<PAGE> 1
Registration No. 33-00145
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 16
TO FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
-------------------
NATIONWIDE VLI SEPARATE ACCOUNT
(EXACT NAME OF TRUST)
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
GORDON E. MCCUTCHAN
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
-------------------
This Post-Effective Amendment amends the Registration Statement in respect to
the prospectus and the Financial Statements
It is proposed that this filing will become effective (check appropriate
space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1997 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of rule (485)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
The Registrant has registered an indefinite number of securities by a prior
registration statement in accordance with Rule 24f-2 under the Investment
Company Act of 1940. Registrant filed its Rule 24f-2 Notice for the fiscal year
ended December 31, 1996 on February 25, 1997.
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1 of 83
REDLINED
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
<S> <C>
1............................................................................Nationwide Life Insurance Company
The Variable Account
2............................................................................Nationwide Life Insurance Company
3............................................................................Custodian of Assets
4............................................................................Distribution of The Policies
5............................................................................The Variable Account
6............................................................................Not Applicable
7............................................................................Not Applicable
8............................................................................Not Applicable
9............................................................................Legal Proceedings
10...........................................................................Information About The Policies; How
The Cash Value Varies; Right to
Exchange for a Fixed Benefit Policy;
Reinstatement; Other Policy
Provisions
11...........................................................................Investments of The Variable Account
12...........................................................................The Variable Account
13...........................................................................Policy Charges
Reinstatement
14...........................................................................Underwriting and Issuance -
Premium Payments
Minimum Requirements for Issuance
of a Policy
15...........................................................................Investments of the Variable Account;
Premium Payments
16...........................................................................Underwriting and Issuance -
Allocation of Cash Value
17...........................................................................Surrendering The Policy for Cash
18...........................................................................Reinvestment
19...........................................................................Not Applicable
20...........................................................................Not Applicable
21...........................................................................Policy Loans
22...........................................................................Not Applicable
23...........................................................................Not Applicable
24...........................................................................Not Applicable
25...........................................................................Nationwide Life Insurance Company
26...........................................................................Not Applicable
27...........................................................................Nationwide Life Insurance Company
28...........................................................................Company Management
29...........................................................................Company Management
30...........................................................................Not Applicable
31...........................................................................Not Applicable
32...........................................................................Not Applicable
33...........................................................................Not Applicable
34...........................................................................Not Applicable
35...........................................................................Nationwide Life Insurance Company
36...........................................................................Not Applicable
37...........................................................................Not Applicable
38...........................................................................Distribution of The Policies
39...........................................................................Distribution of The Policies
40...........................................................................Not Applicable
41(a)........................................................................Distribution of The Policies
42...........................................................................Not Applicable
43...........................................................................Not Applicable
44...........................................................................How The Cash Value Varies
45...........................................................................Not Applicable
46...........................................................................How The Cash Value Varies
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
<S> <C>
47...........................................................................Not Applicable
48...........................................................................Custodian of Assets
49...........................................................................Not Applicable
50...........................................................................Not Applicable
51...........................................................................Summary of The Policies;
Information About The Policies
52...........................................................................Substitution of Securities
53...........................................................................Taxation of The Company
54...........................................................................Not Applicable
55...........................................................................Not Applicable
56...........................................................................Not Applicable
57...........................................................................Not Applicable
58...........................................................................Not Applicable
59...........................................................................Financial Statements
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
P.O. Box 182150
One Nationwide Plaza
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES*
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT
The Life Insurance Policies offered by this prospectus are variable life
insurance policies (collectively referred to as the "Policies"). The Policies
are designed to provide life insurance coverage on the Insured named in the
Policy. The Policies may also provide a Cash Surrender Value if the Policy is
terminated during the lifetime of the Insured. The Death Benefit and Cash Value
of the Policies may vary to reflect the experience of the Nationwide VLI
Separate Account (the "Variable Account") or the Fixed Account to which Cash
Values are allocated.
The Policies described in this prospectus may meet the definition of "modified
endowment contracts" under Section 7702A of the Internal Revenue Code (the
"Code"). The Code provides for taxation of surrenders, partial surrenders,
loans, collateral assignments and other pre-death distributions from modified
endowment contracts in the same way annuities are taxed. Any distribution is
taxable to the extent the Cash Value of the Policy exceeds, at the time of the
distribution, the premiums paid into the Policy. The Code also provides for a
10% tax penalty on the taxable portion of such distributions. That penalty is
applicable unless the distribution is: (1) paid after the Policy Owner is
59-1/2 or disabled; or (2) the distribution is part of an annuity to the Policy
Owner as defined in the Code (see "Tax Matters").
It may not be advantageous to replace existing insurance with Policies
described in this prospectus. It may also be disadvantageous to purchase a
policy to obtain additional insurance protection if the purchaser already owns
another variable life insurance policy. The policies may not be advantageous
for persons who may wish to make policy loans or withdrawals prior to attaining
age 59-1/2 (see "Tax Matters"). The Policy Owner may allocate premiums and Cash
Value to one or more of the sub-accounts of the Variable Account and the Fixed
Account. The assets of each sub-account will be used to purchase, at Net Asset
Value, shares of a designated underlying Mutual Fund of the following series of
the underlying Variable Account Mutual Fund options:
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
- Asset Allocation Fund
- Domestic Income Fund
- Emerging Growth Fund
- Enterprise Fund
- Global Equity Fund
- Government Fund
- Money Market Fund
- Real Estate Securities Fund
Nationwide Life Insurance Company (the "Company") guarantees that the Death
Benefit for a Policy will never be less than the Specified Amount stated on the
Policy data pages as long as the Policy is in force. There is no guaranteed
Cash Surrender Value. If the Cash Surrender Value is insufficient to cover the
charges under the Policy, the Policy will lapse.
This prospectus generally describes only that portion of the Cash Value
allocated to the Variable Account. For a brief summary of the Fixed Account
Option, see "The Fixed Account Option."
* The contract is titled a "Flexible Premium Life Insurance Policy" in Texas.
1
<PAGE> 5
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED SHOULD BE READ IN
CONJUNCTION HEREWITH.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1997.
2
<PAGE> 6
GLOSSARY OF TERMS
ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Cash Value.
BENEFICIARY- The person to whom the proceeds due on the Insured's death are
paid.
CASH VALUE- The sum of the value of Policy assets in the Variable Account,
Fixed Account and any associated value in the Policy Loan Account.
CASH SURRENDER VALUE- The Policy's Cash Value, less any indebtedness under the
Policy, less any Surrender Charge.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies
while the Policy is in force.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance
with the provisions of the Code as amended. It represents the single premium
required to mature the Policy under guaranteed mortality and expense charges,
and an interest rate of 6%.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INSURED- The person whose life is covered by the Policy, and who is named on
the Policy Data Page.
MATURITY DATE- The Policy Anniversary on or following the Insured's 95th
birthday.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
MUTUAL FUNDS- The underlying mutual funds which correspond to the sub-accounts
of the Variable Account. NET ASSET VALUE- The worth of one share at the end of
a market day or at the close of the New York Stock Exchange. Net Asset Value is
computed by adding the value of all portfolio holdings, plus other assets,
deducting liabilities and then dividing the results by the number of shares
outstanding.
POLICY ANNIVERSARY- An anniversary of the Policy Date.
POLICY CHARGES- All deductions made from the value of the Variable Account or
the Policy Cash Value.
POLICY DATE- The date the provisions of the Policy take effect, as shown on the
Policy Owner's Policy Data Page.
POLICY LOAN ACCOUNT- The portion of the Cash Value which results from Policy
Loans.
POLICY OWNER- The person designated in the Policy application as the Owner. In
the State of New York, the variable life insurance Policies offered by the
Company are offered as "Certificates" for "Certificate Owners" under a group
contract rather than individual Policies. The provisions of both these
Certificates and the Policies are essentially the same and references to the
provisions of Policies and rights of Policy Owners in this prospectus include
Certificates and Certificate Owners.
POLICY YEAR- Each year commencing with the Policy Date and each Policy Date
anniversary thereafter.
SPECIFIED AMOUNT- A dollar amount used to determine the Death Benefit under a
Policy as shown on the Policy Data Page.
SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is
surrendered.
VALUATION DATE- Each day the New York Stock Exchange and the Company's Home
Office are open for business, or any other day during which there is a
sufficient degree of trading of the Variable Account's underlying Mutual Fund
shares that the current Net Asset Value of the Accumulation Units might be
materially affected.
VALUATION PERIOD- A period commencing with the close of a Valuation Date and
ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT- A separate investment account of the Nationwide Life
Insurance Company.
3
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF TERMS......................................................................................................3
SUMMARY OF THE POLICIES................................................................................................6
Variable Life Insurance.......................................................................................6
The Variable Account and its Sub-Accounts.....................................................................6
The Fixed Account.............................................................................................6
Deductions and Charges........................................................................................6
Premiums......................................................................................................7
NATIONWIDE LIFE INSURANCE COMPANY......................................................................................7
THE VARIABLE ACCOUNT...................................................................................................7
Investments of the Variable Account...........................................................................8
Van Kampen American Capital Life Investment Trust.............................................................8
Reinvestment..................................................................................................9
Transfers.....................................................................................................9
Dollar Cost Averaging........................................................................................10
Substitution of Securities...................................................................................10
Voting Rights................................................................................................10
INFORMATION ABOUT THE POLICIES........................................................................................11
Underwriting and Issuance....................................................................................11
-Minimum Requirements for Issuance of a Policy...............................................................11
-Premium Payments............................................................................................11
-Allocation of Cash Value....................................................................................12
-Short-Term Right to Cancel Policy...........................................................................12
POLICY CHARGES........................................................................................................12
Deductions from Premiums.....................................................................................12
Deductions from Cash Value...................................................................................12
-Charges on Surrender........................................................................................12
-Annual Administrative Charge................................................................................13
-Cost of Insurance Charge....................................................................................13
Deductions from the Sub-Accounts.............................................................................14
-Mortality and Expense Risk Charge...........................................................................14
-Administrative Expense Charge...............................................................................14
-Premium Tax Recovery Charge.................................................................................14
-Income Tax Charge...........................................................................................15
HOW THE CASH VALUE VARIES.............................................................................................15
How the Investment Experience is Determined..................................................................15
Net Investment Factor........................................................................................15
Valuation of Assets..........................................................................................16
Determining The Cash Value...................................................................................16
Valuation Date and Valuation Period..........................................................................16
SURRENDERING THE POLICY FOR CASH......................................................................................16
Right to Surrender...........................................................................................16
Cash Surrender Value.........................................................................................16
Partial Surrenders...........................................................................................16
Maturity Proceeds............................................................................................17
Income Tax Withholding.......................................................................................17
POLICY LOANS..........................................................................................................17
Taking a Policy Loan.........................................................................................17
Effect on Investment Performance.............................................................................17
Interest.....................................................................................................17
Effect on Death Benefit and Cash Value.......................................................................18
Repayment....................................................................................................18
HOW THE DEATH BENEFIT VARIES..........................................................................................18
-Calculation of the Death Benefit............................................................................18
-Proceeds Payable on Death...................................................................................19
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY..........................................................................19
CHANGES OF INVESTMENT POLICY..........................................................................................20
GRACE PERIOD..........................................................................................................20
REINSTATEMENT.........................................................................................................20
THE FIXED ACCOUNT OPTION..............................................................................................21
CHANGES IN EXISTING INSURANCE COVERAGE................................................................................21
Changes in the Specified Amount..............................................................................21
Changes in the Death Benefit Option..........................................................................21
OTHER POLICY PROVISIONS...............................................................................................21
</TABLE>
4
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<TABLE>
<S> <C>
Policy Owner.................................................................................................21
Beneficiary..................................................................................................22
Assignment...................................................................................................22
Incontestability.............................................................................................22
Error in Age or Sex..........................................................................................22
Suicide......................................................................................................22
Nonparticipating Policies....................................................................................22
LEGAL CONSIDERATIONS..................................................................................................22
DISTRIBUTION OF THE POLICIES..........................................................................................23
CUSTODIAN OF ASSETS...................................................................................................23
TAX MATTERS...........................................................................................................23
Policy Proceeds..............................................................................................23
Federal Estate and Generation Skipping Transfer Taxes........................................................24
Non-Resident Aliens..........................................................................................24
Taxation of the Company......................................................................................25
Tax Changes..................................................................................................25
THE COMPANY...........................................................................................................25
COMPANY MANAGEMENT....................................................................................................26
Directors of the Company.....................................................................................27
Executive Officers of the Company............................................................................28
OTHER CONTRACTS ISSUED BY THE COMPANY.................................................................................28
STATE REGULATION......................................................................................................28
REPORTS TO POLICY OWNERS..............................................................................................28
ADVERTISING...........................................................................................................29
LEGAL PROCEEDINGS.....................................................................................................29
EXPERTS...............................................................................................................29
REGISTRATION STATEMENT................................................................................................29
LEGAL OPINIONS........................................................................................................29
APPENDIX 1............................................................................................................30
APPENDIX 2............................................................................................................31
FINANCIAL STATEMENTS..................................................................................................42
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
5
<PAGE> 9
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The variable life insurance Policies offered by Nationwide Life Insurance
Company (the "Company") are similar in many ways to fixed-benefit whole life
insurance. As with fixed-benefit whole life insurance, the Owner of the Policy
pays a premium for life insurance coverage on the person insured. Also like
fixed-benefit whole life insurance, the Policies may provide for a Cash
Surrender Value which is payable if the Policy is terminated during the
Insured's lifetime. (As with fixed-benefit whole life insurance, the Cash
Surrender Value during the early Policy years may be substantially lower than
the premiums paid).
However, the Policies differ from fixed-benefit whole life insurance in several
respects. Unlike fixed-benefit whole life insurance, the Death Benefit and Cash
Value of the Policies may increase or decrease to reflect the investment
performance of the Variable Account sub-accounts or the Fixed Account to which
Cash Values are allocated (see "How the Death Benefit Varies"). There is no
guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash
Surrender Value is insufficient to pay Policy Charges, the Policy will lapse.
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Cash Value in the Nationwide VLI Separate
Account (the "Variable Account") at the time the Policy is issued. The Policy
Owner chooses the sub-accounts of the Variable Account or the Fixed Account
into which the Cash Value will be allocated (see "Allocation of Cash Value").
During the free look period, however, the Cash Value is allocated to the Van
Kampen American Capital Life Investment Trust- Money Market Fund or the Fixed
Account. For more information on the short term right to cancel this policy,
please see "Short Term Right to Cancel Policy." At present, there are eight
sub-accounts. Assets of each sub-account are invested at Net Asset Value in
shares of a corresponding underlying Mutual Fund option. For a description of
the underlying Mutual Fund options and their investment objectives, see
"Investments of the Variable Account."
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General Account.
Cash Values allocated to the Fixed Account are credited with interest daily at
a rate declared by the Company. The interest rate declared is at the Company's
sole discretion, but may never be less than an effective annual rate of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for administrative and
sales expenses, state premium taxes, providing life insurance protection and
assuming the mortality and expense risks.
The Company deducts a charge for the cost of insurance from the Policy's Cash
Value on the Policy Date and each Monthly Anniversary Date. The Company deducts
an annual policy administrative charge from the Policy's Cash Value at the
beginning of each Policy Year after the first. The current annual charge is $90
($65 in New York) for total premium payments less than $25,000 and $50 for
total premium payments greater than or equal to $25,000. This charge is
guaranteed never to exceed $135 ($120 in New York) for total premium payments
less than $25,000 and $75 for total premium payments greater than or equal to
$25,000. The Company also deducts on a daily basis from the assets of the
Variable Account a charge to provide for mortality and expense risks,
administrative charges and premium tax recovery. These current charges are
equal on an annual basis to 1.30% of the Variable Account assets for the first
10 Policy Years and 1.00% thereafter and are guaranteed never to exceed 1.60%
and 1.30% respectively. For Policies which are surrendered, the Company may
deduct a Surrender Charge. The Surrender Charge associated with each premium
payment will not exceed 8.5% of the premium payment, and will be applied for
nine years after the effective date of the premium payment. The Surrender
Charge is designed to recover certain expenses incurred by the Company related
to the sale of Policies.
Underlying Mutual Fund shares are purchased at Net Asset Value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Mutual Fund's investment adviser
for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund for its most
recently completed fiscal year, expressed as a percentage of the underlying
Mutual Fund's average assets, are as follows:
6
<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Management Fees Other Expenses Total Portfolio
Expenses
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Van Kampen American Capital Life Investment Trust Asset 0.00% 0.60% 0.60%
Allocation Fund*
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Domestic 0.00% 0.60% 0.60%
Income Fund*
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Emerging 0.00% 0.85% 0.85%
Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Enterprise 0.37% 0.23% 0.60%
Fund*
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Global 0.00% 1.20% 1.20%
Equity Fund
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Government 0.33% 0.27% 0.60%
Fund*
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Money 0.00% 0.60% 0.60%
Market Fund*
- ------------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust Real Estate 0.83% 0.27% 1.10%
Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Mutual Fund expenses shown above are assessed at the underlying Mutual Fund
level and are not direct charges against the Variable Account or reductions in
Cash Value. These underlying Mutual Fund expenses are taken into consideration
in computing each underlying Mutual Fund's Net Asset Value, which is the share
price used to calculate the Variable Account's unit value. None of the above
underlying Mutual Funds are subject to 12(b)(1) fees.
* Pursuant to an agreement with the Advisor, the ordinary business expenses of
the Van Kampen American Capital Life Investment Trust Asset Allocation Fund,
Domestic Income Fund, Enterprise Fund, Government Fund and Money Market Fund,
are limited to 0.60% per year of the average net assets by reducing the other
expenses in excess of such limitations. Without such an agreement, the total
expenses would have been 0.60%, 0.69%, 0.58%, 0.59% and 0.70% respectively.
The information relating to the underlying Mutual Fund expenses was provided by
the underlying Mutual Fund and was not independently verified by the Company.
PREMIUMS
The minimum premium for which a Policy may be issued is $10,000. A Policy may
be issued to an insured up to age 80.
For a limited time, the Policy Owner has a right to cancel the Policy and
receive a full refund of premiums paid (see "Short Term Right to Cancel
Policy").
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the Nationwide
Insurance Enterprise of companies which includes Nationwide Mutual Insurance
Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity
Insurance Company, Nationwide Property and Casualty Insurance Company, National
Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity
Company, Nationwide Indemnity Company and Nationwide General Insurance Company.
The Company's Home Office is at One Nationwide Plaza, Columbus, Ohio 43215.
The Company offers a complete line of life insurance, including annuities and
accident and health insurance. It is admitted to do business in all states, the
District of Columbia and Puerto Rico (for additional information, see "The
Company").
THE VARIABLE ACCOUNT
The Nationwide VLI Separate Account (the "Variable Account"), was established
by a resolution of the Company's Board of Directors, on August 8, 1984,
pursuant to the provisions of Ohio law. The Company has caused the Variable
Account to be registered with the Securities and Exchange Commission as a unit
investment trust pursuant to the provisions of the Investment Company Act of
1940. Nationwide Life Insurance Company, One Nationwide Plaza, Columbus, Ohio
43215 serves as trustee for the trust. Nationwide Advisory Services, Inc., One
Nationwide Plaza, Columbus, Ohio 43215 serves as principal underwriter for the
trust. Such registration does not involve supervision of the management of the
Variable Account or the Company by the Securities and Exchange Commission.
7
<PAGE> 11
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. The Death Benefit and Cash Value under the
Policy may vary with the investment performance of the investments in the
Variable Account (see "How the Death Benefit Varies" and "How the Cash Value
Varies").
Premium payments and Cash Value are allocated within the Variable Account among
one or more sub-accounts. The assets of each sub-account are used to purchase
shares of the underlying Mutual Funds designated by the Policy Owner. Thus, the
investment performance of a Policy depends upon the investment performance of
the underlying Mutual Funds designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Cash Value
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). When the Policy is issued, for any
Cash Value not allocated to the Fixed Account, Cash Value will be placed in the
Money Market Fund or the Fixed Account, as designated by the Policy Owner,
until expiration of the period in which the Policy Owner may exercise his or
her short-term right to cancel the Policy. At the expiration of the period in
which the Policy Owner may exercise his or her short-term right to cancel the
Policy, shares of the underlying Mutual Funds specified by the Policy Owner are
purchased at Net Asset Value for the respective sub-account(s). Such election
is subject to any minimum premium limitations which may be imposed by the
underlying Mutual Fund option(s). In addition, no less than 5% of premium may
be allocated to any one sub-account or the Fixed Account. The Policy Owner may
change the allocation of Cash Value or may transfer Cash Value from one
sub-account to another, subject to such terms and conditions as may be imposed
by each underlying Mutual Fund and as set forth in this prospectus (see
"Transfers", "Allocation of Cash Value" and "Short-Term Right to Cancel
Policy"). Additional Premium Payments, upon acceptance, will be allocated to
the Money Market Fund unless the Policy Owner specifies otherwise (see "Premium
Payments").
Each of the underlying Mutual Fund options receives investment advice from Van
Kampen American Capital Asset Management, Inc., which is paid fees for its
services by the underlying Mutual Funds. A summary of investment objectives is
contained in the description of each underlying Mutual Fund below. These
underlying Mutual Fund options are available only to serve as the underlying
investment for variable annuity and variable life contracts issued through
separate accounts of life insurance companies which may or may not be
affiliated, also known as "mixed and shared funding." There are certain risks
associated with mixed and shared funding, which is disclosed in the underlying
Mutual Funds' prospectuses. A full description of the underlying Mutual Fund
options, their investment policies and restrictions, risks and charges are
contained in the prospectuses of the respective underlying Mutual Funds. A
prospectus for the underlying Mutual Fund option(s) being considered must
accompany this prospectus and should be read in conjunction herewith.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The Van Kampen American Capital Life Investment Trust ("Trust") is an
open-end diversified management investment company organized as a Massachusetts
business trust on June 3, 1985. The Trust offers shares in separate funds which
are sold only to insurance companies to provide funding for variable life
insurance policies and variable annuity contracts. Van Kampen American Capital
Asset Management, Inc. (The "Advisor") serves as the Fund's investment adviser.
ASSET ALLOCATION FUND (FORMERLY "MULTIPLE STRATEGY FUND")
The investment objective of this Fund is to seek a high total investment
return consistent with prudent risk through a fully managed investment
policy utilizing equity, intermediate and long-term debt and money
market securities. Total investment return consists of current income,
including dividends, interest, and discount accruals, and capital
appreciation. The Advisor may vary the composition of the portfolio from
time to time based upon an evaluation of economic and market trends and
the anticipated relative total return available from a particular type
of security.
DOMESTIC INCOME FUND (FORMERLY "DOMESTIC STRATEGIC INCOME FUND")
The investment objective of this Fund is to seek current income as its
primary objective. Capital appreciation is a secondary objective. The
Fund attempts to achieve these objectives through investment primarily
in a diversified portfolio of fixed-income securities. The Fund may
invest in investment grade securities and lower rated and nonrated
securities. Lower rated securities are regarded by the rating agencies
as predominantly speculative with respect to the issuer's continuing
ability to meet principal and interest payments.
8
<PAGE> 12
EMERGING GROWTH FUND
The investment objective of this Fund is to seek capital appreciation by
investing in a portfolio of securities consisting principally of common
stocks of small and medium sized companies considered by the Adviser, to
be emerging growth companies. Under normal market conditions, at least
65% of the Fund's total assets will be invested in common stocks of
small and medium sized companies (less than $2 billion of market
capitalization), both domestic and foreign. The Fund may invest up to
20% of its total assets in securities of foreign issuers. Additionally,
the Fund may invest up to 15% of the value of its assets in restricted
securities (i.e., securities which may not be sold without registration
under the Securities Act of 1933) and in other securities not having
readily available market quotations.
ENTERPRISE FUND
The investment objective of this Fund is to seek capital appreciation by
investing securities believed by the Advisor to have above average
potential for capital appreciation. Any income received on such
securities is incidental to the objective of capital appreciation.
GLOBAL EQUITY FUND
The investment objective of this Fund is to seek long term capital
growth through investments in an internationally diversified portfolio
of equity securities of companies of any nation including the United
States. The Fund intends to be invested in equity securities of
companies of at least three countries including the United States. Under
normal market conditions, at least 65% of the Fund's total assets are so
invested. Equity securities include common stocks, preferred stocks and
warrants or options to acquire such securities.
GOVERNMENT FUND
The investment objective of this Fund is to provide investors with a
high current return consistent with preservation of capital. The
Government Fund invests primarily in debt securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. In
order to hedge against changes in interest rates, the Government Fund
may also purchase or sell options and engage in transactions involving
interest rate futures contracts and options on such contracts.
MONEY MARKET FUND
The investment objective of this Fund is to seek as high a level of
current income as is considered consistent with the preservation of
capital and liquidity by investing primarily in money market
instruments.
REAL ESTATE SECURITIES FUND
The investment objective of this Fund is to seek long-term capital
growth by investing in a portfolio of securities of companies operating
in the real estate industry ("Real Estate Securities"). Current income
is a secondary consideration. Real Estate Securities include equity
securities, including common stocks and convertible securities, as well
as non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be
Real Estate Securities. There can be no assurance that the Fund will
achieve its investment objective.
REINVESTMENT
The Funds described above have as a policy the distribution of dividends in the
form of additional shares (or fractions thereof) of the underlying Mutual
Funds. The distribution of additional shares will not affect the number of
Accumulation Units attributable to a particular Policy (see "Allocation of Cash
Value").
TRANSFERS
The Policy Owner may request a transfer of up to 100% of the Cash Value from
the Variable Account to the Fixed Account. The Owner's Cash Value in each
Sub-Account will be determined as of the date the transfer request is received
in the Home Office in good order. The Company reserves the right to restrict
transfers to the Fixed Account to 25% of the Cash Value.
9
<PAGE> 13
The Policy Owner may annually transfer a portion of the value of the Fixed
Account to the Variable Account and a portion of the Variable Account to the
Fixed Account, without penalty or adjustment. The Company reserves the right to
limit the amount of Cash Value transferred out of the Fixed Account each Policy
Year. Transfers from the Fixed Account must be made within 45 days after the
termination date of the interest rate guarantee period.
Transfers may be made either in writing or, in states allowing such transfers,
by telephone. This telephone exchange privilege is made available to Policy
Owners automatically without the Policy Owner's election. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include the following: requesting
identifying information, such as name, contract number, Social Security Number,
and/or personal identification number; tape recording all telephone
transactions; or providing written confirmation thereof to both the Policy
Owner and any agent of record, at the last address of record; or such other
procedures as the Company may deem reasonable. Although failure to follow
reasonable procedures may result in the Company's liability for any losses to
unauthorized or fraudulent telephone transfers, the Company will not be liable
for following instructions communicated by telephone which it reasonably
believes to be genuine. Any losses incurred pursuant to actions taken by the
Company in reliance on telephone instructions reasonably believed to be genuine
shall be borne by the Policy Owner. The Company may withdraw the telephone
exchange privilege upon 30 days' written notice to the Policy Owners.
Policy Owners who have entered into a Dollar Cost Averaging Agreement with the
Company (see "Dollar Cost Averaging" below) may transfer from the Fixed Account
to the Variable Account under the terms of that agreement.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer from the
Money Market Fund or the Fixed Account to any other sub-account within the
Variable Account on a monthly basis or as frequently as otherwise authorized by
the Company. This service is intended to allow the Policy Owner to utilize
Dollar Cost Averaging, a long-term investment program which provides for
regular, level investments over time. The Company makes no guarantees that
Dollar Cost Averaging will result in a profit or protect against loss in a
declining market. To qualify for Dollar Cost Averaging there must be a minimum
total Cash Value, less policy indebtedness, of $15,000. Transfers for purposes
of Dollar Cost Averaging can only be made from the Money Market Fund or the
Fixed Account. The minimum monthly Dollar Cost Averaging transfer is $100. In
addition, Dollar Cost Averaging monthly transfers from the Fixed Account must
be equal to or less than 1/30th of the Fixed Account value when the Dollar Cost
Averaging program is requested. Transfers out of the Fixed Account, other than
for Dollar Cost Averaging, may be subject to certain additional restrictions
(see "Transfers"). A written election of this service, on a form provided by
the Company, must be completed by the Policy Owner in order to begin transfers.
Once elected, transfers from the Money Market sub-account or the Fixed Account
will be processed monthly, or as frequently as otherwise authorized by the
Company, until either the value in the Money Market Fund or the Fixed Account
is completely depleted or the Policy Owner instructs the Company in writing to
cancel the transfers.
The Company reserves the right to discontinue offering Dollar Cost Averaging
upon 30 days' written notice to Policy Owners however, any discontinuation will
not affect Dollar Cost Averaging programs already commenced. The Company also
reserves the right to assess a processing fee for this service.
SUBSTITUTION OF SECURITIES
If shares of the underlying Mutual Fund options described in this prospectus
should no longer be available for investment by the Variable Account or, if in
the judgment of the Company's management further investment in such underlying
Mutual Funds should become inappropriate the Company may eliminate
Sub-Accounts, combine two or more Sub-Accounts, or substitute shares of one or
more underlying Mutual Fund for other underlying Mutual Fund shares already
purchased or to be purchased in the future by premium payments under the
Policy. No substitution of securities in the Variable Account may take place
without prior approval of the Securities and Exchange Commission, and under
such requirements as it and any state insurance department may impose.
VOTING RIGHTS
Voting rights under the Policies apply with respect to Cash Value allocated to
the sub-accounts of the Variable Account.
In accordance with its view of present applicable law, the Company will vote
the shares of the underlying Mutual Funds held in the Variable Account at
regular and special meetings of the shareholders of the underlying Mutual
Funds. These shares will be voted in accordance with instructions from Policy
Owners who have an interest in the Variable Account. If the Investment Company
Act of 1940 or any regulation thereunder
10
<PAGE> 14
should be amended or if the present interpretation thereof should change, and
as a result the Company determines that it is permitted to vote the shares of
the underlying Mutual Funds in its own right, it may elect to do so.
The Policy Owner shall be the person who has the voting interest under the
Contract. The number of underlying Mutual Fund shares attributable to each
Policy Owner is determined by dividing the Policy Owner's interest in each
respective Sub-Account of the Variable Account by the net asset value of the
underlying Mutual Fund corresponding to the Sub-Account. The number of shares
which a person has the right to vote will be determined as of the date to be
chosen by the Company not more than 90 days prior to the meeting of the
underlying Mutual Fund. Each person having a voting interest will receive
periodic reports relating to the underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
Voting instructions will be solicited by written communication at least 21 days
prior to such meeting. Underlying Mutual Fund shares held in the Variable
Account as to which no timely instructions are received will be voted by the
Company in the same proportion as the voting instructions which are received
with respect to all Contracts participating in the Variable Account.
Notwithstanding contrary Policy Owner voting instructions, the Company may vote
underlying Mutual Fund shares in any manner necessary to enable the underlying
Mutual Fund to: (1) make or refrain from making any change in the investments
or investment policies for any of the underyling Mutual Funds, if required by
an insurance regulatory authority; (2) refrain from making any change in the
investment policies or any investment adviser or principal underwriter of any
portfolio which may be initiated by Policy Owners or the underlying Mutual
Fund's Board of Directors, provided the Company's disapproval of the change is
reasonable and, in the case of a change in the investment policies or
investment adviser, based on a good faith determination that such change would
be contrary to state law or otherwise inappropriate in light of the portfolio's
objective and purposes; or (3) enter into or refrain from entering into any
advisory agreement or underwriting contract, if required by any insurance
requlatory authority.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -MINIMUM REQUIREMENTS FOR ISSUANCE OF A POLICY
The minimum amount of initial premium that will be accepted by the Company is
$10,000. Policies may be issued to Insureds issue ages 80 or younger. Before
issuing any Policy, the Company requires satisfactory evidence of insurability
which may include a medical examination.
- -PREMIUM PAYMENTS
The initial premium for a Policy is payable in full at the Company's Home
Office. The minimum amount of initial premium required is $10,000 for issue
ages 75 or younger and $50,000 for issue ages 76 through 80. The Specified
Amount is determined by treating the initial premium as equal to 100% of the
Guideline Single Premium. Upon payment of an initial premium, temporary
insurance may be provided, subject to a maximum amount. The effective date of
permanent insurance coverage is dependent upon completion of all underwriting
requirements, payment of the initial premium, and delivery of the Policy while
the Insured is still living.
The Policy Owner may make additional premium payments. The Policy is primarily
intended to be a single premium with a limited ability to make additional
payments. Subsequent premium payments under the Policy are permitted under the
following circumstances:
1. an additional premium payment is required to keep the Policy in force (see
"Grace Period"); or
2. except in Virginia, additional premium payments of at least $1,000 may be
made at any time provided the premium limits prescribed by the Internal
Revenue Service to qualify the Policy as a life insurance contract are not
violated.
Payment of additional premiums if accepted, may increase the Specified Amount
of insurance. However, the Company reserves the right to require satisfactory
evidence of insurability before accepting any additional premium payment which
results in an increase in the net amount at risk. The Company may also require
that any existing Policy indebtedness is repaid prior to accepting any
additional premium payments.
The Company will not accept a subsequent premium payment which would result in
total premiums paid exceeding the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
11
<PAGE> 15
- -ALLOCATION OF CASH VALUE
At the time a Policy is issued, its Cash Value will be based on the Money
Market Fund value or the Fixed Account as if the Policy had been issued and the
premium invested on the date the premium was received in good order by the
Company. When the Policy is issued, the Cash Value will be allocated to the
Money Market Fund (for any Cash Value Allocated to any other Sub-Account on the
application) or the Fixed Account until the expiration of the period in which
the Policy Owner may exercise his or her short-term right to cancel the Policy.
Cash Value not designated for the Fixed Account will be placed in the Money
Market Fund Sub-Account. At the expiration of the period in which the Policy
Owner may exercise his or her short term right to cancel the Policy, shares of
the Mutual Funds specified by the Policy Owner are purchased at Net Asset Value
for the respective sub-account(s). The Policy Owner may change the allocation
of Cash Value or may transfer Cash Value from one sub-account to another,
subject to such terms and conditions as may be imposed by each underlying
Mutual Fund option and as set forth in the prospectus. Cash Value allocated to
the Fixed Account at the time of application may not be transferred prior to
the first Policy Anniversary (see "Transfers" and "Investments of the Variable
Account").
The designation of investment allocations will be made by the prospective
Policy Owner at the time of application for a Policy. The Policy Owner may
change the way in which future premiums are allocated by giving written notice
to the Company. All percentage allocations must be in whole numbers, and must
be at least 5%. The sum of allocations must equal 100%.
- -SHORT-TERM RIGHT TO CANCEL POLICY
A Policy may be returned for cancellation and a full refund of premium within
10 days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or
delivered to the registered representative who sold it or the Company.
Immediately after such mailing or delivery, the Policy will be deemed void from
the beginning. The Company will refund the total premiums paid within seven
days after it receives the Policy. The scope of this right may vary by state.
The policy provision approved or used in a particular state will be disclosed
in any Policy issued.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
No deduction is made from any premium at the time of payment. 100% of each
premium payment is applied to the Cash Value.
DEDUCTIONS FROM CASH VALUE
The Company may deduct certain charges from the Policy's Cash Value. While the
Company reserves the right to change current charges, it has no present intent
to do so. Charges are comprised of the following items:
- -Charges on Surrender
No charges are deducted from any premium payment. The Company incurs certain
expenses related to the sale of the Policies. These expenses include
commissions paid to sales personnel, the cost of sales literature and other
promotional activity. To recover these expenses, the Company imposes a
Surrender Charge. The Surrender Charge may be insufficient to recover all these
expenses. Unrecovered expenses are borne by the Company's general assets which
may include profits, if any, from Mortality and Expense Risk Charges.
12
<PAGE> 16
The initial premium payment and any subsequent premium payment which results in
an increased net amount at risk will have a Surrender Charge associated with it
that will be less than or equal to 8.5% of such premium payment, as set forth
in the chart in this provision. The Surrender Charge applies for nine years
after the effective date of each premium payment. Certain surrenders may result
in adverse tax consequences (see "Tax Matters").
<TABLE>
<CAPTION>
COMPLETED YEAR(S) SINCE CHARGES ON SURRENDER AS A
PREMIUM PAYMENT % PREMIUM PAYMENT
--------------- -----------------
<S> <C>
0 8.5%
1 8.5%
2 8.0%
3 8.0%
4 7.5%
5 7.0%
6 6.0%
7 5.0%
8 4.0%
9 0.0%
</TABLE>
In no event will the Surrender Charge deducted on surrender exceed 8.5% of the
total premiums paid.
The amount of the Surrender Charge may be eliminated when the Policies are
issued to an officer, director, former director, partner, employee, or retired
employee of the Company; an employee of the General Distributor of the
Policies, Van Kampen American Capital Marketing, Inc.; an employee of an
affiliate of the Company or the General Distributor; or, a duly appointed
representative of the Company who receives no commission as a result of the
purchase.
Elimination of the Surrender Charge will be permitted by the Company only in
those situations where the Company does not incur sales or administrative
expenses normally associated with sales of a Policy. In no event will reduction
of the Surrender Charge be permitted where such reduction will be unfairly
discriminatory to any person.
- -Annual Administrative Charge
The Company deducts an annual administrative charge at the beginning of each
Policy Year after the first. It will be charged proportionately to the Cash
Values in each Variable Account sub-account and the Fixed Account. The amount
of this annual charge is determined by the total net premium payments (premium
payments less any previous partial surrenders) as follows:
<TABLE>
<CAPTION>
TOTAL NET PREMIUM PAYMENTS CURRENT ANNUAL
GREATER THAN BUT LESS ADMINISTRATIVE GUARANTEED MAXIMUM ANNUAL
OR EQUAL TO THAN CHARGE ADMINISTRATIVE CHARGE
----------- ---- ------ ---------------------
<S> <C> <C> <C>
$10,000 $25,000 $90 Non-New York $135 Non-New York
$65 In New York $120 In New York
$25,000 $50 All States $ 75 All States
</TABLE>
- -Cost of Insurance Charge
A monthly deduction for the Cost of insurance is charged proportionately
against the Cash Value in each Variable Account sub-account and the Fixed
Account on the Policy Date and each Monthly Anniversary Day. The Company will
determine the Monthly Cost of Insurance charge by multiplying the applicable
cost of insurance rate by the net amount at risk. The net amount at risk is
equal to the Death Benefit minus the Cash Value.
Guaranteed cost of insurance charges will not exceed the cost based on the
guaranteed cost of insurance rate and the Policy's net amount at risk.
Guaranteed cost of insurance rates for Standard-Simplified issues are based on
the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980
CET). Guaranteed cost of insurance rates for Standard Preferred issues are
based on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO). Guaranteed cost of insurance rates for substandard issues
are based on appropriate percentage multiples of the 1980 CSO. These mortality
tables are sex distinct. In addition, separate mortality tables will be used
for standard and non-tobacco.
13
<PAGE> 17
For Policies issued in Texas, guaranteed cost of insurance rates for
Standard-Simplified issues ("Special Class-Simplified" in Texas) are based on
130% of the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO).
The rate class of an Insured may affect the cost of insurance rate. The Company
currently places Insureds into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical Policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks. The Company may also
issue certain Policies on a "Simplified Issue" basis to certain categories of
individuals. Due to the underwriting criteria established for Policies issued
on a Simplified Issue basis, actual rates for healthy individuals will be
higher than the current cost of insurance rates being charged under otherwise
identical Policies that are issued on a Preferred basis.
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company will deduct, on a daily basis, certain charges from the assets of
the Variable Account. On an annual basis, these charges are equivalent to:
<TABLE>
<CAPTION>
POLICY YEARS POLICY YEARS
1-10 11+
---- ---
<S> <C> <C>
Current 1.30% 1.00%
Guaranteed Maximum 1.60% 1.30%
</TABLE>
While the Company reserves the right to change current charges, it has no
present intent to do so.
These charges consist of the following items:
- -Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing mortality and expense
charges. The mortality risk assumed under the Policies is that the Insured may
not live as long as expected. The expense risk assumed is that the actual
expenses incurred in issuing and administering the Policies may be greater than
expected. In addition, the Company assumes risks associated with the
nonrecovery of policy issue, underwriting, and other administrative expenses
due to Policies which lapse or are surrendered during the first ten years
following each premium payment.
To compensate the Company for assuming these risks associated with the
Policies, the Company deducts a daily charge from the assets of the
sub-accounts of the Variable Account. This charge currently is equivalent to an
effective annual rate of 0.75%. To the extent that future levels of mortality
and expenses are less than or equal to those expected, the Company may realize
a profit from these charges. This charge is guaranteed not to exceed 0.90%.
- -Administrative Expense Charge
The Company deducts a daily Administrative Expense Charge to reimburse it for
expenses related to issuance and maintenance of the Policies including
underwriting, establishing policy records, accounting and record keeping, and
periodic reporting to Policy Owners. This charge is designed only to reimburse
the Company for its actual administrative expenses. In the aggregate, the
Company expects that the charges for administrative costs will be approximately
equal to the related expenses.
This charge is deducted daily from the assets of the sub-accounts of the
Variable Account. This charge currently is equivalent to an annual effective
rate of 0.25%. This charge is guaranteed not to exceed 0.40%.
- -Premium Tax Recovery Charge
Premium taxes are not deducted at the time a premium is paid. The Company pays
any state premium taxes attributable to a particular Policy when incurred by
the Company. The Company expects to pay an average state premium tax rate of
approximately 2.5% of premiums for all states, although such tax rates
gradually can range from 0% to 4%. To reimburse the Company for the payment of
state premium taxes associated with the Policies, during the first ten Policy
Years, the Company deducts a daily charge from the assets of the sub-accounts.
This charge is computed on a daily basis, and is equivalent to an annual
effective rate of 0.30% of the assets of the Variable Account during the first
ten Policy Years, and 0% thereafter. This charge may be more or less than the
amount actually assessed by the state in which a particular Policy owner lives.
The Company does not expect to make a profit from this charge.
14
<PAGE> 18
- -Income Tax Charge
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the sub-accounts of the Variable
Account (see "Taxation of the Company"). The Company reserves the right to
assess a charge for such taxes against the Variable Account if the Company
determines that such taxes will be incurred.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any premium applied since the previous Valuation
Date, plus or minus any investment results, and less any Policy Charges.
There is no guaranteed Cash Value. The Cash Value will vary with the investment
experience of the Variable Account and/or the daily crediting of interest in
the Fixed Account and Policy Loan Account depending on the allocation of Cash
Value by the Policy Owner.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value in each sub-account is converted to Accumulation Units of that
Variable Account sub-account. The conversion is accomplished by dividing the
amount of Cash Value allocated to a Variable Account sub-account by the value
of an Accumulation Unit for the Variable Account sub-account of the Valuation
Period during which the allocation occurs.
The value of an Accumulation Unit for each Variable Account sub-account was
arbitrarily set initially at $10 when the underlying Mutual Fund shares in that
Variable Account sub-account were available for purchase. The value for any
subsequent Valuation Period is determined by multiplying the Accumulation Unit
value for each Variable Account sub-account for the immediately preceding
Valuation Period by the Net Investment Factor for the Variable Account
sub-account during the subsequent Valuation Period. The value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period. The number of Accumulation Units will not change as a result of
investment experience.
NET INVESTMENT FACTOR
The Net Investment Factor for any Valuation Period is determined by dividing
(a) by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the Net Asset Value per share of the underlying Mutual Fund
held in the sub- account determined at the end of the current
Valuation Period, plus
(2) the per share amount of any dividend or capital gain
distributions made by the underlying Mutual Fund held in the
sub-account if the "ex-dividend" date occurs during the
current Valuation Period.
(b) is the net of:
(1) the Net Asset Value per share of the underlying Mutual Fund
held in the Sub-Account determined at the end of the
immediately preceding Valuation Period, plus or minus
(2) the per share charge or credit, if any, for any taxes reserved
for in the immediately preceding Valuation Period.
(c) is a factor representing the daily Mortality and Expense Risk
Charge, Administration Expense Charge and Premium Tax Recovery
Charge deducted from the Variable Account. Such factor is equal
to an annual rate of 1.30% for the first ten years and then
1.00% thereafter of the daily Net Asset Value of the Variable
Account.
For underlying Mutual Funds that credit dividends on a daily basis and pay such
dividends once a month, the Net Investment Factor allows for the monthly
reinvestment of these daily dividends.
The Net Investment Factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the Net Investment Factor may not be directly proportional to
changes in the Net Asset Value of underlying Mutual Fund shares, because of the
deduction for Mortality and Expense Risk Charge, Administration Expense Charge,
Premium Tax Recovery Charge and any charge or credit for tax reserves.
15
<PAGE> 19
VALUATION OF ASSETS
Underlying Mutual Fund shares in the Variable Account will be valued at their
Net Asset Value.
DETERMINING THE CASH VALUE
The sum of the value of all Variable Account Accumulation Units attributable to
the Policy and amounts credited to the Fixed Account is the Cash Value. The
number of Accumulation Units credited per each Variable Account sub-account are
determined by dividing the net amount allocated to the Variable Account
sub-account by the Accumulation Unit Value for the Variable Account sub-account
for the Valuation Period during which the premium is received by the Company.
In the event part or all of the Cash Value is surrendered or charges or
deductions are made against the Cash Value, an appropriate number of
Accumulation Units from the Variable Account and an appropriate amount from the
Fixed Account will be deducted in the same proportion that the Policy Owner's
interest in the Variable Account and the Fixed Account bears to the total Cash
Value.
The Cash Value in the Fixed Account and the Policy Loan Account is credited
with interest daily at an effective annual rate which the Company periodically
declares. The annual effective rate will never be less than 4%. Upon request,
the Company will inform the Policy Owner of the then applicable rates for each
account.
VALUATION DATE AND VALUATION PERIOD
A Valuation Date is each day that the New York Stock Exchange and the Company's
Home Office are open for business or any other day during which there is
sufficient degree of trading of the Variable Accounts' Underlying Mutual Fund
shares held by the Variable Account, such that the current net asset value of
the Accumulation Units might be materially affected. A Valuation Period is the
period commencing at the close of a Valuation Date and ending at the close of
business for the next succeeding Valuation Date.
SURRENDERING THE POLICY FOR CASH
RIGHT TO SURRENDER
The Policy Owner may surrender the Policy in full at any time while the Insured
is living and receive its Cash Surrender Value. The cancellation will be
effective as of the date the Company receives a proper written request for
cancellation and the Policy. Such written request must be signed and, where
permitted, the signature guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a commercial
bank or a savings and loan, which is a member of the Federal Deposit Insurance
Corporation or other guarantor institution as defined by the federal security
laws and regulations. In some cases, the Company may require additional
documentation of a customary nature.
CASH SURRENDER VALUE
The Cash Surrender Value increases or decreases daily to reflect the investment
experience of the Variable Account and the daily crediting of interest in the
Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
written request for surrender and the Policy, minus any charges, indebtedness
or other deductions due on that date, which may also include a Surrender
Charge.
PARTIAL SURRENDERS
After the Policy has been in force for 5 Policy Years, the Policy Owner may
request a partial surrender. Partial surrenders will be permitted only if they
satisfy the following requirements:
1 The maximum partial surrender in any Policy Year is limited to 10% of
the total premium payment;
2 Partial surrenders must not result in a reduction of the Cash Surrender
Value below $10,000; and
3 After the partial surrender, the Policy continues to qualify as life
insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of
the partial surrender. Under Death Benefit Option 1, the Specified Amount is
reduced by the amount of the partial surrender, unless the death benefit is
based on the applicable percentage of cash value. In such a case, a partial
surrender will decrease the Specified Amount by the amount by which the partial
surrender exceeds the difference between the death benefit and Specified
Amount. Partial surrender amounts must be first deducted from the values in the
Variable Account sub-accounts. Partial surrenders will be deducted from the
Fixed Account only to the extent that insufficient values are available in the
Variable Account sub-accounts.
16
<PAGE> 20
Surrender Charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
95th birthday. The Maturity Proceeds will be payable to the Policy Owner on the
Maturity Date provided the Policy is still in force. The Maturity Proceeds will
be equal to the amount of the Policy's Cash Value, less any indebtedness.
INCOME TAX WITHHOLDING
Federal law requires the Company to withhold income tax from any portion of
surrender proceeds that is subject to tax, unless the Policy Owner advises the
Company, in writing, of his or her request not to withhold.
If the Policy Owner requests that the Company not withhold taxes, or if the
taxes withheld are insufficient, the Policy Owner may be liable for payment of
an estimated tax. The Policy Owner should consult his or her tax advisor.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income
tax purposes, one or more of the following: (1) the value each year of the life
insurance protection provided; (2) an amount equal to any employer-paid
premiums; or (3) some or all of the amount by which the current value of the
contract exceeds the employer's interest in the contract. Participants should
consult with the sponsor or the administrator of the plan, and/or with their
personal tax or legal advisers, to determine the tax consequences, if any, of
their employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
The Policy Owner may take a loan using the Policy as security. During the first
year, maximum Policy indebtedness is limited to 50% of the Cash Surrender Value
less interest due on the next Policy Anniversary. After the first Policy Year,
the maximum Policy indebtedness is limited to 90% of the Cash Surrender Value
less interest due on the next Policy Anniversary. The Company will not grant a
loan for an amount less than $1,000 ($200 in Connecticut, $500 in New York).
Should the Death Benefit become payable, the Policy be surrendered, or the
Policy mature while a loan is outstanding, the amount of Policy indebtedness
will be deducted from the Death Benefit, Cash Surrender Value or the Maturity
Value, respectively.
Maximum Policy indebtedness, in Texas, is limited to 90% of the Cash Surrender
Value in the Variable Account sub-accounts and 100% of the Cash Surrender Value
in the Fixed Account less interest due on the next Policy Anniversary.
Any request for a Policy loan must be in written form satisfactory to the
Company. The request must be signed and, where permitted, the signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange or by a Commercial Bank or a Savings and
Loan which is a member of the Federal Deposit Insurance Corporation. Certain
Policy loans may result in currently taxable income and tax penalties (see "Tax
Matters").
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the Variable Account to the Policy Loan Account. If the assets relating to
a Policy are held in more than one Variable Account sub-account, withdrawals
from Variable Account sub-accounts will be made in proportion to the assets in
each Variable Account sub-account at the time of the loan. Policy Loans will be
transferred from the Fixed Account only when insufficient amounts are available
in the Variable Account sub-accounts. The amount taken out of the Variable
Account will not be affected by the Variable Account's investment experience
while the loan is outstanding.
INTEREST
Amounts transferred to the Policy Loan Account will earn interest daily from
the date of transfer.
Policy Loans will be currently credited interest daily at an annual effective
rate of 5.0%. This rate is guaranteed never to be lower than 4%. The Company
may change the current interest crediting rate on Policy Loans at any time at
its sole discretion. This earned interest is transferred from the Policy Loan
Account to a Variable Account or the Fixed Account on each Policy Anniversary.
It will be allocated according to the underlying Mutual Fund Allocation Factors
in effect at the time of the transfer.
17
<PAGE> 21
The loan interest rate is 6% per year for all Policy Loans. Interest is charged
daily and is payable at the end of each Policy year. Unpaid interest will be
added to the existing policy indebtedness as of the due date and will be
charged interest at the same rate as the rest of the indebtedness.
Whenever the total loan indebtedness plus accrued interest exceeds the Cash
Value less any Surrender Charges, the Company will send a notice to the Policy
Owner and the assignee, if any. The Policy will terminate without value 61 days
after the mailing of the notice unless a sufficient repayment is made during
that period. A repayment is sufficient if it is large enough to reduce the
total loan indebtedness plus accrued interest to an amount equal to the total
Cash Value less any Surrender Charges plus an amount sufficient to continue the
Policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the Death
Benefit and Cash Value because the investment results of the Variable Account
or the Fixed Account will apply only to the non-loaned portion of the Cash
Value. The longer the loan is outstanding, the greater the effect is likely to
be. Depending on the investment results of the Variable Account or the Fixed
Account while the loan is outstanding, the effect could be favorable or
unfavorable.
REPAYMENT
All or part of a loan may be repaid at any time while the Policy is in force
during the insured's lifetime. Any payment intended as a loan repayment, rather
than a premium payment, must be identified as such. Loan repayments will be
credited to the Variable Account sub-accounts and the Fixed Account in
proportion to the Policy Owner's Premium allocation in effect at the time of
the repayment. Each repayment may not be less than $1,000 ($50 in Connecticut
and New York). The Company reserves the right to require that any loan
repayments resulting from Policy Loans transferred from the Fixed Account must
be first allocated to the Fixed Account.
HOW THE DEATH BENEFIT VARIES
- -Calculation of the Death Benefit
At issue, the Specified Amount is determined by treating the initial premium as
equal to 100% of the Guideline Single Premium. Additional premium payments, if
accepted, may increase the Specified Amount. Guideline Single Premiums vary by
attained age, sex, smoking classification, underwriting classification and
total premium payments. The following table illustrates representative initial
Specified Amounts, under Death Benefit Option 1, for non-tobacco.
<TABLE>
<CAPTION>
ISSUE $25,000 SINGLE PREMIUM $50,000 SINGLE PREMIUM
AGE MALE FEMALE MALE FEMALE
--- ----- ------ ---- ------
<S> <C> <C> <C> <C>
35 $179,733 $208,354 $364,774 $423,008
40 143,373 166,704 290,792 338,264
45 114,856 134,300 232,769 272,332
50 92,583 108,739 187,452 220,323
55 75,306 88,601 152,298 179,349
60 62,112 72,636 125,453 146,866
65 52,094 59,930 105,070 121,014
</TABLE>
Generally, for a given premium payment, the initial Specified Amount is greater
for non-tobacco than standard, females than males, preferred issue than
simplified issue. The Specified Amount is shown in the Policy.
While the Policy is in force, the Death Benefit will never be less than the
Specified Amount. The Death Benefit may vary with the Cash Value of the Policy,
which depends on investment performance.
The Policy Owner may choose one of two Death Benefit Options. Under Option (1),
the Death Benefit will be the greater of the Specified Amount or the Applicable
Percentage of Cash Value. Under Option (1), the amount of the Death Benefit
will ordinarily not change for several years to reflect the investment
performance and may not change at all. If investment performance is favorable
the amount of Death Benefit may increase. To see how and when investment
performance will begin to affect Death Benefits, please see the illustrations.
Under Option (2), the Death Benefit will be the greater of the Specified Amount
plus the Cash Value, or the Applicable Percentage of Cash Value and will vary
directly with the investment performance.
18
<PAGE> 22
Policy Owners who are satisfied with the amount of their current insurance
coverage and prefer to have favorable investment performance and any future
premium payments reflected in increased Policy Cash Values should choose Death
Benefit Option (1). Policy Owners who prefer to have favorable investment
performance and any future premium payments increase Death Benefits should
choose Death Benefit Option (2).
The monthly Cost of Insurance for Option (1) will always be less than or equal
to the monthly Cost of Insurance for the same amount of Death Benefit under
Option (2) (see "Cost of Insurance Charge").
The term "applicable percentage" means:
1. 250% when the Insured is Attained Age 40 or less at the beginning of
a Policy Year, and
2. when the Insured is above Attained Age 40, the percentage shown in
the "Applicable Percentage of Cash Value Table" shown in this
provision.
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
<TABLE>
<CAPTION>
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
</TABLE>
<TABLE>
<CAPTION>
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
- -Proceeds Payable on Death
The actual Proceeds payable on the Insured's death will be the Death Benefit as
described above less any outstanding Policy loans, and less any unpaid Policy
Charges. Under certain circumstances, the proceeds may be adjusted (see
"Incontestability," "Error in Age or Sex" and "Suicide").
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may exchange the Policy for a modified single premium life
insurance policy offered by the Company on the Policy Date. If not available,
the new policy may be a flexible premium adjustable life insurance policy
offered by the Company on the Policy Date. The benefits for the new policy will
not vary with the investment experience of a separate account. The exchange
must be elected within 24 months from the Policy Date. No evidence of
insurability will be required.
19
<PAGE> 23
The Policy Owner and Beneficiary under the new Policy will be the same as those
under the exchanged Policy on the effective date of the exchange. The new
Policy will have a death benefit on the exchange date not more than the death
benefit of the original Policy immediately prior to the exchange date. The new
Policy will have the same policy date and issue age as the original Policy. The
initial Specified Amount and any increases in Specified Amount will have the
same rate class as those of the original Policy. Any indebtedness may be
transferred to the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two Policies.
After adjustment, if any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
CHANGES OF INVESTMENT POLICY
The Company may materially change the Investment Policy of a Variable Account.
The Company must inform the Policy Owner and obtain all necessary regulatory
approvals. Any change must be submitted to the various state insurance
departments which may disapprove it if deemed detrimental to the interests of
the policy holders or if it renders the Company's operations hazardous to the
public. If a Policy Owner objects, the Policy may be converted to a
substantially comparable Nationwide General Account Life Insurance Policy on
the life of the insured. The Policy Owner has the later of 60 days (6 months in
Pennsylvania) from the date of the Investment Policy change or 60 days (6
months in Pennsylvania) from being informed of such change to make this
conversion. The Company will not require evidence of insurability for this
conversion.
The new policy will not be affected by the investment experience of any
Variable Account. The New Policy will be for an amount of insurance not
exceeding the Death Benefit of the Policy converted on the date of such
conversion.
GRACE PERIOD
If the Cash Surrender Value in the Policy is insufficient to pay the Cost of
Insurance Charges, Policy loan interest, or other charges which become due but
are unpaid, a grace period of 61 days will be allowed for payment of sufficient
premium to continue the Policy in force. The Company will notify the Policy
Owner of the amount required to continue the Policy in force. If the required
amount is not received within 61 days of the notice, the Policy will terminate
without value. If the Insured dies during the Grace Period, the Company will
pay the Death Proceeds.
REINSTATEMENT
If the Grace Period ends and the Policy Owner has neither paid the required
premium nor surrendered the Policy for its Cash Surrender Value, the Policy
Owner may reinstate the Policy by:
1. Submitting a written request at any time within 3 years after the end
of the Grace Period and prior to the Maturity Date;
2. Providing evidence of insurability satisfactory to the Company;
3. Paying sufficient premium to cover all Policy Charges that were due
and unpaid during the Grace Period;
4. Paying sufficient premium to keep the Policy in force for 3 months
from the date of reinstatement; and
5. Paying or reinstating any indebtedness against the Policy which
existed at the end of the Grace Period.
The effective date of a reinstated Policy will be the Monthly Anniversary Day
on or next following the date the application for reinstatement is approved by
the Company. If the Policy is reinstated, the Cash Value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the appropriate Surrender Charge. Such Surrender Charge
will be based on the length of time from the date of premium payments to the
effective date of the reinstatement. Unless the Policy Owner has provided
otherwise, the allocation of the amount of the Surrender Charge, additional
premium payments, and any loan repayments will be based on the underlying
Mutual Fund Allocation factors in effect at the start of the Grace Period.
20
<PAGE> 24
THE FIXED ACCOUNT OPTION
A Policy Owner may elect to allocate or transfer all or part of the Cash Value
to the Fixed Account and the amount allocated or transferred becomes part of
the Company's General Account. The Company's General Account consists of all
assets of the Company other than those in the Variable Account and in other
separate accounts that have been or may be established by the Company. Subject
to applicable law, the Company has sole discretion over the investment of the
assets of the General Account, and Policy Owners do not share in the investment
experience of those assets.
Because of exemptive and exclusionary provisions, interests in the Company's
General Account have not been registered under the Securities Act of 1933 and
the General Account has not been registered as an investment company under the
Investment Company Act of 1940. Accordingly, neither the General Account nor
any interests therein are subject to the provisions of these Acts, and the
Company has been advised that the staff of the Securities and Exchange
Commission has not reviewed the disclosures in this prospectus relating to the
Fixed Account. Disclosures regarding the General Account may, however, be
subject to certain generally applicable provisions of the federal securities
laws relating to the accuracy and completeness of statements made in
prospectuses.
The Company guarantees that the part of the Cash Value invested under the Fixed
Account option will accrue interest daily at an effective annual rate that the
Company declares periodically. The Fixed Account crediting rate will not be
less than an effective annual rate of 4%. Upon request and in the annual
statement the Company will inform a Policy Owner of the then applicable rate.
The Company is not obligated to credit interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
After the first Policy Year, the Policy Owner may request certain changes in
the insurance coverage under the Policy. Any request must be in writing and
received at the Company's Home Office. No change will take effect unless the
Cash Surrender Value, after the change, is sufficient to keep the Policy in
force for at least 3 months.
CHANGES IN THE SPECIFIED AMOUNT
Payment of additional premiums or changes in the Death Benefit Option may
require an increase to the Specified Amount. The minimum increase in the
Specified Amount permitted by the Company is $10,000. An approved increase will
have an effective date of the Monthly Anniversary Day on or next following the
date the Company approves the supplemental application. The Company reserves
the right to limit such increases to one per Policy Year, and to require
satisfactory evidence of insurability for any increase in the Specified Amount.
In addition, the rate class, rate class multiple and rate type for the increase
in Specified Amount must be identical to those on the Policy Date. The
Specified Amount can not be decreased if, after the decrease the policy would
fail to satisfy the definition of Life Insurance under Section 7702 of the
Code.
CHANGES IN THE DEATH BENEFIT OPTION
The Policy Owner may change the Death Benefit Option under the Policy. If the
change is from Option 1 to Option 2, the Specified Amount will be decreased by
the amount of the Cash Value. If the change is from Option 2 to Option 1, the
Specified Amount will be increased by the amount of the Cash Value. Evidence of
insurability is not required for a change from Option 2 to Option 1. The
Company reserves the right to require evidence of insurability for a change
from Option 1 to Option 2. The effective date of the change will be the Monthly
Anniversary Day on or next following the date the Company approves the request
for change. Only one change of option is permitted per Policy Year. A change
in Death Benefit Option will not be permitted if it results in the total
premiums paid exceeding the then current maximum premium limitations prescribed
by the Internal Revenue Service to qualify the Policy as a life insurance
contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While the Insured is living, all rights in this Policy are vested in the Policy
Owner named in the application or as subsequently changed, subject to
assignment, if any.
21
<PAGE> 25
The Policy Owner may name a contingent policy owner or a new policy owner while
the Insured is living. Any change must be in a written form satisfactory to the
Company and recorded at the Company's Home Office. Once recorded, the change
will be effective when signed. The change will not affect any payment made or
action taken by the Company before it was recorded. The Company may require
that the Policy be submitted for endorsement before making a change.
If the Policy Owner is other than the Insured and names no contingent owner,
and dies before the Insured, the Policy Owner's rights in this Policy belong to
the Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named on the application or as subsequently
changed, subject to any assignment.
The Policy Owner may name a new Beneficiary while the Insured is living. Any
change must be in a written form satisfactory to the Company and recorded at
the Company's Home Office. Once recorded, the change will be effective when
signed. The change will not affect any payment made or action taken by the
Company before it was recorded.
If any Beneficiary predeceases the Insured, that Beneficiary's interest passes
to any surviving Beneficiary, unless otherwise provided. Multiple beneficiaries
will be paid in equal shares, unless otherwise provided. If no named
Beneficiary survives the Insureds, the proceeds shall be paid to the Policy
Owner or the Policy Owner's estate.
ASSIGNMENT
While the Insured is living, the Policy Owner may assign his or her rights in
the Policy. The assignment must be in writing, signed by the Policy Owner and
recorded by the Company at its Home Office. The Company is not responsible for
any assignment not submitted for recording, nor is the Company responsible for
the sufficiency or validity of any assignment.
The assignment will be subject to any indebtedness owed to the Company before
it was recorded.
INCONTESTABILITY
The Company will not contest a Death Benefit based on representations in any
written application when such benefit has been in force, during the lifetime of
the Insured, for two years.
ERROR IN AGE OR SEX
If the Insured's age, sex or both, as stated in the application, are incorrect,
the affected benefits will be adjusted to reflect the correct age or sex.
SUICIDE
If the Insured dies by suicide within two years from the Policy Date, the
Company will pay no more than the sum of the premiums, less any unpaid loan. If
the Insured dies by suicide within two years from the date an application is
accepted for an increase in the Specified Amount, the Company will pay no more
than the amount paid for such additional benefit.
NONPARTICIPATING POLICIES
The Policies are nonparticipating; they do not participate in any dividend
distribution of the Company's surplus.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from contributions made on or
after August 1, 1983. The Policies offered by this prospectus are based upon
actuarial tables which distinguish between men and women and thus the Policies
provided different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with
legal counsel, the impact of Norris on any employment related insurance or
benefit program before purchasing this Policy.
22
<PAGE> 26
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents in those states where
the Policies may lawfully be sold. Such agents will be registered
representatives of broker dealers registered under the Securities Exchange Act
of 1934 who are members of the National Association of Securities Dealers, Inc.
(NASD). The Policies will be distributed by the General Distributor, American
Capital Marketing, Inc.
Nationwide Advisory Services, Inc., One Nationwide Plaza, Columbus, Ohio 43215,
("NAS") acts as general distributor for the Nationwide Multi-Flex Variable
Account, Nationwide DC Variable Account, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA Separate
Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VLI Separate Account -2,
Nationwide VLI Separate Account-3, NACo Variable Account, Nationwide Variable
Account, and the Nationwide DCVA-II, all of which are separate investment
accounts of the Company or its affiliates. NAS is a wholly owned subsidiary of
the Company.
NAS also acts as principal underwriter for the Nationwide Investing Foundation,
Nationwide Separate Account Trust, Financial Horizons Investment Trust,
Nationwide Asset Allocation Trust and Nationwide Investing Foundation II, which
are open-end management investment companies.
Gross commissions paid by the Company on the sale of these Policies plus fees
for marketing services provided by the General Distributor are not more than
7.50% of the premiums paid.
CUSTODIAN OF ASSETS
The Company serves as the Custodian of the assets of the Variable Account.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Code provides that if certain tests are met, a policy will
be treated as a life insurance policy for federal tax purposes. The Company
will monitor compliance with these tests. The policy should thus receive the
same Federal income tax treatment as fixed benefit life insurance. As a result,
the life insurance proceeds payable under a policy are excludable from gross
income of the beneficiary under Section 101 of the Code.
The Policies described in this prospectus, meet the definition of "modified
endowment contracts" under Section 7702A of the Code. The Code defines modified
endowment contracts as those policies issued or materially changed after June
21, 1988 on which the total premiums paid during the first seven years exceed
the amount that would have been paid if the policy provided for paid up
benefits after seven level annual premiums. The policies offered in this
prospectus typically fall within this definition. The Code provides for
taxation of surrenders, partial surrenders, loans, collateral assignments and
other pre-death distributions from modified endowment contracts in the same way
annuities are taxed. Any distribution is taxable to the extent the Cash Value
of the Policy exceeds, at the time of the distribution, the premiums paid into
the Policy. The Code generally provides for a 10% tax penalty on the taxable
portion of such distributions. That penalty is applicable unless the
distribution is: (1) paid after the Policy Owner is 59-1/2 or disabled; or (2)
the distribution is part of an annuity to the Policy Owner as defined in the
Code.
Even though exchanges under Section 1035 of the Code qualify as material
changes, certain exchanges of pre-June 22, 1988 policies may retain their
non-modified endowment status. Therefore, the policies offered by this
prospectus may or may not be issued as modified endowment contracts. The
Company will monitor premiums paid and will notify the Policy Owner when the
policy's non-modified endowment status is in jeopardy. If a policy is not a
modified endowment contract, a cash distribution during the first fifteen years
after a policy is issued which causes a reduction in death benefits may still
become fully or partially taxable to the Policy Owner pursuant to Section
7702(f)(7) of the Code. The Policy Owner should carefully consider this
potential effect and seek further information before initiating any changes in
the terms of the policy. Under certain conditions, a policy may become a
modified endowment as a result of certain material changes or a reduction in
benefits as defined by Section 7702A(c) of the Code.
23
<PAGE> 27
In addition to meeting the tests required under Sections 7702, Section 817(h)
of the Code requires that the investments of separate accounts such as the
Variable Account be adequately diversified. Regulations under 817(h) provide
that a variable life policy which does not satisfy the diversification
standards will not be treated as life insurance unless the failure to satisfy
the regulations was inadvertent, the failure is corrected, and the Policy Owner
or the Company pays an amount to the Internal Revenue Service. The amount will
be based on the tax that would have been paid by the Policy Owner if the
income, for the period the policy was not diversified, had been received by the
Policy Owner. If the failure to diversify is not corrected in this manner, the
Policy Owner will be deemed the owner of the underlying securities and taxed on
the earnings of his or her account.
A total surrender or cancellation of the Policy by lapse may have adverse tax
consequences depending on the circumstances.
Federal estate and state and local estate, inheritance and other tax
consequences of ownership or receipt of Policy proceeds depend on the
circumstances of each Policy Owner or Beneficiary.
FEDERAL ESTATE AND GENERATION - SKIPPING TRANSFER TAXES
The federal estate tax is integrated with the federal gift tax under a unified
tax rate schedule. In general, an estate of less than $600,000 (inclusive of
certain pre-death gifts) will not incur a federal estate tax liability. In
addition, an unlimited marital deduction may be available for federal estate
tax purposes, for certain amounts that pass to the surviving spouse.
When the Insured dies, the death benefit will generally be included in the
Insured's federal gross estate if: (1) the proceeds were payable to or for the
benefit of the Insured's estate; or (2) the Insured held any "incident of
ownership" in the Policy at death or at any time within three years of death.
An incident of ownership is, in general, any right that may be exercised by the
owner of a policy, such as the right to borrow on the policy, or the right to
name a new beneficiary.
If the Policy Owner (whether or not he or she is the Insured) transfers
ownership of the Policy to another person, such transfer may be subject to a
federal gift tax. In addition, if such Policy Owner transfers the Policy to
someone two or more generations younger than the Policy Owner, the transfer may
be subject to the federal generation-skipping transfer tax ("GSTT"), the
taxable amount being the value of the Policy.
Similarly, if the Beneficiary is two or more generations younger than the
Insured, the payment of the Death Proceeds at the death of the Insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the
Internal Revenue Service, the Company may be required to withhold a portion of
the Death Proceeds and pay them directly to the Internal Revenue Service as the
GSTT liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes. The tax rate is a flat rate equal to the maximum estate
tax rate (currently 55%), and there is a provision for an aggregate $1 million
exemption. Due to the complexity of these rules, the Policy Owner should
consult with their counsel or other competent advisors regarding these taxes.
NON-RESIDENT ALIENS
Distributions to nonresident aliens (NRAs) are generally subject to federal
income tax and tax withholding, at a statutory rate of thirty percent (30%) of
the amount of income that is distributed. The Company is required to withhold
such amount from the Distribution and remit it to the Internal Revenue Service.
Distributions to certain NRAs may be subject to lower, or in certain instances
zero, tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to the Company sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the Internal
Revenue Service. In addition, for any Distribution made after December 31,
1997, the NRA must obtain an Individual Taxpayer Identification Number from the
Internal Revenue Service, and furnish that number to the Company prior to the
Distribution. If the Company does not have the proper proof of citizenship or
residency and (for Distributions after December 31, 1997) a proper Individual
Taxpayer Identification Number prior to any Distribution, the Company will be
required to withhold 30% of the income, regardless of any treaty provision.
A payment may not be subject to withholding where the recipient sufficiently
establishes to the Company that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and that such
payment is includable in the recipient's gross income for United States federal
income tax purposes. Any such distributions may be subject to back-up
withholding at the statutory rate (currently 31%) if no taxpayer identification
number, or an incorrect taxpayer identification number, is provided.
24
<PAGE> 28
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Variable Account is not a separate entity from the Company and its operations
form a part of the Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Variable Account are reinvested and
taken into account in determining the value of Accumulation Units. As a result,
such investment income and realized capital gains are automatically applied to
increase reserves under the Policies.
The Company does not initially expect to incur any federal income tax liability
that would be chargeable to the Variable Account. Based upon these
expectations, no charge is currently being made against the Variable Account
for federal income taxes. If, however, the Company determines that on a
separate company basis such taxes may be incurred, it reserves the right to
assess a charge for such taxes against the Variable Account.
The Company may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
TAX CHANGES
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the Internal Revenue
Service, is general and is not intended as tax advice.
In the recent past, the Internal Revenue Code has been subjected to numerous
amendments and changes, and it is reasonable to believe that it will continue
to be revised. The United States Congress has, in the past, considered numerous
legislative proposal that, if enacted, could change the tax treatment of the
Policies. It is reasonable to believe that such proposals, and other proposals
will be considered in the future, and some of them may be enacted into law. In
addition, the Treasury Department may amend existing regulations, issue new
regulations, or adopt new interpretations of existing law that may be in
variance with its current positions on these matters. In addition, current
state law (which is not discussed herein), and future amendments to state law,
may affect the tax consequences of the Policy.
If the Policy Owner, Insured, or Beneficiary or other person receiving any
benefit or interest in or from the Policy is not both a resident or citizen of
the United States, there may be a tax imposed by a foreign country, in addition
to any tax imposed by the United States. The foreign law (including
regulations, rulings, and case law) may change and impose additional taxes on
the Policy, the Death Benefit, or other distributions under the Policy. If
there is currently a treaty that provides favorable treatment for distributions
from the Policy and/or ownership of the Policy, that treaty may be amended and
all or part of the favorable treatment may be eliminated.
Any or all of the foregoing may change from time to time without any notice,
and the tax consequences arising out of a Policy may be changed retroactively.
There is no way of predicting whether, when, and to what extent any such change
may take place. No representation is made as to the likelihood of the
continuation of these current laws, interpretations, and policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
INSURANCE CONTRACTS. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD
NOT TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
The Company serves as depositor for the Nationwide Variable Account, Nationwide
Variable Account-II, Nationwide Variable Account-3, Nationwide Variable
Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8,
MFS Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI
Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, the NACo Variable Account, the Nationwide DC Variable Account, and
the Nationwide DCVA-II, each of which is a registered investment company, and
each of which is a separate investment account of the Company.
25
<PAGE> 29
The Company, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in that state. In
general, all states have statutory administrative powers. Such regulation
relates, among other things, to licensing of insurers and their agents, the
approval of policy forms, the methods of computing reserves, the form and
content of statutory financial statements, the amount of policyholders' and
stockholders' dividends, and the type of distribution of investments permitted.
The Company operates in the highly competitive field of life insurance. There
are approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete
with the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the
other insurance companies in the group. In addition to its direct salaried
employees, the Company shares employees with Nationwide Mutual Insurance
Company and Nationwide Mutual Fire Insurance Company.
The Company does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. The Company shares its Home Office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company, together with Nationwide Mutual Insurance
Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity
Insurance Company, Nationwide Property and Casualty Insurance Company, National
Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity
Company, Nationwide Indemnity Company and Nationwide General Insurance Company
and all of their affiliated companies comprise the Nationwide Insurance
Enterprise.
26
<PAGE> 30
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Corporation is the sole
shareholder of Nationwide Life.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
DIRECTOR
NAME SINCE PRINCIPAL OCCUPATION
---- ----- --------------------
<S> <C> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Keith W. Eckel 1996 Partner, Fred W. Eckel Sons ; President Eckel Farms, Inc. (1)
Willard J. Engel 1994 General Manager Lyon County Cooperative Oil Company (1)
Fred C. Finney 1992 Owner and Operator, Moreland Fruit Farm; Operator, Melrose
Orchard
Charles L. Fuellgraf, Jr. *+ 1969 Chief Executive Officer, Fuellgraf Electric Company, Electrical
Construction and Engineering Services (1)
Joseph J. Gasper *+ 1996 President and Chief Operating Officer, Nationwide Life Insurance
Company and Nationwide Life and Annuity Company
Henry S. Holloway *+ 1986 Farm Owner and Operator (1)
Dimon Richard McFerson *+ 1988 Chairman and Chief Executive Officer, Nationwide Insurance
Enterprise Company (2)
David O. Miller *+ 1985 Farm Owner and Land Developer; President, Owen Potato Farm,
Inc.; Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Owner and Operator, Noecker Farms (1)
James F. Patterson + 1989 Vice President, Pattersons, Inc.; President Patterson Farms, Inc.
Arden L. Shisler *+ 1984 Partner and Manager, Sweetwater Beef Farms; President and Chief
Executive Officer, K&B Transport, Inc. (1)
Robert L. Stewart 1989 Owner and Operator; Sunnydale Farms and Mining (1)
Nancy C. Thomas * 1986 Farm Owner and Operator, Da-Ma-Lor Farm (1)
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1)
- ---------------------------------------
</TABLE>
*Member, Executive +Member,
Committee Investment
Committee
1) Principal occupation for last five years.
2) Prior to assuming this current position, Messrs. McFerson and Gasper held
other executive management positions with the companies.
Each of the directors is a director of the other major affiliates of the
Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of
the Company and Nationwide Life Insurance Company. Messrs. McFerson and Gasper
are directors of Nationwide Advisory Services, Inc., a registered
broker-dealer.
Messrs. Gasper, Holloway, McFerson, Miller, Patterson Shisler and Fuellgraf are
directors of Nationwide Financial Services, Inc. Messrs. Fuellgraf, McFerson,
Ms. Thomas and Mr. Weihl are trustees of Nationwide Investing Foundation, a
registered investment company. Mr. McFerson is a trustee of Nationwide Separate
Account Trust, Financial Horizons Investment Trust, Nationwide Asset Allocation
Trust and Nationwide Investing Foundation II, registered investment companies.
Mr. Engel is a director of Western Cooperative Transport.
27
<PAGE> 31
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME OFFICE HELD
- ---- -----------
<S> <C>
Dimon Richard McFerson Chairman and Chief Executive Officer-Nationwide Insurance Enterprise
Joseph J. Gasper President and Chief Operating Officer
Gordon E. McCutchan Executive Vice President, Law and Corporate Services and Secretary
Robert A. Oakley Executive Vice President-Chief Financial Officer
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
James E. Brock Senior Vice President - Life Company Operations
W. Sidney Druen Senior Vice President and General Counsel and Assistant Secretary
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary
Richard A. Karas Senior Vice President - Sales and Financial Services
Mark R. Thresher Vice President - Controller
Duane M. Campbell Vice President - Treasurer
</TABLE>
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and
Annuity Insurance Company. Mr. Galloway is also an officer of Nationwide Mutual
Insurance Company and Nationwide Life and Annuity Insurance Company. Each of
the other officers listed above is also an officer of each of the companies
comprising the Nationwide Insurance Enterprise. Each of the executive officers
listed above has been associated with the registrant in an executive capacity
for more than the past five years, except Mr. Thresher, who joined the
Registrant in 1996. From 1988-1996, Mr. Thresher served as a partner in the
accounting firm KPMG Peat Marwick LLP and lead partner for Nationwide Insurance
Enterprise from 1993-1996.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable
contracts and policies with benefits which vary in accordance with the
investment experience of a separate account of the Company.
STATE REGULATION
The Company is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a
prescribed form is filed with the Insurance Department each year covering the
operation of the Company for the preceding year and its financial condition as
of the end of such year. Regulation by the Insurance Department includes
periodic examination to determine the Company's contract liabilities and
reserves so that the Insurance Department may certify the items are correct.
The Company's books and accounts are subject to review by the Insurance
Department at all times and a full examination of its operations is conducted
periodically by the National Association of Insurance Commissioners. Such
regulation does not, however, involve any supervision of management or
investment practices or policies. In addition, the Company is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current Death Benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each sub-account of the Variable Account, and any
Policy debt, as well as interest on the debt for the preceding year.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as change in Specified Amount, change in Death Benefit Option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, increase in loan principal, loan repayments, unpaid loan interest added
to principal, reinstatement and termination.
28
<PAGE> 32
ADVERTISING
The Company is ranked and rated by independent financial rating services, among
which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts . Furthermore,
the Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs based on selected tax brackets or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is expected
to have a material adverse effect on the Company.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In October, 1996, a policyholder of Nationwide Life
filed a complaint in Alabama state court against Nationwide Life and an agent
of Nationwide Life (Wayne M. King v. Nationwide Life Insurance Company and
Danny Nix) related to the sale of a whole life policy on a "vanishing premium"
basis and seeking unspecified compensatory and punitive damages. In February,
1997, Nationwide Life was named as a defendant in a lawsuit filed in New York
Supreme Court which also related to the sale of whole life policies on a
"vanishing premium" basis (John H. Snyder v. Nationwide Mutual Insurance
Company, Nationwide Mutual Insurance Co. and Nationwide Life Insurance Co.).
The plaintiff in such lawsuit seeks to represent a national class of Nationwide
Life policyholders and claims unspecified compensatory and punitive damages.
This lawsuit is in an early stage and has not been certified as a class action.
Nationwide Life intends to defend these cases vigorously. There can be no
assurance that any future litigation relating to pricing and sales practices
will not have a material adverse effect on the Company.
Van Kampen American Capital Distributors, Inc., is not engaged in any material
litigation of any nature.
EXPERTS
The financial statements and schedules have been included herein in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Account, the Company, and the Policies
offered hereby. Statements contained in this prospectus as to the content of
Policies and other legal instruments are summaries. For a complete statement of
the terms thereof, reference is made to such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43215. All
the members of such firm are employed by the Nationwide Mutual Insurance
Company.
29
<PAGE> 33
APPENDIX 1
ILLUSTRATIONS OF WHEN ADDITIONAL PREMIUM PAYMENTS ARE PERMITTED
Example 1: A male non-tobacco, age 35, purchases a Policy with an initial
premium of $25,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $179,733. In the 12th and subsequent policy years, annual premiums of
$2,177 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
Additional premiums which increase the Specified Amount may be made at any
time, subject to the $1,000 minimum. The Company reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time
if they are required to continue the Policy in force.
Example 2: A male non-tobacco, age 55, purchases a Policy with an initial
premium of $100,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $306,283. In the 11th and subsequent policy years, annual premiums of
$9,591 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
Additional premiums which increase the Specified Amount may be made at any
time, subject to the $1,000 minimum. The Company reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time
if they are required to continue the Policy in force.
30
<PAGE> 34
APPENDIX 2
ILLUSTRATIONS OF CASH VALUES
CASH SURRENDER VALUES
AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Cash Values, Cash Surrender Values and Death Benefits under a
Policy would vary over time if the hypothetical gross investment rates of
return were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Cash Values, Cash Surrender Values and Death Benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the Policies would go into default, at which time additional
premium payments would be required to continue the Policy in force. The
illustrations also assume there is no Policy Indebtedness, no additional
premium payments are made, no Cash Values are allocated to the Fixed Account,
and there are no changes in the Specified Amount or Death Benefit option.
The amounts shown for the Cash Value, Cash Surrender Value and Death Benefit as
of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks, recovering premium taxes and providing for
administrative expenses. On a current basis, these charges are equivalent to an
annual effective rate of 1.30% in the first 10 policy years and 1.00%
thereafter. On a guaranteed basis, these charges are equivalent to an annual
maximum effective rate of 1.60% in the first 10 policy years and 1.30%
thereafter. In addition, the net investment returns also reflect the deduction
of underlying Mutual Fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 0.80%.
Taking account of the current charges for mortality and expense risks,
recovering premium taxes and providing for administrative and underlying Mutual
Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net
investment experience at constant annual rates of -2.1%, 3.9%, and 9.9%
respectively, in policy years 1 through ten, and -1.8%, 4.2%, and 10.2%
thereafter. Taking account of guaranteed charges, gross annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -2.4%, 3.6%, and 9.6% respectively, in policy years 1 through 10, and
- -2.1%, 3.9% and 9.9% thereafter.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the Policy. The values shown are for policies which are
issued as standard (including non-tobacco). Policies issued on a substandard
basis would result in lower Cash Values and Death Benefits than those
illustrated. Death Benefit Option 1 has been assumed in all the illustrations.
In addition, the illustrations reflect the fact that the Company deducts an
annual administrative charge at the beginning of each Policy Year after the
first. The illustrations also reflect the fact that no charges for federal or
state income taxes are currently made against the Variable Account. If such a
charge is made in the future, it will require a higher gross investment return
than illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, the Company will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
31
<PAGE> 35
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,657 8,807 43,190 10,242 9,392 43,190 10,826 9,976 43,190
2 11,025 9,246 8,396 43,190 10,415 9,565 43,190 11,654 10,804 43,190
3 11,576 8,830 8,030 43,190 10,585 9,785 43,190 12,555 11,755 43,190
4 12,155 8,408 7,608 43,190 10,750 9,950 43,190 13,536 12,736 43,190
5 12,763 7,978 7,228 43,190 10,908 10,158 43,190 14,605 13,855 43,190
6 13,401 7,539 6,839 43,190 11,059 10,359 43,190 15,771 15,071 43,190
7 14,071 7,088 6,488 43,190 11,199 10,599 43,190 17,043 16,443 43,190
8 14,775 6,622 6,122 43,190 11,325 10,825 43,190 18,430 17,930 43,190
9 15,513 6,136 5,736 43,190 11,435 11,035 43,190 19,946 19,546 43,190
10 16,289 5,629 5,629 43,190 11,525 11,525 43,190 21,603 21,603 43,190
11 17,103 5,112 5,112 43,190 11,627 11,627 43,190 23,488 23,488 43,190
12 17,959 4,571 4,571 43,190 11,710 11,710 43,190 25,566 25,566 43,190
13 18,856 4,004 4,004 43,190 11,772 11,772 43,190 27,862 27,862 43,190
14 19,799 3,408 3,408 43,190 11,811 11,811 43,190 30,403 30,403 43,190
15 20,789 2,780 2,780 43,190 11,822 11,822 43,190 33,219 33,219 44,513
16 21,829 2,114 2,114 43,190 11,801 11,801 43,190 36,323 36,323 47,220
17 22,920 1,407 1,407 43,190 11,745 11,745 43,190 39,724 39,724 50,846
18 24,066 651 651 43,190 11,646 11,646 43,190 43,448 43,448 54,745
19 25,270 (*) (*) (*) 11,497 11,497 43,190 47,528 47,528 58,935
20 26,533 (*) (*) (*) 11,292 11,292 43,190 52,000 52,000 63,440
21 27,860 (*) (*) (*) 11,023 11,023 43,190 56,902 56,902 68,283
22 29,253 (*) (*) (*) 10,659 10,659 43,190 62,259 62,259 74,088
23 30,715 (*) (*) (*) 10,186 10,186 43,190 68,110 68,110 80,370
24 32,251 (*) (*) (*) 9,583 9,583 43,190 74,502 74,502 87,167
25 33,864 (*) (*) (*) 8,829 8,829 43,190 81,482 81,482 94,520
26 35,557 (*) (*) (*) 7,891 7,891 43,190 89,104 89,104 102,469
27 37,335 (*) (*) (*) 6,728 6,728 43,190 97,461 97,461 110,130
28 39,201 (*) (*) (*) 5,286 5,286 43,190 106,635 106,635 118,365
29 41,161 (*) (*) (*) 3,501 3,501 43,190 116,725 116,725 127,230
30 43,219 (*) (*) (*) 1,296 1,296 43,190 127,847 127,847 136,797
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS.. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
32
<PAGE> 36
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,616 8,766 43,190 10,199 9,349 43,190 10,781 9,931 43,190
2 11,025 9,110 8,260 43,190 10,268 9,418 43,190 11,495 10,645 43,190
3 11,576 8,600 7,800 43,190 10,327 9,527 43,190 12,267 11,467 43,190
4 12,155 8,084 7,284 43,190 10,374 9,574 43,190 13,101 12,301 43,190
5 12,763 7,561 6,811 43,190 10,407 9,657 43,190 14,004 13,254 43,190
6 13,401 7,029 6,329 43,190 10,424 9,724 43,190 14,981 14,281 43,190
7 14,071 6,483 5,883 43,190 10,420 9,820 43,190 16,039 15,439 43,190
8 14,775 5,920 5,420 43,190 10,393 9,893 43,190 17,185 16,685 43,190
9 15,513 5,336 4,936 43,190 10,337 9,937 43,190 18,426 18,026 43,190
10 16,289 4,726 4,726 43,190 10,248 10,248 43,190 19,772 19,772 43,190
11 17,103 4,098 4,098 43,190 10,151 10,151 43,190 21,298 21,298 43,190
12 17,959 3,434 3,434 43,190 10,013 10,013 43,190 22,965 22,965 43,190
13 18,856 2,729 2,729 43,190 9,827 9,827 43,190 24,791 24,791 43,190
14 19,799 1,976 1,976 43,190 9,587 9,587 43,190 26,796 26,796 43,190
15 20,789 1,168 1,168 43,190 9,283 9,283 43,190 29,002 29,002 43,190
16 21,829 294 294 43,190 8,905 8,905 43,190 31,438 31,438 43,190
17 22,920 (*) (*) (*) 8,441 8,441 43,190 34,137 34,137 43,695
18 24,066 (*) (*) (*) 7,874 7,874 43,190 37,104 37,104 46,751
19 25,270 (*) (*) (*) 7,185 7,185 43,190 40,336 40,336 50,016
20 26,533 (*) (*) (*) 6,352 6,352 43,190 43,856 43,856 53,504
21 27,860 (*) (*) (*) 5,352 5,352 43,190 47,691 47,691 57,229
22 29,253 (*) (*) (*) 4,156 4,156 43,190 51,858 51,858 61,711
23 30,715 (*) (*) (*) 2,735 2,735 43,190 56,383 56,383 66,532
24 32,251 (*) (*) (*) 1,045 1,045 43,190 61,298 61,298 71,719
25 33,864 (*) (*) (*) (*) (*) (*) 66,636 66,636 77,298
26 35,557 (*) (*) (*) (*) (*) (*) 72,430 72,430 83,295
27 37,335 (*) (*) (*) (*) (*) (*) 78,761 78,761 89,000
28 39,201 (*) (*) (*) (*) (*) (*) 85,690 85,690 95,116
29 41,161 (*) (*) (*) (*) (*) (*) 93,292 93,292 101,689
30 43,219 (*) (*) (*) (*) (*) (*) 101,661 101,661 108,778
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
33
<PAGE> 37
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,672 8,822 41,661 10,256 9,406 41,661 10,841 9,991 41,661
2 11,025 9,252 8,402 41,661 10,421 9,571 41,661 11,660 10,810 41,661
3 11,576 8,829 8,029 41,661 10,583 9,783 41,661 12,552 11,752 41,661
4 12,155 8,402 7,602 41,661 10,741 9,941 41,661 13,524 12,724 41,661
5 12,763 7,970 7,220 41,661 10,895 10,145 41,661 14,586 13,836 41,661
6 13,401 7,532 6,832 41,661 11,043 10,343 41,661 15,745 15,045 41,661
7 14,071 7,084 6,484 41,661 11,184 10,584 41,661 17,012 16,412 41,661
8 14,775 6,625 6,125 41,661 11,314 10,814 41,661 18,396 17,896 41,661
9 15,513 6,152 5,752 41,661 11,431 11,031 41,661 19,909 19,509 41,661
10 16,289 5,661 5,661 41,661 11,532 11,532 41,661 21,566 21,566 41,661
11 17,103 5,165 5,165 41,661 11,651 11,651 41,661 23,453 23,453 41,661
12 17,959 4,649 4,649 41,661 11,754 11,754 41,661 25,533 25,533 41,661
13 18,856 4,112 4,112 41,661 11,841 11,841 41,661 27,832 27,832 41,661
14 19,799 3,549 3,549 41,661 11,909 11,909 41,661 30,376 30,376 41,918
15 20,789 2,958 2,958 41,661 11,954 11,954 41,661 33,184 33,184 44,467
16 21,829 2,335 2,335 41,661 11,973 11,973 41,661 36,272 36,272 47,153
17 22,920 1,675 1,675 41,661 11,962 11,962 41,661 39,654 39,654 50,757
18 24,066 971 971 41,661 11,915 11,915 41,661 43,359 43,359 54,633
19 25,270 218 218 41,661 11,826 11,826 41,661 47,420 47,420 58,800
20 26,533 (*) (*) (*) 11,690 11,690 41,661 51,870 51,870 63,282
21 27,860 (*) (*) (*) 11,499 11,499 41,661 56,751 56,751 68,101
22 29,253 (*) (*) (*) 11,229 11,229 41,661 62,085 62,085 73,881
23 30,715 (*) (*) (*) 10,866 10,866 41,661 67,916 67,916 80,141
24 32,251 (*) (*) (*) 10,396 10,396 41,661 74,288 74,288 86,917
25 33,864 (*) (*) (*) 9,799 9,799 41,661 81,250 81,250 94,250
26 35,557 (*) (*) (*) 9,048 9,048 41,661 88,856 88,856 102,184
27 37,335 (*) (*) (*) 8,111 8,111 41,661 97,197 97,197 109,832
28 39,201 (*) (*) (*) 6,943 6,943 41,661 106,355 106,355 118,054
29 41,161 (*) (*) (*) 5,491 5,491 41,661 116,427 116,427 126,905
30 43,219 (*) (*) (*) 3,694 3,694 41,661 127,528 127,528 136,455
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
34
<PAGE> 38
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,623 8,773 41,661 10,206 9,356 41,661 10,788 9,938 41,661
2 11,025 9,109 8,259 41,661 10,267 9,417 41,661 11,494 10,644 41,661
3 11,576 8,592 7,792 41,661 10,319 9,519 41,661 12,258 11,458 41,661
4 12,155 8,071 7,271 41,661 10,359 9,559 41,661 13,084 12,284 41,661
5 12,763 7,543 6,793 41,661 10,385 9,635 41,661 13,979 13,229 41,661
6 13,401 7,006 6,306 41,661 10,396 9,696 41,661 14,948 14,248 41,661
7 14,071 6,457 5,857 41,661 10,387 9,787 41,661 15,997 15,397 41,661
8 14,775 5,892 5,392 41,661 10,355 9,855 41,661 17,135 16,635 41,661
9 15,513 5,306 4,906 41,661 10,295 9,895 41,661 18,369 17,969 41,661
10 16,289 4,697 4,697 41,661 10,204 10,204 41,661 19,708 19,708 41,661
11 17,103 4,071 4,071 41,661 10,107 10,107 41,661 21,228 21,228 41,661
12 17,959 3,410 3,410 41,661 9,968 9,968 41,661 22,889 22,889 41,661
13 18,856 2,710 2,710 41,661 9,785 9,785 41,661 24,711 24,711 41,661
14 19,799 1,964 1,964 41,661 9,549 9,549 41,661 26,714 26,714 41,661
15 20,789 1,165 1,165 41,661 9,252 9,252 41,661 28,920 28,920 41,661
16 21,829 303 303 41,661 8,884 8,884 41,661 31,358 31,358 41,661
17 22,920 (*) (*) (*) 8,434 8,434 41,661 34,053 34,053 43,588
18 24,066 (*) (*) (*) 7,884 7,884 41,661 36,997 36,997 46,617
19 25,270 (*) (*) (*) 7,217 7,217 41,661 40,203 40,203 49,852
20 26,533 (*) (*) (*) 6,412 6,412 41,661 43,694 43,694 53,307
21 27,860 (*) (*) (*) 5,446 5,446 41,661 47,499 47,499 56,999
22 29,253 (*) (*) (*) 4,293 4,293 41,661 51,632 51,632 61,442
23 30,715 (*) (*) (*) 2,922 2,922 41,661 56,121 56,121 66,223
24 32,251 (*) (*) (*) 1,295 1,295 41,661 60,996 60,996 71,366
25 33,864 (*) (*) (*) (*) (*) (*) 66,291 66,291 76,897
26 35,557 (*) (*) (*) (*) (*) (*) 72,038 72,038 82,843
27 37,335 (*) (*) (*) (*) (*) (*) 78,317 78,317 88,498
28 39,201 (*) (*) (*) (*) (*) (*) 85,190 85,190 94,561
29 41,161 (*) (*) (*) (*) (*) (*) 92,731 92,731 101,076
30 43,219 (*) (*) (*) (*) (*) (*) 101,032 101,032 108,104
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
35
<PAGE> 39
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,174 22,049 114,856 25,636 23,511 114,856 27,097 24,972 114,856
2 27,563 23,291 21,166 114,856 26,223 24,098 114,856 29,328 27,203 114,856
3 28,941 22,397 20,397 114,856 26,810 24,810 114,856 31,759 29,759 114,856
4 30,388 21,492 19,492 114,856 27,396 25,396 114,856 34,411 32,411 114,856
5 31,907 20,572 18,697 114,856 27,978 26,103 114,856 37,306 35,431 114,856
6 33,502 19,633 17,883 114,856 28,553 26,803 114,856 40,467 38,717 114,856
7 35,178 18,669 17,169 114,856 29,116 27,616 114,856 43,920 42,420 114,856
8 36,936 17,675 16,425 114,856 29,663 28,413 114,856 47,693 46,443 114,856
9 38,783 16,643 15,643 114,856 30,186 29,186 114,856 51,817 50,817 114,856
10 40,722 15,567 15,567 114,856 30,681 30,681 114,856 56,332 56,332 114,856
11 42,758 14,484 14,484 114,856 31,235 31,235 114,856 61,462 61,462 114,856
12 44,896 13,349 13,349 114,856 31,762 31,762 114,856 67,116 67,116 114,856
13 47,141 12,159 12,159 114,856 32,260 32,260 114,856 73,356 73,356 114,856
14 49,498 10,907 10,907 114,856 32,724 32,724 114,856 80,254 80,254 114,856
15 51,973 9,584 9,584 114,856 33,146 33,146 114,856 87,888 87,888 117,770
16 54,572 8,182 8,182 114,856 33,518 33,518 114,856 96,305 96,305 125,196
17 57,300 6,689 6,689 114,856 33,833 33,833 114,856 105,530 105,530 135,078
18 60,165 5,089 5,089 114,856 34,076 34,076 114,856 115,640 115,640 145,707
19 63,174 3,368 3,368 114,856 34,235 34,235 114,856 126,722 126,722 157,136
20 66,332 1,510 1,510 114,856 34,297 34,297 114,856 138,873 138,873 169,425
21 69,649 (*) (*) (*) 34,250 34,250 114,856 152,200 152,200 182,641
22 73,132 (*) (*) (*) 34,034 34,034 114,856 166,778 166,778 198,465
23 76,788 (*) (*) (*) 33,625 33,625 114,856 182,720 182,720 215,609
24 80,627 (*) (*) (*) 32,991 32,991 114,856 200,153 200,153 234,179
25 84,659 (*) (*) (*) 32,091 32,091 114,856 219,214 219,214 254,289
26 88,892 (*) (*) (*) 30,868 30,868 114,856 240,050 240,050 276,058
27 93,336 (*) (*) (*) 29,254 29,254 114,856 262,908 262,908 297,086
28 98,003 (*) (*) (*) 27,158 27,158 114,856 288,008 288,008 319,689
29 102,903 (*) (*) (*) 24,470 24,470 114,856 315,612 315,612 344,017
30 108,049 (*) (*) (*) 21,069 21,069 114,856 346,029 346,029 370,251
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
36
<PAGE> 40
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,010 21,885 114,856 25,465 23,340 114,856 26,920 24,795 114,856
2 27,563 22,932 20,807 114,856 25,837 23,712 114,856 28,914 26,789 114,856
3 28,941 21,839 19,839 114,856 26,189 24,189 114,856 31,070 29,070 114,856
4 30,388 20,726 18,726 114,856 26,515 24,515 114,856 33,402 31,402 114,856
5 31,907 19,589 17,714 114,856 26,813 24,938 114,856 35,927 34,052 114,856
6 33,502 18,421 16,671 114,856 27,075 25,325 114,856 38,663 36,913 114,856
7 35,178 17,214 15,714 114,856 27,293 25,793 114,856 41,626 40,126 114,856
8 36,936 15,959 14,709 114,856 27,457 26,207 114,856 44,836 43,586 114,856
9 38,783 14,642 13,642 114,856 27,555 26,555 114,856 48,317 47,317 114,856
10 40,722 13,254 13,254 114,856 27,577 27,577 114,856 52,095 52,095 114,856
11 42,758 11,820 11,820 114,856 27,592 27,592 114,856 56,370 56,370 114,856
12 44,896 10,287 10,287 114,856 27,510 27,510 114,856 61,045 61,045 114,856
13 47,141 8,645 8,645 114,856 27,318 27,318 114,856 66,169 66,169 114,856
14 49,498 6,877 6,877 114,856 26,999 26,999 114,856 71,799 71,799 114,856
15 51,973 4,962 4,962 114,856 26,531 26,531 114,856 78,001 78,001 114,856
16 54,572 2,876 2,876 114,856 25,887 25,887 114,856 84,854 84,854 114,856
17 57,300 592 592 114,856 25,041 25,041 114,856 92,441 92,441 118,325
18 60,165 (*) (*) (*) 23,949 23,949 114,856 100,752 100,752 126,948
19 63,174 (*) (*) (*) 22,565 22,565 114,856 109,801 109,801 136,153
20 66,332 (*) (*) (*) 20,838 20,838 114,856 119,657 119,657 145,981
21 69,649 (*) (*) (*) 18,711 18,711 114,856 130,397 130,397 156,477
22 73,132 (*) (*) (*) 16,118 16,118 114,856 142,065 142,065 169,057
23 76,788 (*) (*) (*) 12,984 12,984 114,856 154,740 154,740 182,593
24 80,627 (*) (*) (*) 9,213 9,213 114,856 168,506 168,506 197,152
25 84,659 (*) (*) (*) 4,678 4,678 114,856 183,456 183,456 212,810
26 88,892 (*) (*) (*) (*) (*) (*) 199,687 199,687 229,640
27 93,336 (*) (*) (*) (*) (*) (*) 217,419 217,419 245,684
28 98,003 (*) (*) (*) (*) (*) (*) 236,825 236,825 262,876
29 102,903 (*) (*) (*) (*) (*) (*) 258,116 258,116 281,347
30 108,049 (*) (*) (*) (*) (*) (*) 281,551 281,551 301,260
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
37
<PAGE> 41
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,836 88,336 306,283 102,691 94,191 306,283 108,548 100,048 306,283
2 110,250 93,571 85,071 306,283 105,349 96,849 306,283 117,822 109,322 306,283
3 115,763 90,250 82,250 306,283 108,023 100,023 306,283 127,957 119,957 306,283
4 121,551 86,860 78,860 306,283 110,707 102,707 306,283 139,044 131,044 306,283
5 127,628 83,384 75,884 306,283 113,391 105,891 306,283 151,185 143,685 306,283
6 134,010 79,805 72,805 306,283 116,067 109,067 306,283 164,497 157,497 306,283
7 140,710 76,105 70,105 306,283 118,726 112,726 306,283 179,113 173,113 306,283
8 147,746 72,256 67,256 306,283 121,349 116,349 306,283 195,180 190,180 306,283
9 155,133 68,229 64,229 306,283 123,922 119,922 306,283 212,872 208,872 306,283
10 162,889 63,997 63,997 306,283 126,430 126,430 306,283 232,394 232,394 306,283
11 171,034 59,715 59,715 306,283 129,248 129,248 306,283 254,742 254,742 306,283
12 179,586 55,153 55,153 306,283 131,999 131,999 306,283 279,440 279,440 332,534
13 188,565 50,283 50,283 306,283 134,674 134,674 306,283 306,515 306,515 361,688
14 197,993 45,069 45,069 306,283 137,258 137,258 306,283 336,192 336,192 393,344
15 207,893 39,461 39,461 306,283 139,732 139,732 306,283 368,719 368,719 427,714
16 218,287 33,394 33,394 306,283 142,065 142,065 306,283 404,368 404,368 465,023
17 229,202 26,782 26,782 306,283 144,217 144,217 306,283 443,535 443,535 501,195
18 240,662 19,519 19,519 306,283 146,139 146,139 306,283 486,596 486,596 540,121
19 252,695 11,491 11,491 306,283 147,781 147,781 306,283 533,980 533,980 582,038
20 265,330 2,589 2,589 306,283 149,098 149,098 306,283 586,184 586,184 627,217
21 278,596 (*) (*) (*) 150,051 150,051 306,283 643,783 643,783 675,972
22 292,526 (*) (*) (*) 150,385 150,385 306,283 706,896 706,896 742,241
23 307,152 (*) (*) (*) 150,001 150,001 306,283 776,024 776,024 814,825
24 322,510 (*) (*) (*) 148,772 148,772 306,283 851,706 851,706 894,291
25 338,635 (*) (*) (*) 146,527 146,527 306,283 934,517 934,517 981,243
26 355,567 (*) (*) (*) 143,025 143,025 306,283 1,025,070 1,025,070 1,076,324
27 373,346 (*) (*) (*) 137,948 137,948 306,283 1,124,009 1,124,009 1,180,210
28 392,013 (*) (*) (*) 130,863 130,863 306,283 1,232,009 1,232,009 1,293,610
29 411,614 (*) (*) (*) 121,216 121,216 306,283 1,349,781 1,349,781 1,417,270
30 432,194 (*) (*) (*) 108,302 108,302 306,283 1,478,079 1,478,079 1,551,983
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
38
<PAGE> 42
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,948 87,448 306,283 101,775 93,275 306,283 107,604 99,104 306,283
2 110,250 91,708 83,208 306,283 103,374 94,874 306,283 115,732 107,232 306,283
3 115,763 87,336 79,336 306,283 104,857 96,857 306,283 124,525 116,525 306,283
4 121,551 82,805 74,805 306,283 106,202 98,202 306,283 134,051 126,051 306,283
5 127,628 78,081 70,581 306,283 107,381 99,881 306,283 144,385 136,885 306,283
6 134,010 73,125 66,125 306,283 108,360 101,360 306,283 155,616 148,616 306,283
7 140,710 67,894 61,894 306,283 109,104 103,104 306,283 167,850 161,850 306,283
8 147,746 62,323 57,323 306,283 109,560 104,560 306,283 181,201 176,201 306,283
9 155,133 56,345 52,345 306,283 109,670 105,670 306,283 195,814 191,814 306,283
10 162,889 49,889 49,889 306,283 109,374 109,374 306,283 211,865 211,865 306,283
11 171,034 43,014 43,014 306,283 108,940 108,940 306,283 230,263 230,263 306,283
12 179,586 35,483 35,483 306,283 107,985 107,985 306,283 250,728 250,728 306,283
13 188,565 27,207 27,207 306,283 106,434 106,434 306,283 273,495 273,495 322,725
14 197,993 18,072 18,072 306,283 104,191 104,191 306,283 298,360 298,360 349,082
15 207,893 7,926 7,926 306,283 101,127 101,127 306,283 325,428 325,428 377,496
16 218,287 (*) (*) (*) 97,072 97,072 306,283 354,887 354,887 408,120
17 229,202 (*) (*) (*) 91,803 91,803 306,283 387,101 387,101 437,424
18 240,662 (*) (*) (*) 85,031 85,031 306,283 422,374 422,374 468,835
19 252,695 (*) (*) (*) 76,405 76,405 306,283 461,068 461,068 502,564
20 265,330 (*) (*) (*) 65,518 65,518 306,283 503,621 503,621 538,875
21 278,596 (*) (*) (*) 51,895 51,895 306,283 550,563 550,563 578,091
22 292,526 (*) (*) (*) 34,952 34,952 306,283 601,683 601,683 631,768
23 307,152 (*) (*) (*) 13,965 13,965 306,283 657,322 657,322 690,188
24 322,510 (*) (*) (*) (*) (*) (*) 717,842 717,842 753,734
25 338,635 (*) (*) (*) (*) (*) (*) 783,619 783,619 822,800
26 355,567 (*) (*) (*) (*) (*) (*) 855,039 855,039 897,791
27 373,346 (*) (*) (*) (*) (*) (*) 932,494 932,494 979,119
28 392,013 (*) (*) (*) (*) (*) (*) 1,016,372 1,016,372 1,067,191
29 411,614 (*) (*) (*) (*) (*) (*) 1,107,070 1,107,070 1,162,424
30 432,194 (*) (*) (*) (*) (*) (*) 1,204,998 1,204,998 1,265,248
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
39
<PAGE> 43
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,508 88,008 211,021 102,374 93,874 211,021 108,241 99,741 211,021
2 110,250 92,854 84,354 211,021 104,682 96,182 211,021 117,213 108,713 211,021
3 115,763 89,070 81,070 211,021 106,972 98,972 211,021 127,070 119,070 211,021
4 121,551 85,137 77,137 211,021 109,240 101,240 211,021 137,933 129,933 211,021
5 127,628 81,027 73,527 211,021 111,476 103,976 211,021 149,940 142,440 211,021
6 134,010 76,704 69,704 211,021 113,668 106,668 211,021 163,251 156,251 211,021
7 140,710 72,123 66,123 211,021 115,796 109,796 211,021 178,060 172,060 211,021
8 147,746 67,225 62,225 211,021 117,840 112,840 211,021 194,591 189,591 215,996
9 155,133 61,951 57,951 211,021 119,777 115,777 211,021 212,875 208,875 232,034
10 162,889 56,238 56,238 211,021 121,591 121,591 211,021 232,962 232,962 249,269
11 171,034 50,190 50,190 211,021 123,647 123,647 211,021 255,820 255,820 268,611
12 179,586 43,354 43,354 211,021 125,474 125,474 211,021 280,866 280,866 294,909
13 188,565 35,600 35,600 211,021 127,041 127,041 211,021 308,299 308,299 323,714
14 197,993 26,767 26,767 211,021 128,308 128,308 211,021 338,333 338,333 355,249
15 207,893 16,637 16,637 211,021 129,219 129,219 211,021 371,196 371,196 389,756
16 218,287 4,918 4,918 211,021 129,691 129,691 211,021 407,131 407,131 427,488
17 229,202 (*) (*) (*) 129,613 129,613 211,021 446,394 446,394 468,714
18 240,662 (*) (*) (*) 128,837 128,837 211,021 489,252 489,252 513,715
19 252,695 (*) (*) (*) 127,175 127,175 211,021 535,989 535,989 562,788
20 265,330 (*) (*) (*) 124,397 124,397 211,021 586,902 586,902 616,247
21 278,596 (*) (*) (*) 120,215 120,215 211,021 642,311 642,311 674,426
22 292,526 (*) (*) (*) 114,104 114,104 211,021 702,504 702,504 737,629
23 307,152 (*) (*) (*) 105,486 105,486 211,021 767,818 767,818 806,209
24 322,510 (*) (*) (*) 93,550 93,550 211,021 838,603 838,603 880,533
25 338,635 (*) (*) (*) 77,123 77,123 211,021 915,212 915,212 960,973
26 355,567 (*) (*) (*) 54,481 54,481 211,021 997,997 997,997 1,047,897
27 373,346 (*) (*) (*) 23,024 23,024 211,021 1,089,398 1,089,398 1,132,973
28 392,013 (*) (*) (*) (*) (*) (*) 1,190,757 1,190,757 1,226,479
29 411,614 (*) (*) (*) (*) (*) (*) 1,303,713 1,303,713 1,329,788
30 432,194 (*) (*) (*) (*) (*) (*) 1,430,336 1,430,336 1,444,639
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50
ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
40
<PAGE> 44
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,130 86,630 211,021 100,970 92,470 211,021 106,812 98,312 211,021
2 110,250 89,907 81,407 211,021 101,644 93,144 211,021 114,088 105,588 211,021
3 115,763 84,356 76,356 211,021 102,066 94,066 211,021 121,987 113,987 211,021
4 121,551 78,419 70,419 211,021 102,196 94,196 211,021 130,609 122,609 211,021
5 127,628 72,016 64,516 211,021 101,980 94,480 211,021 140,072 132,572 211,021
6 134,010 65,041 58,041 211,021 101,345 94,345 211,021 150,520 143,520 211,021
7 140,710 57,359 51,359 211,021 100,195 94,195 211,021 162,134 156,134 211,021
8 147,746 48,791 43,791 211,021 98,404 93,404 211,021 175,149 170,149 211,021
9 155,133 39,127 35,127 211,021 95,825 91,825 211,021 189,879 185,879 211,021
10 162,889 28,128 28,128 211,021 92,288 92,288 211,021 206,608 206,608 221,071
11 171,034 15,598 15,598 211,021 87,881 87,881 211,021 225,818 225,818 237,109
12 179,586 1,122 1,122 211,021 82,107 82,107 211,021 246,737 246,737 259,074
13 188,565 (*) (*) (*) 74,678 74,678 211,021 269,505 269,505 282,980
14 197,993 (*) (*) (*) 65,220 65,220 211,021 294,270 294,270 308,983
15 207,893 (*) (*) (*) 53,215 53,215 211,021 321,186 321,186 337,245
16 218,287 (*) (*) (*) 37,932 37,932 211,021 350,411 350,411 367,931
17 229,202 (*) (*) (*) 18,350 18,350 211,021 382,105 382,105 401,210
18 240,662 (*) (*) (*) (*) (*) (*) 416,427 416,427 437,249
19 252,695 (*) (*) (*) (*) (*) (*) 453,540 453,540 476,217
20 265,330 (*) (*) (*) (*) (*) (*) 493,610 493,610 518,290
21 278,596 (*) (*) (*) (*) (*) (*) 536,814 536,814 563,655
22 292,526 (*) (*) (*) (*) (*) (*) 583,336 583,336 612,502
23 307,152 (*) (*) (*) (*) (*) (*) 633,366 633,366 665,035
24 322,510 (*) (*) (*) (*) (*) (*) 687,104 687,104 721,459
25 338,635 (*) (*) (*) (*) (*) (*) 744,737 744,737 781,974
26 355,567 (*) (*) (*) (*) (*) (*) 806,444 806,444 846,766
27 373,346 (*) (*) (*) (*) (*) (*) 874,778 874,778 909,769
28 392,013 (*) (*) (*) (*) (*) (*) 950,870 950,870 979,396
29 411,614 (*) (*) (*) (*) (*) (*) 1,036,099 1,036,099 1,056,821
30 432,194 (*) (*) (*) (*) (*) (*) 1,132,229 1,132,229 1,143,552
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE
OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT
FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A
PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR
INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR
THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
41
<PAGE> 45
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide VLI Separate Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account as of December 31,
1996, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the
three year period then ended. These financial statements and schedules of
changes in unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of
the underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VLI Separate Account as of December 31, 1996, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments in Van Kampen American Capital Life
Investment Trust, at market value:
Asset Allocation Fund
2,155,022 shares (cost $24,422,269) $ 24,459,498
Domestic Income Fund
333,174 shares (cost $2,688,144) 2,668,722
Emerging Growth Fund
119,694 shares (cost $1,613,469) 1,635,017
Enterprise Fund
1,816,594 shares (cost $25,629,353) 29,537,819
Global Equity Fund
86,385 shares (cost $962,884) 1,007,252
Government Fund
5,762,429 shares (cost $50,750,069) 49,902,635
Money Market Fund
9,135,631 shares (cost $9,135,631) 9,135,631
Real Estate Securities Fund
13,353 shares (cost $168,204) 197,360
-------------
Total assets 118,543,934
ACCOUNTS PAYABLE 43,083
-------------
CONTRACT OWNER'S EQUITY $ 118,500,851
=============
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Contract owners' equity represented by: UNITS UNIT VALUE
----- ----------
<S> <C> <C> <C>
Single Premium contracts issued prior to April 16, 1990
(policy years 1 through 10):
Asset Allocation Fund (formerly Multiple Strategy) 744,990 $ 24.272482 $ 18,082,756
Domestic Income Fund 86,684 18.211426 1,578,639
Emerging Growth Fund 69,012 13.467256 929,402
Enterprise Fund (formerly Common Stock) 700,997 27.810473 19,495,058
Global Equity Fund 33,541 11.864328 397,941
Government Fund 1,655,527 19.185493 31,762,102
Money Market Fund 400,870 16.307639 6,537,243
Real Estate Securities Fund 10,042 15.011508 150,746
Single Premium contracts issued prior to April 16, 1990
(policy year 11 and thereafter):
Asset Allocation Fund (formerly Multiple Strategy) 251,360 24.345677 6,119,529
Domestic Income Fund 51,343 18.266338 937,849
Emerging Growth Fund 32,856 13.507925 443,816
Enterprise Fund (formerly Common Stock) 351,513 27.894373 9,805,235
Global Equity Fund 50,767 11.900110 604,133
Government Fund 939,781 19.243796 18,084,954
Money Market Fund 158,361 16.356824 2,590,283
Real Estate Securities Fund 3,093 15.056707 46,570
Single Premium contracts issued on or after April 16, 1990:
Asset Allocation Fund (formerly Multiple Strategy) 5,452 20.858239 113,719
Domestic Income Fund 8,374 18.004549 150,770
Emerging Growth Fund 19,492 13.396950 261,133
Enterprise Fund (formerly Common Stock) 2,431 26.183349 63,652
Global Equity Fund 342 11.802380 4,036
Government Fund 2,775 14.546815 40,367
Money Market Fund 122 12.061110 1,471
Multiple Premium Contracts and Flexible Premium Contracts:
Asset Allocation Fund (formerly Multiple Strategy) 7,384 18.790954 138,752
Enterprise Fund (formerly Common Stock) 7,157 22.452797 160,695
========= ========= -------------
$ 118,500,851
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends $ 11,026,808 11,096,149 9,791,294
Mortality and expense charges (note 3) (1,030,085) (1,124,778) (1,135,456)
------------ ----------- -----------
Net investment activity 9,996,723 9,971,371 8,655,838
------------ ----------- -----------
Proceeds from mutual fund shares sold 24,568,211 23,835,749 22,040,399
Cost of mutual fund shares sold (22,544,406) (21,777,460) (20,667,556)
------------ ----------- -----------
Realized gain (loss) on investments 2,023,805 2,058,289 1,372,843
Change in unrealized gain (loss) on investments (1,839,618) 11,069,519 (15,672,902)
------------ ----------- -----------
Net gain (loss) on investments 184,187 13,127,808 (14,300,059)
------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations 10,180,910 23,099,179 (5,644,221)
------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners 54,433 39,639 25,229
Surrenders (note 2d) (13,731,809) (11,745,567) (9,547,706)
Death Benefits (note 4) (1,201,226) (1,552,445) (1,196,526)
Policy loans (net of repayments) (note 5) 3,043,009 833,405 1,817,775
Deductions for surrender charges (note 2d) (16,455) (193,286) (377,936)
Redemptions to pay cost of insurance charges
and administrative charges (notes 2b and 2c) (1,530,522) (1,770,626) (2,043,874)
------------ ----------- -----------
Net equity transactions (13,382,570) (14,388,880) (11,323,038)
------------ ----------- -----------
Net change in contract owners' equity (3,201,660) 8,710,299 (16,967,259)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD 121,702,511 112,992,212 129,959,471
------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 118,500,851 121,702,511 112,992,212
============ =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on August 8, 1984. The Account has
been registered as a unit investment trust under the Investment
Company Act of 1940.
The Company offers modified single premium, multiple payment and
flexible premium variable life insurance contracts through the
Account. The primary distribution for the contracts is through the
brokerage community; however, other distributors may be utilized.
(b) The Contracts
Prior to December 31, 1990, only contracts without a front-end sales
charge, but with a contingent deferred sales charge and certain other
fees, were offered for purchase. Beginning December 31, 1990,
contracts with a front-end sales charge, a contingent deferred sales
charge and certain other fees, are offered for purchase. See note 2
for a discussion of policy charges and note 3 for asset charges.
Contract owners may invest in the following funds:
Funds of the Van Kampen American Capital Life Investment Trust (Van
Kampen American Capital LIT);
Van Kampen American Capital LIT-Asset Allocation Fund
(formerly Multiple Strategy)
Van Kampen American Capital LIT-Domestic Income Fund
(formerly Corporate Bond)
Van Kampen American Capital LIT-Emerging Growth Fund
Van Kampen American Capital LIT-Enterprise Fund
(formerly Common Stock Fund)
Van Kampen American Capital LIT-Global Equity Fund
Van Kampen American Capital LIT-Government Fund
Van Kampen American Capital LIT-Money Market Fund
Van Kampen American Capital LIT-Real Estate Securities Fund
At December 31, 1996, contract owners have invested in all of the
above funds.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain policy
charges (see notes 2 and 3). The accompanying financial statements
include only contract owners' purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts
of the Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the
closing net asset value per share at December 31, 1996. Fund purchases
and sales are accounted for on the trade date (date the order to buy
or sell is executed). The cost of investments sold is determined on a
specific identification basis, and dividends (which include capital
gain distributions) are accrued as of the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account.
Taxes are the responsibility of the contract owner upon termination or
withdrawal.
<PAGE> 6
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities,
if any, at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(f) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with
the current year presentation.
(2) POLICY CHARGES
(a) Deductions from Premiums
On multiple payment contracts and flexible premium contracts, the
Company deducts a charge for state premium taxes equal to 2.5% of all
premiums received to cover the payment of these premium taxes. The
Company also deducts a sales load from each premium payment received
not to exceed 3.5% of each premium payment. The Company may at its
sole discretion reduce this sales loading.
(b) Cost of Insurance
A cost of insurance charge is assessed monthly against each contract
by liquidating units. The amount of the charge is based upon age, sex,
rate class and net amount at risk (death benefit less total contract
value).
(c) Administrative Charges
For single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
Contracts issued prior to April 16, 1990:
Purchase payments totalling less than $25,000 - $10/month
Purchase payments totalling $25,000 or more - none
Contracts issued on or after April 16, 1990:
Purchase payments totalling less than $25,000 - $90/year ($65/year
in New York) Purchase payments totalling $25,000 or more - $50/year
For multiple payment contracts the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.
For flexible premium contracts, the Company currently deducts a
monthly administrative charge of $25 during the first policy year and
$5 per month thereafter (may deduct up to $7.50, maximum) to recover
policy maintenance, accounting, record keeping and other
administrative expenses. Additionally, the Company deducts an increase
charge of $2.04 per year per $1,000 applied to any increase in the
specified amount during the first 12 months after the increase becomes
effective.
The above charges are assessed against each contract by liquidating
units.
(d) Surrender Charges
Policy surrenders result in a redemption of the contract value from
the Account and payment of the surrender proceeds to the contract
owner or designee. The surrender proceeds consist of the contract
value, less any outstanding policy loans, and less a surrender charge,
if applicable. The charge is determined according to contract type.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single
premium contracts issued prior to April 16, 1990, the charge is 8% in
the first year and declines to 0% after the ninth year. For single
premium contracts issued on or after April 16, 1990, the charge is
8.5% in the first year and declines to 0% after the ninth year.
For multiple payment contracts and flexible premium contracts, the
amount charged is based upon a specified percentage of the initial
surrender charge, which varies by issue age, sex and rate class. The
charge is 100% of the initial surrender charge in the first year, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of
a contract are not incurred.
<PAGE> 7
(3) ASSET CHARGES
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to
operations, and to recover policy maintenance and premium tax charges. For
contracts issued prior to April 16, 1990, the charge is equal to an annual
rate of .95% during the first ten policy years, and .50% thereafter. A
reduction of charges on these contracts is possible in policy years six
through ten for those contracts achieving certain investment performance
criteria; for contracts issued on or after April 16, 1990, the charge is
equal to an annual rate of 1.30% during the first ten policy years, and
1.00% thereafter.
For multiple payment contracts and flexible premium contracts, the Company
deducts a charge equal to an annual rate of .80%, with certain exceptions,
to cover mortality and expense risk charges related to operations.
The above charges are assessed through the daily unit value calculation.
(4) DEATH BENEFITS
Death benefits result in a redemption of the contract value from the
Account and payment of the death benefit proceeds, less any outstanding
policy loans and policy charges, to the legal beneficiary. The excess of
the death benefit proceeds over the contract value on the date of death is
paid by the Company's general account.
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% (50% during
first year of single premium contracts) of a policy's cash surrender
value. For single premium contracts issued prior to April 16, 1990, 6.5%
interest is due and payable annually in advance. For single premium
contracts issued on or after April 16, 1990, multiple payment contracts
and flexible premium contracts, 6% interest is due and payable in advance
on the policy anniversary when there is a loan outstanding on the policy.
At the time the loan is granted, the amount of the loan is transferred
from the Account to the Company's general account as collateral for the
outstanding loan. Collateral amounts in the general account are credited
with the stated rate of interest in effect at the time the loan is made,
subject to a guaranteed minimum rate. Loan repayments result in a transfer
of collateral, including interest, back to the Account.
(6) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented in the following format:
o Beginning unit value - Jan. 1
o Reinvested dividends and capital gains
(This amount reflects the increase in the unit value due to
dividend and capital gain distributions from the underlying
mutual funds.)
o Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
o Asset charges
(This amount reflects the decrease in the unit value due to the
charges discussed in note 3.)
o Ending unit value - Dec. 31
o Percentage increase (decrease) in unit value.
<PAGE> 8
SCHEDULE I
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
(POLICY YEARS 1 THROUGH 10)
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL LIT)
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING
ALLOCATION INCOME GROWTH ENTERPRISE
FUND FUND FUND FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $21.519909 17.235188 11.655608 22.498859
- ----------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.456144 1.551321 .000000 3.050863
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.488445) (.410339) 1.935098 2.501932
- ----------------------------------------------------------------------------------------------------
Asset charges (.215126) (.164744) (.123450) (.241181)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $24.272482 18.211426 13.467256 27.810473
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 13% 6% 16% 24%
====================================================================================================
1995
Beginning unit value - Jan. 1 $16.538427 14.336077 10.000000 16.580891
- ----------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.418600 1.359225 .000000 3.004553
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.744315 1.690878 1.707069 3.100329
- ----------------------------------------------------------------------------------------------------
Asset charges (.181433) (.150992) (.051461) (.186914)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $21.519909 17.235188 11.655608 22.498859
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 30% 20% 17%(b) 36%
====================================================================================================
1994
Beginning unit value - Jan. 1 $17.329774 15.127964 ** 17.325425
- ----------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.995739 1.490981 1.976086
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.627910) (2.144766) (2.559308)
- ----------------------------------------------------------------------------------------------------
Asset charges (.159176) (.138102) (.161312)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.538427 14.336077 16.580891
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (5)% (5)% (4)%
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND FUND
------- ---------- ------- ---------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 10.262083 18.968390 15.695093 10.784280
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .358540 1.225305 .764922 .288822
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.350014 (.828963) .000000 4.051625
- --------------------------------------------------------------------------------------------------------
Asset charges (.106309) (.179239) (.152376) (.113219)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.864328 19.185493 16.307639 15.011508
- --------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 16% 1% 4% 39%
========================================================================================================
1995
Beginning unit value - Jan. 1 10.000000 16.344365 15.022875 10.000000
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 1.217414 .817690 .092106
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .309271 1.576618 .000000 .740132
- --------------------------------------------------------------------------------------------------------
Asset charges (.047188) (.170007) (.145472) (.047958)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 10.262083 18.968390 15.695093 10.784280
- --------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 3%(b) 16% 4% 8%(b)
========================================================================================================
1994
Beginning unit value - Jan. 1 ** 17.301801 14.623465 **
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.062855 .539516
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.862740) .000000
- --------------------------------------------------------------------------------------------------------
Asset charges (.157551) (.140106)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 16.344365 15.022875
- --------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (6)% 3%
========================================================================================================
</TABLE>
*An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in
note 2; and
(b) This investment option was not utilized for the entire year
indicated.
**This investment option was not being utilized or was not available.
<PAGE> 9
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
(POLICY YEARS 11 AND THEREAFTER)
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL LIT)
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING
ALLOCATION INCOME GROWTH ENTERPRISE
FUND FUND FUND FUND
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 $21.519909 17.235188 11.655608 22.498859
- ----------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 3.464578 1.555582 .000000 3.057101
- ----------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.492537) (.411984) 1.935344 2.501147
- ----------------------------------------------------------------------------------------------------
Asset charges (.146273) (.112448) (.083027) (.162734)
- ----------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $24.345677 18.266338 13.507925 27.894373
- ----------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 6% 16% 24%
====================================================================================================
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND FUND
------- ---------- ------- ---------
<S> <C> <C> <C> <C>
1996
Beginning unit value - Jan. 1 10.262083 18.968390 15.695093 10.784280
- --------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .359541 1.226436 .765692 .289605
- --------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.350463 (.828621) .000000 4.058907
- --------------------------------------------------------------------------------------------------
Asset charges (.071977) (.122409) (.103961) (.076085)
- --------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.900110 19.243796 16.356824 15.056707
- --------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 16% 1% 4% 40%
==================================================================================================
</TABLE>
*An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
<PAGE> 10
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL LIT)
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING GLOBAL MONEY
ALLOCATION INCOME GROWTH ENTERPRISE EQUITY GOVERNMENT MARKET
FUND FUND FUND FUND FUND FUND FUND
--------- --------- --------- --------- -------- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
1996***
Beginning unit value - Jan. 1 $18.558022 17.099466 11.635640 21.257132 10.244489 14.433482 11.648994
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.971435 1.534027 .000000 2.874772 .356729 .930855 .566598
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.417798) (.405672) 1.929643 2.362697 1.346140 (.630892) .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Asset charges (.253420) (.223272) (.168333) (.311252) (.144978) (.186630) (.154482)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $20.858239 18.004549 13.396950 26.183349 11.802380 14.546815 12.061110
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 12% 5% 15% 23% 15% 1% 4%
===================================================================================================================================
1995***
Beginning unit value - Jan. 1 $14.311997 14.272889 ** 15.720497 ** 12.480782 11.189053
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.086061 1.348751 2.839638 .928076 .607952
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.374431 1.683177 2.939071 1.202259 .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Asset charges (.214467) (.205351) (.242074) (.177635) (.148011)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.558022 17.099466 21.257132 14.433482 11.648994
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 30% 20% 35% 16% 4%
===================================================================================================================================
1994***
Beginning unit value - Jan. 1 $15.049256 15.113958 ** 16.483852 ** 13.258615 10.929642
- -----------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.727365 1.484668 1.874048 .813111 .402452
- -----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (2.275800) (2.137258) (2.427739) (1.425714) .000000
- -----------------------------------------------------------------------------------------------------------------------------------
Asset charges (.188824) (.188479) (.209664) (.165230) (.143041)
- -----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.311997 14.272889 15.720497 12.480782 11.189053
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (5)% (6)% (5)% (6)% 2%
===================================================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
<PAGE> 11
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
(UNDERLYING MUTUAL FUNDS OF VAN KAMPEN AMERICAN CAPITAL LIT)
<TABLE>
<CAPTION>
ASSET
ALLOCATION ENTERPRISE
FUND FUND
--------- ---------
<S> <C> <C>
1996**
Beginning unit value - Jan. 1 $16.634918 18.137100
- ----------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.675077 2.462233
- ----------------------------------------------------------------------------
Unrealized gain (loss) (.378897) 2.017312
- ----------------------------------------------------------------------------
Asset charges (.140144) (.163848)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.790954 22.452797
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 24%
============================================================================
1995**
Beginning unit value - Jan. 1 $12.765144 13.346462
- ----------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.869449 2.421740
- ----------------------------------------------------------------------------
Unrealized gain (loss) 2.118344 2.495698
- ----------------------------------------------------------------------------
Asset charges (.118019) (.126800)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 $16.634918 18.137100
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 30% 36%
============================================================================
1994**
Beginning unit value - Jan. 1 $13.355954 13.924920
- ----------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.540293 1.590429
- ----------------------------------------------------------------------------
Unrealized gain (loss) (2.027726) (2.059623)
- ----------------------------------------------------------------------------
Asset charges (.103377) (.109264)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.765144 13.346462
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% (4)%
============================================================================
</TABLE>
* An annualized rate of return cannot be determined as
asset charges do not include the policy charges
discussed in note 2.
** No other investment options were being utilized.
See note 6.
<PAGE> 46
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers throughout the
United States. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently recorded
in the consolidated financial statements. The Company mitigates
this risk by offering a wide range of products and by operating
throughout the United States, thus reducing its exposure to any
single product or jurisdiction, and also by employing underwriting
practices which identify and minimize the adverse impact of this
risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment
strategy, by maintaining reinsurance and credit and collection
policies and by providing for any amounts deemed uncollectible.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, NLIC
effected certain transactions with respect to certain subsidiaries and
lines of business that were unrelated to long-term savings and
retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the outstanding shares of common stock
of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group
accident and health and group life insurance business and maintains it
offices in Wausau, Wisconsin. NCC is a property and casualty company
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high
dollar term life insurance policies and is located in San Francisco,
California. ELICW, NCC and WCLIC have been accounted for as
discontinued operations for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a
complete discussion of the reinsurance agreements. NLIC has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated companies
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC did not recognize any gain or loss on the disposal of the accident
and health and group life insurance business. The assets, liabilities,
results of operations and activities of discontinued operations are
distinguished physically, operationally and for financial reporting
purposes from the remaining assets, liabilities, results of operations
and activities of NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
Subsidiaries Classified as Discontinued Operations" in the
accompanying consolidated balance sheets and "Income for
Discontinued Operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health
insurance premiums are recognized as revenue over the terms of the
policies. Policy claims are charged to expense in the period that
the claims are incurred. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life products,
these deferred policy acquisition costs are predominantly being
amortized with interest over the premium paying period of the
related policies in proportion to the ratio of actual annual
premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except for the
fees the Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits and claims for collectively renewable
long-term disability policies and group long-term disability
policies are the present value of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred but
unreported claims. The impact of reserve discounting is not
material. Future policy benefits and claims on other group health
insurance policies are not discounted. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) of life insurance premiums. The provision for
policyholder dividends is based on current dividend scales. Future
dividends are provided for ratably in future policy benefits based
on dividend scales in effect at the time the policies were issued.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability
as if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,299,665
and $6,721,714, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded at
amortized cost. The effect as of January 1, 1994 has been recorded as a
direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
--------------- --------------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of
$3,535.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995 the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, respectively, were on deposit with
various regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for investment contracts
represents approximately 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
Interest rates: Interest rates vary as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
WITHDRAWALS: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on
published tables, modified for the Company's actual
experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$240,451 and $245,255 as of December 31, 1996 and 1995, respectively.
The contract is immaterial to the Company's results of operations. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. Under the terms of the contract,
Franklin has established a trust as collateral for the recoveries. The
trust assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102% of
the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(SFAS 107) requires disclosure of fair value information about existing
on and off-balance sheet financial instruments. SFAS 107 defines the
fair value of a financial instrument as the amount at which the
financial instrument could be exchanged in a current transaction
between willing parties. In cases where quoted market prices are not
available, fair value is based on estimates using present value or
other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts is provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated balance
sheets for these instruments approximates their fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $327,456 extending into
1997 were outstanding as of December 31, 1996.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one thousand hours of service within a twelve-month period and who have
met certain age requirements. Benefits are based upon the highest
average annual salary of a specified number of consecutive years of the
last ten years of service. The Company funds pension costs accrued for
direct employees plus an allocation of pension costs accrued for
employees of affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan. Immediately prior to the merger, the plans were
amended to provide consistent benefits for service after January 1,
1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation; however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
---------------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, respectively. The allocations are based on techniques
and procedures in accordance with insurance regulatory guidelines.
Measures used to allocate expenses among companies include individual
employee estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
intercompany agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $15,111 and $1,186 as of December 31, 1996 and 1995,
respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1996 and
1995 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts exist between NLIC and, respectively
NMIC and ELICW whereby all of NLIC's accident and health and group life
insurance business is ceded on a modified coinsurance basis. NLIC
entered into the reinsurance agreements during 1996 because the
accident and health and group life insurance business was unrelated to
NLIC's long-term savings and retirement products. Accordingly, the
accident and health and group life insurance business has been
accounted for as discontinued operations for all periods presented.
Under modified coinsurance agreements, invested assets are retained by
the ceding company and investment earnings are paid to the reinsurer.
Under the terms of NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's
retention of such risk. The agreements will remain in force until all
policy obligations are settled. However, with respect to the agreement
between NLIC and NMIC, either party may terminate the contract on
January 1 of any year with prior notice. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation (WSC)
for $155,000. NLIC transferred fixed maturity securities and cash with
a fair value of $155,000 to WSC on December 28, 1994, which resulted in
a realized loss of $19,239 on the disposition of the securities. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share home
office, other facilities, equipment and common management and
administrative services with WSC. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 loan over a five year
term on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by either NLIC or NMIC. NLIC
and NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. All previously existing line of
credit agreements were canceled.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Contingencies
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(16) Segment Information
-------------------
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Life Insurance segment consists of
insurance products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis. In addition, the
Company reports corporate expenses and investments, and the related
investment income supporting capital not specifically allocated to its
product segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other revenue
earned from mutual funds, other than the portion allocated to the
variable annuities and life insurance segments, are reported in the
Corporate and Other segment.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 47
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 16 to Form S-6 Registration Statement
comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 76 pages.
Representations and Undertakings.
Accountants' Consent.
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C> <C>
1. Power of Attorney dated April 2, 1997 Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for
authorizing the establishment of the Registrant, the Nationwide VLI Separate Account, and hereby incorporated
adopted. herein by reference.
3. Distribution Contracts Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account, and hereby incorporated
herein by reference.
4. Form of Security Included with Post-Effective Amendment No. 8 and hereby
incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account, and hereby incorporated
herein by reference.
6. Application form of Security Included with Post-Effective Amendment No. 8 and hereby
incorporated herein by reference.
7. Opinion of Counsel Included with Post-Effective Amendment No. 8 and hereby
incorporated herein by reference.
</TABLE>
<PAGE> 48
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and the Company hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 (the "Act"). The Registrant and the Company elect to be
governed by Rule 6e-3(T)(b)(13)(i)(B) under the Act with respect to the
Policies described in the prospectus. The Policies have been designed in such a
way as to qualify for the exemptive relief from various provisions of the Act
afforded by Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges") assumed by
the Company under the Policies. The Company represents that the risk charges
are within the range of industry practice for comparable policies and
reasonable in relation to all of the risks assumed by the issuer under the
Policies. Actuarial memoranda demonstrating the reasonableness of these charges
are maintained by the Company, and will be made available to the Securities and
Exchange Commission (the "Commission") on request.
(c) The Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit the
separate account and the contractholders and will keep and make available to
the Commission on request a memorandum setting forth the basis for this
representation.
(d) The Company represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the Company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and reports
as may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
(f) The fees and charges deducted under the Policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
<PAGE> 49
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the Nationwide VLI Separate Account:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Columbus, Ohio
April 22, 1997
<PAGE> 50
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, NATIONWIDE VLI SEPARATE ACCOUNT, certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment No. 16 and has duly caused this Post-Effective
Amendment No. 16 to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City
of Columbus, and State of Ohio, on this 22nd day of April, 1997.
NATIONWIDE VLI SEPARATE ACCOUNT
---------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
Attest: ---------------------------------
(Sponsor)
W. SIDNEY DRUEN By: JOSEPH P. RATH
- ------------------------------ ------------------------------
W. Sidney Druen Joseph P. Rath
Assistant Secretary Vice President
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 16 has been signed below by the following persons in the
capacities indicated on the 22nd day of April, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
KEITH W. ECKEL Director
- -------------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- -------------------------------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President/Chief
- -------------------------------------------------
Joseph J. Gasper Operating Office and Director
HENRY S. HOLLOWAY Chairman of the Board
- -------------------------------------------------
Henry S. Holloway and Director
DIMON RICHARD McFERSON Chairman and Chief Executive Officer-
- -------------------------------------------------
Dimon Richard McFerson Nationwide Insurance Enterprise and Director
DAVID O. MILLER Director
- -------------------------------------------------
David O. Miller
C. RAY NOECKER Director
- -------------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- -------------------------------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By /s/ JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
Attorney-in-Fact
ARDEN L. SHISLER Director
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------------------------------
Harold W. Weihl
</TABLE>
<PAGE> 1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C and Nationwide VA Separate Account-Q; and the registration of fixed
interest rate options subject to a market value adjustment offered under some or
all of the aforementioned individual Variable Annuity Contracts in connection
with Nationwide Multiple Maturity Separate Account and Nationwide Multiple
Maturity Separate Account-A, and the registration of Group Flexible Fund
Retirement Contracts in connection with Nationwide DC Variable Account,
Nationwide DCVA-II, and NACo Variable Account; and the registration of Group
Common Stock Variable Annuity Contracts in connection with Separate Account No.
1; and the registration of variable life insurance policies in connection with
Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VL Separate Account-A and Nationwide VL
Separate Account-B, hereby constitutes and appoints Dimon Richard McFerson,
Joseph J. Gasper, W. Sidney Druen, and Joseph P. Rath, and each of them with
power to act without the others, his/her attorney, with full power of
substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to approve, and sign such Registration Statements and
any and all amendments thereto, with power to affix the corporate seal of said
corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument may
be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 2nd day of April, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
