<PAGE> 1
Registration No. 33-42180
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 10
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-2
(EXACT NAME OF TRUST)
---------------------------
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
GORDON E. MCCUTCHAN
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(NAME AND ADDRESS OF AGENT FOR SERVICE)
---------------------------
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus and Financial Statements.
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on August 5, 1996 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
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. Pursuant to Paragraph (a) (3) thereof, a non-refundable fee
in the amount of $500.00 has been paid to the Commission. Registrant filed its
Rule 24f-2 Notice for the fiscal year ended December 31, 1995, on February 15,
1996.
================================================================================
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<PAGE> 2
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
</TABLE>
2 of 106
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
- ----------- ---------------------
<S> <C>
45................................... Not Applicable
46................................... How The Cash Value Varies
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>
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<PAGE> 4
SUPPLEMENT DATED AUGUST 5, 1996 TO
PROSPECTUS DATED MAY 1, 1996 FOR
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT - 2
This supplement updates certain information contained in your prospectus.
Please read it and keep it with your prospectus for future reference.
On Page No. 8 of the prospectus, the first paragraph is amended as follows:
The Company also deducts on a daily basis from the assets of the Variable
Account a charge to provide for mortality and expense risks. This charge is
equivalent to an annual effective rate of 0.80% of the daily net assets of
the Variable Account. On each Policy Anniversary beginning with the 10th,
the mortality and expense risk charge is reduced to 0.50% on an annual
basis of the daily net assets of the Variable Account, provided the Cash
Surrender Value is $25,000 or more on such anniversary. (FOR POLICIES
ISSUED IN NEW YORK, SUCH REDUCTION OCCURS REGARDLESS OF THE AMOUNT OF CASH
SURRENDER VALUE ON SUCH ANNIVERSARY).
On Page No. 21, the second paragraph under the section entitled "Deductions
from the Sub-Accounts" is deleted and replaced with the following:
To compensate the Company for assuming these risks associated with the
Policies, the Company deducts on a daily basis from the assets of the
Variable Account a charge to provide for mortality and expense risks. This
charge is equivalent to an annual effective rate of 0.80% of the daily net
assets of the Variable Account. On each Policy Anniversary beginning with
the 10th, the mortality and expense risk charge is reduced to 0.50% on an
annual basis of the daily net assets of the Variable Account, provided the
Cash Surrender Value is $25,000 or more on such anniversary. (FOR POLICIES
ISSUED IN NEW YORK, SUCH REDUCTION OCCURS REGARDLESS OF THE AMOUNT OF CASH
SURRENDER VALUE ON SUCH ANNIVERSARY). 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 this charge. The Surrender Charge may be
insufficient to recover certain expenses related to the sale of the
Policies. Unrecovered expenses are born by the Company's general assets
which may include profits, if any, from mortality and expense risk
charges (see "Surrender Charges").
4 of 106
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY
P.O. Box 182150
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-2
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 and the flexibility to vary the
amount and frequency of premium payments. The Policies may also provide a Cash
Surrender Value if the Policy is terminated during the lifetime of the Insured.
Nationwide Life Insurance Company guarantees to keep the Policy in force during
the first three years so long as the Minimum Premium requirement has been met.
The death benefit and Cash Value of the Policies may vary to reflect the
experience of the Nationwide VLI Separate Account-2 (the "Variable Account") or
the Fixed Account to which Cash Values are allocated.
The Policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code (the "Code").
The Policy Owner may allocate Net 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 in the following series of the underlying variable
account Mutual Fund options:
DREYFUS
Dreyfus Stock Index Fund The Dreyfus Socially Responsible Growth Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Equity-Income Portfolio Growth Portfolio
High Income Portfolio* Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Asset Manager Portfolio Contrafund Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund Government Bond Fund Money Market Fund
Small Company Fund Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
(FORMERLY "ADVISERS MANAGEMENT TRUST")
Growth Portfolio Limited Maturity Bond Portfolio Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Multiple Strategies Fund
STRONG SPECIAL FUND II, INC.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. International Stock Fund II
TCI PORTFOLIOS, INC., AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.
TCI Balanced TCI Growth TCI International
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST)
Worldwide Bond Fund (Formerly Global Bond Fund)
Gold and Natural Resources Fund
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Real Estate Securities Fund
WARBURG PINCUS TRUST
International Equity Portfolio Small Company Growth Portfolio
*The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
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 without value. Nationwide Life
Insurance Company guarantees to keep the Policy in force during the first three
years so long as the Minimum Premium requirement has been met. 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."
5 of 106
<PAGE> 6
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
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 MUST ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH.
The date of this prospectus is May 1, 1996
6 of 106
<PAGE> 7
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 Death Proceeds are paid.
BREAK POINT PREMIUM-The level annual premium at which the sales load is reduced
on a current basis.
CASH VALUE-The sum of the Policy values 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 LEVEL PREMIUM-The amount of level annual premium calculated in
accordance with the provisions of the Internal Revenue Code of 1986. It
represents the level annual premiums required to mature the Policy under
guaranteed mortality and expense charges, and an interest rate of 5%.
INDEBTEDNESS-Amounts owed the Company as a result of Policy loans including both
principal and accrued interest.
INITIAL PREMIUM-The Initial Premium is the premium required for coverage to
become effective on the Policy Date. It is shown on the Policy Data Page.
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.
MINIMUM PREMIUM-The Minimum Premium is shown on the Policy Data Page. It is used
to measure the total amount of premiums that must be paid during the first three
Policy Years to guarantee the Policy remains in force.
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 result by the number of shares outstanding.
NET PREMIUMS-Net Premiums are equal to the actual premiums minus the percent of
premium charge. The percent of premium charges are shown on the Policy Data
Page.
POLICY ANNIVERSARY-The same day and month as the Policy Date for succeeding
years.
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
Indebtedness.
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
Anniversary thereafter.
SCHEDULED PREMIUM-The Scheduled Premium is shown on the Policy Data Page.
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<PAGE> 8
SPECIFIED AMOUNT-A dollar amount used to determine the death benefit under a
Policy. It is 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 sufficient
degree of trading that the current net asset value of the Accumulation Units
might be materially affected.
VALUATION PERIOD-A period commencing with the close of business on the New York
Stock Exchange and ending at the close of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT-A separate investment account of Nationwide Life Insurance
Company.
8 of 106
<PAGE> 9
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF TERMS................................................................... 3
SUMMARY OF THE POLICIES............................................................. 7
Variable Life Insurance......................................................... 7
The Variable Account and its Sub-Accounts....................................... 7
The Fixed Account............................................................... 7
Deductions and Charges.......................................................... 7
Premiums........................................................................ 9
NATIONWIDE LIFE INSURANCE COMPANY................................................... 10
THE VARIABLE ACCOUNT................................................................ 10
Investments of the Variable Account............................................. 10
Dreyfus......................................................................... 11
Fidelity Variable Insurance Products Fund....................................... 11
Fidelity Variable Insurance Products Fund II.................................... 12
Nationwide Separate Account Trust............................................... 12
Neuberger & Berman Advisers Management Trust.................................... 13
Oppenheimer Variable Account Funds.............................................. 13
Strong Special Fund II, Inc..................................................... 14
Strong Variable Insurance Funds, Inc............................................ 14
TCI Portfolios, Inc., a member of the Twentieth Century Family of Mutual Funds.. 14
Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust)........... 15
Van Kampen American Capital Life Investment Trust............................... 15
Warburg Pincus Trust............................................................ 15
Reinvestment.................................................................... 16
Transfers....................................................................... 16
Dollar Cost Averaging........................................................... 16
Substitution of Securities...................................................... 17
Voting Rights................................................................... 17
INFORMATION ABOUT THE POLICIES...................................................... 18
Underwriting and Issuance....................................................... 18
-Minimum Requirements for Issuance of a Policy.................................. 18
-Premium Payments............................................................... 18
Allocation of Cash Value........................................................ 18
Short-Term Right to Cancel Policy............................................... 18
POLICY CHARGES...................................................................... 19
Deductions from Premiums........................................................ 19
Surrender Charges............................................................... 19
-Reductions to Surrender Charges................................................ 20
Deductions from Cash Value...................................................... 20
-Monthly Cost of Insurance...................................................... 20
-Monthly Administrative Charge.................................................. 21
-Increase Charge................................................................ 21
Deductions from the Sub-Accounts................................................ 21
HOW THE CASH VALUE VARIES........................................................... 21
How the Investment Experience is Determined..................................... 21
Net Investment Factor........................................................... 22
Valuation of Assets............................................................. 22
Determining the Cash Value...................................................... 22
Valuation Periods and Valuation Dates........................................... 22
SURRENDERING THE POLICY FOR CASH.................................................... 22
Right to Surrender.............................................................. 22
Cash Surrender Value............................................................ 23
Partial Surrenders.............................................................. 23
Maturity Proceeds............................................................... 23
Income Tax Withholding.......................................................... 23
POLICY LOANS........................................................................ 23
Taking a Policy Loan............................................................ 23
Effect on Investment Performance................................................ 24
Interest........................................................................ 24
Effect on Death Benefit and Cash Value.......................................... 24
Repayment....................................................................... 24
HOW THE DEATH BENEFIT VARIES........................................................ 25
</TABLE>
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<PAGE> 10
<TABLE>
<S> <C>
Calculation of the Death Benefit................................................ 25
Proceeds Payable on Death....................................................... 25
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY........................................ 25
CHANGES OF INVESTMENT POLICY........................................................ 26
GRACE PERIOD........................................................................ 26
-First Three Policy Years....................................................... 26
-Policy Years Four and After.................................................... 26
-All Policy Years............................................................... 26
REINSTATEMENT....................................................................... 26
THE FIXED ACCOUNT OPTION............................................................ 27
CHANGES IN EXISTING INSURANCE COVERAGE.............................................. 27
Specified Amount Increases....................................................... 27
Specified Amount Decreases....................................................... 28
Changes in the Death Benefit Option.............................................. 28
OTHER POLICY PROVISIONS............................................................. 28
Policy Owner..................................................................... 28
Beneficiary...................................................................... 28
Assignment....................................................................... 28
Incontestability................................................................. 29
Error in Age or Sex.............................................................. 29
Suicide.......................................................................... 29
Nonparticipating Policies........................................................ 29
LEGAL CONSIDERATIONS................................................................ 29
DISTRIBUTION OF THE POLICIES........................................................ 29
CUSTODIAN OF ASSETS................................................................. 30
TAX MATTERS......................................................................... 30
Policy Proceeds................................................................. 30
Taxation of the Company......................................................... 31
Other Considerations............................................................ 31
THE COMPANY......................................................................... 31
COMPANY MANAGEMENT.................................................................. 31
Directors of the Company........................................................ 32
Executive Officers of the Company............................................... 32
OTHER CONTRACTS ISSUED BY THE COMPANY............................................... 33
STATE REGULATION.................................................................... 33
REPORTS TO POLICY OWNERS............................................................ 33
ADVERTISING......................................................................... 33
LEGAL PROCEEDINGS................................................................... 34
EXPERTS............................................................................. 34
REGISTRATION STATEMENT.............................................................. 34
LEGAL OPINIONS...................................................................... 34
APPENDIX 1.......................................................................... 35
APPENDIX 2.......................................................................... 36
APPENDIX 3.......................................................................... 53
PERFORMANCE TABLES.................................................................. 54
FINANCIAL STATEMENTS................................................................ 58
</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.
10 of 106
<PAGE> 11
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 the Policy Charges, the Policy will lapse
without value. Nationwide Life Insurance Company guarantees to keep the Policy
in force during the first three years so long as certain requirements have been
met (see "Underwriting and Issuance").
Under certain conditions, a Policy may become a modified endowment contract as a
result of a material change or a reduction in benefits as defined by the
Internal Revenue Code ("Code"). Excess premiums paid may also cause the Policy
to become a modified endowment contract. The Company will monitor premiums paid
and other policy transactions and will notify the Policy Owner when the Policy's
non-modified endowment contract status is in jeopardy (see "Tax Matters").
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Net Premiums in the Variable Account or the
Fixed Account at the time the Policy is issued. The Policy Owner selects the
sub-accounts of the Variable Account or the Fixed Account into which the Cash
Value will be allocated (see "Allocation of Cash Value"). When the Policy is
issued, the Net Premiums will be allocated to the Nationwide Separate Account
Trust Money Market Fund sub-account (for any Net Premiums allocated to a
sub-account on the application) in 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. Assets of each sub-account are invested at net asset value in
shares of a corresponding underlying Mutual Fund. 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. For a discussion of any charges
imposed by the underlying Mutual Fund options, see the prospectuses of the
respective underlying Mutual Funds.
The Company deducts a sales load from each premium payment received not to
exceed 3.5% of each premium payment. On a current basis, the sales load is
reduced to 1.5% on any portion of the annual premium paid in excess of the
annual Break Point Premium. The total sales load actually deducted from any
Policy will be equal to the sum of this front-end sales load plus any sales
surrender charge that may be deducted from Policies that are surrendered.
The Company also deducts a charge for state premium taxes equal to 2.5% of all
premium payments.
The Company also deducts the following charges from the Policy's Cash Value on
the Policy Date and each subsequent Monthly Anniversary Day:
1. monthly cost of insurance; plus
2. monthly cost of any additional benefits provided by riders to the
Policy; plus
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<PAGE> 12
3. an administrative expense charge. This charge is $25 per month in
the first year and $5 per month in renewal years. The charge in
renewal years may be increased at the sole discretion of the
Company but may not exceed $7.50 per month; plus
4. an increase charge per $1000 applied to any increase in the
Specified Amount. The increase charge is $2.04 per year per $1000
and is shown on the Policy data page. This charge is designed to
cover the costs associated with increasing the Specified Amount
(see "Policy Charges"). This charge will be deducted on each
Monthly Anniversary Day for the first 12 months after the increase
becomes effective.
The Company also deducts on a daily basis from the assets of the Variable
Account a charge to provide for mortality and expense risks. This charge is
equivalent to an annual effective rate of 0.80% of the daily net assets of the
Variable Account. On each Policy Anniversary beginning with the 10th, the
mortality and expense risk charge is reduced to 0.50% on an annual basis of the
daily net assets of the Variable Account, provided the Cash Surrender Value is
$25,000 or more on such anniversary.
For Policies which are surrendered during the first nine Policy Years, the
Company deducts a Surrender Charge. This Surrender Charge is comprised of an
Underwriting Surrender Charge and a Sales Surrender Charge. The maximum initial
Surrender Charge varies by issue age, sex, Specified Amount and underwriting
classification and is calculated based on the initial Specified Amount. The
following table illustrates the maximum initial Surrender Charge per $1,000 of
initial Specified Amount for Policies which are issued on a Standard basis (see
Appendix 1 for specific examples).
Initial Specified Amount $50,000-$99,999
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C>
25 $ 7.776 $ 7.521 $ 8.369 $ 7.818
35 8.817 8.398 9.811 8.891
45 12.191 11.396 13.887 12.169
55 15.636 14.011 18.415 15.116
65 22.295 19.086 26.577 20.641
25 $ 5.776 $ 5.521 $ 6.369 $ 5.818
35 6.817 6.398 7.811 6.891
45 9.691 8.896 11.387 9.669
55 13.136 11.511 15.915 12.616
65 21.295 18.086 25.577 19.641
</TABLE>
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:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Management Other Total
Fees Expenses Expenses
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Stock Index Fund 0.27% 0.12% 0.39%
- --------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund 0.69% 0.58% 1.27%
- --------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61%
- --------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70%
- --------------------------------------------------------------------------------
Fidelity VIP Fund-High Income Portfolio 0.60% 0.11% 0.71%
- --------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas Portfolio 0.76% 0.15% 0.91%
- --------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio 0.71% 0.08% 0.79%
- --------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72%
- --------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54%
- --------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- --------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.02% 0.52%
- --------------------------------------------------------------------------------
NSAT-Small Company Fund 1.00% 0.25% 1.25%
- --------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.01% 0.51%
- --------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.84% 0.10% 0.94%
Trust-Growth Portfolio
- --------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.65% 0.10% 0.75%
Trust-Limited Maturity Bond Portfolio
- --------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.85% 0.30% 1.15%
Trust-Partners Portfolio
- --------------------------------------------------------------------------------
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
Management Other Total
Fees Expenses Expenses
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
Oppenheimer Variable Account Funds-Bond Fund 0.75% 0.05% 0.80%
- ----------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.74% 0.15% 0.89%
Global Securities Fund
- ----------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Multiple 0.74% 0.03% 0.77%
Strategies
- ----------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
- ----------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.-Discovery 1.00% 0.31% 1.31%
Fund II, Inc.
- ----------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.- 1.00% 0.97% 1.97%
International Stock Fund II
- ----------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Balanced 1.00% 0.00% 1.00%
- ----------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI Growth 1.00% 0.00% 1.00%
- ----------------------------------------------------------------------------------
TCI Portfolios, Inc.-TCI International 1.50% 0.00% 1.50%
- ----------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Gold and 0.79% 0.15% 0.94%
Natural Resources Fund
- ----------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide 0.80% 0.16% 0.96%
Bond Fund
- ----------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 1.90% 2.90%
Trust- Real Estate Securities Fund
- ----------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity 1.00% 0.44% 1.44%
Portfolio
- ----------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth 0.90% 0.35% 1.25%
Portfolio
- ----------------------------------------------------------------------------------
</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. The management fees
and other expenses are more fully described in the prospectuses for each
individual underlying Mutual Fund. The management fees and other expenses, some
of which may be subject to fee waivers or expense reimbursement, are more fully
described in the prospectus for each underlying Mutual Fund. 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 Initial Premium for which a Policy may be issued is equal to three
minimum monthly premiums. A policy may be issued to an Insured up to age 80.
For a limited time, the Policy Owner has the right to cancel the Policy and
receive a full refund of premiums paid (see "Short-Term Right to Cancel
Policy").
The Initial Premium is due on the Policy Date. It will be credited on the Policy
Date. Any due and unpaid monthly deductions will be subtracted from the Cash
Value at this time. Insurance will not be effective until the Initial Premium is
paid. The Initial Premium is shown on the Policy data page.
Premiums, other than the Initial Premium may be made at any time while your
Policy is in force subject to the limits described below. During the first three
Policy Years, the total premium payments less any Policy Indebtedness, less any
partial surrenders, and less any partial surrender fee must be greater than or
equal to the Minimum Premium requirement in order to guarantee the Policy remain
in force. The Minimum Premium requirement is equal to the monthly Minimum
Premium multiplied by the number of completed policy months. The monthly Minimum
Premium is shown on the Policy data page.
We will send Scheduled Premium payment reminder notices to you. We will send
them according to the premium mode shown on the Policy data page.
You may pay the Initial Premium to us at our home office or to an authorized
agent. All premiums after the first are payable at our home office. Premium
receipts will be furnished upon request.
Each premium must be at least equal to the monthly Minimum Premium. The Company
reserves the right to require satisfactory evidence of insurability before
accepting any additional premium payment which results in any increase in the
net amount at risk. Also, we will refund any portion of any premium payment
which is determined to be in excess of the premium limit established by law to
qualify your Policy as a contract for life insurance. Where permitted by state
law, we may also require that any existing Policy Indebtedness is repaid prior
to accepting any additional premium payments.
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<PAGE> 14
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 which includes Nationwide Mutual Insurance Company,
Nationwide Indemnity 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 and Nationwide General Insurance Company. The
Company's home office is at One Nationwide Plaza, Columbus, Ohio 43216.
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 Variable Account was established by a resolution of the Company's Board of
Directors, on May 7,1987, pursuant to 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
43216 serves as Trustee for the Trust. Nationwide Financial Services, Inc., One
Nationwide Plaza, Columbus, Ohio 43216 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.
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").
Net Premium payments and Cash Value are allocated within the Variable Account
among one or more sub-accounts (see "Tax Matters"). The assets of each
sub-account are used to purchase shares of the underlying Mutual Fund options
designated by the Policy Owner. Thus, the investment performance of a Policy
depends upon the investment performance of the underlying Mutual Fund options
designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Net Premiums
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). During the period in which the Policy
Owner may exercise his or her short-term right to cancel the Policy, all Net
Premiums not allocated to the Fixed Account are placed in the Nationwide
Separate Account Trust Money Market Fund sub-account. At the end of this period,
the Cash Value in that sub-account will be transferred to the Variable Account
sub-accounts based on the Fund allocation factors. Any subsequent Net Premiums
received after this period will be allocated based on the Fund allocation
factors.
No less than 5% of Net Premiums may be allocated to any one sub-account or the
Fixed Account. The Policy Owner may change the allocation of Net Premiums 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 this prospectus (see "Transfers", "Allocation of Cash Value" and
"Short-Term Right to Cancel Policy").
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 Funds,
their investment policies and restrictions, risks and charges are contained in
the prospectuses of the respective underlying Mutual Funds.
Additional Premium payments, upon acceptance, will be allocated to the
Nationwide Separate Account Money Market Fund unless the Policy Owner specifies
otherwise (see "Premium Payments").
Each of the underlying Mutual Fund options is a registered investment company
which receives investment advice from a registered investment adviser:
1) Dreyfus Stock Index Fund, managed by Wells Fargo Nikko Investment
Advisors;
2) The Dreyfus Socially Responsible Growth Fund, Inc., managed by Dreyfus
Corporation;
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<PAGE> 15
3) Fidelity Variable Insurance Products Fund, managed by Fidelity
Management & Research Company;
4) Fidelity Variable Insurance Products Fund II, managed by Fidelity
Management & Research Company;
5) Nationwide Separate Account Trust, managed by Nationwide Financial
Services, Inc.;
6) Neuberger & Berman Advisers Management Trust, managed by Neuberger &
Berman Management Incorporated;
7) Oppenheimer Variable Account Funds, managed by Oppenheimer Management
Corporation;
8) Strong Special Fund II, Inc., managed by Strong Capital Management,
Inc.;
9) Strong Variable Insurance Funds, Inc., managed by Strong Capital
Management, Inc.;
10) TCI Portfolios, Inc., a member of the Twentieth Century Family of Mutual
Funds;
11) Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust),
managed by Van Eck Associates Corporation;
12) Van Kampen American Capital Life Investment Trust managed by Van Kampen
American Capital Management, Inc.
13) Warburg Pincus Trust, managed by Warburg, Pincus Counsellors, Inc.
A summary of investment objectives is contained in the description of each
underlying Mutual Fund below. More detailed information may be found in the
current prospectus for each underlying Mutual Fund option. A prospectus for the
underlying Mutual Fund option(s) being considered must accompany this prospectus
and should be read in conjunction herewith.
DREYFUS
- - DREYFUS STOCK INDEX FUND
Dreyfus Stock Index Fund is an open-end, non-diversified, management
investment company. It was incorporated under Maryland law on January 24,
1989, and commenced operations on September 29, 1989. Wells Fargo Nikko
Investment Advisors serves as the Fund's index fund manager. As of May 1,
1994, Dreyfus Life and Annuity Index Fund began doing business as Dreyfus
Stock Index Fund.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
- - DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
Dreyfus Socially Responsible Growth Fund, Inc. is an open-end,
diversified, management investment company. It was incorporated under
Maryland law on July 20, 1992, and commenced operations on October 7,
1993. Dreyfus Corporation serves as the Fund's investment advisor.
Tiffany Capitol Advisors, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: The Fund's primary goal is to provide capital
growth through equity investment in companies that, in the opinion of the
Fund's management, not only meet traditional investment standards, but
which also show evidence that they conduct their business in a manner
that contributes to the enhancement of the quality of life in America.
Current income is secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fund is an open-end, diversified, management investment company organized as
a Massachusetts business trust on November 13, 1981. The Fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. Fidelity Management & Research Company ('FMR') is the Fund's
manager.
- - HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital. The
portfolio's manager will seek high current income normally by investing
the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities, zero coupon securities,
and mortgage-backed and asset-backed securities.
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities.
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<PAGE> 16
Higher yields are usually available on securities that are lower-rated or that
are unrated. Lower-rated securities are usually defined as Ba or lower by
Moody's; BB or lower by Standard & Poor's and may be deemed to be of a
speculative nature. The Portfolio may also purchase lower-quality bonds such as
those rated Ca3 by Moody's or C- by Standard & Poor's which provide poor
protection for payment of principal and interest (commonly referred to as "junk
bonds"). For a further discussion of lower-rated securities, please see the
"Risks of Lower-Rated Debt Securities" section of the Portfolio's prospectus.
- - EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
- - GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
the ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent in
other mutual funds. It is also important to point out that the Portfolio
makes most sense for you if you can afford to ride out changes in the
stock market, because it invests primarily in common stocks. FMR also can
make temporary investments in securities such as investment-grade bonds,
high-quality preferred stocks and short-term notes, for defensive
purposes when it believes market conditions warrant.
- - OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fund is an open-end, diversified, management investment company organized as
a Massachusetts business trust on March 21, 1988. The Fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. FMR is the Fund's manager.
- - ASSET MANAGER PORTFOLIO
Investment Objective: To seek to obtain high total return with reduced
risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed income instruments.
- - CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the fund manager believes to be undervalued due to an
overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The fund primarily invests in common stock
and securities convertible into common stock, but it has the flexibility
to invest in any type of security that may produce capital appreciation.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust (the "Trust") is a diversified open-end
management investment company created under the laws of Massachusetts. The Trust
offers shares in the five separate Mutual Funds listed below, each with its own
investment objectives. Currently, shares of the Trust will be sold only to life
insurance company separate accounts to fund the benefits under variable life
insurance policies or variable annuity contracts issued by life insurance
companies. The assets of the Trust are managed by Nationwide Financial Services,
Inc., One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of
Nationwide Life Insurance Company.
- - CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the long
term.
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<PAGE> 17
- - MONEY MARKET FUND
Investment Objective: 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.
- - GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with capital preservation through investing primarily in bonds
and securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested capital
from a flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
- - SMALL COMPANY FUND
Investment Objective: The Fund seeks long-term growth of capital by
investing primarily in equity securities of domestic and foreign
companies with market capitalizations of less than $1 billion at the time
of purchase. Nationwide Financial Services, Inc. ("NFS"), the Fund's
adviser, has contracted with a group of sub-advisers, each of which will
manage a portion of the Fund's portfolio. These sub-advisers are the
Dreyfus Corporation, Neuberger & Berman, L. P., Pictet International
Management Limited, Van Eck Associates Corporation, Strong Capital
Management, Inc. and Warburg Pincus Counsellors, Inc. The sub-advisers
were chosen because they utilize a number of different investment styles
when investing in small company stocks. By utilizing a number of
investment styles, NFS hopes to increase prospects for investment return
and to reduce market risk and volatility.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered directly to
qualified pension and retirement plans outside of the separate account context.
The investment adviser is Neuberger & Berman Management Incorporated.
- - LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its objectives
through investments in a diversified portfolio of limited maturity debt
securities. The Portfolio invests in securities which are at least
investment grade and does not invest in junk bonds.
- - GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to
purchase such stocks.
- - PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This Portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed
to be undervalued based on fundamentals such as low price-to-earnings
ratios, consistent cash flows, and support from asset values. The
objective of the Partners Portfolio is not fundamental and can be changed
by the Trustees of the Trust without shareholder approval. Shareholders
will, however, receive at least 30 days prior notice thereof. There is no
assurance the investment objective will be met.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-ended, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. Oppenheimer Management Corporation is
the Funds' investment advisor.
17 of 106
<PAGE> 18
- - OPPENHEIMER BOND FUND
Investment Objective: Primarily to seek a high level of current income
from investment in high yield fixed-income securities rated "Baa" or
better by Moody's or "BBB" or better by Standard & Poor's. Secondarily,
the Fund seeks capital growth when consistent with its primary objective.
- - OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
- - OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG SPECIAL FUND II, INC.
The Strong Special Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. The Special Fund II, Inc. was incorporated in
Wisconsin and may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity contracts and variable
life insurance policies. Strong Capital Management Inc. (the "Advisor") is the
investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments
in a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management
investment company, commonly referred to as a Mutual Fund. Incorporated in the
State of Wisconsin, the Corporation has been authorized to issue shares of
common stock and series and classes of series of common stock. The International
Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by
the Corporation to insurance company separate accounts for the purpose of
funding variable life insurance policies and variable annuity contracts. Strong
Capital Management, Inc. is the investment advisor to the Funds.
- DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt securities.
- - INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
TCI PORTFOLIOS, INC., A MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS
TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It is a
diversified, open-end management company, designed only to provide investment
vehicles for variable annuity and variable life insurance products of insurance
companies. A member of the Twentieth Century Family of Mutual Funds, TCI
Portfolios is managed by Investors Research Corporation.
- - TCI BALANCED
Investment Objective: Capital growth and current income. The fund will
seek to achieve its objective by maintaining approximately 60% of the
assets of the fund in common stocks (including securities convertible
into common stocks and other equity equivalents) that are considered by
management to have better-than-average prospects for appreciation and
approximately 40% in fixed income securities. There can be no assurance
that the Fund will achieve its investment objective.
- - TCI GROWTH
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the Fund's
18 of 106
<PAGE> 19
investment manager, better than average potential for appreciation. The
fund tries to stay fully invested in such securities, regardless of the
movement of stock prices generally.
The fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least
three years continuous operation. There can be no assurance that the Fund
will achieve its investment objective.
- - TCI INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to
achieve its investment objective by investing primarily in securities of
foreign companies that meet certain fundamental and technical standards
of selection and, in the opinion of the investment manager, have
potential for appreciation. Under normal conditions, the Fund will invest
at least 65% of its assets in common stocks or other equity securities of
issuers from at least three countries outside the United States.
Securities of United States issuers may be included in the portfolio from
time to time. Although the primary investment of the Fund will be common
stocks (defined to include depository receipts for common stocks), the
Fund may also invest in other types of securities consistent with the
Fund's objective. When the manager believes that the total return
potential of other securities equals or exceeds the potential return of
common stocks, the Fund may invest up to 35% of its assets in such other
securities. There can be no assurance that the Fund will achieve its
objectives.
(Although the Statement of Additional Information concerning TCI
Portfolios, Inc., refers to redemptions of securities in kind under
certain conditions, all surrendering or redeeming Contract Owners will
receive cash from the Company.)
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST)
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a "business trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of the Trust are offered only to
separate accounts of various insurance companies to fund benefits of variable
insurance and annuity policies. The assets of the Trust are managed by Van Eck
Associates Corporation.
- - GOLD AND NATURAL RESOURCES FUND
Investment Objective: To seek long-term capital appreciation by investing
in equity and debt securities of companies engaged in the exploration,
development, production and distribution of gold and other natural
resources, such as strategic and other metals, minerals, forest products,
oil, natural gas and coal. Current income is not an objective.
- - WORLDWIDE BOND FUND (FORMERLY GLOBAL BOND FUND)
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities. The Fund does not
invest in junk bonds.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
The American Capital Life Investment 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.
serves as the Fund's investment adviser.
- REAL ESTATE SECURITIES FUND
Investment Objective: 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, 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.
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management investment company
organized in March 1995 as a business trust under the laws of The Commonwealth
of Massachusetts. The Trust offers its shares to
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<PAGE> 20
insurance companies for allocation to separate accounts for the purpose of
funding variable annuity and variable life contracts. Trust portfolios are
managed by Warburg, Pincus Counsellors, Inc. ("Counsellors.")
- - INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: To seek long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of "Counsellors" have
their principal business activities and interests outside the United
States. The Portfolio will ordinarily invest substantially all of its
assets, but no less than 65% of its total assets, in common stocks,
warrants and securities convertible into or exchangeable for common
stocks. The Portfolio intends to invest principally in the securities of
financially strong companies with opportunities for growth within growing
international economies and markets through increased earning power and
improved utilization or recognition of assets.
- - SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a portfolio
of equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks
or warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
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
After the first Policy Anniversary, the Policy Owner may annually transfer a
portion of the value of the Variable Account to the Fixed Account, without
penalty or adjustment. The Policy Owner may request a transfer of up to 100% of
the Cash Value from the Variable Account to the Fixed Account. The Company
reserves the right to restrict transfers to the Fixed Account to 25% of the Cash
Value. The Policy 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 Policy Owner may transfer a portion of the value of the Fixed Account to the
Variable Account once each Policy Year, without penalty or adjustment. The
Policy Owner may request a transfer of up to 100% of the Cash Value in the Fixed
Account to the Variable sub-accounts. The Company reserves the right to restrict
the amounts of such transfers to 25% of the Cash Value in the Fixed Account.
Transfers may be made either in writing or, in states allowing such transfers,
by telephone. In states allowing telephone transfers, and if the Owner so
elects, the Company will also permit the Policy Owner to utilize the Telephone
Exchange Privilege for exchanging amounts among sub-account options. The
Company will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. Such procedures may include any or all
of the following, or such other procedures as the Company may, from time to
time, deem reasonable: requesting identifying information, such as name,
contract number, Social Security Number, and/or personal identification number;
tape recording all telephone transactions; and providing written confirmation
thereof to both the Policy Owner and any agent of record at the last address of
record. Although failure to follow reasonable procedures may result in the
Company's liability for any losses due 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
Contract Owner. The Company may determine to withdraw the Telephone Exchange
Privilege, upon 30 days written notice to 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 sub-account, Fixed Account, or the Limited Maturity Bond Portfolio
sub-account to any other sub-account within the Variable Account on a monthly
basis. This service is intended to allow the Policy Owner to utilize Dollar Cost
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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 sub-account, Fixed
Account, or the Limited Maturity Bond Portfolio sub-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" above). 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, Fixed Account, or the Limited Maturity Bond
Portfolio sub-account will be processed monthly until either the value in the
Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio
sub-account is completely depleted or the Policy Owner instructs the Company in
writing to cancel the monthly transfers.
The Company reserves the right to discontinue offering Dollar Cost Averaging
upon 30 days' written notice to Policy Owners however, any such discontinuation
would 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 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 in view of the purposes of the Policy, the Company may substitute
shares of another underlying Mutual Fund for shares already purchased or to be
purchased in the future by Net 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 only 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 in
accordance with instructions received from Policy Owners. However, if the
Investment Company Act of 1940 or any regulation thereunder 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, the Company may elect to do so.
The Policy Owner shall have the voting interest under a Policy. The number of
shares in each sub-account for which the Policy Owner may give voting
instructions is determined by dividing any portion of the Policy's Cash Value
derived from participation in that underlying Mutual Fund by the net asset value
of one share of that underlying Mutual Fund.
The number of shares which a person has a right to vote will be determined as of
a date chosen by the Company, but not more than 90 days prior to the meeting of
the underlying Mutual Fund. Voting instructions will be solicited by written
communication prior to such meeting.
The Company will vote underlying Mutual Fund shares in accordance with
instructions received from the Policy Owners. Underlying Mutual Fund shares held
by the Company or by 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.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to investments of the Variable Account, the underlying
Mutual Funds' proxy material and a form with which to give such voting
instructions.
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 underlying 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
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<PAGE> 22
purposes; or (3) enter into or refrain from entering into any advisory agreement
or underwriting contract, if required by any insurance regulatory authority.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
The Policies are designed to provide life insurance coverage and the flexibility
to vary the amount and frequency of premium payments. At issue, the Policy Owner
selects the initial Specified Amount and premium. The minimum Specified Amount
is $50,000 ($100,000 in Pennsylvania and New Jersey). Policies may be issued to
Insureds with 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. 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
Initial Premium, and delivery of the policy while the Insured is still living.
Premiums, other than the Initial Premium, may be made at any time while the
Policy is in force subject to the limits described below. During the first three
Policy Years, the total premium payments less any Policy Indebtedness, less any
partial surrenders, and less any partial surrender fee must be greater than or
equal to the Minimum Premium requirement in order to guarantee the Policy
remains in force. The Minimum Premium requirement is equal to the monthly
Minimum Premium multiplied by the number of completed policy months. The monthly
Minimum Premium is shown on the Policy data page.
Each premium payment must be at least equal to the monthly Minimum Premium.
Additional premium payments may be made at any time while the Policy is in
force. 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. Also, the Company will refund any portion
of any premium payment which is determined to be in excess of the premium limit
established by law to qualify the Policy as a contract for life insurance. The
Company may also require that any existing Policy Indebtedness is repaid prior
to accepting any additional premium payments. Additional premium payments or
other changes to the contract, may jeopardize the Policy's non-modified
endowment status. The Company will monitor premiums paid and other policy
transactions and will notify the Policy Owner when non-modified endowment
contract status is in jeopardy (see "Tax Matters").
ALLOCATION OF CASH VALUE
At the time a Policy is issued, its Cash Value will be based on the Nationwide
Separate Account Trust Money Market Fund sub-account value or the Fixed Account
as if the Policy had been issued and the Initial Net Premium invested on the
date such premium was received in good order by the Company. When the Policy is
issued, the Net Premiums will be allocated to the Nationwide Separate Account
Trust Money Market Fund sub-account (for any Net Premiums allocated to a
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. Net Premiums not designated for the Fixed Account will be
placed in the Nationwide Separate Account Trust Money Market 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 underlying 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 Net Premiums 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
the prospectus. Net Premiums 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 Net 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 to the Company.
Immediately after such mailing or delivery, the Policy
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<PAGE> 23
will be deemed void from the beginning. The Company will refund the total
premiums paid within seven days after it receives the Policy.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
The Company deducts a sales load from each premium payment received not to
exceed 3.5% of each premium payment. On a current basis, the sales load is
reduced to 1.5% on any portion of the annual premium paid in excess of the
annual Break Point Premium. The total sales load actually deducted from any
Policy will be equal to the sum of this front-end sales load plus any sales
surrender charge that may be deducted from Policies that are surrendered.
The Company also 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 range from 0% to 4%. To reimburse the Company for the payment of state
premium taxes associated with the Policies, the Company deducts a charge for
state premium taxes equal to 2.5% of all premium payments received. 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.
SURRENDER CHARGES
The Company will deduct a Surrender Charge from the Policy's Cash Value for any
Policy surrendered during the first nine Policy Years. The maximum initial
Surrender Charge varies by issue age, sex, Specified Amount and underwriting
classification and is calculated based on the initial Specified Amount. The
following table illustrates the maximum initial Surrender Charge per $1,000 of
initial Specified Amount for Policies which are issued on a standard basis (see
Appendix 1 for specific examples).
Initial Specified Amount $50,000-$99,999
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C>
25 $ 7.776 $ 7.521 $ 8.369 $ 7.818
35 8.817 8.398 9.811 8.891
45 12.191 11.396 13.887 12.169
55 15.636 14.011 18.415 15.116
65 22.295 19.086 26.577 20.641
</TABLE>
Initial Specified Amount $100,000+
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--- ----------- ----------- -------- --------
<S> <C> <C> <C> <C>
25 $ 5.776 $ 5.521 $ 6.369 $ 5.818
35 6.817 6.398 7.811 6.891
45 9.691 8.896 11.387 9.669
55 13.136 11.511 15.915 12.616
65 21.295 18.086 25.577 19.641
</TABLE>
The Surrender Charge is comprised of two components: an underwriting surrender
charge and sales surrender charge. The underwriting surrender charge varies by
issue age in the following manner:
Charge per $1,000 of
Initial Specified Amount
<TABLE>
<CAPTION>
Issue Specified Amounts Specified Amounts
Age less than $100,000 $100,000 or more
--- ------------------ ----------------
<S> <C> <C>
0-35 $6.00 $4.00
36-55 7.50 5.00
56-80 7.50 6.50
</TABLE>
The underwriting surrender charge is designed to cover the administrative
expenses associated with underwriting and issuing the Policy, including the
costs of processing applications, conducting medical exams, determining
insurability and the Insured's underwriting class, and establishing policy
records. The Company does not expect to profit from the underwriting surrender
charges. The Surrender Charge may be insufficient to recover certain expenses
related to the sale of the Policies. Unrecovered expenses are borne by the
Company's general assets which may include profits, if any, from mortality and
expense risk charges (see
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<PAGE> 24
"Deductions from the Sub-Accounts"). Additional premiums and/or income earned on
assets in the Variable Account have no effect on these charges. The remainder of
the Surrender Charge which is not attributable to the underwriting surrender
charge component represents the sales surrender charge component. In no event
will this component exceed 26-1/2% of the lesser of the Guideline Level Premium
required in the first year or the premiums actually paid in the first year. The
purpose of the sales surrender charge component is to reimburse the Company for
some of the expenses incurred in the distribution of the Policies. The company
also deducts 3.5% of each premium for sales load (see "Deductions from
Premiums").
- -Reductions to Surrender Charges
The Surrender Charges are reduced in subsequent Policy Years in the following
manner:
<TABLE>
<CAPTION>
Surrender Charge Surrender Charge
Completed as a % of Initial Completed as a % of Initial
Policy Years Surrender Charges Policy Years Surrender Charges
<S> <C> <C> <C>
0 100% 5 60%
1 100% 6 50%
2 90% 7 40%
3 80% 8 30%
4 70% 9+ 0%
</TABLE>
Special guaranteed maximum Surrender Charges apply in Pennsylvania (see Appendix
1).
DEDUCTIONS FROM CASH VALUE
The Company also deducts the following charges from the Policy's Cash Value on
the Policy Date and each subsequent Monthly Anniversary Day:
1. monthly cost of insurance charges; plus
2. monthly cost of any additional benefits provided by riders; plus
3. monthly administrative expense charge; plus
4. the increase charge per $1000 applied to any increase in the
Specified Amount (see "Specified Amount Increases"). The increase
charge is $2.04 per year per $1000 and is shown on the Policy data
page. This charge is designed to cover the costs associated with
increasing the Specified Amount (see "Policy Charges"). This
charge will be deducted on each Monthly Anniversary Day for the
first 12 months after the increase becomes effective.
These deductions will be charged proportionately to the Cash Value in each
Variable Account sub-account and the Fixed Account.
- -Monthly Cost of Insurance
The monthly cost of insurance charge for each policy month is determined by
multiplying the monthly cost of insurance rate by the net amount at risk. The
net amount at risk is the difference between the death benefit and the Policy's
Cash Value, each calculated at the beginning of the policy month.
If death benefit Option 1 is in effect and there have been increases in the
Specified Amount, then the Cash Value shall first be considered a part of the
initial Specified Amount. If the Cash Value exceeds the initial Specified
Amount, it shall then be considered a part of the additional increases in
Specified Amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will not exceed those guaranteed in the Policy.
Guaranteed cost of insurance rates for Policies issued on Specified Amounts less
than $100,000 are based on the 1980 Commissioners Extended Term Mortality Table,
Age Last Birthday (1980 CET). Guaranteed cost of insurance rates for Policies
issued on Specified Amounts $100,000 or more are based on the 1980 Commissioners
Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO). Guaranteed cost
of insurance rates for Policies issued on a substandard basis 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.
For Policies issued in Texas on a standard basis ("Special Class - Standard" in
Texas), guaranteed cost of insurance rates for Specified Amounts less than
$100,000 are based on 130% of the 1980 Commissioners 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 "Non Medical" basis to
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<PAGE> 25
certain categories of individuals. Due to the underwriting criteria established
for Policies issued on a Non Medical basis, actual rates will be higher than the
current cost of insurance rates being charged under Policies that are medically
underwritten.
- -Monthly Administrative Charge
The Company deducts a monthly Administrative Expense Charge to reimburse it for
certain expenses related to maintenance of the Policies, accounting and record
keeping and periodic reporting to Policy Owners. This charge is designed only to
reimburse the Company for certain actual administrative expenses. The Company
does not expect to recover from this charge any amount in excess of aggregate
maintenance expenses. Currently, this charge is $25 per month in the first year,
$5 per month in renewal years. The Company may at its sole discretion increase
this charge. However, the Company guarantees that this charge will never exceed
$7.50 per month in renewal years.
- -Increase Charge
The Increase Charge is comprised of two components: an underwriting and
administration charge as well as a sales charge (see "Specified Amount
Increases"). The underwriting and administration charge is $1.50 per year per
$1000. This charge is to cover the cost of underwriting the increases and any
processing expenses. The Company does not expect to profit from this charge. The
sales charge is equal to .54 per year per $1000 and reimburses the Company for
expenses incurred in distribution.
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company assumes certain risks for guaranteeing the mortality and expense
charges. The mortality risks 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
non-recovery of policy issue, underwriting and other administrative expenses due
to Policies which lapse or are surrendered in the early Policy Years.
To compensate the Company for assuming these risks associated with the Policies,
the Company deducts on a daily basis from the assets of the Variable Account a
charge to provide for mortality and expense risks. This charge is equivalent to
an annual effective rate of 0.80% of the daily net assets of the Variable
Account. On each Policy Anniversary beginning with the 10th, the mortality and
expense risk charge is reduced to 0.50% on an annual basis of the daily net
assets of the Variable Account, provided the Cash Surrender Value is $25,000 or
more on such anniversary. 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 this charge. The Surrender Charge may be insufficient to recover
certain expenses related to the sale of the Policies. Unrecovered expenses are
born by the Company's general assets which may include profits, if any, from
mortality and expense risk charges (see "Surrender Charges").
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 Net Premium applied since the previous
Valuation Date, minus any partial surrenders, 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
sub-account. The conversion is accomplished by dividing the amount of Cash Value
allocated to a sub-account by the value of an Accumulation Unit for the
sub-account of the Valuation Period during which the allocation occurs.
The value of an Accumulation Unit for each sub-account was arbitrarily set
initially at $10 when the underlying Mutual Fund shares in that sub-account were
available for purchase. The value for any subsequent Valuation Period is
determined by multiplying the Accumulation Unit value for each sub-account for
the immediately preceding Valuation Period by the Net Investment Factor for the
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.
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<PAGE> 26
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 (see "Charge For Tax
Provisions").
(c) is a factor representing the daily Mortality and Expense Risk Charge
deducted from the Variable Account. Such factor is equal to an annual
rate of 0.80% of the daily net asset value of the Variable Account. On
each Policy Anniversary beginning with the 10th, the mortality and
expense risk charge is reduced to 0.50% on an annual basis of the daily
net assets of the Variable Account, provided the Cash Surrender Value is
$25,000 or more on such anniversary.
For underlying Mutual Fund options 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, and any charge or credit for
tax reserves.
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 sub-account are determined by
dividing the net amount allocated to the sub-account by the Accumulation Unit
Value for the 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 PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business on the New
York Stock Exchange and ending at the close of business for the next succeeding
Valuation Date. 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 that the current net asset value of
the Accumulation Units might be materially affected.
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
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<PAGE> 27
Insurance Corporation. 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 one year, the Policy Owner may request a
partial surrender. Partial surrenders will be permitted only if they satisfy the
following requirements:
1. The minimum partial surrender is $500;
2. The partial surrender may not reduce the Specified Amount to less
than $50,000;
3. After the partial surrender, the Cash Surrender Value is greater
than $500 or an amount equal to three times the current monthly
deduction if higher;
4. The maximum total partial surrenders in any policy year are
limited to 10% of the total premium payments. On a current basis,
this requirement is waived in years 15 and beyond provided the
Cash Surrender Value is $10,000 or more after the withdrawal; and
5. 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.
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 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 advisor, to determine the tax consequences, if any, of their
employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
After the first Policy Year, the Policy Owner may take a Policy loan using the
Policy as security. Maximum Policy Indebtedness is limited to 90% of the Cash
Value less Surrender Charge less interest due on the next Policy Anniversary.
Maximum Policy Indebtedness, in Texas, is limited to 90% of the Cash Value in
the sub-accounts and 100% of the Cash Value in the Fixed Account less Surrender
Charge less interest due on the next Policy Anniversary. The Company will not
grant a loan for an amount less than $200. Should the Death Proceeds become
payable, the Policy be surrendered, or the Policy mature while a loan is
outstanding, the
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amount of Policy Indebtedness will be deducted from the death benefit, Cash
Surrender Value or the maturity value, respectively.
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").
A Policy Owner considering the use of policy loans in connection with his or her
retirement income plan should consult his or her personal tax adviser regarding
potential tax consequences that may arise if necessary payments are not made to
keep the Policy from lapsing. The amount of such payments necessary to prevent
the Policy from lapsing would increase with age (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 sub-account, withdrawals from sub-accounts
will be made in proportion to the assets in each Variable 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 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
On a current basis, policy loans are credited with an annual effective rate of
5.1% during policy years 2 through 14 and an annual effective rate of 6% during
the 15th and subsequent policy years. The rate is guaranteed never to be lower
than 5.1%. The Company may change the current interest crediting rate on policy
loans at any time at its sole discretion. The loan interest rate is 6% per year
for all Policy loans. In the event that it is determined that such loans will be
treated, as a result of the differential between the interest crediting rate and
the loan interest rate, as taxable distributions under any applicable ruling,
regulation, or court decision, the Company retains the right to increase the net
cost (by decreasing the interest crediting rate) on all subsequent policy loans
to an amount that would result in the transaction being treated as a loan under
Federal tax law. If this amount is not prescribed by such ruling, regulation, or
court decision, the amount will be that which the Company considers to be more
likely to result in the transaction being treated as a loan under Federal tax
law.
Amounts transferred to the Policy Loan Account will earn interest daily from the
date of transfer. The earned interest is transferred from the Policy Loan
Account to a Variable Account or the Fixed Account on each Policy Anniversary or
at the time of loan repayment. It will be allocated according to the Fund
allocation factors in effect at the time of the transfer.
Interest is charged daily and is payable at the end of each Policy Year or at
the time of loan repayment. 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 Policy Indebtedness 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 Policy Indebtedness 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 the Indebtedness 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 sub-accounts and the Fixed Account in proportion to
the Policy Owner's underlying Mutual Fund allocation factors in effect at the
time of the repayment. Each repayment may not be less than $50. 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.
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HOW THE DEATH BENEFIT VARIES
CALCULATION OF THE DEATH BENEFIT
At issue, the Policy Owner selects the Specified Amount.
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.
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."
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%
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 Death Proceeds payable on the Insured's death will be the death
benefit as described above, less any Policy Indebtedness and less any unpaid
Policy Charges. Under certain circumstances, the Death 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 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.
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
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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 the Variable Account.
The Company must inform the Policy Owners 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 Owners 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 General Account life insurance policy offered by the
Company 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 separate
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
- -First Three Policy Years
This Policy will not lapse during the first three Policy Years provided that on
each Monthly Anniversary Day (1) is greater than or equal to (2) where:
(1) Is the sum of all premiums paid to date minus any Policy
Indebtedness, minus any partial surrenders, and minus any partial
surrender fee; and
(2) Is the sum of monthly Minimum Premiums required since the Policy
Date including the monthly Minimum Premium for the current
Monthly Anniversary Day.
If (1) is less than (2) and the Cash Surrender Value is less than zero, a Grace
Period of 61 days from the Monthly Anniversary Day will be allowed for the
payment of sufficient premium to satisfy the Minimum Premium requirement. If
sufficient premium is not paid by the end of the Grace Period, the Policy will
lapse without value. In any event the Policy will not lapse as long as there is
a positive Cash Surrender Value.
- -Policy Years Four and After
If the Cash Surrender Value on a Monthly Anniversary Day is not sufficient to
cover the current Policy Charges, a Grace Period of 61 days from the Monthly
Anniversary Day will be allowed for the payment of sufficient premium to
cover the current Policy Charges due plus an amount equal to three times the
current monthly deduction.
- -All Policy Years
The Company will send such a notice at the start of the Grace Period to the
Policy Owner's last known address. 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 an amount of premium equal to the sum of the Minimum
Monthly Premiums missed since the beginning of the Grace Period,
if your Policy terminated in the first three policy years;
4. paying sufficient premium to cover all policy charges that were
due and unpaid during the Grace Period if your Policy terminated
in the fourth or later policy year;
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5. paying sufficient premium to keep the Policy in force for 3
months from the date of reinstatement; and
6. 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 your 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 lesser of:
1. the Cash Value at the end of the Grace Period; or
2. the Surrender Charge for the Policy Year in which the Policy was
reinstated.
Unless the Policy Owner has provided otherwise, all amounts will be allocated
based on the underlying Mutual Fund allocation factors in effect at the start of
the Grace Period.
THE FIXED ACCOUNT OPTION
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
option. 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.
As explained earlier, 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. 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 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
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.
SPECIFIED AMOUNT INCREASES
After the first Policy Year, the Policy Owner may request an increase to the
Specified Amount. Any increase will be subject to the following conditions:
1. the request must be applied for in writing;
2. satisfactory evidence of insurability must be provided;
3. the increase must be for a minimum of $10,000;
4. the Cash Surrender Value is sufficient to continue the Policy in
force for at least 3 months; and
5. age limits are the same as for a new issue.
Any 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 the number of Specified Amount increases
to one each Policy Year.
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<PAGE> 32
SPECIFIED AMOUNT DECREASES
After the first Policy Year, the Policy Owner may also request a decrease to the
Specified Amount. Any approved decrease will be effective on the Monthly
Anniversary Day on or next following the date the Company receives the request.
Any such decrease shall reduce insurance in the following order:
1. against insurance provided by the most recent increase;
2. against the next most recent increases successively; and
3. against insurance provided under the original application.
The Company reserves the right to limit the number of Specified Amount decreases
to one each Policy Year. The Company will refuse a request for a decrease which
would:
1. reduce the Specified Amount to less than $50,000 ($100,000 in New
Jersey); or
2. disqualify the Policy as a contract for life insurance.
CHANGES IN THE DEATH BENEFIT OPTION
After the first Policy Year, 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.
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 Policy
Owner, and dies before the Insured, the Policy Owner's rights in this Policy
belong to the Policy Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or as subsequently
changed, subject to assignment, if any.
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(ies), unless otherwise provided. Multiple
Beneficiaries will be paid in equal shares, unless otherwise provided. If no
named Beneficiary survives the Insureds, the Death 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. Any assignment will not affect any
payments made or actions taken by the Company before it was recorded. 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.
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INCONTESTABILITY
The Company will not contest payment of the Death Proceeds based on the initial
Specified Amount after the Policy has been in force during the Insured's
lifetime for 2 years from the Policy Date. For any increase in Specified Amount
requiring evidence of insurability, the Company will not contest payment of the
Death Proceeds based on such an increase after it has been in force during the
Insured's lifetime for 2 years from its effective date.
ERROR IN AGE OR SEX
If the age or sex of the Insured has been misstated, the affected benefits will
be adjusted. The amount of the death benefit will be 1. multiplied by 2. and
then the result added to 3., where:
1. is the amount of the death benefit at the time of the Insured's
death reduced by the amount of the Cash Value at the time of the
Insured's death;
2. is the ratio of the monthly cost of insurance applied in the
policy month of death and the monthly cost of insurance that
should have been applied at the true age and sex in the policy
month of death; and
3. is the Cash Value at the time of the Insured's death.
SUICIDE
If the Insured dies by suicide, while sane or insane, within two years from the
Policy Date, the Company will pay no more than the sum of the premiums paid,
less any Indebtedness. If the Insured dies by suicide, while sane or insane,
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
These are nonparticipating Policies on which no dividends are payable. These
Policies do not share in the profits or surplus earnings of the Company.
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 premiums 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 provide
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.
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, Nationwide Financial
Services, Inc. NFS 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 VLI Separate Account-2, Nationwide VLI Separate Account-3,
NACo Variable Account and the Nationwide Variable Account, all of which are
separate investment accounts of the Company or its affiliates. NFS is a wholly
owned subsidiary of the Company.
NFS also acts as principal underwriter for the Nationwide Investing Foundation,
Nationwide Separate Account Trust, Financial Horizons Investment Trust, and
Nationwide Investing Foundation II, which are open-end management investment
companies.
Gross first year commissions plus any expense allowance payments paid by the
Company on the sale of these policies provided by the General Distributor will
not exceed 80% of the target Premium plus 4% of any excess premium payments.
Gross renewal commissions in years 2-10 paid by the Company will not exceed 4%
of actual premium payment, and will not exceed 1% in years 11+.
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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
Death Proceeds payable under a Policy are excludable from gross income of the
beneficiary under Section 101 of the Code.
Section 7702A of the Code defines modified endowment contracts as those policies
issued or materially changed on or 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 (see "Information about the Policies"). 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. Modified endowment contract distributions are defined by
the Code as amounts not received as an annuity and are taxable to the extent the
cash value of the policy exceeds, at the time of distribution, the premiums paid
into the policy. A 10% tax penalty generally applies to the taxable portion of
such distributions unless the Policy Owner is over age 59-1/2 or disabled.
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 15 years after a policy is issued which causes a reduction in death
benefits may still become fully or partially taxable to the 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 a material change or a reduction in benefits
as defined by Section 7702A(c) of the Code.
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 failing to satisfy the diversification standards will not
be treated as life insurance unless such failure was inadvertent, 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.
Representatives of the Internal Revenue Service have suggested, from time to
time, that the number of underlying Mutual Funds available or the number of
transfer opportunities available under a variable product may be relevant in
determining whether the product qualifies for the desired tax treatment. No
formal guidance has been issued in this area. Should the Secretary of the
Treasury issue additional rules or regulations limiting the number of funds,
transfers between funds, exchanges of funds or changes in investment objectives
of funds such that the Policy would no longer qualify as life insurance under
Section 7702 of the Code, the Company will take whatever steps are available to
remain in compliance.
The Company will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the sub-account investments
to remain in compliance.
A total surrender or cancellation of the Policy by lapse or the maturity of the
Policy on its Maturity Date may have adverse tax consequences. If the amount
received by the Policy Owner plus total Policy Indebtedness exceeds the premiums
paid into the Policy, the excess generally will be treated as taxable income,
regardless of whether or not the Policy is a modified endowment contract.
Generally the taxable portion of any distribution from a contract to a
nonresident alien of the United States is subject to tax withholding at a rate
equal to thirty percent (30%) of such amount or, if applicable, a lower treaty
rate. A payment may not be subject to withholding where the recipient
sufficiently establishes that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and such payment
is includable in the recipient's gross income.
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.
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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.
OTHER CONSIDERATIONS
The foregoing discussion is general and is not intended as tax advice. Counsel
and other competent advisors should be consulted for more complete information.
This discussion is based on the Company's understanding of Federal income tax
laws as they are currently interpreted by the Internal Revenue Service. No
representation is made as to the likelihood of continuation of these current
laws and interpretations.
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 and the DC Variable Account, each of which
is a registered investment company, and each of which is a separate investment
account of the Company.
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 home office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company, together with Nationwide Mutual Insurance
Company, Nationwide Indemnity 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 and Nationwide General Insurance Company and their
affiliate companies comprise the Nationwide Insurance Enterprise.
The companies comprising the Nationwide Insurance Enterprise have substantially
common boards of directors and officers. Nationwide Corporation is the sole
shareholder of Nationwide Life.
35 of 106
<PAGE> 36
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
Director
Name Since Principal Occupation
---- ----- --------------------
<S> <C> <C>
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Keith W. Eckel 1996 Partner and Manager, Fred W. Eckel Sons and 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)
James J. Gasper *+ 1996 President and Chief Operating Officer, Nationwide Life
Insurance Company and Nationwide Life and Annuity
Insurance Company (2)
Henry S. Holloway *+ 1986 Farm Owner and Operator (1)
D. Richard McFerson *+ 1988 Chairman and Chief Executive Officer; Nationwide Insurance
Enterprise (2)
David O. Miller *+ 1985 Farm Owner and Land Developer; President, Owen Potato
Farm, Inc.; Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Farm Owner and Operator (1)
James F. Patterson 1989 Vice President, Pattersons, Inc.; President Patterson Farms,
Inc. (1)
Arden L. Shisler *+ 1984 Partner and Manager, Sweetwater Beef Farms; President and
Chief Executive Officer, K&B Transport, Inc. (1)
Robert L. Stewart 1989 Farm Owner and Operator; Owner, Sunnydale 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 Committee +Member, 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 insurance 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 Financial Services, Inc., a registered
broker-dealer.
Messrs. Gasper, Holloway, McFerson, Miller, Patterson and Shisler are directors
of Nationwide Corporation. Messrs. Fuellgraf, McFerson, Ms. Thomas and Mr. Weihl
are trustees of Nationwide Investing Foundation, a registered investment
company. Mr. McFerson is trustee of Nationwide Separate Account Trust, Financial
Horizons Investment Trust and Nationwide Investing Foundation II, registered
investment companies. Mr. Engel is a director of Western Cooperative Transport.
EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME OFFICE HELD
- ---- -----------
<S> <C>
D. 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
</TABLE>
36 of 106
<PAGE> 37
<TABLE>
<CAPTION>
<S> <C>
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 A. Folk Vice President and 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. Folk who joined the Registrant in
1993. From 1983-1993, Mr. Folk served as a partner in the accounting firm KPMG
Peat Marwick LLP.
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
Indebtedness.
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 changes in Specified Amount, changes in death benefit option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, loan repayments, reinstatement and termination.
ADVERTISING
The Company is also ranked and rated by independent financial rating services,
including 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.
37 of 106
<PAGE> 38
LEGAL PROCEEDINGS
There are no material legal proceedings, other than ordinary routine litigation
incidental to the business to which the Company and the Variable Account are
parties or to which any of their property is the subject.
The General Distributor, Nationwide Financial Services, Inc., is not engaged in
any material litigation of any nature.
EXPERTS
The financial statements and schedules included herein 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 43216. All
the members of such firm are employed by the Nationwide Mutual Insurance
Company.
38 of 106
<PAGE> 39
APPENDIX 1
ILLUSTRATION OF
SURRENDER CHARGES
Example 1: A female non-tobacco, age 45, purchases a Policy with a Specified
Amount of $50,000 and a Scheduled Premium of $750. She now wishes to surrender
the Policy during the first Policy year. By using the initial surrender charge
table reproduced below, (also see "Surrender Charges") the total surrender
charge per thousand multiplied by the Specified Amount expressed in thousands
equals the total surrender charge of $569.80 ($11.396 x 50=569.80).
Example 2: A male non-tobacco, age 35, purchases a Policy with a Specified
Amount of $100,000 and a Scheduled Premium of $1100. He now wants to surrender
the Policy in the sixth Policy Year. The total initial surrender charge is
calculated using the method illustrated above. (surrender charge per 1000 6.817
x 100=681.70 maximum initial surrender charge). Because the fifth Policy Year
has been completed, the maximum initial surrender charge is reduced by
multiplying it by the applicable percentage factor from the "Reductions to
Surrender Charges" table below. (Also see "Reductions to Surrender Charges"). In
this case, $681.70 x 60%=$409.02. Maximum Surrender Charge per $1,000 of initial
Specified Amount for policies which are issued on a standard basis.
Initial Specified Amount $50,000-$99,999
<TABLE>
<CAPTION>
------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
------------------------------------------------------------
<S> <C> <C> <C> <C>
25 $ 7.776 $ 7.521 $ 8.369 $ 7.818
------------------------------------------------------------
35 8.817 8.398 9.811 8.891
------------------------------------------------------------
45 12.191 11.396 13.887 12.169
------------------------------------------------------------
55 15.636 14.011 18.415 15.116
------------------------------------------------------------
65 22.295 19.086 26.577 20.641
------------------------------------------------------------
</TABLE>
Initial Specified Amount $100,000+
<TABLE>
<CAPTION>
------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
------------------------------------------------------------
<S> <C> <C> <C> <C>
25 $ 5.776 $ 5.521 $ 6.369 $ 5.818
------------------------------------------------------------
35 6.817 6.398 7.811 6.891
------------------------------------------------------------
45 9.691 8.896 11.387 9.669
------------------------------------------------------------
55 13.136 11.511 15.915 12.616
------------------------------------------------------------
65 21.295 18.086 25.577 19.641
------------------------------------------------------------
</TABLE>
Reductions to Surrender Charges.
<TABLE>
<CAPTION>
------------------------------------------------------------------------
SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
------------------------------------------------------------------------
<S> <C> <C> <C>
0 100% 5 60%
------------------------------------------------------------------------
1 100% 6 50%
------------------------------------------------------------------------
2 90% 7 40%
------------------------------------------------------------------------
3 80% 8 30%
------------------------------------------------------------------------
4 70% 9+ 0%
------------------------------------------------------------------------
</TABLE>
The current Surrender Charges are the same for all states. However, in
Pennsylvania the guaranteed maximum Surrender Charges are spread out over 14
years. The guaranteed maximum Surrender Charge in subsequent years in
Pennsylvania is reduced in the following manner:
<TABLE>
<CAPTION>
COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE
POLICY AS A % OF INITIAL POLICY AS A % OF INITIAL POLICY AS A % OF INITIAL
YEARS SURRENDER CHARGES YEARS SURRENDER CHARGES YEARS SURRENDER CHARGES
----- ----------------- ----- ----------------- ----- -----------------
<S> <C> <C> <C> <C> <C>
0 100% 5 60% 10 20%
1 100% 6 50% 11 15%
2 90% 7 40% 12 10%
3 80% 8 30% 13 5%
4 70% 9 25% 14+ 0%
</TABLE>
The illustrations of current values in this prospectus are the same for
Pennsylvania. However, the illustrations of guaranteed values in this prospectus
do not reflect guaranteed maximum Surrender Charges which are spread out over 14
years. If this contract is issued in Pennsylvania, please contact the home
office for an illustration.
The Company has no plans to change the current Surrender Charges.
39 of 106
<PAGE> 40
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. The mortality and expense risk charges are
equivalent to an annual effective rate of 0.80% of the daily net asset value of
the Variable Account. On each Policy Anniversary beginning with the 10th, the
mortality and expense risk charge is reduced to 0.50% on an annual basis of the
daily net assets of the Variable Account, provided the Cash Surrender Value is
$25,000 or more on such anniversary. 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 1.00% of
the daily net asset value of the Variable Account. This effective rate is based
on the average of the fund expenses for the preceding year for all mutual fund
options available under the policy as of April 30, 1996.
Considering current charges for mortality and expense risks 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 -1.80%, 4.20% and
0.20%. On each Policy Anniversary beginning with the 10th, the gross annual
rates of return of 0%, 6%, and 12% correspond to net investment experience at
constant annual rates of -1.50%, 4.50%, and 10.50%, provided the Cash Surrender
Value is $25,000 or more on such anniversary. This is due to a guaranteed
reduction in the mortality and expense risk charge from an annual effective rate
of 0.80% to an annual effective rate of 0.50% if the aforementioned conditions
apply.
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. Policies issued on a substandard basis would result in lower
Cash Values and Death benefits than those illustrated.
The illustrations also reflect the fact that the Company deducts a sales load
from each premium payment. Current values reflect a deduction of 3.5% of each
premium payment up to Break Point Premium and 1.5% of any excess. Guaranteed
values reflect a deduction of 3.5% of each premium payment. The illustrations
also reflect the fact that the Company deducts a charge for state premium taxes
equal to 2.5% of all premium payments.
The Cash Surrender Values shown in the illustrations reflect the fact that the
Company will deduct a Surrender Charge from the Policy's Cash Value for any
Policy surrendered in full during the first nine years.
In addition, the illustrations reflect the fact that the Company deducts a
monthly administrative charge at the beginning of each Policy Month. This
monthly administrative expense charge is $25 per month in the first year, $5 per
month in renewal years. Current values reflect a current monthly administrative
expense charge of $5 in renewal years, and guaranteed values reflect the $7.50
maximum monthly administrative charge under the Policy in renewal years. 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.
40 of 106
<PAGE> 41
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT
----------------------- ----------------------- ----------------
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>
1 788 240 0 50,000 268 0 50,000 295 0 50,000
2 1,614 704 130 50,000 781 207 50,000 861 287 50,000
3 2,483 1,149 632 50,000 1,305 788 50,000 1,474 957 50,000
4 3,394 1,570 1,111 50,000 1,835 1,376 50,000 2,132 1,673 50,000
5 4,351 1,969 1,567 50,000 2,371 1,969 50,000 2,841 2,440 50,000
6 5,357 2,345 2,001 50,000 2,915 2,570 50,000 3,607 3,263 50,000
7 6,412 2,705 2,418 50,000 3,472 3,185 50,000 4,442 4,155 50,000
8 7,520 3,042 2,813 50,000 4,037 3,807 50,000 5,348 5,118 50,000
9 8,683 3,359 3,187 50,000 4,612 4,440 50,000 6,332 6,160 50,000
10 9,905 3,655 3,655 50,000 5,197 5,197 50,000 7,405 7,405 50,000
11 11,188 3,926 3,926 50,000 5,787 5,787 50,000 8,571 8,571 50,000
12 12,535 4,170 4,170 50,000 6,384 6,384 50,000 9,839 9,839 50,000
13 13,949 4,384 4,384 50,000 6,981 6,981 50,000 11,220 11,220 50,000
14 15,434 4,563 4,563 50,000 7,578 7,578 50,000 12,721 12,721 50,000
15 16,993 4,699 4,699 50,000 8,164 8,164 50,000 14,352 14,352 50,000
16 18,630 4,795 4,795 50,000 8,743 8,743 50,000 16,130 16,130 50,000
17 20,349 4,840 4,840 50,000 9,305 9,305 50,000 18,068 18,068 50,000
18 22,154 4,826 4,826 50,000 9,843 9,843 50,000 20,182 20,182 50,000
19 24,049 4,754 4,754 50,000 10,357 10,357 50,000 22,497 22,497 50,000
20 26,039 4,613 4,613 50,000 10,838 10,838 50,000 25,037 25,037 50,000
21 28,129 4,399 4,399 50,000 11,282 11,282 50,000 27,920 27,920 50,000
22 30,323 4,102 4,102 50,000 11,679 11,679 50,000 31,115 31,115 50,000
23 32,626 3,710 3,710 50,000 12,020 12,020 50,000 34,671 34,671 50,000
24 35,045 3,211 3,211 50,000 12,294 12,294 50,000 38,646 38,646 50,000
25 37,585 2,600 2,600 50,000 12,496 12,496 50,000 43,113 43,113 50,011
26 40,252 1,862 1,862 50,000 12,614 12,614 50,000 48,081 48,081 55,293
27 43,052 966 966 50,000 12,619 12,619 50,000 53,548 53,548 60,509
28 45,992 (*) (*) (*) 12,503 12,503 50,000 59,572 59,572 66,125
29 49,079 (*) (*) (*) 12,247 12,247 50,000 66,220 66,220 72,180
30 52,321 (*) (*) (*) 11,827 11,827 50,000 73,567 73,567 78,717
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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 of 106
<PAGE> 42
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 175 0 50,000 200 0 50,000 225 0 50,000
2 1,614 538 0 50,000 605 31 50,000 676 102 50,000
3 2,483 877 360 50,000 1,010 493 50,000 1,155 639 50,000
4 3,394 1,191 732 50,000 1,412 953 50,000 1,663 1,204 50,000
5 4,351 1,478 1,077 50,000 1,810 1,408 50,000 2,200 1,799 50,000
6 5,357 1,737 1,393 50,000 2,201 1,856 50,000 2,769 2,425 50,000
7 6,412 1,964 1,677 50,000 2,581 2,294 50,000 3,368 3,082 50,000
8 7,520 2,155 1,926 50,000 2,945 2,716 50,000 3,999 3,769 50,000
9 8,683 2,306 2,134 50,000 3,289 3,117 50,000 4,658 4,486 50,000
10 9,905 2,413 2,413 50,000 3,607 3,607 50,000 5,348 5,348 50,000
11 11,188 2,471 2,471 50,000 3,893 3,893 50,000 6,066 6,066 50,000
12 12,535 2,477 2,477 50,000 4,143 4,143 50,000 6,815 6,815 50,000
13 13,949 2,429 2,429 50,000 4,352 4,352 50,000 7,596 7,596 50,000
14 15,434 2,319 2,319 50,000 4,512 4,512 50,000 8,409 8,409 50,000
15 16,993 2,140 2,140 50,000 4,613 4,613 50,000 9,253 9,253 50,000
16 18,630 1,885 1,885 50,000 4,644 4,644 50,000 10,127 10,127 50,000
17 20,349 1,542 1,542 50,000 4,592 4,592 50,000 11,029 11,029 50,000
18 22,154 1,097 1,097 50,000 4,439 4,439 50,000 11,955 11,955 50,000
19 24,049 534 534 50,000 4,165 4,165 50,000 12,902 12,902 50,000
20 26,039 (*) (*) (*) 3,747 3,747 50,000 13,865 13,865 50,000
21 28,129 (*) (*) (*) 3,161 3,161 50,000 14,843 14,843 50,000
22 30,323 (*) (*) (*) 2,378 2,378 50,000 15,835 15,835 50,000
23 32,626 (*) (*) (*) 1,368 1,368 50,000 16,841 16,841 50,000
24 35,045 (*) (*) (*) 90 90 50,000 17,859 17,859 50,000
25 37,585 (*) (*) (*) (*) (*) (*) 18,885 18,885 50,000
26 40,252 (*) (*) (*) (*) (*) (*) 19,912 19,912 50,000
27 43,052 (*) (*) (*) (*) (*) (*) 20,928 20,928 50,000
28 45,992 (*) (*) (*) (*) (*) (*) 21,916 21,916 50,000
29 49,079 (*) (*) (*) (*) (*) (*) 22,861 22,861 50,000
30 52,321 (*) (*) (*) (*) (*) (*) 23,746 23,746 50,000
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
42 of 106
<PAGE> 43
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 239 0 50,239 266 0 50,266 293 0 50,293
2 1,614 700 126 50,700 776 202 50,776 856 282 50,856
3 2,483 1,140 624 51,140 1,295 778 51,295 1,462 946 51,462
4 3,394 1,555 1,096 51,555 1,816 1,357 51,816 2,111 1,652 52,111
5 4,351 1,944 1,543 51,944 2,341 1,939 52,341 2,805 2,403 52,805
6 5,357 2,309 1,965 52,309 2,869 2,525 52,869 3,549 3,205 53,549
7 6,412 2,655 2,368 52,655 3,406 3,119 53,406 4,355 4,068 54,355
8 7,520 2,977 2,748 52,977 3,946 3,717 53,946 5,223 4,993 55,223
9 8,683 3,275 3,103 53,275 4,490 4,318 54,490 6,158 5,986 56,158
10 9,905 3,549 3,549 53,549 5,037 5,037 55,037 7,167 7,167 57,167
11 11,188 3,794 3,794 53,794 5,582 5,582 55,582 8,251 8,251 58,251
12 12,535 4,010 4,010 54,010 6,123 6,123 56,123 9,417 9,417 59,417
13 13,949 4,191 4,191 54,191 6,655 6,655 56,655 10,667 10,667 60,667
14 15,434 4,334 4,334 54,334 7,172 7,172 57,172 12,005 12,005 62,005
15 16,993 4,428 4,428 54,428 7,664 7,664 57,664 13,428 13,428 63,428
16 18,630 4,476 4,476 54,476 8,130 8,130 58,130 14,946 14,946 64,946
17 20,349 4,469 4,469 54,469 8,558 8,558 58,558 16,559 16,559 66,559
18 22,154 4,396 4,396 54,396 8,937 8,937 58,937 18,263 18,263 68,263
19 24,049 4,260 4,260 54,260 9,265 9,265 59,265 20,068 20,068 70,068
20 26,039 4,051 4,051 54,051 9,527 9,527 59,527 21,974 21,974 71,974
21 28,129 3,764 3,764 53,764 9,717 9,717 59,717 23,984 23,984 73,984
22 30,323 3,391 3,391 53,391 9,821 9,821 59,821 26,099 26,099 76,099
23 32,626 2,922 2,922 52,922 9,823 9,823 59,823 28,402 28,402 78,402
24 35,045 2,347 2,347 52,347 9,707 9,707 59,707 30,822 30,822 80,822
25 37,585 1,668 1,668 51,668 9,467 9,467 59,467 33,369 33,369 83,369
26 40,252 873 873 50,873 9,087 9,087 59,087 36,045 36,045 86,045
27 43,052 (*) (*) (*) 8,530 8,530 58,530 38,831 38,831 88,831
28 45,992 (*) (*) (*) 7,789 7,789 57,789 41,739 41,739 91,739
29 49,079 (*) (*) (*) 6,843 6,843 56,843 44,767 44,767 94,767
30 52,321 (*) (*) (*) 5,671 5,671 55,671 47,915 47,915 97,915
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
43 of 106
<PAGE> 44
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 173 0 50,173 197 0 50,197 223 0 50,223
2 1,614 532 0 50,532 599 25 50,599 670 96 50,670
3 2,483 866 350 50,866 997 481 50,997 1,141 624 51,141
4 3,394 1,172 713 51,172 1,390 931 51,390 1,636 1,177 51,636
5 4,351 1,450 1,048 51,450 1,775 1,373 51,775 2,156 1,755 52,156
6 5,357 1,696 1,352 51,696 2,148 1,803 52,148 2,701 2,357 52,701
7 6,412 1,908 1,621 51,908 2,505 2,218 52,505 3,267 2,980 53,267
8 7,520 2,081 1,851 52,081 2,841 2,611 52,841 3,853 3,624 53,853
9 8,683 2,210 2,038 52,210 3,149 2,976 53,149 4,455 4,283 54,455
10 9,905 2,292 2,292 52,292 3,423 3,423 53,423 5,069 5,069 55,069
11 11,188 2,323 2,323 52,323 3,657 3,657 53,657 5,691 5,691 55,691
12 12,535 2,298 2,298 52,298 3,844 3,844 53,844 6,318 6,318 56,318
13 13,949 2,216 2,216 52,216 3,979 3,979 53,979 6,946 6,946 56,946
14 15,434 2,072 2,072 52,072 4,053 4,053 54,053 7,568 7,568 57,568
15 16,993 1,857 1,857 51,857 4,056 4,056 54,056 8,175 8,175 58,175
16 18,630 1,564 1,564 51,564 3,974 3,974 53,974 8,757 8,757 58,757
17 20,349 1,187 1,187 51,187 3,797 3,797 53,797 9,301 9,301 59,301
18 22,154 712 712 50,712 3,504 3,504 53,504 9,788 9,788 59,788
19 24,049 128 128 50,128 3,077 3,077 53,077 10,199 10,199 60,199
20 26,039 (*) (*) (*) 2,497 2,497 52,497 10,510 10,510 60,510
21 28,129 (*) (*) (*) 1,743 1,743 51,743 10,699 10,699 60,699
22 30,323 (*) (*) (*) 797 797 50,797 10,739 10,739 60,739
23 32,626 (*) (*) (*) (*) (*) (*) 10,605 10,605 60,605
24 35,045 (*) (*) (*) (*) (*) (*) 10,261 10,261 60,261
25 37,585 (*) (*) (*) (*) (*) (*) 9,665 9,665 59,665
26 40,252 (*) (*) (*) (*) (*) (*) 8,762 8,762 58,762
27 43,052 (*) (*) (*) (*) (*) (*) 7,486 7,486 57,486
28 45,992 (*) (*) (*) (*) (*) (*) 5,752 5,752 55,752
29 49,079 (*) (*) (*) (*) (*) (*) 3,471 3,471 53,471
30 52,321 (*) (*) (*) (*) (*) (*) 547 547 50,547
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
44 of 106
<PAGE> 45
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 491 0 50,000 538 0 50,000 585 0 50,000
2 2,583 1,191 498 50,000 1,323 630 50,000 1,461 768 50,000
3 3,972 1,854 1,230 50,000 2,116 1,492 50,000 2,400 1,777 50,000
4 5,431 2,476 1,921 50,000 2,913 2,358 50,000 3,406 2,852 50,000
5 6,962 3,050 2,565 50,000 3,706 3,221 50,000 4,478 3,993 50,000
6 8,570 3,577 3,161 50,000 4,499 4,083 50,000 5,626 5,211 50,000
7 10,259 4,051 3,704 50,000 5,281 4,935 50,000 6,852 6,505 50,000
8 12,032 4,462 4,185 50,000 6,046 5,769 50,000 8,157 7,880 50,000
9 13,893 4,812 4,604 50,000 6,795 6,587 50,000 9,554 9,346 50,000
10 15,848 5,093 5,093 50,000 7,519 7,519 50,000 11,050 11,050 50,000
11 17,901 5,302 5,302 50,000 8,214 8,214 50,000 12,655 12,655 50,000
12 20,056 5,429 5,429 50,000 8,873 8,873 50,000 14,381 14,381 50,000
13 22,318 5,466 5,466 50,000 9,487 9,487 50,000 16,241 16,241 50,000
14 24,694 5,401 5,401 50,000 10,044 10,044 50,000 18,252 18,252 50,000
15 27,189 5,233 5,233 50,000 10,545 10,545 50,000 20,442 20,442 50,000
16 29,808 4,951 4,951 50,000 10,977 10,977 50,000 22,837 22,837 50,000
17 32,559 4,524 4,524 50,000 11,315 11,315 50,000 25,462 25,462 50,000
18 35,447 3,949 3,949 50,000 11,554 11,554 50,000 28,453 28,453 50,000
19 38,479 3,206 3,206 50,000 11,678 11,678 50,000 31,797 31,797 50,000
20 41,663 2,277 2,277 50,000 11,668 11,668 50,000 35,567 35,567 50,000
21 45,006 1,127 1,127 50,000 11,494 11,494 50,000 39,851 39,851 50,000
22 48,517 (*) (*) (*) 11,120 11,120 50,000 44,760 44,760 50,000
23 52,202 (*) (*) (*) 10,503 10,503 50,000 50,403 50,403 52,923
24 56,073 (*) (*) (*) 9,597 9,597 50,000 56,622 56,622 59,453
25 60,136 (*) (*) (*) 8,337 8,337 50,000 63,445 63,445 66,617
26 64,403 (*) (*) (*) 6,647 6,647 50,000 70,925 70,925 74,471
27 68,883 (*) (*) (*) 4,428 4,428 50,000 79,119 79,119 83,075
28 73,587 (*) (*) (*) 1,557 1,557 50,000 88,092 88,092 92,497
29 78,527 (*) (*) (*) (*) (*) (*) 97,909 97,909 102,805
30 83,713 (*) (*) (*) (*) (*) (*) 108,641 108,641 114,074
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
45 of 106
<PAGE> 46
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 286 0 50,000 327 0 50,000 368 0 50,000
2 2,583 727 34 50,000 832 139 50,000 942 249 50,000
3 3,972 1,107 484 50,000 1,305 681 50,000 1,522 898 50,000
4 5,431 1,424 870 50,000 1,741 1,186 50,000 2,103 1,548 50,000
5 6,962 1,669 1,184 50,000 2,129 1,644 50,000 2,678 2,193 50,000
6 8,570 1,836 1,421 50,000 2,460 2,044 50,000 3,239 2,824 50,000
7 10,259 1,917 1,571 50,000 2,723 2,377 50,000 3,780 3,433 50,000
8 12,032 1,898 1,621 50,000 2,901 2,624 50,000 4,284 4,007 50,000
9 13,893 1,765 1,557 50,000 2,976 2,768 50,000 4,736 4,528 50,000
10 15,848 1,504 1,504 50,000 2,928 2,928 50,000 5,120 5,120 50,000
11 17,901 1,100 1,100 50,000 2,737 2,737 50,000 5,416 5,416 50,000
12 20,056 537 537 50,000 2,377 2,377 50,000 5,602 5,602 50,000
13 22,318 (*) (*) (*) 1,824 1,824 50,000 5,655 5,655 50,000
14 24,694 (*) (*) (*) 1,041 1,041 50,000 5,540 5,540 50,000
15 27,189 (*) (*) (*) (*) (*) (*) 5,215 5,215 50,000
16 29,808 (*) (*) (*) (*) (*) (*) 4,617 4,617 50,000
17 32,559 (*) (*) (*) (*) (*) (*) 3,664 3,664 50,000
18 35,447 (*) (*) (*) (*) (*) (*) 2,246 2,246 50,000
19 38,479 (*) (*) (*) (*) (*) (*) 219 219 50,000
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
46 of 106
<PAGE> 47
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 486 0 50,486 532 0 50,532 579 0 50,579
2 2,583 1,176 483 51,176 1,306 613 51,306 1,443 750 51,443
3 3,972 1,823 1,199 51,823 2,080 1,457 52,080 2,360 1,736 52,360
4 5,431 2,423 1,868 52,423 2,849 2,295 52,849 3,331 2,777 53,331
5 6,962 2,967 2,482 52,967 3,603 3,118 53,603 4,351 3,866 54,351
6 8,570 3,456 3,040 53,456 4,342 3,926 54,342 5,426 5,010 55,426
7 10,259 3,883 3,536 53,883 5,055 4,709 55,055 6,551 6,204 56,551
8 12,032 4,236 3,959 54,236 5,730 5,453 55,730 7,718 7,441 57,718
9 13,893 4,518 4,310 54,518 6,366 6,158 56,366 8,933 8,725 58,933
10 15,848 4,719 4,719 54,719 6,950 6,950 56,950 10,190 10,190 60,190
11 17,901 4,836 4,836 54,836 7,474 7,474 57,474 11,485 11,485 61,485
12 20,056 4,860 4,860 54,860 7,926 7,926 57,926 12,814 12,814 62,814
13 22,318 4,780 4,780 54,781 8,290 8,290 58,290 14,167 14,167 64,167
14 24,694 4,588 4,588 54,588 8,551 8,551 58,551 15,533 15,533 65,533
15 27,189 4,284 4,284 54,284 8,705 8,705 58,705 16,914 16,914 66,914
16 29,808 3,859 3,859 53,859 8,734 8,734 58,734 18,298 18,298 68,298
17 32,559 3,285 3,285 53,285 8,603 8,603 58,603 19,655 19,655 69,655
18 35,447 2,565 2,565 52,565 8,305 8,305 58,305 20,982 20,982 70,982
19 38,479 1,689 1,689 51,689 7,820 7,820 57,820 22,261 22,261 72,261
20 41,663 647 647 50,647 7,129 7,129 57,129 23,476 23,476 73,476
21 45,006 (*) (*) (*) 6,198 6,198 56,198 24,594 24,594 74,594
22 48,517 (*) (*) (*) 4,990 4,990 54,990 25,580 25,580 75,580
23 52,202 (*) (*) (*) 3,470 3,470 53,470 26,476 26,476 76,476
24 56,073 (*) (*) (*) 1,605 1,605 51,605 27,172 27,172 77,172
25 60,136 (*) (*) (*) (*) (*) (*) 27,623 27,623 77,623
26 64,403 (*) (*) (*) (*) (*) (*) 27,775 27,775 77,775
27 68,883 (*) (*) (*) (*) (*) (*) 27,570 27,570 77,570
28 73,587 (*) (*) (*) (*) (*) (*) 26,951 26,951 76,951
29 78,527 (*) (*) (*) (*) (*) (*) 25,840 25,840 75,840
30 83,713 (*) (*) (*) (*) (*) (*) 24,147 24,147 74,147
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
47 of 106
<PAGE> 48
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 279 0 50,279 319 0 50,319 359 0 50,359
2 2,583 706 13 50,706 809 116 50,809 917 224 50,917
3 3,972 1,068 444 51,068 1,259 636 51,259 1,470 846 51,470
4 5,431 1,359 805 51,359 1,662 1,108 51,662 2,009 1,454 52,009
5 6,962 1,572 1,087 51,572 2,006 1,521 52,006 2,525 2,040 52,525
6 8,570 1,700 1,285 51,700 2,281 1,865 52,281 3,006 2,590 53,006
7 10,259 1,736 1,390 51,736 2,474 2,128 52,474 3,440 3,093 53,440
8 12,032 1,667 1,390 51,667 2,568 2,290 52,568 3,806 3,529 53,806
9 13,893 1,481 1,273 51,481 2,543 2,335 52,543 4,083 3,875 54,083
10 15,848 1,167 1,167 51,167 2,381 2,381 52,381 4,247 4,247 54,247
11 17,901 713 713 50,713 2,063 2,063 52,063 4,274 4,274 54,274
12 20,056 110 110 50,110 1,570 1,570 51,570 4,137 4,137 54,137
13 22,318 (*) (*) (*) 882 882 50,882 3,807 3,807 53,807
14 24,694 (*) (*) (*) (*) (*) (*) 3,247 3,247 53,247
15 27,189 (*) (*) (*) (*) (*) (*) 2,415 2,415 52,415
16 29,808 (*) (*) (*) (*) (*) (*) 1,252 1,252 51,252
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
48 of 106
<PAGE> 49
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 797 0 100,000 861 0 100,000 926 28 100,000
2 3,229 1,797 899 100,000 1,982 1,085 100,000 2,176 1,278 100,000
3 4,965 2,759 1,951 100,000 3,129 2,322 100,000 3,531 2,723 100,000
4 6,788 3,685 2,967 100,000 4,305 3,587 100,000 5,004 4,286 100,000
5 8,703 4,575 3,947 100,000 5,511 4,883 100,000 6,606 5,978 100,000
6 10,713 5,432 4,894 100,000 6,749 6,211 100,000 8,354 7,816 100,000
7 12,824 6,245 5,796 100,000 8,011 7,562 100,000 10,252 9,803 100,000
8 15,040 7,003 6,644 100,000 9,287 8,928 100,000 12,305 11,946 100,000
9 17,367 7,709 7,440 100,000 10,579 10,310 100,000 14,533 14,263 100,000
10 19,810 8,354 8,354 100,000 11,880 11,880 100,000 16,945 16,945 100,000
11 22,376 8,950 8,950 100,000 13,202 13,202 100,000 19,576 19,576 100,000
12 25,069 9,506 9,506 100,000 14,554 14,554 100,000 22,459 22,459 100,000
13 27,898 10,024 10,024 100,000 15,941 15,941 100,000 25,623 25,623 100,000
14 30,868 10,486 10,486 100,000 17,347 17,347 100,000 29,174 29,174 100,000
15 33,986 10,874 10,874 100,000 18,757 18,757 100,000 33,066 33,066 100,000
16 37,261 11,193 11,193 100,000 20,176 20,176 100,000 37,346 37,346 100,000
17 40,699 11,437 11,437 100,000 21,602 21,602 100,000 42,060 42,060 100,000
18 44,309 11,592 11,592 100,000 23,021 23,021 100,000 47,257 47,257 100,000
19 48,099 11,651 11,651 100,000 24,432 24,432 100,000 52,999 52,999 100,000
20 52,079 11,621 11,621 100,000 25,841 25,841 100,000 59,365 59,365 100,000
21 56,258 11,488 11,488 100,000 27,323 27,323 100,000 66,436 66,436 100,000
22 60,646 11,223 11,223 100,000 28,782 28,782 100,000 74,305 74,305 100,000
23 65,253 10,817 10,817 100,000 30,214 30,214 100,000 83,092 83,092 100,000
24 70,091 10,243 10,243 100,000 31,602 31,602 100,000 92,865 92,865 108,653
25 75,170 9,490 9,490 100,000 32,941 32,941 100,000 103,604 103,604 120,181
26 80,504 8,545 8,545 100,000 34,228 34,228 100,000 115,401 115,401 132,711
27 86,104 7,368 7,368 100,000 35,438 35,438 100,000 128,390 128,390 145,081
28 91,984 5,942 5,942 100,000 36,565 36,565 100,000 142,708 142,708 158,406
29 98,158 4,239 4,239 100,000 37,598 37,598 100,000 158,508 158,508 172,774
30 104,641 2,209 2,209 100,000 38,510 38,510 100,000 175,964 175,964 188,282
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
49 of 106
<PAGE> 50
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 749 0 100,000 812 0 100,000 875 0 100,000
2 3,229 1,669 771 100,000 1,847 950 100,000 2,034 1,137 100,000
3 4,965 2,546 1,739 100,000 2,900 2,092 100,000 3,283 2,475 100,000
4 6,788 3,380 2,662 100,000 3,967 3,249 100,000 4,629 3,911 100,000
5 8,703 4,169 3,540 100,000 5,048 4,420 100,000 6,081 5,453 100,000
6 10,713 4,908 4,369 100,000 6,140 5,601 100,000 7,645 7,107 100,000
7 12,824 5,594 5,145 100,000 7,237 6,788 100,000 9,330 8,881 100,000
8 15,040 6,221 5,862 100,000 8,335 7,976 100,000 11,142 10,783 100,000
9 17,367 6,783 6,514 100,000 9,428 9,159 100,000 13,091 12,822 100,000
10 19,810 7,276 7,276 100,000 10,510 10,510 100,000 15,187 15,187 100,000
11 22,376 7,692 7,692 100,000 11,574 11,574 100,000 17,442 17,442 100,000
12 25,069 8,028 8,028 100,000 12,616 12,616 100,000 19,871 19,871 100,000
13 27,898 8,279 8,279 100,000 13,631 13,631 100,000 22,494 22,494 100,000
14 30,868 8,438 8,438 100,000 14,611 14,611 100,000 25,328 25,328 100,000
15 33,986 8,495 8,495 100,000 15,546 15,546 100,000 28,480 28,480 100,000
16 37,261 8,438 8,438 100,000 16,424 16,424 100,000 31,909 31,909 100,000
17 40,699 8,254 8,254 100,000 17,232 17,232 100,000 35,646 35,646 100,000
18 44,309 7,925 7,925 100,000 17,950 17,950 100,000 39,725 39,725 100,000
19 48,099 7,429 7,429 100,000 18,557 18,557 100,000 44,188 44,188 100,000
20 52,079 6,745 6,745 100,000 19,032 19,032 100,000 49,088 49,088 100,000
21 56,258 5,853 5,853 100,000 19,352 19,352 100,000 54,492 54,492 100,000
22 60,646 4,728 4,728 100,000 19,493 19,493 100,000 60,481 60,481 100,000
23 65,253 3,349 3,349 100,000 19,429 19,429 100,000 67,156 67,156 100,000
24 70,091 1,681 1,681 100,000 19,126 19,126 100,000 74,640 74,640 100,000
25 75,170 (*) (*) (*) 18,539 18,539 100,000 83,081 83,081 100,000
26 80,504 (*) (*) (*) 17,606 17,606 100,000 92,592 92,592 106,481
27 86,104 (*) (*) (*) 16,247 16,247 100,000 103,074 103,074 116,473
28 91,984 (*) (*) (*) 14,359 14,359 100,000 114,612 114,612 127,219
29 98,158 (*) (*) (*) 11,816 11,816 100,000 127,334 127,334 138,794
30 104,641 (*) (*) (*) 8,476 8,476 100,000 141,392 141,392 151,290
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
50 of 106
<PAGE> 51
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 794 0 100,794 858 0 100,858 922 25 100,922
2 3,229 1,787 890 101,787 1,972 1,074 101,972 2,164 1,267 102,164
3 4,965 2,739 1,931 102,739 3,107 2,299 103,107 3,505 2,698 103,505
4 6,788 3,651 2,933 103,651 4,265 3,547 104,265 4,956 4,238 104,956
5 8,703 4,524 3,895 104,524 5,446 4,818 105,446 6,527 5,899 106,527
6 10,713 5,358 4,819 105,358 6,653 6,115 106,653 8,232 7,693 108,232
7 12,824 6,142 5,694 106,143 7,874 7,425 107,874 10,069 9,621 110,069
8 15,040 6,867 6,508 106,867 9,097 8,738 109,097 12,042 11,683 112,042
9 17,367 7,532 7,262 107,532 10,322 10,053 110,322 14,162 13,893 114,162
10 19,810 8,127 8,127 108,127 11,538 11,538 111,538 16,434 16,434 116,434
11 22,376 8,667 8,667 108,667 12,759 12,759 112,759 18,885 18,885 118,885
12 25,069 9,161 9,161 109,161 13,991 13,991 113,991 21,543 21,543 121,543
13 27,898 9,610 9,610 109,610 15,237 15,237 115,237 24,428 24,428 124,428
14 30,868 9,994 9,994 109,994 16,476 16,476 116,476 27,542 27,542 127,542
15 33,986 10,294 10,294 110,294 17,686 17,686 117,686 30,979 30,979 130,979
16 37,261 10,515 10,515 110,515 18,870 18,870 118,870 34,693 34,693 134,693
17 40,699 10,650 10,650 110,650 20,017 20,017 120,017 38,703 38,703 138,703
18 44,309 10,683 10,683 110,683 21,109 21,109 121,109 43,021 43,021 143,021
19 48,099 10,609 10,609 110,609 22,137 22,137 122,137 47,673 47,673 147,673
20 52,079 10,435 10,435 110,435 23,102 23,102 123,102 52,698 52,698 152,698
21 56,258 10,147 10,147 110,147 23,985 23,985 123,985 58,118 58,118 158,118
22 60,646 9,715 9,715 109,715 24,751 24,751 124,751 63,938 63,938 163,938
23 65,253 9,131 9,131 109,131 25,385 25,385 125,385 70,192 70,192 170,192
24 70,091 8,369 8,369 108,369 25,930 25,930 125,930 76,891 76,891 176,891
25 75,170 7,423 7,423 107,423 26,294 26,294 126,294 84,071 84,071 184,071
26 80,504 6,286 6,286 106,286 26,460 26,460 126,460 91,774 91,774 191,774
27 86,104 4,923 4,923 104,923 26,379 26,379 126,379 100,010 100,010 200,010
28 91,984 3,329 3,329 103,329 26,030 26,030 126,030 108,826 108,826 208,826
29 98,158 1,489 1,489 101,489 25,383 25,383 125,383 118,261 118,261 218,261
30 104,641 (*) (*) (*) 24,382 24,382 124,382 128,338 128,338 228,338
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
51 of 106
<PAGE> 52
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 746 0 100,746 808 0 100,808 871 0 100,871
2 3,229 1,658 761 101,658 1,836 938 101,836 2,021 1,123 102,021
3 4,965 2,525 1,717 102,525 2,874 2,067 102,874 3,254 2,447 103,254
4 6,788 3,343 2,625 103,343 3,922 3,204 103,922 4,576 3,858 104,576
5 8,703 4,111 3,483 104,111 4,976 4,348 104,976 5,992 5,364 105,992
6 10,713 4,824 4,286 104,824 6,032 5,493 106,032 7,507 6,968 107,507
7 12,824 5,478 5,030 105,478 7,082 6,633 107,082 9,123 8,675 109,123
8 15,040 6,067 5,708 106,067 8,120 7,761 108,120 10,844 10,485 110,844
9 17,367 6,584 6,314 106,584 9,138 8,869 109,138 12,672 12,403 112,672
10 19,810 7,022 7,022 107,022 10,126 10,126 110,126 14,610 14,610 114,610
11 22,376 7,376 7,376 107,376 11,076 11,076 111,076 16,659 16,659 116,659
12 25,069 7,640 7,640 107,640 11,978 11,978 111,978 18,825 18,825 118,825
13 27,898 7,810 7,810 107,810 12,825 12,825 112,825 21,113 21,113 121,113
14 30,868 7,878 7,878 107,878 13,606 13,606 113,606 23,525 23,525 123,525
15 33,986 7,834 7,834 107,834 14,303 14,303 114,303 26,060 26,060 126,060
16 37,261 7,667 7,667 107,667 14,901 14,901 114,901 28,805 28,805 128,805
17 40,699 7,364 7,364 107,364 15,381 15,381 115,381 31,685 31,685 131,685
18 44,309 6,906 6,906 106,906 15,716 15,716 115,716 34,694 34,694 134,694
19 48,099 6,276 6,276 106,276 15,878 15,878 115,878 37,820 37,820 137,820
20 52,079 5,455 5,455 105,455 15,838 15,838 115,838 41,055 41,055 141,055
21 56,258 4,427 4,427 104,427 15,569 15,569 115,569 44,389 44,389 144,389
22 60,646 3,178 3,178 103,178 15,040 15,040 115,040 47,812 47,812 147,812
23 65,253 1,694 1,694 101,694 14,224 14,224 114,224 51,314 51,314 151,314
24 70,091 (*) (*) (*) 13,085 13,085 113,085 54,880 54,880 154,880
25 75,170 (*) (*) (*) 11,577 11,577 111,577 58,481 58,481 158,481
26 80,504 (*) (*) (*) 9,641 9,641 109,641 62,078 62,078 162,078
27 86,104 (*) (*) (*) 7,207 7,207 107,207 65,615 65,615 165,615
28 91,984 (*) (*) (*) 4,188 4,188 104,188 69,017 69,017 169,017
29 98,158 (*) (*) (*) 493 493 100,493 72,201 72,201 172,201
30 104,641 (*) (*) (*) (*) (*) (*) 75,085 75,085 175,085
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
52 of 106
<PAGE> 53
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,382 220 100,000 1,491 329 100,000 1,601 438 100,000
2 5,381 2,951 1,789 100,000 3,263 2,101 100,000 3,589 2,427 100,000
3 8,275 4,469 3,423 100,000 5,086 4,040 100,000 5,756 4,710 100,000
4 11,314 5,918 4,988 100,000 6,943 6,013 100,000 8,101 7,171 100,000
5 14,505 7,280 6,466 100,000 8,819 8,005 100,000 10,628 9,814 100,000
6 17,855 8,562 7,864 100,000 10,721 10,023 100,000 13,362 12,665 100,000
7 21,373 9,759 9,178 100,000 12,645 12,064 100,000 16,325 15,744 100,000
8 25,066 10,858 10,393 100,000 14,581 14,116 100,000 19,532 19,067 100,000
9 28,945 11,857 11,508 100,000 16,527 16,179 100,000 23,010 22,662 100,000
10 33,017 12,762 12,762 100,000 18,493 18,493 100,000 26,804 26,804 100,000
11 37,293 13,561 13,561 100,000 20,471 20,471 100,000 31,040 31,040 100,000
12 41,782 14,230 14,230 100,000 22,440 22,440 100,000 35,676 35,676 100,000
13 46,497 14,763 14,763 100,000 24,398 24,398 100,000 40,770 40,770 100,000
14 51,446 15,137 15,137 100,000 26,328 26,328 100,000 46,378 46,378 100,000
15 56,644 15,344 15,344 100,000 28,318 28,318 100,000 52,582 52,582 100,000
16 62,101 15,377 15,377 100,000 30,290 30,290 100,000 59,479 59,479 100,000
17 67,831 15,203 15,203 100,000 32,225 32,225 100,000 67,176 67,176 100,000
18 73,848 14,811 14,811 100,000 34,123 34,123 100,000 75,815 75,815 100,000
19 80,165 14,181 14,181 100,000 35,979 35,979 100,000 85,569 85,569 100,000
20 86,798 13,272 13,272 100,000 37,776 37,776 100,000 96,629 96,629 103,394
21 93,763 12,050 12,050 100,000 39,503 39,503 100,000 108,943 108,943 114,391
22 101,076 10,431 10,431 100,000 41,118 41,118 100,000 122,479 122,479 128,603
23 108,755 8,349 8,349 100,000 42,598 42,598 100,000 137,350 137,350 144,218
24 116,818 5,727 5,727 100,000 43,917 43,917 100,000 153,681 153,681 161,365
25 125,284 2,462 2,462 100,000 45,041 45,041 100,000 171,604 171,604 180,184
26 134,173 (*) (*) (*) 45,933 45,933 100,000 191,264 191,264 200,827
27 143,506 (*) (*) (*) 46,558 46,558 100,000 212,815 212,815 223,456
28 153,307 (*) (*) (*) 46,858 46,858 100,000 236,426 236,426 248,247
29 163,597 (*) (*) (*) 46,761 46,761 100,000 262,272 262,272 275,385
30 174,402 (*) (*) (*) 46,158 46,158 100,000 290,539 290,539 305,066
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
53 of 106
<PAGE> 54
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,209 46 100,000 1,312 150 100,000 1,417 254 100,000
2 5,381 2,533 1,371 100,000 2,822 1,659 100,000 3,124 1,961 100,000
3 8,275 3,760 2,714 100,000 4,320 3,273 100,000 4,929 3,883 100,000
4 11,314 4,884 3,954 100,000 5,799 4,869 100,000 6,837 5,907 100,000
5 14,505 5,896 5,082 100,000 7,250 6,436 100,000 8,850 8,037 100,000
6 17,855 6,786 6,089 100,000 8,662 7,964 100,000 10,975 10,277 100,000
7 21,373 7,545 6,964 100,000 10,023 9,441 100,000 13,214 12,633 100,000
8 25,066 8,155 7,690 100,000 11,315 10,850 100,000 15,570 15,105 100,000
9 28,945 8,599 8,250 100,000 12,518 12,170 100,000 18,046 17,697 100,000
10 33,017 8,861 8,861 100,000 13,615 13,615 100,000 20,647 20,647 100,000
11 37,293 8,922 8,922 100,000 14,585 14,585 100,000 23,385 23,385 100,000
12 41,782 8,766 8,766 100,000 15,408 15,408 100,000 26,275 26,275 100,000
13 46,497 8,374 8,374 100,000 16,064 16,064 100,000 29,428 29,428 100,000
14 51,446 7,720 7,720 100,000 16,523 16,523 100,000 32,799 32,799 100,000
15 56,644 6,769 6,769 100,000 16,748 16,748 100,000 36,416 36,416 100,000
16 62,101 5,470 5,470 100,000 16,687 16,687 100,000 40,311 40,311 100,000
17 67,831 3,759 3,759 100,000 16,270 16,270 100,000 44,522 44,522 100,000
18 73,848 1,548 1,548 100,000 15,408 15,408 100,000 49,097 49,097 100,000
19 80,165 (*) (*) (*) 13,996 13,996 100,000 54,107 54,107 100,000
20 86,798 (*) (*) (*) 11,915 11,915 100,000 59,652 59,652 100,000
21 93,763 (*) (*) (*) 9,029 9,029 100,000 65,879 65,879 100,000
22 101,076 (*) (*) (*) 5,171 5,171 100,000 72,980 72,980 100,000
23 108,755 (*) (*) (*) 139 139 100,000 81,212 81,212 100,000
24 116,818 (*) (*) (*) (*) (*) (*) 90,917 90,917 100,000
25 125,284 (*) (*) (*) (*) (*) (*) 102,302 102,302 107,417
26 134,173 (*) (*) (*) (*) (*) (*) 114,787 114,787 120,527
27 143,506 (*) (*) (*) (*) (*) (*) 128,427 128,427 134,848
28 153,307 (*) (*) (*) (*) (*) (*) 143,307 143,307 150,472
29 163,597 (*) (*) (*) (*) (*) (*) 159,518 159,518 167,494
30 174,402 (*) (*) (*) (*) (*) (*) 177,155 177,155 186,012
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
54 of 106
<PAGE> 55
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,370 208 101,370 1,479 316 101,479 1,587 425 101,587
2 5,381 2,917 1,754 102,917 3,225 2,063 103,225 3,547 2,385 103,547
3 8,275 4,400 3,354 104,400 5,007 3,961 105,007 5,665 4,619 105,665
4 11,314 5,800 4,870 105,800 6,803 5,873 106,803 7,935 7,005 107,935
5 14,505 7,098 6,285 107,098 8,594 7,780 108,594 10,350 9,536 110,350
6 17,855 8,300 7,602 108,300 10,382 9,684 110,382 12,928 12,230 112,928
7 21,373 9,397 8,816 109,397 12,159 11,578 112,159 15,677 15,095 115,677
8 25,066 10,376 9,911 110,376 13,906 13,441 113,906 18,594 18,129 118,594
9 28,945 11,231 10,882 111,231 15,616 15,267 115,616 21,691 21,342 121,691
10 33,017 11,969 11,969 111,969 17,291 17,291 117,291 24,990 24,990 124,990
11 37,293 12,577 12,577 112,577 18,914 18,914 118,914 28,495 28,495 128,495
12 41,782 13,025 13,025 113,025 20,450 20,450 120,450 32,290 32,290 132,290
13 46,497 13,306 13,306 113,306 21,885 21,885 121,885 36,308 36,308 136,308
14 51,446 13,393 13,393 113,393 23,185 23,185 123,185 40,541 40,541 140,541
15 56,644 13,281 13,281 113,281 24,334 24,334 124,334 45,001 45,001 145,001
16 62,101 12,964 12,964 112,964 25,316 25,316 125,316 49,701 49,701 149,701
17 67,831 12,406 12,406 112,406 26,166 26,166 126,166 54,624 54,624 154,624
18 73,848 11,602 11,602 111,602 26,790 26,790 126,790 59,784 59,784 159,784
19 80,165 10,538 10,538 110,538 27,157 27,157 127,157 65,185 65,185 165,185
20 86,798 9,180 9,180 109,180 27,217 27,217 127,217 70,812 70,812 170,812
21 93,763 7,505 7,505 107,505 26,927 26,927 126,927 76,656 76,656 176,656
22 101,076 5,441 5,441 105,441 26,191 26,191 126,191 82,659 82,659 182,659
23 108,755 2,948 2,948 102,948 24,942 24,942 124,942 88,786 88,786 188,786
24 116,818 (*) (*) (*) 23,031 23,031 123,031 95,002 95,002 195,002
25 125,284 (*) (*) (*) 20,454 20,454 120,454 101,252 101,252 201,252
26 134,173 (*) (*) (*) 17,130 17,130 117,130 107,488 107,488 207,488
27 143,506 (*) (*) (*) 12,990 12,990 112,990 113,667 113,667 213,667
28 153,307 (*) (*) (*) 7,935 7,935 107,935 119,717 119,717 219,717
29 163,597 (*) (*) (*) 1,864 1,864 101,864 125,559 125,559 225,559
30 174,402 (*) (*) (*) (*) (*) (*) 131,068 131,068 231,068
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY
ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR AND $5.00
THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS
UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT
FOR ANY SINGLE POLICY YEAR.
(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.
55 of 106
<PAGE> 56
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,194 31 101,194 1,297 134 101,297 1,400 238 101,400
2 5,381 2,491 1,328 102,491 2,775 1,612 102,775 3,072 1,910 103,072
3 8,275 3,676 2,630 103,676 4,222 3,176 104,222 4,817 3,771 104,817
4 11,314 4,741 3,811 104,741 5,627 4,697 105,627 6,632 5,702 106,632
5 14,505 5,676 4,862 105,676 6,975 6,161 106,975 8,510 7,696 108,510
6 17,855 6,470 5,772 106,470 8,250 7,552 108,250 10,443 9,746 110,443
7 21,373 7,111 6,530 107,111 9,435 8,853 109,435 12,423 11,842 112,423
8 25,066 7,582 7,117 107,582 10,503 10,038 110,503 14,432 13,967 114,432
9 28,945 7,862 7,514 107,862 11,429 11,080 111,429 16,449 16,100 116,449
10 33,017 7,937 7,937 107,937 12,185 12,185 112,185 18,453 18,453 118,453
11 37,293 7,789 7,789 107,789 12,744 12,744 112,744 20,423 20,423 120,423
12 41,782 7,403 7,403 107,403 13,078 13,078 113,078 22,334 22,334 122,334
13 46,497 6,767 6,767 106,767 13,159 13,159 113,159 24,164 24,164 124,164
14 51,446 5,861 5,861 105,861 12,955 12,955 112,955 25,877 25,877 125,877
15 56,644 4,660 4,660 104,660 12,420 12,420 112,420 27,517 27,517 127,517
16 62,101 3,125 3,125 103,125 11,498 11,498 111,498 28,950 28,950 128,950
17 67,831 1,213 1,213 101,213 10,119 10,119 110,119 30,098 30,098 130,098
18 73,848 (*) (*) (*) 8,198 8,198 108,198 30,865 30,865 130,865
19 80,165 (*) (*) (*) 5,647 5,647 105,647 31,141 31,141 131,141
20 86,798 (*) (*) (*) 2,382 2,382 102,382 30,817 30,817 130,817
21 93,763 (*) (*) (*) (*) (*) (*) 29,784 29,784 129,784
22 101,076 (*) (*) (*) (*) (*) (*) 27,926 27,926 127,926
23 108,755 (*) (*) (*) (*) (*) (*) 25,120 25,120 125,120
24 116,818 (*) (*) (*) (*) (*) (*) 21,225 21,225 121,225
25 125,284 (*) (*) (*) (*) (*) (*) 15,999 15,999 115,999
26 134,173 (*) (*) (*) (*) (*) (*) 9,287 9,287 109,287
27 143,506 (*) (*) (*) (*) (*) (*) 812 812 100,812
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A
MONTHLY ADMINISTRATIVE EXPENSE CHARGE OF $25 FOR THE FIRST POLICY YEAR
AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON
ALL PREMIUMS.
(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.
56 of 106
<PAGE> 57
APPENDIX 3
The following performance tables display historical investment results of the
underlying Mutual Fund sub-accounts of the Variable Account. This information
may be useful in helping potential investors in deciding which underlying Mutual
Fund sub-accounts to choose and in assessing the competence of the underlying
Mutual Funds' investment advisers. The performance figures shown should be
considered in light of the investment objectives and policies, characteristics
and quality of the underlying portfolios of the underlying Mutual Funds, and the
market conditions during the periods of time quoted. The performance figures
should not be considered as estimates or predictions of future performance.
Investment return and the principal value of the underlying Mutual Fund
sub-accounts are not guaranteed and will fluctuate so that a Policy Owner's
units, when redeemed, may be worth more or less than their original cost.
57 of 106
<PAGE> 58
PERFORMANCE TABLES
TOTAL RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
ANNUAL PERCENTAGE
CHANGE
- -------------------------------------------------------------------------
FUND
INCEPTION
DATE* 1993 1994 1995
- --------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Corporation
Stock Index Fund 09/29/89 8.46 0.08 13.78
Socially Responsible Growth 10/06/93 N/A* 0.69 14.40
Fund
- --------------------------------------------------------------------------
Fidelity VIP Fund & VIP
Fund II
Asset Manager Portfolio 09/06/89 20.09 -6.84 15.98
High Income Portfolio 09/19/85 19.55 -2.33 20.85
Equity-Income Portfolio 10/09/86 17.26 6.22 22.22
Overseas Portfolio 01/28/87 36.14 0.92 13.65
Growth Portfolio 10/09/86 18.42 -0.81 21.26
Contrafund Portfolio 07/01/95 N/A* N/A* 11.10
- --------------------------------------------------------------------------
Nationwide Separate
Account Trust
Money Market Fund 11/10/81 1.93 3.05 11.71
Government Bond Fund 11/08/82 8.64 -4.00 14.98
Total Return Fund 11/08/82 10.03 0.27 18.19
Small Company Fund 10/23/95 N/A* N/A* 11.42
Capital Appreciation Fund 04/15/92 8.73 -1.69 14.71
- --------------------------------------------------------------------------
Neuberger & Berman
Advisers Management.
Trust
Growth Portfolio 09/10/84 5.94 -5.74 15.96
Limited Maturity Bond 09/10/84 5.78 -0.95 13.10
Portfolio
Partners Portfolio 03/22/94 N/A* N/A* 13.59
- --------------------------------------------------------------------------
Oppenheimer Variable
Account Funds
Multiple Strategies Fund 02/09/87 15.02 -2.73 16.10
Bond Fund 04/30/85 12.14 -2.72 15.16
Global Securities Fund 11/12/90 68.96 -6.47 11.54
- --------------------------------------------------------------------------
Strong Special Fund II, Inc. 05/08/92 24.17 2.77 18.41
- --------------------------------------------------------------------------
Strong Variable Insurance
Funds, Inc.
Strong Discovery Fund II, Inc. 05/08/92 21.05 -6.14 16.51
Strong International Stock
Fund, II 10/23/95 N/A* N/A* 10.24
- --------------------------------------------------------------------------
TCI Portfolios, Inc.
TCI Growth 11/20/87 9.43 -1.95 16.15
TCI Balanced 05/01/91 6.83 -0.19 13.16
TCI International 05/01/94 N/A* N/A* 10.48
- --------------------------------------------------------------------------
Van Eck Worldwide
Insurance Trust
Worldwide Bond Fund 09/01/89 6.92 -2.10 13.25
Gold and Natural Resources Fund 09/01/89 63.52 -5.55 15.61
- --------------------------------------------------------------------------
Van Kampen American
Capital Life Investment
Trust
Real Estate Securities Fund 07/01/95 N/A* N/A* 10.79
- --------------------------------------------------------------------------
Warburg Pincus Trust
International Equity Portfolio 07-01-95 N/A* N/A* 10.69
Small Company Growth Portfolio 07-01-95 N/A* N/A* 2.46
- --------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------------------------
NON-ANNUALIZED PERCENTAGE CHANGE
- ------------------------------------------------------------------------------------------------------
INCEPTION
1 MO. TO 1 YR. TO 2 YRS. TO 3 YRS. TO 5 YRS. TO TO
12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Dreyfus Corporation
Stock Index Fund 1.75 35.69 35.80 47.29 101.58 96.76
Socially Responsible Growth -0.05 33.49 34.41 N/A* N/A* 44.02
Fund
- ------------------------------------------------------------------------------------------------------
Fidelity VIP Fund & VIP
Fund II
Asset Manager Portfolio 2.47 16.03 8.09 29.80 75.15 86.45
High Income Portfolio 1.11 19.65 16.86 39.70 128.83 187.88
Equity-Income Portfolio 2.86 34.02 42.35 66.92 152.58 195.01
Overseas Portfolio 2.89 8.81 9.80 49.48 42.07 74.75
Growth Portfolio -3.18 34.29 33.20 57.73 146.91 232.96
Contrafund Portfolio 0.38 N/A* N/A* N/A* N/A* 38.52
- ------------------------------------------------------------------------------------------------------
Nationwide Separate
Account Trust
Money Market Fund 0.38 4.81 8.01 10.10 18.58 138.29
Government Bond Fund 1.08 17.80 13.09 22.86 52.20 216.68
Total Return Fund 1.17 28.07 28.41 41.30 108.31 457.03
Small Company Fund 4.39 N/A* N/A* N/A* N/A* 14.21
Capital Appreciation Fund 2.93 28.33 26.16 37.18 N/A* 44.29
- ------------------------------------------------------------------------------------------------------
Neuberger & Berman
Advisers Management.
Trust
Growth Portfolio -2.99 30.68 23.18 30.49 82.48 269.61
Limited Maturity Bond 0.83 10.05 9.01 15.31 32.88 133.79
Portfolio
Partners Portfolio 1.31 35.39 N/A* N/A* N/A* 31.45
- ------------------------------------------------------------------------------------------------------
Oppenheimer Variable
Account Funds
Multiple Strategies Fund 0.76 20.39 17.11 34.71 69.74 137.24
Bond Fund 1.38 16.07 12.91 26.62 56.09 160.94
Global Securities Fund 1.22 1.43 -5.14 60.28 51.48 51.92
- ------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 2.46 24.82 28.28 59.29 N/A* 84.09
- ------------------------------------------------------------------------------------------------------
Strong Variable Insurance
Funds, Inc.
Strong Discovery Fund II, Inc. -1.39 34.18 25.95 52.46 N/A* 65.15
Strong International Stock
Fund, II 3.06 N/A* N/A* N/A* N/A* 2.46
- ------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.
TCI Growth -1.21 30.06 27.51 39.54 92.21 149.64
TCI Balanced 0.92 20.16 19.93 28.13 N/A* 49.11
TCI International 3.43 11.32 N/A* N/A* N/A* 5.19
- ------------------------------------------------------------------------------------------------------
Van Eck Worldwide
Insurance Trust
Worldwide Bond Fund 0.84 16.37 13.92 21.80 34.43 49.03
Gold and Natural Resources Fund 1.77 10.11 4.00 70.06 55.87 43.98
- ------------------------------------------------------------------------------------------------------
Van Kampen American
Capital Life Investment
Trust
Real Estate Securities Fund 5.02 N/A* N/A* N/A* N/A* 7.92
- ------------------------------------------------------------------------------------------------------
Warburg Pincus Trust
International Equity Portfolio 2.32 N/A* N/A* N/A* N/A* 6.88
Small Company Growth Portfolio 4.27 N/A* N/A* N/A* N/A* 24.61
- ------------------------------------------------------------------------------------------------------
</TABLE>
This table displays three types of total return. Simply stated, total return
shows the percent change in unit values, with dividends and capital gains
reinvested, after the deduction of a 0.80% asset charge (and the deduction of
applicable investment advisory fees and other expenses of the underlying Mutual
Funds). The total return figures shown in the Annual Percentage Change and
Annualized Percentage Change columns represent annualized figures, i.e., they
show the rate of growth that would have produced the corresponding cumulative
return had performance been constant over the entire period quoted. The
Non-Annualized Percentage Change total return figures are not annual return
figures but instead represent the total percentage change in unit value over the
stated periods without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO
ACCOUNT THE SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY
CHARGES" SECTION. THESE OTHER CHARGES INCLUDE DEDUCTIONS FROM PREMIUMS, COST OF
INSURANCE CHARGES, SURRENDER CHARGES AND A MONTHLY ADMINISTRATIVE CHARGE.
*The underlying Mutual Fund Inception Date is the date the underlying Mutual
Fund first became effective, which is not necessarily the same date the
underlying Mutual Fund was first made available through the Variable Account.
For those underlying Mutual Funds which have not been offered as sub-accounts
through the Variable Account for one of the quoted periods, the total return
figures will show the investment performance such underlying Mutual Funds would
have achieved (reduced by the 0.80% asset charge and Fund investment advisory
fees and expenses) had they been offered as sub-accounts through the Variable
Account for the period quoted. Certain underlying Mutual Funds are not as old as
some of the periods quoted, therefore, total return figures may not be available
for all of the periods shown.
58 of 106
<PAGE> 59
PERFORMANCE TABLES
TOTAL RETURN
(CONTINUED)
<TABLE>
<CAPTION>
ANNUALIZED PERCENTAGE
CHANGE
- -----------------------------------------------------------------------------------------------
3 Yrs. to 5 Yrs. to Inception to
12/31/95 12/31/95 12/31/95
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Corporation
Stock Index Fund 13.78 15.05 11.43
Socially Responsible Growth Fund N/A* N/A* 17.74
- -----------------------------------------------------------------------------------------------
Fidelity VIP Fund & VIP Fund II
Asset Manager Portfolio 9.08 11.86 10.37
High Income Portfolio 11.79 18.01 10.83
Equity-Income Portfolio 18.62 20.36 12.44
Overseas Portfolio 14.34 7.28 6.45
Growth Portfolio 16.40 19.81 13.93
Contrafund Portfolio N/A* N/A* 38.89
- -----------------------------------------------------------------------------------------------
Nationwide Separate Account Trust
Money Market Fund 3.26 3.47 6.33
Government Bond Fund 7.10 8.76 9.17
Total Return Fund 12.21 15.81 13.93
Capital Appreciation Fund 11.11 N/A* 10.39
Small Company Fund N/A* N/A* 102.59
- -----------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management
Trust
Growth Portfolio 9.28 12.78 12.26
Limited Maturity Bond Portfolio 4.86 5.85 7.80
Partners Portfolio N/A* N/A* 16.67
- -----------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Multiple Strategies Fund 10.44 11.16 10.21
Bond Fund 8.19 9.31 9.41
Global Securities Fund 17.03 8.66 8.49
- -----------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 16.79 N/A* 18.22
- -----------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.
Strong Discovery Fund II, Inc. 15.09 N/A* 14.75
Strong International Stock Fund II N/A* N/A* 13.16
- -----------------------------------------------------------------------------------------------
TCI Portfolios, Inc.
TCI Growth 11.75 13.96 11.94
TCI Balanced 8.61 N/A* 8.94
TCI International N/A* N/A* 3.09
- -----------------------------------------------------------------------------------------------
Van Eck Worldwide
Insurance Trust
Worldwide Bond Fund 6.80 6.10 6.50
Gold and Natural Resources Fund 19.36 9.28 5.93
- -----------------------------------------------------------------------------------------------
Van Kampen American Capital Life N/A* N/A* 16.76
Investment Trust
Real Estate Securities Fund
- -----------------------------------------------------------------------------------------------
Warburg Pincus Trust N/A* N/A* 14.48
International Equity Portfolio
Warburg Pincus N/A* N/A* 56.40
Small Company Growth Portfolio
- -----------------------------------------------------------------------------------------------
</TABLE>
59 of 106
<PAGE> 60
PERFORMANCE TABLES
CASH VALUES
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1 YR. TO 12/31/95 2 YRS. TO 12/31/95
- -------------------------------------------------------------------------------------------------
Fund Cash Cash
Inception Cash. Surr. Cash. Surr.
Date** Value Value Value Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Corporation
Stock Index Fund 09/29/89 11,064 6,258 22,019 17,213
Socially Responsible Growth Fund 10/06/93 10,861 6,055 21,728 16,922
- -------------------------------------------------------------------------------------------------
Fidelity VIP Fund & VIP Fund II
Asset Manager Portfolio 09/06/89 9,312 4,507 18,009 13,203
High Income Portfolio 09/19/85 9,669 4,863 19,102 14,297
Equity-Income Portfolio 10/09/86 10,905 6,099 22,463 17,657
Overseas Portfolio 01/28/87 8,679 3,874 17,623 12,817
Growth Portfolio 10/09/86 10,978 6,172 21,673 16,868
Contrafund Portfolio 07/01/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust
Money Market Fund 11/10/81 8,359 3,553 17,111 12,305
Government Bond Fund 11/08/82 9,497 4,692 18,592 13,786
Total Return Fund 11/08/82 10,396 5,590 20,791 15,985
Capital Appreciation Fund 04/15/92 10,374 5,568 20,543 15,738
Small Company Fund 10/23/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management
Trust
Growth Portfolio 09/10/84 10,679 5,873 20,563 15,757
Limited Maturity Bond Portfolio 09/10/84 8,818 4,012 17,620 12,814
Partners Portfolio 03/22/94 11,046 6,240 N/A** N/A**
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Multiple Strategies Fund 02/09/87 9,737 4,931 19,182 14,376
Bond Fund 04/30/85 9,344 4,538 18,449 13,643
Global Securities Fund 11/12/90 8,063 3,257 15,745 10,939
- -------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 05/08/92 10,086 5,280 20,503 15,697
- -------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds
Discovery Fund II, Inc. 05/08/92 10,905 6,099 20,994 16,188
International Stock Fund II N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.
TCI Growth 11/20/87 10,592 5,786 20,860 16,054
TCI Balanced 05/01/91 9,697 4,891 19,391 14,586
TCI International 05/01/94 8,882 4,076 N/A** N/A**
- -------------------------------------------------------------------------------------------------
Van Eck Worldwide
Insurance Trust
Worldwide Bond Fund 09/01/89 9,410 4,604 18,569 13,763
Gold and Natural Resources Fund 09/01/89 8,778 3,972 17,174 12,368
- -------------------------------------------------------------------------------------------------
Van Kampen American Capital Life
Investment Trust
Real Estate Securities Fund 07/01/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Warburg Pincus Trust
International Equity Portfolio 07/01/95 N/A** N/A** N/A** N/A**
Small Company Growth Portfolio 07/01/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
<CAPTION>
- -------------------------------------------------------------------------------------------------
3 YRS. TO 12/31/95 5 YRS. TO 12/31/95
- -------------------------------------------------------------------------------------------------
Fund Cash Cash
Inception Cash. Surr. Cash. Surr.
Date** Value Value Value Value
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Dreyfus Corporation
Stock Index Fund 09/29/89 33,917 29,592 62,751 59,387
Socially Responsible Growth Fund 10/06/93 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Fidelity VIP Fund & VIP Fund II
Asset Manager Portfolio 09/06/89 28,546 24,220 54,300 50,936
High Income Portfolio 09/19/85 30,479 26,154 63,123 59,758
Equity-Income Portfolio 10/09/86 36,073 31,747 72,361 68,997
Overseas Portfolio 01/28/87 29,924 25,598 51,719 48,354
Growth Portfolio 10/09/86 34,515 30,190 68,392 65,028
Contrafund Portfolio 07/01/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust
Money Market Fund 11/10/81 25,944 21,619 44,316 40,951
Government Bond Fund 11/08/82 28,538 24,213 51,178 47,814
Total Return Fund 11/08/82 32,219 27,893 61,337 57,973
Capital Appreciation Fund 04/15/92 31,559 27,234 N/A** N/A**
Small Company Fund 10/23/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management
Trust
Growth Portfolio 09/10/84 31,053 26,727 57,144 53,780
Limited Maturity Bond Portfolio 09/10/84 26,918 22,593 47,061 43,697
Partners Portfolio 03/22/94 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Multiple Strategies Fund 02/09/87 30,106 25,781 55,376 52,012
Bond Fund 04/30/85 28,719 24,394 51,907 48,543
Global Securities Fund 11/12/90 28,987 24,662 52,774 49,410
- -------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 05/08/92 33,514 29,189 N/A** N/A**
- -------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds
Discovery Fund II, Inc. 05/08/92 33,335 29,010 N/A** N/A**
International Stock Fund II N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.
TCI Growth 11/20/87 32,132 27,807 58,577 55,212
TCI Balanced 05/01/91 29,719 25,393 N/A** N/A**
TCI International 05/01/94 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Van Eck Worldwide
Insurance Trust
Worldwide Bond Fund 09/01/89 28,379 24,054 48,106 44,742
Gold and Natural Resources Fund 09/01/89 31,330 27,005 56,541 53,177
- -------------------------------------------------------------------------------------------------
Van Kampen American Capital Life
Investment Trust
Real Estate Securities Fund 07/01/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
Warburg Pincus Trust
International Equity Portfolio 07/01/95 N/A** N/A** N/A** N/A**
Small Company Growth Portfolio 07/01/95 N/A** N/A** N/A** N/A**
- -------------------------------------------------------------------------------------------------
</TABLE>
This table shows the effect of the performance quoted on accumulated values and
cash surrender values, based on a hypothetical annual premium of $10,000 for a
45 year-old male, non-tobacco preferred, with a level death benefit and an
initial specified amount of $495,941 (based on a guideline-level premium of
$10,000 issued on a preferred basis). The cash surrender value figures reflect
the deduction of all applicable Policy Charges, including a deduction from each
premium payment, a 0.80% asset charge, applicable cost of insurance charges,
surrender charges, and a monthly administrative charge (and the deduction of
applicable investment advisory fees and other expenses of the underlying Mutual
Funds). See the "Policy Charges" section for more information about these
charges. The cost of insurance charges may be higher or lower for purchasers who
do not meet the profile of the hypothetical purchaser. Illustrations reflecting
a potential purchaser's specific characteristics are available from the Company
upon request.
**The underlying Mutual Fund Inception Date is the date the underlying Mutual
Fund first became effective, which is not necessarily the same date the
underlying Mutual Fund was first made available through the Variable Account.
For those underlying Mutual Funds which have not been offered as sub- accounts
through the Variable Account for one of the quoted periods, the cash values will
show the investment performance such underlying Mutual Funds would have achieved
(reduced by any applicable Variable Account and Policy Charges, and underlying
Mutual Fund investment advisory fees and expenses) had they been offered as
sub-accounts through the Variable Account for the period quoted. Certain
underlying Mutual Funds are not as old as some of the periods quoted, therefore,
the cash values may not be available for all of the periods shown.
60 of 106
<PAGE> 61
PERFORMANCE TABLES
TOTAL RETURN
(CONTINUED)
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
10 Yrs. to Inception to
12/31/95 12/31/95
- --------------------------------------------------------------------------------------------------------
Cash. Cash Surr. Cash. Cash Surr.
Value Value Value Value
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Corporation
Stock Index Fund N/A** N/A** 91,028 88,625
Socially Responsible Growth Fund N/A** N/A** 31,889 27,564
- --------------------------------------------------------------------------------------------------------
Fidelity VIP Fund & VIP Fund II
Asset Manager Portfolio N/A** N/A** 80,088 77,685
High Income Portfolio 154,929 154,929 164,865 164,865
Equity-Income Portfolio N/A** N/A** 161,923 161,923
Overseas Portfolio N/A** N/A** 104,094 102,652
Growth Portfolio N/A** N/A** 167,787 167,787
Contrafund Portfolio N/A** N/A** 11,338 6,532
- --------------------------------------------------------------------------------------------------------
Nationwide Separate Account Trust
Money Market Fund 100,505 100,505 172,791 172,791
Government Bond Fund 128,018 128,018 208,810 208,810
Total Return Fund 156,633 156,633 288,921 288,921
Capital Appreciation Fund N/A** N/A** 43,453 39,608
Small Company Fund N/A** N/A** 10,376 5,570
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management
Trust
Growth Portfolio 151,379 151,379 185,663 185,663
Limited Maturity Bond Portfolio 111,407 111,407 140,389 140,389
Partners Portfolio N/A** N/A** 21,218 16,412
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds
Multiple Strategies Fund N/A** N/A** 118,953 117,511
Bond Fund 129,132 129,132 147,593 147,593
Global Securities Fund N/A** N/A** 62,453 59,569
- --------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. N/A** N/A** 46,843 42,998
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc.
Strong International Stock Fund II N/A** N/A** 47,283 43,439
Strong Discovery Fund II, Inc. N/A** N/A** 9,297 4,491
- --------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc.
TCI Growth N/A** N/A** 124,952 123,510
TCI Balanced N/A** N/A** 52,377 49,013
TCI International N/A** N/A** 17,759 12,954
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide
Insurance Trust
Worldwide Bond Fund N/A** N/A** 69,739 67,336
Gold and Natural Resources Fund N/A** N/A** 74,424 72,021
- --------------------------------------------------------------------------------------------------------
Van Kampen American Life Investment Trust
Real Estate Securities Fund N/A** N/A** 9,404 4,598
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust
International Equity Portfolio N/A** N/A** 9,322 4,516
Small Company Growth Portfolio N/A** N/A** 10,921 6,115
- --------------------------------------------------------------------------------------------------------
</TABLE>
61 of 106
<PAGE> 62
- --------------------------------------------------------------------------------
Independent Auditors' Report
The Board of Directors and Contract Owners of
Nationwide VLI Separate Account-2
Nationwide Life Insurance Company:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account-2 as of December 31,
1995, 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, 1995, by correspondence with the custodian and 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-2 as of December 31, 1995, 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 6, 1996
- --------------------------------------------------------------------------------
<PAGE> 63
================================================================================
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1995
<TABLE>
ASSETS:
Investments at market value:
<S> <C>
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
62,614 shares (cost $1,038,589) ............................................ $ 1,083,848
Dreyfus Stock Index Fund (DryStkIx)
271,861 shares (cost $4,342,422) ........................................... 4,676,009
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
1,479,252 shares (cost $24,428,367) ........................................ 28,505,182
Fidelity VIP - Growth Portfolio (FidGro)
1,134,365 shares (cost $33,508,734) ........................................ 33,123,460
Fidelity VIP - High Income Portfolio (FidHiInc)
825,519 shares (cost $9,365,281) ........................................... 9,947,503
Fidelity VIP - Overseas Portfolio (FidOSeas)
676,060 shares (cost $10,850,506) .......................................... 11,526,815
Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr)
1,172,533 shares (cost $16,833,524) ........................................ 18,514,290
Fidelity VIP-II - Contrafund Portfolio (FidContP)
195,404 shares (cost $2,668,754) ........................................... 2,692,665
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
212,307 shares (cost $2,582,301) ........................................... 2,861,899
Nationwide SAT - Government Bond Fund (NWGvtBd)
467,280 shares (cost $4,984,922) ........................................... 5,308,298
Nationwide SAT - Money Market Fund (NWMyMkt)
25,831,056 shares (cost $25,831,056) ....................................... 25,831,056
Nationwide SAT - Small Company Fund (NWSmCoFd)
30,450 shares (cost $339,903) .............................................. 347,742
Nationwide SAT - Total Return Fund (NWTotRet)
1,926,298 shares (cost $20,615,292) ........................................ 22,229,482
Neuberger & Berman - Growth Portfolio (NBGro)
351,272 shares (cost $8,083,142) ........................................... 9,083,899
Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat)
211,743 shares (cost $2,994,517) ........................................... 3,114,733
Neuberger & Berman - Partners Portfolio (NBPart)
216,170 shares (cost $2,643,081) ........................................... 2,859,928
Oppenheimer - Bond Fund (OppBdFd)
342,871 shares (cost $3,867,584) ........................................... 4,059,588
Oppenheimer - Global Securities Fund (OppGlSec)
397,052 shares (cost $5,971,306) ........................................... 5,955,777
Oppenheimer - Multiple Strategies Fund (OppMult)
349,048 shares (cost $4,730,069) ........................................... 5,078,650
Strong VIP - Strong Discovery Fund II, Inc. (StDisc2)
403,468 shares (cost $4,727,581) ........................................... 5,422,616
Strong VIP - Strong International Stock Fund II, Inc. (StIntStk2)
9,631 shares (cost $97,747) ................................................ 98,431
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
672,585 shares (cost $10,088,689) .......................................... 11,460,850
TCI Portfolios - TCI Balanced (TCIBal)
217,142 shares (cost $1,372,140) ........................................... 1,528,680
TCI Portfolios - TCI Growth (TCIGro)
868,667 shares (cost $8,887,302) ........................................... 10,476,124
TCI Portfolios - TCI International (TCIInt)
208,270 shares (cost $1,082,648) ........................................... 1,110,078
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
244,680 shares (cost $3,489,920) ........................................... 3,528,286
Van Eck - Worldwide Bond Fund (VEWrldBd)
182,821 shares (cost $1,985,685) ........................................... 2,036,622
Van Kampen American Capital - Real Estate Securities Fund (VKACRESec)
28,825 shares (cost $299,720) .............................................. 309,583
Warburg Pincus - International Equity Portfolio (WPIntEq)
158,334 shares (cost $1,656,897) ........................................... 1,686,256
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
273,996 shares (cost $3,188,845) ........................................... 3,427,686
------------
Total assets ........................................................... 237,886,036
ACCOUNTS PAYABLE ................................................................ 816,393
------------
CONTRACT OWNERS' EQUITY ......................................................... $237,069,643
============
</TABLE>
<PAGE> 64
Contract owners' equity represented by:
<TABLE>
<CAPTION>
UNITS UNIT VALUE
--------- ----------
<S> <C> <C> <C>
Single Premium contracts issued prior to April 16, 1990:
Fidelity VIP - Equity-Income Portfolio ....................................... 13,681 $26.373971 $ 360,822
Fidelity VIP - Growth Portfolio .............................................. 9,046 30.259267 273,725
Fidelity VIP - High Income Portfolio ......................................... 3,417 21.685282 74,099
Fidelity VIP - Overseas Portfolio ............................................ 9,048 17.526172 158,577
Fidelity VIP-II - Asset Manager Portfolio .................................... 1,075 18.081878 19,438
Nationwide SAT - Government Bond Fund ........................................ 2,984 19.357639 57,763
Nationwide SAT - Money Market Fund ........................................... 9,556 14.287454 136,531
Nationwide SAT - Total Return Fund ........................................... 1,195 22.138653 26,456
Neuberger & Berman - Growth Portfolio ........................................ 5,776 22.976381 132,712
Neuberger & Berman - Limited Maturity Bond Portfolio ......................... 4,610 15.906671 73,330
Oppenheimer - Global Securities Fund ......................................... 1,656 11.503363 19,050
Strong VIP - Strong Special Fund II, Inc. .................................... 319 18.309087 5,841
TCI Portfolios - TCI Growth .................................................. 8,480 25.381408 215,234
Van Eck - Gold and Natural Resources Fund .................................... 4,617 12.839256 59,279
Van Eck - Worldwide Bond Fund ................................................ 23 14.458585 333
Van Kampen American Capital - Real Estate Securities Fund .................... 4,203 10.784280 45,326
Single Premium contracts issued on or after April 16, 1990:
The Dreyfus Socially Responsible Growth Fund, Inc. ........................... 10,235 14.242220 145,769
Dreyfus Stock Index Fund ..................................................... 57,341 13.621789 781,087
Fidelity VIP - Equity-Income Portfolio ....................................... 508,482 21.648958 11,008,105
Fidelity VIP - Growth Portfolio .............................................. 435,011 20.999607 9,135,060
Fidelity VIP - High Income Portfolio ......................................... 124,646 22.388295 2,790,611
Fidelity VIP - Overseas Portfolio ............................................ 299,548 12.667544 3,794,537
Fidelity VIP-II - Asset Manager Portfolio .................................... 354,042 17.721708 6,274,229
Fidelity VIP-II - Contrafund Portfolio ....................................... 63,736 11.071965 705,683
Nationwide SAT - Capital Appreciation Fund ................................... 16,446 14.444672 237,557
Nationwide SAT - Government Bond Fund ........................................ 221,416 16.104612 3,565,819
Nationwide SAT - Money Market Fund ........................................... 1,202,213 12.028786 14,461,163
Nationwide SAT - Small Company Fund .......................................... 18,120 11.410311 206,755
Nationwide SAT - Total Return Fund ........................................... 136,950 19.154939 2,623,269
Neuberger & Berman - Growth Portfolio ........................................ 167,819 16.264834 2,729,548
Neuberger & Berman - Limited Maturity Bond Portfolio ......................... 80,410 13.684722 1,100,388
Neuberger & Berman - Partners Portfolio ...................................... 59,329 13.495873 800,697
Oppenheimer - Bond Fund ...................................................... 91,827 16.056725 1,474,441
Oppenheimer - Global Securities Fund ......................................... 103,965 11.413379 1,186,592
Oppenheimer - Multiple Strategies Fund ....................................... 124,127 16.404926 2,036,294
Strong VIP - Strong Discovery Fund II, Inc. .................................. 130,968 16.214896 2,123,632
Strong VIP - Strong International Stock Fund II, Inc. ........................ 2,862 10.226632 29,269
Strong VIP - Strong Special Fund II, Inc. .................................... 162,203 18.074367 2,931,717
TCI Portfolios - TCI Balanced ................................................ 38,974 12.914886 503,345
TCI Portfolios - TCI Growth .................................................. 229,772 17.116040 3,932,787
TCI Portfolios - TCI International ........................................... 41,356 10.403803 430,260
Van Eck - Gold and Natural Resources Fund .................................... 118,139 14.230388 1,681,164
Van Eck - Worldwide Bond Fund ................................................ 55,939 14.170551 792,686
Van Kampen American Capital - Real Estate Securities Fund .................... 12,834 10.765797 138,168
Warburg Pincus - International Equity Portfolio .............................. 68,691 10.661502 732,349
Warburg Pincus - Small Company Growth Portfolio .............................. 93,602 12.430586 1,163,528
Multiple Payment contracts and Flexible Premium contracts:
The Dreyfus Socially Responsible Growth Fund, Inc. ........................... 65,138 14.401809 938,105
Dreyfus Stock Index Fund ..................................................... 282,759 13.775382 3,895,113
Fidelity VIP - Equity-Income Portfolio ....................................... 771,429 22.215745 17,137,870
Fidelity VIP - Growth Portfolio .............................................. 1,116,041 21.256059 23,722,633
Fidelity VIP - High Income Portfolio ......................................... 339,950 20.852993 7,088,975
Fidelity VIP - Overseas Portfolio ............................................ 554,741 13.645033 7,569,459
Fidelity VIP-II - Asset Manager Portfolio .................................... 764,633 15.982529 12,220,769
Fidelity VIP-II - Contrafund Portfolio ....................................... 179,024 11.099135 1,987,012
Nationwide SAT - Capital Appreciation Fund ................................... 178,373 14.713230 2,624,443
Nationwide SAT - Government Bond Fund ........................................ 112,463 14.984933 1,685,251
Nationwide SAT - Money Market Fund ........................................... 887,531 11.714295 10,396,800
Nationwide SAT - Small Company Fund .......................................... 12,345 11.420759 140,989
Nationwide SAT - Total Return Fund ........................................... 1,076,286 18.192762 19,580,615
Neuberger & Berman - Growth Portfolio ........................................ 389,800 15.962482 6,222,175
Neuberger & Berman - Limited Maturity Bond Portfolio ......................... 148,223 13.096811 1,941,249
Neuberger & Berman - Partners Portfolio ...................................... 151,517 13.591346 2,059,320
Oppenheimer - Bond Fund ...................................................... 170,613 15.164813 2,587,314
Oppenheimer - Global Securities Fund ......................................... 411,619 11.542134 4,750,962
Oppenheimer - Multiple Strategies Fund ....................................... 188,985 16.100377 3,042,730
Strong VIP - Strong Discovery Fund II, Inc. .................................. 199,781 16.514850 3,299,353
Strong VIP - Strong International Stock Fund II, Inc. ........................ 6,756 10.236021 69,155
Strong VIP - Strong Special Fund II, Inc. .................................... 463,043 18.408627 8,523,986
TCI Portfolios - TCI Balanced ................................................ 77,950 13.155049 1,025,436
TCI Portfolios - TCI Growth .................................................. 391,898 16.149061 6,328,785
TCI Portfolios - TCI International ........................................... 64,755 10.477472 678,469
Van Eck - Gold and Natural Resources Fund .................................... 114,539 15.612002 1,788,183
Van Eck - Worldwide Bond Fund ................................................ 93,956 13.253457 1,245,242
Van Kampen American Capital - Real Estate Securities Fund .................... 11,685 10.792212 126,107
Warburg Pincus - International Equity Portfolio .............................. 89,255 10.687672 953,928
Warburg Pincus - Small Company Growth Portfolio .............................. 181,701 12.461074 2,264,190
====== ========== ------------
$237,069,643
============
</TABLE>
See accompanying notes to financial statements.
===============================================================================
<PAGE> 65
================================================================================
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends ......................... $ 6,764,208 3,376,057 974,676
------------- ------------ ------------
Gain (loss) on investments:
Proceeds from redemption of mutual fund shares ............ 163,574,836 184,340,809 115,961,691
Cost of mutual fund shares sold ........................... (154,208,870) (184,441,475) (113,135,035)
------------- ------------ ------------
Realized gain (loss) on investments ....................... 9,365,966 (100,666) 2,826,656
Change in unrealized gain (loss) on investments ........... 17,134,325 (3,604,010) 1,224,589
------------- ------------ ------------
Net gain (loss) on investments ....................... 26,500,291 (3,704,676) 4,051,245
------------- ------------ ------------
Net investment activity ......................... 33,264,499 (328,619) 5,025,921
------------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners ................ 106,694,208 77,172,455 31,008,045
Surrenders (note 2d) ........................................... (4,970,867) (1,308,994) (559,275)
Death benefits (note 4) ........................................ (143,265) (15,398) (360,580)
Policy loans (net of repayments) (note 5) ...................... (2,529,830) (2,980,396) (1,781,013)
------------- ------------ ------------
Net equity transactions ......................... 99,050,246 72,867,667 28,307,177
------------- ------------ ------------
EXPENSES:
Deductions for surrender charges (note 2d) ..................... (364,725) (116,899) (24,490)
Redemptions to pay cost of insurance charges
and administrative charges (notes 2b and 2c) .............. (14,110,656) (5,382,393) (1,539,443)
Deductions for asset charges (note 3) .......................... (1,747,342) (879,737) (430,173)
------------- ------------ ------------
Total expenses .................................. (16,222,723) (6,379,029) (1,994,106)
------------- ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .............................. 116,092,022 66,160,019 31,338,992
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........................ 120,977,621 54,817,602 23,478,610
------------- ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD .............................. $ 237,069,643 120,977,621 54,817,602
============= =========== ==========
</TABLE>
See accompanying notes to financial statements.
===============================================================================
<PAGE> 66
================================================================================
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995, 1994 AND 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account-2 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life Insurance
Company (the Company) on May 7, 1987. The Account has been registered as a unit
investment trust under the Investment Company Act of 1940.
The Company offers Modified Single Premium and Flexible Premium Variable
Life Insurance Policies 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:
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro);
Dreyfus Stock Index Fund (DryStkIx)(formerly Dreyfus Life and Annuity Index
Fund, Inc. (DLAI));
Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidEqInc)
Fidelity VIP - Growth Portfolio (FidGro)
Fidelity VIP - High Income Portfolio (FidHiInc)
Fidelity VIP - Overseas Portfolio (FidOSeas)
Portfolios of the Fidelity Variable Insurance Products Fund II (Fidelity
VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr)
Fidelity VIP-II - Contrafund Portfolio (FidContP)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed
for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NWCapApp)
Nationwide SAT - Government Bond Fund (NWGvtBd)
Nationwide SAT - Money Market Fund (NWMyMkt)
Nationwide SAT - Small Company Fund (NWSmCoFd)
Nationwide SAT - Total Return Fund (NWTotRet)
Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger &
Berman);
Neuberger & Berman - Growth Portfolio (NBGro)
Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat)
Neuberger & Berman - Partners Portfolio (NBPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
Oppenheimer - Bond Fund (OppBdFd)
Oppenheimer - Global Securities Fund (OppGlSec)
Oppenheimer - Multiple Strategies Fund (OppMult)
Funds of the Strong Variable Insurance Products Funds (Strong VIP);
Strong VIP - Strong Discovery Fund II, Inc. (StDisc2)
Strong VIP - Strong International Stock Fund II, Inc. (StIntStk2)
Strong VIP - Strong Special Fund II, Inc. (StSpec2)
<PAGE> 67
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Balanced (TCIBal)
TCI Portfolios - TCI Growth (TCIGro)
TCI Portfolios - TCI International (TCIInt)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck) (formerly Van Eck
Investment Trust);
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
Van Eck - Worldwide Bond Fund (VEWrldBd) (formerly Van Eck - Global
Bond Fund (VEGlobBd))
Fund of the Van Kampen American Capital Life Investment Trust (Van Kampen
American Capital);
Van Kampen American Capital - Real Estate Securities Fund
(VKACRESec)
Portfolios of the Warburg Pincus Trust (Warburg Pincus);
Warburg Pincus - International Equity Portfolio (WPIntEq)
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1995, 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, 1995. 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
The operations of the Account form a part of, and are taxed with, the
operations of the Company, which is taxed as a life insurance company under the
provisions of the Internal Revenue Code.
Currently, no charge is being made to the Account for Federal income taxes,
or reserves for such taxes, which may be attributed to the Account. However, the
Company reserves the right to make such charges in the future.
(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.
(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
<PAGE> 68
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) Surrenders
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, 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.
(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 single premium 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.
<PAGE> 69
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 for each series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- 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.)
- Unrealized gain (loss)
(This amount reflects the increase (decrease) in the unit value
resulting from the market appreciation (depreciation) of the
underlying mutual funds.)
- Asset charges
(This amount reflects the decrease in the unit value due to the
charges discussed in note 3.)
- Ending unit value - Dec. 31
- Percentage increase (decrease) in unit value.
===============================================================================
<PAGE> 70
===============================================================================
Schedule I
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
FIDEQINC FIDGRO FIDHIINC FIDOSEAS
-------- ------ -------- --------
1995
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $19.708533 22.566466 18.151674 16.131866
- ------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.542607 .124738 1.314664 .123427
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.341041 7.828480 2.410020 1.428229
- ------------------------------------------------------------------------------------------------------------
Asset charges (.218210) (.260417) (.191076) (.157350)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $26.373971 30.259267 21.685282 17.526172
- ------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 34% 34% 19% 9%
============================================================================================================
1994
Beginning unit value - Jan. 1 $18.583057 22.785679 18.612185 16.009316
- ------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.395798 1.371061 1.706032 .082663
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.087894) (1.381165) (1.991707) .196908
- ------------------------------------------------------------------------------------------------------------
Asset charges (.182428) (.209109) (.174836) (.157021)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $19.708533 22.566466 18.151674 16.131866
- ------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 6% (1)% (2)% 1%
============================================================================================================
1993
Beginning unit value - Jan. 1 $15.870837 19.270345 15.591886 11.777024
- ------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .463717 .428707 1.282532 .275295
- ------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.415095 3.287237 1.901458 4.091447
- ------------------------------------------------------------------------------------------------------------
Asset charges (.166592) (.200610) (.163691) (.134450)
- ------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.583057 22.785679 18.612185 16.009316
- ------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 17% 18% 19% 36%
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDASMGR NWGVTBD NWMYMKT NWTOTRET
-------- ------- ------- --------
<S> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 15.607540 16.457035 13.652006 17.312690
- ----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .327932 1.167149 .768745 1.720678
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.304058 1.903991 .000000 3.293404
- ----------------------------------------------------------------------------------------------------------
Asset charges (.157652) (.170536) (.133297) (.188119)
- ----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.081878 19.357639 14.287454 22.138653
- ----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 16% 18% 5% 28%
==========================================================================================================
1994
Beginning unit value - Jan. 1 16.778042 17.168348 13.267517 17.291720
- ----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .815806 1.079469 .512535 .875020
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.832732) (1.633239) .000000 (.688478)
- ----------------------------------------------------------------------------------------------------------
Asset charges (.153576) (.157543) (.128046) (.165572)
- ----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 15.607540 16.457035 13.652006 17.312690
- ----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (7)% (4)% 3% 0%
==========================================================================================================
1993
Beginning unit value - Jan. 1 13.992516 15.826033 13.035884 15.738275
- ----------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .649736 1.013212 .357335 .643850
- ----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.280467 .488744 .000000 1.067081
- ----------------------------------------------------------------------------------------------------------
Asset charges (.144677) (.159641) (.125702) (.157486)
- ----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 16.778042 17.168348 13.267517 17.291720
- ----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 20% 8% 2% 10%
==========================================================================================================
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
<PAGE> 71
Schedule I, Continued
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NBGRO NBLTDMAT OPPGLSEC STSPEC2 TCIGRO
---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $17.608267 14.475203 11.358489 14.690448 19.544976
- -------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .623265 .804090 .298934 .761035 .022491
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 4.945641 .771696 (.045712) 3.013032 6.032555
- -------------------------------------------------------------------------------------------------------
Asset charges (.200792) (.144318) (.108348) (.155428) (.218614)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $22.976381 15.906671 11.503363 18.309087 25.381408
- -------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
unit value*(a) 30% 10% 1% 25% 30%
=======================================================================================================
1994
Beginning unit value - Jan. 1 $18.709214 14.635617 12.162716 14.315226 19.964524
- -------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 2.255334 .618309 .214436 .411358 .002137
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (3.185612) (.641424) (.903773) .103258 (.236035)
- -------------------------------------------------------------------------------------------------------
Asset charges (.170669) (.137299) (.114890) (.139394) (.185650)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.608267 14.475203 11.358489 14.690448 19.544976
- -------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (6)% (1)% (7)% 3% (2)%
=======================================================================================================
1993
Beginning unit value - Jan. 1 $17.686598 13.856975 ** ** 18.270571
- -------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .409995 .569917 .049805
- -------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .782366 .345457 1.825395
- -------------------------------------------------------------------------------------------------------
Asset charges (.169745) (.136732) (.181247)
- -------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.709214 14.635617 19.964524
- -------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 6% 6% 9%
=======================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEGOLDNR VEWRLDBD VKACRESEC
--------- --------- ---------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 11.677805 12.443161 10.000000
- ----------------------------------------------------------------------------
Reinvested dividends and capital gains .115292 1.008475 .092106
- ----------------------------------------------------------------------------
Unrealized gain (loss) 1.160549 1.138120 .740132
- ----------------------------------------------------------------------------
Asset charges (.114390) (.131171) (.047958)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 12.839256 14.458585 10.784280
- ----------------------------------------------------------------------------
Percentage increase (decrease)
unit value*(a) 10% 16% 8%(b)
============================================================================
1994
Beginning unit value - Jan. 1 12.382561 12.729709 **
- ----------------------------------------------------------------------------
Reinvested dividends and capital gains .062321 .051271
- ----------------------------------------------------------------------------
Unrealized gain (loss) (.652194) (.220753)
- ----------------------------------------------------------------------------
Asset charges (.114883) (.117066)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 11.677805 12.443161
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (6)% (2)%
============================================================================
1993
Beginning unit value - Jan. 1 7.583732 ** **
- ----------------------------------------------------------------------------
Reinvested dividends and capital gains .035765
- ----------------------------------------------------------------------------
Unrealized gain (loss) 4.857738
- ----------------------------------------------------------------------------
Asset charges (.094674)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 12.382561
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 63%
============================================================================
</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 available or was not utilized.
<PAGE> 72
===============================================================================
Schedule I, Continued
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
DRYSRGRO DRYSTKLX FIDEQINC FIDGRO FIDHIINC FIDOSEAS FIDASMGR
---------- ----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.722275 10.088849 16.234159 15.715602 18.805616 11.700527 15.350115
- ----------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .392053 .36133 1.269479 .086841 1.361583 .089493 .322418
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.289798 3.326196 4.390826 5.444880 2.491513 1.033414 2.260958
- ----------------------------------------------------------------------------------------------------------------------------------
Asset charges (.161906) (.154595) (.245506) (.247716) (.270417) (.155890) (.211783)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.242220 13.621789 21.648958 20.999607 22.388295 12.667544 17.721708
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 33% 35% 33% 34% 19% 8% 15%
==================================================================================================================================
1994
Beginning unit value - Jan. 1 $10.702403 10.131165 15.360584 15.923752 19.350153 11.652241 16.559029
- ----------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .276372 .283260 1.152726 .957853 1.773098 .060146 .804872
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.117327) (.195255) (.073161) (.966373) (2.069306) .144272 (1.806726)
- ----------------------------------------------------------------------------------------------------------------------------------
Asset charges (.139173) (.130321) (.205990) (.199630) (.248329) (.156132) (.207060)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.722275 10.088849 16.234159 15.715602 18.805616 11.700527 15.350115
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% 0% 6% (1)% (3)% 0% (7)%
==================================================================================================================================
1993
Beginning unit value - Jan. 1 ** $10.000000 13.165400 13.515048 16.267831 8.602313 13.859040
- ----------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains 1.497818 .383884 .300564 1.337665 .201014 .643313
- ----------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.334006) 2.000061 2.300317 1.977956 2.983042 2.252405
- ----------------------------------------------------------------------------------------------------------------------------------
Asset charges (.032647) (.188761) (.192177) (.233299) (.134128) (.195729)
- ----------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.131165 15.360584 15.923752 19.350153 11.652241 16.559029
- ----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 1%(b) 17% 18% 19% 35% 19%
==================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDCONTP NWCAPAPP NWGVTBD
--------- --------- ---------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 10.000000 11.312336 13.739287
- ----------------------------------------------------------------------------
Reinvested dividends and capital gains .142783 .642275 .972265
- ----------------------------------------------------------------------------
Unrealized gain (loss) .998389 2.653961 1.587542
- ----------------------------------------------------------------------------
Asset charges (.069207) (.163900) (.194482)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 11.071965 14.444672 16.104612
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 11%(b) 28% 17%
============================================================================
1994
Beginning unit value - Jan. 1 ** 11.563943 14.383265
- ----------------------------------------------------------------------------
Reinvested dividends and capital gains .182742 .902346
- ----------------------------------------------------------------------------
Unrealized gain (loss) (.286826) (1.366016)
- ----------------------------------------------------------------------------
Asset charges (.147523) (.180308)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 11.312336 13.739287
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (2)% (4)%
============================================================================
1993
Beginning unit value - Jan. 1 ** 10.688742 13.305926
- ----------------------------------------------------------------------------
Reinvested dividends and capital gains .260088 .849957
- ----------------------------------------------------------------------------
Unrealized gain (loss) .755302 .410720
- ----------------------------------------------------------------------------
Asset charges (.140189) (.183338)
- ----------------------------------------------------------------------------
Ending unit value - Dec. 31 11.563943 14.383265
- ----------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 8% 8%
============================================================================
</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 available or was not utilized.
===============================================================================
<PAGE> 73
===============================================================================
Schedule I, Continued
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NWMYMKT NWSMCOFD NWTOTRET NBGRO NBLTDMAT NBPART OPPBDFD
----------- ---------- ---------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $11.534440 10.000000 15.031721 12.508337 12.496729 10.018146 13.903136
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .648458 .017459 1.489410 .442496 .693794 .081860 .956955
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.418328 2.856936 3.508824 .664378 3.550382 1.391543
- ---------------------------------------------------------------------------------------------------------------------------------
Asset charges (.154112) (.025476) (.223128) (.194823) (.170179) (.154515) (.194909)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.028786 11.410311 19.154939 16.264834 13.684722 13.495873 16.056725
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 4% 14%(b) 27% 30% 10% 35% 15%
=================================================================================================================================
1994
Beginning unit value - Jan. 1 $11.249231 ** 15.066007 13.336899 12.679406 10.000000 14.362878
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .433762 .760244 1.607088 .535454 .000000 .809172
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (.597472) (2.269450) (.555628) .072562 (1.086058)
- ---------------------------------------------------------------------------------------------------------------------------------
Asset charges (.148553) (.197058) (.166200) (.162503) (.054416) (.182856)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.534440 15.031721 12.508337 12.496729 10.018146 13.903136
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% 0% (6)% (1)% 0%(b) (3)%
=================================================================================================================================
1993
Beginning unit value - Jan. 1 $11.092030 ** 13.761364 12.652864 12.047601 ** 12.872824
- ---------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .303567 .561430 .293188 .495297 .894915
- ---------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .931322 .556715 .298894 .774891
- ---------------------------------------------------------------------------------------------------------------------------------
Asset charges (.146366) (.188109) (.165868) (.162386) (.179752)
- ---------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.249231 15.066007 13.336899 12.679406 14.362878
- ---------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 1% 9% 5% 5% 12%
=================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
OPPGLSEC OPPMULT STDISC2
---------- ---------- ----------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 11.309050 13.693997 12.144445
- -------------------------------------------------------------------------------
Reinvested dividends and capital gains .297396 1.103154 .211667
- -------------------------------------------------------------------------------
Unrealized gain (loss) (.045694) 1.805769 4.042004
- -------------------------------------------------------------------------------
Asset charges (.147373) (.197994) (.183220)
- -------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.413379 16.404926 16.214896
- -------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 1% 20% 34%
===============================================================================
1994
Beginning unit value - Jan. 1 12.152136 14.148115 13.003547
- -------------------------------------------------------------------------------
Reinvested dividends and capital gains .214078 .720350 .971167
- -------------------------------------------------------------------------------
Unrealized gain (loss) (.900362) (.993926) (1.670283)
- -------------------------------------------------------------------------------
Asset charges (.156802) (.180542) (.159986)
- -------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.309050 13.693997 12.144445
- -------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (7)% (3)% (7)%
===============================================================================
1993
Beginning unit value - Jan. 1 10.000000 12.362293 10.796269
- -------------------------------------------------------------------------------
Reinvested dividends and capital gains .000000 .546245 .809234
- -------------------------------------------------------------------------------
Unrealized gain (loss) 2.187580 1.411883 1.546688
- -------------------------------------------------------------------------------
Asset charges (.035444) (.172306) (.148644)
- -------------------------------------------------------------------------------
Ending unit value - Dec. 31 12.152136 14.148115 13.003547
- -------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 22%(b) 14% 20%
===============================================================================
</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 available or was not utilized.
<PAGE> 74
Schedule I, Continued
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
STINTSTK2 STSPEC2 TCIBAL TCIGRO TCIINT VEGOLDNR VEWRLDBD
----------- --------- ---------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.000000 14.552799 10.801955 13.226279 9.392654 12.988341 12.237880
- --------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .041085 .753037 .305779 .015219 .000000 .127947 .990055
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .209467 2.978850 1.961461 4.076606 1.136602 1.287916 1.118852
- --------------------------------------------------------------------------------------------------------------------------------
Asset charges (.023920) (.210319) (.154309) (.202064) (.125453) (.173816) (.176236)
- --------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.226632 18.074367 12.914886 17.116040 10.403803 14.230388 14.170551
- --------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 2%(b) 24% 20% 29% 11% 10% 16%
================================================================================================================================
1994
Beginning unit value - Jan. 1 ** $14.230663 10.876445 13.557427 10.000000 13.820369 12.563474
- --------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .407898 .260556 .001450 .000000 .069418 .050533
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .103521 (.194370) (.160376) (.554327) (.726294) (.218292)
- --------------------------------------------------------------------------------------------------------------------------------
Asset charges (.189283) (.140676) (.172222) (.053019) (.175152) (.157835)
- --------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.552799 10.801955 13.226279 9.392654 12.988341 12.237880
- --------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 2% (1)% (2)% (6)%(b) (6)% (3)%
================================================================================================================================
1993
Beginning unit value - Jan. 1 ** $11.518529 10.232336 12.451309 ** 8.494453 11.809827
- --------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .057229 .193813 .033826 .039957 .949184
- --------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.823424 .587650 1.241015 5.430795 (.037350)
- --------------------------------------------------------------------------------------------------------------------------------
Asset charges (.168519) (.137354) (.168723) (.144836) (.158187)
- --------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.230663 10.876445 13.557427 13.820369 12.563474
- --------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 24% 6% 9% 63% 6%
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VKACRESEC WPINTEQ WPSMCOGR
---------- ---------- ----------
<S> <C> <C> <C>
1995
Beginning unit value - Jan. 1 10.000000 10.000000 10.000000
- ------------------------------------------------------------------------------
Reinvested dividends and capital gains .091962 .077347 .000000
- ------------------------------------------------------------------------------
Unrealized gain (loss) .739397 .650501 2.501606
- ------------------------------------------------------------------------------
Asset charges (.065562) (.066346) (.071020)
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31 10.765797 10.661502 12.430586
- ------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 8%(b) 7%(b) 24%(b)
==============================================================================
1994
Beginning unit value - Jan. 1 ** ** **
- ------------------------------------------------------------------------------
Reinvested dividends and capital gains
- ------------------------------------------------------------------------------
Unrealized gain (loss)
- ------------------------------------------------------------------------------
Asset charges
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31
- ------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a)
==============================================================================
1993
Beginning unit value - Jan. 1 ** ** **
- ------------------------------------------------------------------------------
Reinvested dividends and capital gains
- ------------------------------------------------------------------------------
Unrealized gain (loss)
- ------------------------------------------------------------------------------
Asset charges
- ------------------------------------------------------------------------------
Ending unit value - Dec. 31
- ------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a)
==============================================================================
</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 available or was not utilized.
<PAGE> 75
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
DrySRGro DryStkIx FidEqInc FidGro FidHiInc
-------- -------- -------- ------ --------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.788547 10.151919 16.576413 15.828463 17.428943
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .396430 .364933 1.297971 .087506 1.262495
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.317353 3.354508 4.496038 5.494030 2.316172
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.100521) (.095978) (.154677) (.153940) (.154617)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.401809 13.775382 22.215745 21.256059 20.852993
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 33% 36% 34% 34% 20%
====================================================================================================================================
1994
Beginning unit value - Jan. 1 $10.715005 10.143796 15.606442 15.958341 17.844401
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .278073 .284601 1.172669 .960381 1.635883
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.118575) (.195976) (.073581) (.966828) (1.910067)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.085956) (.080502) (.129117) (.123431) (.141274)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.788547 10.151919 16.576413 15.828463 17.428943
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 1% 0% 6% (1)% (2)%
====================================================================================================================================
1993
Beginning unit value - Jan. 1 $10.000000 10.000000 13.308899 13.476298 14.926526
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .031142 1.499665 .389191 .299849 1.227974
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .703426 (1.335764) 2.026087 2.300419 1.821967
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.019563) (.020105) (.117735) (.118225) (.132066)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.715005 10.143796 15.606442 15.958341 17.844401
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 7%(b) 1%(b) 17% 18% 20%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FidOSeas FidAsMgr FidContP NWCapApp NWGvtBd
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 12.540728 13.774855 10.000000 11.465403 12.720514
- ------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .095965 .289466 .143118 .653781 .903001
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.111417 2.035460 .998657 2.696528 1.472503
- ------------------------------------------------------------------------------------------------------------------------
Asset charges (.103077) (.117252) (.042640) (.102482) (.111085)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 13.645033 15.982529 11.099135 14.713230 14.984933
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 9% 16% 11%(b) 28% 18%
========================================================================================================================
1994
Beginning unit value - Jan. 1 12.426854 14.785784 ** 11.662121 13.250482
- ------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .064174 .719044 .184927 .833925
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .152413 (1.615920) (.289863) (1.261429)
- ------------------------------------------------------------------------------------------------------------------------
Asset charges (.102713) (.114053) (.091782) (.102464)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 12.540728 13.774855 11.465403 12.720514
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 1% (7)% (2)% (4)%
========================================================================================================================
1993
Beginning unit value - Jan. 1 9.128094 12.312732 ** 10.725293 12.196370
- ------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .213405 .571816 .261975 .781559
- ------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.173177 2.008516 .761628 .376228
- ------------------------------------------------------------------------------------------------------------------------
Asset charges (.087822) (.107280) (.086775) (.103675)
- ------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 12.426854 14.785784 11.662121 13.250482
- ------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 36% 20% 9% 9%
========================================================================================================================
</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 available or was not utilized.
<PAGE> 76
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NWMyMkt NWSmCoFd NWTotRet NBGro NBLtdMat
------- -------- -------- ----- --------
1995
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $11.176411 10.000000 14.205723 12.214794 11.900389
- -----------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .629782 .017475 1.413734 .432461 .661221
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.418968 2.703396 3.432609 .635177
- -----------------------------------------------------------------------------------------------------------------------------
Asset charges (.091898) (.015684) (.130091) (.117382) (.099976)
- -----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.714295 11.420759 18.192762 15.962482 13.096811
- -----------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 5% 14%(b) 28% 31% 10%
=============================================================================================================================
1994
Beginning unit value - Jan. 1 $10.845265 ** 14.167308 12.959107 12.014277
- -----------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .419275 .717782 1.562441 .507651
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (.565055) (2.207122) (.526553)
- -----------------------------------------------------------------------------------------------------------------------------
Asset charges (.088129) (.114312) (.099632) (.094986)
- -----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.176411 14.205723 12.214794 11.900389
- -----------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% 0% (6)% (1)%
=============================================================================================================================
1993
Beginning unit value - Jan. 1 $10.639809 ** 12.875439 12.232618 11.358230
- -----------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .291848 .527331 .283612 .467224
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 .873117 .541815 .283278
- -----------------------------------------------------------------------------------------------------------------------------
Asset charges (.086392) (.108579) (.098938) (.094455)
- -----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.845265 14.167308 12.959107 12.014277
- -----------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 2% 10% 6% 6%
=============================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NBPart OppBdFd OppGlSec OppMult StDisc2
------ ------- -------- ------- -------
1995
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $10.038887 13.065574 11.379737 13.372968 12.307607
- -------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .082096 .902009 .299595 1.079776 .215562
- -------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.565899 1.310232 (.045711) 1.766931 4.106245
- -------------------------------------------------------------------------------------------------------------------------
Asset charges (.095536) (.113002) (.091487) (.119298) (.114564)
- -------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.591346 15.164813 11.542134 16.100377 16.514850
- -------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 35% 16% 1% 20% 34%
=========================================================================================================================
1994
Beginning unit value - Jan. 1 $10.000000 13.430475 12.167250 13.747705 13.112678
- -------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .000000 .759284 .214589 .702216 .983647
- -------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .072401 (1.018698) (.905246) (.968729) (1.689193)
- -------------------------------------------------------------------------------------------------------------------------
Asset charges (.033514) (.105487) (.096856) (.108224) (.099525)
- -------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.038887 13.065574 11.379737 13.372968 12.307607
- -------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% (3)% (6)% (3)% (6)%
=========================================================================================================================
1993
Beginning unit value - Jan. 1 ** $11.976650 10.000000 11.952042 10.832134
- -------------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .835328 .000000 .529802 .814568
- -------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .721678 2.189077 1.368631 1.557980
- -------------------------------------------------------------------------------------------------------------------------
Asset charges (.103181) (.021827) (.102770) (.092004)
- -------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.430475 12.167250 13.747705 13.112678
- -------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 12% 22%(b) 15% 21%
=========================================================================================================================
</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 available or was not utilized.
<PAGE> 77
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUES
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
StIntStk2 StSpec2 TCIBal TCIGro TCIInt
--------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 $10.000000 14.748256 10.948128 12.417011 9.412116
- -----------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .041121 .764407 .310910 .014289 .000000
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .209625 3.027469 1.992508 3.834812 1.142911
- -----------------------------------------------------------------------------------------------------------------------
Asset charges (.014725) (.131505) (.096497) (.117051) (.077555)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.236021 18.408627 13.155049 16.149061 10.477472
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 2%(b) 25% 20% 30% 11%
=======================================================================================================================
1994
Beginning unit value - Jan. 1 ** $14.350073 10.968814 12.664593 10.000000
- -----------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .412806 .263602 .001356 .000000
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .103139 (.196764) (.149703) (.555221)
- -----------------------------------------------------------------------------------------------------------------------
Asset charges (.117762) (.087524) (.099235) (.032663)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.748256 10.948128 12.417011 9.412116
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% 0% (2)% (6)%(b)
=======================================================================================================================
1993
Beginning unit value - Jan. 1 ** $11.556788 10.267347 11.572833 **
- -----------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .057587 .195102 .031592
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.840017 .591395 1.156915
- -----------------------------------------------------------------------------------------------------------------------
Asset charges (.104319) (.085030) (.096747)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.350073 10.968814 12.664593
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 24% 7% 9%
=======================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEGoldNR VEWrldBd VKACRESec WPIntEq WPSmCoGr
-------- -------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
1995
Beginning unit value - Jan. 1 14.178501 11.388987 10.000000 10.000000 10.000000
- -----------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .140115 .923751 .092168 .077521 .000000
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.410450 1.041904 .740443 .651025 2.504833
- -----------------------------------------------------------------------------------------------------------------------
Asset charges (.117064) (.101185) (.040399) (.040874) (.043759)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 15.612002 13.253457 10.792212 10.687672 12.461074
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 10% 16% 8%(b) 7%(b) 25%(b)
=======================================================================================================================
1994
Beginning unit value - Jan. 1 15.011706 11.633841 ** ** **
- -----------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .075618 .046884
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.791458) (.201583)
- -----------------------------------------------------------------------------------------------------------------------
Asset charges (.117365) (.090155)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 14.178501 11.388987
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (6)% (2)%
=======================================================================================================================
1993
Beginning unit value - Jan. 1 9.180337 10.880964 ** ** **
- -----------------------------------------------------------------------------------------------------------------------
Reinvested dividends and capital gains .043340 .876895
- -----------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.884613 (.034094)
- -----------------------------------------------------------------------------------------------------------------------
Asset charges (.096584) (.089924)
- -----------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 15.011706 11.633841
- -----------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 64% 7%
=======================================================================================================================
</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 available.
See note 6.
- --------------------------------------------------------------------------------
<PAGE> 78
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the consolidated financial statements of Nationwide Life
Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and
subsidiaries as listed in the accompanying index. In connection with our audits
of the consolidated financial statements, we also have audited the financial
statement schedules as listed in the accompanying index. These consolidated
financial statements and financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement schedules 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.
Participating insurance and the related surplus are discussed in note 12. The
Company and its counsel are of the opinion that the ultimate ownership of the
participating surplus in excess of the contemplated equitable policyholder
dividends belongs to the shareholder. The accompanying consolidated financial
statements are presented on such basis.
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, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally
accepted accounting principles. Also in our opinion, the related financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for
Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions.
KPMG Peat Marwick LLP
Columbus, Ohio
February 26, 1996
<PAGE> 79
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Balance Sheets
December 31, 1995 and 1994
(000's omitted)
<TABLE>
<CAPTION>
ASSETS 1995 1994
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906
Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713
Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787
Mortgage loans on real estate 4,786,599 4,222,284
Real estate 239,089 252,681
Policy loans 370,908 340,491
Other long-term investments 67,280 63,914
Short-term investments (note 13) 45,732 131,643
----------- -----------
19,710,703 16,770,419
----------- -----------
Cash 10,485 7,436
Accrued investment income 239,881 220,540
Deferred policy acquisition costs 1,094,195 1,064,159
Deferred Federal income tax -- 36,515
Other assets 795,169 790,603
Assets held in Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
$40,614,111 31,112,133
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461
Policyholders' dividend accumulations 353,554 338,058
Other policyholder funds 71,155 72,770
Accrued Federal income tax (note 7):
Current 34,064 13,126
Deferred 238,877 -
----------- -----------
272,941 13,126
----------- -----------
Other liabilities 284,143 235,778
Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461
----------- -----------
37,945,599 29,203,654
----------- -----------
Shareholder's equity (notes 3, 4, 5, 7, 12 and 13):
Capital shares, $1 par value. Authorized 5,000 shares, issued and
outstanding 3,815 shares 3,815 3,815
Additional paid-in capital 673,782 622,753
Retained earnings 1,606,607 1,401,579
Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668)
----------- -----------
2,668,512 1,908,479
----------- -----------
Commitments and contingencies (notes 9 and 15)
$40,614,111 31,112,133
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 80
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Income
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Traditional life insurance premiums $ 274,957 209,538 215,715
Accident and health insurance premiums 509,658 324,524 312,655
Universal life and investment product policy charges 307,676 239,021 188,057
Net investment income (note 5) 1,482,980 1,289,501 1,204,426
Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673
---------- ---------- ----------
2,576,107 2,046,200 2,034,526
---------- ---------- ----------
Benefits and expenses:
Benefits and claims 1,656,287 1,279,763 1,236,906
Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Other operating costs and expenses 458,970 352,402 329,396
---------- ---------- ----------
2,256,375 1,772,970 1,721,625
---------- ---------- ----------
Income before Federal income tax expense and cumulative effect of
changes in accounting principles 319,732 273,230 312,901
---------- ---------- ----------
Federal income tax expense (note 7):
Current 103,464 79,847 75,124
Deferred 3,790 9,657 31,634
---------- ---------- ----------
107,254 89,504 106,758
---------- ---------- ----------
Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143
Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365
---------- ---------- ----------
Net income $ 212,478 183,726 211,508
========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 81
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1995, 1994 and 1993
(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>
1993:
Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242
Capital contributions -- 111,000 -- -- 111,000
Dividends paid to shareholder -- -- (17,805) -- (17,805)
Net income -- -- 211,508 -- 211,508
Unrealized losses on equity securities, net -- -- -- (83,777) (83,777)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168
========== ========== ========= ========== ==========
1994:
Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168
Capital contribution -- 200,000 -- -- 200,000
Net income -- -- 183,726 -- 183,726
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 3) -- -- -- 216,915 216,915
Unrealized losses on securities available-
for-sale, net -- -- -- (343,330) (343,330)
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479
========== ========== ========== ========== ==========
1995:
Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479
Capital contribution (note 13) -- 51,029 -- (4,111) 46,918
Dividends paid to shareholder -- -- (7,450) -- (7,450)
Net income -- -- 212,478 -- 212,478
Unrealized gains on securities available-
for-sale, net -- -- -- 508,087 508,087
---------- ---------- ---------- ---------- ----------
Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512
========== ========== ========== ========== ==========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 82
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
(000's omitted)
<TABLE>
<CAPTION>
1995 1994 1993
-------------- ------------ -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 212,478 183,726 211,508
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994)
Amortization of deferred policy acquisition costs 93,044 94,744 102,134
Amortization and depreciation 10,319 6,207 11,156
Realized losses (gains) on invested assets, net 717 15,949 (113,648)
Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006)
Increase in accrued investment income (19,341) (29,654) (4,218)
Increase in other assets (3,227) (112,566) (549,277)
Increase in policy liabilities 198,200 1,038,641 509,370
Increase in policyholders' dividend accumulations 15,496 15,372 17,316
Increase in accrued Federal income tax payable 20,938 832 16,838
Increase in other liabilities 48,365 17,826 26,958
Other, net (20,556) (19,303) (11,745)
----------- ----------- ------------
Net cash provided by operating activities 211,000 945,174 18,392
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 706,442 579,067 --
Proceeds from sale of securities available-for-sale 131,420 247,876 247,502
Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093
Proceeds from sale of fixed maturities -- -- 33,959
Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047
Proceeds from sale of real estate 48,477 46,713 23,587
Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643
Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550)
Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831)
Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336)
Cost of real estate acquired (10,970) (15,962) (8,827)
Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491)
----------- ----------- ------------
Net cash used in investing activities (2,012,182) (2,261,105) (887,204)
----------- ----------- -----------
Cash flows from financing activities:
Proceeds from capital contributions 46,918 200,000 111,000
Dividends paid to shareholder (7,450) -- (17,805)
Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740
Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504)
----------- ----------- -----------
Net cash provided by financing activities 1,718,320 1,391,378 884,431
----------- ----------- -----------
Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619
Cash and cash equivalents, beginning of year 139,079 63,632 48,013
----------- ----------- -----------
Cash and cash equivalents, end of year $ 56,217 139,079 63,632
=========== =========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE> 83
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(000's omitted)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of
Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include
Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as
Financial Horizons Life Insurance Company), West Coast Life Insurance
Company (WCLIC), Employers Life Insurance Company of Wausau and
subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide
Financial Services, Inc. (NFS). NLIC and its subsidiaries are
collectively referred to as "the Company."
NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers
and NCC is a property and casualty insurer. The Company is licensed in
all 50 states, the District of Columbia, the Virgin Islands and Puerto
Rico. The Company offers a full range of life insurance, health insurance
and annuity products through exclusive agents, brokers and other
distribution channels and is subject to competition from other insurers
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 and health 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 designed to reduce insurer
profits, 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
sound reinsurance and credit and collection policies and by
providing for any amounts deemed uncollectible.
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) 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. See note 4.
<PAGE> 84
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
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 December 31, 1995 consolidated financial statements include the
accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC
and NFS. The December 31, 1994 and 1993 consolidated financial statements
include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31,
1994 consolidated balance sheet also includes the accounts of ELICW, which
was acquired by NLIC effective December 31, 1994. See Note 13. 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, 1995.
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.
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.
In March, 1995, the Financial Accounting Standards Board (FASB) issued
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF
(SFAS 121). SFAS 121 requires impairment losses to be 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. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be disposed of.
The statement is effective for fiscal years beginning after December 15,
1995 and earlier application is permitted. Previously issued consolidated
financial statements shall not be restated. The Company will adopt SFAS 121
in 1996 and the impact on the consolidated financial statements is not
expected to be material.
<PAGE> 85
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums and
benefits and consist primarily of whole life, limited-payment life, term
life 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.
UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include
universal life, variable universal life and other interest-sensitive life
insurance policies. Investment products consist primarily of individual and
group deferred annuities, annuities without life contingencies and
guaranteed investment contracts. Revenues for universal life and investment
products consist of 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 benefits and claims incurred in the period in
excess of related policy account balances and interest credited to policy
account balances.
ACCIDENT AND HEALTH INSURANCE: 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.
(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 traditional life and
individual health insurance 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. For
universal life and investment 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. 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 2(b).
(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 for administrative services
and risks assumed.
(f) FUTURE POLICY BENEFITS
Future policy benefits for traditional life and individual health
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 for annuity policies in the accumulation phase,
universal life and variable universal life policies have been calculated
based on participants' contributions plus interest credited less applicable
contract charges.
<PAGE> 86
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Future policy benefits and claims for collectively renewable long-term
disability policies (primarily discounted at 5.2%) and group long-term
disability policies (primarily discounted at 5.5%) 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.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 45% (45% in 1994 and
48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in
1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and
45% in 1993) 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. Dividend scales are approved
by the Board of Directors.
Income attributable to participating policies in excess of policyholder
dividends is accounted for as belonging to the shareholder. See note 12.
(h) FEDERAL INCOME TAX
NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax
return with Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Corp. Through 1994, ELICW filed a consolidated Federal
income tax return with Employers Insurance of Wausau A Mutual Company.
Beginning in 1995, ELICW files a separate Federal income tax return.
In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change
from the deferred method of accounting for income tax of APB Opinion 11 to
the asset and liability method of accounting for income tax. Under the
asset and liability 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.
The Company has reported the cumulative effect of the change in method
of accounting for income tax in the 1993 consolidated statement of income.
See note 3.
(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.
(j) CASH EQUIVALENTS
For purposes of the consolidated statements of cash flows, the Company
considers all short-term investments with original maturities of three
months or less to be cash equivalents.
<PAGE> 87
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(k) RECLASSIFICATION
Certain items in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(3) CHANGES IN ACCOUNTING PRINCIPLES
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 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 $6,593,844
and $7,024,736, 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 $ 430,892
Adjustment to deferred policy acquisition costs (97,177)
Deferred Federal income tax (116,800)
---------
$ 216,915
=========
During 1993, the Company adopted accounting principles in connection
with the issuance of two accounting standards by the FASB. The effect
as of January 1, 1993, the date of adoption, has been recognized in
the 1993 consolidated statement of income as the cumulative effect of
changes in accounting principles, as follows:
Asset/liability method of recognizing income tax (note 2(h)) $ 26,344
Accrual method of recognizing postretirement benefits other
than pensions (net of tax benefit of $11,296) (note 11) (20,979)
--------
$ 5,365
========
</TABLE>
(4) BASIS OF PRESENTATION
The consolidated financial statements have been prepared in accordance
with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC,
filed with the Department of Insurance of the State of Ohio (the
Department), California Department of Insurance, Wisconsin Insurance
Department and Michigan Bureau of Insurance, respectively, are prepared
on the basis of accounting practices prescribed or permitted by such
regulatory authorities. 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.
The statutory capital shares and surplus of NLIC as reported to
regulatory authorities as of December 31, 1995, 1994 and 1993 was
$1,363,031, $1,262,861 and $992,631, respectively. The statutory net
income of NLIC as reported to regulatory authorities for the years
ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and
$185,943, respectively.
<PAGE> 88
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(5) INVESTMENTS
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
------------- ------------ ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturities $ 772,589 674,346 --
Equity securities 1,436 550 7,230
Fixed maturities held-to-maturity 232,692 193,009 800,255
Mortgage loans on real estate 410,965 376,783 364,810
Real estate 39,222 40,280 39,684
Short-term investments 12,249 6,990 5,080
Other 61,701 42,831 33,832
---------- ---------- ----------
Total investment income 1,530,854 1,334,789 1,250,891
Less investment expenses 47,874 45,288 46,465
---------- ---------- ----------
Net investment income $1,482,980 1,289,501 1,204,426
========== ========== ==========
</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>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 6,792 (7,120) --
Equity securities 3,435 1,427 129,728
Fixed maturities -- -- 20,225
Mortgage loans on real estate (7,312) (20,462) (28,241)
Real estate and other (2,079) 9,771 (8,039)
-------- -------- --------
$ 836 (16,384) 113,673
======== ======== ========
</TABLE>
The components of unrealized gains (losses) on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
--------------- -------------
<S> <C> <C>
Gross unrealized gains (losses) $ 735,103 (266,618)
Adjustment to deferred policy acquisition costs (143,851) 82,525
Deferred Federal income tax (206,944) 64,425
--------- ---------
$ 384,308 (119,668)
========= =========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturities held-to-maturity
follows for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
--------------- ------------- -------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturities $ 1,001,706 (703,851) --
Equity securities 15 (1,990) (128,837)
Fixed maturities held-to-maturity 86,477 (421,427) 223,392
----------- ----------- -----------
$ 1,088,198 (1,127,268) 94,555
=========== =========== ===========
</TABLE>
<PAGE> 89
LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
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>
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 438,109 36,714 (53) 474,770
Obligations of states and political subdivisions 9,742 1,252 (1) 10,993
Debt securities issued by foreign governments 162,442 9,641 (66) 172,017
Corporate securities 8,902,494 524,796 (30,561) 9,396,729
Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868
--------- ----------- ----------- -----------
Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377
Equity securities 27,362 6,441 (85) 33,718
---------- ----------- ----------- -----------
$13,465,992 775,489 (40,386) 14,201,095
=========== =========== ============ ===========
</TABLE>
The amortized cost and estimated fair value of securities available-for-sale
and fixed maturities held-to-maturity were as follows as of December 31, 1994:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE-FOR-SALE
Fixed maturities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 393,156 1,794 (18,941) 376,009
Obligations of states and political subdivisions 2,202 55 (21) 2,236
Debt securities issued by foreign governments 177,910 872 (9,205) 169,577
Corporate securities 4,201,738 50,405 (128,698) 4,123,445
Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639
---------- ---------- ---------- ---------
Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906
Equity securities 18,372 6,637 (296) 24,713
---------- ---------- ---------- ---------
$8,337,237 77,888 (344,506) 8,070,619
========== ========= ========== =========
FIXED MATURITY SECURITIES HELD-TO-MATURITY
Obligations of states and political subdivisions $ 11,613 92 (255) 11,450
Debt securities issued by foreign governments 16,131 111 (39) 16,203
Corporate securities 3,661,043 34,180 (120,566) 3,574,657
---------- ---------- ---------- ---------
$3,688,787 34,383 (120,860) 3,602,310
========== ========== ========== =========
</TABLE>
<PAGE> 90
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity securities
available-for-sale as of December 31, 1995, 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 $ 641,490 647,639
Due after one year through five years 5,365,703 5,623,126
Due after five years through ten years 2,477,457 2,609,262
Due after ten years 1,028,137 1,174,482
----------- -----------
9,512,787 10,054,509
Mortgage-backed securities 3,925,843 4,112,868
----------- -----------
$13,438,630 14,167,377
=========== ===========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1995 and 1994
were $131,420 and $247,876, respectively, while proceeds from sales of
investments in fixed maturity securities during 1993 were $33,959. Gross gains
of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309
($21,866 in 1994 and $39 in 1993) were realized on those sales.
During 1995, the Company transferred fixed maturity securities classified as
held-to-maturity with amortized cost of $27,929 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 $4,285.
As permitted by the FASB'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 $3,705,644, resulting in a gross
unrealized gain of $171,531.
Investments that were non-income producing for the twelve month period
preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and
consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740
($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term
investments.
Real estate is presented at cost less accumulated depreciation of $30,931 in
1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in
1994).
Other long-term investments are presented net of valuation allowances of $457
as of December 31, 1995. There were no such valuation allowances as of December
31, 1994.
As of December 31, 1995, the recorded investment of mortgage loans on real
estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING
STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended
by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS
FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995,
which includes $23,975 of impaired mortgage loans on real estate for which the
related valuation allowance was $5,276 and $21,020 of impaired mortgage loans
on real estate for which there was no valuation allowance. During 1995, the
average recorded investment in impaired mortgage loans on real estate was
approximately $22,621 and interest income recognized on those loans was $416,
which is equal to interest income recognized using a cash-basis method of
income recognition.
<PAGE> 91
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the year ended December 31, 1995:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Allowance, beginning year $ 47,892
Additions charged to operations 7,653
Direct write-downs charged against the allowance (4,850)
--------
Allowance, end of year $ 50,695
========
</TABLE>
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and
mortgage loans on real estate in process of foreclosure or in-substance
foreclosed as of December 31, 1994 totaled $19,878, which approximated fair
value.
Fixed maturity securities with an amortized cost of $13,982 and $11,137 as
of December 31, 1995 and 1994, 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 82% and 81% of the total liability for future policy benefits
as of December 31, 1995 and 1994, respectively. The average interest rate
credited on investment product policies was approximately 6.5%, 6.5% and
7.0% for the years ended December 31, 1995, 1994 and 1993, respectively.
The liability for future policy benefits for traditional life insurance and
individual health insurance policies has been established based upon the
following assumptions:
INTEREST RATES: Interest rates vary as follows:
<TABLE>
<CAPTION>
Health
Year of issue Life Insurance insurance
-------------- ------------------------------------------------------------ ---------------
<S> <C> <C>
1995 7.6%, not graded - permanent contracts with loan provisions 4.5%
7.7%, not graded - all other contracts
1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0%
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0%
1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
</TABLE>
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.
<PAGE> 92
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Activity in the liability for unpaid claims and claim adjustment expenses is
summarized for the years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ---------
<S> <C> <C> <C>
Balance, beginning of year $ 637,998 592,180 760,209
Less reinsurance recoverables 438,761 430,720 547,683
--------- --------- ---------
Net balance, beginning of year 199,237 161,460 212,526
--------- --------- ---------
Incurred related to:
Current year 425,907 273,299 309,721
Prior years (17,203) (26,156) (26,248)
--------- --------- ---------
Total incurred 408,704 247,143 283,473
--------- --------- ---------
Paid related to:
Current year 290,605 175,700 208,978
Prior years 111,353 73,889 125,561
--------- --------- ---------
Total paid 401,958 249,589 334,539
--------- --------- ---------
Unpaid claims of acquired companies 2,542 40,223 --
--------- --------- ---------
Net balance, end of year 208,525 199,237 161,460
Plus reinsurance recoverables 491,321 438,761 430,720
--------- --------- ---------
Balance, end of year $ 699,846 637,998 592,180
========= ========= =========
</TABLE>
Reinsurance recoverables include amounts from affiliates, as discussed in
note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31,
1995, 1994, 1993 and 1992, respectively.
The provision for claims and claim adjustment expenses for prior years
decreased in each of the three years ended December 31, 1995 due to
lower-than-anticipated costs to settle accident and health insurance claims.
(7) FEDERAL INCOME TAX
The tax effects of temporary differences that give rise to significant
components of the net deferred tax asset (liability) as of December 31,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 179,916 124,044
Fixed maturity securities available-for-sale -- 95,536
Liabilities in Separate Accounts 129,120 94,783
Mortgage loans on real estate and real estate 26,062 25,632
Other policyholder funds 7,752 7,137
Other assets and other liabilities 47,215 57,528
--------- ---------
Total gross deferred tax assets 390,065 404,660
--------- ---------
Deferred tax liabilities:
Deferred policy acquisition costs 312,616 317,224
Fixed maturity securities available-for-sale 266,184 --
Equity securities available-for-sale and other
long-term investments 3,431 3,620
Other 46,711 47,301
--------- ---------
Total gross deferred tax liabilities 628,942 368,145
--------- ---------
$(238,877) 36,515
========= =========
</TABLE>
<PAGE> 93
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company has determined that valuation allowances are not necessary as
of December 31, 1995, 1994 and 1993 based on its analysis of future
deductible amounts. 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. All future
deductible amounts can be offset by future taxable amounts or recovery of
Federal income tax paid within the statutory carryback period. In
addition, for future deductible amounts for securities available-for-sale,
affiliates of the Company which are included in the same consolidated
Federal income tax return hold investments that could be sold for capital
gains that could offset capital losses realized by the Company should
securities available-for-sale be sold at a loss.
<TABLE>
Total Federal income tax expense for the years ended December 31, 1995,
1994 and 1993 differs from the amount computed by applying the U.S.
Federal income tax rate to income before tax as follows:
<CAPTION>
1995 1994 1993
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
--------------- ----- -------------- ------ ------------- -------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0
Tax exempt interest and dividends
received deduction (137) (0.1) (194) (0.1) (2,322) (0.7)
Current year increase in U.S. Federal
income tax rate -- -- -- -- 1,704 0.5
Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7)
--------- ---- --------- ---- --------- ----
Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1
========= ==== ========= ==== ========= ====
</TABLE>
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the
years ended December 31, 1995, 1994 and 1993, respectively.
Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as
amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral
from taxation of a portion of statutory income under certain
circumstances. In these situations, the deferred income was accumulated in
the Policyholders' Surplus Account (PSA). Management considers the
likelihood of distributions from the PSA to be remote; therefore, no
Federal income tax has been provided for such distributions in the
consolidated financial statements. The DRA eliminated any additional
deferrals to the PSA. Any distributions from the PSA, however, will
continue to be taxable at the then current tax rate. The balance of the
PSA was approximately $35,344 as of December 31, 1995.
(8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS 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.
<PAGE> 94
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
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 are 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.
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 analysis. 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, universal life 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.
<PAGE> 95
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts were
as follow as of December 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
-------------------------- -------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
ASSETS
- ------
Investments:
Securities available-for-sale:
Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906
Equity securities 33,718 33,718 24,713 24,713
Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310
Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284
Policy loans 370,908 370,908 340,491 340,491
Short-term investments 45,732 45,732 131,643 131,643
Cash 10,485 10,485 7,436 7,436
Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461
LIABILITIES
- -----------
Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556
Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384
Policyholders' dividend accumulations 353,554 353,554 338,058 338,058
Other policyholder funds 71,155 71,155 72,770 72,770
Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
</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.
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 80% 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 $361,974 extending into 1996 were
outstanding as of December 31, 1995.
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 20% (22%
in 1994) in any geographic area and no more than 2% (2% in 1994) with any
one borrower.
<PAGE> 96
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The summary below depicts loans by remaining principal balance as of
December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1995:
East North Central $ 140,732 110,361 534,814 184,201 970,108
East South Central 23,978 15,653 183,790 84,588 308,009
Mountain -- 18,940 144,156 48,727 211,823
Middle Atlantic 124,079 72,201 183,562 18,383 398,225
New England 9,594 39,526 153,644 1 202,765
Pacific 190,628 239,687 395,914 107,650 933,879
South Atlantic 101,904 74,731 458,355 279,692 914,682
West North Central 134,866 14,205 81,521 37,586 268,178
West South Central 69,143 99,618 194,717 272,323 635,801
--------- --------- --------- --------- ---------
$ 794,924 684,922 2,330,473 1,033,151 4,843,470
========= ========= ========= =========
Less valuation allowances and unamortized discount 56,871
---------
Total mortgage loans on real estate, net $4,786,599
=========
</TABLE>
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1994:
East North Central $ 109,233 103,499 540,686 191,489 944,907
East South Central 24,298 10,803 127,845 76,897 239,843
Mountain 3,150 13,770 140,358 39,682 196,960
Middle Atlantic 61,299 53,285 140,847 30,111 285,542
New England 10,536 43,282 139,131 4 192,953
Pacific 195,393 210,930 397,911 68,768 873,002
South Atlantic 87,150 81,576 424,150 210,354 803,230
West North Central 127,760 11,766 80,854 4,738 225,118
West South Central 51,013 84,796 184,923 194,788 515,520
--------- --------- --------- --------- ---------
$ 669,832 613,707 2,176,705 816,831 4,277,075
========= ========= ========= =========
Less valuation allowances and unamortized discount 54,791
---------
Total mortgage loans on real estate, net $4,222,284
=========
</TABLE>
(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.
<PAGE> 97
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
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, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702,
respectively.
The Company's net accrued pension expense as of December 31, 1995 and
1994 was $1,376 and $1,836, respectively.
The net periodic pension cost for the Nationwide Insurance Companies and
Affiliates Retirement Plan as a whole for the years ended December 31,
1995, 1994 and 1993 follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 64,524 64,740 47,694
Interest cost on projected benefit obligation 95,283 73,951 70,543
Actual return on plan assets (249,294) (21,495) (105,002)
Net amortization and deferral 143,353 (62,150) 20,832
--------- --------- ---------
$ 53,866 55,046 34,067
========= ========= =========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- ---------
<S> <C> <C> <C>
Weighted average discount rate 7.50% 5.75% 6.75%
Rate of increase in future compensation levels 6.25% 4.50% 4.75%
Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
</TABLE>
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1995
(post-merger) and the Nationwide Insurance Companies and Affiliates
Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Accumulated benefit obligation:
Vested $ 1,236,730 1,002,079 914,850
Nonvested 26,503 8,998 7,570
----------- ----------- -----------
$ 1,263,233 1,011,077 922,420
=========== =========== ===========
Net accrued pension expense:
Projected benefit obligation for services rendered
to date $ 1,780,616 1,447,522 1,305,547
Plan assets at fair value 1,738,004 1,508,781 1,241,771
----------- ----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (42,612) 61,259 (63,776)
Unrecognized prior service cost 42,845 42,850 46,201
Unrecognized net (gains) losses (63,130) (86,195) 39,408
Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994)
----------- ----------- -----------
$ (21,592) (1,927) (161)
=========== =========== ===========
</TABLE>
<PAGE> 98
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
Post-merger Pre-merger
1995 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighed average discount rate 6.00% 6.00% 7.50%
Rate of increase in future compensation levels 4.25% 4.25% 6.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested
in group annuity contracts of NLIC and ELICW. Prior to the merger, the
assets of the Nationwide Insurance Companies and Affiliates Retirement
Plan were invested in a group annuity contract of NLIC.
(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.
Effective January 1, 1993, the Company adopted the provisions of STATEMENT
OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the
accrual method of accounting for postretirement life and health care
insurance benefits based on actuarially determined costs to be recognized
over the period from the date of hire to the full eligibility date of
employees who are expected to qualify for such benefits.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation as of January 1, 1993. Accordingly, a
noncash charge of $32,275 ($20,979 net of related income tax benefit) was
recorded in the 1993 consolidated statement of income as a cumulative
effect of a change in accounting principle. See note 3. The adoption of
SFAS 106, including the cumulative effect of the change in accounting
principle, increased the expense for postretirement benefits by $35,277
to $36,544 in 1993. 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, 1995 and 1994 was $51,490 and $36,001, respectively, and the
net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was
$8,269 and $4,627, respectively.
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1995, 1994 and 1993 was as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090
Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928
Actual return on plan assets (2,657) (1,622) --
Amortization of unrecognized transition obligation of affiliates 2,966 568 568
Net amortization and deferral (1,619) 1,622 --
-------- -------- --------
$ 19,076 23,165 21,586
======== ======== ========
</TABLE>
<PAGE> 99
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the plan as a whole as of
December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 88,680 76,677
Fully eligible, active plan participants 28,793 22,013
Other active plan participants 90,375 59,089
--------- ---------
Accumulated postretirement benefit obligation (APBO) 207,848 157,779
Plan assets at fair value 54,325 49,012
--------- ---------
Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767)
Unrecognized transition obligation of affiliates 1,827 6,577
Unrecognized net gains (1,038) (41,497)
--------- ---------
$(152,734) (143,687)
========= =========
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were
as follows:
<TABLE>
<CAPTION>
1995 1995 1994 1994 1993
APBO NPPBC APBO NPPBC NPPBC
----------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Discount rate 6.75% 8% 8% 7% 8%
Assumed health care cost trend rate:
Initial rate 11% 10% 11% 12% 14%
Ultimate rate 6% 6% 6% 6% 6%
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, 1995 by $641 and the NPPBC for the year ended December 31,
1995 by $107.
(12) 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 subsidiaries exceed the minimum risk-based capital
requirements.
In accordance with the requirements of the New York statutes, the
Company has agreed with the Superintendent of Insurance of that state
that so long as participating policies and contracts are held by
residents of New York, no profits on participating policies and
contracts in excess of the larger of (a) ten percent of such profits or
(b) fifty cents per year per thousand dollars of participating life
insurance in force, exclusive of group term, as of the year-end shall
inure to the benefit of the shareholder. Such New York statutes
further provide that so long as such agreement is in effect, such
excess of profits shall be exhibited as "participating policyholders'
surplus" in annual statements filed with the Superintendent and shall
be used only for the payment or apportionment of dividends to
participating policyholders at least to the extent required by statute
or for the purpose of making up any loss on participating policies.
<PAGE> 100
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
In the opinion of counsel for the Company, the ultimate ownership of the
entire surplus, however classified, of the Company resides with the
shareholder, subject to the usual requirements under state laws and
regulations that certain deposits, reserves and minimum surplus be
maintained for the protection of the policyholders until all policy
contracts are discharged.
Based on the opinion of counsel with respect to the ownership of its
surplus, the Company is of the opinion that the earnings attributable to
participating policies in excess of the amounts paid as dividends to
policyholders belong to the shareholder rather than the policyholders,
and such earnings are so treated by the Company.
The amount of shareholder's equity other than capital shares was
$2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and
1993, respectively. The amount thereof not presently available for
dividends to the shareholder due to the New York restrictions was
$1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993,
respectively.
Ohio law limits the payment of dividends to shareholders. The maximum
dividend that may be paid by the Company without prior approval of the
Director of the Department is limited to the greater of statutory gain
from operations of the preceding calendar year or 10% of statutory
shareholder's surplus as of the prior December 31. Therefore, $2,468,687
of shareholder's equity, as presented in the accompanying consolidated
financial statements, is so restricted as to dividend payments in 1996.
Each of NLIC's insurance company subsidiaries are limited in their
payment of dividends by the state insurance department of their
respective state of domicile. As of December 31, 1995, the maximum amount
of shareholder's equity available for dividend payment to NLIC in 1996 by
its insurance company subsidiaries without prior approval are:
<TABLE>
<S> <C>
Nationwide Life and Annuity Insurance Company $10,143
West Coast Life Insurance Company 13,153
Employers Life Insurance Company of Wausau 10,132
National Casualty Company --
-------
$33,428
=======
</TABLE>
(13) TRANSACTIONS WITH AFFILIATES
----------------------------
On March 1, 1995, Corp. contributed all of the outstanding shares of
Farmland Life Insurance Company (Farmland) to NLIC, which then merged
Farmland into WCLIC effective June 30, 1995. The contribution resulted in
a direct increase to consolidated shareholder's equity of $46,918. The
contribution of Farmland has been accounted for in a manner similar to a
pooling of interests and accordingly, Farmland's results are included in
the consolidated statements of income beginning January 1, 1995. However,
prior period consolidated financial statements have not been restated due
to the impact of Farmland being immaterial.
Effective December 31, 1994, NLIC purchased all of the outstanding shares
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.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Corp. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1995 were
$57,969, $50,470 and $44,577, respectively.
<PAGE> 101
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
The Company shares home office, other facilities, equipment and common
management and administrative services with affiliates.
The Company 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 1995 and
1994 were not material.
During 1993, the Company sold equity securities with a market value
$194,515 to NMIC, resulting in a realized gain of $122,823. With the
proceeds, the Company purchased securities with a market value of
$194,139 and cash of $376 from NMIC.
Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and
WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December
31, 1995. These contracts are immaterial to the consolidated financial
statements.
NCC participates in several 100% quota share reinsurance agreements with
NMIC and Nationwide Mutual Fire Insurance Company, the minority
shareholder of Corp. As a result of these agreements, the following
assets and (liabilities) are included in the consolidated financial
statements as of December 31, 1995 and 1994 for reinsurance ceded:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Reinsurance recoverable $ 590,379 541,289
Unearned premium reserves (112,467) (110,353)
Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
</TABLE>
The ceding of reinsurance does not discharge the original insurer from
primary liability to its policyholder. The insurer which assumes the
coverage assumes the related liability and it is the practice of insurers
to treat insured risks, to the extent of reinsurance ceded, as though
they were risks for which the original insurer is not liable. Management
believes the financial strength of NMIC reduces to an acceptable level
any risk to NCC under these intercompany reinsurance agreements.
ELICW assumes certain accident and health insurance business from
Employers Insurance of Wausau A Mutual Company, an affiliate. During
1995, total premiums assumed by ELICW under the reinsurance
agreement were $150,622.
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 $21,644 and $92,531 as of December 31, 1995 and 1994,
respectively, and are included in short-term investments on the
accompanying consolidated balance sheets.
(14) BANK LINES OF CREDIT
--------------------
As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but
unused bank lines of credit which support a $100,000 commercial paper
borrowing authorization.
(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.
<PAGE> 102
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Corporation)
Notes to Consolidated Financial Statements, Continued
(16) SEGMENT INFORMATION
-------------------
The Company operates in the long-term savings, life insurance and
accident and health insurance lines of business in the life insurance and
property and casualty insurance industries. Long-term savings operations
include both qualified and non-qualified annuity contracts issued to both
individuals and groups. Life insurance operations include whole life,
universal life, variable universal life and endowment and term life
insurance issued to individuals and groups. Accident and health insurance
operations also provide coverage to individuals and groups. Corporate
primarily includes investments, and the related investment income, which
are not specifically allocated to one of the three operating segments. In
addition, realized gains and losses on all general account investments
are reported as a component of the corporate segment.
During 1995, 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 (loss) before
Federal income tax expense and cumulative effect of changes in accounting
principles for the years ended December 31, 1995, 1994 and 1993 and
assets as of December 31, 1995, 1994 and 1993, by business segment.
<TABLE>
<CAPTION>
1995 1994 1993
------------ ------------ ------------
<S> <C> <C> <C>
Revenues:
Long-term savings $ 1,406,241 1,125,013 1,048,045
Life insurance 502,885 452,795 432,343
Accident and health insurance 532,383 345,545 339,764
Corporate 134,598 122,847 214,374
------------ ------------ ------------
$ 2,576,107 2,046,200 2,034,526
============ ============ ============
Income (loss) before Federal income tax expense and
cumulative effect of changes in accounting principles:
Long-term savings 129,475 95,530 47,966
Life insurance 63,169 46,119 36,383
Accident and health insurance (12,521) 13,221 15,041
Corporate 139,609 118,360 213,511
------------ ------------ ------------
$ 319,732 273,230 312,901
============ ============ ============
Assets:
Long-term savings 34,634,892 25,815,273 20,695,598
Life insurance 3,675,581 3,231,651 2,897,574
Accident and health insurance 307,643 291,296 297,200
Corporate 1,995,995 1,773,913 1,515,989
------------ ------------ ------------
$ 40,614,111 31,112,133 25,406,361
============ ============ ============
</TABLE>
<PAGE> 103
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 10 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 98 pages.
Representations and Undertakings.
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C>
1. Power of Attorney dated April 4, 1996 Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2
authorizing the establishment of the Registrant, for the Nationwide VLI Separate Account-2 (File No. 811-
adopted 5311), and hereby incorporated herein by reference.
3. Distribution Contracts Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account-2 (File No. 811-
5311), and hereby incorporated herein by reference.
4. Form of Security Included with the Registration Statement on Form S-6 for
the Nationwide VLI Separate Account-2 (File No. 33-
42180), 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-2 (File No. 811-
5311), and hereby incorporated herein by reference.
6. Application form of Security Included with the Registration Statement on Form S-6 for
the Nationwide VLI Separate Account-2 (File No. 33-
42180), and hereby incorporated herein by reference.
7. Opinion of Counsel Included with the Registration Statement on Form S-6 for
the Nationwide VLI Separate Account-2 (File No. 33-
42180), and hereby incorporated herein by reference.
</TABLE>
103 of 106
<PAGE> 104
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)(A) 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.
104 of 106
<PAGE> 105
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, NATIONWIDE VLI SEPARATE ACCOUNT-2, certifies that it meets the
requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment No. 10 and has duly caused this Post-Effective
Amendment No. 10 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 5th day of August, 1996.
NATIONWIDE VLI SEPARATE ACCOUNT-2
------------------------------------
(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 and Associate
General Counsel
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 10 has been signed below by the following persons in the
capacities indicated on the 5th day of August, 1996.
<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 Operating Officer and Director
- --------------------------
Joseph J. Gasper
HENRY S. HOLLOWAY Chairman of the Board and Director
- --------------------------
Henry S. Holloway
D. RICHARD MCFERSON Chairman and Chief Executive Officer - Nationwide
- -------------------------- Insurance Enterprise and Director
D. Richard McFerson
DAVID O. MILLER Director
- --------------------------
David O. Miller
C. RAY NOECKER Director
- --------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-Chief Financial Officer
- --------------------------
Robert A. Oakley
JAMES F. PATTERSON Director By /s/ JOSEPH P. RATH
- -------------------------- -----------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- --------------------------
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>
106 of 106
