<PAGE> 1
REGISTRATION NO. 33-16999
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 13
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 the 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 December 23, 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. On behalf of its
separate account registrants, the Company has filed its 24f-2 Notices for the
fiscal year ended December 31, 1995, on February 15, 1996.
<PAGE> 2
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
1....................................Nationwide Life Insurance Company
The Variable Account
2....................................Nationwide Life Insurance Company
3....................................Custodian of Assets
4....................................Distribution of The Policies
5....................................The Variable Account
6....................................Not Applicable
7....................................Not Applicable
8....................................Not Applicable
9....................................Legal Proceedings
10....................................Information About The Policies; How
The Cash Value Varies; Right to
Exchange for a Fixed Benefit Policy;
Reinstatement; Other Policy
Provisions
11....................................Investments of The Variable Account
12....................................The Variable Account
13....................................Policy Charges
Reinstatement
14....................................Underwriting and Issuance - Premium
Payments
Minimum Requirements for Issuance
of a Policy
15....................................Investments of the Variable Account;
Premium Payments
16....................................Underwriting and Issuance -
Allocation of Cash Value
17....................................Surrendering The Policy for Cash
18....................................Reinvestment
19....................................Not Applicable
20....................................Not Applicable
21....................................Policy Loans
22....................................Not Applicable
23....................................Not Applicable
24....................................Not Applicable
25....................................Nationwide Life Insurance Company
26....................................Not Applicable
27....................................Nationwide Life Insurance Company
28....................................Company Management
29....................................Company Management
30....................................Not Applicable
31....................................Not Applicable
32....................................Not Applicable
33....................................Not Applicable
34....................................Not Applicable
35....................................Nationwide Life Insurance Company
36....................................Not Applicable
37....................................Not Applicable
38....................................Distribution of The Policies
39....................................Distribution of The Policies
40....................................Not Applicable
41(a).................................Distribution of The Policies
42....................................Not Applicable
43....................................Not Applicable
44....................................How The Cash Value Varies
45....................................Not Applicable
<PAGE> 3
N-8B-2 ITEM CAPTION IN PROSPECTUS
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
<PAGE> 4
SUPPLEMENT DATED DECEMBER 23, 1996 TO
PROSPECTUS DATED MAY 1, 1996 FOR
MODIFIED SINGLE PREMIUM VARIABLE 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.
1.Effective December 23,1996, the underlying Mutual Fund Options
located on page 1 of the Prospectus are hereby amended to
include the following underlying Mutual Funds:
DREYFUS VARIABLE INVESTMENT FUND
- Growth & Income Portfolio*
TCI PORTFOLIOS, INC. AN AFFILIATE OF TWENTIETH CENTURY
COMPANIES, INC.***
- TCI Value
VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT
TRUST)
- Worldwide Emerging Markets Fund
WARBURG PINCUS TRUST
- Post-Venture Capital Portfolio
*The Growth and Income Portfolio may invest in lower quality
debt securities commonly referred to as junk bonds
2. The expense table located on page 7 of the Prospectus is hereby
amended to include the following information:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Management Fees Other Total Expenses
Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Dreyfus Variable Investment Fund- Growth & Income Portfolio 0.75% 0.20% 0.95%
- ---------------------------------------------------------------------------------------------------------------------------
TCI Portfolios, Inc. - TCI Value 1.00% 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets 1.00% 0.00% 1.00%
Fund
- ---------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio** 0.65% 0.75% 1.40%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
**Absent the waiver of fees by the Portfolio's investment adviser and
co-administrator, Management Fees for the Portfolio would equal 1.25%;
other Expenses would equal .81%; and Total Portfolio Operating Expenses
would equal 2.06%. Other Expenses for the Portfolio are based on
annualized estimates of expenses for the fiscal year ending December
31, 1996, net of any fee waivers or expense reimbursements. The
investment adviser has undertaken to limit the Portfolio's Total
Portfolio Operating Expenses through December 31,1996.
***Effective January 1, 1997, Twentieth Century Companies, Inc. will
change its name to American Century Companies, Inc. Also effective
January 1, 1997, Twentieth Century Mutual Funds is changing its name to
American Century(SM) Investments.
<PAGE> 5
3. The section entitled THE VARIABLE ACCOUNT located on pages 8 through 16
of the Prospectus is also amended to include the following information
regarding the underlying Mutual Funds:
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund (the "Fund") is an open-end,
management investment company. It was organized as an unincorporated
business trust under the laws of the Commonwealth of Massachusetts on
October 29,1986 and commenced operations August 31, 1990. The Dreyfus
Corporation ("Dreyfus") serves as the Fund's manager. Dreyfus is a
wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned
subsidiary of Mellon Bank Corporation.
GROWTH AND INCOME PORTFOLIO
Investment Objective: To provide long-term capital growth, current
income and growth of income, consistent with reasonable investment
risk. The Portfolio invests in equity securities, debt securities and
money market instruments of domestic and foreign issuers. The
proportion of the Portfolio's assets invested in each type of security
will vary from time to time in accordance with Dreyfus' assessment of
economic conditions and investment opportunities. In purchasing equity
securities, Dreyfus will invest in common stocks, preferred stocks and
securities convertible into common stocks, particularly those which
offer opportunities for capital appreciation and growth of earnings,
while paying current dividends. The Portfolio will generally invest in
investment-grade debt obligations, except that it may invest up to 35%
of the value of its net assets in convertible debt securities rated not
lower than Caa by Moody's Investor Service, Inc. or CCC by Standard &
Poor's Ratings Group, Fitch Investors Service, L.P. or Duff & Phelps
Credit Rating Co., or if unrated, deemed to be of comparable quality by
Dreyfus. These securities are considered to have predominantly
speculative characteristics with respect to capacity to pay interest
and repay principal and are considered to be of poor standing. See
"Investment Considerations and Risks-Lower Rated Securities" in the
Portfolio's prospectuses.
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 investment 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, which is changing its
name to American Century(SM) Investments, effective January 1, 1997.
TCI Portfolios, Inc. is managed by Investors Research Corporation,
which is changing its name to American Century Investment Management,
Inc., effective January 1, 1997.
- TCI VALUE FUND
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. Under normal market
conditions, the Fund expects to invest at least 80% of the value of its
total asset in equity securities, including common and preferred stock,
convertible preferred stock and convertible debt obligations. The
equity securities in which the Fund will invest will be primarily
securities of well-established companies with intermediate-to-large
market capitalizations that are believed by management to be
undervalued at the time of purchase.
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. Trust shares are
offered only to separate accounts of various insurance companies to
fund the benefits of variable insurance and annuity policies. The
investment advisor and manager is Van Eck Associates Corporation.
- WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world.
The Fund specifically emphasizes investment in countries that, compared
to the world's major economies, exhibit relatively low gross national
product per capita, as
<PAGE> 6
well as the potential for rapid economic growth. Peregrine Asset
Management (Hong Kong) Limited serves as sub-investment adviser to this
Fund.
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 insurance companies for allocation to separate accounts for
the purpose of funding variable annuity and variable life Policies.
Trust portfolios are managed by Warburg, Pincus Counsellors, Inc.
("Counsellors")
- POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: The Portfolio seeks long-term growth of capital
by investing primarily in equity securities of issuers in their
post-venture capital stage of development and pursues an aggressive
investment strategy. Under normal market conditions, the Portfolio will
invest at least 65% of its total assets in equity securities of
"post-venture capital companies." A post-venture capital company is one
that has received venture capital financing either (a) during the early
stages of the company's existence or the early stages of the
development of a new product or service or (b) as part of a
restructuring or recapitalization of the company. The Portfolio may
invest up to 10% of its assets in venture capital and other investment
funds.
4. The section entitled "TRANSFERS" located on page 14 of the Prospectus
is hereby amended by adding the following information:
Policies described in this prospectus may in some cases be sold to
individuals who independently utilize the services of a firm or
individual engaged in market timing. Generally, such firms or
individuals obtain authorization from multiple Policy Owners to make
transfers and exchanges among the Sub-Accounts (the underlying Mutual
Funds) on the basis of perceived market trends. Because of the
unusually large transfers of funds associated with some of these
transactions, the ability of the Company or underlying Mutual Funds to
process such transactions may be compromised, and the execution of such
transactions may possibly disadvantage or work to the detriment of
other Policy Owners not utilizing market timing services.
Accordingly, the right to exchange Cash Surrender Values among the
Sub-Accounts may be subject to modification if such rights are
exercised by a market timing firm or any other third party authorized
to initiate transfer or exchange transactions on behalf of multiple
Policy Owners. THE RIGHTS OF INDIVIDUAL POLICY OWNERS TO EXCHANGE CASH
SURRENDER VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE
POLICY OWNER, OR BY THE POLICY OWNER'S REPRESENTATIVE OF RECORD AS
AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF
ATTORNEY FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such
rights, the Company may, among other things, not accept (1) the
transfer or exchange instructions of any agent acting under a power of
attorney on behalf of more than one Policy Owner, or (2) the transfer
or exchange instructions of individual policy owners who have executed
pre-authorized transfer or exchange forms which are submitted by market
timing firms or other third parties on behalf of more than one Policy
Owner at the same time. The Company will not impose any such
restrictions or otherwise modify exchange rights unless such action is
reasonably intended to prevent the use of such rights in a manner that
will disadvantage or potentially impair the contract rights of other
Policy Owners.
5. Effective October 17, 1996, Nationwide Financial Services, Inc.
has changed its name to Nationwide Advisory Services, Inc. Accordingly,
any and all references to Nationwide Financial Services, Inc. in this
Prospectus are hereby amended to reflect this name change.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 182150
One Nationwide Plaza
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES*
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-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 on the Insured named in the
Policy. The Policies may also provide a Cash Surrender Value if the Policy is
terminated during the lifetime of the Insured. The Death Benefit and Cash Value
of the Policies may vary to reflect the experience of the Nationwide VLI
Separate Account-2 (the "Variable Account") or the Fixed Account to which Cash
Values are allocated.
The Policies described in this prospectus may meet the definition of "modified
endowment contracts" under Section 7702A of the Internal Revenue Code (the
"Code"). The Code provides for taxation of surrenders, partial surrenders,
loans, collateral assignments and other pre-death distributions from modified
endowment contracts in the same way annuities are taxed. Any distribution is
taxable to the extent the Cash Value of the Policy exceeds, at the time of the
distribution, the premiums paid into the Policy. The Code also provides for a
10% tax penalty on the taxable portion of such distributions. That penalty is
applicable unless the distribution is 1) paid after the Policy Owner is 59 1/2
or disabled; or 2) the distribution is part of an annuity to the Policy Owner as
defined in the Code (see "Tax Matters").
It may not be advantageous to replace existing insurance with Policies described
in this prospectus. It may also be disadvantageous to purchase a policy to
obtain additional insurance protection if the purchaser already owns another
variable life insurance policy. The policies may not be advantageous for persons
who may wish to make policy loans or withdrawals prior to attaining age 59 1/2
(see "Tax Matters").
*The contract is titled a "Flexible Premium Variable Life Insurance Policy" in
Texas. The Policy Owner may allocate premiums and Cash Value to one or more of
the sub-accounts of the Variable Account and the Fixed Account. The assets of
each sub-account will be used to purchase, at net asset value, shares of a
designated underlying Mutual Fund in the following series of the underlying
variable account Mutual Fund options:
<TABLE>
<S> <C>
DREYFUS OPPENHEIMER VARIABLE ACCOUNT FUNDS:
-Dreyfus Stock Index Fund -Bond Fund
-Dreyfus Socially Responsible Growth Fund -Global Securities Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND: -Multiple Strategies Fund
-High Income Portfolio* STRONG SPECIAL FUND II, INC.
-Equity-Income Portfolio STRONG VARIABLE INSURANCE FUNDS, INC.:
-Growth Portfolio -Discovery Fund II, Inc.
-Overseas Portfolio -International Stock Fund II
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: TCI PORTFOLIOS, INS.:
-Asset Manager Portfolio -TCI Growth
-Contrafund Portfolio -TCI Balanced
NATIONWIDE SEPARATE ACCOUNT TRUST: -TCI International
-Capital Appreciation Fund VAN ECK WORLDWIDE INSURANCE TRUST:
-Money Market Fund -Gold and Natural Resources Fund
-Government Bond Fund -Worldwide Bond Fund
-Small Company Fund VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST:
-Total Return Fund -Real Estate Securities Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST: WARBURG PINCUS TRUST
-Limited Maturity Bond Portfolio -International Equity Portfolio
-Growth Portfolio -Small Company Growth Portfolio
-Partners Portfolio
</TABLE>
* The High Income Portfolio may invest in lower quality debt securities commonly
referred to as junk bonds.
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.
1
<PAGE> 8
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. 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.
Nationwide Life Insurance Company (the "Company") guarantees that the Death
Benefit for a Policy will never be less than the Specified Amount stated on the
Policy data pages as long as the Policy is in force. There is no guaranteed Cash
Surrender Value. If the Cash Surrender Value is insufficient to cover the
charges under the Policy, the Policy will lapse.
This prospectus generally describes only that portion of the Cash Value
allocated to the Variable Account. For a brief summary of the Fixed Account
Option, see "The Fixed Account Option."
The date of this prospectus is May 1, 1996.
2
<PAGE> 9
GLOSSARY OF TERMS
ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Cash Value.
BENEFICIARY- The person to whom the proceeds due on the Insured's death are
paid.
CASH VALUE- The sum of the value of Policy assets in the Variable Account, Fixed
Account and any associated value in the Policy Loan Account.
CASH SURRENDER VALUE- The Policy's Cash Value, less any indebtedness under the
Policy, less any Surrender Charge.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies
while the Policy is in force.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance
with the provisions of the Internal Revenue Code. It represents the single
premium required to mature the Policy under guaranteed mortality and expense
charges, and an interest rate of 6%.
INSURED- The person whose life is covered by the Policy, and who is named on the
Policy Data Page.
MATURITY DATE- The Policy Anniversary on or following the Insured's 95th
birthday.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
MUTUAL FUNDS- The underlying mutual funds which correspond to the sub-accounts
of the Variable Account.
NET ASSET VALUE- The worth of one share at the end of a market day or at the
close of the New York Stock Exchange. Net Asset Value is computed by adding the
value of all portfolio holdings plus other assets, deducting liabilities and
then dividing the result by the number of shares outstanding.
POLICY ANNIVERSARY- An anniversary of the Policy Date.
POLICY CHARGES- All deductions made from the value of the Variable Account, or
the Policy Cash Value.
POLICY DATE- The date the provisions of the Policy take effect, as shown on the
Policy Owner's Policy Data Page.
POLICY LOAN ACCOUNT- The portion of the Cash Value which results from Policy
Loans.
POLICY OWNER- The person designated in the Policy application as the Owner. In
the State of New York, the variable life insurance policies offered by the
Company are offered as "Certificates" for "Certificate Owners" under a group
contract rather than individual Policies. The provisions of both these
Certificates and the Policies are essentially the same and references to the
provisions of Policies and rights of Policy Owners in this prospectus include
Certificates and Certificate Owners.
POLICY YEAR- Each year commencing with the Policy Date and each Policy Date
anniversary thereafter.
SPECIFIED AMOUNT- A dollar amount used to determine the Death Benefit under a
Policy. 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 is open for business or any other day during which there is sufficient
degree of trading that the current net asset value of the Accumulated 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.
3
<PAGE> 10
TABLE OF CONTENTS
GLOSSARY OF TERMS..............................................3
SUMMARY OF THE POLICIES........................................6
Variable Life Insurance...............................6
The Variable Account and its Sub-Accounts.............6
The Fixed Account.....................................6
Deductions and Charges................................6
Premiums..............................................7
NATIONWIDE LIFE INSURANCE COMPANY..............................8
THE VARIABLE ACCOUNT...........................................8
Investments of the Variable Account...................8
Dreyfus...............................................9
Fidelity's Variable Insurance Products Fund...........9
Fidelity's Variable Insurance Products Fund II.......10
Nationwide Separate Account Trust....................10
Neuberger & Berman Advisers Management Trust.........11
Oppenheimer Variable Account Funds...................11
Strong Special Fund II, Inc..........................12
Strong Variable Insurance Funds, Inc.................12
TCI Portfolios, Inc., a member of the Twentieth
Century Family of Mutual Funds ....................12
Van Eck Worldwide Insurance Trust (Formerly
Van Eck Investment Trust) .........................13
Van Kampen American Capital Life Investment Trust....13
Warburg Pincus Trust.................................14
Reinvestment.........................................14
Transfers............................................14
Dollar Cost Averaging................................15
Substitution of Securities...........................15
Voting Rights........................................15
INFORMATION ABOUT THE POLICIES................................16
Underwriting and Issuance............................16
-Minimum Requirements for Issuance of a Policy.......16
-Premium Payments....................................16
-Allocation of Cash Value............................16
-Short-Term Right to Cancel Policy...................16
POLICY CHARGES................................................17
Deductions from Premiums.............................17
Deductions from Cash Value...........................17
-Charges on Surrender................................17
-Annual Administrative Charge........................17
-Cost of Insurance Charge............................17
Deductions from the Sub-Accounts.....................18
-Mortality and Expense Risk Charge...................18
-Administrative Expense Charge.......................18
-Premium Tax Recovery Charge.........................18
-Income Tax Charge...................................19
HOW THE CASH VALUE VARIES.....................................19
How the Investment Experience is Determined..........19
Net Investment Factor................................19
Valuation of Assets..................................20
Determining the Cash Value...........................20
Valuation Periods and Valuation Dates................20
SURRENDERING THE POLICY FOR CASH..............................20
Right to Surrender...................................20
Cash Surrender Value.................................20
Partial Surrenders...................................20
Maturity Proceeds....................................21
Income Tax Withholding...............................21
POLICY LOANS..................................................21
Taking a Policy Loan.................................21
Effect on Investment Performance.....................21
Interest.............................................21
Effect on Death Benefit and Cash Value...............22
4
<PAGE> 11
Repayment......................................................22
HOW THE DEATH BENEFIT VARIES............................................22
-Calculation of the Death Benefit..............................22
-Proceeds Payable on Death.....................................23
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY............................23
CHANGES OF INVESTMENT POLICY............................................23
GRACE PERIOD............................................................24
REINSTATEMENT...........................................................24
THE FIXED ACCOUNT OPTION................................................24
CHANGES IN EXISTING INSURANCE COVERAGE..................................24
Changes in the Specified Amount................................25
Changes in the Death Benefit Option............................25
OTHER POLICY PROVISIONS.................................................25
Policy Owner...................................................25
Beneficiary....................................................25
Assignment.....................................................25
Incontestability...............................................25
Error in Age or Sex............................................26
Suicide........................................................26
Nonparticipating Policies......................................26
LEGAL CONSIDERATIONS....................................................26
DISTRIBUTION OF THE POLICIES............................................26
CUSTODIAN OF ASSETS.....................................................26
TAX MATTERS.............................................................26
Policy Proceeds................................................26
Taxation of the Company........................................27
Other Considerations...........................................28
THE COMPANY.............................................................28
COMPANY MANAGEMENT......................................................28
Directors of the Company.......................................28
Executive Officers of the Company..............................29
OTHER CONTRACTS ISSUED BY THE COMPANY...................................30
STATE REGULATION........................................................30
REPORTS TO POLICY OWNERS................................................30
ADVERTISING.............................................................30
LEGAL PROCEEDINGS.......................................................30
EXPERTS.................................................................30
REGISTRATION STATEMENT..................................................31
LEGAL OPINIONS..........................................................31
APPENDIX 1..............................................................32
APPENDIX 2..............................................................33
APPENDIX 3..............................................................44
PERFORMANCE TABLES......................................................45
FINANCIAL STATEMENTS....................................................49
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS.
5
<PAGE> 12
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The variable life insurance Policies offered by Nationwide Life Insurance
Company (the "Company") are similar in many ways to fixed-benefit whole life
insurance. As with fixed-benefit whole life insurance, the Owner of the Policy
pays a premium for life insurance coverage on the person insured. Also like
fixed-benefit whole life insurance, the Policies may provide for a Cash
Surrender Value which is payable if the Policy is terminated during the
Insured's lifetime. (As with fixed-benefit whole life insurance, the Cash
Surrender Value during the early Policy years may be substantially lower than
the premiums paid.)
However, the Policies differ from fixed-benefit whole life insurance in several
respects. Unlike fixed-benefit whole life insurance, the Death Benefit and Cash
Value of the Policies may increase or decrease to reflect the investment
performance of the Variable Account sub-accounts or the Fixed Account to which
Cash Values are allocated (see "How the Death Benefit Varies"). There is no
guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash
Surrender Value is insufficient to pay Policy Charges, the Policy will lapse.
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Cash Value in the Nationwide VLI Separate
Account-2 (the "Variable 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 Cash Value will be allocated to the Nationwide
Separate Account Trust Money Market Fund sub-account (for any Cash Value
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. Assets of each sub-account are invested
at net asset value in shares of a corresponding underlying Mutual Fund option.
For a description of the underlying Mutual Fund options and their investment
objectives, see "Investments of the Variable Account."
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General Account. Cash
Values allocated to the Fixed Account are credited with interest daily at a rate
declared by the Company. The interest rate declared is at the Company's sole
discretion, but may never be less than an effective annual rate of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for administrative and
sales expenses, state premium taxes, providing life insurance protection and
assuming the mortality and expense risks.
The Company deducts a charge for the cost of insurance from the Policy's Cash
Value on the Policy Date and each Monthly Anniversary Day. The Company deducts
an annual policy administrative charge from the Policy's Cash Value at the
beginning of each Policy Year after the first. The current annual charge is $90
($65 in New York) for total premium payments less than $25,000 and $50 for total
premium payments greater than or equal to $25,000. This charge is guaranteed
never to exceed $135 ($120 in New York) for total premium payments less than
$25,000 and $75 for total premium payments greater than or equal to $25,000. The
Company also deducts on a daily basis from the assets of the Variable Account a
charge to provide for mortality and expense risks, administrative charges and
premium tax recovery. These current charges are equal on an annual basis to
1.30% of the Variable Account assets for the first 10 Policy Years and 1.00%
thereafter and are guaranteed never to exceed 1.60% and 1.30% respectively. For
Policies which are surrendered, the Company may deduct a Surrender Charge. The
Surrender Charge associated with each premium payment will not exceed 8.5% of
the premium payment, and will be applied for nine years after the effective date
of the premium payment. The Surrender Charge is designed to recover certain
expenses incurred by the Company related to the sale of the Policies.
Underlying Mutual Fund shares are purchased at net asset value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each underlying Mutual Fund's investment adviser
for managing the underlying Mutual Fund and selecting its portfolio of
securities. Other underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the underlying Mutual Fund. The
management fees and other expenses for each underlying Mutual Fund for its most
recently completed fiscal year, expressed as a percentage of the underlying
Mutual Fund's average assets, are as follows:
6
<PAGE> 13
<TABLE>
<CAPTION>
Management Fees Other Expenses Total 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 Trust- 0.84% 0.10% 0.94%
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust- 0.65% 0.10% 0.75%
Limited Maturity Bond Portfolio
- ----------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management Trust- 0.85% 0.30% 1.15%
Partners Portfolio
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Bond Fund 0.75% 0.05% 0.80%
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Global 0.74% 0.15% 0.89%
Securities Fund
- ----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds-Multiple 0.74% 0.03% 0.77%
Strategies Fund
- ----------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. -Discovery 1.00% 0.31% 1.31%
Fund II, Inc.
- ----------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 1.00% 0.97% 1.97%
Inc.-International Stock Fund II
- ----------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.20% 1.20%
- ----------------------------------------------------------------------------------------------------------
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 Natural 0.80% 0.16% 0.96%
Resources
- ----------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Bond 0.79% 0.15% 0.94%
Fund
- ----------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 1.90% 2.90%
Trust-Real Estate Securities Portfolio
- ----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity Portfolio 1.00% 0.44% 1.44%
- ----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.35% 1.25%
- ----------------------------------------------------------------------------------------------------------
</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 reimbursements, 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 was not independently verified by the Company.
PREMIUMS
The minimum premium for which a Policy may be issued is $10,000. A Policy may be
issued to an insured up to age 80.
For a limited time, the Policy Owner has a right to cancel the Policy and
receive a full refund of premiums paid (see "Short-Term Right to Cancel
Policy").
7
<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 of companies which includes Nationwide Mutual Insurance
Company, Nationwide Indemnity Company, Nationwide Mutual Fire Insurance Company,
Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty
Company, National Casualty Company, West Coast Life Insurance Company,
Scottsdale Indemnity Company and Nationwide General Insurance Company and their
affiliated companies. 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 the District of
Columbia, Puerto Rico, and in all states (for additional information, see "The
Company").
THE VARIABLE ACCOUNT
The Nationwide VLI Separate Account-2 (the "Variable Account"), was established
by a resolution of the Company's Board of Directors, on May 7,1987, pursuant to
the provisions of Ohio law. The Company has caused the Variable Account to be
registered with the Securities and Exchange Commission as a unit investment
trust pursuant to the provisions of the Investment Company Act of 1940.
Nationwide Life Insurance Company, One Nationwide Plaza, Columbus, Ohio, 43216,
serves as Trustee for the Trust. Nationwide Financial Services, Inc., One
Nationwide Plaza, Columbus, Ohio, 43216, serves a 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").
Premium payments and Cash Value are allocated within the Variable Account among
one or more sub-accounts. The assets of each sub-account are used to purchase
shares of the underlying Mutual 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 Cash Value
allocated among one or more of the Variable Account sub-accounts and the Fixed
Account (see "Allocation of Cash Value"). When the policy is issued, the
Policy's Cash Value not allocated to the Fixed Account is placed in the
Nationwide Separate Account Trust Money Market sub-account (for any Cash Value
allocated to a Sub-Account on the application) or Fixed Account until expiration
of the period in which the Policy Owner may exercise his or her short-term right
to cancel the Policy. At the expiration of the period in which the Policy Owner
may exercise his or her short-term right to cancel the Policy, shares of the
underlying Mutual Funds specified by the Policy Owner are purchased at net asset
value for the respective sub-account(s). Such election is subject to any minimum
premium limitations which may be imposed by the underlying Mutual Fund
option(s). In addition, no less than 5% of premium may be allocated to any one
sub-account or the Fixed Account. The Policy Owner may change the allocation of
Cash Value or may transfer Cash Value from one sub-account to another, subject
to such terms and conditions as may be imposed by each underlying Mutual Fund
option and as set forth in this prospectus (see "Transfers", "Allocation of Cash
Value" and "Short-Term Right to Cancel Policy").
Additional Premium payments, upon acceptance, will be allocated to the
Nationwide Separate Account Trust Money Market Fund unless the Policy Owner
specifies otherwise (see "Premium Payments").
Each of the underlying Mutual Fund options is a series of registered investment
companies which receive investment advice from a registered investment advisers:
1) Dreyfus Stock Index Fund, managed by Wells Fargo Nikko Investment
Advisors;
2) Dreyfus Socially Responsible Growth Fund, Inc., managed by Dreyfus
Corporation;
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) The Nationwide Separate Account Trust, managed by Nationwide Financial
Services, Inc.;
8
<PAGE> 15
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., managed by Investors Research Corporation, an
affiliate of Twentieth Century Companies;
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 Asset 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. 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. 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 The Dreyfus Stock Index Fund, Inc. 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, the Dreyfus
Life and Annuity Index Fund began doing business as the 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.
- - THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. The 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. The Dreyfus
Corporation serves as the Fund's investment advisor. Tiffany Capital
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'S 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: 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 Fund's manager will seek high current income normally by
investing the Fund'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-based securities;
9
<PAGE> 16
- up to 20% in common stocks and other equity securities when
consistent with the Fund's primary objective or acquired as
part of a unit combining fixed-income and equity securities.
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 Fund 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 Fund'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 underlying 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'S 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 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.
10
<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.
- - 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 then $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.
- - 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.
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
11
<PAGE> 18
under variable life insurance policies and variable annuity contracts.
Oppenheimer Management Corporation is the Funds' investment advisor.
- - 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.
- - 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.
- - 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 annuity contracts and variable life insurance
policies. 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., 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.
12
<PAGE> 19
- - 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 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,
including common stocks and convertible securities, as well as
non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Fund's total assets will be invested in
Real Estate Securities, primarily equity securities of real estate
investment trusts. The Fund may invest up to 25% of its total assets in
securities issued by foreign issuers, some or all of which may also be
Real Estate Securities. There can be no assurance that the Fund will
achieve its investment objective.
13
<PAGE> 20
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 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 underlying Mutual Funds described above have as a policy the distribution of
dividends in the form of additional shares (or fractions thereof) of the Mutual
Funds. The distribution of additional shares will not affect the number of
Accumulation Units attributable to a particular Policy (see "Allocation of Cash
Value").
TRANSFERS
The Policy Owner may transfer Cash Value among the sub-accounts of the Variable
Account and the Fixed Account. A transfer will take effect on the date of
receipt of written notice at the Company's home office. Transfer requests must
be in a written form acceptable to the Company.
The Policy Owner may request a transfer of up to 100% of the Cash Value from the
Variable Account to the Fixed Account. 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 Company reserves the right to restrict
transfers to the Fixed Account to 25% of the Cash Value.
The Policy Owner may annually transfer a portion of the value of the Fixed
Account to the Variable Account and a portion of the Variable Account to the
Fixed Account, without penalty or adjustment. The Company reserves the right to
limit the amount of Cash Value transferred out of the Fixed Account each Policy
Year. Transfers from the Fixed Account must be made within 30 days after the
termination date of the interest rate guarantee period.
Transfers may be made either in writing or, in states allowing such transfers,
by telephone. 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 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.
14
<PAGE> 21
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
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"). 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 described in this prospectus
should no longer be available for investment by the Variable Account or, if in
the judgment of the Company's management further investment in such underlying
Mutual Funds should become inappropriate 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 premium payments under the
Policy. No substitution of securities in the Variable Account may take place
without prior approval of the Securities and Exchange Commission, and under such
requirements as it and any state insurance department may impose.
VOTING RIGHTS
Voting rights under the Policies apply with respect to Cash Value allocated to
the sub-accounts of the Variable Account.
In accordance with its view of present applicable law, the Company will vote the
shares of the underlying Mutual Funds held in the Variable Account at regular
and special meetings of the shareholders of the underlying Mutual Funds 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.
Underlying Mutual Fund shares held in the Variable Account as to which no timely
instructions are received will be voted by the Company in the same proportion as
the voting instructions which are received.
Each person having a voting interest in the Variable Account will receive
periodic reports relating to investments of the Variable Account, the underlying
Mutual Fund(s') 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
15
<PAGE> 22
case of a change in the investment policies or investment adviser, based on a
good faith determination that such change would be contrary to state law or
otherwise inappropriate in light of the portfolio's objective and purposes; or
(3) enter into or refrain from entering into any advisory agreement or
underwriting contract, if required by any insurance regulatory authority.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
The minimum amount of initial premium that will be accepted by the Company is
$10,000. Policies may be issued to Insureds issue ages 80 or younger. Before
issuing any Policy, the Company requires evidence of insurability satisfactory
to it, which may include a medical examination.
- -Premium Payments
The initial premium for a Policy is payable in full at the Company's home
office. The minimum amount of initial premium required is $10,000 for issue ages
75 or younger and $50,000 for issue ages 76 through 80. The Specified Amount is
determined by treating the initial premium as equal to 100% of the Guideline
Single Premium. Upon payment of an initial premium, temporary insurance may be
provided, subject to a maximum amount. The effective date of permanent insurance
coverage is dependent upon completion of all underwriting requirements, payment
of the initial premium, and delivery of the Policy while the insured is still
living.
The Policy Owner may make additional premium payments. The Policy is primarily
intended to be a single premium with a limited ability to make additional
payments. Subsequent premium payments under the Policy are permitted under the
following circumstances:
1. an additional premium payment is required to keep the Policy in
force (see "Grace Period"); or
2. except in Virginia, additional premium payments of at least $1,000
may be made at any time provided the premium limits prescribed by
the Internal Revenue Service to qualify the Policy as a life
insurance contract are not violated.
Payment of additional premiums if accepted, may increase the Specified Amount of
insurance. However, the Company reserves the right to require satisfactory
evidence of insurability before accepting any additional premium payment which
results in an increase in the net amount at risk. The Company may also require
that any existing Policy indebtedness is repaid prior to accepting any
additional premium payments.
The Company will not accept a subsequent premium payment which would result in
total premiums paid exceeding the premium limitations prescribed by the Internal
Revenue Service to qualify the Policy as a life insurance contract.
- -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 premium invested on the date the
premium was received in good order by the Company. When the Policy is issued,
the Cash Value will be allocated to the Nationwide Separate Account Trust Money
Market Fund sub-account (for any Cash Value 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.
Cash Value 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 Cash Value or may transfer Cash Value from one
sub-account to another, subject to such terms and conditions as may be imposed
by each underlying Mutual Fund and as set forth in the prospectus. Cash Value
allocated to the Fixed Account at the time of application may not be transferred
prior to the first Policy Anniversary (see "Transfers" and "Investments of the
Variable Account").
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
- -Short-Term Right to Cancel Policy
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails
16
<PAGE> 23
or delivers a Notice of Right of Withdrawal, whichever is latest. The Policy can
be mailed or delivered to the registered representative who sold it, or the
Company. Immediately after such mailing or delivery, the Policy will be deemed
void from the beginning. The Company will refund the total premiums paid within
seven days after it receives the Policy.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
No deduction is made from any premium at the time of payment. 100% of each
premium payment is applied to the Cash Value.
DEDUCTIONS FROM CASH VALUE
The Company may deduct certain charges from the Policy's Cash Value. While the
Company reserves the right to change current charges, it has no present intent
to do so. These are comprised of the following items:
- -Charges on Surrender
No charges are deducted from any premium payment. The Company incurs certain
expenses related to the sale of the Policies. These expenses include commissions
paid to sales personnel, the cost of sales literature and other promotional
activity. To recover these expenses, the Company imposes a Surrender Charge. The
Surrender Charge may be insufficient to recover all these expenses. Unrecovered
expenses are borne by the Company's general assets which may include profits, if
any, from Mortality and Expense Risk Charges. The initial premium payment and
any subsequent premium payment which results in an increased net amount at risk
will have a Surrender Charge associated with it, that will be less than or equal
to 8.5% of such premium payment, as set forth in the following chart. The
Surrender Charge applies for nine years after the effective date of each premium
payment. Certain surrenders may result in adverse tax consequences (see "Tax
Matters").
<TABLE>
<CAPTION>
Completed Year(s) Charges on Completed Year(s) Charges on
Since Surrender as a Since Surrender as a
Premium Payment % Premium Payment Premium Payment % Premium Payment
<S> <C> <C> <C>
0 8.5% 5 7.0%
1 8.5% 6 6.0%
2 8.0% 7 5.0%
3 8.0% 8 4.0%
4 7.5% 9 0.0%
</TABLE>
In no event will the surrender charge deducted on surrender exceed 8.5% of the
total premiums paid.
The amount of the Surrender Charge may be eliminated when the Policies are
issued to an officer, director, former director, partner, employee, or retired
employee of the Company; an employee of the General distributor of the Policies,
Nationwide Financial Services, Inc.; or an employee of an affiliate of the
Company or the General Distributor; or, a duly appointed representative of the
Company who receives no commission as a result of the purchase.
Elimination of the Surrender Charge will be permitted by the Company only in
those situations where the Company does not incur sales or administrative
expenses normally associated with sales of a Policy. In no event will reduction
of the Surrender Charge be permitted where such reduction will be unfairly
discriminatory to any person.
- -Annual Administrative Charge
The Company deducts an annual administrative charge at the beginning of each
Policy Year after the first. It will be charged proportionately to the Cash
Values in each Variable sub-account and the Fixed Account. The amount of this
annual charge is determined by the total net premium payments (premium payments
less any previous partial surrenders) as follows:
<TABLE>
<CAPTION>
Total Net Premium Payments Current Guaranteed Maximum
Greater than But Less Annual Administrative Annual Administrative
or Equal to than Charge Charge
----------- ---- ------ ------
<S> <C> <C> <C> <C> <C>
$10,000 $25,000 $90 Non-New York $135 Non-New York
$65 in New York $120 in New York
$25,000 $50 All States $ 75 All States
</TABLE>
- -Cost of Insurance Charge
17
<PAGE> 24
A monthly deduction for the Cost of insurance is charged proportionately against
the Cash Value in each sub-account and the Fixed Account on the Policy Date and
each Monthly Anniversary Day. The Company will determine the Monthly Cost of
Insurance charge by multiplying the Applicable Cost of Insurance rate by the net
amount at risk. The net amount at risk is equal to the Death Benefit minus the
Cash Value.
Guaranteed cost of insurance charges will not exceed the cost based on the
guaranteed cost of insurance rate and the Policy's net amount at risk.
Guaranteed cost of insurance rates for Standard Simplified issues are based on
the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980
CET). Guaranteed cost of insurance rates for Standard Preferred issues are based
on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday
(1980 CSO). Guaranteed cost of insurance rates for substandard issues are based
on appropriate percentage multiples of the 1980 CSO. These mortality tables are
sex distinct. In addition, separate mortality tables will be used for standard
and non-tobacco.
For Policies issued in Texas, guaranteed cost of insurance rates for Standard
Simplified issues ("Special Class-Simplified" in Texas) are based on 130% of the
1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980
CSO).
The rate class of an Insured may affect the cost of insurance rate. The Company
currently places an Insured into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical Policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks. The Company may also
issue certain Policies on a "Simplified Issue" basis to certain categories of
individuals. Due to the underwriting criteria established for Policies issued on
a Simplified Issue basis, actual rates for healthy individuals will be higher
than the current cost of insurance rates being charged under otherwise identical
Policies that are issued on a Preferred basis.
DEDUCTIONS FROM THE SUB-ACCOUNTS
The Company will deduct, on a daily basis, certain charges from the assets of
the Variable Account. On an annual basis, these charges are equivalent to:
<TABLE>
<S> <C> <C>
Policy Years Policy Years
1-10 11+
Current 1.30% 1.00%
Guaranteed Maximum 1.60% 1.30%
</TABLE>
While the Company reserves the right to change current charges, it has no
present intent to do so.
These charges consist of the following items:
- -Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing mortality and expense
charges. The mortality risk assumed under the Policies is that the Insured may
not live as long as expected. The expense risk assumed is that the actual
expenses incurred in issuing and administering the Policies may be greater than
expected. In addition, the Company assumes risks associated with the nonrecovery
of policy issue, underwriting, and other administrative expenses due to Policies
which lapse or are surrendered during the first ten years following each premium
payment.
To compensate the Company for assuming these risks associated with the Policies,
the Company deducts a daily charge from the assets of the sub-accounts of the
Variable Account. This charge currently is equivalent to an effective annual
rate of 0.75%. To the extent that future levels of mortality and expenses are
less than or equal to those expected, the Company may realize a profit from
these charges. This charge is guaranteed not to exceed 0.90%.
- -Administrative Expense Charge
The Company deducts a daily Administrative Expense Charge to reimburse it for
expenses related to issuance and maintenance of the Policies including
underwriting, establishing policy records, accounting and record keeping, and
periodic reporting to Policy Owners. This charge is designed only to reimburse
the Company for its actual administrative expenses. In the aggregate, the
Company expects that the charges for administrative costs will be approximately
equal to the related expenses.
This charge is deducted daily from the assets of the sub-accounts of the
Variable Account. This charge currently is equivalent to an annual effective
rate of 0.25%. This charge is guaranteed not to exceed 0.40%.
- -Premium Tax Recovery Charge
Premium taxes are not deducted at the time a premium is paid. The Company pays
any state premium taxes attributable to a particular Policy when incurred by the
Company. The Company expects to pay an average state premium tax rate of
approximately 2.5% of premiums for all states, although such tax rates generally
can
18
<PAGE> 25
range from 0% to 4%. To reimburse the Company for the payment of state premium
taxes associated with the Policies, during the first ten Policy Years the
Company deducts a daily charge from the assets of the sub-accounts. This charge
is computed on a daily basis, and is equivalent to an annual effective rate of
0.30% of the assets of the Variable Account during the first ten Policy Years,
and 0% thereafter. This charge may be more or less than the amount actually
assessed by the state in which a particular Policy Owner lives. The Company does
not expect to make a profit from this charge.
- -Income Tax Charge
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the sub-accounts of the Variable
Account (see "Taxation of the Company"). The Company reserves the right to
assess a charge for such taxes against the Variable Account if the Company
determines that such taxes will be incurred.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any premium applied since the previous Valuation
Date, plus or minus any investment results, and less any Policy Charges.
There is no guaranteed Cash Value. The Cash Value will vary with the investment
experience of the Variable Account and/or the daily crediting of interest in the
Fixed Account and Policy Loan Account depending on the allocation of Cash Value
by the Policy Owner.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The Cash Value in each sub-account is converted to Accumulation Units of that
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.
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 option
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 option 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,
Administration Expense Charge and Premium Tax Recovery Charge deducted
from the Variable Account. Such factor is equal to an annual rate of
1.30% for the first ten years and 1.00% thereafter of the daily net asset
value of the Variable Account.
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
19
<PAGE> 26
Mortality and Expense Risk Charge, Administration Expense Charge, and Premium
Tax Recovery 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 is 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 Savings and Loan, which is a member of the Federal Deposit 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 of the Policy, minus any charges, indebtedness or
other deductions due on that date, which may also include a Surrender Charge.
PARTIAL SURRENDERS
After the Policy has been in force for 5 Policy Years, the Policy Owner may
request a partial surrender. Partial surrenders will be permitted only if they
satisfy the following requirements:
1. The maximum partial surrender in any Policy Year is limited to 10%
of the total premium payments;
2. Partial surrenders must not result in a reduction of the Cash
Surrender Value below $10,000; and
3. After the partial surrender, the Policy continues to qualify as
life insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of the
partial surrender. Under Death Benefit Option 1, the Specified Amount is reduced
by the amount of the partial surrender, unless the death benefit is based on the
applicable percentage of cash value. In such a case, a partial surrender will
decrease the Specified Amount by the amount by which the partial surrender
exceeds the difference between the death benefit and Specified Amount. Partial
surrender amounts must be first deducted from the values in the Variable
sub-accounts. Partial surrenders will be deducted from the Fixed Account only to
the extent that insufficient values are available in the Variable sub-accounts.
20
<PAGE> 27
Surrender Charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
95th birthday. The maturity proceeds will be payable to the Policy Owner on the
Maturity Date provided the Policy is still in force. The Maturity Proceeds will
be equal to the amount of the Policy's Cash Value, less any indebtedness.
INCOME TAX WITHHOLDING
Federal law requires the Company to withhold income tax from any portion of
surrender proceeds that is subject to tax, unless the Policy Owner advises the
Company, in writing, of his or her request not to withhold.
If the Policy Owner requests that the Company not withhold taxes, or if the
taxes withheld are insufficient, the Policy Owner may be liable for payment of
an estimated tax. The Policy Owner should consult his or her tax advisor.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, Participants may be required to report for income tax
purposes, one or more of the following: (1) the value each year of the life
insurance protection provided; (2) an amount equal to any employer-paid
premiums; or (3) some or all of the amount by which the current value of the
contract exceeds the employer's interest in the contract. Participants should
consult with the sponsor or the administrator of the Plan, and/or with their
personal tax or legal advisers, to determine the tax consequences, if any, of
their employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
The Policy Owner may take a loan using the Policy as security. During the first
year, maximum Policy indebtedness is limited to 50% of the Cash Surrender Value
less interest due on the next Policy Anniversary. After the first Policy Year,
the maximum Policy indebtedness is limited to 90% of the Cash Surrender Value
less interest due on the next Policy Anniversary. The Company will not grant a
loan for an amount less than $1,000 ($200 in Connecticut, $500 in New York).
Should the Death Benefit become payable, the Policy be surrendered, or the
Policy mature while a loan is outstanding, the amount of Policy indebtedness
will be deducted from the Death Benefit, Cash Surrender Value or the Maturity
Value, respectively.
Maximum Policy indebtedness, in Texas, is limited to 90% of the Cash Surrender
Value in the sub-accounts and 100% of the Cash Surrender Value in the Fixed
Account less interest due on the next Policy Anniversary.
Any request for a Policy loan must be in written form satisfactory to the
Company. The request must be signed and, where permitted, the signature
guaranteed by a member firm of the New York, American, Boston, Midwest,
Philadelphia or Pacific Stock Exchange; or by a Commercial Bank or a Savings and
Loan which is a member of the Federal Deposit Insurance Corporation. Certain
Policy loans may result in currently taxable income and tax penalties (see "Tax
Matters").
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the Variable Account to the Policy Loan Account. If the assets relating to
a Policy are held in more than one 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
Amounts transferred to the Policy Loan Account will earn interest daily from the
date of transfer.
Policy Loans will be currently credited interest daily at an annual effective
rate of 5.0%. This rate is guaranteed never to be lower than 4%. The Company may
change the current interest crediting rate on Policy Loans at any time at its
sole discretion. This earned interest is transferred from the Policy Loan
Account to a Variable Account or the Fixed Account on each Policy Anniversary.
It will be allocated according to the underlying Mutual Fund Allocation Factors
in effect at the time of the transfer.
The loan interest rate is 6% per year for all Policy Loans. Interest is charged
daily and is payable at the end of each Policy year. Unpaid interest will be
added to the existing policy indebtedness as of the due date and will be charged
interest at the same rate as the rest of the indebtedness.
21
<PAGE> 28
Whenever the total loan indebtedness plus accrued interest exceeds the Cash
Value less any Surrender Charges, the Company will send a notice to the Policy
Owner and the assignee, if any. The Policy will terminate without value 61 days
after the mailing of the notice unless a sufficient repayment is made during
that period. A repayment is sufficient if it is large enough to reduce the total
loan indebtedness plus accrued interest to an amount equal to the total Cash
Value less any Surrender Charges plus an amount sufficient to continue the
Policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the Death
Benefit and Cash Value because the investment results of the Variable Account or
the Fixed Account will apply only to the non-loaned portion of the Cash Value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Variable Account or the Fixed Account
while the loan is outstanding, the effect could be favorable or unfavorable.
REPAYMENT
All or part of a loan may be repaid at any time while the Policy is in force
during the insured's lifetime. Any payment intended as a loan repayment, rather
than a premium payment, must be identified as such. Loan repayments will be
credited to the variable sub-accounts and the Fixed Account in proportion to the
Policy Owner's Premium allocation in effect at the time of the repayment. Each
repayment may not be less than $1,000 ($50 in Connecticut and New York). The
Company reserves the right to require that any loan repayments resulting from
Policy Loans transferred from the Fixed Account must be first allocated to the
Fixed Account.
HOW THE DEATH BENEFIT VARIES
- -Calculation of the Death Benefit
At issue, the Specified Amount is determined by treating the initial premium as
equal to 100% of the Guideline Single Premium. Additional premium payments, if
accepted, may increase the Specified Amount. Guideline Single Premiums vary by
attained age, sex, smoking classification, underwriting classification and total
premium payments. The following table illustrates representative initial
Specified Amounts, under Death Benefit Option 1, for non-tobacco.
<TABLE>
<CAPTION>
Issue $25,000 Single Premium $50,000 Single Premium
<S> <C> <C> <C> <C>
Age Male Female Male Female
35 $179,733 $208,354 $364,774 $423,008
40 143,373 166,704 290,792 338,264
45 114,856 134,300 232,769 272,332
50 92,583 108,739 187,452 220,323
55 75,306 88,601 152,298 179,349
60 62,112 72,636 125,453 146,866
65 52,094 59,930 105,070 121,014
</TABLE>
Generally, for a given premium payment, the initial Specified Amount is greater
for non-tobacco than standard and females than males. The Specified Amount is
shown in the Policy.
While the Policy is in force, the Death Benefit will never be less than the
Specified Amount. The Death Benefit may vary with the Cash Value of the Policy,
which depends on investment performance.
The Policy Owner may choose one of two Death Benefit Options. Under Option 1,
the Death Benefit will be the greater of the Specified Amount or the Applicable
Percentage of Cash Value. Under Option 1, the amount of the Death Benefit will
ordinarily not change for several years to reflect the investment performance
and may not change at all. If investment performance is favorable the amount of
Death Benefit may increase. To see how and when investment performance will
begin to affect Death Benefits, please see the illustrations. Under Option 2,
the Death Benefit will be the greater of the Specified Amount plus the Cash
Value, or the Applicable Percentage of Cash Value and will vary directly with
the investment performance.
Policy Owners who are satisfied with the amount of their current insurance
coverage and prefer to have favorable investment performance and any future
premium payments reflected in increased Policy Cash Values should choose Death
Benefit Option 1. Policy Owners who prefer to have favorable investment
performance and any future premium payments increase Death Benefits should
choose Death Benefit Option 2.
The monthly Cost of Insurance for Option 1 will always be less than or equal to
the monthly Cost of Insurance for the same amount of Specified Amount under
Option 2 (see "Cost of Insurance Charge").
The term "applicable percentage" means:
22
<PAGE> 29
1. 250% when the Insured is Attained Age 40 or less at the beginning
of a Policy Year, and
2. when the Insured is Attained Age 40, the percentage shown in the
"Applicable Percentage of Cash Value Table" following.
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 outstanding Policy loans and less any
unpaid Policy Charges. Under certain circumstances, the Proceeds may be adjusted
(see "Incontestability", "Error in Age or Sex", and "Suicide").
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may exchange the Policy for a modified single premium life
insurance policy offered by the Company on the Policy Date. If not available,
the new policy may be a flexible premium adjustable life insurance policy
offered by the Company on the Policy Date. The benefits for the new policy will
not vary with the investment experience of a separate account. The exchange must
be elected within 24 months from the Policy Date. No evidence of insurability
will be required.
The Policy Owner and Beneficiary under the new Policy will be the same as those
under the exchanged Policy on the effective date of the exchange. The new Policy
will have a death benefit on the exchange date not more than the death benefit
of the original Policy immediately prior to the exchange date. The new Policy
will have the same policy date and issue age as the original Policy. The initial
Specified Amount and any increases in Specified Amount will have the same rate
class as those of the original Policy. Any indebtedness may be transferred to
the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two Policies.
After adjustment, if any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
CHANGES OF INVESTMENT POLICY
The Company may materially change the Investment Policy of the Variable Account.
The Company must inform the Policy Owner and obtain all necessary regulatory
approvals. Any change must be submitted to the various state insurance
departments which may disapprove it if deemed detrimental to the interests of
the policy holders or if it renders the Company's operations hazardous to the
public. If a Policy Owner objects, the Policy may be converted to a
substantially comparable Nationwide General Account Life Insurance Policy on the
life of the insured. The Policy Owner has the later of 60 days (6 months in
Pennsylvania) from the date of
23
<PAGE> 30
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
If the Cash Surrender Value in the Policy is insufficient to pay the Cost of
Insurance Charges, Policy loan interest, or other charges which become due but
are unpaid, a grace period of 61 days will be allowed for payment of sufficient
premium to continue the Policy in force. The Company will notify the Policy
Owner of the amount required to continue the Policy in force. If the required
amount is not received within 61 days of the notice, the Policy will terminate
without value. If the Insured dies during the Grace Period, the Company will pay
the Death Proceeds.
REINSTATEMENT
If the Grace Period ends and the Policy Owner has neither paid the required
premium nor surrendered the Policy for its Cash Surrender Value, the Policy
Owner may reinstate the Policy by:
1. submitting a written request at any time within 3 years after the end of
the Grace Period and prior to the Maturity Date:
2. providing evidence of insurability satisfactory to the Company;
3. paying sufficient premium to cover all policy charges that were due and
unpaid during the Grace Period;
4. paying sufficient premium to keep the Policy in force for 3 months from
the date of reinstatement, and
5. paying or reinstating any indebtedness against the Policy which existed
at the end of the Grace Period.
The effective date of a reinstated Policy will be the Monthly Anniversary Day on
or next following the date the application for reinstatement is approved by us.
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 appropriate Surrender Charge. Such Surrender Charge will be based on the
length of time from the date of premium payments to the effective date of the
reinstatement. Unless the Policy Owner has provided otherwise, the allocation of
the amount of the Surrender Charge, additional premium payments, and any loan
repayments will be based on the underlying Mutual Fund Allocation factors in
effect at the start of the Grace Period.
THE FIXED ACCOUNT OPTION
Because of exemptive and exclusionary provisions, interests in Nationwide'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 Nationwide
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 Nationwide's general assets (General Account).
Nationwide'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 and in the annual
statement the Company will inform a Policy Owner of the then applicable rate.
The Company is not obligated to credit interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
After the first Policy Year, the Policy Owner may request certain changes in the
insurance coverage under the Policy. Any request must be in writing and received
at the Company's home office. No change will take effect unless the Cash
Surrender Value, after the change, is sufficient to keep the Policy in force for
at least 3 months.
24
<PAGE> 31
CHANGES IN THE SPECIFIED AMOUNT
Payment of additional premiums or changes in the Death Benefit Option may
require an increase to the Specified Amount (the minimum increase in the
Specified Amount permitted by the Company is $10,000). An approved increase will
have an effective date of the Monthly Anniversary Day on or next following the
date we approve the supplemental application. The Company reserves the right to
limit such increases to one per Policy Year, and to require satisfactory
evidence of insurability for any increase in the Specified Amount. In addition,
the rate class, rate class multiple and rate type for the increase in Specified
Amount must be identical to those on the Policy Date. The Specified Amount
cannot be decreased if, after the decrease, the policy would fail to satisfy the
definition of Life Insurance under Section 7702 of the Code.
CHANGES IN THE DEATH BENEFIT OPTION
The Policy Owner may change the Death Benefit Option under the Policy. If the
change is from Option 1 to Option 2, the Specified Amount will be decreased by
the amount of the Cash Value. If the change is from Option 2 to Option 1, the
Specified Amount will be increased by the amount of the Cash Value. Evidence of
insurability is not required for a change from Option 2 to Option 1. The Company
reserves the right to require evidence of insurability for a change from Option
1 to Option 2. The effective date of the change will be the Monthly Anniversary
Day on or next following the date the Company approves the request for change.
Only one change of option is permitted per Policy Year. A change in Death
Benefit Option will not be permitted if it results in the total premiums paid
exceeding the then current maximum premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While the Insured is living, all rights in this Policy are vested in the Policy
Owner named in the application or as subsequently changed, subject to
assignment, if any.
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, unless otherwise provided. Multiple beneficiaries
will be paid in equal shares, unless otherwise provided. If no named Beneficiary
survives the Insureds, the proceeds shall be paid to the Policy Owner or the
Policy Owner's estate.
ASSIGNMENT
While the Insured is living, the Policy Owner may assign his or her rights in
the Policy. The assignment must be in writing, signed by the Policy Owner and
recorded by the Company at its home office. The Company is not responsible for
any assignment not submitted for recording, nor is the Company responsible for
the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness owed to the Company before it
was recorded.
INCONTESTABILITY
The Company will not contest a Death Benefit based on representations in any
written application when such benefit has been in force, during the lifetime of
the Insured, for two years.
25
<PAGE> 32
ERROR IN AGE OR SEX
If the Insured's age, sex or both, as stated in the application, are incorrect,
the affected benefits will be adjusted to reflect the correct age or sex.
SUICIDE
If the Insured dies by suicide within two years from the Policy Date, the
Company will pay no more than the sum of the premiums, less any unpaid loan. If
the Insured dies by suicide within two years from the date an application is
accepted for an increase in the Specified Amount, the Company will pay no more
than the amount paid for such additional benefit.
NONPARTICIPATING POLICIES
The Policies are nonparticipating. This means that they do not participate in
any dividend distribution of the Company's surplus.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from 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 commissions paid by the Company on the sale of these Policies plus fees
for marketing services provided by the General Distributor are not more than
7.50% of the premiums paid.
CUSTODIAN OF ASSETS
The Company serves as the Custodian of the assets of the Variable Account.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Code provides that if certain tests are met, a Policy will
be treated as a life insurance policy for federal tax purposes. The Company will
monitor compliance with these tests. The Policy should thus receive the same
Federal income tax treatment as fixed benefit life insurance. As a result, the
life insurance proceeds payable under a Policy are excludable from gross income
of the beneficiary under Section 101 of the Code.
The Policies described in this prospectus, meet the definition of "modified
endowment contracts" under Section 7702A of the Code. The Code defines modified
endowment contracts as those policies issued or materially changed after June
21, 1988 on which the total premiums paid during the first seven years exceed
the amount that would have been paid if the policy provided for paid up benefits
after seven level annual premiums. The policies offered in this prospectus
typically fall within this definition. The Code provides for taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified
26
<PAGE> 33
endowment contracts in the same way annuities are taxed. Any distribution is
taxable to the extent the Cash Value of the Policy exceeds, at the time of the
distribution, the premiums paid into the Policy. The Code generally provides for
a 10% tax penalty on the taxable portion of such distributions. That penalty is
applicable unless the distribution is 1) paid after the Policy Owner is 59 1/2
or disabled; or 2) the distribution is part of an annuity to the Policy Owner as
defined in the Code.
Even though exchanges under Section 1035 of the Code qualify as material
changes, certain exchanges of pre-June 22, 1988 policies may retain their
non-modified endowment status. Therefore, the policies offered by this
prospectus may or may not be issued as modified endowment contracts. The Company
will monitor premiums paid and will notify the Policy Owner when the policy's
non-modified endowment status is in jeopardy. If a policy is not a modified
endowment contract, a cash distribution during the first fifteen years after a
policy is issued which causes a reduction in death benefits may still become
fully or partially taxable to the Owner pursuant to Section 7702(f)(7) of the
Code. The Policy Owner should carefully consider this potential effect and seek
further information before initiating any changes in the terms of the policy.
Under certain conditions, a policy may become a modified endowment as a result
of certain material changes or a reduction in benefits as defined by Section
7702A(c) of the Code.
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 underlying
Mutual Funds, transfers between underlying Mutual Funds, exchanges of underlying
Mutual Funds or changes in investment objectives of underlying Mutual 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.
A total surrender or cancellation of the Policy by lapse may have adverse tax
consequences depending on the circumstances. 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.
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.
27
<PAGE> 34
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 Mutual Fire Insurance Company, Nationwide Indemnity 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
affiliated 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.
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
(1)
Charles L. Fuellgraf, Jr. * + 1969 Chief Executive Officer, Fuellgraf Electric Company, Electrical
Construction and Engineering Services (1)
</TABLE>
28
<PAGE> 35
<TABLE>
<S> <C> <C>
Joseph J. Gasper*+ 1996 President and Chief Operating Officer, Nationwide Life Insurance
Company and Nationwide Life and Annuity Insurance Company
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 Farms (1)
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1)
*Member, Executive Committee +Member, Investment Committee
</TABLE>
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. 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
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
29
<PAGE> 36
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
debt, as well as interest on the debt for the preceding year.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as change in Specified Amount, change in Death Benefit Option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, increase in loan principal, loan repayments, unpaid loan interest added
to principal, reinstatement and termination.
ADVERTISING
The Company is ranked and rated by independent financial rating services, among
which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of the
Company. The ratings are not intended to reflect the investment experience or
financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts. Furthermore, the
Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs based on selected tax brackets or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
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.
30
<PAGE> 37
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.
31
<PAGE> 38
APPENDIX 1
ILLUSTRATIONS OF WHEN ADDITIONAL
PREMIUM PAYMENTS ARE PERMITTED
Example 1: A male non-tobacco, age 35, purchases a Policy with an initial
premium of $25,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $179,733. In the 12th and subsequent policy years, annual premiums of
$2,177 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
Additional premiums which increase the Specified Amount may be made at any time,
subject to the $1,000 minimum. The Company reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time if
they are required to continue the Policy in force.
Example 2: A male non-tobacco, age 55, purchases a Policy with an initial
premium of $100,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a Specified
Amount of $306,283. In the 11th and subsequent policy years, annual premiums of
$9,591 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the Policy as a life insurance contract.
Additional premiums which increase the Specified Amount may be made at any time,
subject to the $1,000 minimum. The Company reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time if
they are required to continue the Policy in force.
32
<PAGE> 39
APPENDIX 2
ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES,
AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Cash Values, Cash Surrender Values and Death Benefits under a
Policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Cash Values, Cash Surrender Values and Death Benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the Policies would go into default, at which time additional
premium payments would be required to continue the Policy in force. The
illustrations also assume there is no Policy Indebtedness, no additional premium
payments are made, no Cash Values are allocated to the Fixed Account, and there
are no changes in the Specified Amount or Death Benefit option.
The amounts shown for the Cash Value, Cash Surrender Value and Death Benefit as
of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks, recovering premium taxes and providing for
administrative expenses. On a current basis, these charges are equivalent to an
annual effective rate of 1.30% in the first 10 policy years and 1.00%
thereafter. On a guaranteed basis, these charges are equivalent to a maximum
annual effective rate of 1.60% in the first 10 policy years and 1.30%
thereafter. In addition, the net investment returns also reflect the deduction
of underlying Mutual Fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 1.00%. 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.
Taking account of the current charges for mortality and expense risks,
recovering premium taxes and providing for administrative and underlying Mutual
Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net
investment experience at constant annual rates of -2.30, 3.70% and 9.70%,
respectively, in policy years one through ten, and -2.00%, 4.00% and 10.00%
thereafter. Taking account of guaranteed charges, gross annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -2.60%, 3.40% and 9.40%, respectively, in policy years one through ten,
and -2.30%, 3.70% and 9.70% thereafter.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the Policy. The values shown are for policies which are
issued as standard. Policies issued on a substandard basis would result in lower
Cash Values and Death Benefits than those illustrated. Death Benefit Option 1
has been assumed in all the illustrations.
In addition, the illustrations reflect the fact that the Company deducts an
annual administrative charge at the beginning of each Policy Year after the
first. The illustrations also reflect the fact that no charges for federal or
state income taxes are currently made against the Variable Account. If such a
charge is made in the future, it will require a higher gross investment return
than illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, the Company will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
33
<PAGE> 40
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,638 8,788 43,190 10,221 9,371 43,190 10,805 9,955 43,190
2 11,025 9,208 8,358 43,190 10,373 9,523 43,190 11,607 10,757 43,190
3 11,576 8,775 7,975 43,190 10,520 9,720 43,190 12,478 11,678 43,190
4 12,155 8,337 7,537 43,190 10,661 9,861 43,190 13,425 12,625 43,190
5 12,763 7,893 7,143 43,190 10,794 10,044 43,190 14,453 13,703 43,190
6 13,401 7,440 6,740 43,190 10,917 10,217 43,190 15,572 14,872 43,190
7 14,071 6,976 6,376 43,190 11,029 10,429 43,190 16,790 16,190 43,190
8 14,775 6,498 5,998 43,190 11,125 10,625 43,190 18,115 17,615 43,190
9 15,513 6,003 5,603 43,190 11,203 10,803 43,190 19,558 19,158 43,190
10 16,289 5,486 5,486 43,190 11,260 11,260 43,190 21,131 21,131 43,190
11 17,103 4,960 4,960 43,190 11,325 11,325 43,190 22,918 22,918 43,190
12 17,959 4,410 4,410 43,190 11,369 11,369 43,190 24,883 24,883 43,190
13 18,856 3,836 3,836 43,190 11,390 11,390 43,190 27,049 27,049 43,190
14 19,799 3,235 3,235 43,190 11,385 11,385 43,190 29,439 29,439 43,190
15 20,789 2,602 2,602 43,190 11,350 11,350 43,190 32,082 32,082 43,190
16 21,829 1,933 1,933 43,190 11,281 11,281 43,190 35,003 35,003 45,504
17 22,920 1,223 1,223 43,190 11,173 11,173 43,190 38,201 38,201 48,898
18 24,066 466 466 43,190 11,018 11,018 43,190 41,698 41,698 52,539
19 25,270 (*) (*) (*) 10,810 10,810 43,190 45,520 45,520 56,445
20 26,533 (*) (*) (*) 10,541 10,541 43,190 49,701 49,701 60,636
21 27,860 (*) (*) (*) 10,204 10,204 43,190 54,276 54,276 65,132
22 29,253 (*) (*) (*) 9,767 9,767 43,190 59,265 59,265 70,525
23 30,715 (*) (*) (*) 9,213 9,213 43,190 64,703 64,703 76,350
24 32,251 (*) (*) (*) 8,524 8,524 43,190 70,631 70,631 82,639
25 33,864 (*) (*) (*) 7,675 7,675 43,190 77,093 77,093 89,427
26 35,557 (*) (*) (*) 6,632 6,632 43,190 84,133 84,133 96,752
27 37,335 (*) (*) (*) 5,353 5,353 43,190 91,837 91,837 103,776
28 39,201 (*) (*) (*) 3,782 3,782 43,190 100,279 100,279 111,310
29 41,161 (*) (*) (*) 1,851 1,851 43,190 109,546 109,546 119,405
30 43,219 (*) (*) (*) (*) (*) (*) 119,742 119,742 128,124
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
34
<PAGE> 41
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,597 8,747 43,190 10,178 9,328 43,190 10,760 9,910 43,190
2 11,025 9,073 8,223 43,190 10,226 9,376 43,190 11,448 10,598 43,190
3 11,576 8,546 7,746 43,190 10,263 9,463 43,190 12,191 11,391 43,190
4 12,155 8,016 7,216 43,190 10,287 9,487 43,190 12,992 12,192 43,190
5 12,763 7,479 6,729 43,190 10,296 9,546 43,190 13,856 13,106 43,190
6 13,401 6,933 6,233 43,190 10,287 9,587 43,190 14,789 14,089 43,190
7 14,071 6,376 5,776 43,190 10,257 9,657 43,190 15,796 15,196 43,190
8 14,775 5,803 5,303 43,190 10,202 9,702 43,190 16,883 16,383 43,190
9 15,513 5,210 4,810 43,190 10,117 9,717 43,190 18,056 17,656 43,190
10 16,289 4,592 4,592 43,190 9,998 9,998 43,190 19,325 19,325 43,190
11 17,103 3,958 3,958 43,190 9,869 9,869 43,190 20,761 20,761 43,190
12 17,959 3,288 3,288 43,190 9,696 9,696 43,190 22,324 22,324 43,190
13 18,856 2,578 2,578 43,190 9,475 9,475 43,190 24,030 24,030 43,190
14 19,799 1,823 1,823 43,190 9,197 9,197 43,190 25,898 25,898 43,190
15 20,789 1,012 1,012 43,190 8,854 8,854 43,190 27,945 27,945 43,190
16 21,829 138 138 43,190 8,434 8,434 43,190 30,198 30,198 43,190
17 22,920 (*) (*) (*) 7,927 7,927 43,190 32,684 32,684 43,190
18 24,066 (*) (*) (*) 7,313 7,313 43,190 35,433 35,433 44,646
19 25,270 (*) (*) (*) 6,575 6,575 43,190 38,437 38,437 47,662
20 26,533 (*) (*) (*) 5,689 5,689 43,190 41,702 41,702 50,877
21 27,860 (*) (*) (*) 4,633 4,633 43,190 45,253 45,253 54,304
22 29,253 (*) (*) (*) 3,378 3,378 43,190 49,103 49,103 58,432
23 30,715 (*) (*) (*) 1,892 1,892 43,190 53,275 53,275 62,865
24 32,251 (*) (*) (*) 133 133 43,190 57,798 57,798 67,624
25 33,864 (*) (*) (*) (*) (*) (*) 62,699 62,699 72,731
26 35,557 (*) (*) (*) (*) (*) (*) 68,008 68,008 78,210
27 37,335 (*) (*) (*) (*) (*) (*) 73,798 73,798 83,392
28 39,201 (*) (*) (*) (*) (*) (*) 80,123 80,123 88,937
29 41,161 (*) (*) (*) (*) (*) (*) 87,050 87,050 94,885
30 43,219 (*) (*) (*) (*) (*) (*) 94,663 94,663 101,289
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
35
<PAGE> 42
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,652 8,802 41,661 10,236 9,386 41,661 10,820 9,970 41,661
2 11,025 9,214 8,364 41,661 10,379 9,529 41,661 11,613 10,763 41,661
3 11,576 8,774 7,974 41,661 10,518 9,718 41,661 12,475 11,675 41,661
4 12,155 8,332 7,532 41,661 10,652 9,852 41,661 13,413 12,613 41,661
5 12,763 7,885 7,135 41,661 10,781 10,031 41,661 14,435 13,685 41,661
6 13,401 7,433 6,733 41,661 10,902 10,202 41,661 15,547 14,847 41,661
7 14,071 6,973 6,373 41,661 11,014 10,414 41,661 16,759 16,159 41,661
8 14,775 6,502 6,002 41,661 11,114 10,614 41,661 18,081 17,581 41,661
9 15,513 6,018 5,618 41,661 11,199 10,799 41,661 19,523 19,123 41,661
10 16,289 5,518 5,518 41,661 11,268 11,268 41,661 21,097 21,097 41,661
11 17,103 5,014 5,014 41,661 11,350 11,350 41,661 22,886 22,886 41,661
12 17,959 4,490 4,490 41,661 11,415 11,415 41,661 24,854 24,854 41,661
13 18,856 3,945 3,945 41,661 11,461 11,461 41,661 27,024 27,024 41,661
14 19,799 3,377 3,377 41,661 11,486 11,486 41,661 29,418 29,418 41,661
15 20,789 2,781 2,781 41,661 11,485 11,485 41,661 32,063 32,063 42,965
16 21,829 2,153 2,153 41,661 11,456 11,456 41,661 34,973 34,973 45,465
17 22,920 1,491 1,491 41,661 11,393 11,393 41,661 38,155 38,155 48,839
18 24,066 786 786 41,661 11,291 11,291 41,661 41,635 41,635 52,460
19 25,270 32 32 41,661 11,144 11,144 41,661 45,439 45,439 56,345
20 26,533 (*) (*) (*) 10,944 10,944 41,661 49,601 49,601 60,514
21 27,860 (*) (*) (*) 10,686 10,686 41,661 54,157 54,157 64,988
22 29,253 (*) (*) (*) 10,343 10,343 41,661 59,126 59,126 70,359
23 30,715 (*) (*) (*) 9,902 9,902 41,661 64,545 64,545 76,164
24 32,251 (*) (*) (*) 9,346 9,346 41,661 70,457 70,457 82,434
25 33,864 (*) (*) (*) 8,655 8,655 41,661 76,902 76,902 89,206
26 35,557 (*) (*) (*) 7,802 7,802 41,661 83,929 83,929 96,518
27 37,335 (*) (*) (*) 6,751 6,751 41,661 91,620 91,620 103,531
28 39,201 (*) (*) (*) 5,457 5,457 41,661 100,049 100,049 111,055
29 41,161 (*) (*) (*) 3,862 3,862 41,661 109,301 109,301 119,138
30 43,219 (*) (*) (*) 1,904 1,904 41,661 119,480 119,480 127,843
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
36
<PAGE> 43
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,604 8,754 41,661 10,185 9,335 41,661 10,767 9,917 41,661
2 11,025 9,072 8,222 41,661 10,226 9,376 41,661 11,448 10,598 41,661
3 11,576 8,539 7,739 41,661 10,255 9,455 41,661 12,182 11,382 41,661
4 12,155 8,002 7,202 41,661 10,272 9,472 41,661 12,975 12,175 41,661
5 12,763 7,460 6,710 41,661 10,274 9,524 41,661 13,831 13,081 41,661
6 13,401 6,911 6,211 41,661 10,259 9,559 41,661 14,755 14,055 41,661
7 14,071 6,350 5,750 41,661 10,224 9,624 41,661 15,754 15,154 41,661
8 14,775 5,775 5,275 41,661 10,164 9,664 41,661 16,833 16,333 41,661
9 15,513 5,181 4,781 41,661 10,076 9,676 41,661 18,000 17,600 41,661
10 16,289 4,564 4,564 41,661 9,955 9,955 41,661 19,262 19,262 41,661
11 17,103 3,931 3,931 41,661 9,825 9,825 41,661 20,692 20,692 41,661
12 17,959 3,264 3,264 41,661 9,653 9,653 41,661 22,250 22,250 41,661
13 18,856 2,560 2,560 41,661 9,434 9,434 41,661 23,953 23,953 41,661
14 19,799 1,811 1,811 41,661 9,161 9,161 41,661 25,818 25,818 41,661
15 20,789 1,010 1,010 41,661 8,825 8,825 41,661 27,866 27,866 41,661
16 21,829 148 148 41,661 8,415 8,415 41,661 30,121 30,121 41,661
17 22,920 (*) (*) (*) 7,921 7,921 41,661 32,612 32,612 41,744
18 24,066 (*) (*) (*) 7,325 7,325 41,661 35,353 35,353 44,545
19 25,270 (*) (*) (*) 6,608 6,608 41,661 38,334 38,334 47,534
20 26,533 (*) (*) (*) 5,751 5,751 41,661 41,573 41,573 50,720
21 27,860 (*) (*) (*) 4,729 4,729 41,661 45,097 45,097 54,116
22 29,253 (*) (*) (*) 3,516 3,516 41,661 48,916 48,916 58,210
23 30,715 (*) (*) (*) 2,081 2,081 41,661 53,056 53,056 62,606
24 32,251 (*) (*) (*) 384 384 41,661 57,543 57,543 67,325
25 33,864 (*) (*) (*) (*) (*) (*) 62,406 62,406 72,390
26 35,557 (*) (*) (*) (*) (*) (*) 67,673 67,673 77,824
27 37,335 (*) (*) (*) (*) (*) (*) 73,418 73,418 82,962
28 39,201 (*) (*) (*) (*) (*) (*) 79,693 79,693 88,459
29 41,161 (*) (*) (*) (*) (*) (*) 86,566 86,566 94,357
30 43,219 (*) (*) (*) (*) (*) (*) 94,119 94,119 100,707
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
37
<PAGE> 44
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,126 22,001 114,856 25,584 23,459 114,856 27,043 24,918 114,856
2 27,563 23,197 21,072 114,856 26,117 23,992 114,856 29,210 27,085 114,856
3 28,941 22,261 20,261 114,856 26,647 24,647 114,856 31,566 29,566 114,856
4 30,388 21,315 19,315 114,856 27,171 25,171 114,856 34,131 32,131 114,856
5 31,907 20,357 18,482 114,856 27,688 25,813 114,856 36,923 35,048 114,856
6 33,502 19,382 17,632 114,856 28,194 26,444 114,856 39,965 38,215 114,856
7 35,178 18,385 16,885 114,856 28,685 27,185 114,856 43,280 41,780 114,856
8 36,936 17,360 16,110 114,856 29,154 27,904 114,856 46,893 45,643 114,856
9 38,783 16,300 15,300 114,856 29,595 28,595 114,856 50,833 49,833 114,856
10 40,722 15,198 15,198 114,856 30,002 30,002 114,856 55,135 55,135 114,856
11 42,758 14,090 14,090 114,856 30,462 30,462 114,856 60,015 60,015 114,856
12 44,896 12,932 12,932 114,856 30,888 30,888 114,856 65,380 65,380 114,856
13 47,141 11,721 11,721 114,856 31,279 31,279 114,856 71,287 71,287 114,856
14 49,498 10,451 10,451 114,856 31,629 31,629 114,856 77,801 77,801 114,856
15 51,973 9,113 9,113 114,856 31,929 31,929 114,856 84,993 84,993 114,856
16 54,572 7,697 7,697 114,856 32,172 32,172 114,856 92,933 92,933 120,813
17 57,300 6,193 6,193 114,856 32,349 32,349 114,856 101,632 101,632 130,089
18 60,165 4,586 4,586 114,856 32,444 32,444 114,856 111,146 111,146 140,044
19 63,174 2,859 2,859 114,856 32,446 32,446 114,856 121,555 121,555 150,728
20 66,332 998 998 114,856 32,339 32,339 114,856 132,944 132,944 162,192
21 69,649 (*) (*) (*) 32,110 32,110 114,856 145,411 145,411 174,494
22 73,132 (*) (*) (*) 31,699 31,699 114,856 159,020 159,020 189,234
23 76,788 (*) (*) (*) 31,078 31,078 114,856 173,874 173,874 205,171
24 80,627 (*) (*) (*) 30,213 30,213 114,856 190,083 190,083 222,398
25 84,659 (*) (*) (*) 29,060 29,060 114,856 207,771 207,771 241,014
26 88,892 (*) (*) (*) 27,562 27,562 114,856 227,066 227,066 261,126
27 93,336 (*) (*) (*) 25,643 25,643 114,856 248,191 248,191 280,456
28 98,003 (*) (*) (*) 23,207 23,207 114,856 271,345 271,345 301,193
29 102,903 (*) (*) (*) 20,140 20,140 114,856 296,760 296,760 323,469
30 108,049 (*) (*) (*) 16,309 16,309 114,856 324,714 324,714 347,443
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
38
<PAGE> 45
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 23,962 21,837 114,856 25,414 23,289 114,856 26,866 24,741 114,856
2 27,563 22,840 20,715 114,856 25,733 23,608 114,856 28,797 26,672 114,856
3 28,941 21,704 19,704 114,856 26,028 24,028 114,856 30,879 28,879 114,856
4 30,388 20,553 18,553 114,856 26,295 24,295 114,856 33,127 31,127 114,856
5 31,907 19,379 17,504 114,856 26,530 24,655 114,856 35,553 33,678 114,856
6 33,502 18,178 16,428 114,856 26,727 24,977 114,856 38,174 36,424 114,856
7 35,178 16,941 15,441 114,856 26,876 25,376 114,856 41,005 39,505 114,856
8 36,936 15,658 14,408 114,856 26,967 25,717 114,856 44,064 42,814 114,856
9 38,783 14,316 13,316 114,856 26,990 25,990 114,856 47,370 46,370 114,856
10 40,722 12,907 12,907 114,856 26,931 26,931 114,856 50,947 50,947 114,856
11 42,758 11,452 11,452 114,856 26,860 26,860 114,856 54,988 54,988 114,856
12 44,896 9,901 9,901 114,856 26,687 26,687 114,856 59,391 59,391 114,856
13 47,141 8,244 8,244 114,856 26,398 26,398 114,856 64,202 64,202 114,856
14 49,498 6,465 6,465 114,856 25,978 25,978 114,856 69,472 69,472 114,856
15 51,973 4,541 4,541 114,856 25,401 25,401 114,856 75,257 75,257 114,856
16 54,572 2,450 2,450 114,856 24,644 24,644 114,856 81,627 81,627 114,856
17 57,300 165 165 114,856 23,676 23,676 114,856 88,664 88,664 114,856
18 60,165 (*) (*) (*) 22,454 22,454 114,856 96,424 96,424 121,495
19 63,174 (*) (*) (*) 20,932 20,932 114,856 104,873 104,873 130,043
20 66,332 (*) (*) (*) 19,058 19,058 114,856 114,057 114,057 139,149
21 69,649 (*) (*) (*) 16,771 16,771 114,856 124,045 124,045 148,853
22 73,132 (*) (*) (*) 14,007 14,007 114,856 134,872 134,872 160,498
23 76,788 (*) (*) (*) 10,688 10,688 114,856 146,610 146,610 173,000
24 80,627 (*) (*) (*) 6,715 6,715 114,856 159,333 159,333 186,420
25 84,659 (*) (*) (*) 1,961 1,961 114,856 173,122 173,122 200,822
26 88,892 (*) (*) (*) (*) (*) (*) 188,061 188,061 216,270
27 93,336 (*) (*) (*) (*) (*) (*) 204,350 204,350 230,916
28 98,003 (*) (*) (*) (*) (*) (*) 222,144 222,144 246,580
29 102,903 (*) (*) (*) (*) (*) (*) 241,631 241,631 263,378
30 108,049 (*) (*) (*) (*) (*) (*) 263,042 263,042 281,455
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
39
<PAGE> 46
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,643 88,143 306,283 102,487 93,987 306,283 108,332 99,832 306,283
2 110,250 93,194 84,694 306,283 104,926 96,426 306,283 117,348 108,848 306,283
3 115,763 89,699 81,699 306,283 107,366 99,366 306,283 127,180 119,180 306,283
4 121,551 86,143 78,143 306,283 109,800 101,800 306,283 137,911 129,911 306,283
5 127,628 82,511 75,011 306,283 112,218 104,718 306,283 149,634 142,134 306,283
6 134,010 78,785 71,785 306,283 114,609 107,609 306,283 162,457 155,457 306,283
7 140,710 74,946 68,946 306,283 116,964 110,964 306,283 176,503 170,503 306,283
8 147,746 70,966 65,966 306,283 119,264 114,264 306,283 191,906 186,906 306,283
9 155,133 66,816 62,816 306,283 121,490 117,490 306,283 208,825 204,825 306,283
10 162,889 62,470 62,470 306,283 123,627 123,627 306,283 227,448 227,448 306,283
11 171,034 58,078 58,078 306,283 126,038 126,038 306,283 248,734 248,734 306,283
12 179,586 53,413 53,413 306,283 128,351 128,351 306,283 272,276 272,276 324,008
13 188,565 48,447 48,447 306,283 130,554 130,554 306,283 298,064 298,064 351,716
14 197,993 43,144 43,144 306,283 132,629 132,629 306,283 326,274 326,274 381,740
15 207,893 37,457 37,457 306,283 134,551 134,551 306,283 357,131 357,131 414,272
16 218,287 31,317 31,317 306,283 136,286 136,286 306,283 390,883 390,883 449,516
17 229,202 24,643 24,643 306,283 137,788 137,788 306,283 427,894 427,894 483,520
18 240,662 17,325 17,325 306,283 139,000 139,000 306,283 468,504 468,504 520,040
19 252,695 9,253 9,253 306,283 139,864 139,864 306,283 513,107 513,107 559,286
20 265,330 317 317 306,283 140,324 140,324 306,283 562,153 562,153 601,504
21 278,596 (*) (*) (*) 140,331 140,331 306,283 616,166 616,166 646,974
22 292,526 (*) (*) (*) 139,604 139,604 306,283 675,230 675,230 708,992
23 307,152 (*) (*) (*) 138,022 138,022 306,283 739,791 739,791 776,781
24 322,510 (*) (*) (*) 135,435 135,435 306,283 810,329 810,329 850,846
25 338,635 (*) (*) (*) 131,634 131,634 306,283 887,355 887,355 931,723
26 355,567 (*) (*) (*) 126,337 126,337 306,283 971,408 971,408 1,019,979
27 373,346 (*) (*) (*) 119,163 119,163 306,283 1,063,056 1,063,056 1,116,209
28 392,013 (*) (*) (*) 109,599 109,599 306,283 1,162,890 1,162,890 1,221,035
29 411,614 (*) (*) (*) 96,987 96,987 306,283 1,271,529 1,271,529 1,335,106
30 432,194 (*) (*) (*) 80,480 80,480 306,283 1,389,629 1,389,629 1,459,111
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
40
<PAGE> 47
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,756 87,256 306,283 101,572 93,072 306,283 107,389 98,889 306,283
2 110,250 91,334 82,834 306,283 102,954 94,454 306,283 115,263 106,763 306,283
3 115,763 86,793 78,793 306,283 104,208 96,208 306,283 123,759 115,759 306,283
4 121,551 82,103 74,103 306,283 105,312 97,312 306,283 132,936 124,936 306,283
5 127,628 77,231 69,731 306,283 106,233 98,733 306,283 142,864 135,364 306,283
6 134,010 72,137 65,137 306,283 106,941 99,941 306,283 153,623 146,623 306,283
7 140,710 66,778 60,778 306,283 107,396 101,396 306,283 165,305 159,305 306,283
8 147,746 61,090 56,090 306,283 107,545 102,545 306,283 178,014 173,014 306,283
9 155,133 55,005 51,005 306,283 107,328 103,328 306,283 191,879 187,879 306,283
10 162,889 48,451 48,451 306,283 106,683 106,683 306,283 207,057 207,057 306,283
11 171,034 41,485 41,485 306,283 105,867 105,867 306,283 224,417 224,417 306,283
12 179,586 33,874 33,874 306,283 104,500 104,500 306,283 243,664 243,664 306,283
13 188,565 25,529 25,529 306,283 102,504 102,504 306,283 265,101 265,101 312,820
14 197,993 16,338 16,338 306,283 99,779 99,779 306,283 288,628 288,628 337,695
15 207,893 6,148 6,148 306,283 96,191 96,191 306,283 314,187 314,187 364,457
16 218,287 (*) (*) (*) 91,562 91,562 306,283 341,947 341,947 393,239
17 229,202 (*) (*) (*) 85,662 85,662 306,283 372,245 372,245 420,637
18 240,662 (*) (*) (*) 78,189 78,189 306,283 405,358 405,358 449,947
19 252,695 (*) (*) (*) 68,778 68,778 306,283 441,613 441,613 481,359
20 265,330 (*) (*) (*) 57,006 57,006 306,283 481,412 481,412 515,111
21 278,596 (*) (*) (*) 42,377 42,377 306,283 525,239 525,239 551,501
22 292,526 (*) (*) (*) 24,283 24,283 306,283 572,867 572,867 601,511
23 307,152 (*) (*) (*) 1,972 1,972 306,283 624,599 624,599 655,829
24 322,510 (*) (*) (*) (*) (*) (*) 680,751 680,751 714,789
25 338,635 (*) (*) (*) (*) (*) (*) 741,654 741,654 778,737
26 355,567 (*) (*) (*) (*) (*) (*) 807,643 807,643 848,025
27 373,346 (*) (*) (*) (*) (*) (*) 879,056 879,056 923,009
28 392,013 (*) (*) (*) (*) (*) (*) 956,226 956,226 1,004,037
29 411,614 (*) (*) (*) (*) (*) (*) 1,039,490 1,039,490 1,091,465
30 432,194 (*) (*) (*) (*) (*) (*) 1,129,195 1,129,195 1,185,654
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
41
<PAGE> 48
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,315 87,815 211,021 102,169 93,669 211,021 108,024 99,524 211,021
2 110,250 92,475 83,975 211,021 104,256 95,756 211,021 116,737 108,237 211,021
3 115,763 88,515 80,515 211,021 106,310 98,310 211,021 126,287 118,287 211,021
4 121,551 84,414 76,414 211,021 108,323 100,323 211,021 136,785 128,785 211,021
5 127,628 80,143 72,643 211,021 110,284 102,784 211,021 148,359 140,859 211,021
6 134,010 75,667 68,667 211,021 112,178 105,178 211,021 161,159 154,159 211,021
7 140,710 70,940 64,940 211,021 113,986 107,986 211,021 175,363 169,363 211,021
8 147,746 65,904 60,904 211,021 115,681 110,681 211,021 191,187 186,187 212,218
9 155,133 60,496 56,496 211,021 117,238 113,238 211,021 208,727 204,727 227,512
10 162,889 54,658 54,658 211,021 118,636 118,636 211,021 227,969 227,969 243,927
11 171,034 48,485 48,485 211,021 120,225 120,225 211,021 249,840 249,840 262,332
12 179,586 41,528 41,528 211,021 121,531 121,531 211,021 273,757 273,757 287,445
13 188,565 33,657 33,657 211,021 122,514 122,514 211,021 299,899 299,899 314,894
14 197,993 24,711 24,711 211,021 123,121 123,121 211,021 328,461 328,461 344,884
15 207,893 14,473 14,473 211,021 123,279 123,279 211,021 359,651 359,651 377,633
16 218,287 2,650 2,650 211,021 122,887 122,887 211,021 393,686 393,686 413,370
17 229,202 (*) (*) (*) 121,803 121,803 211,021 430,795 430,795 452,335
18 240,662 (*) (*) (*) 119,843 119,843 211,021 471,220 471,220 494,781
19 252,695 (*) (*) (*) 116,770 116,770 211,021 515,209 515,209 540,970
20 265,330 (*) (*) (*) 112,289 112,289 211,021 563,030 563,030 591,181
21 278,596 (*) (*) (*) 106,025 106,025 211,021 614,963 614,963 645,711
22 292,526 (*) (*) (*) 97,321 97,321 211,021 671,259 671,259 704,822
23 307,152 (*) (*) (*) 85,428 85,428 211,021 732,214 732,214 768,824
24 322,510 (*) (*) (*) 69,302 69,302 211,021 798,130 798,130 838,037
25 338,635 (*) (*) (*) 47,439 47,439 211,021 869,315 869,315 912,781
26 355,567 (*) (*) (*) 17,631 17,631 211,021 946,069 946,069 993,373
27 373,346 (*) (*) (*) (*) (*) (*) 1,030,666 1,030,666 1,071,893
28 392,013 (*) (*) (*) (*) (*) (*) 1,124,328 1,124,328 1,158,058
29 411,614 (*) (*) (*) (*) (*) (*) 1,228,543 1,228,543 1,253,114
30 432,194 (*) (*) (*) (*) (*) (*) 1,345,193 1,345,193 1,358,645
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
42
<PAGE> 49
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 94,938 86,438 211,021 100,766 92,266 211,021 106,596 98,096 211,021
2 110,250 89,531 81,031 211,021 101,221 92,721 211,021 113,616 105,116 211,021
3 115,763 83,808 75,808 211,021 101,410 93,410 211,021 121,210 113,210 211,021
4 121,551 77,707 69,707 211,021 101,289 93,289 211,021 129,470 121,470 211,021
5 127,628 71,149 63,649 211,021 100,803 93,303 211,021 138,503 131,003 211,021
6 134,010 64,029 57,029 211,021 99,875 92,875 211,021 148,438 141,438 211,021
7 140,710 56,210 50,210 211,021 98,407 92,407 211,021 159,437 153,437 211,021
8 147,746 47,514 42,514 211,021 96,266 91,266 211,021 171,711 166,711 211,021
9 155,133 37,729 33,729 211,021 93,301 89,301 211,021 185,542 181,542 211,021
10 162,889 26,619 26,619 211,021 89,334 89,334 211,021 201,292 201,292 215,382
11 171,034 13,983 13,983 211,021 84,433 84,433 211,021 219,569 219,569 230,548
12 179,586 (*) (*) (*) 78,098 78,098 211,021 239,432 239,432 251,404
13 188,565 (*) (*) (*) 70,027 70,027 211,021 261,006 261,006 274,056
14 197,993 (*) (*) (*) 59,829 59,829 211,021 284,423 284,423 298,644
15 207,893 (*) (*) (*) 46,960 46,960 211,021 309,821 309,821 325,312
16 218,287 (*) (*) (*) 30,660 30,660 211,021 337,340 337,340 354,207
17 229,202 (*) (*) (*) 9,860 9,860 211,021 367,121 367,121 385,477
18 240,662 (*) (*) (*) (*) (*) (*) 399,302 399,302 419,267
19 252,695 (*) (*) (*) (*) (*) (*) 434,024 434,024 455,725
20 265,330 (*) (*) (*) (*) (*) (*) 471,431 471,431 495,003
21 278,596 (*) (*) (*) (*) (*) (*) 511,676 511,676 537,259
22 292,526 (*) (*) (*) (*) (*) (*) 554,914 554,914 582,660
23 307,152 (*) (*) (*) (*) (*) (*) 601,310 601,310 631,376
24 322,510 (*) (*) (*) (*) (*) (*) 651,032 651,032 683,584
25 338,635 (*) (*) (*) (*) (*) (*) 704,239 704,239 739,451
26 355,567 (*) (*) (*) (*) (*) (*) 761,075 761,075 799,129
27 373,346 (*) (*) (*) (*) (*) (*) 823,926 823,926 856,884
28 392,013 (*) (*) (*) (*) (*) (*) 893,818 893,818 920,632
29 411,614 (*) (*) (*) (*) (*) (*) 972,000 972,000 991,440
30 432,194 (*) (*) (*) (*) (*) (*) 1,060,075 1,060,075 1,070,676
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL
$50 ADMINISTRATIVE EXPENSE CHARGE.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
43
<PAGE> 50
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.
44
<PAGE> 51
PERFORMANCE TABLES
TOTAL RETURN
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
ANNUAL PERCENTAGE
CHANGE NON-ANNUALIZED PERCENTAGE CHANGE
- ---------------------------------------------------------------------------------------------------------------
Fund
Inception 1 Mo. 1 Yr. 2 Yrs. 3 Yrs. 5 Yrs. Inception
Date* 1993 1994 1995 to to to to 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> <C> <C> <C> <C>
DREYFUS CORPORATION
Stock Index Fund 09/29/89 7.91 -0.42 35.02 1.71 35.02 34.45 45.09 96.58 90.67
Socially Responsible 10/06/93 N/A* 0.19 32.83 -0.09 32.83 33.07 N/A* N/A* 42.42
Growth Fund
- --------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND &
VIP FUND II
Asset Manager 09/06/89 19.48 -7.30 15.45 2.43 15.45 7.02 27.87 70.78 80.58
Portfolio
Contrafund Portfolio 01/03/95 N/A* N/A* N/A* 0.34 N/A* N/A* N/A* N/A* 37.83
Equity-Income 10/09/86 16.67 5.69 33.35 2.82 33.35 40.94 64.44 146.28 181.51
Portfolio
Growth Portfolio 10/09/86 17.82 -1.31 33.62 -3.22 33.62 31.88 55.38 146.29 217.73
High Income Portfolio 09/19/85 18.95 -2.81 19.05 1.07 19.05 15.70 37.62 123.13 173.23
Overseas Portfolio 01/28/87 35.45 0.41 8.26 2.85 8.26 8.71 47.26 38.53 67.01
- ---------------------------------------------------------------------------------------------------------------
NATIONWIDE SEPARATE
ACCOUNT TRUST
Capital Appreciation 04/15/92 8.19 -2.18 27.69 2.89 27.69 24.91 35.14 N/A* 41.62
Fund
Government Bond Fund 11/08/82 8.10 -4.48 17.22 1.04 17.22 11.97 21.03 48.40 196.19
Money Market Fund 11/10/81 1.42 2.54 4.29 0.34 4.29 6.93 8.45 15.61 121.72
Small Company Fund 08/23/95 N/A* N/A* N/A* 4.34 N/A* N/A* N/A* N/A* 14.10
Total Return Fund 11/08/82 9.48 -0.23 27.43 1.13 27.43 27.14 39.19 103.12 420.99
- ---------------------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN
ADVISERS MGT. TRUST
Growth Portfolio 09/10/84 5.41 -6.21 30.03 -3.03 30.03 21.95 28.55 77.93 248.96
Limited Maturity 09/10/84 5.24 -1.44 9.51 0.79 9.51 7.93 13.59 29.57 120.73
Bond Portfolio
Partners Portfolio 03/22/94 N/A* N/A* 34.71 1.27 34.71 N/A* N/A* N/A* 30.30
- ---------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
Bond Fund 04/30/85 11.58 -3.20 15.49 1.34 15.49 11.79 24.73 52.20 147.19
Global Securities 11/12/90 68.11 -6.94 0.92 1.18 0.92 -6.08 57.89 47.72 48.05
Fund
Multiple Strategies 02/09/87 14.45 -3.21 19.80 0.72 19.80 15.95 32.70 65.51 126.77
Fund
- ---------------------------------------------------------------------------------------------------------------
STRONG SPECIAL FUND 05/08/92 23.55 2.26 24.20 2.42 24.20 27.01 56.92 N/A* 80.74
II, INC.
- ---------------------------------------------------------------------------------------------------------------
STRONG VARIABLE
INSURANCE PRODUCTS
FUNDS, INC.
Strong Discovery 05/08/92 20.44 -6.61 33.52 -1.43 33.52 24.70 50.19 N/A* 62.15
Fund II, Inc.
International Stock 10/20/95 N/A* N/A* N/A* 3.02 N/A* N/A* N/A* N/A* 2.36
Fund II
- ---------------------------------------------------------------------------------------------------------------
TCI PORTFOLIOS, INC.
TCI Balanced 05/01/91 6.29 -0.68 19.56 0.88 19.56 18.74 26.22 N/A* 45.64
TCI Growth 11/20/87 8.88 -2.44 29.41 -1.25 29.41 26.25 37.46 87.42 139.58
TCI International 05/01/94 N/A* N/A* 10.77 3.39 10.77 N/A* N/A* N/A* 4.32
- ---------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE
INSURANCE TRUST
Gold and Natural 09/01/89 62.70 -6.02 9.56 1.73 9.56 2.97 67.53 51.98 39.44
Resources Fund
Worldwide Bond Fund 09/01/89 6.38 -2.59 15.79 0.80 15.79 12.79 19.99 31.07 44.33
- ---------------------------------------------------------------------------------------------------------------
VAN KAMPEN AMERICAN
CAPITAL LIFE
INVESTMENT TRUST
Real Estate 07/03/95 N/A* N/A* N/A* 4.98 N/A* N/A* N/A* N/A* 7.66
Securities Fund
- ---------------------------------------------------------------------------------------------------------------
WARBURG PINCUS TRUST
International Equity 06/30/95 N/A* N/A* N/A* 2.28 N/A* N/A* N/A* N/A* 6.62
Portfolio
Small Company 06/30/95 N/A* N/A* N/A* 4.23 N/A* N/A* N/A* N/A* 24.31
Growth Portfolio
- ---------------------------------------------------------------------------------------------------------------
</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 1.30% 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 COST OF INSURANCE CHARGES,
SURRENDER CHARGES AND AN ANNUAL 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 1.30% asset charge 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, total return
figures may not be available for all of the periods shown.
45
<PAGE> 52
PERFORMANCE TABLES
TOTAL RETURN
(CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------
ANNUALIZED PERCENTAGE CHANGE
- -----------------------------------------------------
3 Yrs. 5 Yrs. to Inception
to 12/31/95 to
12/31/95 12/31/95
- -----------------------------------------------------
<S> <C> <C> <C>
DREYFUS CORPORATION
Stock Index Fund 13.21 14.47 10.87
Socially Responsible N/A* N/A* 17.15
Growth Fund
- -----------------------------------------------------
FIDELITY VIP FUND &
VIP FUND II
Asset Manager 8.54 11.30 9.81
Portfolio
Contrafund Portfolio N/A* N/A* 38.19
Equity-Income 18.03 19.75 11.87
Portfolio
Growth Portfolio 15.82 19.21 13.35
High Income Portfolio 11.23 17.41 10.27
Overseas Portfolio 13.77 6.73 5.92
- -----------------------------------------------------
NATIONWIDE SEPARATE
ACCOUNT TRUST
Capital Appreciation 10.56 N/A* 9.84
Fund
Government Bond Fund 6.57 8.22 8.61
Money Market Fund 2.74 2.94 5.79
Small Company Fund N/A* N/A* 101.60
Total Return Fund 11.65 15.32 13.38
- -----------------------------------------------------
NEUBERGER & BERMAN
ADVISERS MGT. TRUST
Growth Portfolio 8.73 12.21 11.69
Limited Maturity 4.34 5.32 7.25
Bond Portfolio
Partners Portfolio N/A* N/A* 16.09
- -----------------------------------------------------
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
Bond Fund 7.65 8.76 8.85
Global Securities 16.45 8.12 7.94
Fund
Multiple Strategies 9.89 10.60 9.65
Fund
- -----------------------------------------------------
STRONG SPECIAL FUND 16.20 N/A* 17.63
II, INC.
- -----------------------------------------------------
STRONG VARIABLE
INSURANCE FUNDS, INC.
Strong Discovery 14.52 N/A* 14.18
Fund II, Inc.
International Stock N/A* N/A* 12.61
Fund II
- -----------------------------------------------------
TCI PORTFOLIOS, INC.
TCI Balanced 8.07 N/A* 8.40
TCI Growth 11.19 13.39 11.37
TCI International N/A* N/A* 2.57
- -----------------------------------------------------
VAN ECK WORLDWIDE
INSURANCE TRUST
Gold and Natural 18.77 8.73 5.39
Resources Fund
Worldwide Bond Fund 6.26 5.56 5.97
- -----------------------------------------------------
VAN KAMPEN AMERICAN
CAPITAL LIFE
INVESTMENT TRUST
Real Estate N/A* N/A* 16.18
Securities Fund
- -----------------------------------------------------
WARBURG PINCUS TRUST
International Equity N/A* N/A* 13.91
Portfolio
Small Company Growth N/A* N/A* 55.63
Portfolio
- -----------------------------------------------------
</TABLE>
46
<PAGE> 53
PERFORMANCE TABLES
CASH VALUES
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1 YR. TO 12/31/95 2 YRS. TO 12/31/95 3 YRS. TO 12/31/95 5 YRS. TO 12/31/95
- -----------------------------------------------------------------------------------------------------------------------
Fund Cash Cash Cash Cash
Inception Accum. Surr. Accum. Surr. Accum. Surr. Accum. Surr.
Date** Value Value Value Value Value Value Value Value
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
DREYFUS CORPORATION
Stock Index Fund 09/29/89 66,758 62,508 65,410 61,160 69,618 65,618 92,988 89,238
Socially Responsible 10/06/93 65,660 61,410 64,746 60,496 N/A** N/A** N/A** N/A**
Growth Fund
- -----------------------------------------------------------------------------------------------------------------------
FIDELITY VIP FUND &
VIP FUND II
Asset Manager 09/06/89 56,993 52,743 51,867 47,617 61,420 57,420 80,751 77,001
Portfolio
Contrafund Portfolio 01-03-95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A**
Equity-Income 10/09/86 65,921 61,671 68,675 64,425 79,335 75,335 117,786 114,036
Portfolio
Growth Portfolio 10/09/86 68,262 64,012 66,245 61,995 77,306 73,306 119,078 115,328
High Income Portfolio 09/19/85 58,810 54,560 56,201 51,951 66,248 62,248 107,053 103,303
Overseas Portfolio 01/28/87 53,413 49,163 52,812 48,562 71,304 67,304 64,360 60,610
- -----------------------------------------------------------------------------------------------------------------------
NATIONWIDE SEPARATE
ACCOUNT TRUST
Capital Appreciation 04/15/92 61,296 57,046 58,960 54,710 62,882 58,882 N/A** N/A**
Fund
Government Bond Fund 11/08/82 57,290 53,040 53,765 49,515 57,340 53,340 68,705 64,955
Money Market Fund 11/10/81 51,271 47,021 51,762 47,512 51,605 47,605 53,099 49,349
Small Company Fund 08/23/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A**
Total Return Fund 11/08/82 62,260 58,010 61,138 56,888 66,065 62,065 95,569 91,819
- -----------------------------------------------------------------------------------------------------------------------
NEUBERGER & BERMAN
ADVISERS MGT. TRUST
Growth Portfolio 09/10/84 64,307 60,057 59,239 54,989 61,490 57,490 84,038 80,288
Limited Maturity 09/10/84 54,050 49,800 52,390 48,140 54,316 50,316 60,180 56,430
Bond Portfolio
Partners Portfolio 03/22/94 66,612 62,362 N/A** N/A** N/A** N/A** N/A** N/A**
- -----------------------------------------------------------------------------------------------------------------------
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
Bond Fund 04/30/85 57,029 52,779 54,267 50,017 59,830 55,830 71,355 67,605
Global Securities 11/12/90 49,774 45,524 45,497 41,247 76,840 72,840 68,968 65,218
Fund
Multiple Strategies 02/09/87 59,183 54,933 56,318 52,068 63,750 59,750 77,816 74,066
Fund
- -----------------------------------------------------------------------------------------------------------------------
STRONG SPECIAL FUND 05/08/92 61,352 57,102 61,799 57,549 75,779 71,779 N/A** N/A**
II, INC.
- -----------------------------------------------------------------------------------------------------------------------
STRONG VARIABLE
INSURANCE FUNDS, INC.
Strong Discovery 05/08/92 65,994 61,744 60,513 56,263 72,221 68,221 N/A** N/A**
Fund II, Inc.
INTERNATIONAL STOCK 01/03/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A**
FUND II
- -----------------------------------------------------------------------------------------------------------------------
TCI PORTFOLIOS, INC.
TCI Balanced 05/01/91 59,054 54,804 57,704 53,454 60,446 56,446 N/A** N/A**
TCI Growth 11/20/87 63,977 59,727 61,372 57,122 65,931 61,931 88,764 85,014
TCI International 05/01/94 54,648 50,398 N/A** N/A** N/A** N/A** N/A** N/A**
- -----------------------------------------------------------------------------------------------------------------------
VAN ECK WORLDWIDE
INSURANCE TRUST
Gold and Natural 09/01/89 54,050 49,800 54,772 50,522 81,527 77,527 70,699 66,949
Resources Fund
Worldwide Bond Fund 09/01/89 57,204 52,954 49,893 45,643 57,416 53,416 60,788 57,038
- -----------------------------------------------------------------------------------------------------------------------
VAN KAMPEN AMERICAN
CAPITAL LIFE
INVESTMENT TRUST
Real Estate 07/03/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A**
Securities Fund
- -----------------------------------------------------------------------------------------------------------------------
WARBURG PINCUS TRUST
International Equity 06/30/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A**
Portfolio
Small Company Growth 06/30/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A**
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
This table shows the effect of the performance quoted on accumulated values and
cash surrender values, based on a hypothetical single premium of $50,000 for a
50 year-old male, non-tobacco simplified, with a level death benefit and an
initial specified amount of $187,451.64. The cash surrender values reflect the
deduction of all applicable Policy Charges, including a 1.30% asset charge,
applicable cost of insurance charges, surrender charges, and an annual
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 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.
47
<PAGE> 54
PERFORMANCE TABLES
CASH VALUES
(CONTINUED)
<TABLE>
<CAPTION>
- ----------------------------------------------------------
10 YRS. TO INCEPTION TO
12/31/95 12/31/95
- ----------------------------------------------------------
Cash Cash
Accum. Surr. Accum. Surr.
Value Value Value Value
- ----------------------------------------------------------
<S> <C> <C> <C> <C>
DREYFUS CORPORATION
Stock Index Fund N/A** N/A** 87,400 84,400
Socially Responsible N/A** N/A** 69,145 65,145
Growth Fund
- ----------------------------------------------------------
FIDELITY VIP FUND &
VIP FUND II
Asset Manager N/A** N/A** 83,388 80,388
Portfolio
Contrafund Portfolio N/A** N/A** 68,176 63,926
Equity-Income N/A** N/A** 125,469 125,469
Portfolio
Growth Portfolio N/A** N/A** 144,265 144,265
High Income Portfolio 113,823 113,823 120,698 120,698
Overseas Portfolio N/A** N/A** 71,972 69,972
- ----------------------------------------------------------
NATIONWIDE SEPARATE
ACCOUNT TRUST
Capital Appreciation N/A** N/A** 66,948 62,948
Fund
Government Bond Fund 95,250 95,250 127,467 127,467
Money Market Fund 65,728 65,728 91,173 91,173
Small Company Fund N/A** N/A** 56,865 52,615
Total Return Fund 126,240 126,240 239,930 239,930
- ----------------------------------------------------------
NEUBERGER & BERMAN
ADVISERS MGT. TRUST
Growth Portfolio 122,910 122,910 159,310 159,310
Limited Maturity 79,194 79,194 96,311 96,311
Bond Portfolio
Partners Portfolio N/A** N/A** 63,498 59,248
- ----------------------------------------------------------
OPPENHEIMER VARIABLE
ACCOUNT FUNDS
Bond Fund 93,661 93,661 109,384 109,384
Global Securities N/A** N/A** 68,842 65,342
Fund
Multiple Strategies N/A** N/A** 102,059 100,059
Fund
- ----------------------------------------------------------
STRONG SPECIAL FUND N/A** N/A** 86,859 82,859
II, INC.
- ----------------------------------------------------------
STRONG VARIABLE
INSURANCE FUNDS, INC.
INTERNATIONAL STOCK N/A** N/A** 51,004 46,754
FUND II
Strong Discovery N/A** N/A** 77,290 73,290
Fund II, Inc.
- ----------------------------------------------------------
TCI PORTFOLIOS, INC.
TCI Balanced N/A** N/A** 68,309 64,559
TCI Growth N/A** N/A** 109,127 107,127
TCI International N/A** N/A** 50,831 46,581
- ----------------------------------------------------------
VAN ECK WORLDWIDE
INSURANCE TRUST
Gold and Natural N/A** N/A** 62,124 59,124
Resources Fund
Worldwide Bond Fund N/A** N/A** 65,608 62,608
- ----------------------------------------------------------
VAN KAMPEN AMERICAN
CAPITAL LIFE
INVESTMENT TRUST
Real Estate N/A** N/A** 53,472 49,222
Securities Fund
- ----------------------------------------------------------
WARBURG PINCUS TRUST
International Equity N/A** N/A** 52,959 48,709
Portfolio
Small Company Growth N/A** N/A** 77,014 72,764
Portfolio
- ----------------------------------------------------------
</TABLE>
48
<PAGE> 55
<PAGE> 1
- --------------------------------------------------------------------------------
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> 2
================================================================================
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> 3
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> 4
================================================================================
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> 5
================================================================================
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> 6
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> 7
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> 8
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> 9
===============================================================================
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> 10
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> 11
===============================================================================
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> 12
===============================================================================
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> 13
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> 14
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> 15
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> 16
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> 56
<PAGE> 1
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> 2
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> 3
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> 4
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> 5
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> 6
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> 7
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> 8
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> 9
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> 10
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> 11
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> 12
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> 13
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> 14
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> 15
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> 16
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> 17
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> 18
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> 19
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> 20
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> 21
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> 22
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> 23
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> 24
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> 25
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> 57
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 13 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 89 pages.
Representations and Undertakings.
Accountants' Consent
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 An original Power of Attorney dated April 4, 1996 is included
with the Post-Effective Amendment No. 8 to the Registration
Statement on Form N-4 of NACo Variable Account (File No.
33-33425, 811-5999) on file with the Company.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for the
authorizing the establishment of the Registrant, adopted Nationwide VLI Separate Account-2, 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, and hereby
incorporated herein by reference.
4. Form of Security Included with Post-Effective Amendment No. 3 and is 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, and hereby incorporated herein by reference.
6. Application form of Security Included with Post-Effective Amendment No. 3 and is hereby
incorporated herein by reference.
7. Opinion of Counsel Included with Post-Effective Amendment No. 3 and is hereby
incorporated herein by reference.
</TABLE>
<PAGE> 58
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and the Company hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 (the "Act"). The Registrant and the Company elect to be
governed by Rule 6e-3(T)(b)(13)(i)(B) under the Act with respect to the Policies
described in the prospectus. The Policies have been designed in such a way as to
qualify for the exemptive relief from various provisions of the Act afforded by
Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges") assumed by
the Company under the Policies. The Company represents that the risk charges are
within the range of industry practice for comparable policies and reasonable in
relation to all of the risks assumed by the issuer under the Policies. Actuarial
memoranda demonstrating the reasonableness of these charges are maintained by
the Company, and will be made available to the Securities and Exchange
Commission (the "Commission") on request.
(c) The Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit the
separate account and the contractholders and will keep and make available to the
Commission on request a memorandum setting forth the basis for this
representation.
(d) The Company represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and reports
as may be prescribed by any rule or regulation of the Commission heretofore or
hereafter duly adopted pursuant to authority conferred in that section.
(f) That the fees and charges deducted under the Policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to be
incurred, and the risks assumed by the Company.
<PAGE> 59
ACCOUNTANTS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account-2:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Columbus, Ohio
April 26, 1996
<PAGE> 60
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. 13 and has duly caused this Post-Effective
Amendment No. 13 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 20th day of December, 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. 13 has been signed below by the following persons in the
capacities indicated on the 20th day of December, 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
D. Richard McFerson and Director
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: JOSEPH P. RATH
- ---------------------------------- --------------------------------
James F. Patterson Joseph P. Rath, Attorney-in-Fact
ARDEN L. SHISLER Director
- ----------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ----------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ----------------------------------
Harold W. Weihl
</TABLE>
<PAGE> 61
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio
corporation, which has filed or will file with the Securities and Exchange
Commission under the provisions of the Securities Act of 1933, as amended,
various Registration Statements and amendments thereto for the registration
under said Act of Individual Deferred Variable Annuity Contracts in connection
with the MFS Variable Account, Nationwide Variable Account, Nationwide Variable
Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4,
Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide
Fidelity Advisor Variable Account, Nationwide Multi-Flex Variable Account and
Nationwide Variable Account-8; and the registration of fixed interest rate
options subject to a market value adjustment offered under some or all of the
aforementioned individual Variable Annuity Contracts in connection with the
Nationwide Multiple Maturity Separate Account, and the registration of Group
Flexible Fund Retirement Contracts in connection with the Nationwide DC
Variable Account, Nationwide DCVA-II, and the NACo Variable Account; and the
registration of Group Common Stock Variable Annuity Contracts in connection
with Separate Account No. 1; and the registration of variable life insurance
policies in connection with the Nationwide VLI Separate Account, Nationwide
VLI Separate Account-2 and Nationwide VLI Separate Account-3 of Nationwide Life
Insurance Company, hereby constitutes and appoints D. Richard McFerson, Joseph
J. Gasper, Gordon E. McCutchan, W. Sidney Druen, and Joseph P. Rath, and each
of them with power to act without the others, his/her attorney, with full power
of substitution and resubstitution, for and in his/her name, place and stead,
in any and all capacities, to approve, and sign such Registration Statements
and any and all amendments thereto, with power to affix the corporate seal of
said corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument
may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 9th day of August, 1996.
- ------------------------------------- -------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
- ------------------------------------- -------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
- ------------------------------------- -------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice
President and Chief Financial Officer
- -------------------------------------
Fred C. Finney, Director -------------------------------------
James F. Patterson, Director
- -------------------------------------
Charles F. Fuellgraf, Jr., Director -------------------------------------
Arden L. Shisler, Director
- -------------------------------------
Joseph J. Gasper, President and Chief -------------------------------------
Operating Officer and Director Robert L. Stewart, Director
- ------------------------------------- -------------------------------------
Henry S. Holloway, Chairman of the Nancy C. Thomas, Director
Board, Director
-------------------------------------
- ------------------------------------- Harold W. Weihl, Director
D. Richard McFerson, Chairman and
Chief Executive Officer-Nationwide
Insurance Enterprise and Director
