<PAGE> 1
Registration No. 33-16999
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
Post-Effective Amendment No. 14
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 May 1, 1997 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. On behalf of its separate account registrants, the Company
has filed its 24f-2 Notices for the fiscal year ended December 31, 1996, on
February 25, 1997.
================================================================================
1 of 107
<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
2
<PAGE> 3
N-8B-2 Item Caption in Prospectus
- ----------- ---------------------
43.........................................Not Applicable
44.........................................How The Cash Value Varies
45.........................................Not Applicable
46.........................................How The Cash Value Varies
47.........................................Not Applicable
48.........................................Custodian of Assets
49.........................................Not Applicable
50.........................................Not Applicable
51.........................................Summary of The Policies; Information
About The Policies
52.........................................Substitution of Securities
53.........................................Taxation of The Company
54.........................................Not Applicable
55.........................................Not Applicable
56.........................................Not Applicable
57.........................................Not Applicable
58.........................................Not Applicable
59.........................................Financial Statements
3
<PAGE> 4
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 Mutual Fund
options:
<TABLE>
<CAPTION>
<S> <C>
American Century Variable Portfolios, Inc.: Neuberger & Berman Advisers Management Trust:
- American Century VP Balanced -Limited Maturity Bond Portfolio
- American Century VP Capital Appreciation -Growth Portfolio
- American Century VP International -Partners Portfolio
- American Century VP Value Oppenheimer Variable Account Funds:
Dreyfus -Bond Fund
-Dreyfus Socially Responsible Growth Fund -Global Securities Fund
-Dreyfus Stock Index Fund -Multiple Strategies Fund
Dreyfus Variable Investment Fund Strong Special Fund II, Inc.
-Growth & Income Portfolio** -Special Fund II
Fidelity Variable Insurance Products Fund: Strong Variable Insurance Funds, Inc.:
-Equity-Income Portfolio -Discovery Fund II, Inc.
-Growth Portfolio -International Stock Fund II
-High Income Portfolio** Van Eck Worldwide Insurance Trust:
-Overseas Portfolio -Worldwide Bond Fund
Fidelity Variable Insurance Products Fund II: -Worldwide Emerging Markets Fund
-Asset Manager Portfolio -Worldwide Hard Assets Fund
-Contrafund Portfolio Van Kampen American Capital Life Investment Trust:
Nationwide Separate Account Trust: -American Capital Real Estate Securities Fund
-Capital Appreciation Fund Warburg Pincus Trust
-Government Bond Fund -International Equity Portfolio
-Money Market Fund -Post-Venture Capital Portfolio
-Small Company Fund -Small Company Growth Portfolio
-Total Return Fund
</TABLE>
1
<PAGE> 5
** The Growth & Income Portfolio and 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.
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, 1997.
2
<PAGE> 6
GLOSSARY OF TERMS
Attained Age- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
Accumulation Unit- An accounting unit of measure used to calculate the Cash
Value of the Variable Account.
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%.
Home Office- The main office of the Company located in Columbus, Ohio.
Insured- The person whose life is covered by the Policy, and who is named on the
Policy Data Page. Maturity Date- The Policy Anniversary on or following the
Insured's 95th birthday.
Monthly Anniversary Day- The same day as the Policy Date for each succeeding
month.
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.
Underlying Mutual Funds- The Underlying mutual funds which correspond to the
sub-accounts of the Variable Account.
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.
3
<PAGE> 7
Variable Account- A separate investment account of Nationwide Life Insurance
Company. Nationwide VLI Separate Account-2.
4
<PAGE> 8
TABLE OF CONTENTS
GLOSSARY OF TERMS..............................................................3
SUMMARY OF THE POLICIES........................................................8
Variable Life Insurance..................................................8
The Variable Account and its Sub-Accounts................................8
The Fixed Account........................................................8
Deductions and Charges...................................................8
Premiums................................................................11
NATIONWIDE LIFE INSURANCE COMPANY.............................................11
THE VARIABLE ACCOUNT..........................................................11
Investments of the Variable Account.....................................12
American Century Variable Portfolios, Inc.,
a member of American Century(SM) Investments........................12
Dreyfus.................................................................13
Dreyfus Variable Investment Fund........................................14
Fidelity Variable Insurance Products Fund...............................14
Fidelity Variable Insurance Products Fund II............................15
Nationwide Separate Account Trust.......................................15
Neuberger & Berman Advisers Management Trust............................16
Oppenheimer Variable Account Funds......................................16
Strong Special Fund II, Inc.............................................17
Strong Variable Insurance Funds, Inc....................................17
Van Eck Worldwide Insurance Trust (Formerly Van Eck
Investment Trust) ..................................................17
Van Kampen American Capital Life Investment Trust.......................18
Warburg Pincus Trust....................................................18
Reinvestment............................................................19
Transfers...............................................................19
Dollar Cost Averaging...................................................20
Substitution of Securities..............................................20
Voting Rights...........................................................20
INFORMATION ABOUT THE POLICIES................................................21
Underwriting and Issuance...............................................21
-Minimum Requirements for Issuance of a Policy..........................21
-Premium Payments.......................................................21
-Allocation of Cash Value...............................................21
-Short-Term Right to Cancel Policy......................................22
POLICY CHARGES................................................................22
Deductions from Premiums................................................22
Deductions from Cash Value..............................................22
-Charges on Surrender...................................................22
-Annual Administrative Charge...........................................23
-Cost of Insurance Charge...............................................23
Deductions from the Sub-Accounts........................................23
-Mortality and Expense Risk Charge......................................23
-Administrative Expense Charge..........................................24
-Premium Tax Recovery Charge............................................24
-Income Tax Charge......................................................24
HOW THE CASH VALUE VARIES.....................................................24
How the Investment Experience is Determined.............................24
Net Investment Factor...................................................24
Valuation of Assets.....................................................25
Determining the Cash Value..............................................25
Valuation Periods and Valuation Dates...................................25
SURRENDERING THE POLICY FOR CASH..............................................25
Right to Surrender......................................................25
Cash Surrender Value....................................................26
Partial Surrenders......................................................26
5
<PAGE> 9
Maturity Proceeds.......................................................26
Income Tax Withholding..................................................26
POLICY LOANS..................................................................26
Taking a Policy Loan....................................................26
Effect on Investment Performance........................................27
Interest................................................................27
Effect on Death Benefit and Cash Value..................................27
Repayment...............................................................27
HOW THE DEATH BENEFIT VARIES..................................................27
-Calculation of the Death Benefit.......................................27
-Proceeds Payable on Death..............................................29
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY..................................29
CHANGES OF INVESTMENT POLICY..................................................29
GRACE PERIOD..................................................................29
REINSTATEMENT.................................................................29
THE FIXED ACCOUNT OPTION......................................................30
CHANGES IN EXISTING INSURANCE COVERAGE........................................30
Changes in the Specified Amount.........................................30
Changes in the Death Benefit Option.....................................30
OTHER POLICY PROVISIONS.......................................................31
Policy Owner............................................................31
Beneficiary.............................................................31
Assignment..............................................................31
Incontestability........................................................31
Error in Age or Sex.....................................................31
Suicide.................................................................31
Nonparticipating Policies...............................................31
Riders..................................................................32
LEGAL CONSIDERATIONS..........................................................32
DISTRIBUTION OF THE POLICIES..................................................32
CUSTODIAN OF ASSETS...........................................................32
TAX MATTERS...................................................................32
Policy Proceeds.........................................................32
-Federal Estate and Generation-Skipping Transfer Taxes..................33
-Non-Resident Aliens....................................................34
Taxation of the Company.................................................34
-Tax Changes............................................................34
THE COMPANY...................................................................35
COMPANY MANAGEMENT............................................................35
Directors of the Company.................................................36
Executive Officers of the Company........................................36
OTHER CONTRACTS ISSUED BY THE COMPANY.........................................37
STATE REGULATION..............................................................37
REPORTS TO POLICY OWNERS......................................................37
ADVERTISING...................................................................37
LEGAL PROCEEDINGS.............................................................38
EXPERTS.......................................................................38
REGISTRATION STATEMENT........................................................38
LEGAL OPINIONS................................................................38
APPENDIX 1....................................................................39
APPENDIX 2....................................................................40
APPENDIX 3....................................................................51
FINANCIAL STATEMENTS..........................................................56
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.
6
<PAGE> 10
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.
7
<PAGE> 11
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.
8
<PAGE> 12
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:
Underlying Mutual Fund Annual Expenses
(After Expense Reimbursement)
<TABLE>
<CAPTION>
--------------------------------------
Management Other Total
Fees Expenses Expenses
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, Inc.-American Century VP Balanced 1.00% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American Century VP Capital 1.00% 0.00% 1.00%
Appreciation
- -----------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American Century VP International 1.50% 0.00% 1.50%
- -----------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.-American Century VP Value 1.00% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible Growth Fund 0.72% 0.24% 0.96%
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 0.25% 0.05% 0.30%
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Growth & Income Portfolio. 0.75% 0.08% 0.83%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.07% 0.58%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Growth Portfolio 0.61% 0.08% 0.69%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-High Income Portfolio 0.59% 0.12% 0.71%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund-Overseas Portfolio 0.76% 0.17% 0.93%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Asset Manager Portfolio 0.64% 0.10% 0.74%
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.13% 0.74%
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.83% 0.09% 0.92%
Trust-Growth Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.65% 0.13% 0.78%
Trust-Limited Maturity Bond Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman Advisers Management 0.84% 0.11% 0.95%
Trust-Partners Portfolio
- -----------------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.50% 0.02% 0.52%
- -----------------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.01% 0.51%
- -----------------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.50% 0.03% 0.53%
- -----------------------------------------------------------------------------------------------------------------------
NSAT Small Company Fund 1.00% 0.10% 1.10%
-----------------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.50% 0.02% 0.52%
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund-Bond Fund 0.74% 0.04% 0.78%
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund-Global Securities Fund 0.73% 0.08% 0.81%
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Fund-Multiple Strategies 0.73% 0.04% 0.77%
- -----------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, Inc. 1.00% 0.17% 1.17%
- -----------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. - Discovery Fund II, Inc. 1.00% 0.22% 1.22%
- -----------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. - International Stock Fund II 1.00% 0.59% 1.59%
- -----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Bond Fund 1.00% 0.08% 1.08%
- -----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Emerging Markets Fund 1.00% 0.00% 1.00%
- ------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust-Worldwide Hard Assets Fund 1.00% 0.08% 1.08%
- -----------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment Trust - 0.83% 0.27% 1.10%
American Capital Real Estate Securities Fund
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-International Equity Portfolio 0.96% 0.40% 1.36%
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Post-Venture Capital Portfolio 0.62% 0.78% 1.40%
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.26% 1.16%
- -----------------------------------------------------------------------------------------------------------------------
</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. None of the above Underlying Mutual Funds are
subject to 12b-1 fees.
9
<PAGE> 13
The following Underlying Mutual Funds are subject to fee waivers or expense
reimbursement arrangements:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
American Century Variable Absent a waiver of fees by the Portfolio's investment adviser and co-administrator,
Portfolios, Inc. - American Management Fees for the Portfolio would equal 1.25%; Other Expenses would equal
Century VP Value .81%; Total Portfolio Operating Expenses would have been 2.06%.
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund In the event that aggregate expenses of the Fund exceed .40 of 1% of the value of the
Fund's average net assets for the fiscal year, the Fund may deduct from the payment
to be made to Dreyfus, or Dreyfus will bear, such excess expense. In addition, the
Fund may waive receipt of its fees and/or voluntarily assume certain expenses of the
Fund, which would have the effect of lowering the overall expense ratio of the Fund.
- -------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially Responsible In the event that aggregate expenses of the Fund exceed .40 of 1% of the value of the
Growth Fund Fund's average net assets for the fiscal year, the Fund may deduct from the payment
to be made to Dreyfus, or Dreyfus will bear, such excess expense. In addition, the
Fund may waive receipt of its fees and/or voluntarily assume certain expenses of the
Fund, which would have the effect of lowering the overall expense ratio of the Fund.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - Equity- The Adviser has voluntarily agreed subject to revision or termination to reimburse a
Income Portfolio fund if, and to the extent that, its aggregate operating expenses, including
management fees, exceed a specified annual rate for the fund. The expense cap is:
1.50% imposed on October 9, 1986. Since the expense ratio is significantly below the
expense cap there is no reimbursement and none anticipated during the current year.
Since there is no reimbursement the discontinuance of the arrangement has no effect
on total fund operating expenses.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - Growth The Fund may, from time to time, agree to reimburse a fund for management fees and
Portfolio other expenses above a specified limit. The Fund retains the ability to be repaid if
expenses fall below the specified limit prior to the end of the fiscal year.
Reimbursement arrangements, which may be terminated at any time, can decrease the
Fund's expense and boost its performance.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - High- The Fund may, from time to time, agree to reimburse a fund for management fees and
Income Portfolio other expenses above a specified limit. The Fund retains the ability to be repaid if
expenses fall below the specified limit prior to the end of the fiscal year.
Reimbursement arrangements, which may be terminated at any time, can decrease
the Fund's expense and boost its performance.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity Variable Insurance The Adviser has voluntarily agreed subject to revision or termination to reimburse a
Products Fund - Overseas fund if, and to the extent that, its aggregate operating expenses, including
Portfolio management fees, exceed a specified annual rate for the fund. The expense cap is:
1.50% imposed on January 28, 1986. Since the expense ratio is significantly below
the expense cap there is no reimbursement and none anticipated during the current
year. Since there is no reimbursement the discontinuance of the arrangement has no
effect on total fund operating expenses.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - Asset The Fund may, from time to time, agree to reimburse a fund for management fees and
Manager Portfolio other expenses above a specified limit. The Fund retains the ability to be repaid if
expenses fall below the specified limit prior to the end of the fiscal year.
Reimbursement arrangements, which may be terminated at any time, can decrease
the Fund's expense and boost its performance.
- -------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II - The Fund may, from time to time, agree to reimburse a fund for management fees and
Contrafund Portfolio other expenses above a specified limit. The Fund retains the ability to be repaid if
expenses fall below the specified limit prior to the end of the fiscal year.
Reimbursement arrangements, which may be terminated at any time, can decrease
the Fund's expense and boost its performance.
- -------------------------------------------------------------------------------------------------------------------------
Neuberger&Berman Advisers The Fund manager will limit expenses by reimbursing the Portfolio for its operating
Management Trust - Growth expenses and its pro rata share of operating expenses, that exceed 1% of the Fund's
Portfolio average daily net asset value.
- -------------------------------------------------------------------------------------------------------------------------
Neuberger&Berman Advisers The Fund manager will limit expenses by reimbursing the Portfolio for its operating
Management Trust - Limited expenses and its pro rata share of operating expenses, that exceed 1% of the Fund's
Maturity Bond Portfolio average daily net asset value.
- -------------------------------------------------------------------------------------------------------------------------
Neuberger&Berman Advisers The Fund manager will limit expenses by reimbursing the Portfolio for its operating
Management Trust - Partners expenses and its pro rata share of operating expenses, that exceed 1% of the Fund's
Portfolio average daily net asset value.
- -------------------------------------------------------------------------------------------------------------------------
Van Kampen American Capital The Trust reimburses the Adviser for the cost of the Fund's accounting services.
Life Investment Trust - Further, the Adviser and the Subadviser may, from time to time, agree to waive their
American Capital Real Estate respective investment advisory fees or any portion thereof or elect to reimburse the
Securities Fund Fund for ordinary business expenses in excess of an agreed upon amount.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 14
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Warburg Pincus Trust - The Management Fees, Other Expenses and Total Portfolio Operating Expenses are
International Equity Portfolio net of any fee waivers or expense reimbursements. Without such waivers or
reimbursements, Management Fees would have equaled 1.00%, Other Expenses
would have equaled 1.21% and total Portfolio Operating Expenses would have equaled
2.21%. The Fund's investment adviser had undertaken to reduce or otherwise limit
Total Portfolio Operating Expenses; there is no assurance that these undertakings will
continue.
- -------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Small The Management Fees, Other Expenses and Total Portfolio Operating Expenses are
Company Growth Portfolio net of any fee waivers or expense reimbursements. Without such waivers or
reimbursements, Management Fees would have equaled .90%, Other Expenses would
have equaled .60% and total Portfolio Operating Expenses would have equaled 1.50%.
The Fund's investment adviser had undertaken to reduce or otherwise limit Total
Portfolio Operating Expenses; there is no assurance that these undertakings will
continue.
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
Premiums
The minimum premium for which a Policy may be issued is $10,000. A Policy may be
issued to an insured up to age 80.
For a limited time, the Policy Owner has a right to cancel the Policy and
receive a full refund of premiums paid (see "Short-Term Right to Cancel
Policy").
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the Nationwide
Insurance Enterprise of companies which includes Nationwide Mutual Insurance
Company, Nationwide 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 Advisory 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.
11
<PAGE> 15
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) American Century Variable Portfolios, Inc., managed by American Century
Investment Management, Inc., an affiliate of American Century Companies;
2) Dreyfus Stock Index Fund, managed by Wells Fargo Nikko Investment
Advisors;
3) Dreyfus Socially Responsible Growth Fund, Inc., managed by the Dreyfus
Corporation;
4) Dreyfus Variable Investment Fund, managed by the Dreyfus Corporation;
5) Fidelity Variable Insurance Products Fund, managed by Fidelity
Management & Research Company;
6) Fidelity Variable Insurance Products Fund II, managed by Fidelity
Management & Research Company;
7) The Nationwide Separate Account Trust, managed by Nationwide Advisory
Services, Inc.;
8) Neuberger & Berman Advisers Management Trust, managed by Neuberger &
Berman Management Incorporated;
9) Oppenheimer Variable Account Funds, managed by Oppenheimer Management
Corporation;
10) Strong Special Fund II, Inc., managed by Strong Capital Management,
Inc.;
11) Strong Variable Insurance Funds, Inc., managed by Strong Capital
Management, Inc.;
12) Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust),
managed by Van Eck Associates Corporation;
13) Van Kampen American Capital Life Investment Trust managed by Van Kampen
American Capital Asset Management, Inc.; and
14) 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.
American Century Variable Portfolios, Inc., member of American Century(SM)
Investments
American Century Variable Portfolios, Inc. (formerly known as 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
12
<PAGE> 16
American Century(SM) Investments, American Century Variable Portfolios is
managed by American Century Investment Management, Inc.
- - American Century VP 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.
- - American Century VP Capital Appreciation
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.
- - American Century VP 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 American
Century Variable Portfolios, Inc., refers to redemptions of securities in
kind under certain conditions, all surrendering or redeeming Contract
Owners will receive cash from the Company.)
- - American Century VP Value
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.
Dreyfus
- - 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. NCN
Capital Management Group, 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.
13
<PAGE> 17
- - 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.
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.
Fidelity Variable Insurance Products Fund
The Fund is an open-end, diversified, management investment company organized as
a Massachusetts business trust on November 13, 1981. The Fund's shares are
purchased by insurance companies to fund benefits under variable insurance and
annuity policies. Fidelity Management & Research Company ('FMR') is the Fund's
manager.
- - High Income Portfolio
Investment Objective: 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;
- 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.
14
<PAGE> 18
- - 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 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 Advisory 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.
- - 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.
15
<PAGE> 19
- - 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.
- - 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 Advisory Services, Inc. ("NAS"), 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, NAS 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.
- - 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.
- - 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.
- - Partners Portfolio
Investment Objective: To seek capital growth. This portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed to
be undervalued based on fundamentals such as low price-to-earnings ratios,
consistent cash flows, and support from asset values. The objective of the
Partners Portfolio is not fundamental and can be changed by the Trustees of
the Trust without shareholder approval. Shareholders will, however, receive
at least 30 days prior notice thereof. There is no assurance the investment
objective will be met.
Oppenheimer Variable Account Funds
The Oppenheimer Variable Account Funds is an open-ended, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. Oppenheimer Management Corporation is
the Funds' investment advisor.
16
<PAGE> 20
- - 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.
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.
- - 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.
- - 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,
17
<PAGE> 21
compared to the world's major economies, exhibit relatively low gross
national product per capita, as well as the potential for rapid economic
growth. Peregrine Asset Management (Hong Kong) Limited serves as
sub-investment adviser to this Fund.
- - Worldwide Hard Assets Fund (formerly Gold and Natural Resources Fund)
Investment Description: To seek long-term capital appreciation by investing
globally, primarily in "Hard Assets Securities." Hard assets are tangible,
finite assets, asuch as real estate, energy, timber, and industrial and
precious metals. Income is a secondary consideration.
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.
- - American Capital 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.
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.
- - 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.
- - 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.
18
<PAGE> 22
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.
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.
19
<PAGE> 23
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 or as frequently as otherwise authorized by the Company. This service is
intended to allow the Policy Owner to utilize dollar cost averaging, a long-term
investment program which provides for regular, level investments over time. The
Company makes no guarantees that dollar cost averaging, will result in a profit
or protect against loss in a declining market. To qualify for dollar cost
averaging, there must be a minimum total Cash Value, less policy indebtedness,
of $15,000. Transfers for purposes of dollar cost averaging can only be made
from the Money Market 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
20
<PAGE> 24
change in the investments or investment policies for any of the Underlying
Mutual Funds, if required by an insurance regulatory authority; (2) refrain from
making any change in the investment policies or any investment adviser or
principal underwriter of any portfolio which may be initiated by Policy Owners
or the Underlying Mutual Fund's Board of Directors, provided the Company's
disapproval of the change is reasonable and, in the case of a change in the
investment policies or investment adviser, based on a good faith determination
that such change would be contrary to state law or otherwise inappropriate in
light of the portfolio's objective and 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").
21
<PAGE> 25
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
- -Short-Term Right to Cancel Policy
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or
delivered to the registered representative who sold it, or the Company.
Immediately after such mailing or delivery, the Policy will be deemed void from
the beginning. The Company will refund the total premiums paid within seven days
after it receives the Policy. The scope of this right may vary by state. The
policy provision approved or used by a particular state will be disclosed in any
policy issued.
POLICY CHARGES
Deductions from Premiums
No deduction is made from any premium at the time of payment. 100% of each
premium payment is applied to the Cash Value.
Deductions from Cash Value
The Company may deduct certain charges from the Policy's Cash Value. While the
Company reserves the right to change current charges, it has no present intent
to do so. 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").
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
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%
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 Advisory 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.
22
<PAGE> 26
- -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:
Total Net Premium Payments Current Guaranteed Maximum
Greater than But Less Annual Administrative Annual Administrative
or Equal to than Charge Charge
----------- ---- ------ ------
$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
- -Cost of Insurance Charge
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.
Current 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:
Policy Years Policy Years
1-10 11+
---- ---
Current 1.30% 1.00%
Guaranteed Maximum 1.60% 1.30%
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.
23
<PAGE> 27
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 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:
24
<PAGE> 28
(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 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.
25
<PAGE> 29
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.
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.
26
<PAGE> 30
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.
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.
27
<PAGE> 31
Issue $50,000 Single Premium
$25,000 Single Premium
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
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:
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
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
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%
28
<PAGE> 32
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
- -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 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 -
29
<PAGE> 33
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
Under 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
concerning 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.
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.
30
<PAGE> 34
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.
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.
31
<PAGE> 35
Riders
A rider may be added as an addition to the Policy. Riders currently include:
1. Accelerated Death Benefit Rider; and
2. Maturity Extension Endorsement.
Rider availability varies by state.
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 Advisory
Services, Inc.
NAS acts as general distributor for the Nationwide Multi-Flex Variable Account,
Nationwide DC Variable Account, Nationwide DCVA-II, Nationwide Variable
Account-II, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA
Separate Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate
Account-A, Nationwide VL Separate Account-B, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, NACo Variable Account and the Nationwide
Variable Account, all of which are separate investment accounts of the Company
or its affiliates. NAS is a wholly owned subsidiary of the Company.
NAS also acts as principal underwriter for the Nationwide Investing Foundation,
Nationwide Separate Account Trust, Financial Horizons Investment Trust, and
Nationwide Investing Foundation II, and Nationwide Asset Allocation Trust, 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
32
<PAGE> 36
endowment contracts (other than certain Distributions made under a Policy on the
life of a "terminally ill individual" or "chronically ill individuals") are
subject to federal income taxes in a manner similar to the 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. Under certain
circumstances, certain distributions made under a Policy on the life of a
"terminally ill individual" or a "chronically ill individual," as those terms
are defined in the Code, are excludible from gross income.
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 that fails 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.
- - Federal Estate and Generation-Skipping Transfer Taxes
The federal estate tax is integrated with the federal gift tax under a unified
tax rate schedule. In general, an estate of less than $600,000 (inclusive of
certain predeath gifts) will not incur a federal estate tax liability. In
addition, an unlimited marital deduction may be available for federal estate tax
purposes, for certain amounts that pass to the surviving spouse.
When the Insured dies, the death benefit will generally be included in the
lnsured's federal gross estate if: (1) the proceeds were payable to or for the
benefit of the Insured's estate; or (2) the Insured held any "incident of
ownership" in the Policy at death or at any time within three years of death. An
incident of ownership is, in general, any right that may be exercised by the
Policy, such as the right to borrow on the Policy, or the right to name a new
Beneficiary.
If the Policy Owner (whether or not he or she is the Insured) transfers
ownership of the Policy to another person, such transfer may be subject to a
federal gift tax. In addition, if such Policy Owner transfers the Policy to
someone two or more generations younger than the Policy Owner, the transfer may
be subject to the federal generation-skipping transfer tax ("GSTT"), the taxable
amount being the value of the policy.
33
<PAGE> 37
Similarly, if the Beneficiary is two or more generations younger than the
Insured, the payment of the Death Proceeds at the death of the Insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the U.S.
Treasury Department, the Company may be required to withhold a portion of the
Death Proceeds and pay them directly to the Internal Revenue Service as the GSTT
liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes.
The tax rate is a flat rate equal to the maximum estate tax rate (currently
55%), and there is a provision for an aggregate $1 million exemption. Due to the
complexity of these rules, the Policy Owner should consult with counsel and
other competent advisors regarding these taxes,
- - Non-Resident Aliens
Distributions to nonresident aliens ("NRAs") are generally subject to federal
income tax and tax withholding, at a statutory rate of 30% of the amount of
income that is distributed. The Company is required to withhold such amount from
the Distribution and remit it to the Internal Revenue Service. Distributions to
certain NRAs may be subject to lower, or in certain instances zero, tax and
withholding rates, if the United States has entered into an applicable treaty.
However, in order to obtain the benefits of such treaty provisions, the NRA must
give to the Company sufficient proof of his or her residency and citizenship in
the form and manner prescribed by the Internal Revenue Service. In addition, for
any Distribution made after December 31, 1997, the NRA must obtain an individual
Taxpayer Identification Number from the Internal Revenue Service, and furnish
that number to the Company prior to the Distribution. If the Company does not
have the proper proof of citizenship or residency and (for Distributions after
December 31, 1997) a proper individual Taxpayer Identification Number prior to
any Distribution, the Company will be required to withhold 30% of the income,
regardless of any treaty provision.
A payment may not be subject to withholding where the recipient sufficiently
establishes to the Company that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and that such
payment is includable in the recipient's gross income for United States federal
income tax purposes, Any such distributions may be subject to back-up
withholding at the statutory rate (currently 31%) if not taxpayer identification
number, or an incorrect taxpayer identification number, is provided.
State and local estate, inheritance, income 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.
Tax Changes
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the Internal Revenue
Service, is general and is not intended as tax advice.
In the recent past, the Code has been subjected to numerous amendments and
changes, and it is reasonable to believe that it will continue to be revised.
The United States Congress has, in the past, considered numerous legislative
proposals that, if enacted, could change the tax treatment of the Policies. It
is reasonable to believe that such proposals, and other proposals will be
considered in the future, and some may be enacted into law. In addition, the
U.S. Treasury Department may amend existing regulations, issue new regulations,
or adopt new interpretations of existing law that may be at variance with its
current positions on these matters. In addition, current state law (which is not
discussed herein), and future amendments to state law, may affect the tax
consequences of the Policy.
34
<PAGE> 38
If the Policy Owner, Insured, or Beneficiary or other person receiving any
benefit or interest in or from the Policy is not both a resident and citizen of
the United States, there may be a tax imposed by a foreign country, in addition
to any tax imposed by the United States. The foreign law (including regulations,
rulings, and case law) may change and impose additional taxes on the Policy, the
Death Benefit, or other Distributions and/or ownership of the Policy, or a
treaty may be amended and all or part of the favorable treatment may be
eliminated.
Any or all of the foregoing may change from time to time without any notice, and
the tax consequences arising out of a Policy may be changed retroactively. There
is no way of predicting if when, and to what extent any such change may take
place. No representation is made as to the likelihood of the continuation of
these current laws, interpretations, and policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
INSURANCE POLICIES. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT
TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
The Company serves as depositor for the Nationwide Variable Account, Nationwide
Variable Account-II, Nationwide Variable Account-3, Nationwide Variable
Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8, MFS
Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI
Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate
Account-3, NACo Variable Account, Nationwide DC Variable Account and Nationwide
DCVA-II, 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 Financial Services, Inc. is
the sole shareholder of Nationwide Life.
35
<PAGE> 39
Directors of the Company
Director
Name Since Principal Occupation
---- ----- --------------------
Lewis J. Alphin 1993 Farm Owner and Operator (1)
Keith W. Eckel 1996 Partner, Fred W. Eckel Sons; President,
Eckel Farms, Inc. (1)
Willard J. Engel 1994 General Manager Lyon County Co-Operative
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. (1)
Joseph J. Gasper*+ 1996 President and Chief Operating Officer,
Nationwide Life Insurance Company and
Nationwide Life and Annuity Insurance
Company. (2)
Henry S. Holloway *+ 1986 Farm Owner and Operator (1)
Dimon Richard McFerson *+ 1988 Chairman and Chief Executive Officer,
Nationwide Insurance Enterprise (2)
David O. Miller *+ 1985 President, Owen Potato Farm, Inc.;
Partner, M&M Enterprises (1)
C. Ray Noecker 1994 Owner and Operator, Noecker Farms (1)
James F. Patterson + 1989 Vice President, Pattersons, Inc. ;
President, Patterson Farms, Inc. (1)
Arden L. Shisler *+ 1984 President and Chief Executive Officer,
K&B Transport, Inc. (1)
Robert L. Stewart 1989 Owner and Operator, Sunnydale Farms and
Mining (1)
Nancy C. Thomas * 1986 Farm Owner and Operator. (1)
Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farms (1)
*Member, Executive +Member, Investment Committee
Committee
1) Principal occupation for last five years.
2) Prior to assuming this current position, Messrs. McFerson and Gasper held
other executive management positions with the companies.
Each of the directors is a director of the other major insurance affiliates of
the Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of
the Company and Nationwide Life Insurance Company. Messrs. McFerson and Gasper
are directors of Nationwide Advisory Services, Inc., a registered broker-dealer.
Messrs. Holloway, McFerson, Miller, Patterson, Shisler and Fuellgraf are
directors of Nationwide Financial Services, Inc. Messrs. Fuellgraf, McFerson,
Ms. Thomas and Mr. Weihl are trustees of Nationwide Investing Foundation, a
registered investment company. Mr. McFerson is trustee of Nationwide Separate
Account Trust, Financial Horizons Investment Trust, Nationwide Investing
Foundation II and Nationwide Asset Allocation Trust, registered investment
companies. Mr. Engel is a director of Western Cooperative Transport.
Executive Officers of the Company
Name Office Held
- ---- -----------
Dimon Richard McFerson Chairman and Chief Executive Officer-Nationwide
Insurance Enterprise
Joseph J. Gasper President and Chief Operating Officer
Gordon E. McCutchan Executive Vice President, Law and Corporate
Services and Secretary
Robert A. Oakley Executive Vice President-Chief Financial Officer
Robert J. Woodward, Jr. Executive Vice President-Chief Investment
Officer
36
<PAGE> 40
James E. Brock Senior Vice President - Life Company Operations
W. Sidney Druen Senior Vice President and General Counsel and
Assistant Secretary
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary
Richard A. Karas Senior Vice President - Sales and Financial
Services
Mark R. Thresher Vice President - Controller
Duane M. Campbell Vice President - Treasurer
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and
Annuity Insurance Company. Mr. Galloway is also an officer of Nationwide Mutual
Insurance Company and Nationwide Life and Annuity Insurance Company. Each of the
other officers listed above is also an officer of each of the companies
comprising the Nationwide Insurance Enterprise. Each of the executive officers
listed above has been associated with the registrant in an executive capacity
for more than the past five years, except Mr. Thresher, who joined the
Registrant in 1996. From 1988-1996, Mr. Thresher served as a partner in the
accounting firm KPMG Peat Marwick LLP and lead partner for Nationwide Insurance
Enterprise from 1993-1996.
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of the Company.
STATE REGULATION
The Company is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering the operation of
the Company for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine the Company's contract liabilities and reserves so that the
Insurance Department may certify the items are correct. The Company's books and
accounts are subject to review by the Insurance Department at all times and a
full examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. Such regulation does not, however,
involve any supervision of management or investment practices or policies. In
addition, the Company is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current Death Benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each sub-account of the Variable Account, and any Policy
debt, as well as interest on the debt for the preceding year.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as change in Specified Amount, change in Death Benefit Option, changes in
future premium allocation, transfers among sub-accounts, premium payments,
loans, increase in loan principal, loan repayments, unpaid loan interest added
to principal, reinstatement and termination.
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
37
<PAGE> 41
Company may include in certain advertisements endorsements in the form of a list
of organizations, individuals or other parties which recommend the Company or
the Contracts. Furthermore, the Company may occasionally include in
advertisements comparisons of currently taxable and tax deferred investment
programs based on selected tax brackets or discussions of alternative investment
vehicles and general economic conditions.
LEGAL PROCEEDINGS
From time to time the Company is a party to litigation and arbitration
proceedings in the ordinary course of its business, none of which is expected to
have a material adverse effect on the Company.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In October 1996, a policyholder of Nationwide Life
filed a complaint in Alabama state court against Nationwide Life and an agent of
Nationwide Life (Wayne M. King v. Nationwide Life Insurance Company and Danny
Nix), related to the sale of a whole life policy on a "vanishing premium" basis
and seeking unspecified compensatory and punitive damages. In February 1997,
Nationwide Life was named as a defendant in a lawsuit filed in New York Supreme
Court also related to the sale of whole life policies on a "vanishing premium"
basis (John H. Snyder v. Nationwide Mutual Insurance Company, Nationwide Mutual
Insurance Co. and Nationwide Life Insurance Co.). The plaintiff in such lawsuit
seeks to represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit is in an early stage
and has not been certified as a class action. Nationwide Life intends to defend
these cases vigorously. There can be no assurance that any future litigation
relating to pricing and sales practices will not have a material adverse effect
on the Company.
The General Distributor, Nationwide Advisory Services, Inc., is not engaged in
any material litigation of any nature.
EXPERTS
The financial statements and schedules have been included herein in reliance
upon the reports of KPMG Peat Marwick LLP, independent certified public
accountants, and upon the authority of said firm as experts in accounting and
auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
Policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the Variable Account, the Company, and the Policies
offered hereby. Statements contained in this prospectus as to the content of
Policies and other legal instruments are summaries. For a complete statement of
the terms thereof, reference is made to such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the Policies described herein are being passed
upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43216. All
the members of such firm are employed by the Nationwide Mutual Insurance
Company.
38
<PAGE> 42
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.
39
<PAGE> 43
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 0.90%. 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 March 31, 1997.
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 -2.20, 3.80% and 9.80%,
respectively, in policy years one through ten, and -1.90%, 4.10% and 10.10%
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 -2.50%, 3.50% and 9.50%, respectively, in policy years one through ten,
and -2.20%, 3.80% and 9.80% 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.
40
<PAGE> 44
$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 9,648 8,798 43,190 10,231 9,381 43,190 10,815 9,965 43,190
2 11,025 9,227 8,377 43,190 10,394 9,544 43,190 11,630 10,780 43,190
3 11,576 8,803 8,003 43,190 10,553 9,753 43,190 12,516 11,716 43,190
4 12,155 8,372 7,572 43,190 10,705 9,905 43,190 13,480 12,680 43,190
5 12,763 7,935 7,185 43,190 10,851 10,101 43,190 14,529 13,779 43,190
6 13,401 7,489 6,789 43,190 10,988 10,288 43,190 15,671 14,971 43,190
7 14,071 7,032 6,432 43,190 11,113 10,513 43,190 16,916 16,316 43,190
8 14,775 6,560 6,060 43,190 11,225 10,725 43,190 18,272 17,772 43,190
9 15,513 6,069 5,669 43,190 11,319 10,919 43,190 19,751 19,351 43,190
10 16,289 5,557 5,557 43,190 11,392 11,392 43,190 21,366 21,366 43,190
11 17,103 5,035 5,035 43,190 11,475 11,475 43,190 23,201 23,201 43,190
12 17,959 4,490 4,490 43,190 11,538 11,538 43,190 25,222 25,222 43,190
13 18,856 3,919 3,919 43,190 11,580 11,580 43,190 27,452 27,452 43,190
14 19,799 3,321 3,321 43,190 11,596 11,596 43,190 29,917 29,917 43,190
15 20,789 2,690 2,690 43,190 11,584 11,584 43,190 32,646 32,646 43,746
16 21,829 2,023 2,023 43,190 11,539 11,539 43,190 35,659 35,659 46,357
17 22,920 1,314 1,314 43,190 11,456 11,456 43,190 38,958 38,958 49,866
18 24,066 557 557 43,190 11,329 11,329 43,190 42,567 42,567 53,634
19 25,270 0 0 0 11,150 11,150 43,190 46,516 46,516 57,680
20 26,533 0 0 0 10,912 10,912 43,190 50,841 50,841 62,026
21 27,860 0 0 0 10,609 10,609 43,190 55,577 55,577 66,693
22 29,253 0 0 0 10,207 10,207 43,190 60,747 60,747 72,289
23 30,715 0 0 0 9,693 9,693 43,190 66,389 66,389 78,339
24 32,251 0 0 0 9,046 9,046 43,190 72,545 72,545 84,878
25 33,864 0 0 0 8,243 8,243 43,190 79,262 79,262 91,944
26 35,557 0 0 0 7,251 7,251 43,190 86,588 86,588 99,576
27 37,335 0 0 0 6,029 6,029 43,190 94,613 94,613 106,912
28 39,201 0 0 0 4,521 4,521 43,190 103,414 103,414 114,790
29 41,161 0 0 0 2,661 2,661 43,190 113,085 113,085 123,263
30 43,219 0 0 0 370 370 43,190 123,736 123,736 132,398
</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.
41
<PAGE> 45
$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 9,607 8,757 43,190 10,188 9,338 43,190 10,770 9,920 43,190
2 11,025 9,091 8,241 43,190 10,247 9,397 43,190 11,472 10,622 43,190
3 11,576 8,573 7,773 43,190 10,295 9,495 43,190 12,229 11,429 43,190
4 12,155 8,050 7,250 43,190 10,330 9,530 43,190 13,046 12,246 43,190
5 12,763 7,520 6,770 43,190 10,351 9,601 43,190 13,930 13,180 43,190
6 13,401 6,981 6,281 43,190 10,355 9,655 43,190 14,885 14,185 43,190
7 14,071 6,429 5,829 43,190 10,338 9,738 43,190 15,917 15,317 43,190
8 14,775 5,861 5,361 43,190 10,297 9,797 43,190 17,033 16,533 43,190
9 15,513 5,273 4,873 43,190 10,226 9,826 43,190 18,240 17,840 43,190
10 16,289 4,659 4,659 43,190 10,122 10,122 43,190 19,547 19,547 43,190
11 17,103 4,028 4,028 43,190 10,009 10,009 43,190 21,028 21,028 43,190
12 17,959 3,360 3,360 43,190 9,853 9,853 43,190 22,642 22,642 43,190
13 18,856 2,653 2,653 43,190 9,650 9,650 43,190 24,408 24,408 43,190
14 19,799 1,899 1,899 43,190 9,390 9,390 43,190 26,343 26,343 43,190
15 20,789 1,089 1,089 43,190 9,066 9,066 43,190 28,469 28,469 43,190
16 21,829 216 216 43,190 8,667 8,667 43,190 30,813 30,813 43,190
17 22,920 0 0 0 8,181 8,181 43,190 33,404 33,404 43,190
18 24,066 0 0 0 7,590 7,590 43,190 36,263 36,263 45,692
19 25,270 0 0 0 6,876 6,876 43,190 39,380 39,380 48,831
20 26,533 0 0 0 6,017 6,017 43,190 42,770 42,770 52,180
21 27,860 0 0 0 4,988 4,988 43,190 46,462 46,462 55,754
22 29,253 0 0 0 3,762 3,762 43,190 50,467 50,467 60,056
23 30,715 0 0 0 2,307 2,307 43,190 54,814 54,814 64,680
24 32,251 0 0 0 582 582 43,190 59,530 59,530 69,650
25 33,864 0 0 0 0 0 0 64,645 64,645 74,988
26 35,557 0 0 0 0 0 0 70,193 70,193 80,722
27 37,335 0 0 0 0 0 0 76,248 76,248 86,161
28 39,201 0 0 0 0 0 0 82,870 82,870 91,985
29 41,161 0 0 0 0 0 0 90,128 90,128 98,240
30 43,219 0 0 0 0 0 0 98,112 98,112 104,979
</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.
42
<PAGE> 46
$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 9,662 8,812 41,661 10,246 9,396 41,661 10,831 9,981 41,661
2 11,025 9,233 8,383 41,661 10,400 9,550 41,661 11,636 10,786 41,661
3 11,576 8,801 8,001 41,661 10,550 9,750 41,661 12,513 11,713 41,661
4 12,155 8,367 7,567 41,661 10,697 9,897 41,661 13,469 12,669 41,661
5 12,763 7,928 7,178 41,661 10,838 10,088 41,661 14,510 13,760 41,661
6 13,401 7,482 6,782 41,661 10,973 10,273 41,661 15,646 14,946 41,661
7 14,071 7,028 6,428 41,661 11,098 10,498 41,661 16,885 16,285 41,661
8 14,775 6,564 6,064 41,661 11,213 10,713 41,661 18,238 17,738 41,661
9 15,513 6,085 5,685 41,661 11,314 10,914 41,661 19,715 19,315 41,661
10 16,289 5,589 5,589 41,661 11,399 11,399 41,661 21,330 21,330 41,661
11 17,103 5,089 5,089 41,661 11,500 11,500 41,661 23,168 23,168 41,661
12 17,959 4,569 4,569 41,661 11,584 11,584 41,661 25,192 25,192 41,661
13 18,856 4,028 4,028 41,661 11,650 11,650 41,661 27,425 27,425 41,661
14 19,799 3,462 3,462 41,661 11,696 11,696 41,661 29,893 29,893 41,661
15 20,789 2,869 2,869 41,661 11,717 11,717 41,661 32,620 32,620 43,711
16 21,829 2,243 2,243 41,661 11,712 11,712 41,661 35,618 35,618 46,303
17 22,920 1,582 1,582 41,661 11,675 11,675 41,661 38,899 38,899 49,790
18 24,066 877 877 41,661 11,600 11,600 41,661 42,489 42,489 53,537
19 25,270 124 124 41,661 11,481 11,481 41,661 46,420 46,420 57,561
20 26,533 (*) (*) (*) 11,313 11,313 41,661 50,725 50,725 61,884
21 27,860 (*) (*) (*) 11,088 11,088 41,661 55,440 55,440 66,528
22 29,253 (*) (*) (*) 10,780 10,780 41,661 60,589 60,589 72,101
23 30,715 (*) (*) (*) 10,377 10,377 41,661 66,211 66,211 78,129
24 32,251 (*) (*) (*) 9,863 9,863 41,661 72,349 72,349 84,648
25 33,864 (*) (*) (*) 9,218 9,218 41,661 79,049 79,049 91,696
26 35,557 (*) (*) (*) 8,415 8,415 41,661 86,360 86,360 99,314
27 37,335 (*) (*) (*) 7,420 7,420 41,661 94,370 94,370 106,638
28 39,201 (*) (*) (*) 6,187 6,187 41,661 103,157 103,157 114,504
29 41,161 (*) (*) (*) 4,662 4,662 41,661 112,811 112,811 122,964
30 43,219 (*) (*) (*) 2,782 2,782 41,661 123,442 123,442 132,083
</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> 47
$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 9,613 8,763 41,661 10,195 9,345 41,661 10,778 9,928 41,661
2 11,025 9,091 8,241 41,661 10,246 9,396 41,661 11,471 10,621 41,661
3 11,576 8,566 7,766 41,661 10,287 9,487 41,661 12,220 11,420 41,661
4 12,155 8,036 7,236 41,661 10,315 9,515 41,661 13,029 12,229 41,661
5 12,763 7,501 6,751 41,661 10,329 9,579 41,661 13,904 13,154 41,661
6 13,401 6,958 6,258 41,661 10,327 9,627 41,661 14,851 14,151 41,661
7 14,071 6,403 5,803 41,661 10,305 9,705 41,661 15,875 15,275 41,661
8 14,775 5,833 5,333 41,661 10,259 9,759 41,661 16,984 16,484 41,661
9 15,513 5,243 4,843 41,661 10,185 9,785 41,661 18,183 17,783 41,661
10 16,289 4,630 4,630 41,661 10,079 10,079 41,661 19,484 19,484 41,661
11 17,103 4,001 4,001 41,661 9,965 9,965 41,661 20,958 20,958 41,661
12 17,959 3,337 3,337 41,661 9,810 9,810 41,661 22,567 22,567 41,661
13 18,856 2,634 2,634 41,661 9,608 9,608 41,661 24,329 24,329 41,661
14 19,799 1,887 1,887 41,661 9,354 9,354 41,661 26,262 26,262 41,661
15 20,789 1,087 1,087 41,661 9,037 9,037 41,661 28,388 28,388 41,661
16 21,829 225 225 41,661 8,648 8,648 41,661 30,734 30,734 41,661
17 22,920 (*) (*) (*) 8,175 8,175 41,661 33,328 33,328 42,660
18 24,066 (*) (*) (*) 7,601 7,601 41,661 36,171 36,171 45,575
19 25,270 (*) (*) (*) 6,909 6,909 41,661 39,262 39,262 48,685
20 26,533 (*) (*) (*) 6,077 6,077 41,661 42,626 42,626 52,004
21 27,860 (*) (*) (*) 5,083 5,083 41,661 46,288 46,288 55,546
22 29,253 (*) (*) (*) 3,899 3,899 41,661 50,262 50,262 59,812
23 30,715 (*) (*) (*) 2,495 2,495 41,661 54,574 54,574 64,398
24 32,251 (*) (*) (*) 832 832 41,661 59,252 59,252 69,325
25 33,864 (*) (*) (*) (*) (*) (*) 64,327 64,327 74,620
26 35,557 (*) (*) (*) (*) (*) (*) 69,831 69,831 80,305
27 37,335 (*) (*) (*) (*) (*) (*) 75,838 75,838 85,697
28 39,201 (*) (*) (*) (*) (*) (*) 82,407 82,407 91,472
29 41,161 (*) (*) (*) (*) (*) (*) 89,608 89,608 97,672
30 43,219 (*) (*) (*) (*) (*) (*) 97,528 97,528 104,355
</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.
44
<PAGE> 48
$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 24,150 22,025 114,856 25,610 23,485 114,856 27,070 24,945 114,856
2 27,563 23,244 21,119 114,856 26,170 24,045 114,856 29,269 27,144 114,856
3 28,941 22,329 20,329 114,856 26,728 24,728 114,856 31,663 29,663 114,856
4 30,388 21,403 19,403 114,856 27,283 25,283 114,856 34,271 32,271 114,856
5 31,907 20,464 18,589 114,856 27,833 25,958 114,856 37,114 35,239 114,856
6 33,502 19,507 17,757 114,856 28,373 26,623 114,856 40,215 38,465 114,856
7 35,178 18,527 17,027 114,856 28,899 27,399 114,856 43,599 42,099 114,856
8 36,936 17,517 16,267 114,856 29,407 28,157 114,856 47,291 46,041 114,856
9 38,783 16,471 15,471 114,856 29,889 28,889 114,856 51,323 50,323 114,856
10 40,722 15,381 15,381 114,856 30,340 30,340 114,856 55,730 55,730 114,856
11 42,758 14,286 14,286 114,856 30,846 30,846 114,856 60,734 60,734 114,856
12 44,896 13,139 13,139 114,856 31,322 31,322 114,856 66,242 66,242 114,856
13 47,141 11,938 11,938 114,856 31,766 31,766 114,856 72,314 72,314 114,856
14 49,498 10,678 10,678 114,856 32,172 32,172 114,856 79,018 79,018 114,856
15 51,973 9,347 9,347 114,856 32,533 32,533 114,856 86,430 86,430 115,816
16 54,572 7,937 7,937 114,856 32,839 32,839 114,856 94,608 94,608 122,990
17 57,300 6,438 6,438 114,856 33,084 33,084 114,856 103,567 103,567 132,566
18 60,165 4,835 4,835 114,856 33,252 33,252 114,856 113,376 113,376 142,854
19 63,174 3,110 3,110 114,856 33,331 33,331 114,856 124,117 124,117 153,905
20 66,332 1,250 1,250 114,856 33,307 33,307 114,856 135,882 135,882 165,776
21 69,649 (*) (*) (*) 33,167 33,167 114,856 148,773 148,773 178,528
22 73,132 (*) (*) (*) 32,852 32,852 114,856 162,859 162,859 193,803
23 76,788 (*) (*) (*) 32,335 32,335 114,856 178,249 178,249 210,334
24 80,627 (*) (*) (*) 31,582 31,582 114,856 195,061 195,061 228,222
25 84,659 (*) (*) (*) 30,553 30,553 114,856 213,424 213,424 247,572
26 88,892 (*) (*) (*) 29,190 29,190 114,856 233,477 233,477 268,499
27 93,336 (*) (*) (*) 27,420 27,420 114,856 255,453 255,453 288,662
28 98,003 (*) (*) (*) 25,149 25,149 114,856 279,563 279,563 310,315
29 102,903 (*) (*) (*) 22,267 22,267 114,856 306,052 306,052 333,597
30 108,049 (*) (*) (*) 18,645 18,645 114,856 335,215 335,215 358,680
</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.
45
<PAGE> 49
$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 23,986 21,861 114,856 25,439 23,314 114,856 26,893 24,768 114,856
2 27,563 22,886 20,761 114,856 25,785 23,660 114,856 28,855 26,730 114,856
3 28,941 21,772 19,772 114,856 26,108 24,108 114,856 30,974 28,974 114,856
4 30,388 20,639 18,639 114,856 26,405 24,405 114,856 33,264 31,264 114,856
5 31,907 19,484 17,609 114,856 26,671 24,796 114,856 35,740 33,865 114,856
6 33,502 18,299 16,549 114,856 26,900 25,150 114,856 38,418 36,668 114,856
7 35,178 17,077 15,577 114,856 27,084 25,584 114,856 41,314 39,814 114,856
8 36,936 15,808 14,558 114,856 27,211 25,961 114,856 44,449 43,199 114,856
9 38,783 14,478 13,478 114,856 27,271 26,271 114,856 47,841 46,841 114,856
10 40,722 13,080 13,080 114,856 27,252 27,252 114,856 51,518 51,518 114,856
11 42,758 11,635 11,635 114,856 27,224 27,224 114,856 55,675 55,675 114,856
12 44,896 10,093 10,093 114,856 27,095 27,095 114,856 60,212 60,212 114,856
13 47,141 8,443 8,443 114,856 26,855 26,855 114,856 65,178 65,178 114,856
14 49,498 6,670 6,670 114,856 26,485 26,485 114,856 70,627 70,627 114,856
15 51,973 4,750 4,750 114,856 25,961 25,961 114,856 76,618 76,618 114,856
16 54,572 2,661 2,661 114,856 25,260 25,260 114,856 83,226 83,226 114,856
17 57,300 376 376 114,856 24,351 24,351 114,856 90,539 90,539 115,890
18 60,165 (*) (*) (*) 23,193 23,193 114,856 98,577 98,577 124,207
19 63,174 (*) (*) (*) 21,739 21,739 114,856 107,322 107,322 133,080
20 66,332 (*) (*) (*) 19,937 19,937 114,856 116,838 116,838 142,542
21 69,649 (*) (*) (*) 17,729 17,729 114,856 127,197 127,197 152,637
22 73,132 (*) (*) (*) 15,048 15,048 114,856 138,440 138,440 164,743
23 76,788 (*) (*) (*) 11,819 11,819 114,856 150,639 150,639 177,754
24 80,627 (*) (*) (*) 7,945 7,945 114,856 163,876 163,876 191,735
25 84,659 (*) (*) (*) 3,298 3,298 114,856 178,237 178,237 206,755
26 88,892 (*) (*) (*) (*) (*) (*) 193,811 193,811 222,883
27 93,336 (*) (*) (*) (*) (*) (*) 210,810 210,810 238,215
28 98,003 (*) (*) (*) (*) (*) (*) 229,396 229,396 254,630
29 102,903 (*) (*) (*) (*) (*) (*) 249,769 249,769 272,248
30 108,049 (*) (*) (*) (*) (*) (*) 272,174 272,174 291,226
</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.
46
<PAGE> 50
$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 96,739 88,239 306,283 102,589 94,089 306,283 108,440 99,940 306,283
2 110,250 93,383 84,883 306,283 105,137 96,637 306,283 117,585 109,085 306,283
3 115,763 89,974 81,974 306,283 107,694 99,694 306,283 127,568 119,568 306,283
4 121,551 86,501 78,501 306,283 110,252 102,252 306,283 138,476 130,476 306,283
5 127,628 82,946 75,446 306,283 112,803 105,303 306,283 150,407 142,907 306,283
6 134,010 79,293 72,293 306,283 115,336 108,336 306,283 163,474 156,474 306,283
7 140,710 75,523 69,523 306,283 117,841 111,841 306,283 177,802 171,802 306,283
8 147,746 71,608 66,608 306,283 120,302 115,302 306,283 193,535 188,535 306,283
9 155,133 67,519 63,519 306,283 122,700 118,700 306,283 210,839 206,839 306,283
10 162,889 63,229 63,229 306,283 125,021 125,021 306,283 229,907 229,907 306,283
11 171,034 58,892 58,892 306,283 127,633 127,633 306,283 251,719 251,719 306,283
12 179,586 54,277 54,277 306,283 130,163 130,163 306,283 275,838 275,838 328,247
13 188,565 49,358 49,358 306,283 132,599 132,599 306,283 302,264 302,264 356,672
14 197,993 44,099 44,099 306,283 134,926 134,926 306,283 331,200 331,200 387,504
15 207,893 38,450 38,450 306,283 137,120 137,120 306,283 362,883 362,883 420,944
16 218,287 32,346 32,346 306,283 139,149 139,149 306,283 397,573 397,573 457,209
17 229,202 25,701 25,701 306,283 140,972 140,972 306,283 435,649 435,649 492,283
18 240,662 18,410 18,410 306,283 142,534 142,534 306,283 477,469 477,469 529,991
19 252,695 10,359 10,359 306,283 143,780 143,780 306,283 523,444 523,444 570,554
20 265,330 1,439 1,439 306,283 144,661 144,661 306,283 574,048 574,048 614,231
21 278,596 (*) (*) (*) 145,132 145,132 306,283 629,829 629,829 661,320
22 292,526 (*) (*) (*) 144,926 144,926 306,283 690,887 690,887 725,432
23 307,152 (*) (*) (*) 143,931 143,931 306,283 757,697 757,697 795,582
24 322,510 (*) (*) (*) 142,010 142,010 306,283 830,766 830,766 872,304
25 338,635 (*) (*) (*) 138,970 138,970 306,283 910,637 910,637 956,169
26 355,567 (*) (*) (*) 134,551 134,551 306,283 997,885 997,885 1,047,779
27 373,346 (*) (*) (*) 128,402 128,402 306,283 1,093,114 1,093,114 1,147,770
28 392,013 (*) (*) (*) 120,049 120,049 306,283 1,196,957 1,196,957 1,256,805
29 411,614 (*) (*) (*) 108,884 108,884 306,283 1,310,077 1,310,077 1,375,581
30 432,194 (*) (*) (*) 94,130 94,130 306,283 1,433,178 1,433,178 1,504,837
</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.
47
<PAGE> 51
$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 95,852 87,352 306,283 101,673 93,173 306,283 107,496 98,996 306,283
2 110,250 91,521 83,021 306,283 103,163 94,663 306,283 115,497 106,997 306,283
3 115,763 87,064 79,064 306,283 104,532 96,532 306,283 124,141 116,141 306,283
4 121,551 82,453 74,453 306,283 105,756 97,756 306,283 133,492 125,492 306,283
5 127,628 77,655 70,155 306,283 106,805 99,305 306,283 143,622 136,122 306,283
6 134,010 72,629 65,629 306,283 107,648 100,648 306,283 154,616 147,616 306,283
7 140,710 67,333 61,333 306,283 108,247 102,247 306,283 166,572 160,572 306,283
8 147,746 61,704 56,704 306,283 108,548 103,548 306,283 179,600 174,600 306,283
9 155,133 55,671 51,671 306,283 108,493 104,493 306,283 193,836 189,836 306,283
10 162,889 49,165 49,165 306,283 108,021 108,021 306,283 209,448 209,448 306,283
11 171,034 42,244 42,244 306,283 107,394 107,394 306,283 227,322 227,322 306,283
12 179,586 34,672 34,672 306,283 106,231 106,231 306,283 247,172 247,172 306,283
13 188,565 26,361 26,361 306,283 104,455 104,455 306,283 269,279 269,279 317,749
14 197,993 17,197 17,197 306,283 101,967 101,967 306,283 293,468 293,468 343,358
15 207,893 7,028 7,028 306,283 98,637 98,637 306,283 319,774 319,774 370,937
16 218,287 (*) (*) (*) 94,291 94,291 306,283 348,374 348,374 400,630
17 229,202 (*) (*) (*) 88,701 88,701 306,283 379,619 379,619 428,970
18 240,662 (*) (*) (*) 81,573 81,573 306,283 413,798 413,798 459,316
19 252,695 (*) (*) (*) 72,547 72,547 306,283 451,258 451,258 491,871
20 265,330 (*) (*) (*) 61,209 61,209 306,283 492,415 492,415 526,884
21 278,596 (*) (*) (*) 47,072 47,072 306,283 537,777 537,777 564,666
22 292,526 (*) (*) (*) 29,542 29,542 306,283 587,126 587,126 616,482
23 307,152 (*) (*) (*) 7,877 7,877 306,283 640,781 640,781 672,820
24 322,510 (*) (*) (*) (*) (*) (*) 699,082 699,082 734,036
25 338,635 (*) (*) (*) (*) (*) (*) 762,382 762,382 800,501
26 355,567 (*) (*) (*) (*) (*) (*) 831,040 831,040 872,592
27 373,346 (*) (*) (*) (*) (*) (*) 905,421 905,421 950,692
28 392,013 (*) (*) (*) (*) (*) (*) 985,884 985,884 1,035,178
29 411,614 (*) (*) (*) (*) (*) (*) 1,072,794 1,072,794 1,126,434
30 432,194 (*) (*) (*) (*) (*) (*) 1,166,530 1,166,530 1,224,857
</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.
48
<PAGE> 52
$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 96,411 87,911 211,021 102,271 93,771 211,021 108,132 99,632 211,021
2 110,250 92,664 84,164 211,021 104,469 95,969 211,021 116,975 108,475 211,021
3 115,763 88,792 80,792 211,021 106,641 98,641 211,021 126,678 118,678 211,021
4 121,551 84,775 76,775 211,021 108,780 100,780 211,021 137,358 129,358 211,021
5 127,628 80,584 73,084 211,021 110,878 103,378 211,021 149,147 141,647 211,021
6 134,010 76,184 69,184 211,021 112,920 105,920 211,021 162,201 155,201 211,021
7 140,710 71,529 65,529 211,021 114,888 108,888 211,021 176,706 170,706 211,021
8 147,746 66,561 61,561 211,021 116,756 111,756 211,021 192,884 187,884 214,101
9 155,133 61,220 57,220 211,021 118,501 114,501 211,021 210,796 206,796 229,767
10 162,889 55,443 55,443 211,021 120,105 120,105 211,021 230,457 230,457 246,589
11 171,034 49,332 49,332 211,021 121,925 121,925 211,021 252,818 252,818 265,459
12 179,586 42,435 42,435 211,021 123,489 123,489 211,021 277,294 277,294 291,159
13 188,565 34,621 34,621 211,021 124,760 124,760 211,021 304,076 304,076 319,280
14 197,993 25,730 25,730 211,021 125,694 125,694 211,021 333,367 333,367 350,036
15 207,893 15,545 15,545 211,021 126,223 126,223 211,021 365,385 365,385 383,654
16 218,287 3,772 3,772 211,021 126,257 126,257 211,021 400,359 400,359 420,377
17 229,202 (*) (*) (*) 125,669 125,669 211,021 438,533 438,533 460,460
18 240,662 (*) (*) (*) 124,291 124,291 211,021 480,160 480,160 504,168
19 252,695 (*) (*) (*) 121,913 121,913 211,021 525,506 525,506 551,781
20 265,330 (*) (*) (*) 118,269 118,269 211,021 574,852 574,852 603,594
21 278,596 (*) (*) (*) 113,027 113,027 211,021 628,499 628,499 659,924
22 292,526 (*) (*) (*) 105,596 105,596 211,021 686,715 686,715 721,051
23 307,152 (*) (*) (*) 95,309 95,309 211,021 749,817 749,817 787,307
24 322,510 (*) (*) (*) 81,237 81,237 211,021 818,129 818,129 859,036
25 338,635 (*) (*) (*) 62,036 62,036 211,021 891,982 891,982 936,581
26 355,567 (*) (*) (*) 35,735 35,735 211,021 971,700 971,700 1,020,285
27 373,346 (*) (*) (*) (*) (*) (*) 1,059,640 1,059,640 1,102,026
28 392,013 (*) (*) (*) (*) (*) (*) 1,157,081 1,157,081 1,191,794
29 411,614 (*) (*) (*) (*) (*) (*) 1,265,587 1,265,587 1,290,898
30 432,194 (*) (*) (*) (*) (*) (*) 1,387,129 1,387,129 1,401,000
</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.
49
<PAGE> 53
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% Hypothetical 6% Hypothetical 12% Hypothetical
Gross Investment Return Gross Investment Return Gross Investment Return
----------------------- ----------------------- -----------------------
Premiums
Paid Plus Cash Cash Cash
Policy Interest Cash Surr Death Cash Surr Death Cash Surr Death
Year at 5% Value Value Benefit Value Value Benefit Value Value Benefit
---- ----- ----- ----- ------- ----- ----- ------- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,034 86,534 211,021 100,868 92,368 211,021 106,704 98,204 211,021
2 110,250 89,719 81,219 211,021 101,432 92,932 211,021 113,852 105,352 211,021
3 115,763 84,082 76,082 211,021 101,737 93,737 211,021 121,598 113,598 211,021
4 121,551 78,062 70,062 211,021 101,741 93,741 211,021 130,038 122,038 211,021
5 127,628 71,581 64,081 211,021 101,390 93,890 211,021 139,285 131,785 211,021
6 134,010 64,533 57,533 211,021 100,607 93,607 211,021 149,475 142,475 211,021
7 140,710 56,782 50,782 211,021 99,297 93,297 211,021 160,780 154,780 211,021
8 147,746 48,149 43,149 211,021 97,330 92,330 211,021 173,422 168,422 211,021
9 155,133 38,424 34,424 211,021 94,556 90,556 211,021 187,699 183,699 211,021
10 162,889 27,369 27,369 211,021 90,802 90,802 211,021 203,946 203,946
11 171,034 14,785 14,785 211,021 86,146 86,146 211,021 222,686 222,686 233,820
12 179,586 260 260 211,021 80,087 80,087 211,021 243,073 243,073 255,226
13 188,565 0 0 0 72,333 72,333 211,021 265,238 265,238 278,500
14 197,993 0 0 0 62,500 62,500 211,021 289,323 289,323 303,789
15 207,893 0 0 0 50,057 50,057 211,021 315,472 315,472 331,246
16 218,287 0 0 0 34,257 34,257 211,021 343,835 343,835 361,027
17 229,202 0 0 0 14,056 14,056 211,021 374,561 374,561 393,289
18 240,662 0 0 0 0 0 0 407,800 407,800 428,190
19 252,695 0 0 0 0 0 0 443,702 443,702 465,887
20 265,330 0 0 0 0 0 0 482,423 482,423 506,544
21 278,596 0 0 0 0 0 0 524,126 524,126 550,332
22 292,526 0 0 0 0 0 0 568,982 568,982 597,431
23 307,152 0 0 0 0 0 0 617,167 617,167 648,026
24 322,510 0 0 0 0 0 0 668,864 668,864 702,308
25 338,635 0 0 0 0 0 0 724,248 724,248 760,460
26 355,567 0 0 0 0 0 0 783,477 783,477 822,651
27 373,346 0 0 0 0 0 0 849,021 849,021 882,982
28 392,013 0 0 0 0 0 0 921,956 921,956 949,615
29 411,614 0 0 0 0 0 0 1,003,596 1,003,596 1,023,667
30 432,194 0 0 0 0 0 0 1,095,621 1,095,621 1,106,577
</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.
50
<PAGE> 54
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.
51
<PAGE> 55
FUND PERFORMANCE TABLE
<TABLE>
<CAPTION>
============================================================================================================
Annual Percentage Change Non annualized Percentage Change
====================================================================================================================================
Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Inception
Underlying Mutual Fund Inception Values 1994 1995 1996 to to to to to to
Date** 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century VP 05/01/91 14.3 -0.68 19.56 10.75 -2.57 10.75 32.42 31.51 29.62 61.3
Balanced
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP 11/20/87 16.16 -2.44 29.41 -5.56 -3.23 -5.56 22.21 19.22 26.4 126.25
Capital Appreciation
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP 05/01/94 11.75 N/A 10.77 12.92 1.94 12.92 25.08 N/A N/A 17.8
International
- ------------------------------------------------------------------------------------------------------------------------------------
American Century VP 05/01/96 10.14 N/A N/A N/A 0.61 N/A N/A N/A N/A 11.32
Value
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable 05/02/94 9.99 N/A 59.87 18.08 -2.2 18.08 88.78 N/A N/A 83.25
Investment Fund
Growth & Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Socially 10/06/93 17.04 0.19 32.83 19.66 -3.55 19.66 58.94 59.23 N/A 70.42
Responsible Growth
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 09/29/89 16.47 -0.42 35.02 20.95 -2.15 20.95 63.3 62.62 85.51 130.6
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II 09/06/89 20.05 -7.3 15.45 13.12 -1.57 13.12 30.59 21.06 59.71 104.27
- -Asset Manager
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II 01/03/95 13.26 N/A N/A 19.73 -0.71 19.73 N/A N/A N/A 65.03
- -Contrafund Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 10/09/86 24.42 5.69 33.35 12.8 -1.75 12.8 50.42 58.98 114.13 217.54
Equity-Income
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 10/09/86 23.77 -1.31 33.62 13.22 -3.19 13.22 51.28 49.3 89.79 259.72
Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 09/19/85 25.2 -2.81 19.05 12.55 1.26 12.55 33.99 30.22 88.11 207.53
High Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 01/28/87 14.16 0.41 8.26 11.75 0.42 11.75 20.98 21.48 45.01 86.63
Overseas Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Capital 04/15/92 17.98 -2.18 27.69 24.5 0.13 24.5 58.98 55.52 N/A 76.32
Appreciation Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond 11/08/82 16.45 -4.48 17.22 2.14 -1.24 2.14 19.73 14.37 31.61 202.54
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 11/10/81 12.48 2.54 4.29 3.74 0.31 3.74 8.19 10.93 14.82 130.02
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Small Company 10/23/95 13.83 N/A N/A 21.23 1.06 21.23 N/A N/A N/A 38.33
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 11/08/82 23.04 -0.23 27.43 20.26 0.03 20.26 53.25 52.9 78.72 526.54
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 09/10/84 17.52 -6.21 30.03 7.72 -0.69 7.72 40.07 31.37 49.7 275.91
Advisers Management
Trust -Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 09/10/84 14.09 -1.44 9.51 2.95 -0.18 2.95 12.74 11.11 21.38 127.25
Advisers Management
Trust -Bond Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 03/22/94 17.26 N/A 34.71 27.89 0.07 27.89 72.28 N/A N/A 66.63
Advisers Management
Trust -Partners
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 04/30/85 16.61 -3.2 15.49 3.44 -1.03 3.44 19.46 15.63 35.61 155.68
Account Fund - Bond
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 11/12/90 13.27 -6.94 0.92 16.27 0.68 16.27 17.34 9.2 68.31 72.14
Account Fund - Global
Securities
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 02/09/87 18.7 -3.21 19.8 14 -0.62 14 36.56 32.18 62.73 158.51
Account Fund -
Multiple Strategies
- ------------------------------------------------------------------------------------------------------------------------------------
Strong Variable 05/08/92 16.13 -6.61 33.52 -0.5 -0.48 -0.5 32.85 24.07 N/A 61.34
Insurance Funds, Inc.
- -Discovery Fund II,
Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Strong Variable 10/20/95 11.14 N/A N/A 8.95 -0.91 8.95 N/A N/A N/A 11.52
Insurance Funds, Inc.
- -International Stock
Fund II
- ------------------------------------------------------------------------------------------------------------------------------------
Strong Special Fund 05/08/92 21.08 2.26 24.2 16.62 -0.37 16.62 44.83 48.11 N/A 110.77
II, Inc.
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 09/01/89 16.58 -6.02 9.56 16.53 0.85 16.53 27.68 19.99 84.78 62.49
Insurance Trust
- -Worldwide Emerging
Markets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 09/01/89 14.34 -2.59 15.79 1.19 -1.01 1.19 17.17 14.14 13.48 46.05
Insurance Trust
- -Worldwide Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 12/27/95 10.07 N/A N/A 25.09 0.94 25.09 N/A N/A N/A 23.83
Insurance Trust
- -Worldwide Hard
Assets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Kampen American 07/03/95 14.93 N/A N/A 38.71 10.94 38.71 N/A N/A N/A 49.33
Capital Life
Investment Trust -
American Capital Real
Estate Securities Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 06/30/95 11.57 N/A N/A 8.56 0.09 8.56 N/A N/A N/A 15.74
Trust-International
Equity Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 11/18/96 10.16 N/A N/A N/A -0.12 N/A N/A N/A N/A -2.55
Trust-Post Venture
Capital Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 06/30/95 13.98 N/A N/A 12.43 2.18 12.43 N/A N/A N/A 39.76
Trust-Small Company
Growth Portfolio
====================================================================================================================================
</TABLE>
============================
Annualized Percentage Change
====================================================
3 Yrs. 5 yrs. Inception
Underlying Mutual Fund to to to
12/31/96 12/31/96 12/31/96
====================================================
American Century VP 9.56 5.33 8.81
Balanced
- ----------------------------------------------------
American Century VP 6.04 4.8 9.37
Capital Appreciation
- ----------------------------------------------------
American Century VP N/A N/A 6.34
International
- ----------------------------------------------------
American Century VP N/A N/A N/A
Value
- ----------------------------------------------------
Dreyfus Variable N/A N/A 25.56
Investment Fund
Growth & Income Fund
- ----------------------------------------------------
Dreyfus Socially 16.77 N/A 17.92
Responsible Growth
Fund
- ----------------------------------------------------
Dreyfus Stock Index 17.59 13.16 12.21
Fund
- ----------------------------------------------------
Fidelity VIP Fund II 6.58 9.82 10.25
- -Asset Manager
Portfolio
- ----------------------------------------------------
Fidelity VIP Fund II N/A N/A 28.6
- -Contrafund Portfolio
- ----------------------------------------------------
Fidelity VIP Fund - 16.71 16.45 11.96
Equity-Income
Portfolio
- ----------------------------------------------------
Fidelity VIP Fund - 14.29 13.67 13.34
Growth Portfolio
- ----------------------------------------------------
Fidelity VIP Fund - 9.2 13.47 10.47
High Income Portfolio
- ----------------------------------------------------
Fidelity VIP Fund - 6.7 7.72 6.49
Overseas Portfolio
- ----------------------------------------------------
NSAT Capital 15.86 N/A 12.8
Appreciation Fund
- ----------------------------------------------------
NSAT Government Bond 4.58 5.65 8.14
Fund
- ----------------------------------------------------
NSAT Money Market Fund 3.52 2.8 5.66
- ----------------------------------------------------
NSAT Small Company N/A N/A 31.4
Fund
- ----------------------------------------------------
NSAT Total Return Fund 15.2 12.31 13.85
- ----------------------------------------------------
Neuberger & Berman 9.52 8.4 11.36
Advisers Management
Trust -Growth
Portfolio
- ----------------------------------------------------
Neuberger & Berman 3.58 3.95 6.9
Advisers Management
Trust -Bond Portfolio
- ----------------------------------------------------
Neuberger & Berman N/A N/A 20.21
Advisers Management
Trust -Partners
Portfolio
- ----------------------------------------------------
Oppenheimer Variable 4.96 6.28 8.38
Account Fund - Bond
Fund
- ----------------------------------------------------
Oppenheimer Variable 2.98 10.97 9.26
Account Fund - Global
Securities
- ----------------------------------------------------
Oppenheimer Variable 9.75 10.23 10.08
Account Fund -
Multiple Strategies
- ----------------------------------------------------
Strong Variable 7.45 N/A 10.85
Insurance Funds, Inc.
- -Discovery Fund II,
Inc.
- ----------------------------------------------------
Strong Variable N/A N/A 9.54
Insurance Funds, Inc.
- -International Stock
Fund II
- ----------------------------------------------------
Strong Special Fund 13.99 N/A 17.41
II, Inc.
- ----------------------------------------------------
Van Eck Worldwide 6.26 13.07 6.85
Insurance Trust
- -Worldwide Emerging
Markets Fund
- ----------------------------------------------------
Van Eck Worldwide 4.51 2.56 5.3
Insurance Trust
- -Worldwide Bond Fund
- ----------------------------------------------------
Van Eck Worldwide N/A N/A 23.55
Insurance Trust
- -Worldwide Hard
Assets Fund
- ----------------------------------------------------
Van Kampen American N/A N/A 30.84
Capital Life
Investment Trust -
American Capital Real
Estate Securities Fund
- ----------------------------------------------------
Warburg Pincus N/A N/A 10.29
Trust-International
Equity Portfolio
- ----------------------------------------------------
Warburg Pincus N/A N/A N/A
Trust-Post Venture
Capital Portfolio
- ----------------------------------------------------
Warburg Pincus N/A N/A 25.15
Trust-Small Company
Growth Portfolio
====================================================
52
<PAGE> 56
The preceding 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 DEDUCTIONS FROM PREMIUMS, COST OF
INSURANCE CHARGES, SURRENDER CHARGES AND A MONTHLY ADMINISTRATIVE CHARGE.
The Underlying Mutual Fund Inception Date is the date the Underlying Mutual Fund
first became effective, which is not necessarily the same date the Underlying
Mutual Fund was first made available through the Variable Account. For those
Underlying Mutual Funds which have not been offered as sub-accounts through the
Variable Account for one of the quoted periods, the total return figures will
show the investment performance such Underlying Mutual Funds would have achieved
(reduced by the 1.30% asset charge and Fund investment advisory fees and
expenses) had they been offered as sub-accounts through the Variable Account for
the period quoted. Certain Underlying Mutual Funds are not as old as some of the
periods quoted, therefore, total return figures may not be available for all of
the periods shown.
53
<PAGE> 57
CASH VALUE PERFORMANCE TABLE
<TABLE>
<CAPTION>
========================================================================================
1 Year to 2 Years to 3 Years to 5 Years to
12/31/96 12/31/96 12/31/96 12/31/96
===================================================================================================================
Fund Cash Cash Cash Cash
Underlying Mutual Fund 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>
American Century VP 05/01/91 $ 54,658 $ 50,408 $ 64,623 $ 60,373 $ 63,056 $ 59,056 $ 59,420 $ 55,670
Balanced
- -------------------------------------------------------------------------------------------------------------------
American Century VP 11/20/87 $ 46,568 $ 42,318 $ 59,736 $ 55,486 $ 57,206 $ 53,206 $ 58,395 $ 54,645
Capital Appreciation
- -------------------------------------------------------------------------------------------------------------------
American Century VP 05/01/94 $ 55,732 $ 51,482 $ 60,890 $ 56,640 NA NA NA NA
International
- -------------------------------------------------------------------------------------------------------------------
American Century VP Value 05/01/94 NA NA NA NA NA NA NA NA
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable 05/02/94 $ 58,347 $ 54,097 $ 92,846 $ 88,596 NA NA NA NA
Investment Fund
Growth & Income Fund
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Socially 10/06/93 $ 59,098 $ 54,848 $ 77,816 $ 73,566 $ 76,654 $ 72,654 NA NA
Responsible Growth Fund
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund 09/29/89 $ 59,728 $ 55,478 $ 79,982 $ 75,732 $ 78,281 $ 74,281 $ 86,703 $ 82,953
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II 09/06/89 $ 55,832 $ 51,582 $ 63,666 $ 59,416 $ 57,768 $ 53,768 $ 74,834 $ 71,084
- -Asset Manager Portfolio
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund II 01/03/95 $ 59,117 $ 54,867 NA NA NA NA NA NA
- -Contrafund Portfolio
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 10/09/86 $ 55,675 $ 51,425 $ 73,614 $ 69,364 $ 76,677 $ 72,677 $101,563 $ 97,813
Equity-Income Portfolio
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 10/09/86 $ 55,904 $ 51,654 $ 76,507 $ 72,257 $ 74,149 $ 70,149 $ 92,174 $ 88,424
Growth Portfolio
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - High 09/19/85 $ 55,565 $ 51,315 $ 65,419 $ 61,169 $ 62,402 $ 58,402 $ 89,224 $ 85,474
Income Portfolio
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Fund - 01/28/87 $ 55,157 $ 50,907 $ 58,875 $ 54,625 $ 58,133 $ 54,133 $ 67,399 $ 63,649
Overseas Portfolio
- -------------------------------------------------------------------------------------------------------------------
NSAT Capital 04/15/92 $ 61,499 $ 57,249 $ 77,603 $ 73,353 $ 74,531 $ 70,531 NA NA
Appreciation Fund
- -------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 11/08/82 $ 50,362 $ 46,112 $ 59,075 $ 54,825 $ 55,305 $ 51,305 $ 61,842 $ 58,092
- -------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 11/10/81 $ 51,179 $ 46,929 $ 52,413 $ 48,163 $ 52,860 $ 48,860 $ 52,653 $ 48,903
- -------------------------------------------------------------------------------------------------------------------
NSAT Small Company Fund 10/23/95 $ 59,902 $ 55,652 NA NA NA NA NA NA
- -------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 11/08/82 $ 59,383 $ 55,133 $ 74,893 $ 70,643 $ 73,455 $ 69,455 $ 83,535 $ 79,785
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 09/10/84 $ 53,154 $ 48,904 $ 68,535 $ 64,285 $ 62,984 $ 58,984 $ 69,644 $ 65,894
Advisers Management
Trust -Growth Portfolio
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 09/10/84 $ 50,775 $ 46,525 $ 54,856 $ 50,606 $ 53,072 $ 49,072 $ 56,072 $ 52,322
Advisers Management
Trust -Bond Portfolio
- -------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 03/22/94 $ 63,183 $ 58,933 $ 84,414 $ 80,164 NA NA NA NA
Advisers Management
Trust -Partners Portfolio
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 04/30/85 $ 51,009 $ 46,759 $ 58,208 $ 53,958 $ 55,270 $ 51,270 $ 63,066 $ 59,316
Account Fund - Bond Fund
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 11/12/90 $ 57,407 $ 53,157 $ 57,023 $ 52,773 $ 51,951 $ 47,951 $ 79,155 $ 75,405
Account Fund - Global
Securities
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 02/09/87 $ 56,275 $ 52,025 $ 66,682 $ 62,432 $ 63,332 $ 59,332 $ 76,143 $ 72,393
Account Fund - Multiple
Strategies
- -------------------------------------------------------------------------------------------------------------------
Strong Variable 05/08/92 $ 49,040 $ 44,790 $ 64,929 $ 60,679 $ 59,384 $ 55,384 NA NA
Insurance Funds, Inc.
- -Discovery Fund II, Inc.
- -------------------------------------------------------------------------------------------------------------------
Strong Variable 10/20/95 $ 53,797 $ 49,547 NA NA NA NA NA NA
Insurance Funds, Inc.
- -International Stock
Fund II
- -------------------------------------------------------------------------------------------------------------------
Strong Special Fund II, 05/08/92 $ 57,573 $ 53,323 $ 70,763 $ 66,513 $ 71,223 $ 67,223 NA NA
Inc.
- -------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 09/01/89 $ 57,581 $ 53,331 $ 62,210 $ 57,960 $ 57,275 $ 53,275 $ 87,255 $ 83,505
Insurance Trust
- -Worldwide Emerging
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
======================================
10 Years to Inception to
12/31/96 12/31/96
=================================================================
Cash Cash
Underlying Mutual Fund Accum Surr. Accum Surr.
Value Value Value Value
=================================================================
American Century VP NA NA $ 74,673 $ 71,173
Balanced
- -----------------------------------------------------------------
American Century VP NA NA $102,271 $102,271
Capital Appreciation
- -----------------------------------------------------------------
American Century VP NA NA $ 56,516 $ 52,516
International
- -----------------------------------------------------------------
American Century VP Value NA NA $ 55,165 $ 50,915
- -----------------------------------------------------------------
Dreyfus Variable NA NA $ 89,069 $ 85,069
Investment Fund
Growth & Income Fund
- -----------------------------------------------------------------
Dreyfus Socially NA NA $ 81,943 $ 77,943
Responsible Growth Fund
- -----------------------------------------------------------------
Dreyfus Stock Index Fund NA NA $104,768 $102,268
- -----------------------------------------------------------------
Fidelity VIP Fund II NA NA $ 93,347 $ 90,847
- -Asset Manager Portfolio
- -----------------------------------------------------------------
Fidelity VIP Fund II NA NA $ 80,875 $ 76,625
- -Contrafund Portfolio
- -----------------------------------------------------------------
Fidelity VIP Fund - $141,964 $141,964 $140,829 $140,829
Equity-Income Portfolio
- -----------------------------------------------------------------
Fidelity VIP Fund - $169,144 $169,144 $162,707 $162,707
Growth Portfolio
- -----------------------------------------------------------------
Fidelity VIP Fund - High $108,810 $108,810 $135,060 $135,060
Income Portfolio
- -----------------------------------------------------------------
Fidelity VIP Fund - NA NA $ 79,118 $ 79,118
Overseas Portfolio
- -----------------------------------------------------------------
NSAT Capital NA NA $ 82,394 $ 78,644
Appreciation Fund
- -----------------------------------------------------------------
NSAT Government Bond Fund $ 86,333 $ 86,333 $129,204 $129,204
- -----------------------------------------------------------------
NSAT Money Market Fund $ 64,711 $ 64,711 $ 92,972 $ 92,972
- -----------------------------------------------------------------
NSAT Small Company Fund NA NA $ 68,202 $ 63,952
- -----------------------------------------------------------------
NSAT Total Return Fund $127,358 $127,358 $287,487 $287,487
- -----------------------------------------------------------------
Neuberger & Berman $115,896 $115,896 $170,971 $170,971
Advisers Management
Trust -Growth Portfolio
- -----------------------------------------------------------------
Neuberger & Berman $ 71,419 $ 71,419 $ 97,924 $ 97,924
Advisers Management
Trust -Bond Portfolio
- -----------------------------------------------------------------
Neuberger & Berman NA NA $ 80,362 $ 76,362
Advisers Management
Trust -Partners Portfolio
- -----------------------------------------------------------------
Oppenheimer Variable $ 88,916 $ 88,916 $112,121 $112,121
Account Fund - Bond Fund
- -----------------------------------------------------------------
Oppenheimer Variable NA NA $ 79,021 $ 76,021
Account Fund - Global
Securities
- -----------------------------------------------------------------
Oppenheimer Variable NA NA $115,391 $115,391
Account Fund - Multiple
Strategies
- -----------------------------------------------------------------
Strong Variable NA NA $ 76,065 $ 72,315
Insurance Funds, Inc.
- -Discovery Fund II, Inc.
- -----------------------------------------------------------------
Strong Variable NA NA $ 54,833 $ 50,583
Insurance Funds, Inc.
- -International Stock
Fund II
- -----------------------------------------------------------------
Strong Special Fund II, NA NA $100,525 $ 96,775
Inc.
- -----------------------------------------------------------------
Van Eck Worldwide NA NA $ 71,287 $ 68,787
Insurance Trust
- -Worldwide Emerging
- -----------------------------------------------------------------
54
<PAGE> 58
<TABLE>
<CAPTION>
========================================================================================
1 Year to 2 Years to 3 Years to 5 Years to
12/31/96 12/31/96 12/31/96 12/31/96
===================================================================================================================
Fund Cash Cash Cash Cash
Underlying Mutual Fund 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>
Markets Fund
- -------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 09/01/89 $ 49,891 $ 45,641 $ 57,111 $ 52,861 $ 54,572 $ 50,572 $ 51,940 $ 48,190
Insurance Trust
- -Worldwide Bond Fund
- -------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 12/27/95 $ 61,825 $ 57,575 NA NA NA NA NA NA
Insurance Trust
- -Worldwide Hard Assets
Fund
- -------------------------------------------------------------------------------------------------------------------
Van Kampen American 12/27/95 $ 68,503 $ 64,253 NA NA NA NA NA NA
Capital Life Investment
Trust - American Capital
Real Estate Securities
Fund
- -------------------------------------------------------------------------------------------------------------------
Warburg Pincus 06/30/95 $ 53,587 $ 49,337 NA NA NA NA NA NA
Trust-International
Equity Portfolio
- -------------------------------------------------------------------------------------------------------------------
Warburg Pincus 11/18/96 NA NA NA NA NA NA NA NA
Trust-Post Venture
Capital Portfolio
- -------------------------------------------------------------------------------------------------------------------
Warburg Pincus 06/30/95 $ 55,521 $ 51,271 NA NA NA NA NA NA
Trust-Small Company
Growth Portfolio
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
=====================================
10 Years to Inception to
12/31/96 12/31/96
================================================================
Cash Cash
Underlying Mutual Fund Accum Surr. Accum Surr.
Value Value Value Value
================================================================
Markets Fund
- ----------------------------------------------------------------
Van Eck Worldwide NA NA $ 65,263 $ 62,763
Insurance Trust
- -Worldwide Bond Fund
- ----------------------------------------------------------------
Van Eck Worldwide NA NA $ 61,067 $ 56,817
Insurance Trust
- -Worldwide Hard Assets
Fund
- ----------------------------------------------------------------
Van Kampen American NA NA $ 73,247 $ 68,997
Capital Life Investment
Trust - American Capital
Real Estate Securities
Fund
- ----------------------------------------------------------------
Warburg Pincus NA NA $ 56,738 $ 52,488
Trust-International
Equity Portfolio
- ----------------------------------------------------------------
Warburg Pincus NA NA $ 48,555 $ 44,305
Trust-Post Venture
Capital Portfolio
- ----------------------------------------------------------------
Warburg Pincus NA NA $ 68,754 $ 64,504
Trust-Small Company
Growth Portfolio
- ----------------------------------------------------------------
The PRECEDING CASH VALUE PERFORMANCE table shows the effect of the performance
quoted on accumulated values and cash surrender values, based on a hypothetical
annual 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 value figures 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 Fund Inception Date is the date the Underlying Mutual
Fund first became effective, which is not necessarily the same date the
Underlying Mutual Fund was first made available through the Variable Account.
For those Underlying Mutual Funds which have not been offered as sub-accounts
through the Variable Account for one of the quoted periods, the cash values will
show the investment performance such Underlying Mutual Funds would have achieved
(reduced by any applicable Variable Account and Policy Charges, and Underlying
Mutual Fund investment advisory fees and expenses) had they been offered as
sub-accounts through the Variable Account for the period quoted. Certain
Underlying Mutual Funds are not as old as some of the periods quoted, therefore,
the cash values may not be available for all of the periods shown.
55
<PAGE> 59
<PAGE> 1
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide VLI Separate Account-2:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account-2 as of December 31,
1996, and the related statements of operations and changes in contract owners'
equity and schedules of changes in unit value for each of the years in the three
year period then ended. These financial statements and schedules of changes in
unit value are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules of changes in unit value based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and schedules of
changes in unit value are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures include confirmation of securities
owned as of December 31, 1996, by correspondence with the transfer agents of the
underlying mutual funds. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and schedules of changes in unit
value referred to above present fairly, in all material respects, the financial
position of Nationwide VLI Separate Account-2 as of December 31, 1996, and the
results of its operations and its changes in contract owners' equity and the
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 7, 1997
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
146,819 shares (cost $3,024,270) ................................. $ 2,949,585
Dreyfus Stock Index Fund (DryStkIx)
763,499 shares (cost $14,597,832) ................................ 15,483,766
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
2,131,003 shares (cost $38,585,366) .............................. 44,815,000
Fidelity VIP - Growth Portfolio (FidVIPGr)
1,730,628 shares (cost $51,294,462) .............................. 53,891,755
Fidelity VIP - High Income Portfolio (FidVIPHI)
1,362,065 shares (cost $16,148,006) .............................. 17,053,049
Fidelity VIP - Overseas Portfolio (FidVIPOv)
859,910 shares (cost $14,604,187) ................................ 16,200,703
Fidelity VIP II - Asset Manager Portfolio (FidVIPAM)
1,317,970 shares (cost $19,127,367) .............................. 22,313,225
Fidelity VIP II - Contrafund Portfolio (FidVIPCon)
824,740 shares (cost $12,402,278) ................................ 13,657,697
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
505,369 shares (cost $7,950,583) ................................. 8,227,404
Nationwide SAT - Government Bond Fund (NSATGvtBd)
605,008 shares (cost $6,588,470) ................................. 6,679,290
Nationwide SAT - Money Market Fund (NSATMyMkt)
34,777,014 shares (cost $34,777,014) ............................. 34,777,014
Nationwide SAT - Small Company Fund (NSATSmCo)
425,548 shares (cost $5,751,682) ................................. 5,910,856
Nationwide SAT - Total Return Fund (NSATTotRe)
3,193,395 shares (cost $37,809,735) .............................. 42,376,355
Neuberger &Berman - Growth Portfolio (NBAMTGro)
493,535 shares (cost $12,574,511) ................................ 12,723,337
Neuberger &Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
197,236 shares (cost $2,784,764) ................................. 2,771,172
Neuberger &Berman - Partners Portfolio (NBAMTPart)
646,222 shares (cost $9,535,912) ................................. 10,649,743
Oppenheimer - Bond Fund (OppBdFd)
513,225 shares (cost $5,888,181) ................................. 5,968,803
Oppenheimer - Global Securities Fund (OppGlSec)
561,069 shares (cost $8,710,530) ................................. 9,914,098
Oppenheimer - Multiple Strategies Fund (OppMult)
509,706 shares (cost $7,225,046) ................................. 7,966,703
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Strong Special Fund II, Inc. (StSpec2)
893,185 shares (cost $14,371,245) ................................ 17,184,873
Strong VIF - Strong Discovery Fund II (StDisc2)
624,950 shares (cost $7,308,503) ................................. 6,749,458
Strong VIF - Strong International Stock Fund II (StIntStk2)
162,907 shares (cost $1,831,224) ................................. 1,829,443
TCI Portfolios - TCI Balanced (TCIBal)
351,201 shares (cost $2,386,878) ................................. 2,648,056
TCI Portfolios - TCI Growth (TCIGro)
1,169,740 shares (cost $12,750,085) .............................. 11,978,141
TCI Portfolios - TCI International (TCIInt)
576,818 shares (cost $3,278,870) ................................. 3,437,835
TCI Portfolios - TCI Value (TCIValue)
1,637 shares (cost $9,188) ....................................... 9,133
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
377,518 shares (cost $6,100,328) ................................. 6,312,096
Van Eck - Worldwide Bond Fund (VEWrldBd)
202,885 shares (cost $2,232,824) ................................. 2,252,023
Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt)
257 shares (cost $3,213) ......................................... 3,213
Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRES
216,078 shares (cost $2,880,829) ................................. 3,193,630
Warburg Pincus - International Equity Portfolio (WPIntEq)
730,797 shares (cost $8,366,199) ................................. 8,389,554
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
514,119 shares (cost $7,238,771) ................................. 7,326,189
-------------
Total investments ............................................. 405,643,199
Accounts receivable .................................................... 3,525,975
-------------
Total assets .................................................. 409,169,174
-------------
CONTRACT OWNERS' EQUITY (NOTE 7) .......................................... $ 409,169,174
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested capital gains and dividends . . . . . . . . . . . . . $ 16,972,691 6,764,208 3,376,057
Mortality and expense charges (note 3) . . . . . . . . . . . . . (2,983,466) (1,747,342) (879,737)
------------ ----------- -----------
Net investment activity . . . . . . . . . . . . . . . . . . . 13,989,225 5,016,866 2,496,320
------------ ----------- -----------
Proceeds from mutual fund shares sold . . . . . . . . . . . . . 275,979,207 163,574,836 184,340,809
Cost of mutual fund shares sold . . . . . . . . . . . . . . . . (266,008,543) (154,208,870) (184,441,475)
------------ ----------- -----------
Realized gain (loss) on investments . . . . . . . . . . . . . 9,970,664 9,365,966 (100,666)
Change in unrealized gain (loss) on investments . . . . . . . . 12,175,328 17,134,325 (3,604,010)
------------ ----------- -----------
Net gain (loss) on investments . . . . . . . . . . . . . . . 22,145,992 26,500,291 (3,704,676)
------------ ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations . . . . . . . . . . . 36,135,217 31,517,157 (1,208,356)
------------ ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners . . . . . . . . 174,104,282 106,694,208 77,172,455
Surrenders (note 2d) . . . . . . . . . . . . . . . . . . . . . . (6,124,049) (4,970,867) (1,308,994)
Death benefits . . . . . . . . . . . . . . . . . . . . . . . . . (730,700) (143,265) (15,398)
Policy loans (net of repayments) (note 5) . . . . . . . . . . . (6,468,023) (2,529,830) (2,980,396)
Deductions for surrender charges (note 2d) . . . . . . . . . . . (721,263) (364,725) (116,899)
Redemptions to pay cost of insurance charges
and administrative charges (notes 2b and 2c) . . . . . . . . (24,075,896) (14,110,656) (5,382,393)
Deductions for asset charges (note 3) . . . . . . . . . . . . . (20,037) - -
------------ ----------- -----------
Net increase (decrease) in equity transactions . . . . . . 135,964,314 84,574,865 67,368,375
------------ ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY . . . . . . . . . . . . . . . 172,099,531 116,092,022 66,160,019
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD . . . . . . . . . . . . 237,069,643 120,977,621 54,817,602
------------ ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD . . . . . . . . . . . . . . . $ 409,169,174 237,069,643 120,977,621
============= =========== ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account-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)
Dreyfus Variable Investment Fund - Growth and Income Portfolio (DryGroInc)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II (Fidelity
VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed
for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman);
Neuberger & Berman - Growth Portfolio (NBAMTGro)
Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
Neuberger & Berman - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
Oppenheimer - Bond Fund (OppBdFd)
Oppenheimer - Global Securities Fund (OppGlSec)
Oppenheimer - Multiple Strategies Fund (OppMult)
<PAGE> 6
Strong Special Fund II, Inc. (StSpec2)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Portfolios of the TCI Portfolios, Inc. (TCI Portfolios);
TCI Portfolios - TCI Balanced (TCIBal)
TCI Portfolios - TCI Growth (TCIGro)
TCI Portfolios - TCI International (TCIInt)
TCI Portfolios - TCI Value (TCIValue)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck);
Van Eck - Gold and Natural Resources Fund (VEGoldNR)
Van Eck - Worldwide Bond Fund (VEWrldBd) (formerly Van Eck - Global
Bond Fund (VEGlobBd))
Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt)
Fund of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital);
Van Kampen American Capital LIT - Real Estate Securities Fund
(VKACRESec)
Portfolios of the Warburg Pincus Trust (Warburg Pincus);
Warburg Pincus - International Equity Portfolio (WPIntEq)
Warburg Pincus - Post Venture Capital Portfolio (WPPVenCap)
Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1996, contract owners have invested in all of the above
funds (except Dreyfus Variable Investment Fund - Growth and Income Portfolio and
Warburg Pincus - Post Venture Capital Portfolio.) The contract owners' equity is
affected by the investment results of each fund, equity transactions by contract
owners and certain contract expenses (see notes 2 and 3). The accompanying
financial statements include only contract owners' purchase payments pertaining
to the variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts of the
Company.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1996. Fund purchases and sales are
accounted for on the trade date (date the order to buy or sell is executed). The
cost of investments sold is determined on a specific identification basis, and
dividends (which include capital gain distributions) are accrued as of the
ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company, which is taxed as a life insurance company under the provisions
of the Internal Revenue Code.
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.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(f) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with the
current year presentation.
<PAGE> 7
(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.
On last survivor flexible premium contracts, the Company deducts a charge
for state premium taxes equal to 3.5% 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 5% of each premium payment during the
first ten years and 1.5% of each premium payment thereafter.
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).
For last survivor flexible premium contracts, the monthly cost of
insurance is determined in a manner that reflects the anticipated mortality of
the two insureds and the fact that the death benefit is not payable until the
death of the second insured to die.
(c) Administrative Charges
An administrative charge is assessed against each contract to recover
policy maintenance, accounting, record keeping and other administrative expenses
and is assessed against each contract by liquidating units.
For single premium contracts, the Company deducts an annual administrative
charge which is determined as follows:
Contracts issued prior to April 16, 1990:
Purchase payments totalling less than $25,000 - $10/month
Purchase payments totalling $25,000 or more - none
Contracts issued on or after April 16, 1990:
Purchase payments totalling less than $25,000 - $90/year ($65/year in
New York)
Purchase payments totalling $25,000 or more - $50/year
For multiple payment contracts, the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum).
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). 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.
For modified single premium contracts, the monthly charge is equal to an
annual rate of .30% multiplied by the policy's cash value. For policy years 11
and later, this monthly charge is reduced to an annual rate of 0.15% of the
policy's cash value. The monthly charge is subject to a $10 minimum.
For last survivor flexible premium contracts, the Company deducts a
monthly administrative charge equal to the sum of the policy charge and the
basic coverage charge. For policy years one through ten the policy charge is
$10. Additionally, there is a $0.04 per $1000 basic coverage charge (not less
than $20 or more than $80 per policy). For policy years eleven and after, the
policy charge is $5. Additionally, there is a $0.02 per $1000 basic coverage
charge (not less than $10 or more than $40 per policy). Additionally, the
Company deducts a monthly increase charge of $2.40 per $1000 applied to any
increase in the specified amount during the first 12 months after the increase
becomes effective. The charge may be raised to $3.60 per $1000 of increase per
year at the Company's discretion.
<PAGE> 8
(d) Surrender Charges
Policy surrenders result in a redemption of the contract value from the
Account and payment of the surrender proceeds to the contract owner or designee.
The surrender proceeds consist of the contract value, less any outstanding
policy loans, and less a surrender charge, if applicable. The charge is
determined according to contract type.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single premium
contracts issued prior to April 16, 1990, the charge is 8% in the first year and
declines to 0% after the ninth year. For single premium contracts issued on or
after April 16, 1990, the charge is 8.5% in the first year, and declines to 0%
after the ninth year.
For multiple payment contracts and flexible premium contracts, the amount
charged is based upon a specified percentage of the initial surrender charge,
which varies by issue age, sex and rate class. The charge is 100% of the initial
surrender charge in the first year, declining to 0% after the ninth year.
For modified single premium contracts, the amount charged is based on the
original purchase payment. The charge is 10% in the first year, declining to 0%
in the ninth year.
For last survivor flexible premium contracts, the charge is 100% of the
initial surrender charge, declining to 0% in the fourteenth year if the average
issue age is 74 or less. The charge is 100% of the initial surrender charge,
declining to 0% in the ninth year if the average issue age is 75 or greater. For
last survivor flexible payment contracts, the initial surrender charge is
comprised of two components, an underwriting surrender charge and a sales
surrender charge.
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.
For modified single premium contracts, the Company deducts an annual rate
of .90% charged against the cash value of the contacts. This charge is assessed
monthly against each contract by liquidating units.
For last survivor flexible premium contracts, the Company deducts an
annual rate of .80% in policy years one through ten. This charge is assessed
monthly by liquidating units. In policy years eleven and greater, the Company
deducts an annual rate of .80% if the cash value of the contract is less than
$100,000. If the cash value is greater than or equal to $100,000, the Company
reduces the annual asset fee rate to .30%.
(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. For last survivor flexible
premium contracts, the proceeds are payable on the death of the last surviving
insured. The excess of the death benefit proceeds over the contract value on the
date of death is paid by the Company's general account.
<PAGE> 9
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% (50% during
first year of single and modified 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, flexible premium,
modified single and last survivor flexible premium contracts, 6% interest is due
and payable in advance on the policy anniversary when there is a loan
outstanding on the policy.
At the time the loan is granted, the amount of the loan is transferred
from the Account to the Company's general account as collateral for the
outstanding loan. Collateral amounts in the general account are credited with
the stated rate of interest in effect at the time the loan is made, subject to a
guaranteed minimum rate. Loan repayments result in a transfer of collateral,
including interest, back to the Account.
(6) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented for each series, as applicable, in the following format:
- Beginning unit value - Jan. 1
- Reinvested capital gains and dividends
(This amount reflects the increase in the unit value due to
capital gains and dividend 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> 10
(7) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1996,
for each series, in both the accumulation and payout phases.
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 ........................ 8,709 $29.854628 $260,004
Fidelity VIP - Growth Portfolio ............................... 5,280 34.379126 181,522
Fidelity VIP - High Income Portfolio .......................... 3,462 24.493313 84,796
Fidelity VIP - Overseas Portfolio ............................. 5,297 19.654083 104,108
Fidelity VIP-II - Asset Manager Portfolio ..................... 1,158 20.525705 23,769
Nationwide SAT - Government Bond Fund ......................... 2,831 19.842234 56,173
Nationwide SAT - Money Market Fund ............................ 28,405 14.875178 422,529
Nationwide SAT - Total Return Fund ............................ 1,189 26.717684 31,767
Neuberger &Berman - Growth Portfolio .......................... 5,398 24.838185 134,077
Neuberger &Berman - Limited Maturity Bond Portfolio ........... 5,192 16.433880 85,325
Oppenheimer - Global Securities Fund .......................... 1,616 13.422186 21,690
Strong Special Fund II, Inc. .................................. 406 21.426416 8,699
TCI Portfolios - TCIGrowth .................................... 8,408 24.053649 202,243
Van Eck - Gold and Natural Resources Fund ..................... 4,593 15.014547 68,962
Van Eck - Worldwide Bond Fund ................................. 23 14.682655 338
Van Kampen American Capital LIT - Real Estate Securities Fund . 5,134 15.011508 77,069
Warburg Pincus - International Equity Portfolio ............... 1,802 11.634515 20,965
Single Premium contracts issued on or after April 16, 1990:
The Dreyfus Socially Responsible Growth Fund, Inc. ............ 16,672 17.041821 284,121
Dreyfus Stock Index Fund ...................................... 166,883 16.474993 2,749,396
Fidelity VIP - Equity-Income Portfolio ........................ 556,249 24.419978 13,583,588
Fidelity VIP - Growth Portfolio ............................... 436,608 23.774932 10,380,326
Fidelity VIP - High Income Portfolio .......................... 160,710 25.198564 4,049,661
Fidelity VIP - Overseas Portfolio ............................. 349,868 14.155666 4,952,615
Fidelity VIP-II - Asset Manager Portfolio ..................... 328,224 20.046209 6,579,647
Fidelity VIP-II - Contrafund Portfolio ........................ 253,591 13.256842 3,361,816
Nationwide SAT - Capital Appreciation Fund .................... 69,468 17.984058 1,249,317
Nationwide SAT - Government Bond Fund ......................... 215,649 16.449774 3,547,377
Nationwide SAT - Money Market Fund ............................ 1,264,987 12.479104 15,785,904
Nationwide SAT - Small Company Fund ........................... 84,265 13.833221 1,165,656
Nationwide SAT - Total Return Fund ............................ 145,392 23.035683 3,349,204
Neuberger &Berman - Growth Portfolio .......................... 171,390 17.521012 3,002,926
Neuberger &Berman - Limited Maturity Bond Portfolio ........... 72,295 14.088625 1,018,537
Neuberger &Berman - Partners Portfolio ........................ 166,759 17.259712 2,878,212
Oppenheimer - Bond Fund ....................................... 107,202 16.608318 1,780,445
Oppenheimer - Global Securities Fund .......................... 112,397 13.270426 1,491,556
Oppenheimer - Multiple Strategies Fund ........................ 137,052 18.701076 2,563,020
Strong Special Fund II, Inc. .................................. 145,314 21.077454 3,062,849
Strong VIF - Strong Discovery Fund II ......................... 96,856 16.133543 1,562,630
Strong VIF - Strong International Stock Fund II ............... 51,959 11.141803 578,917
TCI Portfolios - TCIBalanced .................................. 38,880 14.303509 556,120
TCI Portfolios - TCIGrowth .................................... 187,431 16.163625 3,029,564
TCI Portfolios - TCIInternational ............................. 140,670 11.748051 1,652,598
Van Eck - Gold and Natural Resources Fund ..................... 179,378 16.582948 2,974,616
Van Eck - Worldwide Bond Fund ................................. 51,233 14.339608 734,661
Van Kampen American Capital LIT - Real Estate Securities Fund . 77,060 14.933196 1,150,752
Warburg Pincus - International Equity Portfolio ............... 229,373 11.573771 2,654,711
Warburg Pincus - Small Company Growth Portfolio ............... 101,386 13.975650 1,416,935
Multiple Payment contracts and Flexible Premium contracts:
The Dreyfus Socially Responsible Growth Fund, Inc. ............ 149,312 17.319589 2,586,022
Dreyfus Stock Index Fund ...................................... 743,163 16.744674 12,444,022
Fidelity VIP - Equity-Income Portfolio ........................ 1,203,661 25.185570 30,314,888
Fidelity VIP - Growth Portfolio ............................... 1,774,112 24.186560 42,909,666
</TABLE>
<PAGE> 11
<TABLE>
<S> <C> <C> <C>
Fidelity VIP - High Income Portfolio .......................... 519,177 23.588786 12,246,755
Fidelity VIP - Overseas Portfolio ............................. 723,688 15.324813 11,090,383
Fidelity VIP-II - Asset Manager Portfolio ..................... 858,375 18.169993 15,596,668
Fidelity VIP-II - Contrafund Portfolio ........................ 741,153 13.356323 9,899,079
Nationwide SAT - Capital Appreciation Fund .................... 373,658 18.410667 6,879,293
Nationwide SAT - Government Bond Fund ......................... 196,023 15.383251 3,015,471
Nationwide SAT - Money Market Fund ............................ 1,548,800 12.214743 18,918,194
Nationwide SAT - Small Company Fund ........................... 325,390 13.915643 4,528,011
Nationwide SAT - Total Return Fund ............................ 1,740,045 21.988773 38,261,455
Neuberger &Berman - Growth Portfolio .......................... 542,729 17.282005 9,379,445
Neuberger &Berman - Limited Maturity Bond Portfolio ........... 117,219 13.551318 1,588,472
Neuberger &Berman - Partners Portfolio ........................ 434,744 17.469360 7,594,699
Oppenheimer - Bond Fund ....................................... 260,488 15.764821 4,106,547
Oppenheimer - Global Securities Fund .......................... 616,399 13.487753 8,313,837
Oppenheimer - Multiple Strategies Fund ........................ 287,199 18.446363 5,297,777
Strong VIF - Strong Discovery Fund II ......................... 305,653 16.514861 5,047,817
Strong VIF - Strong International Stock Fund II ............... 103,783 11.208230 1,163,224
Strong Special Fund II, Inc. .................................. 649,651 21.575419 14,016,493
TCI Portfolios - TCIBalanced .................................. 137,856 14.642920 2,018,614
TCI Portfolios - TCIGrowth .................................... 564,722 15.327392 8,655,715
TCI Portfolios - TCIInternational ............................. 145,930 11.890858 1,735,233
TCI Portfolios - TCI Value .................................... 900 10.143687 9,129
Van Eck - Gold and Natural Resources Fund ..................... 174,641 18.284590 3,193,239
Van Eck - Worldwide Bond Fund ................................. 110,868 13.479157 1,494,407
Van Eck - Worldwide Emerging Markets Fund ..................... 319 10.078948 3,215
Van Kampen American Capital LIT - Real Estate Securities Fund . 120,572 15.045195 1,814,029
Warburg Pincus - International Equity Portfolio ............... 469,367 11.660648 5,473,123
Warburg Pincus - Small Company Growth Portfolio ............... 402,279 14.080553 5,664,311
Modified Single Premium and Last Survivor Flexible Premium contracts:
The Dreyfus Socially Responsible Growth Fund, Inc. ............ 7,118 11.180091 79,580
Dreyfus Stock Index Fund ...................................... 25,438 11.459856 291,516
Fidelity VIP - Equity-Income Portfolio ........................ 61,195 10.790149 660,303
Fidelity VIP - Growth Portfolio ............................... 40,595 10.446167 424,062
Fidelity VIP - High Income Portfolio .......................... 62,142 10.830462 673,027
Fidelity VIP - Overseas Portfolio ............................. 5,158 10.668178 55,026
Fidelity VIP-II - Asset Manager Portfolio ..................... 10,453 11.022140 115,214
Fidelity VIP-II - Contrafund Portfolio ........................ 35,353 11.249999 397,721
Nationwide SAT - Capital Appreciation Fund .................... 8,542 11.610340 99,176
Nationwide SAT - Government Bond Fund ......................... 5,711 10.679205 60,989
Nationwide SAT - Money Market Fund ............................ 304,482 10.339005 3,148,041
Nationwide SAT - Small Company Fund ........................... 20,576 10.524418 216,550
Nationwide SAT - Total Return Fund ............................ 64,330 11.444877 736,249
Neuberger &Berman - Growth Portfolio .......................... 21,053 9.869834 207,790
Neuberger &Berman - Limited Maturity Bond Portfolio ........... 7,552 10.477247 79,124
Neuberger &Berman - Partners Portfolio ........................ 15,462 11.476324 177,447
Oppenheimer - Bond Fund ....................................... 7,727 10.644626 82,251
Oppenheimer - Global Securities Fund .......................... 8,064 10.833847 87,364
Oppenheimer - Multiple Strategies Fund ........................ 9,746 10.937578 106,598
Strong Special Fund II, Inc. .................................. 9,106 10.766829 98,043
Strong VIF - Strong Discovery Fund II ......................... 14,115 9.884557 139,521
Strong VIF - Strong International Stock Fund II ............... 8,692 10.054422 87,393
TCI Portfolios - TCIBalanced .................................. 6,725 10.931147 73,512
TCI Portfolios - TCIGrowth .................................... 9,987 9.118427 91,066
TCI Portfolios - TCIInternational ............................. 4,661 10.773558 50,216
Van Eck - Gold and Natural Resources Fund ..................... 7,974 10.056004 80,187
Van Eck - Worldwide Bond Fund ................................. 2,209 10.516764 23,232
Van Kampen American Capital LIT - Real Estate Securities Fund . 11,112 13.673840 151,944
Warburg Pincus - International Equity Portfolio ............... 24,290 9.935018 241,322
Warburg Pincus - Small Company Growth Portfolio ............... 24,804 9.827590 243,764
------ -------- ------------
$409,169,174
============
</TABLE>
<PAGE> 12
SCHEDULE I
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
FIDVIPEI FIDVIPGR FIDVIPHI FIDVIPOV FIDVIPAM
-------- -------- -------- -------- --------
1996**
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan 1 $26.373971 30.259267 21.685282 17.526172 18.081878
- -------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.217030 2.174262 1.977825 .431349 1.189904
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.528645 2.256603 1.050520 1.872575 1.435663
- -------------------------------------------------------------------------------------------------------------------------------
Asset charges (.265018) (.311006) (.220314) (.176013) (.181740)
- -------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $29.854628 34.379126 24.493313 19.654083 20.525705
- -------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 13% 14% 13% 12% 14%
================================================================================================================================
1995
Beginning unit value - Jan 1 $19.708533 22.566466 18.151674 16.131866 15.607540
- -------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.542607 .124738 1.314664 .123427 .327932
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 5.341041 7.828480 2.410020 1.428229 2.304058
- -------------------------------------------------------------------------------------------------------------------------------
Asset charges (.218210) (.260417) (.191076) (.157350) (.157652)
- -------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $26.373971 30.259267 21.685282 17.526172 18.081878
- -------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 34% 34% 19% 9% 16%
================================================================================================================================
1994
Beginning unit value - Jan 1 $18.583057 22.785679 18.612185 16.009316 16.778042
- -------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.395798 1.371061 1.706032 .082663 .815806
- -------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.087894) (1.381165) (1.991707) .196908 (1.832732)
- -------------------------------------------------------------------------------------------------------------------------------
Asset charges (.182428) (.209109) (.174836) (.157021) (.153576)
- -------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $19.708533 22.566466 18.151674 16.131866 15.607540
- -------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 6% (1)% (2)% 1% (7)%
================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NSATGVTBD NSATMYMKT NSATTOTRE
--------- --------- ---------
1996
<S> <C> <C> <C>
Beginning unit value - Jan. 1 19.357639 14.287454 22.138653
- --------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.200383 .727569 1.479674
- --------------------------------------------------------------------------------------------
Unrealized gain (loss) (.533024) .000000 3.328301
- --------------------------------------------------------------------------------------------
Asset charges (.182764) (.139845) (.228944)
- --------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 19.842234 14.875178 26.717684
- --------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 3% 4% 21%
============================================================================================
1995
Beginning unit value - Jan. 1 16.457035 13.652006 17.312690
- --------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.167149 .768745 1.720678
- --------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.903991 .000000 3.293404
- --------------------------------------------------------------------------------------------
Asset charges (.170536) (.133297) (.188119)
- --------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 19.357639 14.287454 22.138653
- --------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* 18% 5% 28%
============================================================================================
1994
Beginning unit value - Jan. 1 17.168348 13.267517 17.291720
- --------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 1.079469 .512535 .875020
- --------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.633239) .000000 (.688478)
- --------------------------------------------------------------------------------------------
Asset charges (.157543) (.128046) (.165572)
- --------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 16.457035 13.652006 17.312690
- --------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (4)% 3% 0%
============================================================================================
<FN>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** No other investment options were being utilized.
</TABLE>
<PAGE> 13
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NBAMTGRO NBAMTLDMAT OPPGLSEC STSPEC2
-------- ---------- -------- -------
1996***
<S> <C> <C> <C> <C>
Beginning unit value - Jan 1 $22.976381 15.906671 11.503363 18.309087
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.084651 1.338753 .000000 .861320
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .004126 (.659070) 2.036434 2.443023
- -----------------------------------------------------------------------------------------------------------------
Asset charges (.226973) (.152474) (.117611) (.187014)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $24.838185 16.433880 13.422186 21.426416
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
unit value* (a) 8% 3% 17% 17%
=================================================================================================================
1995
Beginning unit value - Jan 1 $17.608267 14.475203 11.358489 14.690448
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .623265 .804090 .298934 .761035
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 4.945641 .771696 (.045712) 3.013032
- -----------------------------------------------------------------------------------------------------------------
Asset charges (.200792) (.144318) (.108348) (.155428)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $22.976381 15.906671 11.503363 18.309087
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 30% 10% 1% 25%
=================================================================================================================
1994
Beginning unit value - Jan 1 $18.709214 14.635617 12.162716 14.315226
- -----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.255334 .618309 .214436 .411358
- -----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (3.185612) (.641424) (.903773) .103258
- -----------------------------------------------------------------------------------------------------------------
Asset charges (.170669) (.137299) (.114890) (.139394)
- -----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.608267 14.475203 11.358489 14.690448
- -----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (6)% (1)% (7)% 3%
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
TCIGRO VEGOLDNR VEWRLDBD VKACRESEC WPINTEQ
------ -------- -------- --------- --------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan 1 25.381408 12.839256 14.458585 10.784280 10.679811
- -----------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends 2.847171 .272272 .394300 .288822 .226874
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (3.934619) 2.040791 (.034088) 4.051625 .835595
- -----------------------------------------------------------------------------------------------------------------------------
Asset charges (.240311) (.137772) (.136142) (.113219) (.107765)
- -----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 24.053649 15.014547 14.682655 15.011508 11.634515
- -----------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
unit value* (a) (5)% 17% 2% 39% 9%
=============================================================================================================================
1995
Beginning unit value - Jan 1 19.544976 11.677805 12.443161 10.000000 **
- -----------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .022491 .115292 1.008475 .092106
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 6.032555 1.160549 1.138120 .740132
- -----------------------------------------------------------------------------------------------------------------------------
Asset charges (.218614) (.114390) (.131171) (.047958)
- -----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 25.381408 12.839256 14.458585 10.784280
- -----------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 30% 10% 16% 8%(B)
=============================================================================================================================
1994
Beginning unit value - Jan 1 19.964524 12.382561 12.729709 ** **
- -----------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .002137 .062321 .051271
- -----------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.236035) (.652194) (.220753)
- -----------------------------------------------------------------------------------------------------------------------------
Asset charges (.185650) (.114883) (.117066)
- -----------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 19.544976 11.677805 12.443161
- -----------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (2)% (6)% (2)%
=============================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 14
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR FIDVIPHI
-------- -------- -------- -------- --------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $14.242220 13.621789 21.648958 20.999607 22.388295
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .735836 .587431 .998669 1.508424 2.041281
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.266937 2.459672 2.069513 1.561724 1.079684
- -----------------------------------------------------------------------------------------------------------
Asset charges (.203172) (.193899) (.297162) (.294823) (.310696)
- -----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.041821 16.474993 24.419978 23.774932 25.198564
- -----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 20% 21% 13% 13% 13%
============================================================================================================
1995
Beginning unit value - Jan. 1 $10.722275 10.088849 16.234159 15.715602 18.805616
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .392053 .361339 1.269479 .086841 1.361583
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.289798 3.326196 4.390826 5.444880 2.491513
- -----------------------------------------------------------------------------------------------------------
Asset charges (.161906) (.154595) (.245506) (.247716) (.270417)
- -----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.242220 13.621789 21.648958 20.999607 22.388295
- -----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 33% 35% 33% 34% 19%
============================================================================================================
1994
Beginning unit value - Jan. 1 $10.702403 10.131165 15.360584 15.923752 19.350153
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .276372 .283260 1.152726 .957853 1.773098
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.117327) (.195255) (.073161) (.966373) (2.069306)
- -----------------------------------------------------------------------------------------------------------
Asset charges (.139173) (.130321) (.205990) (.199630) (.248329)
- -----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $10.722275 10.088849 16.234159 15.715602 18.805616
- -----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% 0% 6% (1)% (3)%
============================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDVIPOV FIDVIPAM FIDVIPCON NSATCAPAP NSATGVTBD
-------- -------- --------- --------- ---------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 12.667544 17.721708 11.071965 14.444672 16.104612
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .311669 1.165823 .104326 .749268 .996469
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.350232 1.401973 2.236026 2.998693 (.443598)
- -----------------------------------------------------------------------------------------------------------
Asset charges (.173779) (.243295) (.155475) (.208575) (.207709)
- -----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 14.155666 20.046209 13.256842 17.984058 16.449774
- -----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 12% 13% 20% 25% 2%
============================================================================================================
1995
Beginning unit value - Jan. 1 11.700527 15.350115 10.000000 11.312336 13.739287
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .089493 .322418 .142783 .642275 .972265
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.033414 2.260958 .998389 2.653961 1.587542
- -----------------------------------------------------------------------------------------------------------
Asset charges (.155890) (.211783) (.069207) (.163900) (.194482)
- -----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 12.667544 17.721708 11.071965 14.444672 16.104612
- -----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 8% 15% 11%(B) 28% 17%
============================================================================================================
1994
Beginning unit value - Jan. 1 11.652241 16.559029 ** 11.563943 14.383265
- -----------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .060146 .804872 .182742 .902346
- -----------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .144272 (1.806726) (.286826) (1.366016)
- -----------------------------------------------------------------------------------------------------------
Asset charges (.156132) (.207060) (.147523) (.180308)
- -----------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 11.700527 15.350115 11.312336 13.739287
- -----------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0% (7)% (2)% (4)%
============================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 15
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NSATMYMKT NSATSMCO NSATTOTRE NBAMTGRO NBAMTLMAT
--------- -------- --------- -------- ---------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan 1 $12.028786 11.410311 19.154939 16.264834 13.684722
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .611421 .133295 1.276326 1.474851 1.151075
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 2.456523 2.875006 .000818 (.567983)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.161103) (.166908) (.270588) (.219491) (.179189)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.479104 13.833221 23.035683 17.521012 14.088625
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 4% 21% 20% 8% 3%
====================================================================================================================================
1995
Beginning unit value - Jan 1 $11.534440 10.000000 15.031721 12.508337 12.496729
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .648458 .017459 1.489410 .442496 .693794
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.418328 2.856936 3.508824 .664378
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.154112) (.025476) (.223128) (.194823) (.170179)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.028786 11.410311 19.154939 16.264834 13.684722
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 4% 14%(b) 27% 30% 10%
====================================================================================================================================
1994
Beginning unit value - Jan 1 $11.249231 ** 15.066007 13.336899 12.679406
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .433762 .760244 1.607088 .535454
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (.597472) (2.269450) (.555628)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.148553) (.197058) (.166200) (.162503)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.534440 15.031721 12.508337 12.496729
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% 0% (6)% (1)%
====================================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
NBAMTPART OPPBDFD OPPGLSEC OPPMULT STDISC2 STINTSTK2
--------- ------- -------- ------- ------- ---------
1996***
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan 1 13.495873 16.056725 11.413379 16.404926 16.214896 10.226632
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .549661 1.030165 .000000 1.247087 3.300617 .050938
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.411340 (.269155) 2.016448 1.276232 (3.177170) 1.007488
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.197162) (.209417) (.159401) (.227169) (.204800) (.143255)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 17.259712 16.608318 13.270426 18.701076 16.133543 11.141803
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 28% 3% 16% 14% (1)% 9%
====================================================================================================================================
1995
Beginning unit value - Jan 1 10.018146 13.903136 11.309050 13.693997 12.144445 10.000000
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .081860 .956955 .297396 1.103154 .211667 .041085
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.550382 1.391543 (.045694) 1.805769 4.042004 .209467
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges (.154515) (.194909) (.147373) (.197994) (.183220) (.023920)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 13.495873 16.056725 11.413379 16.404926 16.214896 10.226632
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 35% 15% 1% 20% 34% 2%(b)
====================================================================================================================================
1994
Beginning unit value - Jan 1 10.000000 14.362878 12.152136 14.148115 13.003547 **
- ------------------------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .809172 .214078 .720350 .971167
- ------------------------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .072562 (1.086058) (.900362) (.993926) (1.670283)
- ------------------------------------------------------------------------------------------------------------------------------------
Asset charges .054416 (.182856) (.156802) (.180542) (.159986)
- ------------------------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 10.018146 13.903136 11.309050 13.693997 12.144445
- ------------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 0%(b) (3)% (7)% (3)% (7)%
====================================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 16
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
STSPEC2 TCIBAL TCIGRO TCIINT VEGOLDNR
------- ------ ------ ------ --------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $18.074367 12.914886 17.116040 10.403803 14.230388
- ------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .849403 .609960 1.918348 .247063 .301335
- ------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.405871 .954721 (2.649394) 1.239275 2.259820
- ------------------------------------------------------------------------------------------------------------------
Asset charges (.252187) (.176058) (.221369) (.142090) (.208595)
- ------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $21.077454 14.303509 16.163625 11.748051 16.582948
- ------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 11% (6)% 13% 17%
==================================================================================================================
1995
Beginning unit value - Jan. 1 $14.552799 10.801955 13.226279 9.392654 12.988341
- ------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .753037 .305779 .015219 .000000 .127947
- ------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.978850 1.961461 4.076606 1.136602 1.287916
- ------------------------------------------------------------------------------------------------------------------
Asset charges (.210319) (.154309) (.202064) (.125453) (.173816)
- ------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.074367 12.914886 17.116040 10.403803 14.230388
- ------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 24% 20% 29% 11% 10%
==================================================================================================================
1994
Beginning unit value - Jan. 1 $14.230663 10.876445 13.557427 10.000000 13.820369
- ------------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .407898 .260556 .001450 .000000 .069418
- ------------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .103521 (.194370) (.160376) (.554327) (.726294)
- ------------------------------------------------------------------------------------------------------------------
Asset charges (.189283) (.140676) (.172222) (.053019) (.175152)
- ------------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $14.552799 10.801955 13.226279 9.392654 12.988341
- ------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 2% (1)% (2)% (6)%(b) (6)%
==================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEWRLDBD VKACRESEC WPLNTEQ WPSMCOGR
-------- --------- ------- --------
1996***
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 14.170551 10.765797 10.661502 12.430586
- -------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .385883 .287384 .225731 .000000
- -------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.034573) 4.034391 .833478 1.720228
- -------------------------------------------------------------------------------------------------
Asset charges (.182253) (.154376) (.146940) (.175164)
- -------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 14.339608 14.933196 11.573771 13.975650
- -------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 1% 39% 9% 12%
=================================================================================================
1995
Beginning unit value - Jan. 1 $ 12.237880 10.000000 10.000000 10.000000
- -------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .990055 .091962 .077347 .000000
- -------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.118852 .739397 .650501 2.501606
- -------------------------------------------------------------------------------------------------
Asset charges (.176236) (.065562) (.066346) (.071020)
- -------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ 14.170551 10.765797 10.661502 12.430586
- -------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 16% 8%(b) 7%(b) 24%(b)
=================================================================================================
1994
Beginning unit value - Jan. 1 $ 12.563474 ** ** **
- -------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .050533
- -------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.218292)
- -------------------------------------------------------------------------------------------------
Asset charges (.157835)
- -------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $ 12.237880
- -------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (3)%
=================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 17
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR FIDVIPHI
-------- -------- -------- -------- --------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $14.401809 13.775382 22.215745 21.256059 20.852993
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .747630 .596225 1.025291 1.527554 1.902180
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.296912 2.494042 2.132663 1.587071 1.012148
- --------------------------------------------------------------------------------------------------------
Asset charges (.126762) (.120975) (.188129) (.184124) (.178535)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $17.319589 16.744674 25.185570 24.186560 23.588786
- --------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 20% 22% 13% 14% 13%
========================================================================================================
1995
Beginning unit value - Jan. 1 $10.788547 10.151919 16.576413 15.828463 17.428943
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .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 capital gains
and dividends .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)%
========================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDVIPOV FIDVIPAM FIDVIPCON NSATCAPAP NSATGVTBD
-------- -------- --------- --------- ---------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 13.645033 15.982529 11.099135 14.713230 14.984933
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .335875 1.051899 .104631 .766553 .930103
- --------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.459385 1.270941 2.248711 3.061949 (.412550)
- --------------------------------------------------------------------------------------------------------
Asset charges (.115480) (.135376) (.096154) (.131065) (.119235)
- --------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 15.324813 18.169993 13.356323 18.410667 15.383251
- --------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 12% 14% 20% 25% 3%
========================================================================================================
1995
Beginning unit value - Jan. 1 12.540728 13.774855 10.000000 11.465403 12.720514
- --------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .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 capital gains
and dividends .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)%
========================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 18
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NSATMYMKT NSATSMCO NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART
--------- -------- --------- -------- --------- ---------
1996***
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $11.714295 11.420759 18.192762 15.962482 13.096811 13.591346
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .596995 .133983 1.217547 1.448641 1.102543 .554011
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 2.463983 2.737018 .003774 (.542247) 3.446498
- ----------------------------------------------------------------------------------------------------------------
Asset charges (.096547) (.103082) (.158554) (.132892) (.105789) (.122495)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $12.214743 13.915643 21.988773 17.282005 13.551318 17.469360
- ----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 4% 22% 21% 8% 3% 29%
================================================================================================================
1995
Beginning unit value - Jan. 1 $11.176411 10.000000 14.205723 12.214794 11.900389 10.038887
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .629782 .017475 1.413734 .432461 .661221 .082096
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 1.418968 2.703396 3.432609 .635177 3.565899
- ----------------------------------------------------------------------------------------------------------------
Asset charges (.091898) (.015684) (.130091) (.117382) (.099976) (.095536)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.714295 11.420759 18.192762 15.962482 13.096811 13.591346
- ----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 5% 14%(b) 28% 31% 10% 35%
================================================================================================================
1994
Beginning unit value - Jan. 1 $10.845265 ** 14.167308 12.959107 12.014277 10.000000
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .419275 .717782 1.562441 .507651 .000000
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) .000000 (.565055) (2.207122) (.526553) .072401
- ----------------------------------------------------------------------------------------------------------------
Asset charges (.088129) (.114312) (.099632) (.094986) (.033514)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.176411 14.205723 12.214794 11.900389 10.038887
- ----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 3% 0% (6)% (1)% 0%(b)
================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
OPPBDFD OPPGLSEC OPPMULT STDISC2 STINTSTK2
------- -------- ------- ------- ---------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 15.164813 11.542134 16.100377 16.514850 10.236021
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .975830 .000000 1.226905 3.367146 .051144
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (.253799) 2.045080 1.256649 (3.238459) 1.009533
- ----------------------------------------------------------------------------------------------------------------
Asset charges (.122023) (.099461) (.137568) (.128676) (.088468)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 15.764821 13.487753 18.446363 16.514861 11.208230
- ----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 4% 17% 15% 0% 9%
================================================================================================================
1995
Beginning unit value - Jan. 1 $13.065574 11.379737 13.372968 12.307607 10.000000
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .902009 .299595 1.079776 .215562 .041121
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.310232 (.045711) 1.766931 4.106245 .209625
- ----------------------------------------------------------------------------------------------------------------
Asset charges (.113002) (.091487) (.119298) (.114564) (.014725)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $15.164813 11.542134 16.100377 16.514850 10.236021
- ----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 16% 1% 20% 34% 2%(b)
================================================================================================================
1994
Beginning unit value - Jan. 1 $13.430475 12.167250 13.747705 13.112678 **
- ----------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .759284 .214589 .702216 .983647
- ----------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) (1.018698) (.905246) (.968729) (1.689193)
- ----------------------------------------------------------------------------------------------------------------
Asset charges (.105487) (.096856) (.108224) (.099525)
- ----------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $13.065574 11.379737 13.372968 12.307607
- ----------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) (3)% (6)% (3)% (6)%
================================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 19
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, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
STSPEC2 TCIBAL TCIGRO TCIINT TCIVALUE
------- ------ ------ ------ --------
1996***
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $18.408627 13.155049 16.149061 10.477472 10.000000
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .866384 .622373 1.812196 .249286 .000000
- ---------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.458870 .976138 (2.505020) 1.252389 .145457
- ---------------------------------------------------------------------------------------------------
Asset charges (.158462) (.110640) (.128845) (.088289) (.001770)
- ---------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $21.575419 14.642920 15.327392 11.890858 10.143687
- ---------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 11% (5)% 13% 1%(b)
===================================================================================================
1995
Beginning unit value - Jan. 1 $14.748256 10.948128 12.417011 9.412116 **
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .764407 .310910 .014289 .000000
- ---------------------------------------------------------------------------------------------------
Unrealized gain (loss) 3.027469 1.992508 3.834812 1.142911
- ---------------------------------------------------------------------------------------------------
Asset charges (.131505) (.096497) (.117051) (.077555)
- ---------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $18.408627 13.155049 16.149061 10.477472
- ---------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 25% 20% 30% 11%
===================================================================================================
1994
Beginning unit value - Jan. 1 $14.350073 10.968814 12.664593 10.000000 **
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .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)
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEGOLDNR VEWRLDBD VEWRLDEMKT VKACRESEC WPLNTEQ WPSMCOGR
-------- -------- ---------- --------- ------- --------
1996***
<S> <C> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 15.612002 13.253457 10.000000 10.792212 10.687672 12.461074
- --------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .331277 .361660 .000000 .289441 .227366 .000000
- --------------------------------------------------------------------------------------------------------------
Unrealized gain (loss) 2.482492 (.030793) .080699 4.059026 .836487 1.727810
- --------------------------------------------------------------------------------------------------------------
Asset charges (.141181) (.105167) (.001751) (.095484) (.090877) (.108331)
- --------------------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 18.284590 13.479157 10.078948 15.045195 11.660648 14.080553
- --------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value* (a) 17% 2% 1%(b) 39% 9% 13%
==============================================================================================================
1995
Beginning unit value - Jan. 1 14.178501 11.388987 ** 10.000000 10.000000 10.000000
- --------------------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .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 capital gains
and dividends .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)%
==============================================================================================================
<FN>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2; and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
</TABLE>
<PAGE> 20
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR
-------- -------- -------- --------
1996**
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .482403 .358216 .000000 .000000
- ---------------------------------------------------------------------------------------------------
Unrealized gain (loss) .697688 1.101640 .790149 .446167
- ---------------------------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000 .000000
- ---------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.180091 11.459856 10.790149 10.446167
- ---------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 12%(b) 15%(b) 8%(b) 4%(b)
===================================================================================================
FIDVIPCON NSATCAPAP NSATGVTBD NSATMYMKT
--------- --------- --------- ---------
1996**
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .445367 .489314 .339005
- ---------------------------------------------------------------------------------------------------
Unrealized gain (loss) 1.249999 1.164973 .189891 .000000
- ---------------------------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000 .000000
- ---------------------------------------------------------------------------------------------------
Ending unit value - Dec. 31 $11.249999 11.610340 10.679205 10.339005
- ---------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 12%(b) 16%(b) 7%(b) 3%(b)
===================================================================================================
NBAMTLMAT NBAMTPART OPPBDFD OPPGLSEC
--------- --------- ------- --------
1996**
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .000000 .479143 .000000
- ---------------------------------------------------------------------------------------------------
Unrealized gain (loss) .477247 1.476324 .165483 .833847
- ---------------------------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000 .000000
- ---------------------------------------------------------------------------------------------------
Ending unit value - Dec.31 $10.477247 11.476324 10.644626 10.833847
- ---------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 5%(b) 15%(b) 6%(b) 8%(b)
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
FIDVIPHI FIDVIPOV FIDVIPAM
-------- -------- --------
1996**
<S> <C> <C> <C>
Beginning unit value - Jan. 1 10.000000 10.000000 10.000000
- --------------------------------------------------------------------------------
Reinvested capital gains
and dividends .000000 .000000 .000000
- --------------------------------------------------------------------------------
Unrealized gain (loss) .830462 .668178 1.022140
- --------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000
- --------------------------------------------------------------------------------
Ending unit value - Dec.31 10.830462 10.668178 11.022140
- --------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 8%(b) 7%(b) 10%(b)
================================================================================
NSATSMCO NSATTOTRE NBAMTGRO
-------- --------- --------
1996**
Beginning unit value - Jan. 1 10.000000 10.000000 10.000000
- --------------------------------------------------------------------------------
Reinvested capital gains
and dividends .095576 .580169 .000000
- --------------------------------------------------------------------------------
Unrealized gain (loss) .428842 .864708 (.130166)
- --------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000
- --------------------------------------------------------------------------------
Ending unit value - Dec.31 $10.524418 11.444877 9.869834
- --------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 5%(b) 14%(b) (1)%(b)
================================================================================
OPPMULT STDISC2 STINTSTK2
------- ------- ---------
1996**
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000
- --------------------------------------------------------------------------------
Reinvested capital gains
and dividends .402281 .520758 .045738
- --------------------------------------------------------------------------------
Unrealized gain (loss) .535297 (.636201) .008684
- --------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000
- --------------------------------------------------------------------------------
Ending unit value - Dec.31 10.937578 9.884557 10.054422
- --------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 9%(b) (1)%(b) 1%(b)
================================================================================
<FN>
* 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.
** No other investment options were being utilized.
</TABLE>
<PAGE> 21
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
STSPEC2 TCIBAL TCIGRO TCIINT
------- ------ ------ ------
1996**
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------------------------
Reinvested capital gains
and dividends .045100 .122861 .000000 .224735
- ---------------------------------------------------------------------------------------------------
Unrealized gain (loss) .721729 .808286 (.881573) .548823
- ---------------------------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000 .000000
- ---------------------------------------------------------------------------------------------------
Ending unit value - Dec.31 $10.766829 10.931147 9.118427 10.773558
- ---------------------------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 8%(b) 9%(b) (9)%(b) 8%(b)
===================================================================================================
</TABLE>
<TABLE>
<CAPTION>
VEGoldNR VEWrldNR VKACRESec
-------- -------- ---------
1996**
<S> <C> <C> <C>
Beginning unit value - Jan. 1 10.000000 10.000000 10.000000
- ---------------------------------------------------------------------------------
Reinvested capital gains
and dividends .181335 .280847 .255666
- ---------------------------------------------------------------------------------
Unrealized gain (loss) (.125331) .235917 3.418174
- ---------------------------------------------------------------------------------
Contract charges .000000 .000000 .000000
- ---------------------------------------------------------------------------------
Ending unit value - Dec. 31 10.056004 10.516764 13.673840
- ---------------------------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) 1%(b) 5%(b) 37%(b)
=================================================================================
</TABLE>
<TABLE>
<CAPTION>
WPINTEQ WPSMCOGR
------- --------
1996**
<S> <C> <C>
Beginning unit value - Jan. 1 $10.000000 10.000000
- ----------------------------------------------------------------
Reinvested capital gains
and dividends .193639 .000000
- ----------------------------------------------------------------
Unrealized gain (loss) (.258621) (.172410)
- ----------------------------------------------------------------
Contract charges .000000 .000000
- ----------------------------------------------------------------
Ending unit value - Dec.31 $9.935018 9.827590
- ----------------------------------------------------------------
Percentage increase (decrease)
in unit value*(a) (1)%(b) (2)%(b)
================================================================
<FN>
* 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.
** No other investment options were being utilized.
See note 6.
</TABLE>
<PAGE> 60
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company) as of December 31,
1996 and 1995, and the related consolidated statements of income, shareholder's
equity and cash flows for each of the years in the three-year period ended
December 31, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
In 1994, the Company adopted the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities.
KPMG Peat Marwick LLP
Columbus, Ohio
January 31, 1997
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1996 and 1995
($000's omitted)
Assets 1996 1995
------ ----------------- ----------------
<S> <C> <C>
Investments (notes 5, 8 and 9):
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564
Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953
Mortgage loans on real estate, net 5,272,119 4,602,764
Real estate, net 265,759 229,442
Policy loans 371,816 336,356
Other long-term investments 28,668 61,989
Short-term investments (note 13) 4,789 32,792
----------------- ----------------
18,306,921 17,778,860
----------------- ----------------
Cash 43,784 9,455
Accrued investment income 210,182 212,963
Deferred policy acquisition costs 1,366,509 1,020,356
Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677
Other assets (note 6) 426,441 388,214
Assets held in Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
$47,766,246 38,507,633
================= ================
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614
Policyholders' dividend accumulations 361,401 348,027
Other policyholder funds 60,073 65,297
Accrued federal income tax (note 7):
Current 30,170 35,301
Deferred 162,212 246,627
----------------- ----------------
192,382 281,928
----------------- ----------------
Dividend payable to shareholder (notes 1 and 2) 485,707 -
Other liabilities 423,047 234,147
Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108
----------------- ----------------
45,628,372 35,879,121
----------------- ----------------
Commitments and contingencies (notes 6, 9 and 15)
Shareholder's equity (notes 3, 4, 5, 12 and 13):
Capital shares, $1 par value. Authorized 5,000,000 shares, issued and
outstanding 3,814,779 shares 3,815 3,815
Additional paid-in capital 527,874 657,118
Retained earnings 1,432,593 1,583,275
Unrealized gains on securities available-for-sale, net 173,592 384,304
----------------- ----------------
2,137,874 2,628,512
----------------- ----------------
$47,766,246 38,507,633
================= ================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
--------------- -------------- -------------
<S> <C> <C> <C>
Revenues (note 16):
Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245
Traditional life insurance premiums 198,642 199,106 176,658
Net investment income (note 5) 1,357,759 1,294,033 1,210,811
Realized losses on investments (note 5) (326) (1,724) (16,527)
Other income 35,861 20,702 11,312
--------------- -------------- -------------
1,992,838 1,798,651 1,599,499
--------------- -------------- -------------
Benefits and expenses:
Benefits and claims 1,160,580 1,115,493 992,667
Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Other operating expenses (note 13) 342,394 272,954 240,652
--------------- -------------- -------------
1,677,341 1,511,079 1,357,641
--------------- -------------- -------------
Income from continuing operations before federal income tax expense 315,497 287,572 241,858
--------------- -------------- -------------
Federal income tax expense (benefit) (note 7):
Current 116,512 88,700 73,559
Deferred (5,623) 11,108 5,030
--------------- -------------- -------------
110,889 99,808 78,589
--------------- -------------- -------------
Income from continuing operations 204,608 187,764 163,269
Income from discontinued operations (less federal income tax expense of
$4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459
--------------- -------------- -------------
Net income $ 215,932 212,478 183,728
=============== ============== =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
Unrealized
gains (losses)
Additional on securities Total
Capital paid-in Retained available-for- shareholder's
shares capital earnings sale, net equity
----------- ------------- --------------- ----------------- ---------------
<S> <C> <C> <C> <C> <C>
1994:
Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168
Capital contribution - 200,000 - - 200,000
Net income - - 183,728 - 183,728
Adjustment for change in accounting for
certain investments in debt and equity
securities, net (note 4) - - - 212,553 212,553
Unrealized losses on securities available-
for-sale, net - - - (338,971) (338,971)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478
=========== ============= =============== ================= ===============
1995:
Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478
Capital contribution (note 13) - 51,029 - (4,111) 46,918
Dividends to shareholder - - (7,450) - (7,450)
Net income - - 212,478 - 212,478
Unrealized gains on securities available-
for-sale, net - - - 508,088 508,088
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512
=========== ============= =============== ================= ===============
1996:
Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512
Capital contribution (note 13) - 25 5 - 30
Dividends to shareholder - (129,269) (366,619) (39,819) (535,707)
Net income - - 215,932 - 215,932
Unrealized losses on securities available-
for-sale, net - - - (170,893) (170,893)
----------- ------------- --------------- ----------------- ---------------
Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874
=========== ============= =============== ================= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
($000's omitted)
<TABLE>
<CAPTION>
1996 1995 1994
---------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 215,932 212,478 183,728
Adjustments to reconcile net income to net cash provided by operating
activities:
Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431)
Amortization of deferred policy acquisition costs 133,394 82,695 85,568
Amortization and depreciation 6,962 10,234 3,603
Realized (gains) losses on invested assets, net (284) 3,250 16,094
Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946
Decrease (increase) in accrued investment income 2,781 (16,999) (12,808)
(Increase) decrease in other assets (38,876) 39,880 (102,676)
Increase in policy liabilities 305,755 135,937 118,361
Increase in policyholders' dividend accumulations 13,374 12,639 15,298
(Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714)
Increase in other liabilities 188,900 26,851 506
Other, net (61,679) 1,832 (29,595)
--------------- --------------- ---------------
Net cash provided by operating activities 346,159 187,633 39,880
---------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843
Proceeds from sale of securities available-for-sale 299,558 107,345 228,308
Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862
Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574
Proceeds from sale of real estate 18,519 48,331 46,713
Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506
Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370)
Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379)
Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570)
Cost of real estate acquired (7,862) (10,928) (6,385)
Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302)
Short-term investments, net 28,003 77,837 (89,376)
Purchase of affiliate (note 13) - - (155,000)
---------------- --------------- ---------------
Net cash used in investing activities (771,327) (1,724,978) (1,391,576)
---------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from capital contributions 30 - 200,000
Dividends paid to shareholder (50,000) (7,450) -
Increase in investment product and universal life insurance
product account balances 2,293,933 2,809,385 3,547,976
Decrease in investment product and universal life insurance
product account balances (1,784,466) (1,258,758) (2,412,595)
---------------- --------------- --------------
Net cash provided by financing activities 459,497 1,543,177 1,335,381
---------------- --------------- --------------
Net increase (decrease) in cash 34,329 5,832 (16,315)
---------------- --------------- ---------------
Cash, beginning of year 9,455 3,623 19,938
---------------- --------------- ---------------
Cash, end of year $ 43,784 9,455 3,623
================ =============== ===============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1996, 1995 and 1994
($000's omitted)
(1) Organization and Description of Business
----------------------------------------
Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary
of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries
of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC),
Employers Life Insurance Company of Wausau and subsidiaries (ELICW),
National Casualty Company (NCC), West Coast Life Insurance Company
(WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide
Financial Services, Inc.), Nationwide Investment Services Corporation
(formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and
its subsidiaries are collectively referred to as "the Company."
Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in
November 1996 as a holding company for NLIC and the other companies of
the Nationwide Insurance Enterprise that offer or distribute long-term
savings and retirement products. On January 27, 1997, Nationwide Corp.
contributed to NFS the common stock of NLIC and three marketing and
distribution companies. NFS is planning an initial public offering of
its Class A common stock during the first quarter of 1997.
In anticipation of the restructuring described above, on September 24,
1996, NLIC's Board of Directors declared a dividend payable January 1,
1997 to Nationwide Corp. consisting of the outstanding shares of common
stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer
or distribute long-term savings and retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and another affiliate effective January 1, 1996. These
subsidiaries and all accident and health and group life insurance
business have been accounted for as discontinued operations for all
periods presented. See notes 2 and 13.
In addition, as part of the restructuring described above, NLIC intends
to make an $850,000 distribution to NFS which will then make an
equivalent distribution to Nationwide Corp.
The Company is a leading provider of long-term savings and retirement
products to retail and institutional customers and is subject to
competition from other financial services providers throughout the
United States. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK is the risk that changes in the legal or
regulatory environment in which an insurer operates will create
additional expenses not anticipated by the insurer in pricing its
products. That is, regulatory initiatives, new legal theories or
insurance company insolvencies through guaranty fund assessments
may create costs for the insurer beyond those currently recorded
in the consolidated financial statements. The Company mitigates
this risk by offering a wide range of products and by operating
throughout the United States, thus reducing its exposure to any
single product or jurisdiction, and also by employing underwriting
practices which identify and minimize the adverse impact of this
risk.
CREDIT RISK is the risk that issuers of securities owned by the
Company or mortgagors on mortgage loans on real estate owned by
the Company will default or that other parties, including
reinsurers, which owe the Company money, will not pay. The Company
minimizes this risk by adhering to a conservative investment
strategy, by maintaining reinsurance and credit and collection
policies and by providing for any amounts deemed uncollectible.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK is the risk that interest rates will change and
cause a decrease in the value of an insurer's investments. This
change in rates may cause certain interest-sensitive products to
become uncompetitive or may cause disintermediation. The Company
mitigates this risk by charging fees for non-conformance with
certain policy provisions, by offering products that transfer this
risk to the purchaser, and/or by attempting to match the maturity
schedule of its assets with the expected payouts of its
liabilities. To the extent that liabilities come due more quickly
than assets mature, an insurer would have to borrow funds or sell
assets prior to maturity and potentially recognize a gain or loss.
(2) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies that offer or distribute long-term savings and
retirement products. Prior to the contribution by Nationwide Corp. to
NFS of the outstanding common stock of NLIC and other companies, NLIC
effected certain transactions with respect to certain subsidiaries and
lines of business that were unrelated to long-term savings and
retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend to
Nationwide Corp. consisting of the outstanding shares of common stock
of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group
accident and health and group life insurance business and maintains it
offices in Wausau, Wisconsin. NCC is a property and casualty company
that serves as a fronting company for a property and casualty
subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate.
NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high
dollar term life insurance policies and is located in San Francisco,
California. ELICW, NCC and WCLIC have been accounted for as
discontinued operations for all periods presented. NLIC did not
recognize any gain or loss on the disposal of these subsidiaries.
A summary of the combined results of operations, including the results
of the accident and health and group life insurance business ELICW
assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and
WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ 668,870 422,149 84,226
Net income 11,324 26,456 11,753
Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692
Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
</TABLE>
During 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a
complete discussion of the reinsurance agreements. NLIC has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated companies
and will cease writing any new business prior to December 31, 1997.
NLIC's accident and health and group life insurance business is
accounted for as discontinued operations for all periods presented.
NLIC did not recognize any gain or loss on the disposal of the accident
and health and group life insurance business. The assets, liabilities,
results of operations and activities of discontinued operations are
distinguished physically, operationally and for financial reporting
purposes from the remaining assets, liabilities, results of operations
and activities of NLIC.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
A summary of the results of operations, net of amounts ceded to ELICW
and NMIC in 1996, and assets and liabilities of NLIC's accident and
health and group life insurance business as of and for the years ended
December 31, 1996, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ----------- -----------
<S> <C> <C> <C>
Revenues $ - 354,788 362,476
Net income (loss) - (1,742) 8,706
Assets, consisting primarily of investments 259,185 239,426 234,082
Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
</TABLE>
(3) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles (GAAP) which
differ from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and its insurance
subsidiaries, filed with the department of insurance of each insurance
company's state of domicile, are prepared on the basis of accounting
practices prescribed or permitted by each department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
Subsidiaries Classified as Discontinued Operations" in the
accompanying consolidated balance sheets and "Income for
Discontinued Operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1996 or 1995.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate are included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
---------------------
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities, annuities without life contingencies
and guaranteed investment contracts. Universal life insurance
products include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health
insurance premiums are recognized as revenue over the terms of the
policies. Policy claims are charged to expense in the period that
the claims are incurred. All accident and health insurance
business is accounted for as discontinued operations. See note 2.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable agency expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life products,
these deferred policy acquisition costs are predominantly being
amortized with interest over the premium paying period of the
related policies in proportion to the ratio of actual annual
premium revenue to the anticipated total premium revenue. Such
anticipated premium revenue was estimated using the same
assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 3(b).
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(e) Separate Accounts
-----------------
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. The investment income and gains or losses
of these accounts accrue directly to the contractholders. The
activity of the Separate Accounts is not reflected in the
consolidated statements of income and cash flows except for the
fees the Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 6.
Future policy benefits and claims for collectively renewable
long-term disability policies and group long-term disability
policies are the present value of amounts not yet due on reported
claims and an estimate of amounts to be paid on incurred but
unreported claims. The impact of reserve discounting is not
material. Future policy benefits and claims on other group health
insurance policies are not discounted. All health insurance
business is accounted for as discontinued operations. See note 2.
(g) Participating Business
----------------------
Participating business represents approximately 52% in 1996 (54%
in 1995 and 55% in 1994) of the Company's life insurance in force,
78% in 1996 (79% in 1995 and 79% in 1994) of the number of life
insurance policies in force, and 40% in 1996 (47% in 1995 and 51%
in 1994) of life insurance premiums. The provision for
policyholder dividends is based on current dividend scales. Future
dividends are provided for ratably in future policy benefits based
on dividend scales in effect at the time the policies were issued.
(h) Federal Income Tax
------------------
The Company, with the exception of ELICW, files a consolidated
federal income tax return with NMIC, the majority shareholder of
Nationwide Corp. The members of the consolidated tax return group
have a tax sharing arrangement which provides, in effect, for each
member to bear essentially the same federal income tax liability
as if separate tax returns were filed. Through 1994, ELICW filed a
consolidated federal income tax return with Employers Insurance of
Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW
files a separate federal income tax return.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 2 and 13.
(j) Reclassification
----------------
Certain items in the 1995 and 1994 consolidated financial
statements have been reclassified to conform to the 1996
presentation.
(4) Change in Accounting Principle
------------------------------
Effective January 1, 1994, the Company changed its method of accounting
for certain investments in debt and equity securities in connection
with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS)
NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY
SECURITIES. As of January 1, 1994, the Company classified fixed
maturity securities with amortized cost and fair value of $6,299,665
and $6,721,714, respectively, as available-for-sale and recorded the
securities at fair value. Previously, these securities were recorded at
amortized cost. The effect as of January 1, 1994 has been recorded as a
direct credit to shareholder's equity as follows:
<TABLE>
<CAPTION>
<S> <C>
Excess of fair value over amortized cost of fixed maturity
securities available-for-sale $ 422,049
Adjustment to deferred policy acquisition costs (95,044)
Deferred federal income tax (114,452)
--------------
$ 212,553
==============
</TABLE>
(5) Investments
-----------
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1996:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- -----------
<S> <C> <C> <C> <C>
1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151
Obligations of states and political subdivisions 6,242 450 (2) 6,690
Debt securities issued by foreign governments 100,656 2,141 (857) 101,940
Corporate securities 7,999,310 285,946 (33,686) 8,251,570
Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288
------------ ---------- ------------ ------------
Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639
Equity securities 43,890 15,571 (330) 59,131
------------ ---------- ------------ ------------
$12,014,768 400,341 (51,339) 12,363,770
============ ========== ============ ============
</TABLE>
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of securities
available-for-sale were as follows as of December 31, 1995:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
cost gains losses fair value
------------ ---------- ----------- ---------------
<S> <C> <C> <C> <C>
1995:
Fixed maturity securities:
U.S. Treasury securities and obligations of
U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949
Obligations of states and political subdivisions 8,655 1,205 (1) 9,859
Debt securities issued by foreign governments 101,414 4,387 (66) 105,735
Corporate securities 7,888,440 473,681 (25,742) 8,336,379
Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642
------------ ---------- ----------- ---------------
Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564
Equity securities 23,617 6,382 (46) 29,953
------------ ---------- ----------- ---------------
$11,886,173 663,588 (34,244) 12,515,517
============ ========== =========== ===============
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1996, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
cost fair value
--------------- --------------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $ 440,235 444,214
Due after one year through five years 3,937,010 4,053,152
Due after five years through ten years 2,809,813 2,871,806
Due after ten years 1,194,846 1,270,179
--------------- --------------
8,381,904 8,639,351
Mortgage-backed securities 3,588,974 3,665,288
--------------- --------------
$11,970,878 12,304,639
=============== ==============
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1996 1995
--------------- --------------
<S> <C> <C>
Gross unrealized gains $349,002 629,344
Adjustment to deferred policy acquisition costs (81,939) (138,914)
Deferred federal income tax (93,471) (171,649)
--------------- --------------
173,592 318,781
Unrealized gains on securities available-for-sale, net, of
subsidiaries classified as discontinued operations (note 2) - 65,523
--------------- --------------
$173,592 384,304
=============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- --------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(289,247) 876,332 (675,373)
Equity securities 8,905 (26) (1,927)
Fixed maturity securities held-to-maturity - 75,626 (398,183)
--------------- ------------- --------------
$(280,342) 951,932 (1,075,483)
=============== ============= ==============
</TABLE>
Proceeds from the sale of securities available-for-sale during 1996,
1995 and 1994 were $299,558, $107,345 and $228,308, respectively.
During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994,
respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995
and 1994, respectively) were realized on those sales.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25,429 to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of
$3,535.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995 the Company transferred all of its fixed maturity securities
previously classified as held-to-maturity to available-for-sale. As of
December 14, 1995, the date of transfer, the fixed maturity securities
had amortized cost of $3,320,093, resulting in a gross unrealized gain
of $155,940.
Investments that were non-income producing for the twelve month period
preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and
consisted of $248 ($6,982 in 1995) in fixed maturity securities,
$20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in
other long-term investments.
Real estate is presented at cost less accumulated depreciation of
$30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and
valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of
December 31, 1995).
The recorded investment of mortgage loans on real estate considered to
be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR
IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY
CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE)
as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995),
which includes $41,663 ($23,975 as of December 31, 1995) of impaired
mortgage loans on real estate for which the related valuation allowance
was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of
December 31, 1995) of impaired mortgage loans on real estate for which
there was no valuation allowance. During 1996, the average recorded
investment in impaired mortgage loans on real estate was approximately
$39,674 ($22,181 in 1995) and interest income recognized on those loans
was $2,103 ($387 in 1995), which is equal to interest income recognized
using a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995
------------- --------------
<S> <C> <C>
Allowance, beginning of year $49,128 46,381
Additions charged to operations 4,497 7,433
Direct write-downs charged against the allowance (2,587) (4,686)
------------- -------------
Allowance, end of year $51,038 49,128
============= ==============
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 917,135 685,787 647,927
Equity securities 1,291 1,330 509
Fixed maturity securities held-to-maturity - 201,808 185,938
Mortgage loans on real estate 432,815 395,478 372,734
Real estate 44,332 38,344 40,170
Short-term investments 4,155 10,576 6,141
Other 3,998 7,239 2,121
--------------- ------------- --------------
Total investment income 1,403,726 1,340,562 1,255,540
Less investment expenses 45,967 46,529 44,729
--------------- ------------- ---------------
Net investment income $1,357,759 1,294,033 1,210,811
=============== ============= ==============
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(3,462) 4,213 (7,296)
Equity securities 3,143 3,386 1,422
Mortgage loans on real estate (4,115) (7,091) (20,446)
Real estate and other 4,108 (2,232) 9,793
------------ ------------ ------------
$ (326) (1,724) (16,527)
============ ============ ============
</TABLE>
Fixed maturity securities with an amortized cost of $6,161 and $5,592
as of December 31, 1996 and 1995, respectively, were on deposit with
various regulatory agencies as required by law.
(6) Future Policy Benefits and Claims
---------------------------------
The liability for future policy benefits for investment contracts
represents approximately 87% and 87% of the total liability for future
policy benefits as of December 31, 1996 and 1995, respectively. The
average interest rate credited on investment product policies was
approximately 6.3%, 6.6% and 6.5% for the years ended December 31,
1996, 1995 and 1994, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
Interest rates: Interest rates vary as follows:
--------------
<TABLE>
<CAPTION>
Year of issue Interest rates
----------------- ----------------------------------------
<S> <C>
1996 6.6%, not graded
1984-1995 6.0% to 10.5%, not graded
1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6%
1965 and prior generally lower than post 1965 issues
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
WITHDRAWALS: Rates, which vary by issue age, type of coverage
and policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on
published tables, modified for the Company's actual
experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$240,451 and $245,255 as of December 31, 1996 and 1995, respectively.
The contract is immaterial to the Company's results of operations. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. Under the terms of the contract,
Franklin has established a trust as collateral for the recoveries. The
trust assets are invested in investment grade securities, the market
value of which must at all times be greater than or equal to 102% of
the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 13. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(7) Federal Income Tax
-------------------
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1996
and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------- ---------------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $175,571 149,192
Liabilities in Separate Accounts 188,426 129,120
Mortgage loans on real estate and real estate 23,366 25,165
Other policyholder funds 7,407 7,424
Other assets and other liabilities 53,757 41,847
----------------- ---------------
Total gross deferred tax assets 448,527 352,748
Less valuation allowances (7,000) (7,000)
----------------- ---------------
Net deferred tax assets 441,527 345,748
================= ===============
Deferred tax liabilities:
Deferred policy acquisition costs 399,345 299,579
Fixed maturity securities 133,210 227,345
Deferred tax on realized investment gains 37,597 40,634
Equity securities and other long-term investments 8,210 3,780
Other 25,377 21,037
----------------- ---------------
Total gross deferred tax liabilities 603,739 592,375
----------------- ---------------
$162,212 246,627
================= ===============
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1996, 1995 and 1994.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1996,
1995 and 1994 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------------------- ---------------------- ----------------------
Amount % Amount % Amount %
---------------------- ---------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0
Tax exempt interest and dividends
received deduction (212) (0.1) (18) (0.0) (130) (0.1)
Other, net 677 0.3 (824) (0.3) (5,931) (2.5)
------------ -------- ------------- -------- ------------- --------
Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5
============ ======== ============= ======== ============= ========
</TABLE>
Total federal income tax paid was $115,839, $51,840 and $83,239
during the years ended December 31, 1996, 1995 and 1994,
respectively.
(8) Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
(SFAS 107) requires disclosure of fair value information about existing
on and off-balance sheet financial instruments. SFAS 107 defines the
fair value of a financial instrument as the amount at which the
financial instrument could be exchanged in a current transaction
between willing parties. In cases where quoted market prices are not
available, fair value is based on estimates using present value or
other valuation techniques.
These techniques are significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows.
Although fair value estimates are calculated using assumptions that
management believes are appropriate, changes in assumptions could cause
these estimates to vary materially. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in the immediate
settlement of the instruments. SFAS 107 excludes certain assets and
liabilities from its disclosure requirements. Accordingly, the
aggregate fair value amounts presented do not represent the underlying
value of the Company.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from SFAS 107 disclosures, estimated fair value of policy reserves on
life insurance contracts is provided to make the fair value disclosures
more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans
on real estate is estimated using discounted cash flow analyses,
using interest rates currently being offered for similar loans to
borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgages in default is the estimated fair value of
the underlying collateral.
INVESTMENT CONTRACTS: Fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analyses. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER
FUNDS: The carrying amount reported in the consolidated balance
sheets for these instruments approximates their fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 9.
Carrying amount and estimated fair value of financial instruments
subject to SFAS 107 and policy reserves on life insurance contracts
were as follows as of December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets
------
Investments:
Securities available-for-sale:
Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564
Equity securities 59,131 59,131 29,953 29,953
Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655
Policy loans 371,816 371,816 336,356 336,356
Short-term investments 4,789 4,789 32,792 32,792
Cash 43,784 43,784 9,455 9,455
Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108
Liabilities
-----------
Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798
Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486
Policyholders' dividend accumulations 361,401 361,401 348,027 348,027
Other policyholder funds 60,073 60,073 65,297 65,297
Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
</TABLE>
(9) Additional Financial Instruments Disclosures
--------------------------------------------
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $327,456 extending into
1997 were outstanding as of December 31, 1996.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 21% (20% in 1995) in any geographic area and no more than 2% (2%
in 1995) with any one borrower as of December 31, 1996.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1996 and 1995. See note 6.
The summary below depicts loans by remaining principal balance as of
December 31, 1996 and 1995:
<TABLE>
<CAPTION>
Apartment
Office Warehouse Retail & other Total
------------ ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
1996:
East North Central $139,518 119,069 549,064 215,038 1,022,689
East South Central 33,267 22,252 172,968 90,623 319,110
Mountain 17,972 43,027 113,292 73,390 247,681
Middle Atlantic 129,077 54,046 160,833 18,498 362,454
New England 33,348 43,581 161,960 - 238,889
Pacific 202,562 325,046 424,295 110,108 1,062,011
South Atlantic 103,889 134,492 482,934 385,185 1,106,500
West North Central 126,467 2,441 75,180 40,529 244,617
West South Central 104,877 120,314 197,090 304,256 726,537
------------- ------------- ------------- -------------- ------------
$890,977 864,268 2,337,616 1,237,627 5,330,488
============ ============= ============= =============
Less valuation allowances and unamortized discount 58,369
--------------
Total mortgage loans on real estate, net $5,272,119
==============
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1995:
East North Central $138,965 101,925 514,995 175,213 931,098
East South Central 21,329 13,053 180,858 82,383 297,623
Mountain - 17,219 138,220 45,274 200,713
Middle Atlantic 116,187 64,813 158,252 10,793 350,045
New England 9,559 39,525 148,449 1 197,534
Pacific 183,206 233,186 374,915 105,419 896,726
South Atlantic 106,246 73,541 446,800 278,265 904,852
West North Central 133,899 14,205 78,065 36,651 262,820
West South Central 69,140 92,594 190,299 267,268 619,301
------------ ------------ ------------- ------------- --------------
$778,531 650,061 2,230,853 1,001,267 4,660,712
============ ============= ============= =============
Less valuation allowances and unamortized discount 57,948
--------------
Total mortgage loans on real estate, net $4,602,764
==============
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(10) Pension Plan
------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one thousand hours of service within a twelve-month period and who have
met certain age requirements. Benefits are based upon the highest
average annual salary of a specified number of consecutive years of the
last ten years of service. The Company funds pension costs accrued for
direct employees plus an allocation of pension costs accrued for
employees of affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan. Immediately prior to the merger, the plans were
amended to provide consistent benefits for service after January 1,
1996. These amendments had no significant impact on the accumulated
benefit obligation or projected benefit obligation as of December 31,
1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and
$10,063, respectively.
The Company's net accrued pension expense as of December 31, 1996 and
1995 was $1,075 and $1,392, respectively.
The net periodic pension cost for the Nationwide Insurance Enterprise
Retirement Plan as a whole for the year ended December 31, 1996 and for
the Nationwide Insurance Companies and Affiliates Retirement Plan as a
whole for the years ended December 31, 1995 and 1994 follows:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 75,466 64,524 64,740
Interest cost on projected benefit obligation 105,511 95,283 73,951
Actual return on plan assets (210,583) (249,294) (21,495)
Net amortization and deferral 101,795 143,353 (62,150)
--------------- --------------- ---------------
$ 72,189 53,866 55,046
=============== =============== ===============
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Weighted average discount rate 6.00% 7.50% 5.75%
Rate of increase in future compensation levels 4.25% 6.25% 4.50%
Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the Nationwide Insurance
Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995
follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,338,554 1,236,730
Nonvested 11,149 26,503
--------------- ---------------
$1,349,703 1,263,233
=============== ===============
Net accrued pension expense:
Projected benefit obligation for services rendered to
date $1,847,828 1,780,616
Plan assets at fair value 1,947,933 1,738,004
--------------- ---------------
Plan assets in excess of (less than) projected benefit
obligation 100,105 (42,612)
Unrecognized prior service cost 37,870 42,845
Unrecognized net gains (201,952) (63,130)
Unrecognized net asset at transition 37,158 41,305
--------------- ---------------
$ (26,819) (21,592)
=============== ===============
</TABLE>
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Weighted average discount rate 6.50% 6.00%
Rate of increase in future compensation levels 4.75% 4.25%
</TABLE>
Assets of the Nationwide Insurance Enterprise Retirement Plan are
invested in group annuity contracts of NLIC and ELICW.
(11) Postretirement Benefits Other Than Pensions
-------------------------------------------
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation; however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1996 and 1995 was $34,884 and $33,537, respectively, and the net
periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994
was $3,286, $3,132 and $4,284, respectively.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1996, 1995 and 1994 was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586
Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011
Actual return on plan assets (4,348) (2,657) (1,622)
Amortization of unrecognized transition obligation of affiliates 173 2,966 568
Net amortization and deferral 1,830 (1,619) 1,622
----------- ----------- -----------
$17,875 19,076 23,165
=========== =========== ===========
</TABLE>
Information regarding the funded status of the plan as a whole as of
December 31, 1996 and 1995 follows:
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 92,954 88,680
Fully eligible, active plan participants 23,749 28,793
Other active plan participants 83,986 90,375
--------------- ---------------
Accumulated postretirement benefit obligation (APBO) 200,689 207,848
Plan assets at fair value 63,044 54,325
--------------- ---------------
Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523)
Unrecognized transition obligation of affiliates 1,654 1,827
Unrecognized net gains (23,225) (1,038)
--------------- ---------------
$(159,216) (152,734)
=============== ===============
</TABLE>
Actuarial assumptions used for the measurement of the APBO as of
December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were
as follows:
<TABLE>
<CAPTION>
1996 1996 1995 1995 1994
APBO NPPBC APBO NPPBC NPPBC
------------ ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Discount rate 7.25% 6.65% 6.75% 8.00% 7.00%
Long-term rate of return on plan
assets, net of tax - 4.80% - 8.00% N/A
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 11.00% 10.00% 12.00%
Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
</TABLE>
The health care cost trend rate assumption has an effect on the amounts
reported. For the plan as a whole, a one percentage point increase in
the assumed health care cost trend rate would increase the APBO as of
December 31, 1996 by $701 and the NPPBC for the year ended December 31,
1996 by $83.
(12) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
---------------------------------------------------------------------
Each insurance company's state of domicile imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and each of its
insurance company subsidiaries exceed the minimum risk-based capital
requirements.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
The statutory capital shares and surplus of NLIC as of December 31,
1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861,
respectively. The statutory net income of NLIC for the years ended
December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532,
respectively.
NLIC is limited in the amount of shareholder dividends it may pay
without prior approval by the Department of Insurance of the State of
Ohio (the Department). NLIC's dividend of the outstanding shares of
common stock of certain companies which was declared on September 24,
1996 and the anticipated $850,000 dividend (as discussed in note 1) are
deemed extraordinary under Ohio insurance laws. As a result of such
dividends, any dividend paid by NLIC during the 12-month period
immediately following the $850,000 dividend would also be an
extraordinary dividend under Ohio insurance laws. Accordingly, no such
dividend could be paid without prior regulatory approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its stockholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(13) Transactions With Affiliates
----------------------------
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the
Company made lease payments to NMIC and its subsidiaries of $9,065,
$8,986 and $8,133, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $101,584, $107,112, and $100,601 in 1996,
1995 and 1994, respectively. The allocations are based on techniques
and procedures in accordance with insurance regulatory guidelines.
Measures used to allocate expenses among companies include individual
employee estimates of time spent, special cost studies, salary expense,
commissions expense and other methods agreed to by the participating
companies that are within industry guidelines and practices. The
Company believes these allocation methods are reasonable. In addition,
the Company does not believe that expenses recognized under the
intercompany agreements are materially different than expenses that
would have been recognized had the Company operated on a stand alone
basis. Amounts payable to NMIC from the Company under the cost sharing
agreement were $15,111 and $1,186 as of December 31, 1996 and 1995,
respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1996 and
1995 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance contracts exist between NLIC and, respectively
NMIC and ELICW whereby all of NLIC's accident and health and group life
insurance business is ceded on a modified coinsurance basis. NLIC
entered into the reinsurance agreements during 1996 because the
accident and health and group life insurance business was unrelated to
NLIC's long-term savings and retirement products. Accordingly, the
accident and health and group life insurance business has been
accounted for as discontinued operations for all periods presented.
Under modified coinsurance agreements, invested assets are retained by
the ceding company and investment earnings are paid to the reinsurer.
Under the terms of NLIC's agreements, the investment risk associated
with changes in interest rates is borne by NMIC or ELICW, as the case
may be. Risk of asset default is retained by NLIC, although a fee is
paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's
retention of such risk. The agreements will remain in force until all
policy obligations are settled. However, with respect to the agreement
between NLIC and NMIC, either party may terminate the contract on
January 1 of any year with prior notice. The ceding of risk does not
discharge the original insurer from its primary obligation to the
policyholder. NLIC believes that the terms of the modified coinsurance
agreements are consistent in all material respects with what NLIC could
have obtained with unaffiliated parties.
Amounts ceded to ELICW in 1996 are included in ELICW's results of
operations for 1996 which, combined with the results of WCLIC and NCC,
are summarized in note 2. Amounts ceded to ELICW in 1996 include
premiums of $224,224, net investment income and other revenue of
$14,833, and benefits, claims and other expenses of $246,641. Amounts
ceded to NMIC in 1996 include premiums of $97,331, net investment
income of $10,890, and benefits, claims and other expenses of $100,476.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC) and California Cash
Management Company (CCMC), both affiliates, under which NCMC and CCMC
act as common agents in handling the purchase and sale of short-term
securities for the respective accounts of the participants. Amounts on
deposit with NCMC and CCMC were $4,789 and $9,654 as of December 31,
1996 and 1995, respectively, and are included in short-term investments
on the accompanying consolidated balance sheets.
On April, 5 1996, Nationwide Corp. contributed all of the outstanding
shares, with shareholder equity value of $30, of NISC to NLIC. NLIC
contributed an additional $500 to NISC on August 30, 1996.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46,918. As discussed in note 2, WCLIC is
accounted for as discontinued operations.
Effective December 31, 1994, NLIC purchased all of the outstanding
shares of common stock of ELICW from Wausau Service Corporation (WSC)
for $155,000. NLIC transferred fixed maturity securities and cash with
a fair value of $155,000 to WSC on December 28, 1994, which resulted in
a realized loss of $19,239 on the disposition of the securities. The
purchase price approximated both the historical cost basis and fair
value of net assets of ELICW. ELICW has and will continue to share home
office, other facilities, equipment and common management and
administrative services with WSC. As discussed in note 2, ELICW is
accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies
which are also subsidiaries of Nationwide Corp. Total commissions and
fees paid to these affiliates for the years ended December 31, 1996,
1995 and 1994 were $76,922, $57,280 and $50,168, respectively.
(14) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, established a $600,000 revolving
credit facility which provides for a $600,000 loan over a five year
term on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by either NLIC or NMIC. NLIC
and NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. All previously existing line of
credit agreements were canceled.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements, Continued
(15) Contingencies
-------------
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(16) Segment Information
-------------------
The Company has three primary segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Life Insurance segment consists of
insurance products that provide a death benefit and may also allow the
customer to build cash value on a tax-deferred basis. In addition, the
Company reports corporate expenses and investments, and the related
investment income supporting capital not specifically allocated to its
product segments in a Corporate and Other segment. In addition, all
realized gains and losses, investment management fees and other revenue
earned from mutual funds, other than the portion allocated to the
variable annuities and life insurance segments, are reported in the
Corporate and Other segment.
During 1996, the Company changed its reporting segments to better
reflect the way the businesses are managed. Prior periods have been
restated to reflect these changes.
The following table summarizes the revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1996, 1995 and 1994 and assets as of December 31, 1996,
1995 and 1994, by business segment.
<TABLE>
<CAPTION>
1996 1995 1994
----------------- --------------- ---------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 284,638 189,071 132,687
Fixed Annuities 1,092,566 1,051,970 939,868
Life Insurance 435,657 409,135 383,150
Corporate and Other 179,977 148,475 143,794
----------------- --------------- ---------------
$ 1,992,838 1,798,651 1,599,499
================= =============== ===============
Income from continuing operations before federal income tax
expense:
Variable Annuities 90,244 50,837 24,574
Fixed Annuities 135,405 137,000 138,950
Life Insurance 67,242 67,590 53,046
Corporate and Other 22,606 32,145 25,288
----------------- --------------- ---------------
$ 315,497 287,572 241,858
================= =============== ===============
Assets:
Variable Annuities 25,069,725 17,333,039 11,146,465
Fixed Annuities 13,994,715 13,250,359 11,668,973
Life Insurance 3,353,286 3,027,420 2,752,283
Corporate and Other 5,348,520 4,896,815 3,678,303
----------------- --------------- ---------------
$47,766,246 38,507,633 29,246,024
================= =============== ===============
</TABLE>
<PAGE> 61
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 14 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 100 pages.
Representations and Undertakings.
Accountants' Consent
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
1. Power of Attorney dated April Attached hereto.
2, 1997.
2. Resolution of the Depositor's Statement on Form N-8B-2 for the
Board of Directors authorizing Nationwide VLI Separate Account-2, and
the Included with the hereby incorporated herein by reference.
Registration establishment of
the Registrant, adopted
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 Included with the Registration Statement
Depositor 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.
101
<PAGE> 62
Representations and Undertakings
The Registrant and the Company hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940 (the "Act"). The Registrant and the Company
elect to be governed by Rule 6e-3(T)(b)(13)(i)(B) under the Act with
respect to the Policies described in the prospectus. The Policies have
been designed in such a way as to qualify for the exemptive relief from
various provisions of the Act afforded by Rule 6e-3(T).
(b) Paragraph (b)(13)(iii)(F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by the Company under the Policies. The Company represents that the
risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the Policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by the Company, and will be
made available to the Securities and Exchange Commission (the
"Commission") on request.
(c) The Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit
the separate account and the contractholders and will keep and make
available to the Commission on request a memorandum setting forth the
basis for this representation.
(d) The Company represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and
reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred in
that section.
(f) The fees and charges deducted under the Policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by the Company.
102
<PAGE> 63
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 22, 1997
103
<PAGE> 64
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. 14 and has duly caused this Post-Effective
Amendment No. 14 to be signed on its behalf by the undersigned thereunto duly
authorized, and its seal to be hereunto affixed and attested, all in the City of
Columbus, and State of Ohio, on this 22nd day of April, 1997.
NATIONWIDE VLI SEPARATE ACCOUNT-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
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 14 has been signed below by the following persons in the
capacities indicated on the 22nd day of April, 1997.
Signature Title
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
DIMON RICHARD McFERSON Chairman and Chief Executive
- --------------------------- Officer -Nationwide Insurance
Dimon Richard McFerson Enterprise 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
104
<PAGE> 1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as
directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE
LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or
will file with the U.S. Securities and Exchange Commission under the provisions
of the Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide VA
Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C and Nationwide VA Separate Account-Q; and the registration of fixed
interest rate options subject to a market value adjustment offered under some or
all of the aforementioned individual Variable Annuity Contracts in connection
with Nationwide Multiple Maturity Separate Account and Nationwide Multiple
Maturity Separate Account-A, and the registration of Group Flexible Fund
Retirement Contracts in connection with Nationwide DC Variable Account,
Nationwide DCVA-II, and NACo Variable Account; and the registration of Group
Common Stock Variable Annuity Contracts in connection with Separate Account No.
1; and the registration of variable life insurance policies in connection with
Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VL Separate Account-A and Nationwide VL
Separate Account-B, hereby constitutes and appoints Dimon Richard McFerson,
Joseph J. Gasper, W. Sidney Druen, and Joseph P. Rath, and each of them with
power to act without the others, his/her attorney, with full power of
substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to approve, and sign such Registration Statements and
any and all amendments thereto, with power to affix the corporate seal of said
corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, hereby granting unto said attorneys, and
each of them, full power and authority to do and perform all and every act and
thing requisite to all intents and purposes as he/she might or could do in
person, hereby ratifying and confirming that which said attorneys, or any of
them, may lawfully do or cause to be done by virtue hereof. This instrument may
be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and
seals as of this 2nd day of April, 1997.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director David O. Miller, Director
/s/ Keith W. Eckel /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
Keith W. Eckel, Director C. Ray Noecker, Director
/s/ Willard J. Engel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief
Financial Officer
/s/ Fred C. Finney /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director James F. Patterson, Director
/s/ Charles L. Fuellgraf /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director
and Director
/s/ Henry S. Holloway /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director
/s/ Dimon Richard McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
</TABLE>
