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Registration No. 33-62795
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 4
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 43215
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
DENNIS W. CLICK
---------------
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
-------------------
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus and the Financial Statements.
It is proposed that this filing will become effective (check appropriate box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1998 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
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities being registered: Modified Single Premium Variable Life
Insurance Policies
Approximate date of proposed offering: Continuously on and after May 1, 1998
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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1..............................................................................Nationwide Life Insurance Company
The Variable Account
2..............................................................................Nationwide Life Insurance Company
3..............................................................................Custodian of Assets
4..............................................................................Distribution of The Policies
5..............................................................................The Variable Account
6..............................................................................Not Applicable
7..............................................................................Not Applicable
8..............................................................................Not Applicable
9..............................................................................Legal Proceedings
10..............................................................................Information About The Policies; How
The Cash Value Varies; Right to
Exchange for a Fixed Benefit Policy;
Reinstatement; Other Policy Provisions
11..............................................................................Investments of The Variable
Account
12..............................................................................The Variable Account
13..............................................................................Policy Charges
Reinstatement
14..............................................................................Underwriting and Issuance -
Premium Payments
Minimum Requirements for Issuance
of a Policy
15..............................................................................Investments of the Variable
Account; Premium Payments
16..............................................................................Underwriting and Issuance -
Allocation of Cash Value
17..............................................................................Surrendering The Policy for Cash
18..............................................................................Reinvestment
19..............................................................................Not Applicable
20..............................................................................Not Applicable
21..............................................................................Policy Loans
22..............................................................................Not Applicable
23..............................................................................Not Applicable
24..............................................................................Not Applicable
25..............................................................................Nationwide Life Insurance Company
26..............................................................................Not Applicable
27..............................................................................Nationwide Life Insurance Company
28..............................................................................Company Management
29..............................................................................Company Management
30..............................................................................Not Applicable
31..............................................................................Not Applicable
32..............................................................................Not Applicable
33..............................................................................Not Applicable
34..............................................................................Not Applicable
35..............................................................................Nationwide Life Insurance Company
36..............................................................................Not Applicable
37..............................................................................Not Applicable
38..............................................................................Distribution of The Policies
39..............................................................................Distribution of The Policies
40..............................................................................Not Applicable
41(a)...........................................................................Distribution of The Policies
42..............................................................................Not Applicable
43..............................................................................Not Applicable
44..............................................................................How The Cash Value Varies
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<TABLE>
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N-8B-2 ITEM CAPTION IN PROSPECTUS
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45..............................................................................Not Applicable
46..............................................................................How The Cash Value Varies
47..............................................................................Not Applicable
48..............................................................................Custodian of Assets
49..............................................................................Not Applicable
50..............................................................................Not Applicable
51 Summary of The Policies; Information
About The Policies
52..............................................................................Substitution of Securities
53..............................................................................Taxation of The Company
54..............................................................................Not Applicable
55..............................................................................Not Applicable
56..............................................................................Not Applicable
57..............................................................................Not Applicable
58..............................................................................Not Applicable
59..............................................................................Financial Statements
</TABLE>
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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 modified single
premium 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 Policies are surrendered 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 a "modified
endowment contract" under Section 7702A of the Internal Revenue Code of 1986, as
amended (the "Code"). The Code provides for taxation in the same manner as
annuities for surrenders, partial surrenders, loans, collateral assignments and
other pre-death distributions from modified endowment contracts. Any
distribution is taxable to the extent the Cash Value of the Policy exceeds, at
the time of the distribution, the premiums paid into the Policy. The Code also
provides for a 10% tax penalty on the taxable portion of such distributions.
That penalty is applicable unless the distribution is: (1) paid after the Policy
Owner is 59-1/2 or disabled; or (2) the distribution is part of an annuity to
the Policy Owner as defined in the Code (see "Tax Matters").
It may not be advantageous to replace existing insurance with Policies described
in this prospectus. It may also be disadvantageous to purchase a Policy to
obtain additional insurance protection if the purchaser already owns another
variable life insurance policy. The Policies may not be advantageous for persons
who may wish to make policy loans or withdrawals prior to attaining age 59-1/2
(see "Tax Matters").
*The Policy 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 and/or the Fixed Account. The assets of each Sub-Account will be
used to purchase, at Net Asset Value, shares of Underlying Mutual Fund(s) in the
following series of the Underlying Mutual Fund options:
<TABLE>
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AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
A MEMBER OF THE AMERICAN CENTURY(SM) FAMILY NEUBERGER & BERMAN ADVISERS
OF INVESTMENTS: MANAGEMENT TRUST:
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-American Century VP Balanced -AMT Limited Maturity Bond Portfolio
-American Century VP Capital Appreciation -AMT Growth Portfolio
-American Century VP Income & Growth -AMT Guardian Portfolio
-American Century VP International -AMT Partners Portfolio
-American Century VP Value OPPENHEIMER VARIABLE ACCOUNTS FUNDS:
DREYFUS: -Oppenheimer Bond Fund
-Dreyfus Stock Index Fund, Inc. -Oppenheimer Global Securities Fund
-The Dreyfus Socially Responsible Growth -Oppenheimer Growth Fund
Fund, Inc. -Oppenheimer Multiple Strategies Fund
DREYFUS VARIABLE INVESTMENT FUND: STRONG OPPORTUNITY FUND II, INC. (FORMERLY
-Capital Appreciation Portfolio "STRONG SPECIAL FUND II, INC.")
-Growth & Income Portfolio** STRONG VARIABLE INSURANCE FUNDS, INC.:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND: -Strong Discovery Fund II, Inc.
-VIP Equity-Income Portfolio -International Stock Fund II
-VIP Growth Portfolio VAN ECK WORLDWIDE INSURANCE TRUST:
-VIP High Income Portfolio** -Worldwide Bond Fund
-VIP Overseas Portfolio -Worldwide Emerging Markets Fund
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: -Worldwide Hard Assets Fund
-VIP II Asset Manager Portfolio VAN KAMPEN AMERICAN CAPITAL LIFE
-VIP II Contrafund Portfolio INVESTMENT TRUST:
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III: -Morgan Stanley Real Estate
-VIP III Growth Opportunities Portfolio Securities Portfolio
</TABLE>
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<TABLE>
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MORGAN STANLEY UNIVERSAL FUNDS, INC.: WARBURG PINCUS TRUST:
-Emerging Markets Debt Portfolio -International Equity Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST: -Post-Venture Capital Portfolio
-Capital Appreciation Fund -Small Company Growth Portfolio
-Government Bond Fund
-Money Market Fund
-Nationwide Small Cap Value Fund
-Nationwide Small Company Fund
-Total Return Fund
</TABLE>
** These Underlying Mutual Funds 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.
THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY
JURISDICTION. PLEASE REFER TO YOUR POLICY FOR SPECIFIC BENEFIT INFORMATION.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, ANY ADVISER 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.
THE COMPANY (NATIONWIDE LIFE INSURANCE 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.
THE SECURITIES AND EXCHANGE COMMISSION MAINTAINS A WEB SITE, www.sec.gov, THAT
CONTAINS ANY MATERIAL INCORPORATED BY REFERENCE RELATING TO THIS PROSPECTUS.
INFORMATION ABOUT THIS PRODUCT AND OTHER BEST OF AMERICA PRODUCTS CAN BE
OBTAINED FROM THE WORLD-WIDE WEB AT www.bestofamerica.com.
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, 1998.
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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 those of other separate accounts that have been or may be established
by the Company.
GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance
with the provisions of the Code. 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 100th
birthday.
MONTHLY ANNIVERSARY DATE- The same day as the Policy Date for each succeeding
month.
NET ASSET VALUE- The value of one share of an Underlying Mutual Fund as
calculated at the end of each business day. 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 other than individual policies. The provisions of both these
Certificates and Policies are essentially the same and references to the
provisions of the 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.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units are separately maintained.
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 both the New York Stock Exchange and the Home Office
are open for business or any other day during which there is a sufficient degree
of trading such that the current Net Asset Value of the Accumulated Units might
be materially affected.
VALUATION PERIOD- A period commencing with the close of business on the New York
Stock Exchange and ending at the close of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT- Nationwide VLI Separate-2, a separate investment account of
Nationwide Life Insurance Company.
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<TABLE>
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TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS......................................................................................................3
SUMMARY OF THE POLICIES................................................................................................6
Variable Life Insurance.......................................................................................6
The Variable Account and its Sub-accounts.....................................................................6
The Fixed Account.............................................................................................6
Deductions and Charges........................................................................................6
Premiums......................................................................................................6
NATIONWIDE LIFE INSURANCE COMPANY......................................................................................7
THE VARIABLE ACCOUNT...................................................................................................7
Investments of the Variable Account...........................................................................7
American Century Variable Portfolios, Inc., a member of the American Century(SM) Family of Investments........8
Dreyfus Stock Index Fund, Inc.................................................................................9
Dreyfus Variable Investment Fund.............................................................................10
The Dreyfus Socially Responsible Growth Fund, Inc............................................................10
Fidelity Variable Insurance Products Fund....................................................................10
Fidelity Variable Insurance Products Fund II.................................................................11
Fidelity Variable Insurance Products Fund III................................................................11
Morgan Stanley Universal Funds, Inc..........................................................................12
Nationwide Separate Account Trust............................................................................12
Neuberger & Berman Advisers Management Trust.................................................................13
Oppenheimer Variable Account Funds...........................................................................13
Strong Opportunity Fund II, Inc..............................................................................14
Strong Variable Insurance Funds, Inc.........................................................................14
Van Eck Worldwide Insurance Trust............................................................................15
Van Kampen American Capital Life Investment Trust............................................................15
Warburg Pincus Trust.........................................................................................15
Reinvestment.................................................................................................16
Transfers....................................................................................................16
Dollar Cost Averaging........................................................................................17
Substitution of Securities...................................................................................17
Voting Rights................................................................................................17
INFORMATION ABOUT THE POLICIES........................................................................................18
Underwriting and Issuance....................................................................................18
-Minimum Requirements for Issuance of a Policy...............................................................18
-Premium Deposits............................................................................................18
-Allocation of Cash Value....................................................................................18
-Short-Term Right to Cancel Policy...........................................................................19
POLICY CHARGES........................................................................................................19
Deductions from Premiums.....................................................................................19
Monthly Deductions...........................................................................................19
-Cost of Insurance Charge....................................................................................19
-Administrative Expense Charge...............................................................................19
-Tax Expense Charge..........................................................................................20
-Mortality and Expense Risk Charge...........................................................................20
Surrender Charges............................................................................................20
Expenses of the Underlying Mutual Funds......................................................................21
HOW THE CASH VALUE VARIES.............................................................................................23
How the Investment Experience is Determined..................................................................23
Net Investment Factor........................................................................................23
Determining the Cash Value...................................................................................24
Valuation Periods and Valuation Dates........................................................................24
SURRENDERING THE POLICY FOR CASH......................................................................................24
Right to Surrender...........................................................................................24
Cash Surrender Value.........................................................................................24
Partial Surrenders...........................................................................................25
Maturity Proceeds............................................................................................25
Income Tax Withholding.......................................................................................25
</TABLE>
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<TABLE>
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POLICY LOANS..........................................................................................................25
Taking a Policy Loan.........................................................................................25
Effect on Investment Performance.............................................................................26
Interest.....................................................................................................26
Effect on Death Benefit and Cash Value.......................................................................26
Repayment....................................................................................................26
HOW THE DEATH BENEFIT VARIES..........................................................................................27
-Calculation of the Death Benefit............................................................................27
-Proceeds Payable on Death...................................................................................28
RIGHT OF CONVERSION...................................................................................................28
CHANGES OF INVESTMENT POLICY..........................................................................................28
GRACE PERIOD..........................................................................................................28
REINSTATEMENT.........................................................................................................28
THE FIXED ACCOUNT OPTION..............................................................................................28
OTHER POLICY PROVISIONS...............................................................................................29
Policy Owner.................................................................................................29
Beneficiary..................................................................................................29
Assignment...................................................................................................29
Incontestability.............................................................................................29
Error in Age or Sex..........................................................................................29
Suicide......................................................................................................29
Nonparticipating Policies....................................................................................30
Riders.......................................................................................................30
LEGAL CONSIDERATIONS..................................................................................................30
DISTRIBUTION OF THE POLICIES..........................................................................................30
CUSTODIAN OF ASSETS...................................................................................................30
TAX MATTERS...........................................................................................................30
Policy Proceeds..............................................................................................30
-Withholding.................................................................................................32
-Federal Estate and Generation-Skipping Transfer Taxes.......................................................31
-Non-Resident Aliens.........................................................................................32
Taxation of the Company......................................................................................32
Tax Changes..................................................................................................33
THE COMPANY...........................................................................................................33
COMPANY MANAGEMENT....................................................................................................34
Directors of the Company.....................................................................................34
Executive Officers of the Company............................................................................36
OTHER CONTRACTS ISSUED BY THE COMPANY.................................................................................36
STATE REGULATION......................................................................................................36
REPORTS TO POLICY OWNERS..............................................................................................37
ADVERTISING...........................................................................................................37
YEAR 2000 COMPLIANCE ISSUES...........................................................................................37
LEGAL PROCEEDINGS.....................................................................................................37
EXPERTS...............................................................................................................38
REGISTRATION STATEMENT................................................................................................38
LEGAL OPINIONS........................................................................................................38
APPENDIX 1............................................................................................................39
APPENDIX 2............................................................................................................51
FINANCIAL STATEMENTS..................................................................................................56
</TABLE>
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS. 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.
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SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The Policies are similar in many ways to fixed-benefit whole life insurance. As
with fixed-benefit whole life insurance, the Policy Owner pays a premium for
life insurance coverage on the 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 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") and/or the Fixed Account at the time the
Policy is issued. The Policy Owner selects the Sub-Accounts 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 ("NSAT")-Money Market Fund (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. (See "Short-Term Right to Cancel Policy.") Assets of each Sub-Account
are invested at Net Asset Value in shares of corresponding Underlying Mutual
Fund options. For a description of the Underlying Mutual Fund options and their
investment objectives, see "Investments of the Variable Account." The Policy
Owner also can have Cash Value allocated to the Fixed Account.
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the 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 3%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the Cash Value of the Policy. These
charges are made for administrative expenses, state premium taxes, federal
taxes, providing life insurance protection and assuming the mortality and
expense risks.
The Company deducts a monthly charge for the cost of insurance, administrative
charges, premium tax, and federal tax from the Policy's Cash Value attributable
to the Variable Account and Fixed Account. The Company also deducts on a monthly
basis from the Cash Value attributable to the Variable Account, a charge to
provide for mortality and expense risks. For Policies which are surrendered in
the first 9 Policy Years, the Company deducts a Surrender Charge not to exceed
10% of the initial Premium Payment. This includes a charge for deferred sales
expenses and premium tax recovery. The sales surrender charge will never exceed
7.5% of the initial premium payments. For a complete discussion of all charges,
deductions and reductions of charges, see "Charges and Other Deductions."
PREMIUMS
The minimum premium for which a Policy may be issued is $10,000 for issue ages
0-70 and $50,000 for issue ages 71-80. 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.")
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<PAGE> 10
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" with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215.
The Company is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia, and
Puerto Rico (for additional information, see "The Company").
THE VARIABLE ACCOUNT
The Variable Account was established by the Company, on May 7, 1987, pursuant to
Ohio law. The Company has caused the Variable Account to be registered with the
Securities and Exchange Commission as a unit investment trust pursuant to the
provisions of the Investment Company Act of 1940 (the "1940 Act"). Such
registration does not involve supervision of the management of the Variable
Account or of the Company by the Securities and Exchange Commission.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with the liabilities arising out of any other business
the Company may conduct. The Company does not guarantee the investment
performance of the Variable Account. The death benefit and Cash Value under the
Policy may vary with the investment performance of the investments in the
Variable Account (see "How the Death Benefit Varies" and "How the Cash Value
Varies").
Net Premium payments and Cash Value are allocated within the Variable Account
among one or more sub-accounts (see "Tax Matters"). The assets of each
Sub-Account are used to purchase shares of the Underlying Mutual Fund options
designated by the Policy Owner. Thus, the investment performance of a Policy
depends upon the investment performance of the Underlying Mutual Fund options
designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
The Company places the Policy's Cash Value in the Variable Account or the Fixed
Account at the time the Policy is issued. The Policy Owner selects the
Sub-Accounts or the Fixed Account into which the Cash Value will be allocated
(see "Allocation of Cash Value"). In such states which require a return of
premiums to those Policy Owners exercising their short term right to cancel (see
"Short Term Right to Cancel Policy"), the Net Premiums will be allocated to the
NSAT-Money Market Fund (for any Net Premiums allocated to a Sub-Account on the
application) and/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
corresponding Underlying Mutual Funds (see "Transfers", "Allocation of Cash
Value" and "Short Term Right to Cancel Policy").
Additional Premium Deposits, upon acceptance, will be allocated to the
NSAT-Money Market Fund unless the Policy Owner specifies otherwise. (See
"Premium Deposits.") Premium Deposits will be held only while the Company
obtains information necessary to evaluate the risk. Following the underwriting
process, the Company will either issue the Policy or refund deposits within 5
days from the date thereof.
Each of the Underlying Mutual Fund options is a series of registered investment
companies which receive investment advice from a registered investment adviser.
1) American Century Variable Portfolios, Inc., a member of the American
Centurysm Family of Investments managed by American Century Investment
Management, Inc.;
2) Dreyfus Stock Index Fund, Inc., managed by The Dreyfus Corporation and
Mellon Equity Associates;
3) Dreyfus Socially Responsible Growth Fund, Inc., managed by The Dreyfus
Corporation and NCM Capital Management Group, Inc.;
4) Dreyfus Variable Investments 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
<PAGE> 11
7) Fidelity Variable Insurance Products Fund III, managed by Fidelity
Management & Research Company;
8) Morgan Stanley Universal Funds, Inc., managed by Morgan Stanley Asset
Management, Inc.
9) Nationwide Separate Account Trust, managed by Nationwide Advisory Services,
Inc.;
10) Neuberger & Berman Advisers Management Trust, managed by Neuberger & Berman
Management Incorporated;
11) Oppenheimer Variable Account Funds, managed by OppenheimerFunds, Inc.;
12) Strong Opportunity Fund II, Inc., managed by Strong Capital Management,
Inc.;
13) Strong Variable Insurance Funds, Inc., managed by Strong Capital
Management, Inc.;
14) Van Eck Worldwide Insurance Trust, managed by Van Eck Associates
Corporation;
15) Van Kampen American Capital Life Investment Trust managed by Van Kampen
American Capital Asset Management, Inc.; and
16) Warburg Pincus Trust, managed by Warburg Pincus Asset Management, Inc.
The Underlying Mutual Fund options are NOT available to the general public
directly. The Underlying Mutual Funds are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the Underlying Mutual Funds have been established by investment advisers
which manage publicly traded mutual funds having similar names and investment
objectives. While some of the Underlying Mutual Funds may be similar to, and may
in fact be modeled after publicly traded mutual funds, Contract purchasers
should understand that the Underlying Mutual Funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any corresponding Underlying
Mutual Funds may differ substantially.
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.
A copy of each Underlying Mutual Fund's prospectus can be obtained without
charge from the Company by calling 1-800-547-7548, prospectus 1-800-238-3035,
or by writing P.O. Box 182150, Columbus, Ohio 43218-2150. THERE CAN BE NO
ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. 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. A minimum of 25% of the
fixed income portion of the Fund will be invested in fixed income senior
securities. There can be no assurance that the Fund will achieve its
investment objective.
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-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 INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the
portfolio to match the risk characteristics of the S&P 500 Stock Index
and then optimizes each portfolio to achieve the desired balance of risk
and return potential. This includes targeting a dividend yield that
exceeds that of the S&P 500. Such a management technique known as
"portfolio optimization" may cause the Fund to be more heavily invested
in some industries than in others. However, the Fund may not invest more
than 25% of its total assets in companies whose principal business
activities are in the same industry.
-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. While
securities of United States issuers may be included in the portfolio from
time to time, it is the primary intent of the manager to diversify
investments across a broad range of foreign issuers. Although the primary
investment of the Fund will be common stocks (defined to include
depository receipts for common stock and other equity equivalents), the
Fund may also invest in other types of securities consistent with the
Fund's objective. When the manager believes that the total capital growth
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.
-AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. 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. 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.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation.
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.
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<PAGE> 13
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("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
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
Capital Appreciation Portfolio's subadviser and provides day-to-day management
of this Portfolio.
-CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This
Portfolio invests primarily in the common stocks of domestic and foreign
issuers.
-GROWTH & 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.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM 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: Capital growth through equity investment in
companies that, in the opinion of the Fund's advisers, not only meet
traditional investment standards, but which also show evidence that they
conduct their business in a manner that contributes to the enhancement
of the quality of life in America. Current income is secondary to the
primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
-VIP EQUITY-INCOME PORTFOLIO
Investment Objective: 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.
-VIP GROWTH PORTFOLIO
Investment Objective: 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
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<PAGE> 14
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 this 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 can also 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.
-VIP HIGH INCOME PORTFOLIO
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities
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 Investor Services, Inc. ("Moody's"); BB or lower by
Standard & Poor's and may be deemed to be of a speculative nature. The
Portfolio may also purchase lower-quality bonds such as those rated Ca3
by Moody's or C- by Standard & Poor's which provide poor protection for
payment of principal and interest (commonly referred to as "junk bonds").
For a further discussion of lower-rated securities, please see the "Risks
of Lower-Rated Debt Securities" section of the Portfolio's prospectus.
-VIP OVERSEAS PORTFOLIO
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This 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 Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
-VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek 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.
-VIP II CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the FMR 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 Portfolio 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.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and its portfolios.
-VIP III GROWTH OPPORTUNITIES PORTFOLIO
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio,
under normal conditions, will invest at least 65% of its total assets
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<PAGE> 15
in securities of companies that FMR believes have long-term growth
potential. Although the Portfolio invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The Portfolio may invest in foreign securities without
limitation.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
Morgan Stanley Universal Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley Asset Management, Inc.
-EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the funds listed below, each with its own investment objectives. Shares of
NSAT will be sold primarily to life insurance company separate accounts to fund
the benefits under variable life insurance policies and variable annuity
contracts issued by life insurance companies. The assets of NSAT are managed by
Nationwide Advisory Services, Inc. ("NAS"), a wholly-owned subsidiary of
Nationwide Life Insurance Company.
-CAPITAL APPRECIATION FUND
Investment Objective: Long-term growth by primarily investing in a
diversified portfolio of the common stock of companies which the NAS
determines have a better-than-average potential for sustained capital
growth over the long term.
-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
-MONEY MARKET FUND
Investment Objective: 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.
-NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. Under normal market
conditions, at least 75% of the Fund's total assets will be invested in
equity securities of companies with market capitalizations at the time of
purchase of between $200 million and $2.5 billion. The Fund will invest
in equity securities of domestic and foreign issuers characterized as
"value" companies according to criteria established by The Dreyfus
Corporation, the Fund's subadviser.
-NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger & Berman, L.P., Pictet
International Management Limited with Van Eck Associates Corporation,
Strong Capital Management, Inc. and Warburg Pincus Asset Management,
Inc.
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
different investment styles, NAS hopes to increase prospects for
investment return and to reduce market risk and volatility.
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<PAGE> 16
-TOTAL RETURN FUND
Investment Objective: Capital growth by investing in common stocks of
companies that NAS believes will have above-average earnings or otherwise
provide investors with above-average potential for capital appreciation.
To maximize this potential, NAS may also utilize from time to time,
securities convertible into common stock, warrants and options to
purchase such stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger and Berman Advisers Management Trust ("N&B AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of N&B AMT 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 Guardian and Partners Portfolios of N&B AMT invest all of their investable
assets in a corresponding series of Advisers Managers Trust managed by Neuberger
& Berman Management Incorporated ("N&B Management"). Each series then invests in
securities in accordance with an investment objective, policies and limitations
identical to those of the Portfolio. This "master/feeder fund" structure is
different from that of many other investment companies which directly acquire
and manage their own portfolios of securities. (For more information regarding
"master/feeder fund" structure, see "Special Information Regarding Organization,
Capitalization and Other Matters" in the underlying mutual fund prospectus.) The
investment advisor for all the portfolios is N&B Management.
-AMT GROWTH PORTFOLIO
Investment Objective: 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.
-AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current
income. The Portfolio and its corresponding series seek to achieve these
objectives by investing in common stocks of long-established,
high-quality companies. N&B Management uses a value-oriented investment
approach in selecting securities, looking for low price-to-earnings
ratios, strong balance sheets, solid management, and consistent earnings.
-AMT LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide 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.
-AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth 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 the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds are an open-end, 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. OppenheimerFunds, Inc. is investment
adviser.
-OPPENHEIMER BOND FUND
Investment Objective: Primarily seeks a high level of current income by
investing at least 65% of its total assets in investment grade debt
securities, U.S. government securities and money market
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<PAGE> 17
instruments. Investment grade debt securities would include those rated
in one of the four highest ranking categories by any nationally
recognized rating organization or if unrated or split-rated (rated
investment grade and below investment grade by different rating
organizations), determined by OppenheimerFunds, Inc. to be of comparable
quality. The Fund may invest up to 35% of its total assets in debt
securities rated less than investment grade when consistent with the
Fund's investment objectives. The Fund seeks capital growth as a
secondary objective when consistent with its primary objective.
-OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
-OPPENHEIMER GROWTH FUND
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a
history of earnings and dividends and are issued by seasoned companies
(companies which have an operating history of at least five years
including predecessors). Current income is a secondary consideration in
the selection of the Fund's portfolio securities.
-OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUND II, INC.")
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. Strong Opportunity 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. is the investment
advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management
investment company commonly referred to as a mutual fund. Incorporated in the
State of Wisconsin, the Corporation has been authorized to issue shares of
common stock and series and classes of series of common stock. The International
Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by
the Corporation to insurance company separate accounts for the purpose of
funding variable life insurance policies and variable annuity contracts. Strong
Capital Management, Inc. is the investment advisor to the Funds.
-DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt securities.
-INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
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VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck 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 Van Eck Trust are
offered only to separate accounts of various insurance companies to fund the
benefits of life insurance policies and variable annuity contracts. The
investment advisor and manager is Van Eck Associates Corporation.
-WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
-WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund specifically emphasizes investment in countries that, compared to
the world's major economies, exhibit relatively low gross national
product per capita, as well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Description: Seeks long-term capital appreciation by
investing, primarily in "Hard Assets Securities." For the Fund's purpose,
"Hard Assets" are real estate, energy, timber, and industrial and
precious metals. Income is a secondary consideration.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Van Kampen American Capital Life Investment Trust is an open-end diversified
management investment company organized as a Delaware business trust. Shares are
offered in separate portfolios 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
Portfolio's investment adviser.
-MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally
in a diversified 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 Portfolio's total assets will be invested
in Real Estate Securities, primarily equity securities of real estate
investment trusts. The Portfolio 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.
WARBURG PINCUS TRUST
The Warburg Pincus 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. The Portfolios are managed by Warburg Pincus Asset Management,
Inc. ("Warburg").
-INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of Warburg 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.
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<PAGE> 19
-POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: 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: Capital growth by investing in a portfolio of
equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks
or warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
REINVESTMENT
The Underlying Mutual Funds described above have as a policy the distribution of
dividends in the form of additional shares (or fractions thereof) of the
Underlying Mutual Funds. The distribution of additional shares will not affect
the number of Accumulation Units attributable to a particular Policy. (See
"Allocation of Cash Value.')
TRANSFERS
After the First Policy Anniversary, the Policy Owner may annually 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 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 among the Sub-Accounts may be made once per Valuation Date and 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 will 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 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
16
<PAGE> 20
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.
DOLLAR COST AVERAGING
The Policy Owner may direct the Company to automatically transfer amounts from
the Fidelity VIP High Income Portfolio, NSAT-Government Bond Fund, NSAT-Money
Market Fund, Neuberger & Berman AMT-Limited Maturity Bond Portfolio or the Fixed
Account to any other Sub-Account. Dollar Cost Averaging will occur on a monthly
basis or on another frequency permitted by the Company. Dollar Cost Averaging is
a long-term investment program which provides for regular, level investments
over time. There is no guarantee that Dollar Cost Averaging will result in a
profit or protect against loss. To qualify for Dollar Cost Averaging, there must
be a minimum total Cash Value, less Policy Indebtedness, of $15,000. The minimum
monthly 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 program is requested. Transfers will be processed until either
the value in the originating funds is exhausted or the Policy Owner instructs
the Home Office in writing to cancel the transfers.
The Company reserves the right to discontinue establishing new Dollar Cost
Averaging programs. 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 ONLY with respect to Cash Value allocated
to the Sub-Accounts.
In accordance with its view of applicable law, the Company will vote the shares
of the Underlying Mutual Funds at regular and special meetings of the
shareholders. These shares will be voted in accordance with instructions
received from Policy Owners. If the 1940 Act or any regulation thereunder should
be amended or if the present interpretation changes, permitting the Company to
vote the shares of the Underlying Mutual Funds in its own right, the Company may
elect to do so.
The Policy Owner is the person who has voting interest under the Policy. The
number of Underlying Mutual Fund shares attributable to each Policy Owner 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 may be voted 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 at
least 21 days prior to such meeting. Each person having a voting interest will
receive periodic reports relating to the Underlying Mutual Fund, proxy material
and a form with which to give
17
<PAGE> 21
such voting instructions. Underlying Mutual Fund shares held by the Company or
by the Variable Account as to which no timely instructions are received will be
voted by the Company in the same proportion as the voting instructions which are
received.
Notwithstanding contrary Policy Owner voting instructions, the Company may vote
Underlying Mutual Fund shares in any manner necessary to enable the Underlying
Mutual Fund to: (1) make or refrain from making any change in the investments or
investment policies for any of the Underlying Mutual Funds, if required by an
insurance regulatory authority; (2) refrain from making any change in the
investment policies or any investment adviser or principal underwriter of any
portfolio which may be initiated by Policy Owners or the Underlying Mutual
Fund's Board of Directors, provided the Company's disapproval of the change is
reasonable and, in the case of a change in the investment policies or investment
adviser, based on a good faith determination that such change would be contrary
to state law or otherwise inappropriate in light of the portfolio's objective
and 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
Underwriting for these Policies is designed to group applicants into
classifications which can be expected to produce mortality experience consistent
with the actuarial structure for that class. The Company uses the following
methods of underwriting: (a) simplified underwriting not routinely requiring a
physical examination, and (b) medical or paramedical underwriting which requires
such an examination. (See "How the Death Benefit Varies.")
The Company reserves the right to request a medical examination on any applicant
where an affirmative response to one of the medical questions of the application
requires additional underwriting by the Company.
The minimum amount of initial premium that will be accepted by the Company is
$10,000 for issue ages 0-70 and $50,000 for issue ages 71-80. Policies may be
issued to Insureds who are 80 or younger at the time of issue. Before issuing
any Policy, the Company requires satisfactory evidence of insurability, which
may include a medical examination.
- -Premium Deposits
The initial premium for a Policy is payable in full at the Home Office. The
minimum amount of initial premium required is $10,000 for issue ages 0-70 and
$50,000 for issue ages 71-80. The Specified Amount of Death Benefit is
determined by treating the initial premium as equal to 100% of the Guideline
Single Premium. 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 is primarily intended to be a single premium policy 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 IRS to qualify the Policy as a life
insurance contract are not violated.
Deposits 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 require that
any existing Policy indebtedness is repaid prior to accepting any additional
premium payments.
Additional Premium Deposits, upon acceptance, will be allocated to the
NSAT-Money Market Fund unless the Policy Owner specifies otherwise.
The Company will not accept a subsequent premium deposit which would result in
total premiums paid exceeding the premium limitations prescribed by the IRS 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 NSAT-Money
Market Fund value or the Fixed Account as if the Policy had been issued and the
premium invested on the date the premium was received in good order by the
Company. When the Policy is issued, the Cash Value will be allocated to the
18
<PAGE> 22
NSAT-Money Market Fund (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.
At the expiration of the period in which the Policy Owner may exercise his or
her short term right to cancel the Policy, shares of the Underlying Mutual Funds
specified by the Policy Owner are purchased at Net Asset Value for the
respective Sub-Account(s). The Policy Owner may change the allocation of Cash
Value or may transfer Cash Value from one Sub-Account to another, subject to
such terms and conditions as may be imposed by each Underlying Mutual Fund and
as set forth in the prospectus. Cash Value allocated to the Fixed Account at the
time of application may not be transferred prior to the first Policy
Anniversary. (See "Transfers" and "Investments of the Variable Account.")
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
- -Short-Term Right to Cancel Policy
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails 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 either the total premiums paid, or the
Cash Value less Indebtedness, as prescribed by the state in which the Policy was
issued, within seven days after it receives the Policy. The scope of this right
may vary by state.
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.
MONTHLY DEDUCTIONS
On the Policy Date and on each Monthly Anniversary Date, the Company will deduct
an amount to cover charges and expenses incurred in connection with the Policy.
Generally, this Monthly Deduction will be deducted on a pro-rata basis from the
Cash Value in each Sub-Account and the Fixed Account. The amount of the Monthly
Deductions will vary from month to month. If the Cash Surrender Value is not
sufficient to cover the Monthly Deduction which is due, the Policy may lapse
(see "Grace Period'). The Monthly Deductions are comprised of the following
charges:
-Cost of Insurance Charge
Immediately after the Policy is issued, the Death Benefit will be
substantially greater than the initial premium payment. While the Policy
is in force, prior to the Maturity Date, the Death Benefit will always be
greater than the Cash Value. To enable the Company to pay this excess of
the Death Benefit over the Cash Value, a monthly cost of insurance charge
is deducted.
Currently, this charge is deducted monthly and is equal to an annual rate
of 0.65% multiplied by the Cash Value. On a current basis, for policy
years 11 and later, this monthly charge is anticipated to be reduced to
the Cash Value multiplied by an annual rate of 0.30% if the Cash
Surrender Value is $100,000 or more. In New York State the current cost
of insurance charge is calculated at an annual rate of 0.65% in all years
and will not exceed the 1980 Commissioner's Standard Ordinary Mortality
Table, Age Last Birthday (1980 CSO).
In no event will this current monthly deduction for the cost of insurance
exceed the guaranteed monthly cost of insurance charges. Guaranteed cost
of insurance charges will not exceed the cost based on the guaranteed
cost of insurance rate multiplied by the Policy's net amount at risk. The
net amount at risk is equal to the Death Benefit minus the Cash Value.
Guaranteed cost of insurance rates for standard issues are based on the
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.
-Administrative Expense Charge
The Company deducts a monthly Administrative Expense Charge to reimburse
it for expenses related to the 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
19
<PAGE> 23
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 monthly charge
is equal to an annual rate of 0.30% multiplied by the Policy's Cash
Value. On a current basis, for Policy Years eleven (11) and later, this
monthly charge is anticipated to be reduced to an annual rate of 0.15%
multiplied by the Cash Value, provided the Cash Surrender Value is
greater than or equal to $100,000. This Administrative Expense Charge is
subject to a $10 per month minimum. (In the State of New York this charge
is calculated at an annual rate of 0.30% in all years and may not exceed
$7.50 per month).
-Tax Expense Charge
During the first ten policy years, the Company makes a Monthly Deduction
to compensate for certain taxes which are incurred by the Company
including premium taxes imposed by various states and local jurisdictions
and for federal taxes imposed under Section 848 of the Code. This monthly
charge is equal to an annual rate of 0.50% multiplied by the Policy's
Cash Value.
This charge is deducted monthly and includes a premium tax component
equal to an annual rate of 0.30% and a federal tax component equal to an
annual rate of 0.20%. The Company expects to pay an average state premium
tax of approximately 2.5% of premiums for all states, although such tax
rates can generally range from 0% to 4%. The Company does not anticipate
to make a profit from this monthly Tax Expense 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. (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.
-Mortality and Expense Risk Charge
The Company assumes certain risks for guaranteeing the 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 early Policy Years.
To compensate the Company for assuming these risks, a monthly charge for
mortality and expense risks is deducted on a pro-rata basis from the Cash
Value in each Sub-Account. This monthly charge is equal to an annual rate
of 0.90% multiplied by the Cash Value attributable to the Variable
Account. 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.
SURRENDER CHARGES
The Company will deduct a surrender charge from the Policy's Cash Value for any
Policy which is surrendered during the first nine policy years. The surrender
charge is comprised of two components: a sales surrender charge and a premium
tax surrender charge.
The Company incurs certain sales and other distribution expenses at the time the
Policies are issued. The majority of these expenses consist of commissions paid
for the sale or these policies. Premium taxes are generally incurred by the
Company at the time the Policies are issued. These surrender charges are
designed to recover a portion of these expenses. The Company does not expect to
profit from these surrender charges. Unrecovered expenses are borne by the
Company's general assets which may include profits, if any, from the monthly
mortality and expense risk charges (see "Monthly Deductions"). Certain
surrenders may result in adverse tax consequences (see "Tax Matters").
Maximum surrender charges are shown in the following table:
<TABLE>
<CAPTION>
Surrender Charge as a
Percent of Initial
Completed Policy Years Premium Payment
---------------------- ---------------
<S> <C>
0 10.0%
1 10.0
2 9.0
3 8.0
</TABLE>
20
<PAGE> 24
<TABLE>
Surrender Charge as a
Percent of Initial
Completed Policy Years Premium Payment
---------------------- ---------------
<S> <C>
4 7.0
5 6.0
6 5.0
7 4.0
8 3.0
9+ 0.0
</TABLE>
Approximately 75% of the total surrender charges are for the recovery of sales
expenses and 25% for the recovery of premium taxes. In no event will the sales
surrender charge exceed 7.5% of the total premium payments.
The amount of the sales 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 sales surrender charge will be permitted by the Company only in those
situations where the Company does not incur sales expenses normally associated
with sales of a Policy. In no event will the elimination of any sales surrender
charge be permitted where such elimination will be unfairly discriminatory to
any person.
EXPENSES OF THE UNDERLYING MUTUAL FUNDS
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.
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AFTER EXPENSE REIMBURSEMENT)
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 Income & 0.70% 0.00% 0.70%
Growth
American Century Variable Portfolios, Inc.- American Century VP 1.50% 0.00% 1.50%
International
American Century Variable Portfolios, Inc.- American Century VP Value 1.00% 0.00% 1.00%
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.01% 0.76%
Dreyfus Stock Index Fund, Inc. 0.25% 0.03% 0.28%
Dreyfus Variable Investment Fund- Capital Appreciation Portfolio 0.75% 0.05% 0.80%
Dreyfus Variable Investment Fund- Growth & Income Portfolio 0.75% 0.05% 0.80%
Fidelity VIP Equity-Income Portfolio 0.50% 0.07% 0.57%
Fidelity VIP Growth Portfolio 0.60% 0.07% 0.67%
Fidelity VIP High Income Portfolio 0.59% 0.12% 0.71%
Fidelity VIP Overseas Portfolio 0.75% 0.15% 0.90%
Fidelity VIP II Asset Manager Portfolio 0.55% 0.09% 0.64%
Fidelity VIP II Contrafund Portfolio 0.60% 0.08% 0.68%
Fidelity VIP II Growth Opportunities Portfolio 0.60% 0.13% 0.73%
Morgan Stanley Universal Funds, Inc.- Emerging Markets Debt Portfolio 0.04% 1.26% 1.30%
Neuberger & Berman AMT- Growth Portfolio 0.83% 0.07% 0.90%
Neuberger & Berman AMT- Guardian Portfolio 0.60% 0.40% 1.00%
Neuberger & Berman AMT- Limited Maturity Bond Portfolio 0.65% 0.12% 0.77%
Neuberger & Berman AMT- Partners Portfolio 0.80% 0.06% 0.86%
NSAT- Capital Appreciation Fund 0.60% 0.09% 0.69%
NSAT- Government Bond Fund 0.50% 0.08% 0.08%
NSAT- Money Market Fund 0.40% 0.08% 0.48%
NSAT- Nationwide Small Cap Value Fund 0.90% 0.15% 1.05%
</TABLE>
21
<PAGE> 25
<TABLE>
<S> <C> <C> <C>
NSAT- Nationwide Small Company Fund 1.00% 0.11% 1.11%
NSAT- Total Return Fund 0.60% 0.07% 0.67%
Oppenheimer Variable Account Fund- Oppenheimer Bond Fund 0.73% 0.05% 0.78%
Oppenheimer Variable Account Fund- Oppenheimer Global Securities Fund 0.70% 0.06% 0.76%
Oppenheimer Variable Account Funds- Oppenheimer Growth Fund 0.73% 0.02% 0.75%
Oppenheimer Variable Account Fund- Oppenheimer Multiple Strategies Fund 0.72% 0.03% 0.75%
Strong Opportunity Fund II, Inc. 1.00% 0.15% 1.15%
Strong Variable Insurance Funds, Inc.- Discovery Fund II, Inc. 1.00% 0.18% 1.18%
Strong Variable Insurance Funds, Inc.- International Stock Fund II 1.00% 0.51% 1.51%
Van Eck Worldwide Insurance Trust- Worldwide Bond Fund 1.00% 0.12% 1.12%
Van Eck Worldwide Insurance Trust- Worldwide Emerging Markets Fund 0.80% 0.00% 0.80%
Van Eck Worldwide Insurance Trust- Worldwide Hard Assets Fund 1.00% 0.17% 1.17%
Van Kampen American Capital Life Investment Trust- 1.00% 0.07% 1.07%
Morgan Stanley Real Estate Securities Portfolio
Warburg Pincus Trust- International Equity Portfolio 1.00% 0.35% 1.35%
Warburg Pincus Trust-Post- Venture Capital Portfolio 1.07% 0.33% 1.40%
Warburg Pincus Trust- Small Company Growth Portfolio 0.90% 0.24% 1.14%
</TABLE>
The Underlying 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, some of which are subject to fee waivers or
expense reimbursements 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. The following Underlying Mutual Funds are subject to the
following fee waiver or expense reimbursement arrangements:
FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER
Fidelity VIP Equity-Income The Management Fees, Other Expenses and Total
Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.50%, Other Expenses would have
equaled 0.08% and Total Portfolio Operating
Expenses would have equaled 0.58%
Fidelity VIP Growth Portfolio The Management Fees, Other Expenses and Total
Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.60%, Other Expenses would have
equaled 0.09% and Total Portfolio Operating
Expenses would have equaled 0.69%
Fidelity VIP Overseas The Management Fees, Other Expenses and Total
Portfolio Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.75%, Other Expenses would have
equaled 0.17% and Total Portfolio Operating
Expenses would have equaled 0.92%
Fidelity VIP II Asset The Management Fees, Other Expenses and Total
Manager Portfolio Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.55%, Other Expenses would have
equaled 0.10% and Total Portfolio Operating
Expenses would have equaled 0.65%
Fidelity VIP II Contrafund The Management Fees, Other Expenses and Total
Portfolio Operating Expenses are net of any Portfolio
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.60%, Other Expenses would have
equaled 0.11% and Total Portfolio Operating
Expenses would have equaled 0.71%
Fidelity VIP III Growth The Management Fees, Other Expenses and Total
Opportunities Portfolio Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.60%, Other Expenses would have
equaled 0.14% and Total Portfolio Operating
Expenses would have equaled 0.74%
Morgan Stanley Universal The Management Fees, Other Expenses and Total
Funds, Inc. - Emerging Portfolio Operating Expenses are net of any
Markets Debt Portfolio fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.80%, Other Expenses would have
equaled 1.26% and total Portfolio Operating
Expenses would have equaled 2.06%
22
<PAGE> 26
FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER
NSAT-Nationwide Small Cap The Management Fees, Other Expenses and Total
Value Fund Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.90%, Other Expenses would have
equaled 5.41% and Total Portfolio Operating
Expenses would have equaled 6.31%
Van Eck Worldwide Insurance The Management Fees, Other Expenses and Total
Trust - Worldwide Emerging Portfolio Operating Expenses are net of any
Markets Fund fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 1.00%, Other Expenses would have
equaled 0.34% and Total Portfolio Operating
Expenses would have equaled 1.34%
Van Eck Worldwide Insurance The Management Fees, Other Expenses and Total
Trust - Worldwide Hard Assets Portfolio Operating Expenses are net of any
Fund fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
Assets Fund reimburse a portion of the
management fees and/or other expenses
resulting in a reduction of total expenses.
Without such waivers or reimbursements,
Management Fees would have equaled 1.00%,
Other Expenses would have equaled 0.18% and
Total Portfolio Operating Expenses would have
equaled 1.18%
Warburg Pincus Trust - The Management Fees, Other Expenses and Total
International Equity Portfolio Operating Expenses are net of any
Portfolio fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 1.00%, Other Expenses would have
equaled 0.36% and Total Portfolio Operating
Expenses would have equaled 1.36%
Warburg Pincus Trust - Post- The Management Fees, Other Expenses and Total
Venture Capital Portfolio Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 1.25%, Other Expenses would have
equaled 0.33% and Total Portfolio Operating
Expenses would have equaled 1.58%
Warburg Pincus Trust - Small The Management Fees, Other Expenses and Total
Company Growth Portfolio Portfolio Operating Expenses are net of any
fee waivers or expense reimbursements. The
investment adviser has voluntarily agreed to
reimburse a portion of the management fees
and/or other expenses resulting in a reduction
of total expenses. Without such waivers or
reimbursements, Management Fees would have
equaled 0.90%, Other Expenses would have
equaled 0.25% and Total Portfolio Operating
Expenses would have equaled 1.15%
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
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) where:
(a) is the net of:
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<PAGE> 27
(1) the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the current
Valuation Period; and
(2) the per share amount of any dividend or capital gain
distributions made by the Underlying Mutual Fund held in the
Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period.
(b) is the Net Asset Value per share of the Underlying Mutual Fund held in
the Sub-Account determined at the end of the immediately preceding
Valuation Period (see "Taxation of the Company").
The net investment factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. Currently, the Company does
not maintain a tax reserve with respect to the Policies since income with
respect to the Underlying Mutual Funds is not taxable to the Company or the
Variable Account. The Company reserves the right to adjust the calculation of
the net investment factor to reflect a tax reserve should such income of other
items become taxable to the Company. It should be noted that charges in the net
investment factor may not be directly proportional to changes in the Net Asset
Value of Underlying Mutual Fund shares because of any charge or credit for tax
reserves.
DETERMINING THE CASH VALUE
The sum of the value of all Variable Account Accumulation Units attributable to
the Policy, amounts credited to the Fixed Account, and any associated value in
the Policy Loan Account is the Cash Value. The number of Accumulation Units
credited each Sub-Account is 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, generally 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 Owners 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 credited to the Fixed Account will never be
less than 3%. The annual effective rate credited to the Policy Loan Account 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 Home Office are open for business or any other day during which there is
sufficient degree of trading that the current Net Asset Value of the
Accumulation Units might be materially affected.
SURRENDERING THE POLICY FOR CASH
RIGHT TO SURRENDER
The Policy Owner may surrender the Policy in full at any time while the Insured
is living and receive its Cash Surrender Value. The cancellation will be
effective as of the date the Company receives a proper written request for
cancellation and the Policy. Such written request must be signed and, where
permitted, the signature guaranteed by a member firm of the New York, American,
Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a commercial bank
or savings and loan, which is a member of the Federal Deposit Insurance
Corporation. In some cases, the Company may require additional documentation of
a customary nature.
CASH SURRENDER VALUE
The Cash Surrender Value increases or decreases daily to reflect the investment
experience of the Variable Account and the daily crediting of interest in the
Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
written request for surrender of the Policy, minus any charges, indebtedness or
other deductions due on that date, which may also include a Surrender Charge.
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<PAGE> 28
PARTIAL SURRENDERS
Partial surrenders are permitted after the fifth Policy Year. Partial surrenders
will be permitted only if they satisfy the following requirements:
1. The partial surrender request is in writing and the request is
signed by the Policy Owner or an authorized party of the Policy
Owner; and
2. The maximum partial surrender in any Policy Year, not subject to
Surrender Charges, is limited to the maximum of:
(i) 10% of the total premium payments; and
(ii) 100% of cumulative earnings (Cash Value less total premium
payments less any existing policy indebtedness);
3. Such partial surrenders must not result in a reduction of the
Cash Surrender Value below $10,000; and
4. After such partial surrender, the Policy continues to qualify as
life insurance.
All partial surrenders will be next computed after the date the Company receives
a proper written request. When a partial surrender is made, the Cash Value is
reduced by the amount of the partial surrender. Also, the Specified Amount is
reduced by the amount of the partial surrender unless the Death Benefit is based
on the applicable percentage of the 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 the Specified
Amount. Partial surrender amounts must be first deducted from the values in the
Sub-Accounts. Partial surrenders will be deducted from the Fixed Account only to
the extent that insufficient values are available in the Sub-Accounts.
No Surrender Charges will be assessed against any such eligible partial
surrenders. Certain partial surrenders may result in currently taxable income
and tax penalties.
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
100th 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 Value less any
Surrender Charge. Thereafter, maximum policy indebtedness is limited to 90% of
the Cash Value less any Surrender Charge. The Company will not grant a loan for
an amount less than $1,000 ($200 in Connecticut, $250 in Oregon, $500 in New
Jersey and $500 in New York). Should the Death Benefit become payable, the
Policy be surrendered, or the Policy mature while
25
<PAGE> 29
a loan is outstanding, the amount of Policy indebtedness will be deducted from
the Death Benefit, Cash Surrender Value or the Maturity Value, respectively.
Maximum Policy indebtedness, in Texas, is limited to 90% of the Cash Value in
the Sub-Accounts and 100% of the Cash Value in the Fixed Account less any
surrender charge.
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 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 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.
Total policy indebtedness is composed of two components: (I) Preferred Loans and
(ii) Regular Loans. The amount of the loan account will be treated as a
Preferred Loan to the extent such amount is less than or equal to the Cash Value
minus the result of: the premiums excluding any 1035 Exchange amount, less any
withdrawals not taxed as distributions plus any loans previously taxed as
distributions plus any amounts reported to the Company as cost basis
attributable to exchanges under Section 1035 of the Code. Any additional loaned
amounts will be treated as Regular Loans. Preferred and Regular Loan amounts
will be determined once a year, as well as at any time a new loan is requested.
On a current basis, preferred indebtedness will be credited interest daily at an
annual effective rate of 6%, and Regular indebtedness will be credited interest
daily at an annual effective rate of 4%. The credited rate for all policy
indebtedness is guaranteed never to be lower than 4%. This earned interest is
transferred from the Policy Loan Account to a Variable Account or the Fixed
Account on each Policy Anniversary, at any time a new loan is requested or at
the time of loan repayment. It will be allocated according to the Fund
Allocation Factors in effect at the time of the transfer.
The loan interest rate is 6% per year for all policy indebtedness. Interest is
charged daily and is payable at the end of each Policy Year as well as at any
time a new loan is requested. 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 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. The
26
<PAGE> 30
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. Guideline Single Premiums vary by
attained age, sex, underwriting classification, and total premium payments. The
following table illustrates representative initial Specified Amounts.
<TABLE>
<CAPTION>
$10,000 Single Premium $25,000 Single Premium $50,000 Single Premium
---------------------- ---------------------- ----------------------
Issue
Age Male Female Male Female Male Female
--- ---- ------ ---- ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
35 $62,031 $76,231 $155,077 $190,577 $310,154 $381,154
40 49,883 61,337 124,707 153,343 249,413 306,685
45 40,437 49,825 101,093 124,562 202,186 249,124
50 33,079 40,742 82,698 101,854 165,397 203,708
55 27,358 33,531 68,396 83,828 136,791 167,655
60 22,964 27,734 57,410 69,335 114,821 138,671
65 19,579 23,052 48,948 57,631 97,895 115,261
</TABLE>
Generally, for a given premium payment, the initial Specified Amount is greater
for 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 or the Applicable Percentage of Cash Value. The Death Benefit
may vary with the Cash Value of the Policy, which depends on investment
performance. The amount of Death Benefit will ordinarily not change for several
years to reflect investment performance and may not change at all. If investment
performance is favorable, the amount of Death Benefit may increase. The
Applicable Percentage of Cash Value varies by attained age.
<TABLE>
<CAPTION>
Applicable Percentage of Cash Value Factors
-------------------------------------------
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 101%
56 146% 76 105% 96 101%
57 142% 77 105% 97 101%
58 138% 78 105% 98 101%
59 134% 79 105% 99 101%
100 100%
</TABLE>
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<PAGE> 31
- -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 OF CONVERSION
The Policy Owner may at any time, upon written request to the Company within 24
months of the Policy Date, make an irrevocable, one time election to transfer
all Sub-Account Cash Values to the Fixed Account. The Right of Conversion
provision is subject to state availability.
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 Owners or if it renders the Company's operations hazardous to the
public. If a Policy Owner objects, there is an unconditional right to transfer
all of the Cash Value in the Variable Account to the Fixed Account. 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 transfer.
GRACE PERIOD
If the Cash Surrender Value in the Policy is insufficient to pay the monthly
deductions, 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 additional premiums at least equal to 3 times the guaranteed cost of
insurance charges; and
5. repaying 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 Date
on or next following the date the application for reinstatement is approved by
the Company. If your Policy is reinstated, the Cash Value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the 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 the 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 1940 Act.
Accordingly, neither the General Account nor any interests therein is subject to
the provisions of these Acts, and the Company has been advised that the staff of
the Securities and Exchange Commission has not reviewed the disclosures in this
prospectus relating to the Fixed Account option. Disclosures regarding the
General Account may, however, be subject to certain generally applicable
provisions of the federal securities laws 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 the Company's general assets
28
<PAGE> 32
(General Account). The 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 3%. 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.
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 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 the change 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) will 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
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 will be paid to the Policy Owner or the
Policy Owners 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 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, sex or both.
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.
29
<PAGE> 33
NONPARTICIPATING POLICIES
The Policies are nonparticipating. This means that they do not participate in
any dividend distribution of the Company's surplus.
RIDERS
A rider may be added as an addition to the Policy. Riders currently include a
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"), One Nationwide Plaza, Columbus, Ohio 43216.
NAS is a corporation which was organized under the laws of the State of Ohio on
April 8, 1965. NAS is both a broker-dealer and registered investment adviser. As
such, it is the principal underwriter for several open-end investment companies
and for a number of separate accounts issued by the Company and Nationwide Life
and Annuity Insurance Company ("NLAIC") to fund the benefits of variable
insurance and annuity polices. NAS also currently acts as the investment adviser
and/or administrator for the mutual fund portfolios sold through NAS's
registered representatives and for some of the mutual fund portfolios which act
as underlying investment options for the variable insurance and annuity policies
issued by the Company or NLAIC.
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 Variable Account-9, 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 VL Separate Account-C, Nationwide VLI Separate Account-2, Nationwide
VLI Separate Account-3, Nationwide VLI Separate Account-4, 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,
Nationwide Investing Foundation II, Nationwide Investing Foundation III 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 are not more than 6.75% 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
30
<PAGE> 34
insurance proceeds payable under a Policy are excludable from gross income of
the beneficiary under Section 101 of the Code.
The Policies described in this prospectus, meet the definition of "modified
endowment contracts" under Section 7702A of the Code. The Code defines modified
endowment contracts as those Policies issued or materially changed after June
21, 1988 on which the total premiums paid during the first seven years exceed
the amount that would have been paid if the Policy provided for paid up benefits
after seven level annual premiums. The Policies offered in this prospectus
typically fall within this definition. The Code provides for taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts (other than certain
Distributions made under a Policy on the life of a terminally 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", as that term is 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 Policy Owner pursuant to Section 7702(f)(7) of
the Code. The Policy Owner should carefully consider this potential effect and
seek further information before initiating any changes in the terms of the
Policy. Under certain conditions, a Policy may become a modified endowment as a
result of certain material changes or a reduction in benefits as defined by
Section 7702A(c) of the Code.
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 issued by the Secretary of the
Treasury, set the standards for measuring the adequacy of this diversification.
To be adequately diversified, each Sub-Account must meet certain tests. The
Company believes that the investments of the Variable Account meet the
applicable diversification standards. The regulations provide that a variable
life Policy which does not satisfy the diversification standards will not be
treated as life insurance under Section 7702 of the Code, unless the failure to
satisfy regulations was inadvertent, the failure is corrected, and the Policy
Owner or the Company pays an amount to the IRS. 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 of the
life Policy will be deemed the owner of the underlying securities and will be
taxed on the earnings of his or her account. The Company will monitor compliance
with these regulations and, to the extent necessary, will change the objectives
or assets of the Sub-Account investments to remain in compliance.
Representatives of the IRS 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, in
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<PAGE> 35
1998, an estate of less than $625,000 (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.
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 IRS 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,
- -Withholding
Distributions of income from a modified endowment contract are subject to
federal income tax withholding; however, the recipient may elect not to have the
withholding taken from the distribution. A distribution of income from a
modified endowment contract may be subject to mandatory back-up withholding
(which cannot be waived). The mandatory back-up withholding rate is 31% of the
income that is distributed and will arise of no Taxpayer Identification Number
is provided to the Company, or if the IRS notifies the Company that back-up
withholding is required.
- -Non-Resident Aliens
Pre-Death 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 IRS. 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 IRS. In addition, the NRA must obtain an individual Taxpayer
Identification Number from the IRS, 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 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 pre-death distribution 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
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<PAGE> 36
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 IRS, is general and is
not intended as tax advice.
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.
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,
annuities and retirement products 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, 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.
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<PAGE> 37
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 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,
Nationwide Variable Account-9, MFS Variable Account, Nationwide Multi-Flex
Variable Account, Nationwide VLI Separate Account, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4,
NACo Variable Account, Nationwide DC Variable Account and Nationwide DCVA-II,
each of which is a registered investment 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 the Home Office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual
Fire Insurance Company, Nationwide Property and Casualty Insurance Company and
Nationwide General Insurance Company and their affiliated companies comprise the
Nationwide Insurance Enterprise.
The companies listed above have substantially common boards of directors and
officers. Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of
Nationwide Life Insurance Company. NFS serves as a holding company for other
financial institutions. Nationwide Life Insurance Company is the sole owner of
Nationwide Life and Annuity Insurance Company. Each of the directors and
officers listed below is a director or officer respectively of at least one or
more of the other major insurance affiliates of the Nationwide Insurance
Enterprise. Messrs. McFerson, Gasper, Woodward, Fuellgraf and Weihl and Ms.
Thomas are also trustees of one or more of the registered investment companies
distributed by Nationwide Advisory Services, a registered broker-dealer
affiliated with the Nationwide Insurance Enterprise.
DIRECTORS OF THE COMPANY
<TABLE>
<CAPTION>
DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICERS WITH PRINCIPAL OCCUPATION
----------------------------------- --------------------------- --------------------
PRINCIPAL BUSINESS ADDRESS DEPOSITOR
-------------------------- ---------
<C> <C> <C>
Lewis J. Alphin Director Farm Owner and Operator (1)
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director Farm Owner and Operator (1)
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director Partner, Fred W. Eckel Sons;
1647 Falls Road President, Eckel Farms, Inc. (1)
Clarks Summit, PA 18411
Willard J. Engel Director Retired General Manager, Lyon County
301 East Marshall Street Co-operative Oil Company (1)
Marshall, MN 44691
Fred C. Finney Director Owner and Operator, Moreland Fruit
1558 West Moreland Road Farm; Operator, Melrose Orchard (1)
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director Chief Executive Officer, Fuellgraf
600 South Washington Street Electric Company (1)
Butler, PA 16001
</TABLE>
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<PAGE> 38
<TABLE>
<C> <C> <C>
Joseph J. Gasper President and Chief Operating Officer President and Chief Operating Officer,
One Nationwide Plaza and Director Nationwide Life Insurance Company and
Columbus, OH 43215 Nationwide Life and Annuity Insurance
Company (2)
Dimon R. McFerson Chairman and Chief Executive Chairman and Chief Executive
One Nationwide Plaza Officer-Nationwide Insurance Enterprise Officer-Nationwide Insurance
Columbus, OH 43215 and Director Enterprise (2)
David O. Miller Chairman of the Board and Director President, Owen Potato Farm, Inc.;
115 Sprague Drive Partner, M&M Enterprises (1)
Hebron, OH 43025
Yvonne L. Montgomery Director Senior Vice President-General Manager
Suite 1600 Southern Customer Operations for U.S.
2859 Paces Ferry Road Customer Operations, Xerox Corporation
Atlanta, GA 30339 (2)
C. Ray Noecker Director Owner and Operator Noecker Farms (1)
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director Vice President, Pattersons, Inc.;
8765 Mulberry Road President, Patterson Farms, Inc. (1)
Chesterland, OH 44026
Arden L. Shisler Director President and Chief Executive Officer,
1356 North Wenger Road K&B Transport, Inc. (1)
Dalton, OH 44618
Robert L. Stewart Director Owner and Operator Sunnydale Farms and
88740 Fairview Road Mining (1)
Jewett, OH 43986
Nancy C. Thomas Director Farm Owner and Operator, Da-Ma-Lor
10835 Georgetown Street NE Farms (1)
Louisville, OH 44641
Harold W. Weihl Director Farm Owner and Operator, Weihl Farms
14282 King Road (1)
Bowling Green, OH 43402
</TABLE>
1) Principal Occupation for last 5 years
2) Prior to assuming this current position, held other executive management
positions with the same or affiliated 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. 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, and Nationwide
Investing Foundation III, registered investment companies. Messrs. McFerson,
Gasper and Woodward are trustees of Nationwide Separate Account Trust and
Nationwide Asset Allocation Trust, registered investment companies. Mr. McFerson
is trustee of Financial Horizons Investment Trust and Nationwide Investing
Foundation II, registered investment companies. Mr. Engel is a director of
Western Cooperative Transport.
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<PAGE> 39
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF THE COMPANY
OFFICERS OF THE DEPOSITOR OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
<S> <C>
Robert A. Oakley Executive Vice President-Chief Financial Officer
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General Counsel and Assistant
One Nationwide Plaza Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary, Health and Annuities
One Nationwide Plaza
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales and Financial Services
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life Company Operations
One Nationwide Plaza
Columbus, OH 43215
Matthew S. Easley Vice President-Life Marketing and Administrative Services
One Nationwide Plaza
Columbus, OH 43215
Timothy E. Murphy Vice President-Strategic Marketing
One Nationwide Plaza
Columbus, OH 43215
R. Dennis Noice Vice President Retail Operations
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath Vice President-Product and Market Compliance
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
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.
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<PAGE> 40
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing current policy values, transactions since the last
statement, policy loan information, and any other information required by
federal or state laws or regulations.
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, changes in future premium allocation,
transfers among Sub-Accounts, premium payments, loans, increase in loan
principal, loan repayments, unpaid loan interest added to principal,
reinstatement and termination.
ADVERTISING
The Company is ranked and rated by independent financial rating services, among
which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of the
Company. The ratings are not intended to reflect the investment experience or
financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts. Furthermore, the
Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs based on selected tax brackets or
discussions of alternative investment vehicles and general economic conditions.
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year 2000. The
problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of others since 1996. The Company expects all system
changes and replacements needed to achieve Year 2000 compliance to be completed
by the end of 1998. Compliance testing will be completed in the first quarter of
1999. The Company charges all costs associated with these system changes as the
costs are incurred.
Operating expenses in 1997 include approximately $45 million on technology
projects, which includes costs related to Year 2000 and the development of a new
policy administration system for traditional life insurance products and other
system enhancements. The Company anticipates spending a comparable amount in
1998 on technology projects, including Year 2000 initiatives. These expenses do
not have an effect on the assets of the Variable Account and are not charged
through to the Contract Owner.
LEGAL PROCEEDINGS
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.
The General Distributor, Nationwide Advisory Services, Inc. is not engaged in
any litigation of any material nature.
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 February 1997, Nationwide Life Insurance Company
was named as a defendant in a lawsuit filed in New York Supreme Court related to
the sale of whole life policies on a "vanishing premium" basis (John H. Snyder
v. 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 has not been
certified as a class action. In April, 1997, a motion to dismiss the Snyder
complaint in its entirety was filed by the defendants, and the plaintiff has
opposed such motion.
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<PAGE> 41
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced an action against Nationwide Life Insurance Company and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this action, plaintiffs seek to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that some portion of their premiums were
invested in a publicly traded mutual fund when, in fact, the premium monies were
invested in a mutual fund whose shares may only be purchased by insurance
companies. The complaint seeks unspecified compensatory, treble and punitive
damages. In January 1998, both Nationwide Life Insurance Company and American
Century filed motions to dismiss the entire complaint. Plaintiffs' counsel have
opposed these motions and the federal court in Texas heard arguments on the
motions to dismiss in April, 1998. This lawsuit is in an early stage and has not
been certified as a class action. Nationwide Life Insurance Company intends to
defend this case vigorously.
There can be no assurance that any litigation relating to pricing and sales
practices will not have a material adverse effect on the Company in the future.
EXPERTS
The audited 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, Dietrich, Reynolds & Koogler, One Nationwide Plaza, Columbus,
Ohio 43215. All the members of such firm are employed by the Nationwide Mutual
Insurance Company.
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<PAGE> 42
APPENDIX 1
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 Cash Surrender Values falls to zero, 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 and no Cash Values are allocated to the Fixed Account.
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 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 Underlying Mutual Fund options available under the Policy as of
March 13, 1998.
Taking account of the Underlying Mutual Fund expenses, gross annual rates of
return of 0%, 6% and 12% correspond to net investment experience at constant
annual rates of -0.90%, 5.10%, and 11.10% respectively.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection, recovering taxes, providing for
administrative expenses, and assuming mortality and expense risks. Current
values reflect current charges and guaranteed values reflect the maximum 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.
In addition, the illustrations 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, rating classification and Premium Payment
requested.
39
<PAGE> 43
<TABLE>
<CAPTION>
$10,000 INITIAL PREMIUM: $40,437 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
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> <C>
1 10,500 9,591 8,591 40,437 10,170 9,170 40,437 10,749 9,749 40,437
2 11,025 9,194 8,194 40,437 10,345 9,345 40,437 11,563 10,563 40,437
3 11,576 8,809 7,909 40,437 10,525 9,625 40,437 12,449 11,549 40,437
4 12,155 8,435 7,635 40,437 10,710 9,910 40,437 13,412 12,612 40,437
5 12,763 8,071 7,371 40,437 10,901 10,201 40,437 14,459 13,759 40,437
6 13,401 7,719 7,119 40,437 11,098 10,498 40,437 15,598 14,998 40,437
7 14,071 7,376 6,876 40,437 11,300 10,800 40,437 16,837 16,337 40,437
8 14,775 7,044 6,644 40,437 11,508 11,108 40,437 18,184 17,784 40,437
9 15,513 6,721 6,421 40,437 11,722 11,422 40,437 19,648 19,348 40,437
10 16,289 6,407 6,407 40,437 11,942 11,942 40,437 21,241 21,241 40,437
15 20,789 5,104 5,104 40,437 13,485 13,485 40,437 32,418 32,418 43,441
20 26,533 3,952 3,952 40,437 15,313 15,313 40,437 50,069 50,069 61,084
25 33,864 2,932 2,932 40,437 17,477 17,477 40,437 77,190 77,190 89,540
30 43,219 2,029 2,029 40,437 20,039 20,039 40,437 119,951 119,951 128,348
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 44
<TABLE>
<CAPTION>
$25,000 INITIAL PREMIUM: $101,093 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
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> <C>
1 26,250 24,156 21,656 101,093 25,608 23,108 101,093 27,061 24,561 101,093
2 27,562 23,336 20,836 101,093 26,234 23,734 101,093 29,302 26,802 101,093
3 28,941 22,539 20,289 101,093 26,878 24,628 101,093 31,739 29,489 101,093
4 30,388 21,766 19,766 101,093 27,541 25,541 101,093 34,390 32,390 101,093
5 31,907 21,016 19,266 101,093 28,224 26,474 101,093 37,272 35,522 101,093
6 33,502 20,287 18,787 101,093 28,926 27,426 101,093 40,406 38,906 101,093
7 35,178 19,579 18,329 101,093 29,649 28,399 101,093 43,809 42,559 101,093
8 36,936 18,892 17,892 101,093 30,393 29,393 101,093 47,498 46,498 101,093
9 38,783 18,225 17,475 101,093 31,159 30,409 101,093 51,497 50,747 101,093
10 40,722 17,578 17,578 101,093 31,947 31,947 101,093 55,834 55,834 101,093
15 51,973 14,989 14,989 101,093 37,174 37,174 101,093 86,002 86,002 115,242
20 66,332 12,698 12,698 101,093 43,350 43,350 101,093 134,605 134,605 164,218
25 84,659 10,670 10,670 101,093 50,566 50,566 101,093 212,016 212,016 245,939
30 108,049 8,877 8,877 101,093 58,984 58,984 101,093 333,947 333,947 357,324
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 45
<TABLE>
<CAPTION>
$100,000 INITIAL PREMIUM: $273,583 SPECIFIED AMOUNT
MALE: REGULAR ISSUE: AGE 55
CURRENT VALUES
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> <C>
1 105,000 96,804 86,804 273,583 102,612 92,612 273,583 108,421 98,421 273,583
2 110,250 93,710 83,710 273,583 105,293 95,293 273,583 117,550 107,550 273,583
3 115,762 90,715 81,715 273,583 108,043 99,043 273,583 127,449 118,449 273,583
4 121,551 87,816 79,816 273,583 110,866 102,866 273,583 138,181 130,181 273,583
5 127,628 85,009 78,009 273,583 113,762 106,762 273,583 149,817 142,817 273,583
6 134,010 82,292 76,292 273,583 116,734 110,734 273,583 162,432 156,432 273,583
7 140,710 79,662 74,662 273,583 119,783 114,783 273,583 176,110 171,110 273,583
8 147,746 77,116 73,116 273,583 122,912 118,912 273,583 190,940 186,940 273,583
9 155,133 74,651 71,651 273,583 126,123 123,123 273,583 207,018 204,018 273,583
10 162,889 72,265 72,265 273,583 129,417 129,417 273,583 224,496 224,496 273,885
15 207,893 62,990 62,990 273,583 154,788 154,788 273,583 353,603 353,603 410,180
20 265,330 54,905 54,905 273,583 185,132 185,132 273,583 556,961 556,961 595,948
25 338,635 47,857 47,857 273,583 221,425 221,425 273,583 877,270 877,270 921,133
30 432,194 41,715 41,715 273,583 264,833 264,833 278,075 1,381,789 1,381,789 1,450,878
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 46
<TABLE>
<CAPTION>
$100,000 INITIAL PREMIUM: $195,791 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
CURRENT VALUES
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> <C>
1 105,000 96,804 86,804 195,791 102,612 92,612 195,791 108,421 98,421 195,791
2 110,250 93,710 83,710 195,791 105,293 95,293 195,791 117,550 107,550 195,791
3 115,762 90,715 81,715 195,791 108,043 99,043 195,791 127,449 118,449 195,791
4 121,551 87,816 79,816 195,791 110,866 102,866 195,791 138,181 130,181 195,791
5 127,628 85,009 78,009 195,791 113,762 106,762 195,791 149,817 142,817 195,791
6 134,010 82,292 76,292 195,791 116,734 110,734 195,791 162,432 156,432 195,791
7 140,710 79,662 74,662 195,791 119,783 114,783 195,791 176,127 171,127 199,023
8 147,746 77,116 73,116 195,791 122,912 118,912 195,791 191,122 187,122 212,145
9 155,133 74,651 71,651 195,791 126,123 123,123 195,791 207,505 204,505 226,181
10 162,889 72,265 72,265 195,791 129,417 129,417 195,791 225,453 225,453 241,235
15 207,893 62,990 62,990 195,791 154,788 154,788 195,791 355,112 355,112 372,868
20 265,330 54,905 54,905 195,791 185,132 185,132 195,791 559,337 559,337 587,304
25 338,635 47,857 47,857 195,791 221,425 221,425 232,497 881,013 881,013 925,064
30 432,194 41,715 41,715 195,791 264,833 264,833 267,481 1,387,685 1,387,685 1,401,562
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 47
<TABLE>
<CAPTION>
$10,000 INITIAL PREMIUM: $19,579 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
CURRENT VALUES
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> <C>
1 10,500 9,591 8,591 19,579 10,170 9,170 19,579 10,749 9,749 19,579
2 11,025 9,194 8,194 19,579 10,345 9,345 19,579 11,563 10,563 19,579
3 11,576 8,809 7,909 19,579 10,525 9,625 19,579 12,449 11,549 19,579
4 12,155 8,435 7,635 19,579 10,710 9,910 19,579 13,412 12,612 19,579
5 12,763 8,071 7,371 19,579 10,901 10,201 19,579 14,459 13,759 19,579
6 13,401 7,719 7,119 19,579 11,098 10,498 19,579 15,598 14,998 19,579
7 14,071 7,376 6,876 19,579 11,300 10,800 19,579 16,837 16,337 19,579
8 14,775 7,044 6,644 19,579 11,508 11,108 19,579 18,190 17,790 20,191
9 15,513 6,721 6,421 19,579 11,722 11,422 19,579 19,683 19,383 21,455
10 16,289 6,407 6,407 19,579 11,942 11,942 19,579 21,324 21,324 22,817
15 20,789 5,104 5,104 19,579 13,485 13,485 19,579 32,877 32,877 34,521
20 26,533 3,952 3,952 19,579 15,313 15,313 19,579 50,553 50,553 53,080
25 33,864 2,932 2,932 19,579 17,477 17,477 19,579 77,657 77,657 81,540
30 43,219 2,029 2,029 19,579 20,097 20,097 20,298 120,494 120,494 121,699
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 48
<TABLE>
<CAPTION>
$100,000 INITIAL PREMIUM: $195,791 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
CURRENT VALUES
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> <C>
1 105,000 96,998 86,998 195,791 102,818 92,818 195,791 108,638 98,638 195,791
2 110,250 94,086 84,086 195,791 105,716 95,716 195,791 118,022 108,022 195,791
3 115,762 91,262 82,262 195,791 108,695 99,695 195,791 128,217 119,217 195,791
4 121,551 88,522 80,522 195,791 111,758 103,758 195,791 139,293 131,293 195,791
5 127,628 85,865 78,865 195,791 114,907 107,907 195,791 151,325 144,325 195,791
6 134,010 83,287 77,287 195,791 118,145 112,145 195,791 164,397 158,397 195,791
7 140,710 80,787 75,787 195,791 121,475 116,475 195,791 178,629 173,629 201,851
8 147,746 78,362 74,362 195,791 124,898 120,898 195,791 194,228 190,228 215,593
9 155,133 76,009 73,009 195,791 128,418 125,418 195,791 211,300 208,300 230,317
10 162,889 73,728 73,728 195,791 132,037 132,037 195,791 230,037 230,037 246,140
15 207,893 64,911 64,911 195,791 159,510 159,510 195,791 365,977 365,977 384,276
20 265,330 57,149 57,149 195,791 192,699 192,699 202,334 582,250 582,250 611,363
25 338,635 50,315 50,315 195,791 232,794 232,794 244,434 926,330 926,330 972,646
30 432,194 44,299 44,299 195,791 281,232 281,232 284,044 1,473,742 1,473,742 1,488,480
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 49
<TABLE>
<CAPTION>
$10,000 INITIAL PREMIUM: $40,437 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
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> <C>
1 10,500 9,510 8,510 40,437 10,090 9,090 40,437 10,669 9,669 40,437
2 11,025 9,018 8,018 40,437 10,171 9,171 40,437 11,393 10,393 40,437
3 11,576 8,521 7,621 40,437 10,243 9,343 40,437 12,177 11,277 40,437
4 12,155 8,018 7,218 40,437 10,304 9,504 40,437 13,026 12,226 40,437
5 12,763 7,508 6,808 40,437 10,352 9,652 40,437 13,948 13,248 40,437
6 13,401 6,988 6,388 40,437 10,386 9,786 40,437 14,948 14,348 40,437
7 14,071 6,456 5,956 40,437 10,402 9,902 40,437 16,034 15,534 40,437
8 14,775 5,907 5,507 40,437 10,397 9,997 40,437 17,214 16,814 40,437
9 15,513 5,339 5,039 40,437 10,367 10,067 40,437 18,497 18,197 40,437
10 16,289 4,747 4,747 40,437 10,307 10,307 40,437 19,894 19,894 40,437
15 20,789 1,398 1,398 40,437 9,734 9,734 40,437 29,930 29,930 40,437
20 26,533 (*) (*) (*) 7,665 7,665 40,437 46,178 46,178 56,337
25 33,864 (*) (*) (*) 2,424 2,424 40,437 71,191 71,191 82,582
30 43,219 (*) (*) (*) (*) (*) (*) 109,912 109,912 117,605
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 50
<TABLE>
<CAPTION>
$25,000 INITIAL PREMIUM: $101,093 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
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> <C>
1 26,250 23,955 21,455 101,093 25,408 22,908 101,093 26,863 24,363 101,093
2 27,562 22,898 20,398 101,093 25,803 23,303 101,093 28,881 26,381 101,093
3 28,941 21,828 19,578 101,093 26,183 23,933 101,093 31,070 28,820 101,093
4 30,388 20,741 18,741 101,093 26,544 24,544 101,093 33,448 31,448 101,093
5 31,907 19,633 17,883 101,093 26,883 25,133 101,093 36,031 34,281 101,093
6 33,502 18,499 16,999 101,093 27,196 25,696 101,093 38,841 37,341 101,093
7 35,178 17,331 16,081 101,093 27,474 26,224 101,093 41,896 40,646 101,093
8 36,936 16,121 15,121 101,093 27,711 26,711 101,093 45,213 44,213 101,093
9 38,783 14,861 14,111 101,093 27,898 27,148 101,093 48,817 48,067 101,093
10 40,722 13,541 13,541 101,093 28,027 28,027 101,093 52,739 52,739 101,093
15 51,973 6,020 6,020 101,093 28,322 28,322 101,093 80,678 80,678 108,109
20 66,332 (*) (*) (*) 25,627 25,627 101,093 124,710 124,710 152,146
25 84,659 (*) (*) (*) 16,455 16,455 101,093 192,262 192,262 223,024
30 108,049 (*) (*) (*) (*) (*) (*) 296,833 296,833 317,611
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 51
<TABLE>
<CAPTION>
$100,000 INITIAL PREMIUM: $273,583 SPECIFIED AMOUNT
MALE: REGULAR ISSUE: AGE 55
CURRENT VALUES
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> <C>
1 105,000 96,804 86,804 273,583 102,612 92,612 273,583 108,421 98,421 273,583
2 110,250 93,710 83,710 273,583 105,293 95,293 273,583 117,550 107,550 273,583
3 115,762 90,715 81,715 273,583 108,043 99,043 273,583 127,449 118,449 273,583
4 121,551 87,816 79,816 273,583 110,866 102,866 273,583 138,181 130,181 273,583
5 127,628 85,009 78,009 273,583 113,762 106,762 273,583 149,817 142,817 273,583
6 134,010 82,292 76,292 273,583 116,734 110,734 273,583 162,432 156,432 273,583
7 140,710 79,662 74,662 273,583 119,783 114,783 273,583 176,110 171,110 273,583
8 147,746 77,116 73,116 273,583 122,912 118,912 273,583 190,940 186,940 273,583
9 155,133 74,651 71,651 273,583 126,123 123,123 273,583 207,018 204,018 273,583
10 162,889 72,265 72,265 273,583 129,417 129,417 273,583 224,496 224,496 273,885
15 207,893 62,990 62,990 273,583 154,788 154,788 273,583 353,603 353,603 410,180
20 265,330 54,905 54,905 273,583 185,132 185,132 273,583 556,961 556,961 595,948
25 338,635 47,857 47,857 273,583 221,425 221,425 273,583 877,270 877,270 921,133
30 432,194 41,715 41,715 273,583 264,833 264,833 278,075 1,381,789 1,381,789 1,450,878
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT THE CURRENT CHARGES DESCRIBED IN THE "MONTHLY
DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 52
<TABLE>
<CAPTION>
$10,000 INITIAL PREMIUM: $19,579 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
GUARANTEED VALUES
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> <C>
1 10,500 9,391 8,391 19,579 9,972 8,972 19,579 10,554 9,554 19,579
2 11,025 8,752 7,752 19,579 9,917 8,917 19,579 11,153 10,153 19,579
3 11,576 8,079 7,179 19,579 9,831 8,931 19,579 11,805 10,905 19,579
4 12,155 7,365 6,565 19,579 9,709 8,909 19,579 12,518 11,718 19,579
5 12,763 6,600 5,900 19,579 9,544 8,844 19,579 13,303 12,603 19,579
6 13,401 5,774 5,174 19,579 9,327 8,727 19,579 14,172 13,572 19,579
7 14,071 4,871 4,371 19,579 9,048 8,548 19,579 15,142 14,642 19,579
8 14,775 3,872 3,472 19,579 8,690 8,290 19,579 16,233 15,833 19,579
9 15,513 2,754 2,454 19,579 8,236 7,936 19,579 17,473 17,173 19,579
10 16,289 1,490 1,490 19,579 7,663 7,663 19,579 18,893 18,893 20,216
15 20,789 (*) (*) (*) 2,111 2,111 19,579 29,042 29,042 30,494
20 26,533 (*) (*) (*) (*) (*) (*) 44,509 44,509 46,735
25 33,864 (*) (*) (*) (*) (*) (*) 67,116 67,116 70,472
30 43,219 (*) (*) (*) (*) (*) (*) 102,020 102,020 103,040
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE 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> 53
<TABLE>
<CAPTION>
$100,000 INITIAL PREMIUM: $195,791 SPECIFIED AMOUNT
MALE: SIMPLIFIED ISSUE: AGE 65
GUARANTEED VALUES
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> <C>
1 105,000 94,820 84,820 195,791 100,656 90,656 195,791 106,495 96,495 195,791
2 110,250 89,368 79,368 195,791 101,099 91,099 195,791 113,539 103,539 195,791
3 115,762 83,598 74,598 195,791 101,302 92,302 195,791 121,226 112,226 195,791
4 121,551 77,451 69,451 195,791 101,230 93,230 195,791 129,666 121,666 195,791
5 127,628 70,850 63,850 195,791 100,832 93,832 195,791 138,989 131,989 195,791
6 134,010 63,689 57,689 195,791 100,039 94,039 195,791 149,354 143,354 195,791
7 140,710 55,834 50,834 195,791 98,761 93,761 195,791 160,964 155,964 195,791
8 147,746 47,111 43,111 195,791 96,882 92,882 195,791 174,080 170,080 195,791
9 155,133 37,309 34,309 195,791 94,261 91,261 195,791 188,908 185,908 205,909
10 162,889 26,170 26,170 195,791 90,739 90,739 195,791 205,247 205,247 219,615
15 207,893 (*) (*) (*) 54,139 54,139 195,791 318,961 318,961 334,909
20 265,330 (*) (*) (*) (*) (*) (*) 489,843 489,843 514,335
25 338,635 (*) (*) (*) (*) (*) (*) 738,638 738,638 775,570
30 432,194 (*) (*) (*) (*) (*) (*) 1,122,773 1,122,773 1,134,001
</TABLE>
ASSUMPTIONS:
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT THE GUARANTEED CHARGES DESCRIBED IN THE
"MONTHLY DEDUCTION" AND "SURRENDER CHARGES" SECTION OF THE PROSPECTUS.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS THE AVERAGE FUND MANAGEMENT EXPENSE DESCRIBED IN
THE PROSPECTUS APPENDIX
(*) UNLESS ADDITIONAL PREMIUMS ARE PAID, THE POLICY WILL NOT STAY IN FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
51
<PAGE> 54
APPENDIX 2
The following performance tables display historical investment results of the
Underlying Mutual Fund Sub-Accounts. 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
<TABLE>
<CAPTION>
FUND PERFORMANCE TABLE
Annual Percentage Change Non annualized Percentage Change
Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Inception
UNDERLYING INVESTMENT OPTIONS Inception Values 1995 1996 1997 To to to to to to
Date** 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century VP 05/01/91 12.66 21.12 12.21 15.81 1.60 15.81 29.95 57.39 70.53 101.14
Balanced
American Century VP 11/20/87 8.82 31.10 -4.32 -3.26 -2.12 -3.26 -7.44 21.35 32.30 146.60
Capital Appreciation
American Century VP 05/01/94 12.78 11.33 14.10 18.63 3.48 18.63 35.36 50.69 N/A 42.40
International
American Century VP Value 05/01/96 12.79 N/A N/A 26.08 2.51 26.08 N/A N/A N/A 41.57
The Dreyfus Socially 10/06/93 14.36 34.56 21.23 28.43 2.35 28.43 55.70 109.51 N/A 128.27
Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund, Inc. 09/29/89 15.24 33.28 22.54 32.96 1.71 32.96 62.92 117.13 144.03 237.04
Dreyfus Variable 04/05/93 10.25 33.52 24.28 28.05 1.76 28.05 59.14 112.48 N/A 133.69
Investment Fund Capital
Appreciation Fund
Dreyfus Variable 05/02/94 11.61 61.89 19.63 16.21 2.20 16.21 39.02 125.06 N/A 120.37
Investment Fund Growth &
Income Fund
Fidelity VIP II Asset 09/06/89 13.30 16.96 14.60 20.65 1.52 20.65 38.27 61.72 83.83 171.19
Manager Portfolio
Fidelity VIP II Contrafund 01/03/95 13.97 N/A 21.31 24.14 1.84 24.14 50.59 N/A N/A 107.52
Portfolio
Fidelity VIP Equity-Income 10/09/86 13.82 35.09 14.28 28.11 2.15 28.11 46.41 97.78 150.31 365.10
Portfolio
Fidelity VIP III Growth 01/03/95 11.00 N/A 18.27 29.95 2.77 29.95 53.70 N/A N/A 103.68
Opportunity Portfolio
Fidelity VIP Growth 10/09/86 12.90 35.36 14.71 23.48 0.22 23.48 41.64 91.73 128.82 407.79
Portfolio
Fidelity VIP High Income 09/19/85 12.74 20.60 14.03 17.67 1.12 17.67 34.18 61.82 92.00 322.05
Portfolio
Fidelity VIP Overseas 01/28/87 11.90 9.68 13.22 11.56 0.84 11.56 26.30 38.52 93.38 137.09
Portfolio
Morgan Stanley Emerging 06/16/97 9.87 N/A N/A N/A 2.92 N/A N/A N/A N/A N/A
Markets Debt Portfolio
NSAT Capital Appreciation 04/15/92 15.61 29.35 26.14 34.49 2.01 34.49 69.65 119.45 138.37 152.15
Fund
NSAT Government Bond Fund 11/08/82 11.71 18.74 3.49 9.67 1.05 9.67 13.49 34.76 42.82 299.38
NSAT Money Market Fund 11/10/81 10.88 5.64 5.13 5.26 0.45 5.26 10.66 16.90 24.78 199.91
NSAT Nationwide 10/23/95 12.35 N/A 22.83 17.35 0.99 17.35 44.14 N/A N/A 64.86
Small Company Fund
NSAT Total Return 11/08/82 14.81 29.09 21.84 29.43 2.15 29.43 57.70 103.57 128.23 876.12
Fund
Neuberger & Berman 09/10/84 12.73 31.73 9.14 29.01 3.56 29.01 40.80 85.47 88.19 469.82
Advisers Management Trust
- - Growth Portfolio
Neuberger & Berman 09/10/84 11.18 10.93 4.31 6.74 0.57 6.74 11.34 23.51 31.49 185.00
Advisers Management Trust
- - Limited Maturity Bond
Portfolio
Neuberger & Berman 03/22/94 15.06 36.47 29.57 31.25 1.63 31.25 70.06 132.08 N/A 126.74
Advisers Management Trust
- - Partners Portfolio
Oppenheimer Variable 04/30/85 11.63 17.00 4.80 9.25 1.00 9.25 14.49 33.95 48.49 225.39
Account Fund - Oppenheimer
Bond Fund
Oppenheimer Variable 11/12/90 13.26 2.24 17.80 22.43 0.99 22.43 44.22 47.45 136.76 128.29
Account Fund - Oppenheimer
Global Securities Fund
Oppenheimer Variable 04/03/85 10.49 36.66 25.20 26.68 0.09 26.68 58.61 116.75 134.71 522.65
Account Fund - Oppenheimer
Growth Fund
Oppenheimer Variable 02/09/87 12.82 21.36 15.50 17.22 0.60 17.22 35.39 64.30 86.79 244.92
Account Fund - Oppenheimer
Multiple Strategies Fund
Strong Variable Insurance 05/08/92 11.01 35.26 0.81 11.39 -3.30 11.39 12.29 51.88 75.35 90.93
Fund, Inc. - Discovery
Fund II
Strong Variable Insurance 10/20/95 8.70 N/A 10.38 -13.52 -1.38 -13.52 -4.54 N/A N/A -2.05
Fund, Inc. - International
Fund II
Strong Variable Insurance 05/08/92 13.51 25.82 18.15 25.45 1.51 25.45 48.22 86.49 141.83 180.93
Fund, Inc. - Opportunity
Fund II
Van Eck Worldwide 09/01/89 10.77 17.30 2.52 2.39 0.18 2.39 4.97 23.13 30.96 64.58
Insurance Trust -
Worldwide Bond Fund
Van Eck Worldwide 12/27/95 8.91 N/A 26.72 -11.53 -0.27 -11.53 12.10 N/A N/A 10.98
Insurance Trust -
Worldwide Emerging Markets
Fund
Van Eck Worldwide 09/01/89 9.89 12.08 20.57 -1.68 -0.38 -1.68 18.55 32.88 108.54 81.35
Insurance Trust -
Worldwide Hard Assets Fund
Van Kampen American 07/03/95 16.61 N/A 40.53 21.47 2.77 21.47 70.71 N/A N/A 83.34
Capital Life Investment
Trust - Morgan Stanley
Real Estate Securities
Portfolio
Warburg Pincus Trust - 06/30/95 9.71 N/A 9.98 -2.26 -1.05 -2.26 7.50 N/A N/A 15.35
International Equity
Portfolio
Warburg Pincus Trust - 09/30/96 11.52 N/A N/A 13.34 2.05 13.34 N/A N/A N/A 10.82
Post Venture Capital
Portfolio
Warburg Pincus Trust - 06/30/95 11.37 N/A 13.91 15.65 2.11 15.65 31.73 N/A N/A 64.80
Small Company Growth
Portfolio
Annualized Percentage Change
3 Yrs. 5 yrs. Inception
UNDERLYING INVESTMENT OPTIONS to to To
12/31/97 12/31/97 12/31/97
<S> <C> <C> <C>
American Century VP 16.32 11.27 11.06
Balanced
American Century VP 6.66 5.76 9.34
Capital Appreciation
American Century VP 14.65 N/A 10.13
International
American Century VP Value N/A N/A 23.23
Dreyfus Socially 27.96 N/A 21.52
Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund, Inc. 29.49 19.53 15.86
Dreyfus Variable 28.56 N/A 19.63
Investment Fund Capital
Appreciation Fund
Dreyfus Variable 31.05 N/A 24.09
Investment Fund Growth &
Income Fund
Fidelity VIP II Asset 17.38 12.95 12.74
Manager Portfolio
Fidelity VIP II Contrafund N/A N/A 27.64
Portfolio
Fidelity VIP Equity-Income 25.52 20.14 14.67
Portfolio
Fidelity VIP III Growth N/A N/A 26.84
Opportunity Portfolio
Fidelity VIP Growth 24.23 18.00 15.57
Portfolio
Fidelity VIP High Income 17.40 13.94 12.44
Portfolio
Fidelity VIP Overseas 11.47 14.10 8.22
Portfolio
Morgan Stanley Emerging N/A N/A N/A
Markets Debt Portfolio
NSAT Capital Appreciation 29.95 18.97 17.59
Fund
NSAT Government Bond Fund 10.46 7.39 9.57
NSAT Money Market Fund 5.34 4.53 7.04
NSAT Nationwide Small N/A N/A 25.67
Company Fund
NSAT Total Return Fund 26.74 17.94 16.23
Neuberger & Berman 22.86 13.48 13.97
Advisers Management Trust
- - Growth Portfolio
Neuberger & Berman 7.29 5.63 8.19
Advisers Management Trust
- - Limited Maturity Bond
Portfolio
Neuberger & Berman 32.40 N/A 24.22
Advisers Management Trust
- - Partners Portfolio
Oppenheimer Variable 10.23 8.23 9.76
Account Fund - Oppenheimer
Bond Fund
Oppenheimer Variable 13.82 18.81 12.27
Account Fund - Oppenheimer
Global Securities Fund
Oppenheimer Variable 29.42 18.61 15.43
Account Fund - Oppenheimer
Growth Fund
Oppenheimer Variable 18.00 13.31 12.04
Account Fund - Oppenheimer
Multiple Strategies Fund
Strong Variable Insurance 14.95 11.89 12.14
Fund, Inc. - Discovery
Fund II
Strong Variable Insurance N/A N/A -0.94
Fund, Inc. - International
Fund II
Strong Variable Insurance 23.09 19.32 20.08
Fund, Inc. - Opportunity
Fund II
Van Eck Worldwide 7.18 5.54 6.16
Insurance Trust -
Worldwide Bond Fund
Van Eck Worldwide N/A N/A 5.32
Insurance Trust -
Worldwide Emerging Markets
Fund
Van Eck Worldwide 9.94 15.83 7.41
Insurance Trust -
Worldwide Hard Assets Fund
Van Kampen American N/A N/A 27.54
Capital Life Investment
Trust - Morgan Stanley
Real Estate Securities Portfolio
Warburg Pincus Trust - N/A N/A 5.90
International Equity
Portfolio
Warburg Pincus Trust - N/A N/A 8.56
Post Venture Capital
Portfolio
Warburg Pincus Trust - N/A N/A 22.20
Small Company Growth
Portfolio
</TABLE>
52
<PAGE> 56
The preceding table displays three types of total return: (1) Annuitized
Percentage Change; (2) Cumulative Non-Annualized Percentage Change; and (3)
Average Annualized Percentage Change. Total return shows the percent change in
unit values, with dividends and capital gains reinvested, after the deduction of
applicable investment advisory fees and other expenses of the Underlying Mutual
Funds), and includes no contract-level charges. 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 Annual Percentage Change reflects the rate of
return on an annual percentage basis during the 1995, 1996 and 1997 calendar
years. The Average Annualized Percentage Change reflects the annual percentage
rate of return over 3 and 5 year periods, or from Underlying Mutual Fund
inception. 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
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.
THE PRECEDING FUND PERFORMANCE TABLE DISPLAYS HISTORICAL INVESTMENT
RESULTS OF THE UNDERLYING MUTUAL FUNDS. THIS INFORMATION MAY BE USEFUL IN
HELPING POTENTIAL INVESTORS IN DECIDING WHICH UNDERLYING MUTUAL FUNDS 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 FUNDS ARE NOT GUARANTEED AND
WILL FLUCTUATE SO THAT A POLICY OWNER'S UNITS, WHEN REDEEMED, MAY BE WORTH MORE
OR LESS THAT THEIR ORIGINAL COST.
53
<PAGE> 57
<TABLE>
<CAPTION>
FUND PERFORMANCE TABLE
---------------------------------------------------------------------------------------------------------------
1 YEAR TO 2 YEARS TO 3 YEARS TO 5 YEARS TO 10 YEARS TO INCEPTION TO
12/31/97 12/31/97 12/31/97 12/31/97 12/31/97 12/31/97
---------------- --------------- -------------- ------------- ----------------- -----------
FUND CASH CASH CASH CASH CASH Cash
UNDERLYING Inception ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR.
INVESTMENT DATE** VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE Value
OPTIONS
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American 05/01/91 $56,821 $51,821 $62,583 $57,583 $74,460 $69,960 $77,737 $74,237 $0 $0 $74,597 $72,097
Century
VP Balanced
American 11/20/87 $47,454 $42,454 $44,544 $39,544 $57,401 $52,901 $60,305 $56,805 $95,983 $95,983 $243,340 $243,340
Century
VP
Capital
Appreciation
American 05/01/94 $58,214 $53,214 $65,200 $60,200 $71,261 $66,761 $0 $0 $0 $0 $167,505 $163,505
Century
VP
International
American 05/01/96 $61,868 $56,868 $0 $0 $0 $0 $0 $0 $0 $0 $129,144 $124,144
Century
VP Value
The Dreyfus10/06/93 $63,026 $58,026 $75,019 $70,019 $99,201 $94,701 $0 $0 $0 $0 $105,567 $102,067
Socially
Responsible
Growth
Fund, Inc.
Dreyfus 09/29/89 $65,248 $60,248 $78,500 $73,500 $102,810 $98,310 $111,350 $107,850 $0 $0 $183,607 $182,107
Stock
Index Fund, Inc.
Dreyfus 04/05/93 $62,839 $57,839 $76,682 $71,682 $100,609 $96,109 $0 $0 $0 $0 $86,006 $82,506
Variable
Investment
Fund
Capital
Appreciation
Fund
Dreyfus 05/02/94 $57,019 $52,019 $66,975 $61,975 $106,641 $102,14 $0 $0 $0 $0 $60,898 $56,898
Variable
Investment
Fund
Growth &
Income
Fund
Fidelity 09/06/89 $59,200 $54,200 $66,600 $61,600 $76,496 $71,996 $83,844 $80,344 $0 $0 $62,869 $61,369
VIP II
Asset
Manager
Portfolio
Fidelity 01/03/95 $60,915 $55,915 $72,549 $67,549 $0 $0 $0 $0 $0 $0 $73,051 $68,551
VIP II
Contrafund
Portfolio
Fidelity 10/09/86 $62,864 $57,864 $70,522 $65,522 $93,632 $89,132 $114,313 $110,813 $196,777 $196,777 $88,238 $88,238
VIP
Equity
Income
Portfolio
Fidelity 01/03/95 $63,768 $58,768 $74,040 $69,040 $0 $0 $0 $0 $0 $0 $49,802 $45,302
VIP III
Growth
Opportunity
Portfolio
Fidelity 10/09/86 $60,591 $55,591 $68,229 $63,229 $90,777 $86,277 $104,467 $100,967 $204,598 $204,598 $115,917 $115,917
VIP
Growth
Portfolio
Fidelity 09/19/85 $57,733 $52,733 $64,627 $59,627 $76,563 $72,063 $87,611 $84,111 $139,308 $139,308 $116,729 $116,729
VIP High
Income
Portfolio
Fidelity 01/28/87 $54,737 $49,737 $60,832 $55,832 $65,498 $60,998 $88,323 $84,823 $104,473 $104,473 $92,589 $92,589
VIP
Overseas
Portfolio
Morgan 06/16/97 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $57,986 $52,986
Stanley
Emerging
Markets
Debt
Portfolio
NSAT 04/15/92 $66,002 $61,002 $81,749 $76,749 $103,889 $99,389 $108,725 $105,225 $0 $0 $143,616 $140,616
Capital
Appreciation
Fund
NSAT 11/08/82 $53,802 $48,802 $54,634 $49,634 $63,727 $59,227 $65,073 $61,573 $101,113 $101,113 $65,361 $65,361
Government
Bond Fund
NSAT 11/10/81 $51,639 $46,639 $53,277 $48,277 $55,245 $50,745 $56,814 $53,314 $71,793 $71,793 $143,235 $143,235
Money
Market
Fund
NSAT 10/23/95 $57,577 $52,577 $69,445 $64,445 $0 $0 $0 $0 $0 $0 $233,665 $229,165
Nationwide
Small
Company
Fund
NSAT 11/08/82 $63,515 $58,515 $75,980 $70,980 $96,372 $91,872 $104,133 $100,633 $178,674 $178,674 $102,869 $102,869
Total
Return
Fund
Neuberger 09/10/84 $63,308 $58,308 $67,814 $62,814 $87,794 $83,294 $85,782 $82,282 $167,633 $167,633 $230,007 $230,007
& Berman
AMT -
Growth
Portfolio
Neuberger 09/10/84 $52,367 $47,367 $53,601 $48,601 $58,385 $53,885 $59,889 $56,389 $82,428 $82,428 $114,381 $114,381
& Berman
AMT -
Limited
Maturity
Bond
Portfolio
Neuberger 03/22/94 $64,409 $59,409 $81,953 $76,953 $109,907 $105,407 $0 $0 $0 $0 $105,674 $101,674
& Berman
AMT -
Partners
Portfolio
Oppenheimer04/30/85 $53,600 $48,600 $55,120 $50,120 $63,341 $58,841 $67,683 $64,183 $103,411 $103,411 $156,480 $156,480
Variable
Account
Fund
- -Oppenheimer
Bond Fund
Oppenheimer 11/12/90 $60,078 $55,078 $69,476 $64,476 $69,705 $65,205 $108,241 $104,741 $0 $0 $116,111 $114,111
Variable
Account
Fund -
Oppenheimer
Global
Securities
Fund
Oppenheimer 04/03/85 $62,166 $57,166 $76,428 $71,428 $102,643 $98,143 $107,081 $103,581 $195,495 $195,495 $57,902 $57,902
Variable
Account
Fund -
Oppenheimer
Growth
Fund
Oppenheimer 02/09/87 $57,516 $52,516 $65,212 $60,212 $77,742 $73,242 $85,206 $81,706 $138,670 $138,670 $52,241 $52,241
Variable
Account
Fund -
Oppenheimer
Multiple
Strategies
Fund
Strong 05/08/92 $54,649 $49,649 $54,050 $49,050 $71,865 $67,365 $79,994 $76,494 $0 $0 $80,085 $77,085
Variable
Insurance
Fund,
Inc. -
Discovery
Fund II
Strong 10/20/95 $42,425 $37,425 $45,970 $40,970 $0 $0 $0 $0 $0 $0 $142,477 $137,977
Variable
Insurance
Fund,
Inc. -
International
Fund II
Strong 05/08/92 $61,559 $56,559 $71,403 $66,403 $88,259 $83,759 $110,444 $106,944 $0 $0 $168,415 $165,415
Variable
Insurance
Fund,
Inc. -
Opportunity
Fund II
Van Eck 09/01/89 $50,226 $45,226 $50,526 $45,526 $58,221 $53,721 $59,656 $56,156 $0 $0 $79,647 $78,147
Worldwide
Insurance
Trust -
Worldwide
Bond Fund
Van Eck 12/27/95 $43,409 $38,409 $54,019 $49,019 $0 $0 $0 $0 $0 $ 0 $65,577 $61,077
Worldwide
Insurance
Trust -
Worldwide
Emerging
Markets
Fund
Van Eck 09/01/89 $48,234 $43,234 $57,111 $52,111 $62,844 $58,344 $95,356 $91,856 $0 $0 $253,397 $251,897
Worldwide
Insurance
Trust -
Worldwide
Hard
Assets
Fund
Van 07/03/95 $59,600 $54,600 $82,262 $77,262 $0 $0 $0 $0 $0 $0 $87,544 $83,044
Kampen
American
Capital
Life
Investment
Trust -
Morgan
Stanley
Real
Estate
Securities
Portfolio
Warburg 06/30/95 $47,956 $42,956 $51,772 $46,772 $0 $0 $0 $0 $0 $0 $124,921 $120,421
Pincus
Trust -
International
Equity
Portfolio
Warburg 09/30/96 $55,604 $50,604 $0 $0 $0 $0 $0 $0 $0 $0 $70,121 $65,121
Pincus
Trust -
Post
Venture
Capital
Portfolio
Warburg 06/30/95 $56,736 $51,736 $63,446 $58,446 $0 $0 $0 $0 $0 $0 $94,214 $89,714
Pincus
Trust -
Small
Company
Growth
Portfolio
</TABLE>
54
<PAGE> 58
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, simplified,
with a level death benefit and an initial specified amount of $165,397. The
Cash Surrender Value figures reflect the deduction of the applicable
fund-level investment advisory fees and an asset fee comprised of a mortality
and expense risk charge, the applicable cost of insurance charges, tax
expense charges and an annual administrative charge. Performance for the Cash
Surrender Value columns reflect the deduction of the applicable Surrender
Charge at the end of each period. 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
TheBoard 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,
1997, 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, 1997, 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, 1997, and the
results of its operations and its changes in contract owners' equity and
schedules of changes in unit value for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
American Century VP - American Century VP Balanced (ACVPBal)
450,365 shares (cost $3,528,940) ................................................... $ 3,711,009
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
1,251,568 shares (cost $13,536,259) ................................................ 12,115,182
American Century VP - American Century VP International (ACVPInt)
962,266 shares (cost $6,644,002) ................................................... 6,581,900
American Century VP - American Century VP Value (ACVPValue)
247,477 shares (cost $1,686,843) ................................................... 1,715,016
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
288,951 shares (cost $6,988,377) ................................................... 7,215,109
Dreyfus Stock Index Fund (DryStkIx)
1,707,776 shares (cost $40,352,694) ................................................ 43,975,229
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
15,469 shares (cost $435,161) ...................................................... 431,598
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
57,884 shares (cost $1,280,956) .................................................... 1,202,834
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
2,871,655 shares (cost $56,323,170) ................................................ 69,723,785
Fidelity VIP - Growth Portfolio (FidVIPGr)
2,020,415 shares (cost $67,005,105) ................................................ 74,957,386
Fidelity VIP - High Income Portfolio (FidVIPHI)
1,852,037 shares (cost $23,041,039) ................................................ 25,150,659
Fidelity VIP - Overseas Portfolio (FidVIPOv)
994,402 shares (cost $18,739,132) .................................................. 19,092,517
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
1,569,275 shares (cost $23,423,853) ................................................ 28,262,651
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
1,444,442 shares (cost $24,113,457) ................................................ 28,802,183
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
57,717 shares (cost $1,083,502) .................................................... 1,112,204
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
26,082 shares (cost $249,822) ...................................................... 252,215
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
1,025,559 shares (cost $21,432,535) ................................................ 21,752,099
Nationwide SAT - Government Bond Fund (NSATGvtBd)
792,837 shares (cost $9,071,723) ................................................... 9,022,484
Nationwide SAT - Money Market Fund (NSATMyMkt)
41,137,522 shares (cost $41,137,522) ............................................... 41,137,522
</TABLE>
(Continued)
<PAGE> 3
<TABLE>
<S> <C>
Nationwide SAT - Small Company Fund (NSATSmCo)
861,772 shares (cost $14,442,491) .......................................... 13,659,092
Nationwide SAT - Total Return Fund (NSATTotRe)
4,556,451 shares (cost $61,467,891) ........................................ 74,634,664
Neuberger &Berman AMT - Growth Portfolio (NBAMTGro)
574,343 shares (cost $16,246,741) .......................................... 17,540,438
Neuberger &Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
417,231 shares (cost $5,804,690) ........................................... 5,891,308
Neuberger &Berman AMT - Partners Portfolio (NBAMTPart)
1,394,479 shares (cost $26,115,621) ........................................ 28,726,274
Oppenheimer VAF - Bond Fund (OppBdFd)
740,592 shares (cost $8,732,177) ........................................... 8,820,455
Oppenheimer VAF - Global Securities Fund (OppGlSec)
774,702 shares (cost $13,493,381) .......................................... 16,555,373
Oppenheimer VAF - Growth Fund (OppGro)
19,076 shares (cost $615,472) .............................................. 618,841
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
726,507 shares (cost $10,917,824) .......................................... 12,357,889
Strong Opportunity Fund II, Inc. (StOpp2)
1,170,744 shares (cost $20,723,927) ........................................ 25,405,139
Strong VIF - Strong Discovery Fund II (StDisc2)
627,226 shares (cost $7,206,442) ........................................... 7,545,529
Strong VIF - Strong International Stock Fund II (StIntStk2)
213,104 shares (cost $2,308,084) ........................................... 1,986,133
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
230,121 shares (cost $2,486,613) ........................................... 2,529,034
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
218,008 shares (cost $3,213,391) ........................................... 2,398,087
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
401,815 shares (cost $7,002,936) ........................................... 6,316,535
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
480,988 shares (cost $7,935,817) ........................................... 7,623,661
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
950,953 shares (cost $11,329,279) .......................................... 9,975,497
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
69,318 shares (cost $768,255) .............................................. 766,662
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
947,893 shares (cost $15,514,842) .......................................... 15,621,270
-------------
Total investments ....................................................... 655,185,463
Accounts receivable .............................................................. 3,401,859
-------------
Total assets ............................................................ 658,587,322
ACCOUNTS PAYABLE .................................................................... -
-------------
CONTRACT OWNERS' EQUITY (NOTE 8) .................................................... $ 658,587,322
=============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 9,547,366 6,387,808 4,182,333
Mortality and expense charges (note 3)
Single Premium contracts issued prior to
April 16, 1990 ............................. (17,545) (16,385) (15,723)
Single Premium contracts issued on or after
April 16, 1990 ............................. (1,003,388) (874,853) (670,173)
Multiple Payment and Flexible Premium contracts (3,622,060) (2,092,228) (1,061,446)
------------- ------------ ------------
Net investment activity .......................... 4,904,373 3,404,342 2,434,991
------------- ------------ ------------
Proceeds from mutual fund shares sold ............... 443,749,426 275,979,207 163,574,836
Cost of mutual funds sold ........................... (409,583,997) (266,008,543) (154,208,870)
------------- ------------ ------------
Realized gain on investments ..................... 34,165,429 9,970,664 9,365,966
Change in unrealized gain on investments ............ 31,280,650 12,175,328 17,134,325
------------- ------------ ------------
Net gain on investments .......................... 65,446,079 22,145,992 26,500,291
------------- ------------ ------------
Reinvested capital gains ............................ 19,594,720 10,584,883 2,581,875
------------- ------------ ------------
Net increase in contract owners'
equity resulting from operations ........... 89,945,172 36,135,217 31,517,157
------------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from contract owners ..... 218,381,791 174,104,282 106,694,208
Surrenders .......................................... (11,960,967) (6,124,049) (4,970,867)
Death benefits (note 4) ............................. (664,672) (730,700) (143,265)
Policy loans (net of repayments) (note 5) ........... (9,898,715) (6,468,023) (2,529,830)
Deductions for surrender charges (note 2d) .......... (1,603,674) (721,263) (364,725)
Redemptions to pay cost of insurance charges
and administration charges (notes 2b and 2c) ..... (34,553,252) (24,075,896) (14,110,656)
Deductions for asset charges (note 3) ............... (227,535) (20,037) --
------------- ------------ ------------
Net increase in equity transactions ........... 159,472,976 135,964,314 84,574,865
------------- ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .................. 249,418,148 172,099,531 116,092,022
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ............ 409,169,174 237,069,643 120,977,621
------------- ------------ ------------
CONTRACT OWNERS' EQUITY END OF PERIOD .................. $ 658,587,322 409,169,174 237,069,643
============= ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
(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:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP) (formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Balanced (ACVPBal)
(formerly TCI Portfolios - TCI Balanced)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp) (formerly TCI Portfolios - TCI Growth)
American Century VP - American Century VP International
(ACVPInt) (formerly TCI Portfolios - TCI International)
American Century VP - American Century VP Value (ACVPValue)
(formerly TCI Portfolios - TCI Value)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
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)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
<PAGE> 6
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
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 AMT);
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Bond Fund (OppBdFd)
Oppenheimer VAF - Global Securities Fund (OppGlSec)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
Strong Opportunity Fund II, Inc. (StOpp2) (formerly Strong
Special Fund II)
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)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs) (formerly
Van Eck WIT - Gold and Natural Resources Fund)
Portfolio of the Van Kampen American Capital Life Investment
Trust (Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (MSRESec) (formerly Van Kampen American
Capital LIT - Real Estate Securities Fund)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain 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, 1997. Fund purchases and
sales are accounted for on the trade date (date the order to buy or
sell is executed). The cost of investments sold is determined on a
specific identification basis, and dividends (which include capital
gain distributions) are accrued as of the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
<PAGE> 7
(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 1996 and 1995 amounts have been reclassified to conform with
the current period presentation.
(2) POLICY CHARGES
(a) Deductions from Premiums
For single premium contracts, no deduction is made from any premium at
the time of payment. 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 policyholder.
(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 $12.50 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.
<PAGE> 8
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.
(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 contracts. 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%.
<PAGE> 9
(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.
(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) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
(7) SCHEDULE I
Schedule I presents the components of the change in the unit values, which
are the basis for 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 gain 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
(8) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997,
for each product in the accumulation phase.
<TABLE>
<CAPTION>
Contract owners' equity represented by: ANNUAL
UNITS UNIT VALUE RETURN
--------- --------- --------
<S> <C> <C> <C> <C>
Single Premium contracts issued prior to April 16, 1990:
American Century VP - American Century
VP Capital Appreciation .......................... 8,329 $23.049846 $ 191,982 (4)%
Dreyfus Stock Index Fund ............................ 9,956 21.945853 218,493 32%
Fidelity VIP - Equity-Income Portfolio .............. 6,812 37.884780 258,071 27%
Fidelity VIP - Growth Portfolio ..................... 5,177 42.050483 217,695 22%
Fidelity VIP - High Income Portfolio ................ 3,493 28.548032 99,718 17%
Fidelity VIP - Overseas Portfolio ................... 5,108 21.717871 110,935 11%
Fidelity VIP-II - Asset Manager Portfolio ........... 1,203 24.530415 29,510 20%
Fidelity VIP-II - Contrafund Portfolio .............. 3,331 16.387248 54,586 23%
Nationwide SAT -
Capital Appreciation Fund ........................ 2,373 24.356996 57,799 33%
Nationwide SAT -
Government Bond Fund ............................. 2,159 21.554629 46,536 9%
Nationwide SAT - Money Market Fund .................. 9,301 15.508767 144,247 4%
Nationwide SAT - Small Company Fund ................. 124 16.146794 2,002 16%
Nationwide SAT - Total Return Fund .................. 2,904 34.253930 99,473 28%
Neuberger &Berman AMT -
Growth Portfolio ................................. 5,113 31.739871 162,286 28%
Neuberger &Berman AMT -
Limited Maturity Bond Portfolio .................. 5,557 17.375997 96,558 6%
Neuberger & Berman AMT -
Partners Portfolio ............................... 2,379 22.629887 53,837 30%
Strong Opportunity Fund II, Inc. .................... 456 26.626359 12,142 24%
Van Eck WIT - Worldwide Bond Fund ................... 22 14.891060 328 1%
Van Eck WIT -
Worldwide Hard Assets Fund ....................... 5,526 14.622970 80,807 (3)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio ............................. 4,138 18.062622 74,743 20%
Warburg Pincus Trust -
International Equity Portfolio ................... 1,792 11.264405 20,186 (3)%
Warburg Pincus Trust -
Small Company Growth Portfolio ................... 134 16.093971 2,157 15%
Single Premium contracts issued on or
after April 16, 1990:
American Century VP -
American Century VP Balanced ..................... 38,245 16.350628 625,330 14%
American Century VP - American Century
VP Capital Appreciation .......................... 129,674 15.434921 2,001,508 (5)%
</TABLE>
(Continued)
<PAGE> 11
<TABLE>
<S> <C> <C> <C> <C>
American Century VP -
American Century VP International .... 109,065 13.757328 1,500,443 17%
American Century VP -
American Century VP Value ............ 36,293 12.622928 458,124 24%
The Dreyfus Socially Responsible
Growth Fund, Inc. .................... 27,923 21.605205 603,282 27%
Dreyfus Stock Index Fund ................ 252,267 21.622115 5,454,546 31%
Dreyfus VIF -
Capital Appreciation Portfolio ....... 8,365 10.192453 85,260 2%(a)
Dreyfus VIF -
Growth and Income Portfolio .......... 11,510 11.456116 131,860 15%
Fidelity VIP - Equity-Income Portfolio .. 525,933 30.880183 16,240,907 26%
Fidelity VIP - Growth Portfolio ......... 325,852 28.978553 9,442,719 22%
Fidelity VIP - High Income Portfolio .... 160,493 29.267460 4,697,222 16%
Fidelity VIP - Overseas Portfolio ....... 310,985 15.587449 4,847,463 10%
Fidelity VIP-II - Asset Manager Portfolio 293,986 23.873730 7,018,542 19%
Fidelity VIP-II - Contrafund Portfolio .. 257,262 16.244815 4,179,174 23%
Fidelity VIP-III -
Growth Opportunities Portfolio ....... 31,619 10.932562 345,677 9%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio ...... 5,443 9.810873 53,401 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund ............ 71,279 23.875030 1,701,788 33%
Nationwide SAT -
Government Bond Fund ................. 255,535 17.806978 4,550,306 8%
Nationwide SAT - Money Market Fund ...... 1,051,590 12.964662 13,633,509 4%
Nationwide SAT - Small Company Fund ..... 79,580 16.023638 1,275,161 16%
Nationwide SAT - Total Return Fund ...... 149,445 29.430261 4,398,205 28%
Neuberger &Berman AMT -
Growth Portfolio ..................... 135,697 22.311330 3,027,581 27%
Neuberger &Berman AMT -
Limited Maturity Bond Portfolio ...... 169,876 14.844266 2,521,685 5%
Neuberger &Berman AMT -
Partners Portfolio ................... 233,445 22.361130 5,220,094 30%
Oppenheimer VAF - Bond Fund ............. 89,920 17.910876 1,610,546 8%
Oppenheimer VAF -
Global Securities Fund ............... 113,733 16.036486 1,823,878 21%
Oppenheimer VAF - Growth Fund ........... 10,788 10.428297 112,500 4%(a)
Oppenheimer VAF -
Multiple Strategies Fund ............. 152,543 21.638756 3,300,841 16%
Strong Opportunity Fund II, Inc. ........ 132,285 26.101254 3,452,804 24%
Strong VIF - Strong Discovery Fund II ... 68,152 17.738866 1,208,939 10%
Strong VIF -
Strong International Stock Fund II ... 40,251 9.511045 382,829 (15)%
Van Eck WIT - Worldwide Bond Fund ....... 45,566 14.492332 660,358 1%
Van Eck WIT -
Worldwide Emerging Markets Fund ...... 35,382 8.793232 311,122 (13)%
Van Eck WIT -
Worldwide Hard Assets Fund ........... 142,782 16.093994 2,297,933 (3)%
</TABLE>
<PAGE> 12
<TABLE>
<S> <C> <C> <C> <C>
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio ................. 98,406 17.905659 1,762,024 20%
Warburg Pincus Trust -
International Equity Portfolio ....... 134,117 11.166430 1,497,608 (4)%
Warburg Pincus Trust -
Post Venture Capital Portfolio ....... 20,440 11.370593 232,415 12%
Warburg Pincus Trust -
Small Company Growth Portfolio ....... 175,452 15.954033 2,799,167 14%
Multiple Payment contracts and
Flexible Premium contracts:
American Century VP -
American Century VP Balanced ......... 162,980 16.822481 2,741,728 15%
American Century VP - American Century
VP Capital Appreciation .............. 655,176 14.709822 9,637,522 (4)%
American Century VP -
American Century VP International .... 333,719 13.994328 4,670,173 18%
American Century VP -
American Century VP Value ............ 81,237 12.687534 1,030,697 25%
The Dreyfus Socially Responsible
Growth Fund, Inc. .................... 275,028 22.067304 6,069,126 27%
Dreyfus Stock Index Fund ................ 1,577,410 22.086039 34,838,739 32%
Dreyfus VIF -
Capital Appreciation Portfolio ....... 33,449 10.216196 341,722 2%(a)
Dreyfus VIF -
Growth and Income Portfolio .......... 74,022 11.514756 852,345 15%
Fidelity VIP - Equity-Income Portfolio .. 1,533,661 32.007773 49,089,073 27%
Fidelity VIP - Growth Portfolio ......... 2,133,432 29.627929 63,209,172 22%
Fidelity VIP - High Income Portfolio .... 660,090 27.535006 18,175,582 17%
Fidelity VIP - Overseas Portfolio ....... 801,447 16.959418 13,592,075 11%
Fidelity VIP-II - Asset Manager Portfolio 930,767 21.747656 20,242,001 20%
Fidelity VIP-II - Contrafund Portfolio .. 1,351,683 16.448700 22,233,428 23%
Fidelity VIP-III -
Growth Opportunities Portfolio ....... 55,769 10.958018 611,118 10%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio ...... 16,674 9.833749 163,968 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund ............ 755,171 24.563746 18,549,829 33%
Nationwide SAT -
Government Bond Fund ................. 237,476 16.735906 3,974,376 9%
Nationwide SAT - Money Market Fund ...... 1,823,184 12.754301 23,253,438 4%
Nationwide SAT - Small Company Fund ..... 690,077 16.199871 11,179,158 16%
Nationwide SAT - Total Return Fund ...... 2,342,232 28.233403 66,129,180 28%
Neuberger &Berman AMT -
Growth Portfolio ..................... 628,860 22.117203 13,908,624 28%
Neuberger &Berman AMT -
Limited Maturity Bond Portfolio ...... 178,356 14.349688 2,559,353 6%
</TABLE>
(Continued)
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Neuberger &Berman AMT -
Partners Portfolio ................ 928,663 22.746051 21,123,416 30%
Oppenheimer VAF - Bond Fund .......... 381,236 17.086434 6,513,964 8%
Oppenheimer VAF -
Global Securities Fund ............ 855,620 16.380762 14,015,708 21%
Oppenheimer VAF - Growth Fund ........ 40,779 10.452595 426,246 5%(a)
Oppenheimer VAF -
Multiple Strategies Fund .......... 387,094 21.450954 8,303,536 16%
Strong Opportunity Fund II, Inc. ..... 791,884 26.851737 21,263,461 24%
Strong VIF - Strong Discovery Fund II 337,867 18.249145 6,165,784 11%
Strong VIF -
Strong International Stock Fund II 140,532 9.615755 1,351,321 (14)%
Van Eck WIT - Worldwide Bond Fund .... 121,423 13.690999 1,662,402 2%
Van Eck WIT -
Worldwide Emerging Markets Fund ... 222,956 8.838307 1,970,554 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund ........ 212,577 17.834480 3,791,200 (2)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio .............. 275,704 18.130321 4,998,602 21%
Warburg Pincus Trust -
International Equity Portfolio .... 651,598 11.306660 7,367,397 (3)%
Warburg Pincus Trust -
Post Venture Capital Portfolio .... 44,199 11.428806 505,142 12%
Warburg Pincus Trust -
Small Company Growth Portfolio .... 712,489 16.154327 11,509,780 15%
Modified Single Premium contracts and
Last Survivor Flexible Premium contracts:
American Century VP -
American Century VP Balanced ...... 27,206 12.659036 344,402 16%
American Century VP - American Century
VP Capital Appreciation ........... 32,542 8.821378 287,065 (3)%
American Century VP -
American Century VP International . 32,515 12.781185 415,580 19%
American Century VP -
American Century VP Value ......... 17,691 12.791587 226,296 26%
The Dreyfus Socially Responsible
Growth Fund, Inc. ................. 37,804 14.359114 542,832 28%
Dreyfus Stock Index Fund ............. 228,273 15.236658 3,478,118 33%
Dreyfus VIF -
Capital Appreciation Portfolio .... 450 10.254291 4,614 3%(a)
Dreyfus VIF -
Growth and Income Portfolio ....... 18,834 11.609215 218,648 16%
Fidelity VIP - Equity-Income Portfolio 299,539 13.822981 4,140,522 28%
Fidelity VIP - Growth Portfolio ...... 162,254 12.898986 2,092,912 23%
Fidelity VIP - High Income Portfolio . 171,832 12.743794 2,189,792 18%
Fidelity VIP - Overseas Portfolio .... 45,600 11.900892 542,681 12%
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-II - Asset Manager Portfolio.. 73,280 13.298253 974,496 21%
Fidelity VIP-II - Contrafund Portfolio .... 167,595 13.965921 2,340,619 24%
Fidelity VIP-III -
Growth Opportunities Portfolio ......... 13,840 10.998857 152,224 10%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio ........ 3,497 9.870449 34,517 (1)%(a)
Nationwide SAT -
Capital Appreciation Fund .............. 92,414 15.614947 1,443,040 34%
Nationwide SAT -
Government Bond Fund ................... 38,575 11.711522 451,772 10%
Nationwide SAT - Money Market Fund ........ 680,581 10.882768 7,406,605 5%
Nationwide SAT - Small Company Fund ....... 99,062 12.350345 1,223,450 17%
Nationwide SAT - Total Return Fund ........ 270,928 14.813042 4,013,268 29%
Neuberger & Berman AMT -
Growth Portfolio ....................... 35,081 12.732630 446,673 29%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio ........ 63,831 11.183579 713,859 7%
Neuberger & Berman AMT -
Partners Portfolio ..................... 154,752 15.062681 2,330,980 31%
Oppenheimer VAF - Bond Fund ............... 60,188 11.629634 699,964 9%
Oppenheimer VAF -
Global Securities Fund ................. 53,741 13.263226 712,779 22%
Oppenheimer VAF - Growth Fund ............. 7,635 10.491590 80,103 5%(a)
Oppenheimer VAF -
Multiple Strategies Fund ............... 58,544 12.821215 750,605 17%
Strong Opportunity Fund II, Inc. .......... 50,153 13.507426 677,438 25%
Strong VIF - Strong Discovery Fund II ..... 15,515 11.010302 170,825 11%
Strong VIF -
Strong International Stock Fund II ..... 28,984 8.695226 252,022 (14)%
Van Eck WIT - Worldwide Bond Fund ......... 19,142 10.767851 206,118 2%
Van Eck WIT -
Worldwide Emerging Markets Fund ........ 13,242 8.910909 117,998 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund ............. 14,793 9.887286 146,263 (2)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio ................... 47,746 16.610019 793,062 21%
Warburg Pincus Trust -
International Equity Portfolio ......... 112,574 9.710827 1,093,187 (2)%
Warburg Pincus Trust -
Post Venture Capital Portfolio ......... 2,527 11.522579 29,118 13%
Warburg Pincus Trust -
Small Company Growth Portfolio ......... 116,237 11.365509 1,321,093 16%
======= ========= -------------
$ 658,587,322
=============
</TABLE>
(a) This investment option was not being utilized for the entire period.
<PAGE> 15
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, 1997, 1996 and 1995
<TABLE>
<CAPTION>
ACVPCapAp DryStkIx FidVIPEI FidVIPGr FidVIPHI FidVIPOv
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 $ 24.053649 16.663330 29.854628 34.379126 24.493313 19.654083
------------ ------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .485163 .958001 3.077613 1.268399 1.954453 1.709218
------------ ------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) (1.263148) 4.511423 5.277194 6.771006 2.351846 .559210
------------ ------------ ------------ ------------ ------------ ------------
Asset charges (.225818) (.186901) (.324655) (.368048) (.251580) (.204640)
------------ ------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 23.049846 21.945853 37.884780 42.050483 28.548032 21.717871
------------ ------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* (4)% 32% 27% 22% 17% 11%
============ ============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 25.381408 ** 26.373971 30.259267 21.685282 17.526172
------------ ------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends 2.847171 1.217030 2.174262 1.977825 .431349
------------ ------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) (3.934619) 2.528645 2.256603 1.050520 1.872575
------------ ------------ ------------ ------------ ------------ ------------
Asset charges (.240311) (.265018) (.311006) (.220314) (.176013)
------------ ------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 24.053649 29.854628 34.379126 24.493313 19.654083
------------ ------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* (5)% 13% 14% 13% 12%
============ ============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 $ 19.544976 ** 19.708533 22.566466 18.151674 16.131866
------------ ------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .022491 1.542607 .124738 1.314664 .123427
------------ ------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) 6.032555 5.341041 7.828480 2.410020 1.428229
------------ ------------ ------------ ------------ ------------ ------------
Asset charges (.218614) (.218210) (.260417) (.191076) (.157350)
------------ ------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 25.381408 26.373971 30.259267 21.685282 17.526172
------------ ------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 30% 34% 34% 19% 9%
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
FidVIPAM FidVIPCon NSATCapAp NSATGvtBd
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 20.525705 13.326381 18.283070 19.842234
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends 2.507226 .410019 .742935 1.267003
------------ ------------ ------------ ------------
Unrealized gain (loss) 1.712461 2.792665 5.535524 .639911
------------ ------------ ------------ ------------
Asset charges (.214977) (.141817) (.204533) (.194519)
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 24.530415 16.387248 24.356996 21.554629
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 20% 23% 33% 9%
============ ============ ============ ============
1996
Beginning unit value - Jan. 1 18.081878 ** ** 19.357639
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends 1.189904 1.200383
------------ ------------ ------------ ------------
Unrealized gain (loss) 1.435663 (.533024)
------------ ------------ ------------ ------------
Asset charges (.181740) (.182764)
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 20.525705 19.842234
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 14% 3%
============ ============ ============ ============
1995
Beginning unit value - Jan. 1 15.607540 ** ** 16.457035
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .327932 1.167149
------------ ------------ ------------ ------------
Unrealized gain (loss) 2.304058 1.903991
------------ ------------ ------------ ------------
Asset charges (.157652) (.170536)
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 18.081878 19.357639
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value* 16% 18%
============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
<PAGE> 16
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, 1997, 1996 and 1995
<TABLE>
<CAPTION>
NSATMyMkt NSATSmCo NSATTotRe NBAMTGro NBAMTLMat NBAMTPart
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 $ 14.875178 13.890860 26.717684 24.838185 16.433880 17.406201
------------ ------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .778864 .440845 1.558497 2.183777 .969363 .864780
------------ ------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) .000000 1.957974 6.272453 4.993139 .133106 4.551693
------------ ------------ ------------ ------------ ------------ ------------
Asset charges (.145275) (.142885) (.294704) (.275230) (.160352) (.192787)
------------ ------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 15.508767 16.146794 34.253930 31.739871 17.375997 22.629887
------------ ------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) 4% 16% 28% 28% 6% 30%
============ ============ ============ ============ ============ ============
Beginning unit value - Jan. 1 $ 14.287454 ** 22.138653 22.976381 15.906671 **
------------ ------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .727569 1.479674 2.084651 1.338753
------------ ------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) .000000 3.328301 .004126 (.659070)
------------ ------------ ------------ ------------ ------------ ------------
Asset charges (.139845) (.228944) (.226973) (.152474)
------------ ------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 14.875178 26.717684 24.838185 16.433880
------------ ------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) 4% 21% 8% 3%
============ ============ ============ ============ ============ ============
1995
Beginning unit value - Jan. 1 $ 13.652006 ** 17.312690 17.608267 14.475203 **
------------ ------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .768745 1.720678 .623265 .804090
------------ ------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) .000000 3.293404 4.945641 .771696
------------ ------------ ------------ ------------ ------------ ------------
Asset charges (.133297) (.188119) (.200792) (.144318)
------------ ------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 14.287454 22.138653 22.976381 15.906671
------------ ------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) 5% 28% 30% 10%
============ ============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
StOpp2 VEWrldBd VEWrldHAs MSRESec
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
1997***
Beginning unit value - Jan. 1 21.426416 14.682655 15.014547 15.011508
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends 2.183305 .475835 .655044 2.041009
------------ ------------ ------------ ------------
Unrealized gain (loss) 3.245388 (.129445) (.902356) 1.163065
------------ ------------ ------------ ------------
Asset charges (.228750) (.137985) (.144265) (.152960)
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 26.626359 14.891060 14.622970 18.062622
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) 24% 1% (3)% 20%
============ ============ ============ ============
1996
Beginning unit value - Jan. 1 18.309087 14.458585 12.839256 10.784280
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .861320 .394300 .272272 .288822
------------ ------------ ------------ ------------
Unrealized gain (loss) 2.443023 (.034088) 2.040791 4.051625
------------ ------------ ------------ ------------
Asset charges (.187014) (.136142) (.137772) (.113219)
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 21.426416 14.682655 15.014547 15.011508
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) 17% 2% 17% 39%
============ ============ ============ ============
1995
Beginning unit value - Jan. 1 14.690448 12.443161 11.677805 10.000000
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends .761035 1.008475 .115292 .092106
------------ ------------ ------------ ------------
Unrealized gain (loss) 3.013032 1.138120 1.160549 .740132
------------ ------------ ------------ ------------
Asset charges (.155428) (.131171) (.114390) (.047958)
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 18.309087 14.458585 12.839256 10.784280
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) 25% 16% 10% 8%(b)
============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note
2; and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
<PAGE> 17
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, 1997, 1996 and 1995
<TABLE>
<CAPTION>
WPIntEq WPSmCoGr
------------ ------------
<S> <C> <C>
1997***
Beginning unit value - Jan. 1 $ 11.634515 14.048996
------------ ------------
Reinvested capital gains
and dividends .721426 .000000
------------ ------------
Unrealized gain (loss) (.974429) 2.183432
------------ ------------
Asset charges (.117107) (.138457)
------------ ------------
Ending unit value - Dec. 31 $ 11.264405 16.093971
------------ ------------
Percentage increase (decrease)
in unit value* (3)% 15%
============ ============
1996
Beginning unit value - Jan. 1 $ 10.679811 **
------------ ------------
Reinvested capital gains
and dividends .226874
------------ ------------
Unrealized gain (loss) .835595
------------ ------------
Asset charges (.107765)
------------ ------------
Ending unit value - Dec. 31 $ 11.634515
------------ ------------
Percentage increase (decrease)
in unit value* 9%
============ ============
1995
Beginning unit value - Jan. 1 ** **
------------ ------------
Reinvested capital gains
and dividends
------------ ------------
Unrealized gain (loss)
------------ ------------
Asset charges
------------ ------------
Ending unit value - Dec. 31
------------ ------------
Percentage increase (decrease)
in unit value*
============ ============
</TABLE>
* An annualized rate of return cannot be determined as asset charges do not
include the policy charges discussed in note 2.
** This investment option was not being utilized or was not available.
*** No other investment options were being utilized.
<PAGE> 18
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, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ACVPBAL ACVPCAPAP ACVPINT ACVPVALUE DRYSRGRO
---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $14.303509 16.163625 11.748051 10.142583 17.041821
---------- ---------- ---------- ---------- ----------
Reinvested capital gains
and dividends .804637 .325754 .402865 .154473 .696492
---------- ---------- ---------- ---------- ----------
Unrealized gain (loss) 1.443113 (.847176) 1.778602 2.474066 4.123199
---------- ---------- ---------- ---------- ----------
Asset charges (.200631) (.207282) (.172190) (.148194) (.256307)
---------- ---------- ---------- ---------- ----------
Ending unit value - Dec. 31 $16.350628 15.434921 13.757328 12.622928 21.605205
---------- ---------- ---------- ---------- ----------
Percentage increase (decrease)
in unit value*(a) 14% (5)% 17% 24% 27%
========== ========== ========== ========== ==========
1996
Beginning unit value - Jan. 1 $12.914886 17.116040 10.403803 ** 14.242220
---------- ---------- ---------- ---------- ----------
Reinvested capital gains
and dividends .609960 1.918348 .247063 -- .735836
---------- ---------- ---------- ---------- ----------
Unrealized gain (loss) .954721 (2.649394) 1.239275 -- 2.266937
---------- --------- ---------- ---------- ----------
Asset charges (.176058) (.221369) (.142090) -- (.203172)
---------- ---------- ---------- ---------- ----------
Ending unit value - Dec. 31 $14.303509 16.163625 11.748051 -- 17.041821
---------- ---------- ---------- ---------- ----------
Percentage increase (decrease)
in unit value*(a) 11% (6)% 13% -- 20%
========== ========== ========== ========== ==========
1995
Beginning unit value - Jan. 1 $10.801955 13.226279 9.392654 ** 10.722275
---------- ---------- ---------- ---------- ----------
Reinvested capital gains
and dividends .305779 .015219 .000000 -- .392053
---------- ---------- ---------- ---------- ----------
Unrealized gain (loss) 1.961461 4.076606 1.136602 -- 3.289798
---------- ---------- ---------- ---------- ----------
Asset charges (.154309) (.202064) (.125453) -- (.161906)
---------- ---------- ---------- ---------- ----------
Ending unit value - Dec. 31 $12.914886 17.116040 10.403803 -- 14.242220
---------- ---------- ---------- ---------- ----------
Percentage increase (decrease)
in unit value*(a) 20% 29% 11% -- 33%
========== ========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
DRYSTKIX DRYCAPAP DRYGRINC FIDVIPEI FIDVIPGR
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 16.474993 10.000000 9.986945 24.419978 23.774932
---------- ---------- ---------- ---------- ----------
Reinvested capital gains
and dividends .944651 .084439 .949964 2.516481 .876852
---------- ---------- ---------- ---------- ----------
Unrealized gain (loss) 4.454866 .168744 .659324 4.306453 4.674425
---------- ---------- ---------- ---------- ----------
Asset charges (.252395) (.060730) (.140117) (.362729) (.347656)
---------- ---------- ---------- ---------- ----------
Ending unit value - Dec. 31 21.622115 10.192453 11.456116 30.880183 28.978553
---------- ---------- ---------- ---------- ----------
Percentage increase (decrease)
in unit value*(a) 31% 2%(b) 15% 26% 22%
========== ========== ========== ========== ==========
1996
Beginning unit value - Jan. 1 13.621789 ** ** 21.648958 20.999607
---------- ---------- ---------- ---------- ----------
Reinvested capital gains
and dividends .587431 -- -- .998669 1.508424
---------- ---------- ---------- ---------- ----------
Unrealized gain (loss) 2.459672 -- -- 2.069513 1.561724
---------- ---------- ---------- ---------- ----------
Asset charges (.193899) -- -- (.297162) (.294823)
---------- ---------- ---------- ---------- ----------
Ending unit value - Dec. 31 16.474993 -- -- 24.419978 23.774932
---------- ---------- ---------- ---------- ----------
Percentage increase (decrease)
in unit value*(a) 21% -- -- 13% 13%
========== ========== ========== ========== ==========
1995
Beginning unit value - Jan. 1 10.088849 ** ** 16.234159 15.715602
---------- ---------- ---------- ---------- ----------
Reinvested capital gains
and dividends .361339 -- -- 1.269479 .086841
---------- ---------- ---------- ---------- ----------
Unrealized gain (loss) 3.326196 -- -- 4.390826 5.444880
---------- ---------- ---------- ---------- ----------
Asset charges (.154595) -- -- (.245506) (.247716)
---------- ---------- ---------- ---------- ----------
Ending unit value - Dec. 31 13.621789 -- -- 21.648958 20.999607
---------- ---------- ---------- ---------- ----------
Percentage increase (decrease)
in unit value*(a) 35% -- -- 33% 34%
========== ========== ========== ========== ==========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 19
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, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON FIDVIPGROP
-------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $25.198564 14.155666 20.046209 13.256842 10.000000
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 2.010016 1.230611 2.447787 .407735 .000000
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.412412 .402500 1.666528 2.772953 .995976
---------- --------- --------- --------- ---------
Asset charges (.353532) (.201328) (.286794) (.192715) (.063414)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $29.267460 15.587449 23.873730 16.244815 10.932562
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 16% 10% 19% 23% 9%(b)
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $22.388295 12.667544 17.721708 11.071965 **
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 2.041281 .311669 1.165823 .104326 --
---------- --------- --------- --------- ---------
Unrealized gain (loss) 1.079684 1.350232 1.401973 2.236026 --
---------- --------- --------- --------- ---------
Asset charges (.310696) (.173779) (.243295) (.155475) --
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $25.198564 14.155666 20.046209 13.256842 --
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 13% 12% 13% 20% --
========== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 $18.805616 11.700527 15.350115 10.000000 **
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.361583 .089493 .322418 .142783 --
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.491513 1.033414 2.260958 .998389 --
---------- --------- --------- --------- ---------
Asset charges (.270417) (.155890) (.211783) (.069207) --
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $22.388295 12.667544 17.721708 11.071965 --
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 19% 8% 15% 11%(b) --
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MSEMMKT NSATCAPAP NSATGVTBD NSATMYMKT NSATSMCO
------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 10.000000 17.984058 16.449774 12.479104 13.833221
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .380433 .728536 1.048107 .652320 .437491
--------- --------- --------- --------- ---------
Unrealized gain (loss) (.509130) 5.437239 .529384 .000000 1.947285
--------- --------- --------- --------- ---------
Asset charges (.060430) (.274803) (.220287) (.166762) (.194359)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 9.810873 23.875030 17.806978 12.964662 16.023638
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) (2)%(b) 33% 8% 4% 16%
======== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 ** 14.444672 16.104612 12.028786 11.410311
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends -- .749268 .996469 .611421 .133295
--------- --------- --------- --------- ---------
Unrealized gain (loss) -- 2.998693 (.443598) .000000 2.456523
--------- --------- --------- --------- ---------
Asset charges -- (.208575) (.207709) (.161103) (.166908)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 -- 17.984058 16.449774 12.479104 13.833221
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) -- 25% 2% 4% 21%
======== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 ** 11.312336 13.739287 11.534440 10.000000
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends -- .642275 .972265 .648458 .017459
--------- --------- --------- --------- ---------
Unrealized gain (loss) -- 2.653961 1.587542 .000000 1.418328
--------- --------- --------- --------- ---------
Asset charges -- (.163900) (.194482) (.154112) (.025476)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 -- 14.444672 16.104612 12.028786 11.410311
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) -- 28% 17% 4% 14%(b)
======== ========= ========= ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 20
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, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART OPPBDFD
--------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $23.035683 17.521012 14.088625 17.259712 16.608318
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.339626 1.539595 .830565 .857026 1.104155
---------- --------- --------- --------- ---------
Unrealized gain (loss) 5.402014 3.515921 .112862 4.505516 .420527
---------- --------- --------- --------- ---------
Asset charges (.347062) (.265198) (.187786) (.261124) (.222124)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $29.430261 22.311330 14.844266 22.361130 17.910876
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 28% 27% 5% 30% 8%
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $19.154939 16.264834 13.684722 13.495873 16.056725
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.276326 1.474851 1.151075 .549661 1.030165
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.875006 .000818 (.567983) 3.411340 (.269155)
---------- --------- --------- --------- ---------
Asset charges (.270588) (.219491) (.179189) (.197162) (.209417)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $23.035683 17.521012 14.088625 17.259712 16.608318
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 20% 8% 3% 28% 3%
========== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 $15.031721 12.508337 12.496729 10.018146 13.903136
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.489410 .442496 .693794 .081860 .956955
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.856936 3.508824 .664378 3.550382 1.391543
---------- --------- --------- --------- ---------
Asset charges (.223128) (.194823) (.170179) (.154515) (.194909)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $19.154939 16.264834 13.684722 13.495873 16.056725
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 27% 30% 10% 35% 15%
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OPPGISEC OPPGRO OPPMULT STOPP2 STDISC2
-------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 13.270426 10.000000 18.701076 21.077454 16.133543
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .168504 .000000 1.441360 2.145928 .000000
--------- --------- --------- --------- ---------
Unrealized gain (loss) 2.793865 .491636 1.760353 3.185243 1.826618
--------- --------- --------- --------- ---------
Asset charges (.196309) (.063339) (.264033) (.307371) (.221295)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 16.036486 10.428297 21.638756 26.101254 17.738866
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 21% 4%(b) 16% 24% 10%
========= ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 11.413379 ** 16.404926 18.074367 16.214896
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .000000 -- 1.247087 .849403 3.300617
--------- --------- --------- --------- ---------
Unrealized gain (loss) 2.016448 -- 1.276232 2.405871 (3.177170)
--------- --------- --------- --------- ---------
Asset charges (.159401) -- (.227169) (.252187) (.204800)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 13.270426 -- 18.701076 21.077454 16.133543
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 16% -- 14% 17% (1)%
========= ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 11.309050 ** 13.693997 14.552799 12.144445
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .297396 -- 1.103154 .753037 .211667
--------- --------- --------- --------- ---------
Unrealized gain (loss) (.045694) -- 1.805769 2.978850 4.042004
--------- --------- --------- --------- ---------
Asset charges (.147373) -- (.197994) (.210319) (.183220)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 11.413379 -- 16.404926 18.074367 16.214896
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 1% -- 20% 24% 34%
========= ========= ========= ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 21
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, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
STINTSTK2 VEWRLDBD VEWRLDEMKT VEWRLDHAS MSRESEC
--------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $11.141803 14.339608 10.077849 16.582948 14.933196
---------- --------- --------- --------- ----------
Reinvested capital gains
and dividends .468352 .464588 .040302 .723268 2.023697
---------- --------- --------- --------- ----------
Unrealized gain (loss) (1.953789) (.127783) (1.180028) (.994564) 1.156620
---------- --------- --------- --------- ----------
Asset charges (.145321) (.184081) (.144891) (.217658) (.207854)
---------- --------- --------- --------- ----------
Ending unit value - Dec. 31 $ 9.511045 14.492332 8.793232 16.093994 17.905659
---------- --------- --------- --------- ----------
Percentage increase (decrease)
in unit value*(a) (15)% 1% (13)% (3)% 20%
========== ========= ========= ========= ==========
1996
Beginning unit value - Jan. 1 $10.226632 14.170551 ** 14.230388 10.765797
---------- --------- --------- --------- ----------
Reinvested capital gains
and dividends .050938 .385883 -- .301335 .287384
---------- --------- --------- --------- ----------
Unrealized gain (loss) 1.007488 (.034573) -- 2.259820 4.034391
---------- --------- --------- --------- ----------
Asset charges (.143255) (.182253) -- (.208595) (.154376)
---------- --------- --------- --------- ----------
Ending unit value - Dec. 31 $11.141803 14.339608 -- 16.582948 14.933196
---------- --------- --------- --------- ----------
Percentage increase (decrease)
in unit value*(a) 9% 1% -- 17% 39%
========== ========= ========= ========= ==========
1995
Beginning unit value - Jan. 1 $10.000000 12.237880 ** 12.988341 10.000000
---------- --------- --------- --------- ----------
Reinvested capital gains
and dividends .041085 .990055 -- .127947 .091962
---------- --------- --------- --------- ----------
Unrealized gain (loss) .209467 1.118852 -- 1.287916 .739397
---------- --------- --------- --------- ----------
Asset charges (.023920) (.176236) -- (.173816) (.065562)
---------- --------- --------- --------- ----------
Ending unit value - Dec. 31 $10.226632 14.170551 -- 14.230388 10.765797
---------- --------- --------- --------- ----------
Percentage increase (decrease)
in unit value*(a) 2%(b) 16% -- 10% 8%(b)
========== ========= ========= ========= ==========
</TABLE>
<TABLE>
<CAPTION>
WPINTEQ WPPVENCAP WPSMCOGR
------- --------- --------
<S> <C> <C> <C>
1997
Beginning unit value - Jan. 1 11.573771 10.163791 13.975650
--------- --------- ---------
Reinvested capital gains
and dividends .715241 .001645 .000000
--------- --------- ---------
Unrealized gain (loss) (.963430) 1.343613 2.166520
--------- --------- ---------
Asset charges (.159152) (.138456) (.188137)
--------- --------- ---------
Ending unit value - Dec. 31 11.166430 11.370593 15.954033
--------- --------- ---------
Percentage increase (decrease)
in unit value*(a) (4)% 12% 14%
========= ========= =========
1996
Beginning unit value - Jan. 1 10.661502 ** 12.430586
--------- --------- ---------
Reinvested capital gains
and dividends .225731 -- .000000
--------- --------- ---------
Unrealized gain (loss) .833478 -- 1.720228
--------- --------- ---------
Asset charges (.146940) -- (.175164)
--------- --------- ---------
Ending unit value - Dec. 31 11.573771 -- 13.975650
--------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 9% -- 12%
========= ========= =========
1995
Beginning unit value - Jan. 1 10.000000 ** 10.000000
--------- --------- ---------
Reinvested capital gains
and dividends .077347 -- .000000
--------- --------- ---------
Unrealized gain (loss) .650501 -- 2.501606
--------- --------- ---------
Asset charges (.066346) -- (.071020)
--------- --------- ---------
Ending unit value - Dec. 31 10.661502 -- 12.430586
--------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 7%(b) -- 24%(b)
========= ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 22
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
ACVPBAL ACVPCAPAP ACVPINT ACVPVALUE DRYSRGRO
------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $14.642920 15.327392 11.890858 10.143687 17.319589
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .824605 .309262 .408237 .154643 .711304
---------- --------- --------- --------- ---------
Unrealized gain (loss) 1.481680 (.805571) 1.802759 2.480646 4.197125
---------- --------- --------- --------- ---------
Asset charges (.126724) (.121261) (.107526) (.091442) (.160714)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $16.822481 14.709822 13.994328 12.687534 22.067304
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 15% (4)% 18% 25% 27%
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $13.155049 16.149061 10.477472 10.000000 14.401809
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .622373 1.812196 .249286 .000000 .747630
---------- --------- --------- --------- ---------
Unrealized gain (loss) .976138 2.505020 1.252389 .145457 2.296912
---------- --------- --------- --------- ---------
Asset charges (.110640) (.128845) (.088289) (.001770) (.126762)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $14.642920 15.327392 11.890858 10.143687 17.319589
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 11% (5)% 13% 1%(b) 20%
========== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 $10.948128 12.417011 9.412116 ** 10.788547
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .310910 .014289 .000000 -- .396430
---------- --------- --------- --------- ---------
Unrealized gain (loss) 1.992508 3.834812 1.142911 -- 3.317353
---------- --------- --------- --------- ---------
Asset charges (.096497) (.117051) (.077555) -- (.100521)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $13.155049 16.149061 10.477472 -- 14.401809
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 20% 30% 11% -- 33%
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DRYSTKIX DRYCAPAP DRYGRINC FIDVIPEI FIDVIPGR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 16.744674 10.000000 9.988034 25.185570 24.186560
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .963779 .084621 .953991 2.596690 .892486
--------- --------- --------- --------- ---------
Unrealized gain (loss) 4.535869 .168989 .659188 4.456322 4.767095
--------- --------- --------- --------- ---------
Asset charges (.158283) (.037414) (.086457) (.230809) (.218212)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 22.086039 10.216196 11.514756 32.007773 29.627929
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 32% 2%(b) 15% 27% 22%
========= ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 13.775382 ** ** 22.215745 21.256059
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .596225 -- -- 1.025291 1.527554
--------- --------- --------- --------- ---------
Unrealized gain (loss) 2.494042 -- -- 2.132663 1.587071
--------- --------- --------- --------- ---------
Asset charges (.120975) -- -- (.188129) (.184124)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 16.744674 -- -- 25.185570 24.186560
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 22% -- -- 13% 14%
========= ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 10.151919 ** ** 16.576413 15.828463
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .364933 -- -- 1.297971 .087506
--------- --------- --------- --------- ---------
Unrealized gain (loss) 3.354508 -- -- 4.496038 5.494030
--------- --------- --------- --------- ---------
Asset charges (.095978) -- -- (.154677) (.153940)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 13.775382 -- -- 22.215745 21.256059
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 36% -- -- 34% 34%
========= ========= ========= ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 23
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON FIDVIPGROP
-------- -------- -------- --------- ----------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $23.588786 15.324813 18.169993 13.356323 10.000000
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.882562 1.332926 2.219812 .411003 .000000
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.267847 .436152 1.518239 2.801162 .997084
---------- --------- --------- --------- ---------
Asset charges (.204189) (.134473) (.160388) (.119788) (.039066)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $27.535006 16.959418 21.747656 16.448700 10.958018
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 17% 11% 20% 23% 10%(b)
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $20.852993 13.645033 15.982529 11.099135 **
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.902180 .335875 1.051899 .104631 --
---------- --------- --------- --------- ---------
Unrealized gain (loss) 1.012148 1.459385 1.270941 2.248711 --
---------- --------- --------- --------- ---------
Asset charges (.178535) (.115480) (.135376) (.096154) --
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $23.588786 15.324813 18.169993 13.356323 --
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 13% 12% 14% 20% --
========== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 $17.428943 12.540728 13.774855 10.000000 **
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.262495 .095965 .289466 .143118 --
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.316172 1.111417 2.035460 .998657 --
---------- --------- --------- --------- ---------
Asset charges (.154617) (.103077) (.117252) (.042640) --
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $20.852993 13.645033 15.982529 11.099135 --
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 20% 9% 16% 11%(b) --
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
MSEMMKT NSATCAPAP NSATGVTBD NSATMYMKT NSATSMCO
------- --------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 10.000000 18.410667 15.383251 12.214743 13.915643
-------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .381254 .749108 .983193 .640005 .442290
-------- --------- --------- --------- ---------
Unrealized gain (loss) (.510280) 5.577539 .496554 .000000 1.962570
-------- --------- --------- --------- ---------
Asset charges (.037225) (.173568) (.127092) (.100447) (.120632)
-------- --------- --------- --------- ---------
Ending unit value - Dec. 31 9.833749 24.563746 16.735906 12.754301 16.199871
-------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) (2)%(b) 33% 9% 4% 16%
======== ========= ========= ========== =========
1996
Beginning unit value - Jan. 1 ** 14.713230 14.984933 11.714295 11.420759
-------- --------- --------- --------- ---------
Reinvested capital gains
and dividends -- .766553 .930103 .596995 .133983
-------- --------- --------- --------- ---------
Unrealized gain (loss) -- 3.061949 (.412550) .000000 2.463983
-------- --------- --------- --------- ---------
Asset charges -- (.131065) (.119235) (.096547) (.103082)
-------- --------- --------- --------- ---------
Ending unit value - Dec. 31 -- 18.410667 15.383251 12.214743 13.915643
-------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) -- 25% 3% 4% 22%
======== ========= ========= ========== =========
1995
Beginning unit value - Jan. 1 ** 11.465403 12.720514 11.176411 10.000000
-------- --------- --------- --------- ---------
Reinvested capital gains
and dividends -- .653781 .903001 .629782 .017475
-------- --------- --------- --------- ---------
Unrealized gain (loss) -- 2.696528 1.472503 .000000 1.418968
-------- --------- --------- --------- ---------
Asset charges -- (.102482) (.111085) (.091898) (.015684)
-------- --------- --------- --------- ---------
Ending unit value - Dec. 31 -- 14.713230 14.984933 11.714295 11.420759
-------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) -- 28% 18% 5% 14%(b)
======== ========= ========= ========== =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 24
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART OPPBDFD
--------- -------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $21.988773 17.282005 13.551318 17.469360 15.764821
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.284328 1.519798 .799524 .868124 1.051063
---------- --------- --------- --------- ---------
Unrealized gain (loss) 5.164704 3.476793 .110278 4.571636 .400626
---------- --------- --------- --------- ---------
Asset charges (.204402) (.161393) (.111432) (.163069) (.130076)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $28.233403 22.117203 14.349688 22.746051 17.086434
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 28% 28% 6% 30% 8%
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $18.192762 15.962482 13.096811 13.591346 15.164813
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.217547 1.448641 1.102543 .554011 .975830
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.737018 .003774 (.542247) 3.446498 (.253799)
---------- --------- --------- --------- ---------
Asset charges (.158554) (.132892) (.105789) (.122495) (.122023)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $21.988773 17.282005 13.551318 17.469360 15.764821
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 21% 8% 3% 29% 4%
========== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 $14.205723 12.214794 11.900389 10.038887 13.065574
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends 1.413734 .432461 .661221 .082096 .902009
---------- --------- --------- --------- ---------
Unrealized gain (loss) 2.703396 3.432609 .635177 3.565899 1.310232
---------- --------- --------- --------- ---------
Asset charges (.130091) (.117382) (.099976) (.095536) (.113002)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $18.192762 15.962482 13.096811 13.591346 15.164813
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 28% 31% 10% 35% 16%
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
OPPGISEC OPPGRO OPPMULT STOPP2 STDISC2
-------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 13.487753 10.000000 18.446363 21.575419 16.514861
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .171449 .000000 1.424675 2.199285 .000000
--------- --------- --------- --------- ---------
Unrealized gain (loss) 2.844659 .491618 1.740590 3.271150 1.874039
--------- --------- --------- --------- ---------
Asset charges (.123099) (.039023) (.160674) (.194117) (.139755)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 16.380762 10.452595 21.450954 26.851737 18.249145
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 21% 5%(b) 16% 24% 11%
========= ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 11.542134 ** 16.100377 18.408627 16.514850
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .000000 -- 1.226905 .866384 3.367146
--------- --------- --------- --------- ---------
Unrealized gain (loss) 2.045080 -- 1.256649 2.458870 (.3.238459)
--------- --------- --------- --------- ---------
Asset charges (.099461) -- (.137568) (.158462) (.128676)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 13.487753 -- 18.446363 21.575419 16.514861
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 17% -- 15% 17% 0%
========= ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 11.379737 ** 13.372968 14.748256 12.307607
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .299595 -- 1.079776 .764407 .215562
--------- --------- --------- --------- ---------
Unrealized gain (loss) (.045711) -- 1.766931 3.027469 4.106245
--------- --------- --------- --------- ---------
Asset charges (.091487) -- (.119298) (.131505) (.114564)
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 11.542134 -- 16.100377 18.408627 16.514850
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 1% -- 20% 25% 34%
========= ========= ========= ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 25
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
STINTSTK2 VEWRLDBD VEWRLDEMKT VEWRLDHAS MSRESEC
--------- -------- ---------- --------- -------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $11.208230 13.479157 10.078948 18.284590 15.045195
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .471812 .436884 .040323 .797803 2.048475
---------- --------- --------- --------- ---------
Unrealized gain (loss) (1.974108) (.118284) (1.191572) (1.099846) 1.165854
---------- --------- --------- --------- ---------
Asset charges (.090179) (.106758) (.089392) (.148067) (.129203)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $ 9.615755 13.690999 8.838307 17.834480 18.130321
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) (14)% 2% (12)% (2)% 21%
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $10.236021 13.253457 10.000000 15.612002 10.792212
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .051144 .361660 .000000 .331277 .289441
---------- --------- --------- --------- ---------
Unrealized gain (loss) 1.009533 (.030793) .080699 2.482492 4.059026
---------- --------- --------- --------- ---------
Asset charges (.088468) (.105167) (.001751) (.141181) (.095484)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $11.208230 13.479157 10.078948 18.284590 15.045195
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 9% 2% 1%(b) 17% 39%
========== ========= ========= ========= =========
1995
Beginning unit value - Jan. 1 $10.000000 11.388987 ** 14.178501 10.000000
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .041121 .923751 -- .140115 .092168
---------- --------- --------- --------- ---------
Unrealized gain (loss) .209625 1.041904 -- 1.410450 .740443
---------- --------- --------- --------- ---------
Asset charges (.014725) (.101185) -- (.117064) (.040399)
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $10.236021 13.253457 -- 15.612002 10.792212
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 2%(b) 16% -- 10% 8%(b)
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
WPINTEQ WPPVENCAP WPSMCOGR
------- --------- --------
<S> <C> <C> <C>
1997
Beginning unit value - Jan. 1 11.660648 10.164897 14.080553
--------- --------- ---------
Reinvested capital gains
and dividends .724094 .001654 .000000
--------- --------- ---------
Unrealized gain (loss) (.979169) 1.347681 2.190720
--------- --------- ---------
Asset charges (.098913) (.085426) (.116946)
--------- --------- ---------
Ending unit value - Dec. 31 11.306660 11.428806 16.154327
--------- --------- ---------
Percentage increase (decrease)
in unit value*(a) (3)% 12% 15%
========= ========= =========
1996
Beginning unit value - Jan. 1 10.687672 ** 12.461074
--------- --------- ---------
Reinvested capital gains
and dividends .227366 -- .000000
--------- --------- ---------
Unrealized gain (loss) .836487 -- 1.727810
--------- --------- ---------
Asset charges (.090877) -- (.108331)
--------- --------- ---------
Ending unit value - Dec. 31 11.660648 -- 14.080553
--------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 9% -- 13%
========= ========= =========
1995
Beginning unit value - Jan. 1 10.000000 ** 10.000000
--------- --------- ---------
Reinvested capital gains
and dividends .077521 == .000000
--------- --------- ---------
Unrealized gain (loss) .651025 -- 2.504833
--------- --------- ---------
Asset charges (.040874) -- (.043759)
--------- --------- ---------
Ending unit value - Dec. 31 10.687672 -- 12.461074
--------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 7%(b) -- 25%(b)
========= ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 26
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ACVPBAL ACVPCAPAP ACVPINT ACVPVALUE DRYSRGRO
------- --------- ------- --------- --------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 $10.931147 9.118427 10.773558 10.145455 11.180091
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .616626 .184328 .370567 .154914 .462754
---------- --------- --------- --------- ---------
Unrealized gain (loss) 1.111263 (.481377) 1.637060 2.491218 2.716269
---------- --------- --------- --------- ---------
Asset charges .000000 .000000 .000000 .000000 .000000
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $12.659036 8.821378 12.781185 12.791587 14.359114
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 16% (3)% 19% 26% 28%
========== ========= ========= ========= =========
1996
Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 ** 10.000000
---------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .122861 .000000 .224735 -- .482403
---------- --------- --------- --------- ---------
Unrealized gain (loss) .808286 (.881573) .548823 -- .697688
---------- --------- --------- --------- ---------
Asset charges .000000 .000000 .000000 -- .000000
---------- --------- --------- --------- ---------
Ending unit value - Dec. 31 $10.931147 9.118427 10.773558 -- 11.180091
---------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 9%(b) (9)%(b) 8%(b) -- 12%(b)
========== ========= ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
DRYSTKIX DRYCAPAP DRYGRINC FIDVIPEI FIDVIPGR
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
1997
Beginning unit value - Jan. 1 11.459856 10.000000 9.989781 10.790149 10.446167
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .663632 .084913 .960475 1.113391 .385777
--------- --------- --------- --------- ---------
Unrealized gain (loss) 3.113170 .169378 .658959 1.919441 2.067042
--------- --------- --------- --------- ---------
Asset charges .000000 .000000 .000000 .000000 .000000
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 15.236658 10.254291 11.609215 13.822981 12.898986
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 33% 3%(b) 16% 28% 23%
========= ========= --------- ========= =========
1996
Beginning unit value - Jan. 1 10.000000 ** ** 10.000000 10.000000
--------- --------- --------- --------- ---------
Reinvested capital gains
and dividends .358216 -- -- .000000 .000000
--------- --------- --------- --------- ---------
Unrealized gain (loss) 1.101640 -- -- .790149 .446167
--------- --------- --------- --------- ---------
Asset charges .000000 -- -- .000000 .000000
--------- --------- --------- --------- ---------
Ending unit value - Dec. 31 11.459856 -- -- 10.790149 10.446167
--------- --------- --------- --------- ---------
Percentage increase (decrease)
in unit value*(a) 15%(b) -- -- 8%(b) 4%(b)
========= ========= --------- ========= =========
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year indicated.
** This investment option was not being utilized or was not available.
<PAGE> 27
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON FIDVIPGROP
------------ ------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $ 10.830462 10.668178 11.022140 11.249999 10.000000
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ........... .865053 .928652 1.347657 .346467 .000000
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... 1.048279 .304062 .928456 2.369455 .998857
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 12.743794 11.900892 13.298253 13.965921 10.998857
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ....... 18% 12% 21% 24% 10%(b)
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 10.000000 10.000000 10.000000 10.000000 **
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ........... .000000 .000000 .000000 .000000 --
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... .830462 .668178 1.022140 1.249999 --
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000 --
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 10.830462 10.668178 11.022140 11.249999 --
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ....... 8%(b) 7%(b) 10%(b) 12%(b) --
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MSEMMKT NSATCAPAP NSATGVTBD NSATMYMKT NSATSMCO
------------ ------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 10.000000 11.610340 10.679205 10.339005 10.524418
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ........... .382570 .475750 .685934 .543763 .337176
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... (.512121) 3.528857 .346383 .000000 1.488751
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 9.870449 15.614947 11.711522 10.882768 12.350345
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ....... (1)%(b) 34% 10% 5% 17%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 ** 10.000000 10.000000 10.000000 10.000000
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ........... -- .445367 .489314 .339005 .095576
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... -- 1.164973 .189891 .000000 .428842
------------ ------------ ------------ ------------ ------------
Asset charges .............. -- .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 -- 11.610340 10.679205 10.339005 10.524418
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ....... -- 16%(b) 7%(b) 3%(b) 5%(b)
============ ============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
<PAGE> 28
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART OPPBDFD
------------ ------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $ 11.444877 9.869834 10.477247 11.476324 10.644626
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .673155 .869066 .618940 .571031 .712931
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... 2.695010 1.993730 .087392 3.015326 .272077
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 14.813042 12.732630 11.183579 15.062681 11.629634
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 29% 29% 7% 31% 9%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 10.000000 10.000000 10.000000 10.000000 10.000000
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .580169 .000000 .000000 .000000 .479143
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... .864708 (.130166) .477247 1.476324 .165483
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 11.444877 9.869834 10.477247 11.476324 10.644626
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 14%(b) (1)%(b) 5%(b) 15%(b) 6%(b)
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OPPGISEC OPPGRO OPPMULT STOPP2 STDISC2
------------ ------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C> <C>
Beginning unit value - Jan. 1 10.833847 10.000000 10.937578 10.766829 9.884557
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .137952 .000000 .847553 1.099641 .000000
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... 2.291427 .491590 1.036084 1.640956 1.125745
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 13.263226 10.491590 12.821215 13.507426 11.010302
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 22% 5%(b) 17% 25% 11%
============ ============ ============ ============ ============
1996
Beginning unit value - Jan. 1 10.000000 ** 10.000000 10.000000 10.000000
------------ ------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .000000 -- .402281 .045100 .520758
------------ ------------ ------------ ------------ ------------
Unrealized gain (loss) ..... .833847 -- .535297 .721729 (.636201)
------------ ------------ ------------ ------------ ------------
Asset charges .............. .000000 -- .000000 .000000 .000000
------------ ------------ ------------ ------------ ------------
Ending unit value - Dec. 31 10.833847 -- 10.937578 10.766829 9.884557
------------ ------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 8%(b) -- 9%(b) 8%(b) (1)%(b)
============ ============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
<PAGE> 29
SCHEDULE I, CONTINUED
NATIONWIDE VLI SEPARATE ACCOUNT-2
MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS
SCHEDULES OF CHANGES IN UNIT VALUE
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
STINTSTK2 VEWRLDBD VEWRLDEMKT VEWRLDHAS
------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 $ 10.054422 10.516764 10.080710 10.056004
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .424202 .341084 .040355 .439048
------------ ------------ ------------ ------------
Unrealized gain (loss) ..... (1.783398) (.089997) (1.210156) (.607766)
------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 8.695226 10.767851 8.910909 9.887286
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ (14)% 2% (12)% (2)%
============ ============ ============ ============
1996
Beginning unit value - Jan. 1 $ 10.000000 10.000000 ** 10.000000
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .045738 .280847 -- .181335
------------ ------------ ------------ ------------
Unrealized gain (loss) ..... .008684 .235917 -- (.125331)
------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 -- .000000
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 $ 10.054422 10.516764 -- 10.056004
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 1%(b) 5%(b) -- 1%(b)
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MSRESEC WPINTEQ WPPVENCAP WPSMCOGR
------------ ------------ ------------ ------------
1997
<S> <C> <C> <C> <C>
Beginning unit value - Jan. 1 13.673840 9.935018 10.166668 9.827590
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ 1.875805 .621718 .001667 .000000
------------ ------------ ------------ ------------
Unrealized gain (loss) ..... 1.060374 (.845909) 1.354244 1.537919
------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 .000000 .000000
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 16.610019 9.710827 11.522579 11.365509
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 21% (2)% 13% 16%
============ ============ ============ ============
1996
Beginning unit value - Jan. 1 10.000000 10.000000 ** 10.000000
------------ ------------ ------------ ------------
Reinvested capital gains
and dividends ............ .255666 .193639 -- .000000
------------ ------------ ------------ ------------
Unrealized gain (loss) ..... 3.418174 (.258621) -- (.172410)
------------ ------------ ------------ ------------
Asset charges .............. .000000 .000000 -- .000000
------------ ------------ ------------ ------------
Ending unit value - Dec. 31 13.673840 9.935018 -- 9.827590
------------ ------------ ------------ ------------
Percentage increase (decrease)
in unit value*(a) ........ 37%(b) (1)%(b) (2)%(b)
============ ============ ============ ============
</TABLE>
* An annualized rate of return cannot be determined as:
(a) Asset charges do not include the policy charges discussed in note 2;
and
(b) This investment option was not utilized for the entire year
indicated.
** This investment option was not being utilized or was not available.
See note 7.
<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), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, 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,
1997. 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or 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 two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the 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.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The 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 from
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, 1997 or 1996.
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 is 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.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. 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.
(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 sales 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. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, 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 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (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.
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.
(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 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, 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
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
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>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million 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 $3.5
million.
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 nearly 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 $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</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>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, 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 by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
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
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
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 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</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, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined 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 to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
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.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, 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:
FIXED MATURITY AND EQUITY SECURITIES: The 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.
MORTGAGE LOANS ON REAL ESTATE, NET: 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 mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
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.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. 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: 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> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: 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.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 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 $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) 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 year of service. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the 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, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) 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 (APBO), 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,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
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,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC'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 NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required 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 shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, 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 $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, 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 inter-company 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 $20.5 million and $15.1 million as of
December 31, 1997 and 1996, 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 1997 and
1996 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> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements 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 the Company'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 the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company'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. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
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 $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million 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. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) 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.
(14) SEGMENT INFORMATION
The Company has three product 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 Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. 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 and
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.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, 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
payable to Nationwide Corp. on January 1, 1997 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 with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. 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 in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, 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 11 for a
complete discussion of the reinsurance agreements. The Company 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. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company 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 the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 61
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This 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 108 pages.
Representations and Undertakings.
Accountants' Consent
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<CAPTION>
<S> <C>
1. Power of Attorney dated April 1, 1998. Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2
authorizing the establishment of the Registrant, for the Nationwide VLI Separate Account-2, and hereby
adopted incorporated herein by reference.
3. Distribution Contracts Filed previously with initial registration (File No. 33-62795)
and is hereby incorporated by reference.
4. Form of Security Filed previously with initial registration (File No. 33-62795)
and is hereby incorporated by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2
for the Nationwide VLI Separate Account-2, and hereby
incorporated herein by reference.
6. Application form of Security Filed previously with initial registration (File No. 33-62795)
and is hereby incorporated by reference.
7. Opinion of Counsel Filed previously with initial registration (File No. 33-62795)
and is hereby incorporated by reference.
</TABLE>
<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.
<PAGE> 63
INDEPENDENT AUDITORS' 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 24, 1998
<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 for effectiveness of this Post-Effective Amendment No. 4
and has duly caused this Post-Effective Amendment No. 4 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
24th day of April, 1998.
<TABLE>
<CAPTION>
<S> <C> <C>
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-Product and Market Compliance
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 4 has been signed below by the
following persons in the capacities indicated on the 24th day of April, 1998.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
A. I. BELL Director
- -------------------------------------------------
A. I. Bell
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 and Chief
- ------------------------------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ------------------------------------------------- Nationwide Insurance Enterprise and Director
Dimon R. McFerson Chairman of the Board and Director
DAVID O. MILLER
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
C. RAY NOECKER Director
- -------------------------------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- ----------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- -------------------------------------------------
Harold W. Weihl
</TABLE>
<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, and if applicable, of the Investment
Company Act of 1940, 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 Variable
Account-9, 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 VLI Separate Account-4,
Nationwide VL Separate Account-A and Nationwide VL Separate Account-B,
Nationwide VL Separate Account-C, hereby constitutes and appoints Dimon R.
McFerson, Joseph J. Gasper, W. Sidney Druen, Mark R. Thresher, 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 1st day of April, 1998.
<TABLE>
<CAPTION>
<S> <C>
/s/ Lewis J. Alphin /s/ Yvonne L. Montgomery
- ------------------------------------------------- --------------------------------------------------
Lewis J. Alphin, Director Yvonne L. Montgomery, Director
/s/ A. I. Bell /s/ C. Ray Noecker
- ------------------------------------------------- -------------------------------------------------
A. I. Bell, Director C. Ray Noecker, Director
/s/ Keith W. Eckel /s/ Robert A. Oakley
- ------------------------------------------------- --------------------------------------------------
Keith W. Eckel, Director Robert A. Oakley, Executive Vice President - Chief
Financial Officer
/s/ Willard J. Engel /s/ James F. Patterson
- ------------------------------------------------- --------------------------------------------------
Willard J. Engel, Director James F. Patterson, Director
/s/ Fred C. Finney /s/ Arden L. Shisler
- ------------------------------------------------- --------------------------------------------------
Fred C. Finney, Director Arden L. Shisler, Director
/s/ Charles L. Fuellgraf /s/ Robert L. Stewart
- ------------------------------------------------- --------------------------------------------------
Charles L. Fuellgraf, Jr., Director Robert L. Stewart, Director
/s/ Joseph J. Gasper /s/ Nancy C. Thomas
- ------------------------------------------------- --------------------------------------------------
Joseph J. Gasper, President and Chief Operating Officer Nancy C. Thomas, Director
and Director
/s/ Dimon R. McFerson /s/ Harold W. Weihl
- ------------------------------------------------- --------------------------------------------------
Dimon R. McFerson, Chairman and Chief Executive Harold W. Weihl, Director
Officer-Nationwide Insurance Enterprise and Director
/s/ David O. Miller
- -------------------------------------------------
David O. Miller, Chairman of the Board, Director
</TABLE>
