<PAGE> 1
Registration Statement No. 33-35783
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 8
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 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: Multiple Payment 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.
===============================================================================
1 OF 115
<PAGE> 2
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
1..............................................................................Nationwide Life Insurance Company
The Variable Account
2..............................................................................Nationwide Life Insurance Company
3..............................................................................Custodian of Assets
4..............................................................................Distribution of The Policies
5..............................................................................The Variable Account
6..............................................................................Not Applicable
7..............................................................................Not Applicable
8..............................................................................Not Applicable
9..............................................................................Legal Proceedings
10..............................................................................Information About The Policies;
How The Cash Value Varies;
Right to Exchange for a Fixed Benefit
Policy; Reinstatement; Other Policy
Provisions
11..............................................................................Investments of The Variable
Account
12..............................................................................The Variable Account
13..............................................................................Policy Charges
Reinstatement
14..............................................................................Underwriting and Issuance -
Premium Payments Minimum
Requirements for Issuance of a Policy
15..............................................................................Investments of the Variable
Account; Premium Payments
16..............................................................................Underwriting and Issuance -
Allocation of Cash Value
17..............................................................................Surrendering The Policy for Cash
18..............................................................................Reinvestment
19..............................................................................Not Applicable
20..............................................................................Not Applicable
21..............................................................................Policy Loans
22..............................................................................Not Applicable
23..............................................................................Not Applicable
24..............................................................................Not Applicable
25..............................................................................Nationwide Life Insurance Company
26..............................................................................Not Applicable
27..............................................................................Nationwide Life Insurance Company
28..............................................................................Company Management
29..............................................................................Company Management
30..............................................................................Not Applicable
31..............................................................................Not Applicable
32..............................................................................Not Applicable
33..............................................................................Not Applicable
34..............................................................................Not Applicable
35..............................................................................Nationwide Life Insurance Company
36..............................................................................Not Applicable
37..............................................................................Not Applicable
38..............................................................................Distribution of The Policies
39..............................................................................Distribution of The Policies
40..............................................................................Not Applicable
41(a)...........................................................................Distribution of The Policies
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
42..............................................................................Not Applicable
43..............................................................................Not Applicable
44..............................................................................How The Cash Value Varies
45..............................................................................Not Applicable
46..............................................................................How The Cash Value Varies
47..............................................................................Not Applicable
48..............................................................................Custodian of Assets
49..............................................................................Not Applicable
50..............................................................................Not Applicable
51..............................................................................Summary of The Policies; Information
About The Policies
52..............................................................................Substitution of Securities
53..............................................................................Taxation of The Company
54..............................................................................Not Applicable
55..............................................................................Not Applicable
56..............................................................................Not Applicable
57..............................................................................Not Applicable
58..............................................................................Not Applicable
59..............................................................................Financial Statements
</TABLE>
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY
P.O. Box 182150
Columbus, Ohio 43218-2150
(800) 547-7548, TDD (800) 238-3035
MULTIPLE PAYMENT VARIABLE LIFE INSURANCE POLICIES
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-2
The life insurance policies offered by this prospectus are Variable Life
Insurance Policies (collectively referred to as the "Policies"). The Policies
are designed to provide life insurance coverage on the Insured named in the
Policy. The Policies may also provide a Cash Surrender Value if the Policy is
terminated during the lifetime of the Insured. The death benefit and Cash Value
of the Policies may vary to reflect the experience of the Nationwide VLI
Separate Account-2 (the "Variable Account") or the Fixed Account to which Cash
Values are allocated.
The Policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code (the "Code"). The
Policies are designed to generally require the payment of the Guideline Single
Premium in five annual installments for death benefit Option 1 and five or more
annual Guideline Level Premiums under death benefit Option 2.
The Policy Owner may allocate Net Premiums and Cash Value to one or more of the
Sub-Accounts and the Fixed Account. The assets of each Sub-Account will be used
to purchase, at Net Asset Value, shares of a designated mutual fund of the
following Underlying Mutual Fund options:
<TABLE>
<S> <C>
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF NEUBERGER & BERMAN ADVISERS
THE AMERICAN CENTURY(SM) FAMILY OF INVESTMENTS: MANAGEMENT TRUST:
-American Century VP Balanced -Growth Portfolio
-American Century VP Capital Appreciation -Guardian Portfolio
-American Century VP Income & Growth -Limited Maturity Bond Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP"): OPPENHEIMER VARIABLE ACCOUNT FUNDS:
-VIP Equity Income Portfolio -Bond Fund
-VIP Growth Portfolio -Multiple Strategies Fund
-VIP High Income Portfolio*
-VIP Overseas Portfolio STRONG OPPORTUNITY FUND II, INC.
(FORMERLY STRONG SPECIAL FUND II, INC.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
("VIP II"): STRONG VARIABLE INSURANCE FUNDS, INC.:
-VIP II Asset Manager Portfolio -Discovery Fund II, Inc.
NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT): VAN ECK WORLDWIDE INSURANCE TRUST:
-Capital Appreciation Fund -Worldwide Bond Fund
-Government Bond Fund -Worldwide Hard Assets Fund
-Money Market Fund
-Nationwide Small Cap Value Fund
-Total Return Fund
</TABLE>
*The VIP High Income Portfolio may invest in lower quality debt securities
commonly referred to as junk bonds.
Nationwide Life Insurance Company (the "Company") guarantees that the death
benefit for a Policy will never be less than the Specified Amount stated on the
Policy data page as long as the Policy is in force. There is no guaranteed Cash
Surrender Value. If the Cash Surrender Value is insufficient to cover the
charges under the Policy, the Policy will lapse without value. Also, during the
first five Policy Years, the total premium payments, less any existing Policy
Indebtedness, must be greater than or equal to the Minimum Premium requirement
in order for the Policy to continue in force.
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."
1
<PAGE> 5
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, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS
IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE.
INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY
INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE
THE POSSIBLE LOSS OF PRINCIPAL.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY
OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SEC MAINTAINS A WEBSITE, WWW.SEC.GOV, THAT CONTAINS 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 SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS
FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS
PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH.
The date of this prospectus is May 1, 1998
2
<PAGE> 6
GLOSSARY OF TERMS
ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full
years since the Policy Date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Cash Value.
BENEFICIARY- The person to whom the Death Proceeds are paid.
CASH VALUE- The sum of the Policy values in the Variable Account, Fixed Account
and any associated value in the Policy Loan Account.
CASH SURRENDER VALUE- The Policy's Cash Value, less any Indebtedness under the
Policy, less any Surrender Charge.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies
while the Policy is in force.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
GUIDELINE LEVEL PREMIUM- The amount of level annual premium calculated in
accordance with the provisions of the Code, as amended. It represents the level
annual premiums required to mature the Policy under guaranteed mortality and
expense charges, and an interest rate of 4%.
GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance
with the provisions of the Code, as amended. It represents the single premium
required to mature the Policy under guaranteed mortality and expense charges,
and an interest rate of 6%.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDEBTEDNESS- Amounts owed the Company as a result of Policy loans including
both principal and accrued interest.
INITIAL PREMIUM- The premium required for coverage to become effective on the
Policy Date. It is shown on the Policy data page.
INSURED- The person whose life is covered by the Policy, and who is named on the
Policy data page.
MATURITY DATE- The Policy Anniversary on or following the Insured's 95th
birthday.
MINIMUM PREMIUM- The Minimum Premium is shown on the Policy data page. It is
used to measure the total amount that must be paid during the first five Policy
Years to continue the Policy in force.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
NET ASSET VALUE- The value of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
NET PREMIUMS- Net Premiums are equal to the actual premiums minus the percent of
premium charge. The percent of premium charges are shown on the Policy data
page.
POLICY ANNIVERSARY- The same day and month as the Policy Date for succeeding
years.
POLICY CHARGES- All deductions made from the value of the Variable Account or
the Policy Cash Value.
POLICY DATE- The date the provisions of the Policy take effect, as shown on the
Policy data page.
POLICY LOAN ACCOUNT- The portion of the Cash Value which results from Policy
Indebtedness.
POLICY OWNER- The person designated in the Policy application as the owner. In
the State of New York, the variable life insurance Policies offered by the
Company are offered as "Certificates" for "Certificate Owners" under a group
contract rather than individual Policies. The provisions of both these
Certificates and the Policies are essentially the same and references to the
provisions of Policies and rights of Policy Owners in this prospectus include
Certificates and Certificate Owners.
3
<PAGE> 7
POLICY YEAR- Each year commencing with the Policy Date and each Policy
Anniversary thereafter.
SCHEDULED PREMIUM- The Scheduled Premium is shown on the Policy data page. It is
used to calculate the initial Specified Amount.
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.
UNSCHEDULED PREMIUM- Additional premium payments which may be allowed under
certain conditions.
VALUATION DATE- Each day 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 Cash Value might be materially affected.
VALUATION PERIOD- A period commencing with the close of business on a
Valuation Date and ending at the close of business for the next succeeding
Valuation Date.
VARIABLE ACCOUNT- A separate investment account of the Company, Nationwide VLI
Separate Account-2.
4
<PAGE> 8
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF TERMS.........................................................................................3
SUMMARY OF THE POLICIES...................................................................................7
Variable Life Insurance..........................................................................7
The Variable Account and its Sub-Accounts........................................................7
The Fixed Account................................................................................7
Deductions and Charges...........................................................................7
Premiums.........................................................................................8
NATIONWIDE LIFE INSURANCE COMPANY.........................................................................9
THE VARIABLE ACCOUNT......................................................................................9
Investments of the Variable Account..............................................................9
American Century Variable Portfolios, Inc., a member of the American Century(SM) Family of
Investments................................................................................10
Fidelity Variable Insurance Products Fund.......................................................11
Fidelity Variable Insurance Products Fund II....................................................12
Nationwide Separate Account Trust (NSAT)........................................................12
Neuberger & Berman Advisers Management Trust....................................................13
Oppenheimer Variable Account Funds..............................................................13
Strong Opportunity Fund II, Inc.................................................................13
Strong Variable Insurance Funds, Inc............................................................14
Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust)...........................14
Reinvestment....................................................................................14
Transfers.......................................................................................14
Dollar Cost Averaging...........................................................................15
Substitution of Securities......................................................................15
Voting Rights...................................................................................15
INFORMATION ABOUT THE POLICIES...........................................................................16
Underwriting and Issuance.......................................................................16
-Minimum Requirements for Issuance of a Policy..................................................16
-Premium Payments...............................................................................16
Allocation of Cash Value........................................................................17
Short-Term Right to Cancel Policy...............................................................17
POLICY CHARGES...........................................................................................17
Deductions from Premiums........................................................................17
Surrender Charges...............................................................................17
-Reductions to Surrender Charges................................................................18
Deductions from Cash Value......................................................................18
-Monthly Cost of Insurance......................................................................19
-Monthly Administrative Charge..................................................................19
Deductions from the Sub-Accounts................................................................19
Expenses of the Underlying Mutual Funds.........................................................20
HOW THE CASH VALUE VARIES................................................................................21
How the Investment Experience is Determined.....................................................21
Net Investment Factor...........................................................................22
Determining the Cash Value......................................................................22
Valuation Periods and Valuation Dates...........................................................22
SURRENDERING THE POLICY FOR CASH.........................................................................22
Right to Surrender..............................................................................22
Cash Surrender Value............................................................................22
Partial Surrenders..............................................................................23
Maturity Proceeds...............................................................................23
Income Tax Withholding..........................................................................23
POLICY LOANS.............................................................................................23
Taking a Policy Loan............................................................................23
Effect on Investment Performance................................................................24
Interest........................................................................................24
Effect on Death Benefit and Cash Value..........................................................24
Repayment.......................................................................................24
</TABLE>
5
<PAGE> 9
<TABLE>
<S> <C>
HOW THE DEATH BENEFIT VARIES.............................................................................24
Calculation of the Death Benefit................................................................24
Proceeds Payable on Death.......................................................................26
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY.............................................................26
CHANGES OF INVESTMENT POLICY.............................................................................26
GRACE PERIOD.............................................................................................26
-First Five Policy Years........................................................................26
-Policy Years Six and After.....................................................................26
-All Policy Years...............................................................................27
REINSTATEMENT............................................................................................27
THE FIXED ACCOUNT OPTION.................................................................................27
CHANGES IN EXISTING INSURANCE COVERAGE...................................................................27
Specified Amount Increases......................................................................27
Specified Amount Decreases......................................................................28
Changes in the Death Benefit Option.............................................................28
OTHER POLICY PROVISIONS..................................................................................28
Policy Owner....................................................................................28
Beneficiary.....................................................................................28
Assignment......................................................................................29
Incontestability................................................................................29
Error in Age or Sex.............................................................................29
Suicide.........................................................................................29
Nonparticipating Policies.......................................................................29
LEGAL CONSIDERATIONS.....................................................................................29
DISTRIBUTION OF THE POLICIES.............................................................................29
CUSTODIAN OF ASSETS......................................................................................30
TAX MATTERS..............................................................................................30
Policy Proceeds.................................................................................30
-Federal Estate and Generation-Skipping Transfer Taxes..........................................31
-Non-Resident Aliens............................................................................31
Taxation of the Company.........................................................................32
Tax Changes.....................................................................................32
THE COMPANY..............................................................................................33
COMPANY MANAGEMENT.......................................................................................33
Directors of the Company........................................................................33
Executive Officers of the Company...............................................................35
OTHER CONTRACTS ISSUED BY THE COMPANY....................................................................36
STATE REGULATION.........................................................................................36
REPORTS TO POLICY OWNERS.................................................................................36
ADVERTISING..............................................................................................36
YEAR 2000 COMPLIANCE ISSUES..............................................................................36
LEGAL PROCEEDINGS........................................................................................37
EXPERTS..................................................................................................37
REGISTRATION STATEMENT...................................................................................37
LEGAL OPINIONS...........................................................................................37
APPENDIX 1...............................................................................................38
APPENDIX 2...............................................................................................39
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.
6
<PAGE> 10
THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR
THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN
ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND.
SUMMARY OF THE POLICIES
VARIABLE LIFE INSURANCE
The Policies offered by the Company 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 person insured. Also
like fixed-benefit whole life insurance, the Policies may provide for a Cash
Surrender Value which is payable if the Policy is terminated during the
Insured's lifetime. As with fixed-benefit whole life insurance, the Cash
Surrender Value during the early Policy years may be substantially lower than
the premiums paid.
However, the Policies differ from fixed-benefit whole life insurance in several
respects. Unlike fixed-benefit whole life insurance, the death benefit and Cash
Value of the Policies may increase or decrease to reflect the investment
performance of the Sub-Accounts or the Fixed Account to which Cash Values are
allocated (see "How the Death Benefit Varies"). There is no guaranteed Cash
Surrender Value (see "How the Cash Value Varies"). If the Cash Surrender Value
is insufficient to pay the Policy Charges, the Policy will lapse without value.
Also, during the first five Policy Years, the total premium payments, less any
existing Policy Indebtedness, must be greater than or equal to the Minimum
Premium requirement in order for the Policy to continue in force. The Policies
are designed to generally permit the payment of the Guideline Single Premium in
five annual installments for death benefit Option 1 and five annual Guideline
Level Premiums under death benefit Option 2.
The Policies are designed to avoid classification as modified endowment
contracts under Section 7702A of the Code, which provides for taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions in the same way that annuities are taxed. Under certain
conditions, a Policy may become a modified endowment contract as a result of a
material change or a reduction in benefits as defined by the Code. Excess
premiums paid may also cause the Policy to become a modified endowment contract.
The Company will monitor premiums paid and other Policy transactions and will
notify the Policy Owner when the Policy's non-modified endowment contract status
is in jeopardy (see "Tax Matters").
THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS
The Company places the Policy's Net Premiums in the Variable Account or the
Fixed Account at the time the Policy is issued. The Policy Owner selects the
Sub-Accounts or the Fixed Account into which the Cash Value will be allocated
(see "Allocation of Cash Value"). When the Policy is issued, the Net Premiums
will be allocated to the NSAT-Money Market Fund (for any Net Premiums allocated
to a Sub-Account on the application) or the Fixed Account until the expiration
of the period in which the Policy Owner may exercise his or her short term right
to cancel the Policy. Assets of each Sub-Account are invested at Net Asset Value
in shares of a corresponding Underlying Mutual Fund option. For a description of
the Underlying Mutual Fund option and its investment objectives, see
"Investments of the Variable Account" located in this prospectus.
THE FIXED ACCOUNT
The Fixed Account is funded by the assets of the Company's General Account. Cash
Values allocated to the Fixed Account are credited with interest daily at a rate
declared by the Company. The interest rate declared is at the Company's sole
discretion, but may never be less than an effective annual rate of 4%.
DEDUCTIONS AND CHARGES
The Company deducts certain charges from the assets of the Variable Account and
the Cash Value of the Policy. These charges are made for administrative and
sales expenses, state premium taxes, providing life insurance protection and
assuming the mortality and expense risks. For a discussion of any charges
imposed by the Underlying Mutual Fund options, see the prospectuses of the
respective Underlying Mutual Funds.
The Company deducts a sales load from each premium payment received not to
exceed 3.5% of each premium payment. The Company may reduce this sales loading
at its sole discretion. The total sales load actually deducted from any Policy
will be equal to the sum of the 3.5% front-end sales load plus any sales
Surrender Charge that may be deducted from Policies that are surrendered.
The Company also deducts a charge for state premium taxes equal to 2.5% of all
premium payments.
7
<PAGE> 11
The Company also deducts the following charges from the Policy's Cash Value on
the Policy Date and each subsequent Monthly Anniversary Day:
1. monthly cost of insurance; plus
2. monthly cost of any additional benefits provided by riders to the
Policy; plus
3. a current administrative expense charge of $5. This charge may be
increased at the sole discretion of the Company but may not
exceed $7.50.
The Company also deducts on a daily basis from the assets of the Variable
Account a charge to provide for mortality and expense risks. This charge is
equal on an annual basis to 0.80% of the Variable Account assets.
For Policies which are surrendered during the first nine Policy Years, the
Company deducts a Surrender Charge. This Surrender Charge is comprised of an
underwriting Surrender Charge and a sales Surrender Charge. The initial
Surrender Charge varies by issue age, sex and underwriting classification and is
calculated based on the initial Specified Amount. The following table
illustrates the initial Surrender Charge per $1,000 of initial Specified Amount
for Policies which are issued on a standard basis (see Appendix 1 for specific
examples). Special guaranteed maximum Surrender Charges apply in Pennsylvania
(see Appendix 1).
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
<S> <C> <C> <C> <C>
25 $5.878 $5.537 $6.680 $5.945
35 7.260 6.712 8.559 7.373
45 11.159 10.160 13.244 11.151
55 15.275 13.375 18.373 14.686
65 23.821 20.553 27.943 22.165
</TABLE>
Underlying Mutual Fund shares are purchased at Net Asset Value, which reflects
the deduction of investment management fees and certain other expenses. The
management fees are charged by each Underlying Mutual Fund's investment adviser
for managing the Underlying Mutual Fund and selecting its portfolio of
securities. Other Underlying Mutual Fund expenses can include such items as
interest expense on loans and contracts with transfer agents, custodians, and
other companies that provide services to the Underlying Mutual Fund (see
"Expenses of the Underlying Mutual Funds").
PREMIUMS
The minimum Initial Premium for which a Policy may be issued is $2,000. A Policy
may be issued to an Insured up to age 75.
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").
The Initial Premium is due on the Policy Date. It will be credited on the
initial investment date. Any due and unpaid monthly deductions will be
subtracted from the Cash Value at this time. Insurance will not be effective
until the Initial Premium is paid. The Initial Premium is shown on the Policy
data page.
Premiums, other than the Initial Premium, may be made at any time while the
Policy is in force subject to the limits described below. During the first five
Policy Years, the total premium payments, less any Policy Indebtedness, must be
greater than or equal to the Minimum Premium in order for the Policy to continue
in force. The Minimum Premium is equal to the monthly Minimum Premium multiplied
by the number of completed Policy months. The monthly Minimum Premium is shown
on the Policy data page.
The Company will send Scheduled Premium payment reminder notices to you. The
Company will send them according to the premium mode shown on the Policy data
page.
You may pay the Initial Premium at the Home Office or to an authorized agent.
All premiums after the first are payable at the Home Office. Premium receipts
will be furnished upon request.
Each premium must be at least equal to the monthly Minimum Premium. The Company
reserves the right to require satisfactory evidence of insurability before
accepting any additional premium payment which results in any increase in the
net amount at risk. Also, the Company will refund any portion of any premium
payment which is determined to be in excess of the premium limit established by
law to qualify the Policy as a contract for life insurance. The Company may also
require that any existing Policy Indebtedness be repaid prior to accepting any
additional premium payments.
8
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the "Nationwide
Insurance Enterprise" which includes Nationwide Mutual Insurance Company,
Nationwide Indemnity Company, Nationwide Mutual Fire Insurance Company,
Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty
Company, National Casualty Company, Scottsdale Indemnity Company and Nationwide
General Insurance Company. The Company's home office is at One Nationwide
Plaza, Columbus, Ohio 43215.
The Company offers a complete line of life insurance, 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 a resolution of the Company's Board of
Directors on May 7, 1987 pursuant to Ohio law. The Company has caused the
Variable Account to be registered with the Securities and Exchange Commission as
a unit investment trust pursuant to the Investment Company Act of 1940 (the
"1940 Act"). Nationwide Life Insurance Company, One Nationwide Plaza, Columbus,
Ohio 43215 serves as trustee for the trust. Nationwide Advisory Services, Inc.,
One Nationwide Plaza, Columbus, Ohio 43215 serves as principal underwriter for
the trust. Such registration does not involve supervision of the management of
the Variable Account or the Company by the Securities and Exchange Commission.
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 Funds
designated by the Policy Owner. Thus, the investment performance of a Policy
depends upon the investment performance of the Underlying Mutual Funds
designated by the Policy Owner.
INVESTMENTS OF THE VARIABLE ACCOUNT
At the time of application, the Policy Owner elects to have the Net Premiums
allocated among one or more of the Sub-Accounts and the Fixed Account (see
"Allocation of Cash Value"). During the period in which the Policy Owner may
exercise his or her short-term right to cancel the Policy, all Net Premiums not
allocated to the Fixed Account are placed in the NSAT- Money Market Fund. At the
end of this period, the Cash Value in that Sub-Account will be transferred to
the Sub-Accounts based on the Underlying Mutual Fund allocation factors. Any
subsequent Net Premiums received after this period will be allocated based on
the Underlying Mutual Fund allocation factors.
No less than 5% of Net Premiums may be allocated to any one Sub-Account or the
Fixed Account. The Policy Owner may change the allocation of Net Premiums or may
transfer Cash Value from one Sub-Account to another, subject to such terms and
conditions as may be imposed by each Underlying Mutual Fund option and as set
forth in this prospectus (see "Transfers", "Allocation of Cash Value" and
"Short-Term Right to Cancel Policy").
Additional Premium payments, upon acceptance, will be allocated to the
NSAT-Money Market Fund unless the Policy Owner specifies otherwise (see "Premium
Payments").
9
<PAGE> 13
Each of the Underlying Mutual Funds is a registered investment company which
receives investment advice from a registered investment adviser:
1) American Century Variable Portfolios, Inc. a member of the American
Century(SM) Family of Investments, managed by American Century
Investment Management, Inc., an affiliate of American Century
Companies, Inc.;
2) Fidelity Variable Insurance Products Fund, managed by Fidelity
Management & Research Company;
3) Fidelity Variable Insurance Products Fund II, managed by Fidelity
Management & Research Company;
4) The Nationwide Separate Account Trust, managed by Nationwide Advisory
Services, Inc.;
5) The Neuberger & Berman Advisers Management Trust, managed by Neuberger
& Berman Management Incorporated;
6) Oppenheimer Variable Account Funds, managed by OppenheimerFunds, Inc.;
7) Strong Opportunity Fund II, Inc., managed by Strong Capital
Management, Inc.;
8) Strong Variable Insurance Funds, Inc. managed by Strong Capital
Management, Inc.; and
9) Van Eck Worldwide Insurance Trust, managed by Van Eck Associates
Corporation.
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, Policy 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 are
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.
The Underlying Mutual Funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A 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 management
company, designed only to provide investment vehicles for variable annuity and
variable life insurance products of insurance companies. A member of the
American Century(SM) Family of Investments, the Fund 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.
10
<PAGE> 14
- - 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.
(Although the Statement of Additional Information concerning American
Century Variable Portfolios, Inc., refers to redemptions of securities in
kind under certain conditions, all surrendering or redeeming Contract
Owners will receive cash from the Company.)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP")
VIP is an open-end, diversified, management investment company organized as a
Massachusetts business trust on November 13, 1981. VIP's shares are purchased by
insurance companies to fund benefits under variable insurance and annuity
policies. FMR is the Fund's manager.
- - VIP EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
- - VIP GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This
Portfolio will invest in the securities of both well-known and
established companies, and smaller, less well-known companies which may
have a narrow product line or whose securities are thinly traded. These
latter securities will often involve greater risk than may be found in
the ordinary investment security. FMR's analysis and expertise plays an
integral role in the selection of securities and, therefore, the
performance of the Portfolio. Many securities which FMR believes would
have the greatest potential may be regarded as speculative, and
investment in the Portfolio may involve greater risk than is inherent in
other mutual funds. It is also important to point out that the Portfolio
makes most sense for you if you can afford to ride out changes in the
stock market, because it invests primarily in common stocks. FMR also can
make temporary investments in securities such as investment-grade bonds,
high-quality preferred stocks and short-term notes, for defensive
purposes when it believes market conditions warrant.
- - VIP HIGH INCOME PORTFOLIO
Investment Objective: To obtain a high level of current income by
investing primarily in high-risk, high-yielding, lower-rated,
fixed-income securities, while also considering growth of capital. The
Fund's manager will seek high current income normally by investing the
Fund's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities, zero coupon securities,
and mortgage-backed and asset-backed securities;
- up to 20% in common stocks and other equity securities when
consistent with the Fund's primary objective or acquired as part
of a unit combining fixed-income and equity securities.
11
<PAGE> 15
Higher yields are usually available on securities that are lower-rated or that
are unrated. Lower-rated securities are usually defined as Ba or lower by
Moody's; BB or lower by Standard & Poor's and may be deemed to be of a
speculative nature. The Fund's may also purchase lower-quality bonds such as
those rated Ca3 by Moody's or C- by Standard & Poor's which provide poor
protection for payment of principal and interest (commonly referred to as "junk
bonds"). For a further discussion of lower-rated securities, please see the
"Risks of Lower-Rated Debt Securities" section of the Fund's prospectus.
- - VIP OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily
through investments in foreign securities. The Overseas Portfolio
provides a means for investors to diversify their own portfolios by
participating in companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ("VIP 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 insurance and annuity
policies. Fidelity Management and Research Company (FMR) is the Fund's manager.
- - VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek to obtain high total return with reduced
risk over the long-term by allocating its assets among domestic and
foreign stocks, bonds and short-term fixed income instruments.
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. The NSAT offers
shares in the five separate funds listed below, each with its own investment
objective. Currently, shares of the NSAT will be sold only to life insurance
company separate accounts to fund the benefits under variable life insurance
policies or variable annuity contracts issued by life insurance companies. The
assets of the NSAT are managed by Nationwide Advisory Services, Inc., Three
Nationwide Plaza, Columbus, Ohio 43215, a wholly-owned subsidiary of Nationwide
Life Insurance Company.
- - CAPITAL APPRECIATION FUND
Investment Objective: The Fund is designed for investors who are
interested in long-term growth. The Fund seeks to meet its objective
primarily through a diversified portfolio of the common stock of
companies which the investment manager determines have a
better-than-average potential for sustained capital growth over the long
term.
- - GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is
consistent with capital preservation through investing primarily in bonds
and securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
- - MONEY MARKET FUND
Investment Objective: To seek as high a level of current income as is
considered consistent with the preservation of capital and liquidity by
investing primarily in money market instruments.
- - 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.
- - TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return
(i.e., earnings growth plus potential dividend yield) on invested capital
from a flexible combination of current return and capital gains through
investments in common stocks, convertible issues, money market
instruments and bonds with a primary emphasis on common stocks.
12
<PAGE> 16
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust is an open-end diversified
management investment company established as a Massachusetts business trust on
December 14, 1983. Shares of the Trust are offered in connection with certain
variable annuity contracts and variable life insurance policies issued through
life insurance company separate accounts and are also offered to qualified
pension and retirement plans outside of the separate account context. The
investment adviser is Neuberger & Berman Management Incorporated.
- - GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to
purchase such stocks.
- - 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.
- - LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and
rising bond prices, indicate that capital appreciation may be available
without significant risk to principal. It seeks to achieve its objectives
through investments in a diversified portfolio of limited maturity debt
securities. The Portfolio invests in securities which are at least
investment grade and does not invest in junk bonds.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-ended, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. OppenheimerFunds, Inc. is the Funds'
investment advisor.
- - OPPENHEIMER BOND FUND
Investment Objective: 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 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 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.)
The Strong Opportunity Fund II, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Fund 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 to the fund.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
13
<PAGE> 17
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 Strong
Discovery Fund II, Inc. ("Fund") is 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 Fund.
- - 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.
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
benefits of life insurance policies and annuity contracts. The assets of the
Trust are managed by Van Eck Associates Corporation.
- - WORLDWIDE HARD ASSETS FUND
Investment Objective: To seek long-term capital appreciation by investing
globally, primarily in "Hard Assets Securities." Hard assets are
tangible, finite assets, such as real estate, energy, timber, and
industrial and precious metals. Income is a secondary consideration.
- - WORLDWIDE BOND FUND Investment Objective: To seek high total return
through a flexible policy of investing globally, primarily in debt
securities. The Fund does not invest in junk bonds.
REINVESTMENT
The Underlying Mutual Fund options described above have as a policy the
distribution of dividends in the form of additional shares (or fractions
thereof) of the Underlying Mutual Funds. The distribution of additional shares
will not affect the number of Accumulation Units attributable to a particular
Policy (see "Allocation of Cash Value").
TRANSFERS
The Policy Owner may request a transfer of up to 100% of the Cash Value from the
Variable Account to the Fixed Account. The Policy Owner's Cash Value in each
Sub-Account will be determined as of the date the transfer request is received
at the Home Office in good order. The Company reserves the right to restrict
transfers to the Fixed Account to 25% of the Cash Value.
The Policy Owner may annually transfer a portion of the value of the Fixed
Account to the Variable Account and a portion of the Variable Account to the
Fixed Account, without penalty or adjustment. The Company reserves the right to
limit the amount of Cash Value transferred out of the Fixed Account each Policy
Year. Transfers from the Fixed Account must be made within 30 days after the
termination date of the interest rate guarantee period.
Transfers 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: requesting identifying information, such as name, contract
number, Social Security number, and/or personal identification number; tape
recording all telephone transactions; providing written confirmation thereof to
both the Policy Owner and any agent of record at the last address of record; or
such other procedures as the Company may deem reasonable. Although failure to
follow reasonable procedures may result in the Company's liability for any
losses 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.
14
<PAGE> 18
Policy Owners who have entered into a Dollar Cost Averaging agreement with the
Company (see "Dollar Cost Averaging") may transfer from the Fixed Account to the
Variable Account under the terms of that agreement.
Policies described in this prospectus may 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 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 preauthorized transfer of exchange forms which are submitted
by market timing firms or other third parties in 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 manner that will disadvantage potentially
impair the contract rights of other Policy Owners.
DOLLAR COST AVERAGING
If the total Cash Value, less Policy Indebtedness, is $15, 000 or more, the
Policy Owner may direct the Company to automatically transfer a specified amount
from the Fidelity VIP-High Income Portfolio, the NSAT-Money Market Fund, the
NSAT-Government Bond Fund, the 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. The minimum monthly
transfer is $100. Monthly transfers from the Fixed Account must be equal to or
less than 1/30th of the Fixed Account when the program is requested. Transfers
will be processed until either the value in the originating Sub-Account 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 are no longer available for
investment by the Variable Account or if, in the judgment of the Company's
management, further investment in such Underlying Mutual Funds is inappropriate,
the Company may substitute shares of another Underlying Mutual Fund for shares
already purchased or to be purchased in the future by Net Premium payments under
the Policy. No substitution of securities in the Variable Account may take place
without prior approval of the SEC.
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. The shares will be voted in accordance with instructions received
from Policy Owners. If the 1940 Act or any regulation thereunder is 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.
15
<PAGE> 19
The Policy Owner is the person who has the voting interest under the Policy. The
number of Underlying Mutual Fund shares attributable to each Policy Owner is
determined by dividing the Policy Owner's interest in each respective
Sub-Account by the Net Asset Value of the Underlying Mutual Fund corresponding
to the Sub-Account. The number of shares which may be voted will be determined
as of a date chosen by the Company not more than 90 days prior to the meeting of
the Underlying Mutual Fund. Each person having a voting interest will receive
periodic reports relating to the Underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
Voting instructions will be solicited by written communication prior to such
meeting. Underlying Mutual Fund shares 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 Fund options, if required
by an insurance regulatory authority; (2) refrain from making any change in the
investment policies or any investment adviser or principal underwriter of any
portfolio which may be initiated by Policy Owners or the Underlying Mutual
Fund's Board of Directors, provided the Company's disapproval of the change is
reasonable and, in the case of a change in the investment policies or investment
adviser, based on a good faith determination that such change would be contrary
to state law or otherwise inappropriate in light of the portfolio's objective
and purposes; or (3) enter into or refrain from entering into any advisory
agreement or underwriting contract, if required by any insurance regulatory
authority.
INFORMATION ABOUT THE POLICIES
UNDERWRITING AND ISSUANCE
- -Minimum Requirements for Issuance of a Policy
The Policies are designed to generally permit the payment of the Guideline
Single Premium in five annual installments for death benefit Option 1 and five
annual Guideline Level Premiums under death benefit Option 2. At issue, the
Policy Owner selects a Scheduled Premium level. This Scheduled Premium is used
to determine the initial Specified Amount. The minimum Scheduled Premium is
$2,000. Policies may be issued to Insureds with issue ages 75 or younger. Before
issuing any Policy, the Company requires satisfactory evidence of insurability
which may include a medical examination.
- -Premium Payments
The Initial Premium for a Policy is payable in full at the Home Office. The
effective date of 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.
Premiums, other than the Initial Premium, may be made at any time while the
Policy is in force subject to the limits described below. During the first 5
Policy Years, the total premium payments, less any Policy Indebtedness, must be
greater than or equal to the Minimum Premium requirement in order for the Policy
to continue in force. The Minimum Premium requirement is equal to the monthly
Minimum Premium multiplied by the number of completed Policy months. The monthly
Minimum Premium is shown on the Policy data page.
Each premium payment must be at least equal to the monthly Minimum Premium.
Additional premium payments may be made at any time while the Policy is in
force. However, the Company reserves the right to require satisfactory evidence
of insurability before accepting any additional premium payment which results in
an increase in the net amount at risk. Also, the Company will refund any portion
of any premium payment which is determined to be in excess of the premium limit
established by law to qualify the Policy as a contract for life insurance. The
Company may also require that any existing Policy Indebtedness be repaid prior
to accepting additional premium payments. Additional premium payments or other
changes to the contract may jeopardize the Policy's non-modified endowment
contract status. The Company will monitor premiums paid and other Policy
transactions, and will notify the Policy Owner when non-modified endowment
contract status is in jeopardy (see "Tax Matters").
16
<PAGE> 20
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 value as if the Policy had been issued
and the Initial Net Premium invested on the date such premium was received in
good order by the Company. When the Policy is issued, the Net Premium will be
allocated to the NSAT-Money Market Fund (for any Net Premiums allocated to a
Sub-Account on the application) or the Fixed Account until the expiration of the
period in which the Policy Owner may exercise his or her short-term right to
cancel the Policy. 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 Fund options specified by the Policy Owner are purchased at
Net Asset Value for the respective Sub-Account(s). The Policy Owner may change
the allocation of Net Premiums or may transfer Cash Value from one Sub-Account
to another subject to such terms and conditions as may be imposed by each
Underlying Mutual Fund and as set forth in the prospectus. Net Premiums
allocated to the Fixed Account at the time of application may not be transferred
prior to the first Policy Anniversary (see "Transfers" and "Investments of the
Variable Account").
The designation of investment allocations will be made by the prospective Policy
Owner at the time of application for a Policy. The Policy Owner may change the
way in which future Net Premiums are allocated by giving written notice to the
Company. All percentage allocations must be in whole numbers, and must be at
least 5%. The sum of allocations must equal 100%.
SHORT-TERM RIGHT TO CANCEL POLICY
A Policy may be returned for cancellation and a full refund of premium within 10
days after the Policy is received, within 45 days after the application for
insurance is signed, or within 10 days after the Company mails or delivers a
Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or
delivered to the registered representative who sold it or to the Company.
Immediately after such mailing or delivery, the Policy will be deemed void from
the beginning. The Company will refund either the total premiums paid or the
Cash Surrender Value, less Indebtedness, as prescribed by the state in which the
Policy was issued, within seven days after receipt of the Policy.
POLICY CHARGES
DEDUCTIONS FROM PREMIUMS
The Company deducts a sales load from each premium payment received not to
exceed 3.5% of each premium payment. The Company may reduce this sales load at
its sole discretion. The total sales load actually deducted from any Policy will
be equal to the sum of the 3.5% front-end sales load plus any sales Surrender
Charge that may be deducted from Policies that are surrendered.
The Company also pays any state premium taxes attributable to a particular
Policy when incurred by the Company. The Company expects to pay an average state
premium tax rate of approximately 2.5% of premiums for all states, although such
tax rates generally can range from 0% to 4%. To reimburse the Company for the
payment of state premium taxes associated with the Policies, the Company deducts
a charge for state premium taxes equal to 2.5% of all premium payments received.
This charge may be more or less than the amount actually assessed by the state
in which a particular Policy Owner lives. The Company does not expect to make a
profit from this charge.
SURRENDER CHARGES
The Company will deduct a Surrender Charge from the Policy's Cash Value for any
Policy surrendered during the first nine Policy Years. The initial Surrender
Charge varies by issue age, sex and underwriting classification and is
calculated based on the initial Specified Amount. The following table
illustrates the initial Surrender Charge per $1,000 of initial Specified Amount
for Policies which are issued on a standard basis (see Appendix 1 for specific
examples). Special guaranteed maximum Surrender Charges apply in Pennsylvania
(see Appendix 1).
17
<PAGE> 21
<TABLE>
<CAPTION>
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
<S> <C> <C> <C> <C>
25 $5.878 $5.537 $6.680 $5.945
35 7.260 6.712 8.559 7.373
45 11.159 10.160 13.244 11.151
55 15.275 13.375 18.373 14.686
65 23.821 20.553 27.943 22.165
</TABLE>
The Surrender Charge is comprised of two components: an underwriting Surrender
Charge and sales Surrender Charge. The underwriting Surrender Charge varies by
issue age in the following manner:
<TABLE>
<CAPTION>
Issue Charge per $1,000 of
Age Initial Specified Amount
<S> <C>
0-39 $3.50
40-59 $5.00
60-75 $6.50
</TABLE>
The underwriting Surrender Charge is designed to cover the administrative
expenses associated with underwriting and issuing the Policy, including the
costs of processing applications, conducting medical exams, determining
insurability and the Insured's underwriting class, and establishing Policy
records. The Company does not expect to profit from the underwriting Surrender
Charge. The Surrender Charge may be insufficient to recover certain expenses
related to the sale of the Policies. Unrecovered expenses are borne by the
Company's general assets which may include profits, if any, from mortality and
expense risk charges (see "Deductions from the Sub-Accounts"). Additional
premiums and/or income earned on assets in the Variable Account or partial
surrenders have no effect on these charges. The remainder of the Surrender
Charge which is not attributable to the underwriting Surrender Charge component
represents the sales Surrender Charge component. The purpose of the sales
Surrender Charge component is to reimburse the Company for some of the expenses
incurred in the distribution of the Policies. The Company also deducts 3.5% of
each premium for sales load (see "Deductions from Premiums").
- -Reductions to Surrender Charges
The Surrender Charge is reduced in subsequent Policy Years in the following
manner:
<TABLE>
<CAPTION>
Surrender Charge Surrender Charge
Completed as a % of Initial Completed as a % of Initial
Policy Years Surrender Charges Policy Years Surrender Charges
------------ ----------------- ------------ -----------------
<S> <C> <C> <C>
0 100% 5 85%
1 100% 6 80%
2 100% 7 75%
3 95% 8 50%
4 90% 9+ 0%
</TABLE>
Special guaranteed maximum Surrender Charges apply in Pennsylvania (see Appendix
1).
DEDUCTIONS FROM CASH VALUE
The Company deducts the following charges from the Policy's Cash Value on the
Policy Date and each subsequent Monthly Anniversary Day:
1. monthly cost of insurance charges; plus
2. monthly cost of any additional benefits provided by riders; plus
3. monthly administrative expense charge.
These deductions will be charged proportionately to the Cash Value in each
Variable Account Sub-Account and the Fixed Account.
18
<PAGE> 22
- -Monthly Cost of Insurance
The monthly cost of insurance charge for each Policy month is determined by
multiplying the monthly cost of insurance rate by the net amount at risk. The
net amount at risk is the difference between the death benefit and the Policy's
Cash Value, each calculated at the beginning of the Policy month.
If death benefit Option 1 is in effect and there have been increases in the
Specified Amount, then the Cash Value will first be considered a part of the
initial Specified Amount. If the Cash Value exceeds the initial Specified
Amount, it will then be considered a part of the additional increases in
Specified Amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will not exceed those guaranteed in the Policy.
Guaranteed cost of insurance rates for Policies issued on a simplified basis are
based on the 1980 Commissioners Extended Term Mortality Table, Age Last Birthday
(1980 CET). Guaranteed cost of insurance rates for Policies issued on a
preferred basis are based on the 1980 Commissioners Standard Ordinary Mortality
Table, Age Last Birthday (1980 CSO). Guaranteed cost of insurance rates for
Policies issued on a substandard basis are based on appropriate percentage
multiples of the 1980 CSO. These mortality tables are sex distinct. In addition,
separate mortality tables will be used for standard and non-tobacco.
For Policies issued in Texas, guaranteed cost of insurance rates for
standard-simplified issues ("Special Class-Simplified" in Texas) are based on
130% of the 1980 Commissioners Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO).
The rates for Policies issued on a simplified or preferred basis will not exceed
the rates in the appropriate table. The cost of insurance rates per $1,000 of
net amount at risk are less for Policies issued on a preferred basis as compared
to a simplified basis.
The rate class of an Insured may affect the cost of insurance rate. The Company
currently places Insureds into both standard rate classes and substandard
classes that involve a higher mortality risk. In an otherwise identical Policy,
an Insured in the standard rate class will have a lower cost of insurance than
an Insured in a rate class with higher mortality risks. The Company may also
issue certain Policies on a 'Simplified Issue' basis to certain categories of
individuals. Due to the underwriting criteria established for Policies issued on
a Simplified Issue basis, actual rates for healthy individuals will be higher
than the current cost of insurance rates being charged under otherwise identical
Policies that are issued on a preferred basis.
- -Monthly Administrative Charge
The Company deducts a monthly Administrative Expense Charge to reimburse it for
certain expenses related to maintenance of the Policies, accounting and record
keeping and periodic reporting to Policy Owners. This charge is designed only to
reimburse the Company for certain actual administrative expenses. The Company
does not expect to recover from this charge any amount in excess of aggregate
maintenance expenses. Currently, this charge is $5 per month. The Company may,
at its sole discretion, increase this charge. However, the Company guarantees
that this charge will never exceed $7.50 per month.
DEDUCTIONS FROM THE SUB-ACCOUNTS
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
non-recovery of Policy issue, underwriting and other administrative expenses due
to Policies which lapse or are surrendered in the early Policy Years.
To compensate the Company for assuming these risks associated with the Policies,
the Company deducts a daily Mortality and Expense Risk Charge from the assets of
the Sub-Accounts. This charge is equivalent to an annual effective rate of 0.80%
of the daily net assets of 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 this charge. The Surrender Charge may be
insufficient to recover certain expenses related to the sale of the Policies.
Unrecovered expenses are borne by the Company's general assets which may include
profits, if any, from the Mortality and Expense Risk Charge (see "Surrender
Charges").
The Company does not currently assess any charge for income taxes incurred by
the Company as a result of the operations of the Sub-Accounts (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.
19
<PAGE> 23
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. The
management fees and other expenses for each Underlying Mutual Fund, for its most
recently completed fiscal year, expressed as a percentage of the Underlying
Mutual Fund's average assets, are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
Management Total
Fees Other Expenses Expenses
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc. - American Century VP Balanced
- ------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc. - American Century VP Capital
Appreciation
- ------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 0.70% 0.00% 0.70%
Inc. - American Century VP Income &
Growth
- ------------------------------------------------------------------------------------------------------------
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 0.55% 0.09% 0.64%
Portfolio
- ------------------------------------------------------------------------------------------------------------
NSAT-Capital Appreciation Fund 0.60% 0.09% 0.69%
- ------------------------------------------------------------------------------------------------------------
NSAT-Government Bond Fund 0.50% 0.08% 0.58%
- ------------------------------------------------------------------------------------------------------------
NSAT-Money Market Fund 0.40% 0.08% 0.48%
- ------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Cap Value Fund 0.50% 0.55% 1.05%
- ------------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 0.60% 0.07% 0.67%
- ------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Growth 0.83% 0.07% 0.90%
Portfolio
- ------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Guardian 0.60% 0.40% 1.00%
Portfolio
- ------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Limited 0.65% 0.12% 0.77%
Maturity Bond
Portfolio
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Bond Fund 0.73% 0.05% 0.78%
- ------------------------------------------------------------------------------------------------------------
Oppenheimer Multiple Strategies 0.72% 0.03% 0.75%
- ------------------------------------------------------------------------------------------------------------
Strong Discovery Fund II, Inc. 1.00% 0.18% 1.18%
- ------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00% 0.15% 1.15%
- ------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust 1.00% 0.12 1.12%
- -Worldwide Bond Fund
- ------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 1.00% 0.17% 1.17%
Trust-Worldwide Hard Assets Fund
- ------------------------------------------------------------------------------------------------------------
</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. None of
the above Underlying Mutual Funds are subject to 12b-1 fees.
20
<PAGE> 24
The following Underlying Mutual Funds are subject to fee waivers and/or expense
reimbursement arrangements:
<TABLE>
<CAPTION>
- ----------------------------- ---------------------------------------------------------------------------------
FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER
- ----------------------------- ---------------------------------------------------------------------------------
<S> <C>
Fidelity VIP Equity Income The Management Fees, Other Expenses and Total Portfolio Operating Expenses are
Portfolio net of any fee waivers or expenses 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 expenses 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 Operating Expenses are
Portfolio net of any fee waivers or expenses 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 Portfolio Operating Expenses are
Manager Portfolio net of any fee waivers or expenses 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%
- ------------------------------ ---------------------------------------------------------------------------------
NSAT - Nationwide Small Cap The Management Fees, Other Expenses and Total Portfolio Operating Expenses are
Value Fund net of any fee waivers or expenses 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 Portfolio Operating Expenses are
Trust - Worldwide Hard net of any fee waivers or expenses reimbursements. The investment adviser has
Assets Fund 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 0.18% and Total Portfolio Operating Expenses would have equaled
1.18%
- ------------------------------ ---------------------------------------------------------------------------------
</TABLE>
The information relating to the Underlying Mutual Fund expenses was provided by
the Underlying Mutual Fund and was not independently verified by the Company.
HOW THE CASH VALUE VARIES
On any date during the Policy Year, the Cash Value equals the Cash Value on the
preceding Valuation Date, plus any Net Premium applied since the previous
Valuation Date, minus any partial surrenders, plus or minus any investment
results, and less any Policy Charges.
There is no guaranteed Cash Value. The Cash Value will vary with the investment
experience of the Variable Account and/or the daily crediting of interest to 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 for 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 shares of 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. Although the number of Accumulation
Units will not change as a result of investment experience, the value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period.
21
<PAGE> 25
NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by dividing (a)
by (b) and then subtracting (c) from the result where:
(a) is the net of:
(1) the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the current Valuation
Period; and
(2) the per share amount of any dividend or income 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.
(c) is a factor representing the daily Mortality and Expense Risk Charge
deducted from the Variable Account. Such factor is equal to an annual
rate of .80% of the daily net assets of the Variable Account.
For Underlying Mutual Fund options that credit dividends on a daily basis and
pay such dividends once a month, the net investment factor allows for the
monthly reinvestment of these daily dividends.
The net investment factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the Net Asset Value of Underlying Mutual Fund shares because of the deduction
for Mortality and Expense Risk Charge, and any charge or credit for tax
reserves.
DETERMINING THE CASH VALUE
The Cash Value is the sum of the value of all Accumulation Units and amounts
credited to the Fixed Account. The number of Accumulation Units credited to 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 changes or deductions are made against
the Cash Value, an appropriate number of Accumulation Units from the Variable
Account and an appropriate amount from the Fixed Account will be deducted in the
same proportion that the Policy Owner's interest in the Variable Account and the
Fixed Account bears to the total Cash Value.
The Cash Value in the Fixed Account and the Policy Loan Account is credited with
interest daily at an effective annual rate which the Company periodically
declares. The annual effective rate will never be less than 4%. Upon request,
the Company will inform the Policy Owner of the then applicable rates for each
account.
VALUATION PERIODS AND VALUATION DATES
A Valuation Period is the period commencing at the close of business on a
Valuation Date 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 a savings and loan that 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 to the
Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the
Policy's Cash Value, next computed after the date the Company receives a proper
written request for surrender and the Policy, minus any charges, Indebtedness or
other deductions due on that date, which may also include a Surrender Charge.
22
<PAGE> 26
PARTIAL SURRENDERS
After the Policy has been in force for 5 Policy Years, the Policy Owner may
request a partial surrender. Partial surrenders will be permitted only if the
following requirements are met:
1. The maximum partial surrender in any Policy Year is limited to 10%
of the total premium payments;
2. The minimum partial surrender is $500; and
3. After the partial surrender, the Policy continues to qualify as
life insurance.
When a partial surrender is made, the Cash Value is reduced by the amount of the
partial surrender. Under Death Benefit Option 1, the Specified Amount is reduced
by the amount of the partial surrender, unless the death benefit is based on the
applicable percentage of Cash Value. In such a case, a partial surrender will
decrease the Specified Amount by the amount by which the partial surrender
exceeds the difference between the death benefit and Specified Amount.
Surrender Charges will be waived for any partial surrenders which satisfy the
above conditions. Certain partial surrenders may result in currently taxable
income and tax penalties (see "Tax Matters").
MATURITY PROCEEDS
The Maturity Date is the Policy Anniversary on or next following the Insured's
95th birthday. The maturity proceeds will be payable to the Policy Owner on the
Maturity Date provided the Policy is still in force. The Maturity Proceeds will
be equal to the amount of the Policy's Cash Value, less any Indebtedness.
INCOME TAX WITHHOLDING
Federal law requires the Company to withhold income tax from any portion of
surrender proceeds that is subject to tax, unless the Policy Owner advises the
Company, in writing, of his or her request not to withhold.
If the Policy Owner requests that the Company not withhold taxes, or if the
taxes withheld are insufficient, the Policy Owner may be liable for payment of
an estimated tax. The Policy Owner should consult his or her tax advisor.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following: (1) the value each year of the life
insurance protection provided; (2) an amount equal to any employer-paid
premiums; or (3) some or all of the amount by which the current value exceeds
the employer's interest in the contract. Participants should consult with the
sponsor or the administrator of the plan, and/or with their personal tax or
legal advisor, to determine the tax consequences, if any, of their
employer-sponsored life insurance arrangements.
POLICY LOANS
TAKING A POLICY LOAN
After the first Policy Year, the Policy Owner may take a Policy loan using the
Policy as security. Maximum Policy Indebtedness is limited to 90% of the Cash
Surrender Value, less interest due on the next Policy Anniversary. Maximum
Policy Indebtedness in Texas is limited to 90% of the Cash Surrender Value in
the Sub-Accounts and 100% of the Cash Surrender Value in the Fixed Account, less
interest due on the next Policy Anniversary. The Company will not grant a loan
for an amount less than $1,000 ($200 in Connecticut, $500 in New York). Should
the Death Proceeds become payable, the Policy be surrendered, or the Policy
mature while a loan is outstanding, the amount of Policy Indebtedness will be
deducted from the death benefit, Cash Surrender Value or the maturity value,
respectively.
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 that is a member of the Federal Deposit Insurance Corporation. Certain
Policy loans may result in currently taxable income and tax penalties (see "Tax
Matters").
23
<PAGE> 27
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.
Policy loans will be currently credited interest daily at an annual effective
rate of 5.1%. This rate is guaranteed never to be lower than 4%. The Company may
change the current interest crediting rate on Policy loans at any time at its
sole discretion. This earned interest is transferred from the Policy Loan
Account to a Variable Account or the Fixed Account on each Policy Anniversary 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 loans. Interest is charged
daily and is payable at the end of each Policy Year or at the time of loan
repayment. Unpaid interest will be added to the existing Policy Indebtedness as
of the due date and will be charged interest at the same rate as the rest of the
Indebtedness. Whenever the total Policy Indebtedness exceeds the Cash Value,
less any Surrender Charges, the Company will send a notice to the Policy Owner
and the assignee, if any. The Policy will terminate without value 61 days after
the mailing of the notice unless a sufficient repayment is made during that
period. A repayment is sufficient if it is large enough to reduce the total
Policy Indebtedness to an amount equal to the total Cash Value, less any
Surrender Charges, plus an amount sufficient to continue the Policy in force for
3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A Policy loan, whether or not repaid, will have a permanent effect on the death
benefit and Cash Value because the investment results of the Variable Account or
the Fixed Account will apply only to the non-loaned portion of the Cash Value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the Variable Account or the Fixed Account
while the loan is outstanding, the effect could be favorable or unfavorable.
REPAYMENT
All or part of the Indebtedness may be repaid at any time while the Policy is in
force during the Insured's lifetime. Any payment intended as a loan repayment,
rather than a premium payment, must be identified as such. Loan repayments will
be credited to the Sub-Accounts and the Fixed Account in proportion to the
Policy Owner's fund allocation factors in effect at the time of the repayment.
Each repayment may not be less than $1,000 ($50 in Connecticut and New York).
The Company reserves the right to require that any loan repayments resulting
from Policy loans transferred from the Fixed Account must be first allocated to
the Fixed Account.
HOW THE DEATH BENEFIT VARIES
CALCULATION OF THE DEATH BENEFIT
At issue, the Policy Owner selects a desired Scheduled Premium level. The
Scheduled Premium is used to determine the initial Specified Amount. Under death
benefit Option 1, the initial Specified Amount is determined by treating the
Scheduled Premium as 20% of the Guideline Single Premium. Under death benefit
Option 2, the initial Specified Amount is determined by treating the Scheduled
Premium as the Guideline Level Premium. For either death benefit option, the
initial Specified Amount will be set at such a level such that payment of the
Scheduled Premiums will not result in the Policy being classified as a modified
endowment contract (see "Tax Matters").
24
<PAGE> 28
The following table illustrates the initial Specified Amount that results from a
$2,000 Scheduled Premium payment.
<TABLE>
<CAPTION>
Male Female
Issue Non-Tobacco Non-Tobacco
Age Option 1 Option 2 Option 1 Option 2
<S> <C> <C> <C> <C>
30 $85,779 $75,378 $99,541 $93,577
35 $68,165 $61,559 $79,212 $76,497
40 $54,111 $50,082 $63,070 $62,320
45 $43,165 $40,605 $50,599 $50,633
50 $34,675 $32,791 $40,824 $40,958
55 $28,136 $26,852 $33,171 $32,949
60 $23,176 $22,867 $27,141 $26,301
65 $19,474 $19,474 $22,369 $22,168
</TABLE>
Generally, for a given Scheduled Premium, the initial Specified Amount is
greater for non-tobacco than standard, and females than males. The Specified
Amount is shown in the Policy.
While the Policy is in force, the death benefit will never be less than the
Specified Amount. The death benefit may vary with the Cash Value of the Policy,
which depends on investment performance.
The Policy Owner may choose one of two death benefit options. Under Option 1,
the death benefit will be the greater of the Specified Amount or the applicable
percentage of Cash Value. Under Option 1, the amount of the death benefit will
ordinarily not change for several years to reflect the investment performance
and may not change at all. If investment performance is favorable, the amount of
death benefit may increase. To see how and when investment performance will
begin to affect death benefits, please see the illustrations located in the
prospectus. Under Option 2, the death benefit will be the greater of the
Specified Amount plus the Cash Value, or the applicable percentage of Cash Value
and will vary directly with the investment performance.
The term "applicable percentage" means:
1. 250% when the Insured is Attained Age 40 or less at the beginning
of a Policy Year; and
2. when the Insured is above Attained Age 40, the percentage shown in
the "Applicable Percentage of Cash Value Table" shown below.
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
--- ------------- --- ------------- --- -------------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
25
<PAGE> 29
PROCEEDS PAYABLE ON DEATH
The actual proceeds payable on the Insured's death will be the death benefit as
described above, less any Policy Indebtedness, and less any unpaid Policy
Charges. Under certain circumstances, the Death Proceeds may be adjusted (see
"Incontestability," "Error in Age or Sex" and "Suicide").
RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY
The Policy Owner may exchange the Policy for a flexible premium adjustable life
insurance policy offered by the Company on the Policy Date. The benefits for the
new policy will not vary with the investment experience of a separate account.
The exchange must be elected within 24 months from the Policy Date. No evidence
of insurability will be required.
The policy owner and beneficiary under the new policy will be the same as those
under the exchanged Policy on the effective date of the exchange. The new policy
will have a death benefit on the exchange date not more than the death benefit
of the original Policy immediately prior to the exchange date. The new policy
will have the same policy date and issue age as the original Policy. The initial
specified amount and any increases in specified amount will have the same rate
class as those of the original Policy. Any Indebtedness may be transferred to
the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two policies.
After adjustment, if any excess is owed the Policy Owner, the Company will pay
the excess to the Policy Owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
CHANGES OF INVESTMENT POLICY
The Company may materially change the investment policy of the Variable Account.
The Company must inform the Policy Owners and obtain all necessary regulatory
approvals. Any change must be submitted to the various state insurance
departments which may disapprove it if deemed detrimental to the interests of
the Policy Owners or if it renders the Company's operations hazardous to the
public. If a Policy Owner objects, the Policy may be converted to a
substantially comparable General Account life insurance policy offered by the
Company on the life of the Insured. The Policy Owner has the later of 60 days (6
months in Pennsylvania) from the date of the investment policy change or 60 days
(6 months in Pennsylvania) from being informed of such change to make this
conversion. The Company will not require evidence of insurability for this
conversion.
The new policy will not be affected by the investment experience of any separate
account. The new policy will be for an amount of insurance not exceeding the
death benefit of the Policy converted on the date of such conversion.
GRACE PERIOD
- -First Five Policy Years
This Policy will not lapse during the first five Policy Years provided that on
each Monthly Anniversary Day, (1) is greater than or equal to (2) where:
(1) Is the sum of all premiums paid to date, minus any Policy
Indebtedness; and
(2) Is the sum of monthly Minimum Premiums since the Policy Date
including the monthly Minimum Premium for the current Monthly
Anniversary Day.
If (1) is less than (2), a grace period of 61 days from the Monthly Anniversary
Day will be allowed for the payment of sufficient premium to satisfy the Minimum
Premium requirement. If sufficient premium is not paid by the end of the grace
period, the Policy will lapse. The Policy will be terminated with the return of
any available Cash Surrender Value. The Cash Surrender Value will be calculated
as of the beginning of the grace period. The Policy Owner may also elect in
writing to have the Policy placed on Extended Term Insurance.
- -Policy Years Six and After
If the Cash Surrender Value on a Monthly Anniversary Day is not sufficient to
cover the current monthly deduction for insurance costs, administrative expenses
and other benefits, a grace period of 61 days from the Monthly Anniversary Day
will be allowed for the payment of sufficient premium to cover the current
monthly deduction plus an amount equal to three times the current monthly
deduction.
26
<PAGE> 30
- -All Policy Years
The Company will send a notice at the start of the grace period to the Policy
Owner's last known address. If the Insured dies during the grace period, the
Company will pay the Death Proceeds.
REINSTATEMENT
If the grace period ends and the Policy Owner has neither paid the required
premium nor surrendered the Policy for its Cash Surrender Value, the Policy
Owner may reinstate the Policy by:
1. submitting a written request at any time within 3 years after the
end of the grace period and prior to the Maturity Date:
2. providing evidence of insurability satisfactory to the Company;
3. paying sufficient premium to cover all Policy Charges that were
due and unpaid during the grace period;
4. paying sufficient premium to keep the Policy in force for 3 months
from the date of reinstatement; and
5. paying or reinstating any Indebtedness against the Policy which
existed at the end of the grace period.
The effective date of a reinstated Policy will be the Monthly Anniversary Day on
or next following the date the application for reinstatement is approved by the
Company. If the Policy is reinstated, the Cash Value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the lesser of:
(1) the Cash Value at the end of the grace period; or
(2) the Surrender Charge for the Policy Year in which the Policy was
reinstated.
Unless the Policy Owner has provided otherwise, all amounts will be allocated
based on the 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 1933 Act 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 SEC has not
reviewed the disclosures in this prospectus relating to the Fixed Account.
Disclosures regarding the General Account may, however, be subject to certain
generally applicable provisions of the federal securities laws concerning the
accuracy and completeness of statements made in prospectuses.
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
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 in the Fixed Account
will accrue interest daily at an effective annual rate that the Company declares
periodically. The Fixed Account crediting rate will not be less than an
effective annual rate of 4%. Upon request, the Company will inform a Policy
Owner of the then applicable rate. The Company is not obligated to credit
interest at a higher rate.
CHANGES IN EXISTING INSURANCE COVERAGE
The Policy Owner may request certain changes in the insurance coverage under the
Policy. Any request must be in writing and received at the Home Office. No
change will take effect unless the Cash Surrender Value, after the change, is
sufficient to keep the Policy in force for at least 3 months.
SPECIFIED AMOUNT INCREASES
After the fifth Policy Year, the Policy Owner may request an increase in the
Specified Amount. Any increase will be subject to the following conditions:
(1) the request must be in writing;
(2) satisfactory evidence of insurability must be provided;
27
<PAGE> 31
(3) the increase must be for a minimum of $10,000;
(4) the Cash Surrender Value is sufficient to continue the Policy in
force for at least 3 months; and
(5) age limits are the same as a new issue.
Any approved increase will have an effective date of the Monthly Anniversary Day
on or next following the date the Company approves the supplemental application.
The Company reserves the right to limit the number of Specified Amount increases
to one each Policy Year.
SPECIFIED AMOUNT DECREASES
After the fifth Policy Year, the Policy Owner may request a decrease in the
Specified Amount. Any approved decrease will be effective on the Monthly
Anniversary Day on or next following the date the Company receives the request.
Any such decrease will reduce insurance in the following order:
(1) against insurance provided by the most recent increase;
(2) against the next most recent increases successively; and
(3) against insurance provided under the original application.
The Company reserves the right to limit the number of Specified Amount decreases
to one each Policy Year. The Company will refuse a request for a decrease which
would:
(1) reduce the Specified Amount to less than $10,000; or
(2) disqualify the Policy as a contract for life insurance.
CHANGES IN THE DEATH BENEFIT OPTION
After the fifth Policy Year, the Policy Owner may change the death benefit
option under the Policy. If the change is from Option 1 to Option 2, the
Specified Amount will be decreased by the amount of the Cash Value. If the
change is from Option 2 to Option 1, the Specified Amount will be increased by
the amount of the Cash Value. The Company reserves the right to require evidence
of insurability for either change (from Option 1 to Option 2 only in New York).
The effective date of the change will be the Monthly Anniversary Day on or next
following the date the Company approves the request for change. Only one change
of option is permitted per Policy Year. A change in death benefit option will
not be permitted if it results in the total premiums paid exceeding the then
current maximum premium limitations prescribed by the IRS to qualify the Policy
as a life insurance contract.
OTHER POLICY PROVISIONS
POLICY OWNER
While the Insured is living, all rights in the 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 it was recorded. The Company may require that the
Policy be submitted for endorsement before making a change.
If the Policy Owner is other than the Insured, no contingent Policy Owner is
named, and the Policy Owner dies before the Insured, the Policy Owner's rights
in the Policy belong to the Policy Owner's estate.
BENEFICIARY
The Beneficiary(ies) shall be as named in the application or as subsequently
changed, subject to assignment, if any.
The Policy Owner may name a new Beneficiary while the Insured is living. Any
change must be in a written form satisfactory to the Company and recorded at the
Home Office. Once recorded, the change will be effective when signed. The change
will not affect any payment made or action taken by the Company before it was
recorded.
If any Beneficiary predeceases the Insured, that Beneficiary's interest passes
to any surviving Beneficiary(ies), unless otherwise provided. Multiple
Beneficiaries will be paid in equal shares, unless otherwise provided. If no
named Beneficiary survives the Insureds, the Death Proceeds will be paid to the
Policy Owner or the Policy Owner's estate.
28
<PAGE> 32
ASSIGNMENT
While the Insured is living, the Policy Owner may assign his or her rights in
the Policy. The assignment must be in writing, signed by the Policy Owner and
recorded by the Company at its Home Office. Any assignment will not affect any
payments made or actions taken by the Company before it was recorded. The
Company is not responsible for any assignment not submitted for recording, nor
is the Company responsible for the sufficiency or validity of any assignment.
The assignment will be subject to any Indebtedness owed to the Company before it
was recorded.
INCONTESTABILITY
The Company will not contest payment of the Death Proceeds based on the initial
Specified Amount after the Policy has been in force during the Insured's
lifetime for 2 years from the Policy Date. For any increase in Specified Amount
requiring evidence of insurability, the Company will not contest payment of the
Death Proceeds based on such an increase after it has been in force during the
Insured's lifetime for 2 years from its effective date.
ERROR IN AGE OR SEX
If the age or sex of the Insured has been misstated, the affected benefits will
be adjusted. The amount of the death benefit will be (1) multiplied by (2) and
then the result added to (3), where:
(1) is the amount of the death benefit at the time of the Insured's
death, reduced by the amount of the Cash Value at the time of the
Insured's death;
(2) is the ratio of the monthly cost of insurance applied in the Policy
month of death and the monthly cost of insurance that should have
been applied at the true age and sex in the Policy month of death;
and
(3) is the Cash Value at the time of the Insured's death.
SUICIDE
If the Insured dies by suicide, while sane or insane, within two years from the
Policy Date, the Company will pay no more than the sum of the premiums paid,
less any Indebtedness. If the Insured dies by suicide, while sane or insane,
within two years from the date an application is accepted for an increase in the
Specified Amount, the Company will pay no more than the amount paid for such
additional benefit.
NONPARTICIPATING POLICIES
These are nonparticipating Policies on which no dividends are payable. These
Policies do not share in the profits or surplus earnings of the Company.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from contributions made on or
after August 1, 1983. The Policies offered by this prospectus are based upon
actuarial tables which distinguish between men and women and thus the Policies
provide different benefits to men and women of the same age. Accordingly,
employers and employee organizations should consider, in consultation with legal
counsel, the impact of Norris on any employment related insurance or benefit
program before purchasing this Policy.
DISTRIBUTION OF THE POLICIES
The Policies will be sold by licensed insurance agents in those states where the
Policies may lawfully be sold. Such agents will be registered representatives of
broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. (NASD). The
Policies will be distributed by the General Distributor, Nationwide Advisory
Services, Inc. NAS acts as general distributor for the Nationwide Multi-Flex
Variable Account, Nationwide DC Variable Account, Nationwide DCVA-II, Nationwide
Variable Account-II, Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide 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.
29
<PAGE> 33
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, all of which are open-end management
investment companies.
Gross first year commissions paid by the Company on the sale of these Policies
plus fees for marketing services provided by the General Distributor are not
more than 26% of the Scheduled Premium plus 5% of any excess premium payments.
Gross renewal commissions paid by the Company will not exceed 5% of actual
premium payments.
CUSTODIAN OF ASSETS
The Company serves as the custodian of the assets of the Variable Account.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Code provides that if certain tests are met, a policy will
be treated as a life insurance policy for federal tax purposes. The Company will
monitor compliance with these tests. The Policy should thus receive the same
federal income tax treatment as fixed benefit life insurance. As a result, the
Death Proceeds payable under a Policy are excludable from gross income of the
Beneficiary under Section 101 of the Code.
Section 7702A of the Code defines modified endowment contracts as those policies
issued or materially changed after June 21, 1988, on which the total premiums
paid during the first seven years exceed the amount that would have been paid if
the policy provided for paid up benefits after seven level annual premiums (see
"Information about the Policies"). The Code provides that taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts (other than certain
distributions to terminally ill individuals) are subject to federal income taxes
a manner similar to the way annuities are taxed. Modified endowment contract
distributions are defined by the Code as amounts not received as an annuity and
are taxable to the extent the cash value of the policy exceeds, at the time of
distribution, the premiums paid into the policy. A 10% tax penalty generally
applies to the taxable portion of such distributions unless the policy owner is
over age 59 1/2 or disabled.
The Policies offered by this prospectus may or may not be issued as modified
endowment contracts. The Company will monitor premiums paid and will notify the
Policy Owner when the Policy's non-modified endowment status is in jeopardy. If
a policy is not a modified endowment contract, a cash distribution during the
first 15 years after a policy is issued which causes a reduction in death
benefits may still become fully or partially taxable to the owner pursuant to
Section 7702(f)(7) of the Code. The policy owner should carefully consider this
potential effect and seek further information before initiating any changes in
the terms of the policy. Under certain conditions, a policy may become a
modified endowment as a result of a material change or a reduction in benefits
as defined by Section 7702A(c) of the Code. 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.
In addition to meeting the tests required under Section 7702, Section 817(h) of
the Code requires that the investments of separate accounts such as the Variable
Account be adequately diversified. Regulations under 817(h) provide that a
variable life insurance policy failing to satisfy the diversification standards
will not be treated as life insurance unless such failure was inadvertent, is
corrected, and the policy owner or the company pays an amount to the 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 will be deemed the owner of the underlying securities and taxed
on the earnings in his or her account.
Representatives of the IRS have suggested 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.
30
<PAGE> 34
The Company will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the Sub-Account investments
to remain in compliance.
A total surrender or cancellation of the Policy by lapse 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 will generally be treated as taxable income, regardless of
whether or not the Policy is a modified endowment contract.
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 if no taxpayer identification number
is provided to the Company, or if the IRS notifies the Company that back-up
withholding is required.
- - 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 1998, an estate of less than $625,000
(inclusive of certain pre-death gifts) will not incur a federal estate tax
liability. In addition, an unlimited marital deduction may be available for
federal estate tax purposes, for certain amounts that pass to the surviving
spouse.
When the Insured dies, the death benefit will generally be included in the
Insured's federal gross estate if: (1) the proceeds were payable to or for the
benefit of the Insured's estate; or (2) the Insured held any "incident of
ownership" in the Policy at death or at any time within three years of death. An
"incident of ownership" is, in general, any right that may be exercised by the
Policy Owner 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 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.
- - Non-Resident Aliens
Pre-death distributions from modified endowment contracts 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. For
distributions, 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 may not be subject to withholding where the recipient
sufficiently establishes to the Company that such payment is effectively
connected to the recipient's conduct of a trade or business in the United States
and that such payment is includable in the recipient's gross income for United
States federal income tax purposes. Any such distributions may be subject to
back-up withholding at the statutory rate (currently 31%) if no taxpayer
identification number, or an incorrect taxpayer identification number, is
provided.
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.
31
<PAGE> 35
TAXATION OF THE COMPANY
The Company is taxed as a life insurance company under the Code. Since the
Variable Account is not a separate entity from the Company and its operations
form a part of the Company, it will not be taxed separately as a "regulated
investment company" under Sub-chapter M of the Code. Investment income and
realized capital gains on the assets of the Variable Account are reinvested and
taken into account in determining the value of Accumulation Units. As a result,
such investment income and realized capital gains are automatically applied to
increase reserves under the Policies.
The Company does not initially expect to incur any federal income tax liability
that would be chargeable to the Variable Account. Based upon these expectations,
no charge is currently being made against the Variable Account for federal
income taxes. If, however, the Company determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the Variable Account.
The Company may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
TAX CHANGES
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice.
Recently, 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 considered numerous legislative proposals that, if enacted, could
change the tax treatment of the Policies. It is reasonable to believe that such
proposals, and future proposals, may be enacted into law. 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) may affect the tax consequences of the Policies.
If the Policy Owner, Insured, 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 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.
32
<PAGE> 36
THE COMPANY
The life insurance business, which includes product lines in health insurance
and annuities, is the only business in which the Company is engaged.
The Company markets its Policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker-dealer firms.
The Company serves as depositor for the Nationwide Variable Account, Nationwide
Variable Account-II, Nationwide Variable Account-3, Nationwide Variable
Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6,
Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8,
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,
the NACo Variable Account, DC Variable Account and the Nationwide DCVA-II, each
of which is a registered investment company, and each of which is a separate
investment account of the Company.
The Company, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in that state. In general,
all states have statutory administrative powers. Such regulation relates, among
other things, to licensing of insurers and their agents, the approval of policy
forms, the methods of computing reserves, the form and content of statutory
financial statements, the amount of policyholders' and stockholders' dividends,
and the type of distribution of investments permitted.
The Company operates in the highly competitive field of life insurance. There
are approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete with
the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the other
insurance companies in the group. In addition to its direct salaried employees,
the Company shares employees with Nationwide Mutual Insurance Company and
Nationwide Mutual Fire Insurance Company.
The Company does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. The Company shares Home Office, other facilities and equipment with
Nationwide Mutual Insurance Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company 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 Investments 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 POSITIONS AND OFFICERS WITH PRINCIPAL OCCUPATION
AND PRINCIPAL BUSINESS ADDRESS DEPOSITOR
<S> <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
</TABLE>
33
<PAGE> 37
<TABLE>
<CAPTION>
DIRECTORS OF THE DEPOSITOR NAME POSITIONS AND OFFICERS WITH PRINCIPAL OCCUPATION
AND PRINCIPAL BUSINESS ADDRESS DEPOSITOR
<S> <C> <C>
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
301 East Marshall Street County Co-operative Oil Company
Marshall, MN 44691 (1)
Fred C. Finney Director Owner and Operator, Moreland
1558 West Moreland Road Fruit Farm; Operator, Melrose
Wooster, OH 44691 Orchard (1)
Charles L. Fuellgraf, Jr. Director Chief Executive Officer, Fuellgraf
600 South Washington Street Electric Company (1)
Butler, PH 16001
Joseph J. Gasper President and Chief Operating President and Chief Operating
One Nationwide Plaza Officer and Director Officer, Nationwide Life Insurance
Columbus, OH 43215 Company and Nationwide Life and
Annuity Insurance Company (2)
Dimon R. McFerson Chairman and Chief Executive Chairman and Chief Executive
One Nationwide Plaza Officer-Nationwide Insurance Officer-Nationwide Insurance
Columbus, OH 43215 Enterprise 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
Suite 1600 Manager Southern Customer
2859 Paces Ferry Road Operations for U.S. Customer
Atlanta, GA 30339 Operations, Xerox Corporation (2)
C. Ray Noecker Director Owner and Operator, Noecker
2770 Winchester Southern S. Farms (1)
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
1356 North Wenger Road Officer, K&B Transport, Inc. (1)
Dalton, OH 44616
Robert L. Stewart Director Owner and Operating Sunnydale
88740 Fairview Road Farms and Mining (1)
Jewett, OH 43986
Nancy C. Thomas Director Farm Owner and Operator, Da-Ma-
10835 Georgetown Street NE Lor Farms (1)
Louisville, OH 44641
Harold W. Weihl Director Farm Owner and Operator, Weihl
14282 King Road Farms (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.
34
<PAGE> 38
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 and Annuity 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 Allocation Trust, registered Investments 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.
<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>
35
<PAGE> 39
OTHER CONTRACTS ISSUED BY THE COMPANY
The Company does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of the Company.
STATE REGULATION
The Company is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering the operation of
the Company for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine the Company's contract liabilities and reserves so that the
Insurance Department may certify the items are correct. The Company's books and
accounts are subject to review by the Insurance Department at all times and a
full examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. Such regulation does not, however,
involve any supervision of management or investment practices or policies. In
addition, the Company is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
REPORTS TO POLICY OWNERS
The Company will mail to the Policy Owner, at the last known address of record,
an annual statement showing the amount of the current death benefit, the Cash
Value, and Cash Surrender Value, premiums paid and monthly charges deducted
since the last report, the amounts invested in the Fixed Account and in the
Variable Account and in each Sub-Account, and any Policy Indebtedness.
Policy Owners will also be sent annual and semi-annual reports containing
financial statements for the Variable Account as required by the 1940 Act.
In addition, Policy Owners will receive statements of significant transactions,
such as changes in Specified Amount, changes in death benefit option, changes in
future premium allocation, transfers among Sub-Accounts, premium payments,
loans, loan repayments, reinstatement and termination.
ADVERTISING
The Company is also ranked and rated by independent financial rating services,
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 Policies. 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.
36
<PAGE> 40
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.
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 SEC under the 1933 Act, 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.
37
<PAGE> 41
APPENDIX 1
ILLUSTRATION OF
SURRENDER CHARGES
Example 1: A female non-tobacco, age 45, purchases a Policy with a Scheduled
Premium of $2,000 yielding a Specified Amount of $50,599. She now wishes to
surrender the Policy during the first Policy Year. By using the "Initial
Surrender Charge" table reproduced below, (also see "Surrender Charges") the
total Surrender Charge per thousand, multiplied by the Specified Amount
expressed in thousands, equals the total Surrender Charge of $514.09 ($10.160 x
50.599 = $514.09).
Example 2: A male non-tobacco, age 35, purchases a Policy with a Scheduled
Premium of $2,000 yielding a Specified Amount of $68,165. He now wants to
surrender the Policy in the sixth Policy Year. The total initial surrender value
is calculated using the method illustrated above. (Specified Amount in thousands
$68.165 x 7.260 = 494.88 total first year Surrender Charge.) Because the fifth
Policy Year has been completed, the total initial Surrender Charge is reduced by
multiplying it by the applicable percentage factor from the "Reductions to
Surrender Charges" table below (Also see "Reductions to Surrender Charges"). In
this case, $494.88 x 85% = $420.65.
Initial Surrender Charge per $1,000 of initial Specified Amount for Policies
which are issued on a standard basis
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25 $5.878 $5.537 $6.680 $5.945
- ---------------------------------------------------------------------------------------------------------
35 7.260 6.712 8.559 7.373
- ---------------------------------------------------------------------------------------------------------
45 11.159 10.160 13.244 11.151
- ---------------------------------------------------------------------------------------------------------
55 15.275 13.375 18.373 14.686
- ---------------------------------------------------------------------------------------------------------
65 23.821 20.553 27.943 22.165
- ---------------------------------------------------------------------------------------------------------
</TABLE>
Reductions to Surrender Charges.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0 100% 5 85%
- ----------------------------------------------------------------------------------------------------------
1 100% 6 80%
- ----------------------------------------------------------------------------------------------------------
2 100% 7 75%
- ----------------------------------------------------------------------------------------------------------
3 95% 8 50%
- ----------------------------------------------------------------------------------------------------------
4 90% 9+ 0%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
The current Surrender Charges are the same for all states. However, in
Pennsylvania, the guaranteed maximum Surrender Charges are 8% higher than those
shown. In addition, the guaranteed maximum Surrender Charges in subsequent years
in Pennsylvania are reduced in the following manner:
<TABLE>
<CAPTION>
SURRENDER CHARGE SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
------------ ----------------- ------------ ----------------- ------------ -----------------
<S> <C> <C> <C> <C> <C>
0 100% 5 83% 10 46%
1 98% 6 75% 11 37%
2 95% 7 70% 12 28%
3 92% 8 65% 13 14%
4 88% 9 55% 14+ 0%
</TABLE>
The illustrations of current values are the same for Pennsylvania. However, the
guaranteed maximum Surrender Charges are slightly higher in Pennsylvania. If
this Policy is issued in Pennsylvania, please contact the Home Office for an
illustration.
The Company has no plans to change the current Surrender Charges.
38
<PAGE> 42
APPENDIX 2
ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the Policies change with investment performance. The illustrations
illustrate how Cash Values, Cash Surrender Values and death benefits under a
Policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the Cash Values, Cash Surrender Values and death benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the Policies would go into default, at which time additional
premium payments would be required to continue the Policy in force. The
illustrations also assume there is no Policy Indebtedness, no additional premium
payments are made, no Cash Values are allocated to the Fixed Account, and there
are no changes in the Specified Amount or death benefit option.
The amounts shown for the Cash Value, Cash Surrender Value and death benefit as
of each Policy Anniversary reflect the fact that the net investment return on
the assets held in the Sub-Accounts is lower than the gross return. This is due
to the daily charges made against the assets of the Sub-Accounts for assuming
mortality and expense risks. The mortality and expense risk charges are
equivalent to an annual effective rate of .80% of the daily net assets of the
Variable Account. In addition, the net investment returns also reflect the
deduction of fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 1.00% of the daily net assets of the
Variable Account. 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 December 31, 1997.
Considering current charges for mortality and expense risks and fund expenses,
gross annual rates of return of 0%, 6% and 12% correspond to net investment
experience at constant annual rates of -1.80%, 4.20% and 10.20%.
The illustrations also reflect the fact that the Company makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the Policy. The values shown are for Policies which are
issued as standard (including non-tobacco). Policies issued on a substandard
basis would result in lower Cash Values and death benefits than those
illustrated.
In addition, the illustrations reflect the fact that the Company deducts a
monthly administrative charge at the beginning of each Policy month. This
monthly administrative expense charge is $5 and is guaranteed not to exceed
$7.50. Current values reflect a current monthly administrative expense charge of
$5 and guaranteed values reflect the $7.50 maximum monthly administrative charge
under the Policy. The illustrations also reflect the fact that no charges for
federal or state income taxes are currently made against the Variable Account.
If such a charge is made in the future, it will require a higher gross
investment return than illustrated in order to produce the net after-tax returns
shown in the illustrations.
Upon request, the Company will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
39
<PAGE> 43
DEATH BENEFIT OPTION 1
$2,000 ANNUAL PREMIUM: $43,165 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
<TABLE>
<CAPTION>
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,668 1,186 43,165 1,773 1,292 43,165 1,879 1,397 43,165
2 2,000 4,305 3,307 2,825 43,165 3,620 3,139 43,165 3,947 3,465 43,165
3 2,000 6,620 4,915 4,433 43,165 5,544 5,062 43,165 6,225 5,743 43,165
4 2,000 9,051 6,495 6,037 43,165 7,549 7,091 43,165 8,734 8,277 43,165
5 2,000 11,604 8,044 7,611 43,165 9,636 9,203 43,165 11,499 11,066 43,165
6 0 12,184 7,707 7,298 43,165 9,844 9,434 43,165 12,468 12,059 43,165
7 0 12,793 7,363 6,977 43,165 10,049 9,664 43,165 13,530 13,144 43,165
8 0 13,433 7,009 6,648 43,165 10,252 9,891 43,165 14,693 14,331 43,165
9 0 14,105 6,646 6,405 43,165 10,452 10,211 43,165 15,970 15,729 43,165
10 0 14,810 6,270 6,270 43,165 10,647 10,647 43,165 17,371 17,371 43,165
15 0 18,901 4,172 4,172 43,165 11,510 11,510 43,165 26,820 26,820 43,165
20 0 24,124 1,433 1,433 43,165 11,959 11,959 43,165 42,382 42,382 51,706
25 0 30,788 (*) (*) (*) 11,388 11,388 43,165 67,360 67,360 78,138
30 0 39,295 (*) (*) (*) 8,375 8,375 43,165 107,288 107,288 114,798
35 0 50,151 (*) (*) (*) (*) (*) (*) 171,712 171,712 180,297
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
40
<PAGE> 44
DEATH BENEFIT OPTION 1
$2,000 ANNUAL PREMIUM: $43,165 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,575 1,094 43,165 1,678 1,196 43,165 1,780 1,299 43,165
2 2,000 4,305 3,118 2,636 43,165 3,420 2,939 43,165 3,736 3,254 43,165
3 2,000 6,620 4,627 4,146 43,165 5,231 4,749 43,165 5,885 5,403 43,165
4 2,000 9,051 6,105 5,647 43,165 7,113 6,656 43,165 8,249 7,791 43,165
5 2,000 11,604 7,549 7,116 43,165 9,070 8,637 43,165 10,852 10,419 43,165
6 0 12,184 7,099 6,690 43,165 9,133 8,723 43,165 11,636 11,227 43,165
7 0 12,793 6,632 6,246 43,165 9,176 8,791 43,165 12,485 12,100 43,165
8 0 13,433 6,143 5,781 43,165 9,198 8,837 43,165 13,405 13,044 43,165
9 0 14,105 5,627 5,386 43,165 9,192 8,951 43,165 14,401 14,160 43,165
10 0 14,810 5,082 5,082 43,165 9,154 9,154 43,165 15,481 15,481 43,165
15 0 18,901 1,733 1,733 43,165 8,288 8,288 43,165 22,508 22,508 43,165
20 0 24,124 (*) (*) (*) 5,399 5,399 43,165 33,826 33,826 43,165
25 0 30,788 (*) (*) (*) (*) (*) (*) 52,553 52,553 60,962
30 0 39,295 (*) (*) (*) (*) (*) (*) 82,040 82,040 87,783
35 0 50,151 (*) (*) (*) (*) (*) (*) 129,233 129,233 135,695
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS
INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS
APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
41
<PAGE> 45
DEATH BENEFIT OPTION 2
$2,000 ANNUAL PREMIUM: $40,605 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,670 1,217 42,276 1,776 1,322 42,381 1,881 1,428 42,486
2 2,000 4,305 3,306 2,853 43,911 3,619 3,166 44,225 3,945 3,492 44,551
3 2,000 6,620 4,906 4,453 45,512 5,533 5,080 46,138 6,210 5,757 46,816
4 2,000 9,051 6,472 6,041 47,077 7,519 7,089 48,124 8,697 8,266 49,302
5 2,000 11,604 8,000 7,592 48,605 9,578 9,170 50,183 11,423 11,015 52,028
6 2,000 14,284 9,491 9,106 50,096 11,712 11,327 52,317 14,414 14,029 55,020
7 2,000 17,098 10,944 10,582 51,549 13,924 13,561 54,529 17,695 17,333 58,301
8 2,000 20,053 12,359 12,019 52,964 16,214 15,875 56,820 21,295 20,955 61,900
9 2,000 23,156 13,736 13,509 54,341 18,588 18,361 59,193 25,244 25,018 65,850
10 2,000 26,414 15,072 15,072 55,677 21,043 21,043 61,649 29,576 29,576 70,182
15 2,000 45,315 21,328 21,328 61,934 34,889 34,889 75,494 58,723 58,723 99,328
20 2,000 69,439 26,366 26,366 66,971 51,122 51,122 91,728 105,084 105,084 145,690
25 2,000 100,227 29,734 29,734 70,339 69,680 69,680 110,285 178,686 178,686 219,292
30 2,000 139,522 30,537 30,537 71,143 89,915 89,915 130,520 295,140 295,140 335,746
35 2,000 189,673 27,631 27,631 68,237 110,666 110,666 151,271 479,373 479,373 519,978
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
42
<PAGE> 46
DEATH BENEFIT OPTION 2
$2,000 ANNUAL PREMIUM: $40,605 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,579 1,126 42,184 1,681 1,228 42,287 1,784 1,331 42,389
2 2,000 4,305 3,118 2,665 43,723 3,420 2,966 44,025 3,734 3,281 44,339
3 2,000 6,620 4,616 4,163 45,221 5,216 4,763 45,821 5,865 5,412 46,470
4 2,000 9,051 6,072 5,641 46,677 7,071 6,640 47,676 8,195 7,764 48,800
5 2,000 11,604 7,485 7,077 48,091 8,985 8,577 49,591 10,741 10,334 51,347
6 2,000 14,284 8,854 8,469 49,459 10,959 10,574 51,565 13,524 13,139 54,130
7 2,000 17,098 10,176 9,814 50,781 12,993 12,630 53,598 16,564 16,202 57,170
8 2,000 20,053 11,448 11,108 52,053 15,083 14,743 55,689 19,883 19,543 60,488
9 2,000 23,156 12,666 12,440 53,272 17,229 17,003 57,835 23,505 23,278 64,110
10 2,000 26,414 13,828 13,828 54,434 19,429 19,429 60,035 27,456 27,456 68,062
15 2,000 45,315 18,689 18,689 59,294 31,176 31,176 71,781 53,297 53,297 93,902
20 2,000 69,439 21,506 21,506 62,111 43,754 43,754 84,359 93,070 93,070 133,675
25 2,000 100,227 21,252 21,252 61,857 55,986 55,986 96,591 153,879 153,879 194,485
30 2,000 139,522 16,189 16,189 56,794 65,535 65,535 106,140 246,274 246,274 286,879
35 2,000 189,673 3,371 3,371 43,976 67,920 67,920 108,526 385,475 385,475 426,080
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
43
<PAGE> 47
DEATH BENEFIT OPTION 1
$5,000 ANNUAL PREMIUM: $114,019 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,291 3,019 114,019 4,558 3,286 114,019 4,825 3,553 114,019
2 5,000 10,763 8,507 7,234 114,019 9,306 8,034 114,019 10,138 8,866 114,019
3 5,000 16,551 12,646 11,373 114,019 14,251 12,979 114,019 15,987 14,715 114,019
4 5,000 22,628 16,712 15,503 114,019 19,405 18,196 114,019 22,433 21,224 114,019
5 5,000 29,010 20,700 19,555 114,019 24,772 23,626 114,019 29,532 28,387 114,019
6 0 30,460 19,975 18,893 114,019 25,447 24,365 114,019 32,163 31,082 114,019
7 0 31,983 19,232 18,214 114,019 26,127 25,109 114,019 35,047 34,029 114,019
8 0 33,582 18,468 17,514 114,019 26,811 25,857 114,019 38,211 37,257 114,019
9 0 35,261 17,685 17,049 114,019 27,500 26,864 114,019 41,688 41,052 114,019
10 0 37,024 16,873 16,873 114,019 28,186 28,186 114,019 45,506 45,506 114,019
15 0 47,254 12,337 12,337 114,019 31,571 31,571 114,019 71,267 71,267 114,019
20 0 60,309 6,421 6,421 114,019 34,445 34,445 114,019 113,599 113,599 138,591
25 0 76,971 (*) (*) (*) 35,716 35,716 114,019 181,626 181,626 210,686
30 0 98,237 (*) (*) (*) 32,871 32,871 114,019 290,627 290,627 310,971
35 0 125,378 (*) (*) (*) 20,885 20,885 114,019 466,657 466,657 489,989
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
44
<PAGE> 48
DEATH BENEFIT OPTION 1
$5,000 ANNUAL PREMIUM: $114,019 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,159 2,886 114,019 4,422 3,149 114,019 4,685 3,413 114,019
2 5,000 10,763 8,235 6,962 114,019 9,018 7,746 114,019 9,834 8,561 114,019
3 5,000 16,551 12,229 10,956 114,019 13,798 12,526 114,019 15,496 14,223 114,019
4 5,000 22,628 16,142 14,933 114,019 18,770 17,561 114,019 21,727 20,518 114,019
5 5,000 29,010 19,974 18,829 114,019 23,944 22,798 114,019 28,589 27,444 114,019
6 0 30,460 19,078 17,996 114,019 24,402 23,320 114,019 30,945 29,864 114,019
7 0 31,983 18,147 17,129 114,019 24,839 23,821 114,019 33,514 32,496 114,019
8 0 33,582 17,174 16,220 114,019 25,247 24,293 114,019 36,314 35,360 114,019
9 0 35,261 16,151 15,514 114,019 25,619 24,983 114,019 39,369 38,732 114,019
10 0 37,024 15,069 15,069 114,019 25,947 25,947 114,019 42,703 42,703 114,019
15 0 47,254 8,481 8,481 114,019 26,597 26,597 114,019 64,815 64,815 114,019
20 0 60,309 (*) (*) (*) 24,190 24,190 114,019 101,107 101,107 123,350
25 0 76,971 (*) (*) (*) 14,938 14,938 114,019 159,556 159,556 185,085
30 0 98,237 (*) (*) (*) (*) (*) (*) 252,154 252,154 269,805
35 0 125,378 (*) (*) (*) (*) (*) (*) 400,851 400,851 420,893
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
45
<PAGE> 49
DEATH BENEFIT OPTION 2
$5,000 ANNUAL PREMIUM: $103,521 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,306 3,151 107,827 4,573 3,418 108,094 4,841 3,685 108,362
2 5,000 10,763 8,526 7,371 112,047 9,325 8,170 112,847 10,157 9,002 113,678
3 5,000 16,551 12,658 11,502 116,179 14,261 13,105 117,782 15,993 14,838 119,515
4 5,000 22,628 16,704 15,606 120,225 19,388 18,291 122,909 22,404 21,307 125,926
5 5,000 29,010 20,657 19,618 124,179 24,707 23,667 128,228 29,439 28,400 132,961
6 5,000 35,710 24,522 23,540 128,043 30,227 29,245 133,748 37,164 36,182 140,685
7 5,000 42,746 28,293 27,369 131,815 35,953 35,029 139,474 45,643 44,718 149,164
8 5,000 50,133 31,971 31,105 135,493 41,890 41,024 145,411 54,950 54,084 158,471
9 5,000 57,889 35,558 34,980 139,079 48,048 47,471 151,569 65,171 64,593 168,692
10 5,000 66,034 39,046 39,046 142,567 54,428 54,428 157,949 76,389 76,389 179,910
15 5,000 113,287 55,493 55,493 159,014 90,520 90,520 194,042 152,000 152,000 255,521
20 5,000 173,596 69,077 69,077 172,598 133,213 133,213 236,734 272,686 272,686 376,207
25 5,000 250,567 78,844 78,844 182,366 182,703 182,703 286,224 465,021 465,021 568,542
30 5,000 348,804 82,881 82,881 186,402 238,011 238,011 341,532 770,716 770,716 874,238
35 5,000 474,182 78,731 78,731 182,252 297,141 297,141 400,662 1,256,583 1,256,583 1,360,104
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
46
<PAGE> 50
DEATH BENEFIT OPTION 2
$5,000 ANNUAL PREMIUM: $103,521 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,180 3,024 107,701 4,443 3,288 107,964 4,706 3,551 108,227
2 5,000 10,763 8,262 7,107 111,783 9,046 7,890 112,567 9,861 8,705 113,382
3 5,000 16,551 12,248 11,092 115,769 13,813 12,658 117,334 15,507 14,351 119,028
4 5,000 22,628 16,134 15,036 119,655 18,750 17,652 122,271 21,691 20,593 125,212
5 5,000 29,010 19,920 18,880 123,441 23,858 22,819 127,380 28,465 27,425 131,986
6 5,000 35,710 23,602 22,620 127,123 29,142 28,160 132,663 35,883 34,901 139,405
7 5,000 42,746 27,175 26,251 130,696 34,601 33,677 138,122 44,005 43,081 147,526
8 5,000 50,133 30,634 29,768 134,156 40,236 39,370 143,757 52,894 52,027 156,415
9 5,000 57,889 33,974 33,396 137,495 46,046 45,468 149,567 62,619 62,042 166,140
10 5,000 66,034 37,187 37,187 140,708 52,030 52,030 155,551 73,258 73,258 176,779
15 5,000 113,287 51,171 51,171 154,692 84,551 84,551 188,072 143,444 143,444 246,965
20 5,000 173,596 60,809 60,809 164,330 120,924 120,924 224,445 253,129 253,129 356,650
25 5,000 250,567 64,135 64,135 167,656 159,381 159,381 262,902 423,868 423,868 527,389
30 5,000 348,804 57,829 57,829 161,350 196,058 196,058 299,579 688,770 688,770 792,291
35 5,000 474,182 36,319 36,319 139,840 223,193 223,193 326,714 1,098,021 1,098,021 1,201,543
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
47
<PAGE> 51
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $301,625 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 17,219 12,612 301,625 18,290 13,683 301,625 19,362 14,755 301,625
2 20,000 43,050 34,140 29,533 301,625 37,351 32,744 301,625 40,691 36,083 301,625
3 20,000 66,203 50,782 46,175 301,625 57,238 52,630 301,625 64,217 59,610 301,625
4 20,000 90,513 67,147 62,770 301,625 77,990 73,613 301,625 90,181 85,804 301,625
5 20,000 116,038 83,219 79,072 301,625 99,636 95,490 301,625 118,836 114,689 301,625
6 0 121,840 80,411 76,495 301,625 102,519 98,603 301,625 129,664 125,748 301,625
7 0 127,932 77,510 73,824 301,625 105,434 101,748 301,625 141,575 137,889 301,625
8 0 134,329 74,485 71,030 301,625 108,359 104,904 301,625 154,679 151,223 301,625
9 0 141,045 71,326 69,022 301,625 111,293 108,990 301,625 169,121 166,817 301,625
10 0 148,097 68,037 68,037 301,625 114,247 114,247 301,625 185,075 185,075 301,625
15 0 189,014 48,054 48,054 301,625 128,364 128,364 301,625 294,478 294,478 341,595
20 0 241,235 17,507 17,507 301,625 138,985 138,985 301,625 472,509 472,509 505,585
25 0 307,884 (*) (*) (*) 141,234 141,234 301,625 760,267 760,267 798,281
30 0 392,947 (*) (*) (*) 124,862 124,862 301,625 1,217,535 1,217,535 1,278,412
35 0 501,511 (*) (*) (*) 59,677 59,677 301,625 1,935,318 1,935,318 2,032,083
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
48
<PAGE> 52
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $301,625 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,081 11,474 301,625 17,117 12,510 301,625 18,155 13,548 301,625
2 20,000 43,050 31,805 27,198 301,625 34,883 30,275 301,625 38,086 33,479 301,625
3 20,000 66,203 47,188 42,581 301,625 53,347 48,740 301,625 60,015 55,408 301,625
4 20,000 90,513 62,237 57,860 301,625 72,558 68,181 301,625 84,184 79,807 301,625
5 20,000 116,038 76,955 72,808 301,625 92,570 88,423 301,625 110,875 106,728 301,625
6 0 121,840 72,607 68,691 301,625 93,579 89,663 301,625 119,426 115,509 301,625
7 0 127,932 67,951 64,265 301,625 94,347 90,661 301,625 128,709 125,023 301,625
8 0 134,329 62,922 59,466 301,625 94,816 91,360 301,625 138,800 135,345 301,625
9 0 141,045 57,453 55,149 301,625 94,923 92,619 301,625 149,795 147,491 301,625
10 0 148,097 51,472 51,472 301,625 94,602 94,602 301,625 161,814 161,814 301,625
15 0 189,014 10,890 10,890 301,625 83,750 83,750 301,625 243,970 243,970 301,625
20 0 241,235 (*) (*) (*) 42,243 42,243 301,625 385,307 385,307 412,279
25 0 307,884 (*) (*) (*) (*) (*) (*) 612,829 612,829 643,471
30 0 392,947 (*) (*) (*) (*) (*) (*) 963,397 963,397 1,011,567
35 0 501,511 (*) (*) (*) (*) (*) (*) 1,486,642 1,486,642 1,560,974
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
49
<PAGE> 53
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $271,462 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 17,271 13,125 288,733 18,342 14,195 289,804 19,413 15,266 290,875
2 20,000 43,050 34,168 30,021 305,630 37,371 33,224 308,833 40,702 36,555 312,164
3 20,000 66,203 50,702 46,556 322,164 57,123 52,977 328,585 64,064 59,918 335,526
4 20,000 90,513 66,864 62,925 338,326 77,613 73,674 349,075 89,694 85,755 361,156
5 20,000 116,038 82,622 78,890 354,084 98,834 95,102 370,296 117,783 114,051 389,245
6 20,000 142,840 97,989 94,465 369,451 120,824 117,299 392,286 148,588 145,063 420,050
7 20,000 170,982 112,959 109,641 384,421 143,600 140,283 415,062 182,370 179,052 453,832
8 20,000 200,531 127,503 124,393 398,965 167,163 164,053 438,625 219,397 216,287 490,859
9 20,000 231,558 141,620 139,547 413,082 191,536 189,463 462,998 259,988 257,915 531,450
10 20,000 264,136 155,325 155,325 426,787 216,763 216,763 488,225 304,517 304,517 575,979
15 20,000 453,150 218,239 218,239 489,701 357,592 357,592 629,054 602,578 602,578 874,040
20 20,000 694,385 265,419 265,419 536,881 518,819 518,819 790,281 1,072,248 1,072,248 1,343,710
25 20,000 1,002,269 291,795 291,795 563,257 697,917 697,917 969,379 1,812,137 1,812,137 2,083,599
30 20,000 1,395,216 290,557 290,557 562,019 889,293 889,293 1,160,756 2,979,455 2,979,455 3,250,917
35 20,000 1,896,726 249,775 249,775 521,237 1,079,693 1,079,693 1,351,155 4,822,266 4,822,266 5,093,728
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
50
<PAGE> 54
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $271,462 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,184 12,038 287,646 17,220 13,073 288,682 18,257 14,110 289,719
2 20,000 43,050 31,877 27,730 303,339 34,940 30,794 306,402 38,128 33,982 309,590
3 20,000 66,203 47,072 42,926 318,534 53,168 49,022 324,630 59,765 55,618 331,227
4 20,000 90,513 61,751 57,812 333,213 71,898 67,958 343,360 83,317 79,378 354,779
5 20,000 116,038 75,889 72,157 347,351 91,116 87,384 362,578 108,945 105,213 380,407
6 20,000 142,840 89,459 85,934 360,921 110,807 107,282 382,269 136,821 133,297 408,283
7 20,000 170,982 102,431 99,114 373,893 130,950 127,633 402,413 167,134 163,817 438,596
8 20,000 200,531 114,758 111,648 386,220 151,507 148,397 422,969 200,069 196,959 471,531
9 20,000 231,558 126,392 124,318 397,854 172,434 170,361 443,896 235,832 233,759 507,294
10 20,000 264,136 137,288 137,288 408,750 193,690 193,690 465,152 274,652 274,652 546,114
15 20,000 453,150 179,287 179,287 450,749 303,404 303,404 574,866 524,459 524,459 795,921
20 20,000 694,385 193,401 193,401 464,863 410,516 410,516 681,978 897,812 897,812 1,169,274
25 20,000 1,002,269 165,230 165,230 436,692 495,149 495,149 766,611 1,449,402 1,449,402 1,720,864
30 20,000 1,395,216 76,531 76,531 347,993 527,482 527,482 798,944 2,262,330 2,262,330 2,533,792
35 20,000 1,896,726 (*) (*) (*) 454,371 454,371 725,833 3,451,917 3,451,917 3,723,379
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 55
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $205,135 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,618 11,732 205,135 17,673 12,786 205,135 18,728 13,842 205,135
2 20,000 43,050 32,941 28,054 205,135 36,092 31,206 205,135 39,372 34,485 205,135
3 20,000 66,203 48,992 44,105 205,135 55,327 50,441 205,135 62,184 57,297 205,135
4 20,000 90,513 64,779 60,137 205,135 75,440 70,798 205,135 87,442 82,800 205,135
5 20,000 116,038 80,339 75,941 205,135 96,529 92,131 205,135 115,498 111,100 205,135
6 0 121,840 76,906 72,753 205,135 98,778 94,625 205,135 125,708 121,555 205,135
7 0 127,932 73,232 69,323 205,135 100,961 97,052 205,135 136,997 133,088 205,135
8 0 134,329 69,291 65,627 205,135 103,072 99,407 205,135 149,534 145,869 205,135
9 0 141,045 65,045 62,602 205,135 105,098 102,654 205,135 163,519 161,076 205,135
10 0 148,097 60,430 60,430 205,135 107,010 107,010 205,135 179,187 179,187 205,135
15 0 189,014 29,550 29,550 205,135 114,133 114,133 205,135 287,698 287,698 302,083
20 0 241,235 (*) (*) (*) 113,840 113,840 205,135 460,496 460,496 483,521
25 0 307,884 (*) (*) (*) 94,478 94,478 205,135 731,738 731,738 768,325
30 0 392,947 (*) (*) (*) 15,855 15,855 205,135 1,166,147 1,166,147 1,177,808
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
52
<PAGE> 56
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $205,135 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 14,205 9,319 205,135 15,188 10,302 205,135 16,174 11,288 205,135
2 20,000 43,050 28,074 23,187 205,135 30,954 26,067 205,135 33,958 29,072 205,135
3 20,000 66,203 41,640 36,754 205,135 47,385 42,499 205,135 53,624 48,737 205,135
4 20,000 90,513 54,939 50,297 205,135 64,586 59,944 205,135 75,496 70,854 205,135
5 20,000 116,038 67,999 63,601 205,135 82,675 78,277 205,135 99,971 95,573 205,135
6 0 121,840 61,657 57,503 205,135 81,451 77,297 205,135 106,042 101,889 205,135
7 0 127,932 54,577 50,668 205,135 79,596 75,686 205,135 112,561 108,652 205,135
8 0 134,329 46,582 42,917 205,135 76,953 73,288 205,135 119,588 115,924 205,135
9 0 141,045 37,460 35,016 205,135 73,337 70,894 205,135 127,215 124,772 205,135
10 0 148,097 26,972 26,972 205,135 68,532 68,532 205,135 135,581 135,581 205,135
15 0 189,014 (*) (*) (*) 15,446 15,446 205,135 198,356 198,356 208,274
20 0 241,235 (*) (*) (*) (*) (*) (*) 311,439 311,439 327,011
25 0 307,884 (*) (*) (*) (*) (*) (*) 480,207 480,207 504,217
30 0 392,947 (*) (*) (*) (*) (*) (*) 746,244 746,244 753,706
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
53
<PAGE> 57
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $194,739 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,547 11,908 211,285 17,594 12,955 212,332 18,642 14,003 213,381
2 20,000 43,050 32,613 27,974 227,351 35,722 31,083 230,460 38,957 34,318 233,695
3 20,000 66,203 48,191 43,552 242,929 54,391 49,752 249,129 61,097 56,458 255,836
4 20,000 90,513 63,246 58,839 257,984 73,579 69,172 268,318 85,205 80,798 279,943
5 20,000 116,038 77,770 73,595 272,509 93,294 89,119 288,032 111,462 107,287 306,201
6 20,000 142,840 91,757 87,814 286,496 113,540 109,596 308,278 140,070 136,127 334,809
7 20,000 170,982 105,157 101,446 299,895 134,280 130,569 329,019 171,208 167,497 365,947
8 20,000 200,531 117,963 114,484 312,701 155,519 152,040 350,258 205,115 201,636 399,853
9 20,000 231,558 130,153 127,834 324,892 177,246 174,926 371,984 242,039 239,720 436,778
10 20,000 264,136 141,679 141,679 336,418 199,420 199,420 394,159 282,225 282,225 476,963
15 20,000 453,150 190,197 190,197 384,936 318,421 318,421 513,160 545,952 545,952 740,690
20 20,000 694,385 216,571 216,571 411,309 444,024 444,024 638,763 949,833 949,833 1,144,572
25 20,000 1,002,269 212,426 212,426 407,165 566,208 566,208 760,946 1,568,052 1,568,052 1,762,790
30 20,000 1,395,216 167,420 167,420 362,158 669,255 669,255 863,994 2,516,798 2,516,798 2,711,536
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
54
<PAGE> 58
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $194,739 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
----------------------- ----------------------- -----------------------
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 14,065 9,426 208,804 15,033 10,394 209,771 16,003 11,364 210,741
2 20,000 43,050 27,434 22,795 222,172 30,225 25,586 224,964 33,136 28,497 227,875
3 20,000 66,203 40,082 35,444 234,821 45,548 40,910 240,287 51,479 46,840 246,217
4 20,000 90,513 51,978 47,571 246,716 60,962 56,555 255,700 71,106 66,699 265,844
5 20,000 116,038 63,071 58,896 257,810 76,406 72,231 271,145 92,083 87,908 286,822
6 20,000 142,840 73,294 69,351 268,032 91,798 87,855 286,537 114,461 110,518 309,200
7 20,000 170,982 82,559 78,848 277,298 107,032 103,321 301,771 138,276 134,565 333,014
8 20,000 200,531 90,758 87,279 285,497 121,972 118,493 316,710 163,539 160,060 358,278
9 20,000 231,558 97,782 95,462 292,520 136,475 134,155 331,213 190,265 187,945 385,003
10 20,000 264,136 103,541 103,541 298,279 150,410 150,410 345,149 218,487 218,487 413,225
15 20,000 453,150 111,282 111,282 306,020 207,629 207,629 402,368 384,589 384,589 579,328
20 20,000 694,385 73,398 73,398 268,136 226,517 226,517 421,255 595,047 595,047 789,786
25 20,000 1,002,269 (*) (*) (*) 168,760 168,760 363,499 843,370 843,370 1,038,109
30 20,000 1,395,216 (*) (*) (*) (*) (*) (*) 1,119,536 1,119,536 1,314,275
<FN>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER
MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS
SHOWN IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE.
</TABLE>
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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
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 Post-Effective Amendment No. 8 to Form S-6 Registration Statement comprises
the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 108 pages.
Representations and Undertakings.
Accountants' Consent.
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
1. Power of Attorney dated April 1, 1998. Attached hereto.
2. Resolution of the Depositor's Board Included with the Registration
of Directors authorizing the Statement on Form N-8B-2 for the
establishment of the Registrant, Nationwide VLI Separate Account-2
adopted (File No. 811-5311), and hereby
incorporated herein by reference.
3. Distribution Contracts Included with the Registration
Statement on Form N-8B-2 for the
Nationwide VLI Separate Account-2
(File No. 811-5311), and hereby
incorporated herein by reference.
4. Form of Security Included with Pre-Effective
Amendment No. 1 and hereby
incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration
Statement on Form N-8B-2 for the
Nationwide VLI Separate Account-2
(File No. 811-5311), and hereby
incorporated herein by reference.
6. Application form of Security Included with Pre-Effective
Amendment No. 1 and hereby
incorporated herein by reference.
7. Opinion of Counsel Included with Pre-Effective
Amendment No. 1 and hereby
incorporated herein by reference.
<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)(A) under the Act
with respect to the Policies described in the prospectus. The Policies
have been designed in such a way as to qualify for the exemptive relief
from various provisions of the Act afforded by Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by the Company under the Policies. The Company represents that
the risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the Policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by the Company, and will
be made available to the Securities and Exchange Commission (the
"Commission") on request.
(c) The Company has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit
the separate account and the contractholders and will keep and make
available to the Commission on request a memorandum setting forth the
basis for this representation.
(d) The Company represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the company,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and
reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred in
that section.
(f) That the fees and charges deducted under the Contract 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 29, 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(b) for effectiveness of this Post-Effective Amendment
No. 8 and has duly caused this Post-Effective Amendment No. 8 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 29th day of April, 1998.
NATIONWIDE VLI SEPARATE ACCOUNT-2
---------------------------------
(Registrant)
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. 8 has been signed below by the following persons in the capacities
indicated on the 29th 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
- --------------------------
Joseph J. Gasper Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer
- --------------------------
Dimon R. McFerson Nationwide Insurance Enterprise and Director
DAVID O. MILLER Chairman of the Board and Director
- --------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- --------------------------
Yvonne L. Montgomery
C. RAY NOECKER Director
- --------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- --------------------------
Robert A. Oakley Chief Financial Officer
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- -------------------------- -------------------
James F. Patterson Joseph P. Rath
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
<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>
