1


      Nationwide(R) VLI
      Separate Account-2
        June 30, 1996

[LOGO]
THE 
BEST OF                                        
AMERICA(R)
LIFE PLANNING SERIES(R)
                                       '96

                       
                               SEMI-ANNUAL REPORT

                       
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In cooperation with:

Dreyfus Corporation
Fidelity Investments
Nationwide Financial Services, Inc.
Neuberger & Berman Management Incorporated
Oppenheimer Management Corporation
Strong Funds
Twentieth Century Companies
Van Eck Associates Corporation
Van Kampen American Capital
Warburg Pincus Funds

[LOGO]
Nationwide Life Insurance Company
Home Office: Columbus, Ohio
   2





                                    [LOGO]
                      NATIONWIDE LIFE INSURANCE COMPANY
                  ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215



                                  [PICTURE]




                             PRESIDENT'S MESSAGE

         We are pleased to present the 1996 semi-annual report of the
         Nationwide VLI Separate Account-2.

         Equity investments provided a respectable return for the first
         half of 1996 with the major market indices holding comfortably
         in double digits. Fixed-income investments, however, did not
         perform as well with the average bond fund showing slightly
         negative performance for the period. This was due to rising
         interest rates and lingering inflation fears.

         The U.S. economy showed signs of increasing strength during
         the first half of the year. The question remains: will growth
         fall back to the perceived inflation-free path by itself or
         will the Federal Reserve have to step in and enforce
         moderation? Recent economic statistics, such as the July
         unemployment report, point in the direction of some
         moderation. Also, fierce competition in all consumer-goods
         markets make inflationary price increases very difficult. One
         way or the other, we expect slower economic growth in the near
         future.

         Financial assets will remain the preferred individual
         investment option because they will continue providing
         security, liquidity, and income and growth.

         We appreciate your confidence in the Nationwide Insurance
         Enterprise and in our life and annuity products. You have our
         assurance that your personal satisfaction with our products
         and service is our highest priority.
                           

                           /s/ Joseph J. Gasper

                           Joseph J. Gasper, President

                                        2

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CONTENTS


HOW TO READ THE SEMI-ANNUAL REPORT ........................................    4
     Explanation on how to read and understand
     the various financial reports


A FEW WORDS ABOUT OUR FUNDS ...............................................    6
     Fund Objectives and Narratives
     written by the fund managers*

FUND PERFORMANCES .........................................................   33

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY ..............   39


STATEMENTS OF OPERATIONS AND CHANGES

IN CONTRACT OWNERS' EQUITY ................................................   41

NOTES TO FINANCIAL STATEMENTS .............................................   42

SCHEDULES OF CHANGES IN UNIT VALUE ........................................   46








 * The discussions refer to two stock market indexes. The Standard & Poor's 500
   Index (S&P 500) is an unmanaged index of 500 U.S. common stocks and the
   historical performance assumes the reinvestment of dividends. The Morgan
   Stanley Capital International Europe, Australia, Far East (EAFE) index is an
   unmanaged index of more than 900 companies from these regions. The EAFE Index
   reflects the prices of these common stocks translated into U.S. dollars with
   dividends reinvested net of any foreign taxes.

   The performance figures quoted by the fund managers do not include the
   annual mortality, expense and administration charges of the annuity contract.
   The Fund's portfolio is subject to change.



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HOW TO READ THE SEMI-ANNUAL REPORT



This Semi-Annual Report is sent to all customers who own a Nationwide life
insurance contract with all or some of the funds in the Nationwide VLI Separate
Account-2 (the Account). The Account is a separate account trust which offers
investment options in thirty mutual funds from ten mutual fund houses. An
explanation of the funds and their objectives can be found on pages 6 through
32.

The Semi-Annual Report has three major financial sections.

STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY

This statement, beginning on page 39, lists all the funds in the Account, the
number of shares owned, the amount paid for the shares (i.e., cost) and their
market value on June 30, 1996. The market value of the assets change as the
underlying mutual fund shares change in value. As contract owners make exchanges
between the funds, the number of shares in each fund increases and decreases.
When money is deposited (withdrawn) by contract owners, shares of the mutual
funds are bought (sold) by the Account. The total market value of the funds is
equal to the Total investments.

Accounts receivable, if applicable, is an asset of the Account for money market
fund shares added to the contract owners' accounts, but not yet added to Total
investments. Total investments plus Accounts receivable equals Total assets.

Accounts payable, if applicable, is a liability of the Account for money market
fund shares deducted from the contract owners' accounts, but not yet deducted
from Total investments.

Total assets minus Accounts payable equals Contract owners' equity. For a
summary of Contract owners' equity by fund series turn to page 40.

STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY

These statements, found on page 41, show the activity in the Account from
January 1 to June 30, 1996, 1995, and 1994.

The Investment activity section shows the changes in unrealized gain or loss of
the mutual funds in the Account, realized gain or loss as shares of the funds
are bought and sold, and dividends and capital gains earnings from the
underlying mutual funds.

The Equity transactions section illustrates purchase payments received as new
contracts are sold, existing contracts owners deposit additional funds, loans
are processed against the Account, money is withdrawn, contracts are canceled
and death benefits are paid.

Expenses are the charges associated with the contract. Note 2 on pages 42 and 43
outlines these charges.

Net change in contract owners' equity equals Investment activity plus Equity
transactions minus Expenses.

The Contract owners' equity at the beginning of the period plus the Net change
in contract owners' equity equals the Contract owners' equity at the end of the
period. Contract owners' equity at the end of the calendar year will equal the
Contract owners' equity at the beginning of the next year.

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SCHEDULES OF CHANGES IN UNIT VALUE

As a contract owner, you invest in the mutual funds offered in your life
insurance contract. However, you do not buy shares of the mutual fund. Instead,
the Account buys shares of the fund and you in turn purchase units of the
Account. Except for the units surrendered for the annual contract maintenance
charge, the number of units you own will not change unless you contribute to or
withdraw money from your account. The value of your contract can change based on
the value of the units you own. For example, if you purchase 100 units at $10
per unit, the value of your contract is $1,000. If the value of the units
increases to $12 per unit, your contract value increases to $1,200. Therefore,
to determine the value of your account, multiply the number of units of each
fund you own by the fund's unit value.
                                                             
The Schedules of Changes in Unit Value show you the unit value at the beginning
of the period and at the end of the period. The percentage increase (decrease)
in unit value shows how it changed in value. This is computed by subtracting the
beginning unit value from the ending unit value and dividing the difference by
the beginning unit value. This can be used as a measure of the performance of
the funds over the three annual periods reported.

As you review the following pages of the Annual Report, the Notes to Financial
Statements on page 42 will also help explain and clarify the various statements
and schedules.



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A FEW WORDS ABOUT OUR FUNDS


[DREYFUS LOGO]
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.

OBJECTIVE - To provide capital growth by investing in stocks that enhance the
quality of life in America.

NARRATIVE BY DREYFUS CORPORATION

We have been pleased with the performance of several of the Fund's sectors
during the past six months. Strong returns from the Consumer Cyclicals,
Technology and Financial Services sectors have been key drivers of the Fund's
performance. Sears and Consolidated Stores are two holdings in the Consumer
Cyclicals sector that have acted well, driven by investor belief that consumer
debt levels, although high, would not hamper spending. Other stocks in the
sector with strong performance include Nike, an athletic shoe and apparel
manufacturer, Jones New York, a woman's apparel maker and CUC International, a
consumer buying group membership company.

Continued strong demand for PCs, computer networking systems and software has
helped the performance of the Fund's technology sector. Winners in this area
include BMC Software, a maker of business software, Computer Associates, in the
network software business, Hewlett-Packard, a PC and peripherals manufacturer
and the software giant Microsoft.

Financial Services stocks were also decent performers for most of the last six
months, supported by speculation that a better interest rate environment was
approaching. Citicorp, Bank America and Green Tree Financial all performed well
in this sector.

We have also increased the Fund's exposure to small-capitalization stocks. While
it is uncertain that small-cap names will continue to outperform the market as
they have recently, we will continue to look for opportunities in this area,
while maintaining a solid position in larger-capitalization companies, some of
which are mentioned above.

In terms of the Fund's social investment criteria, we feel that the present
holdings are well within the objectives of the Fund's special considerations. We
were particularly pleased that two of the Fund's holdings, Hewlett-Packard and
the Federal National Mortgage Association, America's largest mortgage guarantor,
were among the recipients of the Council on Economic Priorities' prestigious
America's Corporate Conscience Award for 1996. The Fund is continually engaged
in a process of identifying companies that meet the Fund's goal of enhancing the
quality of life in America along with adhering to traditional financial
standards.

Going forward, we expect the market to undergo a 5-10% correction from its
current levels. At the same time, we see a continuation of modest economic
growth during the medium term. Given these expectations, the Federal Reserve is
likely, in our opinion, to keep interest rates at a level favorable to the
markets. At some point over the coming twelve months, we do expect some economic
weakness, leading to falling Fed rates and an increasingly positive market
environment, though we will most likely see some bumps along the way as economic
data and market sector corrections come along. At this point we do, however,
express cautious optimism for the future, and we have positioned the Fund
accordingly.

DREYFUS STOCK INDEX FUND++

OBJECTIVE - To provide investment results that correspond to the price and yield
performance of the S&P 500.+

NARRATIVE BY DREYFUS CORPORATION

The objective of the Stock Index Fund is to provide investment results that
correspond to the price and yield performance of publicly traded common stocks
in the aggregate, as represented by the Standard & Poor's 500 Composite Price
Index, better known as the S&P 500.



  + "Standard & Poor's 500", "S&P 500(R)" are trademarks of the Standard & 
    Poor's Corporation and have been licensed for use. The fund is not 
    sponsored, endorsed, sold or promoted by Standard & Poor's Corporation.

 ++ Formerly the Dreyfus Life and Annuity Index Fund.

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DREYFUS STOCK INDEX FUND (CONT'D)

The manager generally selects stocks for the Fund's portfolio in the order of
their weightings in the S&P 500, beginning with the heaviest weighted stocks.
With respect to the Fund's assets invested in the stocks in the S&P 500, the
percentage of such assets invested in each stock is approximately the same as
the percentage it represents in the S&P 500.

The Fund will attempt to achieve a correlation between the performance of its
portfolio and that of the S&P 500 of at least 0.95, without taking into account
expenses. The Fund's ability to correlate its performance with the S&P 500 may
be affected by, among other things, changes in securities markets, the manner in
which the S&P 500 is calculated by Standard & Poor's Corporation, the timing of
purchases and redemptions, the size of the Fund's portfolio, and the size of
cash flow into and out of the Fund. There can be no assurance that the Fund's
investment objective will be achieved and an investment in the Fund involves
risks similar to those of investing in common stocks.


    [LOGO] FIDELITY 
           INVESTMENTS(R)
VARIABLE INSURANCE PRODUCTS FUND

EQUITY-INCOME PORTFOLIO

OBJECTIVE - To seek reasonable income by investing primarily in income-producing
equity securities.

AN INTERVIEW WITH ANDY OFFIT, PORTFOLIO MANAGER

Q. HOW DID THE FUND PERFORM, ANDY?

A. It's been disappointing. The fund trailed its benchmark index, The Standard
& Poor's 500 Index, which returned 10.10% for the six-month and 26.00% for the
12-month periods.

Q. WHY DID THE FUND LAG ITS BENCHMARK DURING THE PAST SIX MONTHS?

A. Simply put, the fund didn't own some of the stocks in the S&P that have
performed well during the past couple of months. That's been disappointing to me
because since I started managing the fund in March I've worked hard to implement
some investment strategies that I think will benefit the fund in the long
run. The fund was also hurt by a large investment in Philip Morris that lost
value during the period.

Q. CAN YOU EXPLAIN WHAT CHANGES YOU'VE MADE TO THE FUND SINCE YOU TOOK OVER?

A. Yes. But before I describe what's changed, I'd like to explain what stayed
the same. The fund continued to invest mainly in U.S. stocks - mostly large-cap,
growth stocks. I also began to make selective investments in mid-cap growth
stocks of companies with between $2 billion and $6 billion in market
capitalization. As for the income portion, the fund no longer owns bonds.
Instead, I've begun to accumulate a position in convertible bond securities.

Q. WHY DO YOU FIND CONVERTIBLE BONDS ATTRACTIVE?

A. First of all, I managed a convertible bond fund for three years and am very
familiar with and comfortable with convertible bonds. I believe that convertible
bonds have the potential to add value to the fund on the upside while minimizing
risk. Secondly, the fund's prospectus says that the fund should seek a yield
higher than the S&P 500, and I think that strategic investments in convertible
bonds can add a lot of yield to the fund. I also think that convertible bonds
can lower the fund's volatility since they don't necessarily move in sync with
the market. At the end of the period the fund had a 13% position in convertible
bonds.

Q. WHAT ABOUT THE FUND'S HOLDINGS IN MID-CAP STOCKS . . .

A. Although investments in mid-cap stocks is a strategy that I'm enthusiastic
about, I don't expect to make it a very large percentage of the fund's
investments. That said, I think the fund can benefit from prudent investments in
medium-sized companies that have a lot of room to grow and I think it's an area
of the market with a lot of potential. Mid-cap stocks can be more risky than
large-cap stocks, but sometimes the reward can make the risk worthwhile. At the
end of the period, the portion of the fund's investments in mid-cap stocks was
less than three percent.

Q. WHAT OTHER CHANGES HAVE YOU MADE TO THE FUND'S STRATEGY?

A. I reduced the concentration in the fund's top holdings. At the end of the 
last period, the fund had 24% of its investments in the top 10 stocks. By June
30, 1996, that number was reduced to about 17%. I wanted to distribute the
fund's holdings a bit more evenly in order to help reduce volatility; I'm not
eager to have

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EQUITY-INCOME PORTFOLIO (CONT'D)

5% or 6% of the fund's assets invested in any one stock.

Q. WHERE DID YOU FIND INVESTMENT OPPORTUNITIES DURING THE PERIOD?

A. Nearly four percent of the fund's investments are in casinos. I find gaming
and casinos an attractive place to invest because the industry continues to be
very strong despite increasing competition. Las Vegas is the top vacation
destination in the United States -- beating out Disneyland and Disney World.
Families are starting to vacation in Las Vegas because of good weather,
affordable prices and the allure of the hotels -- which are tourist attractions
in themselves. I think the fund's holdings in Mirage, Circus Circus and Hilton
could benefit from this trend.

Q. WHAT'S BEEN MOST DISAPPOINTING DURING THE PAST SIX MONTHS?

A. That the fund hasn't performed better. I can't point toward one investment
that really hurt performance, I simply owned too many stocks that didn't go up
as much as the market, and too few stocks that did.

Q. WHAT'S YOUR OUTLOOK GOING FORWARD, ANDY?

A. My overall outlook is positive. I'm very comfortable with the changes I've
made to the fund's investment strategy. Though the fund's performance was
disappointing during the past six months, I'm pleased with its growth stock and
convertible bond holdings and am looking forward to continuing with this
strategy during the next six months.

GROWTH PORTFOLIO

OBJECTIVE - Seeks to achieve capital appreciation.

AN INTERVIEW WITH LAWRENCE GREENBERG,
PORTFOLIO MANAGER

Q. HOW DID THE FUND PERFORM, LARRY?

A. For the six months ended May 31, 1996, the fund slightly edged out the
Standard & Poor's 500 return of 10.10%. Unfortunately, for the same time frame,
the fund underperformed its peers.
                                                             
Q. WHY DO YOU THINK THE FUND UNDERPERFORMED ITS PEERS OVER THE PAST SIX MONTHS?

A. The fund's position in semiconductor stocks hurt its performance in the
fourth quarter of 1995. Semiconductor company stocks fell as it became apparent
that a worldwide supply glut would reduce prices and therefore lower profit
margins and curb expansion. Unfortunately, I was not able to reduce the fund's
position in these stocks quick enough to avoid some losses.

Q. YOU ALSO CONTINUED TO REDUCE THE FUND'S TECHNOLOGY POSITION. SHOULD ONE TAKE 
THIS AS AN INDICATION THAT YOU HAD A NEGATIVE VIEW ON THE TECHNOLOGY SECTOR?

A. Absolutely not. During the period I cut back on technology stocks because I
thought some companies fundamentals did not justify their stock prices.
Remember, there are always going to be ups and downs in the various areas that
make up the technology sector. However, on a long-term basis, I believe
technology is where an investor is going to find the best growth opportunities,
and I intend to continue to make it a major focus of the fund. In fact, many
technology stocks have come back from the correction in the fourth quarter.

Q. SO WHAT WERE THE GROWTH AREAS DURING THE PERIOD?

A. The major growth areas I found revolved around improvement of communications.
This involved the computer networking equipment industry, modem manufacturers
and database vendors. These industries are active in structuring data so that it
can be communicated across corporate networks. Some examples from the fund's
holdings include Cisco Systems in networking, U.S. Robotics in modems, and
Oracle and Peoplesoft in database.

Q. AS YOU REDUCED YOUR TECHNOLOGY POSITION, IT APPEARS YOU REALLOCATED SOME OF
THE FUND'S ASSETS TO THE HEALTH AND MEDIA/LEISURE SECTORS. WHY?

A. I reinvested these assets in companies within these sectors that offered good
growth potential, solid fundamentals and attractive valuations. Some examples
included biopharmaceutical firm Biogen and HPS -- which owns hotels such as Days
Inn and Ramada, and real estate group Century 21, which recently announced it
intends to acquire rental-car chain Avis.

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GROWTH PORTFOLIO (CONT'D)

Q. IN YOUR LAST REPORT, YOU DISCUSSED THE MERITS OF SPECIALTY RETAIL STOCKS. 
WHAT'S HAPPENED IN THAT AREA?

A. Many of them have done well. I prefer to own specialty retailers that are
considered to be "category killers" -- companies that dominate their market
segment no matter what is happening in the overall retail market or the economy.
Some examples of these included PETsMART and Sunglass Hut International. The
difference from six months ago, however, is that the general retail environment
has recently shown some strength. Therefore, I added some stocks that benefited
from the improving retail environment.

Q. WITH THE STOCK MARKET SURPASSING HISTORICALLY HIGH PRICE LEVELS, WHAT 
ADJUSTMENTS HAVE YOU MADE TO THE FUND?

A. I've attempted to spread out the fund's holdings more than in the recent
past. When market valuations get to such high levels, it's often not a good idea
to be counting on the performance of one sector or industry. This strategy gives
the potential of lowering the fund's volatility in a market downturn, while
still remaining fully invested.

Q. WHAT'S YOUR OUTLOOK?

A. There is no question that the market has gone a long time without a
meaningful correction and many stocks are approaching fair value. If interest
rates continue to climb -- or cash flows into mutual funds begin to slow -- I
believe a healthy correction at some point is likely. I use the word "healthy"
because corrections give me an opportunity to reposition the fund back into the
companies that I like the most at more attractive valuations. Those people that
believe a correction is imminent, however, may be surprised as the market has
been up in the May through November time frame in 21 of the last 23 election
years.

HIGH INCOME PORTFOLIO

OBJECTIVE - Seeks to obtain a high level of current income by investing
primarily in high risk, lower-rated, high-yielding, fixed income securities,
while also considering growth of capital.

AN INTERVIEW WITH BARRY COFFMAN,
PORTFOLIO MANAGER

Q. BARRY, HOW DID THE FUND PERFORM?
                                                          
A. It did quite well compared to its peers, and significantly outperformed its
benchmark. The Merrill Lynch High Yield master Index had a total return of 2.85%
for the six months ended June 30, 1996, and 9.37% for the 12-month period.

Q. WHAT CONTRIBUTED TO THE FUND'S PERFORMANCE?

A. Well, a primary difference between the fund and its index is that the index
tends to have a much higher weighting of BB-rated bonds than the fund, which is
more concentrated in B-rated issues. That makes the index generally more
sensitive to changes in interest rates, while the fund responds more to changes
in credit spreads. Simply put, when the credit status of companies in the
high-yield market is improving, the fund tends to outperform the index, and
that's what we saw over the period.

Q. HOW DID INTEREST RATES FACTOR INTO THIS EQUATION?

A. They went hand-in-hand with the credit story. As the economy's strength
exceeded most people's expectations, the Federal Reserve tried to moderate
growth by raising interest rates. Within the high-yield market, the higher-rated
securities that dominate the index and are most sensitive to rate changes
performed poorly. Meanwhile, the rise in rates had less of a negative impact on
the fund, and the economy's strength improved credit conditions and helped
generate good performance for the fund.

Q. WHAT WAS BEHIND THE FUND'S INCREASE IN MEDIA AND TELECOMMUNICATIONS 
SECURITIES?

A. First of all, coming into the period, the fund already had significant
investments in those sectors. That's because I had seen opportunities in
emerging areas such as satellite and paging companies, as well as other
broadcast-related securities. These areas had been dominating the new issuance
market, and investors were receptive to the high coupon rates offered by many of
these companies. Several of the fund's large holdings in these kinds of
companies -- for example, PanAmSat, the fund's largest holding at the end of the
period -- as well as Echostar, a company that offers a satellite/cable service,
were strong contributors to performance during the period. They benefited from
the market's perception that they had good growth prospects regardless of the
economy's strength.

Q. IN THE LAST REPORT, YOU MENTIONED THAT YOU HAD BEEN ADDING SOME SMALLER, 
LESS VISIBLE COMPANIES TO THE PORTFOLIO. HOW DID THOSE INVESTMENTS WORK OUT?

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HIGH INCOME PORTFOLIO (CONT'D)

A. Many of them also were solid contributors to performance during the period.
The fund benefited from investing in securities which I was able to purchase on
what I viewed as very favorable terms. Harcor Energy is an excellent example. We
bought a sizable number of its bonds and received warrants for equity in the
company as well. Harcor subsequently announced a secondary stock offering,
boosting its stock price and creating significant value for the warrants the
fund had received. In the specialty retail area, the fund also was helped by
some regional retailers such as Stage Apparel and Mother's Work, a maternity
cloths company I've discussed before and which continued to perform well over
the period.

Q. STILL, THERE MUST HAVE BEEN SOME DISAPPOINTMENTS . . .

A. Right, but nothing that negatively impacted the fund very much. Somewhat
ironically, one of the higher quality positions in the fund, Viacom, was one of
the poorer performers. After acquiring Paramount and Blockbuster, Viacom planned
to sell some cable systems, which I thought would result in a credit upgrade.
But a combination of regulatory delays and weakness in the Treasury market -- 
the bonds are not priced in terms of dollars, they instead trade on a spread 
basis relative to the price of Treasuries -- hurt the securities.

Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?

A. I'd say that I'm a bit more cautious now than I was a few months ago. In the
high-yield market, you need to be especially alert to any weakness in the
economy. Given its recent continued strength, economic softening is not only
inevitable, but probably closer today than it was six months ago. Still, I'll
continue to look for companies that I think can prosper independent of the
economy and, within those companies, I'll invest in whichever aspect of their
capital structure looks most promising.

OVERSEAS PORTFOLIO

OBJECTIVE - To seek long term growth of capital primarily through investments in
foreign securities.

AN INTERVIEW WITH RICHARD MACE, PORTFOLIO MANAGER

Q. HOW HAS THE FUND PERFORMED, RICK?

A. For the six months ended June 30, 1996, the fund outperformed the Morgan
Stanley Capital International EAFE Index which tracks the performance of stocks
in Europe, Australia and the Far East. The index had a total return of 4.52% for
the six-month period.

Q. IN YOUR OPINION, WHY DID THE FUND OUTPERFORM ITS BENCHMARK?

A. In my opinion, good individual stock selection was important to the fund's
performance. Because I use a bottom-up, stock-by-stock approach to investing, I
believe stock selection plays a greater role in fund performance than country or
sector investing.

Q. JAPAN CONTINUES TO BE ONE OF THE MAJOR WEIGHTINGS OF THE FUND . . .

A. The fund's Japanese position is somewhat below the Japanese weighting of the
EAFE index, but much larger than many international funds. What made Japanese
equities so attractive was the weak yen, low interest rates, a recovering
economy and a great variety of undervalued stocks. These characteristics
benefited broadly based export companies such as Sony and Omron, retailers such
as Ito-Yokado and auto companies such as Toyota and Honda.

Q. SPECIFICALLY, WHAT IS THE ADVANTAGE OF A WEAK YEN?

A. It improves the competitiveness of Japanese companies by reducing the prices
of Japanese exports measured in foreign currencies. Additionally, reported
profits are favorably impacted by the translation of overseas earnings back into
yen. For example, when you consider a company like Canon, a 1% weakening in the
yen helps their earnings by almost 5%.

Q. TURNING TO EUROPE, WHAT'S BEEN THE STORY THERE?

A. The new investments in Europe have come mainly in French stocks and, to a
lesser extent, the United Kingdom and Germany. I believe that the aggressive
cost cutting of many European companies, the cheapness of European stocks and
the potential for a more robust European economy have provided outstanding
investment opportunities. Investors may remember the spectacular performance of
the stocks of U.S. companies in the early 1990s. This performance was driven by
cost cutting, increased corporate earnings and a strong economy. Of course,
there can be no guarantee this scenario will occur in Europe.

                                       10
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OVERSEAS PORTFOLIO (CONT'D)

Q. CAN YOU GIVE EXAMPLES OF SOME COMPANIES YOU'VE LIKE IN EUROPE?

A. Sure. Veba, a German conglomerate; Pechiney, a French aluminum company; 
Alcatel Alsthom Compagnie Generale d'Electricite, a French telecom company; 
and Volvo, a Swedish car and truck manufacturer; all exemplify my reasons for 
raising the fund's European position.

Q. WOULD YOU SAY THAT ONE OF THE FUND'S MAJOR THEMES WAS AN EMPHASIS ON 
ECONOMICALLY SENSITIVE COMPANIES?

A. Definitely. Companies whose performance is influenced by the economic cycle
were very inexpensive and could benefit from any potential economic recovery in
the world's developed markets. Some companies that highlight this theme include
Veba, Pechiney, Alcatel, Honda, Scania (a Swedish truck maker) and Michelin.

Q. WERE THERE ANY DISAPPOINTMENTS?

A. Unfortunately, Deutsche Bank has not exhibited the ability to cut costs that
I had hoped it would. The stock remains at very inexpensive levels, and I am
hopeful that the bank's continued cost-cutting efforts will produce more
meaningful results.

Q. SINCE THIS IS YOUR FIRST REPORT AS MANAGER OF THE FUND, WOULD YOU MIND 
SUMMARIZING YOUR INVESTMENT STYLE?

A. Sure. When I look at a stock, I attempt to establish its worth as a means of
determining what return I can expect and as a way of comparing potential rewards
and potential risks. I try to minimize surprises by thoroughly understanding
what the downside possibilities are for each stock I own. I attempt to select
stocks that I believe have two or three times as much upside potential as
downside risk. I also focus on a company's cash flow and balance sheet. I've
found that while accounting conventions vary dramatically from country to
country, the items that are most comparable are cash flow and balance sheets.

VARIABLE INSURANCE PRODUCTS FUND II

ASSET MANAGER PORTFOLIO

OBJECTIVE - To seek high total return with reduced risk over the long-term by
allocating its assets among stocks, bonds and short-term fixed income
securities.

AN INTERVIEW WITH DICK HABERMANN, PORTFOLIO MANAGER

Q. HOW DID THE FUND PERFORM, DICK?

A. The fund performed reasonably well in the first half of 1996. In an
environment that produced mixed returns for stocks and bonds, Asset Manager
performed roughly in line with other flexible portfolios. Looking back over the
period, the fund held its own during a time when the portfolio underwent some
restructuring as a result of the management change.

Q. HOW WERE THE FUND'S ASSETS DISTRIBUTED AT THE END OF THE PERIOD?

A. Around 55% in equities, 33% bonds and 12% cash equivalents. During the past
six months, the overall asset mix did not change substantially, but the
securities within the asset classes did undergo some significant change.

Q. COULD YOU DETAIL WHAT SOME OF THOSE CHANGES WERE?

A. Sure. Within equities, we sold a substantial amount of the fund's foreign
holdings, especially in Japan. Despite underperformance of the Japanese market
compared to the U.S., our individual holdings in many Japanese stocks had
actually done fairly well, so we took some profits and re-directed those assets
into domestic equities. On the fixed-income side, our holdings had been focused
in the middle of the yield curve, in securities with maturities between five and
15 years. We allocated more assets into the high-yield, longer maturity end of
the market, and re-structured the fixed-income portion of the portfolio to more
closely reflect the composition of the Lehman Brothers Aggregate Bond Index. The
result was an increase of corporate bonds and mortgage securities and a
reduction of the fund's U.S. Treasury holdings.

                                       11
   12


 
ASSET MANAGER PORTFOLIO (CONT'D)

Q. LET'S TURN TO THE MANAGEMENT CHANGE. WHAT WAS THE THINKING BEHIND THIS TEAM 
APPROACH?

A. We think this approach makes more sense than relying on a single person,
given that the fund invests in so many different kinds of securities and is
involved in so many segments of the market. Fidelity has traditionally taken
what's known as a bottom-up approach with most of its funds, emphasizing
research and individual security selection. Our hope is that by dividing the
responsibility for different parts of the fund among sub-portfolio managers with
established expertise in those areas, we can better leverage our strength as a
fund management organization.

Q. WILL THE FUND'S INVESTMENT STRATEGY CHANGE?

A. No. As always, the fund will seek competitive long-term results by investing
in a broad mix of stocks and bonds. In the past, the fund has never tried to
time the market by making sudden shifts in the asset mix, nor will it try to do
so in the future. In short, the fund's basic asset allocation structure will not
change. The shift at the top should be seen as an attempt to better fulfill the
fund's original investment objective, not take the fund in a different
direction.

Q. WHAT'S YOUR OUTLOOK FOR THE NEXT SEVERAL MONTHS?

A. I'm guardedly optimistic. I think that the economy has shown that it's pretty
resilient so far this year. Still, there are signs that various businesses may
be slowing down, which could mean that we may see some earnings disappointments.
One other note of caution is that stimulus packages in other countries have
helped boost some foreign economies. With a group of economies growing in sync,
that could imply a degree of inflation risk, which bears watching. I do feel
that there is still room for company managements to add value by rationalizing
their businesses and continuing to cut costs. Those efforts may not have the
impact they did over the past year or two, but they can still be meaningful.
That's why individual security selection will continue to be crucial, and I take
comfort in having George Vanderheiden and Michael Gray, two of the best in the
business, on the team. In the next report, each of them will provide their views
on their respective parts of the portfolio.

CONTRAFUND PORTFOLIO

OBJECTIVE - Seeks to achieve capital appreciation.

AN INTERVIEW WITH WILL DANOFF, PORTFOLIO MANAGER

Q. HOW DID THE FUND PERFORM, WILL?

A. The fund slightly underperformed the Standard & Poor's 500 Index, which
returned 10.10% for the six-month period ended June 30, 1996.

Q. WHAT'S YOUR EVALUATION OF THE FUND'S PERFORMANCE?

A. The fund's net asset value rose for the first six months of 1996, in line
with its peers. The fund achieved this performance despite it taking, in my
opinion, much less risk than the average growth fund. While it is difficult to
quantify lower risk in a fund, one measure is the fund's price to earnings
(P/E) ratio -- or the price the fund is paying for one dollar of earnings.      
Contrafund's average P/E ratio was 20.8 times at the end of the period, lower
than the average growth fund 26.6 P/E ratio. Additionally, the fund carried a
higher than average cash percentage during the period. Contrafund had between
13% and 15% of total assets in cash for the entire period, much more than the
7.8% cash position for the average growth fund. Thus, with the market up 10%
for the period, the fund's cash position hurt its performance by approximately
one percentage point.

Q. WHY DID THE FUND HOLD A LARGE CASH POSITION?

A. While in the short term it would have been better for the fund to have
stayed fully invested in stocks, the fund held its relatively high cash
position because the market was paying incredibly (and irrationally) high
prices for most growth companies -- particularly small and rapidly growing
companies. While  small growth companies produced some of the best returns in
the market so far  this year, many of these companies are trading at P/E ratios
of more than 60 -- which is more than three times as much as the average stock
in the Contrafund. I was simply unwilling to chase these stocks in order
to produce better than average returns for one six-month period. If interest
rates increase, or this year's historically huge cash flows into mutual funds
slow, or earnings growth diminishes, these very expensive stocks could fall
precipitously.

Q. WHICH SECTORS HELPED THE FUND DURING THE PERIOD? WHICH ONES HURT IT?

A. The energy and energy-service sector contributed nicely to the fund's
performance during the first half of the year despite suffering a mild (and
healthy) correction in the second quarter. The energy and energy-service sector
rose about 15% in the first six months

                                       12

   13

CONTRAFUND PORTFOLIO (CONT'D)

of the year, handily beating all of the market averages and generating the best
returns of all sectors with the exception of the volatile precious metals
group. One dampening influence on the fund during the period other than the
high cash position, was its underweighting of the consumer products sector.
While the fund was adequately represented in the retailing sector -- which
rebounded sharply after a disastrous 1995 -- it missed the moves in the
consumer nondurables, which includes tobacco, soft drink and personal care
multinationals. Unfortunately, I underestimated the excellent overseas unit
growth of these companies.

Q. WOULD YOU SAY UNDERWEIGHTING TECHNOLOGY STOCKS ENHANCED OR DIMINISHED THE 
FUND'S RETURN?

A. It's hard to generalize about the performance of technology stocks over the  
past six months. While several groups within technology -- such as 
semiconductors -- performed as poorly as I expected, other groups performed
extremely well. For example, networking companies -- which sell equipment to
enable different computers to communicate with one another -- experienced
superb demand propelled by the surging use of the Internet as well as strong
corporate demand to upgrade their computer networks. The fund remains
underweighted in technology because the valuations of these stocks are
unequivocally too high to make even the companies with the brightest
fundamental outlook appear attractive.

Q. DID YOU FEEL AS OPTIMISTIC ABOUT THE ENERGY SECTOR AS YOU DID AT THE 
BEGINNING OF THE YEAR?

A. Yes, I still believe that the energy sector is one of the most attractive
segments of the stock market. As I outlined in a letter to shareholders last
year, new technological breakthroughs such as three dimensional seismic analysis
and horizontal drilling techniques now enable exploration companies to find and
extract oil much more economically than in the past. Thus, these energy
companies are more profitable and can grow faster even if the price of oil and
natural gas stays at current levels.

[LOGO]
NATIONWIDE
FINANCIAL SERVICES, INC.
Nationwide is on your side

NATIONWIDE(R) SEPARATE ACCOUNT TRUST

CAPITAL APPRECIATION FUND

OBJECTIVE - To obtain long-term growth.

NARRATIVE BY CHARLES BATH, FUND MANAGER

The Capital Appreciation Fund benefited from the strong performance of the
pharmaceutical sector. The drug stocks now comprise the largest industry
weighting in the Capital Appreciation Fund. These companies are financially
strong world-dominant franchises. These are the type of investments I would
continue to expect will dominate the portfolio. Currently one of the largest
weightings is in Allergan, a small ophthalmic drug company. Allergan is dominate
in its niche and has an important new drug which should accelerate its growth.
This growth potential combined with a reasonable valuation makes Allergan an
attractive investment.

Another large investment in the Capital Appreciation Fund is Horace Mann. This
is a unique insurance company which dominates the personal lines insurance
market for educators. Horace Mann has remained very profitable by focusing on
one narrow market niche and dominating that market. Despite its attractive
financial characteristics Horace Mann sells at a discount to the market and to
its insurance industry peers. I anticipate this will be a good long-term
investment with the opportunity for both attractive earnings growth and an
upward revaluation of the earnings multiple.

GOVERNMENT BOND FUND

OBJECTIVE - To provide as high a level of income as is consistent with the
preservation of capital.

NARRATIVE BY WAYNE FRISBEE, FUND MANAGER

During the past six months long-term and intermediate-term interest rates have
increased by approximately 100 basis points. The yield curve steepened as
short-term rates were up less than long-term rates. The price of the Government
Bond Fund moved lower reflecting the move in the broad bond market.

Inflation and expectations for future inflation always drive the bond market in
the long run, with the value of fixed coupons being eroded by higher levels of
infla-

                                       13

   14

GOVERNMENT BOND FUND (CONT'D)

tion. Currently, higher interest rates are generally being blamed on fears of a
stronger economy and thus higher inflation rates in the future. Actual reported
numbers however have continued to show stable or even declining inflation rates
in recent months.

Lower bond prices with the recent move to higher interest rates and a stable
inflation environment creates additional value in the fixed-income markets. The
portfolio manager has used this opportunity to increase market exposure
slightly, investing cash at higher rates as the market declined, thus allowing
shareholders to benefit from future decreases in interest rates.

The Government Bond Fund continues to be invested in sectors of the U.S.
Treasury, government agency, and mortgage-backed markets perceived to be
undervalued. Approximately one-third of portfolio assets are invested in the
Collateralized Mortgage Obligation (CMO) market. The yield on these
conservatively structured investments continues to make them attractive
portfolio holdings.

MONEY MARKET FUND

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.

NARRATIVE BY KAREN MADER, FUND MANAGER

In January 1996 the Federal Reserve lowered the fed funds rate to 5.25% from
5.50% due to the perception that the economy was continuing a slow growth
pattern with low inflation. This represented the third cut in the fed funds rate
since July 1995. Since January, economic indicators have signaled a growing
economy with low unemployment. The next two FOMC meetings will be held in July
and August. At this time the Federal Reserve will decide the direction of
interest rates based on their perceptions of economic growth and inflation.

The Fund continues to invest in only the highest rated money market securities.
An internal credit review is completed on every company that the Fund invests
in.

SMALL COMPANY FUND

OBJECTIVE - To seek long-term growth of capital by investing in equity
securities of small-capitalization companies.

NARRATIVE BY NATIONWIDE FINANCIAL SERVICES, INC.

The first half of 1996 saw an unprecedented inflow of funds into stock mutual
funds. The $138.5 billion net inflow in the six months exceeded the total for
any previous full year. The Small Company Fund shared in this increase, as
assets rose to $82.4 million as of June 30, 1996.

The strong cash inflows helped drive the stock market, including the small
company segment, to record levels. The Russell 2000 Index, which serves as the
benchmark for the Small Company Fund, advanced 10.5% during the period,
including dividends. Another factor impacting small company returns was a brisk
initial public offering (IPO) market during the first half.

The Fund outperformed its benchmark during the first six months of 1996. Among
the contributing factors were gains on stocks in the oil services and temporary
personnel sectors. Oil services companies benefited from the surprisingly
durable increase in the price of oil, as well as from fundamental industry
factors. Temporary employment firms saw a high level of activity as U.S.
employment levels rose much faster than expected.

As of June 30, 1996, the Fund had 73.7% of net assets invested in domestic
stocks, 19.0% in international stocks, and 7.3% in cash and short-term
securities. The market sectors most heavily weighted among Fund investments were
Healthcare, Commercial Services and Financial Services.

TOTAL RETURN FUND

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.

                                       14


   15

TOTAL RETURN FUND (CONT'D)

NARRATIVE BY JOHN M. SCHAFFNER, FUND MANAGER

In the first half of 1996, the Total Return Fund's performance was positively
impacted by its holdings in technology stocks, as well as strength in the
financial sector, particularly brokerage stocks. The Fund's holdings in
consumer-related issues, particularly food and drug stocks, have not kept up
with gains in the overall markets, hindering performance.

The Fund continued to shift its emphasis in the financial sector away from banks
towards insurance companies, selling First-Chicago NBD Corp. and adding holdings
in Chubb, Equitable Companies, and Allstate Corp. Telecommunications holdings
were also boosted, with additions to MCI and 360 Communications, both companies
with strong franchises and solid long term growth prospects.

Part of the Total Return Fund's investment strategy has been to look for
reasonable yields coupled with rising dividend streams in most of the stocks it
buys. However, many companies are now focused on share repurchase programs in
lieu of dividend increases. This, in addition to the strength in the market, has
resulted in both lower "reasonable" yields (at least on an absolute basis), and
a less certain outlook for rising dividends. As a result, the Fund has sold some
stocks, such as Hanson PLC, Lubrizol Corp., and Sonat, which have fairly high
yields, but unclear growth potential. The Fund has also bought some stocks with
fairly low yields, but strong growth potential. These purchases have included,
besides MCI and 360 Communications, Monsanto, Comcast Corp., and Seagram
Company.

The Fund is not abandoning its strategy of seeking reasonable and growing
yields. Indeed, the majority of the Fund's current holdings fit that
description. However, in the long run, reasonable and growing income depends on
the quality of the business generating it. Currently, many of the strongest and
best-positioned companies, as well as some of the most undervalued stocks, do
not follow dividend policies that strictly fit the "reasonable and growing"
description. To the extent that better quality and more undervalued
opportunities continue to exist somewhat outside of that description, the Fund
will continue to pursue them.

[LOGO] NEUBERGER & BERMAN
       MANAGEMENT INC.(SM)
  
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST

GROWTH PORTFOLIO

OBJECTIVE - The Portfolio seeks capital growth through investments in common
stocks of companies that the investment adviser believes will have above average
potential for long-term capital appreciation.

NARRATIVE BY MARK GOLDSTEIN, PORTFOLIO MANAGER

During the Semi-Annual Report period between January 1, 1996 and June 30, 1996
our best-performing sectors were financial services, restaurants, and selected
consumer/retail stocks. One of our best performers was CKE Restaurants, which
enjoyed strong earnings growth due to robust sales of several new menu items.
Other strong performers in the restaurant sector were Cheesecake Factory, Home
Town Buffet, and Sonic Corporation. The common theme of our restaurant
investments was the very high quality food/service consumers felt they received
for a reasonable price.

The financial sector provided many good performers, in spite of rising interest
rates. Bear Stearns and Morgan Stanley Group benefited from strong securities
markets, and an increase in business, which included a high level of merger
transactions. FirstUSA and Capital One Financial enjoyed very strong earnings
growth, as receivables continued to grow and costs were moderated.

Within the consumer/retail sector, Nine West and Viking Office Products were
superior performers. Nine West has consolidated its position as the dominant
factor in the shoe market with its recent acquisition of U.S. Shoe. Viking
Office Products is the leading company in the mail order office supply business.
Its growth accelerated as it expanded its operations into Europe.

Two lagging sectors were health care and technology. The HMO (health maintenance
organization) industry was our major concentration in health care. After
rebounding 50% from mid-year 1995 lows into February 1996, the group fell from
25%-35% off its 1996 price levels through June due to concerns

                                       15
   16

GROWTH PORTFOLIO (CONT'D)

regarding increased medical costs and pricing competition. First quarter
earnings were slightly below expectations for most companies. We believe that
pricing is improving and that medical cost increases can be contained. HMO
member growth continues at a 15%-18% rate, and our HMO companies were growing at
a 20%-25% annual rate, over the first half of 1996. Through July, those same
companies were still selling at only 13 to 14 times their estimated 1997
earnings. This is a very compelling valuation in our opinion.

The technology sector rebounded from its January 1996 lows into April but
retested those earlier low prices toward the end of the Semi-Annual Report
period as memory pricing continued to weaken. End-user demand for many
subsectors of the broad technology industry remains robust as lower prices
stimulate demand. Valuation is very compelling relative to growth in this
sector. Based on this assumption, we added to some of our positions in
semiconductor equipment and client server software companies.

Another addition to the portfolio, pharmaceuticals manufacturer Warner-Lambert,
has been plagued by a scarcity of new products over the last few years. This
could change next year with the launches of Atorvastatin, a new
cholesterol-lowering agent, and Troglitzone, a new diabetes treatment. In
addition to bringing sales momentum to Warner-Lambert's product line, we look
for these drugs to add significant profit margins to the company. Furthermore,
in this consolidating industry, we feel that Warner-Lambert is an attractive
acquisition candidate.

On the sell side, we made a number of changes to the portfolio over the
Semi-Annual Report period. Both Life Partners Group and U.S. Healthcare were
sold only after they reached prices that we felt fully reflected the upside in
both stocks. We sold Mannesmann AG after it became evident that the company was
not inclined to recognize the value in the cellular part of its business, that
we believed was attractive; the industrial operations that made up the rest of
the company were not growing businesses. We also sold our position in Time
Warner. We felt the company had not acted on management's promises to
shareholders to reduce debt and focus the company on the more attractive
programming side of the business. We felt that other companies in the cable
business, such as Comcast, which we still owned at the end of June, were more
committed to recognizing the value of their assets that were not reflected in
the market.

Furthermore, we have built up positions in the United Kingdom cable market with
stocks such as Comcast UK. These companies are introducing the cable business to
British subscribers for the first time, and offering phone service that we feel
is exceedingly competitive with the rival British Telecom offering.

We continue to believe that stock prices follow earnings over time. We have
positioned the portfolio based upon our belief that the earnings growth of the
companies in the portfolio may exceed that of the overall market. Additionally,
the average stock valuation multiple in the portfolio is equal to the market on
1996 earnings and 10%-15% less than the market based on 1997 projected earnings.
Over time, we feel that the market has generally recognized such
inconsistencies.

LIMITED MATURITY BOND PORTFOLIO

OBJECTIVE - To provide the highest level of total return, consistent with
preservation of capital.

NARRATIVE BY THERESA HAVELL & THOMAS WOLFE, PORTFOLIO CO-MANAGERS

The bond market suffered through a rather dismal six-month period through June
30, 1996 as the "bears" took over. Interest rates rose dramatically across the
yield curve as U.S. economic growth rebounded, rekindling fears of future
inflationary pressures. Rates on Treasury securities with maturities of 2
through 30 years rose approximately 1.0%, resulting in negative total returns
for any bonds longer than 3 years. The bulk of the rise in rates occurred during
a two-and-a-half week period beginning in mid-February. The sell-off was
initially triggered by Federal Reserve Board Chairman Alan Greenspan's comments
that economic growth was probably stronger than the market was anticipating. The
subsequent Labor Department report that over 700,000 new jobs were created in
February confirmed the market's fears and drove yields higher. The Portfolio's
return was impacted most heavily by the sharp rise in rates, despite the fact
that we shortened the Portfolio's duration (duration is a measure of the
Portfolio's exposure to interest rate risk) during the first quarter. The
positions in corporate bonds, asset-backed securities and mortgage securities
outperformed Treasuries and offset some of the poor results from Treasury
securities.

We lowered the average portfolio duration from 2.9 years to 2.6 years during
February, and shortened it again to 2.3 years before the end of the first
quarter.  These moves were made in response to our view that

                                       16

   17
 
LIMITED MATURITY BOND PORTFOLIO (CONT'D)

the positive bond market environment that prevailed in 1995 had come to an end
with the dramatic turnaround from the economy's weak fourth quarter 1995
performance. Our view this summer is that while it is yet to be seen if
inflation will re-ignite, the market may continue to push rates higher until
growth slows and some slack in both labor and industrial capacity is created.
With that view in mind, we ended the first half of 1996 with a cautious duration
position of 2.3 years.

We added significantly to our corporate position, increasing our allocation to
54% from 31%. While the corporate bond market as a whole remained relatively
expensive, we were still able to find individual bonds that offered good
relative value. These attractive names tended to be lower investment grade or
just below investment grade credit quality. Our more optimistic view of the
economy was also a key factor in our decision to increase the corporate
allocation in the Portfolio, since we felt many corporations would experience
higher earnings which in turn would ensure bond payments to investors (and
perhaps credit-quality upgrades), reducing the probability of defaults. We
maintained a relatively heavy 23% weighting in asset-backed securities
throughout most of the Semi-Annual Report period, which provided incremental
yield and AAA-rated credit quality. We closely followed the rise in consumer
delinquencies on the collateral backing for these bonds and were convinced that
the credit risk on these issues was extremely low.

Our mortgage position was increased to 6% of the Portfolio by the end of June in
response to our changed view of interest rates in February. Mortgage bonds tend
to hold up better in rising rate environments because homeowners are
less-tempted to refinance their mortgages, a consumer action that often causes
mortgage bonds to prepay and lose value.

We utilized the future market to manage duration during the first half of 1996.
This was done mainly due to our heavy weighting in corporate bonds. We sold
short (a technique used to take advantage of an anticipated decline in the
price) futures contracts on a 5- and 10-year Treasuries as a means of hedging
the interest rate risk on those corporate bonds that provided attractive
incremental yields and also had the potential to increase in price relative to
Treasuries as credit quality goes up. The use of futures to manage interest rate
risk was our main use of derivatives within the Portfolio over the Semi-Annual
Report period.

We believe the U.S. economy is still in excellent shape, and corporate credit
quality may remain at a relatively high level, supporting corporate bond values.
We also believe that interest rates could continue to rise over the near term in
response to what might be a cyclical upturn in inflation. However, we believe
the long-term secular disinflationary trend that we've seen in recent years
remains intact, and eventually bonds should once again provide income and total
return solidly above the levels of inflation.

PARTNERS PORTFOLIO

OBJECTIVE - The Portfolio seeks capital growth through an investment approach
that is designed to increase capital with reasonable risk.

NARRATIVE BY MICHAEL KASSEN & ROBERT GENDELMAN, PORTFOLIO CO-MANAGERS

Two sectors contributed greatly to our strong performance in the six months from
January 1, 1996 to June 30, 1996: finance-related (Insurance, Banking, and
Financial Services issues) and Consumer Non-Durables. Among the finance
categories, insurance stocks such as EXEL Ltd. and CIGNA had some of the best
gains. Many of the food and drug stocks that make up our Consumer Non-Durables
sector, such as IBP Incorporated and Warner Lambert, appreciated in value as
investors purchased stocks of companies that have historically offered
resistance to market declines. Investors tend to gravitate toward food and drug
companies because product demand for food and drug staples stays relatively
constant, regardless of market condition or economic cycle. On the other hand,
some of our technology issues suffered from investors' reaction to falling
computer memory and semiconductor prices, and the possibility of a surplus in
the computer marketplace. We believed some of these issues held long-term
potential based on consumer demand -- regardless of the day-to-day headlines --
and added companies to the portfolio that we felt suffered from investor
overreaction during the broad sell-off. Our Health Care issues, especially HMOs,
which were some of our strongest positions in 1995, also performed weakly during
the Semi-Annual Report period because the entire HMO group was plagued by rising
medical costs and earnings disappointments.

Among Consumer Non-Durables, we bought and sold Pharmacia & Upjohn, a worldwide
pharmaceuticals manufacturer, over the course of the Semi-Annual Report period.
We purchased the stock subsequent to the announcement of a merger proposal. The
merger made excellent business sense and increased the opportunities for both
companies. As the stock quickly achieved its target price, it was profitably
sold.

                                       17

   18

PARTNERS PORTFOLIO (CONT'D)

We also sold Monsanto, a leading chemical company, as it achieved a price level
we thought reflected its fair value. Our intent is to purchase stocks when they
are undervalued and sell them when they appear fairly valued.

We also sold Bowater, but in this case it was on the belief that we made a
mistake. Bowater is a premier producer of paper products, particularly
newsprint. We believed that in light of previously wild swings in demand for
paper -- a cyclical commodity -- companies would act more rationally in their
supply decisions. Instead, several paper producers announced capacity additions
in a weakening economic environment (when demand usually falls off). This had
the effect of driving down pricing at the same time demand appeared to be
weakening.

We bought two stocks on the basis of announced restructuring plans: consumer
goods concern Premark International and Witco, a company which produces a wide
range of specialty chemical and petroleum products. Premark split into two
companies, one for its Tupperware business, the other for its food equipment
businesses. We believed the two businesses had very different capital needs and
that the Tupperware business had impressive growth potential. As part of
Premark, however, it had been used as a source of funds to feed the remaining
businesses. If funded properly, we feel Tupperware has the potential to become
an impressive international consumer products company that will sell at a higher
share price. At Witco, a new chief operating officer was hired from outside the
company specifically to remake Witco into a focused specialty chemicals
operation. This would require extensive expense cuts and a sale of one or more
businesses. If successful, Witco may generate significant free cash flow and
earn a higher share price.

Since our approach involves valuing companies as a businessman would -- asking
ourselves if we'd be willing to buy the entire company at its stock price today
- -- we feel vindicated when our companies are actually purchased by other
companies. During the Semi-Annual Report period, we were fortunate enough to
have several such stocks, including Stop & Shop (which was in our Retail
position) and Loral Space & Communications (a leading Aerospace company).

[LOGO] OPPENHEIMER FUNDS (SM)
OPPENHEIMER VARIABLE ACCOUNT FUNDS

OPPENHEIMER BOND FUND

OBJECTIVE - Primarily seeks a high level of current income from investments in
high yield fixed-income securities rated "Baa" or better by Moody's or "BBB" or
better by Standard & Poor's. Secondarily, the Fund seeks capital growth when
consistent with its primary objective of high current income.

NARRATIVE BY DAVID NEGRI, FUND MANAGER

There were two major factors that contributed to the performance of Oppenheimer
Bond Fund. First, was our defensive decision to keep the portfolio's average
maturity relatively short, and second, was our strategic diversification over a
variety of different types of bonds. A short average maturity was a benefit as
interest rates rose. Since longer bonds are typically the most sensitive to
changes in interest rates, they depreciated the most this year. So, by having a
shorter portfolio, we were able to capture a competitive level of income, but
suffered less in terms of price than some longer-term investments. Our
diversification among different classes of bonds also benefited the portfolio.
In particular, our international bonds performed well, avoiding the difficulties
experienced by most types of domestic bonds. Our mortgage-backed securities also
performed well. As interest rates rose, prepayment risk decreased supporting
mortgage bond prices. Mortgage-backed securities also pay very competitive
income, which benefited the portfolio.

While the Fund's short average maturity and high degree of current income helped
to offset the negative price performance of the general bond market, our
Treasury securities performed poorly in comparison with our other holdings.
Still, at only half of our U.S. government bond allocation, and with
shorter-term maturities, we were able to limit their potentially negative
impact.

As we move through the second half of the year, we will continue to work on
capturing as much income as possible. Because we believe the economy is
relatively healthy, we will continue to focus on corporate bonds. In particular,
we believe there is great potential to be found in bonds issued by financial
services firms

                                       18

   19


OPPENHEIMER BOND FUND (CONT'D)

and oil- and gas-related businesses. Within the financial services industry,
companies with ongoing consolidations should improve balance sheets and
profitability, while in the oil and gas industry, technology stocks are
experiencing improving profits.

We also believe that foreign government bonds offer greater income and relative
value than domestic government bonds, so we'll continue to emphasize the bonds
of developed nations where we see compelling yield and total return
opportunities.

Finally, we continue to favor mortgage-related securities over Treasuries, and
have been adding to our holdings in private label mortgages. Because these are
loans underwritten by banks rather than the federal government, in general they
tend to offer higher yields than similar securities.

Looking forward, we think the Fund will continue to do well because of its
strategic positioning. Currently, we expect that economic growth in the U.S.
will continue, though it may not necessarily accelerate. In this type of
environment, it's difficult to imagine the Federal Reserve will cut interest
rates, so it's hard to imagine another bull market like the one we experienced
last year. In light of our outlook on the economy, we will continue to position
the portfolio around income opportunities and avoid taking on unnecessary
interest rate risk. By investing in quality bonds, with an attractive
inflation-adjusted real rate of return, we expect to provide investors with
relative price stability and competitive income going forward.

OPPENHEIMER GLOBAL SECURITIES FUND

OBJECTIVE - Seeks capital growth by investing in a diversified portfolio of
foreign and domestic stocks.

NARRATIVE BY WILLIAM WILBY, FUND MANAGER

Oppenheimer Global Securities Fund has performed well over the past six months.
Using our theme-driven investment approach, we turned in results that were
better than most of our competitors. Even so, it was difficult for global funds
to compete with the outstanding returns from the U.S. market over the period. As
the domestic market has continued to evolve, however, we are beginning to see
evidence of a shift toward international stocks. The long-term potential for
growth may be greater in international stocks than it is in the U.S. market,
especially at current valuation levels.

Because of the strength in the domestic market and where we were positioned
within it, our U.S. holdings performed extremely well over the period. One of
our largest concentrations within domestic stocks was in the technology sector.
And just as technology led the U.S. market, our efficiency-enhancing technology
theme led the portfolio. Our Japanese technology companies performed
particularly well, as Japan began to climb out of a five year recession. In
fact, our Japanese technology stocks have appreciated to the point that we think
they're slightly expensive now. As a result, we've been selling Japanese and
buying U.S. technology again.

On the negative side, toward the end of 1995 and into 1996, we thought European
cyclicals companies -- the economically sensitive chemical, automotive, and
industrial companies -- had become overly discounted as a result of slow 
European economic growth. We felt that their reduced prices would allow us to 
buy them while they were good values and then participate in their gains as 
local economies improved. However, western Europe growth has remained somewhat
subdued, so these companies have not yet returned to favor.

After the huge rally in U.S. stocks, we've cut back on our domestic holdings
slightly. While we believe the outlook for the U.S. market remains favorable, we
believe there may be better opportunities overseas at this time. As such, we've
reduced our domestic allocation to 43%, down from a high of 49%.

Recently, we've also been buying some gold stocks, both as part of our natural
resources theme and to help diversify the portfolio. Gold stocks look like a
good investment right now for several reasons. First, gold production worldwide
is below what is needed to meet current demand, particularly due to the
increased demand for jewelry from the emerging markets. And because gold may be
a good hedge against -- both inflation and deflation -- demand from investors
could increase.

We expect the remainder of the year will be good for us. Since our market lagged
somewhat during 1995, we've been able to buy what we believe are excellent
stocks at good prices, and that should give us an extra push when the U.S.
market returns to favor. We think the Fund's portfolio, invested as it is in
high growth potential stocks, continues to offer investors an outstanding
opportunity both for diversification and long-term appreciation potential.

                                       19
   20

OPPENHEIMER MULTIPLE STRATEGIES FUND

OBJECTIVE - Seeks a total investment return (including current income and
capital appreciation in the value of its shares) from investments in common
stocks and other equity securities, and "money market" securities. The current
allocation of the Fund's portfolio aims to take advantage of current economic
conditions while managing risk.

NARRATIVE BY RICHARD RUBINSTEIN, FUND MANAGER

The Multiple Strategies portfolio delivered solid results for the past six
months. Its performance can be attributed to both the benefits of an investment
strategy designed to work well under a variety of conditions and the continued
strength of the domestic stock market and our diversified approach to bonds.

Our domestic stock holdings, which included large positions in technology and
healthcare stocks, performed well for us even as earnings momentum in general
began to slow. These companies are positioned to grow rapidly regardless of the
overall U.S. economic growth rate, and as a result, they were very much in
demand with investors. In addition, our bond allocation decisions helped
performance as we moved away from government bonds to seek the more competitive
returns of high yield, lower rated bonds.

And, while the Fund's international equity holdings contributed less to the
portfolio's total return than did its U.S. stock component, our broad
international diversification helped us maintain a low risk profile. And
although our foreign stock holdings failed to meet our expectations this period,
our philosophy for including these securities in the portfolio is that they may
help limit overall portfolio risk. However, over the long-term they offer the
potential to add to performance.

As we position the portfolio for the remainder of the year, we have looked at
current economic factors and reallocated the portfolio's assets to a more
conservative mix. The combination of slowing U.S. corporate earnings momentum,
high valuations and an increase in interest rates of over 100 basis points, led
us to make some strategic changes. These changes resulted in a decrease in our
total equity holdings by about five percent as well as a decrease in our total
number of securities. At the same time, we increased, on a percentage basis,
those holdings we believe are best positioned for the future. Our expectation is
that the stock market will continue to become very selective, and these changes
may be to our advantage.

More specifically, we continued to focus on growth stocks that are issued by
companies with strong competitive positions and consistent earnings. We also
recently added to our position in energy stocks. These stocks tend to sell at
low prices relative to cash flows. With energy prices on the rise, we believe
they offer reward potential.

A strong part of our overall strategy involved a contrarian approach to
investing. Using this approach we looked for opportunities in out-of-favor
industries and companies on the rebound. Recently, we bought retail stocks.
Though sales have suffered from consumer uneasiness, these companies still have
attractive store economics. As a result, we think their prospects look good.

On the international side, we increased positions in companies having
comparative advantages over the U.S. competitors or that sell at valuation
discounts. We located companies offering such advantages in Argentina, Turkey
and the Far East, as well as in several more established European markets, and
invested in those firms.

Going forward, our long-term outlook is positive, in spite of the increased
volatility experienced by the stock market during the first half of 1996 and the
risks of foreign investing and of high yield bonds, described in the Fund's
prospectus. We feel the portfolio's diversification may help it ride the current
market waves and continue to offer excellent opportunities for the long-term
investor.

                                     [LOGO]
                                  STRONG FUNDS

STRONG VARIABLE INSURANCE FUNDS, INC.

STRONG DISCOVERY FUND II

OBJECTIVE - To seek maximum capital appreciation through investments in a
diversified portfolio of securities.

NARRATIVE BY RICHARD STRONG, FUND MANAGER

In managing the Strong Discovery Fund II, we strive to provide our investors 
with long-term capital growth.

                                       20

   21
 


STRONG DISCOVERY FUND II (CONT'D)

We pursue our goal by investing primarily in the stocks of well-managed, small-
and mid-cap growth companies, with a core commitment to large, established
companies to provide stability and diversification. To identify attractive
investments, we employ a thorough research process that includes on-site visits
to the companies in which we invest, and frequent discussions with management,
suppliers, customers and competitors.

On a personal level, I try to add value by drawing on over 30 years of
investment experience. Through the course of my career, I've seen just about
every type of financial market behavior, from euphoria to utter negativity and
back again. At times, emotion can feed on emotion, driving market cycles beyond
the highs and lows dictated by fundamental value. Historically, when it appears
the market has gotten ahead of itself, we've taken defensive positions to help
protect capital. The six-month period ended June 30, 1996, was one of those
times.

THE MARKET SWITCHES GEARS

The year began with investors basking in the glow of a great 1995. The S&P 500
had gained over 37%, fueled by declining long-term interest rates and
skyrocketing corporate profits.

Late in 1995, however, it appeared to us that the economy was slowing,
increasing the likelihood that corporate earnings would come under pressure, and
that interest rates would trend still lower. These factors suggested that bonds
were becoming more attractive relative to stocks, and therefore we began to
increase our bond exposure, culminating in a 36% allocation to long-term
Treasury bonds by the end of January. In February and March, however,
surprisingly strong economic indicators suggested that the economy's growth
might be accelerating rather than slowing. At that point, bonds began losing
ground while stocks pushed higher. In response, we reallocated assets back to
the stock market, but as a result of the prior misallocation and our reduced
exposure to common stocks during the market's rally, the Fund posted a
disappointing return for the first six months of the year, versus the broader
market's gain of 10.10% as measured by the S&P 500.

THE IMPORTANCE OF FOCUS . . .

The Fund's charter gives us the flexibility to allocate assets away from stocks
when we believe it is appropriate. That said, our true strength has always been
stock selection. We are stock pickers through and through -- it's who we are and
what we do -- and we believe our highly-developed stock selection process gives
us the greatest opportunity to achieve attractive investment results over the
long-term.

While market conditions may occasionally prompt us to adopt a defensive
position, we intend to focus on our stock selection process, honing the skills
that have proven their value over time. That means . . .

o    VISITING HUNDREDS OF COMPANIES A YEAR, using our ability to judge character
     in talks with each firm's management, suppliers and competitors as we
     separate those who succeed from those who merely try.

o    EMPHASIZING SOLID FIRMS that offer what we call "razor relationship," in
     that their products are used by consumers on a regular basis, resulting in
     a predictable pattern of growth and earnings.

o    MAINTAINING A BROADLY DIVERSIFIED PORTFOLIO that offers the powerful growth
     potential of small- and mid-sized companies, but is built on a bedrock of
     large, established firms.

We believe it's this diligent approach that offers the most potential as we
pursue our goal of long-term capital growth.

 . . . AND THE IMPORTANCE OF PERSPECTIVE

Earlier this year, the emotions of the market drove prices to unreasonably high
levels. Now, with interest rates having moved up, investors are trying to
evaluate the ability of corporate America to sustain earnings. As a result,
emotion may drives prices down to unreasonably low levels. To guard against
this, nearly 10% of the portfolio was positioned in cash and equivalent
instruments at the end of June.

These near term concerns aside, we encourage you to keep the market's volatility
in perspective. Stocks have always had their cycles, and they always will. What
matters most is the overall economic picture, which appears positive for stocks.
The Federal Reserve seems determined to maintain a balance of growth with low
inflation regardless of who is in the White House.

Moreover, we expect the nation's savings rate to increase as baby boomers begin
saving for retirement, which should provide a solid flow of capital into the
stock market for years to come. And, when we factor in the growth of capitalism
and free market economies around the world, and the likelihood that global
competition will keep inflation subdued, we are encouraged by the prospects for
growth stocks over the next several years.

For our part, we will continue to use our disciplined investment process and our
vigorous research as we strive to add long-term value for our shareholders.

                                       21

   22

STRONG INTERNATIONAL STOCK FUND II

OBJECTIVE - To seek capital growth. The Fund invests primarily in the equity
securities of issuers located outside the United States.

NARRATIVE BY ANTHONY L.T. CRAGG, FUND MANAGER

By investing primarily in the stocks of companies based outside the United
States, the Strong International Stock Fund II pursues capital growth. The Fund
provides convenient access to growth opportunities worldwide and, when added to
a domestic portfolio, will increase diversification while providing the
potential for higher returns compared to a U.S.-only portfolio.

The slow, steady recovery in international markets we saw in 1995 continued
during the first half of this year. However, except on an individual country and
stock level, performance was somewhat muted during the second quarter. Global
markets as a whole -- as measured by the MSCI EAFETM Index -- gained 4.52% over
this six-month period.

Our accuracy in selecting the more attractive markets -- and the more attractive
stocks in those markets -- contributed to the Fund outperforming the Index by a
broad margin.

At mid-year, assets under management in the Strong International Fund II
approached $50 million -- up from $1.8 million at the beginning of the year -- 
and the Fund held 191 stocks.

European economies generally tended to lag that of the U.S. during the first
half of the year, although the dollar's strength helped to improve their export
competitiveness. The Fund benefited, in particular, from holdings in Italy (3.9%
of net assets) and Spain (3.0% of net assets), which gained 13.2% and 14.4%,
respectively, for the six months through June.

Economic growth remained impressive in Asia, although the picture there also was
mixed. Concerns about inflation and overheating generally depressed investor
sentiment, while mainland China's aggressive posturing toward Taiwan -- and to a
lesser extent Hong Kong -- fueled some political worries. The area's best
performers included Taiwan, the Philippines, and Malaysia, which posted gains of
37.0%, 19.5% and 16.2%, respectively. The only Asian countries in negative
territory so far this year have been South Korea, whose market lost 14.6%, and
Thailand, which was down 0.4%.

Among emerging markets, Poland was the big winner -- gaining 52.0% over this
six-month period. Despite the dramatic differences among worldwide markets, we
retained our "bottom up" approach by attending to country weightings only after
first identifying value in individual companies.

Attention has returned to the international markets this year as investors who
previously kept their funds invested solely in U.S. stocks have been more
inclined to plug into the faster growth rates in international and emerging
markets. We expect to see a more general pick-up in international markets in the
second half of the year which, together with the value added by rigorous
attention to stock selection, we believe will produce returns superior to the
U.S. markets.

Shareholders should keep in mind, however, that the Fund is likely to be more
volatile than a U.S.-only fund, due to changes in stock-market conditions,
currency values, interest rates, local regulations and economic and political
conditions. But given the value currently available in international markets, we
believe foreign equities offer long-term investors an attractive opportunity.

STRONG SPECIAL FUND II

OBJECTIVE - To seek capital appreciation through investments in a diversified
portfolio of equity securities.

NARRATIVE BY RICHARD WEISS & MARINA CARLSON, FUND MANAGERS

In pursuit of capital growth, the Strong Special Fund II invests at least 80% of
its total assets in equity securities. It currently emphasizes medium-sized
companies that the Fund's advisor believes are under-researched and attractively
valued.

Despite a difficult June, the stock market turned in a good performance over the
first half of the year. The broad market, as measured by the S&P 500 Index,
gained 10.10% for the six months ended June 30, while the S&P 400 MidCap Index
posted a slightly lower gain of 9.21%.

A slow-growing economy early in the year prompted the Federal Reserve Board to
lower short-term interest rates in January, but the announcement of February's
unexpectedly large increase in jobs set the slow-growth scenario on its head.
Other signs of renewed growth followed -- including price increases

                                       22


   23

STRONG SPECIAL FUND II (CONT'D)

in several key commodities -- and prompted some economists to predict the return
of higher inflation. The Fed, however, declined subsequent opportunities to
increase rates further, and signs of renewed inflation have been elusive.

Given this scenario, we entered the second quarter with a slightly more
defensive portfolio. Consequently, the Fund did not realize the gains that many
higher priced growth stocks produced in April and May -- when small- and mid-cap
stocks produced some very impressive gains. However, our defensive stance
protected the Fund from some of the sharp price declines experienced in June.
The Fund also benefited from an overweighted position in the energy sector, as
many oil service and oil and gas exploration and production companies performed
well during this period.

We believe that much of this market's increase has been momentum-driven,
stimulated by a surge of cash into mutual funds. Despite the momentum, we remain
committed to a consistent investment approach and will continue to evaluate
existing and prospective holdings by analyzing their "private value." That
simply means that we evaluate companies as if we were private buyers --
determining how much we would be willing to pay to own the entire company. In
doing so, we have a disciplined way to view the company's inherent value and
impartially evaluate potential winners and losers.

We look at underfollowed stocks -- those with low institutional ownership and   
low analyst coverage -- because we believe they tend to be undervalued by the
market. We look at unpopular, or "quiet," sectors because we think that, in a
market increasingly dominated by institutions, unpopular sectors can yield
superior returns. And now, more than ever -- given higher stock valuations --
we believe it is essential to thoroughly understand the dynamics of each
individual stock.

We are somewhat cautious going into the second half of the year as the general
market appears to be fairly valued, and we don't expect to see stock valuations
rise across the board. We look for corporate profit margins to begin to get
squeezed, and believe that only the best management teams will be rewarded with
higher stock prices.

Consequently, the quality of management will be increasingly important to a
company's ability to perform well during the second half of the year. We intend
to focus on individual stock selection, and to place emphasis on underfollowed,
growing firms selling at significant discounts to their private-market values.

                                     [LOGO]
                                   TWENTIETH
                                    CENTURY

A MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS.

TCI BALANCED

OBJECTIVE - To seek capital growth and current income.

NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.

TCI Balanced compiled a total return for the six-month period ended June 30,
1996, which slightly trailed its benchmark blended index, which posted a 6.0%
return. The blended index combines the S&P 500 and the Lehman Brothers
Intermediate Government/Corporate Index.

TCI Balanced is a blended portfolio. Its approximate 60% stock position is
compiled using Twentieth Century's focus on earnings and revenue growth and is
managed to provide long-term opportunities for capital growth. Income is derived
from an approximate 40% stake in government and corporate bonds.

The equity portion of the fund has been hurt by its orientation away from the
defensive stocks that the market favored in June. As investors anticipated
disappointing corporate earnings reports, they moved to stocks with steady
earnings, not the accelerating growth stocks the fund's management team prefers
for TCI Balanced. We believe, however, that over time the companies with the
above-average earnings growth that the team seeks on your behalf will perform
well.

Our search for companies that meet our earnings growth criteria led us to energy
stocks, which were the largest contributor to total return. The industry has
increased exploration activity significantly, resulting in an extremely strong
market for drilling rigs and other oil service equipment. Oil and gas producing
companies also are benefitting from strong commodity prices and higher
production volumes. The portfolio's hold ings of energy stocks increased from
3.8% to 9.6% over the six months ending June 30, 1996.


                                       23


   24

TCI BALANCED (CONT'D)

The fund has also followed earnings into pharmaceutical stock holdings, moving
from a 4.9% position at year-end to 11.6% six months later. Profits in the
pharmaceutical sector have been boosted recently by a stream of new products,
which in general provide more effective treatments than existing remedies and
are usually patent protected, yielding strong profit margins.

The fund's bond portion reflected recent declines in U.S. bond prices. During
the first six months of 1996, bonds traded up to their highest prices since this
latest interest rate cycle began, then reversed course. Bond prices at the
beginning of the year had anticipated in the deflationary benefits of a federal
balanced-budget agreement and rate-cutting moves by the Federal Reserve. Neither
was forthcoming.

During declining markets, the duration of the bond portion is shortened in a
defensive move. Accordingly, the fund's management team shortened the duration
of the bond portfolio in February and have kept it short since then.

TCI Balanced continues to pursue its original goal of providing shareholders
with the opportunity to invest in a portfolio of growing companies while using
bonds to reduce share-price fluctuations along the way.

TCI GROWTH

OBJECTIVE - To seek capital growth by investing in common stocks (including
securities convertible into common stocks) that meet certain fundamental and
technical standards of selection and, in the opinion of the Fund's management,
have better than average potential for appreciation.

NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.

The performance of TCI Growth during the six months ended June 30, 1996, has
lagged both the market and Twentieth Century's expectations for its growth
funds. Accordingly, a new management team assumed responsibility for the fund
effective July 1.

The team is led by Glenn Fogle, vice president and portfolio manager, who has
been with Twentieth Century since 1990. In addition to TCI Growth, this team
also manages Giftrust Investors and Vista Investors, two Twentieth Century funds
that have notable long-term records.

In our view, TCI Growth's lagging performance can be attributed to inconsistent
implementation of our investment process. Proper execution of our time-tested
approach demands an emphasis on accelerating growth stocks. Additionally, our
portfolio construction process is based on the notion of adding to "winners" and
quickly selling "losers." It is our belief that if our stock selection is
accurate, these more concentrated portfolios should be able to generate more
robust performance than a more broadly diversified portfolio would. The new
management team will be much more focused on these critical variables.

TCI Growth's mission remains the same -- to continue to invest in growing
companies of all sizes for investors seeking capital growth. To meet that
objective, the fund identifies companies with earnings and revenue acceleration.
We believe that such an approach has the potential to provide attractive returns
over the long run. We are confident that the measures we have taken to
reinvigorate this fund will make a noticeable difference over time.

TCI INTERNATIONAL

OBJECTIVE - To seek capital growth by investing primarily in an internationally
diversified portfolio of common stocks that are considered by management to have
prospects for appreciation.

NARRATIVE BY TWENTIETH CENTURY COMPANIES, INC.

TCI International posted a total return for the six months ended June 30, 1996,
that was nearly double the 3.9% for the fund's benchmark index, EAFE. The strong
relative performance of TCI International vs. the index was in part a result of
our stock selection discipline and the fact that the fund held a relatively
smaller percentage of Japanese securities, which lagged during the period, than
the EAFE Index. TCI's largest country weighting continued to be Japan, with 26%
of the fund's assets at June 30. Japanese stocks make up approximately 40% of
EAFE. Economic recovery in Japan helped produce significant earnings growth in
the companies TCI International holds. However a sell-off in June in the
Japanese market dampened returns. In addition, the dollar rallied against the
yen, diminishing Japanese stock returns in U.S. dollars.

Much of the fund's gains came from earnings growth in European and emerging
markets holdings. During the last six months the fund's management team added
investments in French and German stocks, 


                                       24


   25

TCI INTERNATIONAL (CONT'D)

which together made up 14.6% of the fund's portfolio at June 30, 1996, compared
to 7% at Dec. 31, 1995. Many companies in France and Germany are undergoing
restructuring and cost-cutting similar to what we've seen in the U.S. since the
late 1980's, providing numerous opportunities for earnings growth.

The management team is also selecting stocks in the food, beverage and consumer
goods category, where 10% of the fund was committed at June 30, up from 4% six
months earlier. The team is finding that retail stocks are strong in Europe as
investors move to defensive positions.

TCI International celebrated its second birthday in May. It has outperformed
EAFE since inception and we believe there are good prospects for continued
strong performance as overseas investing increases. In the first quarter of
1996, investors poured $11.8 billion into U.S.-based international mutual funds,
compared to $322 million in the first quarter of 1995. Twentieth Century
believes the exporting of our long-held growth investing philosophy carries
significant investment potential for investors.

                                     [LOGO]
                                 VAN ECK GLOBAL
                             THE UNUSUAL FUNDS(SM)


GOLD AND NATURAL RESOURCES FUND

OBJECTIVE - To seek long-term capital appreciation by investing in equity and
debt securities of companies engaged in the exploration, development, production
and distribution of gold and other natural resources, such as strategic and
other metals, minerals, forest products, oil, natural gas and coal.

NARRATIVE BY DEREK S. VAN ECK, PORTFOLIO MANAGER

We are pleased to report that the Van Eck Gold and Natural Resources Fund was up
through June 30 as many hard asset sectors performed well on strong economic
growth through much of the world during the first half of 1996. In addition, the
Fund has outperformed the S&P 500, which rose 10.1% and the Ibbotson Hard Assets
Index, which rose 5.75% over this period.

ECONOMIC REVIEW AND OUTLOOK

During the first six months, economic growth in the U.S. surprised market
participants with its vigor and investors continually marked up projections for
GDP growth and inflationary expectations. Thus, investors' expectations of
Federal Reserve interest rate policy changed from an expectation of interest
rate cuts to a 50 basis point increase in the federal funds rate by the end of
December. Economic growth was also stronger-than-anticipated in Japan where
first quarter GDP growth increased over 12% on an annualized basis. In Europe,
however, economic growth was lower-than-anticipated, with growth rates at only
modest levels. Strong economic growth continued in the emerging countries of
Asia and Latin America.

Going forward, we continue to believe that the economic environment is favorable
for hard asset performance. We believe global economic growth will continue to
accelerate modestly, and we broadly agree with the recently-released
International Monetary Fund (IMF) estimates of accelerating global growth from
3.5% last year to 3.8% this year and 4.3% in 1997 (despite differences in
regional economic growth, with the U.S. and Japan running at a healthy 2.5%
estimated growth rate, while Germany's economy is growing at a more modest
0.8%). Signs of healthy growth include growth in leading economic indicators,
positively sloped yield curves in major industrial economies, and a stimulative
monetary policy as measured by 25% annual growth rates in G7 monetary reserves.
These growth estimates are consistent with our view that the inflation rate in
the U.S. has troughed and will rise modestly in the coming year. In Japan and
Germany, although inflation rates are presently rising, they are likely to be
muted in the coming year. We expect growth rates in the developing economies to
continue to be exceptionally strong in Asia and to strengthen further in Latin
America.

SECTOR REVIEW AND OUTLOOK

The energy sector performed well during this period and we expect good
performance to continue, albeit in selected sectors. While some investors
anticipate oil price declines over the remainder of the year, we believe oil
prices will remain strong, and may in fact rise. Consensus demand forecasts have
consistently underestimated demand and, in our view, commodity markets will not
see Iraqi oil until September at the earliest. This suggests that any supply
disruptions could cause significant upward movements in the oil prices. An
example of this occurred this past spring as low oil inventories, caused by the
adoption of "just-in-

                                       25


   26

GOLD AND NATURAL RESOURCES FUND (CONT'D)

time" inventory practices, combined with strong demand, stemming from an
unexpectedly cold winter in the Northeast, led to crude oil prices rising to
over $25 per barrel. The market fell from those levels but stabilized at $20 per
barrel despite news of renewed Iraqi supply. Commodity fundamentals for natural
gas also remain strong, but we continue to believe that the natural gas
producers are a better investment. Approximately 15% of the Fund is allocated to
exploration and production companies which will benefit from this strong pricing
environment. Our top holdings include Louisiana Land and Exploration, Triton
Energy and United Meridian Corporation. Your portfolio also continues to hold
deep-water offshore drilling companies and oil service companies as
supply/demand fundamentals remain strong and offshore rig-leasing rates continue
to climb.

In the base metals markets, the primary focus has been the Sumitomo copper
scandal. The Fund generally sidestepped the scandal and the associated copper
price crash since it had only indirect exposure to copper-related equities. Our
fundamental view on copper had been bearish for some time, with supply growing
at nearly four times demand, and we found much better value in other base
metals, particularly aluminum and other diversified equities. We believe recent
weakness in many base metal prices stem, at least in part, from "knock-on"
impacts from the copper scandal and that current levels represent good value.
This value, combined with our view that demand should increase during the second
half of 1996 and in 1997, should result in higher prices. Therefore, base metals
may be an important driver of the Fund during the last half of the year. Our top
holdings in the sector include Western Mining Corporation, a large diversified
mining company based in Australia and Reynolds Metal Corporation, one of the
largest aluminum companies in the world.

Gold shares completed a round trip during the first six months of the year. The
year started with a bang as gold jumped to over $415 per ounce in early February
and gold shares rose over 25%. That ascent was retraced with most of the decline
occurring during June when gold shares turned in their worst performance in 18
months. The Fund's exposure to gold ranged from a high of 55% to a low of
approximately 40% during the first half of the year, ending the second quarter
with a 48% allocation. Fundamentally, we believe gold is attractive based on its
commercial supply/demand gap. In addition, we believe investment demand will
increase as central banks engage in monetary "reflation" (or "easy" monetary
policy) and competitive currency devaluation. On the other side of the ledger,
central bank sales and mining company hedging programs have put pressure on the
gold price. It's virtually impossible to predict when these sales will end, but
recently some mining companies have announced reversals of hedging programs,
which we believe is a bullish indicator.

False start. Those two words describe the recent action in paper shares. The
equity market had begun to anticipate price increases in many paper grades over
the past several months. However, during June, information was released that
suggested that commodity price increases were going to be postponed until 1997
and paper shares declined. While valuations are extremely cheap in the paper
sector, we continue to position the Fund defensively. Our allocation has been at
or below 5% of total assets so far this year. In addition we have concentrated
the portfolio in defensive holdings such as tissue company Fort Howard and
cellulose pulp producer Buckeye Cellulose.

In the real estate arena, market fundamentals in the U.S. continue to improve,
particularly in the hotel, suburban office and industrial sectors, where
occupancy levels and rate growth are strong. Apartment markets nationwide are at
supply/demand equilibrium but select markets are experiencing imbalances due to
development restrictions which are preventing supply from keeping up with job
growth. Retail real estate continues to suffer as the nation is still
"over-stored". Internationally, strong GDP growth is driving record development
activity in China and South East Asia. The Hong Kong market is showing signs of
strength as the colony prepares for 1997, while Singapore's recently enacted
anti-speculation moves have cooled the markets. Europe continues to be sluggish,
reflecting the overall economy. We believe that real estate can continue to
provide consistent returns and acts as a portfolio stabilizer to other sectors
in the Fund.

We continue to emphasize the role of hard assets as an excellent portfolio
diversifier and complement to traditional investments. We believe the outlook
for the sector overall is very favorable, particularly given strong growth and
increasing demand for hard assets.


                                       26


   27

WORLDWIDE BOND FUND+++

OBJECTIVE - To seek high total return through a flexible policy of investing
globally, primarily in debt securities.

NARRATIVE BY MADIS SENNER, FUND MANAGER

After achieving exceptional returns in 1995, the U.S. bond market retreated
during the first half of 1996 as economic growth proved stronger than expected.
European bonds overall achieved very moderate returns, but U.S. dollar strength
versus most currencies continued, lowering gains for U.S. investors.

BOND MARKET REVIEW

After a final cut in the Federal Funds target rate in the first quarter, U.S.
economic growth indicators came in stronger than expected and interest rates
began to rise. Rates on long-term Treasury bonds, for example, rose from 6.15%
at the beginning of the year to 7.0% by March 31, having a negative impact on
bond prices. In anticipation of continued growth and doubtful that the Federal
Reserve would continue the rate-cutting trend that begin in 1995, we adopted a
defensive position in the beginning of the year, favoring short-term bonds and
lowering the Fund's duration to approximately 3.0 years. We also decreased the
Fund's U.S. bond position somewhat.

In Europe, sluggish economic growth and a low inflation scenario (an ideal
environment for bonds) prompted interest rate reductions, and most European
markets achieved moderately positive returns in local currency terms. The
peripheral markets, such as Italy, Spain and Sweden, outperformed the core
European bond markets for the first six months of the year, providing very good
returns (in both local currency and dollar terms) as those countries continued
to get their fiscal affairs in order to meet the terms for European Monetary
Union (EMU) in 1997, and their bond yields converged further toward those of
their core neighbors. In the beginning of the second quarter, in anticipation of
these moves, we began to reduce core bond positions, such as the Netherlands and
Denmark, while increasing the Italian bond position and maintaining the Spanish
bond allocation.

We added substantial Canadian and UK bond positions to the portfolio during the
first half of the year, both of which have witnessed good performance recently,
although gains for the first six months were slight. The Canadian government
remains on track to eliminate the budget by 2000. The UK appears to have already
discounted a probable Labour Party victory in the upcoming elections and UK
bonds have benefited from some investors' skepticism regarding the success of
EMU.

We liquidated the Fund's already slight position in Japanese bonds early in the
first quarter, given expectations for a strong economic recovery after a
long-lived recession. Although economic growth rates were indeed high in the
first half (estimated at an extraordinary 12% for the first quarter on an
annualized basis), bond buying by the Bank of Japan has supported prices despite
fears of interest rate hikes. Japanese bonds showed flat performance for the
first half in local currency terms (with negative returns in dollar terms).

CURRENCY REVIEW

The U.S. dollar continued its climb against most major foreign currencies. This
strength rendered many positive bond returns negative for U.S. investors. As a
defensive measure, we have maintained a relatively large U.S. cash (and cash
equivalents) position in the Fund.

THE OUTLOOK

Going forward we expect continued strong global growth as Japanese reflation and
European monetary easing take hold. Given this outlook, in our opinion, it will
continue to be a challenging year for bonds, and thus, we remain defensively
positioned with a fairly high cash allocation and a low duration. (Our
perceptions of global growth, however, should be tempered by the fragility of
the global recovery, particularly to shocks such as stock market declines or
another EMU (European Monetary Union) scare.) As for currencies, the dollar
could come under pressure as European and Asian economies gather steam relative
to the U.S., and we are prepared to maximize exposure to foreign currencies
should their strength re-emerge.

                       [VAN KAMPEN AMERICAN CAPITAL LOGO]

REAL ESTATE SECURITIES FUND

OBJECTIVE - To achieve long-term growth of capital through investing in publicly
traded real estate securities. Current income is an important secondary
consideration.

NARRATIVE BY VAN KAMPEN AMERICAN CAPITAL

We seek to achieve our objective by creating a diverse portfolio of real estate
investment trusts, or

+++Formerly Global Bond Fund

                                       27


   28

REAL ESTATE SECURITIES FUND (CONT'D)

REITs, and real estate companies. REITs are companies that own, acquire, develop
and manage real estate. They are no different from any other operating company.
For example, while General Motors is in the business of manufacturing and
selling autos and trucks, REIT companies are in the business of real estate.

Before picking the stocks for our portfolio, we first decide which property
sectors are most attractive from a supply/demand point of view; then, we must
also ascertain which geographic regions within that sector are exhibiting the
best real estate fundamentals. At that point, we choose the stocks that are
characterized by having the best valuations and growth prospects.

As of June 30, 1996, the portfolio was comprised of about 40 companies and 10
different property sectors. Our three largest property sector weights are retail
at 28%, office/industrial at 22% and apartments at 17%. About 40% of the
portfolio is comprised of companies with a nationwide focus. Another 15% of the
portfolio is made up of stocks in the western portion of the U.S.

Our performance over the 12 months, ending June 30, 1996, was good relative to
the REIT market and peer group of dedicated REIT funds. We would attribute our
good performance to our overweighting in the office/industrial and hotel sectors
for most of the time period under review. In addition, we added to our retail
exposure in the beginning of 1996, because this group had been punished in a
depressed retail environment. This sector has performed well of late and added
handsomely to our recent performance.

We would note, however, that in the same time period, REIT performance was
outstripped by the dramatic performance of the S&P 500. In our opinion, the
extreme performance of the broader market indices is an anomaly, not the norm.
We would expect REIT shares to provide low to mid-double digit returns over the
long term, which in a market correction, could be attractive. We would also note
that the risk level of that performance is lower than that of the broader market
as a greater portion of it is composed of income. Of course, even though the
Fund does not invest directly in real estate, an investment in the Fund
generally will be subject to the risks associated with real estate because of
its policy of concentration in the securities of companies in the real estate
industry.

As mentioned above, we would expect REIT shares to provide low to mid-double
digit returns over the next 12 months. If valuations remain the same, 8-10% cash
flow growth should provide a similar level of price appreciation in REIT shares
with yield providing the remainder of their total return. We feel comfortable
with these numbers as real estate fundamentals continue to be attractive. Many
sectors continue to experience limited new supply with the result being greater
occupancy and higher rental rates. We feel this group of stocks could act
defensively in a market correction due to the reasonable valuation level as well
as the attractive yield. Our concern with this group of stocks is the economy. A
growing economy fuels the demand for space. Were our economy to drift into a
recession, (we are not predicting this) our growth rate assumptions would be too
high.

                              [WARBURG PINCUS LOGO]

INTERNATIONAL EQUITY PORTFOLIO

OBJECTIVE - Seeks long-term capital appreciation by investing in equity
securities of non-U.S. issuers.

NARRATIVE BY WARBURG PINCUS FUNDS

Foreign equity markets, with few exceptions, continued to advance in the second
quarter of 1996, building on momentum established in the year's first three
months. By region, the strongest showing belonged to Latin America, though
European and Asian-Pacific markets also enjoyed solid gains. The Portfolio
benefited from this broad-based strength and from timely stock selection,
particularly in the case of Japan, the Asian-Pacific region's heavyweight and
the Portfolios' single-largest country weighting (30.5% of the portfolio as of
June 30).

JAPAN

Most, if not all, of the recent data on the Japanese economy have strengthened
our conviction that the country remains well on the road to recovery. Dramatic
evidence of such came in the form of a 3% rise in gross domestic product in the
first quarter (which translated into an annualized growth rate of 12.7%), the
fastest quarterly growth in 23 years. While the magnitude of the gain is
attributable, in part, to statistical factors, the message is clear: the worst
of Japan's economic woes are, in large measure, behind it, and the recovery is
on increasingly solid footing.


                                       28


   29

INTERNATIONAL EQUITY PORTFOLIO (CONT'D)

Particularly encouraging is the rebound in consumption. Japan's consumers have
rediscovered their propensity to spend, reflected in a 6.6% rise in
department-store sales in the first quarter, with especially strong demand for
durable goods (e.g., automobiles and computers). We believe that demand will
remain strong in the months ahead, noting as evidence the general reduction in
discounting among retailers and the concurrent growth in credit-card use among
consumers. This buoyancy in demand should do much to compensate for the
diminishing impact of earlier government stimulus packages.

Another bright spot in the Japanese economy is capital spending. Japanese
companies continue to revise upward their capital-spending budgets, spurred by
recovering profits and higher rates of capacity utilization. We estimate a 10%
year-over-year rise in capital spending in fiscal-year 1996 (the 12 months ended
March 31, 1997), and our recent company visits have given us added confidence in
our projection.

The Portfolio is well-positioned to benefit from the resurgence in these two
areas, with concentrations in the retail and machinery & industrial-components
sectors. Examples of the former that did well for the Portfolio during the
second quarter are Jusco and Uny (1.0% and 0.6% of the portfolio, respectively,
through June 30), two leading supermarket chains whose earnings have climbed
along with the pickup in demand. Examples of the latter include Mitsubishi Heavy
Industries (1.3%), a diversified manufacturer of heavy machinery, and Yokogawa
Electric (0.7%), maker of testing and analytical equipment. Both holdings
appreciated strongly during the quarter, and we believe that their fundamentals
remain attractive.

Given the Japanese market's show of strength during the second quarter - the
Nikkei 225 Index closed June above 22,600, it's highest level in four years -
what can be expected for the remainder of the year? We believe that the market
should continue to do well. A stronger economy, rising corporate earnings, the
likelihood of a continued benign monetary policy from the Bank of Japan, and
reasonable equity valuations all suggest room for higher share prices in the
months ahead. Also arguing for further gains in Japanese equities are
potentially sizable cash inflows from Japan's financial institutions. To date,
these institutions have remained underinvested in the stock market, but they
stand to be enticed back into equities as analysts continue to upgrade earnings
estimates. Thus there are reasons for optimism.

Our outlook on the yen is unchanged. We expect the currency to weaken further
vs. the U.S. dollar (the yen recently hit a two-year low of 110 per dollar),
hence we continue to hedge a substantial portion of the Portfolio's exposure as
a defensive measure.

OTHER ASIAN-PACIFIC MARKETS

Elsewhere in the region, we remain positive on the Hong Kong market's prospects,
its vulnerability to higher U.S. interest rates notwithstanding. Hong Kong is,
and will likely remain for years, China's financial center, thus it stands to be
a direct beneficiary of the anticipated surge in growth in China through the
rest of the decade. The Hang Seng index currently trades at a discount to other
Asian-Pacific markets, reflecting investors' concerns regarding Hong Kong's
reversion to Chinese rule next year. But we remain of the view that the Chinese
are pragmatic and recognize Hong Kong's significance in China's future economic
development, hence we expect the transfer of power to have little lasting impact
on business in Hong Kong or its financial markets.

Both South Korea and Taiwan, which combined represented 9.0% of the portfolio on
June 30, rallied sharply in April (climbing 11.7% and 25.0%, respectively, per
Morgan Stanley Capital International) after posting disappointing results in the
first quarter. In South Korea's case the rebound was largely attributable to a
favorable response from foreign investors to its decision to further open its
stock market (effective April 1, foreign investors can own 18% of a listed South
Korean company, up from 15% previously); in Taiwan's case it was due to the
successful completion of the country's first democratic presidential election in
March and the easing of tensions with China. We continue to find attractive
values on a selective basis in South Korea, but we have taken a somewhat more
cautious near-term view on the Taiwanese market, given its substantial rise
within such a short period.

We remain very positive on the New Zealand stock market (5.1% of the portfolio
as of June 30). On a macroeconomic level, the country has much to recommend it:
relatively little in the way of government regulation; low unemployment; steady
growth (the economy has expanded at an average annual rate of 3.25% since 1992);
and negligible inflation. It is telling, with regard to the last point, that the
head of New Zealand's central bank has his remuneration tied directly to his
ability to keep inflation at bay. As well, New Zealand boasts many well-managed,
shareholder-focused companies. The Portfolio owns what we believe to be among
the most promising, including several very strong resource-based firms. We
contin-


                                       29



   30

INTERNATIONAL EQUITY PORTFOLIO (CONT'D)

ue to look for, and find, attractive opportunities, though we are constrained,
to an extent, by the relatively small size of the market.

EUROPE

The Portfolio remains underweighted in Europe. Though interest rates have fallen
across the Continent, economic growth, in general, remains weak, and
unemployment stubbornly high. Further, governments are limited in their ability
to remedy the situation via increased spending, given the fiscal restraints
imposed by the Maastrict criteria for economic and monetary union. We believe
that there is the potential for stronger growth in Europe in 1997, at which
point there may be more attractive opportunities presented. But for the time
being, the greater portion of the Portfolio's emphasis lies elsewhere,
principally in Asia.

That said, there remain selective values on a stock-by-stock basis in Europe. We
added a number of attractively valued companies to the portfolio in the second
quarter, including several from the United Kingdom and France, the Portfolio's
two largest weightings in the region. The Portfolio's French holdings have done
particularly well this year; indeed, the French market was Europe's strongest
performer in local-currency terms through June, a welcome improvement after a
poor showing in 1995. We believe that the French stock market's prospects remain
favorable, given its still-reasonable valuations and the potential for a further
decline in interest rates. (There is scope for lower rates in the United Kingdom
as well, given the pending election and the Tory government's desire to curry
favor with the electorate.) But we remain cautious with regard to the franc,
thus continue to hedge a good part of the Portfolio's French-currency exposure.

We remain positive, as well, on the Spanish market, which continues to hit new
all-time highs. This largely reflects favorable investor reaction to the newly
elected conservative government, as well as expectations for further cuts in
interest rates, given the improved outlook on inflation.

Among smaller European markets, we are finding attractive opportunities in
Portugal. The broad backdrop for Portuguese equities is good and improving:
inflation has come down dramatically (consumer prices rose at a relatively
modest 12-month rate of 3.5% through May); labor costs are lower than elsewhere
in Europe; and the government is committed to an aggressive privatization
program.

LATIN AMERICA

We believe that many of the best investment opportunities in Latin America
currently can be found in Argentina and Chile. The latter has the region's
soundest economy, with a strong currency, consistent government-budget
surpluses, and savings and investment rates comparable to those of Asian
countries. Chile is also the most robust of Latin America's economies, showing a
9% year-over-year rise in GDP through the first quarter. The Chilean market has
traditionally traded at a premium to the rest of the region, reflecting its
superior fundamentals. But valuations have come down to their lowest levels in
several years, as investors have chosen to focus their attention on other Latin
American markets (principally Mexico). This has made Chilean equities very
attractive, and we have expanded the Portfolio's weighting in Chile in recent
months.

Argentina remains in recession, but there are indications that the economy has
bottomed. Unemployment, though still at record levels, has fallen; mortgage
demand has increased; and industrial production has risen. Inflation is
nonexistent in fact, consumer prices have dropped slightly from year-earlier
levels. The stock market has performed strongly year to date, and we continue to
find cheap stocks. One threat overhanging the Argentine market, however, is the
potential for higher U.S. interest rates. While higher U.S. rates would
negatively impact all Latin American markets to an extent, Argentina is
particularly vulnerable, given the peso's one-to-one linkage with the U.S.
dollar. All told, we remain optimistic on Argentina, but cautiously so.

Mexican stocks have rallied over the past several months, as evidence mounts
that the country has finally begun to shake the worst effects of the peso
devaluation of December 1994. We are encouraged by the improvement in the
Mexican economy, and believe that its longer-term prospects are good. But there
remain reasons for concern in the short term, hence we have maintained a
conservative stance. For one, equity valuations are expensive. Second, the
banking system remains unstable. Third, as with Argentina, the market is very
susceptible to a sharp correction if U.S. interest rates rise. Thus we remain
very focused in our stock selection (the Portfolio's sole position is a 0.5%
weighting in Gruma, a tortilla manufacturer), and will remain so until
developments suggest otherwise.


                                       30


   31

SMALL COMPANY GROWTH PORTFOLIO

OBJECTIVE - Seeks capital growth by investing in equity securities of
small-sized domestic companies.

NARRATIVE BY WARBURG PINCUS FUNDS

MARKET REVIEW

Small-company stocks generated solid gains in the first half of 1996, with the
Nasdaq Composite and Russell 2000 indices rising 12.6% and 10.4%, respectively,
during the period. The small-company stocks' first quarter performance was
characterized by a high degree of volatility, triggered by fairly sharp swings
in the bond market and several late-quarter preannouncements of earnings
disappointments. Most noteworthy, in the first quarter, though, was the
continued correction in many technology stocks.

In the second quarter, small-company stocks also saw positive gains, on an
absolute and relative basis, versus larger stocks. Supporting the sector were
strong cash flows into small-capitalization and aggressive-growth mutual funds,
particularly during the months of April and May. June proved difficult, however.
After a strong start - both the Nasdaq and Russell indices hit all-time highs on
June 5 - small-cap stocks suffered a sharp correction over the next several
weeks, one that took a particularly heavy toll on technology issues. Triggering
the selloff was a series of preannouncements of earnings disappointments among
technology companies (notably Cyrix and Advanced Micro Devices), which fed
concerns about earnings prospects for the sector as a whole. Adding fuel to the
fire were quarter-end "window dressing" activities among fund managers and
institutions, whose shift out of small-capitalization (especially technology)
stocks and into larger-cap, blue-chip issues exacerbated the selling pressure.
Finally, fund inflows into the sector slowed to a trickle, and more than a few
funds were faced with net redemptions, forcing managers to sell into a falling
market.

All told, it was a trying month for small-cap investors. But renewed buying in
the last several trading sessions of the month and subsequent to the quarter's
close suggests that investor interest remains healthy, recent volatility
notwithstanding.

PORTFOLIO STRATEGY

We made few significant changes to the portfolio in terms of its industry
concentrations or specific holdings. We remain bullish on one group of companies
in particular - those that provide business services. The argument for these
companies, broadly speaking, is that they stand to benefit directly from the
ongoing downsizing and outsourcing of corporate America. U.S. companies continue
to shed internal functions that can be performed by outside providers, and a
number of these outside providers have specialized services and/or niche
products that suggest strong growth in earnings going forward. An example of
such is Catalina Marketing Corporation (0.8% of the portfolio as of June 30), a
leader in point-of-scan electronic marketing. The company's marketing network,
which is installed at a large and growing number of supermarket checkout
counters, delivers checkout coupons for specific products directly to consumers
based on their purchases. This provides a targeted and cost-effective marketing
mechanism for consumer-products and food manufacturers.

Elsewhere, the Portfolio maintains exposure to the health-care sector (12.2% of
the portfolio). These stocks in general fared well during the second quarter,
sidestepping much of the volatility that beset other segments of the market. We
remain positive on the prospects for selected makers of medical devices, in
particular, and these represent a significant portion of the Portfolio's
health-care weighting. The Portfolio also holds the stocks of a number of
promising companies in the pharmaceutical area (7.8% of the portfolio). Its
largest holding here, Gilead Sciences (1.2%), recently announced that the FDA
has cleared it to market a drug for the treatment of a virus that causes
blindness in AIDS patients. This stands to have a sizable impact on the
company's sales over time.

The Portfolio's holdings in computers (15.3% of the portfolio as of June 30) and
electronics (8.7%) were not wholly immune to the correction in technology
stocks, but relative to the broader sector they held up well. There remains the
potential for further near-team weakness in the technology area, given the
lingering surplus in inventories. In this type of environment, we believe that
selectivity remains particularly important. Hence we have maintained our focus
on companies with proprietary technologies, expanding margins and recurring
revenues. We continue to avoid semiconductor manufacturers and other makers of
commodity-type products, which in general were hit hardest during the recent
downdraft.

We remain cautious with regard to the booming IPO market as well. New issuance
reached a record level in the second quarter, and many of these companies have
been afforded valuations that far exceed any reasonable assessment of their
earnings prospects.

                                       31


   32

SMALL COMPANY GROWTH PORTFOLIO (CONT'D)

This is particularly so in the case of Internet-related companies. While there
clearly companies coming to market that are worthy of consideration, 
selectivity and caution remain our watchwords here.

Meanwhile, investors' preoccupation with IPOs has drawn attention away from a
number of very promising areas. These include more-established companies in
media, direct marketing, consumer products and retail, and we have selectively
added names to the portfolio from these areas over the past several months.

OUTLOOK

We remain positive, in general, on the small-cap sector's prospects. Smaller
companies continue to generate superior rates of earnings growth vs. larger
companies, which should result in further investor attention for these stocks in
the coming months. Also arguing for the relative outperformance of small-cap
stocks is the strengthening dollar, which has had a negative impact on the
earnings of large-cap, multinational firms but relatively limited effect on
those of smaller, more domestically oriented companies.

There are several forces that have the potential to constrain the small-cap
sector on a near-term basis, however. One is the ongoing flood of supply coming
into the market, whether in the form of IPOs or secondary offerings. Another is
the ongoing inventory correction in the technology sector. Finally, this is an
election year, and politics has a history of unwelcome intrusions on the
financial markets.

These factors notwithstanding, we remain optimistic, and look forward to the
months ahead.

                                       32


   33

FUND PERFORMANCES -   THE BEST OF AMERICA(R)
                      LIFE PLANNING SERIES(SM)
                      FOR SINGLE PREMIUM CONTRACTS
                      ISSUED ON OR AFTER APRIL 16, 1990




- ----------------------------------------------------------------------------------------------------------------------------
                                     TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED**
                              APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND
                                                INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------------------------------------
                                                           NON-ANNUALIZED PERCENT CHANGE+      ANNUALIZED PERCENT CHANGE***
                                            INCEPTION    1 YR. TO     5 YR. TO    INCEPTION TO   5 YR. TO   INCEPTION TO 
FUNDS+/-                                     DATE++       6/30/96      6/30/96       6/30/96      6/30/96      6/30/96   
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                 
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.      10/06/93       22.37%           NA*        54.09%         NA*       17.14%
Stock Index Fund                            09/29/89       23.34%        89.56%       108.31%      13.64%       11.48%

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                     10/09/86       20.23%       123.12%       196.09%      17.41%       11.81%
Growth Portfolio                            10/09/86       19.02%       132.42%       249.54%      18.37%       13.73%
High Income Portfolio                       09/19/85       13.96%        99.78%       191.27%      14.84%       10.43%
Overseas Portfolio                          01/28/87       11.37%        51.61%        78.29%       8.68%        6.33%
Asset Manager Portfolio                     09/06/89       14.78%        60.20%        89.84%       9.88%        9.86%
Contrafund Portfolio                        01/03/95       19.10%           NA*        48.27%         NA*       30.21%

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                   04/15/92       27.61%           NA*        55.12%         NA*       11.00%
Government Bond Fund                        11/08/82        2.99%        40.41%       189.52%       7.02%        8.10%
Money Market Fund                           11/10/81        3.92%        14.94%       125.81%       2.82%        5.72%
Small Company Fund                          10/23/95          NA*           NA*        33.25%         NA*       51.77%
Total Return Fund                           11/08/82       18.79%        93.25%       461.89%      14.08%       13.49%

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                            09/10/84       12.17%        65.55%       266.66%      10.61%       11.63%
Limited Maturity Bond Portfolio             09/10/84        3.23%        25.47%       119.96%       4.64%        6.91%
Partners Portfolio                          03/22/94       24.68%           NA*        45.45%         NA*       17.91%

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                   04/30/85        4.10%        41.29%       144.79%       7.16%        8.35%
Global Securities Fund                      11/12/90        7.46%        69.73%        59.25%      11.16%        8.61%
Multiple Strategies Fund                    02/09/87       11.93%        66.58%       139.23%      10.75%        9.73%

STRONG VIF FUNDS
Strong Discovery Fund II                    05/08/92       11.58%           NA*        57.39%         NA*       11.56%
Strong International Stock Fund II          10/20/95       17.83%           NA*        92.62%         NA*       17.13%
Strong Special Fund II                      05/08/92          NA*           NA*        15.38%         NA*       22.81%

TCI PORTFOLIOS, INC.
TCI Balanced                                05/01/91       11.39%        57.91%        52.22%       9.57%        8.48%
TCI Growth                                  11/20/87        9.33%        65.77%       141.32%      10.64%       10.77%
TCI International                           05/01/94       13.84%           NA*        11.22%         NA*        5.04%

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund             09/01/89       17.25%        64.91%        53.10%      10.52%        6.43%
Worldwide Bond Fund+++                      09/01/89       -1.23%        28.53%        40.39%       5.15%        5.09%

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund                 07/03/95          NA*           NA*        16.01%         NA*       16.15%

WARBURG PINCUS TRUST
International Equity Portfolio              06/30/95          NA*           NA*        16.47%         NA*       16.62%
Small Company Growth Portfolio              06/30/95          NA*           NA*        40.98%         NA*       41.37%
- ----------------------------------------------------------------------------------------------------------------------------


*    Performance information is not available for the fund for part or all of
     the period indicated. See Fund Inception Date.

**   SEC and NASD regulations require that any reporting of product performance
     be accompanied by standardized data and other important disclosures on the
     following page. Please review this information and a product prospectus
     before investing.

***  Percent change in unit value price represents total return after the
     deduction of a 1.30% asset charge for mortality and expense risk,
     administrative charges and premium tax recovery.

+    Percent change in unit value price represents total return after the
     deduction of a 1.30% asset charge for mortality and expense risk,
     administrative charges and premium tax recovery. Numbers in these columns
     represent the total percentage change in the unit value for the period
     indicated. This is not an annual return figure.

++   Performance includes hypothetical performance for periods before the fund
     was available in The BEST OF AMERICA, where applicable, applying contract
     charges to actual fund NAV's to determine the performance the fund would
     have achieved inside the separate account.

+/-  Funds are neither insured nor guaranteed by the U.S. Government. For the
     Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
     calculate Unit Value) can be maintained. Figures quoted represent past
     performance and returns can fluctuate.

+++  Formerly Global Bond Fund.


                                       33


   34

FUND PERFORMANCES - THE BEST OF AMERICA(R) LIFE PLANNING SERIES(SM)
                    FOR SINGLE PREMIUM CONTRACTS ISSUED ON OR 
                    AFTER APRIL 16, 1990



- ----------------------------------------------------------------------------------------------------------------
                                         TOTAL RETURN: ASSUMING CONTRACT SURRENDERED**
                         APPROXIMATE CONTRACT VALUE WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------------------------
                                                                   1 YEAR                       5 YEARS         
                                          INCEPTION                6/30/95                      6/30/91         
                                           DATE++                TO 6/30/96                   TO 6/30/96        
FUNDS+/-                                                      AV            CSV            AV             CSV   
- ----------------------------------------------------------------------------------------------------------------
                                                                                              
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.    10/06/93        $ 60,477      $ 56,227            NA*            NA*  
Stock Index Fund                          09/29/89          60,943        56,693       $ 89,138       $ 85,388  

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                   10/09/86          59,411        85,161        106,140        102,390  
Growth Portfolio                          10/09/86          58,809        54,559        113,112        109,362  
High Income Portfolio                     09/19/85          56,270        52,020         95,146         91,396  
Overseas Portfolio                        01/28/87          54,968        50,718         70,883         67,133  
Asset Manager Portfolio                   09/06/89          56,680        52,430         75,284         71,534  
Contrafund Portfolio                      01/03/95          58,846        54,596            NA*            NA*  

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                 04/15/92          63,085        58,835            NA*            NA*  
Government Bond Fund                      11/08/82          50,813        46,563         64,603         60,853  
Money Market Fund                         11/10/81          51,268        47,018         52,745         48,995  
Small Company Fund                        10/23/95             NA*           NA*            NA*            NA*  
Total Return Fund                         11/08/82          58,679        54,429         91,775         88,025  

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                          09/10/84          55,409        51,159         77,670         73,920  
Limited Maturity Bond Portfolio           09/10/84          50,928        46,678         58,248         54,498  
Partners Portfolio                        03/22/94          61,614        57,364            NA*            NA*  

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                 04/30/85          51,363        47,113         66,065         62,315  
Global Securities Fund                    11/12/90          53,022        48,772         80,097         76,347  
Multiple Strategies Fund                  02/09/87          55,259        51,009         78,335         74,585  

STRONG VIF FUNDS
Strong Discovery Fund II                  05/08/92          55,133        50,883            NA*            NA*  
Strong International Stock Fund II        10/20/95             NA*           NA*            NA*            NA*  
Strong Special Fund II                    05/08/92          58,262        54,012            NA*            NA*  

TCI PORTFOLIOS, INC.
TCI Balanced                              05/01/91          54,991        50,741         74,135         70,385  
TCI Growth                                11/20/87          54,004        49,754         77,929         74,179  
TCI International                         05/01/94          56,200        51,950            NA*            NA*  

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund           09/01/89          57,929        53,679         77,084         73,334  
Worldwide Bond Fund++                     09/01/89          48,707        44,457         59,817         56,067  

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund               07/03/95             NA*           NA*            NA*            NA*  

WARBURG PINCUS TRUST
International Equity Portfolio            06/30/95             NA*           NA*            NA*            NA*  
Small Company Growth Portfolio            06/30/95             NA*           NA*            NA*            NA*  
- ----------------------------------------------------------------------------------------------------------------



- ----------------------------------------------------------------------------------------------
                         TOTAL RETURN: ASSUMING CONTRACT SURRENDERED**
         APPROXIMATE CONTRACT VALUE WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------
                                                   10 YEARS                      LIFE OF  
                                                    6/30/86                       FUND    
                                                  TO 6/30/96                   TO 6/30/96 
FUNDS+/-                                      AV             CSV            AV            CSV
- ----------------------------------------------------------------------------------------------
                                                                              
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.         NA*            NA*       $ 74,469      $ 70,469
Stock Index Fund                               NA*            NA*         95,073        92,073

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                        NA*            NA*        131,661       131,661
Growth Portfolio                               NA*            NA*        158,431       158,431
High Income Portfolio                     $107,398       $107,398        128,300       128,300
Overseas Portfolio                             NA*            NA*         76,169        76,169
Asset Manager Portfolio                        NA*            NA*         87,224        84,224
Contrafund Portfolio                           NA*            NA*         72,957        68,707

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                      NA*            NA*         72,872        69,122
Government Bond Fund                        84,529         84,529        124,144       124,144
Money Market Fund                           64,988         64,988         92,093        92,093
Small Company Fund                             NA*            NA*         66,066        61,816
Total Return Fund                          110,169        110,169        258,318       258,318

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                           103,762        103,762        167,106       167,106
Limited Maturity Bond Portfolio             71,665         71,665         95,414        95,414
Partners Portfolio                             NA*            NA*         70,475        66,475

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                   88,870         88,870        107,810       107,810
Global Securities Fund                         NA*            NA*         73,596        70,096
Multiple Strategies Fund                       NA*            NA*        107,179       107,179

STRONG VIF FUNDS
Strong Discovery Fund II                       NA*            NA*         74,616        70,866
Strong International Stock Fund II             NA*            NA*         57,141        52,891
Strong Special Fund II                         NA*            NA*         92,196        88,446

TCI PORTFOLIOS, INC.
TCI Balanced                                   NA*            NA*         70,905        67,405
TCI Growth                                     NA*            NA*        109,552       107,552
TCI International                              NA*            NA*         53,753        49,753

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund                NA*            NA*         67,733        64,733
Worldwide Bond Fund+++                         NA*            NA*         63,312        60,312

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund                    NA*            NA*         57,274        53,024

WARBURG PINCUS TRUST
International Equity Portfolio                 NA*            NA*         57,514        53,264
Small Company Growth Portfolio                 NA*            NA*         69,742        65,492
- ----------------------------------------------------------------------------------------------


This is neither an offer to sell, nor a solicitation to buy securities. This
material is authorized for distribution to prospective investors only when
preceded or accompanied by a current prospectus which contains more complete
information. You should read the prospectus carefully before investing. These
performance illustrations represent past fund performance based on a
hypothetical single premium of $50,000 for a 50-year-old male non-smoker.
Investment return and the principal value of such investments are not guaranteed
and will fluctuate so that an investor's shares/units, when redeemed, may be
worth more or less than their original cost. Past performance does not guarantee
future returns. The performance figures reflect a mortality and expense risk
charge, applicable cost of insurance charges, surrender charges, an annual
administrative charge, and applicable investment advisory fees. Please refer to
the current prospectus for details regarding these charges.

*    Certain funds are less than 1, 5 or 10 years old, therefore such figures
     are not available for these funds.

++   Performance includes hypothetical performance for periods before the fund
     was available in THE BEST OF AMERICA Life Planning Series(SM), where
     applicable, applying contract charges to actual fund NAV's to determine the
     performance the fund would have achieved in the separate account.

+/-  Funds are neither insured nor guaranteed by the U.S. Government. For the
     Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
     calculate Unit Value) can be maintained. Figures quoted represent past
     performance and returns can fluctuate.

+++  Formerly Global Bond Fund.

AV means Accumulated Value. CSV means Cash Surrender Value.


                                       34
   35
FUND PERFORMANCES - THE BEST OF AMERICA(R)
                    LIFE PLANNING SERIES(SM)
                    FOR FLEXIBLE PREMIUM CONTRACTS


- --------------------------------------------------------------------------------------------------------------------------
                                     TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED**
                APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- --------------------------------------------------------------------------------------------------------------------------
                                                         NON-ANNUALIZED PERCENT CHANGE+     ANNUALIZED PERCENT CHANGE***
                                            INCEPTION    1 YR. TO     5 YR. TO    INCEPTION TO   5 YR. TO   INCEPTION TO 
FUNDS+/-                                     DATE++       6/30/96      6/30/96       6/30/96      6/30/96      6/30/96   
- --------------------------------------------------------------------------------------------------------------------------
                                                                                                 
DREYFUS CORPORATION                         
Socially Responsible Growth Fund, Inc.      10/06/93       22.68%           NA*        56.21%         NA*       17.72%
Stock Index Fund                            09/29/89       23.95%        94.38%       115.51%      14.22%       12.04%

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                     10/09/86       20.83%       128.82%       211.06%      18.00%       12.38%
Growth Portfolio                            10/09/86       19.60%       138.35%       267.21%      18.97%       14.31%
High Income Portfolio                       09/19/85       14.53%       104.88%       207.65%      15.43%       10.99%
Overseas Portfolio                          01/28/87       11.92%        55.48%        87.02%       9.23%        6.87%
Asset Manager Portfolio                     09/06/89       15.35%        64.29%        96.49%      10.44%       10.42%
Contrafund Portfolio                        01/03/95       19.69%           NA*        49.38%         NA*       30.86%

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                   04/15/92       28.24%           NA*        58.44%         NA*       11.56%
Government Bond Fund                        11/08/82        3.50%        44.00%       210.31%       7.57%        8.65%
Money Market Fund                           11/10/81        4.44%        17.89%       143.29%       3.35%        6.26%
Small Company Fund                          10/23/95          NA*           NA*        33.71%         NA*       52.52%
Total Return Fund                           11/08/82       19.38%        98.18%       502.25%      14.66%       14.06%

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                            09/10/84       12.72%        69.78%       289.33%      11.17%       12.20%
Limited Maturity Bond Portfolio             09/10/84        3.74%        28.68%       133.55%       5.17%        7.45%
Partners Portfolio                          03/22/94       25.30%           NA*        47.11%         NA*       18.50%

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                   04/30/85        4.62%        44.90%       159.04%       7.70%        8.90%
Global Securities Fund                      11/12/90        7.99%        74.05%        63.82%      11.72%        9.16%
Multiple Strategies Fund                    02/09/87       12.48%        70.84%       150.89%      11.31%       10.29%

STRONG VIF FUNDS
Strong Discovery Fund II                    05/08/92       12.13%           NA*        60.70%         NA*       12.12%
Strong International Stock Fund II          10/20/95          NA*           NA*        15.78%         NA*       23.42%
Strong Special Fund II                      05/08/92       18.52%           NA*        96.67%         NA*       17.72%

TCI PORTFOLIOS, INC.
TCI Balanced                                05/01/91       11.94%        61.94%        56.23%      10.12%        9.02%
TCI Growth                                  11/20/87        9.87%        70.00%       152.08%      11.20%       11.33%
TCI International                           05/01/94       14.40%           NA*        12.43%         NA*        5.56%

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund             09/01/89       17.83%        69.12%        58.48%      11.08%        6.97%
Worldwide Bond Fund++                       09/01/89       -0.74%        31.82%        45.33%       5.68%        5.63%

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund                 07/03/95           NA            NA        16.59%          NA       16.73%
WARBURG PINCUS TRUST
International Equity Portfolio              06/30/95           NA            NA        17.05%          NA       17.20%
Small Company Growth Portfolio              06/30/95           NA            NA        41.68%          NA       42.08%
- --------------------------------------------------------------------------------------------------------------------------

*    Performance information is not available for the fund for part or all of
     the period indicated. See Fund Inception Date.
**   SEC and NASD regulations require that any reporting of product performance
     be accompanied by standardized data and other important disclosures on the
     following page. Please review this information and a product prospectus
     before investing.
***  Percent change in unit value price represents total return after the
     deduction of an .80% asset charge for mortality and expense risk,
     administrative charges and premium tax recovery.
+    Percent change in unit value price represents total return after the
     deduction of an .80% asset charge for mortality and expense risk,
     administrative charges and premium tax recovery. Numbers in these columns
     represent the total percentage change in the unit value for the period
     indicated. This is not an annual return figure.
++   Performance includes hypothetical performance for periods before the fund
     was available in The BEST OF AMERICA, where applicable, applying contract
     charges to actual fund NAV's to determine the performance the fund would
     have achieved inside the separate account.
+/-  Funds are neither insured nor guaranteed by the U.S. Government. For the
     Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
     calculate Unit Value) can be maintained. Figures quoted represent past
     performance and returns can fluctuate.
+++  Formerly Global Bond Fund.

                                       35


   36

FUND PERFORMANCES - THE BEST OF AMERICA(R) LIFE PLANNING SERIES(SM)
                    FOR FLEXIBLE PREMIUM CONTRACTS (CONT'D)




- -----------------------------------------------------------------------------------------------------------------
                                     TOTAL RETURN: ASSUMING CONTRACT SURRENDERED**
                     APPROXIMATE CONTRACT VALUE WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- -----------------------------------------------------------------------------------------------------------------
                                                                   1 YEAR                       5 YEARS          
                                          INCEPTION                6/30/95                      6/30/91          
                                           DATE++                TO 6/30/96                   TO 6/30/96         
FUNDS+/-                                                      AV            CSV            AV             CSV    
- -----------------------------------------------------------------------------------------------------------------
                                                                                               
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.    10/06/93         $ 9,982       $ 5,176            NA*            NA*   
Stock Index Fund                          09/29/89          10,037         5,231       $ 64,826       $ 61,462   

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                   10/09/86           9,792         4,986         68,993         65,629   
Growth Portfolio                          10/09/86           9,692         4,886         71,865         68,501   
High Income Portfolio                     09/19/85           9,212         4,406         59,715         56,351   
Overseas Portfolio                        01/28/87           8,966         4,160         52,285         48,921   
Asset Manager Portfolio                   09/06/89           9,290         4,484         54,145         50,781   
Contrafund Portfolio                      01/03/95           9,690         4,884            NA*            NA*   

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                 04/15/92          10,938         5,632            NA*            NA*   
Government Bond Fund                      11/08/82           8,259         3,453         48,311         44,947   
Money Market Fund                         11/10/81           8,327         3,521         44,462         41,098   
Small Company Fund                        10/23/95             NA*           NA*            NA*            NA*   
Total Return Fund                         11/08/82           9,640         4,834         61,923         58,559   

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                          09/10/84           9,106         4,301         58,164         54,800   
Limited Maturity Bond Portfolio           09/10/84           8,275         3,469         45,782         42,418   
Partners Portfolio                        03/22/94          10,164         5,358            NA*            NA*   

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                 04/30/85           8,352         3,546         48,944         45,580   
Global Securities Fund                    11/12/90           8,625         3,819         55,486         52,122   
Multiple Strategies Fund                  02/09/87           9,035         4,229         56,185         52,821   

STRONG VIF FUNDS
Strong Discovery Fund II                  05/08/92           9,087         4,282            NA*            NA*   
Strong International Stock Fund II        10/20/95             NA*           NA*            NA*            NA*   
Strong Special Fund II                    05/08/92           9,583         4,777            NA*            NA*   

TCI PORTFOLIOS, INC.
TCI Balanced                              05/01/91           8,987         4,181         54,267         50,903   
TCI Growth                                11/20/87           8,871         4,065         57,437         54,073   
TCI International                         05/01/94           9,188         4,383            NA*            NA*   

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund           09/01/89           9,539         4,733         57,090         53,726   
Worldwide Bond Fund+++                    09/01/89           7,882         3,077         45,978         42,614   

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund               07/03/95             NA*           NA*            NA*            NA*   

WARBURG PINCUS TRUST
International Equity Portfolio            06/30/95             NA*           NA*            NA*            NA*   
Small Company Growth Portfolio            06/30/95             NA*           NA*            NA*            NA*   
- -----------------------------------------------------------------------------------------------------------------



- ----------------------------------------------------------------------------------------------
                         TOTAL RETURN: ASSUMING CONTRACT SURRENDERED**
         APPROXIMATE CONTRACT VALUE WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------
                                                   10 YEARS                      LIFE OF 
                                                    6/30/86                       FUND   
                                                  TO 6/30/96                   TO 6/30/96
FUNDS+/-                                      AV             CSV            AV            CSV
- ----------------------------------------------------------------------------------------------
                                                                               
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.         NA*            NA*       $ 33,860      $ 29,535
Stock Index Fund                               NA*            NA*         98,821        96,418

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                        NA*            NA*        169,805       169,805
Growth Portfolio                               NA*            NA*        184,121       184,121
High Income Portfolio                     $152,428       $152,428        175,182       175,182
Overseas Portfolio                             NA*            NA*        120,434       120,434
Asset Manager Portfolio                        NA*            NA*         83,506        81,103
Contrafund Portfolio                           NA*            NA*         21,717        16,911

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                      NA*            NA*         56,548        53,184
Government Bond Fund                       120,246        120,246        203,571       203,571
Money Market Fund                           99,985         99,985        175,142       175,142
Small Company Fund                             NA*            NA*         11,327         6,521
Total Return Fund                          150,753        150,753        311,649       311,649

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                           140,542        140,542        194,615       194,614
Limited Maturity Bond Portfolio            106,681        106,681        139,125       139,125
Partners Portfolio                             NA*            NA*         33,039        28,714

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                  122,880        122,880        155,014       155,014
Global Securities Fund                         NA*            NA*         66,489        63,605
Multiple Strategies Fund                       NA*            NA*        134,574       134,574

STRONG VIF FUNDS
Strong Discovery Fund II                       NA*            NA*         53,927        50,563
Strong International Stock Fund II             NA*            NA*          9,702         4,896
Strong Special Fund II                         NA*            NA*         58,988        55,624

TCI PORTFOLIOS, INC.
TCI Balanced                                   NA*            NA*         63,731        60,847
TCI Growth                                     NA*            NA*        125,260       123,818
TCI International                              NA*            NA*         27,749        23,423

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund                NA*            NA*         81,072        78,669
Worldwide Bond Fund+++                         NA*            NA*         67,116        64,713

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund                    NA*            NA*          9,364         4,559

WARBURG PINCUS TRUST
International Equity Portfolio                 NA*            NA*          9,422         4,616
Small Company Growth Portfolio                 NA*            NA*         11,613         6,807
- ----------------------------------------------------------------------------------------------



This is neither an offer to sell, nor a solicitation to buy securities. This
material is authorized for distribution to prospective investors only when
preceded or accompanied by a current prospectus which contains more complete
information. You should read the prospectus carefully before investing. These
performance illustrations represent past fund performance based on a
hypothetical annual premium of $10,000 for a 45-year-old male non-smoker
preferred with a level death benefit and an initial specified amount of $495.91
(based on a guideline-level premium of $10,000 issued on a preferred basis).
Investment return and the principal value of such investments are not guaranteed
and will fluctuate so that an investor's shares/units, when redeemed, may be
worth more or less than their original cost. Past performance does not guarantee
future returns. The performance figures reflect a premium load, a mortality and
expense risk charge, applicable cost of insurance charges, surrender charges, a
monthly administrative charge, and applicable investment advisory fees. Please
refer to the current prospectus for details regarding these charges.

*    Certain funds are less than 1, 5 or 10 years old, therefore such figures
     are not available for these funds.

++   Performance includes hypothetical performance for periods before the fund
     was available in THE BEST OF AMERICA Life Planning Series(SM), where
     applicable, applying contract charges to actual fund NAV's to determine the
     performance the fund would have achieved in the separate account.

+/-  Funds are neither insured nor guaranteed by the U.S. Government. For the
     Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
     calculate Unit Value) can be maintained. Figures quoted represent past
     performance and returns can fluctuate.

++   Formerly Global Bond Fund.

AV means Accumulated Value. CSV means Cash Surrender Value.


                                       36


   37
FUND PERFORMANCES - THE BEST OF AMERICA(R)
                    LIFE PLANNING SERIES(SM)
                    FOR MODIFIED SINGLE
                        PREMIUM CONTRACTS


- -------------------------------------------------------------------------------------------------------------------------
                                    TOTAL RETURN: ASSUMING CONTRACT NOT SURRENDERED
              APPROXIMATE PERCENT CHANGE IN NET ASSETS WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- -------------------------------------------------------------------------------------------------------------------------
                                                              NON-ANNUALIZED PERCENT CHANGE+  ANNUALIZED PERCENT CHANGE**  
                                            INCEPTION    1 YR. TO     5 YR. TO    INCEPTION TO   5 YR. TO   INCEPTION TO   
FUNDS+/-                                     DATE++       6/30/96      6/30/96       6/30/96      6/30/96      6/30/96     
- -------------------------------------------------------------------------------------------------------------------------
                                                                                                 
DREYFUS CORPORATION                         
Socially Responsible Growth Fund, Inc.      10/06/93       23.95%           NA*        59.60%         NA*       18.65%
Stock Index Fund                            09/29/89       24.93%       102.15%       127.26%      15.12%       12.93%

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                     10/09/86       21.78%       137.90%       235.62%      18.93%       13.26%
Growth Portfolio                            10/09/86       20.55%       148.07%       296.59%      19.93%       15.22%
High Income Portfolio                       09/19/85       15.44%       113.03%       234.69%      16.33%       11.86%
Overseas Portfolio***                       01/28/87       12.81%        61.72%       101.42%      10.09%        7.71%
Asset Manager Portfolio                     09/06/89       16.26%        70.87%       107.28%      11.31%       11.29%
Contrafund Portfolio                        01/03/95       20.64%           NA*        15.11%         NA*       31.88%

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                   04/15/92       29.25%           NA*        63.95%         NA*       12.47%
Government Bond Fund                        11/08/82        4.34%        49.95%       245.67%       8.44%        9.52%
Money Market Fund                           11/10/81        5.29%        22.85%       173.79%       4.20%        7.12%
Small Company Fund                          10/23/95          NA*           NA*        34.41%         NA*       53.69%
Total Return Fund                           11/08/82       20.32%       106.30%       570.47%      15.58%       14.96%

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                            09/10/84       13.62%        76.58%       326.93%      12.04%       13.08%
Limited Maturity Bond Portfolio             09/10/84        4.57%        33.86%       156.21%       6.01%        8.30%
Partners Portfolio                          03/22/94       26.28%           NA*        49.74%         NA*       19.43%

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                   04/30/85        5.46%        50.71%       182.75%       8.55%        9.75%
Global Securities Fund***                   11/12/90        8.86%        81.02%        71.27%      12.60%       10.02%
Multiple Strategies Fund                    02/09/87       13.38%        77.67%       170.04%      12.18%       11.16%

STRONG VIF FUNDS
Strong Discovery Fund II                    05/08/92       13.02%           NA*        66.02%         NA*       13.01%
Strong International Stock Fund II***       10/20/95          NA*           NA*        16.41%         NA*       24.40%
Strong Special Fund II                      05/08/92       19.46%           NA*       103.14%         NA*       18.65%

TCI PORTFOLIOS, INC.
TCI Balanced                                05/01/91       12.84%        68.42%        62.71%      10.99%        9.89%
TCI Growth                                  11/20/87       10.75%        76.81%       169.66%      12.07%       12.21%
TCI International***                        05/01/94       15.31%           NA*        14.38%         NA*        6.41%

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund             09/01/89       18.76%        75.90%        67.26%      11.96%        7.82%
Worldwide Bond Fund+++                      09/01/89        0.06%        37.12%        53.37%       6.52%        6.46%

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund                 07/03/95          NA*           NA*        17.50%         NA*       17.66%

WARBURG PINCUS TRUST
International Equity Portfolio***           06/30/95          NA*           NA*        17.97%         NA*       18.12%
Small Company Growth Portfolio              06/30/95          NA*           NA*        42.76%         NA*       43.18%
- -------------------------------------------------------------------------------------------------------------------------

*    Performance information is not available for the fund for part or all of
     the period indicated. See Fund Inception Date.

**   Unit values reflect the deduction of applicable investment advisory fees.

***  There are increased risks associated with an investment in global markets,
     e.g. currency fluctuations, economic and political factors.

+    Percent change in unit value price represents total return after the
     deduction of applicable investment advisory fees. Numbers in these columns
     represent the total percentage change in the unit value for the period
     indicated. This is not an annual return figure.

++   Performance includes hypothetical performance for periods before the fund
     was available in The BEST OF AMERICA, where applicable, applying contract
     charges to actual fund NAV's to determine the performance the fund would
     have achieved inside the separate account.

+/-  Funds are neither insured nor guaranteed by the U.S. Government. For the
     Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
     calculate Unit Value) can be maintained. Figures quoted represent past
     performance and returns can fluctuate.

+++  Formerly Global Bond Fund.


                                       37


   38

FUND PERFORMANCES - THE BEST OF AMERICA(R) LIFE PLANNING SERIES(SM)
                    FOR MODIFIED SINGLEPREMIUM CONTRACTS (CONT'D)



- ------------------------------------------------------------------------------------------------------------------
                                      TOTAL RETURN: ASSUMING CONTRACT SURRENDERED
                     APPROXIMATE CONTRACT VALUE WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ------------------------------------------------------------------------------------------------------------------
                                                                   1 YEAR                       5 YEARS           
                                          INCEPTION                6/30/95                      6/30/91           
                                           DATE++                TO 6/30/96                   TO 6/30/96          
FUNDS+/-                                                      AV            CSV            AV             CSV     
- ------------------------------------------------------------------------------------------------------------------
                                                                                                
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.    10/06/93        $ 60,533      $ 55,533            NA*            NA*    
Stock Index Fund                          09/29/89          61,013        56,013         89,863         86,363    

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                   10/09/86          59,476        54,476        105,815        102,315    
Growth Portfolio                          10/09/86          58,875        53,875        112,565        109,065    
High Income Portfolio                     09/19/85          56,377        51,377         94,702         91,202    
Overseas Portfolio**                      01/28/87          55,095        50,095         71,889         68,389    
Asset Manager Portfolio                   09/06/89          56,780        51,780         75,956         72,456    
Contrafund Portfolio                      01/03/95          58,917        53,917            NA*            NA*    

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                 04/15/92          63,122        58,122            NA*            NA*    
Government Bond Fund                      11/08/82          50,955        45,955         65,471         61,971    
Money Market Fund                         11/10/81          51,422        46,422         54,383         50,833    
Small Company Fund                        10/23/95             NA*           NA*            NA*            NA*    
Total Return Fund                         11/08/82          58,764        53,764         91,921         88,421    

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                          09/10/84          55,491        50,491         78,496         74,996    
Limited Maturity Bond Portfolio           09/10/84          51,072        46,072         59,506         56,006    
Partners Portfolio                        03/22/94          61,672        56,672            NA*            NA*    

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                 04/30/85          51,503        46,503         66,999         63,499    
Global Securities Fund**                  11/12/90          53,163        48,163         80,472         76,972    
Multiple Strategies Fund                  02/09/87          55,373        50,373         78,980         75,480    

STRONG VIF FUNDS
Strong Discovery Fund II                  05/08/92          55,198        50,198            NA*            NA*    
Strong International Stock Fund II**      10/20/95             NA*           NA*            NA*            NA*    
Strong Special Fund II                    05/08/92          58,340        53,340            NA*            NA*    

TCI PORTFOLIOS, INC.
TCI Balanced                              05/01/91          55,107        50,107         74,871         71,371    
TCI Growth                                11/20/87          54,089        49,089         78,597         75,097    
TCI International**                       05/01/94          56,315        51,315            NA*            NA*    

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund           09/01/89          58,001        53,001         78,194         74,694    
Worldwide Bond Fund+++                    09/01/89          48,868        43,868         60,957         57,457    

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund               07/03/95             NA*           NA*            NA*            NA*    

WARBURG PINCUS TRUST
International Equity Portfolio**          06/30/95             NA*           NA*            NA*            NA*    
Small Company Growth Portfolio            06/30/95             NA*           NA*            NA*            NA*    
- ------------------------------------------------------------------------------------------------------------------


- ----------------------------------------------------------------------------------------------
                          TOTAL RETURN: ASSUMING CONTRACT SURRENDERED
         APPROXIMATE CONTRACT VALUE WITH CAPITAL GAINS AND INCOME DIVIDENDS REINVESTED
- ----------------------------------------------------------------------------------------------
                                                   10 YEARS                      LIFE OF   
                                                    6/30/86                       FUND     
                                                  TO 6/30/96                   TO 6/30/96  
FUNDS+/-                                      AV             CSV            AV            CSV
- ----------------------------------------------------------------------------------------------
                                                                               
DREYFUS CORPORATION
Socially Responsible Growth Fund, Inc.         NA*            NA*       $ 74,802        70,302
Stock Index Fund                               NA*            NA*         96,762        94,262

FIDELITY VIP FUND & VIP FUND II
Equity-Income Portfolio                        NA*            NA*        133,636       133,636
Growth Portfolio                               NA*            NA*        157,919       157,919
High Income Portfolio                     $111,178       $111,178        130,695       130,695
Overseas Portfolio**                           NA*            NA*         80,548        80,548
Asset Manager Portfolio                        NA*            NA*         88,256        85,756
Contrafund Portfolio                           NA*            NA*         72,938        67,938

NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund                      NA*            NA*         74,033        70,533
Government Bond Fund                        87,392         87,392        128,713       128,713
Money Market Fund                           69,126         69,126         99,105        99,105
Small Company Fund                             NA*            NA*         66,031        61,031
Total Return Fund                          113,636        113,636        254,582       254,582

NEUBERGER & BERMAN ADVISERS
MANAGEMENT TRUST
Growth Portfolio                           106,682        106,682        164,940       164,940
Limited Maturity Bond Portfolio             75,417         75,417         97,886        97,886
Partners Portfolio                             NA*            NA*         70,875        66,375

OPPENHEIMER VARIABLE ACCOUNT FUNDS
Bond Fund                                   91,633         91,633        109,469       109,469
Global Securities Fund**                       NA*            NA*         74,954        71,954
Multiple Strategies Fund                       NA*            NA*        108,228       108,228

STRONG VIF FUNDS
Strong Discovery Fund II                       NA*            NA*         75,265        71,765
Strong International Stock Fund II**           NA*            NA*         57,190        52,190
Strong Special Fund II                         NA*            NA*         92,092        88,592

TCI PORTFOLIOS, INC.
TCI Balanced                                   NA*            NA*         72,050        69,050
TCI Growth                                     NA*            NA*        110,071       108,571
TCI International**                            NA*            NA*         54,349        49,849

VAN ECK WORLDWIDE INSURANCE TRUST
Gold and Natural Resources Fund                NA*            NA*         71,215        68,715
Worldwide Bond Fund+++                         NA*            NA*         65,303        62,803

VAN KAMPEN AMERICAN CAPITAL
LIFE INVESTMENT TRUST
Real Estate Securities Fund                    NA*            NA*         57,385        52,385

WARBURG PINCUS TRUST
International Equity Portfolio**               NA*            NA*         57,612        52,612
Small Company Growth Portfolio                 NA*            NA*         69,722        64,722
- ----------------------------------------------------------------------------------------------


This is neither an offer to sell, nor a solicitation to buy securities. This
material is authorized for distribution to prospective investors only when
preceded or accompanied by a current prospectus which contains more complete
information. You should read the prospectus carefully before investing. These
performance illustrations represent past fund performance based on a
hypothetical single premium of $50,000 for a 50-year-old male. Investment return
and the principal value of such investments are not guaranteed and will
fluctuate so that an investor's shares/units, when redeemed, may be worth more
or less than their original cost. Past performance does not guarantee future
returns. All performance figures reflect the deduction of the applicable
fund-level investment advisory fees and an asset fee compromised of a mortality
and expense risk charge, applicable cost of insurance charges, tax expense
charges and an annual administrative charge. Performance for the CSV columns
reflect the deduction of the applicable Surrender Charge at the end of each
period. The asset fee for policy years 1-10 is 2.35% based on current cost of
insurance charges. For policy years 11+ the asset fee reduces to current rate of
1.85%. Please refer to the current prospectus for more detailed information
regarding these charges. and applicable investment advisory fees. Please refer
to the current prospectus for details regarding these charges.

*    Certain funds are less than 1, 3, 5 or 10 years old, therefore such figures
     are not available for these funds.

**   There are increased risks associated with an investment in global markets,
     e.g. currency fluctuations, economic and political factors.

++   Performance includes hypothetical performance for periods before the fund
     was available in THE BEST OF AMERICA Life Planning Series(SM), where
     applicable, applying contract charges to actual fund NAV's to determine the
     performance the fund would have achieved in the separate account.

+/-  Funds are neither insured nor guaranteed by the U.S. Government. For the
     Money Market Fund, there is no assurance that a stable $1 fund NAV (used to
     calculate Unit Value) can be maintained. Figures quoted represent past
     performance and returns can fluctuate.

+++  Formerly Global Bond Fund.

AV means Accumulated Value. CSV means Cash Surrender Value.


                                       38


   39
                            NATIONWIDE VLI ACCOUNT-2
          STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY

                                  June 30, 1996
                                   (UNAUDITED)



                                                                                     
Assets:
   Investments at market value:
      The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
         96,173 shares (cost $1,754,152) ......................................   $  1,812,860
      Dreyfus Stock Index Fund (DryStkIx)
         472,289 shares (cost $8,120,201) .....................................      8,841,250
      Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
         1,852,738 shares (cost $32,489,276) ..................................     36,091,334
      Fidelity VIP - Growth Portfolio (FidVIPGr)
         1,552,055 shares (cost $45,149,339) ..................................     46,654,780
      Fidelity VIP - High Income Portfolio (FidVIPHI)
         1,013,356 shares (cost $11,830,153) ..................................     11,937,335
      Fidelity VIP - Overseas Portfolio (FidVIPOv)
         819,325 shares (cost $13,430,291) ....................................     14,649,522
      Fidelity VIP - Asset Manager Portfolio (FidVIPAM)
         1,275,887 shares (cost $18,402,283) ..................................     19,942,116
      Fidelity VIP - Contrafund Portfolio (FidVIPCon)
         450,933 shares (cost $6,367,329) .....................................      6,664,795
      Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
         276,545 shares (cost $3,635,480) .....................................      4,076,279
      Nationwide SAT - Government Bond Fund (NSATGvtBd)
         490,416 shares (cost $5,272,856) .....................................      5,311,207
      Nationwide SAT - Money Market Fund (NSATMyMkt)
         26,435,564 shares (cost $26,435,564) .................................     26,435,564
      Nationwide SAT - Small Company Fund (NSATSmCo)
         162,269 shares (cost $2,141,569) .....................................      2,174,411
      Nationwide SAT - Total Return Fund (NSATTotRe)
         2,383,504 shares (cost $26,251,142) ..................................     29,555,452
      Neuberger &Berman - Growth Portfolio (NBAMTGro)
         404,582 shares (cost $10,311,662) ....................................     10,106,455
      Neuberger &Berman - Limited Maturity Bond Portfolio (NBAMTLMat)
         210,042 shares (cost $2,973,157) .....................................      2,837,664
      Neuberger &Berman - Partners Portfolio (NBAMTPart)
         425,819 shares (cost $5,803,907) .....................................      6,084,954
      Oppenheimer - Bond Fund (OppBdFd)
         384,641 shares (cost $4,359,347) .....................................      4,392,605
      Oppenheimer - Global Securities Fund (OppGlSec)
         481,550 shares (cost $7,293,862) .....................................      7,820,372
      Oppenheimer - Multiple Strategies Fund (OppMult)
         450,200 shares (cost $6,274,367) .....................................      6,613,440
      Strong VIF - Strong Discovery Fund II (StDisc2)
         575,422 shares (cost $6,800,135) .....................................      6,100,979
      Strong VIF - Strong International Stock Fund II (StIntStk2)
         107,676 shares (cost $1,194,865) .....................................      1,245,816
      Strong VIF - Strong Special Fund II (StSpec2)
         780,780 shares (cost $12,071,652) ....................................     13,679,263
      TCI Portfolios - TCI Balanced (TCIBal)
         299,898 shares (cost $1,968,398) .....................................      2,132,274
      TCI Portfolios - TCI Growth (TCIGro)
         1,081,806 shares (cost $12,213,934) ..................................     11,737,590
      TCI Portfolios - TCI International (TCIInt)
         352,804 shares (cost $1,928,308) .....................................      1,972,176
      Van Eck - Gold and Natural Resources Fund (VEGoldNR)
         379,360 shares (cost $6,396,813) .....................................      5,936,986
      Van Eck - Worldwide Bond Fund (VEWrldBd)
         187,660 shares (cost $2,070,127) .....................................      1,989,194
      Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRESec)
         73,353 shares (cost $820,669) ........................................        853,826
      Warburg Pincus - International Equity Portfolio (WPIntEq)
         530,669 shares (cost $6,021,608) .....................................      6,214,139
      Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr)
         438,537 shares (cost $6,151,028) .....................................      6,262,315
                                                                                  ------------
            Total assets ......................................................    310,136,953
Accounts payable ..............................................................        523,372
                                                                                  ------------
Contract owners' equity .......................................................   $309,613,581
                                                                                  ============



                                       39
   40

Contract owners' equity represented by:


                                                                        Units  Unit Value
                                                                        -----  ----------
                                                                                 
Single Premium contracts issued prior to April 16, 1990:
      Fidelity VIP - Equity-Income Portfolio ......................      14,384   27.788031 $   399,703
      Fidelity VIP - Growth Portfolio .............................       8,733   33.347492     291,224
      Fidelity VIP - High Income Portfolio ........................       3,486   23.157105      80,726
      Fidelity VIP - Overseas Portfolio ...........................       6,422   18.742845     120,367
      Fidelity VIP-II - Asset Manager Portfolio ...................       1,118   19.041282      21,288
      Nationwide SAT - Government Bond Fund .......................       2,851   18.954340      54,039
      Nationwide SAT - Money Market Fund ..........................      10,064   14.576747     146,700
      Nationwide SAT - Total Return Fund ..........................       1,192   23.918305      28,511
      Neuberger &Berman - Growth Portfolio ........................       5,444   24.183973     131,658
      Neuberger &Berman - Limited Maturity Bond Portfolio .........       5,255   15.878722      83,443
      Oppenheimer - Global Securities Fund ........................       1,637   12.395631      20,292
      Strong VIF - Strong Special Fund II .........................         363   19.546155       7,095
      TCI Portfolios - TCIGrowth ..................................       8,446   25.610124     216,303
      Van Eck - Gold and Natural Resources Fund ...................       4,612   14.121659      65,129
      Van Eck - Worldwide Bond Fund ...............................          23   14.089109         324
      Van Kampen American Capital LIT - Real EstateSecurities Fund        4,183   11.641372      48,696
Single Premium contracts issued on or after April 16, 1990:
      The Dreyfus Socially Responsible Growth Fund, Inc. ..........      10,035   15.409438     154,634
      Dreyfus Stock Index Fund ....................................      95,874   14.882737   1,426,868
      Fidelity VIP - Equity-Income Portfolio ......................     557,700   22.770036  12,698,849
      Fidelity VIP - Growth Portfolio .............................     534,144   23.102595  12,340,113
      Fidelity VIP - High Income Portfolio ........................     113,552   23.866282   2,710,064
      Fidelity VIP - Overseas Portfolio ...........................     374,188   13.523387   5,060,289
      Fidelity VIP-II - Asset Manager Portfolio ...................     341,168   18.629564   6,355,811
      Fidelity VIP-II - Contrafund Portfolio ......................     155,370   11.910278   1,850,500
      Nationwide SAT - Capital Appreciation Fund ..................      23,020   15.822059     364,224
      Nationwide SAT - Government Bond Fund .......................     210,663   15.741657   3,316,185
      Nationwide SAT - Money Market Fund ..........................   1,004,634   12.250762  12,307,532
      Nationwide SAT - Small Company Fund .........................      58,463   13.325444     779,045
      Nationwide SAT - Total Return Fund ..........................     150,559   20.658782   3,110,366
      Neuberger &Berman - Growth Portfolio ........................     172,665   17.089921   2,950,831
      Neuberger &Berman - Limited Maturity Bond Portfolio .........      72,015   13.636916     982,063
      Neuberger &Berman - Partners Portfolio ......................     104,625   15.065243   1,576,201
      Oppenheimer - Bond Fund .....................................      91,400   15.900665   1,453,321
      Oppenheimer - Global Securities Fund ........................     120,045   12.277294   1,473,828
      Oppenheimer - Multiple Strategies Fund ......................     139,809   17.305951   2,419,528
      Strong VIF - Strong Discovery Fund II .......................     118,810   15.738724   1,869,918
      Strong VIF - Strong International Stock Fund II .............      61,913   11.527941     713,729
      Strong VIF - Strong Special Fund II .........................     143,776   19.262037   2,769,419
      TCI Portfolios - TCI Balanced ...............................      40,034   13.498094     540,383
      TCI Portfolios - TCI Growth .................................     228,100   17.240248   3,932,501
      TCI Portfolios - TCI International ..........................      73,010   11.091732     809,807
      Van Eck - Gold and Natural Resources Fund ...................     202,061   15.624548   3,157,112
      Van Eck - Worldwide Bond Fund ...............................      48,117   13.784425     663,265
      Van Kampen American Capital LIT - Real Estate Securities Fund      30,758   11.601219     356,830
      Warburg Pincus - International Equity Portfolio .............     226,019   11.647133   2,632,473
      Warburg Pincus - Small Company Growth Portfolio .............     130,968   14.098011   1,846,388
Multiple Payment contracts and Flexible Premium contracts:
      The Dreyfus Socially Responsible Growth Fund, Inc. ..........     106,158   15.620864   1,658,280
      Dreyfus Stock Index Fund ....................................     491,428   15.087986   7,414,659
      Fidelity VIP - Equity-Income Portfolio ......................     981,650   23.424312  22,994,476
      Fidelity VIP - Growth Portfolio .............................   1,451,415   23.442894  34,025,368
      Fidelity VIP - High Income Portfolio ........................     410,458   22.284936   9,147,030
      Fidelity VIP - Overseas Portfolio ...........................     648,456   14.603161   9,469,507
      Fidelity VIP-II - Asset Manager Portfolio ...................     805,432   16.843096  13,565,968
      Fidelity VIP-II - Contrafund Portfolio ......................     402,241   11.969216   4,814,509
      Nationwide SAT - Capital Appreciation Fund ..................     229,767   16.156308   3,712,186
      Nationwide SAT - Government Bond Fund .......................     132,207   14.683688   1,941,286
      Nationwide SAT - Money Market Fund ..........................   1,124,123   11.960484  13,445,055
      Nationwide SAT - Small Company Fund .........................     104,295   13.370817   1,394,509
      Nationwide SAT - Total Return Fund ..........................   1,343,044   19.669875  26,417,508
      Neuberger &Berman - Growth Portfolio ........................     417,773   16.813980   7,024,427
      Neuberger &Berman - Limited Maturity Bond Portfolio .........     135,460   13.083551   1,772,298
      Neuberger &Berman - Partners Portfolio ......................     296,456   15.209561   4,508,966
      Oppenheimer - Bond Fund .....................................     195,252   15.054812   2,939,482
      Oppenheimer - Global Securities Fund ........................     508,290   12.446692   6,326,529
      Oppenheimer - Multiple Strategies Fund ......................     246,328   17.026933   4,194,210
      Strong VIF - Strong Discovery Fund II .......................     263,929   16.069822   4,241,292
      Strong VIF - Strong International Stock Fund II .............      46,002   11.567221     532,115
      Strong VIF - Strong Special Fund II .........................     554,393   19.667084  10,903,294
      TCI Portfolios - TCI Balanced ...............................     115,500   13.783329   1,591,974
      TCI Portfolios - TCI Growth .................................     465,410   16.306742   7,589,321
      TCI Portfolios - TCI International ..........................     103,808   11.198083   1,162,451
      Van Eck - Gold and Natural Resources Fund ...................     158,197   17.184146   2,718,480
      Van Eck - Worldwide Bond Fund ...............................     102,604   12.924410   1,316,096
      Van Kampen American Capital LIT - Real Estate Securities Fund      38,454   11.658620     448,321
      Warburg Pincus - International Equity Portfolio .............     306,019   11.704777   3,581,884
      Warburg Pincus - Small Company Growth Portfolio .............     311,590   14.167737   4,414,525
                                                                      ---------   --------- ------------ 
                                                                                            $309,613,581
                                                                                            ============


See accompanying notes to financial statements. 

                                       40
   41


                            NATIONWIDE VLI ACCOUNT-2
         STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY

              Six Month Periods Ended June 30, 1996, 1995 and 1994
                                   (UNAUDITED)


                                                            1996             1995            1994
                                                        -------------    ------------    -----------
                                                                                       
INVESTMENT ACTIVITY:
   Reinvested capital gains and dividends ...........   $  12,441,693       3,640,521      2,028,420 
                                                        -------------    ------------    -----------
   Gain (loss) on investments:
      Proceeds from redemptions of mutual fund shares     116,343,494      71,285,062     92,331,535 
      Cost of mutual fund shares sold ...............    (111,224,578)    (69,606,555)   (92,582,661)
                                                        -------------    ------------    -----------
      Realized gain (loss) on investments ...........       5,118,916       1,678,507       (251,126)
      Change in unrealized gain (loss) on investments      (1,126,037)     11,371,311     (4,138,950)
                                                        -------------    ------------    -----------
         Net gain (loss) on investments .............       3,992,879      13,049,818     (4,390,076)
                                                        -------------    ------------    -----------
            Net investment activity .................      16,434,572      16,690,339     (2,361,656)
                                                        -------------    ------------    -----------

EQUITY TRANSACTIONS:
   Purchase payments received from contract owners ..      73,416,698      48,661,101     28,924,452 
   Surrenders (note 2d) .............................      (2,048,467)     (3,300,539)      (535,565)
   Death benefits ...................................        (161,114)         (1,556)       (14,327)
   Policy loans (net of repayments) (note 5) ........      (3,157,787)     (1,329,311)    (1,298,389)
                                                        -------------    ------------    -----------
            Net equity transactions .................      68,049,330      44,029,695     27,076,171 
                                                        -------------    ------------    -----------

EXPENSES (NOTE 2):
   Deductions for surrender charges (note 2d) .......        (280,868)       (149,264)       (25,168)
   Redemptions to pay cost of insurance charges
      and administrative charges (notes 2b and 2c) ..     (10,343,299)     (6,204,277)    (1,878,799)
   Deductions for asset charges (note 3) ............      (1,315,797)       (744,414)      (369,309)
                                                        -------------    ------------    -----------
            Total expenses ..........................     (11,939,964)     (7,097,955)    (2,273,276)
                                                        -------------    ------------    -----------


NET CHANGE IN CONTRACT OWNERS' EQUITY ...............      72,543,938      53,622,079     22,441,239 
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .........     237,069,643     120,977,621     54,817,602 
                                                        -------------    ------------    -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ...............   $ 309,613,581     174,599,700     77,258,841 
                                                        =============    ============    ===========






See accompanying notes to financial statements.

                                       41
   42

                           NATIONWIDE VLI ACCOUNT-2

                         NOTES TO FINANCIAL STATEMENTS

                          June 30, 1996, 1995 and 1994
                                   (UNAUDITED)

(1) Summary of Significant Accounting Policies

   (a) Organization and Nature of Operations

      The Nationwide VLI Separate Account-2 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life Insurance
Company (the Company) on May 7, 1987. The Account has been registered as a unit
investment trust under the Investment Company Act of 1940.

      The Company offers Modified Single Premium and Flexible Premium Variable
Life Insurance Policies through the  Account.  The primary  distribution  for   
the contracts is through the  brokerage  community; however, other distributors
may be utilized.

   (b) The Contracts

      Prior to December 31, 1990, only contracts without a front-end sales
charge, but with a contingent deferred sales charge and certain other fees, were
offered for purchase. Beginning December 31, 1990, contracts with a front-end
sales charge, a contingent deferred sales charge and certain other fees, are
offered for purchase. See note 2 for a discussion of policy charges, and note 3
for asset charges.

      Contract owners may invest in the following:

          The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)

          Dreyfus Stock Index Fund (DryStkIx) (formerly Dreyfus Life and Annuity
          Index Fund, Inc. (DLAI))

          Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity
          VIP);
            Fidelity VIP - Equity-Income Portfolio (FidVIPEI) 
            Fidelity VIP - Growth Portfolio (FidVIPGr) 
            Fidelity VIP - High Income Portfolio (FidVIPHI) 
            Fidelity VIP - Overseas Portfolio (FidVIPOv)

          Portfolios of the Fidelity Variable Insurance Products Fund II
          (Fidelity VIP-II);
            Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
            Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)

          Funds of the Nationwide Separate Account Trust (Nationwide SAT)
          (managed for a fee by an affiliated investment advisor);
            Nationwide SAT - Capital Appreciation Fund (NSATCapAp) 
            Nationwide SAT - Government Bond Fund (NSATGvtBd) 
            Nationwide SAT - Money Market Fund (NSATMyMkt) 
            Nationwide SAT - Small Company Fund (NSATSmCo)
            Nationwide SAT - Total Return Fund (NSATTotRe)

          Portfolios of the Neuberger & Berman Advisers Management Trust
          (Neuberger &Berman);
            Neuberger & Berman - Growth Portfolio (NBAMTGro) 
            Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat) 
            Neuberger & Berman - Partners Portfolio (NBAMTPart)

          Funds of the Oppenheimer Variable Account Funds (Oppenheimer);
            Oppenheimer - Bond Fund (OppBdFd)
            Oppenheimer - Global Securities Fund (OppGlSec)
            Oppenheimer - Multiple Strategies Fund (OppMult)

                                       42
   43


         Funds of the Strong Variable Insurance Funds (Strong VIF); 
            Strong VIF - Strong Discovery Fund II (StDisc2) 
            Strong VIF - Strong International Stock Fund II (StIntStk2) 
            Strong VIF - Strong Special Fund II (StSpec2)

         Portfolios of the TCI Portfolios, Inc. (TCI Portfolios); 
            TCI Portfolios - TCI Balanced (TCIBal) 
            TCI Portfolios - TCI Growth (TCIGro)
            TCI Portfolios - TCI International (TCIInt)

         Funds of the Van Eck Worldwide Insurance Trust (Van Eck);
            Van Eck - Gold and Natural Resources Fund (VEGoldNR)
            Van Eck - Worldwide Bond Fund (VEWrldBd) (formerly Van Eck - Global
            Bond Fund (VEGlobBd) 

         Fund of the Van Kampen American Capital Life Investment Trust (Van 
         Kampen American Capital);
            Van Kampen American Capital LIT - Real Estate Securities Fund 
            (VKACRSec)

         Portfolios of the Warburg Pincus Trust (Warbug Pincus);
            Warburg Pincus - International Equity Portfolio (WPIntEq)
            Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr))

      At June 30, 1996, 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 June 30, 1996. Fund purchases and sales are
accounted for on the trade date (date the order to buy or sell is executed). The
cost of investments sold is determined on a specific identification basis, and
dividends (which include capital gain distributions) are accrued as of the
ex-dividend date.

   (d) Federal Income Taxes

      Operations of the Account form a part of, and are taxed with, operations
of the Company, which is taxed as a life insurance company under the provisions
of the Internal Revenue Code.

      Fund purchases and sales are accounted for on the trade date (date the
order to buy or sell is executed). The cost of investments sold is determined on
a specific identification basis, and dividends (which include capital gain
distributions) are accrued as of the ex-dividend date.

   (e) Use of Estimates in the Preparation of Financial Statements

      The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, if any, at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. 

(2) POLICY CHARGES

   (a) Deductions from Premiums

      On multiple payment contracts and flexible premium contracts, the Company
deducts a charge for state premium taxes equal to 2.5% of all premiums received
to cover the payment of these premium taxes. The Company also deducts a sales
load from each premium payment received not to exceed 3.5% of each premium
payment. The Company may at its sole discretion reduce this sales loading.

   (b) Cost of Insurance

      A cost of insurance charge is assessed monthly against each contract by
liquidating units. The amount of the charge is based upon age, sex, rate class
and net amount at risk (death benefit less total contract value).

                                       43
   44


   (c) Administrative Charges

      For single premium contracts, the Company deducts an annual administrative
charge which is determined as follows:

      Contracts issued prior to April 16, 1990: 
         Purchase payments totalling less than $25,000 - $10/month 
         Purchase payments totalling $25,000 or more - none

      Contracts issued on or after April 16, 1990:
         Purchase payments totalling less than $25,000 - $90/year ($65/year in
         New York) 
         Purchase payments totalling $25,000 or more - $50/year

      For multiple payment contracts, the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to recover policy
maintenance, accounting, record keeping and other administrative expenses.

      For flexible premium contracts, the Company currently deducts a monthly
administrative charge of $25 during the first policy year and $5 per month
thereafter (may deduct up to $7.50, maximum) to recover policy maintenance,
accounting, record keeping and other administrative expenses. Additionally, the
Company deducts an increase charge of $2.04 per year per $1,000 applied to any
increase in the specified amount during the first 12 months after the increase
becomes effective.

      The above charges are assessed against each contract by liquidating units.

   (d) Surrenders

      Policy surrenders result in a redemption of the contract value from the
Account and payment of the surrender proceeds to the contract owner or designee.
The surrender proceeds consist of the contract value, less any outstanding
policy loans, and less a surrender charge, if applicable. The charge is
determined according to contract type.

      For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single premium
contracts issued prior to April 16, 1990, the charge is 8% in the first year and
declines to 0% after the ninth year. For single premium contracts issued on or
after April 16, 1990, the charge is 8.5% in the first year, and declines to 0%
after the ninth year.

      For multiple payment contracts and flexible premium contracts, the amount
charged is based upon a specified percentage of the initial surrender charge,
which varies by issue age, sex and rate class. The charge is 100% of the initial
surrender charge in the first year, declining to 0% after the ninth year.

      The Company may waive the surrender charge for certain contracts in which
the sales expenses normally associated with the distribution of a contract are
not incurred. 

(3) ASSET CHARGES

      For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to operations, and
to recover policy maintenance and premium tax charges. For contracts issued
prior to April 16, 1990, the charge is equal to an annual rate of .95% during
the first ten policy years, and .50% thereafter. A reduction of charges on these
contracts is possible in policy years six through ten for those contracts
achieving certain investment performance criteria. For single premium contracts
issued on or after April 16, 1990, the charge is equal to an annual rate of
1.30% during the first ten policy years, and 1.00% thereafter.

      For multiple payment contracts and flexible premium contracts the Company
deducts a charge equal to an annual rate of .80%, with certain exceptions, to
cover mortality and expense risk charges related to operations.

The above charges are assessed through the daily unit value calculation.

(4) DEATH BENEFITS

      Death benefits result in a redemption of the contract value from the
Account and payment of the death benefit proceeds, less any outstanding policy
loans (and policy charges), to the legal beneficiary. The excess of the death
benefit proceeds over the contract value on the date of death is paid by the
Company's general account.

                                       44
   45

(5) POLICY LOANS (NET OF REPAYMENTS)

      Contract provisions allow contract owners to borrow up to 90% (50% during
first year of single premium contracts) of a policy's cash surrender value. For
single premium contracts issued prior to April 16, 1990, 6.5% interest is due
and payable annually in advance. For single premium contracts issued on or after
April 16, 1990, multiple payment contracts and flexible premium contracts, 6%
interest is due and payable in advance on the policy anniversary when there is a
loan outstanding on the policy.

      At the time the loan is granted, the amount of the loan is transferred
from the Account to the Company's general account as collateral for the
outstanding loan. Collateral amounts in the general account are credited with
the stated rate of interest in effect at the time the loan is made, subject to a
guaranteed minimum rate. Loan repayments result in a transfer of collateral,
including interest, back to the Account. 

(6) SCHEDULE I

      Schedule I presents the components of the change in the unit values, which
are the basis for determining contract owners' equity. This schedule is
presented for each series, as applicable, in the following format:

            -  Beginning unit value - Jan. 1

            -  Reinvested capital gains and dividends
               (This amount reflects the increase in the unit value due to
               capital gains and dividend distributions from the underlying
               mutual funds.)

            -  Unrealized gain (loss)
               (This amount reflects the increase (decrease) in the unit value
               resulting from the market appreciation (depreciation) of the
               underlying mutual funds.)

            -  Asset charges
               (This amount reflects the decrease in the unit value due to the
               charges discussed in note 3.) 

            -  Ending unit value - June 30 

            -  Percentage increase (decrease) in unit value.

                                       45
   46

                                                                      Schedule I


                        NATIONWIDE VLI SEPARATE ACCOUNT-2

             Single Premium Contracts Issued Prior to April 16, 1990

                       SCHEDULES OF CHANGES IN UNIT VALUE

              Six Month Periods Ended June 30, 1996, 1995 and 1994
                                   (UNAUDITED)


                                           FidVIPEI        FidVIPGr     FidVIPHI       FidVIPOv       FidVIPAM     NSATGvtBd  
                                           --------        --------     --------       --------       --------     ---------  

                                                                                                         
1996
   Beginning unit value - Jan. 1          $26.373971      30.259267     21.685282      17.526172      18.081878     19.357639 
- ------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                          1.217030       2.174262      1.977825        .431349       1.189904       .590424 
- ------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                    .325802       1.064266      (.400163)       .870705       (.143280)     (.904671)
- ------------------------------------------------------------------------------------------------------------------------------
   Asset charges                            (.128772)      (.150303)     (.105839)      (.085381)      (.087220)     (.089052)
- ------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $27.788031      33.347492     23.157105      18.742845      19.041282     18.954340 
- ------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                5%            10%            7%             7%             5%           (2)%
==============================================================================================================================
1995
   Beginning unit value - Jan. 1          $19.708533      22.566466     18.151674      16.131866      15.607540     16.457035 
- ------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                          1.270646        .124738      1.314664        .123427        .327932       .567391
- ------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                   2.101444       5.223440       .857975        .541974        .627910      1.382929
- ------------------------------------------------------------------------------------------------------------------------------
   Asset charges                            (.101366)      (.114736)     (.091143)      (.076127)      (.075558)     (.082216)
- ------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $22.979257      27.799908     20.233170      16.721140      16.487824     18.325139 
- ------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                               17%            23%           11%             4%             6%           11%
==============================================================================================================================
1994
   Beginning unit value - Jan. 1          $18.583057      22.785679     18.612185      16.009316      16.778042     17.168348 
- ------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                          1.166327       1.371061      1.706032        .082663        .804460       .512907 
- ------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                   (.952605)      (.562376)     (.974875)       .401701       (.765981)     (.192841)
- ------------------------------------------------------------------------------------------------------------------------------
   Asset charges                            (.088472)      (.105081)     (.088053)      (.077931)      (.077183)     (.079159)
- ------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $18.708307      20.489283     18.255289      16.415749      15.739338     16.409255
- ------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                1%          (10)%          (2)%             3%           (6)%          (4)%
==============================================================================================================================

                                        NSATMyMkt       NSATTotRe
                                        ---------       ---------

                                                      
1996
   Beginning unit value - Jan. 1        14.287454      22.138653 
- -----------------------------------------------------------------
   Reinvested capital gains
     and dividends                        .357554        .239586 
- -----------------------------------------------------------------
   Unrealized gain (loss)                 .000000       1.649278 
- -----------------------------------------------------------------
   Asset charges                         (.068261)      (.109212)
- -----------------------------------------------------------------
   Ending unit value - June 30          14.576747      23.918305 
- -----------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                             2%             8%
=================================================================
1995
   Beginning unit value - Jan. 1        13.652006      17.312690
- -----------------------------------------------------------------
   Reinvested capital gains
     and dividends                        .386170        .267742 
- -----------------------------------------------------------------
   Unrealized gain (loss)                 .000000      (2.502165)
- -----------------------------------------------------------------
   Asset charges                         (.065893)      (.088163)
- -----------------------------------------------------------------
   Ending unit value - June 30          13.972283      19.994434 
- -----------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                             2%            15%
=================================================================
1994
   Beginning unit value - Jan. 1        13.267517      17.291720 
- -----------------------------------------------------------------
   Reinvested capital gains
     and dividends                        .209758        .213925 
- -----------------------------------------------------------------
   Unrealized gain (loss)                 .000000       (.254032)
- -----------------------------------------------------------------
   Asset charges                         (.063203)      (.081736)
- -----------------------------------------------------------------
   Ending unit value - June 30          13.414072       17.169877
- -----------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                             1%             (1)%
=================================================================





*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discussed
     in note 2.

                                       46
   47


                                                           SCHEDULE I, CONTINUED


                        NATIONWIDE VLI SEPARATE ACCOUNT-2

             SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990

                       SCHEDULES OF CHANGES IN UNIT VALUE

              Six Month Periods Ended June 30, 1996, 1995 and 1994
                                   (UNAUDITED)



                                          NBAMTGro       NBAMTLdMat    OppGlSec        StSpec2         TCIGro      VEGoldNR      
                                          --------       ----------    --------        -------         ------      --------      
                                                                                                            
1996
- ---------------------------------------------------------------------------------------------------------------------------------
   Beginning unit value - Jan. 1          $22.976381      15.906671     11.503363      18.309087      25.381408     12.839256    
- ---------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                          2.084651       1.338753       .000000        .799600       2.847171       .272272    
- ---------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                   (.763242)     (1.292197)      .948761        .528129      (2.497816)     1.078501    
- ---------------------------------------------------------------------------------------------------------------------------------
   Asset charges                            (.113817)      (.074505)     (.056493)      (.090661)      (.120639)     (.068370)   
- ---------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $24.183973      15.878722     12.395631      19.546155      25.610124     14.121659    
- ---------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                5%             0%            8%             7%             1%           10%   
=================================================================================================================================
1995
   Beginning unit value - Jan. 1          $17.608267      14.475203     11.358489      14.690448      19.544976     11.677805    
- ---------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                           .623265        .804090       .298934        .679350        .022491       .053202    
- ---------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                   3.204434        .110826      (.138949)      1.242208       3.770258       .345164    
- ---------------------------------------------------------------------------------------------------------------------------------
   Asset charges                            (.091293)      (.070701)     (.052959)      (.072598)      (.098423)     (.054605)   
- ---------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $21.344673      15.319418     11.465515      16.539408      23.239302     12.021566    
- ---------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                               21%             6%            1%            13%            19%            3%   
=================================================================================================================================
1994
   Beginning unit value - Jan. 1          $18.709214      14.635617     12.162716              **     19.964524     12.382561    
- ---------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                          2.255334        .618309       .214436                       .002137       .035632    
- ---------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                  (4.109140)      (.786528)     (.786150)                    (1.407262)     (.705563)   
- ---------------------------------------------------------------------------------------------------------------------------------
   Asset charges                            (.086505)      (.068327)     (.057276)                     (.093919)     (.057741)   
- ---------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $16.768903      14.399071     11.533726                     18.465480     11.654889    
- ---------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                             (10)%           (2)%          (5)%                          (8)%          (6)%   
=================================================================================================================================



                                          VEWrldBd      VKACRESec
                                          --------      ---------

                                                          
1996
- --------------------------------------------------------------------
   Beginning unit value - Jan. 1           14.458585      10.784280 
- --------------------------------------------------------------------
   Reinvested capital gains
     and dividends                           .394300        .008014
- --------------------------------------------------------------------
   Unrealized gain (loss)                   (.697271)       .901141
- --------------------------------------------------------------------
   Asset charges                            (.066505)      (.052063)
- --------------------------------------------------------------------
   Ending unit value - June 30             14.089109      11.641372
- --------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                              (3)%             8%
====================================================================
1995
   Beginning unit value - Jan. 1           12.443161             **
- --------------------------------------------------------------------
   Reinvested capital gains
     and dividends                           .740605 
- --------------------------------------------------------------------
   Unrealized gain (loss)                   1.071054 
- --------------------------------------------------------------------
   Asset charges                            (.063739)
- --------------------------------------------------------------------
   Ending unit value - June 30             14.191081 
- --------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                               14%
====================================================================
1994
   Beginning unit value - Jan. 1           12.729709)            **
- --------------------------------------------------------------------
   Reinvested capital gains
     and dividends                           .051271 
- --------------------------------------------------------------------
   Unrealized gain (loss)                   (.636427)
- --------------------------------------------------------------------
   Asset charges                            (.058353)
- --------------------------------------------------------------------
   Ending unit value - June 30             12.086200
- --------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                               (5)%
====================================================================




*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


                                       47
   48

                                                           SCHEDULE I, CONTINUED

                        NATIONWIDE VLI SEPARATE ACCOUNT-2

          SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER TO APRIL 16, 1990

                       SCHEDULES OF CHANGES IN UNIT VALUE

              SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
                                   (UNAUDITED)



                                    DrySRGro      DryStkIx       FidVIPEI      FidVIPGr       FidVIPHI        FidVIPOv   FidVIPAM  
                                    --------      --------       --------      --------       --------        --------   --------  
                                                                                                           
1996
   Beginning unit value - Jan. 1   $14.242220     13.621789     21.648958      20.999607      22.388295      12.667544  17.721708  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                    .000000       .150132       .998669       1.508424       2.041281        .311669   1.165823  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)            1.264101      1.202948       .266933        .737174       (.413901)       .628547   (.141094) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                     (.096883)     (.092132)     (.144524)      (.142610)      (.149393)      (.084373)  (.116873) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $15.409438     14.882737     22.770036      23.102595      23.866282      13.523387  18.629564  
- -----------------------------------------------------------------------------------------------------------------------------------
Percentage increase (decrease)
     in unit value*                         8%            9%            5%            10%             7%             7%         5% 
===================================================================================================================================
1995
   Beginning unit value - Jan. 1   $10.722275     10.088849      16.234159     15.715602      18.805616      11.700527  15.350115  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                    .000000       .124498       1.046119       .086841       1.361583        .089493    .322418  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss             1.897179      1.870747       1.729207      3.633331        .887489        .392249    .616672  
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                     (.074109)     (.071518)      (.114155)     (.109243)      (.129112)      (.075486)  (.101586) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $12.545345     12.012576      18.895330     19.326531      20.925576      12.106783  16.187619  
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                        17%           19%            16%           23%            11%             3%         5% 
===================================================================================================================================
1994
   Beginning unit value - Jan. 1   $10.702403     10.131165      15.360584     15.923752      19.350153      11.652241  16.559029  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                    .000000       .053554        .963599       .957853       1.773098        .060146    .793701  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)            (.078950)     (.411491)      (.786888)    (2.487143)     (2.051897)       .292509  (1.741649) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                     (.069293)     (.064604)      (.099989)     (.100401)      (.125175)      (.077557)  (.104152) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $10.554160      9.708624      15.437306     14.294061      18.946179      11.927339  15.506929  
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                        (1)%          (4)%            0%         (10)%           (2)%             2%       (6)% 
===================================================================================================================================




                                       FidVIPCon      NSATCapAp     NSATGvtBd
                                       ---------      ---------     ---------
                                                                   
1996
   Beginning unit value - Jan. 1       11.071965      14.444672      16.104612 
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                       .104326        .128216        .490563
- ------------------------------------------------------------------------------
   Unrealized gain (loss)                .807882       1.348249       (.752225)
- ------------------------------------------------------------------------------
   Asset charges                        (.073895)      (.099078)      (.101293)
- ------------------------------------------------------------------------------
   Ending unit value - June 30         11.910278      15.822059      15.741657 
- ------------------------------------------------------------------------------
Percentage increase (decrease)
     in unit value*                            8%            10%            (2)%
==============================================================================
1995
   Beginning unit value - Jan. 1              **      11.312336      13.739287
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                                      .108505        .473075 
- ------------------------------------------------------------------------------
   Unrealized gain (loss                               1.024583       1.153715 
- ------------------------------------------------------------------------------
   Asset charges                                       (.076678)      (.093846)
- ------------------------------------------------------------------------------
   Ending unit value - June 30                        12.368746      15.272231 
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                           9%            11%
==============================================================================
1994
   Beginning unit value - Jan. 1              **      11.563943      14.383265 
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                                      .072046        .429138 
- ------------------------------------------------------------------------------
   Unrealized gain (loss)                              (.647953)      (.998269)
- ------------------------------------------------------------------------------
   Asset charges                                       (.073362)      (.090679)
- ------------------------------------------------------------------------------
   Ending unit value - June 30                        10.914674      13.723455 
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                          (6)%           (5)%
==============================================================================




*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


                                       48
   49


                                                           SCHEDULE I, CONTINUED

                        NATIONWIDE VLI SEPARATE ACCOUNT-2

          SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER TO APRIL 16, 1990

                       SCHEDULES OF CHANGES IN UNIT VALUE

              SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
                                   (UNAUDITED)



                                   NSATMyMkt      NSATSmCo       NSATTotRe     NBAMTGro      NBAMTLMat     NBAMTPart     OppBdFd   
                                   ---------      --------       ---------     --------     ----------    ----------    --------   
                                                                                                           
1996
   Beginning unit value - Jan. 1   $12.028786     11.410311      19.154939    16.264834     13.684722     13.495873     16.056725  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                    .300681       .022370        .207032     1.474851      1.151075       .549661       .513150  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss              .000000      1.972292       1.426011     (.539600)    (1.111242)     1.113355      (.567199) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                     (.078705)     (.079529)      (.129200)    (.110164)     (.087639)     (.093646)     (.102011) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $ 12.250762    13.325444      20.658782    17.089921     13.636916     15.065243     15.900665  
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                          2%          17%             8%           5%            0%           12%          (1)% 
===================================================================================================================================
1995
   Beginning unit value - Jan. 1   $ 11.534440           **      15.031721    12.508337     12.496729     10.018146    13.903136   
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                     .326029                     .232165      .442496       .693794       .081860       .479016  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss               .000000                     2.170685     2.273970      .095431      2.024613       .961762  
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                      (.076248)                    (.104667)    (.088663)     (.083450)    (.070859)     (.094385) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $ 11.784221                    17.329904    15.136140     13.202504    12.053760     15.249529  
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                          2%                          15%          21%            6%          20%           10% 
===================================================================================================================================
1994
   Beginning unit value - Jan. 1   $ 11.249231          **        15.066007    13.336899     12.679406           **     14.362878  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                     .177692                      .186146     1.607088       .535454                    .293823  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss               .000000                     (.220885)   (2.926683)     (.681077)                  (.590888) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                      (.073378)                    (.097367)    (.084318)     (.080944)                  (.091289) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $ 11.353545                    14.933901    11.932986     12.452839                  13.974524  
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                          1%                          (1)%        (11)%          (2)%                       (3)%
===================================================================================================================================



                                      OppGlSec       OppMult        StDisc2
                                      --------       -------        -------
                                                                 
1996
   Beginning unit value - Jan. 1      11.413379      16.404926     16.214896 
- ----------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                      .000000        .846104      3.076316 
- ----------------------------------------------------------------------------
   Unrealized gain (loss                .940556        .163912     (3.449151)
- ----------------------------------------------------------------------------
   Asset charges                       (.076641)      (.108991)     (.103337)
- ----------------------------------------------------------------------------
   Ending unit value - June 30        12.277294      17.305951     15.738724 
- ----------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                           8%             5%           (3)%
============================================================================
1995
   Beginning unit value - Jan. 1      11.309050      13.693997     12.144445 
- ----------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                      .297396        .758506       .003939 
- ----------------------------------------------------------------------------
   Unrealized gain (loss               (.138644)      1.082475      2.005443 
- ----------------------------------------------------------------------------
   Asset charges                       (.072097)      (.094212)     (.082421)
- ----------------------------------------------------------------------------
   Ending unit value - June 30        11.395705      15.440766     14.071406 
- ----------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                           1%            13%           16%
============================================================================
1994
   Beginning unit value - Jan. 1      12.152136      14.148115     13.003547 
- ----------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                      .214078        .314978       .015220 
- ----------------------------------------------------------------------------
   Unrealized gain (loss               (.784285)      (.888226)    (1.379822) 
- ----------------------------------------------------------------------------
   Asset charges                       (.078233)      (.090508)     (.080824)
- ----------------------------------------------------------------------------
   Ending unit value - June 30        11.503696      13.484359     11.558121 
- ----------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                          (5)%           (5)%         (11)%
============================================================================



*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


                                       49
   50


                                                           SCHEDULE I, CONTINUED

                        NATIONWIDE VLI SEPARATE ACCOUNT-2

          SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER TO APRIL 16, 1990

                       SCHEDULES OF CHANGES IN UNIT VALUE

              SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
                                   (UNAUDITED)



                                StIntStk2       StSpec2         TCIBal        TCIGro           TCIInt       VEGoldNR     VEWrldBd  
                                ---------       -------         ------        ------           ------       --------     --------  
                                                                                                           
1996
   Beginning unit value - Jan 1 $10.226632     18.074367       12.914886      17.116040      10.403803      14.230388   14.170551  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                 .024831       .788653         .529344       1.918348        .247063        .301335     .385883  
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)         1.346518       .521387         .138409      (1.682916)       .509589       1.196433    (.682900) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                  (.070040)     (.122370)       (.084545)      (.111224)      (.068723)      (.103608)   (.089109) 
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30  $11.527941     19.262037       13.498094      17.240248      11.091732      15.624548   13.784425  
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                     13%            7%              5%             1%             7%            10%         (3)%
===================================================================================================================================
1995
   Beginning unit value - Jan  1        **  $  14.552799       10.801955      13.226279       9.392654      12.988341   12.237880  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
    and dividends                                .672374         .121402        .015219        .000000        .059090     .727370
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss                        1.229035        1.232108       2.548434        .372699        .382974    1.053127
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                                (.098327)       (.072883)      (.091056)      (.060122)      (.083043)   (.085717)
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30              $  16.355881       12.082582      15.698876       9.705231      13.347362   13.932660
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                   12%             12%            19%             3%             3%         14% 
===================================================================================================================================
1994
   Beginning unit value - Jan 1        **   $  14.230663       10.876445      13.557427             **      13.820369   12.563474  
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                               .039930         .118896        .001450                       .039716     .050533 
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                        .081375        (.393389)      (.953975)                     (.786345)   (.627585)
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                                (.093185)       (.070510)      (.087199)                     (.088112)   (.078753)
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30              $  14.258783)      10.531442)     12.517703                     12.985628   11.907669
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                    0%             (3)%           (8)%                          (6)%        (5)%
===================================================================================================================================



                                     VKACRESec       WPlntEq         WPSmCoGr
                                     ---------       -------         --------
                                                                  
1996
   Beginning unit value - Jan 1      10.765797      10.661502        12.430586
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                     .007993        .000000          .000000
- ------------------------------------------------------------------------------
   Unrealized gain (loss)              .898493       1.057928         1.753163
- ------------------------------------------------------------------------------
   Asset charges                      (.071064)      (.072297)        (.085738)
- ------------------------------------------------------------------------------
   Ending unit value - June 30       11.601219      11.647133        14.098011
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*             %            8%             9%              13%
==============================================================================
1995
   Beginning unit value - Jan  1            **             **               **
- ------------------------------------------------------------------------------
   Reinvested capital gains
    and dividends               
- ------------------------------------------------------------------------------
   Unrealized gain (loss        
- ------------------------------------------------------------------------------
   Asset charges                
- ------------------------------------------------------------------------------
   Ending unit value - June 30  
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*
==============================================================================
1994
   Beginning unit value - Jan 1             **             **              **
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends              
- ------------------------------------------------------------------------------
   Unrealized gain (loss)       
- ------------------------------------------------------------------------------
   Asset charges                
- ------------------------------------------------------------------------------
   Ending unit value - June 30  
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*             
==============================================================================






*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


                                       50
   51


                                                           SCHEDULE I, CONTINUED

                        NATIONWIDE VLI SEPARATE ACCOUNT-2

            MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS

                       SCHEDULES OF CHANGES IN UNIT VALUES

              SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
                                   (UNAUDITED)


                                   DrySRGro     DryStkIx      FidVIPEI      FidVIPGr        FidVIPHI   FidVIPOv        FidVIPAM   
                                   --------     --------      --------      --------        --------   --------        --------   
                                                                                                         
1996
   Beginning unit value - Jan 1 $  14.401809    13.775382      22.215745      21.256059    20.852993    13.645033      15.982529  
- ----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                   .000000      .152111       1.025291       1.527554     1.902180      .335875       1.051899  
- ----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss            1.279416     1.217898        .274656        .748227     (.384502      .678251       (.126389) 
- ----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                    (.060361)    (.057405)      (.091380)      (.088946)    (.085735)    (.055998)      (.064943) 
- ----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30  $  15.620864    15.087986      23.424312      23.442894    22.284936    14.603161      16.843096  
- ----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                        8%          10%             5%            10%           7%           7%             5% 
==================================================================================================================================
1995
   Beginning unit value - Jan 1 $  10.788547    10.151919      16.576413      15.828463    17.428943    12.540728      13.774855  
- ----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                   .000000      .125508       1.068942        .087506     1.262495      .095965        .289466  
- ----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss            1.911763     1.884713       1.768262       3.665672      .824368      .421705        .554509  
- ----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                    (.045951)    (.044343)      (.071826)      (.067794)    (.073725)    (.049851)      (.056172) 
- ----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30  $  12.654359    12.117797      19.341791      19.513847    19.442081    13.008547      14.562658  
- ----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                       17%         19%            17%            23%          12%           4%              6% 
==================================================================================================================================
1994
   Beginning unit value - Jan 1 $  10.715005    10.143796      15.606442      15.958341    17.844401    12.426854      14.785784  
- ----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                   .000000      .053687        .979713        .960381     1.635883      .064174        .709036  
- ----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)           (.079449)    (.412760)      (.800240)     (2.496025)   (1.893913)     .311754      (1.556782) 
- ----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                    (.042741)    (.039859)      (.062595)      (.061996)    (.071122)    (.050964)      (.057299) 
- ----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30  $  10.592815     9.744864      15.723320      14.360701    17.515249    12.751818      13.880739  
- ----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                       (1)%         (4)%            1%           (10)%         (2)%          3%            (6)%
==================================================================================================================================





                                  FidVIPCon   NSATCapAp      NSATGvtBd
                                  ---------   ---------      ---------

                                                        
1996
   Beginning unit value - Jan 1    11.09913   14.713230      14.984933
- ----------------------------------------------------------------------
   Reinvested capital gains
     and dividends                   .10463     .130848        .457308
- ----------------------------------------------------------------------
   Unrealized gain (loss             .81109    1.374408       (.700476)
- ----------------------------------------------------------------------
   Asset charges                   (.045643)   (.062178)      (.058077)
- ----------------------------------------------------------------------
   Ending unit value - June 30     11.96921   16.156308      14.683688
- ----------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                       8%         10%            (2)%
======================================================================
1995
   Beginning unit value - Jan 1          **   11.465403      12.720514
- ----------------------------------------------------------------------
   Reinvested capital gains
     and dividends                              .110173        .438811
- ----------------------------------------------------------------------
   Unrealized gain (loss                       1.039681       1.069274
- ----------------------------------------------------------------------
   Asset charges                               (.047881)      (.053537)
- ----------------------------------------------------------------------
   Ending unit value - June 30                12.567376      14.175062
- ----------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                  10%            11%
======================================================================
1994
   Beginning unit value - Jan 1          **   11.662121      13.250482
- ----------------------------------------------------------------------
   Reinvested capital gains
     and dividends                              .072792        .396083
- ----------------------------------------------------------------------
   Unrealized gain (loss)                      (.654655)      (.921057)
- ----------------------------------------------------------------------
   Asset charges                               (.045583)      (.051463)
- ----------------------------------------------------------------------
   Ending unit value - June 30                11.034675      12.674045
- ----------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                  (5)%           (4)%
======================================================================



*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


                                       51
   52


                                                           SCHEDULE I, CONTINUED

                        NATIONWIDE VLI SEPARATE ACCOUNT-2

            MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS

                       SCHEDULES OF CHANGES IN UNIT VALUES

              SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
                                   (UNAUDITED)


                                            NSATMyMkt         NSATSmCo      NSATTotRe      NBAMTGro        NBAMTLMat      NBAMTPart
                                            ---------         --------      ---------      --------        ---------      ---------
                                                                                                              
1996
   Beginning unit value - Jan. 1          $  11.714295       11.420759      18.192762      15.962482      13.096811      13.591346 
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                             .293298         .022437        .196992       1.448641       1.102543        .554011 
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss                       .000000        1.976674       1.355728       (.530530)     (1.064127       1.122308 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                              (.047109)       (.049053)      (.075607)      (.066613)      (.051676)      (.058104)
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $  11.960484       13.370817      19.669875      16.813980      13.083551      15.209561 
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                  2%             17%             8%             5%             0%            12%
===================================================================================================================================
1995
   Beginning unit value - Jan. 1          $  11.176411              **      14.205723      12.214794      11.900389      10.038887 
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                             .316243                        .219815        .432461        .661221        .082096 
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss                       .000000                       2.053852       2.223876        .091213       2.031600 
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                              (.045408)                      (.060943)      (.053346)      (.048959)      (.043755)
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $  11.447246                      16.418447      14.817785      12.603864      12.108828 
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                  2%                            16%            21%             6%            21%
===================================================================================================================================
1994
   Beginning unit value - Jan. 1          $  10.845265              **      14.167308     12.959107      12.014277              ** 
- -----------------------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                             .171513                        .175370       1.562441        .507651                
- -----------------------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss                       .000000                       (.208324)     (2.847280)      (.645773                
- -----------------------------------------------------------------------------------------------------------------------------------
   Asset charges                              (.043483)                      (.056410)      (.050479)      (.047253)               
- -----------------------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30            $  10.973295                      14.077944      11.623789      11.828902                
- -----------------------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                  1%                            (1)%         (10)%            (2)%              
===================================================================================================================================



                                            OppBdFd        OppGlSec        OppMult        StDisc2
                                            -------        --------        -------        -------
                                                                                   
1996
   Beginning unit value - Jan. 1            15.164813      11.542134      16.100377      16.514850
- --------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                            .485469        .000000        .831692       3.137844
- --------------------------------------------------------------------------------------------------
   Unrealized gain (loss                     (.536110)       .952319        .160781      (3.518027)
- --------------------------------------------------------------------------------------------------
   Asset charges                             (.059360)      (.047761)      (.065917)      (.064845)
- --------------------------------------------------------------------------------------------------
   Ending unit value - June 30              15.054812      12.446692      17.026933      16.069822
- --------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                (1)%            8%             6%            (3)%
===================================================================================================
1995
   Beginning unit value - Jan. 1            13.065574      11.379737      13.372968      12.307607
- --------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                            .450916        .299595        .741780        .003997
- --------------------------------------------------------------------------------------------------
   Unrealized gain (loss                      .904766       (.139069)      1.058341       2.035906
- --------------------------------------------------------------------------------------------------
   Asset charges                             (.054647)      (.044700)      (.056692)      (.051471)
- --------------------------------------------------------------------------------------------------
   Ending unit value - June 30              14.366609      11.495563      15.116397      14.296039
- --------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                10%             1%            13%            16%
===================================================================================================
1994
   Beginning unit value - Jan. 1            13.430475      12.167250      13.747705      13.112678 
- --------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                            .275349        .214589        .306660        .015384
- --------------------------------------------------------------------------------------------------
   Unrealized gain (loss                     (.553440)      (.786955)      (.864902)     (1.393758)
- --------------------------------------------------------------------------------------------------
   Asset charges                             (.052595)      (.048263)      (.054183)      (.050215)
- --------------------------------------------------------------------------------------------------
   Ending unit value - June 30              13.099789      11.546621      13.135280      11.684089
- --------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                (2)%           (5)%           (4)%          (11)%
===================================================================================================



*    This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


                                       52
   53

                                                           SCHEDULE I, CONTINUED

                        NATIONWIDE VLI SEPARATE ACCOUNT-2

            MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS

                       SCHEDULES OF CHANGES IN UNIT VALUES

              SIX MONTH PERIODS ENDED JUNE 30, 1996, 1995 AND 1994
                                   (UNAUDITED)



                                    StIntStk2    StSpec2        TCIBal        TCIGro        TCIInt      VEGoldNR      
                                    ---------    -------        ------        ------        ------      --------      
                                                                                                 
1996
   Beginning unit value - Jan. 1   $10.236021   18.408627     13.155049     16.149061     10.477472     15.612002     
- ----------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                    .024915     .804250       .539952      1.812196       .249286       .331277     
- ----------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)            1.349483     .530996       .141389     (1.589861)      .513970      1.310902     
- ----------------------------------------------------------------------------------------------------------------------
   Asset charges                     (.043198)   (.076789)     (.053061)     (.064654)     (.042645)     (.070035)    
- ----------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30     $11.567221   19.667084     13.783329     16.306742     11.198083     17.184146     
- ----------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                        13%          7%            5%            1%            7%           10%    
======================================================================================================================
1995
   Beginning unit value - Jan. 1           **  $14.748256     10.948128     12.417011      9.412116     14.178501     
- ----------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                                .682289       .123255       .014289       .000000       .064634     
- ----------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                        1.247757      1.250767      2.396454       .374626       .419526     
- ----------------------------------------------------------------------------------------------------------------------
   Asset charges                                 (.061399)     (.045517)     (.052676)     (.037116)     (.055863)    
- ----------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30                 $16.616903     12.276633     14.775078      9.749626     14.606798     
- ----------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                    13%           12%           19%            4%            3%    
======================================================================================================================
1994
   Beginning unit value - Jan. 1           **  $14.350073     10.968814     12.664593            **     15.011706     
- ----------------------------------------------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                                .040336       .120129       .001356                     .043222     
- ----------------------------------------------------------------------------------------------------------------------
   Unrealized gain (loss)                         .081622      (.397883)     (.893383)                   (.855909)    
- ----------------------------------------------------------------------------------------------------------------------
   Asset charges                                 (.057908)     (.043814)     (.050179)                   (.058966)    
- ----------------------------------------------------------------------------------------------------------------------
   Ending unit value - June 30                 $14.414123     10.647246     11.722387                   14.140053     
- ----------------------------------------------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                                     0%           (3)%          (7)%                        (6)%   
======================================================================================================================


                                  VEWrldBd    VKACRESec    WPlntEq   WPSmCoGr
                                  --------    ---------    -------   --------
                                                               
1996
   Beginning unit value - Jan. 1  13.253457    10.792212  10.687672  12.461074
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                  .361660      .008023    .000000    .000000
- ------------------------------------------------------------------------------
   Unrealized gain (loss)          (.639351)     .902276   1.061762   1.759620
- ------------------------------------------------------------------------------
   Asset charges                   (.051356)    (.043891)  (.044657)  (.052957)
- ------------------------------------------------------------------------------
   Ending unit value - June 30    12.924410    11.658620  11.704777  14.167737
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                      (2)%          8%        10%        14%
==============================================================================
1995
   Beginning unit value - Jan. 1  11.388987           **         **         **
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                  .678268                           
- ------------------------------------------------------------------------------
   Unrealized gain (loss)           .980430                           
- ------------------------------------------------------------------------------
   Asset charges                   (.049151)                          
- ------------------------------------------------------------------------------
   Ending unit value - June 30    12.998534                           
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                      14%                          
==============================================================================
1994
   Beginning unit value - Jan. 1  11.633841           **         **         **
- ------------------------------------------------------------------------------
   Reinvested capital gains
     and dividends                  .046884                           
- ------------------------------------------------------------------------------
   Unrealized gain (loss)          (.581843)                          
- ------------------------------------------------------------------------------
   Asset charges                   (.044932)                          
- ------------------------------------------------------------------------------
   Ending unit value - June 30    11.053950                           
- ------------------------------------------------------------------------------
   Percentage increase (decrease)
     in unit value*                      (5)%                         
==============================================================================




 *   This is not an annualized rate of return as it is the change for a six
     month period and asset charges do not include the policy charges discused
     in note 2.

**   This investment option was not being utilized or was not available.


See note 6.

                                       53
   54

                      [THIS PAGE LEFT BLANK INTENTIONALLY]
















                                       54


   55

This report is for the information of contract owners with funds in the
Nationwide VLI Separate Account-2. It may also be used, from time to time, as
sales literature, but only when accompanied or preceded by the current
prospectus, which contains complete information about the contracts which invest
in the separate account, and their fees, charges and expenses. If this report is
used as sales literature after March 31, 1996, it must be accompanied by the
fund performance report reflecting performances for the most recently completed
calendar quarter. Prospective investors should read the prospectus carefully
before investing.

                                       55


   56

NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA o COLUMBUS, OHIO 43215-2220

                                                                   Bulk Rate
                                                                 U.S. Postage
                                                                     PAID
                                                                Columbus, Ohio
                                                                Permit No. 521



Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company