-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VvKAFnrk/+EJY/YLupQIMsj60/5AosY9hViOvbffwWIWmi453KHXEjICBwRxzYUt 8E/hVid4sJ5rmSH451WnMg== 0000950152-96-006766.txt : 19961223 0000950152-96-006766.hdr.sgml : 19961223 ACCESSION NUMBER: 0000950152-96-006766 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 19961220 EFFECTIVENESS DATE: 19961220 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONWIDE VLI SEPARATE ACCOUNT 2 CENTRAL INDEX KEY: 0000820914 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 314156830 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-16999 FILM NUMBER: 96684171 BUSINESS ADDRESS: STREET 1: ONE NATIONWIDE PLZ STREET 2: C/O NATIONWIDE LIFE INSURANCE CO CITY: COLUMBUS STATE: OH ZIP: 43216 BUSINESS PHONE: 614-249-7111 MAIL ADDRESS: STREET 1: NATIONWIDE LIFE INSURANCE CO STREET 2: ONE NATIONWIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43216 485BPOS 1 NATIONWIDE VLI SEP. ACCT-II 485BPOS 1 REGISTRATION NO. 33-16999 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 POST-EFFECTIVE AMENDMENT NO. 13 TO FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 NATIONWIDE VLI SEPARATE ACCOUNT-2 (EXACT NAME OF TRUST) NATIONWIDE LIFE INSURANCE COMPANY ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43216 (EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT) GORDON E. MCCUTCHAN SECRETARY ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43216 (NAME AND ADDRESS OF AGENT FOR SERVICE) This Post-Effective Amendment amends the Registration Statement in respect to the Prospectus and the Financial Statements. It is proposed that this filing will become effective (check appropriate box). [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on December 23, 1996 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 The Registrant has registered an indefinite number of securities by a prior registration statement in accordance with Rule 24f-2 under the Investment Company Act of 1940. Pursuant to Paragraph (a) (3) thereof, a non-refundable fee in the amount of $500.00 has been paid to the Commission. On behalf of its separate account registrants, the Company has filed its 24f-2 Notices for the fiscal year ended December 31, 1995, on February 15, 1996. 2 CROSS REFERENCE TO ITEMS REQUIRED BY FORM N-8B-2 N-8B-2 ITEM CAPTION IN PROSPECTUS 1....................................Nationwide Life Insurance Company The Variable Account 2....................................Nationwide Life Insurance Company 3....................................Custodian of Assets 4....................................Distribution of The Policies 5....................................The Variable Account 6....................................Not Applicable 7....................................Not Applicable 8....................................Not Applicable 9....................................Legal Proceedings 10....................................Information About The Policies; How The Cash Value Varies; Right to Exchange for a Fixed Benefit Policy; Reinstatement; Other Policy Provisions 11....................................Investments of The Variable Account 12....................................The Variable Account 13....................................Policy Charges Reinstatement 14....................................Underwriting and Issuance - Premium Payments Minimum Requirements for Issuance of a Policy 15....................................Investments of the Variable Account; Premium Payments 16....................................Underwriting and Issuance - Allocation of Cash Value 17....................................Surrendering The Policy for Cash 18....................................Reinvestment 19....................................Not Applicable 20....................................Not Applicable 21....................................Policy Loans 22....................................Not Applicable 23....................................Not Applicable 24....................................Not Applicable 25....................................Nationwide Life Insurance Company 26....................................Not Applicable 27....................................Nationwide Life Insurance Company 28....................................Company Management 29....................................Company Management 30....................................Not Applicable 31....................................Not Applicable 32....................................Not Applicable 33....................................Not Applicable 34....................................Not Applicable 35....................................Nationwide Life Insurance Company 36....................................Not Applicable 37....................................Not Applicable 38....................................Distribution of The Policies 39....................................Distribution of The Policies 40....................................Not Applicable 41(a).................................Distribution of The Policies 42....................................Not Applicable 43....................................Not Applicable 44....................................How The Cash Value Varies 45....................................Not Applicable 3 N-8B-2 ITEM CAPTION IN PROSPECTUS 46....................................How The Cash Value Varies 47....................................Not Applicable 48....................................Custodian of Assets 49....................................Not Applicable 50....................................Not Applicable 51....................................Summary of The Policies; Information About The Policies 52....................................Substitution of Securities 53....................................Taxation of The Company 54....................................Not Applicable 55....................................Not Applicable 56....................................Not Applicable 57....................................Not Applicable 58....................................Not Applicable 59....................................Financial Statements 4 SUPPLEMENT DATED DECEMBER 23, 1996 TO PROSPECTUS DATED MAY 1, 1996 FOR MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-2 This Supplement updates certain information contained in your Prospectus. Please read it and keep it with your Prospectus for future reference. 1.Effective December 23,1996, the underlying Mutual Fund Options located on page 1 of the Prospectus are hereby amended to include the following underlying Mutual Funds: DREYFUS VARIABLE INVESTMENT FUND - Growth & Income Portfolio* TCI PORTFOLIOS, INC. AN AFFILIATE OF TWENTIETH CENTURY COMPANIES, INC.*** - TCI Value VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST) - Worldwide Emerging Markets Fund WARBURG PINCUS TRUST - Post-Venture Capital Portfolio *The Growth and Income Portfolio may invest in lower quality debt securities commonly referred to as junk bonds 2. The expense table located on page 7 of the Prospectus is hereby amended to include the following information:
- --------------------------------------------------------------------------------------------------------------------------- Management Fees Other Total Expenses Expenses - --------------------------------------------------------------------------------------------------------------------------- Dreyfus Variable Investment Fund- Growth & Income Portfolio 0.75% 0.20% 0.95% - --------------------------------------------------------------------------------------------------------------------------- TCI Portfolios, Inc. - TCI Value 1.00% 0.00% 1.00% - --------------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets 1.00% 0.00% 1.00% Fund - --------------------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust - Post-Venture Capital Portfolio** 0.65% 0.75% 1.40% - ---------------------------------------------------------------------------------------------------------------------------
**Absent the waiver of fees by the Portfolio's investment adviser and co-administrator, Management Fees for the Portfolio would equal 1.25%; other Expenses would equal .81%; and Total Portfolio Operating Expenses would equal 2.06%. Other Expenses for the Portfolio are based on annualized estimates of expenses for the fiscal year ending December 31, 1996, net of any fee waivers or expense reimbursements. The investment adviser has undertaken to limit the Portfolio's Total Portfolio Operating Expenses through December 31,1996. ***Effective January 1, 1997, Twentieth Century Companies, Inc. will change its name to American Century Companies, Inc. Also effective January 1, 1997, Twentieth Century Mutual Funds is changing its name to American Century(SM) Investments. 5 3. The section entitled THE VARIABLE ACCOUNT located on pages 8 through 16 of the Prospectus is also amended to include the following information regarding the underlying Mutual Funds: DREYFUS VARIABLE INVESTMENT FUND Dreyfus Variable Investment Fund (the "Fund") is an open-end, management investment company. It was organized as an unincorporated business trust under the laws of the Commonwealth of Massachusetts on October 29,1986 and commenced operations August 31, 1990. The Dreyfus Corporation ("Dreyfus") serves as the Fund's manager. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation. GROWTH AND INCOME PORTFOLIO Investment Objective: To provide long-term capital growth, current income and growth of income, consistent with reasonable investment risk. The Portfolio invests in equity securities, debt securities and money market instruments of domestic and foreign issuers. The proportion of the Portfolio's assets invested in each type of security will vary from time to time in accordance with Dreyfus' assessment of economic conditions and investment opportunities. In purchasing equity securities, Dreyfus will invest in common stocks, preferred stocks and securities convertible into common stocks, particularly those which offer opportunities for capital appreciation and growth of earnings, while paying current dividends. The Portfolio will generally invest in investment-grade debt obligations, except that it may invest up to 35% of the value of its net assets in convertible debt securities rated not lower than Caa by Moody's Investor Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed to be of comparable quality by Dreyfus. These securities are considered to have predominantly speculative characteristics with respect to capacity to pay interest and repay principal and are considered to be of poor standing. See "Investment Considerations and Risks-Lower Rated Securities" in the Portfolio's prospectuses. TCI PORTFOLIOS, INC., A MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It is a diversified, open-end investment management company designed only to provide investment vehicles for variable annuity and variable life insurance products of insurance companies. A member of the Twentieth Century Family of Mutual Funds, which is changing its name to American Century(SM) Investments, effective January 1, 1997. TCI Portfolios, Inc. is managed by Investors Research Corporation, which is changing its name to American Century Investment Management, Inc., effective January 1, 1997. - TCI VALUE FUND Investment Objective: The investment objective of the Fund is long-term capital growth; income is a secondary objective. Under normal market conditions, the Fund expects to invest at least 80% of the value of its total asset in equity securities, including common and preferred stock, convertible preferred stock and convertible debt obligations. The equity securities in which the Fund will invest will be primarily securities of well-established companies with intermediate-to-large market capitalizations that are believed by management to be undervalued at the time of purchase. VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST) Van Eck Worldwide Insurance Trust is an open-end management investment company organized as a "Business Trust" under the laws of the Commonwealth of Massachusetts on January 7, 1987. Trust shares are offered only to separate accounts of various insurance companies to fund the benefits of variable insurance and annuity policies. The investment advisor and manager is Van Eck Associates Corporation. - WORLDWIDE EMERGING MARKETS FUND Investment Objective: Seeks long-term capital appreciation by investing primarily in equity securities in emerging markets around the world. The Fund specifically emphasizes investment in countries that, compared to the world's major economies, exhibit relatively low gross national product per capita, as 6 well as the potential for rapid economic growth. Peregrine Asset Management (Hong Kong) Limited serves as sub-investment adviser to this Fund. WARBURG PINCUS TRUST The Warburg Pincus Trust ("Trust") is an open-end management investment company organized in March 1995 as a business trust under the laws of the Commonwealth of Massachusetts. The Trust offers its shares to insurance companies for allocation to separate accounts for the purpose of funding variable annuity and variable life Policies. Trust portfolios are managed by Warburg, Pincus Counsellors, Inc. ("Counsellors") - POST-VENTURE CAPITAL PORTFOLIO Investment Objective: The Portfolio seeks long-term growth of capital by investing primarily in equity securities of issuers in their post-venture capital stage of development and pursues an aggressive investment strategy. Under normal market conditions, the Portfolio will invest at least 65% of its total assets in equity securities of "post-venture capital companies." A post-venture capital company is one that has received venture capital financing either (a) during the early stages of the company's existence or the early stages of the development of a new product or service or (b) as part of a restructuring or recapitalization of the company. The Portfolio may invest up to 10% of its assets in venture capital and other investment funds. 4. The section entitled "TRANSFERS" located on page 14 of the Prospectus is hereby amended by adding the following information: Policies described in this prospectus may in some cases be sold to individuals who independently utilize the services of a firm or individual engaged in market timing. Generally, such firms or individuals obtain authorization from multiple Policy Owners to make transfers and exchanges among the Sub-Accounts (the underlying Mutual Funds) on the basis of perceived market trends. Because of the unusually large transfers of funds associated with some of these transactions, the ability of the Company or underlying Mutual Funds to process such transactions may be compromised, and the execution of such transactions may possibly disadvantage or work to the detriment of other Policy Owners not utilizing market timing services. Accordingly, the right to exchange Cash Surrender Values among the Sub-Accounts may be subject to modification if such rights are exercised by a market timing firm or any other third party authorized to initiate transfer or exchange transactions on behalf of multiple Policy Owners. THE RIGHTS OF INDIVIDUAL POLICY OWNERS TO EXCHANGE CASH SURRENDER VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE POLICY OWNER, OR BY THE POLICY OWNER'S REPRESENTATIVE OF RECORD AS AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company may, among other things, not accept (1) the transfer or exchange instructions of any agent acting under a power of attorney on behalf of more than one Policy Owner, or (2) the transfer or exchange instructions of individual policy owners who have executed pre-authorized transfer or exchange forms which are submitted by market timing firms or other third parties on behalf of more than one Policy Owner at the same time. The Company will not impose any such restrictions or otherwise modify exchange rights unless such action is reasonably intended to prevent the use of such rights in a manner that will disadvantage or potentially impair the contract rights of other Policy Owners. 5. Effective October 17, 1996, Nationwide Financial Services, Inc. has changed its name to Nationwide Advisory Services, Inc. Accordingly, any and all references to Nationwide Financial Services, Inc. in this Prospectus are hereby amended to reflect this name change. 7 NATIONWIDE LIFE INSURANCE COMPANY Home Office P.O. Box 182150 One Nationwide Plaza Columbus, Ohio 43218-2150 (800) 547-7548, TDD (800) 238-3035 MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES* ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-2 The Life Insurance Policies offered by this prospectus are variable life insurance policies (collectively referred to as the "Policies"). The Policies are designed to provide life insurance coverage on the Insured named in the Policy. The Policies may also provide a Cash Surrender Value if the Policy is terminated during the lifetime of the Insured. The Death Benefit and Cash Value of the Policies may vary to reflect the experience of the Nationwide VLI Separate Account-2 (the "Variable Account") or the Fixed Account to which Cash Values are allocated. The Policies described in this prospectus may meet the definition of "modified endowment contracts" under Section 7702A of the Internal Revenue Code (the "Code"). The Code provides for taxation of surrenders, partial surrenders, loans, collateral assignments and other pre-death distributions from modified endowment contracts in the same way annuities are taxed. Any distribution is taxable to the extent the Cash Value of the Policy exceeds, at the time of the distribution, the premiums paid into the Policy. The Code also provides for a 10% tax penalty on the taxable portion of such distributions. That penalty is applicable unless the distribution is 1) paid after the Policy Owner is 59 1/2 or disabled; or 2) the distribution is part of an annuity to the Policy Owner as defined in the Code (see "Tax Matters"). It may not be advantageous to replace existing insurance with Policies described in this prospectus. It may also be disadvantageous to purchase a policy to obtain additional insurance protection if the purchaser already owns another variable life insurance policy. The policies may not be advantageous for persons who may wish to make policy loans or withdrawals prior to attaining age 59 1/2 (see "Tax Matters"). *The contract is titled a "Flexible Premium Variable Life Insurance Policy" in Texas. The Policy Owner may allocate premiums and Cash Value to one or more of the sub-accounts of the Variable Account and the Fixed Account. The assets of each sub-account will be used to purchase, at net asset value, shares of a designated underlying Mutual Fund in the following series of the underlying variable account Mutual Fund options: DREYFUS OPPENHEIMER VARIABLE ACCOUNT FUNDS: -Dreyfus Stock Index Fund -Bond Fund -Dreyfus Socially Responsible Growth Fund -Global Securities Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUND: -Multiple Strategies Fund -High Income Portfolio* STRONG SPECIAL FUND II, INC. -Equity-Income Portfolio STRONG VARIABLE INSURANCE FUNDS, INC.: -Growth Portfolio -Discovery Fund II, Inc. -Overseas Portfolio -International Stock Fund II FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: TCI PORTFOLIOS, INS.: -Asset Manager Portfolio -TCI Growth -Contrafund Portfolio -TCI Balanced NATIONWIDE SEPARATE ACCOUNT TRUST: -TCI International -Capital Appreciation Fund VAN ECK WORLDWIDE INSURANCE TRUST: -Money Market Fund -Gold and Natural Resources Fund -Government Bond Fund -Worldwide Bond Fund -Small Company Fund VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST: -Total Return Fund -Real Estate Securities Fund NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST: WARBURG PINCUS TRUST -Limited Maturity Bond Portfolio -International Equity Portfolio -Growth Portfolio -Small Company Growth Portfolio -Partners Portfolio
* The High Income Portfolio may invest in lower quality debt securities commonly referred to as junk bonds. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 1 8 THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH. INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF PRINCIPAL. Nationwide Life Insurance Company (the "Company") guarantees that the Death Benefit for a Policy will never be less than the Specified Amount stated on the Policy data pages as long as the Policy is in force. There is no guaranteed Cash Surrender Value. If the Cash Surrender Value is insufficient to cover the charges under the Policy, the Policy will lapse. This prospectus generally describes only that portion of the Cash Value allocated to the Variable Account. For a brief summary of the Fixed Account Option, see "The Fixed Account Option." The date of this prospectus is May 1, 1996. 2 9 GLOSSARY OF TERMS ATTAINED AGE- The Insured's age on the Policy Date, plus the number of full years since the Policy Date. ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable Account Cash Value. BENEFICIARY- The person to whom the proceeds due on the Insured's death are paid. CASH VALUE- The sum of the value of Policy assets in the Variable Account, Fixed Account and any associated value in the Policy Loan Account. CASH SURRENDER VALUE- The Policy's Cash Value, less any indebtedness under the Policy, less any Surrender Charge. CODE- The Internal Revenue Code of 1986, as amended. COMPANY- Nationwide Life Insurance Company. DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies while the Policy is in force. FIXED ACCOUNT- An investment option which is funded by the General Account of the Company. GENERAL ACCOUNT- All assets of the Company other than those of the Variable Account or in other separate accounts that have been or may be established by the Company. GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance with the provisions of the Internal Revenue Code. It represents the single premium required to mature the Policy under guaranteed mortality and expense charges, and an interest rate of 6%. INSURED- The person whose life is covered by the Policy, and who is named on the Policy Data Page. MATURITY DATE- The Policy Anniversary on or following the Insured's 95th birthday. MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding month. MUTUAL FUNDS- The underlying mutual funds which correspond to the sub-accounts of the Variable Account. NET ASSET VALUE- The worth of one share at the end of a market day or at the close of the New York Stock Exchange. Net Asset Value is computed by adding the value of all portfolio holdings plus other assets, deducting liabilities and then dividing the result by the number of shares outstanding. POLICY ANNIVERSARY- An anniversary of the Policy Date. POLICY CHARGES- All deductions made from the value of the Variable Account, or the Policy Cash Value. POLICY DATE- The date the provisions of the Policy take effect, as shown on the Policy Owner's Policy Data Page. POLICY LOAN ACCOUNT- The portion of the Cash Value which results from Policy Loans. POLICY OWNER- The person designated in the Policy application as the Owner. In the State of New York, the variable life insurance policies offered by the Company are offered as "Certificates" for "Certificate Owners" under a group contract rather than individual Policies. The provisions of both these Certificates and the Policies are essentially the same and references to the provisions of Policies and rights of Policy Owners in this prospectus include Certificates and Certificate Owners. POLICY YEAR- Each year commencing with the Policy Date and each Policy Date anniversary thereafter. SPECIFIED AMOUNT- A dollar amount used to determine the Death Benefit under a Policy. It is shown on the Policy Data Page. SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is surrendered. VALUATION DATE- Each day the New York Stock Exchange and the Company's Home Office is open for business or any other day during which there is sufficient degree of trading that the current net asset value of the Accumulated Units might be materially affected. VALUATION PERIOD- A period commencing with the close of business on the New York Stock Exchange and ending at the close of business for the next succeeding Valuation Date. VARIABLE ACCOUNT- A separate investment account of Nationwide Life Insurance Company. 3 10 TABLE OF CONTENTS GLOSSARY OF TERMS..............................................3 SUMMARY OF THE POLICIES........................................6 Variable Life Insurance...............................6 The Variable Account and its Sub-Accounts.............6 The Fixed Account.....................................6 Deductions and Charges................................6 Premiums..............................................7 NATIONWIDE LIFE INSURANCE COMPANY..............................8 THE VARIABLE ACCOUNT...........................................8 Investments of the Variable Account...................8 Dreyfus...............................................9 Fidelity's Variable Insurance Products Fund...........9 Fidelity's Variable Insurance Products Fund II.......10 Nationwide Separate Account Trust....................10 Neuberger & Berman Advisers Management Trust.........11 Oppenheimer Variable Account Funds...................11 Strong Special Fund II, Inc..........................12 Strong Variable Insurance Funds, Inc.................12 TCI Portfolios, Inc., a member of the Twentieth Century Family of Mutual Funds ....................12 Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust) .........................13 Van Kampen American Capital Life Investment Trust....13 Warburg Pincus Trust.................................14 Reinvestment.........................................14 Transfers............................................14 Dollar Cost Averaging................................15 Substitution of Securities...........................15 Voting Rights........................................15 INFORMATION ABOUT THE POLICIES................................16 Underwriting and Issuance............................16 -Minimum Requirements for Issuance of a Policy.......16 -Premium Payments....................................16 -Allocation of Cash Value............................16 -Short-Term Right to Cancel Policy...................16 POLICY CHARGES................................................17 Deductions from Premiums.............................17 Deductions from Cash Value...........................17 -Charges on Surrender................................17 -Annual Administrative Charge........................17 -Cost of Insurance Charge............................17 Deductions from the Sub-Accounts.....................18 -Mortality and Expense Risk Charge...................18 -Administrative Expense Charge.......................18 -Premium Tax Recovery Charge.........................18 -Income Tax Charge...................................19 HOW THE CASH VALUE VARIES.....................................19 How the Investment Experience is Determined..........19 Net Investment Factor................................19 Valuation of Assets..................................20 Determining the Cash Value...........................20 Valuation Periods and Valuation Dates................20 SURRENDERING THE POLICY FOR CASH..............................20 Right to Surrender...................................20 Cash Surrender Value.................................20 Partial Surrenders...................................20 Maturity Proceeds....................................21 Income Tax Withholding...............................21 POLICY LOANS..................................................21 Taking a Policy Loan.................................21 Effect on Investment Performance.....................21 Interest.............................................21 Effect on Death Benefit and Cash Value...............22 4 11 Repayment......................................................22 HOW THE DEATH BENEFIT VARIES............................................22 -Calculation of the Death Benefit..............................22 -Proceeds Payable on Death.....................................23 RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY............................23 CHANGES OF INVESTMENT POLICY............................................23 GRACE PERIOD............................................................24 REINSTATEMENT...........................................................24 THE FIXED ACCOUNT OPTION................................................24 CHANGES IN EXISTING INSURANCE COVERAGE..................................24 Changes in the Specified Amount................................25 Changes in the Death Benefit Option............................25 OTHER POLICY PROVISIONS.................................................25 Policy Owner...................................................25 Beneficiary....................................................25 Assignment.....................................................25 Incontestability...............................................25 Error in Age or Sex............................................26 Suicide........................................................26 Nonparticipating Policies......................................26 LEGAL CONSIDERATIONS....................................................26 DISTRIBUTION OF THE POLICIES............................................26 CUSTODIAN OF ASSETS.....................................................26 TAX MATTERS.............................................................26 Policy Proceeds................................................26 Taxation of the Company........................................27 Other Considerations...........................................28 THE COMPANY.............................................................28 COMPANY MANAGEMENT......................................................28 Directors of the Company.......................................28 Executive Officers of the Company..............................29 OTHER CONTRACTS ISSUED BY THE COMPANY...................................30 STATE REGULATION........................................................30 REPORTS TO POLICY OWNERS................................................30 ADVERTISING.............................................................30 LEGAL PROCEEDINGS.......................................................30 EXPERTS.................................................................30 REGISTRATION STATEMENT..................................................31 LEGAL OPINIONS..........................................................31 APPENDIX 1..............................................................32 APPENDIX 2..............................................................33 APPENDIX 3..............................................................44 PERFORMANCE TABLES......................................................45 FINANCIAL STATEMENTS....................................................49 THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. 5 12 THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND. SUMMARY OF THE POLICIES VARIABLE LIFE INSURANCE The variable life insurance Policies offered by Nationwide Life Insurance Company (the "Company") are similar in many ways to fixed-benefit whole life insurance. As with fixed-benefit whole life insurance, the Owner of the Policy pays a premium for life insurance coverage on the person insured. Also like fixed-benefit whole life insurance, the Policies may provide for a Cash Surrender Value which is payable if the Policy is terminated during the Insured's lifetime. (As with fixed-benefit whole life insurance, the Cash Surrender Value during the early Policy years may be substantially lower than the premiums paid.) However, the Policies differ from fixed-benefit whole life insurance in several respects. Unlike fixed-benefit whole life insurance, the Death Benefit and Cash Value of the Policies may increase or decrease to reflect the investment performance of the Variable Account sub-accounts or the Fixed Account to which Cash Values are allocated (see "How the Death Benefit Varies"). There is no guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash Surrender Value is insufficient to pay Policy Charges, the Policy will lapse. THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS The Company places the Policy's Cash Value in the Nationwide VLI Separate Account-2 (the "Variable Account") at the time the Policy is issued. The Policy Owner selects the sub-accounts of the Variable Account or the Fixed Account into which the Cash Value will be allocated (see "Allocation of Cash Value"). When the Policy is issued, the Cash Value will be allocated to the Nationwide Separate Account Trust Money Market Fund sub-account (for any Cash Value allocated to a sub-account on the application) or the Fixed Account until the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. Assets of each sub-account are invested at net asset value in shares of a corresponding underlying Mutual Fund option. For a description of the underlying Mutual Fund options and their investment objectives, see "Investments of the Variable Account." THE FIXED ACCOUNT The Fixed Account is funded by the assets of the Company's General Account. Cash Values allocated to the Fixed Account are credited with interest daily at a rate declared by the Company. The interest rate declared is at the Company's sole discretion, but may never be less than an effective annual rate of 4%. DEDUCTIONS AND CHARGES The Company deducts certain charges from the assets of the Variable Account and the Cash Value of the Policy. These charges are made for administrative and sales expenses, state premium taxes, providing life insurance protection and assuming the mortality and expense risks. The Company deducts a charge for the cost of insurance from the Policy's Cash Value on the Policy Date and each Monthly Anniversary Day. The Company deducts an annual policy administrative charge from the Policy's Cash Value at the beginning of each Policy Year after the first. The current annual charge is $90 ($65 in New York) for total premium payments less than $25,000 and $50 for total premium payments greater than or equal to $25,000. This charge is guaranteed never to exceed $135 ($120 in New York) for total premium payments less than $25,000 and $75 for total premium payments greater than or equal to $25,000. The Company also deducts on a daily basis from the assets of the Variable Account a charge to provide for mortality and expense risks, administrative charges and premium tax recovery. These current charges are equal on an annual basis to 1.30% of the Variable Account assets for the first 10 Policy Years and 1.00% thereafter and are guaranteed never to exceed 1.60% and 1.30% respectively. For Policies which are surrendered, the Company may deduct a Surrender Charge. The Surrender Charge associated with each premium payment will not exceed 8.5% of the premium payment, and will be applied for nine years after the effective date of the premium payment. The Surrender Charge is designed to recover certain expenses incurred by the Company related to the sale of the Policies. Underlying Mutual Fund shares are purchased at net asset value, which reflects the deduction of investment management fees and certain other expenses. The management fees are charged by each underlying Mutual Fund's investment adviser for managing the underlying Mutual Fund and selecting its portfolio of securities. Other underlying Mutual Fund expenses can include such items as interest expense on loans and contracts with transfer agents, custodians, and other companies that provide services to the underlying Mutual Fund. The management fees and other expenses for each underlying Mutual Fund for its most recently completed fiscal year, expressed as a percentage of the underlying Mutual Fund's average assets, are as follows: 6 13
Management Fees Other Expenses Total Expenses - ---------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund 0.27% 0.12% 0.39% - ---------------------------------------------------------------------------------------------------------- Dreyfus Socially Responsible Growth Fund 0.69% 0.58% 1.27% - ---------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.10% 0.61% - ---------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-Growth Portfolio 0.61% 0.09% 0.70% - ---------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-High Income Portfolio 0.60% 0.11% 0.71% - ---------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-Overseas Portfolio 0.76% 0.15% 0.91% - ---------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II-Asset Manager Portfolio 0.71% 0.08% 0.79% - ---------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.11% 0.72% - ---------------------------------------------------------------------------------------------------------- NSAT-Capital Appreciation Fund 0.50% 0.04% 0.54% - ---------------------------------------------------------------------------------------------------------- NSAT-Government Bond Fund 0.50% 0.01% 0.51% - ---------------------------------------------------------------------------------------------------------- NSAT-Money Market Fund 0.50% 0.02% 0.52% - ---------------------------------------------------------------------------------------------------------- NSAT-Small Company Fund 1.00% 0.25% 1.25% - ---------------------------------------------------------------------------------------------------------- NSAT-Total Return Fund 0.50% 0.01% 0.51% - ---------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust- 0.84% 0.10% 0.94% Growth Portfolio - ---------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust- 0.65% 0.10% 0.75% Limited Maturity Bond Portfolio - ---------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust- 0.85% 0.30% 1.15% Partners Portfolio - ---------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Funds-Bond Fund 0.75% 0.05% 0.80% - ---------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Funds-Global 0.74% 0.15% 0.89% Securities Fund - ---------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Funds-Multiple 0.74% 0.03% 0.77% Strategies Fund - ---------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, Inc. -Discovery 1.00% 0.31% 1.31% Fund II, Inc. - ---------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, 1.00% 0.97% 1.97% Inc.-International Stock Fund II - ---------------------------------------------------------------------------------------------------------- Strong Special Fund II, Inc. 1.00% 0.20% 1.20% - ---------------------------------------------------------------------------------------------------------- TCI Portfolios, Inc.-TCI Balanced 1.00% 0.00% 1.00% - ---------------------------------------------------------------------------------------------------------- TCI Portfolios, Inc.-TCI Growth 1.00% 0.00% 1.00% - ---------------------------------------------------------------------------------------------------------- TCI Portfolios, Inc.-TCI International 1.50% 0.00% 1.50% - ---------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Gold and Natural 0.80% 0.16% 0.96% Resources - ---------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Bond 0.79% 0.15% 0.94% Fund - ---------------------------------------------------------------------------------------------------------- Van Kampen American Capital Life Investment 1.00% 1.90% 2.90% Trust-Real Estate Securities Portfolio - ---------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-International Equity Portfolio 1.00% 0.44% 1.44% - ---------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.35% 1.25% - ----------------------------------------------------------------------------------------------------------
The Mutual Fund expenses shown above are assessed at the underlying Mutual Fund level and are not direct charges against the Variable Account or reductions in Cash Value. These underlying Mutual Fund expenses are taken into consideration in computing each underlying Mutual Fund's net asset value, which is the share price used to calculate the Variable Account's unit value. The management fees and other expenses are more fully described in the prospectuses for each individual underlying Mutual Fund. The management fees and other expenses, some of which may be subject to fee waivers or expense reimbursements, are more fully described in the prospectus for each underlying Mutual Fund. The information relating to the underlying Mutual Fund expenses was provided by the underlying Mutual Fund was not independently verified by the Company. PREMIUMS The minimum premium for which a Policy may be issued is $10,000. A Policy may be issued to an insured up to age 80. For a limited time, the Policy Owner has a right to cancel the Policy and receive a full refund of premiums paid (see "Short-Term Right to Cancel Policy"). 7 14 NATIONWIDE LIFE INSURANCE COMPANY The Company is a stock life insurance company organized under the laws of the State of Ohio in March, 1929. The Company is a member of the Nationwide Insurance Enterprise of companies which includes Nationwide Mutual Insurance Company, Nationwide Indemnity Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty Company, National Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity Company and Nationwide General Insurance Company and their affiliated companies. The Company's home office is at One Nationwide Plaza, Columbus, Ohio 43216. The Company offers a complete line of life insurance, including annuities and accident and health insurance. It is admitted to do business in the District of Columbia, Puerto Rico, and in all states (for additional information, see "The Company"). THE VARIABLE ACCOUNT The Nationwide VLI Separate Account-2 (the "Variable Account"), was established by a resolution of the Company's Board of Directors, on May 7,1987, pursuant to the provisions of Ohio law. The Company has caused the Variable Account to be registered with the Securities and Exchange Commission as a unit investment trust pursuant to the provisions of the Investment Company Act of 1940. Nationwide Life Insurance Company, One Nationwide Plaza, Columbus, Ohio, 43216, serves as Trustee for the Trust. Nationwide Financial Services, Inc., One Nationwide Plaza, Columbus, Ohio, 43216, serves a principal underwriter for the Trust. Such registration does not involve supervision of the management of the Variable Account or the Company by the Securities and Exchange Commission. The Variable Account is a separate investment account of the Company and as such, is not chargeable with the liabilities arising out of any other business the Company may conduct. The Company does not guarantee the investment performance of the Variable Account. The Death Benefit and Cash Value under the Policy may vary with the investment performance of the investments in the Variable Account (see "How the Death Benefit Varies" and "How the Cash Value Varies"). Premium payments and Cash Value are allocated within the Variable Account among one or more sub-accounts. The assets of each sub-account are used to purchase shares of the underlying Mutual Fund options designated by the Policy Owner. Thus, the investment performance of a Policy depends upon the investment performance of the underlying Mutual Fund options designated by the Policy Owner. INVESTMENTS OF THE VARIABLE ACCOUNT At the time of application, the Policy Owner elects to have the Cash Value allocated among one or more of the Variable Account sub-accounts and the Fixed Account (see "Allocation of Cash Value"). When the policy is issued, the Policy's Cash Value not allocated to the Fixed Account is placed in the Nationwide Separate Account Trust Money Market sub-account (for any Cash Value allocated to a Sub-Account on the application) or Fixed Account until expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. At the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy, shares of the underlying Mutual Funds specified by the Policy Owner are purchased at net asset value for the respective sub-account(s). Such election is subject to any minimum premium limitations which may be imposed by the underlying Mutual Fund option(s). In addition, no less than 5% of premium may be allocated to any one sub-account or the Fixed Account. The Policy Owner may change the allocation of Cash Value or may transfer Cash Value from one sub-account to another, subject to such terms and conditions as may be imposed by each underlying Mutual Fund option and as set forth in this prospectus (see "Transfers", "Allocation of Cash Value" and "Short-Term Right to Cancel Policy"). Additional Premium payments, upon acceptance, will be allocated to the Nationwide Separate Account Trust Money Market Fund unless the Policy Owner specifies otherwise (see "Premium Payments"). Each of the underlying Mutual Fund options is a series of registered investment companies which receive investment advice from a registered investment advisers: 1) Dreyfus Stock Index Fund, managed by Wells Fargo Nikko Investment Advisors; 2) Dreyfus Socially Responsible Growth Fund, Inc., managed by Dreyfus Corporation; 3) Fidelity Variable Insurance Products Fund, managed by Fidelity Management & Research Company; 4) Fidelity Variable Insurance Products Fund II, managed by Fidelity Management & Research Company; 5) The Nationwide Separate Account Trust, managed by Nationwide Financial Services, Inc.; 8 15 6) Neuberger & Berman Advisers Management Trust, managed by Neuberger & Berman Management Incorporated; 7) Oppenheimer Variable Account Funds, managed by Oppenheimer Management Corporation; 8) Strong Special Fund II, Inc., managed by Strong Capital Management, Inc.; 9) Strong Variable Insurance Funds, Inc., managed by Strong Capital Management, Inc.; 10) TCI Portfolios, Inc., managed by Investors Research Corporation, an affiliate of Twentieth Century Companies; 11) Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust), managed by Van Eck Associates Corporation; 12) Van Kampen American Capital Life Investment Trust managed by Van Kampen American Capital Asset Management, Inc. 13) Warburg Pincus Trust, managed by Warburg Pincus Counsellors, Inc. A summary of investment objectives is contained in the description of each underlying Mutual Fund below. These underlying Mutual Fund options are available only to serve as the underlying investment for variable annuity and variable life contracts issued through separate accounts of life insurance companies which may or may not be affiliated, also known as "mixed and shared funding." There are certain risks associated with mixed and shared funding, which is disclosed in the underlying Mutual Funds' prospectuses. A full description of the underlying Mutual Funds, their investment policies and restrictions, risks and charges are contained in the prospectuses of the respective underlying Mutual Funds. A prospectus for the underlying Mutual Fund option(s) being considered must accompany this prospectus and should be read in conjunction herewith. DREYFUS - - DREYFUS STOCK INDEX FUND The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management investment company. It was incorporated under Maryland law on January 24, 1989, and commenced operations on September 29, 1989. Wells Fargo Nikko Investment Advisors serves as the Fund's index fund manager. As of May 1, 1994, the Dreyfus Life and Annuity Index Fund began doing business as the Dreyfus Stock Index Fund. Investment Objective: To provide investment results that correspond to the price and yield performance of publicly traded common stocks in the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price Index. The Fund is neither sponsored by nor affiliated with Standard & Poor's Corporation. - - THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC. The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified, management investment company. It was incorporated under Maryland law on July 20, 1992, and commenced operations on October 7, 1993. The Dreyfus Corporation serves as the Fund's investment advisor. Tiffany Capital Advisors, Inc. serves as the Fund's sub-investment adviser and provides day-to-day management of the Fund's portfolio. Investment Objective: The Fund's primary goal is to provide capital growth through equity investment in companies that, in the opinion of the Fund's management, not only meet traditional investment standards, but which also show evidence that they conduct their business in a manner that contributes to the enhancement of the quality of life in America. Current income is secondary to the primary goal. FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND The Fund is an open-end, diversified, management investment company organized as a Massachusetts business trust on November 13, 1981. The Fund's shares are purchased by insurance companies to fund benefits under variable insurance and annuity policies. Fidelity Management & Research Company ('FMR') is the Fund's manager. - - HIGH INCOME PORTFOLIO Investment Objective: To obtain a high level of current income by investing primarily in high-risk, high-yielding, lower rated fixed-income securities, while also considering growth of capital. The Fund's manager will seek high current income normally by investing the Fund's assets as follows: - at least 65% in income-producing debt securities and preferred stocks, including convertible securities, zero coupon securities, and mortgage-backed and asset-based securities; 9 16 - up to 20% in common stocks and other equity securities when consistent with the Fund's primary objective or acquired as part of a unit combining fixed-income and equity securities. Higher yields are usually available on securities that are lower-rated or that are unrated. Lower-rated securities are usually defined as Ba or lower by Moody's; BB or lower by Standard & Poor's and may be deemed to be of a speculative nature. The Fund may also purchase lower-quality bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which provide poor protection for payment of principal and interest (commonly referred to as "junk bonds"). For a further discussion of lower-rated securities, please see the "Risks of Lower-Rated Debt Securities" section of the Fund's prospectus. - - EQUITY-INCOME PORTFOLIO Investment Objective: To seek reasonable income by investing primarily in income-producing equity securities. In choosing these securities FMR also will consider the potential for capital appreciation. The Portfolio's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500 Composite Stock Price Index. - - GROWTH PORTFOLIO Investment Objective: Seeks to achieve capital appreciation. This Portfolio will invest in the securities of both well-known and established companies, and smaller, less well-known companies which may have a narrow product line or whose securities are thinly traded. These latter securities will often involve greater risk than may be found in the ordinary investment security. FMR's analysis and expertise plays an integral role in the selection of securities and, therefore, the performance of the Portfolio. Many securities which FMR believes would have the greatest potential may be regarded as speculative, and investment in the Portfolio may involve greater risk than is inherent in other underlying mutual funds. It is also important to point out that the Portfolio makes most sense for you if you can afford to ride out changes in the stock market, because it invests primarily in common stocks. FMR also can make temporary investments in securities such as investment-grade bonds, high-quality preferred stocks and short-term notes, for defensive purposes when it believes market conditions warrant. - - OVERSEAS PORTFOLIO Investment Objective: To seek long term growth of capital primarily through investments in foreign securities. The Overseas Portfolio provides a means for investors to diversify their own portfolios by participating in companies and economies outside of the United States. FIDELITY'S VARIABLE INSURANCE PRODUCTS FUND II The Fund is an open-end, diversified, management investment company organized as a Massachusetts business trust on March 21, 1988. The Fund's shares are purchased by insurance companies to fund benefits under variable insurance and annuity policies. FMR is the Fund's manager. - - ASSET MANAGER PORTFOLIO Investment Objective: To seek to obtain high total return with reduced risk over the long-term by allocating its assets among domestic and foreign stocks, bonds and short-term fixed income instruments. - - CONTRAFUND PORTFOLIO Investment Objective: To seek capital appreciation by investing primarily in companies that the Fund manager believes to be undervalued due to an overly pessimistic appraisal by the public. This strategy can lead to investments in domestic or foreign companies, small and large, many of which may not be well known. The Fund primarily invests in common stock and securities convertible into common stock, but it has the flexibility to invest in any type of security that may produce capital appreciation. NATIONWIDE SEPARATE ACCOUNT TRUST Nationwide Separate Account Trust (the "Trust") is a diversified open-end management investment company created under the laws of Massachusetts. The Trust offers shares in the five separate Mutual Funds listed below, each with its own investment objectives. Currently, shares of the Trust will be sold only to life insurance company separate accounts to fund benefits under variable life insurance policies or variable annuity contracts issued by life insurance companies. The assets of the Trust are managed by Nationwide Financial Services, Inc., One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of Nationwide Life Insurance Company. - - CAPITAL APPRECIATION FUND Investment Objective: The Fund is designed for investors who are interested in long-term growth. The Fund seeks to meet its objective primarily through a diversified portfolio of the common stock of companies which the investment manager determines have a better-than-average potential for sustained capital growth over the long term. 10 17 - - MONEY MARKET FUND Investment Objective: To seek as high a level of current income as is considered consistent with the preservation of capital and liquidity by investing primarily in money market instruments. - - GOVERNMENT BOND FUND Investment Objective: To provide as high a level of income as is consistent with capital preservation through investing primarily in bonds and securities issued or backed by the U.S. Government, its agencies or instrumentalities. - - SMALL COMPANY FUND Investment Objective: The Fund seeks long-term growth of capital by investing primarily in equity securities of domestic and foreign companies with market capitalizations of less then $1 billion at the time of purchase. Nationwide Financial Services, Inc. ("NFS"), the Fund's adviser, has contracted with a group of sub-advisers, each of which will manage a portion of the Fund's portfolio. These sub-advisers are the Dreyfus Corporation, Neuberger & Berman, L.P., Pictet International Management Limited, Van Eck Associates Corporation, Strong Capital Management, Inc. and Warburg, Pincus Counsellors, Inc. The sub-advisers were chosen because they utilize a number of different investment styles when investing in small company stocks. By utilizing a number of investment styles, NFS hopes to increase prospects for investment return and to reduce market risk and volatility. - - TOTAL RETURN FUND Investment Objective: To obtain a reasonable long-term total return (i.e., earnings growth plus potential dividend yield) on invested capital from a flexible combination of current return and capital gains through investments in common stocks, convertible issues, money market instruments and bonds, with a primary emphasis on common stocks. NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST Neuberger & Berman Advisers Management Trust is an open-end diversified management investment company established as a Massachusetts business trust on December 14, 1983. Shares of the Trust are offered in connection with certain variable annuity contracts and variable life insurance policies issued through life insurance company separate accounts and are also offered directly to qualified pension and retirement plans outside of the separate account context. The investment adviser is Neuberger & Berman Management Incorporated. - - LIMITED MATURITY BOND PORTFOLIO Investment Objective: To provide the high level of current income, consistent with low risk to principal and liquidity. As a secondary objective, it also seeks to enhance its total return through capital appreciation when market factors, such as falling interest rates and rising bond prices, indicate that capital appreciation may be available without significant risk to principal. It seeks to achieve its objectives through investments in a diversified portfolio of limited maturity debt securities. The Portfolio invests in securities which are at least investment grade and does not invest in junk bonds. - - GROWTH PORTFOLIO Investment Objective: The Portfolio seeks capital growth through investments in common stocks of companies that the investment adviser believes will have above average earnings or otherwise provide investors with above average potential for capital appreciation. To maximize this potential, the investment adviser may also utilize, from time to time, securities convertible into common stocks, warrants and options to purchase such stocks. - - PARTNERS PORTFOLIO Investment Objective: To seek capital growth. This portfolio will seek to achieve its objective by investing primarily in the common stock of established companies. Its investment program seeks securities believed to be undervalued based on fundamentals such as low price-to-earnings ratios, consistent cash flows, and support from asset values. The objective of the Partners Portfolio is not fundamental and can be changed by the Trustees of the Trust without shareholder approval. Shareholders will, however, receive at least 30 days prior notice thereof. There is no assurance the investment objective will be met. OPPENHEIMER VARIABLE ACCOUNT FUNDS The Oppenheimer Variable Account Funds is an open-ended, diversified management investment company organized as a Massachusetts business trust in 1984. Shares of the Funds are sold only to provide benefits 11 18 under variable life insurance policies and variable annuity contracts. Oppenheimer Management Corporation is the Funds' investment advisor. - - BOND FUND Investment Objective: Primarily to seek a high level of current income from investment in high yield fixed-income securities rated "Baa" or better by Moody's or "BBB" or better by Standard & Poor's. Secondarily, the Fund seeks capital growth when consistent with its primary objective. - - GLOBAL SECURITIES FUND Investment Objective: To seek long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations which are considered to have appreciation possibilities. Current income is not an objective. These securities may be considered to be speculative. - - MULTIPLE STRATEGIES FUND Investment Objective: To seek a total investment return (which includes current income and capital appreciation in the value of its shares) from investments in common stocks and other equity securities, bonds and other debt securities, and "money market" securities. STRONG SPECIAL FUND II, INC. The Strong Special Fund II, Inc. is a diversified, open-end management company commonly called a mutual fund. The Special Fund II, Inc. was incorporated in Wisconsin and may only be purchased by the separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Strong Capital Management Inc. (the "Advisor") is the investment advisor for the Fund. Investment Objective: To seek capital appreciation through investments in a diversified portfolio of equity securities. STRONG VARIABLE INSURANCE FUNDS, INC. Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management investment company commonly referred to as a mutual fund. Incorporated in the State of Wisconsin, the Corporation has been authorized to issue shares of common stock and series and classes of series of common stock. The International Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by the Corporation to insurance company separate accounts for the purpose of funding variable annuity contracts and variable life insurance policies. Strong Capital Management, Inc. is the investment advisor to the Funds. - - DISCOVERY FUND II, INC. Investment Objective: To seek maximum capital appreciation through investments in a diversified portfolio of securities. The Fund normally emphasizes investment in equity securities and may invest up to 100% of its total assets in equity securities including common stocks, preferred stocks and securities convertible into common or preferred stocks. Although the Fund normally emphasizes investment in equity securities, the Fund has the flexibility to invest in any type of security that the Advisor believes has the potential for capital appreciation including up to 100% of its total assets in debt obligations, including intermediate to long-term corporate or U.S. government debt securities. - - INTERNATIONAL STOCK FUND II Investment Objective: To seek capital growth by investing primarily in the equity securities of issuers located outside the United States. TCI PORTFOLIOS, INC., MEMBER OF THE TWENTIETH CENTURY FAMILY OF MUTUAL FUNDS TCI Portfolios, Inc. was organized as a Maryland corporation in 1987. It is a diversified, open-end management company, designed only to provide investment vehicles for variable annuity and variable life insurance products of insurance companies. A member of the Twentieth Century Family of Mutual Funds, TCI Portfolios is managed by Investors Research Corporation. - - TCI BALANCED Investment Objective: Capital growth and current income. The Fund will seek to achieve its objective by maintaining approximately 60% of the assets of the Fund in common stocks (including securities convertible into common stocks and other equity equivalents) that are considered by management to have better-than-average prospects for appreciation and approximately 40% in fixed income securities. There can be no assurance that the Fund will achieve its investment objective. 12 19 - - TCI GROWTH Investment Objective: Capital growth. The Fund will seek to achieve its objective by investing in common stocks (including securities convertible into common stocks and other equity equivalents) that meet certain fundamental and technical standards of selection and have, in the opinion of the Fund's investment manager, better than average potential for appreciation. The Fund tries to stay fully invested in such securities, regardless of the movement of stock prices generally. The Fund may invest in cash and cash equivalents temporarily or when it is unable to find common stocks meeting its criteria of selection. It may purchase securities only of companies that have a record of at least three years continuous operation. There can be no assurance that the Fund will achieve its investment objective. - - TCI INTERNATIONAL Investment Objective: To seek capital growth. The Fund will seek to achieve its investment objective by investing primarily in securities of foreign companies that meet certain fundamental and technical standards of selection and, in the opinion of the investment manager, have potential for appreciation. Under normal conditions, the Fund will invest at least 65% of its assets in common stocks or other equity securities of issuers from at least three countries outside the United States. Securities of United States issuers may be included in the portfolio from time to time. Although the primary investment of the Fund will be common stocks (defined to include depository receipts for common stocks), the Fund may also invest in other types of securities consistent with the Fund's objective. When the manager believes that the total return potential of other securities equals or exceeds the potential return of common stocks, the Fund may invest up to 35% of its assets in such other securities. There can be no assurance that the Fund will achieve its objectives. (Although the Statement of Additional Information concerning TCI Portfolios, Inc., refers to redemptions of securities in kind under certain conditions, all surrendering or redeeming Contract Owners will receive cash from the Company.) VAN ECK WORLDWIDE INSURANCE TRUST (FORMERLY VAN ECK INVESTMENT TRUST) Van Eck Worldwide Insurance Trust is an open-end management investment company organized as a "business trust" under the laws of the Commonwealth of Massachusetts on January 7, 1987. Shares of the Trust are offered only to separate accounts of various insurance companies to fund benefits of variable insurance and annuity policies. The assets of the Trust are managed by Van Eck Associates Corporation. - - GOLD AND NATURAL RESOURCES FUND Investment Objective: To seek long-term capital appreciation by investing in equity and debt securities of companies engaged in the exploration, development, production and distribution of gold and other natural resources, such as strategic and other metals, minerals, forest products, oil, natural gas and coal. Current income is not an objective. - - WORLDWIDE BOND FUND (FORMERLY GLOBAL BOND FUND) Investment Objective: To seek high total return through a flexible policy of investing globally, primarily in debt securities. The Fund does not invest in junk bonds. VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST The American Capital Life Investment Trust is an open-end diversified management investment company organized as a Massachusetts business trust on June 3, 1985. The Trust offers shares in separate funds which are sold only to insurance companies to provide funding for variable life insurance policies and variable annuity contracts. Van Kampen American Capital Asset Management, Inc. serves as the Fund's investment adviser. - - REAL ESTATE SECURITIES FUND Investment Objective: To seek long-term capital growth by investing in a portfolio of securities of companies operating in the real estate industry ("Real Estate Securities"). Current income is a secondary consideration. Real Estate Securities include equity securities, including common stocks and convertible securities, as well as non-convertible preferred stocks and debt securities of real estate industry companies. A "real estate industry company" is a company that derives at least 50% of its assets (marked to market), gross income or net profits from the ownership, construction, management or sale of residential, commercial or industrial real estate. Under normal market conditions, at least 65% of the Fund's total assets will be invested in Real Estate Securities, primarily equity securities of real estate investment trusts. The Fund may invest up to 25% of its total assets in securities issued by foreign issuers, some or all of which may also be Real Estate Securities. There can be no assurance that the Fund will achieve its investment objective. 13 20 WARBURG PINCUS TRUST The Warburg Pincus Trust ("Trust") is an open-end management investment company organized in March 1995 as a business trust under the laws of The Commonwealth of Massachusetts. The Trust offers its shares to insurance companies for allocation to separate accounts for the purpose of funding variable annuity and variable life contracts. Trust portfolios are managed by Warburg, Pincus Counsellors, Inc. ("Counsellors.") - - INTERNATIONAL EQUITY PORTFOLIO Investment Objective: To seek long-term capital appreciation by investing primarily in a broadly diversified portfolio of equity securities of companies, wherever organized, that in the judgment of "Counsellors" have their principal business activities and interests outside the United States. The Portfolio will ordinarily invest substantially all of its assets, but no less than 65% of its total assets, in common stocks, warrants and securities convertible into or exchangeable for common stocks. The Portfolio intends to invest principally in the securities of financially strong companies with opportunities for growth within growing international economies and markets through increased earning power and improved utilization or recognition of assets. - - SMALL COMPANY GROWTH PORTFOLIO Investment Objective: To seek capital growth by investing in a portfolio of equity securities of small-sized domestic companies. The Portfolio ordinarily will invest at least 65% of its total assets in common stocks or warrants of small-sized companies (i.e., companies having stock market capitalizations of between $25 million and $1 billion at the time of purchase) that represent attractive opportunities for capital growth. The Portfolio intends to invest primarily in companies whose securities are traded on domestic stock exchanges or in the over-the-counter market. The Portfolio's investments will be made on the basis of their equity characteristics and securities ratings generally will not be a factor in the selection process. REINVESTMENT The underlying Mutual Funds described above have as a policy the distribution of dividends in the form of additional shares (or fractions thereof) of the Mutual Funds. The distribution of additional shares will not affect the number of Accumulation Units attributable to a particular Policy (see "Allocation of Cash Value"). TRANSFERS The Policy Owner may transfer Cash Value among the sub-accounts of the Variable Account and the Fixed Account. A transfer will take effect on the date of receipt of written notice at the Company's home office. Transfer requests must be in a written form acceptable to the Company. The Policy Owner may request a transfer of up to 100% of the Cash Value from the Variable Account to the Fixed Account. The Policy Owner's Cash Value in each sub-account will be determined as of the date the transfer request is received in the home office in good order. The Company reserves the right to restrict transfers to the Fixed Account to 25% of the Cash Value. The Policy Owner may annually transfer a portion of the value of the Fixed Account to the Variable Account and a portion of the Variable Account to the Fixed Account, without penalty or adjustment. The Company reserves the right to limit the amount of Cash Value transferred out of the Fixed Account each Policy Year. Transfers from the Fixed Account must be made within 30 days after the termination date of the interest rate guarantee period. Transfers may be made either in writing or, in states allowing such transfers, by telephone. The Company will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures may include any or all of the following, or such other procedures as the Company may, from time to time, deem reasonable: requesting identifying information, such as name, contract number, Social Security Number, and/or personal identification number; tape recording all telephone transactions; and providing written confirmation thereof to both the Policy Owner and any agent of record at the last address of record. Although failure to follow reasonable procedures may result in the Company's liability for any losses due to unauthorized or fraudulent telephone transfers, the Company will not be liable for following instructions communicated by telephone which it reasonably believes to be genuine. Any losses incurred pursuant to actions taken by the Company in reliance on telephone instructions reasonably believed to be genuine shall be borne by the Contract Owner. The Company may withdraw the telephone exchange privilege upon 30 days written notice to Policy Owners. Policy Owners who have entered into a Dollar Cost Averaging Agreement with the Company (see "Dollar Cost Averaging" below) may transfer from the Fixed Account to the Variable Account under the terms of that agreement. 14 21 DOLLAR COST AVERAGING The Policy Owner may direct the Company to automatically transfer from the Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio sub-account to any other sub-account within the Variable Account on a monthly basis. This service is intended to allow the Policy Owner to utilize Dollar Cost Averaging, a long-term investment program which provides for regular, level investments over time. The Company makes no guarantees that Dollar Cost Averaging, will result in a profit or protect against loss in a declining market. To qualify for Dollar Cost Averaging, there must be a minimum total Cash Value, less policy indebtedness, of $15,000. Transfers for purposes of Dollar Cost Averaging can only be made from the Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio sub-account. The minimum monthly Dollar Cost Averaging transfer is $100. In addition, Dollar Cost Averaging monthly transfers from the Fixed Account must be equal to or less than 1/30th of the Fixed Account value when the Dollar Cost Averaging program is requested. Transfers out of the Fixed Account, other than for Dollar Cost Averaging, may be subject to certain additional restrictions (see "Transfers"). A written election of this service, on a form provided by the Company, must be completed by the Policy Owner in order to begin transfers. Once elected, transfers from the Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio sub-account will be processed monthly until either the value in the Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio sub-account is completely depleted or the Policy Owner instructs the Company in writing to cancel the monthly transfers. The Company reserves the right to discontinue offering Dollar Cost Averaging upon 30 days' written notice to Policy Owners however, any such discontinuation would not affect Dollar Cost Averaging programs already commenced. The Company also reserves the right to assess a processing fee for this service. SUBSTITUTION OF SECURITIES If shares of the underlying Mutual Fund options described in this prospectus should no longer be available for investment by the Variable Account or, if in the judgment of the Company's management further investment in such underlying Mutual Funds should become inappropriate in view of the purposes of the Policy, the Company may substitute shares of another underlying Mutual Fund for shares already purchased or to be purchased in the future by premium payments under the Policy. No substitution of securities in the Variable Account may take place without prior approval of the Securities and Exchange Commission, and under such requirements as it and any state insurance department may impose. VOTING RIGHTS Voting rights under the Policies apply with respect to Cash Value allocated to the sub-accounts of the Variable Account. In accordance with its view of present applicable law, the Company will vote the shares of the underlying Mutual Funds held in the Variable Account at regular and special meetings of the shareholders of the underlying Mutual Funds in accordance with instructions received from Policy Owners. However, if the Investment Company Act of 1940 or any regulation thereunder should be amended or if the present interpretation thereof should change, and as a result the Company determines that it is permitted to vote the shares of the underlying Mutual Funds in its own right, the Company may elect to do so. The Policy Owner shall have the voting interest under a Policy. The number of shares in each sub-account for which the Policy Owner may give voting instructions is determined by dividing any portion of the Policy's Cash Value derived from participation in that underlying Mutual Fund by the net asset value of one share of that underlying Mutual Fund. The number of shares which a person has a right to vote will be determined as of a date chosen by the Company, but not more than 90 days prior to the meeting of the underlying Mutual Fund. Voting instructions will be solicited by written communication prior to such meeting. Underlying Mutual Fund shares held in the Variable Account as to which no timely instructions are received will be voted by the Company in the same proportion as the voting instructions which are received. Each person having a voting interest in the Variable Account will receive periodic reports relating to investments of the Variable Account, the underlying Mutual Fund(s') proxy material and a form with which to give such voting instructions. Notwithstanding contrary Policy Owner voting instructions, the Company may vote underlying Mutual Fund shares in any manner necessary to enable the underlying Mutual Fund to (1) make or refrain from making any change in the investments or investment policies for any of the underlying Mutual Funds, if required by an insurance regulatory authority; (2) refrain from making any change in the investment policies or any investment adviser or principal underwriter of any portfolio which may be initiated by Policy Owners or the underlying Mutual Fund's Board of Directors, provided the Company's disapproval of the change is reasonable and, in the 15 22 case of a change in the investment policies or investment adviser, based on a good faith determination that such change would be contrary to state law or otherwise inappropriate in light of the portfolio's objective and purposes; or (3) enter into or refrain from entering into any advisory agreement or underwriting contract, if required by any insurance regulatory authority. INFORMATION ABOUT THE POLICIES UNDERWRITING AND ISSUANCE - -Minimum Requirements for Issuance of a Policy The minimum amount of initial premium that will be accepted by the Company is $10,000. Policies may be issued to Insureds issue ages 80 or younger. Before issuing any Policy, the Company requires evidence of insurability satisfactory to it, which may include a medical examination. - -Premium Payments The initial premium for a Policy is payable in full at the Company's home office. The minimum amount of initial premium required is $10,000 for issue ages 75 or younger and $50,000 for issue ages 76 through 80. The Specified Amount is determined by treating the initial premium as equal to 100% of the Guideline Single Premium. Upon payment of an initial premium, temporary insurance may be provided, subject to a maximum amount. The effective date of permanent insurance coverage is dependent upon completion of all underwriting requirements, payment of the initial premium, and delivery of the Policy while the insured is still living. The Policy Owner may make additional premium payments. The Policy is primarily intended to be a single premium with a limited ability to make additional payments. Subsequent premium payments under the Policy are permitted under the following circumstances: 1. an additional premium payment is required to keep the Policy in force (see "Grace Period"); or 2. except in Virginia, additional premium payments of at least $1,000 may be made at any time provided the premium limits prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract are not violated. Payment of additional premiums if accepted, may increase the Specified Amount of insurance. However, the Company reserves the right to require satisfactory evidence of insurability before accepting any additional premium payment which results in an increase in the net amount at risk. The Company may also require that any existing Policy indebtedness is repaid prior to accepting any additional premium payments. The Company will not accept a subsequent premium payment which would result in total premiums paid exceeding the premium limitations prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract. - -Allocation of Cash Value At the time a Policy is issued, its Cash Value will be based on the Nationwide Separate Account Trust Money Market Fund sub-account value or the Fixed Account as if the Policy had been issued and the premium invested on the date the premium was received in good order by the Company. When the Policy is issued, the Cash Value will be allocated to the Nationwide Separate Account Trust Money Market Fund sub-account (for any Cash Value allocated to a Sub-Account on the application) or the Fixed Account until the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. Cash Value not designated for the Fixed Account will be placed in the Nationwide Separate Account Trust Money Market Sub-Account. At the expiration of the period in which the Policy Owner may exercise his or her short term right to cancel the Policy, shares of the underlying Mutual Funds specified by the Policy Owner are purchased at net asset value for the respective sub-account(s). The Policy Owner may change the allocation of Cash Value or may transfer Cash Value from one sub-account to another, subject to such terms and conditions as may be imposed by each underlying Mutual Fund and as set forth in the prospectus. Cash Value allocated to the Fixed Account at the time of application may not be transferred prior to the first Policy Anniversary (see "Transfers" and "Investments of the Variable Account"). The designation of investment allocations will be made by the prospective Policy Owner at the time of application for a Policy. The Policy Owner may change the way in which future premiums are allocated by giving written notice to the Company. All percentage allocations must be in whole numbers, and must be at least 5%. The sum of allocations must equal 100%. - -Short-Term Right to Cancel Policy A Policy may be returned for cancellation and a full refund of premium within 10 days after the Policy is received, within 45 days after the application for insurance is signed, or within 10 days after the Company mails 16 23 or delivers a Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or delivered to the registered representative who sold it, or the Company. Immediately after such mailing or delivery, the Policy will be deemed void from the beginning. The Company will refund the total premiums paid within seven days after it receives the Policy. POLICY CHARGES DEDUCTIONS FROM PREMIUMS No deduction is made from any premium at the time of payment. 100% of each premium payment is applied to the Cash Value. DEDUCTIONS FROM CASH VALUE The Company may deduct certain charges from the Policy's Cash Value. While the Company reserves the right to change current charges, it has no present intent to do so. These are comprised of the following items: - -Charges on Surrender No charges are deducted from any premium payment. The Company incurs certain expenses related to the sale of the Policies. These expenses include commissions paid to sales personnel, the cost of sales literature and other promotional activity. To recover these expenses, the Company imposes a Surrender Charge. The Surrender Charge may be insufficient to recover all these expenses. Unrecovered expenses are borne by the Company's general assets which may include profits, if any, from Mortality and Expense Risk Charges. The initial premium payment and any subsequent premium payment which results in an increased net amount at risk will have a Surrender Charge associated with it, that will be less than or equal to 8.5% of such premium payment, as set forth in the following chart. The Surrender Charge applies for nine years after the effective date of each premium payment. Certain surrenders may result in adverse tax consequences (see "Tax Matters").
Completed Year(s) Charges on Completed Year(s) Charges on Since Surrender as a Since Surrender as a Premium Payment % Premium Payment Premium Payment % Premium Payment 0 8.5% 5 7.0% 1 8.5% 6 6.0% 2 8.0% 7 5.0% 3 8.0% 8 4.0% 4 7.5% 9 0.0%
In no event will the surrender charge deducted on surrender exceed 8.5% of the total premiums paid. The amount of the Surrender Charge may be eliminated when the Policies are issued to an officer, director, former director, partner, employee, or retired employee of the Company; an employee of the General distributor of the Policies, Nationwide Financial Services, Inc.; or an employee of an affiliate of the Company or the General Distributor; or, a duly appointed representative of the Company who receives no commission as a result of the purchase. Elimination of the Surrender Charge will be permitted by the Company only in those situations where the Company does not incur sales or administrative expenses normally associated with sales of a Policy. In no event will reduction of the Surrender Charge be permitted where such reduction will be unfairly discriminatory to any person. - -Annual Administrative Charge The Company deducts an annual administrative charge at the beginning of each Policy Year after the first. It will be charged proportionately to the Cash Values in each Variable sub-account and the Fixed Account. The amount of this annual charge is determined by the total net premium payments (premium payments less any previous partial surrenders) as follows:
Total Net Premium Payments Current Guaranteed Maximum Greater than But Less Annual Administrative Annual Administrative or Equal to than Charge Charge ----------- ---- ------ ------ $10,000 $25,000 $90 Non-New York $135 Non-New York $65 in New York $120 in New York $25,000 $50 All States $ 75 All States
- -Cost of Insurance Charge 17 24 A monthly deduction for the Cost of insurance is charged proportionately against the Cash Value in each sub-account and the Fixed Account on the Policy Date and each Monthly Anniversary Day. The Company will determine the Monthly Cost of Insurance charge by multiplying the Applicable Cost of Insurance rate by the net amount at risk. The net amount at risk is equal to the Death Benefit minus the Cash Value. Guaranteed cost of insurance charges will not exceed the cost based on the guaranteed cost of insurance rate and the Policy's net amount at risk. Guaranteed cost of insurance rates for Standard Simplified issues are based on the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980 CET). Guaranteed cost of insurance rates for Standard Preferred issues are based on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO). Guaranteed cost of insurance rates for substandard issues are based on appropriate percentage multiples of the 1980 CSO. These mortality tables are sex distinct. In addition, separate mortality tables will be used for standard and non-tobacco. For Policies issued in Texas, guaranteed cost of insurance rates for Standard Simplified issues ("Special Class-Simplified" in Texas) are based on 130% of the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO). The rate class of an Insured may affect the cost of insurance rate. The Company currently places an Insured into both standard rate classes and substandard classes that involve a higher mortality risk. In an otherwise identical Policy, an Insured in the standard rate class will have a lower cost of insurance than an Insured in a rate class with higher mortality risks. The Company may also issue certain Policies on a "Simplified Issue" basis to certain categories of individuals. Due to the underwriting criteria established for Policies issued on a Simplified Issue basis, actual rates for healthy individuals will be higher than the current cost of insurance rates being charged under otherwise identical Policies that are issued on a Preferred basis. DEDUCTIONS FROM THE SUB-ACCOUNTS The Company will deduct, on a daily basis, certain charges from the assets of the Variable Account. On an annual basis, these charges are equivalent to: Policy Years Policy Years 1-10 11+ Current 1.30% 1.00% Guaranteed Maximum 1.60% 1.30%
While the Company reserves the right to change current charges, it has no present intent to do so. These charges consist of the following items: - -Mortality and Expense Risk Charge The Company assumes certain risks for guaranteeing mortality and expense charges. The mortality risk assumed under the Policies is that the Insured may not live as long as expected. The expense risk assumed is that the actual expenses incurred in issuing and administering the Policies may be greater than expected. In addition, the Company assumes risks associated with the nonrecovery of policy issue, underwriting, and other administrative expenses due to Policies which lapse or are surrendered during the first ten years following each premium payment. To compensate the Company for assuming these risks associated with the Policies, the Company deducts a daily charge from the assets of the sub-accounts of the Variable Account. This charge currently is equivalent to an effective annual rate of 0.75%. To the extent that future levels of mortality and expenses are less than or equal to those expected, the Company may realize a profit from these charges. This charge is guaranteed not to exceed 0.90%. - -Administrative Expense Charge The Company deducts a daily Administrative Expense Charge to reimburse it for expenses related to issuance and maintenance of the Policies including underwriting, establishing policy records, accounting and record keeping, and periodic reporting to Policy Owners. This charge is designed only to reimburse the Company for its actual administrative expenses. In the aggregate, the Company expects that the charges for administrative costs will be approximately equal to the related expenses. This charge is deducted daily from the assets of the sub-accounts of the Variable Account. This charge currently is equivalent to an annual effective rate of 0.25%. This charge is guaranteed not to exceed 0.40%. - -Premium Tax Recovery Charge Premium taxes are not deducted at the time a premium is paid. The Company pays any state premium taxes attributable to a particular Policy when incurred by the Company. The Company expects to pay an average state premium tax rate of approximately 2.5% of premiums for all states, although such tax rates generally can 18 25 range from 0% to 4%. To reimburse the Company for the payment of state premium taxes associated with the Policies, during the first ten Policy Years the Company deducts a daily charge from the assets of the sub-accounts. This charge is computed on a daily basis, and is equivalent to an annual effective rate of 0.30% of the assets of the Variable Account during the first ten Policy Years, and 0% thereafter. This charge may be more or less than the amount actually assessed by the state in which a particular Policy Owner lives. The Company does not expect to make a profit from this charge. - -Income Tax Charge The Company does not currently assess any charge for income taxes incurred by the Company as a result of the operations of the sub-accounts of the Variable Account (see "Taxation of the Company"). The Company reserves the right to assess a charge for such taxes against the Variable Account if the Company determines that such taxes will be incurred. HOW THE CASH VALUE VARIES On any date during the Policy Year, the Cash Value equals the Cash Value on the preceding Valuation Date, plus any premium applied since the previous Valuation Date, plus or minus any investment results, and less any Policy Charges. There is no guaranteed Cash Value. The Cash Value will vary with the investment experience of the Variable Account and/or the daily crediting of interest in the Fixed Account and Policy Loan Account depending on the allocation of Cash Value by the Policy Owner. HOW THE INVESTMENT EXPERIENCE IS DETERMINED The Cash Value in each sub-account is converted to Accumulation Units of that sub-account. The conversion is accomplished by dividing the amount of Cash Value allocated to a sub-account by the value of an Accumulation Unit for the sub-account of the Valuation Period during which the allocation occurs. The value of an Accumulation Unit for each sub-account was arbitrarily set initially at $10 when the underlying Mutual Fund shares in that sub-account were available for purchase. The value for any subsequent Valuation Period is determined by multiplying the Accumulation Unit value for each sub-account for the immediately preceding Valuation Period by the Net Investment Factor for the sub-account during the subsequent Valuation Period. The value of an Accumulation Unit may increase or decrease from Valuation Period to Valuation Period. The number of Accumulation Units will not change as a result of investment experience. NET INVESTMENT FACTOR The Net Investment Factor for any Valuation Period is determined by dividing (a) by (b) and subtracting (c) from the result where: (a) is the net of: (1) the net asset value per share of the underlying Mutual Fund option held in the sub-account determined at the end of the current Valuation Period, plus (2) the per share amount of any dividend or capital gain distributions made by the underlying Mutual Fund option held in the sub-account if the "ex-dividend" date occurs during the current Valuation Period. (b) is the net of: (1) the net asset value per share of the underlying Mutual Fund held in the sub-account determined at the end of the immediately preceding Valuation Period, plus or minus (2) the per share charge or credit, if any, for any taxes reserved for in the immediately preceding Valuation Period (see "Charge For Tax Provisions"). (c) is a factor representing the daily Mortality and Expense Risk Charge, Administration Expense Charge and Premium Tax Recovery Charge deducted from the Variable Account. Such factor is equal to an annual rate of 1.30% for the first ten years and 1.00% thereafter of the daily net asset value of the Variable Account. For underlying Mutual Fund options that credit dividends on a daily basis and pay such dividends once a month, the Net Investment Factor allows for the monthly reinvestment of these daily dividends. The Net Investment Factor may be greater or less than one; therefore, the value of an Accumulation Unit may increase or decrease. It should be noted that changes in the Net Investment Factor may not be directly proportional to changes in the net asset value of underlying Mutual Fund shares, because of the deduction for 19 26 Mortality and Expense Risk Charge, Administration Expense Charge, and Premium Tax Recovery Charge and any charge or credit for tax reserves. VALUATION OF ASSETS Underlying Mutual Fund shares in the Variable Account will be valued at their net asset value. DETERMINING THE CASH VALUE The sum of the value of all Variable Account Accumulation Units attributable to the Policy and amounts credited to the Fixed Account is the Cash Value. The number of Accumulation Units credited per each sub-account are determined by dividing the net amount allocated to the sub-account by the Accumulation Unit Value for the sub-account for the Valuation Period during which the premium is received by the Company. In the event part or all of the Cash Value is surrendered or charges or deductions are made against the Cash Value, an appropriate number of Accumulation Units from the Variable Account and an appropriate amount from the Fixed Account will be deducted in the same proportion that the Policy Owner's interest in the Variable Account and the Fixed Account bears to the total Cash Value. The Cash Value in the Fixed Account and the Policy Loan Account is credited with interest daily at an effective annual rate which the Company periodically declares. The annual effective rate will never be less than 4%. Upon request, the Company will inform the Policy Owner of the then applicable rates for each account. VALUATION PERIODS AND VALUATION DATES A Valuation Period is the period commencing at the close of business on the New York Stock Exchange and ending at the close of business for the next succeeding Valuation Date. A Valuation Date is each day that the New York Stock Exchange and the Company's home office is open for business or any other day during which there is sufficient degree of trading that the current net asset value of the Accumulation Units might be materially affected. SURRENDERING THE POLICY FOR CASH RIGHT TO SURRENDER The Policy Owner may surrender the Policy in full at any time while the Insured is living and receive its Cash Surrender Value. The cancellation will be effective as of the date the Company receives a proper written request for cancellation and the Policy. Such written request must be signed and, where permitted, the signature guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a Commercial Bank or Savings and Loan, which is a member of the Federal Deposit Insurance Corporation. In some cases, the Company may require additional documentation of a customary nature. CASH SURRENDER VALUE The Cash Surrender Value increases or decreases daily to reflect the investment experience of the Variable Account and the daily crediting of interest in the Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the Policy's Cash Value, next computed after the date the Company receives a proper written request for surrender of the Policy, minus any charges, indebtedness or other deductions due on that date, which may also include a Surrender Charge. PARTIAL SURRENDERS After the Policy has been in force for 5 Policy Years, the Policy Owner may request a partial surrender. Partial surrenders will be permitted only if they satisfy the following requirements: 1. The maximum partial surrender in any Policy Year is limited to 10% of the total premium payments; 2. Partial surrenders must not result in a reduction of the Cash Surrender Value below $10,000; and 3. After the partial surrender, the Policy continues to qualify as life insurance. When a partial surrender is made, the Cash Value is reduced by the amount of the partial surrender. Under Death Benefit Option 1, the Specified Amount is reduced by the amount of the partial surrender, unless the death benefit is based on the applicable percentage of cash value. In such a case, a partial surrender will decrease the Specified Amount by the amount by which the partial surrender exceeds the difference between the death benefit and Specified Amount. Partial surrender amounts must be first deducted from the values in the Variable sub-accounts. Partial surrenders will be deducted from the Fixed Account only to the extent that insufficient values are available in the Variable sub-accounts. 20 27 Surrender Charges will be waived for any partial surrenders which satisfy the above conditions. Certain partial surrenders may result in currently taxable income and tax penalties (see "Tax Matters"). MATURITY PROCEEDS The Maturity Date is the Policy Anniversary on or next following the Insured's 95th birthday. The maturity proceeds will be payable to the Policy Owner on the Maturity Date provided the Policy is still in force. The Maturity Proceeds will be equal to the amount of the Policy's Cash Value, less any indebtedness. INCOME TAX WITHHOLDING Federal law requires the Company to withhold income tax from any portion of surrender proceeds that is subject to tax, unless the Policy Owner advises the Company, in writing, of his or her request not to withhold. If the Policy Owner requests that the Company not withhold taxes, or if the taxes withheld are insufficient, the Policy Owner may be liable for payment of an estimated tax. The Policy Owner should consult his or her tax advisor. In certain employer-sponsored life insurance arrangements, including equity split dollar arrangements, Participants may be required to report for income tax purposes, one or more of the following: (1) the value each year of the life insurance protection provided; (2) an amount equal to any employer-paid premiums; or (3) some or all of the amount by which the current value of the contract exceeds the employer's interest in the contract. Participants should consult with the sponsor or the administrator of the Plan, and/or with their personal tax or legal advisers, to determine the tax consequences, if any, of their employer-sponsored life insurance arrangements. POLICY LOANS TAKING A POLICY LOAN The Policy Owner may take a loan using the Policy as security. During the first year, maximum Policy indebtedness is limited to 50% of the Cash Surrender Value less interest due on the next Policy Anniversary. After the first Policy Year, the maximum Policy indebtedness is limited to 90% of the Cash Surrender Value less interest due on the next Policy Anniversary. The Company will not grant a loan for an amount less than $1,000 ($200 in Connecticut, $500 in New York). Should the Death Benefit become payable, the Policy be surrendered, or the Policy mature while a loan is outstanding, the amount of Policy indebtedness will be deducted from the Death Benefit, Cash Surrender Value or the Maturity Value, respectively. Maximum Policy indebtedness, in Texas, is limited to 90% of the Cash Surrender Value in the sub-accounts and 100% of the Cash Surrender Value in the Fixed Account less interest due on the next Policy Anniversary. Any request for a Policy loan must be in written form satisfactory to the Company. The request must be signed and, where permitted, the signature guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange; or by a Commercial Bank or a Savings and Loan which is a member of the Federal Deposit Insurance Corporation. Certain Policy loans may result in currently taxable income and tax penalties (see "Tax Matters"). EFFECT ON INVESTMENT PERFORMANCE When a loan is made, an amount equal to the amount of the loan is transferred from the Variable Account to the Policy Loan Account. If the assets relating to a Policy are held in more than one sub-account, withdrawals from sub-accounts will be made in proportion to the assets in each variable sub-account at the time of the loan. Policy Loans will be transferred from the Fixed Account only when insufficient amounts are available in the variable sub-accounts. The amount taken out of the Variable Account will not be affected by the Variable Account's investment experience while the loan is outstanding. INTEREST Amounts transferred to the Policy Loan Account will earn interest daily from the date of transfer. Policy Loans will be currently credited interest daily at an annual effective rate of 5.0%. This rate is guaranteed never to be lower than 4%. The Company may change the current interest crediting rate on Policy Loans at any time at its sole discretion. This earned interest is transferred from the Policy Loan Account to a Variable Account or the Fixed Account on each Policy Anniversary. It will be allocated according to the underlying Mutual Fund Allocation Factors in effect at the time of the transfer. The loan interest rate is 6% per year for all Policy Loans. Interest is charged daily and is payable at the end of each Policy year. Unpaid interest will be added to the existing policy indebtedness as of the due date and will be charged interest at the same rate as the rest of the indebtedness. 21 28 Whenever the total loan indebtedness plus accrued interest exceeds the Cash Value less any Surrender Charges, the Company will send a notice to the Policy Owner and the assignee, if any. The Policy will terminate without value 61 days after the mailing of the notice unless a sufficient repayment is made during that period. A repayment is sufficient if it is large enough to reduce the total loan indebtedness plus accrued interest to an amount equal to the total Cash Value less any Surrender Charges plus an amount sufficient to continue the Policy in force for 3 months. EFFECT ON DEATH BENEFIT AND CASH VALUE A Policy loan, whether or not repaid, will have a permanent effect on the Death Benefit and Cash Value because the investment results of the Variable Account or the Fixed Account will apply only to the non-loaned portion of the Cash Value. The longer the loan is outstanding, the greater the effect is likely to be. Depending on the investment results of the Variable Account or the Fixed Account while the loan is outstanding, the effect could be favorable or unfavorable. REPAYMENT All or part of a loan may be repaid at any time while the Policy is in force during the insured's lifetime. Any payment intended as a loan repayment, rather than a premium payment, must be identified as such. Loan repayments will be credited to the variable sub-accounts and the Fixed Account in proportion to the Policy Owner's Premium allocation in effect at the time of the repayment. Each repayment may not be less than $1,000 ($50 in Connecticut and New York). The Company reserves the right to require that any loan repayments resulting from Policy Loans transferred from the Fixed Account must be first allocated to the Fixed Account. HOW THE DEATH BENEFIT VARIES - -Calculation of the Death Benefit At issue, the Specified Amount is determined by treating the initial premium as equal to 100% of the Guideline Single Premium. Additional premium payments, if accepted, may increase the Specified Amount. Guideline Single Premiums vary by attained age, sex, smoking classification, underwriting classification and total premium payments. The following table illustrates representative initial Specified Amounts, under Death Benefit Option 1, for non-tobacco.
Issue $25,000 Single Premium $50,000 Single Premium Age Male Female Male Female 35 $179,733 $208,354 $364,774 $423,008 40 143,373 166,704 290,792 338,264 45 114,856 134,300 232,769 272,332 50 92,583 108,739 187,452 220,323 55 75,306 88,601 152,298 179,349 60 62,112 72,636 125,453 146,866 65 52,094 59,930 105,070 121,014
Generally, for a given premium payment, the initial Specified Amount is greater for non-tobacco than standard and females than males. The Specified Amount is shown in the Policy. While the Policy is in force, the Death Benefit will never be less than the Specified Amount. The Death Benefit may vary with the Cash Value of the Policy, which depends on investment performance. The Policy Owner may choose one of two Death Benefit Options. Under Option 1, the Death Benefit will be the greater of the Specified Amount or the Applicable Percentage of Cash Value. Under Option 1, the amount of the Death Benefit will ordinarily not change for several years to reflect the investment performance and may not change at all. If investment performance is favorable the amount of Death Benefit may increase. To see how and when investment performance will begin to affect Death Benefits, please see the illustrations. Under Option 2, the Death Benefit will be the greater of the Specified Amount plus the Cash Value, or the Applicable Percentage of Cash Value and will vary directly with the investment performance. Policy Owners who are satisfied with the amount of their current insurance coverage and prefer to have favorable investment performance and any future premium payments reflected in increased Policy Cash Values should choose Death Benefit Option 1. Policy Owners who prefer to have favorable investment performance and any future premium payments increase Death Benefits should choose Death Benefit Option 2. The monthly Cost of Insurance for Option 1 will always be less than or equal to the monthly Cost of Insurance for the same amount of Specified Amount under Option 2 (see "Cost of Insurance Charge"). The term "applicable percentage" means: 22 29 1. 250% when the Insured is Attained Age 40 or less at the beginning of a Policy Year, and 2. when the Insured is Attained Age 40, the percentage shown in the "Applicable Percentage of Cash Value Table" following. APPLICABLE PERCENTAGE OF CASH VALUE TABLE
Attained Percentage Attained Percentage Attained Percentage Age of Cash Value Age of Cash Value Age of Cash Value --- ------------- --- ------------- --- ------------- 0-40 250% 60 130% 80 105% 41 243% 61 128% 81 105% 42 236% 62 126% 82 105% 43 229% 63 124% 83 105% 44 222% 64 122% 84 105% 45 215% 65 120% 85 105% 46 209% 66 119% 86 105% 47 203% 67 118% 87 105% 48 197% 68 117% 88 105% 49 191% 69 116% 89 105% 50 185% 70 115% 90 105% 51 178% 71 113% 91 104% 52 171% 72 111% 92 103% 53 164% 73 109% 93 102% 54 157% 74 107% 94 101% 55 150% 75 105% 95 100% 56 146% 76 105% 57 142% 77 105% 58 138% 78 105% 59 134% 79 105%
- -Proceeds Payable on Death The actual Death Proceeds payable on the Insured's death will be the Death Benefit as described above, less any outstanding Policy loans and less any unpaid Policy Charges. Under certain circumstances, the Proceeds may be adjusted (see "Incontestability", "Error in Age or Sex", and "Suicide"). RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY The Policy Owner may exchange the Policy for a modified single premium life insurance policy offered by the Company on the Policy Date. If not available, the new policy may be a flexible premium adjustable life insurance policy offered by the Company on the Policy Date. The benefits for the new policy will not vary with the investment experience of a separate account. The exchange must be elected within 24 months from the Policy Date. No evidence of insurability will be required. The Policy Owner and Beneficiary under the new Policy will be the same as those under the exchanged Policy on the effective date of the exchange. The new Policy will have a death benefit on the exchange date not more than the death benefit of the original Policy immediately prior to the exchange date. The new Policy will have the same policy date and issue age as the original Policy. The initial Specified Amount and any increases in Specified Amount will have the same rate class as those of the original Policy. Any indebtedness may be transferred to the new policy. The exchange may be subject to an equitable adjustment in rates and values to reflect variances, if any, in the rates and values between the two Policies. After adjustment, if any excess is owed the Policy Owner, the Company will pay the excess to the Policy Owner in cash. The exchange may be subject to federal income tax withholding (see "Income Tax Withholding"). CHANGES OF INVESTMENT POLICY The Company may materially change the Investment Policy of the Variable Account. The Company must inform the Policy Owner and obtain all necessary regulatory approvals. Any change must be submitted to the various state insurance departments which may disapprove it if deemed detrimental to the interests of the policy holders or if it renders the Company's operations hazardous to the public. If a Policy Owner objects, the Policy may be converted to a substantially comparable Nationwide General Account Life Insurance Policy on the life of the insured. The Policy Owner has the later of 60 days (6 months in Pennsylvania) from the date of 23 30 the Investment Policy change or 60 days (6 months in Pennsylvania) from being informed of such change to make this conversion. The Company will not require Evidence of Insurability for this conversion. The new policy will not be affected by the investment experience of any separate account. The New Policy will be for an amount of insurance not exceeding the Death Benefit of the Policy converted on the date of such conversion. GRACE PERIOD If the Cash Surrender Value in the Policy is insufficient to pay the Cost of Insurance Charges, Policy loan interest, or other charges which become due but are unpaid, a grace period of 61 days will be allowed for payment of sufficient premium to continue the Policy in force. The Company will notify the Policy Owner of the amount required to continue the Policy in force. If the required amount is not received within 61 days of the notice, the Policy will terminate without value. If the Insured dies during the Grace Period, the Company will pay the Death Proceeds. REINSTATEMENT If the Grace Period ends and the Policy Owner has neither paid the required premium nor surrendered the Policy for its Cash Surrender Value, the Policy Owner may reinstate the Policy by: 1. submitting a written request at any time within 3 years after the end of the Grace Period and prior to the Maturity Date: 2. providing evidence of insurability satisfactory to the Company; 3. paying sufficient premium to cover all policy charges that were due and unpaid during the Grace Period; 4. paying sufficient premium to keep the Policy in force for 3 months from the date of reinstatement, and 5. paying or reinstating any indebtedness against the Policy which existed at the end of the Grace Period. The effective date of a reinstated Policy will be the Monthly Anniversary Day on or next following the date the application for reinstatement is approved by us. If your Policy is reinstated, the Cash Value on the date of reinstatement, but prior to applying any premiums or loan repayments received, will be set equal to the appropriate Surrender Charge. Such Surrender Charge will be based on the length of time from the date of premium payments to the effective date of the reinstatement. Unless the Policy Owner has provided otherwise, the allocation of the amount of the Surrender Charge, additional premium payments, and any loan repayments will be based on the underlying Mutual Fund Allocation factors in effect at the start of the Grace Period. THE FIXED ACCOUNT OPTION Because of exemptive and exclusionary provisions, interests in Nationwide's General Account have not been registered under the Securities Act of 1933 and the General Account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, neither the General Account nor any interests therein are subject to the provisions of these Acts, and Nationwide has been advised that the staff of the Securities and Exchange Commission has not reviewed the disclosures in this prospectus relating to the Fixed-Account option. Disclosures regarding the General Account may, however, be subject to certain generally applicable provisions of the federal securities laws relating to the accuracy and completeness of statements made in prospectuses. As explained earlier, a Policy Owner may elect to allocate or transfer all or part of the Cash Value to the Fixed Account and the amount allocated or transferred becomes part of Nationwide's general assets (General Account). Nationwide's General Account consists of all assets of the Company other than those in the Variable Account and in other separate accounts that have been or may be established by the Company. Subject to applicable law, the Company has sole discretion over the investment of the assets of the General Account, and Policy Owners do not share in the investment experience of those assets. The Company guarantees that the part of the Cash Value invested under the Fixed-Account option will accrue interest daily at an effective annual rate that the Company declares periodically. The Fixed Account crediting rate will not be less than an effective annual rate of 4%. Upon request and in the annual statement the Company will inform a Policy Owner of the then applicable rate. The Company is not obligated to credit interest at a higher rate. CHANGES IN EXISTING INSURANCE COVERAGE After the first Policy Year, the Policy Owner may request certain changes in the insurance coverage under the Policy. Any request must be in writing and received at the Company's home office. No change will take effect unless the Cash Surrender Value, after the change, is sufficient to keep the Policy in force for at least 3 months. 24 31 CHANGES IN THE SPECIFIED AMOUNT Payment of additional premiums or changes in the Death Benefit Option may require an increase to the Specified Amount (the minimum increase in the Specified Amount permitted by the Company is $10,000). An approved increase will have an effective date of the Monthly Anniversary Day on or next following the date we approve the supplemental application. The Company reserves the right to limit such increases to one per Policy Year, and to require satisfactory evidence of insurability for any increase in the Specified Amount. In addition, the rate class, rate class multiple and rate type for the increase in Specified Amount must be identical to those on the Policy Date. The Specified Amount cannot be decreased if, after the decrease, the policy would fail to satisfy the definition of Life Insurance under Section 7702 of the Code. CHANGES IN THE DEATH BENEFIT OPTION The Policy Owner may change the Death Benefit Option under the Policy. If the change is from Option 1 to Option 2, the Specified Amount will be decreased by the amount of the Cash Value. If the change is from Option 2 to Option 1, the Specified Amount will be increased by the amount of the Cash Value. Evidence of insurability is not required for a change from Option 2 to Option 1. The Company reserves the right to require evidence of insurability for a change from Option 1 to Option 2. The effective date of the change will be the Monthly Anniversary Day on or next following the date the Company approves the request for change. Only one change of option is permitted per Policy Year. A change in Death Benefit Option will not be permitted if it results in the total premiums paid exceeding the then current maximum premium limitations prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract. OTHER POLICY PROVISIONS POLICY OWNER While the Insured is living, all rights in this Policy are vested in the Policy Owner named in the application or as subsequently changed, subject to assignment, if any. The Policy Owner may name a Contingent Policy Owner or a new Policy Owner while the Insured is living. Any change must be in a written form satisfactory to the Company and recorded at the Company's home office. Once recorded, the change will be effective when signed. The change will not affect any payment made or action taken by the Company before it was recorded. The Company may require that the Policy be submitted for endorsement before making a change. If the Policy Owner is other than the Insured and names no Contingent Policy Owner, and dies before the Insured, the Policy Owner's rights in this Policy belong to the Policy Owner's estate. BENEFICIARY The Beneficiary(ies) shall be as named in the application or as subsequently changed, subject to assignment, if any. The Policy Owner may name a new Beneficiary while the Insured is living. Any change must be in a written form satisfactory to the Company and recorded at the Company's home office. Once recorded, the change will be effective when signed. The change will not affect any payment made or action taken by the Company before it was recorded. If any Beneficiary predeceases the Insured, that Beneficiary's interest passes to any surviving beneficiary, unless otherwise provided. Multiple beneficiaries will be paid in equal shares, unless otherwise provided. If no named Beneficiary survives the Insureds, the proceeds shall be paid to the Policy Owner or the Policy Owner's estate. ASSIGNMENT While the Insured is living, the Policy Owner may assign his or her rights in the Policy. The assignment must be in writing, signed by the Policy Owner and recorded by the Company at its home office. The Company is not responsible for any assignment not submitted for recording, nor is the Company responsible for the sufficiency or validity of any assignment. The assignment will be subject to any Indebtedness owed to the Company before it was recorded. INCONTESTABILITY The Company will not contest a Death Benefit based on representations in any written application when such benefit has been in force, during the lifetime of the Insured, for two years. 25 32 ERROR IN AGE OR SEX If the Insured's age, sex or both, as stated in the application, are incorrect, the affected benefits will be adjusted to reflect the correct age or sex. SUICIDE If the Insured dies by suicide within two years from the Policy Date, the Company will pay no more than the sum of the premiums, less any unpaid loan. If the Insured dies by suicide within two years from the date an application is accepted for an increase in the Specified Amount, the Company will pay no more than the amount paid for such additional benefit. NONPARTICIPATING POLICIES The Policies are nonparticipating. This means that they do not participate in any dividend distribution of the Company's surplus. LEGAL CONSIDERATIONS On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v. Norris that certain annuity benefits provided by employers' retirement and fringe benefit programs may not vary between men and women on the basis of sex. This decision applies only to benefits derived from premiums made on or after August 1, 1983. The Policies offered by this prospectus are based upon actuarial tables which distinguish between men and women and thus the Policies provide different benefits to men and women of the same age. Accordingly, employers and employee organizations should consider, in consultation with legal counsel, the impact of Norris on any employment related insurance or benefit program before purchasing this Policy. DISTRIBUTION OF THE POLICIES The Policies will be sold by licensed insurance agents in those states where the Policies may lawfully be sold. Such agents will be registered representatives of broker dealers registered under the Securities Exchange Act of 1934 who are members of the National Association of Securities Dealers, Inc. (NASD). The Policies will be distributed by the General Distributor, Nationwide Financial Services, Inc. NFS acts as general distributor for the Nationwide Multi-Flex Variable Account, Nationwide DC Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-A, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, NACo Variable Account and the Nationwide Variable Account, all of which are separate investment accounts of the Company or its affiliates. NFS is a wholly owned subsidiary of the Company. NFS also acts as principal underwriter for the Nationwide Investing Foundation, Nationwide Separate Account Trust, Financial Horizons Investment Trust, and Nationwide Investing Foundation II, which are open-end management investment companies. Gross commissions paid by the Company on the sale of these Policies plus fees for marketing services provided by the General Distributor are not more than 7.50% of the premiums paid. CUSTODIAN OF ASSETS The Company serves as the Custodian of the assets of the Variable Account. TAX MATTERS POLICY PROCEEDS Section 7702 of the Code provides that if certain tests are met, a Policy will be treated as a life insurance policy for federal tax purposes. The Company will monitor compliance with these tests. The Policy should thus receive the same Federal income tax treatment as fixed benefit life insurance. As a result, the life insurance proceeds payable under a Policy are excludable from gross income of the beneficiary under Section 101 of the Code. The Policies described in this prospectus, meet the definition of "modified endowment contracts" under Section 7702A of the Code. The Code defines modified endowment contracts as those policies issued or materially changed after June 21, 1988 on which the total premiums paid during the first seven years exceed the amount that would have been paid if the policy provided for paid up benefits after seven level annual premiums. The policies offered in this prospectus typically fall within this definition. The Code provides for taxation of surrenders, partial surrenders, loans, collateral assignments and other pre-death distributions from modified 26 33 endowment contracts in the same way annuities are taxed. Any distribution is taxable to the extent the Cash Value of the Policy exceeds, at the time of the distribution, the premiums paid into the Policy. The Code generally provides for a 10% tax penalty on the taxable portion of such distributions. That penalty is applicable unless the distribution is 1) paid after the Policy Owner is 59 1/2 or disabled; or 2) the distribution is part of an annuity to the Policy Owner as defined in the Code. Even though exchanges under Section 1035 of the Code qualify as material changes, certain exchanges of pre-June 22, 1988 policies may retain their non-modified endowment status. Therefore, the policies offered by this prospectus may or may not be issued as modified endowment contracts. The Company will monitor premiums paid and will notify the Policy Owner when the policy's non-modified endowment status is in jeopardy. If a policy is not a modified endowment contract, a cash distribution during the first fifteen years after a policy is issued which causes a reduction in death benefits may still become fully or partially taxable to the Owner pursuant to Section 7702(f)(7) of the Code. The Policy Owner should carefully consider this potential effect and seek further information before initiating any changes in the terms of the policy. Under certain conditions, a policy may become a modified endowment as a result of certain material changes or a reduction in benefits as defined by Section 7702A(c) of the Code. In addition to meeting the tests required under Sections 7702, Section 817(h) of the Code requires that the investments of separate accounts such as the Variable Account be adequately diversified. Regulations under 817 (h) provide that a variable life policy failing to satisfy the diversification standards will not be treated as life insurance unless such failure was inadvertent, is corrected, and the Policy Owner or the Company pays an amount to the Internal Revenue Service. The amount will be based on the tax that would have been paid by the Policy Owner if the income, for the period the policy was not diversified, had been received by the Policy Owner. If the failure to diversify is not corrected in this manner, the Policy Owner will be deemed the owner of the underlying securities and taxed on the earnings of his or her account. Representatives of the Internal Revenue Service have suggested, from time to time, that the number of underlying Mutual Funds available or the number of transfer opportunities available under a variable product may be relevant in determining whether the product qualifies for the desired tax treatment. No formal guidance has been issued in this area. Should the Secretary of the Treasury issue additional rules or regulations limiting the number of underlying Mutual Funds, transfers between underlying Mutual Funds, exchanges of underlying Mutual Funds or changes in investment objectives of underlying Mutual Funds such that the Policy would no longer qualify as life insurance under Section 7702 of the Code, the Company will take whatever steps are available to remain in compliance. A total surrender or cancellation of the Policy by lapse may have adverse tax consequences depending on the circumstances. If the amount received by the Policy Owner plus total Policy Indebtedness exceeds the premiums paid into the Policy, the excess generally will be treated as taxable income, regardless of whether or not the Policy is a modified endowment contract. Generally the taxable portion of any Distribution from a Contract to a nonresident alien of the United States is subject to tax withholding at a rate equal to thirty percent (30%) of such amount or, if applicable, a lower treaty rate. A payment may not be subject to withholding where the recipient sufficiently establishes that such payment is effectively connected to the recipient's conduct of a trade or business in the United States and such payment is includable in the recipient's gross income. Federal estate and state and local estate, inheritance and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each Policy Owner or Beneficiary. TAXATION OF THE COMPANY The Company is taxed as a life insurance company under the Code. Since the Variable Account is not a separate entity from the Company and its operations form a part of the Company, it will not be taxed separately as a "regulated investment company" under Sub-chapter M of the Code. Investment income and realized capital gains on the assets of the Variable Account are reinvested and taken into account in determining the value of Accumulation Units. As a result, such investment income and realized capital gains are automatically applied to increase reserves under the Policies. The Company does not initially expect to incur any Federal income tax liability that would be chargeable to the Variable Account. Based upon these expectations, no charge is currently being made against the Variable Account for federal income taxes. If, however, the Company determines that on a separate company basis such taxes may be incurred, it reserves the right to assess a charge for such taxes against the Variable Account. The Company may also incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant. If they increase, however, charges for such taxes may be made. 27 34 OTHER CONSIDERATIONS The foregoing discussion is general and is not intended as tax advice. Counsel and other competent advisors should be consulted for more complete information. This discussion is based on the Company's understanding of Federal income tax laws as they are currently interpreted by the Internal Revenue Service. No representation is made as to the likelihood of continuation of these current laws and interpretations. THE COMPANY The life insurance business, which includes product lines in health insurance and annuities, is the only business in which the Company is engaged. The Company markets its Policies through independent insurance brokers, general agents, and registered representatives of registered NASD broker/dealer firms. The Company serves as depositor for the Nationwide Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8, MFS Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, the NACo Variable Account and the DC Variable Account, each of which is a registered investment company, and each of which is a separate investment account of the Company. The Company, in common with other insurance companies, is subject to regulation and supervision by the regulatory authorities of the states in which it is licensed to do business. A license from the state insurance department is a prerequisite to the transaction of insurance business in that state. In general, all states have statutory administrative powers. Such regulation relates, among other things, to licensing of insurers and their agents, the approval of policy forms, the methods of computing reserves, the form and content of statutory financial statements, the amount of policyholders' and stockholders' dividends, and the type of distribution of investments permitted. The Company operates in the highly competitive field of life insurance. There are approximately 2,300 stock, mutual and other types of insurers in the life insurance business in the United States, and a large number of them compete with the registrant in the sale of insurance policies. As is customary in insurance company groups, employees are shared with the other insurance companies in the group. In addition to its direct salaried employees, the Company shares employees with Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company. The Company does not presently own or lease any materially important physical properties when its property holdings are viewed in relation to its total assets. The Company shares home office, other facilities and equipment with Nationwide Mutual Insurance Company. COMPANY MANAGEMENT Nationwide Life Insurance Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance Company, Nationwide Indemnity Company, Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty Insurance Company, National Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity Company and Nationwide General Insurance Company and their affiliated companies comprise the Nationwide Insurance Enterprise. The companies comprising the Nationwide Insurance Enterprise have substantially common boards of directors and officers. Nationwide Corporation is the sole shareholder of Nationwide Life. DIRECTORS OF THE COMPANY
Director Name Since Principal Occupation ---- ----- -------------------- Lewis J. Alphin 1993 Farm Owner and Operator (1) Keith W. Eckel 1996 Partner and Manager, Fred W. Eckel Sons and Eckel Farms, Inc. (1) Willard J. Engel 1994 General Manager Lyon County Cooperative Oil Company (1) Fred C. Finney 1992 Owner and Operator, Moreland Fruit Farm; Operator, Melrose Orchard (1) Charles L. Fuellgraf, Jr. * + 1969 Chief Executive Officer, Fuellgraf Electric Company, Electrical Construction and Engineering Services (1)
28 35 Joseph J. Gasper*+ 1996 President and Chief Operating Officer, Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company Henry S. Holloway *+ 1986 Farm Owner and Operator (1) D. Richard McFerson *+ 1988 Chairman and Chief Executive Officer, Nationwide Insurance Enterprise (2) David O. Miller *+ 1985 Farm Owner and Land Developer; President, Owen Potato Farm, Inc.; Partner, M&M Enterprises (1) C. Ray Noecker 1994 Farm Owner and Operator (1) James F. Patterson + 1989 Vice President, Pattersons, Inc. ; President, Patterson Farms, Inc. (1) Arden L. Shisler *+ 1984 Partner and Manager, Sweetwater Beef Farms; President and Chief Executive Officer, K&B Transport, Inc. (1) Robert L. Stewart 1989 Farm Owner and Operator; Owner, Sunnydale Mining (1) Nancy C. Thomas * 1986 Farm Owner and Operator, Da-Ma-Lor Farms (1) Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farm (1) *Member, Executive Committee +Member, Investment Committee
1) Principal occupation for last five years. 2) Prior to assuming this current position, Messrs. McFerson and Gasper held other executive management positions with the companies. Each of the directors is a director of the other major insurance affiliates of the Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of the Company and Nationwide Life Insurance Company. Messrs. McFerson and Gasper are directors of Nationwide Financial Services, Inc., a registered broker-dealer. Messrs. Holloway, McFerson, Miller, Patterson and Shisler are directors of Nationwide Corporation. Messrs. Fuellgraf, McFerson, Ms. Thomas and Mr. Weihl are trustees of Nationwide Investing Foundation, a registered investment company. Mr. McFerson is trustee of Nationwide Separate Account Trust, Financial Horizons Investment Trust and Nationwide Investing Foundation II, registered investment companies. Mr. Engel is a director of Western Cooperative Transport. EXECUTIVE OFFICERS OF THE COMPANY
NAME OFFICE HELD D. Richard McFerson Chairman and Chief Executive Officer-Nationwide Insurance Enterprise Joseph J. Gasper President and Chief Operating Officer Gordon E. McCutchan Executive Vice President, Law and Corporate Services and Secretary Robert A. Oakley Executive Vice President-Chief Financial Officer Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer James E. Brock Senior Vice President - Life Company Operations W. Sidney Druen Senior Vice President and General Counsel and Assistant Secretary Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary Richard A. Karas Senior Vice President - Sales and Financial Services Mark A. Folk Vice President and Treasurer
Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and Annuity Insurance Company. Mr. Galloway is also an officer of Nationwide Mutual Insurance Company and Nationwide Life and Annuity Insurance Company. Each of the other officers listed above is also an officer of each of the companies comprising the Nationwide Insurance Enterprise. Each of the executive officers listed above has been associated with the registrant in an executive capacity for more than the past five years, except Mr. Folk who 29 36 joined the Registrant in 1993. From 1983-1993, Mr. Folk served as a partner in the accounting firm KPMG Peat Marwick LLP. OTHER CONTRACTS ISSUED BY THE COMPANY The Company does presently and will, from time to time, offer variable contracts and policies with benefits which vary in accordance with the investment experience of a separate account of the Company. STATE REGULATION The Company is subject to the laws of Ohio governing insurance companies and to regulation by the Ohio Insurance Department. An annual statement in a prescribed form is filed with the Insurance Department each year covering the operation of the Company for the preceding year and its financial condition as of the end of such year. Regulation by the Insurance Department includes periodic examination to determine the Company's contract liabilities and reserves so that the Insurance Department may certify the items are correct. The Company's books and accounts are subject to review by the Insurance Department at all times and a full examination of its operations is conducted periodically by the National Association of Insurance Commissioners. Such regulation does not, however, involve any supervision of management or investment practices or policies. In addition, the Company is subject to regulation under the insurance laws of other jurisdictions in which it may operate. REPORTS TO POLICY OWNERS The Company will mail to the Policy Owner, at the last known address of record, an annual statement showing the amount of the current Death Benefit, the Cash Value, and Cash Surrender Value, premiums paid and monthly charges deducted since the last report, the amounts invested in the Fixed Account and in the Variable Account and in each sub-account of the Variable Account, and any Policy debt, as well as interest on the debt for the preceding year. Policy Owners will also be sent annual and semi-annual reports containing financial statements for the Variable Account as required by the 1940 Act. In addition, Policy Owners will receive statements of significant transactions, such as change in Specified Amount, change in Death Benefit Option, changes in future premium allocation, transfers among sub-accounts, premium payments, loans, increase in loan principal, loan repayments, unpaid loan interest added to principal, reinstatement and termination. ADVERTISING The Company is ranked and rated by independent financial rating services, among which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of these ratings is to reflect the financial strength or claims-paying ability of the Company. The ratings are not intended to reflect the investment experience or financial strength of the Variable Account. The Company may advertise these ratings from time to time. In addition, the Company may include in certain advertisements endorsements in the form of a list of organizations, individuals or other parties which recommend the Company or the Contracts. Furthermore, the Company may occasionally include in advertisements comparisons of currently taxable and tax deferred investment programs based on selected tax brackets or discussions of alternative investment vehicles and general economic conditions. LEGAL PROCEEDINGS There are no material legal proceedings, other than ordinary routine litigation incidental to the business to which the Company and the Variable Account are parties or to which any of their property is the subject. The General Distributor, Nationwide Financial Services, Inc., is not engaged in any material litigation of any nature. EXPERTS The financial statements and schedules included herein have been included herein in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. 30 37 REGISTRATION STATEMENT A Registration Statement has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to the Policies offered hereby. This prospectus does not contain all the information set forth in the Registration Statement and amendments thereto and exhibits filed as a part thereof, to all of which reference is hereby made for further information concerning the Variable Account, the Company, and the Policies offered hereby. Statements contained in this prospectus as to the content of Policies and other legal instruments are summaries. For a complete statement of the terms thereof, reference is made to such instruments as filed. LEGAL OPINIONS Legal matters in connection with the Policies described herein are being passed upon by Druen, Rath & Dietrich, One Nationwide Plaza, Columbus, Ohio 43216. All the members of such firm are employed by the Nationwide Mutual Insurance Company. 31 38 APPENDIX 1 ILLUSTRATIONS OF WHEN ADDITIONAL PREMIUM PAYMENTS ARE PERMITTED Example 1: A male non-tobacco, age 35, purchases a Policy with an initial premium of $25,000 and selects Death Benefit Option 1. The initial premium is treated as 100% of the Guideline Single Premium which results in a Specified Amount of $179,733. In the 12th and subsequent policy years, annual premiums of $2,177 may be paid without violating the premium limitations prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract. Additional premiums which increase the Specified Amount may be made at any time, subject to the $1,000 minimum. The Company reserves the right to require satisfactory evidence of insurability with any premium payment which increases the net amount at risk. In addition, premium payments may be made at any time if they are required to continue the Policy in force. Example 2: A male non-tobacco, age 55, purchases a Policy with an initial premium of $100,000 and selects Death Benefit Option 1. The initial premium is treated as 100% of the Guideline Single Premium which results in a Specified Amount of $306,283. In the 11th and subsequent policy years, annual premiums of $9,591 may be paid without violating the premium limitations prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract. Additional premiums which increase the Specified Amount may be made at any time, subject to the $1,000 minimum. The Company reserves the right to require satisfactory evidence of insurability with any premium payment which increases the net amount at risk. In addition, premium payments may be made at any time if they are required to continue the Policy in force. 32 39 APPENDIX 2 ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH BENEFITS The illustrations in this prospectus have been prepared to help show how values under the Policies change with investment performance. The illustrations illustrate how Cash Values, Cash Surrender Values and Death Benefits under a Policy would vary over time if the hypothetical gross investment rates of return were a uniform annual effective rate of either 0%, 6% or 12%. If the hypothetical gross investment rate of return averages 0%, 6% or 12% over a period of years, but fluctuates above or below those averages for individual years, the Cash Values, Cash Surrender Values and Death Benefits may be different. For hypothetical returns of 0% and 6%, the illustrations also illustrate when the Policies would go into default, at which time additional premium payments would be required to continue the Policy in force. The illustrations also assume there is no Policy Indebtedness, no additional premium payments are made, no Cash Values are allocated to the Fixed Account, and there are no changes in the Specified Amount or Death Benefit option. The amounts shown for the Cash Value, Cash Surrender Value and Death Benefit as of each Policy Anniversary reflect the fact that the net investment return on the assets held in the sub-accounts is lower than the gross return. This is due to the daily charges made against the assets of the sub-accounts for assuming mortality and expense risks, recovering premium taxes and providing for administrative expenses. On a current basis, these charges are equivalent to an annual effective rate of 1.30% in the first 10 policy years and 1.00% thereafter. On a guaranteed basis, these charges are equivalent to a maximum annual effective rate of 1.60% in the first 10 policy years and 1.30% thereafter. In addition, the net investment returns also reflect the deduction of underlying Mutual Fund investment advisory fees and other expenses which are equivalent to an annual effective rate of 1.00%. This effective rate is based on the average of the fund expenses for the preceding year for all mutual fund options available under the policy as of April 30, 1996. Taking account of the current charges for mortality and expense risks, recovering premium taxes and providing for administrative and underlying Mutual Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net investment experience at constant annual rates of -2.30, 3.70% and 9.70%, respectively, in policy years one through ten, and -2.00%, 4.00% and 10.00% thereafter. Taking account of guaranteed charges, gross annual rates of return of 0%, 6% and 12% correspond to net investment experience at constant annual rates of -2.60%, 3.40% and 9.40%, respectively, in policy years one through ten, and -2.30%, 3.70% and 9.70% thereafter. The illustrations also reflect the fact that the Company makes monthly charges for providing insurance protection. Current values reflect current cost of insurance charges and guaranteed values reflect the maximum cost of insurance charges guaranteed in the Policy. The values shown are for policies which are issued as standard. Policies issued on a substandard basis would result in lower Cash Values and Death Benefits than those illustrated. Death Benefit Option 1 has been assumed in all the illustrations. In addition, the illustrations reflect the fact that the Company deducts an annual administrative charge at the beginning of each Policy Year after the first. The illustrations also reflect the fact that no charges for federal or state income taxes are currently made against the Variable Account. If such a charge is made in the future, it will require a higher gross investment return than illustrated in order to produce the net after-tax returns shown in the illustrations. Upon request, the Company will furnish a comparable illustration based on the proposed Insured's age, sex, smoking classification, rating classification and premium payment requested. 33 40 $10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NEW YORK CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 10,500 9,638 8,788 43,190 10,221 9,371 43,190 10,805 9,955 43,190 2 11,025 9,208 8,358 43,190 10,373 9,523 43,190 11,607 10,757 43,190 3 11,576 8,775 7,975 43,190 10,520 9,720 43,190 12,478 11,678 43,190 4 12,155 8,337 7,537 43,190 10,661 9,861 43,190 13,425 12,625 43,190 5 12,763 7,893 7,143 43,190 10,794 10,044 43,190 14,453 13,703 43,190 6 13,401 7,440 6,740 43,190 10,917 10,217 43,190 15,572 14,872 43,190 7 14,071 6,976 6,376 43,190 11,029 10,429 43,190 16,790 16,190 43,190 8 14,775 6,498 5,998 43,190 11,125 10,625 43,190 18,115 17,615 43,190 9 15,513 6,003 5,603 43,190 11,203 10,803 43,190 19,558 19,158 43,190 10 16,289 5,486 5,486 43,190 11,260 11,260 43,190 21,131 21,131 43,190 11 17,103 4,960 4,960 43,190 11,325 11,325 43,190 22,918 22,918 43,190 12 17,959 4,410 4,410 43,190 11,369 11,369 43,190 24,883 24,883 43,190 13 18,856 3,836 3,836 43,190 11,390 11,390 43,190 27,049 27,049 43,190 14 19,799 3,235 3,235 43,190 11,385 11,385 43,190 29,439 29,439 43,190 15 20,789 2,602 2,602 43,190 11,350 11,350 43,190 32,082 32,082 43,190 16 21,829 1,933 1,933 43,190 11,281 11,281 43,190 35,003 35,003 45,504 17 22,920 1,223 1,223 43,190 11,173 11,173 43,190 38,201 38,201 48,898 18 24,066 466 466 43,190 11,018 11,018 43,190 41,698 41,698 52,539 19 25,270 (*) (*) (*) 10,810 10,810 43,190 45,520 45,520 56,445 20 26,533 (*) (*) (*) 10,541 10,541 43,190 49,701 49,701 60,636 21 27,860 (*) (*) (*) 10,204 10,204 43,190 54,276 54,276 65,132 22 29,253 (*) (*) (*) 9,767 9,767 43,190 59,265 59,265 70,525 23 30,715 (*) (*) (*) 9,213 9,213 43,190 64,703 64,703 76,350 24 32,251 (*) (*) (*) 8,524 8,524 43,190 70,631 70,631 82,639 25 33,864 (*) (*) (*) 7,675 7,675 43,190 77,093 77,093 89,427 26 35,557 (*) (*) (*) 6,632 6,632 43,190 84,133 84,133 96,752 27 37,335 (*) (*) (*) 5,353 5,353 43,190 91,837 91,837 103,776 28 39,201 (*) (*) (*) 3,782 3,782 43,190 100,279 100,279 111,310 29 41,161 (*) (*) (*) 1,851 1,851 43,190 109,546 109,546 119,405 30 43,219 (*) (*) (*) (*) (*) (*) 119,742 119,742 128,124
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 34 41 $10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NEW YORK GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 10,500 9,597 8,747 43,190 10,178 9,328 43,190 10,760 9,910 43,190 2 11,025 9,073 8,223 43,190 10,226 9,376 43,190 11,448 10,598 43,190 3 11,576 8,546 7,746 43,190 10,263 9,463 43,190 12,191 11,391 43,190 4 12,155 8,016 7,216 43,190 10,287 9,487 43,190 12,992 12,192 43,190 5 12,763 7,479 6,729 43,190 10,296 9,546 43,190 13,856 13,106 43,190 6 13,401 6,933 6,233 43,190 10,287 9,587 43,190 14,789 14,089 43,190 7 14,071 6,376 5,776 43,190 10,257 9,657 43,190 15,796 15,196 43,190 8 14,775 5,803 5,303 43,190 10,202 9,702 43,190 16,883 16,383 43,190 9 15,513 5,210 4,810 43,190 10,117 9,717 43,190 18,056 17,656 43,190 10 16,289 4,592 4,592 43,190 9,998 9,998 43,190 19,325 19,325 43,190 11 17,103 3,958 3,958 43,190 9,869 9,869 43,190 20,761 20,761 43,190 12 17,959 3,288 3,288 43,190 9,696 9,696 43,190 22,324 22,324 43,190 13 18,856 2,578 2,578 43,190 9,475 9,475 43,190 24,030 24,030 43,190 14 19,799 1,823 1,823 43,190 9,197 9,197 43,190 25,898 25,898 43,190 15 20,789 1,012 1,012 43,190 8,854 8,854 43,190 27,945 27,945 43,190 16 21,829 138 138 43,190 8,434 8,434 43,190 30,198 30,198 43,190 17 22,920 (*) (*) (*) 7,927 7,927 43,190 32,684 32,684 43,190 18 24,066 (*) (*) (*) 7,313 7,313 43,190 35,433 35,433 44,646 19 25,270 (*) (*) (*) 6,575 6,575 43,190 38,437 38,437 47,662 20 26,533 (*) (*) (*) 5,689 5,689 43,190 41,702 41,702 50,877 21 27,860 (*) (*) (*) 4,633 4,633 43,190 45,253 45,253 54,304 22 29,253 (*) (*) (*) 3,378 3,378 43,190 49,103 49,103 58,432 23 30,715 (*) (*) (*) 1,892 1,892 43,190 53,275 53,275 62,865 24 32,251 (*) (*) (*) 133 133 43,190 57,798 57,798 67,624 25 33,864 (*) (*) (*) (*) (*) (*) 62,699 62,699 72,731 26 35,557 (*) (*) (*) (*) (*) (*) 68,008 68,008 78,210 27 37,335 (*) (*) (*) (*) (*) (*) 73,798 73,798 83,392 28 39,201 (*) (*) (*) (*) (*) (*) 80,123 80,123 88,937 29 41,161 (*) (*) (*) (*) (*) (*) 87,050 87,050 94,885 30 43,219 (*) (*) (*) (*) (*) (*) 94,663 94,663 101,289
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 35 42 $10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NON-NEW YORK CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 10,500 9,652 8,802 41,661 10,236 9,386 41,661 10,820 9,970 41,661 2 11,025 9,214 8,364 41,661 10,379 9,529 41,661 11,613 10,763 41,661 3 11,576 8,774 7,974 41,661 10,518 9,718 41,661 12,475 11,675 41,661 4 12,155 8,332 7,532 41,661 10,652 9,852 41,661 13,413 12,613 41,661 5 12,763 7,885 7,135 41,661 10,781 10,031 41,661 14,435 13,685 41,661 6 13,401 7,433 6,733 41,661 10,902 10,202 41,661 15,547 14,847 41,661 7 14,071 6,973 6,373 41,661 11,014 10,414 41,661 16,759 16,159 41,661 8 14,775 6,502 6,002 41,661 11,114 10,614 41,661 18,081 17,581 41,661 9 15,513 6,018 5,618 41,661 11,199 10,799 41,661 19,523 19,123 41,661 10 16,289 5,518 5,518 41,661 11,268 11,268 41,661 21,097 21,097 41,661 11 17,103 5,014 5,014 41,661 11,350 11,350 41,661 22,886 22,886 41,661 12 17,959 4,490 4,490 41,661 11,415 11,415 41,661 24,854 24,854 41,661 13 18,856 3,945 3,945 41,661 11,461 11,461 41,661 27,024 27,024 41,661 14 19,799 3,377 3,377 41,661 11,486 11,486 41,661 29,418 29,418 41,661 15 20,789 2,781 2,781 41,661 11,485 11,485 41,661 32,063 32,063 42,965 16 21,829 2,153 2,153 41,661 11,456 11,456 41,661 34,973 34,973 45,465 17 22,920 1,491 1,491 41,661 11,393 11,393 41,661 38,155 38,155 48,839 18 24,066 786 786 41,661 11,291 11,291 41,661 41,635 41,635 52,460 19 25,270 32 32 41,661 11,144 11,144 41,661 45,439 45,439 56,345 20 26,533 (*) (*) (*) 10,944 10,944 41,661 49,601 49,601 60,514 21 27,860 (*) (*) (*) 10,686 10,686 41,661 54,157 54,157 64,988 22 29,253 (*) (*) (*) 10,343 10,343 41,661 59,126 59,126 70,359 23 30,715 (*) (*) (*) 9,902 9,902 41,661 64,545 64,545 76,164 24 32,251 (*) (*) (*) 9,346 9,346 41,661 70,457 70,457 82,434 25 33,864 (*) (*) (*) 8,655 8,655 41,661 76,902 76,902 89,206 26 35,557 (*) (*) (*) 7,802 7,802 41,661 83,929 83,929 96,518 27 37,335 (*) (*) (*) 6,751 6,751 41,661 91,620 91,620 103,531 28 39,201 (*) (*) (*) 5,457 5,457 41,661 100,049 100,049 111,055 29 41,161 (*) (*) (*) 3,862 3,862 41,661 109,301 109,301 119,138 30 43,219 (*) (*) (*) 1,904 1,904 41,661 119,480 119,480 127,843
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 36 43 $10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NON-NEW YORK GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 10,500 9,604 8,754 41,661 10,185 9,335 41,661 10,767 9,917 41,661 2 11,025 9,072 8,222 41,661 10,226 9,376 41,661 11,448 10,598 41,661 3 11,576 8,539 7,739 41,661 10,255 9,455 41,661 12,182 11,382 41,661 4 12,155 8,002 7,202 41,661 10,272 9,472 41,661 12,975 12,175 41,661 5 12,763 7,460 6,710 41,661 10,274 9,524 41,661 13,831 13,081 41,661 6 13,401 6,911 6,211 41,661 10,259 9,559 41,661 14,755 14,055 41,661 7 14,071 6,350 5,750 41,661 10,224 9,624 41,661 15,754 15,154 41,661 8 14,775 5,775 5,275 41,661 10,164 9,664 41,661 16,833 16,333 41,661 9 15,513 5,181 4,781 41,661 10,076 9,676 41,661 18,000 17,600 41,661 10 16,289 4,564 4,564 41,661 9,955 9,955 41,661 19,262 19,262 41,661 11 17,103 3,931 3,931 41,661 9,825 9,825 41,661 20,692 20,692 41,661 12 17,959 3,264 3,264 41,661 9,653 9,653 41,661 22,250 22,250 41,661 13 18,856 2,560 2,560 41,661 9,434 9,434 41,661 23,953 23,953 41,661 14 19,799 1,811 1,811 41,661 9,161 9,161 41,661 25,818 25,818 41,661 15 20,789 1,010 1,010 41,661 8,825 8,825 41,661 27,866 27,866 41,661 16 21,829 148 148 41,661 8,415 8,415 41,661 30,121 30,121 41,661 17 22,920 (*) (*) (*) 7,921 7,921 41,661 32,612 32,612 41,744 18 24,066 (*) (*) (*) 7,325 7,325 41,661 35,353 35,353 44,545 19 25,270 (*) (*) (*) 6,608 6,608 41,661 38,334 38,334 47,534 20 26,533 (*) (*) (*) 5,751 5,751 41,661 41,573 41,573 50,720 21 27,860 (*) (*) (*) 4,729 4,729 41,661 45,097 45,097 54,116 22 29,253 (*) (*) (*) 3,516 3,516 41,661 48,916 48,916 58,210 23 30,715 (*) (*) (*) 2,081 2,081 41,661 53,056 53,056 62,606 24 32,251 (*) (*) (*) 384 384 41,661 57,543 57,543 67,325 25 33,864 (*) (*) (*) (*) (*) (*) 62,406 62,406 72,390 26 35,557 (*) (*) (*) (*) (*) (*) 67,673 67,673 77,824 27 37,335 (*) (*) (*) (*) (*) (*) 73,418 73,418 82,962 28 39,201 (*) (*) (*) (*) (*) (*) 79,693 79,693 88,459 29 41,161 (*) (*) (*) (*) (*) (*) 86,566 86,566 94,357 30 43,219 (*) (*) (*) (*) (*) (*) 94,119 94,119 100,707
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 37 44 $25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 26,250 24,126 22,001 114,856 25,584 23,459 114,856 27,043 24,918 114,856 2 27,563 23,197 21,072 114,856 26,117 23,992 114,856 29,210 27,085 114,856 3 28,941 22,261 20,261 114,856 26,647 24,647 114,856 31,566 29,566 114,856 4 30,388 21,315 19,315 114,856 27,171 25,171 114,856 34,131 32,131 114,856 5 31,907 20,357 18,482 114,856 27,688 25,813 114,856 36,923 35,048 114,856 6 33,502 19,382 17,632 114,856 28,194 26,444 114,856 39,965 38,215 114,856 7 35,178 18,385 16,885 114,856 28,685 27,185 114,856 43,280 41,780 114,856 8 36,936 17,360 16,110 114,856 29,154 27,904 114,856 46,893 45,643 114,856 9 38,783 16,300 15,300 114,856 29,595 28,595 114,856 50,833 49,833 114,856 10 40,722 15,198 15,198 114,856 30,002 30,002 114,856 55,135 55,135 114,856 11 42,758 14,090 14,090 114,856 30,462 30,462 114,856 60,015 60,015 114,856 12 44,896 12,932 12,932 114,856 30,888 30,888 114,856 65,380 65,380 114,856 13 47,141 11,721 11,721 114,856 31,279 31,279 114,856 71,287 71,287 114,856 14 49,498 10,451 10,451 114,856 31,629 31,629 114,856 77,801 77,801 114,856 15 51,973 9,113 9,113 114,856 31,929 31,929 114,856 84,993 84,993 114,856 16 54,572 7,697 7,697 114,856 32,172 32,172 114,856 92,933 92,933 120,813 17 57,300 6,193 6,193 114,856 32,349 32,349 114,856 101,632 101,632 130,089 18 60,165 4,586 4,586 114,856 32,444 32,444 114,856 111,146 111,146 140,044 19 63,174 2,859 2,859 114,856 32,446 32,446 114,856 121,555 121,555 150,728 20 66,332 998 998 114,856 32,339 32,339 114,856 132,944 132,944 162,192 21 69,649 (*) (*) (*) 32,110 32,110 114,856 145,411 145,411 174,494 22 73,132 (*) (*) (*) 31,699 31,699 114,856 159,020 159,020 189,234 23 76,788 (*) (*) (*) 31,078 31,078 114,856 173,874 173,874 205,171 24 80,627 (*) (*) (*) 30,213 30,213 114,856 190,083 190,083 222,398 25 84,659 (*) (*) (*) 29,060 29,060 114,856 207,771 207,771 241,014 26 88,892 (*) (*) (*) 27,562 27,562 114,856 227,066 227,066 261,126 27 93,336 (*) (*) (*) 25,643 25,643 114,856 248,191 248,191 280,456 28 98,003 (*) (*) (*) 23,207 23,207 114,856 271,345 271,345 301,193 29 102,903 (*) (*) (*) 20,140 20,140 114,856 296,760 296,760 323,469 30 108,049 (*) (*) (*) 16,309 16,309 114,856 324,714 324,714 347,443
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 38 45 $25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 26,250 23,962 21,837 114,856 25,414 23,289 114,856 26,866 24,741 114,856 2 27,563 22,840 20,715 114,856 25,733 23,608 114,856 28,797 26,672 114,856 3 28,941 21,704 19,704 114,856 26,028 24,028 114,856 30,879 28,879 114,856 4 30,388 20,553 18,553 114,856 26,295 24,295 114,856 33,127 31,127 114,856 5 31,907 19,379 17,504 114,856 26,530 24,655 114,856 35,553 33,678 114,856 6 33,502 18,178 16,428 114,856 26,727 24,977 114,856 38,174 36,424 114,856 7 35,178 16,941 15,441 114,856 26,876 25,376 114,856 41,005 39,505 114,856 8 36,936 15,658 14,408 114,856 26,967 25,717 114,856 44,064 42,814 114,856 9 38,783 14,316 13,316 114,856 26,990 25,990 114,856 47,370 46,370 114,856 10 40,722 12,907 12,907 114,856 26,931 26,931 114,856 50,947 50,947 114,856 11 42,758 11,452 11,452 114,856 26,860 26,860 114,856 54,988 54,988 114,856 12 44,896 9,901 9,901 114,856 26,687 26,687 114,856 59,391 59,391 114,856 13 47,141 8,244 8,244 114,856 26,398 26,398 114,856 64,202 64,202 114,856 14 49,498 6,465 6,465 114,856 25,978 25,978 114,856 69,472 69,472 114,856 15 51,973 4,541 4,541 114,856 25,401 25,401 114,856 75,257 75,257 114,856 16 54,572 2,450 2,450 114,856 24,644 24,644 114,856 81,627 81,627 114,856 17 57,300 165 165 114,856 23,676 23,676 114,856 88,664 88,664 114,856 18 60,165 (*) (*) (*) 22,454 22,454 114,856 96,424 96,424 121,495 19 63,174 (*) (*) (*) 20,932 20,932 114,856 104,873 104,873 130,043 20 66,332 (*) (*) (*) 19,058 19,058 114,856 114,057 114,057 139,149 21 69,649 (*) (*) (*) 16,771 16,771 114,856 124,045 124,045 148,853 22 73,132 (*) (*) (*) 14,007 14,007 114,856 134,872 134,872 160,498 23 76,788 (*) (*) (*) 10,688 10,688 114,856 146,610 146,610 173,000 24 80,627 (*) (*) (*) 6,715 6,715 114,856 159,333 159,333 186,420 25 84,659 (*) (*) (*) 1,961 1,961 114,856 173,122 173,122 200,822 26 88,892 (*) (*) (*) (*) (*) (*) 188,061 188,061 216,270 27 93,336 (*) (*) (*) (*) (*) (*) 204,350 204,350 230,916 28 98,003 (*) (*) (*) (*) (*) (*) 222,144 222,144 246,580 29 102,903 (*) (*) (*) (*) (*) (*) 241,631 241,631 263,378 30 108,049 (*) (*) (*) (*) (*) (*) 263,042 263,042 281,455
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 39 46 $100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55 CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 105,000 96,643 88,143 306,283 102,487 93,987 306,283 108,332 99,832 306,283 2 110,250 93,194 84,694 306,283 104,926 96,426 306,283 117,348 108,848 306,283 3 115,763 89,699 81,699 306,283 107,366 99,366 306,283 127,180 119,180 306,283 4 121,551 86,143 78,143 306,283 109,800 101,800 306,283 137,911 129,911 306,283 5 127,628 82,511 75,011 306,283 112,218 104,718 306,283 149,634 142,134 306,283 6 134,010 78,785 71,785 306,283 114,609 107,609 306,283 162,457 155,457 306,283 7 140,710 74,946 68,946 306,283 116,964 110,964 306,283 176,503 170,503 306,283 8 147,746 70,966 65,966 306,283 119,264 114,264 306,283 191,906 186,906 306,283 9 155,133 66,816 62,816 306,283 121,490 117,490 306,283 208,825 204,825 306,283 10 162,889 62,470 62,470 306,283 123,627 123,627 306,283 227,448 227,448 306,283 11 171,034 58,078 58,078 306,283 126,038 126,038 306,283 248,734 248,734 306,283 12 179,586 53,413 53,413 306,283 128,351 128,351 306,283 272,276 272,276 324,008 13 188,565 48,447 48,447 306,283 130,554 130,554 306,283 298,064 298,064 351,716 14 197,993 43,144 43,144 306,283 132,629 132,629 306,283 326,274 326,274 381,740 15 207,893 37,457 37,457 306,283 134,551 134,551 306,283 357,131 357,131 414,272 16 218,287 31,317 31,317 306,283 136,286 136,286 306,283 390,883 390,883 449,516 17 229,202 24,643 24,643 306,283 137,788 137,788 306,283 427,894 427,894 483,520 18 240,662 17,325 17,325 306,283 139,000 139,000 306,283 468,504 468,504 520,040 19 252,695 9,253 9,253 306,283 139,864 139,864 306,283 513,107 513,107 559,286 20 265,330 317 317 306,283 140,324 140,324 306,283 562,153 562,153 601,504 21 278,596 (*) (*) (*) 140,331 140,331 306,283 616,166 616,166 646,974 22 292,526 (*) (*) (*) 139,604 139,604 306,283 675,230 675,230 708,992 23 307,152 (*) (*) (*) 138,022 138,022 306,283 739,791 739,791 776,781 24 322,510 (*) (*) (*) 135,435 135,435 306,283 810,329 810,329 850,846 25 338,635 (*) (*) (*) 131,634 131,634 306,283 887,355 887,355 931,723 26 355,567 (*) (*) (*) 126,337 126,337 306,283 971,408 971,408 1,019,979 27 373,346 (*) (*) (*) 119,163 119,163 306,283 1,063,056 1,063,056 1,116,209 28 392,013 (*) (*) (*) 109,599 109,599 306,283 1,162,890 1,162,890 1,221,035 29 411,614 (*) (*) (*) 96,987 96,987 306,283 1,271,529 1,271,529 1,335,106 30 432,194 (*) (*) (*) 80,480 80,480 306,283 1,389,629 1,389,629 1,459,111
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 40 47 $100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55 GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 105,000 95,756 87,256 306,283 101,572 93,072 306,283 107,389 98,889 306,283 2 110,250 91,334 82,834 306,283 102,954 94,454 306,283 115,263 106,763 306,283 3 115,763 86,793 78,793 306,283 104,208 96,208 306,283 123,759 115,759 306,283 4 121,551 82,103 74,103 306,283 105,312 97,312 306,283 132,936 124,936 306,283 5 127,628 77,231 69,731 306,283 106,233 98,733 306,283 142,864 135,364 306,283 6 134,010 72,137 65,137 306,283 106,941 99,941 306,283 153,623 146,623 306,283 7 140,710 66,778 60,778 306,283 107,396 101,396 306,283 165,305 159,305 306,283 8 147,746 61,090 56,090 306,283 107,545 102,545 306,283 178,014 173,014 306,283 9 155,133 55,005 51,005 306,283 107,328 103,328 306,283 191,879 187,879 306,283 10 162,889 48,451 48,451 306,283 106,683 106,683 306,283 207,057 207,057 306,283 11 171,034 41,485 41,485 306,283 105,867 105,867 306,283 224,417 224,417 306,283 12 179,586 33,874 33,874 306,283 104,500 104,500 306,283 243,664 243,664 306,283 13 188,565 25,529 25,529 306,283 102,504 102,504 306,283 265,101 265,101 312,820 14 197,993 16,338 16,338 306,283 99,779 99,779 306,283 288,628 288,628 337,695 15 207,893 6,148 6,148 306,283 96,191 96,191 306,283 314,187 314,187 364,457 16 218,287 (*) (*) (*) 91,562 91,562 306,283 341,947 341,947 393,239 17 229,202 (*) (*) (*) 85,662 85,662 306,283 372,245 372,245 420,637 18 240,662 (*) (*) (*) 78,189 78,189 306,283 405,358 405,358 449,947 19 252,695 (*) (*) (*) 68,778 68,778 306,283 441,613 441,613 481,359 20 265,330 (*) (*) (*) 57,006 57,006 306,283 481,412 481,412 515,111 21 278,596 (*) (*) (*) 42,377 42,377 306,283 525,239 525,239 551,501 22 292,526 (*) (*) (*) 24,283 24,283 306,283 572,867 572,867 601,511 23 307,152 (*) (*) (*) 1,972 1,972 306,283 624,599 624,599 655,829 24 322,510 (*) (*) (*) (*) (*) (*) 680,751 680,751 714,789 25 338,635 (*) (*) (*) (*) (*) (*) 741,654 741,654 778,737 26 355,567 (*) (*) (*) (*) (*) (*) 807,643 807,643 848,025 27 373,346 (*) (*) (*) (*) (*) (*) 879,056 879,056 923,009 28 392,013 (*) (*) (*) (*) (*) (*) 956,226 956,226 1,004,037 29 411,614 (*) (*) (*) (*) (*) (*) 1,039,490 1,039,490 1,091,465 30 432,194 (*) (*) (*) (*) (*) (*) 1,129,195 1,129,195 1,185,654
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 41 48 $100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65 CURRENT VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 105,000 96,315 87,815 211,021 102,169 93,669 211,021 108,024 99,524 211,021 2 110,250 92,475 83,975 211,021 104,256 95,756 211,021 116,737 108,237 211,021 3 115,763 88,515 80,515 211,021 106,310 98,310 211,021 126,287 118,287 211,021 4 121,551 84,414 76,414 211,021 108,323 100,323 211,021 136,785 128,785 211,021 5 127,628 80,143 72,643 211,021 110,284 102,784 211,021 148,359 140,859 211,021 6 134,010 75,667 68,667 211,021 112,178 105,178 211,021 161,159 154,159 211,021 7 140,710 70,940 64,940 211,021 113,986 107,986 211,021 175,363 169,363 211,021 8 147,746 65,904 60,904 211,021 115,681 110,681 211,021 191,187 186,187 212,218 9 155,133 60,496 56,496 211,021 117,238 113,238 211,021 208,727 204,727 227,512 10 162,889 54,658 54,658 211,021 118,636 118,636 211,021 227,969 227,969 243,927 11 171,034 48,485 48,485 211,021 120,225 120,225 211,021 249,840 249,840 262,332 12 179,586 41,528 41,528 211,021 121,531 121,531 211,021 273,757 273,757 287,445 13 188,565 33,657 33,657 211,021 122,514 122,514 211,021 299,899 299,899 314,894 14 197,993 24,711 24,711 211,021 123,121 123,121 211,021 328,461 328,461 344,884 15 207,893 14,473 14,473 211,021 123,279 123,279 211,021 359,651 359,651 377,633 16 218,287 2,650 2,650 211,021 122,887 122,887 211,021 393,686 393,686 413,370 17 229,202 (*) (*) (*) 121,803 121,803 211,021 430,795 430,795 452,335 18 240,662 (*) (*) (*) 119,843 119,843 211,021 471,220 471,220 494,781 19 252,695 (*) (*) (*) 116,770 116,770 211,021 515,209 515,209 540,970 20 265,330 (*) (*) (*) 112,289 112,289 211,021 563,030 563,030 591,181 21 278,596 (*) (*) (*) 106,025 106,025 211,021 614,963 614,963 645,711 22 292,526 (*) (*) (*) 97,321 97,321 211,021 671,259 671,259 704,822 23 307,152 (*) (*) (*) 85,428 85,428 211,021 732,214 732,214 768,824 24 322,510 (*) (*) (*) 69,302 69,302 211,021 798,130 798,130 838,037 25 338,635 (*) (*) (*) 47,439 47,439 211,021 869,315 869,315 912,781 26 355,567 (*) (*) (*) 17,631 17,631 211,021 946,069 946,069 993,373 27 373,346 (*) (*) (*) (*) (*) (*) 1,030,666 1,030,666 1,071,893 28 392,013 (*) (*) (*) (*) (*) (*) 1,124,328 1,124,328 1,158,058 29 411,614 (*) (*) (*) (*) (*) (*) 1,228,543 1,228,543 1,253,114 30 432,194 (*) (*) (*) (*) (*) (*) 1,345,193 1,345,193 1,358,645
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 42 49 $100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65 GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 105,000 94,938 86,438 211,021 100,766 92,266 211,021 106,596 98,096 211,021 2 110,250 89,531 81,031 211,021 101,221 92,721 211,021 113,616 105,116 211,021 3 115,763 83,808 75,808 211,021 101,410 93,410 211,021 121,210 113,210 211,021 4 121,551 77,707 69,707 211,021 101,289 93,289 211,021 129,470 121,470 211,021 5 127,628 71,149 63,649 211,021 100,803 93,303 211,021 138,503 131,003 211,021 6 134,010 64,029 57,029 211,021 99,875 92,875 211,021 148,438 141,438 211,021 7 140,710 56,210 50,210 211,021 98,407 92,407 211,021 159,437 153,437 211,021 8 147,746 47,514 42,514 211,021 96,266 91,266 211,021 171,711 166,711 211,021 9 155,133 37,729 33,729 211,021 93,301 89,301 211,021 185,542 181,542 211,021 10 162,889 26,619 26,619 211,021 89,334 89,334 211,021 201,292 201,292 215,382 11 171,034 13,983 13,983 211,021 84,433 84,433 211,021 219,569 219,569 230,548 12 179,586 (*) (*) (*) 78,098 78,098 211,021 239,432 239,432 251,404 13 188,565 (*) (*) (*) 70,027 70,027 211,021 261,006 261,006 274,056 14 197,993 (*) (*) (*) 59,829 59,829 211,021 284,423 284,423 298,644 15 207,893 (*) (*) (*) 46,960 46,960 211,021 309,821 309,821 325,312 16 218,287 (*) (*) (*) 30,660 30,660 211,021 337,340 337,340 354,207 17 229,202 (*) (*) (*) 9,860 9,860 211,021 367,121 367,121 385,477 18 240,662 (*) (*) (*) (*) (*) (*) 399,302 399,302 419,267 19 252,695 (*) (*) (*) (*) (*) (*) 434,024 434,024 455,725 20 265,330 (*) (*) (*) (*) (*) (*) 471,431 471,431 495,003 21 278,596 (*) (*) (*) (*) (*) (*) 511,676 511,676 537,259 22 292,526 (*) (*) (*) (*) (*) (*) 554,914 554,914 582,660 23 307,152 (*) (*) (*) (*) (*) (*) 601,310 601,310 631,376 24 322,510 (*) (*) (*) (*) (*) (*) 651,032 651,032 683,584 25 338,635 (*) (*) (*) (*) (*) (*) 704,239 704,239 739,451 26 355,567 (*) (*) (*) (*) (*) (*) 761,075 761,075 799,129 27 373,346 (*) (*) (*) (*) (*) (*) 823,926 823,926 856,884 28 392,013 (*) (*) (*) (*) (*) (*) 893,818 893,818 920,632 29 411,614 (*) (*) (*) (*) (*) (*) 972,000 972,000 991,440 30 432,194 (*) (*) (*) (*) (*) (*) 1,060,075 1,060,075 1,070,676
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 43 50 APPENDIX 3 The following performance tables display historical investment results of the underlying Mutual Fund sub-accounts of the Variable Account. This information may be useful in helping potential investors in deciding which underlying Mutual Fund sub-accounts to choose and in assessing the competence of the underlying Mutual Funds' investment advisers. The performance figures shown should be considered in light of the investment objectives and policies, characteristics and quality of the underlying portfolios of the underlying Mutual Funds, and the market conditions during the periods of time quoted. The performance figures should not be considered as estimates or predictions of future performance. Investment return and the principal value of the underlying Mutual Fund sub-accounts are not guaranteed and will fluctuate so that a Policy Owner's units, when redeemed, may be worth more or less than their original cost. 44 51 PERFORMANCE TABLES TOTAL RETURN
- --------------------------------------------------------------------------------------------------------------- ANNUAL PERCENTAGE CHANGE NON-ANNUALIZED PERCENTAGE CHANGE - --------------------------------------------------------------------------------------------------------------- Fund Inception 1 Mo. 1 Yr. 2 Yrs. 3 Yrs. 5 Yrs. Inception Date* 1993 1994 1995 to to to to to to 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 12/31/95 - --------------------------------------------------------------------------------------------------------------- DREYFUS CORPORATION Stock Index Fund 09/29/89 7.91 -0.42 35.02 1.71 35.02 34.45 45.09 96.58 90.67 Socially Responsible 10/06/93 N/A* 0.19 32.83 -0.09 32.83 33.07 N/A* N/A* 42.42 Growth Fund - -------------------------------------------------------------------------------------------------------------- FIDELITY VIP FUND & VIP FUND II Asset Manager 09/06/89 19.48 -7.30 15.45 2.43 15.45 7.02 27.87 70.78 80.58 Portfolio Contrafund Portfolio 01/03/95 N/A* N/A* N/A* 0.34 N/A* N/A* N/A* N/A* 37.83 Equity-Income 10/09/86 16.67 5.69 33.35 2.82 33.35 40.94 64.44 146.28 181.51 Portfolio Growth Portfolio 10/09/86 17.82 -1.31 33.62 -3.22 33.62 31.88 55.38 146.29 217.73 High Income Portfolio 09/19/85 18.95 -2.81 19.05 1.07 19.05 15.70 37.62 123.13 173.23 Overseas Portfolio 01/28/87 35.45 0.41 8.26 2.85 8.26 8.71 47.26 38.53 67.01 - --------------------------------------------------------------------------------------------------------------- NATIONWIDE SEPARATE ACCOUNT TRUST Capital Appreciation 04/15/92 8.19 -2.18 27.69 2.89 27.69 24.91 35.14 N/A* 41.62 Fund Government Bond Fund 11/08/82 8.10 -4.48 17.22 1.04 17.22 11.97 21.03 48.40 196.19 Money Market Fund 11/10/81 1.42 2.54 4.29 0.34 4.29 6.93 8.45 15.61 121.72 Small Company Fund 08/23/95 N/A* N/A* N/A* 4.34 N/A* N/A* N/A* N/A* 14.10 Total Return Fund 11/08/82 9.48 -0.23 27.43 1.13 27.43 27.14 39.19 103.12 420.99 - --------------------------------------------------------------------------------------------------------------- NEUBERGER & BERMAN ADVISERS MGT. TRUST Growth Portfolio 09/10/84 5.41 -6.21 30.03 -3.03 30.03 21.95 28.55 77.93 248.96 Limited Maturity 09/10/84 5.24 -1.44 9.51 0.79 9.51 7.93 13.59 29.57 120.73 Bond Portfolio Partners Portfolio 03/22/94 N/A* N/A* 34.71 1.27 34.71 N/A* N/A* N/A* 30.30 - --------------------------------------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS Bond Fund 04/30/85 11.58 -3.20 15.49 1.34 15.49 11.79 24.73 52.20 147.19 Global Securities 11/12/90 68.11 -6.94 0.92 1.18 0.92 -6.08 57.89 47.72 48.05 Fund Multiple Strategies 02/09/87 14.45 -3.21 19.80 0.72 19.80 15.95 32.70 65.51 126.77 Fund - --------------------------------------------------------------------------------------------------------------- STRONG SPECIAL FUND 05/08/92 23.55 2.26 24.20 2.42 24.20 27.01 56.92 N/A* 80.74 II, INC. - --------------------------------------------------------------------------------------------------------------- STRONG VARIABLE INSURANCE PRODUCTS FUNDS, INC. Strong Discovery 05/08/92 20.44 -6.61 33.52 -1.43 33.52 24.70 50.19 N/A* 62.15 Fund II, Inc. International Stock 10/20/95 N/A* N/A* N/A* 3.02 N/A* N/A* N/A* N/A* 2.36 Fund II - --------------------------------------------------------------------------------------------------------------- TCI PORTFOLIOS, INC. TCI Balanced 05/01/91 6.29 -0.68 19.56 0.88 19.56 18.74 26.22 N/A* 45.64 TCI Growth 11/20/87 8.88 -2.44 29.41 -1.25 29.41 26.25 37.46 87.42 139.58 TCI International 05/01/94 N/A* N/A* 10.77 3.39 10.77 N/A* N/A* N/A* 4.32 - --------------------------------------------------------------------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST Gold and Natural 09/01/89 62.70 -6.02 9.56 1.73 9.56 2.97 67.53 51.98 39.44 Resources Fund Worldwide Bond Fund 09/01/89 6.38 -2.59 15.79 0.80 15.79 12.79 19.99 31.07 44.33 - --------------------------------------------------------------------------------------------------------------- VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST Real Estate 07/03/95 N/A* N/A* N/A* 4.98 N/A* N/A* N/A* N/A* 7.66 Securities Fund - --------------------------------------------------------------------------------------------------------------- WARBURG PINCUS TRUST International Equity 06/30/95 N/A* N/A* N/A* 2.28 N/A* N/A* N/A* N/A* 6.62 Portfolio Small Company 06/30/95 N/A* N/A* N/A* 4.23 N/A* N/A* N/A* N/A* 24.31 Growth Portfolio - ---------------------------------------------------------------------------------------------------------------
This table displays three types of total return. Simply stated, total return shows the percent change in unit values, with dividends and capital gains reinvested, after the deduction of a 1.30% asset charge (and the deduction of applicable investment advisory fees and other expenses of the underlying Mutual Funds). The total return figures shown in the Annual Percentage Change and Annualized Percentage Change columns represent annualized figures, i.e., they show the rate of growth that would have produced the corresponding cumulative return had performance been constant over the entire period quoted. The Non-Annualized Percentage Change total return figures are not annual return figures but instead represent the total percentage change in unit value over the stated periods without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO ACCOUNT THE SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY CHARGES" SECTION. THESE OTHER CHARGES INCLUDE COST OF INSURANCE CHARGES, SURRENDER CHARGES AND AN ANNUAL ADMINISTRATIVE CHARGE. *The underlying Mutual Fund Inception Date is the date the underlying Mutual Fund first became effective, which is not necessarily the same date the underlying Mutual Fund was first made available through the Variable Account. For those underlying Mutual Funds which have not been offered as sub-accounts through the Variable Account for one of the quoted periods, the total return figures will show the investment performance such underlying Mutual Funds would have achieved (reduced by the 1.30% asset charge and underlying Mutual Fund investment advisory fees and expenses) had they been offered as sub-accounts through the Variable Account for the period quoted. Certain underlying Mutual Funds are not as old as some of the periods quoted, therefore, total return figures may not be available for all of the periods shown. 45 52 PERFORMANCE TABLES TOTAL RETURN (CONTINUED)
- ----------------------------------------------------- ANNUALIZED PERCENTAGE CHANGE - ----------------------------------------------------- 3 Yrs. 5 Yrs. to Inception to 12/31/95 to 12/31/95 12/31/95 - ----------------------------------------------------- DREYFUS CORPORATION Stock Index Fund 13.21 14.47 10.87 Socially Responsible N/A* N/A* 17.15 Growth Fund - ----------------------------------------------------- FIDELITY VIP FUND & VIP FUND II Asset Manager 8.54 11.30 9.81 Portfolio Contrafund Portfolio N/A* N/A* 38.19 Equity-Income 18.03 19.75 11.87 Portfolio Growth Portfolio 15.82 19.21 13.35 High Income Portfolio 11.23 17.41 10.27 Overseas Portfolio 13.77 6.73 5.92 - ----------------------------------------------------- NATIONWIDE SEPARATE ACCOUNT TRUST Capital Appreciation 10.56 N/A* 9.84 Fund Government Bond Fund 6.57 8.22 8.61 Money Market Fund 2.74 2.94 5.79 Small Company Fund N/A* N/A* 101.60 Total Return Fund 11.65 15.32 13.38 - ----------------------------------------------------- NEUBERGER & BERMAN ADVISERS MGT. TRUST Growth Portfolio 8.73 12.21 11.69 Limited Maturity 4.34 5.32 7.25 Bond Portfolio Partners Portfolio N/A* N/A* 16.09 - ----------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS Bond Fund 7.65 8.76 8.85 Global Securities 16.45 8.12 7.94 Fund Multiple Strategies 9.89 10.60 9.65 Fund - ----------------------------------------------------- STRONG SPECIAL FUND 16.20 N/A* 17.63 II, INC. - ----------------------------------------------------- STRONG VARIABLE INSURANCE FUNDS, INC. Strong Discovery 14.52 N/A* 14.18 Fund II, Inc. International Stock N/A* N/A* 12.61 Fund II - ----------------------------------------------------- TCI PORTFOLIOS, INC. TCI Balanced 8.07 N/A* 8.40 TCI Growth 11.19 13.39 11.37 TCI International N/A* N/A* 2.57 - ----------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST Gold and Natural 18.77 8.73 5.39 Resources Fund Worldwide Bond Fund 6.26 5.56 5.97 - ----------------------------------------------------- VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST Real Estate N/A* N/A* 16.18 Securities Fund - ----------------------------------------------------- WARBURG PINCUS TRUST International Equity N/A* N/A* 13.91 Portfolio Small Company Growth N/A* N/A* 55.63 Portfolio - -----------------------------------------------------
46 53 PERFORMANCE TABLES CASH VALUES
- ----------------------------------------------------------------------------------------------------------------------- 1 YR. TO 12/31/95 2 YRS. TO 12/31/95 3 YRS. TO 12/31/95 5 YRS. TO 12/31/95 - ----------------------------------------------------------------------------------------------------------------------- Fund Cash Cash Cash Cash Inception Accum. Surr. Accum. Surr. Accum. Surr. Accum. Surr. Date** Value Value Value Value Value Value Value Value - ----------------------------------------------------------------------------------------------------------------------- DREYFUS CORPORATION Stock Index Fund 09/29/89 66,758 62,508 65,410 61,160 69,618 65,618 92,988 89,238 Socially Responsible 10/06/93 65,660 61,410 64,746 60,496 N/A** N/A** N/A** N/A** Growth Fund - ----------------------------------------------------------------------------------------------------------------------- FIDELITY VIP FUND & VIP FUND II Asset Manager 09/06/89 56,993 52,743 51,867 47,617 61,420 57,420 80,751 77,001 Portfolio Contrafund Portfolio 01-03-95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A** Equity-Income 10/09/86 65,921 61,671 68,675 64,425 79,335 75,335 117,786 114,036 Portfolio Growth Portfolio 10/09/86 68,262 64,012 66,245 61,995 77,306 73,306 119,078 115,328 High Income Portfolio 09/19/85 58,810 54,560 56,201 51,951 66,248 62,248 107,053 103,303 Overseas Portfolio 01/28/87 53,413 49,163 52,812 48,562 71,304 67,304 64,360 60,610 - ----------------------------------------------------------------------------------------------------------------------- NATIONWIDE SEPARATE ACCOUNT TRUST Capital Appreciation 04/15/92 61,296 57,046 58,960 54,710 62,882 58,882 N/A** N/A** Fund Government Bond Fund 11/08/82 57,290 53,040 53,765 49,515 57,340 53,340 68,705 64,955 Money Market Fund 11/10/81 51,271 47,021 51,762 47,512 51,605 47,605 53,099 49,349 Small Company Fund 08/23/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A** Total Return Fund 11/08/82 62,260 58,010 61,138 56,888 66,065 62,065 95,569 91,819 - ----------------------------------------------------------------------------------------------------------------------- NEUBERGER & BERMAN ADVISERS MGT. TRUST Growth Portfolio 09/10/84 64,307 60,057 59,239 54,989 61,490 57,490 84,038 80,288 Limited Maturity 09/10/84 54,050 49,800 52,390 48,140 54,316 50,316 60,180 56,430 Bond Portfolio Partners Portfolio 03/22/94 66,612 62,362 N/A** N/A** N/A** N/A** N/A** N/A** - ----------------------------------------------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS Bond Fund 04/30/85 57,029 52,779 54,267 50,017 59,830 55,830 71,355 67,605 Global Securities 11/12/90 49,774 45,524 45,497 41,247 76,840 72,840 68,968 65,218 Fund Multiple Strategies 02/09/87 59,183 54,933 56,318 52,068 63,750 59,750 77,816 74,066 Fund - ----------------------------------------------------------------------------------------------------------------------- STRONG SPECIAL FUND 05/08/92 61,352 57,102 61,799 57,549 75,779 71,779 N/A** N/A** II, INC. - ----------------------------------------------------------------------------------------------------------------------- STRONG VARIABLE INSURANCE FUNDS, INC. Strong Discovery 05/08/92 65,994 61,744 60,513 56,263 72,221 68,221 N/A** N/A** Fund II, Inc. INTERNATIONAL STOCK 01/03/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A** FUND II - ----------------------------------------------------------------------------------------------------------------------- TCI PORTFOLIOS, INC. TCI Balanced 05/01/91 59,054 54,804 57,704 53,454 60,446 56,446 N/A** N/A** TCI Growth 11/20/87 63,977 59,727 61,372 57,122 65,931 61,931 88,764 85,014 TCI International 05/01/94 54,648 50,398 N/A** N/A** N/A** N/A** N/A** N/A** - ----------------------------------------------------------------------------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST Gold and Natural 09/01/89 54,050 49,800 54,772 50,522 81,527 77,527 70,699 66,949 Resources Fund Worldwide Bond Fund 09/01/89 57,204 52,954 49,893 45,643 57,416 53,416 60,788 57,038 - ----------------------------------------------------------------------------------------------------------------------- VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST Real Estate 07/03/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A** Securities Fund - ----------------------------------------------------------------------------------------------------------------------- WARBURG PINCUS TRUST International Equity 06/30/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A** Portfolio Small Company Growth 06/30/95 N/A** N/A** N/A** N/A** N/A** N/A** N/A** N/A** Portfolio - -----------------------------------------------------------------------------------------------------------------------
This table shows the effect of the performance quoted on accumulated values and cash surrender values, based on a hypothetical single premium of $50,000 for a 50 year-old male, non-tobacco simplified, with a level death benefit and an initial specified amount of $187,451.64. The cash surrender values reflect the deduction of all applicable Policy Charges, including a 1.30% asset charge, applicable cost of insurance charges, surrender charges, and an annual administrative charge (and the deduction of applicable investment advisory fees and other expenses of the underlying Mutual Funds). See the "Policy Charges" section for more information about these charges. The cost of insurance charges may be higher or lower for purchasers who do not meet the profile of the hypothetical purchaser. Illustrations reflecting a potential purchaser's specific characteristics are available from the Company upon request. **The underlying Mutual Inception Date is the date the underlying Mutual Fund first became effective, which is not necessarily the same date the underlying Mutual Fund was first made available through the Variable Account. For those underlying Mutual Funds which have not been offered as sub-accounts through the Variable Account for one of the quoted periods, the cash values will show the investment performance such underlying Mutual Funds would have achieved (reduced by any applicable Variable Account and Policy Charges, and underlying Mutual Fund investment advisory fees and expenses) had they been offered as sub-accounts through the Variable Account for the period quoted. Certain underlying Mutual Funds are not as old as some of the periods quoted, therefore, the cash values may not be available for all of the periods shown. 47 54 PERFORMANCE TABLES CASH VALUES (CONTINUED)
- ---------------------------------------------------------- 10 YRS. TO INCEPTION TO 12/31/95 12/31/95 - ---------------------------------------------------------- Cash Cash Accum. Surr. Accum. Surr. Value Value Value Value - ---------------------------------------------------------- DREYFUS CORPORATION Stock Index Fund N/A** N/A** 87,400 84,400 Socially Responsible N/A** N/A** 69,145 65,145 Growth Fund - ---------------------------------------------------------- FIDELITY VIP FUND & VIP FUND II Asset Manager N/A** N/A** 83,388 80,388 Portfolio Contrafund Portfolio N/A** N/A** 68,176 63,926 Equity-Income N/A** N/A** 125,469 125,469 Portfolio Growth Portfolio N/A** N/A** 144,265 144,265 High Income Portfolio 113,823 113,823 120,698 120,698 Overseas Portfolio N/A** N/A** 71,972 69,972 - ---------------------------------------------------------- NATIONWIDE SEPARATE ACCOUNT TRUST Capital Appreciation N/A** N/A** 66,948 62,948 Fund Government Bond Fund 95,250 95,250 127,467 127,467 Money Market Fund 65,728 65,728 91,173 91,173 Small Company Fund N/A** N/A** 56,865 52,615 Total Return Fund 126,240 126,240 239,930 239,930 - ---------------------------------------------------------- NEUBERGER & BERMAN ADVISERS MGT. TRUST Growth Portfolio 122,910 122,910 159,310 159,310 Limited Maturity 79,194 79,194 96,311 96,311 Bond Portfolio Partners Portfolio N/A** N/A** 63,498 59,248 - ---------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS Bond Fund 93,661 93,661 109,384 109,384 Global Securities N/A** N/A** 68,842 65,342 Fund Multiple Strategies N/A** N/A** 102,059 100,059 Fund - ---------------------------------------------------------- STRONG SPECIAL FUND N/A** N/A** 86,859 82,859 II, INC. - ---------------------------------------------------------- STRONG VARIABLE INSURANCE FUNDS, INC. INTERNATIONAL STOCK N/A** N/A** 51,004 46,754 FUND II Strong Discovery N/A** N/A** 77,290 73,290 Fund II, Inc. - ---------------------------------------------------------- TCI PORTFOLIOS, INC. TCI Balanced N/A** N/A** 68,309 64,559 TCI Growth N/A** N/A** 109,127 107,127 TCI International N/A** N/A** 50,831 46,581 - ---------------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST Gold and Natural N/A** N/A** 62,124 59,124 Resources Fund Worldwide Bond Fund N/A** N/A** 65,608 62,608 - ---------------------------------------------------------- VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST Real Estate N/A** N/A** 53,472 49,222 Securities Fund - ---------------------------------------------------------- WARBURG PINCUS TRUST International Equity N/A** N/A** 52,959 48,709 Portfolio Small Company Growth N/A** N/A** 77,014 72,764 Portfolio - ----------------------------------------------------------
48 55 1 - -------------------------------------------------------------------------------- Independent Auditors' Report The Board of Directors and Contract Owners of Nationwide VLI Separate Account-2 Nationwide Life Insurance Company: We have audited the accompanying statement of assets, liabilities and contract owners' equity of Nationwide VLI Separate Account-2 as of December 31, 1995, and the related statements of operations and changes in contract owners' equity and schedules of changes in unit value for each of the years in the three year period then ended. These financial statements and schedules of changes in unit value are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules of changes in unit value based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules of changes in unit value are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1995, by correspondence with the custodian and the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and schedules of changes in unit value referred to above present fairly, in all material respects, the financial position of Nationwide VLI Separate Account-2 as of December 31, 1995, and the results of its operations and its changes in contract owners' equity and the schedules of changes in unit value for each of the years in the three year period then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Columbus, Ohio February 6, 1996 - -------------------------------------------------------------------------------- 2 ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY DECEMBER 31, 1995 ASSETS: Investments at market value: The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro) 62,614 shares (cost $1,038,589) ............................................ $ 1,083,848 Dreyfus Stock Index Fund (DryStkIx) 271,861 shares (cost $4,342,422) ........................................... 4,676,009 Fidelity VIP - Equity-Income Portfolio (FidEqInc) 1,479,252 shares (cost $24,428,367) ........................................ 28,505,182 Fidelity VIP - Growth Portfolio (FidGro) 1,134,365 shares (cost $33,508,734) ........................................ 33,123,460 Fidelity VIP - High Income Portfolio (FidHiInc) 825,519 shares (cost $9,365,281) ........................................... 9,947,503 Fidelity VIP - Overseas Portfolio (FidOSeas) 676,060 shares (cost $10,850,506) .......................................... 11,526,815 Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr) 1,172,533 shares (cost $16,833,524) ........................................ 18,514,290 Fidelity VIP-II - Contrafund Portfolio (FidContP) 195,404 shares (cost $2,668,754) ........................................... 2,692,665 Nationwide SAT - Capital Appreciation Fund (NWCapApp) 212,307 shares (cost $2,582,301) ........................................... 2,861,899 Nationwide SAT - Government Bond Fund (NWGvtBd) 467,280 shares (cost $4,984,922) ........................................... 5,308,298 Nationwide SAT - Money Market Fund (NWMyMkt) 25,831,056 shares (cost $25,831,056) ....................................... 25,831,056 Nationwide SAT - Small Company Fund (NWSmCoFd) 30,450 shares (cost $339,903) .............................................. 347,742 Nationwide SAT - Total Return Fund (NWTotRet) 1,926,298 shares (cost $20,615,292) ........................................ 22,229,482 Neuberger & Berman - Growth Portfolio (NBGro) 351,272 shares (cost $8,083,142) ........................................... 9,083,899 Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat) 211,743 shares (cost $2,994,517) ........................................... 3,114,733 Neuberger & Berman - Partners Portfolio (NBPart) 216,170 shares (cost $2,643,081) ........................................... 2,859,928 Oppenheimer - Bond Fund (OppBdFd) 342,871 shares (cost $3,867,584) ........................................... 4,059,588 Oppenheimer - Global Securities Fund (OppGlSec) 397,052 shares (cost $5,971,306) ........................................... 5,955,777 Oppenheimer - Multiple Strategies Fund (OppMult) 349,048 shares (cost $4,730,069) ........................................... 5,078,650 Strong VIP - Strong Discovery Fund II, Inc. (StDisc2) 403,468 shares (cost $4,727,581) ........................................... 5,422,616 Strong VIP - Strong International Stock Fund II, Inc. (StIntStk2) 9,631 shares (cost $97,747) ................................................ 98,431 Strong VIP - Strong Special Fund II, Inc. (StSpec2) 672,585 shares (cost $10,088,689) .......................................... 11,460,850 TCI Portfolios - TCI Balanced (TCIBal) 217,142 shares (cost $1,372,140) ........................................... 1,528,680 TCI Portfolios - TCI Growth (TCIGro) 868,667 shares (cost $8,887,302) ........................................... 10,476,124 TCI Portfolios - TCI International (TCIInt) 208,270 shares (cost $1,082,648) ........................................... 1,110,078 Van Eck - Gold and Natural Resources Fund (VEGoldNR) 244,680 shares (cost $3,489,920) ........................................... 3,528,286 Van Eck - Worldwide Bond Fund (VEWrldBd) 182,821 shares (cost $1,985,685) ........................................... 2,036,622 Van Kampen American Capital - Real Estate Securities Fund (VKACRESec) 28,825 shares (cost $299,720) .............................................. 309,583 Warburg Pincus - International Equity Portfolio (WPIntEq) 158,334 shares (cost $1,656,897) ........................................... 1,686,256 Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr) 273,996 shares (cost $3,188,845) ........................................... 3,427,686 ------------ Total assets ........................................................... 237,886,036 ACCOUNTS PAYABLE ................................................................ 816,393 ------------ CONTRACT OWNERS' EQUITY ......................................................... $237,069,643 ============
3 Contract owners' equity represented by:
UNITS UNIT VALUE --------- ---------- Single Premium contracts issued prior to April 16, 1990: Fidelity VIP - Equity-Income Portfolio ....................................... 13,681 $26.373971 $ 360,822 Fidelity VIP - Growth Portfolio .............................................. 9,046 30.259267 273,725 Fidelity VIP - High Income Portfolio ......................................... 3,417 21.685282 74,099 Fidelity VIP - Overseas Portfolio ............................................ 9,048 17.526172 158,577 Fidelity VIP-II - Asset Manager Portfolio .................................... 1,075 18.081878 19,438 Nationwide SAT - Government Bond Fund ........................................ 2,984 19.357639 57,763 Nationwide SAT - Money Market Fund ........................................... 9,556 14.287454 136,531 Nationwide SAT - Total Return Fund ........................................... 1,195 22.138653 26,456 Neuberger & Berman - Growth Portfolio ........................................ 5,776 22.976381 132,712 Neuberger & Berman - Limited Maturity Bond Portfolio ......................... 4,610 15.906671 73,330 Oppenheimer - Global Securities Fund ......................................... 1,656 11.503363 19,050 Strong VIP - Strong Special Fund II, Inc. .................................... 319 18.309087 5,841 TCI Portfolios - TCI Growth .................................................. 8,480 25.381408 215,234 Van Eck - Gold and Natural Resources Fund .................................... 4,617 12.839256 59,279 Van Eck - Worldwide Bond Fund ................................................ 23 14.458585 333 Van Kampen American Capital - Real Estate Securities Fund .................... 4,203 10.784280 45,326 Single Premium contracts issued on or after April 16, 1990: The Dreyfus Socially Responsible Growth Fund, Inc. ........................... 10,235 14.242220 145,769 Dreyfus Stock Index Fund ..................................................... 57,341 13.621789 781,087 Fidelity VIP - Equity-Income Portfolio ....................................... 508,482 21.648958 11,008,105 Fidelity VIP - Growth Portfolio .............................................. 435,011 20.999607 9,135,060 Fidelity VIP - High Income Portfolio ......................................... 124,646 22.388295 2,790,611 Fidelity VIP - Overseas Portfolio ............................................ 299,548 12.667544 3,794,537 Fidelity VIP-II - Asset Manager Portfolio .................................... 354,042 17.721708 6,274,229 Fidelity VIP-II - Contrafund Portfolio ....................................... 63,736 11.071965 705,683 Nationwide SAT - Capital Appreciation Fund ................................... 16,446 14.444672 237,557 Nationwide SAT - Government Bond Fund ........................................ 221,416 16.104612 3,565,819 Nationwide SAT - Money Market Fund ........................................... 1,202,213 12.028786 14,461,163 Nationwide SAT - Small Company Fund .......................................... 18,120 11.410311 206,755 Nationwide SAT - Total Return Fund ........................................... 136,950 19.154939 2,623,269 Neuberger & Berman - Growth Portfolio ........................................ 167,819 16.264834 2,729,548 Neuberger & Berman - Limited Maturity Bond Portfolio ......................... 80,410 13.684722 1,100,388 Neuberger & Berman - Partners Portfolio ...................................... 59,329 13.495873 800,697 Oppenheimer - Bond Fund ...................................................... 91,827 16.056725 1,474,441 Oppenheimer - Global Securities Fund ......................................... 103,965 11.413379 1,186,592 Oppenheimer - Multiple Strategies Fund ....................................... 124,127 16.404926 2,036,294 Strong VIP - Strong Discovery Fund II, Inc. .................................. 130,968 16.214896 2,123,632 Strong VIP - Strong International Stock Fund II, Inc. ........................ 2,862 10.226632 29,269 Strong VIP - Strong Special Fund II, Inc. .................................... 162,203 18.074367 2,931,717 TCI Portfolios - TCI Balanced ................................................ 38,974 12.914886 503,345 TCI Portfolios - TCI Growth .................................................. 229,772 17.116040 3,932,787 TCI Portfolios - TCI International ........................................... 41,356 10.403803 430,260 Van Eck - Gold and Natural Resources Fund .................................... 118,139 14.230388 1,681,164 Van Eck - Worldwide Bond Fund ................................................ 55,939 14.170551 792,686 Van Kampen American Capital - Real Estate Securities Fund .................... 12,834 10.765797 138,168 Warburg Pincus - International Equity Portfolio .............................. 68,691 10.661502 732,349 Warburg Pincus - Small Company Growth Portfolio .............................. 93,602 12.430586 1,163,528 Multiple Payment contracts and Flexible Premium contracts: The Dreyfus Socially Responsible Growth Fund, Inc. ........................... 65,138 14.401809 938,105 Dreyfus Stock Index Fund ..................................................... 282,759 13.775382 3,895,113 Fidelity VIP - Equity-Income Portfolio ....................................... 771,429 22.215745 17,137,870 Fidelity VIP - Growth Portfolio .............................................. 1,116,041 21.256059 23,722,633 Fidelity VIP - High Income Portfolio ......................................... 339,950 20.852993 7,088,975 Fidelity VIP - Overseas Portfolio ............................................ 554,741 13.645033 7,569,459 Fidelity VIP-II - Asset Manager Portfolio .................................... 764,633 15.982529 12,220,769 Fidelity VIP-II - Contrafund Portfolio ....................................... 179,024 11.099135 1,987,012 Nationwide SAT - Capital Appreciation Fund ................................... 178,373 14.713230 2,624,443 Nationwide SAT - Government Bond Fund ........................................ 112,463 14.984933 1,685,251 Nationwide SAT - Money Market Fund ........................................... 887,531 11.714295 10,396,800 Nationwide SAT - Small Company Fund .......................................... 12,345 11.420759 140,989 Nationwide SAT - Total Return Fund ........................................... 1,076,286 18.192762 19,580,615 Neuberger & Berman - Growth Portfolio ........................................ 389,800 15.962482 6,222,175 Neuberger & Berman - Limited Maturity Bond Portfolio ......................... 148,223 13.096811 1,941,249 Neuberger & Berman - Partners Portfolio ...................................... 151,517 13.591346 2,059,320 Oppenheimer - Bond Fund ...................................................... 170,613 15.164813 2,587,314 Oppenheimer - Global Securities Fund ......................................... 411,619 11.542134 4,750,962 Oppenheimer - Multiple Strategies Fund ....................................... 188,985 16.100377 3,042,730 Strong VIP - Strong Discovery Fund II, Inc. .................................. 199,781 16.514850 3,299,353 Strong VIP - Strong International Stock Fund II, Inc. ........................ 6,756 10.236021 69,155 Strong VIP - Strong Special Fund II, Inc. .................................... 463,043 18.408627 8,523,986 TCI Portfolios - TCI Balanced ................................................ 77,950 13.155049 1,025,436 TCI Portfolios - TCI Growth .................................................. 391,898 16.149061 6,328,785 TCI Portfolios - TCI International ........................................... 64,755 10.477472 678,469 Van Eck - Gold and Natural Resources Fund .................................... 114,539 15.612002 1,788,183 Van Eck - Worldwide Bond Fund ................................................ 93,956 13.253457 1,245,242 Van Kampen American Capital - Real Estate Securities Fund .................... 11,685 10.792212 126,107 Warburg Pincus - International Equity Portfolio .............................. 89,255 10.687672 953,928 Warburg Pincus - Small Company Growth Portfolio .............................. 181,701 12.461074 2,264,190 ====== ========== ------------ $237,069,643 ============
See accompanying notes to financial statements. =============================================================================== 4 ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 ------------- ------------ ------------ INVESTMENT ACTIVITY: Reinvested capital gains and dividends ......................... $ 6,764,208 3,376,057 974,676 ------------- ------------ ------------ Gain (loss) on investments: Proceeds from redemption of mutual fund shares ............ 163,574,836 184,340,809 115,961,691 Cost of mutual fund shares sold ........................... (154,208,870) (184,441,475) (113,135,035) ------------- ------------ ------------ Realized gain (loss) on investments ....................... 9,365,966 (100,666) 2,826,656 Change in unrealized gain (loss) on investments ........... 17,134,325 (3,604,010) 1,224,589 ------------- ------------ ------------ Net gain (loss) on investments ....................... 26,500,291 (3,704,676) 4,051,245 ------------- ------------ ------------ Net investment activity ......................... 33,264,499 (328,619) 5,025,921 ------------- ------------ ------------ EQUITY TRANSACTIONS: Purchase payments received from contract owners ................ 106,694,208 77,172,455 31,008,045 Surrenders (note 2d) ........................................... (4,970,867) (1,308,994) (559,275) Death benefits (note 4) ........................................ (143,265) (15,398) (360,580) Policy loans (net of repayments) (note 5) ...................... (2,529,830) (2,980,396) (1,781,013) ------------- ------------ ------------ Net equity transactions ......................... 99,050,246 72,867,667 28,307,177 ------------- ------------ ------------ EXPENSES: Deductions for surrender charges (note 2d) ..................... (364,725) (116,899) (24,490) Redemptions to pay cost of insurance charges and administrative charges (notes 2b and 2c) .............. (14,110,656) (5,382,393) (1,539,443) Deductions for asset charges (note 3) .......................... (1,747,342) (879,737) (430,173) ------------- ------------ ------------ Total expenses .................................. (16,222,723) (6,379,029) (1,994,106) ------------- ------------ ------------ NET CHANGE IN CONTRACT OWNERS' EQUITY .............................. 116,092,022 66,160,019 31,338,992 CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........................ 120,977,621 54,817,602 23,478,610 ------------- ------------ ------------ CONTRACT OWNERS' EQUITY END OF PERIOD .............................. $ 237,069,643 120,977,621 54,817,602 ============= =========== ==========
See accompanying notes to financial statements. =============================================================================== 5 ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization and Nature of Operations The Nationwide VLI Separate Account-2 (the Account) was established pursuant to a resolution of the Board of Directors of Nationwide Life Insurance Company (the Company) on May 7, 1987. The Account has been registered as a unit investment trust under the Investment Company Act of 1940. The Company offers Modified Single Premium and Flexible Premium Variable Life Insurance Policies through the Account. The primary distribution for the contracts is through the brokerage community; however, other distributors may be utilized. (b) The Contracts Prior to December 31, 1990, only contracts without a front-end sales charge, but with a contingent deferred sales charge and certain other fees, were offered for purchase. Beginning December 31, 1990, contracts with a front-end sales charge, a contingent deferred sales charge and certain other fees, are offered for purchase. See note 2 for a discussion of policy charges, and note 3 for asset charges. Contract owners may invest in the following: The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro); Dreyfus Stock Index Fund (DryStkIx)(formerly Dreyfus Life and Annuity Index Fund, Inc. (DLAI)); Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity VIP); Fidelity VIP - Equity-Income Portfolio (FidEqInc) Fidelity VIP - Growth Portfolio (FidGro) Fidelity VIP - High Income Portfolio (FidHiInc) Fidelity VIP - Overseas Portfolio (FidOSeas) Portfolios of the Fidelity Variable Insurance Products Fund II (Fidelity VIP-II); Fidelity VIP-II - Asset Manager Portfolio (FidAsMgr) Fidelity VIP-II - Contrafund Portfolio (FidContP) Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed for a fee by an affiliated investment advisor); Nationwide SAT - Capital Appreciation Fund (NWCapApp) Nationwide SAT - Government Bond Fund (NWGvtBd) Nationwide SAT - Money Market Fund (NWMyMkt) Nationwide SAT - Small Company Fund (NWSmCoFd) Nationwide SAT - Total Return Fund (NWTotRet) Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger & Berman); Neuberger & Berman - Growth Portfolio (NBGro) Neuberger & Berman - Limited Maturity Bond Portfolio (NBLtdMat) Neuberger & Berman - Partners Portfolio (NBPart) Funds of the Oppenheimer Variable Account Funds (Oppenheimer); Oppenheimer - Bond Fund (OppBdFd) Oppenheimer - Global Securities Fund (OppGlSec) Oppenheimer - Multiple Strategies Fund (OppMult) Funds of the Strong Variable Insurance Products Funds (Strong VIP); Strong VIP - Strong Discovery Fund II, Inc. (StDisc2) Strong VIP - Strong International Stock Fund II, Inc. (StIntStk2) Strong VIP - Strong Special Fund II, Inc. (StSpec2) 6 Portfolios of the TCI Portfolios, Inc. (TCI Portfolios); TCI Portfolios - TCI Balanced (TCIBal) TCI Portfolios - TCI Growth (TCIGro) TCI Portfolios - TCI International (TCIInt) Funds of the Van Eck Worldwide Insurance Trust (Van Eck) (formerly Van Eck Investment Trust); Van Eck - Gold and Natural Resources Fund (VEGoldNR) Van Eck - Worldwide Bond Fund (VEWrldBd) (formerly Van Eck - Global Bond Fund (VEGlobBd)) Fund of the Van Kampen American Capital Life Investment Trust (Van Kampen American Capital); Van Kampen American Capital - Real Estate Securities Fund (VKACRESec) Portfolios of the Warburg Pincus Trust (Warburg Pincus); Warburg Pincus - International Equity Portfolio (WPIntEq) Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr) At December 31, 1995, contract owners have invested in all of the above funds. The contract owners' equity is affected by the investment results of each fund, equity transactions by contract owners and certain policy charges (see notes 2 and 3). The accompanying financial statements include only contract owners' purchase payments pertaining to the variable portions of their contracts and exclude any purchase payments for fixed dollar benefits, the latter being included in the accounts of the Company. (c) Security Valuation, Transactions and Related Investment Income The market value of the underlying mutual funds is based on the closing net asset value per share at December 31, 1995. Fund purchases and sales are accounted for on the trade date (date the order to buy or sell is executed). The cost of investments sold is determined on a specific identification basis, and dividends (which include capital gain distributions) are accrued as of the ex-dividend date. (d) Federal Income Taxes The operations of the Account form a part of, and are taxed with, the operations of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code. Currently, no charge is being made to the Account for Federal income taxes, or reserves for such taxes, which may be attributed to the Account. However, the Company reserves the right to make such charges in the future. (e) Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) POLICY CHARGES (a) Deductions from Premiums On multiple payment contracts and flexible premium contracts, the Company deducts a charge for state premium taxes equal to 2.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 3.5% of each premium payment. The Company may at its sole discretion reduce this sales loading. (b) Cost of Insurance A cost of insurance charge is assessed monthly against each contract by liquidating units. The amount of the charge is based upon age, sex, rate class and net amount at risk (death benefit less total contract value). (c) Administrative Charges For single premium contracts, the Company deducts an annual administrative charge which is determined as follows: Contracts issued prior to April 16, 1990: Purchase payments totalling less than $25,000 - $10/month Purchase payments totalling $25,000 or more - none 7 Contracts issued on or after April 16, 1990: Purchase payments totalling less than $25,000 - $90/year ($65/year in New York) Purchase payments totalling $25,000 or more - $50/year For multiple payment contracts, the Company currently deducts a monthly administrative charge of $5 (may deduct up to $7.50, maximum) to recover policy maintenance, accounting, record keeping and other administrative expenses. For flexible premium contracts, the Company currently deducts a monthly administrative charge of $25 during the first policy year and $5 per month thereafter (may deduct up to $7.50, maximum) to recover policy maintenance, accounting, record keeping and other administrative expenses. Additionally, the Company deducts an increase charge of $2.04 per year per $1,000 applied to any increase in the specified amount during the first 12 months after the increase becomes effective. The above charges are assessed against each contract by liquidating units. (d) Surrenders Policy surrenders result in a redemption of the contract value from the Account and payment of the surrender proceeds to the contract owner or designee. The surrender proceeds consist of the contract value, less any outstanding policy loans, and less a surrender charge, if applicable. The charge is determined according to contract type. For single premium contracts, the charge is determined based upon a specified percentage of the original purchase payment. For single premium contracts issued prior to April 16, 1990, the charge is 8% in the first year and declines to 0% after the ninth year. For single premium contracts issued on or after April 16, 1990, the charge is 8.5% in the first year, and declines to 0% after the ninth year. For multiple payment contracts and flexible premium contracts, the amount charged is based upon a specified percentage of the initial surrender charge, which varies by issue age, sex and rate class. The charge is 100% of the initial surrender charge in the first year, declining to 0% after the ninth year. The Company may waive the surrender charge for certain contracts in which the sales expenses normally associated with the distribution of a contract are not incurred. (3) ASSET CHARGES For single premium contracts, the Company deducts a charge from the contract to cover mortality and expense risk charges related to operations, and to recover policy maintenance and premium tax charges. For contracts issued prior to April 16, 1990, the charge is equal to an annual rate of .95% during the first ten policy years, and .50% thereafter. A reduction of charges on these contracts is possible in policy years six through ten for those contracts achieving certain investment performance criteria. For single premium contracts issued on or after April 16, 1990, the charge is equal to an annual rate of 1.30% during the first ten policy years, and 1.00% thereafter. For multiple payment contracts and flexible premium contracts the Company deducts a charge equal to an annual rate of .80%, with certain exceptions, to cover mortality and expense risk charges related to operations. The above charges are assessed through the daily unit value calculation. (4) DEATH BENEFITS Death benefits result in a redemption of the contract value from the Account and payment of the death benefit proceeds, less any outstanding policy loans (and policy charges), to the legal beneficiary. The excess of the death benefit proceeds over the contract value on the date of death is paid by the Company's general account. (5) POLICY LOANS (NET OF REPAYMENTS) Contract provisions allow contract owners to borrow up to 90% (50% during first year of single premium contracts) of a policy's cash surrender value. For single premium contracts issued prior to April 16, 1990, 6.5% interest is due and payable annually in advance. For single premium contracts issued on or after April 16, 1990, multiple payment contracts and flexible premium contracts, 6% interest is due and payable in advance on the policy anniversary when there is a loan outstanding on the policy. 8 At the time the loan is granted, the amount of the loan is transferred from the Account to the Company's general account as collateral for the outstanding loan. Collateral amounts in the general account are credited with the stated rate of interest in effect at the time the loan is made, subject to a guaranteed minimum rate. Loan repayments result in a transfer of collateral, including interest, back to the Account. (6) SCHEDULE I Schedule I presents the components of the change in the unit values, which are the basis for determining contract owners' equity. This schedule is presented for each series, as applicable, in the following format: - Beginning unit value - Jan. 1 - Reinvested dividends and capital gains (This amount reflects the increase in the unit value due to dividend and capital gain distributions from the underlying mutual funds.) - Unrealized gain (loss) (This amount reflects the increase (decrease) in the unit value resulting from the market appreciation (depreciation) of the underlying mutual funds.) - Asset charges (This amount reflects the decrease in the unit value due to the charges discussed in note 3.) - Ending unit value - Dec. 31 - Percentage increase (decrease) in unit value. =============================================================================== 9 =============================================================================== Schedule I NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
FIDEQINC FIDGRO FIDHIINC FIDOSEAS -------- ------ -------- -------- 1995 Beginning unit value - Jan. 1 $19.708533 22.566466 18.151674 16.131866 - ------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains 1.542607 .124738 1.314664 .123427 - ------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 5.341041 7.828480 2.410020 1.428229 - ------------------------------------------------------------------------------------------------------------ Asset charges (.218210) (.260417) (.191076) (.157350) - ------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $26.373971 30.259267 21.685282 17.526172 - ------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* 34% 34% 19% 9% ============================================================================================================ 1994 Beginning unit value - Jan. 1 $18.583057 22.785679 18.612185 16.009316 - ------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains 1.395798 1.371061 1.706032 .082663 - ------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) (.087894) (1.381165) (1.991707) .196908 - ------------------------------------------------------------------------------------------------------------ Asset charges (.182428) (.209109) (.174836) (.157021) - ------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $19.708533 22.566466 18.151674 16.131866 - ------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* 6% (1)% (2)% 1% ============================================================================================================ 1993 Beginning unit value - Jan. 1 $15.870837 19.270345 15.591886 11.777024 - ------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .463717 .428707 1.282532 .275295 - ------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 2.415095 3.287237 1.901458 4.091447 - ------------------------------------------------------------------------------------------------------------ Asset charges (.166592) (.200610) (.163691) (.134450) - ------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $18.583057 22.785679 18.612185 16.009316 - ------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* 17% 18% 19% 36% ============================================================================================================
FIDASMGR NWGVTBD NWMYMKT NWTOTRET -------- ------- ------- -------- 1995 Beginning unit value - Jan. 1 15.607540 16.457035 13.652006 17.312690 - ---------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .327932 1.167149 .768745 1.720678 - ---------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.304058 1.903991 .000000 3.293404 - ---------------------------------------------------------------------------------------------------------- Asset charges (.157652) (.170536) (.133297) (.188119) - ---------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 18.081878 19.357639 14.287454 22.138653 - ---------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 16% 18% 5% 28% ========================================================================================================== 1994 Beginning unit value - Jan. 1 16.778042 17.168348 13.267517 17.291720 - ---------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .815806 1.079469 .512535 .875020 - ---------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (1.832732) (1.633239) .000000 (.688478) - ---------------------------------------------------------------------------------------------------------- Asset charges (.153576) (.157543) (.128046) (.165572) - ---------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 15.607540 16.457035 13.652006 17.312690 - ---------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (7)% (4)% 3% 0% ========================================================================================================== 1993 Beginning unit value - Jan. 1 13.992516 15.826033 13.035884 15.738275 - ---------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .649736 1.013212 .357335 .643850 - ---------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.280467 .488744 .000000 1.067081 - ---------------------------------------------------------------------------------------------------------- Asset charges (.144677) (.159641) (.125702) (.157486) - ---------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 16.778042 17.168348 13.267517 17.291720 - ---------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 20% 8% 2% 10% ==========================================================================================================
* An annualized rate of return cannot be determined as asset charges do not include the policy charges discussed in note 2. 10 Schedule I, Continued NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NBGRO NBLTDMAT OPPGLSEC STSPEC2 TCIGRO ---------- --------- --------- --------- --------- 1995 Beginning unit value - Jan. 1 $17.608267 14.475203 11.358489 14.690448 19.544976 - ------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .623265 .804090 .298934 .761035 .022491 - ------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 4.945641 .771696 (.045712) 3.013032 6.032555 - ------------------------------------------------------------------------------------------------------- Asset charges (.200792) (.144318) (.108348) (.155428) (.218614) - ------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $22.976381 15.906671 11.503363 18.309087 25.381408 - ------------------------------------------------------------------------------------------------------- Percentage increase (decrease) unit value*(a) 30% 10% 1% 25% 30% ======================================================================================================= 1994 Beginning unit value - Jan. 1 $18.709214 14.635617 12.162716 14.315226 19.964524 - ------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains 2.255334 .618309 .214436 .411358 .002137 - ------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (3.185612) (.641424) (.903773) .103258 (.236035) - ------------------------------------------------------------------------------------------------------- Asset charges (.170669) (.137299) (.114890) (.139394) (.185650) - ------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $17.608267 14.475203 11.358489 14.690448 19.544976 - ------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) (6)% (1)% (7)% 3% (2)% ======================================================================================================= 1993 Beginning unit value - Jan. 1 $17.686598 13.856975 ** ** 18.270571 - ------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .409995 .569917 .049805 - ------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .782366 .345457 1.825395 - ------------------------------------------------------------------------------------------------------- Asset charges (.169745) (.136732) (.181247) - ------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $18.709214 14.635617 19.964524 - ------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 6% 6% 9% =======================================================================================================
VEGOLDNR VEWRLDBD VKACRESEC --------- --------- --------- 1995 Beginning unit value - Jan. 1 11.677805 12.443161 10.000000 - ---------------------------------------------------------------------------- Reinvested dividends and capital gains .115292 1.008475 .092106 - ---------------------------------------------------------------------------- Unrealized gain (loss) 1.160549 1.138120 .740132 - ---------------------------------------------------------------------------- Asset charges (.114390) (.131171) (.047958) - ---------------------------------------------------------------------------- Ending unit value - Dec. 31 12.839256 14.458585 10.784280 - ---------------------------------------------------------------------------- Percentage increase (decrease) unit value*(a) 10% 16% 8%(b) ============================================================================ 1994 Beginning unit value - Jan. 1 12.382561 12.729709 ** - ---------------------------------------------------------------------------- Reinvested dividends and capital gains .062321 .051271 - ---------------------------------------------------------------------------- Unrealized gain (loss) (.652194) (.220753) - ---------------------------------------------------------------------------- Asset charges (.114883) (.117066) - ---------------------------------------------------------------------------- Ending unit value - Dec. 31 11.677805 12.443161 - ---------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) (6)% (2)% ============================================================================ 1993 Beginning unit value - Jan. 1 7.583732 ** ** - ---------------------------------------------------------------------------- Reinvested dividends and capital gains .035765 - ---------------------------------------------------------------------------- Unrealized gain (loss) 4.857738 - ---------------------------------------------------------------------------- Asset charges (.094674) - ---------------------------------------------------------------------------- Ending unit value - Dec. 31 12.382561 - ---------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 63% ============================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available or was not utilized. 11 =============================================================================== Schedule I, Continued NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
DRYSRGRO DRYSTKLX FIDEQINC FIDGRO FIDHIINC FIDOSEAS FIDASMGR ---------- ----------- ---------- ---------- ---------- ---------- ---------- 1995 Beginning unit value - Jan. 1 $10.722275 10.088849 16.234159 15.715602 18.805616 11.700527 15.350115 - ---------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .392053 .36133 1.269479 .086841 1.361583 .089493 .322418 - ---------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 3.289798 3.326196 4.390826 5.444880 2.491513 1.033414 2.260958 - ---------------------------------------------------------------------------------------------------------------------------------- Asset charges (.161906) (.154595) (.245506) (.247716) (.270417) (.155890) (.211783) - ---------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.242220 13.621789 21.648958 20.999607 22.388295 12.667544 17.721708 - ---------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 33% 35% 33% 34% 19% 8% 15% ================================================================================================================================== 1994 Beginning unit value - Jan. 1 $10.702403 10.131165 15.360584 15.923752 19.350153 11.652241 16.559029 - ---------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .276372 .283260 1.152726 .957853 1.773098 .060146 .804872 - ---------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.117327) (.195255) (.073161) (.966373) (2.069306) .144272 (1.806726) - ---------------------------------------------------------------------------------------------------------------------------------- Asset charges (.139173) (.130321) (.205990) (.199630) (.248329) (.156132) (.207060) - ---------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.722275 10.088849 16.234159 15.715602 18.805616 11.700527 15.350115 - ---------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 0% 0% 6% (1)% (3)% 0% (7)% ================================================================================================================================== 1993 Beginning unit value - Jan. 1 ** $10.000000 13.165400 13.515048 16.267831 8.602313 13.859040 - ---------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains 1.497818 .383884 .300564 1.337665 .201014 .643313 - ---------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (1.334006) 2.000061 2.300317 1.977956 2.983042 2.252405 - ---------------------------------------------------------------------------------------------------------------------------------- Asset charges (.032647) (.188761) (.192177) (.233299) (.134128) (.195729) - ---------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.131165 15.360584 15.923752 19.350153 11.652241 16.559029 - ---------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 1%(b) 17% 18% 19% 35% 19% ==================================================================================================================================
FIDCONTP NWCAPAPP NWGVTBD --------- --------- --------- 1995 Beginning unit value - Jan. 1 10.000000 11.312336 13.739287 - ---------------------------------------------------------------------------- Reinvested dividends and capital gains .142783 .642275 .972265 - ---------------------------------------------------------------------------- Unrealized gain (loss) .998389 2.653961 1.587542 - ---------------------------------------------------------------------------- Asset charges (.069207) (.163900) (.194482) - ---------------------------------------------------------------------------- Ending unit value - Dec. 31 11.071965 14.444672 16.104612 - ---------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 11%(b) 28% 17% ============================================================================ 1994 Beginning unit value - Jan. 1 ** 11.563943 14.383265 - ---------------------------------------------------------------------------- Reinvested dividends and capital gains .182742 .902346 - ---------------------------------------------------------------------------- Unrealized gain (loss) (.286826) (1.366016) - ---------------------------------------------------------------------------- Asset charges (.147523) (.180308) - ---------------------------------------------------------------------------- Ending unit value - Dec. 31 11.312336 13.739287 - ---------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (2)% (4)% ============================================================================ 1993 Beginning unit value - Jan. 1 ** 10.688742 13.305926 - ---------------------------------------------------------------------------- Reinvested dividends and capital gains .260088 .849957 - ---------------------------------------------------------------------------- Unrealized gain (loss) .755302 .410720 - ---------------------------------------------------------------------------- Asset charges (.140189) (.183338) - ---------------------------------------------------------------------------- Ending unit value - Dec. 31 11.563943 14.383265 - ---------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 8% 8% ============================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available or was not utilized. =============================================================================== 12 =============================================================================== Schedule I, Continued NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NWMYMKT NWSMCOFD NWTOTRET NBGRO NBLTDMAT NBPART OPPBDFD ----------- ---------- ---------- ---------- ---------- ----------- ---------- 1995 Beginning unit value - Jan. 1 $11.534440 10.000000 15.031721 12.508337 12.496729 10.018146 13.903136 - --------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .648458 .017459 1.489410 .442496 .693794 .081860 .956955 - --------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 1.418328 2.856936 3.508824 .664378 3.550382 1.391543 - --------------------------------------------------------------------------------------------------------------------------------- Asset charges (.154112) (.025476) (.223128) (.194823) (.170179) (.154515) (.194909) - --------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $12.028786 11.410311 19.154939 16.264834 13.684722 13.495873 16.056725 - --------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 4% 14%(b) 27% 30% 10% 35% 15% ================================================================================================================================= 1994 Beginning unit value - Jan. 1 $11.249231 ** 15.066007 13.336899 12.679406 10.000000 14.362878 - --------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .433762 .760244 1.607088 .535454 .000000 .809172 - --------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 (.597472) (2.269450) (.555628) .072562 (1.086058) - --------------------------------------------------------------------------------------------------------------------------------- Asset charges (.148553) (.197058) (.166200) (.162503) (.054416) (.182856) - --------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.534440 15.031721 12.508337 12.496729 10.018146 13.903136 - --------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 3% 0% (6)% (1)% 0%(b) (3)% ================================================================================================================================= 1993 Beginning unit value - Jan. 1 $11.092030 ** 13.761364 12.652864 12.047601 ** 12.872824 - --------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .303567 .561430 .293188 .495297 .894915 - --------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 .931322 .556715 .298894 .774891 - --------------------------------------------------------------------------------------------------------------------------------- Asset charges (.146366) (.188109) (.165868) (.162386) (.179752) - --------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.249231 15.066007 13.336899 12.679406 14.362878 - --------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 1% 9% 5% 5% 12% =================================================================================================================================
OPPGLSEC OPPMULT STDISC2 ---------- ---------- ---------- 1995 Beginning unit value - Jan. 1 11.309050 13.693997 12.144445 - ------------------------------------------------------------------------------- Reinvested dividends and capital gains .297396 1.103154 .211667 - ------------------------------------------------------------------------------- Unrealized gain (loss) (.045694) 1.805769 4.042004 - ------------------------------------------------------------------------------- Asset charges (.147373) (.197994) (.183220) - ------------------------------------------------------------------------------- Ending unit value - Dec. 31 11.413379 16.404926 16.214896 - ------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 1% 20% 34% =============================================================================== 1994 Beginning unit value - Jan. 1 12.152136 14.148115 13.003547 - ------------------------------------------------------------------------------- Reinvested dividends and capital gains .214078 .720350 .971167 - ------------------------------------------------------------------------------- Unrealized gain (loss) (.900362) (.993926) (1.670283) - ------------------------------------------------------------------------------- Asset charges (.156802) (.180542) (.159986) - ------------------------------------------------------------------------------- Ending unit value - Dec. 31 11.309050 13.693997 12.144445 - ------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (7)% (3)% (7)% =============================================================================== 1993 Beginning unit value - Jan. 1 10.000000 12.362293 10.796269 - ------------------------------------------------------------------------------- Reinvested dividends and capital gains .000000 .546245 .809234 - ------------------------------------------------------------------------------- Unrealized gain (loss) 2.187580 1.411883 1.546688 - ------------------------------------------------------------------------------- Asset charges (.035444) (.172306) (.148644) - ------------------------------------------------------------------------------- Ending unit value - Dec. 31 12.152136 14.148115 13.003547 - ------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 22%(b) 14% 20% ===============================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available or was not utilized. 13 Schedule I, Continued NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
STINTSTK2 STSPEC2 TCIBAL TCIGRO TCIINT VEGOLDNR VEWRLDBD ----------- --------- ---------- ---------- ---------- ---------- --------- 1995 Beginning unit value - Jan. 1 $10.000000 14.552799 10.801955 13.226279 9.392654 12.988341 12.237880 - -------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .041085 .753037 .305779 .015219 .000000 .127947 .990055 - -------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .209467 2.978850 1.961461 4.076606 1.136602 1.287916 1.118852 - -------------------------------------------------------------------------------------------------------------------------------- Asset charges (.023920) (.210319) (.154309) (.202064) (.125453) (.173816) (.176236) - -------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.226632 18.074367 12.914886 17.116040 10.403803 14.230388 14.170551 - -------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 2%(b) 24% 20% 29% 11% 10% 16% ================================================================================================================================ 1994 Beginning unit value - Jan. 1 ** $14.230663 10.876445 13.557427 10.000000 13.820369 12.563474 - -------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .407898 .260556 .001450 .000000 .069418 .050533 - -------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .103521 (.194370) (.160376) (.554327) (.726294) (.218292) - -------------------------------------------------------------------------------------------------------------------------------- Asset charges (.189283) (.140676) (.172222) (.053019) (.175152) (.157835) - -------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.552799 10.801955 13.226279 9.392654 12.988341 12.237880 - -------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 2% (1)% (2)% (6)%(b) (6)% (3)% ================================================================================================================================ 1993 Beginning unit value - Jan. 1 ** $11.518529 10.232336 12.451309 ** 8.494453 11.809827 - -------------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .057229 .193813 .033826 .039957 .949184 - -------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.823424 .587650 1.241015 5.430795 (.037350) - -------------------------------------------------------------------------------------------------------------------------------- Asset charges (.168519) (.137354) (.168723) (.144836) (.158187) - -------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.230663 10.876445 13.557427 13.820369 12.563474 - -------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 24% 6% 9% 63% 6% ================================================================================================================================
VKACRESEC WPINTEQ WPSMCOGR ---------- ---------- ---------- 1995 Beginning unit value - Jan. 1 10.000000 10.000000 10.000000 - ------------------------------------------------------------------------------ Reinvested dividends and capital gains .091962 .077347 .000000 - ------------------------------------------------------------------------------ Unrealized gain (loss) .739397 .650501 2.501606 - ------------------------------------------------------------------------------ Asset charges (.065562) (.066346) (.071020) - ------------------------------------------------------------------------------ Ending unit value - Dec. 31 10.765797 10.661502 12.430586 - ------------------------------------------------------------------------------ Percentage increase (decrease) in unit value*(a) 8%(b) 7%(b) 24%(b) ============================================================================== 1994 Beginning unit value - Jan. 1 ** ** ** - ------------------------------------------------------------------------------ Reinvested dividends and capital gains - ------------------------------------------------------------------------------ Unrealized gain (loss) - ------------------------------------------------------------------------------ Asset charges - ------------------------------------------------------------------------------ Ending unit value - Dec. 31 - ------------------------------------------------------------------------------ Percentage increase (decrease) in unit value*(a) ============================================================================== 1993 Beginning unit value - Jan. 1 ** ** ** - ------------------------------------------------------------------------------ Reinvested dividends and capital gains - ------------------------------------------------------------------------------ Unrealized gain (loss) - ------------------------------------------------------------------------------ Asset charges - ------------------------------------------------------------------------------ Ending unit value - Dec. 31 - ------------------------------------------------------------------------------ Percentage increase (decrease) in unit value*(a) ==============================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available or was not utilized. 14 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
DrySRGro DryStkIx FidEqInc FidGro FidHiInc -------- -------- -------- ------ -------- 1995 Beginning unit value - Jan. 1 $10.788547 10.151919 16.576413 15.828463 17.428943 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .396430 .364933 1.297971 .087506 1.262495 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 3.317353 3.354508 4.496038 5.494030 2.316172 - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.100521) (.095978) (.154677) (.153940) (.154617) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $14.401809 13.775382 22.215745 21.256059 20.852993 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 33% 36% 34% 34% 20% ==================================================================================================================================== 1994 Beginning unit value - Jan. 1 $10.715005 10.143796 15.606442 15.958341 17.844401 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .278073 .284601 1.172669 .960381 1.635883 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) (.118575) (.195976) (.073581) (.966828) (1.910067) - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.085956) (.080502) (.129117) (.123431) (.141274) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $10.788547 10.151919 16.576413 15.828463 17.428943 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 1% 0% 6% (1)% (2)% ==================================================================================================================================== 1993 Beginning unit value - Jan. 1 $10.000000 10.000000 13.308899 13.476298 14.926526 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .031142 1.499665 .389191 .299849 1.227974 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .703426 (1.335764) 2.026087 2.300419 1.821967 - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.019563) (.020105) (.117735) (.118225) (.132066) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $10.715005 10.143796 15.606442 15.958341 17.844401 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 7%(b) 1%(b) 17% 18% 20% ====================================================================================================================================
FidOSeas FidAsMgr FidContP NWCapApp NWGvtBd -------- -------- -------- -------- ------- 1995 Beginning unit value - Jan. 1 12.540728 13.774855 10.000000 11.465403 12.720514 - ------------------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .095965 .289466 .143118 .653781 .903001 - ------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 1.111417 2.035460 .998657 2.696528 1.472503 - ------------------------------------------------------------------------------------------------------------------------ Asset charges (.103077) (.117252) (.042640) (.102482) (.111085) - ------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 13.645033 15.982529 11.099135 14.713230 14.984933 - ------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 9% 16% 11%(b) 28% 18% ======================================================================================================================== 1994 Beginning unit value - Jan. 1 12.426854 14.785784 ** 11.662121 13.250482 - ------------------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .064174 .719044 .184927 .833925 - ------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .152413 (1.615920) (.289863) (1.261429) - ------------------------------------------------------------------------------------------------------------------------ Asset charges (.102713) (.114053) (.091782) (.102464) - ------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 12.540728 13.774855 11.465403 12.720514 - ------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 1% (7)% (2)% (4)% ======================================================================================================================== 1993 Beginning unit value - Jan. 1 9.128094 12.312732 ** 10.725293 12.196370 - ------------------------------------------------------------------------------------------------------------------------ Reinvested dividends and capital gains .213405 .571816 .261975 .781559 - ------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 3.173177 2.008516 .761628 .376228 - ------------------------------------------------------------------------------------------------------------------------ Asset charges (.087822) (.107280) (.086775) (.103675) - ------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 12.426854 14.785784 11.662121 13.250482 - ------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 36% 20% 9% 9% ========================================================================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available or was not utilized. 15 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NWMyMkt NWSmCoFd NWTotRet NBGro NBLtdMat ------- -------- -------- ----- -------- 1995 Beginning unit value - Jan. 1 $11.176411 10.000000 14.205723 12.214794 11.900389 - ----------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .629782 .017475 1.413734 .432461 .661221 - ----------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 1.418968 2.703396 3.432609 .635177 - ----------------------------------------------------------------------------------------------------------------------------- Asset charges (.091898) (.015684) (.130091) (.117382) (.099976) - ----------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.714295 11.420759 18.192762 15.962482 13.096811 - ----------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 5% 14%(b) 28% 31% 10% ============================================================================================================================= 1994 Beginning unit value - Jan. 1 $10.845265 ** 14.167308 12.959107 12.014277 - ----------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .419275 .717782 1.562441 .507651 - ----------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 (.565055) (2.207122) (.526553) - ----------------------------------------------------------------------------------------------------------------------------- Asset charges (.088129) (.114312) (.099632) (.094986) - ----------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.176411 14.205723 12.214794 11.900389 - ----------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 3% 0% (6)% (1)% ============================================================================================================================= 1993 Beginning unit value - Jan. 1 $10.639809 ** 12.875439 12.232618 11.358230 - ----------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .291848 .527331 .283612 .467224 - ----------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 .873117 .541815 .283278 - ----------------------------------------------------------------------------------------------------------------------------- Asset charges (.086392) (.108579) (.098938) (.094455) - ----------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.845265 14.167308 12.959107 12.014277 - ----------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 2% 10% 6% 6% =============================================================================================================================
NBPart OppBdFd OppGlSec OppMult StDisc2 ------ ------- -------- ------- ------- 1995 Beginning unit value - Jan. 1 $10.038887 13.065574 11.379737 13.372968 12.307607 - ------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .082096 .902009 .299595 1.079776 .215562 - ------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 3.565899 1.310232 (.045711) 1.766931 4.106245 - ------------------------------------------------------------------------------------------------------------------------- Asset charges (.095536) (.113002) (.091487) (.119298) (.114564) - ------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $13.591346 15.164813 11.542134 16.100377 16.514850 - ------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 35% 16% 1% 20% 34% ========================================================================================================================= 1994 Beginning unit value - Jan. 1 $10.000000 13.430475 12.167250 13.747705 13.112678 - ------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .000000 .759284 .214589 .702216 .983647 - ------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .072401 (1.018698) (.905246) (.968729) (1.689193) - ------------------------------------------------------------------------------------------------------------------------- Asset charges (.033514) (.105487) (.096856) (.108224) (.099525) - ------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.038887 13.065574 11.379737 13.372968 12.307607 - ------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 0% (3)% (6)% (3)% (6)% ========================================================================================================================= 1993 Beginning unit value - Jan. 1 ** $11.976650 10.000000 11.952042 10.832134 - ------------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .835328 .000000 .529802 .814568 - ------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .721678 2.189077 1.368631 1.557980 - ------------------------------------------------------------------------------------------------------------------------- Asset charges (.103181) (.021827) (.102770) (.092004) - ------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $13.430475 12.167250 13.747705 13.112678 - ------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 12% 22%(b) 15% 21% =========================================================================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available or was not utilized. 16 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
StIntStk2 StSpec2 TCIBal TCIGro TCIInt --------- ------- ------- ------ ------ 1995 Beginning unit value - Jan. 1 $10.000000 14.748256 10.948128 12.417011 9.412116 - ----------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .041121 .764407 .310910 .014289 .000000 - ----------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .209625 3.027469 1.992508 3.834812 1.142911 - ----------------------------------------------------------------------------------------------------------------------- Asset charges (.014725) (.131505) (.096497) (.117051) (.077555) - ----------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.236021 18.408627 13.155049 16.149061 10.477472 - ----------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 2%(b) 25% 20% 30% 11% ======================================================================================================================= 1994 Beginning unit value - Jan. 1 ** $14.350073 10.968814 12.664593 10.000000 - ----------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .412806 .263602 .001356 .000000 - ----------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .103139 (.196764) (.149703) (.555221) - ----------------------------------------------------------------------------------------------------------------------- Asset charges (.117762) (.087524) (.099235) (.032663) - ----------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.748256 10.948128 12.417011 9.412116 - ----------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 3% 0% (2)% (6)%(b) ======================================================================================================================= 1993 Beginning unit value - Jan. 1 ** $11.556788 10.267347 11.572833 ** - ----------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .057587 .195102 .031592 - ----------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.840017 .591395 1.156915 - ----------------------------------------------------------------------------------------------------------------------- Asset charges (.104319) (.085030) (.096747) - ----------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.350073 10.968814 12.664593 - ----------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 24% 7% 9% =======================================================================================================================
VEGoldNR VEWrldBd VKACRESec WPIntEq WPSmCoGr -------- -------- --------- ------- -------- 1995 Beginning unit value - Jan. 1 14.178501 11.388987 10.000000 10.000000 10.000000 - ----------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .140115 .923751 .092168 .077521 .000000 - ----------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.410450 1.041904 .740443 .651025 2.504833 - ----------------------------------------------------------------------------------------------------------------------- Asset charges (.117064) (.101185) (.040399) (.040874) (.043759) - ----------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 15.612002 13.253457 10.792212 10.687672 12.461074 - ----------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 10% 16% 8%(b) 7%(b) 25%(b) ======================================================================================================================= 1994 Beginning unit value - Jan. 1 15.011706 11.633841 ** ** ** - ----------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .075618 .046884 - ----------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.791458) (.201583) - ----------------------------------------------------------------------------------------------------------------------- Asset charges (.117365) (.090155) - ----------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 14.178501 11.388987 - ----------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (6)% (2)% ======================================================================================================================= 1993 Beginning unit value - Jan. 1 9.180337 10.880964 ** ** ** - ----------------------------------------------------------------------------------------------------------------------- Reinvested dividends and capital gains .043340 .876895 - ----------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 5.884613 (.034094) - ----------------------------------------------------------------------------------------------------------------------- Asset charges (.096584) (.089924) - ----------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 15.011706 11.633841 - ----------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 64% 7% =======================================================================================================================
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not available. See note 6. - -------------------------------------------------------------------------------- 56 1 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors Nationwide Life Insurance Company: We have audited the consolidated financial statements of Nationwide Life Insurance Company (a wholly owned subsidiary of Nationwide Corporation) and subsidiaries as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. Participating insurance and the related surplus are discussed in note 12. The Company and its counsel are of the opinion that the ultimate ownership of the participating surplus in excess of the contemplated equitable policyholder dividends belongs to the shareholder. The accompanying consolidated financial statements are presented on such basis. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Life Insurance Company and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. In 1994, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in Debt and Equity Securities. In 1993, the Company adopted the provisions of SFAS No. 109, Accounting for Income Taxes and SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions. KPMG Peat Marwick LLP Columbus, Ohio February 26, 1996 2 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Consolidated Balance Sheets December 31, 1995 and 1994 (000's omitted)
ASSETS 1995 1994 ------ ----------------- ---------------- Investments (notes 5, 8 and 9): Securities available-for-sale, at fair value: Fixed maturities (cost $13,438,630 in 1995; $8,318,865 in 1994) $ 14,167,377 8,045,906 Equity securities (cost $27,362 in 1995; $18,372 in 1994) 33,718 24,713 Fixed maturities held-to-maturity, at amortized cost (fair value $3,602,310 in 1994) - 3,688,787 Mortgage loans on real estate 4,786,599 4,222,284 Real estate 239,089 252,681 Policy loans 370,908 340,491 Other long-term investments 67,280 63,914 Short-term investments (note 13) 45,732 131,643 ----------- ----------- 19,710,703 16,770,419 ----------- ----------- Cash 10,485 7,436 Accrued investment income 239,881 220,540 Deferred policy acquisition costs 1,094,195 1,064,159 Deferred Federal income tax -- 36,515 Other assets 795,169 790,603 Assets held in Separate Accounts (note 8) 18,763,678 12,222,461 ----------- ----------- $40,614,111 31,112,133 =========== =========== LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Future policy benefits and claims (notes 6 and 8) 18,200,128 16,321,461 Policyholders' dividend accumulations 353,554 338,058 Other policyholder funds 71,155 72,770 Accrued Federal income tax (note 7): Current 34,064 13,126 Deferred 238,877 - ----------- ----------- 272,941 13,126 ----------- ----------- Other liabilities 284,143 235,778 Liabilities related to Separate Accounts (note 8) 18,763,678 12,222,461 ----------- ----------- 37,945,599 29,203,654 ----------- ----------- Shareholder's equity (notes 3, 4, 5, 7, 12 and 13): Capital shares, $1 par value. Authorized 5,000 shares, issued and outstanding 3,815 shares 3,815 3,815 Additional paid-in capital 673,782 622,753 Retained earnings 1,606,607 1,401,579 Unrealized gains (losses) on securities available-for-sale, net 384,308 (119,668) ----------- ----------- 2,668,512 1,908,479 ----------- ----------- Commitments and contingencies (notes 9 and 15) $40,614,111 31,112,133 =========== =========== See accompanying notes to consolidated financial statements.
3 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Consolidated Statements of Income Years ended December 31, 1995, 1994 and 1993 (000's omitted)
1995 1994 1993 --------------- -------------- ------------- Revenues (note 16): Traditional life insurance premiums $ 274,957 209,538 215,715 Accident and health insurance premiums 509,658 324,524 312,655 Universal life and investment product policy charges 307,676 239,021 188,057 Net investment income (note 5) 1,482,980 1,289,501 1,204,426 Realized gains (losses) on investments (notes 5 and 13) 836 (16,384) 113,673 ---------- ---------- ---------- 2,576,107 2,046,200 2,034,526 ---------- ---------- ---------- Benefits and expenses: Benefits and claims 1,656,287 1,279,763 1,236,906 Provision for policyholders' dividends on participating policies (note 12) 48,074 46,061 53,189 Amortization of deferred policy acquisition costs 93,044 94,744 102,134 Other operating costs and expenses 458,970 352,402 329,396 ---------- ---------- ---------- 2,256,375 1,772,970 1,721,625 ---------- ---------- ---------- Income before Federal income tax expense and cumulative effect of changes in accounting principles 319,732 273,230 312,901 ---------- ---------- ---------- Federal income tax expense (note 7): Current 103,464 79,847 75,124 Deferred 3,790 9,657 31,634 ---------- ---------- ---------- 107,254 89,504 106,758 ---------- ---------- ---------- Income before cumulative effect of changes in accounting principles 212,478 183,726 206,143 Cumulative effect of changes in accounting principles, net (note 3) -- -- 5,365 ---------- ---------- ---------- Net income $ 212,478 183,726 211,508 ========== ========== ========== See accompanying notes to consolidated financial statements.
4 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Consolidated Statements of Shareholder's Equity Years ended December 31, 1995, 1994 and 1993 (000's omitted)
Unrealized gains (losses) Additional on securities Total Capital paid-in Retained available-for- shareholder's shares capital earnings sale, net equity ----------- ----------- ----------- ----------------- --------------- 1993: Balance, beginning of year $ 3,815 311,753 1,024,150 90,524 1,430,242 Capital contributions -- 111,000 -- -- 111,000 Dividends paid to shareholder -- -- (17,805) -- (17,805) Net income -- -- 211,508 -- 211,508 Unrealized losses on equity securities, net -- -- -- (83,777) (83,777) ---------- ---------- ---------- ---------- ---------- Balance, end of year $ 3,815 422,753 1,217,853 6,747 1,651,168 ========== ========== ========= ========== ========== 1994: Balance, beginning of year 3,815 422,753 1,217,853 6,747 1,651,168 Capital contribution -- 200,000 -- -- 200,000 Net income -- -- 183,726 -- 183,726 Adjustment for change in accounting for certain investments in debt and equity securities, net (note 3) -- -- -- 216,915 216,915 Unrealized losses on securities available- for-sale, net -- -- -- (343,330) (343,330) ---------- ---------- ---------- ---------- ---------- Balance, end of year $ 3,815 622,753 1,401,579 (119,668) 1,908,479 ========== ========== ========== ========== ========== 1995: Balance, beginning of year 3,815 622,753 1,401,579 (119,668) 1,908,479 Capital contribution (note 13) -- 51,029 -- (4,111) 46,918 Dividends paid to shareholder -- -- (7,450) -- (7,450) Net income -- -- 212,478 -- 212,478 Unrealized gains on securities available- for-sale, net -- -- -- 508,087 508,087 ---------- ---------- ---------- ---------- ---------- Balance, end of year $ 3,815 673,782 1,606,607 384,308 2,668,512 ========== ========== ========== ========== ========== See accompanying notes to consolidated financial statements.
5 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Consolidated Statements of Cash Flows Years ended December 31, 1995, 1994 and 1993 (000's omitted)
1995 1994 1993 -------------- ------------ ----------- Cash flows from operating activities: Net income $ 212,478 183,726 211,508 Adjustments to reconcile net income to net cash provided by operating activities: Capitalization of deferred policy acquisition costs (349,456) (264,434) (191,994) Amortization of deferred policy acquisition costs 93,044 94,744 102,134 Amortization and depreciation 10,319 6,207 11,156 Realized losses (gains) on invested assets, net 717 15,949 (113,648) Deferred Federal income tax expense (benefit) 4,023 (2,166) (6,006) Increase in accrued investment income (19,341) (29,654) (4,218) Increase in other assets (3,227) (112,566) (549,277) Increase in policy liabilities 198,200 1,038,641 509,370 Increase in policyholders' dividend accumulations 15,496 15,372 17,316 Increase in accrued Federal income tax payable 20,938 832 16,838 Increase in other liabilities 48,365 17,826 26,958 Other, net (20,556) (19,303) (11,745) ----------- ----------- ------------ Net cash provided by operating activities 211,000 945,174 18,392 ----------- ----------- ----------- Cash flows from investing activities: Proceeds from maturity of securities available-for-sale 706,442 579,067 -- Proceeds from sale of securities available-for-sale 131,420 247,876 247,502 Proceeds from maturity of fixed maturities held-to-maturity 633,173 516,003 1,192,093 Proceeds from sale of fixed maturities -- -- 33,959 Proceeds from repayments of mortgage loans on real estate 215,134 220,744 146,047 Proceeds from sale of real estate 48,477 46,713 23,587 Proceeds from repayments of policy loans and sale of other invested assets 79,620 134,998 59,643 Cost of securities available-for-sale acquired (2,232,047) (2,569,672) (12,550) Cost of fixed maturities held-to-maturity acquired (669,449) (675,835) (2,016,831) Cost of mortgage loans on real estate acquired (821,078) (627,025) (475,336) Cost of real estate acquired (10,970) (15,962) (8,827) Policy loans issued and other invested assets acquired (92,904) (118,012) (76,491) ----------- ----------- ------------ Net cash used in investing activities (2,012,182) (2,261,105) (887,204) ----------- ----------- ----------- Cash flows from financing activities: Proceeds from capital contributions 46,918 200,000 111,000 Dividends paid to shareholder (7,450) -- (17,805) Increase in universal life and investment product account balances 3,202,135 3,640,958 2,249,740 Decrease in universal life and investment product account balances (1,523,283) (2,449,580) (1,458,504) ----------- ----------- ----------- Net cash provided by financing activities 1,718,320 1,391,378 884,431 ----------- ----------- ----------- Net (decrease) increase in cash and cash equivalents (82,862) 75,447 15,619 Cash and cash equivalents, beginning of year 139,079 63,632 48,013 ----------- ----------- ----------- Cash and cash equivalents, end of year $ 56,217 139,079 63,632 =========== =========== =========== See accompanying notes to consolidated financial statements.
6 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements December 31, 1995, 1994 and 1993 (000's omitted) (1) ORGANIZATION AND DESCRIPTION OF BUSINESS Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of Nationwide Corporation (Corp.). Wholly-owned subsidiaries of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC) (formerly known as Financial Horizons Life Insurance Company), West Coast Life Insurance Company (WCLIC), Employers Life Insurance Company of Wausau and subsidiaries (ELICW), National Casualty Company (NCC) and Nationwide Financial Services, Inc. (NFS). NLIC and its subsidiaries are collectively referred to as "the Company." NLIC, NLAIC, WCLIC and ELICW are life and accident and health insurers and NCC is a property and casualty insurer. The Company is licensed in all 50 states, the District of Columbia, the Virgin Islands and Puerto Rico. The Company offers a full range of life insurance, health insurance and annuity products through exclusive agents, brokers and other distribution channels and is subject to competition from other insurers throughout the United States. The Company is subject to regulation by the Insurance Departments of states in which it is licensed, and undergoes periodic examinations by those departments. The following is a description of the most significant risks facing life and health insurers and how the Company mitigates those risks: LEGAL/REGULATORY RISK is the risk that changes in the legal or regulatory environment in which an insurer operates will create additional expenses not anticipated by the insurer in pricing its products. That is, regulatory initiatives designed to reduce insurer profits, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those currently recorded in the consolidated financial statements. The Company mitigates this risk by offering a wide range of products and by operating throughout the United States, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices which identify and minimize the adverse impact of this risk. CREDIT RISK is the risk that issuers of securities owned by the Company or mortgagors on mortgage loans on real estate owned by the Company will default or that other parties, including reinsurers, which owe the Company money, will not pay. The Company minimizes this risk by adhering to a conservative investment strategy, by maintaining sound reinsurance and credit and collection policies and by providing for any amounts deemed uncollectible. INTEREST RATE RISK is the risk that interest rates will change and cause a decrease in the value of an insurer's investments. This change in rates may cause certain interest-sensitive products to become uncompetitive or may cause disintermediation. The Company mitigates this risk by charging fees for non-conformance with certain policy provisions, by offering products that transfer this risk to the purchaser, and/or by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, an insurer would have to borrow funds or sell assets prior to maturity and potentially recognize a gain or loss. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed by the Company that materially affect financial reporting are summarized below. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) which differ from statutory accounting practices prescribed or permitted by regulatory authorities. See note 4. 7 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ significantly from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs, valuation allowances for mortgage loans on real estate and real estate investments and the liability for future policy benefits and claims. Although some variability is inherent in these estimates, management believes the amounts provided are adequate. (a) CONSOLIDATION POLICY The December 31, 1995 consolidated financial statements include the accounts of NLIC and its wholly owned subsidiaries NLAIC, WCLIC, ELICW, NCC and NFS. The December 31, 1994 and 1993 consolidated financial statements include the accounts of NLIC, NLAIC, WCLIC, NCC and NFS. The December 31, 1994 consolidated balance sheet also includes the accounts of ELICW, which was acquired by NLIC effective December 31, 1994. See Note 13. All significant intercompany balances and transactions have been eliminated. (b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES The Company is required to classify its fixed maturity securities and equity securities as either held-to-maturity, available-for-sale or trading. Fixed maturity securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity and are stated at amortized cost. Fixed maturity securities not classified as held-to-maturity and all equity securities are classified as available-for-sale and are stated at fair value, with the unrealized gains and losses, net of adjustments to deferred policy acquisition costs and deferred Federal income tax, reported as a separate component of shareholder's equity. The adjustment to deferred policy acquisition costs represents the change in amortization of deferred policy acquisition costs that would have been required as a charge or credit to operations had such unrealized amounts been realized. The Company has no fixed maturity securities classified as held-to-maturity or trading as of December 31, 1995. Mortgage loans on real estate are carried at the unpaid principal balance less valuation allowances. The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. The measurement of impaired loans is based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the fair value of the collateral, if the loan is collateral dependent. Loans in foreclosure and loans considered to be impaired are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate are included in interest income in the period received. Real estate is carried at cost less accumulated depreciation and valuation allowances. Other long-term investments are carried on the equity basis, adjusted for valuation allowances. Realized gains and losses on the sale of investments are determined on the basis of specific security identification. Estimates for valuation allowances and other than temporary declines are included in realized gains and losses on investments. In March, 1995, the Financial Accounting Standards Board (FASB) issued STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 121 - ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF (SFAS 121). SFAS 121 requires impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. SFAS 121 also addresses the accounting for long-lived assets that are expected to be disposed of. The statement is effective for fiscal years beginning after December 15, 1995 and earlier application is permitted. Previously issued consolidated financial statements shall not be restated. The Company will adopt SFAS 121 in 1996 and the impact on the consolidated financial statements is not expected to be material. 8 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued (c) REVENUES AND BENEFITS TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life, limited-payment life, term life and certain annuities with life contingencies. Premiums for traditional life insurance products are recognized as revenue when due. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the life of the contract. This association is accomplished by the provision for future policy benefits and the deferral and amortization of policy acquisition costs. UNIVERSAL LIFE AND INVESTMENT PRODUCTS: Universal life products include universal life, variable universal life and other interest-sensitive life insurance policies. Investment products consist primarily of individual and group deferred annuities, annuities without life contingencies and guaranteed investment contracts. Revenues for universal life and investment products consist of asset fees, cost of insurance, policy administration and surrender charges that have been earned and assessed against policy account balances during the period. Policy benefits and claims that are charged to expense include benefits and claims incurred in the period in excess of related policy account balances and interest credited to policy account balances. ACCIDENT AND HEALTH INSURANCE: Accident and health insurance premiums are recognized as revenue over the terms of the policies. Policy claims are charged to expense in the period that the claims are incurred. (d) DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new business, principally commissions, certain expenses of the policy issue and underwriting department and certain variable agency expenses have been deferred. For traditional life and individual health insurance products, these deferred policy acquisition costs are predominantly being amortized with interest over the premium paying period of the related policies in proportion to the ratio of actual annual premium revenue to the anticipated total premium revenue. Such anticipated premium revenue was estimated using the same assumptions as were used for computing liabilities for future policy benefits. For universal life and investment products, deferred policy acquisition costs are being amortized with interest over the lives of the policies in relation to the present value of estimated future gross profits from projected interest margins, asset fees, cost of insurance, policy administration and surrender charges. For years in which gross profits are negative, deferred policy acquisition costs are amortized based on the present value of gross revenues. Deferred policy acquisition costs are adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale as described in note 2(b). (e) SEPARATE ACCOUNTS Separate Account assets and liabilities represent contractholders' funds which have been segregated into accounts with specific investment objectives. The investment income and gains or losses of these accounts accrue directly to the contractholders. The activity of the Separate Accounts is not reflected in the consolidated statements of income and cash flows except for the fees the Company receives for administrative services and risks assumed. (f) FUTURE POLICY BENEFITS Future policy benefits for traditional life and individual health insurance policies have been calculated using a net level premium method based on estimates of mortality, morbidity, investment yields and withdrawals which were used or which were being experienced at the time the policies were issued, rather than the assumptions prescribed by state regulatory authorities. See note 6. Future policy benefits for annuity policies in the accumulation phase, universal life and variable universal life policies have been calculated based on participants' contributions plus interest credited less applicable contract charges. 9 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Future policy benefits and claims for collectively renewable long-term disability policies (primarily discounted at 5.2%) and group long-term disability policies (primarily discounted at 5.5%) are the present value of amounts not yet due on reported claims and an estimate of amounts to be paid on incurred but unreported claims. The impact of reserve discounting is not material. Future policy benefits and claims on other group health insurance policies are not discounted. (g) PARTICIPATING BUSINESS Participating business represents approximately 45% (45% in 1994 and 48% in 1993) of the Company's ordinary life insurance in force, 72% (72% in 1994 and 1993) of the number of policies in force, and 39% (41% in 1994 and 45% in 1993) of life insurance premiums. The provision for policyholder dividends is based on current dividend scales. Future dividends are provided for ratably in future policy benefits based on dividend scales in effect at the time the policies were issued. Dividend scales are approved by the Board of Directors. Income attributable to participating policies in excess of policyholder dividends is accounted for as belonging to the shareholder. See note 12. (h) FEDERAL INCOME TAX NLIC, NLAIC, WCLIC and NCC file a consolidated Federal income tax return with Nationwide Mutual Insurance Company (NMIC), the majority shareholder of Corp. Through 1994, ELICW filed a consolidated Federal income tax return with Employers Insurance of Wausau A Mutual Company. Beginning in 1995, ELICW files a separate Federal income tax return. In 1993, the Company adopted STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 109 - ACCOUNTING FOR INCOME TAXES, which required a change from the deferred method of accounting for income tax of APB Opinion 11 to the asset and liability method of accounting for income tax. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. The Company has reported the cumulative effect of the change in method of accounting for income tax in the 1993 consolidated statement of income. See note 3. (i) REINSURANCE CEDED Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported on a gross basis. (j) CASH EQUIVALENTS For purposes of the consolidated statements of cash flows, the Company considers all short-term investments with original maturities of three months or less to be cash equivalents. 10 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued (k) RECLASSIFICATION Certain items in the 1994 and 1993 consolidated financial statements have been reclassified to conform to the 1995 presentation. (3) CHANGES IN ACCOUNTING PRINCIPLES Effective January 1, 1994, the Company changed its method of accounting for certain investments in debt and equity securities in connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed maturity securities with amortized cost and fair value of $6,593,844 and $7,024,736, respectively, as available-for-sale and recorded the securities at fair value. Previously, these securities were recorded at amortized cost. The effect as of January 1, 1994 has been recorded as a direct credit to shareholder's equity as follows:
Excess of fair value over amortized cost of fixed maturity securities available-for-sale $ 430,892 Adjustment to deferred policy acquisition costs (97,177) Deferred Federal income tax (116,800) --------- $ 216,915 ========= During 1993, the Company adopted accounting principles in connection with the issuance of two accounting standards by the FASB. The effect as of January 1, 1993, the date of adoption, has been recognized in the 1993 consolidated statement of income as the cumulative effect of changes in accounting principles, as follows: Asset/liability method of recognizing income tax (note 2(h)) $ 26,344 Accrual method of recognizing postretirement benefits other than pensions (net of tax benefit of $11,296) (note 11) (20,979) -------- $ 5,365 ========
(4) BASIS OF PRESENTATION The consolidated financial statements have been prepared in accordance with GAAP. Annual Statements for NLIC and NLAIC, WCLIC, ELICW and NCC, filed with the Department of Insurance of the State of Ohio (the Department), California Department of Insurance, Wisconsin Insurance Department and Michigan Bureau of Insurance, respectively, are prepared on the basis of accounting practices prescribed or permitted by such regulatory authorities. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company has no material permitted statutory accounting practices. The statutory capital shares and surplus of NLIC as reported to regulatory authorities as of December 31, 1995, 1994 and 1993 was $1,363,031, $1,262,861 and $992,631, respectively. The statutory net income of NLIC as reported to regulatory authorities for the years ended December 31, 1995, 1994 and 1993 was $86,529, $76,532 and $185,943, respectively. 11 LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued (5) INVESTMENTS An analysis of investment income by investment type follows for the years ended December 31:
1995 1994 1993 ------------- ------------ ------------ Gross investment income: Securities available-for-sale: Fixed maturities $ 772,589 674,346 -- Equity securities 1,436 550 7,230 Fixed maturities held-to-maturity 232,692 193,009 800,255 Mortgage loans on real estate 410,965 376,783 364,810 Real estate 39,222 40,280 39,684 Short-term investments 12,249 6,990 5,080 Other 61,701 42,831 33,832 ---------- ---------- ---------- Total investment income 1,530,854 1,334,789 1,250,891 Less investment expenses 47,874 45,288 46,465 ---------- ---------- ---------- Net investment income $1,482,980 1,289,501 1,204,426 ========== ========== ==========
An analysis of realized gains (losses) on investments, net of valuation allowances, by investment type follows for the years ended December 31:
1995 1994 1993 --------------- ------------- -------------- Securities available-for-sale: Fixed maturities $ 6,792 (7,120) -- Equity securities 3,435 1,427 129,728 Fixed maturities -- -- 20,225 Mortgage loans on real estate (7,312) (20,462) (28,241) Real estate and other (2,079) 9,771 (8,039) -------- -------- -------- $ 836 (16,384) 113,673 ======== ======== ========
The components of unrealized gains (losses) on securities available-for-sale, net, were as follows as of December 31:
1995 1994 --------------- ------------- Gross unrealized gains (losses) $ 735,103 (266,618) Adjustment to deferred policy acquisition costs (143,851) 82,525 Deferred Federal income tax (206,944) 64,425 --------- --------- $ 384,308 (119,668) ========= =========
An analysis of the change in gross unrealized gains (losses) on securities available-for-sale and fixed maturities held-to-maturity follows for the years ended December 31:
1995 1994 1993 --------------- ------------- ------------- Securities available-for-sale: Fixed maturities $ 1,001,706 (703,851) -- Equity securities 15 (1,990) (128,837) Fixed maturities held-to-maturity 86,477 (421,427) 223,392 ----------- ----------- ----------- $ 1,088,198 (1,127,268) 94,555 =========== =========== ===========
12 LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued The amortized cost and estimated fair value of securities available-for-sale were as follows as of December 31, 1995:
Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value -------------- ------------ ------------- --------------- Fixed maturities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 438,109 36,714 (53) 474,770 Obligations of states and political subdivisions 9,742 1,252 (1) 10,993 Debt securities issued by foreign governments 162,442 9,641 (66) 172,017 Corporate securities 8,902,494 524,796 (30,561) 9,396,729 Mortgage-backed securities 3,925,843 196,645 (9,620) 4,112,868 --------- ----------- ----------- ----------- Total fixed maturities 13,438,630 769,048 (40,301) 14,167,377 Equity securities 27,362 6,441 (85) 33,718 ---------- ----------- ----------- ----------- $13,465,992 775,489 (40,386) 14,201,095 =========== =========== ============ ===========
The amortized cost and estimated fair value of securities available-for-sale and fixed maturities held-to-maturity were as follows as of December 31, 1994:
Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value ------------- ------------- ------------- --------------- SECURITIES AVAILABLE-FOR-SALE Fixed maturities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 393,156 1,794 (18,941) 376,009 Obligations of states and political subdivisions 2,202 55 (21) 2,236 Debt securities issued by foreign governments 177,910 872 (9,205) 169,577 Corporate securities 4,201,738 50,405 (128,698) 4,123,445 Mortgage-backed securities 3,543,859 18,125 (187,345) 3,374,639 ---------- ---------- ---------- --------- Total fixed maturities 8,318,865 71,251 (344,210) 8,045,906 Equity securities 18,372 6,637 (296) 24,713 ---------- ---------- ---------- --------- $8,337,237 77,888 (344,506) 8,070,619 ========== ========= ========== ========= FIXED MATURITY SECURITIES HELD-TO-MATURITY Obligations of states and political subdivisions $ 11,613 92 (255) 11,450 Debt securities issued by foreign governments 16,131 111 (39) 16,203 Corporate securities 3,661,043 34,180 (120,566) 3,574,657 ---------- ---------- ---------- --------- $3,688,787 34,383 (120,860) 3,602,310 ========== ========== ========== =========
13 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued The amortized cost and estimated fair value of fixed maturity securities available-for-sale as of December 31, 1995, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated cost fair value ----------- ------------ FIXED MATURITY SECURITIES AVAILABLE-FOR-SALE - -------------------------------------------- Due in one year or less $ 641,490 647,639 Due after one year through five years 5,365,703 5,623,126 Due after five years through ten years 2,477,457 2,609,262 Due after ten years 1,028,137 1,174,482 ----------- ----------- 9,512,787 10,054,509 Mortgage-backed securities 3,925,843 4,112,868 ----------- ----------- $13,438,630 14,167,377 =========== ===========
Proceeds from the sale of securities available-for-sale during 1995 and 1994 were $131,420 and $247,876, respectively, while proceeds from sales of investments in fixed maturity securities during 1993 were $33,959. Gross gains of $7,197 ($3,406 in 1994 and $2,413 in 1993) and gross losses of $2,309 ($21,866 in 1994 and $39 in 1993) were realized on those sales. During 1995, the Company transferred fixed maturity securities classified as held-to-maturity with amortized cost of $27,929 to available-for-sale securities due to evidence of a significant deterioration in the issuer's creditworthiness. The transfer of those fixed maturity securities resulted in a gross unrealized loss of $4,285. As permitted by the FASB's Special Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November, 1995, the Company transferred all of its fixed maturity securities previously classified as held-to-maturity to available-for-sale. As of December 14, 1995, the date of transfer, the fixed maturity securities had amortized cost of $3,705,644, resulting in a gross unrealized gain of $171,531. Investments that were non-income producing for the twelve month period preceding December 31, 1995 amounted to $28,958 ($11,513 for 1994) and consisted of $8,228 (none in 1994) in fixed maturity securities, $14,740 ($11,111 in 1994) in real estate and $5,990 ($402 in 1994) in other long-term investments. Real estate is presented at cost less accumulated depreciation of $30,931 in 1995 ($29,275 in 1994) and valuation allowances of $26,250 in 1995 ($27,330 in 1994). Other long-term investments are presented net of valuation allowances of $457 as of December 31, 1995. There were no such valuation allowances as of December 31, 1994. As of December 31, 1995, the recorded investment of mortgage loans on real estate considered to be impaired (under STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 114, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended by STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 118, ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN - INCOME RECOGNITION AND DISCLOSURE) was $44,995, which includes $23,975 of impaired mortgage loans on real estate for which the related valuation allowance was $5,276 and $21,020 of impaired mortgage loans on real estate for which there was no valuation allowance. During 1995, the average recorded investment in impaired mortgage loans on real estate was approximately $22,621 and interest income recognized on those loans was $416, which is equal to interest income recognized using a cash-basis method of income recognition. 14 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Activity in the valuation allowance account for mortgage loans on real estate is summarized for the year ended December 31, 1995:
1995 -------- Allowance, beginning year $ 47,892 Additions charged to operations 7,653 Direct write-downs charged against the allowance (4,850) -------- Allowance, end of year $ 50,695 ========
Foresclosures of mortgage loans on real estate were $37,187 in 1994 and mortgage loans on real estate in process of foreclosure or in-substance foreclosed as of December 31, 1994 totaled $19,878, which approximated fair value. Fixed maturity securities with an amortized cost of $13,982 and $11,137 as of December 31, 1995 and 1994, respectively, were on deposit with various regulatory agencies as required by law. (6) FUTURE POLICY BENEFITS AND CLAIMS The liability for future policy benefits for investment contracts represents approximately 82% and 81% of the total liability for future policy benefits as of December 31, 1995 and 1994, respectively. The average interest rate credited on investment product policies was approximately 6.5%, 6.5% and 7.0% for the years ended December 31, 1995, 1994 and 1993, respectively. The liability for future policy benefits for traditional life insurance and individual health insurance policies has been established based upon the following assumptions: INTEREST RATES: Interest rates vary as follows:
Health Year of issue Life Insurance insurance -------------- ------------------------------------------------------------ --------------- 1995 7.6%, not graded - permanent contracts with loan provisions 4.5% 7.7%, not graded - all other contracts 1984-1994 6.0% to 10.5%, not graded 5.0% to 6.0% 1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 3.5% to 6.0% 1965 and prior generally lower than post 1965 issues 3.5% to 4.0%
WITHDRAWALS: Rates, which vary by issue age, type of coverage and policy duration, are based on Company experience. MORTALITY: Mortality and morbidity rates are based on published tables, modified for the Company's actual experience. 15 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Activity in the liability for unpaid claims and claim adjustment expenses is summarized for the years ended December 31:
1995 1994 1993 ---------- ---------- --------- Balance, beginning of year $ 637,998 592,180 760,209 Less reinsurance recoverables 438,761 430,720 547,683 --------- --------- --------- Net balance, beginning of year 199,237 161,460 212,526 --------- --------- --------- Incurred related to: Current year 425,907 273,299 309,721 Prior years (17,203) (26,156) (26,248) --------- --------- --------- Total incurred 408,704 247,143 283,473 --------- --------- --------- Paid related to: Current year 290,605 175,700 208,978 Prior years 111,353 73,889 125,561 --------- --------- --------- Total paid 401,958 249,589 334,539 --------- --------- --------- Unpaid claims of acquired companies 2,542 40,223 -- --------- --------- --------- Net balance, end of year 208,525 199,237 161,460 Plus reinsurance recoverables 491,321 438,761 430,720 --------- --------- --------- Balance, end of year $ 699,846 637,998 592,180 ========= ========= =========
Reinsurance recoverables include amounts from affiliates, as discussed in note 13, of $477,912, $430,936, $430,278 and $534,983 as of December 31, 1995, 1994, 1993 and 1992, respectively. The provision for claims and claim adjustment expenses for prior years decreased in each of the three years ended December 31, 1995 due to lower-than-anticipated costs to settle accident and health insurance claims. (7) FEDERAL INCOME TAX The tax effects of temporary differences that give rise to significant components of the net deferred tax asset (liability) as of December 31, 1995 and 1994 are as follows:
1995 1994 -------- -------- Deferred tax assets: Future policy benefits $ 179,916 124,044 Fixed maturity securities available-for-sale -- 95,536 Liabilities in Separate Accounts 129,120 94,783 Mortgage loans on real estate and real estate 26,062 25,632 Other policyholder funds 7,752 7,137 Other assets and other liabilities 47,215 57,528 --------- --------- Total gross deferred tax assets 390,065 404,660 --------- --------- Deferred tax liabilities: Deferred policy acquisition costs 312,616 317,224 Fixed maturity securities available-for-sale 266,184 -- Equity securities available-for-sale and other long-term investments 3,431 3,620 Other 46,711 47,301 --------- --------- Total gross deferred tax liabilities 628,942 368,145 --------- --------- $(238,877) 36,515 ========= =========
16 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued The Company has determined that valuation allowances are not necessary as of December 31, 1995, 1994 and 1993 based on its analysis of future deductible amounts. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the total gross deferred tax assets will not be realized. All future deductible amounts can be offset by future taxable amounts or recovery of Federal income tax paid within the statutory carryback period. In addition, for future deductible amounts for securities available-for-sale, affiliates of the Company which are included in the same consolidated Federal income tax return hold investments that could be sold for capital gains that could offset capital losses realized by the Company should securities available-for-sale be sold at a loss. Total Federal income tax expense for the years ended December 31, 1995, 1994 and 1993 differs from the amount computed by applying the U.S. Federal income tax rate to income before tax as follows:
1995 1994 1993 ---------------------- ---------------------- ---------------------- Amount % Amount % Amount % --------------- ----- -------------- ------ ------------- ------- Computed (expected) tax expense $ 111,906 35.0 $ 95,631 35.0 $ 109,515 35.0 Tax exempt interest and dividends received deduction (137) (0.1) (194) (0.1) (2,322) (0.7) Current year increase in U.S. Federal income tax rate -- -- -- -- 1,704 0.5 Other, net (4,515) (1.4) (5,933) (2.1) (2,139) (0.7) --------- ---- --------- ---- --------- ---- Total (effective rate of each year) $ 107,254 33.5 $ 89,504 32.8 $ 106,758 34.1 ========= ==== ========= ==== ========= ====
Total Federal income tax paid was $75,309, $87,576 and $58,286 during the years ended December 31, 1995, 1994 and 1993, respectively. Prior to 1984, the Life Insurance Company Income Tax Act of 1959 as amended by the Deficit Reduction Act of 1984 (DRA), permitted the deferral from taxation of a portion of statutory income under certain circumstances. In these situations, the deferred income was accumulated in the Policyholders' Surplus Account (PSA). Management considers the likelihood of distributions from the PSA to be remote; therefore, no Federal income tax has been provided for such distributions in the consolidated financial statements. The DRA eliminated any additional deferrals to the PSA. Any distributions from the PSA, however, will continue to be taxable at the then current tax rate. The balance of the PSA was approximately $35,344 as of December 31, 1995. (8) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair value information about existing on and off-balance sheet financial instruments. SFAS 107 defines the fair value of a financial instrument as the amount at which the financial instrument could be exchanged in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Although fair value estimates are calculated using assumptions that management believes are appropriate, changes in assumptions could cause these estimates to vary materially. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and,in many cases, could not be realized in the immediate settlement of the instruments. SFAS 107 excludes certain assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. 17 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Although insurance contracts, other than policies such as annuities that are classified as investment contracts, are specifically exempted from SFAS 107 disclosures, estimated fair value of policy reserves on life insurance contracts are provided to make the fair value disclosures more meaningful. The tax ramifications of the related unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The following methods and assumptions were used by the Company in estimating its fair value disclosures: CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount reported in the consolidated balance sheets for these instruments approximates their fair value. FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed maturity securities is based on quoted market prices, where available. For fixed maturity securities not actively traded, fair value is estimated using values obtained from independent pricing services or, in the case of private placements, is estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. The fair value for equity securities is based on quoted market prices. SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets held in Separate Accounts is based on quoted market prices. The fair value of liabilities related to Separate Accounts is the amount payable on demand. MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on real estate is estimated using discounted cash flow analyses, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Fair value for mortgages in default is the estimated fair value of the underlying collateral. INVESTMENT CONTRACTS: Fair value for the Company's liabilities under investment type contracts is disclosed using two methods. For investment contracts without defined maturities, fair value is the amount payable on demand. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analysis. Interest rates used are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures for individual life, universal life and supplementary contracts with life contingencies for which the estimated fair value is the amount payable on demand. Also included are disclosures for the Company's limited payment policies, which the Company has used discounted cash flow analyses similar to those used for investment contracts with known maturities to estimate fair value. POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS: The carrying amount reported in the consolidated balance sheets for these instruments approximates their fair value. 18 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Carrying amount and estimated fair value of financial instruments subject to SFAS 107 and policy reserves on life insurance contracts were as follow as of December 31, 1995 and 1994:
1995 1994 -------------------------- ------------------------- Carrying Estimated Carrying Estimated amount fair value amount fair value ----------- ----------- ----------- ----------- ASSETS - ------ Investments: Securities available-for-sale: Fixed maturities $14,167,377 14,167,377 8,045,906 8,045,906 Equity securities 33,718 33,718 24,713 24,713 Fixed maturities held-to-maturity -- -- 3,688,787 3,602,310 Mortgage loans on real estate 4,786,599 5,169,805 4,222,284 4,173,284 Policy loans 370,908 370,908 340,491 340,491 Short-term investments 45,732 45,732 131,643 131,643 Cash 10,485 10,485 7,436 7,436 Assets held in Separate Accounts 18,763,678 18,763,678 12,222,461 12,222,461 LIABILITIES - ----------- Investment contracts 13,561,943 13,221,724 12,189,894 11,657,556 Policy reserves on life insurance contacts 3,695,814 3,659,074 3,170,085 2,934,384 Policyholders' dividend accumulations 353,554 353,554 338,058 338,058 Other policyholder funds 71,155 71,155 72,770 72,770 Liabilities related to Separate Accounts 18,763,678 18,224,933 12,222,461 11,807,331
(9) ADDITIONAL FINANCIAL INSTRUMENTS DISCLOSURES -------------------------------------------- FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business through management of its investment portfolio. These financial instruments include commitments to extend credit in the form of loans. These instruments involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets. Commitments to fund fixed rate mortgage loans on real estate are agreements to lend to a borrower, and are subject to conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a deposit. Commitments extended by the Company are based on management's case-by-case credit evaluation of the borrower and the borrower's loan collateral. The underlying mortgage property represents the collateral if the commitment is funded. The Company's policy for new mortgage loans on real estate is to lend no more than 80% of collateral value. Should the commitment be funded, the Company's exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amounts of these commitments less the net realizable value of the collateral. The contractual amounts also represent the cash requirements for all unfunded commitments. Commitments on mortgage loans on real estate of $361,974 extending into 1996 were outstanding as of December 31, 1995. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly commercial mortgage loans on real estate to customers throughout the United States. The Company has a diversified portfolio with no more than 20% (22% in 1994) in any geographic area and no more than 2% (2% in 1994) with any one borrower. 19 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued The summary below depicts loans by remaining principal balance as of December 31, 1995 and 1994:
Apartment Office Warehouse Retail & other Total --------- --------- --------- --------- --------- 1995: East North Central $ 140,732 110,361 534,814 184,201 970,108 East South Central 23,978 15,653 183,790 84,588 308,009 Mountain -- 18,940 144,156 48,727 211,823 Middle Atlantic 124,079 72,201 183,562 18,383 398,225 New England 9,594 39,526 153,644 1 202,765 Pacific 190,628 239,687 395,914 107,650 933,879 South Atlantic 101,904 74,731 458,355 279,692 914,682 West North Central 134,866 14,205 81,521 37,586 268,178 West South Central 69,143 99,618 194,717 272,323 635,801 --------- --------- --------- --------- --------- $ 794,924 684,922 2,330,473 1,033,151 4,843,470 ========= ========= ========= ========= Less valuation allowances and unamortized discount 56,871 --------- Total mortgage loans on real estate, net $4,786,599 =========
Apartment Office Warehouse Retail & other Total --------- --------- --------- --------- --------- 1994: East North Central $ 109,233 103,499 540,686 191,489 944,907 East South Central 24,298 10,803 127,845 76,897 239,843 Mountain 3,150 13,770 140,358 39,682 196,960 Middle Atlantic 61,299 53,285 140,847 30,111 285,542 New England 10,536 43,282 139,131 4 192,953 Pacific 195,393 210,930 397,911 68,768 873,002 South Atlantic 87,150 81,576 424,150 210,354 803,230 West North Central 127,760 11,766 80,854 4,738 225,118 West South Central 51,013 84,796 184,923 194,788 515,520 --------- --------- --------- --------- --------- $ 669,832 613,707 2,176,705 816,831 4,277,075 ========= ========= ========= ========= Less valuation allowances and unamortized discount 54,791 --------- Total mortgage loans on real estate, net $4,222,284 =========
(10) PENSION PLAN ------------ The Company is a participant, together with other affiliated companies, in a pension plan covering all employees who have completed at least one thousand hours of service within a twelve-month period and who have met certain age requirements. Benefits are based upon the highest average annual salary of a specified number of consecutive years of the last ten years of service. The Company funds pension costs accrued for direct employees plus an allocation of pension costs accrued for employees of affiliates whose work efforts benefit the Company. Effective January 1, 1995, the plan was amended to provide enhanced benefits for participants who met certain eligibility requirements and elected early retirement no later than March 15, 1995. The entire cost of the enhanced benefit was borne by NMIC and certain of its property and casualty insurance company affiliates. 20 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Effective December 31, 1995, the Nationwide Insurance Companies and Affiliates Retirement Plan was merged with the Farmland Mutual Insurance Company Employees' Retirement Plan and the Wausau Insurance Companies Pension Plan to form the Nationwide Insurance Enterprise Retirement Plan. Immediately prior to the merger, the plans were amended to provide consistent benefits for service after January 1, 1996. These amendments had no significant impact on the accumulated benefit obligation or projected benefit obligation as of December 31, 1995. Pension costs charged to operations by the Company during the years ended December 31, 1995, 1994 and 1993 were $14,105, $10,451 and $6,702, respectively. The Company's net accrued pension expense as of December 31, 1995 and 1994 was $1,376 and $1,836, respectively. The net periodic pension cost for the Nationwide Insurance Companies and Affiliates Retirement Plan as a whole for the years ended December 31, 1995, 1994 and 1993 follows:
1995 1994 1993 --------- --------- --------- Service cost (benefits earned during the period) $ 64,524 64,740 47,694 Interest cost on projected benefit obligation 95,283 73,951 70,543 Actual return on plan assets (249,294) (21,495) (105,002) Net amortization and deferral 143,353 (62,150) 20,832 --------- --------- --------- $ 53,866 55,046 34,067 ========= ========= =========
Basis for measurements, net periodic pension cost:
1995 1994 1993 --------- --------- --------- Weighted average discount rate 7.50% 5.75% 6.75% Rate of increase in future compensation levels 6.25% 4.50% 4.75% Expected long-term rate of return on plan assets 8.75% 7.00% 7.50%
Information regarding the funded status of the Nationwide Insurance Enterprise Retirement Plan as a whole as of December 31, 1995 (post-merger) and the Nationwide Insurance Companies and Affiliates Retirement Plan as of December 31, 1995 (pre-merger) and 1994 follows:
Post-merger Pre-merger 1995 1995 1994 ----------- ----------- ----------- Accumulated benefit obligation: Vested $ 1,236,730 1,002,079 914,850 Nonvested 26,503 8,998 7,570 ----------- ----------- ----------- $ 1,263,233 1,011,077 922,420 =========== =========== =========== Net accrued pension expense: Projected benefit obligation for services rendered to date $ 1,780,616 1,447,522 1,305,547 Plan assets at fair value 1,738,004 1,508,781 1,241,771 ----------- ----------- ----------- Plan assets (less than) in excess of projected benefit obligation (42,612) 61,259 (63,776) Unrecognized prior service cost 42,845 42,850 46,201 Unrecognized net (gains) losses (63,130) (86,195) 39,408 Unrecognized net obligation (asset) at transition 41,305 (19,841) (21,994) ----------- ----------- ----------- $ (21,592) (1,927) (161) =========== =========== ===========
21 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Basis for measurements, funded status of plan:
Post-merger Pre-merger 1995 1995 1994 --------------- --------------- --------------- Weighed average discount rate 6.00% 6.00% 7.50% Rate of increase in future compensation levels 4.25% 4.25% 6.25%
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested in group annuity contracts of NLIC and ELICW. Prior to the merger, the assets of the Nationwide Insurance Companies and Affiliates Retirement Plan were invested in a group annuity contract of NLIC. (11) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS ------------------------------------------- In addition to the defined benefit pension plan, the Company, together with other affiliated companies, participates in life and health care defined benefit plans for qualifying retirees. Postretirement life and health care benefits are contributory and generally available to full time employees who have attained age 55 and have accumulated 15 years of service with the Company after reaching age 40. Postretirement health care benefit contributions are adjusted annually and contain cost-sharing features such as deductibles and coinsurance. In addition, there are caps on the Company's portion of the per-participant cost of the postretirement health care benefits. These caps can increase annually, but not more than three percent. The Company's policy is to fund the cost of health care benefits in amounts determined at the discretion of management. Plan assets are invested primarily in group annuity contracts of NLIC. Effective January 1, 1993, the Company adopted the provisions of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 106 - EMPLOYERS' ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (SFAS 106), which requires the accrual method of accounting for postretirement life and health care insurance benefits based on actuarially determined costs to be recognized over the period from the date of hire to the full eligibility date of employees who are expected to qualify for such benefits. The Company elected to immediately recognize its estimated accumulated postretirement benefit obligation as of January 1, 1993. Accordingly, a noncash charge of $32,275 ($20,979 net of related income tax benefit) was recorded in the 1993 consolidated statement of income as a cumulative effect of a change in accounting principle. See note 3. The adoption of SFAS 106, including the cumulative effect of the change in accounting principle, increased the expense for postretirement benefits by $35,277 to $36,544 in 1993. Certain affiliated companies elected to amortize their initial transition obligation over periods ranging from 10 to 20 years. The Company's accrued postretirement benefit expense as of December 31, 1995 and 1994 was $51,490 and $36,001, respectively, and the net periodic postretirement benefit cost (NPPBC) for 1995 and 1994 was $8,269 and $4,627, respectively. The amount of NPPBC for the plan as a whole for the years ended December 31, 1995, 1994 and 1993 was as follows:
1995 1994 1993 -------- -------- -------- Service cost - benefits attributed to employee service during the year $ 6,235 8,586 7,090 Interest cost on accumulated postretirement benefit obligation 14,151 14,011 13,928 Actual return on plan assets (2,657) (1,622) -- Amortization of unrecognized transition obligation of affiliates 2,966 568 568 Net amortization and deferral (1,619) 1,622 -- -------- -------- -------- $ 19,076 23,165 21,586 ======== ======== ========
22 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued Information regarding the funded status of the plan as a whole as of December 31, 1995 and 1994 follows:
1995 1994 --------- --------- Accrued postretirement benefit expense: Retirees $ 88,680 76,677 Fully eligible, active plan participants 28,793 22,013 Other active plan participants 90,375 59,089 --------- --------- Accumulated postretirement benefit obligation (APBO) 207,848 157,779 Plan assets at fair value 54,325 49,012 --------- --------- Plan assets less than accumulated postretirement benefit obligation (153,523) (108,767) Unrecognized transition obligation of affiliates 1,827 6,577 Unrecognized net gains (1,038) (41,497) --------- --------- $(152,734) (143,687) ========= =========
Actuarial assumptions used for the measurement of the APBO as of December 31, 1995 and 1994 and the NPPBC for 1995, 1994 and 1993 were as follows:
1995 1995 1994 1994 1993 APBO NPPBC APBO NPPBC NPPBC ----------- ----------- ------------ ------------ ------------ Discount rate 6.75% 8% 8% 7% 8% Assumed health care cost trend rate: Initial rate 11% 10% 11% 12% 14% Ultimate rate 6% 6% 6% 6% 6% Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
The health care cost trend rate assumption has an effect on the amounts reported. For the plan as a whole, a one percentage point increase in the assumed health care cost trend rate would increase the APBO as of December 31, 1995 by $641 and the NPPBC for the year ended December 31, 1995 by $107. (12) REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND RESTRICTIONS ------------------------------------------------------------- Each insurance company's state of domicile imposes minimum risk-based capital requirements that were developed by the NAIC. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of the company's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level risk-based capital, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. NLIC and each of its insurance subsidiaries exceed the minimum risk-based capital requirements. In accordance with the requirements of the New York statutes, the Company has agreed with the Superintendent of Insurance of that state that so long as participating policies and contracts are held by residents of New York, no profits on participating policies and contracts in excess of the larger of (a) ten percent of such profits or (b) fifty cents per year per thousand dollars of participating life insurance in force, exclusive of group term, as of the year-end shall inure to the benefit of the shareholder. Such New York statutes further provide that so long as such agreement is in effect, such excess of profits shall be exhibited as "participating policyholders' surplus" in annual statements filed with the Superintendent and shall be used only for the payment or apportionment of dividends to participating policyholders at least to the extent required by statute or for the purpose of making up any loss on participating policies. 23 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued In the opinion of counsel for the Company, the ultimate ownership of the entire surplus, however classified, of the Company resides with the shareholder, subject to the usual requirements under state laws and regulations that certain deposits, reserves and minimum surplus be maintained for the protection of the policyholders until all policy contracts are discharged. Based on the opinion of counsel with respect to the ownership of its surplus, the Company is of the opinion that the earnings attributable to participating policies in excess of the amounts paid as dividends to policyholders belong to the shareholder rather than the policyholders, and such earnings are so treated by the Company. The amount of shareholder's equity other than capital shares was $2,664,697, $1,904,664 and $1,647,353 as of December 31, 1995, 1994 and 1993, respectively. The amount thereof not presently available for dividends to the shareholder due to the New York restrictions was $1,503,241, $929,934 and $954,037 as of December 31, 1995, 1994 and 1993, respectively. Ohio law limits the payment of dividends to shareholders. The maximum dividend that may be paid by the Company without prior approval of the Director of the Department is limited to the greater of statutory gain from operations of the preceding calendar year or 10% of statutory shareholder's surplus as of the prior December 31. Therefore, $2,468,687 of shareholder's equity, as presented in the accompanying consolidated financial statements, is so restricted as to dividend payments in 1996. Each of NLIC's insurance company subsidiaries are limited in their payment of dividends by the state insurance department of their respective state of domicile. As of December 31, 1995, the maximum amount of shareholder's equity available for dividend payment to NLIC in 1996 by its insurance company subsidiaries without prior approval are: Nationwide Life and Annuity Insurance Company $10,143 West Coast Life Insurance Company 13,153 Employers Life Insurance Company of Wausau 10,132 National Casualty Company -- ------- $33,428 =======
(13) TRANSACTIONS WITH AFFILIATES ---------------------------- On March 1, 1995, Corp. contributed all of the outstanding shares of Farmland Life Insurance Company (Farmland) to NLIC, which then merged Farmland into WCLIC effective June 30, 1995. The contribution resulted in a direct increase to consolidated shareholder's equity of $46,918. The contribution of Farmland has been accounted for in a manner similar to a pooling of interests and accordingly, Farmland's results are included in the consolidated statements of income beginning January 1, 1995. However, prior period consolidated financial statements have not been restated due to the impact of Farmland being immaterial. Effective December 31, 1994, NLIC purchased all of the outstanding shares of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC transferred fixed maturity securities and cash with a fair value of $155,000 to WSC on December 28, 1994, which resulted in a realized loss of $19,239 on the disposition of the securities. The purchase price approximated both the historical cost basis and fair value of net assets of ELICW. ELICW has and will continue to share home office, other facilities, equipment and common management and administrative services with WSC. Certain annuity products are sold through three affiliated companies which are also subsidiaries of Corp. Total commissions and fees paid to these affiliates for the three years ended December 31, 1995 were $57,969, $50,470 and $44,577, respectively. 24 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued The Company shares home office, other facilities, equipment and common management and administrative services with affiliates. The Company participates in intercompany repurchase agreements with affiliates whereby the seller will transfer securities to the buyer at a stated value. Upon demand or a stated period, the securities will be repurchased by the seller at the original sales price plus a price differential. Transactions under the agreements during 1995 and 1994 were not material. During 1993, the Company sold equity securities with a market value $194,515 to NMIC, resulting in a realized gain of $122,823. With the proceeds, the Company purchased securities with a market value of $194,139 and cash of $376 from NMIC. Intercompany reinsurance contracts exist between NLIC and NMIC, NLIC and WCLIC, NLIC and NCC, WCLIC and NMIC and WCLIC and ELICW as of December 31, 1995. These contracts are immaterial to the consolidated financial statements. NCC participates in several 100% quota share reinsurance agreements with NMIC and Nationwide Mutual Fire Insurance Company, the minority shareholder of Corp. As a result of these agreements, the following assets and (liabilities) are included in the consolidated financial statements as of December 31, 1995 and 1994 for reinsurance ceded:
1995 1994 ----------- ----------- Reinsurance recoverable $ 590,379 541,289 Unearned premium reserves (112,467) (110,353) Liability for unpaid claims and claim adjustment expense (477,912) (430,936)
The ceding of reinsurance does not discharge the original insurer from primary liability to its policyholder. The insurer which assumes the coverage assumes the related liability and it is the practice of insurers to treat insured risks, to the extent of reinsurance ceded, as though they were risks for which the original insurer is not liable. Management believes the financial strength of NMIC reduces to an acceptable level any risk to NCC under these intercompany reinsurance agreements. ELICW assumes certain accident and health insurance business from Employers Insurance of Wausau A Mutual Company, an affiliate. During 1995, total premiums assumed by ELICW under the reinsurance agreement were $150,622. The Company and various affiliates entered into agreements with Nationwide Cash Management Company (NCMC) and California Cash Management Company (CCMC), both affiliates, under which NCMC and CCMC act as common agents in handling the purchase and sale of short-term securities for the respective accounts of the participants. Amounts on deposit with NCMC and CCMC were $21,644 and $92,531 as of December 31, 1995 and 1994, respectively, and are included in short-term investments on the accompanying consolidated balance sheets. (14) BANK LINES OF CREDIT -------------------- As of December 31, 1995 and 1994, NLIC had $120,000 of confirmed but unused bank lines of credit which support a $100,000 commercial paper borrowing authorization. (15) CONTINGENCIES ------------- The Company is a defendant in various lawsuits. In the opinion of management, the effects, if any, of such lawsuits are not expected to be material to the Company's financial position or results of operations. 25 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Corporation) Notes to Consolidated Financial Statements, Continued (16) SEGMENT INFORMATION ------------------- The Company operates in the long-term savings, life insurance and accident and health insurance lines of business in the life insurance and property and casualty insurance industries. Long-term savings operations include both qualified and non-qualified annuity contracts issued to both individuals and groups. Life insurance operations include whole life, universal life, variable universal life and endowment and term life insurance issued to individuals and groups. Accident and health insurance operations also provide coverage to individuals and groups. Corporate primarily includes investments, and the related investment income, which are not specifically allocated to one of the three operating segments. In addition, realized gains and losses on all general account investments are reported as a component of the corporate segment. During 1995, the Company changed its reporting segments to better reflect the way the businesses are managed. Prior periods have been restated to reflect these changes. The following table summarizes the revenues and income (loss) before Federal income tax expense and cumulative effect of changes in accounting principles for the years ended December 31, 1995, 1994 and 1993 and assets as of December 31, 1995, 1994 and 1993, by business segment.
1995 1994 1993 ------------ ------------ ------------ Revenues: Long-term savings $ 1,406,241 1,125,013 1,048,045 Life insurance 502,885 452,795 432,343 Accident and health insurance 532,383 345,545 339,764 Corporate 134,598 122,847 214,374 ------------ ------------ ------------ $ 2,576,107 2,046,200 2,034,526 ============ ============ ============ Income (loss) before Federal income tax expense and cumulative effect of changes in accounting principles: Long-term savings 129,475 95,530 47,966 Life insurance 63,169 46,119 36,383 Accident and health insurance (12,521) 13,221 15,041 Corporate 139,609 118,360 213,511 ------------ ------------ ------------ $ 319,732 273,230 312,901 ============ ============ ============ Assets: Long-term savings 34,634,892 25,815,273 20,695,598 Life insurance 3,675,581 3,231,651 2,897,574 Accident and health insurance 307,643 291,296 297,200 Corporate 1,995,995 1,773,913 1,515,989 ------------ ------------ ------------ $ 40,614,111 31,112,133 25,406,361 ============ ============ ============
57 PART II - OTHER INFORMATION CONTENTS OF REGISTRATION STATEMENT This Post-Effective Amendment No. 13 to Form S-6 Registration Statement comprises the following papers and documents: The facing sheet. Cross-reference to items required by Form N-8B-2. The prospectus consisting of 89 pages. Representations and Undertakings. Accountants' Consent The Signatures. The following exhibits required by Forms N-8B-2 and S-6: 1. Power of Attorney dated April 4, 1996 An original Power of Attorney dated April 4, 1996 is included with the Post-Effective Amendment No. 8 to the Registration Statement on Form N-4 of NACo Variable Account (File No. 33-33425, 811-5999) on file with the Company. 2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for the authorizing the establishment of the Registrant, adopted Nationwide VLI Separate Account-2, and hereby incorporated herein by reference. 3. Distribution Contracts Included with the Registration Statement on Form N-8B-2 for the Nationwide VLI Separate Account-2, and hereby incorporated herein by reference. 4. Form of Security Included with Post-Effective Amendment No. 3 and is hereby incorporated herein by reference. 5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for the Nationwide VLI Separate Account-2, and hereby incorporated herein by reference. 6. Application form of Security Included with Post-Effective Amendment No. 3 and is hereby incorporated herein by reference. 7. Opinion of Counsel Included with Post-Effective Amendment No. 3 and is hereby incorporated herein by reference.
58 REPRESENTATIONS AND UNDERTAKINGS The Registrant and the Company hereby make the following representations and undertakings: (a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment Company Act of 1940 (the "Act"). The Registrant and the Company elect to be governed by Rule 6e-3(T)(b)(13)(i)(B) under the Act with respect to the Policies described in the prospectus. The Policies have been designed in such a way as to qualify for the exemptive relief from various provisions of the Act afforded by Rule 6e-3(T). (b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the deduction of the mortality and expense risk charges ("risk charges") assumed by the Company under the Policies. The Company represents that the risk charges are within the range of industry practice for comparable policies and reasonable in relation to all of the risks assumed by the issuer under the Policies. Actuarial memoranda demonstrating the reasonableness of these charges are maintained by the Company, and will be made available to the Securities and Exchange Commission (the "Commission") on request. (c) The Company has concluded that there is a reasonable likelihood that the distribution financing arrangement of the separate account will benefit the separate account and the contractholders and will keep and make available to the Commission on request a memorandum setting forth the basis for this representation. (d) The Company represents that the separate account will invest only in management investment companies which have undertaken to have a board of directors, a majority of whom are not interested persons of the company, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. (e) Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the Registrant hereby undertakes to file with the Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. (f) That the fees and charges deducted under the Policy in the aggregate are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. 59 ACCOUNTANTS' CONSENT The Board of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide VLI Separate Account-2: We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus. KPMG Peat Marwick LLP Columbus, Ohio April 26, 1996 60 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant, NATIONWIDE VLI SEPARATE ACCOUNT-2, certifies that it meets the requirements of Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment No. 13 and has duly caused this Post-Effective Amendment No. 13 to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Columbus, and State of Ohio, on this 20th day of December, 1996. NATIONWIDE VLI SEPARATE ACCOUNT-2 (Registrant) (Seal) NATIONWIDE LIFE INSURANCE COMPANY Attest: (Sponsor) W. SIDNEY DRUEN By: JOSEPH P. RATH - ---------------------------- ----------------------------- W. Sidney Druen Joseph P. Rath Assistant Secretary Vice President and Associate General Counsel Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 13 has been signed below by the following persons in the capacities indicated on the 20th day of December, 1996.
SIGNATURE TITLE LEWIS J. ALPHIN Director - ---------------------------------- Lewis J. Alphin KEITH W. ECKEL Director - ---------------------------------- Keith W. Eckel WILLARD J. ENGEL Director - ---------------------------------- Willard J. Engel FRED C. FINNEY Director - ---------------------------------- Fred C. Finney CHARLES L. FUELLGRAF, JR. Director - ---------------------------------- Charles L. Fuellgraf, Jr. JOSEPH J. GASPER President/Chief Operating - ---------------------------------- Officer and Director Joseph J. Gasper HENRY S. HOLLOWAY Chairman of the Board - ---------------------------------- and Director Henry S. Holloway D. RICHARD McFERSON Chairman and Chief Executive - ---------------------------------- Officer-Nationwide Insurance Enterprise D. Richard McFerson and Director DAVID O. MILLER Director - ---------------------------------- David O. Miller C. RAY NOECKER Director - ---------------------------------- C. Ray Noecker ROBERT A. OAKLEY Executive Vice President- - ---------------------------------- Chief Financial Officer Robert A. Oakley JAMES F. PATTERSON Director By: JOSEPH P. RATH - ---------------------------------- -------------------------------- James F. Patterson Joseph P. Rath, Attorney-in-Fact ARDEN L. SHISLER Director - ---------------------------------- Arden L. Shisler ROBERT L. STEWART Director - ---------------------------------- Robert L. Stewart NANCY C. THOMAS Director - ---------------------------------- Nancy C. Thomas HAROLD W. WEIHL Director - ---------------------------------- Harold W. Weihl
61 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned as directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, an Ohio corporation, which has filed or will file with the Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, various Registration Statements and amendments thereto for the registration under said Act of Individual Deferred Variable Annuity Contracts in connection with the MFS Variable Account, Nationwide Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide Multi-Flex Variable Account and Nationwide Variable Account-8; and the registration of fixed interest rate options subject to a market value adjustment offered under some or all of the aforementioned individual Variable Annuity Contracts in connection with the Nationwide Multiple Maturity Separate Account, and the registration of Group Flexible Fund Retirement Contracts in connection with the Nationwide DC Variable Account, Nationwide DCVA-II, and the NACo Variable Account; and the registration of Group Common Stock Variable Annuity Contracts in connection with Separate Account No. 1; and the registration of variable life insurance policies in connection with the Nationwide VLI Separate Account, Nationwide VLI Separate Account-2 and Nationwide VLI Separate Account-3 of Nationwide Life Insurance Company, hereby constitutes and appoints D. Richard McFerson, Joseph J. Gasper, Gordon E. McCutchan, W. Sidney Druen, and Joseph P. Rath, and each of them with power to act without the others, his/her attorney, with full power of substitution and resubstitution, for and in his/her name, place and stead, in any and all capacities, to approve, and sign such Registration Statements and any and all amendments thereto, with power to affix the corporate seal of said corporation thereto and to attest said seal and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby granting unto said attorneys, and each of them, full power and authority to do and perform all and every act and thing requisite to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming that which said attorneys, or any of them, may lawfully do or cause to be done by virtue hereof. This instrument may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned have herewith set their names and seals as of this 9th day of August, 1996. - ------------------------------------- ------------------------------------- Lewis J. Alphin, Director David O. Miller, Director - ------------------------------------- ------------------------------------- Keith W. Eckel, Director C. Ray Noecker, Director - ------------------------------------- ------------------------------------- Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief Financial Officer - ------------------------------------- Fred C. Finney, Director ------------------------------------- James F. Patterson, Director - ------------------------------------- Charles F. Fuellgraf, Jr., Director ------------------------------------- Arden L. Shisler, Director - ------------------------------------- Joseph J. Gasper, President and Chief ------------------------------------- Operating Officer and Director Robert L. Stewart, Director - ------------------------------------- ------------------------------------- Henry S. Holloway, Chairman of the Nancy C. Thomas, Director Board, Director ------------------------------------- - ------------------------------------- Harold W. Weihl, Director D. Richard McFerson, Chairman and Chief Executive Officer-Nationwide Insurance Enterprise and Director -----END PRIVACY-ENHANCED MESSAGE-----