-----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, GXY99j2hOUEvcbMuTIw+p0RJEZ0MyszYHCoa2BPw/N8tYVnYQX9yYt8exF+l3iIM 7z6NNXE3I/kdRFr9NOiZPg== 0000950152-97-003293.txt : 19970429 0000950152-97-003293.hdr.sgml : 19970429 ACCESSION NUMBER: 0000950152-97-003293 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19970428 EFFECTIVENESS DATE: 19970428 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: 033-42180 FILM NUMBER: 97588929 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 2 1 Registration No. 33-42180 ================================================================================ 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 Financial Statements. It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on May 1, 1997 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 The Registrant has registered an indefinite number of securities by a prior registration statement in accordance with Rule 24f-2 under the Investment Company Act of 1940. Registrant filed its 24f-2 Notice for the fiscal year ended December 31, 1996, on February 25, 1997. ================================================================================ 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 3 N-8B-2 Item Caption in Prospectus - ----------- --------------------- 44.........................................How The Cash Value Varies 45.........................................Not Applicable 46.........................................How The Cash Value Varies 47.........................................Not Applicable 48.........................................Custodian of Assets 49.........................................Not Applicable 50.........................................Not Applicable 51.........................................Summary of The Policies; Information About The Policies 52.........................................Substitution of Securities 53.........................................Taxation of The Company 54.........................................Not Applicable 55.........................................Not Applicable 56.........................................Not Applicable 57.........................................Not Applicable 58.........................................Not Applicable 59.........................................Financial Statements 4 NATIONWIDE LIFE INSURANCE COMPANY P.O. Box 182150 Columbus, Ohio 43218-2150 (800) 547-7548, TDD (800) 238-3035 FLEXIBLE PREMIUM VARIABLE UNIVERSAL 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 and the flexibility to vary the amount and frequency of premium payments. The Policies may also provide a Cash Surrender Value if the Policy is terminated during the lifetime of the Insured. Nationwide Life Insurance Company guarantees to keep the Policy in force during the first three years so long as the Minimum Premium requirement has been met. The death benefit and Cash Value of the Policies may vary to reflect the experience of the Nationwide VLI Separate Account-2 (the "Variable Account") or the Fixed Account to which Cash Values are allocated. The Policies described in this prospectus meet the definition of "life insurance" under Section 7702 of the Internal Revenue Code (the "Code"). The Policy Owner may allocate Net Premiums and Cash Value to one or more of the sub-accounts of the Variable Account and the Fixed Account. The assets of each sub-account will be used to purchase, at net asset value, shares of a designated Underlying Mutual Fund in the following series of the Underlying Mutual Fund options:
American Century Variable Portfolios, Inc.: Neuberger & Berman Advisers Management Trust: -American Century VP Balanced -Growth Portfolio -American Century VP Capital Appreciation -Limited Maturity Bond Portfolio -American Century VP International -Partners Portfolio -American Century VP Value Oppenheimer Variable Accounts Funds: Dreyfus: -Bond Fund -Dreyfus Socially Responsible Growth Fund -Global Securities Fund -Dreyfus Stock Index Fund -Multiple Strategies Fund Dreyfus Variable Investment Fund Strong Special Fund II, Inc.: -Growth & Income Portfolio** -Special Fund II Fidelity Variable Insurance Products Fund: Strong Variable Insurance Funds, Inc.: -Equity-Income Portfolio -Discovery Fund II, Inc. -Growth Portfolio -International Stock Fund II -High Income Portfolio** Van Eck Worldwide Insurance Trust: -Overseas Portfolio -Worldwide Bond Fund Fidelity Variable Insurance Products Fund II: -Worldwide Emerging Markets Fund -Asset Manager Portfolio -Worldwide Hard Assets Fund -Contrafund Portfolio Van Kampen American Capital Life Investment Nationwide Separate Account Trust: Trust: -Capital Appreciation Fund -American Capital Real Estate Securities Fund -Government Bond Fund Warburg Pincus Trust: -Money Market Fund -International Equity Portfolio -Small Company Fund -Post-Venture Capital Portfolio -Total Return Fund -Small Company Growth Portfolio
**The Growth & Income Portfolio and the High Income Portfolio may invest in lower quality debt securities commonly referred to as junk bonds. Nationwide Life Insurance Company (the "Company") guarantees that the death benefit for a Policy will never be less than the Specified Amount stated on the Policy data 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 without value. Nationwide Life Insurance Company guarantees to keep the Policy in force during the first three years so long as the Minimum Premium requirement has been met. This prospectus generally describes only that portion of the Cash Value allocated to the Variable Account. For a brief summary of the Fixed Account Option, see "The Fixed Account Option." 1 5 INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF PRINCIPAL. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH. THE DATE OF THIS PROSPECTUS IS MAY 1, 1997 2 6 GLOSSARY OF TERMS Attained Age-The Insured's age on the Policy Date, plus the number of full years since the Policy Date. Accumulation Unit-An accounting unit of measure used to calculate the Cash Value of the Variable Account. Beneficiary-The person to whom the Death Proceeds are paid. Break Point Premium-The level annual premium at which the sales load is reduced on a current basis. Cash Value-The sum of the Policy values in the Variable Account, Fixed Account and any associated value in the Policy Loan Account. Cash Surrender Value-The Policy's Cash Value, less any Indebtedness under the Policy, less any Surrender Charge. Code-The Internal Revenue Code of 1986, as amended. Company- Nationwide Life Insurance Company. Death Proceeds-Amount of money payable to the Beneficiary if the Insured dies while the Policy is in force. Fixed Account-An investment option which is funded by the General Account of the Company. General Account-All assets of the Company other than those of the Variable Account or in other separate accounts that have been or may be established by the Company. Guideline Level Premium-The amount of level annual premium calculated in accordance with the provisions of the Internal Revenue Code of 1986. It represents the level annual premiums required to mature the Policy under guaranteed mortality and expense charges, and an interest rate of 5%. Home Office-The main office of the Company located in Columbus, Ohio. Indebtedness-Amounts owed the Company as a result of Policy loans including both principal and accrued interest. Initial Premium-The Initial Premium is the premium required for coverage to become effective on the Policy Date. It is shown on the Policy Data Page. Insured-The person whose life is covered by the Policy, and who is named on the Policy Data Page. Maturity Date-The Policy Anniversary on or following the Insured's 95th birthday. Minimum Premium-The Minimum Premium is shown on the Policy Data Page. It is used to measure the total amount of premiums that must be paid during the first three Policy Years to guarantee the Policy remains in force. Monthly Anniversary Day-The same day as the Policy Date for each succeeding month. Net Asset Value-The worth of one share at the end of a market day or at the close of the New York Stock Exchange. Net Asset Value is computed by adding the value of all portfolio holdings plus other assets, deducting liabilities and then dividing the result by the number of shares outstanding. Net Premiums-Net Premiums are equal to the actual premiums minus the percent of premium charge. The percent of premium charges are shown on the Policy Data Page. Policy Anniversary-The same day and month as the Policy Date for succeeding years. Policy Charges-All deductions made from the value of the Variable Account, or the Policy Cash Value. Policy Date-The date the provisions of the Policy take effect, as shown on the Policy Owner's Policy Data Page. Policy Loan Account-The Portion of the Cash Value which results from Policy Indebtedness. Policy Owner-The person designated in the Policy application as the Owner. Policy Year-Each year commencing with the Policy Date and each Policy Anniversary thereafter. Scheduled Premium-The Scheduled Premium is shown on the Policy Data Page. Specified Amount-A dollar amount used to determine the death benefit under a Policy. It is shown on the Policy Data Page. 3 7 Surrender Charge-An amount deducted from the Cash Value if the Policy is surrendered. Underlying Mutual Funds-The Underlying mutual funds which correspond to the sub-accounts of the Variable Account. Valuation Date-Each day the New York Stock Exchange and the Company's Home Office are open for business or any other day during which there is sufficient degree of trading that the current net asset value of the Accumulation Units might be materially affected. 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. Nationwide VLI Separate Account-2. 4 8 TABLE OF CONTENTS GLOSSARY OF TERMS.............................................................3 SUMMARY OF THE POLICIES.......................................................8 Variable Life Insurance..............................................8 The Variable Account and its Sub-Accounts............................8 The Fixed Account....................................................8 Deductions and Charges...............................................8 Premiums............................................................12 NATIONWIDE LIFE INSURANCE COMPANY............................................12 THE VARIABLE ACCOUNT.........................................................12 Investments of the Variable Account.................................13 American Century Variable Portfolios, Inc., a member of American CenturySM Investments.............................................14 Dreyfus.............................................................15 Dreyfus Variable Investment Fund....................................15 Fidelity Variable Insurance Products Fund...........................15 Fidelity Variable Insurance Products Fund II........................16 Nationwide Separate Account Trust...................................17 Neuberger & Berman Advisers Management Trust........................17 Oppenheimer Variable Account Funds..................................18 Strong Special Fund II, Inc.........................................18 Strong Variable Insurance Funds, Inc................................18 Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust)............................................................18 Van Kampen American Capital Life Investment Trust...................19 Warburg Pincus Trust................................................19 Reinvestment........................................................20 Transfers...........................................................20 Dollar Cost Averaging...............................................21 Substitution of Securities..........................................21 Voting Rights.......................................................22 INFORMATION ABOUT THE POLICIES...............................................22 Underwriting and Issuance...........................................22 -Minimum Requirements for Issuance of a Policy......................22 -Premium Payments...................................................22 Allocation of Cash Value............................................23 Short-Term Right to Cancel Policy...................................23 POLICY CHARGES...............................................................23 Deductions from Premiums............................................23 Surrender Charges...................................................24 -Reductions to Surrender Charges....................................25 Deductions from Cash Value..........................................25 -Monthly Cost of Insurance..........................................25 -Monthly Administrative Charge......................................26 -Increase Charge....................................................26 Deductions from the Sub-Accounts....................................26 Reduction of Charges................................................26 HOW THE CASH VALUE VARIES....................................................27 How the Investment Experience is Determined.........................27 Net Investment Factor...............................................27 Valuation of Assets.................................................28 Determining the Cash Value..........................................28 Valuation Periods and Valuation Dates...............................28 SURRENDERING THE POLICY FOR CASH.............................................28 Right to Surrender..................................................28 Cash Surrender Value................................................28 Partial Surrenders..................................................28 Maturity Proceeds...................................................29 Income Tax Withholding..............................................29 POLICY LOANS.................................................................29 5 9 Taking a Policy Loan................................................29 Effect on Investment Performance....................................29 Interest............................................................30 Effect on Death Benefit and Cash Value..............................30 Repayment...........................................................30 HOW THE DEATH BENEFIT VARIES.................................................30 Calculation of the Death Benefit....................................30 Proceeds Payable on Death...........................................31 RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY.................................31 CHANGES OF INVESTMENT POLICY.................................................32 GRACE PERIOD.................................................................32 -First Three Policy Years...........................................32 -Policy Years Four and After........................................32 -All Policy Years...................................................32 REINSTATEMENT................................................................32 THE FIXED ACCOUNT OPTION.....................................................33 CHANGES IN EXISTING INSURANCE COVERAGE.......................................33 Specified Amount Increases..........................................33 Specified Amount Decreases..........................................33 Changes in the Death Benefit Option.................................34 OTHER POLICY PROVISIONS......................................................34 Policy Owner........................................................34 Beneficiary.........................................................34 Assignment..........................................................34 Incontestability....................................................34 Error in Age or Sex.................................................34 Suicide.............................................................35 Nonparticipating Policies...........................................35 Riders..............................................................35 LEGAL CONSIDERATIONS.........................................................35 DISTRIBUTION OF THE POLICIES.................................................35 CUSTODIAN OF ASSETS..........................................................36 TAX MATTERS..................................................................36 Policy Proceeds.....................................................36 -Federal Estate and Generation-Skipping Transfer Taxes..............37 -Non-Resident Aliens................................................37 Taxation of the Company.............................................37 Tax Changes.........................................................38 THE COMPANY..................................................................38 COMPANY MANAGEMENT...........................................................39 Directors of the Company............................................39 Executive Officers of the Company...................................40 OTHER CONTRACTS ISSUED BY THE COMPANY........................................40 STATE REGULATION.............................................................40 REPORTS TO POLICY OWNERS.....................................................41 ADVERTISING..................................................................41 LEGAL PROCEEDINGS............................................................41 EXPERTS......................................................................41 REGISTRATION STATEMENT.......................................................42 LEGAL OPINIONS...............................................................42 APPENDIX 1...................................................................43 APPENDIX 2...................................................................44 APPENDIX 3...................................................................61 PERFORMANCE TABLES...........................................................62 FINANCIAL STATEMENTS.........................................................66 6 10 THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND. 7 11 SUMMARY OF THE POLICIES Variable Life Insurance The variable life insurance Policies offered by Nationwide Life Insurance Company (the "Company") are similar in many ways to fixed-benefit whole life insurance. As with fixed-benefit whole life insurance, the Owner of the Policy pays a premium for life insurance coverage on the person insured. Also like fixed-benefit whole life insurance, the Policies may provide for a Cash Surrender Value which is payable if the Policy is terminated during the Insured's lifetime. As with fixed-benefit whole life insurance, the Cash Surrender Value during the early Policy years may be substantially lower than the premiums paid. However, the Policies differ from fixed-benefit whole life insurance in several respects. Unlike fixed-benefit whole life insurance, the death benefit and Cash Value of the Policies may increase or decrease to reflect the investment performance of the Variable Account sub-accounts or the Fixed Account to which Cash Values are allocated (see "How the Death Benefit Varies"). There is no guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash Surrender Value is insufficient to pay the Policy Charges, the Policy will lapse without value. Nationwide Life Insurance Company guarantees to keep the Policy in force during the first three years so long as certain requirements have been met (see "Underwriting and Issuance"). Under certain conditions, a Policy may become a modified endowment contract as a result of a material change or a reduction in benefits as defined by the Internal Revenue Code ("Code"). Excess premiums paid may also cause the Policy to become a modified endowment contract. The Company will monitor premiums paid and other policy transactions and will notify the Policy Owner when the Policy's non-modified endowment contract status is in jeopardy (see "Tax Matters"). The Variable Account and Its Sub-Accounts The Company places the Policy's Net Premiums in the Variable Account or the Fixed Account at the time the Policy is issued. The Policy Owner selects the sub-accounts 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 Net Premiums will be allocated to the Nationwide Separate Account Trust Money Market Fund sub-account (for any Net Premiums allocated to a sub-account on the application) in 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. 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. For a discussion of any charges imposed by the Underlying Mutual Fund options, see the prospectuses of the respective Underlying Mutual Funds. The Company deducts a sales load from each premium payment received not to exceed 3.5% of each premium payment. On a current basis, the sales load is reduced to 1.5% on any portion of the annual premium paid in excess of the annual Break Point Premium. The total sales load actually deducted from any Policy will be equal to the sum of this front-end sales load plus any sales surrender charge that may be deducted from Policies that are surrendered. The Company also deducts a charge for state premium taxes equal to 2.5% of all premium payments. 8 12 The Company also deducts the following charges from the Policy's Cash Value on the Policy Date and each subsequent Monthly Anniversary Day: 1. monthly cost of insurance; plus 2. monthly cost of any additional benefits provided by riders to the Policy; plus 3. an administrative expense charge. This charge is $12.50 per month in the first year and $5 per month in renewal years. The charge may be increased at the sole discretion of the Company but may not exceed $25 per month in the first year, $7.50 per month in renewal years; plus 4. an increase charge per $1000 applied to any increase in the Specified Amount. The increase charge is $2.04 per year per $1000 and is shown on the Policy data page. This charge is designed to cover the costs associated with increasing the Specified Amount (see "Policy Charges"). This charge will be deducted on each Monthly Anniversary Day for the first 12 months after the increase becomes effective. The Company also deducts on a daily basis from the assets of the Variable Account a charge to provide for mortality and expense risks. This charge is equivalent to an annual effective rate of 0.80% of the daily net assets of the Variable Account. On each Policy Anniversary beginning with the 10th, the mortality and expense risk charge is reduced to 0.50% on an annual basis of the daily net assets of the Variable Account, provided the Cash Surrender Value is $25,000 or more on such anniversary. (For policies issued in New York, such reduction occurs regardless of the amount of Cash Surrender Value on such anniversary). For Policies which are surrendered during the first nine Policy Years, the Company deducts a Surrender Charge. This Surrender Charge is comprised of an Underwriting Surrender Charge and a Sales Surrender Charge. The maximum initial Surrender Charge varies by issue age, sex, Specified Amount and underwriting classification and is calculated based on the initial Specified Amount. The following table illustrates the maximum initial Surrender Charge per $1,000 of initial Specified Amount for Policies which are issued on a Standard basis (see Appendix 1 for specific examples). Initial Specified Amount $50,000-$99,999 Issue Male Female Male Female Age Non-Tobacco Non-Tobacco Standard Standard --- ----------- ----------- -------- -------- 25 $ 7.776 $ 7.521 $ 8.369 $ 7.818 35 8.817 8.398 9.811 8.891 45 12.191 11.396 13.887 12.169 55 15.636 14.011 18.415 15.116 65 22.295 19.086 26.577 20.641 Initial Specified Amount $100,000 + Issue Male Female Male Female Age Non-Tobacco Non-Tobacco Standard Standard --- ----------- ----------- -------- -------- 25 5.776 5.521 6.369 5.818 35 6.817 6.398 7.811 6.891 45 9.691 8.896 11.387 9.669 55 13.136 11.511 15.915 12.616 65 21.295 18.086 25.577 19.641 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 9 13 management fees and other expenses for each Underlying Mutual Fund for its most recently completed fiscal year, expressed as a percentage of the Underlying Mutual Fund's average assets, are as follows: Underlying Mutual Fund Annual Expenses (After Expense Reimbursement)
------------------------------------- Management Other Total Fees Expenses Expenses - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc.-American Century VP Balanced 1.00% 0.00% 1.00% - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc.-American Century VP Capital 1.00% 0.00% 1.00% Appreciation - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc.-American Century VP 1.50% 0.00% 1.50% International - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc.-American Century VP Value 1.00% 0.00% 1.00% - ----------------------------------------------------------------------------------------------------------------- Dreyfus Socially Responsible Growth Fund 0.72% 0.24% 0.96% - ----------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund 0.25% 0.05% 0.30% - ----------------------------------------------------------------------------------------------------------------- Dreyfus Variable Investment Fund- Growth & Income Portfolio. 0.75% 0.08% 0.83% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-Equity-Income Portfolio 0.51% 0.07% 0.58% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-Growth Portfolio 0.61% 0.08% 0.69% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-High Income Portfolio 0.59% 0.12% 0.71% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund-Overseas Portfolio 0.76% 0.17% 0.93% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II-Asset Manager Portfolio 0.64% 0.10% 0.74% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II-Contrafund Portfolio 0.61% 0.13% 0.74% - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management 0.83% 0.09% 0.92% Trust-Growth Portfolio - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management 0.65% 0.13% 0.78% Trust-Limited Maturity Bond Portfolio - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management 0.84% 0.11% 0.95% Trust-Partners Portfolio - ----------------------------------------------------------------------------------------------------------------- NSAT-Capital Appreciation Fund 0.50% 0.02% 0.52% - ----------------------------------------------------------------------------------------------------------------- NSAT-Government Bond Fund 0.50% 0.01% 0.51% - ----------------------------------------------------------------------------------------------------------------- NSAT-Money Market Fund 0.50% 0.03% 0.53% - ----------------------------------------------------------------------------------------------------------------- NSAT Small Company Fund 1.00% 0.10% 1.10% - ----------------------------------------------------------------------------------------------------------------- NSAT-Total Return Fund 0.50% 0.02% 0.52% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Bond Fund 0.74% 0.04% 0.78% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Global Securities Fund 0.73% 0.08% 0.81% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Multiple Strategies 0.73% 0.04% 0.77% - ----------------------------------------------------------------------------------------------------------------- Strong Special Fund II, Inc. 1.00% 0.17% 1.17% - ----------------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, Inc. - Discovery Fund II, Inc. 1.00% 0.22% 1.22% - ----------------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, Inc. - International Stock Fund II 1.00% 0.59% 1.59% - ----------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Bond Fund 1.00% 0.08% 1.08% - ----------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Emerging Markets Fund 1.00% 0.00% 1.00% - ----------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Hard Assets Fund 1.00% 0.08% 1.08% - ----------------------------------------------------------------------------------------------------------------- Van Kampen American Capital Life Investment Trust - 0.83% 0.27% 1.10% American Capital Real Estate Securities Fund - ----------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-International Equity Portfolio 0.62% 0.78% 1.40% - ----------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Post-Venture Capital Portfolio 0.96% 0.40% 1.36% - ----------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.26% 1.16% - -----------------------------------------------------------------------------------------------------------------
The Underlying Mutual Fund expenses shown above are assessed at the Underlying Mutual Fund level and are not direct charges against the Variable Account or reductions in Cash Value. These Underlying Mutual Fund expenses are taken into consideration in computing each Underlying Mutual Fund's net asset value, which is the share price used to calculate the Variable Account's unit value. The management fees and other expenses are more fully described in the prospectuses for each individual Underlying Mutual Fund. None of the above Underlying Mutual Funds are subject to 12b-1 fees. The following Underlying Mutual Funds are subject to the following fee waiver or expense reimbursement arrangements:
- -------------------------------------------------------------------------------------------------------------------------------- FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER - -------------------------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc. - Absent a waiver of fees by the Portfolio's investment adviser and American Century VP Value co-administrator, Management Fees for the Portfolio would equal 1.25%; Other Expenses would equal .81%; Total Portfolio Operating Expenses would have been 2.06%. - --------------------------------------------------------------------------------------------------------------------------------
10 14
- -------------------------------------------------------------------------------------------------------------------------------- FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER - -------------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund In the event that aggregate expenses of the Fund exceed .40 of 1% of the value of the Fund's average net assets for the fiscal year, the Fund may deduct from the payment to be made to Dreyfus, or Dreyfus will bear, such excess expense. In addition, the Fund may waive receipt of its fees and/or voluntarily assume certain expenses of the Fund, which would have the effect of lowering the overall expense ratio of the Fund. - -------------------------------------------------------------------------------------------------------------------------------- Dreyfus Socially Responsible Growth Fund In the event that aggregate expenses of the Fund exceed .40 of 1% of the value of the Fund's average net assets for the fiscal year, the Fund may deduct from the payment to be made to Dreyfus, or Dreyfus will bear, such excess expense. In addition, the Fund may waive receipt of its fees and/or voluntarily assume certain expenses of the Fund, which would have the effect of lowering the overall expense ratio of the Fund. - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - Equity-Income Portfolio The Adviser has voluntarily agreed subject to revision or termination to reimburse a fund if, and to the extent that, its aggregate operating expenses, including management fees, exceed a specified annual rate for the fund. The expense cap is: 1.50% imposed on October 9, 1986. Since the expense ratio is significantly below the expense cap there is no reimbursement and none anticipated during the current year. Since there is no reimbursement the discontinuance of the arrangement has no effect on total fund operating expenses. - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - Growth Portfolio The Fund may, from time to time, agree to reimburse a fund for management fees and other expenses above a specified limit. The Fund retains the ability to be repaid if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be terminated at any time, can decrease the Fund's expense and boost its performance. - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - High-Income Portfolio The Fund may, from time to time, agree to reimburse a fund for management fees and other expenses above a specified limit. The Fund retains the ability to be repaid if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be terminated at any time, can decrease the Fund's expense and boost its performance. - -------------------------------------------------------------------------------------------------------------------------------- Fidelity Variable Insurance Products Fund - The Adviser has voluntarily agreed subject to revision or termination to Overseas Portfolio reimburse a fund if, and to the Overseas Portfolio extent that, its aggregate operating expenses, including management fees, exceed a specified annual rate for the fund. The expense cap is: 1.50% imposed on January 28, 1986. Since the expense ratio is significantly below the expense cap there is no reimbursement and none anticipated during the current year. Since there is no reimbursement the discontinuance of the arrangement has no effect on total fund operating expenses. - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II - Asset Manager Portfolio The Fund may, from time to time, agree to reimburse a fund for management fees and other expenses above a specified limit. The Fund retains the ability to be repaid if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be terminated at any time, can decrease the Fund's expense and boost its performance. - -------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II - Contrafund Portfolio The Fund may, from time to time, agree to reimburse a fund for management fees and other expenses above a specified limit. The Fund retains the ability to be repaid if expenses fall below the specified limit prior to the end of the fiscal year. Reimbursement arrangements, which may be terminated at any time, can decrease the Fund's expense and boost its performance. - -------------------------------------------------------------------------------------------------------------------------------- Neuberger&Berman Advisers Management Trust - The Fund manager will limit expenses by reimbursing the Portfolio for its Growth Portfolio operating expenses and its pro rata share of operating expenses, that exceed 1% of the Fund's average daily net asset value. - -------------------------------------------------------------------------------------------------------------------------------- Neuberger&Berman Advisers Management Trust - The Fund manager will limit expenses by reimbursing the Portfolio for its Limited Maturity Bond Portfolio operating expenses and its pro rata share of operating expenses, that exceed 1% of the Fund's average daily net asset value. - -------------------------------------------------------------------------------------------------------------------------------- Neuberger&Berman Advisers Management Trust - The Fund manager will limit expenses by reimbursing the Portfolio for its Partners Portfolio operating expenses and its pro rata share of operating expenses, that exceed 1% of the Fund's average daily net asset value. - -------------------------------------------------------------------------------------------------------------------------------- Van Kampen American Capital Life Investment The Trust reimburses the Adviser for the cost of the Fund's accounting services. Trust - American Capital Real Estate Securities Further, the Adviser and the Subadviser may, from time to time, agree to waive Fund their respective investment advisory fees or any portion thereof or elect to reimburse the Fund for ordinary business expenses in excess of an agreed upon amount. - -------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust - International Equity The Management Fees, Other Expenses and Total Portfolio Operating Expenses are Portfolio net of any fee waivers or expense reimbursements. Without such waivers or reimbursements, Management Fees would have equaled 1.00%, Other Expenses would have equaled 1.21% and total Portfolio Operating Expenses would have equaled 2.21%. The Fund's investment adviser had undertaken to reduce or otherwise limit Total Portfolio Operating Expenses; there is no assurance that these undertakings will continue. - --------------------------------------------------------------------------------------------------------------------------------
11 15
- -------------------------------------------------------------------------------------------------------------------------------- FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER - -------------------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust - Small Company Growth The Management Fees, Other Expenses and Total Portfolio Operating Expenses are Portfolio net of any fee waivers or expense reimbursements. Without such waivers or reimbursements, Management Fees would have equaled .90%, Other Expenses would have equaled .60% and total Portfolio Operating Expenses would have equaled 1.50%. The Fund's investment adviser had undertaken to reduce or otherwise limit Total Portfolio Operating Expenses; there is no assurance that these undertakings will continue. - --------------------------------------------------------------------------------------------------------------------------------
The information relating to the Underlying Mutual Fund expenses was provided by the Underlying Mutual Fund and was not independently verified by the Company. Premiums The minimum Initial Premium for which a Policy may be issued is equal to three minimum monthly premiums. A policy may be issued to an Insured up to age 80. For a limited time, the Policy Owner has the right to cancel the Policy and receive a full refund of premiums paid (see "Short-Term Right to Cancel Policy"). The Initial Premium is due on the Policy Date. It will be credited on the Policy Date. Any due and unpaid monthly deductions will be subtracted from the Cash Value at this time. Insurance will not be effective until the Initial Premium is paid. The Initial Premium is shown on the Policy data page. Premiums, other than the Initial Premium may be made at any time while your Policy is in force subject to the limits described below. During the first three Policy Years, the total premium payments less any Policy Indebtedness, less any partial surrenders, and less any partial surrender fee must be greater than or equal to the Minimum Premium requirement in order to guarantee the Policy remain in force. The Minimum Premium requirement is equal to the monthly Minimum Premium multiplied by the number of completed policy months. The monthly Minimum Premium is shown on the Policy data page. We will send Scheduled Premium payment reminder notices to you. We will send them according to the premium mode shown on the Policy data page. You may pay the Initial Premium to us at our Home Office or to an authorized agent. All premiums after the first are payable at our Home Office. Premium receipts will be furnished upon request. Each premium must be at least equal to the monthly Minimum Premium. The Company reserves the right to require satisfactory evidence of insurability before accepting any additional premium payment which results in any increase in the net amount at risk. Also, we will refund any portion of any premium payment which is determined to be in excess of the premium limit established by law to qualify your Policy as a contract for life insurance. Where permitted by state law, we may also require that any existing Policy Indebtedness is repaid prior to accepting any additional premium payments. NATIONWIDE LIFE INSURANCE COMPANY The Company is a stock life insurance company organized under the laws of the State of Ohio in March, 1929. The Company is a member of the Nationwide Insurance Enterprise which includes Nationwide Mutual Insurance Company, Nationwide Indemnity Company, Nationwide Mutual Fire Insurance Company, Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty Insurance Company, National Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity Company and Nationwide General Insurance Company. 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 all states, the District of Columbia, and Puerto Rico (for additional information, see "The Company"). THE VARIABLE ACCOUNT The Variable Account was established by a resolution of the Company's Board of Directors, on May 7,1987, pursuant to Ohio law. The Company has caused the Variable Account to be registered with the Securities and Exchange Commission as a unit investment trust pursuant to the provisions of the Investment Company Act of 1940. Nationwide Life Insurance Company, One Nationwide Plaza, Columbus, Ohio 43216 serves as Trustee for the Trust. Nationwide Advisory Services, Inc., One Nationwide Plaza, Columbus, Ohio 43216 serves as 12 16 principal underwriter for the Trust. Such registration does not involve supervision of the management of the Variable Account or the Company by the Securities and Exchange Commission. The Variable Account is a separate investment account of the Company and as such, is not chargeable with the liabilities arising out of any other business the Company may conduct. The Company does not guarantee the investment performance of the Variable Account. The death benefit and Cash Value under the Policy may vary with the investment performance of the investments in the Variable Account (see "How the Death Benefit Varies" and "How the Cash Value Varies"). Net Premium payments and Cash Value are allocated within the Variable Account among one or more sub-accounts (see "Tax Matters"). The assets of each sub-account are used to purchase shares of the Underlying Mutual 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 Net Premiums allocated among one or more of the Variable Account sub-accounts and the Fixed Account (see "Allocation of Cash Value"). During the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy, all Net Premiums not allocated to the Fixed Account are placed in the Nationwide Separate Account Trust Money Market Fund sub-account. At the end of this period, the Cash Value in that sub-account will be transferred to the Variable Account sub-accounts based on the Fund allocation factors. Any subsequent Net Premiums received after this period will be allocated based on the Fund allocation factors. No less than 5% of Net Premiums may be allocated to any one sub-account or the Fixed Account. The Policy Owner may change the allocation of Net Premiums or may transfer Cash Value from one sub-account to another, subject to such terms and conditions as may be imposed by each Underlying Mutual Fund option and as set forth in this prospectus (see "Transfers", "Allocation of Cash Value" and "Short-Term Right to Cancel Policy"). 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. Additional Premium payments, upon acceptance, will be allocated to the Nationwide Separate Account Money Market Fund unless the Policy Owner specifies otherwise (see "Premium Payments"). Each of the Underlying Mutual Fund options is a registered investment company which receives investment advice from a registered investment adviser: 1. American Century Variable Portfolios, Inc., a member of the American CenturySM Investments; 2. Dreyfus Stock Index Fund, managed by Wells Fargo Nikko Investment Advisors; 3. The Dreyfus Socially Responsible Growth Fund, Inc., managed by The Dreyfus Corporation; 4. Dreyfus Variable Investment Fund, managed by The Dreyfus Corporation; 5. Fidelity Variable Insurance Products Fund, managed by Fidelity Management & Research Company; 6. Fidelity Variable Insurance Products Fund II, managed by Fidelity Management & Research Company; 7. Nationwide Separate Account Trust, managed by Nationwide Advisory Services, Inc.; 8. Neuberger & Berman Advisers Management Trust, managed by Neuberger & Berman Management Incorporated; 9. Oppenheimer Variable Accounts Funds, managed by Oppenheimer Management Corporation; 10. Strong Special Fund II, Inc., managed by Strong Capital Management, Inc.; 11. Strong Variable Insurance Funds, Inc., managed by Strong Capital Management 12. Van Eck Worldwide Insurance Trust, managed by Van Eck Associates Corporation; 13 17 13. Van Kampen American Capital Life Investment Trust, managed by Van Kampen American Capital Management, Inc.; and 14. Warburg Pincus Trust, managed by Warburg, Pincus Counsellors, Inc. A summary of investment objectives is contained in the description of each Underlying Mutual Fund below. More detailed information may be found in the current prospectus for each Underlying Mutual Fund option. A prospectus for the Underlying Mutual Fund option(s) being considered must accompany this prospectus and should be read in conjunction herewith. American Century Variable Portfolios, Inc., a member of the American CenturySM Investments American Century Variable Portfolios, Inc. (formerly "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 American CenturySM Investments, American Century Variable Portfolios, Inc. is managed by American Century Investment Management, Inc. - - American Century VP Balanced Investment Objective: Capital growth and current income. The Fund will seek to achieve its objective by maintaining approximately 60% of the assets of the Fund in common stocks (including securities convertible into common stocks and other equity equivalents) that are considered by management to have better-than-average prospects for appreciation and approximately 40% in fixed income securities. There can be no assurance that the Fund will achieve its investment objective. - - American Century VP Capital Appreciation Investment Objective: Capital growth. The Fund will seek to achieve its objective by investing in common stocks (including securities convertible into common stocks and other equity equivalents) that meet certain fundamental and technical standards of selection and have, in the opinion of the Fund's investment manager, better than average potential for appreciation. The Fund tries to stay fully invested in such securities, regardless of the movement of stock prices generally. The Fund may invest in cash and cash equivalents temporarily or when it is unable to find common stocks meeting its criteria of selection. It may purchase securities only of companies that have a record of at least three years continuous operation. There can be no assurance that the Fund will achieve its investment objective. - - American Century VP International Investment Objective: To seek capital growth. The Fund will seek to achieve its investment objective by investing primarily in securities of foreign companies that meet certain fundamental and technical standards of selection and, in the opinion of the investment manager, have potential for appreciation. Under normal conditions, the Fund will invest at least 65% of its assets in common stocks or other equity securities of issuers from at least three countries outside the United States. Securities of United States issuers may be included in the portfolio from time to time. Although the primary investment of the Fund will be common stocks (defined to include depository receipts for common stocks), the Fund may also invest in other types of securities consistent with the Fund's objective. When the manager believes that the total return potential of other securities equals or exceeds the potential return of common stocks, the Fund may invest up to 35% of its assets in such other securities. There can be no assurance that the Fund will achieve its objectives. - - American Century VP Value Investment Objective: The investment objective of the Fund is long-term capital growth; income is a secondary objective. Under normal market conditions, the Fund expects to invest at least 80% of the value of its total asset in equity securities, including common and preferred stock, convertible preferred stock and convertible debt obligations. The equity securities in which the Fund will invest will be primarily securities of well-established companies with intermediate-to-large market capitalizations that are believed by management to be undervalued at the time of purchase. 14 18 (Although the Statement of Additional Information concerning American Century Variable Portfolios, Inc., refers to redemptions of securities in kind under certain conditions, all surrendering or redeeming Contract Owners will receive cash from the Company.) Dreyfus - - Dreyfus Socially Responsible Growth Fund, Inc. 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. Dreyfus Corporation serves as the Fund's investment advisor. Tiffany Capitol 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. - - Dreyfus Stock Index Fund Dreyfus Stock Index Fund 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, Dreyfus Life and Annuity Index Fund began doing business as Dreyfus Stock Index Fund. Investment Objective: To provide investment results that correspond to the price and yield performance of publicly traded common stocks in the aggregate, as represented by the Standard & Poor's 500 Composite Stock Price Index. The Fund is neither sponsored by nor affiliated with Standard & Poor's Corporation. Dreyfus Variable Investment Fund Dreyfus Variable Investment Fund (the "Fund") is an open-end, management investment company. It was organized as an unincorporated business trust under the laws of the Commonwealth of Massachusetts on October 29,1986 and commenced operations August 31, 1990. The Dreyfus Corporation ("Dreyfus") serves as the Fund's manager. Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank Corporation. - - Growth and Income Portfolio Investment Objective: To provide long-term capital growth, current income and growth of income, consistent with reasonable investment risk. The Portfolio invests in equity securities, debt securities and money market instruments of domestic and foreign issuers. The proportion of the Portfolio's assets invested in each type of security will vary from time to time in accordance with Dreyfus' assessment of economic conditions and investment opportunities. In purchasing equity securities, Dreyfus will invest in common stocks, preferred stocks and securities convertible into common stocks, particularly those which offer opportunities for capital appreciation and growth of earnings, while paying current dividends. The Portfolio will generally invest in investment-grade debt obligations, except that it may invest up to 35% of the value of its net assets in convertible debt securities rated not lower than Caa by Moody's Investor Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed to be of comparable quality by Dreyfus. These securities are considered to have predominantly speculative characteristics with respect to capacity to pay interest and repay principal and are considered to be of poor standing. See "Investment Considerations and Risks-Lower Rated Securities" in the Portfolio's prospectuses. Fidelity Variable Insurance Products Fund The Fund is an open-end, diversified, management investment company organized as a Massachusetts business trust on November 13, 1981. The Fund's shares are purchased by insurance companies to fund benefits under variable insurance and annuity policies. Fidelity Management & Research Company ('FMR') is the Fund's manager. 15 19 - - 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 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. - - High Income Portfolio Investment Objective: Seeks 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 portfolio's manager will seek high current income normally by investing the Portfolio's assets as follows: - at least 65% in income-producing debt securities and preferred stocks, including convertible securities, zero coupon securities, and mortgage-backed and asset-backed securities. - up to 20% in common stocks and other equity securities when consistent with the Portfolio's primary objective or acquired as part of a unit combining fixed-income and equity securities. Higher yields are usually available on securities that are lower-rated or that are unrated. Lower-rated securities are usually defined as Ba or lower by Moody's; BB or lower by Standard & Poor's and may be deemed to be of a speculative nature. The Portfolio may also purchase lower-quality bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which provide poor protection for payment of principal and interest (commonly referred to as "junk bonds"). For a further discussion of lower-rated securities, please see the "Risks of Lower-Rated Debt Securities" section of the Portfolio's prospectus. - - Overseas Portfolio Investment Objective: To seek long term growth of capital primarily through investments in foreign securities. The Overseas Portfolio provides a means for investors to diversify their own portfolios by participating in companies and economies outside of the United States. Fidelity Variable Insurance Products Fund II The Fund is an open-end, diversified, management investment company organized as a Massachusetts business trust on March 21, 1988. The Fund's shares are purchased by insurance companies to fund benefits under variable insurance and annuity policies. FMR is the Fund's manager. - - Asset Manager Portfolio Investment Objective: To seek to obtain high total return with reduced risk over the long-term by allocating its assets among domestic and foreign stocks, bonds and short-term fixed income instruments. - - Contrafund Portfolio Investment Objective: To seek capital appreciation by investing primarily in companies that the fund manager believes to be undervalued due to an overly pessimistic appraisal by the public. This strategy can lead to investments in domestic or foreign companies, small and large, many of which may not be well known. The fund primarily invests in common stock and securities convertible into common stock, but it has the flexibility to invest in any type of security that may produce capital appreciation. 16 20 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 the benefits under variable life insurance policies or variable annuity contracts issued by life insurance companies. The assets of the Trust are managed by Nationwide Advisory Services, Inc., One Nationwide Plaza, Columbus, Ohio 43216, a wholly-owned subsidiary of Nationwide Life Insurance Company. - - Capital Appreciation Fund Investment Objective: The Fund is designed for investors who are interested in long-term growth. The Fund seeks to meet its objective primarily through a diversified portfolio of the common stock of companies which the investment manager determines have a better-than-average potential for sustained capital growth over the long term. - - Government Bond Fund Investment Objective: To provide as high a level of income as is consistent with capital preservation through investing primarily in bonds and securities issued or backed by the U.S. Government, its agencies or instrumentalities. - - Money Market Fund Investment Objective: To seek as high a level of current income as is considered consistent with the preservation of capital and liquidity by investing primarily in money market instruments. - - Small Company Fund Investment Objective: The Fund seeks long-term growth of capital by investing primarily in equity securities of domestic and foreign companies with market capitalizations of less than $1 billion at the time of purchase. Nationwide Advisory Services, Inc. ("NAS"), the Fund's adviser, has contracted with a group of sub-advisers, each of which will manage a portion of the Fund's portfolio. These sub-advisers are the Dreyfus Corporation, Neuberger & Berman, L. P., Pictet International Management Limited, Van Eck Associates Corporation, Strong Capital Management, Inc. and Warburg Pincus Counsellors, Inc. The sub-advisers were chosen because they utilize a number of different investment styles when investing in small company stocks. By utilizing a number of investment styles, NAS hopes to increase prospects for investment return and to reduce market risk and volatility. - - Total Return Fund Investment Objective: To obtain a reasonable long-term total return (i.e., earnings growth plus potential dividend yield) on invested capital from a flexible combination of current return and capital gains through investments in common stocks, convertible issues, money market instruments and bonds with a primary emphasis on common stocks. Neuberger & Berman Advisers Management Trust Neuberger & Berman Advisers Management Trust is an open-end diversified management investment company established as a Massachusetts business trust on December 14, 1983. Shares of the Trust are offered in connection with certain variable annuity contracts and variable life insurance policies issued through life insurance company separate accounts and are also offered directly to qualified pension and retirement plans outside of the separate account context. The investment adviser is Neuberger & Berman Management Incorporated. - - Growth Portfolio Investment Objective: The Portfolio seeks capital growth through investments in common stocks of companies that the investment adviser believes will have above average earnings or otherwise provide investors with above average potential for capital appreciation. To maximize this potential, the investment adviser may also utilize, from time to time, securities convertible into common stocks, warrants and options to purchase such stocks. - - Limited Maturity Bond Portfolio Investment Objective: To provide the high level of current income, consistent with low risk to principal and liquidity. As a secondary objective, it also seeks to enhance its total return through capital appreciation 17 21 when market factors, such as falling interest rates and rising bond prices, indicate that capital appreciation may be available without significant risk to principal. It seeks to achieve its objectives through investments in a diversified portfolio of limited maturity debt securities. The Portfolio invests in securities which are at least investment grade and does not invest in junk bonds. - - Partners Portfolio Investment Objective: To seek capital growth. This Portfolio will seek to achieve its objective by investing primarily in the common stock of established companies. Its investment program seeks securities believed to be undervalued based on fundamentals such as low price-to-earnings ratios, consistent cash flows, and support from asset values. The objective of the Partners Portfolio is not fundamental and can be changed by the Trustees of the Trust without shareholder approval. Shareholders will, however, receive at least 30 days prior notice thereof. There is no assurance the investment objective will be met. Oppenheimer Variable Account Funds The Oppenheimer Variable Account Funds is an open-ended, diversified management investment company organized as a Massachusetts business trust in 1984. Shares of the Funds are sold only to provide benefits under variable life insurance policies and variable annuity contracts. Oppenheimer Management Corporation is the Funds' investment advisor. - - Oppenheimer 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. - - Oppenheimer Global Securities Fund Investment Objective: To seek long-term capital appreciation by investing a substantial portion of assets in securities of foreign issuers, "growth-type" companies, cyclical industries and special situations which are considered to have appreciation possibilities. Current income is not an objective. These securities may be considered to be speculative. - - Oppenheimer 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 life insurance policies and variable annuity contracts. Strong Capital Management, Inc. is the investment advisor to the Funds. - - Discovery Fund II, Inc. Investment Objective: To seek maximum capital appreciation through investments in a diversified portfolio of securities. The Fund normally emphasizes investment in equity securities and may invest up to 100% of its total assets in equity securities including common stocks, preferred stocks and securities convertible into common or preferred stocks. Although the Fund normally emphasizes investment in equity securities, the Fund has the flexibility to invest in any type of security that the Advisor believes has the potential for 18 22 capital appreciation including up to 100% of its total assets in debt obligations, including intermediate to long-term corporate or U.S. government debt securities. - - International Stock Fund II Investment Objective: To seek capital growth by investing primarily in the equity securities of issuers located outside the United States. Van Eck Worldwide Insurance Trust (Formerly Van Eck Investment Trust)Worldwide Insurance Trust Formerly Van Eck Investment Trust) Van Eck Worldwide Insurance Trust is an open-end management investment company organized as a "business trust" under the laws of the Commonwealth of Massachusetts on January 7, 1987. Shares of the Trust are offered only to separate accounts of various insurance companies to fund benefits of variable insurance and annuity policies. The assets of the Trust are managed by Van Eck Associates Corporation. - - Worldwide Bond Fund (Formerly Global Bond Fund) Investment Objective: To seek high total return through a flexible policy of investing globally, primarily in debt securities. The Fund does not invest in junk bonds. - - Worldwide Emerging Markets Fund Investment Objective: Seeks long-term capital appreciation by investing primarily in equity securities in emerging markets around the world. The Fund specifically emphasizes investment in countries that, compared to the world's major economies, exhibit relatively low gross national product per capita, as well as the potential for rapid economic growth. Peregrine Asset Management (Hong Kong) Limited serves as sub-investment adviser to this Fund. - - Worldwide Hard Assets Fund (formerly Gold and Natural Resources Fund) Investment Objective: To seek long-term capital appreciation by investing globally, primarily in "Hard Assets Securities." Hard assets are tangible, finite assets, asuch as real estate, energy, timber, and industrial and precious metals. Income is a secondary consideration. Van Kampen American Capital Life Investment Trust The American Capital Life Investment Trust is an open-end diversified management investment company organized as a Massachusetts business trust on June 3, 1985. The Trust offers shares in separate funds which are sold only to insurance companies to provide funding for variable life insurance policies and variable annuity contracts. Van Kampen American Capital Asset Management, Inc. serves as the Fund's investment adviser. - - American Capital Real Estate Securities Fund Investment Objective: To seek long-term capital growth by investing in a portfolio of securities of companies operating in the real estate industry ("Real Estate Securities"). Current income is a secondary consideration. Real Estate Securities include equity securities, common stocks and convertible securities, as well as non-convertible preferred stocks and debt securities of real estate industry companies. A "real estate industry company" is a company that derives at least 50% of its assets (marked to market), gross income or net profits from the ownership, construction, management or sale of residential, commercial or industrial real estate. Under normal market conditions, at least 65% of the Fund's total assets will be invested in Real Estate Securities, primarily equity securities of real estate investment trusts. The Fund may invest up to 25% of its total assets in securities issued by foreign issuers, some or all of which may also be Real Estate Securities. There can be no assurance that the Fund will achieve its investment objective. Warburg Pincus Trust The Warburg Pincus Trust ("Trust") is an open-end management investment company organized in March 1995 as a business trust under the laws of The Commonwealth of Massachusetts. The Trust offers its shares to insurance companies for allocation to separate accounts for the purpose of funding variable annuity and variable life contracts. Trust portfolios are managed by Warburg, Pincus Counsellors, Inc. ("Counsellors.") 19 23 - - International Equity Portfolio Investment Objective: To seek long-term capital appreciation by investing primarily in a broadly diversified portfolio of equity securities of companies, wherever organized, that in the judgment of "Counsellors" have their principal business activities and interests outside the United States. The Portfolio will ordinarily invest substantially all of its assets, but no less than 65% of its total assets, in common stocks, warrants and securities convertible into or exchangeable for common stocks. The Portfolio intends to invest principally in the securities of financially strong companies with opportunities for growth within growing international economies and markets through increased earning power and improved utilization or recognition of assets. - - Post-Venture Capital Portfolio Investment Objective: The Portfolio seeks long-term growth of capital by investing primarily in equity securities of issuers in their post-venture capital stage of development and pursues an aggressive investment strategy. Under normal market conditions, the Portfolio will invest at least 65% of its total assets in equity securities of "post-venture capital companies." A post-venture capital company is one that has received venture capital financing either (a) during the early stages of the company's existence or the early stages of the development of a new product or service or (b) as a part of a restructuring or recapitalization of the company. The Portfolio may invest up to 10% of its assets in venture capital and other investment funds. - - Small Company Growth Portfolio Investment Objective: To seek capital growth by investing in a portfolio of equity securities of small-sized domestic companies. The Portfolio ordinarily will invest at least 65% of its total assets in common stocks or warrants of small-sized companies (i.e., companies having stock market capitalizations of between $25 million and $1 billion at the time of purchase) that represent attractive opportunities for capital growth. The Portfolio intends to invest primarily in companies whose securities are traded on domestic stock exchanges or in the over-the-counter market. The Portfolio's investments will be made on the basis of their equity characteristics and securities ratings generally will not be a factor in the selection process. Reinvestment The Funds described above have as a policy the distribution of dividends in the form of additional shares (or fractions thereof) of the Underlying Mutual Funds. The distribution of additional shares will not affect the number of Accumulation Units attributable to a particular Policy (see "Allocation of Cash Value"). Transfers After the first Policy Anniversary, the Policy Owner may annually transfer a portion of the value of the Variable Account to the Fixed Account, without penalty or adjustment. The Policy Owner may request a transfer of up to 100% of the Cash Value from the Variable Account to the Fixed Account. The Company reserves the right to restrict transfers to the Fixed Account to 25% of the Cash Value. 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 Policy Owner may transfer a portion of the value of the Fixed Account to the Variable Account once each Policy Year, without penalty or adjustment. The Policy Owner may request a transfer of up to 100% of the Cash Value in the Fixed Account to the Variable sub-accounts. The Company reserves the right to restrict the amounts of such transfers to 25% of the Cash Value in the Fixed Account. Transfers may be made either in writing or, in states allowing such transfers, by telephone. In states allowing telephone transfers, and if the Owner so elects, the Company will also permit the Policy Owner to utilize the Telephone Exchange Privilege for exchanging amounts among sub-account options. 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 determine to withdraw the Telephone Exchange Privilege, upon 30 days written notice to Policy Owners. 20 24 Policy Owners who have entered into a Dollar Cost Averaging Agreement with the Company (see "Dollar Cost Averaging" below) may transfer from the Fixed Account to the Variable Account under the terms of that agreement. Policies described in this prospectus may in some cases be sold to individuals who independently utilize the services of a firm or individual engaged in market timing. Generally, such firms or individuals obtain authorization from multiple Policy Owners to make transfers and exchanges among the Sub-Accounts (the Underlying Mutual Funds) on the basis of perceived market trends. Because of the unusually large transfers of funds associated with some of these transactions, the ability of the Company or Underlying Mutual Funds to process such transactions may be compromised, and the execution of such transactions may possibly disadvantage or work to the detriment of other Policy Owners not utilizing market timing services. Accordingly, the right to exchange Cash Surrender Values among the Sub-Accounts may be subject to modification if such rights are exercised by a market timing firm or any other third party authorized to initiate transfer or exchange transactions on behalf of multiple Policy Owners. THE RIGHTS OF INDIVIDUAL POLICY OWNERS TO EXCHANGE CASH SURRENDER VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE POLICY OWNER, OR BY THE POLICY OWNER'S REPRESENTATIVE OF RECORD AS AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company may, among other things, not accept (1) the transfer or exchange instructions of any agent acting under a power of attorney on behalf of more than one Policy Owner, or (2) the transfer or exchange instructions of individual policy owners who have executed pre-authorized transfer or exchange forms which are submitted by market timing firms or other third parties on behalf of more than one Policy Owner at the same time. The Company will not impose any such restrictions or otherwise modify exchange rights unless such action is reasonably intended to prevent the use of such rights in a manner that will disadvantage or potentially impair the contract rights of other Policy Owners. Dollar Cost Averaging The Policy Owner may direct the Company to automatically transfer from the Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio sub-account to any other sub-account within the Variable Account on a monthly basis or as frequently as otherwise authorized by the Company. This service is intended to allow the Policy Owner to utilize dollar cost averaging, a long-term investment program which provides for regular, level investments over time. The Company makes no guarantees that dollar cost averaging, will result in a profit or protect against loss in a declining market. To qualify for dollar cost averaging, there must be a minimum total Cash Value, less Policy Indebtedness, of $15,000. Transfers for purposes of dollar cost averaging can only be made from the Money Market sub-account, Fixed Account, or the Limited Maturity Bond Portfolio sub-account. The minimum monthly dollar cost averaging transfer is $100. In addition, dollar cost averaging monthly transfers from the Fixed Account must be equal to or less than 1/30th of the Fixed Account value when the dollar cost averaging program is requested. Transfers out of the Fixed Account, other than for dollar cost averaging, may be subject to certain additional restrictions (see "Transfers" above). 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 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 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 Net Premium payments under the Policy. No substitution of securities in the Variable Account may take place without prior 21 25 approval of the Securities and Exchange Commission, and under such requirements as it and any state insurance department may impose. Voting Rights Voting rights under the Policies apply only with respect to Cash Value allocated to the sub-accounts 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. The Company will vote Underlying Mutual Fund shares in accordance with instructions received from the Policy Owners. Underlying Mutual Fund shares held by the Company or by the Variable Account as to which no timely instructions are received will be voted by the Company in the same proportion as the voting instructions which are received. Each person having a voting interest in the Variable Account will receive periodic reports relating to investments of the Variable Account, the Underlying Mutual Funds' 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 case of a change in the investment policies or investment adviser, based on a good faith determination that such change would be contrary to state law or otherwise inappropriate in light of the portfolio's objective and purposes; or (3) enter into or refrain from entering into any advisory agreement or underwriting contract, if required by any insurance regulatory authority. INFORMATION ABOUT THE POLICIES Underwriting and Issuance - -Minimum Requirements for Issuance of a Policy The Policies are designed to provide life insurance coverage and the flexibility to vary the amount and frequency of premium payments. At issue, the Policy Owner selects the initial Specified Amount and premium. The minimum Specified Amount is $50,000 ($100,000 in Pennsylvania and New Jersey). Policies may be issued to Insureds who are 80 or younger at the time of issue. Before issuing any Policy, the Company requires satisfactory evidence of insurability which may include a medical examination. - -Premium Payments The Initial Premium for a Policy is payable in full at the Company's Home Office. 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 Initial Premium, and delivery of the policy while the Insured is still living. Premiums, other than the Initial Premium, may be made at any time while the Policy is in force subject to the limits described below. During the first three Policy Years, the total premium payments less any Policy 22 26 Indebtedness, less any partial surrenders, and less any partial surrender fee must be greater than or equal to the Minimum Premium requirement in order to guarantee the Policy remains in force. The Minimum Premium requirement is equal to the monthly Minimum Premium multiplied by the number of completed policy months. The monthly Minimum Premium is shown on the Policy data page. Each premium payment must be at least equal to the monthly Minimum Premium. Additional premium payments may be made at any time while the Policy is in force. However, the Company reserves the right to require satisfactory evidence of insurability before accepting any additional premium payment which results in an increase in the net amount at risk. Also, the Company will refund any portion of any premium payment which is determined to be in excess of the premium limit established by law to qualify the Policy as a contract for life insurance. The Company may also require that any existing Policy Indebtedness is repaid prior to accepting any additional premium payments. Additional premium payments or other changes to the contract, may jeopardize the Policy's non-modified endowment status. The Company will monitor premiums paid and other policy transactions and will notify the Policy Owner when non-modified endowment contract status is in jeopardy (see "Tax Matters"). 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 Initial Net Premium invested on the date such premium was received in good order by the Company. When the Policy is issued, the Net Premiums will be allocated to the Nationwide Separate Account Trust Money Market Fund sub-account (for any Net Premiums allocated to a sub-account on the application) or the Fixed Account until the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. Net Premiums 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 Net Premiums or may transfer Cash Value from one sub-account to another, subject to such terms and conditions as may be imposed by each Underlying Mutual Fund and as set forth in the prospectus. Net Premiums allocated to the Fixed Account at the time of application may not be transferred prior to the first Policy Anniversary (see "Transfers" and "Investments of the Variable Account"). The designation of investment allocations will be made by the prospective Policy Owner at the time of application for a Policy. The Policy Owner may change the way in which future Net Premiums are allocated by giving written notice to the Company. All percentage allocations must be in whole numbers, and must be at least 5%. The sum of allocations must equal 100%. Short-Term Right to Cancel Policy A Policy may be returned for cancellation and a full refund of premium within 10 days after the Policy is received, within 45 days after the application for insurance is signed, or within 10 days after the Company mails or delivers a Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or delivered to the registered representative who sold it, or to the Company. Immediately after such mailing or delivery, the Policy will be deemed void from the beginning. The Company will refund the total premiums paid within seven days after it receives the Policy. The scope of this right may vary by state. The exact policy provision approved or used in a particular state will be disclosed in any policy issued. POLICY CHARGES Deductions from Premiums The Company deducts a sales load from each premium payment received not to exceed 3.5% of each premium payment. On a current basis, the sales load is reduced to 1.5% on any portion of the annual premium paid in excess of the annual Break Point Premium. The total sales load actually deducted from any Policy will be equal to the sum of this front-end sales load plus any sales surrender charge that may be deducted from Policies that are surrendered. The Company also pays any state premium taxes attributable to a particular policy when incurred by the Company. The Company expects to pay an average state premium tax rate of approximately 2.5% of premiums for all states, although such tax rates range from 0% to 4%. To reimburse the Company for the payment of state premium taxes associated with the Policies, the Company deducts a charge for state premium taxes equal to 23 27 2.5% of all premium payments received. This charge may be more or less than the amount actually assessed by the state in which a particular Policy Owner lives. The Company does not expect to make a profit from this charge. Surrender Charges The Company will deduct a Surrender Charge from the Policy's Cash Value for any Policy surrendered during the first nine Policy Years. The maximum initial Surrender Charge varies by issue age, sex, Specified Amount and underwriting classification and is calculated based on the initial Specified Amount. The following table illustrates the maximum initial Surrender Charge per $1,000 of initial Specified Amount for Policies which are issued on a standard basis (see Appendix 1 for specific examples). Initial Specified Amount $50,000-$99,999 Issue Male Female Male Female Age Non-Tobacco Non-Tobacco Standard Standard --- ----------- ----------- -------- -------- 25 $ 7.776 $ 7.521 $ 8.369 $ 7.818 35 8.817 8.398 9.811 8.891 45 12.191 11.396 13.887 12.169 55 15.636 14.011 18.415 15.116 65 22.295 19.086 26.577 20.641 Initial Specified Amount $100,000+ Issue Male Female Male Female Age Non-Tobacco Non-Tobacco Standard Standard --- ----------- ----------- -------- -------- 25 $ 5.776 $ 5.521 $ 6.369 $ 5.818 35 6.817 6.398 7.811 6.891 45 9.691 8.896 11.387 9.669 55 13.136 11.511 15.915 12.616 65 21.295 18.086 25.577 19.641 The Surrender Charge is comprised of two components: an underwriting surrender charge and sales surrender charge. The underwriting surrender charge varies by issue age in the following manner: Charge per $1,000 of Initial Specified Amount Issue Specified Amounts Specified Amounts Age less than $100,000 $100,000 or more --- ------------------ ---------------- 0-35 $6.00 $4.00 36-55 7.50 5.00 56-80 7.50 6.50 The underwriting surrender charge is designed to cover the administrative expenses associated with underwriting and issuing the Policy, including the costs of processing applications, conducting medical exams, determining insurability and the Insured's underwriting class, and establishing policy records. The Company does not expect to profit from the underwriting surrender charges. The Surrender Charge may be insufficient to recover certain expenses related to the sale of the Policies. Unrecovered expenses are borne by the Company's general assets which may include profits, if any, from mortality and expense risk charges (see "Deductions from the Sub-Accounts"). Additional premiums and/or income earned on assets in the Variable Account have no effect on these charges. The remainder of the Surrender Charge which is not attributable to the underwriting surrender charge component represents the sales surrender charge component. In no event will this component exceed 26 1/2% of the lesser of the Guideline Level Premium required in the first year or the premiums actually paid in the first year. The purpose of the sales surrender charge component is to reimburse the Company for some of the expenses incurred in the distribution of the Policies. The Company also deducts 3.5% of each premium for sales load (see "Deductions from Premiums"). 24 28 - -Reductions to Surrender Charges The Surrender Charges are reduced in subsequent Policy Years in the following manner: Surrender Charge Surrender Charge Completed as a % of Initial Completed as a % of Initial Policy Years Surrender Charges Policy Years Surrender Charges 0 100% 5 60% 1 100% 6 50% 2 90% 7 40% 3 80% 8 30% 4 70% 9+ 0% Special guaranteed maximum Surrender Charges apply in Pennsylvania (see Appendix 1). Deductions from Cash Value The Company also deducts the following charges from the Policy's Cash Value on the Policy Date and each subsequent Monthly Anniversary Day: 1. monthly cost of insurance charges; plus 2. monthly cost of any additional benefits provided by riders; plus 3. monthly administrative expense charge; plus 4. the increase charge per $1000 applied to any increase in the Specified Amount (see "Specified Amount Increases"). The increase charge is $2.04 per year per $1000 and is shown on the Policy data page. This charge is designed to cover the costs associated with increasing the Specified Amount (see "Policy Charges"). This charge will be deducted on each Monthly Anniversary Day for the first 12 months after the increase becomes effective. These deductions will be charged proportionately to the Cash Value in each Variable Account sub-account and the Fixed Account. - -Monthly Cost of Insurance The monthly cost of insurance charge for each policy month is determined by multiplying the monthly cost of insurance rate by the net amount at risk. The net amount at risk is the difference between the death benefit and the Policy's Cash Value, each calculated at the beginning of the policy month. If death benefit Option 1 is in effect and there have been increases in the Specified Amount, then the Cash Value shall first be considered a part of the initial Specified Amount. If the Cash Value exceeds the initial Specified Amount, it shall then be considered a part of the additional increases in Specified Amount resulting from the increases in the order of the increases. Monthly cost of insurance rates will not exceed those guaranteed in the Policy. Guaranteed cost of insurance rates for Policies issued on Specified Amounts less than $100,000 are based on the 1980 Commissioners Extended Term Mortality Table, Age Last Birthday (1980 CET). Guaranteed cost of insurance rates for Policies issued on Specified Amounts $100,000 or more are based on the 1980 Commissioners Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO). Guaranteed cost of insurance rates for Policies issued on a substandard basis are based on appropriate percentage multiples of the 1980 CSO. These mortality tables are sex distinct. In addition, separate mortality tables will be used for standard and non-tobacco. For Policies issued in Texas on a standard basis ("Special Class - Standard" in Texas), guaranteed cost of insurance rates for Specified Amounts less than $100,000 are based on 130% of the 1980 Commissioners 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 Insureds into both standard rate classes and substandard classes that involve a higher mortality risk. In an otherwise identical Policy, an Insured in the standard rate class will have a lower cost of insurance than an Insured in a rate class with higher mortality risks. The Company may also issue certain Policies on a "Non Medical" basis to certain categories of individuals. Due to the underwriting criteria established for Policies issued on a Non Medical basis, 25 29 actual rates will be higher than the current cost of insurance rates being charged under Policies that are medically underwritten. - -Monthly Administrative Charge The Company deducts a monthly Administrative Expense Charge to reimburse it for certain expenses related to maintenance of the Policies, accounting and record keeping and periodic reporting to Policy Owners. This charge is designed only to reimburse the Company for certain actual administrative expenses. The Company does not expect to recover from this charge any amount in excess of aggregate maintenance expenses. Currently, this charge is $12.50 per month in the first year, $5 per month in renewal years. The Company may at its sole discretion increase this charge. However, the Company guarantees that this charge will never exceed $25 per month in the first year and $7.50 per month in renewal years. - -Increase Charge The Increase Charge is comprised of two components: an underwriting and administration charge as well as a sales charge (see "Specified Amount Increases"). The underwriting and administration charge is $1.50 per year per $1000. This charge is to cover the cost of underwriting the increases and any processing expenses. The Company does not expect to profit from this charge. The sales charge is equal to .54 per year per $1000 and reimburses the Company for expenses incurred in distribution. Deductions from the Sub-Accounts The Company assumes certain risks for guaranteeing the mortality and expense charges. The mortality risks assumed under the Policies is that the Insured may not live as long as expected. The expense risk assumed is that the actual expenses incurred in issuing and administering the Policies may be greater than expected. In addition, the Company assumes risks associated with the non-recovery of policy issue, underwriting and other administrative expenses due to Policies which lapse or are surrendered in the early Policy Years. To compensate the Company for assuming these risks associated with the Policies, the Company deducts on a daily basis from the assets of the Variable Account a charge to provide for mortality and expense risks. This charge is equivalent to an annual effective rate of 0.80% of the daily net assets of the Variable Account. On each Policy Anniversary beginning with the 10th, the mortality and expense risk charge is reduced to 0.50% on an annual basis of the daily net assets of the Variable Account, provided the Cash Surrender Value is $25,000 or more on such anniversary. (For policies issued in New York, such reduction occurs regardless of the amount of Cash Surrender Value on such anniversary). To the extent that future levels of mortality and expenses are less than or equal to those expected, the Company may realize a profit from this charge. The Surrender Charge may be insufficient to recover certain expenses related to the sale of the Policies. Unrecovered expenses are born by the Company's general assets which may include profits, if any, from mortality and expense risk charges (see "Surrender Charges"). The Company does not currently assess any charge for income taxes incurred by the Company as a result of the operations of the sub-accounts 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. Reduction of Charges The Policy is available for purchase by individuals, corporations and other groups. For group or sponsored arrangements (including employees of the Company and their family members) and for special exchange programs which the Company may make available from time to time, the Company reserves the right to reduce or eliminate the sales load, surrender charge, monthly administrative charge, monthly cost of insurance charges or other charges normally assessed on certain multiple life cases where it is expected that the size or nature of such cases will result in savings of sales, underwriting, administrative or other costs. Eligibility for and the amount of these reductions will be determined by a number of factors, including the number of Insureds, the total premium expected to be paid, total assets under management for the Policy Owner, the nature of the relationship among individual Insureds, the purpose for which the Policies are being purchased, the expected persistency of individual Policies, and any other circumstances which, in the opinion of the Company is rationally related to the expected reduction in expenses. The extent and nature of reductions may change from 26 30 time to time. Any variations in the charge structure will be determined in a uniform manner reflecting differences in costs of services and not unfairly discriminatory to Policy Owners. HOW THE CASH VALUE VARIES On any date during the Policy Year, the Cash Value equals the Cash Value on the preceding Valuation Date, plus any Net Premium applied since the previous Valuation Date, minus any partial surrenders, plus or minus any investment results, and less any Policy Charges. There is no guaranteed Cash Value. The Cash Value will vary with the investment experience of the Variable Account and/or the daily crediting of interest 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 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 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 deducted from the Variable Account. Such factor is equal to an annual rate of 0.80% of the daily net asset value of the Variable Account. On each Policy Anniversary beginning with the 10th, the mortality and expense risk charge is reduced to 0.50% on an annual basis of the daily net assets of the Variable Account, provided the Cash Surrender Value is $25,000 or more on such anniversary. For Policies issued in New York, such reduction occurs regardless of the amount of Cash Surrender Value on such anniversary. For Underlying Mutual Fund options that credit dividends on a daily basis and pay such dividends once a month, the Net Investment Factor allows for the monthly reinvestment of these daily dividends. The Net Investment Factor may be greater or less than one; therefore, the value of an Accumulation Unit may increase or decrease. It should be noted that changes in the Net Investment Factor may not be directly proportional to changes in the net asset value of Underlying Mutual Fund shares, because of the deduction for Mortality and Expense Risk Charge, and any charge or credit for tax reserves. 27 31 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 are open for business or any other day during which there is sufficient degree of trading that the current net asset value of the Accumulation Units might be materially affected. SURRENDERING THE POLICY FOR CASH Right to Surrender The Policy Owner may surrender the Policy in full at any time while the Insured is living and receive its Cash Surrender Value. The cancellation will be effective as of the date the Company receives a proper written request for cancellation and the Policy. Such written request must be signed and, where permitted, the signature guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a Commercial Bank or a Savings and Loan, 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 and 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 one year, the Policy Owner may request a partial surrender. Partial surrenders will be permitted only if they satisfy the following requirements: 1. The minimum partial surrender is $500; 2. The partial surrender may not reduce the Specified Amount to less than $50,000; 3. After the partial surrender, the Cash Surrender Value is greater than $500 or an amount equal to three times the current monthly deduction if higher; 4. The maximum total partial surrenders in any policy year are limited to 10% of the total premium payments. On a current basis, this requirement is waived in years 15 and beyond provided the Cash Surrender Value is $10,000 or more after the withdrawal; and 5. After the partial surrender, the Policy continues to qualify as life insurance. 28 32 When a partial surrender is made, the Cash Value is reduced by the amount of the partial surrender. Under Death Benefit Option 1, the Specified Amount is reduced by the amount of the partial surrender, unless the Death Benefit is based on the applicable percentage of Cash Value. In such a case, a partial surrender will decrease the Specified Amount by the amount by which the partial surrender exceeds the difference between the Death Benefit and Specified Amount. Surrender charges will be waived for any partial surrenders which satisfy the above conditions. Certain partial surrenders may result in currently taxable income and tax penalties (see "Tax Matters"). Maturity Proceeds The Maturity Date is the Policy Anniversary on or next following the Insured's 95th birthday. The maturity proceeds will be payable to the Policy Owner on the Maturity Date provided the Policy is still in force. The Maturity Proceeds will be equal to the amount of the Policy's Cash Value, less any Indebtedness. Income Tax Withholding Federal law requires the Company to withhold income tax from any portion of surrender proceeds that is subject to tax, unless the Policy Owner advises the Company, in writing, of his or her request not to withhold. If the Policy Owner requests that the Company not withhold taxes, or if the taxes withheld are insufficient, the Policy Owner may be liable for payment of an estimated tax. The Policy Owner should consult his or her tax advisor. In certain employer-sponsored life insurance arrangements, including equity split dollar arrangements, participants may be required to report for income tax purposes, one or more of the following: (1) the value each year of the life insurance protection provided, (2) an amount equal to any employer-paid premiums; or (3) some or all of the amount by which the current value exceeds the employer's interest in the Contract. Participants should consult with the sponsor or the administrator of the Plan, and/or with their personal tax or legal advisor, to determine the tax consequences, if any, of their employer-sponsored life insurance arrangements. POLICY LOANS Taking a Policy Loan After the first Policy Year, the Policy Owner may take a Policy loan using the Policy as security. Maximum Policy Indebtedness is limited to 90% of the Cash Value less Surrender Charge less interest due on the next Policy Anniversary. Maximum Policy Indebtedness, in Texas, is limited to 90% of the Cash Value in the sub-accounts and 100% of the Cash Value in the Fixed Account less Surrender Charge less interest due on the next Policy Anniversary. The Company will not grant a loan for an amount less than $200. Should the Death Proceeds become payable, the Policy be surrendered, or the Policy mature while a loan is outstanding, the amount of Policy Indebtedness will be deducted from the death benefit, Cash Surrender Value or the maturity value, respectively. Any request for a Policy loan must be in written form satisfactory to the Company. The request must be signed and, where permitted, the signature guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange; or by a Commercial Bank or a Savings and Loan 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"). A Policy Owner considering the use of policy loans in connection with his or her retirement income plan should consult his or her personal tax adviser regarding potential tax consequences that may arise if necessary payments are not made to keep the Policy from lapsing. The amount of such payments necessary to prevent the Policy from lapsing would increase with age (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. 29 33 Interest On a current basis, policy loans are credited with an annual effective rate of 5.1% during policy years 2 through 14 and an annual effective rate of 6% during the 15th and subsequent policy years. The rate is guaranteed never to be lower than 5.1%. The Company may change the current interest crediting rate on policy loans at any time at its sole discretion. The loan interest rate is 6% per year for all Policy loans. In the event that it is determined that such loans will be treated, as a result of the differential between the interest crediting rate and the loan interest rate, as taxable distributions under any applicable ruling, regulation, or court decision, the Company retains the right to increase the net cost (by decreasing the interest crediting rate) on all subsequent policy loans to an amount that would result in the transaction being treated as a loan under Federal tax law. If this amount is not prescribed by such ruling, regulation, or court decision, the amount will be that which the Company considers to be more likely to result in the transaction being treated as a loan under Federal tax law. Amounts transferred to the Policy Loan Account will earn interest daily from the date of transfer. The earned interest is transferred from the Policy Loan Account to a Variable Account or the Fixed Account on each Policy Anniversary, at the time a new loan is requested, or at the time of loan repayment. It will be allocated according to the Fund allocation factors in effect at the time of the transfer. Interest is charged daily and is payable at the end of each Policy Year or at the time of loan repayment. Unpaid interest will be added to the existing Policy Indebtedness as of the due date and will be charged interest at the same rate as the rest of the Indebtedness. Whenever the total Policy Indebtedness exceeds the Cash Value less any Surrender Charges, the Company will send a notice to the Policy Owner and the assignee, if any. The Policy will terminate without value 61 days after the mailing of the notice unless a sufficient repayment is made during that period. A repayment is sufficient if it is large enough to reduce the total Policy Indebtedness to an amount equal to the total Cash Value less any Surrender Charges plus an amount sufficient to continue the Policy in force for 3 months. Effect on Death Benefit and Cash Value A Policy loan, whether or not repaid, will have a permanent effect on the Death Benefit and Cash Value because the investment results of the Variable Account or the Fixed Account will apply only to the non-loaned portion of the Cash Value. The longer the loan is outstanding, the greater the effect is likely to be. Depending on the investment results of the Variable Account or the Fixed Account while the loan is outstanding, the effect could be favorable or unfavorable. Repayment All or part of the Indebtedness may be repaid at any time while the Policy is in force during the Insured's lifetime. Any payment intended as a loan repayment, rather than a premium payment, must be identified as such. Loan repayments will be credited to the Variable sub-accounts and the Fixed Account in proportion to the Policy Owner's Underlying Mutual Fund allocation factors in effect at the time of the repayment. Each repayment may not be less than $50. The Company reserves the right to require that any loan repayments resulting from Policy loans transferred from the Fixed Account must be first allocated to the Fixed Account. HOW THE DEATH BENEFIT VARIES Calculation of the Death Benefit At issue, the Policy Owner selects the Specified Amount. 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. The term "Applicable Percentage" means: 1. 250% when the Insured is Attained Age 40 or less at the beginning of a Policy Year; and 30 34 2. when the Insured is above Attained Age 40, the percentage shown in the "Applicable Percentage of Cash Value Table." 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 Policy Indebtedness and less any unpaid Policy Charges. Under certain circumstances, the Death Proceeds may be adjusted (see "Incontestability", "Error in Age or Sex", and "Suicide"). RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY The Policy Owner may exchange the Policy for a flexible premium adjustable life insurance policy offered by the Company on the Policy Date. The benefits for the new policy will not vary with the investment experience of a separate account. The exchange must be elected within 24 months from the Policy Date. No evidence of insurability will be required. The Policy Owner and Beneficiary under the new policy will be the same as those under the exchanged Policy on the effective date of the exchange. The new policy will have a death benefit on the exchange date not more than the death benefit of the original Policy immediately prior to the exchange date. The new policy will have the same Policy Date and issue age as the original Policy. The initial Specified Amount and any increases in Specified Amount will have the same rate class as those of the original Policy. Any Indebtedness may be transferred to the new policy. The exchange may be subject to an equitable adjustment in rates and values to reflect variances, if any, in the rates and values between the two Policies. After adjustment, if any excess is owed the Policy Owner, the Company will pay the excess to the Policy Owner in cash. The exchange may be subject to federal income tax withholding (see "Income Tax Withholding"). 31 35 CHANGES OF INVESTMENT POLICY The Company may materially change the investment policy of the Variable Account. The Company must inform the Policy Owners and obtain all necessary regulatory approvals. Any change must be submitted to the various state insurance departments which may disapprove it if deemed detrimental to the interests of the Policy Owners or if it renders the Company's operations hazardous to the public. If a Policy Owner objects, the Policy may be converted to a substantially comparable General Account life insurance policy offered by the Company on the life of the Insured. The Policy Owner has the later of 60 days (6 months in Pennsylvania) from the date of the investment policy change or 60 days (6 months in Pennsylvania) from being informed of such change to make this conversion. The Company will not require evidence of insurability for this conversion. The new policy will not be affected by the investment experience of any separate account. The new policy will be for an amount of insurance not exceeding the death benefit of the Policy converted on the date of such conversion. GRACE PERIOD - -First Three Policy Years This Policy will not lapse during the first three Policy Years provided that on each Monthly Anniversary Day (1) is greater than or equal to (2) where: (1) Is the sum of all premiums paid to date minus any Policy Indebtedness, minus any partial surrenders, and minus any partial surrender fee; and (2) Is the sum of monthly Minimum Premiums required since the Policy Date including the monthly Minimum Premium for the current Monthly Anniversary Day. If (1) is less than (2) and the Cash Surrender Value is less than zero, a Grace Period of 61 days from the Monthly Anniversary Day will be allowed for the payment of sufficient premium to satisfy the Minimum Premium requirement. If sufficient premium is not paid by the end of the Grace Period, the Policy will lapse without value. In any event the Policy will not lapse as long as there is a positive Cash Surrender Value. - -Policy Years Four and After If the Cash Surrender Value on a Monthly Anniversary Day is not sufficient to cover the current Policy Charges, a Grace Period of 61 days from the Monthly Anniversary Day will be allowed for the payment of sufficient premium to cover the current Policy Charges due plus an amount equal to three times the current monthly deduction. - -All Policy Years The Company will send such a notice at the start of the Grace Period to the Policy Owner's last known address. If the Insured dies during the Grace Period, the Company will pay the Death Proceeds. REINSTATEMENT If the Grace Period ends and the Policy Owner has neither paid the required premium nor surrendered the Policy for its Cash Surrender Value, the Policy Owner may reinstate the Policy by: 1. submitting a written request at any time within 3 years after the end of the Grace Period and prior to the Maturity Date; 2. providing evidence of insurability satisfactory to the Company; 3. paying an amount of premium equal to the sum of the Minimum Monthly Premiums missed since the beginning of the Grace Period, if your Policy terminated in the first three policy years; 4. paying sufficient premium to cover all policy charges that were due and unpaid during the Grace Period if your Policy terminated in the fourth or later policy year; 5. paying sufficient premium to keep the Policy in force for 3 months from the date of reinstatement; and 6. paying or reinstating any Indebtedness against the Policy which existed at the end of the Grace Period. The effective date of a reinstated Policy will be the Monthly Anniversary Day on or next following the date the application for reinstatement is approved by the Company. If your Policy is reinstated, the Cash Value on the 32 36 date of reinstatement, but prior to applying any premiums or loan repayments received, will be set equal to the lesser of: 1. the Cash Value at the end of the Grace Period; or 2. the Surrender Charge for the Policy Year in which the Policy was reinstated. Unless the Policy Owner has provided otherwise, all amounts will be allocated based on the Underlying Mutual Fund allocation factors in effect at the start of the Grace Period. THE FIXED ACCOUNT OPTION Under exemptive and exclusionary provisions, interests in the Company'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 is subject to the provisions of these Acts, and the Company has been advised that the staff of the Securities and Exchange Commission has not reviewed the disclosures in this prospectus relating to the Fixed Account option. Disclosures regarding the General Account may, however, be subject to certain generally applicable provisions of the federal securities laws concerning the accuracy and completeness of statements made in prospectuses. As explained earlier, a Policy Owner may elect to allocate or transfer all or part of the Cash Value to the Fixed Account and the amount allocated or transferred becomes part of the Company's General Account. The Company'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 the Company will inform a Policy Owner of the then applicable rate. The Company is not obligated to credit interest at a higher rate. CHANGES IN EXISTING INSURANCE COVERAGE The Policy Owner may request certain changes in the insurance coverage under the Policy. Any request must be in writing and received at the 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. Specified Amount Increases After the first Policy Year, the Policy Owner may request an increase to the Specified Amount. Any increase will be subject to the following conditions: 1. the request must be applied for in writing; 2. satisfactory evidence of insurability must be provided; 3. the increase must be for a minimum of $10,000; 4. the Cash Surrender Value is sufficient to continue the Policy in force for at least 3 months; and 5. age limits are the same as for a new issue. Any approved increase will have an effective date of the Monthly Anniversary Day on or next following the date the Company approves the supplemental application. The Company reserves the right to limit the number of Specified Amount increases to one each Policy Year. Specified Amount Decreases After the first Policy Year, the Policy Owner may also request a decrease to the Specified Amount. Any approved decrease will be effective on the Monthly Anniversary Day on or next following the date the Company receives the request. Any such decrease shall reduce insurance in the following order: 1. against insurance provided by the most recent increase; 2. against the next most recent increases successively; and 3. against insurance provided under the original application. 33 37 The Company reserves the right to limit the number of Specified Amount decreases to one each Policy Year. The Company will refuse a request for a decrease which would: 1. reduce the Specified Amount to less than $50,000 ($100,000 in New Jersey and Pennsylvania); or 2. disqualify the Policy as a contract for life insurance. Changes in the Death Benefit Option After the first Policy Year, the Policy Owner may change the death benefit option under the Policy. If the change is from Option 1 to Option 2, the Specified Amount will be decreased by the amount of the Cash Value. If the change is from Option 2 to Option 1, the Specified Amount will be increased by the amount of the Cash Value. 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(ies), unless otherwise provided. Multiple Beneficiaries will be paid in equal shares, unless otherwise provided. If no named Beneficiary survives the Insureds, the Death Proceeds 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. Any assignment will not affect any payments made or actions taken by the Company before it was recorded. The Company is not responsible for any assignment not submitted for recording, nor is the Company responsible for the sufficiency or validity of any assignment. The assignment will be subject to any Indebtedness owed to the Company before it was recorded. Incontestability The Company will not contest payment of the Death Proceeds based on the initial Specified Amount after the Policy has been in force during the Insured's lifetime for 2 years from the Policy Date. For any increase in Specified Amount requiring evidence of insurability, the Company will not contest payment of the Death Proceeds based on such an increase after it has been in force during the Insured's lifetime for 2 years from its effective date. Error in Age or Sex If the age or sex of the Insured has been misstated, the affected benefits will be adjusted. The amount of the death benefit will be 1. multiplied by 2. and then the result added to 3., where: 34 38 1. is the amount of the death benefit at the time of the Insured's death reduced by the amount of the Cash Value at the time of the Insured's death; 2. is the ratio of the monthly cost of insurance applied in the policy month of death and the monthly cost of insurance that should have been applied at the true age and sex in the policy month of death; and 3. is the Cash Value at the time of the Insured's death. Suicide If the Insured dies by suicide, while sane or insane, within two years from the Policy Date, the Company will pay no more than the sum of the premiums paid, less any Indebtedness. If the Insured dies by suicide, while sane or insane, within two years from the date an application is accepted for an increase in the Specified Amount, the Company will pay no more than the amount paid for such additional benefit. Nonparticipating Policies These are nonparticipating Policies on which no dividends are payable. These Policies do not share in the profits or surplus earnings of the Company. Riders A rider may be added as an addition to the Policy. Riders currently include: 1. Maturity Extension Endorsement; 2. Spouse Rider; 3. Child Rider; 4. Waiver of Monthly Deductions Rider; 5. Accidental Death Benefit Rider; 6. Base Insured Term Rider; 7. Accelerated Death Benefit Rider; 8. Change of Insured Rider; and 9. Guaranteed Minimum Death Benefit Rider. Rider availability varies by state. LEGAL CONSIDERATIONS On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v. Norris that certain annuity benefits provided by employers' retirement and fringe benefit programs may not vary between men and women on the basis of sex. This decision applies only to benefits derived from premiums made on or after August 1, 1983. The Policies offered by this prospectus are based upon actuarial tables which distinguish between men and women and thus the Policies provide different benefits to men and women of the same age. Accordingly, employers and employee organizations should consider, in consultation with legal counsel, the impact of Norris on any employment related insurance or benefit program before purchasing this Policy. DISTRIBUTION OF THE POLICIES The Policies will be sold by licensed insurance agents in those states where the Policies may lawfully be sold. Such agents will be registered representatives of broker dealers registered under the Securities Exchange Act of 1934 who are member firms of the National Association of Securities Dealers, Inc. ("NASD"). The Policies will be distributed by the General Distributor, Nationwide Advisory Services, Inc. NAS acts as general distributor for the Nationwide Multi-Flex Variable Account, Nationwide DC Variable Account, Nationwide DCVA-II, Nationwide Variable Account-II, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-A, Nationwide VL Separate Account-B, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, NACo Variable Account and the Nationwide Variable Account, all of which are separate investment accounts of the Company or its affiliates. NAS is a wholly owned subsidiary of the Company. 35 39 NAS also acts as principal underwriter for the Nationwide Investing Foundation, Nationwide Separate Account Trust, Financial Horizons Investment Trust, Nationwide Investing Foundation II and Nationwide Asset Allocation Trust, which are open-end management investment companies. Gross first year commissions plus any expense allowance payments paid by the Company on the sale of these policies provided by the General Distributor will not exceed 80% of the target Premium plus 4% of any excess premium payments. Gross renewal commissions in years 2-10 paid by the Company will not exceed 4% of actual premium payment, and will not exceed 1% in years 11+. CUSTODIAN OF ASSETS The Company serves as the Custodian of the assets of the Variable Account. TAX MATTERS Policy Proceeds Section 7702 of the Code provides that if certain tests are met, a Policy will be treated as a life insurance policy for federal tax purposes. The Company will monitor compliance with these tests. The Policy should thus receive the same federal income tax treatment as fixed benefit life insurance. As a result, the Death Proceeds payable under a Policy are excludable from gross income of the beneficiary under Section 101 of the Code. Section 7702A of the Code defines modified endowment contracts as those policies issued or materially changed on or after June 21, 1988 on which the total premiums paid during the first seven years exceed the amount that would have been paid if the policy provided for paid up benefits after seven level annual premiums (see "Information about the Policies"). The Code provides for taxation of surrenders, partial surrenders, loans, collateral assignments and other pre-death distributions from modified endowment contracts (other than certain distributions to terminally ill or chronically ill individuals) are subject to federal income taxes a manner similar to the way annuities are taxed. Modified endowment contract distributions are defined by the Code as amounts not received as an annuity and are taxable to the extent the cash value of the policy exceeds, at the time of distribution, the premiums paid into the policy. A 10% tax penalty generally applies to the taxable portion of such distributions unless the Policy Owner is over age 59 1/2 or disabled or the distribution is part of an annuity to the Policy Owner as defined in the Code. Under certain circumstances, certain distributions made under a Policy on the life of a "terminally ill individual" or a "chronically ill individual," as those terms are defined in the Code, are excludible from gross income. The Policies offered by this prospectus may or may not be issued as modified endowment contracts. The Company will monitor premiums paid and will notify the Policy Owner when the policy's non-modified endowment status is in jeopardy. If a Policy is not a modified endowment contract, a cash distribution during the first 15 years after a Policy is issued which causes a reduction in death benefits may still become fully or partially taxable to the Owner pursuant to Section 7702(f)(7) of the Code. The Policy Owner should carefully consider this potential effect and seek further information before initiating any changes in the terms of the policy. Under certain conditions, a Policy may become a modified endowment as a result of a material change or a reduction in benefits as defined by Section 7702A(c) of the Code. In addition to meeting the tests required under Sections 7702, Section 817(h) of the Code requires that the investments of separate accounts such as the Variable Account be adequately diversified. Regulations under 817(h) provide that a variable life policy that fails to satisfy the diversification standards will not be treated as life insurance unless such failure was inadvertent, is corrected, and the Policy Owner or the Company pays an amount to the Internal Revenue Service. The amount will be based on the tax that would have been paid by the Policy Owner if the income, for the period the policy was not diversified, had been received by the Policy Owner. If the failure to diversify is not corrected in this manner, the Policy Owner will be deemed the owner of the underlying securities and taxed on the earnings of his or her account. Representatives of the Internal Revenue Service have suggested, from time to time, that the number of Underlying Mutual Funds available or the number of transfer opportunities available under a variable product may be relevant in determining whether the product qualifies for the desired tax treatment. No formal guidance has been issued in this area. Should the Secretary of the Treasury issue additional rules or regulations limiting the number of Underlying Mutual Funds, transfers between Underlying Mutual Funds, exchanges of Underlying Mutual Funds or changes in investment objectives of Underlying Mutual Funds such that the Policy would no longer qualify as life insurance under Section 7702 of the Code, the Company will take whatever steps are available to remain in compliance. 36 40 The Company will monitor compliance with these regulations and, to the extent necessary, will change the objectives or assets of the sub-account investments to remain in compliance. A total surrender or cancellation of the Policy by lapse or the maturity of the Policy on its Maturity Date may have adverse tax consequences. If the amount received by the Policy Owner plus total Policy Indebtedness exceeds the premiums paid into the Policy, the excess generally will be treated as taxable income, regardless of whether or not the Policy is a modified endowment contract. - - Federal Estate and Generation-Skipping Transfer Taxes The federal estate tax is integrated with the federal gift tax under a unified tax rate schedule. In general, an estate of less than $600,000 (inclusive of certain predeath gifts) will not incur a federal estate tax liability. In addition, an unlimited marital deduction may be available for federal estate tax purposes, for certain amounts that pass to the surviving spouse. When the Insured dies, the death benefit will generally be included in the lnsured's federal gross estate if: (1) the proceeds were payable to or for the benefit of the Insured's estate; or (2) the Insured held any "incident of ownership" in the Policy at death or at any time within three years of death. An incident of ownership is, in general, any right that may be exercised by the Policy Owner, such as the right to borrow on the Policy, or the right to name a new Beneficiary. If the Policy Owner (whether or not he or she is the Insured) transfers ownership of the Policy to another person, such transfer may be subject to a federal gift tax. In addition, if such Policy Owner transfers the Policy to someone two or more generations younger than the Policy Owner, the transfer may be subject to the federal generation-skipping transfer tax ("GSTT"), the taxable amount being the value of the Policy. Similarly, if the Beneficiary is two or more generations younger than the Insured, the payment of the Death Proceeds at the death of the Insured may be subject to the GSTT. Pursuant to regulations recently promulgated by the U.S. Treasury Department, the Company may be required to withhold a portion of the Death Proceeds and pay them directly to the Internal Revenue Service as the GSTT liability. The GSTT provisions generally apply to the same transfers that are subject to estate or gift taxes. The tax rate is a flat rate equal to the maximum estate tax rate (currently 55%), and there is a provision for an aggregate $1 million exemption. Due to the complexity of these rules, the Policy Owner should consult with counsel and other competent advisors regarding these taxes, - - Non-Resident Aliens Distributions to nonresident aliens ("NRAs") are generally subject to federal income tax and tax withholding, at a statutory rate of 30% of the amount of income that is distributed. The Company is required to withhold such amount from the Distribution and remit it to the Internal Revenue Service. Distributions to certain NRAs may be subject to lower, or in certain instances zero, tax and withholding rates, if the United States has entered into an applicable treaty. However, in order to obtain the benefits of such treaty provisions, the NRA must give to the Company sufficient proof of his or her residency and citizenship in the form and manner prescribed by the Internal Revenue Service. In addition, for any Distribution made after December 31, 1997, the NRA must obtain an individual Taxpayer Identification Number from the Internal Revenue Service, and furnish that number to the Company prior to the Distribution. If the Company does not have the proper proof of citizenship or residency and (for Distributions after December 31, 1997) a proper individual Taxpayer Identification Number prior to any Distribution, the Company will be required to withhold 30% of the income, regardless of any treaty provision. A payment may not be subject to withholding where the recipient sufficiently establishes to the Company that such payment is effectively connected to the recipient's conduct of a trade or business in the United States and that such payment is includable in the recipient's gross income for United States federal income tax purposes, Any such distributions may be subject to back-up withholding at the statutory rate (currently 31%) if not taxpayer identification number, or an incorrect taxpayer identification number, is provided. State and local estate, inheritance, income and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each Policy Owner or Beneficiary. Taxation of the Company The Company is taxed as a life insurance company under the Code. Since the Variable Account is not a separate entity from the Company and its operations form a part of the Company, it will not be taxed separately as a "regulated investment company" under Sub-chapter M of the Code. Investment income and realized capital 37 41 gains on the assets of the Variable Account are reinvested and taken into account in determining the value of Accumulation Units. As a result, such investment income and realized capital gains are automatically applied to increase reserves under the Policies. The Company does not initially expect to incur any Federal income tax liability that would be chargeable to the Variable Account. Based upon these expectations, no charge is currently being made against the Variable Account for federal income taxes. If, however, the Company determines that on a separate company basis such taxes may be incurred, it reserves the right to assess a charge for such taxes against the Variable Account. The Company may also incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant. If they increase, however, charges for such taxes may be made. Tax Changes The foregoing discussion, which is based on the Company's understanding of federal tax laws as they are currently interpreted by the Internal Revenue Service, is general and is not intended as tax advice. In the recent past, the Code has been subjected to numerous amendments and changes, and it is reasonable to believe that it will continue to be revised. The United States Congress has, in the past, considered numerous legislative proposals that, if enacted, could change the tax treatment of the Policies. It is reasonable to believe that such proposals, and other proposals will be considered in the future, and some may be enacted into law. In addition, the U.S. Treasury Department may amend existing regulations, issue new regulations, or adopt new interpretations of existing law that may be at variance with its current positions on these matters. In addition, current state law (which is not discussed herein), and future amendments to state law, may affect the tax consequences of the Policy. If the Policy Owner, Insured, or Beneficiary or other person receiving any benefit or interest in or from the Policy is not both a resident and citizen of the United States, there may be a tax imposed by a foreign country, in addition to any tax imposed by the United States. The foreign law (including regulations, rulings, and case law) may change and impose additional taxes on the Policy, the Death Benefit, or other Distributions and/or ownership of the Policy, or a treaty may be amended and all or part of the favorable treatment may be eliminated. Any or all of the foregoing may change from time to time without any notice, and the tax consequences arising out of a Policy may be changed retroactively. There is no way of predicting if when, and to what extent any such change may take place. No representation is made as to the likelihood of the continuation of these current laws, interpretations, and policies. THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO INSURANCE POLICIES. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR. THE COMPANY The life insurance business, which includes product lines in health insurance and annuities, is the only business in which the Company is engaged. The Company markets its Policies through independent insurance brokers, general agents, and registered representatives of registered NASD broker/dealer firms. The Company serves as depositor for the Nationwide Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide Variable Account-8, MFS Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, NACo Variable Account, Nationwide DC Variable Account and the Nationwide DCVA-II, each of which is a registered investment company, and each of which is a separate investment account of the Company. The Company, in common with other insurance companies, is subject to regulation and supervision by the regulatory authorities of the states in which it is licensed to do business. A license from the state insurance department is a prerequisite to the transaction of insurance business in that state. In general, all states have statutory administrative powers. Such regulation relates, among other things, to licensing of insurers and their agents, the approval of policy forms, the methods of computing reserves, the form and content of statutory financial statements, the amount of policyholders' and stockholders' dividends, and the type of distribution of investments permitted. 38 42 The Company operates in the highly competitive field of life insurance. There are approximately 2,300 stock, mutual and other types of insurers in the life insurance business in the United States, and a large number of them compete with the registrant in the sale of insurance policies. As is customary in insurance company groups, employees are shared with the other insurance companies in the group. In addition to its direct salaried employees, the Company shares employees with Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company. The Company does not presently own or lease any materially important physical properties when its property holdings are viewed in relation to its total assets. The Company shares Home Office, other facilities and equipment with Nationwide Mutual Insurance Company. COMPANY MANAGEMENT Nationwide Life Insurance Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance Company, Nationwide Indemnity Company, Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty Insurance Company, National Casualty Company, West Coast Life Insurance Company, Scottsdale Indemnity Company and Nationwide General Insurance Company and their affiliated companies comprise the Nationwide Insurance Enterprise. The companies comprising the Nationwide Insurance Enterprise have substantially common boards of directors and officers. Nationwide Financial Services, Inc. is the sole shareholder of Nationwide Life. Directors of the Company Director Name Since Principal Occupation ---- ----- -------------------- Lewis J. Alphin 1993 Farm Owner and Operator (1) Keith W. Eckel 1996 Partner, Fred W. Eckel Sons; President, Eckel Farms, Inc. (1) Willard J. Engel 1994 General Manager Lyon County Co-Operative Oil Company (1) Fred C. Finney 1992 Owner and Operator, Moreland Fruit Farm; Operator, Melrose Orchard (1) Charles L. Fuellgraf, Jr. * + 1969 Chief Executive Officer, Fuellgraf Electric Company. (1) Joseph J. Gasper*+ 1996 President and Chief Operating Officer, Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company. (2) Henry S. Holloway *+ 1986 Farm Owner and Operator (1) Dimon Richard McFerson *+ 1988 Chairman and Chief Executive Officer, Nationwide Insurance Enterprise (2) David O. Miller *+ 1985 President, Owen Potato Farm, Inc.; Partner, M&M Enterprises (1) C. Ray Noecker 1994 Owner and Operator, Noecker Farms (1) James F. Patterson + 1989 Vice President, Pattersons, Inc. ; President, Patterson Farms, Inc. (1) Arden L. Shisler *+ 1984 President and Chief Executive Officer, K&B Transport, Inc. (1) Robert L. Stewart 1989 Owner and Operator, Sunnydale Farms and Mining (1) Nancy C. Thomas * 1986 Farm Owner and Operator. (1) Harold W. Weihl 1990 Farm Owner and Operator, Weihl Farms (1) *Member, Executive 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. 39 43 Each of the directors is a director of the other major insurance affiliates of the Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of the Company and Nationwide Life Insurance Company. Messrs. McFerson and Gasper are directors of Nationwide Advisory Services, Inc., a registered broker-dealer. Messrs. Holloway, McFerson, Miller, Patterson, Shisler and Fuellgraf are directors of Nationwide Financial Services, Inc. Messrs. Fuellgraf, McFerson, Ms. Thomas and Mr. Weihl are trustees of Nationwide Investing Foundation, a registered investment company. Mr. McFerson is trustee of Nationwide Separate Account Trust, Financial Horizons Investment Trust, Nationwide Investing Foundation II and Nationwide Asset Allocation Trust, registered investment companies. Mr. Engel is a director of Western Cooperative Transport. Executive Officers of the Company Name Office Held - ---- ----------- Dimon Richard McFerson Chairman and Chief Executive Officer-Nationwide Insurance Enterprise Joseph J. Gasper President and Chief Operating Officer Gordon E. McCutchan Executive Vice President, Law and Corporate Services and Secretary Robert A. Oakley Executive Vice President-Chief Financial Officer Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer James E. Brock Senior Vice President - Life Company Operations W. Sidney Druen Senior Vice President and General Counsel and Assistant Secretary Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary Richard A. Karas Senior Vice President - Sales and Financial Services Mark R. Thresher Vice President - Controller Duane M. Campbell Vice President - Treasurer Mr. Gasper is also President and Chief Operating Officer of Nationwide Life and Annuity Insurance Company. Mr. Galloway is also an officer of Nationwide Mutual Insurance Company and Nationwide Life and Annuity Insurance Company. Each of the other officers listed above is also an officer of each of the companies comprising the Nationwide Insurance Enterprise. Each of the executive officers listed above has been associated with the registrant in an executive capacity for more than the past five years, except Mr. Thresher, who joined the Registrant in 1996. From 1988-1996, Mr. Thresher served as a partner in the accounting firm KPMG Peat Marwick LLP and lead partner for Nationwide Insurance Enterprise from 1993-1996. OTHER CONTRACTS ISSUED BY THE COMPANY The Company does presently and will, from time to time, offer variable contracts and policies with benefits which vary in accordance with the investment experience of a separate account of the Company. STATE REGULATION The Company is subject to the laws of Ohio governing insurance companies and to regulation by the Ohio Insurance Department. An annual statement in a prescribed form is filed with the Insurance Department each year covering the operation of the Company for the preceding year and its financial condition as of the end of such year. Regulation by the Insurance Department includes periodic examination to determine the Company's contract liabilities and reserves so that the Insurance Department may certify the items are correct. The Company's books and accounts are subject to review by the Insurance Department at all times and a full examination of its operations is conducted periodically by the National Association of Insurance Commissioners. Such regulation does not, however, involve any supervision of management or investment practices or policies. In addition, the Company is subject to regulation under the insurance laws of other jurisdictions in which it may operate. 40 44 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 Indebtedness. Policy Owners will also be sent annual and semi-annual reports containing financial statements for the Variable Account as required by the 1940 Act. In addition, Policy Owners will receive statements of significant transactions, such as changes in Specified Amount, changes in death benefit option, changes in future premium allocation, transfers among sub-accounts, premium payments, loans, loan repayments, reinstatement and termination. ADVERTISING The Company is also ranked and rated by independent financial rating services, including 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 From time to time the Company is a party to litigation and arbitration proceedings in the ordinary course of its business, none of which is expected to have a material adverse effect on the Company. In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits, relating to life insurance pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements. In October 1996, a policyholder of Nationwide Life filed a complaint in Alabama state court against Nationwide Life and an agent of Nationwide Life (Wayne M. King v. Nationwide Life Insurance Company and Danny Nix), related to the sale of a whole life policy on a "vanishing premium" basis and seeking unspecified compensatory and punitive damages. In February 1997, Nationwide Life was named as a defendant in a lawsuit filed in New York Supreme Court also related to the sale of whole life policies on a "vanishing premium" basis (John H. Snyder v. Nationwide Mutual Insurance Company, Nationwide Mutual Insurance Co. and Nationwide Life Insurance Co.). The plaintiff in such lawsuit seeks to represent a national class of Nationwide Life policyholders and claims unspecified compensatory and punitive damages. This lawsuit is in an early stage and has not been certified as a class action. Nationwide Life intends to defend these cases vigorously. There can be no assurance that any future litigation relating to pricing and sales practices will not have a material adverse effect on the Company. The General Distributor, Nationwide Advisory Services, Inc., is not engaged in any material litigation of any nature. EXPERTS The financial statements and schedules have been included herein in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. 41 45 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. 42 46 APPENDIX 1 ILLUSTRATION OF SURRENDER CHARGES Example 1: A female non-tobacco, age 45, purchases a Policy with a Specified Amount of $50,000 and a Scheduled Premium of $750. She now wishes to surrender the Policy during the first Policy year. By using the initial surrender charge table reproduced below, (also see "Surrender Charges") the total surrender charge per thousand multiplied by the Specified Amount expressed in thousands equals the total surrender charge of $569.80 ($11.396 x 50=569.80). Example 2: A male non-tobacco, age 35, purchases a Policy with a Specified Amount of $100,000 and a Scheduled Premium of $1100. He now wants to surrender the Policy in the sixth Policy Year. The total initial surrender charge is calculated using the method illustrated above. (surrender charge per 1000 6.817 x 100=681.70 maximum initial surrender charge). Because the fifth Policy Year has been completed, the maximum initial surrender charge is reduced by multiplying it by the applicable percentage factor from the "Reductions to Surrender Charges" table below. (Also see "Reductions to Surrender Charges"). In this case, $681.70 x 60%=$409.02. Maximum Surrender Charge per $1,000 of initial Specified Amount for policies which are issued on a standard basis. Initial Specified Amount $50,000-$99,999 - -------------------------------------------------------------------------------- Issue Male Female Male Female Age Non-Tobacco Non-Tobacco Standard Standard - -------------------------------------------------------------------------------- 25 $7.776 $7.521 $8.369 $7.818 - -------------------------------------------------------------------------------- 35 8.817 8.398 9.811 8.891 - -------------------------------------------------------------------------------- 45 12.191 11.396 13.887 12.169 - -------------------------------------------------------------------------------- 55 15.636 14.011 18.415 15.116 - -------------------------------------------------------------------------------- 65 22.295 19.086 26.577 20.641 - -------------------------------------------------------------------------------- Initial Specified Amount $100,000+ - -------------------------------------------------------------------------------- Issue Male Female Male Female Age Non-Tobacco Non-Tobacco Standard Standard - -------------------------------------------------------------------------------- 25 $5.776 $5.521 $6.369 $5.818 - -------------------------------------------------------------------------------- 35 6.817 6.398 7.811 6.891 - -------------------------------------------------------------------------------- 45 9.691 8.896 11.387 9.669 - -------------------------------------------------------------------------------- 55 13.136 11.511 15.915 12.616 - -------------------------------------------------------------------------------- 65 21.295 18.086 25.577 19.641 - -------------------------------------------------------------------------------- Reductions to Surrender Charges. ------------------------------------------------------------------------ Surrender Charge Surrender Charge Completed as a % of Initial Completed as a % of Initial Policy Years Surrender Charges Policy Years Surrender Charges ------------------------------------------------------------------------ 0 100% 5 60% ------------------------------------------------------------------------ 1 100% 6 50% ------------------------------------------------------------------------ 2 90% 7 40% ------------------------------------------------------------------------ 3 80% 8 30% ------------------------------------------------------------------------ 4 70% 9+ 0% ------------------------------------------------------------------------ The current Surrender Charges are the same for all states. However, in Pennsylvania the guaranteed maximum Surrender Charges are spread out over 14 years. The guaranteed maximum Surrender Charge in subsequent years in Pennsylvania is reduced in the following manner:
Completed Surrender Charge Completed Surrender Charge Completed Surrender Charge Policy as a % of Initial Policy as a % of Initial Policy as a % of Initial Years Surrender Charges Years Surrender Charges Years Surrender Charges ----- ----------------- ----- ----------------- ----- ----------------- 0 100% 5 60% 10 20% 1 100% 6 50% 11 15% 2 90% 7 40% 12 10% 3 80% 8 30% 13 5% 4 70% 9 25% 14+ 0%
The illustrations of current values in this prospectus are the same for Pennsylvania. However, the illustrations of guaranteed values in this prospectus do not reflect guaranteed maximum Surrender Charges which are spread out over 14 years. If this contract is issued in Pennsylvania, please contact the Home Office for an illustration. The Company has no plans to change the current Surrender Charges. 43 47 APPENDIX 2 ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH BENEFITS The illustrations in this prospectus have been prepared to help show how values under the Policies change with investment performance. The illustrations illustrate how Cash Values, Cash Surrender Values and death benefits under a Policy would vary over time if the hypothetical gross investment rates of return were a uniform annual effective rate of either 0%, 6% or 12%. If the hypothetical gross investment rate of return averages 0%, 6% or 12% over a period of years, but fluctuates above or below those averages for individual years, the Cash Values, Cash Surrender Values and death benefits may be different. For hypothetical returns of 0% and 6%, the illustrations also illustrate when the Policies would go into default, at which time additional premium payments would be required to continue the Policy in force. The illustrations also assume there is no Policy Indebtedness, no additional premium payments are made, no Cash Values are allocated to the Fixed Account, and there are no changes in the Specified Amount or death benefit option. The amounts shown for the Cash Value, Cash Surrender Value and death benefit as of each Policy Anniversary reflect the fact that the net investment return on the assets held in the sub-accounts is lower than the gross return. This is due to the daily charges made against the assets of the sub-accounts for assuming mortality and expense risks. The mortality and expense risk charges are equivalent to an annual effective rate of 0.80% of the daily net asset value of the Variable Account. On each Policy Anniversary beginning with the 10th, the mortality and expense risk charge is reduced to 0.50% on an annual basis of the daily net assets of the Variable Account, provided the Cash Surrender Value is $25,000 or more on such anniversary. In addition, the net investment returns also reflect the deduction of Underlying Mutual Fund investment advisory fees and other expenses which are equivalent to an annual effective rate of 0.90% of the daily net asset value of the Variable Account. 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. Considering current charges for mortality and expense risks 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 -1.70%, 4.30% and 10.30%. On each Policy Anniversary beginning with the 10th, the gross annual rates of return of 0%, 6%, and 12% correspond to net investment experience at constant annual rates of -1.50%, 4.60%, and 10.60%, provided the Cash Surrender Value is $25,000 or more on such anniversary. This is due to a guaranteed reduction in the mortality and expense risk charge from an annual effective rate of 0.80% to an annual effective rate of 0.50% if the aforementioned conditions apply. 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. The illustrations also reflect the fact that the Company deducts a sales load from each premium payment. Current values reflect a deduction of 3.5% of each premium payment up to Break Point Premium and 1.5% of any excess. Guaranteed values reflect a deduction of 3.5% of each premium payment. The illustrations also reflect the fact that the Company deducts a charge for state premium taxes equal to 2.5% of all premium payments. The Cash Surrender Values shown in the illustrations reflect the fact that the Company will deduct a Surrender Charge from the Policy's Cash Value for any Policy surrendered in full during the first nine years. In addition, the illustrations reflect the fact that the Company deducts a monthly administrative charge at the beginning of each Policy Month. This monthly administrative expense charge is $12.50 per month in the first year, $5 per month in renewal years. The illustrations assume a monthly administrative expense charge of $25 per month in the first year and $7.50 per month in renewal years. 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. 44 48 DEATH BENEFIT OPTION 1 $750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 788 390 0 50,000 422 0 50,000 454 0 50,000 2 1,614 852 278 50,000 943 369 50,000 1,038 464 50,000 3 2,483 1,296 780 50,000 1,476 959 50,000 1,670 1,154 50,000 4 3,394 1,717 1,258 50,000 2,016 1,557 50,000 2,352 1,893 50,000 5 4,351 2,116 1,714 50,000 2,563 2,161 50,000 3,087 2,686 50,000 6 5,357 2,493 2,149 50,000 3,118 2,774 50,000 3,883 3,539 50,000 7 6,412 2,854 2,567 50,000 3,689 3,402 50,000 4,752 4,465 50,000 8 7,520 3,193 2,964 50,000 4,268 4,039 50,000 5,696 5,467 50,000 9 8,683 3,512 3,340 50,000 4,859 4,687 50,000 6,725 6,553 50,000 10 9,905 3,810 3,810 50,000 5,462 5,462 50,000 7,847 7,847 50,000 11 11,188 4,083 4,083 50,000 6,071 6,071 50,000 9,069 9,069 50,000 12 12,535 4,330 4,330 50,000 6,688 6,688 50,000 10,403 10,403 50,000 13 13,949 4,546 4,546 50,000 7,308 7,308 50,000 11,856 11,856 50,000 14 15,434 4,729 4,729 50,000 7,929 7,929 50,000 13,441 13,441 50,000 15 16,993 4,869 4,869 50,000 8,542 8,542 50,000 15,166 15,166 50,000 16 18,630 4,968 4,968 50,000 9,149 9,149 50,000 17,052 17,052 50,000 17 20,349 5,018 5,018 50,000 9,743 9,743 50,000 19,113 19,113 50,000 18 22,154 5,008 5,008 50,000 10,316 10,316 50,000 21,367 21,367 50,000 19 24,049 4,940 4,940 50,000 10,867 10,867 50,000 23,843 23,843 50,000 20 26,039 4,804 4,804 50,000 11,389 11,389 50,000 26,568 26,568 50,000 21 28,129 4,595 4,595 50,000 11,877 11,877 50,000 29,668 29,668 50,000 22 30,323 4,303 4,303 50,000 12,324 12,324 50,000 33,114 33,114 50,000 23 32,626 3,916 3,916 50,000 12,719 12,719 50,000 36,961 36,961 50,000 24 35,045 3,422 3,422 50,000 13,052 13,052 50,000 41,274 41,274 50,000 25 37,585 2,816 2,816 50,000 13,320 13,320 50,000 46,105 46,105 53,482 26 40,252 2,084 2,084 50,000 13,510 13,510 50,000 51,420 51,420 59,132 27 43,052 1,192 1,192 50,000 13,596 13,596 50,000 57,274 57,274 64,719 28 45,992 131 131 50,000 13,570 13,570 50,000 63,731 63,731 70,741 29 49,079 (*) (*) (*) 13,415 13,415 50,000 70,863 70,863 77,240 30 52,321 (*) (*) (*) 13,108 13,108 50,000 78,753 78,753 84,266
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT FOR ANY SINGLE POLICY YEAR. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 45 49 DEATH BENEFIT OPTION 1 $750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 788 175 0 50,000 200 0 50,000 225 0 50,000 2 1,614 539 0 50,000 606 33 50,000 678 104 50,000 3 2,483 879 362 50,000 1,012 496 50,000 1,158 641 50,000 4 3,394 1,194 735 50,000 1,416 957 50,000 1,667 1,208 50,000 5 4,351 1,484 1,082 50,000 1,816 1,415 50,000 2,208 1,806 50,000 6 5,357 1,744 1,400 50,000 2,210 1,865 50,000 2,781 2,436 50,000 7 6,412 1,973 1,686 50,000 2,593 2,306 50,000 3,385 3,098 50,000 8 7,520 2,167 1,937 50,000 2,961 2,732 50,000 4,021 3,792 50,000 9 8,683 2,320 2,148 50,000 3,309 3,137 50,000 4,688 4,516 50,000 10 9,905 2,429 2,429 50,000 3,632 3,632 50,000 5,386 5,386 50,000 11 11,188 2,490 2,490 50,000 3,924 3,924 50,000 6,116 6,116 50,000 12 12,535 2,499 2,499 50,000 4,180 4,180 50,000 6,877 6,877 50,000 13 13,949 2,453 2,453 50,000 4,396 4,396 50,000 7,673 7,673 50,000 14 15,434 2,346 2,346 50,000 4,563 4,563 50,000 8,504 8,504 50,000 15 16,993 2,170 2,170 50,000 4,672 4,672 50,000 9,369 9,369 50,000 16 18,630 1,916 1,916 50,000 4,711 4,711 50,000 10,267 10,267 50,000 17 20,349 1,576 1,576 50,000 4,669 4,669 50,000 11,198 11,198 50,000 18 22,154 1,132 1,132 50,000 4,526 4,526 50,000 12,158 12,158 50,000 19 24,049 571 571 50,000 4,262 4,262 50,000 13,143 13,143 50,000 20 26,039 (*) (*) (*) 3,855 3,855 50,000 14,153 14,153 50,000 21 28,129 (*) (*) (*) 3,281 3,281 50,000 15,185 15,185 50,000 22 30,323 (*) (*) (*) 2,511 2,511 50,000 16,240 16,240 50,000 23 32,626 (*) (*) (*) 1,514 1,514 50,000 17,320 17,320 50,000 24 35,045 (*) (*) (*) 248 248 50,000 18,427 18,427 50,000 25 37,585 (*) (*) (*) (*) (*) (*) 19,559 19,559 50,000 26 40,252 (*) (*) (*) (*) (*) (*) 20,711 20,711 50,000 27 43,052 (*) (*) (*) (*) (*) (*) 21,878 21,878 50,000 28 45,992 (*) (*) (*) (*) (*) (*) 23,051 23,051 50,000 29 49,079 (*) (*) (*) (*) (*) (*) 24,221 24,221 50,000 30 52,321 (*) (*) (*) (*) (*) (*) 25,386 25,386 50,000
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 46 50 DEATH BENEFIT OPTION 2 $750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 788 388 0 50,388 420 0 50,420 452 0 50,452 2 1,614 847 273 50,847 937 363 50,937 1,032 458 51,032 3 2,483 1,286 770 51,286 1,464 948 51,464 1,657 1,141 51,657 4 3,394 1,700 1,241 51,700 1,995 1,536 51,995 2,327 1,868 52,327 5 4,351 2,089 1,688 52,089 2,529 2,128 52,529 3,046 2,645 53,046 6 5,357 2,454 2,110 52,454 3,068 2,724 53,068 3,819 3,475 53,819 7 6,412 2,801 2,514 52,801 3,617 3,330 53,617 4,657 4,370 54,657 8 7,520 3,123 2,893 53,123 4,170 3,941 54,170 5,560 5,331 55,560 9 8,683 3,422 3,250 53,422 4,729 4,556 54,729 6,536 6,363 56,536 10 9,905 3,697 3,697 53,697 5,291 5,291 55,291 7,590 7,590 57,590 11 11,188 3,944 3,944 53,944 5,852 5,852 55,852 8,726 8,726 58,726 12 12,535 4,161 4,161 54,161 6,411 6,411 56,411 9,949 9,949 59,949 13 13,949 4,344 4,344 54,344 6,962 6,962 56,962 11,264 11,264 61,264 14 15,434 4,489 4,489 54,489 7,499 7,499 57,499 12,674 12,674 62,674 15 16,993 4,585 4,585 54,585 8,013 8,013 58,013 14,179 14,179 64,179 16 18,630 4,635 4,635 54,635 8,501 8,501 58,501 15,788 15,788 65,788 17 20,349 4,630 4,630 54,630 8,955 8,955 58,955 17,502 17,502 67,502 18 22,154 4,560 4,560 54,560 9,359 9,359 59,359 19,320 19,320 69,320 19 24,049 4,425 4,425 54,425 9,714 9,714 59,714 21,253 21,253 71,253 20 26,039 4,217 4,217 54,217 10,005 10,005 60,005 23,301 23,301 73,301 21 28,129 3,932 3,932 53,932 10,225 10,225 60,225 25,469 25,469 75,469 22 30,323 3,560 3,560 53,560 10,361 10,361 60,361 27,845 27,845 77,845 23 32,626 3,092 3,092 53,092 10,396 10,396 60,396 30,360 30,360 80,360 24 35,045 2,517 2,517 52,517 10,314 10,314 60,314 33,015 33,015 83,015 25 37,585 1,837 1,837 51,837 10,110 10,110 60,110 35,825 35,825 85,825 26 40,252 1,041 1,041 51,041 9,767 9,767 59,767 38,794 38,794 88,794 27 43,052 103 103 50,103 9,248 9,248 59,248 41,907 41,907 91,907 28 45,992 (*) (*) (*) 8,546 8,546 58,546 45,178 45,178 95,178 29 49,079 (*) (*) (*) 7,639 7,639 57,639 48,610 48,610 98,610 30 52,321 (*) (*) (*) 6,508 6,508 56,508 52,209 52,209 102,209
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT FOR ANY SINGLE POLICY YEAR. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 47 51 DEATH BENEFIT OPTION 2 $750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 ---- ----- ----- ----- ------- ----- ----- ------- ----- ----- ------- 1 788 173 0 50,173 198 0 50,198 223 0 50,223 2 1,614 533 0 50,533 600 27 50,600 671 97 50,671 3 2,483 868 352 50,868 1,000 483 51,000 1,143 627 51,143 4 3,394 1,176 717 51,176 1,394 935 51,394 1,641 1,182 51,641 5 4,351 1,455 1,053 51,455 1,781 1,379 51,781 2,164 1,763 52,164 6 5,357 1,703 1,359 51,703 2,156 1,812 52,156 2,712 2,368 52,712 7 6,412 1,917 1,630 51,917 2,517 2,230 52,517 3,283 2,996 53,283 8 7,520 2,092 1,862 52,092 2,856 2,627 52,856 3,875 3,645 53,875 9 8,683 2,223 2,051 52,223 3,168 2,996 53,168 4,483 4,311 54,483 10 9,905 2,308 2,308 52,308 3,447 3,447 53,447 5,106 5,106 55,106 11 11,188 2,341 2,341 52,341 3,686 3,686 53,686 5,738 5,738 55,738 12 12,535 2,318 2,318 52,318 3,878 3,878 53,878 6,375 6,375 56,375 13 13,949 2,239 2,239 52,239 4,019 4,019 54,019 7,016 7,016 57,016 14 15,434 2,096 2,096 52,096 4,099 4,099 54,099 7,653 7,653 57,653 15 16,993 1,883 1,883 51,883 4,108 4,108 54,108 8,278 8,278 58,278 16 18,630 1,592 1,592 51,592 4,033 4,033 54,033 8,879 8,879 58,879 17 20,349 1,216 1,216 51,216 3,862 3,862 53,862 9,445 9,445 59,445 18 22,154 742 742 50,742 3,576 3,576 53,576 9,957 9,957 59,957 19 24,049 157 157 50,157 3,156 3,156 53,156 10,396 10,396 60,396 20 26,039 (*) (*) (*) 2,582 2,582 52,582 10,738 10,738 60,738 21 28,129 (*) (*) (*) 1,835 1,835 51,835 10,961 10,961 60,961 22 30,323 (*) (*) (*) 894 894 50,894 11,040 11,040 61,040 23 32,626 (*) (*) (*) (*) (*) (*) 10,947 10,947 60,947 24 35,045 (*) (*) (*) (*) (*) (*) 10,649 10,649 60,649 25 37,585 (*) (*) (*) (*) (*) (*) 10,103 10,103 60,103 26 40,252 (*) (*) (*) (*) (*) (*) 9,254 9,254 59,254 27 43,052 (*) (*) (*) (*) (*) (*) 8,036 8,036 58,036 28 45,992 (*) (*) (*) (*) (*) (*) 6,366 6,366 56,366 29 49,079 (*) (*) (*) (*) (*) (*) 4,151 4,151 54,151 30 52,321 (*) (*) (*) (*) (*) (*) 1,298 1,298 51,298
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 48 52 DEATH BENEFIT OPTION 1 $1200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,260 641 0 50,000 693 0 50,000 745 52 50,000 2 2,583 1,341 648 50,000 1,487 794 50,000 1,640 947 50,000 3 3,972 2,004 1,380 50,000 2,290 1,666 50,000 2,601 1,978 50,000 4 5,431 2,628 2,073 50,000 3,099 2,545 50,000 3,633 3,079 50,000 5 6,962 3,204 2,719 50,000 3,907 3,421 50,000 4,735 4,250 50,000 6 8,570 3,734 3,318 50,000 4,714 4,298 50,000 5,918 5,502 50,000 7 10,259 4,211 3,864 50,000 5,514 5,167 50,000 7,183 6,837 50,000 8 12,032 4,626 4,349 50,000 6,298 6,021 50,000 8,535 8,258 50,000 9 13,893 4,981 4,773 50,000 7,068 6,860 50,000 9,986 9,778 50,000 10 15,848 5,267 5,267 50,000 7,816 7,816 50,000 11,544 11,544 50,000 11 17,901 5,482 5,482 50,000 8,538 8,538 50,000 13,222 13,222 50,000 12 20,056 5,615 5,615 50,000 9,226 9,226 50,000 15,032 15,032 50,000 13 22,318 5,658 5,658 50,000 9,872 9,872 50,000 16,990 16,990 50,000 14 24,694 5,601 5,601 50,000 10,466 10,466 50,000 19,115 19,115 50,000 15 27,189 5,441 5,441 50,000 11,007 11,007 50,000 21,437 21,437 50,000 16 29,808 5,166 5,166 50,000 11,484 11,484 50,000 23,988 23,988 50,000 17 32,559 4,748 4,748 50,000 11,872 11,872 50,000 26,796 26,796 50,000 18 35,447 4,181 4,181 50,000 12,167 12,167 50,000 30,006 30,006 50,000 19 38,479 3,447 3,447 50,000 12,354 12,354 50,000 33,612 33,612 50,000 20 41,663 2,528 2,528 50,000 12,415 12,415 50,000 37,693 37,693 50,000 21 45,006 1,387 1,387 50,000 12,322 12,322 50,000 42,348 42,348 50,000 22 48,517 (*) (*) (*) 12,040 12,040 50,000 47,707 47,707 50,093 23 52,202 (*) (*) (*) 11,528 11,528 50,000 53,725 53,725 56,411 24 56,073 (*) (*) (*) 10,742 10,742 50,000 60,337 60,337 63,354 25 60,136 (*) (*) (*) 9,624 9,624 50,000 67,597 67,597 70,977 26 64,403 (*) (*) (*) 8,099 8,099 50,000 75,564 75,564 79,342 27 68,883 (*) (*) (*) 6,073 6,073 50,000 84,301 84,301 88,516 28 73,587 (*) (*) (*) 3,434 3,434 50,000 93,877 93,877 98,571 29 78,527 (*) (*) (*) 21 21 50,000 104,366 104,366 109,584 30 83,713 (*) (*) (*) (*) (*) (*) 115,843 115,843 121,635
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF A 6% BREAK POINT FOR ANY SINGLE POLICY YEAR. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 49 53 DEATH BENEFIT OPTION 1 $1200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,260 287 0 50,000 328 0 50,000 368 0 50,000 2 2,583 728 35 50,000 833 140 50,000 944 251 50,000 3 3,972 1,110 487 50,000 1,309 685 50,000 1,526 903 50,000 4 5,431 1,429 874 50,000 1,746 1,192 50,000 2,110 1,556 50,000 5 6,962 1,676 1,191 50,000 2,138 1,652 50,000 2,689 2,204 50,000 6 8,570 1,846 1,430 50,000 2,472 2,056 50,000 3,256 2,840 50,000 7 10,259 1,929 1,582 50,000 2,739 2,393 50,000 3,802 3,455 50,000 8 12,032 1,912 1,635 50,000 2,922 2,645 50,000 4,314 4,036 50,000 9 13,893 1,781 1,574 50,000 3,002 2,794 50,000 4,775 4,567 50,000 10 15,848 1,523 1,523 50,000 2,959 2,959 50,000 5,170 5,170 50,000 11 17,901 1,121 1,121 50,000 2,773 2,773 50,000 5,478 5,478 50,000 12 20,056 560 560 50,000 2,420 2,420 50,000 5,680 5,680 50,000 13 22,318 (*) (*) (*) 1,872 1,872 50,000 5,750 5,750 50,000 14 24,694 (*) (*) (*) 1,096 1,096 50,000 5,656 5,656 50,000 15 27,189 (*) (*) (*) 45 45 50,000 5,354 5,354 50,000 16 29,808 (*) (*) (*) (*) (*) (*) 4,783 4,783 50,000 17 32,559 (*) (*) (*) (*) (*) (*) 3,863 3,863 50,000 18 35,447 (*) (*) (*) (*) (*) (*) 2,481 2,481 50,000 19 38,479 (*) (*) (*) (*) (*) (*) 499 499 50,000 20 41,663 (*) (*) (*) (*) (*) (*) (*) (*) (*) 21 45,006 (*) (*) (*) (*) (*) (*) (*) (*) (*) 22 48,517 (*) (*) (*) (*) (*) (*) (*) (*) (*) 23 52,202 (*) (*) (*) (*) (*) (*) (*) (*) (*) 24 56,073 (*) (*) (*) (*) (*) (*) (*) (*) (*) 25 60,136 (*) (*) (*) (*) (*) (*) (*) (*) (*) 26 64,403 (*) (*) (*) (*) (*) (*) (*) (*) (*) 27 68,883 (*) (*) (*) (*) (*) (*) (*) (*) (*) 28 73,587 (*) (*) (*) (*) (*) (*) (*) (*) (*) 29 78,527 (*) (*) (*) (*) (*) (*) (*) (*) (*) 30 83,713 (*) (*) (*) (*) (*) (*) (*) (*) (*)
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 50 54 DEATH BENEFIT OPTION 2 $1200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,260 635 0 50,635 687 0 50,687 738 45 50,738 2 2,583 1,324 631 51,324 1,468 775 51,468 1,619 926 51,619 3 3,972 1,971 1,347 51,971 2,252 1,628 52,252 2,557 1,933 52,557 4 5,431 2,571 2,016 52,571 3,031 2,477 53,031 3,552 2,997 53,552 5 6,962 3,115 2,630 53,115 3,796 3,311 53,796 4,599 4,114 54,599 6 8,570 3,606 3,190 53,606 4,548 4,132 54,548 5,704 5,288 55,704 7 10,259 4,034 3,687 54,034 5,275 4,929 55,275 6,864 6,517 56,864 8 12,032 4,389 4,112 54,389 5,966 5,688 55,966 8,071 7,794 58,071 9 13,893 4,674 4,466 54,674 6,618 6,410 56,618 9,331 9,123 59,331 10 15,848 4,878 4,878 54,878 7,219 7,219 57,219 10,638 10,638 60,638 11 17,901 4,997 4,997 54,997 7,763 7,763 57,763 11,991 11,991 61,991 12 20,056 5,023 5,023 55,023 8,235 8,235 58,235 13,384 13,384 63,384 13 22,318 4,946 4,946 54,946 8,621 8,621 58,621 14,809 14,809 64,809 14 24,694 4,756 4,756 54,756 8,905 8,905 58,905 16,256 16,256 66,256 15 27,189 4,454 4,454 54,454 9,083 9,083 59,083 17,728 17,728 67,728 16 29,808 4,030 4,030 54,030 9,137 9,137 59,137 19,213 19,213 69,213 17 32,559 3,458 3,458 53,458 9,033 9,033 59,033 20,683 20,683 70,683 18 35,447 2,738 2,738 52,738 8,762 8,762 58,762 22,135 22,135 72,135 19 38,479 1,862 1,862 51,862 8,305 8,305 58,305 23,554 23,554 73,554 20 41,663 819 819 50,819 7,643 7,643 57,643 24,924 24,924 74,924 21 45,006 (*) (*) (*) 6,740 6,740 56,740 26,215 26,215 76,215 22 48,517 (*) (*) (*) 5,562 5,562 55,562 27,476 27,476 77,476 23 52,202 (*) (*) (*) 4,070 4,070 54,070 28,598 28,598 78,598 24 56,073 (*) (*) (*) 2,233 2,233 52,233 29,544 29,544 79,544 25 60,136 (*) (*) (*) 10 10 50,010 30,272 30,272 80,272 26 64,403 (*) (*) (*) (*) (*) (*) 30,730 30,730 80,730 27 68,883 (*) (*) (*) (*) (*) (*) 30,863 30,863 80,863 28 73,587 (*) (*) (*) (*) (*) (*) 30,617 30,617 80,617 29 78,527 (*) (*) (*) (*) (*) (*) 29,917 29,917 79,917 30 83,713 (*) (*) (*) (*) (*) (*) 28,677 28,677 78,677
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT FOR ANY SINGLE POLICY YEAR. (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. 51 55 DEATH BENEFIT OPTION 2 $1200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,260 280 0 50,280 319 0 50,319 360 0 50,360 2 2,583 708 15 50,708 811 118 50,811 919 226 50,919 3 3,972 1,071 447 51,071 1,263 639 51,263 1,474 850 51,474 4 5,431 1,364 809 51,364 1,668 1,113 51,668 2,016 1,461 52,016 5 6,962 1,579 1,094 51,579 2,015 1,530 52,015 2,535 2,050 52,535 6 8,570 1,709 1,293 51,709 2,293 1,877 52,293 3,021 2,605 53,021 7 10,259 1,747 1,401 51,747 2,489 2,143 52,489 3,460 3,114 53,460 8 12,032 1,680 1,403 51,680 2,586 2,309 52,586 3,833 3,555 53,833 9 13,893 1,496 1,288 51,496 2,565 2,357 52,565 4,117 3,909 54,117 10 15,848 1,183 1,183 51,183 2,407 2,407 52,407 4,290 4,290 54,290 11 17,901 730 730 50,730 2,093 2,093 52,093 4,326 4,326 54,326 12 20,056 128 128 50,128 1,603 1,603 51,603 4,199 4,199 54,199 13 22,318 (*) (*) (*) 919 919 50,919 3,879 3,879 53,879 14 24,694 (*) (*) (*) 16 16 50,016 3,332 3,332 53,332 15 27,189 (*) (*) (*) (*) (*) (*) 2,511 2,511 52,511 16 29,808 (*) (*) (*) (*) (*) (*) 1,360 1,360 51,360 17 32,559 (*) (*) (*) (*) (*) (*) (*) (*) (*) 18 35,447 (*) (*) (*) (*) (*) (*) (*) (*) (*) 19 38,479 (*) (*) (*) (*) (*) (*) (*) (*) (*) 20 41,663 (*) (*) (*) (*) (*) (*) (*) (*) (*) 21 45,006 (*) (*) (*) (*) (*) (*) (*) (*) (*) 22 48,517 (*) (*) (*) (*) (*) (*) (*) (*) (*) 23 52,202 (*) (*) (*) (*) (*) (*) (*) (*) (*) 24 56,073 (*) (*) (*) (*) (*) (*) (*) (*) (*) 25 60,136 (*) (*) (*) (*) (*) (*) (*) (*) (*) 26 64,403 (*) (*) (*) (*) (*) (*) (*) (*) (*) 27 68,883 (*) (*) (*) (*) (*) (*) (*) (*) (*) 28 73,587 (*) (*) (*) (*) (*) (*) (*) (*) (*) 29 78,527 (*) (*) (*) (*) (*) (*) (*) (*) (*) 30 83,713 (*) (*) (*) (*) (*) (*) (*) (*) (*)
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (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. 52 56 DEATH BENEFIT OPTION 1 $1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,575 947 49 100,000 1,016 119 100,000 1,085 188 100,000 2 3,229 1,946 1,049 100,000 2,146 1,249 100,000 2,354 1,457 100,000 3 4,965 2,910 2,102 100,000 3,304 2,496 100,000 3,732 2,924 100,000 4 6,788 3,837 3,119 100,000 4,492 3,774 100,000 5,231 4,513 100,000 5 8,703 4,731 4,103 100,000 5,712 5,084 100,000 6,865 6,236 100,000 6 10,713 5,591 5,053 100,000 6,967 6,429 100,000 8,648 8,110 100,000 7 12,824 6,408 5,960 100,000 8,247 7,799 100,000 10,587 10,139 100,000 8 15,040 7,172 6,813 100,000 9,544 9,185 100,000 12,689 12,330 100,000 9 17,367 7,884 7,615 100,000 10,860 10,590 100,000 14,972 14,703 100,000 10 19,810 8,535 8,535 100,000 12,186 12,186 100,000 17,449 17,449 100,000 11 22,376 9,139 9,139 100,000 13,536 13,536 100,000 20,155 20,155 100,000 12 25,069 9,703 9,703 100,000 14,919 14,919 100,000 23,123 23,123 100,000 13 27,898 10,229 10,229 100,000 16,341 16,341 100,000 26,386 26,386 100,000 14 30,868 10,700 10,700 100,000 17,784 17,784 100,000 30,052 30,052 100,000 15 33,986 11,097 11,097 100,000 19,236 19,236 100,000 34,077 34,077 100,000 16 37,261 11,427 11,427 100,000 20,701 20,701 100,000 38,511 38,511 100,000 17 40,699 11,681 11,681 100,000 22,175 22,175 100,000 43,402 43,402 100,000 18 44,309 11,846 11,846 100,000 23,649 23,649 100,000 48,803 48,803 100,000 19 48,099 11,916 11,916 100,000 25,119 25,119 100,000 54,780 54,780 100,000 20 52,079 11,897 11,897 100,000 26,675 26,675 100,000 61,418 61,418 100,000 21 56,258 11,775 11,775 100,000 28,234 28,234 100,000 68,803 68,803 100,000 22 60,646 11,522 11,522 100,000 29,779 29,779 100,000 77,036 77,036 100,000 23 65,253 11,128 11,128 100,000 31,306 31,306 100,000 86,243 86,243 101,766 24 70,091 10,566 10,566 100,000 32,798 32,798 100,000 96,429 96,429 112,822 25 75,170 9,824 9,824 100,000 34,252 34,252 100,000 107,629 107,629 124,850 26 80,504 8,891 8,891 100,000 35,666 35,666 100,000 119,945 119,945 137,937 27 86,104 7,726 7,726 100,000 37,017 37,017 100,000 133,520 133,520 150,878 28 91,984 6,311 6,311 100,000 38,301 38,301 100,000 148,498 148,498 164,832 29 98,158 4,619 4,619 100,000 39,509 39,509 100,000 165,042 165,042 179,895 30 104,641 2,600 2,600 100,000 40,618 40,618 100,000 183,337 183,337 196,171
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (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. 53 57 DEATH BENEFIT OPTION 1 $1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,575 750 0 100,000 813 0 100,000 876 0 100,000 2 3,229 1,672 774 100,000 1,851 953 100,000 2,038 1,140 100,000 3 4,965 2,552 1,744 100,000 2,906 2,098 100,000 3,290 2,483 100,000 4 6,788 3,389 2,671 100,000 3,978 3,260 100,000 4,642 3,924 100,000 5 8,703 4,182 3,554 100,000 5,065 4,437 100,000 6,102 5,473 100,000 6 10,713 4,926 4,388 100,000 6,163 5,625 100,000 7,676 7,138 100,000 7 12,824 5,618 5,169 100,000 7,269 6,821 100,000 9,373 8,925 100,000 8 15,040 6,251 5,892 100,000 8,378 8,019 100,000 11,202 10,843 100,000 9 17,367 6,820 6,551 100,000 9,482 9,213 100,000 13,171 12,901 100,000 10 19,810 7,320 7,320 100,000 10,578 10,578 100,000 15,291 15,291 100,000 11 22,376 7,744 7,744 100,000 11,657 11,657 100,000 17,575 17,575 100,000 12 25,069 8,088 8,088 100,000 12,717 12,717 100,000 20,039 20,039 100,000 13 27,898 8,348 8,348 100,000 13,751 13,751 100,000 22,703 22,703 100,000 14 30,868 8,515 8,515 100,000 14,753 14,753 100,000 25,586 25,586 100,000 15 33,986 8,580 8,580 100,000 15,711 15,711 100,000 28,798 28,798 100,000 16 37,261 8,532 8,532 100,000 16,615 16,615 100,000 32,298 32,298 100,000 17 40,699 8,357 8,357 100,000 17,452 17,452 100,000 36,118 36,118 100,000 18 44,309 8,036 8,036 100,000 18,201 18,201 100,000 40,294 40,294 100,000 19 48,099 7,548 7,548 100,000 18,843 18,843 100,000 44,873 44,873 100,000 20 52,079 6,873 6,873 100,000 19,356 19,356 100,000 49,910 49,910 100,000 21 56,258 5,988 5,988 100,000 19,718 19,718 100,000 55,475 55,475 100,000 22 60,646 4,871 4,871 100,000 19,905 19,905 100,000 61,656 61,656 100,000 23 65,253 3,497 3,497 100,000 19,891 19,891 100,000 68,558 68,558 100,000 24 70,091 1,834 1,834 100,000 19,643 19,643 100,000 76,311 76,311 100,000 25 75,170 (*) (*) (*) 19,116 19,116 100,000 85,073 85,073 100,000 26 80,504 (*) (*) (*) 18,248 18,248 100,000 94,894 94,894 109,128 27 86,104 (*) (*) (*) 16,963 16,963 100,000 105,704 105,704 119,446 28 91,984 (*) (*) (*) 15,157 15,157 100,000 117,616 117,616 130,554 29 98,158 (*) (*) (*) 12,706 12,706 100,000 130,763 130,763 142,532 30 104,641 (*) (*) (*) 9,468 9,468 100,000 145,305 145,305 155,477
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (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. 54 58 DEATH BENEFIT OPTION 2 $1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,575 943 46 100,943 1,012 115 101,012 1,082 184 101,082 2 3,229 1,936 1,039 101,936 2,135 1,237 102,135 2,342 1,444 102,342 3 4,965 2,889 2,081 102,889 3,280 2,472 103,280 3,705 2,897 103,705 4 6,788 3,802 3,084 103,802 4,450 3,732 104,450 5,181 4,463 105,181 5 8,703 4,677 4,048 104,677 5,645 5,017 105,645 6,781 6,153 106,781 6 10,713 5,514 4,975 105,514 6,867 6,328 106,867 8,520 7,981 108,520 7 12,824 6,302 5,853 106,302 8,105 7,656 108,105 10,397 9,948 110,397 8 15,040 7,031 6,672 107,031 9,346 8,987 109,346 12,415 12,056 112,415 9 17,367 7,701 7,431 107,701 10,593 10,324 110,593 14,587 14,318 114,587 10 19,810 8,302 8,302 108,302 11,832 11,832 111,832 16,919 16,919 116,919 11 22,376 8,848 8,848 108,848 13,078 13,078 113,078 19,438 19,438 119,438 12 25,069 9,347 9,347 109,347 14,338 14,338 114,338 22,173 22,173 122,173 13 27,898 9,803 9,803 109,803 15,614 15,614 115,614 25,147 25,147 125,147 14 30,868 10,195 10,195 110,195 16,886 16,886 116,886 28,447 28,447 128,447 15 33,986 10,502 10,502 110,502 18,131 18,131 118,131 32,010 32,010 132,010 16 37,261 10,731 10,731 110,731 19,353 19,353 119,353 35,866 35,866 135,866 17 40,699 10,873 10,873 110,873 20,541 20,541 120,541 40,037 40,037 140,037 18 44,309 10,913 10,913 110,913 21,677 21,677 121,677 44,539 44,539 144,539 19 48,099 10,847 10,847 110,847 22,750 22,750 122,750 49,397 49,397 149,397 20 52,079 10,679 10,679 110,679 23,765 23,765 123,765 54,655 54,655 154,655 21 56,258 10,398 10,398 110,398 24,701 24,701 124,701 60,337 60,337 160,337 22 60,646 9,972 9,972 109,972 25,523 25,523 125,523 66,454 66,454 166,454 23 65,253 9,394 9,394 109,394 26,295 26,295 126,295 73,040 73,040 173,040 24 70,091 8,636 8,636 108,636 26,908 26,908 126,908 80,114 80,114 180,114 25 75,170 7,694 7,694 107,694 27,344 27,344 127,344 87,716 87,716 187,716 26 80,504 6,560 6,560 106,560 27,585 27,585 127,585 95,891 95,891 195,891 27 86,104 5,199 5,199 105,199 27,582 27,582 127,582 104,658 104,658 204,658 28 91,984 3,604 3,604 103,604 27,315 27,315 127,315 114,068 114,068 214,068 29 98,158 1,762 1,762 101,762 26,752 26,752 126,752 124,170 124,170 224,170 30 104,641 0 0 0 25,840 25,840 125,840 134,993 134,993 234,993
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT FOR ANY SINGLE POLICY YEAR. (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. 55 59 DEATH BENEFIT OPTION 2 $1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 1,575 747 0 100,747 809 0 100,809 872 0 100,872 2 3,229 1,661 763 101,661 1,839 941 101,839 2,025 1,127 102,025 3 4,965 2,530 1,722 102,530 2,881 2,073 102,881 3,262 2,454 103,262 4 6,788 3,352 2,634 103,352 3,933 3,215 103,933 4,589 3,871 104,589 5 8,703 4,124 3,496 104,124 4,993 4,365 104,993 6,013 5,385 106,013 6 10,713 4,842 4,304 104,842 6,055 5,517 106,055 7,537 6,999 107,537 7 12,824 5,502 5,053 105,502 7,114 6,665 107,114 9,166 8,717 109,166 8 15,040 6,097 5,738 106,097 8,162 7,803 108,162 10,902 10,543 110,902 9 17,367 6,619 6,350 106,619 9,190 8,921 109,190 12,749 12,480 112,749 10 19,810 7,065 7,065 107,065 10,191 10,191 110,191 14,709 14,709 114,709 11 22,376 7,426 7,426 107,426 11,155 11,155 111,155 16,786 16,786 116,786 12 25,069 7,697 7,697 107,697 12,073 12,073 112,073 18,983 18,983 118,983 13 27,898 7,874 7,874 107,874 12,937 12,937 112,937 21,309 21,309 121,309 14 30,868 7,950 7,950 107,950 13,737 13,737 113,737 23,764 23,764 123,764 15 33,986 7,913 7,913 107,913 14,455 14,455 114,455 26,350 26,350 126,350 16 37,261 7,752 7,752 107,752 15,075 15,075 115,075 29,154 29,154 129,154 17 40,699 7,455 7,455 107,455 15,578 15,578 115,578 32,103 32,103 132,103 18 44,309 7,004 7,004 107,004 15,937 15,937 115,937 35,191 35,191 135,191 19 48,099 6,379 6,379 106,379 16,125 16,125 116,125 38,408 38,408 138,408 20 52,079 5,563 5,563 105,563 16,112 16,112 116,112 41,745 41,745 141,745 21 56,258 4,539 4,539 104,539 15,871 15,871 115,871 45,197 45,197 145,197 22 60,646 3,293 3,293 103,293 15,371 15,371 115,371 48,752 48,752 148,752 23 65,253 1,809 1,809 101,809 14,585 14,585 114,585 52,405 52,405 152,405 24 70,091 70 70 100,070 13,475 13,475 113,475 56,141 56,141 156,141 25 75,170 (*) (*) (*) 11,996 11,996 111,996 59,933 59,933 159,933 26 80,504 (*) (*) (*) 10,089 10,089 110,089 63,745 63,745 163,745 27 86,104 (*) (*) (*) 7,684 7,684 107,684 67,523 67,523 167,523 28 91,984 (*) (*) (*) 4,691 4,691 104,691 71,195 71,195 171,195 29 98,158 (*) (*) (*) 1,020 1,020 101,020 74,681 74,681 174,681 30 104,641 (*) (*) (*) (*) (*) (*) 77,902 77,902 177,902
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (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. 56 60 DEATH BENEFIT OPTION 1 $2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 2,625 1,533 371 100,000 1,647 485 100,000 1,762 599 100,000 2 5,381 3,104 1,941 100,000 3,431 2,268 100,000 3,772 2,609 100,000 3 8,275 4,625 3,579 100,000 5,267 4,221 100,000 5,964 4,918 100,000 4 11,314 6,078 5,148 100,000 7,141 6,211 100,000 8,341 7,411 100,000 5 14,505 7,447 6,633 100,000 9,036 8,222 100,000 10,905 10,091 100,000 6 17,855 8,737 8,039 100,000 10,960 10,262 100,000 13,684 12,986 100,000 7 21,373 9,943 9,362 100,000 12,910 12,328 100,000 16,699 16,118 100,000 8 25,066 11,052 10,587 100,000 14,875 14,410 100,000 19,968 19,503 100,000 9 28,945 12,062 11,714 100,000 16,854 16,505 100,000 23,520 23,172 100,000 10 33,017 12,980 12,980 100,000 18,857 18,857 100,000 27,400 27,400 100,000 11 37,293 13,793 13,793 100,000 20,877 20,877 100,000 31,739 31,739 100,000 12 41,782 14,476 14,476 100,000 22,892 22,892 100,000 36,497 36,497 100,000 13 46,497 15,025 15,025 100,000 24,903 24,903 100,000 41,735 41,735 100,000 14 51,446 15,415 15,415 100,000 26,893 26,893 100,000 47,511 47,511 100,000 15 56,644 15,639 15,639 100,000 28,949 28,949 100,000 53,913 53,913 100,000 16 62,101 15,691 15,691 100,000 30,997 30,997 100,000 61,045 61,045 100,000 17 67,831 15,536 15,536 100,000 33,017 33,017 100,000 69,018 69,018 100,000 18 73,848 15,164 15,164 100,000 35,010 35,010 100,000 77,985 77,985 100,000 19 80,165 14,555 14,555 100,000 36,973 36,973 100,000 88,129 88,129 100,000 20 86,798 13,667 13,667 100,000 38,890 38,890 100,000 99,603 99,603 106,575 21 93,763 12,467 12,467 100,000 40,753 40,753 100,000 112,329 112,329 117,946 22 101,076 10,871 10,871 100,000 42,524 42,524 100,000 126,332 126,332 132,649 23 108,755 8,813 8,813 100,000 44,183 44,183 100,000 141,732 141,732 148,819 24 116,818 6,215 6,215 100,000 45,708 45,708 100,000 158,661 158,661 166,594 25 125,284 2,976 2,976 100,000 47,071 47,071 100,000 177,258 177,258 186,121 26 134,173 (*) (*) (*) 48,244 48,244 100,000 197,678 197,678 207,562 27 143,506 (*) (*) (*) 49,200 49,200 100,000 220,086 220,086 231,090 28 153,307 (*) (*) (*) 49,893 49,893 100,000 244,659 244,659 256,892 29 163,597 (*) (*) (*) 50,268 50,268 100,000 271,586 271,586 285,165 30 174,402 (*) (*) (*) 50,237 50,237 100,000 301,066 301,066 316,119
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT FOR ANY SINGLE POLICY YEAR. (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. 57 61 DEATH BENEFIT OPTION 1 $2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 2,625 1,210 48 100,000 1,314 152 100,000 1,419 256 100,000 2 5,381 2,538 1,375 100,000 2,827 1,664 100,000 3,130 1,967 100,000 3 8,275 3,769 2,723 100,000 4,330 3,284 100,000 4,941 3,895 100,000 4 11,314 4,898 3,968 100,000 5,816 4,886 100,000 6,857 5,927 100,000 5 14,505 5,916 5,103 100,000 7,275 6,462 100,000 8,882 8,069 100,000 6 17,855 6,814 6,117 100,000 8,698 8,001 100,000 11,022 10,324 100,000 7 21,373 7,581 7,000 100,000 10,072 9,491 100,000 13,281 12,700 100,000 8 25,066 8,200 7,735 100,000 11,379 10,914 100,000 15,661 15,196 100,000 9 28,945 8,653 8,305 100,000 12,600 12,251 100,000 18,167 17,818 100,000 10 33,017 8,925 8,925 100,000 13,716 13,716 100,000 20,805 20,805 100,000 11 37,293 8,996 8,996 100,000 14,708 14,708 100,000 23,587 23,587 100,000 12 41,782 8,851 8,851 100,000 15,556 15,556 100,000 26,529 26,529 100,000 13 46,497 8,469 8,469 100,000 16,240 16,240 100,000 29,748 29,748 100,000 14 51,446 7,826 7,826 100,000 16,730 16,730 100,000 33,197 33,197 100,000 15 56,644 6,885 6,885 100,000 16,989 16,989 100,000 36,908 36,908 100,000 16 62,101 5,596 5,596 100,000 16,966 16,966 100,000 40,917 40,917 100,000 17 67,831 3,893 3,893 100,000 16,591 16,591 100,000 45,266 45,266 100,000 18 73,848 1,689 1,689 100,000 15,776 15,776 100,000 50,008 50,008 100,000 19 80,165 (*) (*) (*) 14,416 14,416 100,000 55,221 55,221 100,000 20 86,798 (*) (*) (*) 12,393 12,393 100,000 61,017 61,017 100,000 21 93,763 (*) (*) (*) 9,571 9,571 100,000 67,554 67,554 100,000 22 101,076 (*) (*) (*) 5,787 5,787 100,000 75,040 75,040 100,000 23 108,755 (*) (*) (*) 836 836 100,000 83,755 83,755 100,000 24 116,818 (*) (*) (*) (*) (*) (*) 94,068 94,068 100,000 25 125,284 (*) (*) (*) (*) (*) (*) 105,902 105,902 111,197 26 134,173 (*) (*) (*) (*) (*) (*) 118,857 118,857 124,800 27 143,506 (*) (*) (*) (*) (*) (*) 133,024 133,024 139,675 28 153,307 (*) (*) (*) (*) (*) (*) 148,495 148,495 155,920 29 163,597 (*) (*) (*) (*) (*) (*) 165,367 165,367 173,635 30 174,402 (*) (*) (*) (*) (*) (*) 183,741 183,741 192,928
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (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. 58 62 DEATH BENEFIT OPTION 2 $2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 2,625 1,521 358 101,521 1,634 471 101,634 1,747 585 101,747 2 5,381 3,068 1,905 103,068 3,390 2,228 103,390 3,727 2,565 103,727 3 8,275 4,553 3,507 104,553 5,185 4,138 105,185 5,870 4,824 105,870 4 11,314 5,957 5,027 105,957 6,995 6,065 106,995 8,168 7,238 108,168 5 14,505 7,260 6,446 107,260 8,803 7,989 108,803 10,618 9,804 110,618 6 17,855 8,467 7,770 108,467 10,611 9,913 110,611 13,236 12,538 113,236 7 21,373 9,572 8,991 109,572 12,410 11,829 112,410 16,032 15,450 116,032 8 25,066 10,558 10,093 110,558 14,182 13,717 114,182 19,004 18,539 119,004 9 28,945 11,422 11,073 111,422 15,920 15,571 115,920 22,165 21,816 122,165 10 33,017 12,169 12,169 112,169 17,625 17,625 117,625 25,537 25,537 125,537 11 37,293 12,787 12,787 112,787 19,282 19,282 119,282 29,216 29,216 129,216 12 41,782 13,245 13,245 113,245 20,855 20,855 120,855 33,119 33,119 133,119 13 46,497 13,537 13,537 113,537 22,329 22,329 122,329 37,260 37,260 137,260 14 51,446 13,634 13,634 113,634 23,672 23,672 123,672 41,634 41,634 141,634 15 56,644 13,532 13,532 113,532 24,866 24,866 124,866 46,253 46,253 146,253 16 62,101 13,225 13,225 113,225 25,897 25,897 125,897 51,134 51,134 151,134 17 67,831 12,676 12,676 112,676 26,801 26,801 126,801 56,262 56,262 156,262 18 73,848 11,880 11,880 111,880 27,481 27,481 127,481 61,654 61,654 161,654 19 80,165 10,824 10,824 110,824 27,908 27,908 127,908 67,317 67,317 167,317 20 86,798 9,472 9,472 109,472 28,031 28,031 128,031 73,238 73,238 173,238 21 93,763 7,801 7,801 107,801 27,806 27,806 127,806 79,414 79,414 179,414 22 101,076 5,739 5,739 105,739 27,138 27,138 127,138 85,789 85,789 185,789 23 108,755 3,246 3,246 103,246 25,958 25,958 125,958 92,333 92,333 192,333 24 116,818 283 283 100,283 24,195 24,195 124,195 99,016 99,016 199,016 25 125,284 (*) (*) (*) 21,690 21,690 121,690 105,789 105,789 205,789 26 134,173 (*) (*) (*) 18,438 18,438 118,438 112,609 112,609 212,609 27 143,506 (*) (*) (*) 14,369 14,369 114,369 119,439 119,439 219,439 28 153,307 (*) (*) (*) 9,384 9,384 109,384 126,214 126,214 226,214 29 163,597 (*) (*) (*) 3,380 3,380 103,380 132,863 132,863 232,863 30 174,402 (*) (*) (*) (*) (*) (*) 139,270 139,270 239,270
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND A MONTHLY $12.50 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $5.00 THEREAFTER. CURRENT VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS UP TO THE BREAK POINT PREMIUM AND 4% ON PREMIUMS IN EXCESS OF BREAK POINT FOR ANY SINGLE POLICY YEAR. (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. 59 63 DEATH BENEFIT OPTION 2 $2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT MALE: NON-TOBACCO: 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 2,625 1,196 33 101,196 1,299 136 101,299 1,402 239 101,402 2 5,381 2,495 1,333 102,495 2,780 1,617 102,780 3,078 1,915 103,078 3 8,275 3,684 2,638 103,684 4,232 3,186 104,232 4,829 3,782 104,829 4 11,314 4,755 3,825 104,755 5,643 4,713 105,643 6,651 5,721 106,651 5 14,505 5,695 4,882 105,695 6,999 6,186 106,999 8,540 7,727 108,540 6 17,855 6,496 5,799 106,496 8,285 7,587 108,285 10,488 9,791 110,488 7 21,373 7,145 6,564 107,145 9,481 8,900 109,481 12,486 11,905 112,486 8 25,066 7,623 7,158 107,623 10,563 10,098 110,563 14,516 14,051 114,516 9 28,945 7,912 7,563 107,912 11,503 11,154 111,503 16,558 16,210 116,558 10 33,017 7,994 7,994 107,994 12,275 12,275 112,275 18,593 18,593 118,593 11 37,293 7,854 7,854 107,854 12,851 12,851 112,851 20,598 20,598 120,598 12 41,782 7,476 7,476 107,476 13,204 13,204 113,204 22,551 22,551 122,551 13 46,497 6,846 6,846 106,846 13,306 13,306 113,306 24,427 24,427 124,427 14 51,446 5,947 5,947 105,947 13,122 13,122 113,122 26,195 26,195 126,195 15 56,644 4,750 4,750 104,750 12,608 12,608 112,608 27,897 27,897 127,897 16 62,101 3,219 3,219 103,219 11,706 11,706 111,706 29,400 29,400 129,400 17 67,831 1,308 1,308 101,308 10,348 10,348 110,348 30,627 30,627 130,627 18 73,848 (*) (*) (*) 8,448 8,448 108,448 31,482 31,482 131,482 19 80,165 (*) (*) (*) 5,915 5,915 105,915 31,856 31,856 131,856 20 86,798 (*) (*) (*) 2,666 2,666 102,666 31,640 31,640 131,640 21 93,763 (*) (*) (*) (*) (*) (*) 30,725 30,725 130,725 22 101,076 (*) (*) (*) (*) (*) (*) 28,996 28,996 128,996 23 108,755 (*) (*) (*) (*) (*) (*) 26,330 26,330 126,330 24 116,818 (*) (*) (*) (*) (*) (*) 22,587 22,587 122,587 25 125,284 (*) (*) (*) (*) (*) (*) 17,520 17,520 117,520 26 134,173 (*) (*) (*) (*) (*) (*) 10,976 10,976 110,976 27 143,506 (*) (*) (*) (*) (*) (*) 2,678 2,678 102,678 28 153,307 (*) (*) (*) (*) (*) (*) (*) (*) (*) 29 163,597 (*) (*) (*) (*) (*) (*) (*) (*) (*) 30 174,402 (*) (*) (*) (*) (*) (*) (*) (*) (*)
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND A MONTHLY $25.00 ADMINISTRATIVE EXPENSE CHARGE FOR THE FIRST POLICY YEAR AND $7.50 THEREAFTER. GUARANTEED VALUES REFLECT A 6% OF PREMIUM CHARGE ON ALL PREMIUMS. (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. 60 64 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. 61 65 FUND PERFORMANCE TABLE
-------------------------------------------------- Annual Percentage Change - -------------------------------------------------------------------------------------- Fund Unit Underlying Mutual Fund Inception Values 1994 1995 1996 Date** 12/31/96 - -------------------------------------------------------------------------------------- American Century VP Balanced 05/01/91 14.64 -0.19 20.16 11.31 - -------------------------------------------------------------------------------------- American Century VP Capital 11/20/87 15.33 -1.95 30.06 -5.09 Appreciation - -------------------------------------------------------------------------------------- American Century VP International 05/01/94 11.89 N/A 11.32 13.49 - -------------------------------------------------------------------------------------- American Century VP Value 05/01/96 10.14 N/A N/A N/A - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Dreyfus Variable Investment Fund 05/02/94 9.99 N/A 60.65 18.68 Growth & Income Fund - -------------------------------------------------------------------------------------- Dreyfus Socially Responsible 10/06/93 17.32 0.69 33.49 20.26 Growth Fund - -------------------------------------------------------------------------------------- Dreyfus Stock Index Fund 09/29/89 16.74 0.08 35.69 21.56 - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Fidelity VIP Fund II -Asset 09/06/89 18.17 -6.84 16.03 13.69 Manager Portfolio - -------------------------------------------------------------------------------------- Fidelity VIP Fund II -Contrafund 01/03/95 13.36 N/A N/A 20.34 Portfolio - -------------------------------------------------------------------------------------- Fidelity VIP Fund - Equity-Income 10/09/86 25.19 6.22 34.02 13.37 Portfolio - -------------------------------------------------------------------------------------- Fidelity VIP Fund - Growth 10/09/86 24.19 -0.81 34.29 13.79 Portfolio - -------------------------------------------------------------------------------------- Fidelity VIP Fund - High Income 09/19/85 23.59 -2.33 19.65 13.12 Portfolio - -------------------------------------------------------------------------------------- Fidelity VIP Fund - Overseas 01/28/87 15.32 0.92 8.81 12.31 Portfolio - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- NSAT Capital Appreciation Fund 04/15/92 18.41 -1.69 28.33 25.13 - -------------------------------------------------------------------------------------- NSAT Government Bond Fund 11/08/82 15.38 -4 17.8 2.66 - -------------------------------------------------------------------------------------- NSAT Money Market Fund 11/10/81 12.21 3.05 4.81 4.27 - -------------------------------------------------------------------------------------- NSAT Small Company Fund 10/23/95 13.92 N/A N/A 21.85 - -------------------------------------------------------------------------------------- NSAT Total Return Fund 11/08/82 21.99 0.27 28.07 20.87 - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Neuberger & Berman Advisers 09/10/84 17.28 -5.74 30.68 8.27 Management Trust -Growth Portfolio - -------------------------------------------------------------------------------------- Neuberger & Berman Advisers 09/10/84 13.55 -0.95 10.05 3.47 Management Trust -Bond Portfolio - -------------------------------------------------------------------------------------- Neuberger & Berman Advisers 03/22/94 17.47 N/A 35.39 28.53 Management Trust -Partners Portfolio - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund 04/30/85 15.76 -2.72 16.07 3.96 - - Bond Fund - -------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund 11/12/90 13.49 -6.47 1.43 16.86 - - Global Securities - -------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund 02/09/87 18.45 -2.73 20.39 14.57 - - Multiple Strategies - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Strong Variable Insurance Funds, 05/08/92 16.51 -6.14 34.18 0 Inc. -Discovery Fund II, Inc. - -------------------------------------------------------------------------------------- Strong Variable Insurance Funds, 10/20/95 11.21 N/A N/A 9.5 Inc. -International Stock Fund II - -------------------------------------------------------------------------------------- Strong Special Fund II, Inc. 05/08/92 21.58 2.77 24.82 17.2 - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust 12/27/95 10.07 N/A N/A 25.72 - -Worldwide Emerging Markets Fund - -------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust 09/01/89 13.48 -2.1 16.37 1.7 - -Worldwide Bond Fund - -------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust 09/01/87 18.28 -5.55 10.11 17.12 - -Worldwide Hard Assets Fund - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Van Kampen American Capital Life 07/03/95 15.05 N/A N/A 39.41 Investment Trust - American Capital Real Estate Securities Fund - -------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------- Warburg Pincus Trust-International 06/30/95 11.66 N/A N/A 9.1 Equity Portfolio - -------------------------------------------------------------------------------------- Warburg Pincus Trust-Post Venture 11/18/96 10.16 N/A N/A N/A Capital Portfolio - -------------------------------------------------------------------------------------- Warburg Pincus Trust-Small Company 06/30/95 14.08 N/A N/A 13 Growth Portfolio - -------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------ Non annualized Percentage Change Annualized Percentage Change - ----------------------------------------------------------------------------------------------------------------------- 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Inception 3 Yrs. 5 yrs. Inception Underlying Mutual Fund to to to to to to to to to 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 - ----------------------------------------------------------------------------------------------------------------------- American Century VP Balanced -2.53 11.31 33.75 33.5 32.92 65.98 10.11 5.86 9.36 - ----------------------------------------------------------------------------------------------------------------------- American Century VP Capital -3.19 -5.09 23.44 21.03 29.62 136.94 6.57 5.33 9.93 Appreciation - ----------------------------------------------------------------------------------------------------------------------- American Century VP International 1.98 13.49 26.34 N/A N/A 19.38 N/A N/A 6.88 - ----------------------------------------------------------------------------------------------------------------------- American Century VP Value 0.65 N/A N/A N/A N/A 11.69 N/A N/A N/A - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Dreyfus Variable Investment Fund -2.16 18.68 90.65 N/A N/A 85.69 N/A N/A 26.18 Growth & Income Fund - ----------------------------------------------------------------------------------------------------------------------- Dreyfus Socially Responsible -3.51 20.26 60.54 61.64 N/A 73.2 17.36 N/A 18.51 Growth Fund - ----------------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund -2.11 21.56 64.94 65.07 90.23 139.17 18.18 13.72 12.78 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II -Asset -1.52 13.69 31.91 22.89 63.78 111.97 7.11 10.37 10.81 Manager Portfolio - ----------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II -Contrafund -0.67 20.34 N/A N/A N/A 66.69 N/A N/A 29.24 Portfolio - ----------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - Equity-Income -1.71 13.37 51.94 61.38 119.59 234.45 17.3 17.04 12.53 Portfolio - ----------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - Growth -3.15 13.79 52.8 51.56 94.63 278.86 14.87 14.25 13.91 Portfolio - ----------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - High Income 1.31 13.12 35.34 32.19 92.9 225.65 9.75 14.04 11.03 Portfolio - ----------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - Overseas 0.46 12.31 22.2 23.32 48.7 96.27 7.24 8.26 7.03 Portfolio - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- NSAT Capital Appreciation Fund 0.17 25.13 60.58 57.87 N/A 80.54 16.44 N/A 13.37 - ----------------------------------------------------------------------------------------------------------------------- NSAT Government Bond Fund -1.2 2.66 20.93 16.1 34.96 225.1 5.1 6.18 8.69 - ----------------------------------------------------------------------------------------------------------------------- NSAT Money Market Fund 0.35 4.27 9.29 12.63 17.76 148.47 4.04 3.32 6.2 - ----------------------------------------------------------------------------------------------------------------------- NSAT Small Company Fund 1.1 21.85 N/A N/A N/A 39.16 N/A N/A 32.06 - ----------------------------------------------------------------------------------------------------------------------- NSAT Total Return Fund 0.08 20.87 54.79 55.21 83.27 573.25 15.78 12.88 14.43 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers -0.65 8.27 41.48 33.36 53.51 300.16 10.07 8.95 11.93 Management Trust -Growth Portfolio - ----------------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers -0.14 3.47 13.87 12.79 24.48 141.9 4.09 4.48 7.44 Management Trust -Bond Portfolio - ----------------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers 0.11 28.53 74.02 N/A N/A 68.96 N/A N/A 20.81 Management Trust -Partners Portfolio - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund -0.99 3.96 20.66 17.38 39.06 171.26 5.49 6.82 8.93 - - Bond Fund - ----------------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund 0.73 16.86 18.52 10.85 72.59 77.53 3.49 11.53 9.81 - - Global Securities - ----------------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund -0.57 14.57 37.94 34.18 66.87 171.81 10.3 10.78 10.64 - - Multiple Strategies - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, -0.44 0 34.18 25.95 N/A 65.15 7.99 N/A 11.4 Inc. -Discovery Fund II, Inc. - ----------------------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, -0.86 9.5 N/A N/A N/A 12.19 N/A N/A 10.09 Inc. -International Stock Fund II - ----------------------------------------------------------------------------------------------------------------------- Strong Special Fund II, Inc. -0.32 17.2 46.29 50.35 N/A 115.75 14.56 N/A 18 - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust 0.98 25.72 N/A N/A N/A 24.45 N/A N/A 24.17 - -Worldwide Emerging Markets Fund - ----------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust -0.96 1.7 18.35 15.86 16.37 51.56 5.03 3.08 5.84 - -Worldwide Bond Fund - ----------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust 0.9 17.12 28.96 21.8 89.49 68.63 6.8 13.64 7.39 - -Worldwide Hard Assets Fund - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Van Kampen American Capital Life 10.98 39.41 N/A N/A N/A 50.45 N/A N/A 31.49 Investment Trust - American Capital Real Estate Securities Fund - ----------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-International 0.13 9.1 N/A N/A N/A 16.61 N/A N/A 10.85 Equity Portfolio - ----------------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Post Venture -0.07 N/A N/A N/A N/A -2.42 N/A N/A N/A Capital Portfolio - ----------------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Small Company 2.23 13 N/A N/A N/A 40.81 N/A N/A 25.78 Growth Portfolio - -----------------------------------------------------------------------------------------------------------------------
62 66 The preceding table displays three types of total return. Simply stated, total return shows the percent change in unit values, with dividends and capital gains reinvested, after the deduction of a 0.80% asset charge (and the deduction of applicable investment advisory fees and other expenses of the Underlying Mutual Funds). The total return figures shown in the Annual Percentage Change and Annualized Percentage Change columns represent annualized figures, i.e., they show the rate of growth that would have produced the corresponding cumulative return had performance been constant over the entire period quoted. The Non-Annualized Percentage Change total return figures are not annual return figures but instead represent the total percentage change in unit value over the stated periods without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO ACCOUNT THE SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY CHARGES" SECTION. THESE OTHER CHARGES INCLUDE DEDUCTIONS FROM PREMIUMS, COST OF INSURANCE CHARGES, SURRENDER CHARGES AND A MONTHLY ADMINISTRATIVE CHARGE. The Underlying Mutual Fund Inception Date is the date the Underlying Mutual Fund first became effective, which is not necessarily the same date the Underlying Mutual Fund was first made available through the Variable Account. For those Underlying Mutual Funds which have not been offered as sub-accounts through the Variable Account for one of the quoted periods, the total return figures will show the investment performance such Underlying Mutual Funds would have achieved (reduced by the 0.80% asset charge and Fund investment advisory fees and expenses) had they been offered as sub-accounts through the Variable Account for the period quoted. Certain Underlying Mutual Funds are not as old as some of the periods quoted, therefore, total return figures may not be available for all of the periods shown. 63 67 CASH VALUE PERFORMANCE TABLE
---------------------------------------------------------------------------- 1 Year to 2 Years to 3 Years to 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------------------------------------------------------- Fund Cash Cash Cash Underlying Mutual Fund Inception Accum Surr. Accum Surr. Accum Surr. Date** Value Value Value Value Value Value - ------------------------------------------------------------------------------------------------------- American Century VP 05/01/91 $9,067 $4,257 $20,049 $15,239 $30,771 $26,442 Balanced - ------------------------------------------------------------------------------------------------------- American Century VP 11/20/87 $7,676 $2,866 $17,895 $13,085 $27,588 $23,259 Capital Appreciation - ------------------------------------------------------------------------------------------------------- American Century VP 05/01/94 $9,251 $4,440 $19,518 $14,708 N/A N/A International - ------------------------------------------------------------------------------------------------------- American Century VP Value 05/01/94 N/A N/A N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Dreyfus Variable 05/02/94 $9,772 $4,962 $25,783 $20,973 N/A N/A Investment Fund Growth & Income Fund - ------------------------------------------------------------------------------------------------------- Dreyfus Socially 10/06/93 $9,863 $5,053 $23,145 $18,335 $36,162 $31,833 Responsible Growth Fund - ------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund 09/29/89 $9,961 $5,151 $23,634 $18,823 $36,901 $32,572 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II 09/06/89 $9,271 $4,461 $20,049 $15,239 $29,849 $25,520 - -Asset Manager Portfolio - ------------------------------------------------------------------------------------------------------- Fidelity VIP Fund II 01/03/95 $9,843 $5,033 N/A N/A N/A N/A - -Contrafund Portfolio - ------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - 10/09/86 $9,245 $4,435 $21,816 $17,005 $34,874 $30,544 Equity-Income Portfolio - ------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - 10/09/86 $9,313 $4,503 $22,009 $17,199 $34,138 $29,809 Growth Portfolio - ------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - High 09/19/85 $9,243 $4,433 $20,371 $15,561 $30,971 $26,642 Income Portfolio - ------------------------------------------------------------------------------------------------------- Fidelity VIP Fund - 01/28/87 $9,161 $4,350 $19,090 $14,280 $29,045 $24,715 Overseas Portfolio - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- NSAT Capital Appreciation 04/15/92 $10,274 $5,464 $23,483 $18,673 $36,142 $31,813 Fund - ------------------------------------------------------------------------------------------------------- NSAT Government Bond Fund 11/08/82 $8,292 $3,482 $18,212 $13,402 $27,473 $23,144 - ------------------------------------------------------------------------------------------------------- NSAT Money Market Fund 11/10/81 $8,464 $3,653 $17,340 $12,530 $26,387 $22,058 - ------------------------------------------------------------------------------------------------------- NSAT Small Company Fund 10/23/95 $10,031 $5,221 N/A N/A N/A N/A - ------------------------------------------------------------------------------------------------------- NSAT Total Return Fund 11/08/82 $9,894 $5,084 $22,673 $17,863 $35,176 $30,847 - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Neuberger & Berman 09/10/84 $8,806 $3,995 $20,556 $15,745 $31,200 $26,871 Advisers Management Trust - -Growth Portfolio - ------------------------------------------------------------------------------------------------------- Neuberger & Berman 09/10/84 $8,379 $3,569 $17,668 $12,858 $26,696 $22,367 Advisers Management Trust - -Bond Portfolio - ------------------------------------------------------------------------------------------------------- Neuberger & Berman 03/22/94 $10,572 $5,762 $25,006 $20,196 N/A N/A Advisers Management Trust - -Partners Portfolio - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Oppenheimer Variable 04/30/85 $8,413 $3,602 $18,297 $13,487 $27,687 $23,357 Account Fund - Bond Fund - ------------------------------------------------------------------------------------------------------- Oppenheimer Variable 11/12/90 $9,557 $4,747 $19,156 $14,346 $28,029 $23,700 Account Fund - Global Securities - ------------------------------------------------------------------------------------------------------- Oppenheimer Variable 02/09/87 $9,356 $4,546 $20,705 $15,895 $31,455 $27,126 Account Fund - Multiple Strategies - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Strong Variable Insurance 05/08/92 $8,051 $3,240 $19,139 $14,329 $29,165 $24,836 Funds, Inc. -Discovery Fund II, Inc. - ------------------------------------------------------------------------------------------------------- Strong Variable Insurance 10/20/95 $8,964 $4,154 N/A N/A N/A N/A Funds, Inc. - -International Stock Fund II - ------------------------------------------------------------------------------------------------------- Strong Special Fund II, 05/08/92 $9,580 $4,770 $21,608 $16,798 $33,752 $29,423 Inc. - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Van Eck Worldwide 12/27/95 $10,376 $5,565 N/A N/A N/A N/A Insurance Trust - -Worldwide Emerging Markets Fund - ------------------------------------------------------------------------------------------------------- Van Eck Worldwide 09/01/89 $8,212 $3,402 $17,945 $13,135 $27,192 $22,863 Insurance Trust - -Worldwide Bond Fund - ------------------------------------------------------------------------------------------------------- Van Eck Worldwide 09/01/89 $9,646 $4,836 $20,120 $15,310 $29,863 $25,534 Insurance Trust - -Worldwide Hard Assets Fund - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Van Kampen American 07/03/95 $11,428 $6,618 N/A N/A N/A N/A Capital Life Investment Trust - American Capital Real Estate Securities Fund - ------------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------- Warburg Pincus 06/30/95 $8,907 $4,097 N/A N/A N/A N/A Trust-International Equity Portfolio - ------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Post 11/18/96 N/A N/A N/A N/A N/A N/A Venture Capital Portfolio - ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------ 5 Years to 10 Years to Inception to 12/31/96 12/31/96 12/31/96 - --------------------------------------------------------------------------------------------------- Cash Cash Cash Underlying Mutual Fund Accum Surr. Accum Surr. Accum Surr. Value Value Value Value Value Value - --------------------------------------------------------------------------------------------------- American Century VP $52,534 $49,167 N/A N/A $67,054 $64,168 Balanced - --------------------------------------------------------------------------------------------------- American Century VP $48,358 $44,991 N/A N/A $126,231 $126,231 Capital Appreciation - --------------------------------------------------------------------------------------------------- American Century VP N/A N/A N/A N/A $28,882 $24,553 International - --------------------------------------------------------------------------------------------------- American Century VP Value N/A N/A N/A N/A $9,565 $4,754 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Dreyfus Variable N/A N/A N/A N/A $36,922 $32,593 Investment Fund Growth & Income Fund - --------------------------------------------------------------------------------------------------- Dreyfus Socially N/A N/A N/A N/A $46,894 $43,045 Responsible Growth Fund - --------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund $66,410 $63,043 N/A N/A $119,303 $117,379 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Fidelity VIP Fund II $54,875 $51,508 N/A N/A $99,808 $97,884 - -Asset Manager Portfolio - --------------------------------------------------------------------------------------------------- Fidelity VIP Fund II N/A N/A N/A N/A $23,708 $18,898 - -Contrafund Portfolio - --------------------------------------------------------------------------------------------------- Fidelity VIP Fund - $67,969 $64,602 $186,089 $186,089 $192,079 $192,079 Equity-Income Portfolio - --------------------------------------------------------------------------------------------------- Fidelity VIP Fund - $64,166 $60,798 $192,142 $192,142 $199,148 $199,148 Growth Portfolio - --------------------------------------------------------------------------------------------------- Fidelity VIP Fund - High $59,499 $56,131 $160,318 $160,318 $194,769 $194,769 Income Portfolio - --------------------------------------------------------------------------------------------------- Fidelity VIP Fund - $54,558 $51,191 N/A N/A $125,565 $125,565 Overseas Portfolio - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- NSAT Capital Appreciation N/A N/A N/A N/A $63,845 $60,478 Fund - --------------------------------------------------------------------------------------------------- NSAT Government Bond Fund $48,319 $44,952 $120,893 $120,893 $222,154 $222,154 - --------------------------------------------------------------------------------------------------- NSAT Money Market Fund $44,823 $41,456 $99,747 $99,747 $187,419 $187,419 - --------------------------------------------------------------------------------------------------- NSAT Small Company Fund N/A N/A N/A N/A $20,910 $16,099 - --------------------------------------------------------------------------------------------------- NSAT Total Return Fund $63,531 $60,164 $170,474 $170,474 $358,697 $358,697 - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Neuberger & Berman $54,640 $51,273 $147,823 $147,823 $209,997 $209,997 Advisers Management Trust - -Growth Portfolio - --------------------------------------------------------------------------------------------------- Neuberger & Berman $46,093 $42,726 $107,774 $107,774 $152,997 $152,997 Advisers Management Trust - -Bond Portfolio - --------------------------------------------------------------------------------------------------- Neuberger & Berman N/A N/A N/A N/A $37,409 $33,080 Advisers Management Trust - -Partners Portfolio - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Oppenheimer Variable $49,343 $45,976 $124,163 $124,163 $161,581 $161,581 Account Fund - Bond Fund - --------------------------------------------------------------------------------------------------- Oppenheimer Variable $57,239 $53,872 N/A N/A $81,310 $78,905 Account Fund - Global Securities - --------------------------------------------------------------------------------------------------- Oppenheimer Variable $57,225 $53,857 N/A N/A $145,121 $145,121 Account Fund - Multiple Strategies - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Strong Variable Insurance N/A N/A N/A N/A $54,838 $51,471 Funds, Inc. -Discovery Fund II, Inc. - --------------------------------------------------------------------------------------------------- Strong Variable Insurance N/A N/A N/A N/A $18,380 $13,570 Funds, Inc. - -International Stock Fund II - --------------------------------------------------------------------------------------------------- Strong Special Fund II, N/A N/A N/A N/A $64,172 $60,805 Inc. - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Van Eck Worldwide N/A N/A N/A N/A $19,659 $14,848 Insurance Trust - -Worldwide Emerging Markets Fund - --------------------------------------------------------------------------------------------------- Van Eck Worldwide $46,231 $42,864 N/A N/A $79,016 $77,092 Insurance Trust - -Worldwide Bond Fund - --------------------------------------------------------------------------------------------------- Van Eck Worldwide $61,534 $58,167 N/A N/A $95,449 $93,525 Insurance Trust - -Worldwide Hard Assets Fund - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Van Kampen American N/A N/A N/A N/A $23,672 $18,862 Capital Life Investment Trust - American Capital Real Estate Securities Fund - --------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------- Warburg Pincus N/A N/A N/A N/A $18,267 $13,456 Trust-International Equity Portfolio - --------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Post N/A N/A N/A N/A $8,884 $4,074 Venture Capital Portfolio - ---------------------------------------------------------------------------------------------------
64 68 The preceding Cash-Value performance table shows the effect of the performance quoted on accumulated values and cash surrender values, based on a hypothetical annual premium of $10,000 for a 45 year-old male, non-tobacco preferred, with a level death benefit and an initial specified amount of $496,386 (based on a guideline-level premium of $10,000 issued on a preferred basis). The cash surrender value figures reflect the deduction of all applicable Policy Charges, including a deduction from each premium payment, a 0.80% asset charge, applicable cost of insurance charges, surrender charges, and a monthly administrative charge (and the deduction of applicable investment advisory fees and other expenses of the Underlying Mutual Funds). See the "Policy Charges" section for more information about these charges. The cost of insurance charges may be higher or lower for purchasers who do not meet the profile of the hypothetical purchaser. Illustrations reflecting a potential purchaser's specific characteristics are available from the Company upon request. **The Underlying Mutual Fund Inception Date is the date the Underlying Mutual Fund first became effective, which is not necessarily the same date the Underlying Mutual Fund was first made available through the Variable Account. For those Underlying Mutual Funds which have not been offered as sub-accounts through the Variable Account for one of the quoted periods, the cash values will show the investment performance such Underlying Mutual Funds would have achieved (reduced by any applicable Variable Account and Policy Charges, and Underlying Mutual Fund investment advisory fees and expenses) had they been offered as sub-accounts through the Variable Account for the period quoted. Certain Underlying Mutual Funds are not as old as some of the periods quoted, therefore, the cash values may not be available for all of the periods shown. 65 69 1 Independent Auditors' Report ---------------------------- The Board of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide VLI Separate Account-2: We have audited the accompanying statement of assets, liabilities and contract owners' equity of Nationwide VLI Separate Account-2 as of December 31, 1996, and the related statements of operations and changes in contract owners' equity and schedules of changes in unit value for each of the years in the three year period then ended. These financial statements and schedules of changes in unit value are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules of changes in unit value based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules of changes in unit value are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures include confirmation of securities owned as of December 31, 1996, by correspondence with the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and schedules of changes in unit value referred to above present fairly, in all material respects, the financial position of Nationwide VLI Separate Account-2 as of December 31, 1996, and the results of its operations and its changes in contract owners' equity and the schedules of changes in unit value for each of the years in the three year period then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Columbus, Ohio February 7, 1997 2 NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY DECEMBER 31, 1996
ASSETS: Investments at market value: The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro) 146,819 shares (cost $3,024,270) ................................. $ 2,949,585 Dreyfus Stock Index Fund (DryStkIx) 763,499 shares (cost $14,597,832) ................................ 15,483,766 Fidelity VIP - Equity-Income Portfolio (FidVIPEI) 2,131,003 shares (cost $38,585,366) .............................. 44,815,000 Fidelity VIP - Growth Portfolio (FidVIPGr) 1,730,628 shares (cost $51,294,462) .............................. 53,891,755 Fidelity VIP - High Income Portfolio (FidVIPHI) 1,362,065 shares (cost $16,148,006) .............................. 17,053,049 Fidelity VIP - Overseas Portfolio (FidVIPOv) 859,910 shares (cost $14,604,187) ................................ 16,200,703 Fidelity VIP II - Asset Manager Portfolio (FidVIPAM) 1,317,970 shares (cost $19,127,367) .............................. 22,313,225 Fidelity VIP II - Contrafund Portfolio (FidVIPCon) 824,740 shares (cost $12,402,278) ................................ 13,657,697 Nationwide SAT - Capital Appreciation Fund (NSATCapAp) 505,369 shares (cost $7,950,583) ................................. 8,227,404 Nationwide SAT - Government Bond Fund (NSATGvtBd) 605,008 shares (cost $6,588,470) ................................. 6,679,290 Nationwide SAT - Money Market Fund (NSATMyMkt) 34,777,014 shares (cost $34,777,014) ............................. 34,777,014 Nationwide SAT - Small Company Fund (NSATSmCo) 425,548 shares (cost $5,751,682) ................................. 5,910,856 Nationwide SAT - Total Return Fund (NSATTotRe) 3,193,395 shares (cost $37,809,735) .............................. 42,376,355 Neuberger &Berman - Growth Portfolio (NBAMTGro) 493,535 shares (cost $12,574,511) ................................ 12,723,337 Neuberger &Berman - Limited Maturity Bond Portfolio (NBAMTLMat) 197,236 shares (cost $2,784,764) ................................. 2,771,172 Neuberger &Berman - Partners Portfolio (NBAMTPart) 646,222 shares (cost $9,535,912) ................................. 10,649,743 Oppenheimer - Bond Fund (OppBdFd) 513,225 shares (cost $5,888,181) ................................. 5,968,803 Oppenheimer - Global Securities Fund (OppGlSec) 561,069 shares (cost $8,710,530) ................................. 9,914,098 Oppenheimer - Multiple Strategies Fund (OppMult) 509,706 shares (cost $7,225,046) ................................. 7,966,703
3
Strong Special Fund II, Inc. (StSpec2) 893,185 shares (cost $14,371,245) ................................ 17,184,873 Strong VIF - Strong Discovery Fund II (StDisc2) 624,950 shares (cost $7,308,503) ................................. 6,749,458 Strong VIF - Strong International Stock Fund II (StIntStk2) 162,907 shares (cost $1,831,224) ................................. 1,829,443 TCI Portfolios - TCI Balanced (TCIBal) 351,201 shares (cost $2,386,878) ................................. 2,648,056 TCI Portfolios - TCI Growth (TCIGro) 1,169,740 shares (cost $12,750,085) .............................. 11,978,141 TCI Portfolios - TCI International (TCIInt) 576,818 shares (cost $3,278,870) ................................. 3,437,835 TCI Portfolios - TCI Value (TCIValue) 1,637 shares (cost $9,188) ....................................... 9,133 Van Eck - Gold and Natural Resources Fund (VEGoldNR) 377,518 shares (cost $6,100,328) ................................. 6,312,096 Van Eck - Worldwide Bond Fund (VEWrldBd) 202,885 shares (cost $2,232,824) ................................. 2,252,023 Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt) 257 shares (cost $3,213) ......................................... 3,213 Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRES 216,078 shares (cost $2,880,829) ................................. 3,193,630 Warburg Pincus - International Equity Portfolio (WPIntEq) 730,797 shares (cost $8,366,199) ................................. 8,389,554 Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr) 514,119 shares (cost $7,238,771) ................................. 7,326,189 ------------- Total investments ............................................. 405,643,199 Accounts receivable .................................................... 3,525,975 ------------- Total assets .................................................. 409,169,174 ------------- CONTRACT OWNERS' EQUITY (NOTE 7) .......................................... $ 409,169,174 =============
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, 1996, 1995 AND 1994 1996 1995 1994 ------------ ----------- ----------- INVESTMENT ACTIVITY: Reinvested capital gains and dividends . . . . . . . . . . . . . $ 16,972,691 6,764,208 3,376,057 Mortality and expense charges (note 3) . . . . . . . . . . . . . (2,983,466) (1,747,342) (879,737) ------------ ----------- ----------- Net investment activity . . . . . . . . . . . . . . . . . . . 13,989,225 5,016,866 2,496,320 ------------ ----------- ----------- Proceeds from mutual fund shares sold . . . . . . . . . . . . . 275,979,207 163,574,836 184,340,809 Cost of mutual fund shares sold . . . . . . . . . . . . . . . . (266,008,543) (154,208,870) (184,441,475) ------------ ----------- ----------- Realized gain (loss) on investments . . . . . . . . . . . . . 9,970,664 9,365,966 (100,666) Change in unrealized gain (loss) on investments . . . . . . . . 12,175,328 17,134,325 (3,604,010) ------------ ----------- ----------- Net gain (loss) on investments . . . . . . . . . . . . . . . 22,145,992 26,500,291 (3,704,676) ------------ ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations . . . . . . . . . . . 36,135,217 31,517,157 (1,208,356) ------------ ----------- ----------- EQUITY TRANSACTIONS: Purchase payments received from contract owners . . . . . . . . 174,104,282 106,694,208 77,172,455 Surrenders (note 2d) . . . . . . . . . . . . . . . . . . . . . . (6,124,049) (4,970,867) (1,308,994) Death benefits . . . . . . . . . . . . . . . . . . . . . . . . . (730,700) (143,265) (15,398) Policy loans (net of repayments) (note 5) . . . . . . . . . . . (6,468,023) (2,529,830) (2,980,396) Deductions for surrender charges (note 2d) . . . . . . . . . . . (721,263) (364,725) (116,899) Redemptions to pay cost of insurance charges and administrative charges (notes 2b and 2c) . . . . . . . . (24,075,896) (14,110,656) (5,382,393) Deductions for asset charges (note 3) . . . . . . . . . . . . . (20,037) - - ------------ ----------- ----------- Net increase (decrease) in equity transactions . . . . . . 135,964,314 84,574,865 67,368,375 ------------ ----------- ----------- NET CHANGE IN CONTRACT OWNERS' EQUITY . . . . . . . . . . . . . . . 172,099,531 116,092,022 66,160,019 CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD . . . . . . . . . . . . 237,069,643 120,977,621 54,817,602 ------------ ----------- ----------- CONTRACT OWNERS' EQUITY END OF PERIOD . . . . . . . . . . . . . . . $ 409,169,174 237,069,643 120,977,621 ============= =========== =========== See accompanying notes to financial statements.
5 NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization and Nature of Operations The Nationwide VLI Separate Account-2 (the Account) was established pursuant to a resolution of the Board of Directors of Nationwide Life Insurance Company (the Company) on May 7, 1987. The Account has been registered as a unit investment trust under the Investment Company Act of 1940. The Company offers Modified Single Premium and Flexible Premium Variable Life Insurance Policies through the Account. The primary distribution for the contracts is through the brokerage community; however, other distributors may be utilized. (b) The Contracts Prior to December 31, 1990, only contracts without a front-end sales charge, but with a contingent deferred sales charge and certain other fees, were offered for purchase. Beginning December 31, 1990, contracts with a front-end sales charge, a contingent deferred sales charge and certain other fees, are offered for purchase. See note 2 for a discussion of policy charges, and note 3 for asset charges. Contract owners may invest in the following: The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro) Dreyfus Stock Index Fund (DryStkIx) Dreyfus Variable Investment Fund - Growth and Income Portfolio (DryGroInc) Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity VIP); Fidelity VIP - Equity-Income Portfolio (FidVIPEI) Fidelity VIP - Growth Portfolio (FidVIPGr) Fidelity VIP - High Income Portfolio (FidVIPHI) Fidelity VIP - Overseas Portfolio (FidVIPOv) Portfolios of the Fidelity Variable Insurance Products Fund II (Fidelity VIP-II); Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM) Fidelity VIP-II - Contrafund Portfolio (FidVIPCon) Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed for a fee by an affiliated investment advisor); Nationwide SAT - Capital Appreciation Fund (NSATCapAp) Nationwide SAT - Government Bond Fund (NSATGvtBd) Nationwide SAT - Money Market Fund (NSATMyMkt) Nationwide SAT - Small Company Fund (NSATSmCo) Nationwide SAT - Total Return Fund (NSATTotRe) Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger & Berman); Neuberger & Berman - Growth Portfolio (NBAMTGro) Neuberger & Berman - Limited Maturity Bond Portfolio (NBAMTLMat) Neuberger & Berman - Partners Portfolio (NBAMTPart) Funds of the Oppenheimer Variable Account Funds (Oppenheimer); Oppenheimer - Bond Fund (OppBdFd) Oppenheimer - Global Securities Fund (OppGlSec) Oppenheimer - Multiple Strategies Fund (OppMult) 6 Strong Special Fund II, Inc. (StSpec2) Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF); Strong VIF - Strong Discovery Fund II (StDisc2) Strong VIF - Strong International Stock Fund II (StIntStk2) Portfolios of the TCI Portfolios, Inc. (TCI Portfolios); TCI Portfolios - TCI Balanced (TCIBal) TCI Portfolios - TCI Growth (TCIGro) TCI Portfolios - TCI International (TCIInt) TCI Portfolios - TCI Value (TCIValue) Funds of the Van Eck Worldwide Insurance Trust (Van Eck); Van Eck - Gold and Natural Resources Fund (VEGoldNR) Van Eck - Worldwide Bond Fund (VEWrldBd) (formerly Van Eck - Global Bond Fund (VEGlobBd)) Van Eck - Worldwide Emerging Markets Fund (VEWrldEMkt) Fund of the Van Kampen American Capital Life Investment Trust (Van Kampen American Capital); Van Kampen American Capital LIT - Real Estate Securities Fund (VKACRESec) Portfolios of the Warburg Pincus Trust (Warburg Pincus); Warburg Pincus - International Equity Portfolio (WPIntEq) Warburg Pincus - Post Venture Capital Portfolio (WPPVenCap) Warburg Pincus - Small Company Growth Portfolio (WPSmCoGr) At December 31, 1996, contract owners have invested in all of the above funds (except Dreyfus Variable Investment Fund - Growth and Income Portfolio and Warburg Pincus - Post Venture Capital Portfolio.) The contract owners' equity is affected by the investment results of each fund, equity transactions by contract owners and certain contract expenses (see notes 2 and 3). The accompanying financial statements include only contract owners' purchase payments pertaining to the variable portions of their contracts and exclude any purchase payments for fixed dollar benefits, the latter being included in the accounts of the Company. (c) Security Valuation, Transactions and Related Investment Income The market value of the underlying mutual funds is based on the closing net asset value per share at December 31, 1996. Fund purchases and sales are accounted for on the trade date (date the order to buy or sell is executed). The cost of investments sold is determined on a specific identification basis, and dividends (which include capital gain distributions) are accrued as of the ex-dividend date. (d) Federal Income Taxes Operations of the Account form a part of, and are taxed with, operations of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code. Fund purchases and sales are accounted for on the trade date (date the order to buy or sell is executed). The cost of investments sold is determined on a specific identification basis, and dividends (which include capital gain distributions) are accrued as of the ex-dividend date. (e) Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (f) Reclassifications Certain 1995 and 1994 amounts have been reclassified to conform with the current year presentation. 7 (2) POLICY CHARGES (a) Deductions from Premiums On multiple payment contracts and flexible premium contracts, the Company deducts a charge for state premium taxes equal to 2.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 3.5% of each premium payment. On last survivor flexible premium contracts, the Company deducts a charge for state premium taxes equal to 3.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 5% of each premium payment during the first ten years and 1.5% of each premium payment thereafter. The Company may at its sole discretion reduce this sales loading. (b) Cost of Insurance A cost of insurance charge is assessed monthly against each contract by liquidating units. The amount of the charge is based upon age, sex, rate class and net amount at risk (death benefit less total contract value). For last survivor flexible premium contracts, the monthly cost of insurance is determined in a manner that reflects the anticipated mortality of the two insureds and the fact that the death benefit is not payable until the death of the second insured to die. (c) Administrative Charges An administrative charge is assessed against each contract to recover policy maintenance, accounting, record keeping and other administrative expenses and is assessed against each contract by liquidating units. For single premium contracts, the Company deducts an annual administrative charge which is determined as follows: Contracts issued prior to April 16, 1990: Purchase payments totalling less than $25,000 - $10/month Purchase payments totalling $25,000 or more - none Contracts issued on or after April 16, 1990: Purchase payments totalling less than $25,000 - $90/year ($65/year in New York) Purchase payments totalling $25,000 or more - $50/year For multiple payment contracts, the Company currently deducts a monthly administrative charge of $5 (may deduct up to $7.50, maximum). For flexible premium contracts, the Company currently deducts a monthly administrative charge of $25 during the first policy year and $5 per month thereafter (may deduct up to $7.50, maximum). Additionally, the Company deducts an increase charge of $2.04 per year per $1,000 applied to any increase in the specified amount during the first 12 months after the increase becomes effective. For modified single premium contracts, the monthly charge is equal to an annual rate of .30% multiplied by the policy's cash value. For policy years 11 and later, this monthly charge is reduced to an annual rate of 0.15% of the policy's cash value. The monthly charge is subject to a $10 minimum. For last survivor flexible premium contracts, the Company deducts a monthly administrative charge equal to the sum of the policy charge and the basic coverage charge. For policy years one through ten the policy charge is $10. Additionally, there is a $0.04 per $1000 basic coverage charge (not less than $20 or more than $80 per policy). For policy years eleven and after, the policy charge is $5. Additionally, there is a $0.02 per $1000 basic coverage charge (not less than $10 or more than $40 per policy). Additionally, the Company deducts a monthly increase charge of $2.40 per $1000 applied to any increase in the specified amount during the first 12 months after the increase becomes effective. The charge may be raised to $3.60 per $1000 of increase per year at the Company's discretion. 8 (d) Surrender Charges Policy surrenders result in a redemption of the contract value from the Account and payment of the surrender proceeds to the contract owner or designee. The surrender proceeds consist of the contract value, less any outstanding policy loans, and less a surrender charge, if applicable. The charge is determined according to contract type. For single premium contracts, the charge is determined based upon a specified percentage of the original purchase payment. For single premium contracts issued prior to April 16, 1990, the charge is 8% in the first year and declines to 0% after the ninth year. For single premium contracts issued on or after April 16, 1990, the charge is 8.5% in the first year, and declines to 0% after the ninth year. For multiple payment contracts and flexible premium contracts, the amount charged is based upon a specified percentage of the initial surrender charge, which varies by issue age, sex and rate class. The charge is 100% of the initial surrender charge in the first year, declining to 0% after the ninth year. For modified single premium contracts, the amount charged is based on the original purchase payment. The charge is 10% in the first year, declining to 0% in the ninth year. For last survivor flexible premium contracts, the charge is 100% of the initial surrender charge, declining to 0% in the fourteenth year if the average issue age is 74 or less. The charge is 100% of the initial surrender charge, declining to 0% in the ninth year if the average issue age is 75 or greater. For last survivor flexible payment contracts, the initial surrender charge is comprised of two components, an underwriting surrender charge and a sales surrender charge. The Company may waive the surrender charge for certain contracts in which the sales expenses normally associated with the distribution of a contract are not incurred. (3) ASSET CHARGES For single premium contracts, the Company deducts a charge from the contract to cover mortality and expense risk charges related to operations, and to recover policy maintenance and premium tax charges. For contracts issued prior to April 16, 1990, the charge is equal to an annual rate of .95% during the first ten policy years, and .50% thereafter. A reduction of charges on these contracts is possible in policy years six through ten for those contracts achieving certain investment performance criteria. For single premium contracts issued on or after April 16, 1990, the charge is equal to an annual rate of 1.30% during the first ten policy years, and 1.00% thereafter. For multiple payment contracts and flexible premium contracts, the Company deducts a charge equal to an annual rate of .80%, with certain exceptions, to cover mortality and expense risk charges related to operations. The above charges are assessed through the daily unit value calculation. For modified single premium contracts, the Company deducts an annual rate of .90% charged against the cash value of the contacts. This charge is assessed monthly against each contract by liquidating units. For last survivor flexible premium contracts, the Company deducts an annual rate of .80% in policy years one through ten. This charge is assessed monthly by liquidating units. In policy years eleven and greater, the Company deducts an annual rate of .80% if the cash value of the contract is less than $100,000. If the cash value is greater than or equal to $100,000, the Company reduces the annual asset fee rate to .30%. (4) DEATH BENEFITS Death benefits result in a redemption of the contract value from the Account and payment of the death benefit proceeds, less any outstanding policy loans (and policy charges), to the legal beneficiary. For last survivor flexible premium contracts, the proceeds are payable on the death of the last surviving insured. The excess of the death benefit proceeds over the contract value on the date of death is paid by the Company's general account. 9 (5) POLICY LOANS (NET OF REPAYMENTS) Contract provisions allow contract owners to borrow up to 90% (50% during first year of single and modified single premium contracts) of a policy's cash surrender value. For single premium contracts issued prior to April 16, 1990, 6.5% interest is due and payable annually in advance. For single premium contracts issued on or after April 16, 1990, multiple payment, flexible premium, modified single and last survivor flexible premium contracts, 6% interest is due and payable in advance on the policy anniversary when there is a loan outstanding on the policy. At the time the loan is granted, the amount of the loan is transferred from the Account to the Company's general account as collateral for the outstanding loan. Collateral amounts in the general account are credited with the stated rate of interest in effect at the time the loan is made, subject to a guaranteed minimum rate. Loan repayments result in a transfer of collateral, including interest, back to the Account. (6) SCHEDULE I Schedule I presents the components of the change in the unit values, which are the basis for determining contract owners' equity. This schedule is presented for each series, as applicable, in the following format: - Beginning unit value - Jan. 1 - Reinvested capital gains and dividends (This amount reflects the increase in the unit value due to capital gains and dividend distributions from the underlying mutual funds.) - Unrealized gain (loss) (This amount reflects the increase (decrease) in the unit value resulting from the market appreciation (depreciation) of the underlying mutual funds.) - Asset charges (This amount reflects the decrease in the unit value due to the charges discussed in note 3.) - Ending unit value - Dec. 31 - Percentage increase (decrease) in unit value. 10 (7) COMPONENTS OF CONTRACT OWNERS' EQUITY The following is a summary of contract owners' equity at December 31, 1996, for each series, in both the accumulation and payout phases. Contract owners' equity represented by:
UNITS UNIT VALUE ----- ---------- Single Premium contracts issued prior to April 16, 1990: Fidelity VIP - Equity-Income Portfolio ........................ 8,709 $29.854628 $260,004 Fidelity VIP - Growth Portfolio ............................... 5,280 34.379126 181,522 Fidelity VIP - High Income Portfolio .......................... 3,462 24.493313 84,796 Fidelity VIP - Overseas Portfolio ............................. 5,297 19.654083 104,108 Fidelity VIP-II - Asset Manager Portfolio ..................... 1,158 20.525705 23,769 Nationwide SAT - Government Bond Fund ......................... 2,831 19.842234 56,173 Nationwide SAT - Money Market Fund ............................ 28,405 14.875178 422,529 Nationwide SAT - Total Return Fund ............................ 1,189 26.717684 31,767 Neuberger &Berman - Growth Portfolio .......................... 5,398 24.838185 134,077 Neuberger &Berman - Limited Maturity Bond Portfolio ........... 5,192 16.433880 85,325 Oppenheimer - Global Securities Fund .......................... 1,616 13.422186 21,690 Strong Special Fund II, Inc. .................................. 406 21.426416 8,699 TCI Portfolios - TCIGrowth .................................... 8,408 24.053649 202,243 Van Eck - Gold and Natural Resources Fund ..................... 4,593 15.014547 68,962 Van Eck - Worldwide Bond Fund ................................. 23 14.682655 338 Van Kampen American Capital LIT - Real Estate Securities Fund . 5,134 15.011508 77,069 Warburg Pincus - International Equity Portfolio ............... 1,802 11.634515 20,965 Single Premium contracts issued on or after April 16, 1990: The Dreyfus Socially Responsible Growth Fund, Inc. ............ 16,672 17.041821 284,121 Dreyfus Stock Index Fund ...................................... 166,883 16.474993 2,749,396 Fidelity VIP - Equity-Income Portfolio ........................ 556,249 24.419978 13,583,588 Fidelity VIP - Growth Portfolio ............................... 436,608 23.774932 10,380,326 Fidelity VIP - High Income Portfolio .......................... 160,710 25.198564 4,049,661 Fidelity VIP - Overseas Portfolio ............................. 349,868 14.155666 4,952,615 Fidelity VIP-II - Asset Manager Portfolio ..................... 328,224 20.046209 6,579,647 Fidelity VIP-II - Contrafund Portfolio ........................ 253,591 13.256842 3,361,816 Nationwide SAT - Capital Appreciation Fund .................... 69,468 17.984058 1,249,317 Nationwide SAT - Government Bond Fund ......................... 215,649 16.449774 3,547,377 Nationwide SAT - Money Market Fund ............................ 1,264,987 12.479104 15,785,904 Nationwide SAT - Small Company Fund ........................... 84,265 13.833221 1,165,656 Nationwide SAT - Total Return Fund ............................ 145,392 23.035683 3,349,204 Neuberger &Berman - Growth Portfolio .......................... 171,390 17.521012 3,002,926 Neuberger &Berman - Limited Maturity Bond Portfolio ........... 72,295 14.088625 1,018,537 Neuberger &Berman - Partners Portfolio ........................ 166,759 17.259712 2,878,212 Oppenheimer - Bond Fund ....................................... 107,202 16.608318 1,780,445 Oppenheimer - Global Securities Fund .......................... 112,397 13.270426 1,491,556 Oppenheimer - Multiple Strategies Fund ........................ 137,052 18.701076 2,563,020 Strong Special Fund II, Inc. .................................. 145,314 21.077454 3,062,849 Strong VIF - Strong Discovery Fund II ......................... 96,856 16.133543 1,562,630 Strong VIF - Strong International Stock Fund II ............... 51,959 11.141803 578,917 TCI Portfolios - TCIBalanced .................................. 38,880 14.303509 556,120 TCI Portfolios - TCIGrowth .................................... 187,431 16.163625 3,029,564 TCI Portfolios - TCIInternational ............................. 140,670 11.748051 1,652,598 Van Eck - Gold and Natural Resources Fund ..................... 179,378 16.582948 2,974,616 Van Eck - Worldwide Bond Fund ................................. 51,233 14.339608 734,661 Van Kampen American Capital LIT - Real Estate Securities Fund . 77,060 14.933196 1,150,752 Warburg Pincus - International Equity Portfolio ............... 229,373 11.573771 2,654,711 Warburg Pincus - Small Company Growth Portfolio ............... 101,386 13.975650 1,416,935 Multiple Payment contracts and Flexible Premium contracts: The Dreyfus Socially Responsible Growth Fund, Inc. ............ 149,312 17.319589 2,586,022 Dreyfus Stock Index Fund ...................................... 743,163 16.744674 12,444,022 Fidelity VIP - Equity-Income Portfolio ........................ 1,203,661 25.185570 30,314,888 Fidelity VIP - Growth Portfolio ............................... 1,774,112 24.186560 42,909,666
11 Fidelity VIP - High Income Portfolio .......................... 519,177 23.588786 12,246,755 Fidelity VIP - Overseas Portfolio ............................. 723,688 15.324813 11,090,383 Fidelity VIP-II - Asset Manager Portfolio ..................... 858,375 18.169993 15,596,668 Fidelity VIP-II - Contrafund Portfolio ........................ 741,153 13.356323 9,899,079 Nationwide SAT - Capital Appreciation Fund .................... 373,658 18.410667 6,879,293 Nationwide SAT - Government Bond Fund ......................... 196,023 15.383251 3,015,471 Nationwide SAT - Money Market Fund ............................ 1,548,800 12.214743 18,918,194 Nationwide SAT - Small Company Fund ........................... 325,390 13.915643 4,528,011 Nationwide SAT - Total Return Fund ............................ 1,740,045 21.988773 38,261,455 Neuberger &Berman - Growth Portfolio .......................... 542,729 17.282005 9,379,445 Neuberger &Berman - Limited Maturity Bond Portfolio ........... 117,219 13.551318 1,588,472 Neuberger &Berman - Partners Portfolio ........................ 434,744 17.469360 7,594,699 Oppenheimer - Bond Fund ....................................... 260,488 15.764821 4,106,547 Oppenheimer - Global Securities Fund .......................... 616,399 13.487753 8,313,837 Oppenheimer - Multiple Strategies Fund ........................ 287,199 18.446363 5,297,777 Strong VIF - Strong Discovery Fund II ......................... 305,653 16.514861 5,047,817 Strong VIF - Strong International Stock Fund II ............... 103,783 11.208230 1,163,224 Strong Special Fund II, Inc. .................................. 649,651 21.575419 14,016,493 TCI Portfolios - TCIBalanced .................................. 137,856 14.642920 2,018,614 TCI Portfolios - TCIGrowth .................................... 564,722 15.327392 8,655,715 TCI Portfolios - TCIInternational ............................. 145,930 11.890858 1,735,233 TCI Portfolios - TCI Value .................................... 900 10.143687 9,129 Van Eck - Gold and Natural Resources Fund ..................... 174,641 18.284590 3,193,239 Van Eck - Worldwide Bond Fund ................................. 110,868 13.479157 1,494,407 Van Eck - Worldwide Emerging Markets Fund ..................... 319 10.078948 3,215 Van Kampen American Capital LIT - Real Estate Securities Fund . 120,572 15.045195 1,814,029 Warburg Pincus - International Equity Portfolio ............... 469,367 11.660648 5,473,123 Warburg Pincus - Small Company Growth Portfolio ............... 402,279 14.080553 5,664,311 Modified Single Premium and Last Survivor Flexible Premium contracts: The Dreyfus Socially Responsible Growth Fund, Inc. ............ 7,118 11.180091 79,580 Dreyfus Stock Index Fund ...................................... 25,438 11.459856 291,516 Fidelity VIP - Equity-Income Portfolio ........................ 61,195 10.790149 660,303 Fidelity VIP - Growth Portfolio ............................... 40,595 10.446167 424,062 Fidelity VIP - High Income Portfolio .......................... 62,142 10.830462 673,027 Fidelity VIP - Overseas Portfolio ............................. 5,158 10.668178 55,026 Fidelity VIP-II - Asset Manager Portfolio ..................... 10,453 11.022140 115,214 Fidelity VIP-II - Contrafund Portfolio ........................ 35,353 11.249999 397,721 Nationwide SAT - Capital Appreciation Fund .................... 8,542 11.610340 99,176 Nationwide SAT - Government Bond Fund ......................... 5,711 10.679205 60,989 Nationwide SAT - Money Market Fund ............................ 304,482 10.339005 3,148,041 Nationwide SAT - Small Company Fund ........................... 20,576 10.524418 216,550 Nationwide SAT - Total Return Fund ............................ 64,330 11.444877 736,249 Neuberger &Berman - Growth Portfolio .......................... 21,053 9.869834 207,790 Neuberger &Berman - Limited Maturity Bond Portfolio ........... 7,552 10.477247 79,124 Neuberger &Berman - Partners Portfolio ........................ 15,462 11.476324 177,447 Oppenheimer - Bond Fund ....................................... 7,727 10.644626 82,251 Oppenheimer - Global Securities Fund .......................... 8,064 10.833847 87,364 Oppenheimer - Multiple Strategies Fund ........................ 9,746 10.937578 106,598 Strong Special Fund II, Inc. .................................. 9,106 10.766829 98,043 Strong VIF - Strong Discovery Fund II ......................... 14,115 9.884557 139,521 Strong VIF - Strong International Stock Fund II ............... 8,692 10.054422 87,393 TCI Portfolios - TCIBalanced .................................. 6,725 10.931147 73,512 TCI Portfolios - TCIGrowth .................................... 9,987 9.118427 91,066 TCI Portfolios - TCIInternational ............................. 4,661 10.773558 50,216 Van Eck - Gold and Natural Resources Fund ..................... 7,974 10.056004 80,187 Van Eck - Worldwide Bond Fund ................................. 2,209 10.516764 23,232 Van Kampen American Capital LIT - Real Estate Securities Fund . 11,112 13.673840 151,944 Warburg Pincus - International Equity Portfolio ............... 24,290 9.935018 241,322 Warburg Pincus - Small Company Growth Portfolio ............... 24,804 9.827590 243,764 ------ -------- ------------ $409,169,174 ============
12 SCHEDULE I NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
FIDVIPEI FIDVIPGR FIDVIPHI FIDVIPOV FIDVIPAM -------- -------- -------- -------- -------- 1996** Beginning unit value - Jan 1 $26.373971 30.259267 21.685282 17.526172 18.081878 - ------------------------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 1.217030 2.174262 1.977825 .431349 1.189904 - ------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.528645 2.256603 1.050520 1.872575 1.435663 - ------------------------------------------------------------------------------------------------------------------------------- Asset charges (.265018) (.311006) (.220314) (.176013) (.181740) - ------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $29.854628 34.379126 24.493313 19.654083 20.525705 - ------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 13% 14% 13% 12% 14% ================================================================================================================================ 1995 Beginning unit value - Jan 1 $19.708533 22.566466 18.151674 16.131866 15.607540 - ------------------------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 1.542607 .124738 1.314664 .123427 .327932 - ------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 5.341041 7.828480 2.410020 1.428229 2.304058 - ------------------------------------------------------------------------------------------------------------------------------- Asset charges (.218210) (.260417) (.191076) (.157350) (.157652) - ------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $26.373971 30.259267 21.685282 17.526172 18.081878 - ------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 34% 34% 19% 9% 16% ================================================================================================================================ 1994 Beginning unit value - Jan 1 $18.583057 22.785679 18.612185 16.009316 16.778042 - ------------------------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 1.395798 1.371061 1.706032 .082663 .815806 - ------------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.087894) (1.381165) (1.991707) .196908 (1.832732) - ------------------------------------------------------------------------------------------------------------------------------- Asset charges (.182428) (.209109) (.174836) (.157021) (.153576) - ------------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $19.708533 22.566466 18.151674 16.131866 15.607540 - ------------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 6% (1)% (2)% 1% (7)% ================================================================================================================================
NSATGVTBD NSATMYMKT NSATTOTRE --------- --------- --------- 1996 Beginning unit value - Jan. 1 19.357639 14.287454 22.138653 - -------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 1.200383 .727569 1.479674 - -------------------------------------------------------------------------------------------- Unrealized gain (loss) (.533024) .000000 3.328301 - -------------------------------------------------------------------------------------------- Asset charges (.182764) (.139845) (.228944) - -------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 19.842234 14.875178 26.717684 - -------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 3% 4% 21% ============================================================================================ 1995 Beginning unit value - Jan. 1 16.457035 13.652006 17.312690 - -------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 1.167149 .768745 1.720678 - -------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.903991 .000000 3.293404 - -------------------------------------------------------------------------------------------- Asset charges (.170536) (.133297) (.188119) - -------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 19.357639 14.287454 22.138653 - -------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* 18% 5% 28% ============================================================================================ 1994 Beginning unit value - Jan. 1 17.168348 13.267517 17.291720 - -------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 1.079469 .512535 .875020 - -------------------------------------------------------------------------------------------- Unrealized gain (loss) (1.633239) .000000 (.688478) - -------------------------------------------------------------------------------------------- Asset charges (.157543) (.128046) (.165572) - -------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 16.457035 13.652006 17.312690 - -------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (4)% 3% 0% ============================================================================================ * An annualized rate of return cannot be determined as asset charges do not include the policy charges discussed in note 2. ** No other investment options were being utilized.
13 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED PRIOR TO APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NBAMTGRO NBAMTLDMAT OPPGLSEC STSPEC2 -------- ---------- -------- ------- 1996*** Beginning unit value - Jan 1 $22.976381 15.906671 11.503363 18.309087 - ----------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 2.084651 1.338753 .000000 .861320 - ----------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .004126 (.659070) 2.036434 2.443023 - ----------------------------------------------------------------------------------------------------------------- Asset charges (.226973) (.152474) (.117611) (.187014) - ----------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $24.838185 16.433880 13.422186 21.426416 - ----------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) unit value* (a) 8% 3% 17% 17% ================================================================================================================= 1995 Beginning unit value - Jan 1 $17.608267 14.475203 11.358489 14.690448 - ----------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .623265 .804090 .298934 .761035 - ----------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 4.945641 .771696 (.045712) 3.013032 - ----------------------------------------------------------------------------------------------------------------- Asset charges (.200792) (.144318) (.108348) (.155428) - ----------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $22.976381 15.906671 11.503363 18.309087 - ----------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 30% 10% 1% 25% ================================================================================================================= 1994 Beginning unit value - Jan 1 $18.709214 14.635617 12.162716 14.315226 - ----------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 2.255334 .618309 .214436 .411358 - ----------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (3.185612) (.641424) (.903773) .103258 - ----------------------------------------------------------------------------------------------------------------- Asset charges (.170669) (.137299) (.114890) (.139394) - ----------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $17.608267 14.475203 11.358489 14.690448 - ----------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (6)% (1)% (7)% 3% =================================================================================================================
TCIGRO VEGOLDNR VEWRLDBD VKACRESEC WPINTEQ ------ -------- -------- --------- -------- 1996*** Beginning unit value - Jan 1 25.381408 12.839256 14.458585 10.784280 10.679811 - ----------------------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends 2.847171 .272272 .394300 .288822 .226874 - ----------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (3.934619) 2.040791 (.034088) 4.051625 .835595 - ----------------------------------------------------------------------------------------------------------------------------- Asset charges (.240311) (.137772) (.136142) (.113219) (.107765) - ----------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 24.053649 15.014547 14.682655 15.011508 11.634515 - ----------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) unit value* (a) (5)% 17% 2% 39% 9% ============================================================================================================================= 1995 Beginning unit value - Jan 1 19.544976 11.677805 12.443161 10.000000 ** - ----------------------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .022491 .115292 1.008475 .092106 - ----------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 6.032555 1.160549 1.138120 .740132 - ----------------------------------------------------------------------------------------------------------------------------- Asset charges (.218614) (.114390) (.131171) (.047958) - ----------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 25.381408 12.839256 14.458585 10.784280 - ----------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 30% 10% 16% 8%(B) ============================================================================================================================= 1994 Beginning unit value - Jan 1 19.964524 12.382561 12.729709 ** ** - ----------------------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .002137 .062321 .051271 - ----------------------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.236035) (.652194) (.220753) - ----------------------------------------------------------------------------------------------------------------------------- Asset charges (.185650) (.114883) (.117066) - ----------------------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 19.544976 11.677805 12.443161 - ----------------------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (2)% (6)% (2)% ============================================================================================================================= * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
14 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR FIDVIPHI -------- -------- -------- -------- -------- 1996*** Beginning unit value - Jan. 1 $14.242220 13.621789 21.648958 20.999607 22.388295 - ----------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .735836 .587431 .998669 1.508424 2.041281 - ----------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.266937 2.459672 2.069513 1.561724 1.079684 - ----------------------------------------------------------------------------------------------------------- Asset charges (.203172) (.193899) (.297162) (.294823) (.310696) - ----------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $17.041821 16.474993 24.419978 23.774932 25.198564 - ----------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 20% 21% 13% 13% 13% ============================================================================================================ 1995 Beginning unit value - Jan. 1 $10.722275 10.088849 16.234159 15.715602 18.805616 - ----------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .392053 .361339 1.269479 .086841 1.361583 - ----------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 3.289798 3.326196 4.390826 5.444880 2.491513 - ----------------------------------------------------------------------------------------------------------- Asset charges (.161906) (.154595) (.245506) (.247716) (.270417) - ----------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.242220 13.621789 21.648958 20.999607 22.388295 - ----------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 33% 35% 33% 34% 19% ============================================================================================================ 1994 Beginning unit value - Jan. 1 $10.702403 10.131165 15.360584 15.923752 19.350153 - ----------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .276372 .283260 1.152726 .957853 1.773098 - ----------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.117327) (.195255) (.073161) (.966373) (2.069306) - ----------------------------------------------------------------------------------------------------------- Asset charges (.139173) (.130321) (.205990) (.199630) (.248329) - ----------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.722275 10.088849 16.234159 15.715602 18.805616 - ----------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 0% 0% 6% (1)% (3)% ============================================================================================================
FIDVIPOV FIDVIPAM FIDVIPCON NSATCAPAP NSATGVTBD -------- -------- --------- --------- --------- 1996*** Beginning unit value - Jan. 1 12.667544 17.721708 11.071965 14.444672 16.104612 - ----------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .311669 1.165823 .104326 .749268 .996469 - ----------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.350232 1.401973 2.236026 2.998693 (.443598) - ----------------------------------------------------------------------------------------------------------- Asset charges (.173779) (.243295) (.155475) (.208575) (.207709) - ----------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 14.155666 20.046209 13.256842 17.984058 16.449774 - ----------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 12% 13% 20% 25% 2% ============================================================================================================ 1995 Beginning unit value - Jan. 1 11.700527 15.350115 10.000000 11.312336 13.739287 - ----------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .089493 .322418 .142783 .642275 .972265 - ----------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.033414 2.260958 .998389 2.653961 1.587542 - ----------------------------------------------------------------------------------------------------------- Asset charges (.155890) (.211783) (.069207) (.163900) (.194482) - ----------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 12.667544 17.721708 11.071965 14.444672 16.104612 - ----------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 8% 15% 11%(B) 28% 17% ============================================================================================================ 1994 Beginning unit value - Jan. 1 11.652241 16.559029 ** 11.563943 14.383265 - ----------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .060146 .804872 .182742 .902346 - ----------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .144272 (1.806726) (.286826) (1.366016) - ----------------------------------------------------------------------------------------------------------- Asset charges (.156132) (.207060) (.147523) (.180308) - ----------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 11.700527 15.350115 11.312336 13.739287 - ----------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 0% (7)% (2)% (4)% ============================================================================================================ * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
15 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NSATMYMKT NSATSMCO NSATTOTRE NBAMTGRO NBAMTLMAT --------- -------- --------- -------- --------- 1996*** Beginning unit value - Jan 1 $12.028786 11.410311 19.154939 16.264834 13.684722 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .611421 .133295 1.276326 1.474851 1.151075 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .000000 2.456523 2.875006 .000818 (.567983) - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.161103) (.166908) (.270588) (.219491) (.179189) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $12.479104 13.833221 23.035683 17.521012 14.088625 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 4% 21% 20% 8% 3% ==================================================================================================================================== 1995 Beginning unit value - Jan 1 $11.534440 10.000000 15.031721 12.508337 12.496729 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .648458 .017459 1.489410 .442496 .693794 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .000000 1.418328 2.856936 3.508824 .664378 - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.154112) (.025476) (.223128) (.194823) (.170179) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $12.028786 11.410311 19.154939 16.264834 13.684722 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 4% 14%(b) 27% 30% 10% ==================================================================================================================================== 1994 Beginning unit value - Jan 1 $11.249231 ** 15.066007 13.336899 12.679406 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .433762 .760244 1.607088 .535454 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .000000 (.597472) (2.269450) (.555628) - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.148553) (.197058) (.166200) (.162503) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $11.534440 15.031721 12.508337 12.496729 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 3% 0% (6)% (1)% ====================================================================================================================================
NBAMTPART OPPBDFD OPPGLSEC OPPMULT STDISC2 STINTSTK2 --------- ------- -------- ------- ------- --------- 1996*** Beginning unit value - Jan 1 13.495873 16.056725 11.413379 16.404926 16.214896 10.226632 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .549661 1.030165 .000000 1.247087 3.300617 .050938 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 3.411340 (.269155) 2.016448 1.276232 (3.177170) 1.007488 - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.197162) (.209417) (.159401) (.227169) (.204800) (.143255) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 17.259712 16.608318 13.270426 18.701076 16.133543 11.141803 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 28% 3% 16% 14% (1)% 9% ==================================================================================================================================== 1995 Beginning unit value - Jan 1 10.018146 13.903136 11.309050 13.693997 12.144445 10.000000 - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .081860 .956955 .297396 1.103154 .211667 .041085 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 3.550382 1.391543 (.045694) 1.805769 4.042004 .209467 - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges (.154515) (.194909) (.147373) (.197994) (.183220) (.023920) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 13.495873 16.056725 11.413379 16.404926 16.214896 10.226632 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 35% 15% 1% 20% 34% 2%(b) ==================================================================================================================================== 1994 Beginning unit value - Jan 1 10.000000 14.362878 12.152136 14.148115 13.003547 ** - ------------------------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .000000 .809172 .214078 .720350 .971167 - ------------------------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .072562 (1.086058) (.900362) (.993926) (1.670283) - ------------------------------------------------------------------------------------------------------------------------------------ Asset charges .054416 (.182856) (.156802) (.180542) (.159986) - ------------------------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 10.018146 13.903136 11.309050 13.693997 12.144445 - ------------------------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 0%(b) (3)% (7)% (3)% (7)% ==================================================================================================================================== * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
16 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
STSPEC2 TCIBAL TCIGRO TCIINT VEGOLDNR ------- ------ ------ ------ -------- 1996*** Beginning unit value - Jan. 1 $18.074367 12.914886 17.116040 10.403803 14.230388 - ------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .849403 .609960 1.918348 .247063 .301335 - ------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 2.405871 .954721 (2.649394) 1.239275 2.259820 - ------------------------------------------------------------------------------------------------------------------ Asset charges (.252187) (.176058) (.221369) (.142090) (.208595) - ------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $21.077454 14.303509 16.163625 11.748051 16.582948 - ------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 17% 11% (6)% 13% 17% ================================================================================================================== 1995 Beginning unit value - Jan. 1 $14.552799 10.801955 13.226279 9.392654 12.988341 - ------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .753037 .305779 .015219 .000000 .127947 - ------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) 2.978850 1.961461 4.076606 1.136602 1.287916 - ------------------------------------------------------------------------------------------------------------------ Asset charges (.210319) (.154309) (.202064) (.125453) (.173816) - ------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $18.074367 12.914886 17.116040 10.403803 14.230388 - ------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 24% 20% 29% 11% 10% ================================================================================================================== 1994 Beginning unit value - Jan. 1 $14.230663 10.876445 13.557427 10.000000 13.820369 - ------------------------------------------------------------------------------------------------------------------ Reinvested capital gains and dividends .407898 .260556 .001450 .000000 .069418 - ------------------------------------------------------------------------------------------------------------------ Unrealized gain (loss) .103521 (.194370) (.160376) (.554327) (.726294) - ------------------------------------------------------------------------------------------------------------------ Asset charges (.189283) (.140676) (.172222) (.053019) (.175152) - ------------------------------------------------------------------------------------------------------------------ Ending unit value - Dec. 31 $14.552799 10.801955 13.226279 9.392654 12.988341 - ------------------------------------------------------------------------------------------------------------------ Percentage increase (decrease) in unit value* (a) 2% (1)% (2)% (6)%(b) (6)% ==================================================================================================================
VEWRLDBD VKACRESEC WPLNTEQ WPSMCOGR -------- --------- ------- -------- 1996*** Beginning unit value - Jan. 1 14.170551 10.765797 10.661502 12.430586 - ------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .385883 .287384 .225731 .000000 - ------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.034573) 4.034391 .833478 1.720228 - ------------------------------------------------------------------------------------------------- Asset charges (.182253) (.154376) (.146940) (.175164) - ------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 14.339608 14.933196 11.573771 13.975650 - ------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 1% 39% 9% 12% ================================================================================================= 1995 Beginning unit value - Jan. 1 $ 12.237880 10.000000 10.000000 10.000000 - ------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .990055 .091962 .077347 .000000 - ------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.118852 .739397 .650501 2.501606 - ------------------------------------------------------------------------------------------------- Asset charges (.176236) (.065562) (.066346) (.071020) - ------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $ 14.170551 10.765797 10.661502 12.430586 - ------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 16% 8%(b) 7%(b) 24%(b) ================================================================================================= 1994 Beginning unit value - Jan. 1 $ 12.563474 ** ** ** - ------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .050533 - ------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.218292) - ------------------------------------------------------------------------------------------------- Asset charges (.157835) - ------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $ 12.237880 - ------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (3)% ================================================================================================= * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
17 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR FIDVIPHI -------- -------- -------- -------- -------- 1996*** Beginning unit value - Jan. 1 $14.401809 13.775382 22.215745 21.256059 20.852993 - -------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .747630 .596225 1.025291 1.527554 1.902180 - -------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.296912 2.494042 2.132663 1.587071 1.012148 - -------------------------------------------------------------------------------------------------------- Asset charges (.126762) (.120975) (.188129) (.184124) (.178535) - -------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $17.319589 16.744674 25.185570 24.186560 23.588786 - -------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 20% 22% 13% 14% 13% ======================================================================================================== 1995 Beginning unit value - Jan. 1 $10.788547 10.151919 16.576413 15.828463 17.428943 - -------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .396430 .364933 1.297971 .087506 1.262495 - -------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 3.317353 3.354508 4.496038 5.494030 2.316172 - -------------------------------------------------------------------------------------------------------- Asset charges (.100521) (.095978) (.154677) (.153940) (.154617) - -------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.401809 13.775382 22.215745 21.256059 20.852993 - -------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 33% 36% 34% 34% 20% ======================================================================================================== 1994 Beginning unit value - Jan. 1 $10.715005 10.143796 15.606442 15.958341 17.844401 - -------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .278073 .284601 1.172669 .960381 1.635883 - -------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.118575) (.195976) (.073581) (.966828) (1.910067) - -------------------------------------------------------------------------------------------------------- Asset charges (.085956) (.080502) (.129117) (.123431) (.141274) - -------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $10.788547 10.151919 16.576413 15.828463 17.428943 - -------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 1% 0% 6% (1)% (2)% ========================================================================================================
FIDVIPOV FIDVIPAM FIDVIPCON NSATCAPAP NSATGVTBD -------- -------- --------- --------- --------- 1996*** Beginning unit value - Jan. 1 13.645033 15.982529 11.099135 14.713230 14.984933 - -------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .335875 1.051899 .104631 .766553 .930103 - -------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.459385 1.270941 2.248711 3.061949 (.412550) - -------------------------------------------------------------------------------------------------------- Asset charges (.115480) (.135376) (.096154) (.131065) (.119235) - -------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 15.324813 18.169993 13.356323 18.410667 15.383251 - -------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 12% 14% 20% 25% 3% ======================================================================================================== 1995 Beginning unit value - Jan. 1 12.540728 13.774855 10.000000 11.465403 12.720514 - -------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .095965 .289466 .143118 .653781 .903001 - -------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.111417 2.035460 .998657 2.696528 1.472503 - -------------------------------------------------------------------------------------------------------- Asset charges (.103077) (.117252) (.042640) (.102482) (.111085) - -------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 13.645033 15.982529 11.099135 14.713230 14.984933 Percentage increase (decrease) in unit value* (a) 9% 16% 11%(b) 28% 18% ======================================================================================================== 1994 Beginning unit value - Jan. 1 12.426854 14.785784 ** 11.662121 13.250482 - -------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .064174 .719044 .184927 .833925 - -------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .152413 (1.615920) (.289863) (1.261429) - -------------------------------------------------------------------------------------------------------- Asset charges (.102713) (.114053) (.091782) (.102464) - -------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 12.540728 13.774855 11.465403 12.720514 - -------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 1% (7)% (2)% (4)% ======================================================================================================== * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
18 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
NSATMYMKT NSATSMCO NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART --------- -------- --------- -------- --------- --------- 1996*** Beginning unit value - Jan. 1 $11.714295 11.420759 18.192762 15.962482 13.096811 13.591346 - ---------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .596995 .133983 1.217547 1.448641 1.102543 .554011 - ---------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 2.463983 2.737018 .003774 (.542247) 3.446498 - ---------------------------------------------------------------------------------------------------------------- Asset charges (.096547) (.103082) (.158554) (.132892) (.105789) (.122495) - ---------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $12.214743 13.915643 21.988773 17.282005 13.551318 17.469360 - ---------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 4% 22% 21% 8% 3% 29% ================================================================================================================ 1995 Beginning unit value - Jan. 1 $11.176411 10.000000 14.205723 12.214794 11.900389 10.038887 - ---------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .629782 .017475 1.413734 .432461 .661221 .082096 - ---------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 1.418968 2.703396 3.432609 .635177 3.565899 - ---------------------------------------------------------------------------------------------------------------- Asset charges (.091898) (.015684) (.130091) (.117382) (.099976) (.095536) - ---------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.714295 11.420759 18.192762 15.962482 13.096811 13.591346 - ---------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 5% 14%(b) 28% 31% 10% 35% ================================================================================================================ 1994 Beginning unit value - Jan. 1 $10.845265 ** 14.167308 12.959107 12.014277 10.000000 - ---------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .419275 .717782 1.562441 .507651 .000000 - ---------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) .000000 (.565055) (2.207122) (.526553) .072401 - ---------------------------------------------------------------------------------------------------------------- Asset charges (.088129) (.114312) (.099632) (.094986) (.033514) - ---------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.176411 14.205723 12.214794 11.900389 10.038887 - ---------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 3% 0% (6)% (1)% 0%(b) ================================================================================================================
OPPBDFD OPPGLSEC OPPMULT STDISC2 STINTSTK2 ------- -------- ------- ------- --------- 1996*** Beginning unit value - Jan. 1 15.164813 11.542134 16.100377 16.514850 10.236021 - ---------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .975830 .000000 1.226905 3.367146 .051144 - ---------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.253799) 2.045080 1.256649 (3.238459) 1.009533 - ---------------------------------------------------------------------------------------------------------------- Asset charges (.122023) (.099461) (.137568) (.128676) (.088468) - ---------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 15.764821 13.487753 18.446363 16.514861 11.208230 - ---------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 4% 17% 15% 0% 9% ================================================================================================================ 1995 Beginning unit value - Jan. 1 $13.065574 11.379737 13.372968 12.307607 10.000000 - ---------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .902009 .299595 1.079776 .215562 .041121 - ---------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.310232 (.045711) 1.766931 4.106245 .209625 - ---------------------------------------------------------------------------------------------------------------- Asset charges (.113002) (.091487) (.119298) (.114564) (.014725) - ---------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $15.164813 11.542134 16.100377 16.514850 10.236021 - ---------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 16% 1% 20% 34% 2%(b) ================================================================================================================ 1994 Beginning unit value - Jan. 1 $13.430475 12.167250 13.747705 13.112678 ** - ---------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .759284 .214589 .702216 .983647 - ---------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (1.018698) (.905246) (.968729) (1.689193) - ---------------------------------------------------------------------------------------------------------------- Asset charges (.105487) (.096856) (.108224) (.099525) - ---------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $13.065574 11.379737 13.372968 12.307607 - ---------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (3)% (6)% (3)% (6)% ================================================================================================================ * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
19 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUES YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
STSPEC2 TCIBAL TCIGRO TCIINT TCIVALUE ------- ------ ------ ------ -------- 1996*** Beginning unit value - Jan. 1 $18.408627 13.155049 16.149061 10.477472 10.000000 - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .866384 .622373 1.812196 .249286 .000000 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.458870 .976138 (2.505020) 1.252389 .145457 - --------------------------------------------------------------------------------------------------- Asset charges (.158462) (.110640) (.128845) (.088289) (.001770) - --------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $21.575419 14.642920 15.327392 11.890858 10.143687 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 17% 11% (5)% 13% 1%(b) =================================================================================================== 1995 Beginning unit value - Jan. 1 $14.748256 10.948128 12.417011 9.412116 ** - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .764407 .310910 .014289 .000000 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) 3.027469 1.992508 3.834812 1.142911 - --------------------------------------------------------------------------------------------------- Asset charges (.131505) (.096497) (.117051) (.077555) - --------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $18.408627 13.155049 16.149061 10.477472 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 25% 20% 30% 11% =================================================================================================== 1994 Beginning unit value - Jan. 1 $14.350073 10.968814 12.664593 10.000000 ** - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .412806 .263602 .001356 .000000 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) .103139 (.196764) (.149703) (.555221) - --------------------------------------------------------------------------------------------------- Asset charges (.117762) (.087524) (.099235) (.032663) - --------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $14.748256 10.948128 12.417011 9.412116 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 3% 0% (2)% 6%(b) ===================================================================================================
VEGOLDNR VEWRLDBD VEWRLDEMKT VKACRESEC WPLNTEQ WPSMCOGR -------- -------- ---------- --------- ------- -------- 1996*** Beginning unit value - Jan. 1 15.612002 13.253457 10.000000 10.792212 10.687672 12.461074 - -------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .331277 .361660 .000000 .289441 .227366 .000000 - -------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 2.482492 (.030793) .080699 4.059026 .836487 1.727810 - -------------------------------------------------------------------------------------------------------------- Asset charges (.141181) (.105167) (.001751) (.095484) (.090877) (.108331) - -------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 18.284590 13.479157 10.078948 15.045195 11.660648 14.080553 - -------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 17% 2% 1%(b) 39% 9% 13% ============================================================================================================== 1995 Beginning unit value - Jan. 1 14.178501 11.388987 ** 10.000000 10.000000 10.000000 - -------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .140115 .923751 .092168 .077521 .000000 - -------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.410450 1.041904 .740443 .651025 2.504833 - -------------------------------------------------------------------------------------------------------------- Asset charges (.117064) (.101185) (.040399) (.040874) (.043759) - -------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 15.612002 13.253457 10.792212 10.687672 12.461074 - -------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) 10% 16% 8%(b) 7%(b) 25%(b) ============================================================================================================== 1994 Beginning unit value - Jan. 1 15.011706 11.633841 ** ** ** ** - -------------------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .075618 .046884 - -------------------------------------------------------------------------------------------------------------- Unrealized gain (loss) (.791458) (.201583) - -------------------------------------------------------------------------------------------------------------- Asset charges (.117365) (.090155) - -------------------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 14.178501 11.388987 - -------------------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value* (a) (6)% (2)% ============================================================================================================== * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized.
20 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEAR ENDED DECEMBER 31, 1996
DRYSRGRO DRYSTKIX FIDVIPEI FIDVIPGR -------- -------- -------- -------- 1996** Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .482403 .358216 .000000 .000000 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) .697688 1.101640 .790149 .446167 - --------------------------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 .000000 - --------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.180091 11.459856 10.790149 10.446167 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 12%(b) 15%(b) 8%(b) 4%(b) =================================================================================================== FIDVIPCON NSATCAPAP NSATGVTBD NSATMYMKT --------- --------- --------- --------- 1996** Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .000000 .445367 .489314 .339005 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) 1.249999 1.164973 .189891 .000000 - --------------------------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 .000000 - --------------------------------------------------------------------------------------------------- Ending unit value - Dec. 31 $11.249999 11.610340 10.679205 10.339005 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 12%(b) 16%(b) 7%(b) 3%(b) =================================================================================================== NBAMTLMAT NBAMTPART OPPBDFD OPPGLSEC --------- --------- ------- -------- 1996** Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .000000 .000000 .479143 .000000 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) .477247 1.476324 .165483 .833847 - --------------------------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 .000000 - --------------------------------------------------------------------------------------------------- Ending unit value - Dec.31 $10.477247 11.476324 10.644626 10.833847 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 5%(b) 15%(b) 6%(b) 8%(b) ===================================================================================================
FIDVIPHI FIDVIPOV FIDVIPAM -------- -------- -------- 1996** Beginning unit value - Jan. 1 10.000000 10.000000 10.000000 - -------------------------------------------------------------------------------- Reinvested capital gains and dividends .000000 .000000 .000000 - -------------------------------------------------------------------------------- Unrealized gain (loss) .830462 .668178 1.022140 - -------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 - -------------------------------------------------------------------------------- Ending unit value - Dec.31 10.830462 10.668178 11.022140 - -------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 8%(b) 7%(b) 10%(b) ================================================================================ NSATSMCO NSATTOTRE NBAMTGRO -------- --------- -------- 1996** Beginning unit value - Jan. 1 10.000000 10.000000 10.000000 - -------------------------------------------------------------------------------- Reinvested capital gains and dividends .095576 .580169 .000000 - -------------------------------------------------------------------------------- Unrealized gain (loss) .428842 .864708 (.130166) - -------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 - -------------------------------------------------------------------------------- Ending unit value - Dec.31 $10.524418 11.444877 9.869834 - -------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 5%(b) 14%(b) (1)%(b) ================================================================================ OPPMULT STDISC2 STINTSTK2 ------- ------- --------- 1996** Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 - -------------------------------------------------------------------------------- Reinvested capital gains and dividends .402281 .520758 .045738 - -------------------------------------------------------------------------------- Unrealized gain (loss) .535297 (.636201) .008684 - -------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 - -------------------------------------------------------------------------------- Ending unit value - Dec.31 10.937578 9.884557 10.054422 - -------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 9%(b) (1)%(b) 1%(b) ================================================================================ * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** No other investment options were being utilized.
21 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEAR ENDED DECEMBER 31, 1996
STSPEC2 TCIBAL TCIGRO TCIINT ------- ------ ------ ------ 1996** Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 10.000000 - --------------------------------------------------------------------------------------------------- Reinvested capital gains and dividends .045100 .122861 .000000 .224735 - --------------------------------------------------------------------------------------------------- Unrealized gain (loss) .721729 .808286 (.881573) .548823 - --------------------------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 .000000 - --------------------------------------------------------------------------------------------------- Ending unit value - Dec.31 $10.766829 10.931147 9.118427 10.773558 - --------------------------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 8%(b) 9%(b) (9)%(b) 8%(b) ===================================================================================================
VEGoldNR VEWrldNR VKACRESec -------- -------- --------- 1996** Beginning unit value - Jan. 1 10.000000 10.000000 10.000000 - --------------------------------------------------------------------------------- Reinvested capital gains and dividends .181335 .280847 .255666 - --------------------------------------------------------------------------------- Unrealized gain (loss) (.125331) .235917 3.418174 - --------------------------------------------------------------------------------- Contract charges .000000 .000000 .000000 - --------------------------------------------------------------------------------- Ending unit value - Dec. 31 10.056004 10.516764 13.673840 - --------------------------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) 1%(b) 5%(b) 37%(b) =================================================================================
WPINTEQ WPSMCOGR ------- -------- 1996** Beginning unit value - Jan. 1 $10.000000 10.000000 - ---------------------------------------------------------------- Reinvested capital gains and dividends .193639 .000000 - ---------------------------------------------------------------- Unrealized gain (loss) (.258621) (.172410) - ---------------------------------------------------------------- Contract charges .000000 .000000 - ---------------------------------------------------------------- Ending unit value - Dec.31 $9.935018 9.827590 - ---------------------------------------------------------------- Percentage increase (decrease) in unit value*(a) (1)%(b) (2)%(b) ================================================================ * An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** No other investment options were being utilized. See note 6.
70 1 INDEPENDENT AUDITORS' REPORT ---------------------------- The Board of Directors Nationwide Life Insurance Company: We have audited the accompanying consolidated balance sheets of Nationwide Life Insurance Company and subsidiaries (collectively the Company) as of December 31, 1996 and 1995, and the related consolidated statements of income, shareholder's equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Life Insurance Company and subsidiaries as of December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. In 1994, the Company adopted the provisions of the Financial Accounting Standards Board's Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities. KPMG Peat Marwick LLP Columbus, Ohio January 31, 1997 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Balance Sheets December 31, 1996 and 1995 ($000's omitted) Assets 1996 1995 ------ ----------------- ---------------- Investments (notes 5, 8 and 9): Securities available-for-sale, at fair value: Fixed maturity securities (cost $11,970,878 in 1996; $11,862,556 in 1995) $12,304,639 12,485,564 Equity securities (cost $43,890 in 1996; $23,617 in 1995) 59,131 29,953 Mortgage loans on real estate, net 5,272,119 4,602,764 Real estate, net 265,759 229,442 Policy loans 371,816 336,356 Other long-term investments 28,668 61,989 Short-term investments (note 13) 4,789 32,792 ----------------- ---------------- 18,306,921 17,778,860 ----------------- ---------------- Cash 43,784 9,455 Accrued investment income 210,182 212,963 Deferred policy acquisition costs 1,366,509 1,020,356 Investment in subsidiaries classified as discontinued operations (notes 1 and 2) 485,707 506,677 Other assets (note 6) 426,441 388,214 Assets held in Separate Accounts (note 8) 26,926,702 18,591,108 ----------------- ---------------- $47,766,246 38,507,633 ================= ================ Liabilities and Shareholder's Equity ------------------------------------ Future policy benefits and claims (notes 6 and 8) $17,179,060 16,358,614 Policyholders' dividend accumulations 361,401 348,027 Other policyholder funds 60,073 65,297 Accrued federal income tax (note 7): Current 30,170 35,301 Deferred 162,212 246,627 ----------------- ---------------- 192,382 281,928 ----------------- ---------------- Dividend payable to shareholder (notes 1 and 2) 485,707 - Other liabilities 423,047 234,147 Liabilities related to Separate Accounts (note 8) 26,926,702 18,591,108 ----------------- ---------------- 45,628,372 35,879,121 ----------------- ---------------- Commitments and contingencies (notes 6, 9 and 15) Shareholder's equity (notes 3, 4, 5, 12 and 13): Capital shares, $1 par value. Authorized 5,000,000 shares, issued and outstanding 3,814,779 shares 3,815 3,815 Additional paid-in capital 527,874 657,118 Retained earnings 1,432,593 1,583,275 Unrealized gains on securities available-for-sale, net 173,592 384,304 ----------------- ---------------- 2,137,874 2,628,512 ----------------- ---------------- $47,766,246 38,507,633 ================= ================
See accompanying notes to consolidated financial statements. 3 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Income Years ended December 31, 1996, 1995 and 1994 ($000's omitted)
1996 1995 1994 --------------- -------------- ------------- Revenues (note 16): Investment product and universal life insurance product policy charges $ 400,902 286,534 217,245 Traditional life insurance premiums 198,642 199,106 176,658 Net investment income (note 5) 1,357,759 1,294,033 1,210,811 Realized losses on investments (note 5) (326) (1,724) (16,527) Other income 35,861 20,702 11,312 --------------- -------------- ------------- 1,992,838 1,798,651 1,599,499 --------------- -------------- ------------- Benefits and expenses: Benefits and claims 1,160,580 1,115,493 992,667 Provision for policyholders' dividends on participating policies (note 12) 40,973 39,937 38,754 Amortization of deferred policy acquisition costs 133,394 82,695 85,568 Other operating expenses (note 13) 342,394 272,954 240,652 --------------- -------------- ------------- 1,677,341 1,511,079 1,357,641 --------------- -------------- ------------- Income from continuing operations before federal income tax expense 315,497 287,572 241,858 --------------- -------------- ------------- Federal income tax expense (benefit) (note 7): Current 116,512 88,700 73,559 Deferred (5,623) 11,108 5,030 --------------- -------------- ------------- 110,889 99,808 78,589 --------------- -------------- ------------- Income from continuing operations 204,608 187,764 163,269 Income from discontinued operations (less federal income tax expense of $4,453, $7,446 and $10,915 in 1996, 1995 and 1994, respectively) (note 2) 11,324 24,714 20,459 --------------- -------------- ------------- Net income $ 215,932 212,478 183,728 =============== ============== =============
See accompanying notes to consolidated financial statements. 4 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Shareholder's Equity Years ended December 31, 1996, 1995 and 1994 ($000's omitted)
Unrealized gains (losses) Additional on securities Total Capital paid-in Retained available-for- shareholder's shares capital earnings sale, net equity ----------- ------------- --------------- ----------------- --------------- 1994: Balance, beginning of year $3,815 406,089 1,194,519 6,745 1,611,168 Capital contribution - 200,000 - - 200,000 Net income - - 183,728 - 183,728 Adjustment for change in accounting for certain investments in debt and equity securities, net (note 4) - - - 212,553 212,553 Unrealized losses on securities available- for-sale, net - - - (338,971) (338,971) ----------- ------------- --------------- ----------------- --------------- Balance, end of year $3,815 606,089 1,378,247 (119,673) 1,868,478 =========== ============= =============== ================= =============== 1995: Balance, beginning of year 3,815 606,089 1,378,247 (119,673) 1,868,478 Capital contribution (note 13) - 51,029 - (4,111) 46,918 Dividends to shareholder - - (7,450) - (7,450) Net income - - 212,478 - 212,478 Unrealized gains on securities available- for-sale, net - - - 508,088 508,088 ----------- ------------- --------------- ----------------- --------------- Balance, end of year $3,815 657,118 1,583,275 384,304 2,628,512 =========== ============= =============== ================= =============== 1996: Balance, beginning of year 3,815 657,118 1,583,275 384,304 2,628,512 Capital contribution (note 13) - 25 5 - 30 Dividends to shareholder - (129,269) (366,619) (39,819) (535,707) Net income - - 215,932 - 215,932 Unrealized losses on securities available- for-sale, net - - - (170,893) (170,893) ----------- ------------- --------------- ----------------- --------------- Balance, end of year $3,815 527,874 1,432,593 173,592 2,137,874 =========== ============= =============== ================= ===============
See accompanying notes to consolidated financial statements. 5 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Consolidated Statements of Cash Flows Years ended December 31, 1996, 1995 and 1994 ($000's omitted)
1996 1995 1994 ---------------- --------------- --------------- Cash flows from operating activities: Net income $ 215,932 212,478 183,728 Adjustments to reconcile net income to net cash provided by operating activities: Capitalization of deferred policy acquisition costs (422,572) (321,327) (242,431) Amortization of deferred policy acquisition costs 133,394 82,695 85,568 Amortization and depreciation 6,962 10,234 3,603 Realized (gains) losses on invested assets, net (284) 3,250 16,094 Deferred federal income tax expense (benefit) 7,603 (30,673) 9,946 Decrease (increase) in accrued investment income 2,781 (16,999) (12,808) (Increase) decrease in other assets (38,876) 39,880 (102,676) Increase in policy liabilities 305,755 135,937 118,361 Increase in policyholders' dividend accumulations 13,374 12,639 15,298 (Decrease) increase in accrued federal income tax payable (5,131) 30,836 (5,714) Increase in other liabilities 188,900 26,851 506 Other, net (61,679) 1,832 (29,595) --------------- --------------- --------------- Net cash provided by operating activities 346,159 187,633 39,880 ---------------- --------------- --------------- Cash flows from investing activities: Proceeds from maturity of securities available-for-sale 1,162,766 634,553 544,843 Proceeds from sale of securities available-for-sale 299,558 107,345 228,308 Proceeds from maturity of fixed maturity securities held-to-maturity - 564,450 491,862 Proceeds from repayments of mortgage loans on real estate 309,050 207,832 190,574 Proceeds from sale of real estate 18,519 48,331 46,713 Proceeds from repayments of policy loans and sale of other invested assets 22,795 53,587 120,506 Cost of securities available-for-sale acquired (1,573,640) (1,942,413) (1,816,370) Cost of fixed maturity securities held-to-maturity acquired - (593,636) (410,379) Cost of mortgage loans on real estate acquired (972,776) (796,026) (471,570) Cost of real estate acquired (7,862) (10,928) (6,385) Policy loans issued and other invested assets acquired (57,740) (75,910) (65,302) Short-term investments, net 28,003 77,837 (89,376) Purchase of affiliate (note 13) - - (155,000) ---------------- --------------- --------------- Net cash used in investing activities (771,327) (1,724,978) (1,391,576) ---------------- --------------- --------------- Cash flows from financing activities: Proceeds from capital contributions 30 - 200,000 Dividends paid to shareholder (50,000) (7,450) - Increase in investment product and universal life insurance product account balances 2,293,933 2,809,385 3,547,976 Decrease in investment product and universal life insurance product account balances (1,784,466) (1,258,758) (2,412,595) ---------------- --------------- -------------- Net cash provided by financing activities 459,497 1,543,177 1,335,381 ---------------- --------------- -------------- Net increase (decrease) in cash 34,329 5,832 (16,315) ---------------- --------------- --------------- Cash, beginning of year 9,455 3,623 19,938 ---------------- --------------- --------------- Cash, end of year $ 43,784 9,455 3,623 ================ =============== ===============
See accompanying notes to consolidated financial statements. 6 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements December 31, 1996, 1995 and 1994 ($000's omitted) (1) Organization and Description of Business ---------------------------------------- Nationwide Life Insurance Company (NLIC) is a wholly owned subsidiary of Nationwide Corporation (Nationwide Corp.). Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC), Employers Life Insurance Company of Wausau and subsidiaries (ELICW), National Casualty Company (NCC), West Coast Life Insurance Company (WCLIC), Nationwide Advisory Services, Inc. (formerly Nationwide Financial Services, Inc.), Nationwide Investment Services Corporation (formerly PEBSCO Securities Corporation) (NISC) and NWE, Inc. NLIC and its subsidiaries are collectively referred to as "the Company." Nationwide Corp. formed Nationwide Financial Services, Inc. (NFS) in November 1996 as a holding company for NLIC and the other companies of the Nationwide Insurance Enterprise that offer or distribute long-term savings and retirement products. On January 27, 1997, Nationwide Corp. contributed to NFS the common stock of NLIC and three marketing and distribution companies. NFS is planning an initial public offering of its Class A common stock during the first quarter of 1997. In anticipation of the restructuring described above, on September 24, 1996, NLIC's Board of Directors declared a dividend payable January 1, 1997 to Nationwide Corp. consisting of the outstanding shares of common stock of certain subsidiaries (ELICW, NCC and WCLIC) that do not offer or distribute long-term savings and retirement products. In addition, during 1996, NLIC entered into two reinsurance agreements whereby all of NLIC's accident and health and group life insurance business was ceded to ELICW and another affiliate effective January 1, 1996. These subsidiaries and all accident and health and group life insurance business have been accounted for as discontinued operations for all periods presented. See notes 2 and 13. In addition, as part of the restructuring described above, NLIC intends to make an $850,000 distribution to NFS which will then make an equivalent distribution to Nationwide Corp. The Company is a leading provider of long-term savings and retirement products to retail and institutional customers and is subject to competition from other financial services providers throughout the United States. The Company is subject to regulation by the Insurance Departments of states in which it is licensed, and undergoes periodic examinations by those departments. The following is a description of the most significant risks facing life insurers and how the Company mitigates those risks: LEGAL/REGULATORY RISK is the risk that changes in the legal or regulatory environment in which an insurer operates will create additional expenses not anticipated by the insurer in pricing its products. That is, regulatory initiatives, new legal theories or insurance company insolvencies through guaranty fund assessments may create costs for the insurer beyond those currently recorded in the consolidated financial statements. The Company mitigates this risk by offering a wide range of products and by operating throughout the United States, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices which identify and minimize the adverse impact of this risk. CREDIT RISK is the risk that issuers of securities owned by the Company or mortgagors on mortgage loans on real estate owned by the Company will default or that other parties, including reinsurers, which owe the Company money, will not pay. The Company minimizes this risk by adhering to a conservative investment strategy, by maintaining reinsurance and credit and collection policies and by providing for any amounts deemed uncollectible. 7 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued INTEREST RATE RISK is the risk that interest rates will change and cause a decrease in the value of an insurer's investments. This change in rates may cause certain interest-sensitive products to become uncompetitive or may cause disintermediation. The Company mitigates this risk by charging fees for non-conformance with certain policy provisions, by offering products that transfer this risk to the purchaser, and/or by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, an insurer would have to borrow funds or sell assets prior to maturity and potentially recognize a gain or loss. (2) Discontinued Operations ----------------------- As discussed in note 1, NFS is a holding company for NLIC and certain other companies that offer or distribute long-term savings and retirement products. Prior to the contribution by Nationwide Corp. to NFS of the outstanding common stock of NLIC and other companies, NLIC effected certain transactions with respect to certain subsidiaries and lines of business that were unrelated to long-term savings and retirement products. On September 24, 1996, NLIC's Board of Directors declared a dividend to Nationwide Corp. consisting of the outstanding shares of common stock of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group accident and health and group life insurance business and maintains it offices in Wausau, Wisconsin. NCC is a property and casualty company that serves as a fronting company for a property and casualty subsidiary of Nationwide Mutual Insurance Company (NMIC), an affiliate. NCC maintains its offices in Scottsdale, Arizona. WCLIC writes high dollar term life insurance policies and is located in San Francisco, California. ELICW, NCC and WCLIC have been accounted for as discontinued operations for all periods presented. NLIC did not recognize any gain or loss on the disposal of these subsidiaries. A summary of the combined results of operations, including the results of the accident and health and group life insurance business ELICW assumed from NLIC in 1996, and assets and liabilities of ELICW, NCC and WCLIC as of and for the years ended December 31, 1996, 1995 and 1994 is as follows:
1996 1995 1994 ------------ ----------- ----------- Revenues $ 668,870 422,149 84,226 Net income 11,324 26,456 11,753 Assets, consisting primarily of investments 3,029,293 2,967,326 2,537,692 Liabilities, consisting primarily of policy benefits and claims 2,543,586 2,460,649 2,179,263
During 1996, NLIC entered into two reinsurance agreements whereby all of NLIC's accident and health and group life insurance business was ceded to ELICW and NMIC, effective January 1, 1996. See note 13 for a complete discussion of the reinsurance agreements. NLIC has discontinued its accident and health and group life insurance business and in connection therewith has entered into reinsurance agreements to cede all existing and any future writings to other affiliated companies and will cease writing any new business prior to December 31, 1997. NLIC's accident and health and group life insurance business is accounted for as discontinued operations for all periods presented. NLIC did not recognize any gain or loss on the disposal of the accident and health and group life insurance business. The assets, liabilities, results of operations and activities of discontinued operations are distinguished physically, operationally and for financial reporting purposes from the remaining assets, liabilities, results of operations and activities of NLIC. 8 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued A summary of the results of operations, net of amounts ceded to ELICW and NMIC in 1996, and assets and liabilities of NLIC's accident and health and group life insurance business as of and for the years ended December 31, 1996, 1995 and 1994 is as follows:
1996 1995 1994 ------------ ----------- ----------- Revenues $ - 354,788 362,476 Net income (loss) - (1,742) 8,706 Assets, consisting primarily of investments 259,185 239,426 234,082 Liabilities, consisting primarily of policy benefits and claims 259,185 239,426 234,082
(3) Summary of Significant Accounting Policies ------------------------------------------ The significant accounting policies followed by the Company that materially affect financial reporting are summarized below. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) which differ from statutory accounting practices prescribed or permitted by regulatory authorities. Annual Statements for NLIC and its insurance subsidiaries, filed with the department of insurance of each insurance company's state of domicile, are prepared on the basis of accounting practices prescribed or permitted by each department. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company has no material permitted statutory accounting practices. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ significantly from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs, valuation allowances for mortgage loans on real estate and real estate investments and the liability for future policy benefits and claims. Although some variability is inherent in these estimates, management believes the amounts provided are adequate. (a) Consolidation Policy -------------------- The consolidated financial statements include the accounts of NLIC and its wholly owned subsidiaries. Subsidiaries that are classified and reported as discontinued operations are not consolidated but rather are reported as "Investment in Subsidiaries Classified as Discontinued Operations" in the accompanying consolidated balance sheets and "Income for Discontinued Operations" in the accompanying consolidated statements of income. All significant intercompany balances and transactions have been eliminated. (b) Valuation of Investments and Related Gains and Losses ----------------------------------------------------- The Company is required to classify its fixed maturity securities and equity securities as either held-to-maturity, available-for-sale or trading. Fixed maturity securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity and are stated at amortized cost. Fixed maturity securities not classified as held-to-maturity and all equity securities are classified as available-for-sale and are stated at fair value, with the unrealized gains and losses, net of adjustments to deferred policy acquisition costs and deferred federal income tax, reported as a separate component of shareholder's equity. The adjustment to deferred policy acquisition costs represents the change in amortization of deferred policy acquisition costs that would have been required as a charge or credit to operations had such unrealized amounts been realized. The Company has no fixed maturity securities classified as held-to-maturity or trading as of December 31, 1996 or 1995. 9 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Mortgage loans on real estate are carried at the unpaid principal balance less valuation allowances. The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. The measurement of impaired loans is based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the fair value of the collateral, if the loan is collateral dependent. Loans in foreclosure and loans considered to be impaired are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate are included in interest income in the period received. Real estate is carried at cost less accumulated depreciation and valuation allowances. Other long-term investments are carried on the equity basis, adjusted for valuation allowances. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Realized gains and losses on the sale of investments are determined on the basis of specific security identification. Estimates for valuation allowances and other than temporary declines are included in realized gains and losses on investments. (c) Revenues and Benefits --------------------- INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS: Investment products consist primarily of individual and group variable and fixed annuities, annuities without life contingencies and guaranteed investment contracts. Universal life insurance products include universal life insurance, variable universal life insurance and other interest-sensitive life insurance policies. Revenues for investment products and universal life insurance products consist of net investment income, asset fees, cost of insurance, policy administration and surrender charges that have been earned and assessed against policy account balances during the period. Policy benefits and claims that are charged to expense include interest credited to policy account balances and benefits and claims incurred in the period in excess of related policy account balances. TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance, limited-payment life insurance, term life insurance and certain annuities with life contingencies. Premiums for traditional life insurance products are recognized as revenue when due. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the life of the contract. This association is accomplished by the provision for future policy benefits and the deferral and amortization of policy acquisition costs. ACCIDENT AND HEALTH INSURANCE PRODUCTS: Accident and health insurance premiums are recognized as revenue over the terms of the policies. Policy claims are charged to expense in the period that the claims are incurred. All accident and health insurance business is accounted for as discontinued operations. See note 2. (d) Deferred Policy Acquisition Costs --------------------------------- The costs of acquiring new business, principally commissions, certain expenses of the policy issue and underwriting department and certain variable agency expenses have been deferred. For investment products and universal life insurance products, deferred policy acquisition costs are being amortized with interest over the lives of the policies in relation to the present value of estimated future gross profits from projected interest margins, asset fees, cost of insurance, policy administration and surrender charges. For years in which gross profits are negative, deferred policy acquisition costs are amortized based on the present value of gross revenues. For traditional life products, these deferred policy acquisition costs are predominantly being amortized with interest over the premium paying period of the related policies in proportion to the ratio of actual annual premium revenue to the anticipated total premium revenue. Such anticipated premium revenue was estimated using the same assumptions as were used for computing liabilities for future policy benefits. Deferred policy acquisition costs are adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale as described in note 3(b). 10 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (e) Separate Accounts ----------------- Separate Account assets and liabilities represent contractholders' funds which have been segregated into accounts with specific investment objectives. The investment income and gains or losses of these accounts accrue directly to the contractholders. The activity of the Separate Accounts is not reflected in the consolidated statements of income and cash flows except for the fees the Company receives. (f) Future Policy Benefits ---------------------- Future policy benefits for investment products in the accumulation phase, universal life insurance and variable universal life insurance policies have been calculated based on participants' contributions plus interest credited less applicable contract charges. Future policy benefits for traditional life insurance policies have been calculated using a net level premium method based on estimates of mortality, morbidity, investment yields and withdrawals which were used or which were being experienced at the time the policies were issued, rather than the assumptions prescribed by state regulatory authorities. See note 6. Future policy benefits and claims for collectively renewable long-term disability policies and group long-term disability policies are the present value of amounts not yet due on reported claims and an estimate of amounts to be paid on incurred but unreported claims. The impact of reserve discounting is not material. Future policy benefits and claims on other group health insurance policies are not discounted. All health insurance business is accounted for as discontinued operations. See note 2. (g) Participating Business ---------------------- Participating business represents approximately 52% in 1996 (54% in 1995 and 55% in 1994) of the Company's life insurance in force, 78% in 1996 (79% in 1995 and 79% in 1994) of the number of life insurance policies in force, and 40% in 1996 (47% in 1995 and 51% in 1994) of life insurance premiums. The provision for policyholder dividends is based on current dividend scales. Future dividends are provided for ratably in future policy benefits based on dividend scales in effect at the time the policies were issued. (h) Federal Income Tax ------------------ The Company, with the exception of ELICW, files a consolidated federal income tax return with NMIC, the majority shareholder of Nationwide Corp. The members of the consolidated tax return group have a tax sharing arrangement which provides, in effect, for each member to bear essentially the same federal income tax liability as if separate tax returns were filed. Through 1994, ELICW filed a consolidated federal income tax return with Employers Insurance of Wausau A Mutual Company, an affiliate. Beginning in 1995, ELICW files a separate federal income tax return. The Company utilizes the asset and liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. 11 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (i) Reinsurance Ceded ----------------- Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported on a gross basis. All of the Company's accident and health and group life insurance business is ceded to affiliates and is accounted for as discontinued operations. See notes 2 and 13. (j) Reclassification ---------------- Certain items in the 1995 and 1994 consolidated financial statements have been reclassified to conform to the 1996 presentation. (4) Change in Accounting Principle ------------------------------ Effective January 1, 1994, the Company changed its method of accounting for certain investments in debt and equity securities in connection with the issuance of STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 115 - ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. As of January 1, 1994, the Company classified fixed maturity securities with amortized cost and fair value of $6,299,665 and $6,721,714, respectively, as available-for-sale and recorded the securities at fair value. Previously, these securities were recorded at amortized cost. The effect as of January 1, 1994 has been recorded as a direct credit to shareholder's equity as follows:
Excess of fair value over amortized cost of fixed maturity securities available-for-sale $ 422,049 Adjustment to deferred policy acquisition costs (95,044) Deferred federal income tax (114,452) -------------- $ 212,553 ==============
(5) Investments ----------- The amortized cost and estimated fair value of securities available-for-sale were as follows as of December 31, 1996:
Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value ------------ ---------- ----------- ----------- 1996: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 275,696 4,795 (1,340) 279,151 Obligations of states and political subdivisions 6,242 450 (2) 6,690 Debt securities issued by foreign governments 100,656 2,141 (857) 101,940 Corporate securities 7,999,310 285,946 (33,686) 8,251,570 Mortgage-backed securities 3,588,974 91,438 (15,124) 3,665,288 ------------ ---------- ------------ ------------ Total fixed maturity securities 11,970,878 384,770 (51,009) 12,304,639 Equity securities 43,890 15,571 (330) 59,131 ------------ ---------- ------------ ------------ $12,014,768 400,341 (51,339) 12,363,770 ============ ========== ============ ============
12 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The amortized cost and estimated fair value of securities available-for-sale were as follows as of December 31, 1995:
Gross Gross Amortized unrealized unrealized Estimated cost gains losses fair value ------------ ---------- ----------- --------------- 1995: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 310,186 12,764 (1) 322,949 Obligations of states and political subdivisions 8,655 1,205 (1) 9,859 Debt securities issued by foreign governments 101,414 4,387 (66) 105,735 Corporate securities 7,888,440 473,681 (25,742) 8,336,379 Mortgage-backed securities 3,553,861 165,169 (8,388) 3,710,642 ------------ ---------- ----------- --------------- Total fixed maturity securities 11,862,556 657,206 (34,198) 12,485,564 Equity securities 23,617 6,382 (46) 29,953 ------------ ---------- ----------- --------------- $11,886,173 663,588 (34,244) 12,515,517 ============ ========== =========== ===============
The amortized cost and estimated fair value of fixed maturity securities available-for-sale as of December 31, 1996, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated cost fair value --------------- -------------- Fixed maturity securities available-for-sale: Due in one year or less $ 440,235 444,214 Due after one year through five years 3,937,010 4,053,152 Due after five years through ten years 2,809,813 2,871,806 Due after ten years 1,194,846 1,270,179 --------------- -------------- 8,381,904 8,639,351 Mortgage-backed securities 3,588,974 3,665,288 --------------- -------------- $11,970,878 12,304,639 =============== ==============
The components of unrealized gains on securities available-for-sale, net, were as follows as of December 31:
1996 1995 --------------- -------------- Gross unrealized gains $349,002 629,344 Adjustment to deferred policy acquisition costs (81,939) (138,914) Deferred federal income tax (93,471) (171,649) --------------- -------------- 173,592 318,781 Unrealized gains on securities available-for-sale, net, of subsidiaries classified as discontinued operations (note 2) - 65,523 --------------- -------------- $173,592 384,304 =============== ==============
13 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued An analysis of the change in gross unrealized gains (losses) on securities available-for-sale and fixed maturity securities held-to-maturity follows for the years ended December 31:
1996 1995 1994 --------------- ------------- -------------- Securities available-for-sale: Fixed maturity securities $(289,247) 876,332 (675,373) Equity securities 8,905 (26) (1,927) Fixed maturity securities held-to-maturity - 75,626 (398,183) --------------- ------------- -------------- $(280,342) 951,932 (1,075,483) =============== ============= ==============
Proceeds from the sale of securities available-for-sale during 1996, 1995 and 1994 were $299,558, $107,345 and $228,308, respectively. During 1996, gross gains of $6,606 ($4,838 and $3,045 in 1995 and 1994, respectively) and gross losses of $6,925 ($2,147 and $21,280 in 1995 and 1994, respectively) were realized on those sales. During 1995, the Company transferred fixed maturity securities classified as held-to-maturity with amortized cost of $25,429 to available-for-sale securities due to evidence of a significant deterioration in the issuer's creditworthiness. The transfer of those fixed maturity securities resulted in a gross unrealized loss of $3,535. As permitted by the Financial Accounting Standards Board's Special Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November 1995 the Company transferred all of its fixed maturity securities previously classified as held-to-maturity to available-for-sale. As of December 14, 1995, the date of transfer, the fixed maturity securities had amortized cost of $3,320,093, resulting in a gross unrealized gain of $155,940. Investments that were non-income producing for the twelve month period preceding December 31, 1996 amounted to $26,805 ($27,712 in 1995) and consisted of $248 ($6,982 in 1995) in fixed maturity securities, $20,633 ($14,740 in 1995) in real estate and $5,924 ($5,990 in 1995) in other long-term investments. Real estate is presented at cost less accumulated depreciation of $30,338 as of December 31, 1996 ($30,482 as of December 31, 1995) and valuation allowances of $15,219 as of December 31, 1996 ($25,819 as of December 31, 1995). The recorded investment of mortgage loans on real estate considered to be impaired (under SFAS NO. 114 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN as amended by SFAS NO. 118 - ACCOUNTING BY CREDITORS FOR IMPAIRMENT OF A LOAN-INCOME RECOGNITION AND DISCLOSURE) as of December 31, 1996 was $51,765 ($44,409 as of December 31, 1995), which includes $41,663 ($23,975 as of December 31, 1995) of impaired mortgage loans on real estate for which the related valuation allowance was $8,485 ($5,276 as of December 31, 1995) and $10,102 ($20,434 as of December 31, 1995) of impaired mortgage loans on real estate for which there was no valuation allowance. During 1996, the average recorded investment in impaired mortgage loans on real estate was approximately $39,674 ($22,181 in 1995) and interest income recognized on those loans was $2,103 ($387 in 1995), which is equal to interest income recognized using a cash-basis method of income recognition. Activity in the valuation allowance account for mortgage loans on real estate is summarized for the years ended December 31:
1996 1995 ------------- -------------- Allowance, beginning of year $49,128 46,381 Additions charged to operations 4,497 7,433 Direct write-downs charged against the allowance (2,587) (4,686) ------------- ------------- Allowance, end of year $51,038 49,128 ============= ==============
14 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued An analysis of investment income by investment type follows for the years ended December 31:
1996 1995 1994 --------------- ------------- ------------ Gross investment income: Securities available-for-sale: Fixed maturity securities $ 917,135 685,787 647,927 Equity securities 1,291 1,330 509 Fixed maturity securities held-to-maturity - 201,808 185,938 Mortgage loans on real estate 432,815 395,478 372,734 Real estate 44,332 38,344 40,170 Short-term investments 4,155 10,576 6,141 Other 3,998 7,239 2,121 --------------- ------------- -------------- Total investment income 1,403,726 1,340,562 1,255,540 Less investment expenses 45,967 46,529 44,729 --------------- ------------- --------------- Net investment income $1,357,759 1,294,033 1,210,811 =============== ============= ==============
An analysis of realized gains (losses) on investments, net of valuation allowances, by investment type follows for the years ended December 31:
1996 1995 1994 ------------ ------------ ------------ Securities available-for-sale: Fixed maturity securities $(3,462) 4,213 (7,296) Equity securities 3,143 3,386 1,422 Mortgage loans on real estate (4,115) (7,091) (20,446) Real estate and other 4,108 (2,232) 9,793 ------------ ------------ ------------ $ (326) (1,724) (16,527) ============ ============ ============
Fixed maturity securities with an amortized cost of $6,161 and $5,592 as of December 31, 1996 and 1995, respectively, were on deposit with various regulatory agencies as required by law. (6) Future Policy Benefits and Claims --------------------------------- The liability for future policy benefits for investment contracts represents approximately 87% and 87% of the total liability for future policy benefits as of December 31, 1996 and 1995, respectively. The average interest rate credited on investment product policies was approximately 6.3%, 6.6% and 6.5% for the years ended December 31, 1996, 1995 and 1994, respectively. The liability for future policy benefits for traditional life insurance policies has been established based upon the following assumptions: Interest rates: Interest rates vary as follows: --------------
Year of issue Interest rates ----------------- ---------------------------------------- 1996 6.6%, not graded 1984-1995 6.0% to 10.5%, not graded 1966-1983 6.0% to 8.1%, graded over 20 years to 4.0% to 6.6% 1965 and prior generally lower than post 1965 issues
15 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued WITHDRAWALS: Rates, which vary by issue age, type of coverage and policy duration, are based on Company experience. MORTALITY: Mortality and morbidity rates are based on published tables, modified for the Company's actual experience. The Company has entered into a reinsurance contract to cede a portion of its general account individual annuity business to The Franklin Life Insurance Company (Franklin). Total recoveries due from Franklin were $240,451 and $245,255 as of December 31, 1996 and 1995, respectively. The contract is immaterial to the Company's results of operations. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder. Under the terms of the contract, Franklin has established a trust as collateral for the recoveries. The trust assets are invested in investment grade securities, the market value of which must at all times be greater than or equal to 102% of the reinsured reserves. The Company has reinsurance agreements with certain affiliates as described in note 13. All other reinsurance agreements are not material to either premiums or reinsurance recoverables. (7) Federal Income Tax ------------------- The tax effects of temporary differences that give rise to significant components of the net deferred tax liability as of December 31, 1996 and 1995 are as follows:
1996 1995 ----------------- --------------- Deferred tax assets: Future policy benefits $175,571 149,192 Liabilities in Separate Accounts 188,426 129,120 Mortgage loans on real estate and real estate 23,366 25,165 Other policyholder funds 7,407 7,424 Other assets and other liabilities 53,757 41,847 ----------------- --------------- Total gross deferred tax assets 448,527 352,748 Less valuation allowances (7,000) (7,000) ----------------- --------------- Net deferred tax assets 441,527 345,748 ================= =============== Deferred tax liabilities: Deferred policy acquisition costs 399,345 299,579 Fixed maturity securities 133,210 227,345 Deferred tax on realized investment gains 37,597 40,634 Equity securities and other long-term investments 8,210 3,780 Other 25,377 21,037 ----------------- --------------- Total gross deferred tax liabilities 603,739 592,375 ----------------- --------------- $162,212 246,627 ================= ===============
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the total gross deferred tax assets will not be realized. Nearly all future deductible amounts can be offset by future taxable amounts or recovery of federal income tax paid within the statutory carryback period. There has been no change in the valuation allowance for the years ended December 31, 1996, 1995 and 1994. 16 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Total federal income tax expense for the years ended December 31, 1996, 1995 and 1994 differs from the amount computed by applying the U.S. federal income tax rate to income before tax as follows:
1996 1995 1994 ---------------------- ---------------------- ---------------------- Amount % Amount % Amount % ---------------------- ---------------------- ---------------------- Computed (expected) tax expense $110,424 35.0 $100,650 35.0 $84,650 35.0 Tax exempt interest and dividends received deduction (212) (0.1) (18) (0.0) (130) (0.1) Other, net 677 0.3 (824) (0.3) (5,931) (2.5) ------------ -------- ------------- -------- ------------- -------- Total (effective rate of each year) $110,889 35.2 $ 99,808 34.7 $78,589 32.5 ============ ======== ============= ======== ============= ========
Total federal income tax paid was $115,839, $51,840 and $83,239 during the years ended December 31, 1996, 1995 and 1994, respectively. (8) Disclosures about Fair Value of Financial Instruments ----------------------------------------------------- SFAS NO. 107 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS (SFAS 107) requires disclosure of fair value information about existing on and off-balance sheet financial instruments. SFAS 107 defines the fair value of a financial instrument as the amount at which the financial instrument could be exchanged in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is based on estimates using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Although fair value estimates are calculated using assumptions that management believes are appropriate, changes in assumptions could cause these estimates to vary materially. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in the immediate settlement of the instruments. SFAS 107 excludes certain assets and liabilities from its disclosure requirements. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. Although insurance contracts, other than policies such as annuities that are classified as investment contracts, are specifically exempted from SFAS 107 disclosures, estimated fair value of policy reserves on life insurance contracts is provided to make the fair value disclosures more meaningful. The tax ramifications of the related unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The following methods and assumptions were used by the Company in estimating its fair value disclosures: CASH, SHORT-TERM INVESTMENTS AND POLICY LOANS: The carrying amount reported in the consolidated balance sheets for these instruments approximates their fair value. FIXED MATURITY AND EQUITY SECURITIES: Fair value for fixed maturity securities is based on quoted market prices, where available. For fixed maturity securities not actively traded, fair value is estimated using values obtained from independent pricing services or, in the case of private placements, is estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. The fair value for equity securities is based on quoted market prices. SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets held in Separate Accounts is based on quoted market prices. The fair value of liabilities related to Separate Accounts is the amount payable on demand, which includes certain surrender charges. 17 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued MORTGAGE LOANS ON REAL ESTATE: The fair value for mortgage loans on real estate is estimated using discounted cash flow analyses, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Fair value for mortgages in default is the estimated fair value of the underlying collateral. INVESTMENT CONTRACTS: Fair value for the Company's liabilities under investment type contracts is disclosed using two methods. For investment contracts without defined maturities, fair value is the amount payable on demand. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analyses. Interest rates used are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures for individual life insurance, universal life insurance and supplementary contracts with life contingencies for which the estimated fair value is the amount payable on demand. Also included are disclosures for the Company's limited payment policies, which the Company has used discounted cash flow analyses similar to those used for investment contracts with known maturities to estimate fair value. POLICYHOLDERS' DIVIDEND ACCUMULATIONS AND OTHER POLICYHOLDER FUNDS: The carrying amount reported in the consolidated balance sheets for these instruments approximates their fair value. COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have nominal fair value because of the short-term nature of such commitments. See note 9. Carrying amount and estimated fair value of financial instruments subject to SFAS 107 and policy reserves on life insurance contracts were as follows as of December 31, 1996 and 1995:
1996 1995 ------------------------------ ------------------------------- Carrying Estimated Carrying Estimated amount fair value amount fair value ------------------------------ --------------- --------------- Assets ------ Investments: Securities available-for-sale: Fixed maturity securities $12,304,639 12,304,639 12,485,564 12,485,564 Equity securities 59,131 59,131 29,953 29,953 Mortgage loans on real estate, net 5,272,119 5,397,865 4,602,764 4,961,655 Policy loans 371,816 371,816 336,356 336,356 Short-term investments 4,789 4,789 32,792 32,792 Cash 43,784 43,784 9,455 9,455 Assets held in Separate Accounts 26,926,702 26,926,702 18,591,108 18,591,108 Liabilities ----------- Investment contracts 13,914,441 13,484,526 13,229,360 12,876,798 Policy reserves on life insurance contracts 2,971,337 2,775,991 2,836,323 2,733,486 Policyholders' dividend accumulations 361,401 361,401 348,027 348,027 Other policyholder funds 60,073 60,073 65,297 65,297 Liabilities related to Separate Accounts 26,926,702 26,164,213 18,591,108 18,052,362
(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. 18 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Commitments to fund fixed rate mortgage loans on real estate are agreements to lend to a borrower, and are subject to conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a deposit. Commitments extended by the Company are based on management's case-by-case credit evaluation of the borrower and the borrower's loan collateral. The underlying mortgage property represents the collateral if the commitment is funded. The Company's policy for new mortgage loans on real estate is to lend no more than 75% of collateral value. Should the commitment be funded, the Company's exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amounts of these commitments less the net realizable value of the collateral. The contractual amounts also represent the cash requirements for all unfunded commitments. Commitments on mortgage loans on real estate of $327,456 extending into 1997 were outstanding as of December 31, 1996. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly commercial mortgage loans on real estate to customers throughout the United States. The Company has a diversified portfolio with no more than 21% (20% in 1995) in any geographic area and no more than 2% (2% in 1995) with any one borrower as of December 31, 1996. The Company had a significant reinsurance recoverable balance from one reinsurer as of December 31, 1996 and 1995. See note 6. The summary below depicts loans by remaining principal balance as of December 31, 1996 and 1995:
Apartment Office Warehouse Retail & other Total ------------ ------------- ------------- ------------- -------------- 1996: East North Central $139,518 119,069 549,064 215,038 1,022,689 East South Central 33,267 22,252 172,968 90,623 319,110 Mountain 17,972 43,027 113,292 73,390 247,681 Middle Atlantic 129,077 54,046 160,833 18,498 362,454 New England 33,348 43,581 161,960 - 238,889 Pacific 202,562 325,046 424,295 110,108 1,062,011 South Atlantic 103,889 134,492 482,934 385,185 1,106,500 West North Central 126,467 2,441 75,180 40,529 244,617 West South Central 104,877 120,314 197,090 304,256 726,537 ------------- ------------- ------------- -------------- ------------ $890,977 864,268 2,337,616 1,237,627 5,330,488 ============ ============= ============= ============= Less valuation allowances and unamortized discount 58,369 -------------- Total mortgage loans on real estate, net $5,272,119 ==============
1995: East North Central $138,965 101,925 514,995 175,213 931,098 East South Central 21,329 13,053 180,858 82,383 297,623 Mountain - 17,219 138,220 45,274 200,713 Middle Atlantic 116,187 64,813 158,252 10,793 350,045 New England 9,559 39,525 148,449 1 197,534 Pacific 183,206 233,186 374,915 105,419 896,726 South Atlantic 106,246 73,541 446,800 278,265 904,852 West North Central 133,899 14,205 78,065 36,651 262,820 West South Central 69,140 92,594 190,299 267,268 619,301 ------------ ------------ ------------- ------------- -------------- $778,531 650,061 2,230,853 1,001,267 4,660,712 ============ ============= ============= ============= Less valuation allowances and unamortized discount 57,948 -------------- Total mortgage loans on real estate, net $4,602,764 ==============
19 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (10) Pension Plan ------------ The Company is a participant, together with other affiliated companies, in a pension plan covering all employees who have completed at least one thousand hours of service within a twelve-month period and who have met certain age requirements. Benefits are based upon the highest average annual salary of a specified number of consecutive years of the last ten years of service. The Company funds pension costs accrued for direct employees plus an allocation of pension costs accrued for employees of affiliates whose work efforts benefit the Company. Effective January 1, 1995, the plan was amended to provide enhanced benefits for participants who met certain eligibility requirements and elected early retirement no later than March 15, 1995. The entire cost of the enhanced benefit was borne by NMIC and certain of its property and casualty insurance company affiliates. Effective December 31, 1995, the Nationwide Insurance Companies and Affiliates Retirement Plan was merged with the Farmland Mutual Insurance Company Employees' Retirement Plan and the Wausau Insurance Companies Pension Plan to form the Nationwide Insurance Enterprise Retirement Plan. Immediately prior to the merger, the plans were amended to provide consistent benefits for service after January 1, 1996. These amendments had no significant impact on the accumulated benefit obligation or projected benefit obligation as of December 31, 1995. Pension costs charged to operations by the Company during the years ended December 31, 1996, 1995 and 1994 were $7,381, $10,478 and $10,063, respectively. The Company's net accrued pension expense as of December 31, 1996 and 1995 was $1,075 and $1,392, respectively. The net periodic pension cost for the Nationwide Insurance Enterprise Retirement Plan as a whole for the year ended December 31, 1996 and for the Nationwide Insurance Companies and Affiliates Retirement Plan as a whole for the years ended December 31, 1995 and 1994 follows:
1996 1995 1994 --------------- --------------- --------------- Service cost (benefits earned during the period) $ 75,466 64,524 64,740 Interest cost on projected benefit obligation 105,511 95,283 73,951 Actual return on plan assets (210,583) (249,294) (21,495) Net amortization and deferral 101,795 143,353 (62,150) --------------- --------------- --------------- $ 72,189 53,866 55,046 =============== =============== ===============
Basis for measurements, net periodic pension cost:
1996 1995 1994 --------------- --------------- --------------- Weighted average discount rate 6.00% 7.50% 5.75% Rate of increase in future compensation levels 4.25% 6.25% 4.50% Expected long-term rate of return on plan assets 6.75% 8.75% 7.00%
20 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Information regarding the funded status of the Nationwide Insurance Enterprise Retirement Plan as a whole as of December 31, 1996 and 1995 follows:
1996 1995 --------------- --------------- Accumulated benefit obligation: Vested $1,338,554 1,236,730 Nonvested 11,149 26,503 --------------- --------------- $1,349,703 1,263,233 =============== =============== Net accrued pension expense: Projected benefit obligation for services rendered to date $1,847,828 1,780,616 Plan assets at fair value 1,947,933 1,738,004 --------------- --------------- Plan assets in excess of (less than) projected benefit obligation 100,105 (42,612) Unrecognized prior service cost 37,870 42,845 Unrecognized net gains (201,952) (63,130) Unrecognized net asset at transition 37,158 41,305 --------------- --------------- $ (26,819) (21,592) =============== ===============
Basis for measurements, funded status of plan:
1996 1995 --------------- --------------- Weighted average discount rate 6.50% 6.00% Rate of increase in future compensation levels 4.75% 4.25%
Assets of the Nationwide Insurance Enterprise Retirement Plan are invested in group annuity contracts of NLIC and ELICW. (11) Postretirement Benefits Other Than Pensions ------------------------------------------- In addition to the defined benefit pension plan, the Company, together with other affiliated companies, participates in life and health care defined benefit plans for qualifying retirees. Postretirement life and health care benefits are contributory and generally available to full time employees who have attained age 55 and have accumulated 15 years of service with the Company after reaching age 40. Postretirement health care benefit contributions are adjusted annually and contain cost-sharing features such as deductibles and coinsurance. In addition, there are caps on the Company's portion of the per-participant cost of the postretirement health care benefits. These caps can increase annually, but not more than three percent. The Company's policy is to fund the cost of health care benefits in amounts determined at the discretion of management. Plan assets are invested primarily in group annuity contracts of NLIC. The Company elected to immediately recognize its estimated accumulated postretirement benefit obligation; however, certain affiliated companies elected to amortize their initial transition obligation over periods ranging from 10 to 20 years. The Company's accrued postretirement benefit expense as of December 31, 1996 and 1995 was $34,884 and $33,537, respectively, and the net periodic postretirement benefit cost (NPPBC) for 1996, 1995 and 1994 was $3,286, $3,132 and $4,284, respectively. 21 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The amount of NPPBC for the plan as a whole for the years ended December 31, 1996, 1995 and 1994 was as follows:
1996 1995 1994 ----------- ----------- ----------- Service cost (benefits attributed to employee service during the year) $ 6,541 6,235 8,586 Interest cost on accumulated postretirement benefit obligation 13,679 14,151 14,011 Actual return on plan assets (4,348) (2,657) (1,622) Amortization of unrecognized transition obligation of affiliates 173 2,966 568 Net amortization and deferral 1,830 (1,619) 1,622 ----------- ----------- ----------- $17,875 19,076 23,165 =========== =========== ===========
Information regarding the funded status of the plan as a whole as of December 31, 1996 and 1995 follows:
1996 1995 --------------- --------------- Accrued postretirement benefit expense: Retirees $ 92,954 88,680 Fully eligible, active plan participants 23,749 28,793 Other active plan participants 83,986 90,375 --------------- --------------- Accumulated postretirement benefit obligation (APBO) 200,689 207,848 Plan assets at fair value 63,044 54,325 --------------- --------------- Plan assets less than accumulated postretirement benefit obligation (137,645) (153,523) Unrecognized transition obligation of affiliates 1,654 1,827 Unrecognized net gains (23,225) (1,038) --------------- --------------- $(159,216) (152,734) =============== ===============
Actuarial assumptions used for the measurement of the APBO as of December 31, 1996 and 1995 and the NPPBC for 1996, 1995 and 1994 were as follows:
1996 1996 1995 1995 1994 APBO NPPBC APBO NPPBC NPPBC ------------ ----------- ----------- ----------- ------------ Discount rate 7.25% 6.65% 6.75% 8.00% 7.00% Long-term rate of return on plan assets, net of tax - 4.80% - 8.00% N/A Assumed health care cost trend rate: Initial rate 11.00% 11.00% 11.00% 10.00% 12.00% Ultimate rate 6.00% 6.00% 6.00% 6.00% 6.00% Uniform declining period 12 Years 12 Years 12 Years 12 Years 12 Years
The health care cost trend rate assumption has an effect on the amounts reported. For the plan as a whole, a one percentage point increase in the assumed health care cost trend rate would increase the APBO as of December 31, 1996 by $701 and the NPPBC for the year ended December 31, 1996 by $83. (12) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings and Dividend Restrictions --------------------------------------------------------------------- Each insurance company's state of domicile imposes minimum risk-based capital requirements that were developed by the NAIC. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of the company's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level risk-based capital, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. NLIC and each of its insurance company subsidiaries exceed the minimum risk-based capital requirements. 22 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued The statutory capital shares and surplus of NLIC as of December 31, 1996, 1995 and 1994 was $1,000,647, $1,363,031 and $1,262,861, respectively. The statutory net income of NLIC for the years ended December 31, 1996, 1995 and 1994 was $73,218, $86,529 and $76,532, respectively. NLIC is limited in the amount of shareholder dividends it may pay without prior approval by the Department of Insurance of the State of Ohio (the Department). NLIC's dividend of the outstanding shares of common stock of certain companies which was declared on September 24, 1996 and the anticipated $850,000 dividend (as discussed in note 1) are deemed extraordinary under Ohio insurance laws. As a result of such dividends, any dividend paid by NLIC during the 12-month period immediately following the $850,000 dividend would also be an extraordinary dividend under Ohio insurance laws. Accordingly, no such dividend could be paid without prior regulatory approval. In addition, the payment of dividends by NLIC may also be subject to restrictions set forth in the insurance laws of New York that limit the amount of statutory profits on NLIC's participating policies (measured before dividends to policyholders) that can inure to the benefit of the Company and its stockholder. The Company currently does not expect such regulatory requirements to impair its ability to pay operating expenses and stockholder dividends in the future. (13) Transactions With Affiliates ---------------------------- The Company leases office space from NMIC and certain of its subsidiaries. For the years ended December 31, 1996, 1995 and 1994, the Company made lease payments to NMIC and its subsidiaries of $9,065, $8,986 and $8,133, respectively. Pursuant to a cost sharing agreement among NMIC and certain of its direct and indirect subsidiaries, including the Company, NMIC provides certain operational and administrative services, such as sales support, advertising, personnel and general management services, to those subsidiaries. Expenses covered by this agreement are subject to allocation among NMIC, the Company and other affiliates. Amounts allocated to the Company were $101,584, $107,112, and $100,601 in 1996, 1995 and 1994, respectively. The allocations are based on techniques and procedures in accordance with insurance regulatory guidelines. Measures used to allocate expenses among companies include individual employee estimates of time spent, special cost studies, salary expense, commissions expense and other methods agreed to by the participating companies that are within industry guidelines and practices. The Company believes these allocation methods are reasonable. In addition, the Company does not believe that expenses recognized under the intercompany agreements are materially different than expenses that would have been recognized had the Company operated on a stand alone basis. Amounts payable to NMIC from the Company under the cost sharing agreement were $15,111 and $1,186 as of December 31, 1996 and 1995, respectively. The Company also participates in intercompany repurchase agreements with affiliates whereby the seller will transfer securities to the buyer at a stated value. Upon demand or a stated period, the securities will be repurchased by the seller at the original sales price plus a price differential. Transactions under the agreements during 1996 and 1995 were not material. The Company believes that the terms of the repurchase agreements are materially consistent with what the Company could have obtained with unaffiliated parties. 23 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued Intercompany reinsurance contracts exist between NLIC and, respectively NMIC and ELICW whereby all of NLIC's accident and health and group life insurance business is ceded on a modified coinsurance basis. NLIC entered into the reinsurance agreements during 1996 because the accident and health and group life insurance business was unrelated to NLIC's long-term savings and retirement products. Accordingly, the accident and health and group life insurance business has been accounted for as discontinued operations for all periods presented. Under modified coinsurance agreements, invested assets are retained by the ceding company and investment earnings are paid to the reinsurer. Under the terms of NLIC's agreements, the investment risk associated with changes in interest rates is borne by NMIC or ELICW, as the case may be. Risk of asset default is retained by NLIC, although a fee is paid by NMIC or ELICW, as the case may be, to NLIC for the NLIC's retention of such risk. The agreements will remain in force until all policy obligations are settled. However, with respect to the agreement between NLIC and NMIC, either party may terminate the contract on January 1 of any year with prior notice. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder. NLIC believes that the terms of the modified coinsurance agreements are consistent in all material respects with what NLIC could have obtained with unaffiliated parties. Amounts ceded to ELICW in 1996 are included in ELICW's results of operations for 1996 which, combined with the results of WCLIC and NCC, are summarized in note 2. Amounts ceded to ELICW in 1996 include premiums of $224,224, net investment income and other revenue of $14,833, and benefits, claims and other expenses of $246,641. Amounts ceded to NMIC in 1996 include premiums of $97,331, net investment income of $10,890, and benefits, claims and other expenses of $100,476. The Company and various affiliates entered into agreements with Nationwide Cash Management Company (NCMC) and California Cash Management Company (CCMC), both affiliates, under which NCMC and CCMC act as common agents in handling the purchase and sale of short-term securities for the respective accounts of the participants. Amounts on deposit with NCMC and CCMC were $4,789 and $9,654 as of December 31, 1996 and 1995, respectively, and are included in short-term investments on the accompanying consolidated balance sheets. On April, 5 1996, Nationwide Corp. contributed all of the outstanding shares, with shareholder equity value of $30, of NISC to NLIC. NLIC contributed an additional $500 to NISC on August 30, 1996. On March 1, 1995, Nationwide Corp. contributed all of the outstanding shares of common stock of Farmland Life Insurance Company (Farmland) to NLIC. Farmland merged into WCLIC effective June 30, 1995. The contribution resulted in a direct increase to consolidated shareholder's equity of $46,918. As discussed in note 2, WCLIC is accounted for as discontinued operations. Effective December 31, 1994, NLIC purchased all of the outstanding shares of common stock of ELICW from Wausau Service Corporation (WSC) for $155,000. NLIC transferred fixed maturity securities and cash with a fair value of $155,000 to WSC on December 28, 1994, which resulted in a realized loss of $19,239 on the disposition of the securities. The purchase price approximated both the historical cost basis and fair value of net assets of ELICW. ELICW has and will continue to share home office, other facilities, equipment and common management and administrative services with WSC. As discussed in note 2, ELICW is accounted for as discontinued operations. Certain annuity products are sold through three affiliated companies which are also subsidiaries of Nationwide Corp. Total commissions and fees paid to these affiliates for the years ended December 31, 1996, 1995 and 1994 were $76,922, $57,280 and $50,168, respectively. (14) Bank Lines of Credit -------------------- In August 1996, NLIC, along with NMIC, established a $600,000 revolving credit facility which provides for a $600,000 loan over a five year term on a fully revolving basis with a group of national financial institutions. The credit facility provides for several and not joint liability with respect to any amount drawn by either NLIC or NMIC. NLIC and NMIC pay facility and usage fees to the financial institutions to maintain the revolving credit facility. All previously existing line of credit agreements were canceled. 24 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES Notes to Consolidated Financial Statements, Continued (15) Contingencies ------------- The Company is a defendant in various lawsuits. In the opinion of management, the effects, if any, of such lawsuits are not expected to be material to the Company's financial position or results of operations. (16) Segment Information ------------------- The Company has three primary segments: Variable Annuities, Fixed Annuities and Life Insurance. The Variable Annuities segment consists of annuity contracts that provide the customer with the opportunity to invest in mutual funds managed by the Company and independent investment managers, with the investment returns accumulating on a tax-deferred basis. The Fixed Annuities segment consists of annuity contracts that generate a return for the customer at a specified interest rate, fixed for a prescribed period, with returns accumulating on a tax-deferred basis. The Life Insurance segment consists of insurance products that provide a death benefit and may also allow the customer to build cash value on a tax-deferred basis. In addition, the Company reports corporate expenses and investments, and the related investment income supporting capital not specifically allocated to its product segments in a Corporate and Other segment. In addition, all realized gains and losses, investment management fees and other revenue earned from mutual funds, other than the portion allocated to the variable annuities and life insurance segments, are reported in the Corporate and Other segment. During 1996, the Company changed its reporting segments to better reflect the way the businesses are managed. Prior periods have been restated to reflect these changes. The following table summarizes the revenues and income from continuing operations before federal income tax expense for the years ended December 31, 1996, 1995 and 1994 and assets as of December 31, 1996, 1995 and 1994, by business segment.
1996 1995 1994 ----------------- --------------- --------------- Revenues: Variable Annuities $ 284,638 189,071 132,687 Fixed Annuities 1,092,566 1,051,970 939,868 Life Insurance 435,657 409,135 383,150 Corporate and Other 179,977 148,475 143,794 ----------------- --------------- --------------- $ 1,992,838 1,798,651 1,599,499 ================= =============== =============== Income from continuing operations before federal income tax expense: Variable Annuities 90,244 50,837 24,574 Fixed Annuities 135,405 137,000 138,950 Life Insurance 67,242 67,590 53,046 Corporate and Other 22,606 32,145 25,288 ----------------- --------------- --------------- $ 315,497 287,572 241,858 ================= =============== =============== Assets: Variable Annuities 25,069,725 17,333,039 11,146,465 Fixed Annuities 13,994,715 13,250,359 11,668,973 Life Insurance 3,353,286 3,027,420 2,752,283 Corporate and Other 5,348,520 4,896,815 3,678,303 ----------------- --------------- --------------- $47,766,246 38,507,633 29,246,024 ================= =============== ===============
71 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 110 pages. Representations and Undertakings. The Signatures. Accountants' Consent The following exhibits required by Forms N-8B-2 and S-6: 1. Power of Attorney dated April 2, 1997. Attached hereto. 2. Resolution of the Depositor's Board of Included with the Registration Directors authorizing the establishment Statement on Form N-8B-2 for the of the Registrant, adopted Nationwide VLI Separate Account-2 (File No. 811-5311), and is hereby incorporated by reference. 3. Distribution Contracts Included with the Registration Statement on Form N-8B-2 for the Nationwide VLI Separate Account-2 (File No. 811-5311), and is hereby incorporated by reference. 4. Form of Security Included with the Registration Statement on Form S-6 for the Nationwide VLI Separate Account-2 (File No. 33-42180), and is hereby incorporated by reference. 5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for the Nationwide VLI Separate Account-2 (File No. 811-5311), and is hereby incorporated by reference. 6. Application form of Security Included with the Registration Statement on Form S-6 for the Nationwide VLI Separate Account-2 (File No. 33-42180), and is hereby incorporated by reference. 7. Opinion of Counsel Included with the Registration Statement on Form S-6 for the Nationwide VLI Separate Account-2 (File No. 33-42180), and is hereby incorporated by reference. 111 72 Representations and Undertakings The Registrant and the Company hereby make the following representations and undertakings: (a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment Company Act of 1940 (the "Act"). The Registrant and the Company elect to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the Act with respect to the Policies described in the prospectus. The Policies have been designed in such a way as to qualify for the exemptive relief from various provisions of the Act afforded by Rule 6e-3(T). (b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the deduction of the mortality and expense risk charges ("risk charges") assumed by the Company under the Policies. The Company represents that the risk charges are within the range of industry practice for comparable policies and reasonable in relation to all of the risks assumed by the issuer under the Policies. Actuarial memoranda demonstrating the reasonableness of these charges are maintained by the Company, and will be made available to the Securities and Exchange Commission (the "Commission") on request. (c) The Company has concluded that there is a reasonable likelihood that the distribution financing arrangement of the separate account will benefit the separate account and the contractholders and will keep and make available to the Commission on request a memorandum setting forth the basis for this representation. (d) The Company represents that the separate account will invest only in management investment companies which have undertaken to have a board of directors, a majority of whom are not interested persons of the company, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. (e) Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the Registrant hereby undertakes to file with the Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. (f) 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. 112 73 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 28, 1997 113 74 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 the 28th day of April, 1997. NATIONWIDE VLI SEPARATE ACCOUNT-2 --------------------------------- (Registrant) (Seal) NATIONWIDE LIFE INSURANCE COMPANY Attest: --------------------------------- (Depositor) W. SIDNEY DRUEN By: JOSEPH P. RATH - ----------------------------- ----------------------------- W. Sidney Druen Joseph P. Rath Assistant Secretary Vice President Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 13 has been signed below by the following persons in the capacities indicated on the 28th day of April, 1997. Signature Title LEWIS J. ALPHIN Director - --------------------------------- Lewis J. Alphin KEITH W. ECKEL Director - --------------------------------- Keith W. Eckel WILLARD J. ENGEL Director - --------------------------------- Willard J. Engel FRED C. FINNEY Director - --------------------------------- Fred C. Finney CHARLES L. FUELLGRAF, JR. Director - --------------------------------- Charles L. Fuellgraf, Jr. JOSEPH J. GASPER President/Chief Operating Officer and Director - --------------------------------- Joseph J. Gasper HENRY S. HOLLOWAY Chairman of the Board and Director - -------------------------------- Henry S. Holloway Chairman and Chief Executive Officer - DIMON RICHARD MCFERSON Nationwide Insurance Enterprise and Director - --------------------------------- Dimon Richard McFerson 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 /s/ 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 114 EX-1 2 EXHIBIT 1 1 POWER OF ATTORNEY KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as directors and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or will file with the U.S. Securities and Exchange Commission under the provisions of the Securities Act of 1933, as amended, various Registration Statements and amendments thereto for the registration under said Act of Individual Deferred Variable Annuity Contracts in connection with MFS Variable Account, Nationwide Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate Account-C and Nationwide VA Separate Account-Q; and the registration of fixed interest rate options subject to a market value adjustment offered under some or all of the aforementioned individual Variable Annuity Contracts in connection with Nationwide Multiple Maturity Separate Account and Nationwide Multiple Maturity Separate Account-A, and the registration of Group Flexible Fund Retirement Contracts in connection with Nationwide DC Variable Account, Nationwide DCVA-II, and NACo Variable Account; and the registration of Group Common Stock Variable Annuity Contracts in connection with Separate Account No. 1; and the registration of variable life insurance policies in connection with Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, Nationwide VL Separate Account-A and Nationwide VL Separate Account-B, hereby constitutes and appoints Dimon Richard McFerson, Joseph J. Gasper, W. Sidney Druen, and Joseph P. Rath, and each of them with power to act without the others, his/her attorney, with full power of substitution and resubstitution, for and in his/her name, place and stead, in any and all capacities, to approve, and sign such Registration Statements and any and all amendments thereto, with power to affix the corporate seal of said corporation thereto and to attest said seal and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, hereby granting unto said attorneys, and each of them, full power and authority to do and perform all and every act and thing requisite to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming that which said attorneys, or any of them, may lawfully do or cause to be done by virtue hereof. This instrument may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned have herewith set their names and seals as of this 2nd day of April, 1997.
/s/ Lewis J. Alphin /s/ David O. Miller - ------------------------------------------------- -------------------------------------------------- Lewis J. Alphin, Director David O. Miller, Director /s/ Keith W. Eckel /s/ C. Ray Noecker - ------------------------------------------------- ------------------------------------------------- Keith W. Eckel, Director C. Ray Noecker, Director /s/ Willard J. Engel /s/ Robert A. Oakley - ------------------------------------------------- -------------------------------------------------- Willard J. Engel, Director Robert A. Oakley, Executive Vice President and Chief Financial Officer /s/ Fred C. Finney /s/ James F. Patterson - ------------------------------------------------- -------------------------------------------------- Fred C. Finney, Director James F. Patterson, Director /s/ Charles L. Fuellgraf /s/ Arden L. Shisler - ------------------------------------------------- -------------------------------------------------- Charles L. Fuellgraf, Jr., Director Arden L. Shisler, Director /s/ Joseph J. Gasper /s/ Robert L. Stewart - ------------------------------------------------- -------------------------------------------------- Joseph J. Gasper, President and Chief Operating Officer Robert L. Stewart, Director and Director /s/ Henry S. Holloway /s/ Nancy C. Thomas - ------------------------------------------------- -------------------------------------------------- Henry S. Holloway, Chairman of the Board, Director Nancy C. Thomas, Director /s/ Dimon Richard McFerson /s/ Harold W. Weihl - ------------------------------------------------- -------------------------------------------------- Dimon Richard McFerson, Chairman and Chief Executive Harold W. Weihl, Director Officer-Nationwide Insurance Enterprise and Director
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