-----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, EpBYzgoacXlLfAUrOi5AnYtpWzXkqn4VOHC3BK2uRgANL01p8J1FXfsrtvgpN5HF qZyxjuoJUauaUFz2+7sQ8Q== 0000950152-98-003724.txt : 19980430 0000950152-98-003724.hdr.sgml : 19980430 ACCESSION NUMBER: 0000950152-98-003724 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19980429 EFFECTIVENESS DATE: 19980429 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: SEC FILE NUMBER: 033-16999 FILM NUMBER: 98604271 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 SEPARATE ACCOUNT-2 485BPOS 1 Registration No. 33-16999 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- POST-EFFECTIVE AMENDMENT NO. 16 TO FORM S-6 FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2 ------------------- NATIONWIDE VLI SEPARATE ACCOUNT-2 (EXACT NAME OF TRUST) NATIONWIDE LIFE INSURANCE COMPANY ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43215 (EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT) DENNIS W. CLICK SECRETARY ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43215 (NAME AND ADDRESS OF AGENT FOR SERVICE) ------------------- This Post-Effective Amendment amends the Registration Statement in respect to the Prospectus and the Financial Statements. It is proposed that this filing will become effective (check appropriate box). [ ] immediately upon filing pursuant to paragraph (b) of Rule 485 [X] on May 1, 1998 pursuant to paragraph (b) of Rule 485 [ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485 [ ] on (date) pursuant to paragraph (a)(1) of Rule 485 If appropriate check the following box: [ ] This post-effective amendment designates a new effective date for a previously filed post-effective amendment Title of Securities being registered: Modified Single Premium Variable Life Insurance Policies Approximate date of proposed offering: Continuously on and after May 1, 1998 [ ] Check box if it is proposed that this filing will become effective on (date) at (time) pursuant to Rule 487. ================================================================================ 1 of 117 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 2 3 N-8B-2 ITEM CAPTION IN PROSPECTUS - ----------- --------------------- 43........................................Not Applicable 44........................................How The Cash Value Varies 45........................................Not Applicable 46........................................How The Cash Value Varies 47........................................Not Applicable 48........................................Custodian of Assets 49........................................Not Applicable 50........................................Not Applicable 51........................................Summary of The Policies; Information About The Policies 52........................................Substitution of Securities 53........................................Taxation of The Company 54........................................Not Applicable 55........................................Not Applicable 56........................................Not Applicable 57........................................Not Applicable 58........................................Not Applicable 59........................................Financial Statements 3 4 NATIONWIDE LIFE INSURANCE COMPANY Home Office: P.O. Box 182150 One Nationwide Plaza Columbus, Ohio 43218-2150 (800) 547-7548, TDD (800) 238-3035 MODIFIED SINGLE PREMIUM VARIABLE LIFE INSURANCE POLICIES* ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY THROUGH ITS NATIONWIDE VLI SEPARATE ACCOUNT-2 The Policies offered by this prospectus are variable life insurance policies (collectively referred to as the "Policies"). The Policies are designed to provide life insurance coverage on the Insured named in the Policy. The Policies may also provide a Cash Surrender Value if the Policy is terminated during the lifetime of the Insured. The death benefit and Cash Value of the Policies may vary to reflect the experience of the Nationwide VLI Separate Account-2 (the "Variable Account") or the Fixed Account to which Cash Values are allocated. The Policies described in this prospectus may meet the definition of "modified endowment contracts" under Section 7702A of the Internal Revenue Code (the "Code"). The Code provides for taxation of surrenders, partial surrenders, loans, collateral assignments and other pre-death distributions from modified endowment contracts in the same way annuities are taxed. Any distribution is taxable to the extent the Cash Value of the Policy exceeds, at the time of the distribution, the premiums paid into the Policy. The Code also provides for a 10% tax penalty on the taxable portion of such distributions. That penalty is applicable unless the distribution is: 1) paid after the Policy Owner is 59 1/2 or disabled; or 2) part of an annuity to the Policy Owner as defined in the Code (see "Tax Matters"). It may not be advantageous to replace existing insurance with Policies described in this prospectus. It may also be disadvantageous to purchase a Policy to obtain additional insurance protection if the purchaser already owns another variable life insurance Policy. The Policies may not be advantageous for persons who may wish to make Policy loans or withdrawals prior to attaining age 59 1/2 (see "Tax Matters"). The Policy Owner may allocate premiums and Cash Value to one or more of the Sub-Accounts and the Fixed Account. The assets of each Sub-Account will be used to purchase, at Net Asset Value, shares of a designated Underlying Mutual Fund in the following series of the Underlying Mutual Fund options: AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., FIDELITY VARIABLE INSURANCE PRODUCTS FUND III A MEMBER OF THE AMERICAN CENTURY(SM) ("VIP III"): FAMILY OF INVESTMENTS: -VIP III Growth Opportunities Portfolio - American Century VP Balanced MORGAN STANLEY UNIVERSAL FUNDS, INC. - American Century VP Capital Appreciation -Emerging Markets Debt Portfolio - American Century VP Income & Growth NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT): - American Century VP International -Capital Appreciation Fund - American Century VP Value -Government Bond Fund DREYFUS: -Money Market Fund -The Dreyfus Socially Responsible Growth Fund -Nationwide Small Cap Value Fund -Dreyfus Stock Index Fund, Inc. -Nationwide Small Company Fund DREYFUS VARIABLE INVESTMENT FUND: -Total Return Fund -Capital Appreciation Portfolio NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST: -Growth & Income Portfolio** -Limited Maturity Bond Portfolio FIDELITY VARIABLE INSURANCE PRODUCTS FUND -Growth Portfolio ("VIP"): -Guardian Portfolio -VIP Equity-Income Portfolio -Partners Portfolio -VIP Growth Portfolio OPPENHEIMER VARIABLE ACCOUNT FUNDS: -VIP High Income Portfolio** -Bond Fund -VIP Overseas Portfolio -Global Securities Fund FIDELITY VARIABLE INSURANCE PRODUCTS FUND II: -Growth Fund ("VIP II"): -Multiple Strategies Fund -VIP II Asset Manager Portfolio STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG -VIP II Contrafund Portfolio SPECIAL FUND II, INC.)
1 5 STRONG VARIABLE INSURANCE FUNDS, INC.: VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST: -Discovery Fund II, Inc. -Morgan Stanley Real Estate Securities Portfolio -International Stock Fund II WARBURG PINCUS TRUST: VAN ECK WORLDWIDE INSURANCE TRUST: -International Equity Portfolio -Worldwide Bond Fund -Post-Venture Capital Portfolio** -Worldwide Emerging Markets Fund -Small Company Growth Portfolio -Worldwide Hard Assets Fund
*The contract is titled a "Flexible Premium Variable Life Insurance Policy" in Texas. **The Growth & Income Portfolio, Fidelity VIP High Income Portfolio and the Warburg Pincus Trust - Post-Venture Capital Portfolio may invest in lower quality debt securities commonly referred to as junk bonds. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION ("SEC") NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY JURISDICTION. PLEASE REFER TO YOUR POLICY FOR SPECIFIC BENEFIT INFORMATION. THIS PROSPECTUS SHOULD BE READ AND RETAINED FOR FUTURE REFERENCE. A PROSPECTUS FOR THE UNDERLYING MUTUAL FUND OPTION(S) BEING CONSIDERED MUST ACCOMPANY THIS PROSPECTUS AND SHOULD BE READ IN CONJUNCTION HEREWITH. INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT GUARANTEED OR ENDORSED BY, THE ADVISER OF ANY OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF PRINCIPAL. NATIONWIDE LIFE INSURANCE COMPANY (THE "COMPANY") GUARANTEES THAT THE DEATH BENEFIT FOR A POLICY WILL NEVER BE LESS THAN THE SPECIFIED AMOUNT STATED ON THE POLICY DATA PAGE AS LONG AS THE POLICY IS IN FORCE. THERE IS NO GUARANTEED CASH SURRENDER VALUE. IF THE CASH SURRENDER VALUE IS INSUFFICIENT TO COVER THE CHARGES UNDER THE POLICY, THE POLICY WILL LAPSE. THE SEC MAINTAINS A WEBSITE, WWW.SEC.GOV, THAT CONTAINS MATERIAL INCORPORATED BY REFERENCE RELATING TO THIS PROSPECTUS. INFORMATION ABOUT THIS PRODUCT AND OTHER BEST OF AMERICA PRODUCTS CAN BE OBTAINED FROM THE WORLD WIDE-WEB AT WWW.BESTOFAMERICA.COM. THIS PROSPECTUS GENERALLY DESCRIBES ONLY THAT PORTION OF THE CASH VALUE ALLOCATED TO THE VARIABLE ACCOUNT. FOR A BRIEF SUMMARY OF THE FIXED ACCOUNT OPTION, SEE "THE FIXED ACCOUNT OPTION." THE DATE OF THIS PROSPECTUS IS MAY 1, 1998. 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 proceeds due on the Insured's death are paid. CASH VALUE- The sum of the value of Policy assets in the Variable Account, Fixed Account and any associated value in the Policy Loan Account. CASH SURRENDER VALUE- The Policy's Cash Value, less any indebtedness under the Policy, less any Surrender Charge. CODE- The Internal Revenue Code of 1986, as amended. COMPANY- Nationwide Life Insurance Company. DEATH PROCEEDS- Amount of money payable to the Beneficiary if the Insured dies while the Policy is in force. FIXED ACCOUNT- An investment option which is funded by the General Account of the Company. GENERAL ACCOUNT- All assets of the Company other than those of the Variable Account or in other separate accounts that have been or may be established by the Company. GUIDELINE SINGLE PREMIUM- The amount of single premium calculated in accordance with the provisions of the Code. It represents the single premium required to mature the Policy under guaranteed mortality and expense charges, and an interest rate of 6%. HOME OFFICE- The main office of the Company located in Columbus, Ohio. INSURED- The person whose life is covered by the Policy, and who is named on the Policy data page. MATURITY DATE- The Policy Anniversary on or following the Insured's 95th birthday. MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding month. NET ASSET VALUE- The value of one share of an Underlying Mutual Fund at the end of a market day or at the close of the New York Stock Exchange. Net Asset Value is computed by adding the value of all portfolio holdings plus other assets, deducting liabilities and then dividing the result by the number of shares outstanding. POLICY ANNIVERSARY- An anniversary of the Policy Date. POLICY CHARGES- All deductions made from the value of the Variable Account or the Policy Cash Value. POLICY DATE- The date the provisions of the Policy take effect, as shown on the Policy data page. POLICY LOAN ACCOUNT- The portion of the Cash Value which results from Policy loans. POLICY OWNER- The person designated in the Policy application as the owner. In the State of New York, the Policies are offered as "Certificates" for "Certificate Owners" under a group contract rather than individual Policies. The provisions of both the Certificates and the Policies are essentially the same and references to the provisions of Policies and rights of Policy Owners in this prospectus include Certificates and Certificate Owners. POLICY YEAR- Each year commencing with the Policy Date and each Policy Date anniversary thereafter. SPECIFIED AMOUNT- A dollar amount used to determine the death benefit under a Policy. It is shown on the Policy data page. SUB-ACCOUNT- Separate and distinct divisions of the Variable Account, to which specific Underlying Mutual Fund shares are allocated and for which Accumulation Units are separately maintained. SURRENDER CHARGE- An amount deducted from the Cash Value if the Policy is surrendered. UNDERLYING MUTUAL FUNDS- The underlying mutual funds which correspond to the Sub-Accounts. VALUATION DATE- Each day the New York Stock Exchange and the Home Office are open for business or any other day during which there is sufficient degree of trading that the current Cash Value might be materially affected. 3 7 VALUATION PERIOD- A period commencing with the close of business on a Valuation Date and ending at the close of business for the next succeeding Valuation Date. VARIABLE ACCOUNT- A separate investment account of Nationwide Life Insurance Company. Nationwide VLI Separate Account-2. 4 8 TABLE OF CONTENTS GLOSSARY OF TERMS............................................................................................3 SUMMARY OF THE POLICIES......................................................................................7 Variable Life Insurance.............................................................................7 The Variable Account and its Sub-Accounts...........................................................7 The Fixed Account...................................................................................7 Deductions and Charges..............................................................................7 Premiums............................................................................................8 NATIONWIDE LIFE INSURANCE COMPANY............................................................................8 THE VARIABLE ACCOUNT.........................................................................................8 Investments of the Variable Account.................................................................8 American Century Variable Portfolios, Inc., a member of American Century(SM) Family of Investments........................................10 Dreyfus............................................................................................11 Dreyfus Variable Investment Fund...................................................................11 Fidelity Variable Insurance Products Fund..........................................................12 Fidelity Variable Insurance Products Fund II.......................................................12 Fidelity Variable Insurance Products Fund III......................................................13 Morgan Stanley Universal Funds, Inc................................................................13 Nationwide Separate Account Trust..................................................................13 Neuberger & Berman Advisers Management Trust.......................................................14 Oppenheimer Variable Account Funds.................................................................15 Strong Opportunity Fund II, Inc....................................................................15 Strong Variable Insurance Funds, Inc...............................................................15 Van Eck Worldwide Insurance Trust..................................................................16 Van Kampen American Capital Life Investment Trust..................................................16 Warburg Pincus Trust...............................................................................16 Reinvestment.......................................................................................17 Transfers..........................................................................................17 Dollar Cost Averaging..............................................................................18 Substitution of Securities.........................................................................18 Voting Rights......................................................................................18 INFORMATION ABOUT THE POLICIES..............................................................................19 Underwriting and Issuance..........................................................................19 -Minimum Requirements for Issuance of a Policy.....................................................19 -Premium Payments..................................................................................19 -Allocation of Cash Value..........................................................................19 -Short-Term Right to Cancel Policy.................................................................19 POLICY CHARGES..............................................................................................20 Deductions from Premiums...........................................................................20 Deductions from Cash Value.........................................................................20 -Charges on Surrender..............................................................................20 -Annual Administrative Charge......................................................................20 -Cost of Insurance Charge..........................................................................21 Deductions from the Sub-Accounts...................................................................21 -Mortality and Expense Risk Charge.................................................................21 -Administrative Expense Charge.....................................................................21 -Premium Tax Recovery Charge.......................................................................22 -Income Tax Charge.................................................................................22 -Expenses of the Underlying Mutual Funds...........................................................22 HOW THE CASH VALUE VARIES...................................................................................25 How the Investment Experience is Determined........................................................25 Net Investment Factor..............................................................................25 Determining the Cash Value.........................................................................26 Valuation Periods and Valuation Dates..............................................................26 SURRENDERING THE POLICY FOR CASH............................................................................26 Right to Surrender.................................................................................26 Cash Surrender Value...............................................................................26 Partial Surrenders.................................................................................26 Maturity Proceeds..................................................................................27
5 9 Income Tax Withholding.............................................................................27 POLICY LOANS................................................................................................27 Taking a Policy Loan...............................................................................27 Effect on Investment Performance...................................................................27 Interest...........................................................................................27 Effect on Death Benefit and Cash Value.............................................................28 Repayment..........................................................................................28 HOW THE DEATH BENEFIT VARIES................................................................................28 -Calculation of the Death Benefit..................................................................28 -Proceeds Payable on Death.........................................................................28 RIGHT TO EXCHANGE FOR A FIXED BENEFIT POLICY................................................................29 CHANGES OF INVESTMENT POLICY................................................................................30 GRACE PERIOD................................................................................................30 REINSTATEMENT...............................................................................................30 THE FIXED ACCOUNT OPTION....................................................................................30 COVERAGE....................................................................................................31 Changes in the Specified Amount....................................................................31 Changes in the Death Benefit Option................................................................31 OTHER POLICY PROVISIONS.....................................................................................31 Policy Owner.......................................................................................31 Beneficiary........................................................................................31 Assignment.........................................................................................32 Incontestability...................................................................................32 Error in Age or Sex................................................................................32 Suicide............................................................................................32 Nonparticipating Policies..........................................................................32 Riders.............................................................................................32 LEGAL CONSIDERATIONS........................................................................................32 DISTRIBUTION OF THE POLICIES................................................................................32 CUSTODIAN OF ASSETS.........................................................................................33 TAX MATTERS.................................................................................................33 Policy Proceeds....................................................................................33 -Federal Estate and Generation-Skipping Transfer Taxes.............................................34 -Non-Resident Aliens...............................................................................34 Taxation of the Company............................................................................35 -Tax Changes.......................................................................................35 THE COMPANY.................................................................................................35 COMPANY MANAGEMENT..........................................................................................36 Directors of the Company...........................................................................36 Executive Officers of the Company..................................................................38 OTHER CONTRACTS ISSUED BY THE COMPANY.......................................................................38 STATE REGULATION............................................................................................38 REPORTS TO POLICY OWNERS....................................................................................39 ADVERTISING.................................................................................................39 YEAR 2000 COMPLIANCE ISSUES.................................................................................39 LEGAL PROCEEDINGS...........................................................................................39 EXPERTS.....................................................................................................40 REGISTRATION STATEMENT......................................................................................40 LEGAL OPINIONS..............................................................................................40 APPENDIX 1..................................................................................................41 APPENDIX 2..................................................................................................42 APPENDIX 3..................................................................................................53 FINANCIAL STATEMENTS........................................................................................58
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS. 6 10 THE PRIMARY PURPOSE OF THE POLICIES IS TO PROVIDE LIFE INSURANCE PROTECTION FOR THE BENEFICIARY NAMED IN THE POLICY. NO CLAIM IS MADE THAT THE POLICIES ARE IN ANY WAY SIMILAR OR COMPARABLE TO A SYSTEMATIC INVESTMENT PLAN OF A MUTUAL FUND. SUMMARY OF THE POLICIES VARIABLE LIFE INSURANCE The Policies offered by the Company are similar in many ways to fixed-benefit whole life insurance. As with fixed-benefit whole life insurance, the Policy Owner pays a premium for life insurance coverage on the Insured. Also like fixed-benefit whole life insurance, the Policies may provide for a Cash Surrender Value which is payable if the Policy is terminated during the Insured's lifetime. As with fixed-benefit whole life insurance, the Cash Surrender Value during the early Policy years may be substantially lower than the premiums paid. However, the Policies differ from fixed-benefit whole life insurance in several respects. Unlike fixed-benefit whole life insurance, the death benefit and Cash Value of the Policies may increase or decrease to reflect the investment performance of the Sub-Accounts or the Fixed Account to which Cash Values are allocated (see "How the Death Benefit Varies"). There is no guaranteed Cash Surrender Value (see "How the Cash Value Varies"). If the Cash Surrender Value is insufficient to pay Policy Charges, the Policy will lapse. THE VARIABLE ACCOUNT AND ITS SUB-ACCOUNTS The Company places the Cash Value in the Variable Account at the time the Policy is issued. The Policy Owner selects the Sub-Accounts or the Fixed Account into which the Cash Value will be allocated (see "Allocation of Cash Value"). When the Policy is issued, the Cash Value will be allocated to the NSAT- Money Market Fund (for any Cash Value allocated to a Sub-Account on the application) or the Fixed Account until the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. Assets of each Sub-Account are invested at Net Asset Value in shares of a corresponding Underlying Mutual Fund option. For a description of the Underlying Mutual Fund options and their investment objectives, see "Investments of the Variable Account." THE FIXED ACCOUNT The Fixed Account is funded by the assets of the General Account. Cash Values allocated to the Fixed Account are credited with interest daily at a rate declared by the Company. The interest rate declared is at the Company's sole discretion, but may never be less than an effective annual rate of 4%. DEDUCTIONS AND CHARGES The Company deducts certain charges from the assets of the Variable Account and the Cash Value of the Policy. These charges are made for administrative and sales expenses, state premium taxes, providing life insurance protection and assuming the mortality and expense risks. The Company deducts a charge for the cost of insurance from the Cash Value on the Policy Date and each Monthly Anniversary Day. The Company deducts an annual policy administrative charge from the Cash Value at the beginning of each Policy Year after the first. The current annual charge is $90 ($65 in New York) for total premium payments less than $25,000 and $50 for total premium payments greater than or equal to $25,000. This charge is guaranteed never to exceed $135 ($120 in New York) for total premium payments less than $25,000 and $75 for total premium payments greater than or equal to $25,000. The Company also deducts on a daily basis from the assets of the Variable Account a charge to provide for mortality and expense risks, administrative charges and premium tax recovery. These current charges are equal on an annual basis to 1.30% of the Variable Account assets for the first 10 Policy Years and 1.00% thereafter and are guaranteed never to exceed 1.60% and 1.30% respectively. For Policies which are surrendered, the Company may deduct a Surrender Charge. The Surrender Charge associated with each premium payment will not exceed 8.5% of the premium payment, and will be applied for nine years after the effective date of the premium payment. The Surrender Charge is designed to recover certain expenses incurred by the Company related to the sale of the Policies. Underlying Mutual Fund shares are purchased at Net Asset Value, which reflects the deduction of investment management fees and certain other expenses. The management fees are charged by each Underlying Mutual Fund's investment adviser for managing the Underlying Mutual Fund and selecting its portfolio of securities. Other Underlying Mutual Fund expenses can include such items as interest expense on loans and contracts with transfer agents, custodians, and other companies that provide services to the Underlying Mutual Fund (see "Expenses of the Underlying Mutual Funds"). 7 11 PREMIUMS The minimum premium for which a Policy may be issued is $10,000. A Policy may be issued to an Insured up to age 80. For a limited time, the Policy Owner has a right to cancel the Policy and receive a full refund of premiums paid (see "Short-Term Right to Cancel Policy"). 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 Mutual Fire Insurance Company, Nationwide Life and Annuity Insurance Company, Nationwide Property and Casualty Company, National Casualty Company, Scottsdale Indemnity Company, Nationwide Indemnity Company and Nationwide General Insurance Company. The Home Office is at One Nationwide Plaza, Columbus, Ohio 43215. The Company offers a complete line of life insurance, annuities and retirement products. It is admitted to do business in all states, the District of Columbia, and Puerto Rico (for additional information, see "The Company"). THE VARIABLE ACCOUNT The Variable Account was established by a resolution of the Company's Board of Directors on May 7, 1997 pursuant to Ohio law. The Company has caused the Variable Account to be registered with the SEC as a unit investment trust pursuant to the Investment Company Act of 1940 ("1940 Act"). The Company, One Nationwide Plaza, Columbus, Ohio 43215 serves as trustee for the trust. Nationwide Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215 serves as principal underwriter for the trust. Such registration does not involve supervision of the management of the Variable Account or the Company by the SEC. 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 Sub-Accounts. (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. The assets of each Sub-Account are used to purchase shares of the Underlying Mutual Funds designated by the Policy Owner. Thus, the investment performance of a Policy depends upon the investment performance of the Underlying Mutual Funds designated by the Policy Owner. INVESTMENTS OF THE VARIABLE ACCOUNT At the time of application, the Policy Owner elects to have the Cash Value allocated among one or more of the Sub-Accounts and the Fixed Account (see "Allocation of Cash Value"). When the Policy is issued, the Cash Value not allocated to the Fixed Account is placed in the NSAT-Money Market Fund (for any Cash Value allocated to a Sub-Account on the application) or Fixed Account until expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. At the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy, shares of the Underlying Mutual Funds specified by the Policy Owner are purchased at Net Asset Value for the respective Sub-Account(s). Such election is subject to any minimum premium limitations which may be imposed by the Underlying Mutual Fund option(s). In addition, no less than 5% of premium may be allocated to any one Sub-Account or the Fixed Account. The Policy Owner may change the allocation of Cash Value or may transfer Cash Value from one Sub-Account to another, subject to such terms and conditions as may be imposed by each Underlying Mutual Fund option and as set forth in this prospectus (see "Transfers", "Allocation of Cash Value" and "Short-Term Right to Cancel Policy"). Additional premium payments, upon acceptance, will be allocated to the NSAT-Money Market Fund unless the Policy Owner specifies otherwise (see "Premium Payments"). 8 12 Each of the Underlying Mutual Fund options is a series of registered investment companies which receive investment advice from a registered investment advisers: 1) American Century Variable Portfolios, Inc., a member of the American Century(sm) Family of Investments, managed by American Century Investment Management, Inc.; 2) Dreyfus Stock Index Fund, Inc., managed by The Dreyfus Corporation and Mellon Equity Associates; 3) The Dreyfus Socially Responsible Growth Fund, Inc., managed by The Dreyfus Corporation and NCM Capital Management Group, Inc.; 4) Dreyfus Variable Investments Fund, managed by The Dreyfus Corporation; 5) Fidelity Variable Insurance Products Fund, managed by Fidelity Management & Research Company; 6) Fidelity Variable Insurance Products Fund II, managed by Fidelity Management & Research Company; 7) Fidelity Variable Insurance Products Fund III, managed by Fidelity Management & Research Company; 8) Morgan Stanley Universal Funds, Inc., managed by Morgan Stanley Asset Management, Inc. 9) Nationwide Separate Account Trust, managed by Nationwide Advisory Services, Inc.; 10) Neuberger & Berman Advisers Management Trust, managed by Neuberger & Berman Management Incorporated; 11) Oppenheimer Variable Account Funds, managed by OppenheimerFunds, Inc.; 12) Strong Opportunity Fund II, Inc., managed by Strong Capital Management, Inc.; 13) Strong Variable Insurance Funds, Inc., managed by Strong Capital Management, Inc.; 14) Van Eck Worldwide Insurance Trust, managed by Van Eck Associates Corporation; 15) Van Kampen American Capital Life Investment Trust managed by Van Kampen American Capital Asset Management, Inc.; and 16) Warburg Pincus Trust, managed by Warburg Pincus Asset Management, Inc. The Underlying Mutual Fund options are NOT available to the general public directly. The Underlying Mutual Funds are available as investment options in variable life insurance policies or variable annuity contracts issued by life insurance companies or, in some cases, through participation in certain qualified pension or retirement plans. Some of the Underlying Mutual Funds have been established by investment advisers which manage publicly traded mutual funds having similar names and investment objectives. While some of the Underlying Mutual Funds may be similar to, and may in fact be modeled after publicly traded mutual funds, Policy purchasers should understand that the Underlying Mutual Funds are not otherwise directly related to any publicly traded mutual fund. Consequently, the investment performance of publicly traded mutual funds and any corresponding Underlying Mutual Funds may differ substantially. A summary of investment objectives is contained in the description of each Underlying Mutual Fund below. These Underlying Mutual Fund options are available only to serve as the underlying investment vehicle for variable annuity contracts and variable life insurance policies issued through separate accounts of life insurance companies which may or may not be affiliated, also known as "mixed and shared funding." There are certain risks associated with mixed and shared funding, which are disclosed in the Underlying Mutual Funds' prospectuses. A full description of the Underlying Mutual Funds, their investment policies and restrictions, risks and charges are contained in the prospectuses of the respective Underlying Mutual Funds. A prospectus for the Underlying Mutual Fund option(s) being considered must accompany this prospectus and should be read in conjunction herewith. Prospectuses for the Underlying Mutual Funds must be read in conjunction with this prospectus. A copy can be obtained without charge from the Company by calling 1-800-547-7548, TDD 1-800-238-3035, or by writing P.O. Box 182150, Columbus, Ohio 43218-2150. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT OBJECTIVES WILL BE ACHIEVED. 9 13 AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM) FAMILY OF INVESTMENTS American Century Variable Portfolios, Inc. was organized as a Maryland corporation in 1987. It is a diversified, open-end management company, designed only to provide investment vehicles for variable annuity and variable life insurance products of insurance companies. A member of the American Century(SM) Family of Investments, American Century Variable Portfolios 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 INCOME & GROWTH Investment Objective: Dividend growth, current income and capital appreciation. The Fund seeks to achieve its investment objective by investing in common stocks. The investment manager constructs the portfolio to match the risk characteristics of the S & P 500 Stock Index and then optimizes each portfolio to achieve the desired balance of risk and return potential. This includes targeting a dividend yield that exceeds that of the S & P 500 Stock Index. Such a management technique known as "portfolio optimization" may cause the Fund to be more heavily invested in some industries than in others. However, the Fund may not invest more than 25% of its total assets in companies whose principal business activities are in the same industry. - - AMERICAN CENTURY VP INTERNATIONAL Investment Objective: To seek capital growth. The Fund will seek to achieve its investment objective by investing primarily in securities of foreign companies that meet certain fundamental and technical standards of selection and, in the opinion of the investment manager, have potential for appreciation. Under normal conditions, the Fund will invest at least 65% of its assets in common stocks or other equity securities of issuers from at least three countries outside the United States. 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. (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 Policy Owners will receive cash from the Company.) 10 14 DREYFUS - - THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND The Dreyfus Socially Responsible Growth Fund is an open-end, diversified, management investment company. It was incorporated under Maryland law on July 20, 1992, and commenced operations on October 7, 1993. The Dreyfus Corporation serves as the Fund's investment advisor. NCM Capital Management Group, Inc. serves as the Fund's sub-investment adviser and provides day-to-day management of the Fund's portfolio. Investment Objective: 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, INC. Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified, management investment company incorporated under Maryland law on January 24, 1989 and commenced operations on September 29, 1989. The Fund offers it's shares only as investment vehicles for variable annuity and variable life insurance products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus, serves as the Fund's index manager. 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. - - CAPITAL APPRECIATION PORTFOLIO Investment Objective: The Portfolio's primary investment objective is to provide long-term capital growth consistent with the preservation of capital; current income is a secondary investment objective. This Portfolio invests primarily in the common stocks of domestic and foreign issuers. - - GROWTH 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. 11 15 FIDELITY VARIABLE INSURANCE PRODUCTS FUND ("VIP") 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. - - VIP HIGH INCOME PORTFOLIO Investment Objective: To obtain a high level of current income by investing primarily in high-risk, high-yielding, lower rated fixed-income securities, while also considering growth of capital. The Fund's manager will seek high current income normally by investing the Fund's assets as follows: - at least 65% in income-producing debt securities and preferred stocks, including convertible securities, zero coupon securities, and mortgage-backed and asset-based securities; - up to 20% in common stocks and other equity securities when consistent with the Fund's primary objective or acquired as part of a unit combining fixed-income and equity securities. Higher yields are usually available on securities that are lower-rated or that are unrated. Lower-rated securities are usually defined as Ba or lower by Moody's; BB or lower by Standard & Poor's and may be deemed to be of a speculative nature. The Fund may also purchase lower-quality bonds such as those rated Ca3 by Moody's or C- by Standard & Poor's which provide poor protection for payment of principal and interest (commonly referred to as "junk bonds"). For a further discussion of lower-rated securities, please see the "Risks of Lower-Rated Debt Securities" section of the Fund's prospectus. - - VIP EQUITY-INCOME PORTFOLIO Investment Objective: To seek reasonable income by investing primarily in income-producing equity securities. In choosing these securities FMR also will consider the potential for capital appreciation. The Portfolio's goal is to achieve a yield which exceeds the composite yield on the securities comprising the Standard & Poor's 500 Composite Stock Price Index. - - VIP GROWTH PORTFOLIO Investment Objective: Seeks to achieve capital appreciation. This Portfolio will invest in the securities of both well-known and established companies, and smaller, less well-known companies which may have a narrow product line or whose securities are thinly traded. These latter securities will often involve greater risk than may be found in the ordinary investment security. FMR's analysis and expertise plays an integral role in the selection of securities and, therefore, the performance of the Portfolio. Many securities which FMR believes would have the greatest potential may be regarded as speculative, and investment in the Portfolio may involve greater risk than is inherent in other Underlying mutual funds. It is also important to point out that the Portfolio makes most sense for you if you can afford to ride out changes in the stock market, because it invests primarily in common stocks. FMR also can make temporary investments in securities such as investment-grade bonds, high-quality preferred stocks and short-term notes, for defensive purposes when it believes market conditions warrant. - - VIP OVERSEAS PORTFOLIO Investment Objective: To seek long term growth of capital primarily through investments in foreign securities. The Overseas Portfolio provides a means for investors to diversify their own portfolios by participating in companies and economies outside of the United States. FIDELITY VARIABLE INSURANCE PRODUCTS FUND II ("VIP II") 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. - - VIP II ASSET MANAGER PORTFOLIO Investment Objective: To seek to obtain high total return with reduced risk over the long-term by allocating its assets among domestic and foreign stocks, bonds and short-term fixed income instruments. - - VIP II 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. 12 16 FIDELITY VARIABLE INSURANCE PRODUCTS FUND III ("VIP III") The Fund is an open-end, diversified, management investment company organized as a Massachusetts business trust on July 14, 1994. The Fund's name was changed from Fidelity Advisor Annuity Fund to Variable Insurance Products Fund III on December 30, 1996. The Fund's shares are purchased by insurance companies to fund benefits under variable life insurance policies and variable annuity contracts. FMR is the Fund's manager. - - VIP III GROWTH OPPORTUNITIES PORTFOLIO: Investment Objective: To provide capital growth by investing primarily in common stocks and securities convertible into common stocks. The Portfolio, under normal conditions, will invest at least 65% of its total assets in securities of companies that FMR believes have long-term growth potential. Although the Portfolio invests primarily in common stock and securities convertible into common stock, it has the ability to purchase other securities, such as preferred stock and bonds, that may produce capital growth. The Portfolio may invest in foreign securities without limitation. MORGAN STANLEY UNIVERSAL FUNDS, INC. Morgan Stanley Universal Funds, Inc. is a mutual fund designed to provide investment vehicles for variable annuity contracts and variable life insurance policies and for certain tax-qualified investors. The Fund is an open-end management investment company, or mutual fund. Its Emerging Markets Debt Portfolio is managed by Morgan Stanley Asset Management, Inc. - - EMERGING MARKETS DEBT PORTFOLIO Investment Objective: The Portfolio seeks high total return by investing primarily in dollar and non-dollar denominated fixed income securities of government and government-related issuers located in emerging market countries, in order to provide a high level of current income, while at the same time holding the potential for capital appreciation if the perceived creditworthiness of the issuer improves due to improving economic, financial, political, social or other conditions in the country in which the issuer is located. NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT) Nationwide Separate Account Trust (NSAT) is a diversified open-end management investment company created under the laws of Massachusetts. NSAT offers shares in the six separate mutual funds listed below, each with its own investment objectives. Currently, shares of NSAT will be sold only to life insurance company separate accounts to fund benefits under variable life insurance policies or variable annuity contracts issued by life insurance companies. The assets of NSAT are managed by NAS, Three Nationwide Plaza, Columbus, Ohio 43215, a wholly-owned subsidiary of Nationwide Life Insurance Company. - - CAPITAL APPRECIATION FUND Investment Objective: The Fund is designed for investors who are interested in long-term growth. The Fund seeks to meet its objective primarily through a diversified portfolio of the common stock of companies which the investment manager determines have a better-than-average potential for sustained capital growth over the long term. - - GOVERNMENT BOND FUND Investment Objective: To provide as high a level of income as is consistent with capital preservation through investing primarily in bonds and securities issued or backed by the U.S. Government, its agencies or instrumentalities. - - MONEY MARKET FUND Investment Objective: To seek as high a level of current income as is considered consistent with the preservation of capital and liquidity by investing primarily in money market instruments. - - NATIONWIDE SMALL CAP VALUE FUND Subadviser: Dreyfus Investment Objective: Capital appreciation through investment in a diversified portfolio of equity securities of companies with a median market capitalization of approximately $1 billion. Under normal market conditions, at least 75% of the Fund's total assets will be invested in equity securities of companies with market capitalizations at the time of purchase of between $200 million and $2.5 billion. The Fund will invest in equity securities of domestic and foreign issuers characterized as "value" companies according to criteria established by Dreyfus, the Fund's subadviser. 13 17 - - NATIONWIDE SMALL COMPANY FUND Investment Objective: The Fund seeks long-term growth of capital by investing primarily in equity securities of domestic and foreign companies with market capitalizations of less then $1 billion at the time of purchase. 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 Dreyfus, Neuberger & Berman, L.P., Pictet International Management Limited, Van Eck Associates Corporation, Strong Capital Management, Inc. and Warburg, Pincus Asset Management, 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. - - GUARDIAN PORTFOLIO Investment Objective: Capital appreciation and secondarily, current income. The Portfolio and its corresponding series seek to achieve these objectives by investing in common stocks of long-established, high-quality companies. Neuberger & Berman Management uses a value-oriented investment approach in selecting securities, looking for low price-to-earnings ratios, strong balance sheets, solid management, and consistent earnings. - - LIMITED MATURITY BOND PORTFOLIO Investment Objective: To provide the high level of current income, consistent with low risk to principal and liquidity. As a secondary objective, it also seeks to enhance its total return through capital appreciation when market factors, such as falling interest rates and rising bond prices, indicate that capital appreciation may be available without significant risk to principal. It seeks to achieve its objectives through investments in a diversified portfolio of limited maturity debt securities. The Portfolio invests in securities which are at least investment grade and does not invest in junk bonds. - - 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. 14 18 OPPENHEIMER VARIABLE ACCOUNT FUNDS The Oppenheimer Variable Account Funds is an open-ended, diversified management investment company organized as a Massachusetts business trust in 1984. Shares of the Funds are sold only to provide benefits under variable life insurance policies and variable annuity contracts. OppenheimerFunds, Inc. is the Funds' investment advisor. - - BOND FUND Investment Objective Seeks a high level of current income by investing at least 65% of its total assets in investment grade debt securities, U.S. government securities and money market instruments. Investment grade debt securities would include those rated in one of the four highest ranking categories by any nationally-recognized rating organization or if unrated or split-rated (rated investment grade and below investment grade by different rating organizations), determined by OppenheimerFunds, Inc. to be of comparable quality. The Fund may invest up to 35% of its total assets in debt securities rated less than investment grade when consistent with the Fund's investment objectives. The Fund seeks capital growth as a secondary objective when consistent with its primary objective. - - 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. - - GROWTH FUND Investment Objective: Capital appreciation by investing in securities of well-known established companies. Such securities generally have a history of earnings and dividends and are issued by seasoned companies (companies which have an operating history of at least five years including predecessors). Current income is a secondary consideration in the selection of the Fund's portfolio securities. - - MULTIPLE STRATEGIES FUND Investment Objective: To seek a total investment return (which includes current income and capital appreciation in the value of its shares) from investments in common stocks and other equity securities, bonds and other debt securities, and "money market" securities. STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG SPECIAL FUND II, INC.) The Strong Opportunity Fund II, Inc. is a diversified, open-end management company commonly called a mutual fund. The Opportunity Fund II, Inc. was incorporated in Wisconsin and may only be purchased by the separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies. Strong Capital Management Inc. is the investment advisor for the Fund. Investment Objective: To seek capital appreciation through investments in a diversified portfolio of equity securities. STRONG VARIABLE INSURANCE FUNDS, INC. Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management investment company commonly referred to as a mutual fund. Incorporated in the State of Wisconsin, the Corporation has been authorized to issue shares of common stock and series and classes of series of common stock. The International Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by the Corporation to insurance company separate accounts for the purpose of funding variable annuity contracts and variable life insurance policies. Strong Capital Management, Inc. is the investment advisor to the Funds. - - DISCOVERY FUND II, INC. Investment Objective: To seek maximum capital appreciation through investments in a diversified portfolio of securities. The Fund normally emphasizes investment in equity securities and may invest up to 100% of its total assets in equity securities including common stocks, preferred stocks and securities convertible into common or preferred stocks. Although the Fund normally emphasizes investment in equity securities, the Fund has the flexibility to invest in any type of security that the Advisor believes has the potential for capital appreciation including up to 100% of its total assets in debt obligations, including intermediate to long-term corporate or U.S. government debt securities. - - INTERNATIONAL STOCK FUND II Investment Objective: To seek capital growth by investing primarily in the equity securities of issuers located outside the United States. 15 19 VAN ECK WORLDWIDE INSURANCE 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 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 Description: Seeks long-term capital appreciation by investing primarily in equity securities in emerging markets around the world. The Fund specifically emphasizes investment in countries that, compared to the world's major economies, exhibit relatively low gross national product per capita, as well as the potential for rapid economic growth. - - WORLDWIDE HARD ASSETS FUND Investment 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. - - MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO Investment Objective: To seek long-term capital growth by investing in a portfolio of securities of companies operating in the real estate industry ("Real Estate Securities"). Current income is a secondary consideration. Real Estate Securities include equity securities, including common stocks and convertible securities, as well as non-convertible preferred stocks and debt securities of real estate industry companies. A "real estate industry company" is a company that derives at least 50% of its assets (marked to market), gross income or net profits from the ownership, construction, management or sale of residential, commercial or industrial real estate. Under normal market conditions, at least 65% of the Fund's total assets will be invested in Real Estate Securities, primarily equity securities of real estate investment trusts. The Fund may invest up to 25% of its total assets in securities issued by foreign issuers, some or all of which may also be Real Estate Securities. There can be no assurance that the Fund will achieve its investment objective. 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 Asset Management, Inc. ("Warburg"). - - 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 Warburg have their principal business activities and interests outside the United States. The Portfolio will ordinarily invest substantially all of its assets, but no less than 65% of its total assets, in common stocks, warrants and securities convertible into or exchangeable for common stocks. The Portfolio intends to invest principally in the securities of financially strong companies with opportunities for growth within growing international economies and markets through increased earning power and improved utilization or recognition of assets. - - POST-VENTURE CAPITAL PORTFOLIO Investment Objective: The Portfolio seeks long-term growth of capital by investing primarily in equity securities of issuers in their post-venture capital stage of development and pursues an aggressive investment strategy. Under normal market conditions, the Portfolio will invest at least 65% of its total assets in equity securities of "post-venture capital companies." A post-venture capital company is one that has received venture capital financing either (a) during the early stages of the company's existence or the early stages of the development of a new product or service or (b) as part of a restructuring or recapitalization of the company. The Portfolio may invest up to 10% of its assets in venture capital and other investment funds. 16 20 - - SMALL COMPANY GROWTH PORTFOLIO Investment Objective: To seek capital growth by investing in a portfolio of equity securities of small-sized domestic companies. The Portfolio ordinarily will invest at least 65% of its total assets in common stocks or warrants of small-sized companies (i.e., companies having stock market capitalizations of between $25 million and $1 billion at the time of purchase) that represent attractive opportunities for capital growth. The Portfolio intends to invest primarily in companies whose securities are traded on domestic stock exchanges or in the over-the-counter market. The Portfolio's investments will be made on the basis of their equity characteristics and securities ratings generally will not be a factor in the selection process. REINVESTMENT The Underlying Mutual Funds described above have as a policy the distribution of dividends in the form of additional shares (or fractions thereof) of the Underlying Mutual Funds. The distribution of additional shares will not affect the number of Accumulation Units attributable to a particular Policy (see "Allocation of Cash Value"). TRANSFERS The Policy Owner may transfer Cash Value among the Sub-Accounts and the Fixed Account. A transfer will take effect on the date of receipt of written notice at the Home Office. Transfer requests must be in a written form acceptable to the Company. The Policy Owner may request a transfer of up to 100% of the Cash Value from the Variable Account to the Fixed Account. The Cash Value in each Sub-Account will be determined as of the date the transfer request is received in the Home Office in good order. The Company reserves the right to restrict transfers to the Fixed Account to 25% of the Cash Value. The Policy Owner may annually transfer a portion of the value of the Fixed Account to the Variable Account and a portion of the Variable Account to the Fixed Account, without penalty or adjustment. The Company reserves the right to limit the amount of Cash Value transferred out of the Fixed Account each Policy Year. Transfers from the Fixed Account must be made within 30 days after the termination date of the interest rate guarantee period. Transfers may be made either in writing or, in states allowing such transfers, by telephone. The Company will employ reasonable procedures to confirm that instructions communicated by telephone are genuine. Such procedures may include any or all of the following: 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; or such other procedures as the Company may deem reasonable. Although failure to follow reasonable procedures may result in the Company's liability for losses due to unauthorized or fraudulent telephone transfers, the Company will not be liable for following instructions communicated by telephone which it reasonably believes to be genuine. Any losses incurred pursuant to actions taken by the Company in reliance on telephone instructions reasonably believed to be genuine will be borne by the Contract Owner. Policy Owners who have entered into a Dollar Cost Averaging agreement with the Company (see "Dollar Cost Averaging") may transfer from the Fixed Account to the Variable Account under the terms of that agreement. Policies described in this prospectus may in some cases be sold to individuals who independently utilize the services of a firm or individual engaged in market timing. Generally, such firms or individuals obtain authorization from multiple Policy Owners to make transfers and exchanges among the Sub-Accounts on the basis of perceived market trends. Because of the unusually large transfers of funds associated with some of these transactions, the ability of the Company or Underlying Mutual Funds to process such transactions may 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 17 21 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 If the total Cash Value, less Policy Indebtedness, is $15,000 or more, the Policy Owner may direct the Company to automatically transfer a specified amount from the Fidelity VIP Fund - High Income Portfolio, the NSAT-Money Market Fund, the NSAT-Government Bond Fund, the Neuberger & Berman AMT-Limited Maturity Bond Portfolio or the Fixed Account to any other Sub-Account within the Variable Account. Dollar Cost Averaging will occur on a monthly basis or on another frequency permitted by the Company. Dollar Cost Averaging is a long-term investment program which provides for regular, level investments over time. There is no guarantee that Dollar Cost Averaging will result in a profit or protect against loss. The minimum monthly transfer is $100. Monthly transfers from the Fixed Account must be equal to or less than 1/30th of the Fixed Account when the program is requested. Transfers will be processed until either the value in the originating Sub-Account is exhausted or the Policy Owner instructs the Home Office in writing to cancel the transfers. The Company reserves the right to discontinue establishing new Dollar Cost Averaging programs. The Company also reserves the right to assess a processing fee for this service. SUBSTITUTION OF SECURITIES If shares of the Underlying Mutual Fund options 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 is inappropriate, the Company may substitute shares of another Underlying Mutual Fund for shares already purchased or to be purchased in the future by premium payments under the Policy. No substitution of securities in the Variable Account may take place without prior approval of the SEC and under such requirements as it and any state insurance department may impose. VOTING RIGHTS Voting rights under the Policies apply only with respect to Cash Value allocated to the Sub-Accounts. In accordance with its view of applicable law, the Company will vote the shares of the Underlying Mutual Funds at regular and special meetings of the shareholders. These shares will be voted in accordance with instructions received from Policy Owners. However, if the 1940 Act or any regulation thereunder should be amended or if the present interpretation changes, permitting the Company to vote the shares of the Underlying Mutual Funds in its own right, the Company may elect to do so. The Policy Owner is the person who has the voting interest under the Policy. The number of Underlying Mutual Fund shares attributable to each Policy Owner is determined by dividing the Policy Owner's interest in each respective Sub-Account by the Net Asset Value of the Underlying Mutual Fund corresponding to the Sub-Account. The number of shares which may be voted will be determined as of a date chosen by the Company not more than 90 days prior to the meeting of the Underlying Mutual Fund. Each person having a voting interest will receive periodic reports relating to the Underlying Mutual Fund, proxy material and a form with which to give such voting instructions. Voting instructions will be solicited by written communication prior to such meeting. Underlying Mutual Fund shares to which no timely instructions are received will be voted by the Company in the same proportion as the voting instructions which are received. Notwithstanding contrary Policy Owner voting instructions, the Company may vote Underlying Mutual Fund shares in any manner necessary to enable the Underlying Mutual Fund to: (1) make or refrain from making any change in the investments or investment policies for any of the Underlying Mutual 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. 18 22 INFORMATION ABOUT THE POLICIES UNDERWRITING AND ISSUANCE - -Minimum Requirements for Issuance of a Policy The minimum amount of initial premium that will be accepted by the Company is $10,000. Policies may be issued to Insureds issue ages 80 or younger. Before issuing any Policy, the Company requires satisfactory evidence of insurability, which may include a medical examination. - -Premium Payments The initial premium for a Policy is payable in full at the Home Office. The minimum amount of initial premium required is $10,000 for issue ages 75 or younger and $50,000 for issue ages 76 through 80. The Specified Amount is determined by treating the initial premium as equal to 100% of the Guideline Single Premium. Upon payment of an initial premium, temporary insurance may be provided, subject to a maximum amount. The effective date of permanent insurance coverage is dependent upon completion of all underwriting requirements, payment of the initial premium, and delivery of the Policy while the Insured is still living. The Policy Owner may make additional premium payments. The Policy is primarily intended to be a single premium with a limited ability to make additional payments. Subsequent premium payments under the Policy are permitted under the following circumstances: 1. an additional premium payment is required to keep the Policy in force (see "Grace Period"); or 2. except in Virginia, additional premium payments of at least $1,000 may be made at any time provided the premium limits prescribed by the IRS to qualify the Policy as a life insurance contract are not violated. Payment of additional premiums, if accepted, may increase the Specified Amount of insurance. However, the Company reserves the right to require satisfactory evidence of insurability before accepting any additional premium payment which results in an increase in the net amount at risk. The Company may also require that any existing Policy indebtedness be repaid prior to accepting any additional premium payments. The Company will not accept a subsequent premium payment which would result in total premiums paid exceeding the premium limitations prescribed by the IRS to qualify the Policy as a life insurance contract. - -Allocation of Cash Value At the time a Policy is issued, its Cash Value will be based on the NSAT-Money Market Fund value or the Fixed Account as if the Policy had been issued and the 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 NSAT-Money Market Fund (for any Net Premiums allocated to a Sub-Account on the application) or the Fixed Account until the expiration of the period in which the Policy Owner may exercise his or her short-term right to cancel the Policy. Net Premiums not designated for the Fixed Account will be placed in the NSAT-Money Market Fund. 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 premiums are allocated by giving written notice to the Company. All percentage allocations must be in whole numbers, and must be at least 5%. The sum of allocations must equal 100%. - -Short-Term Right to Cancel Policy A Policy may be returned for cancellation and a full refund of premium within 10 days after the Policy is received, within 45 days after the application for insurance is signed, or within 10 days after the Company mails or delivers a Notice of Right of Withdrawal, whichever is latest. The Policy can be mailed or delivered to the registered representative who sold it, or the Company. Immediately after such mailing or delivery, the Policy will be deemed void from the beginning. The Company will refund either the total premiums paid, or the Cash Value, less Indebtedness, as prescribed by the state in which the Policy was issued, within seven days after it receives the Policy. The scope of this right may vary by state. The Policy provision approved or used by a particular state will be disclosed in any Policy issued. 19 23 POLICY CHARGES DEDUCTIONS FROM PREMIUMS No deduction is made from any premium at the time of payment. 100% of each premium payment is applied to the Cash Value. DEDUCTIONS FROM CASH VALUE The Company may deduct certain charges from the Cash Value. While the Company reserves the right to change current charges, it has no present intent to do so. These charges are comprised of the following items: - -Charges on Surrender No charges are deducted from any premium payment. The Company incurs certain expenses related to the sale of the Policies. These expenses include commissions paid to sales personnel, the cost of sales literature and other promotional activity. To recover these expenses, the Company imposes a Surrender Charge. The Surrender Charge may be insufficient to recover all these expenses. Unrecovered expenses are borne by the Company's general assets which may include profits, if any, from the Mortality and Expense Risk Charge. The initial premium payment and any subsequent premium payment which results in an increased net amount at risk will have a Surrender Charge associated with it that will be less than or equal to 8.5% of such premium payment, as set forth in the following chart. The Surrender Charge applies for nine years after the effective date of each premium payment. Certain surrenders may result in adverse tax consequences (see "Tax Matters").
Completed Year(s) Charges on Completed Year(s) Charges on Since Surrender as a Since Surrender as a Premium Payment % Premium Payment Premium Payment % Premium Payment 0 8.5% 5 7.0% 1 8.5% 6 6.0% 2 8.0% 7 5.0% 3 8.0% 8 4.0% 4 7.5% 9 0.0%
In no event will the Surrender Charge deducted on a surrender exceed 8.5% of the total premiums paid. The Surrender Charge may be eliminated when the Policies are issued to an officer, director, former director, partner, employee, or retired employee of the Company; an employee of the General Distributor of the Policies, Nationwide Advisory Services, Inc.; or an employee of an affiliate of the Company or the General Distributor; or, a duly appointed representative of the Company who receives no commission as a result of the purchase. Elimination of the Surrender Charge will be permitted by the Company only in those situations where the Company does not incur sales or administrative expenses normally associated with the sale of a Policy. In no event will reduction of the Surrender Charge be permitted where such reduction will be unfairly discriminatory to any person. - -Annual Administrative Charge The Company deducts an annual administrative charge at the beginning of each Policy Year after the first. It will be charged proportionately to the Cash Values in each Sub-Account and the Fixed Account. The amount of this annual charge is determined by the total net premium payments (premium payments less any previous partial surrenders) as follows:
Total Net Premium Payments Current Guaranteed Maximum Greater than But Less Annual Administrative Annual Administrative or Equal to than Charge Charge $10,000 $25,000 $90 Non-New York $135 Non-New York $65 in New York $120 in New York $25,000 $50 All States $75 All States
20 24 - -Cost of Insurance Charge A monthly deduction for the cost of insurance is charged proportionately against the Cash Value in each Sub-Account and the Fixed Account on the Policy Date and each Monthly Anniversary Day. The Company will determine the monthly Cost of Insurance Charge by multiplying the applicable cost of insurance rate by the net amount at risk. The net amount at risk is equal to the death benefit minus the Cash Value. Current Cost of Insurance Charges will not exceed the cost based on the guaranteed cost of insurance rate and the Policy's net amount at risk. Guaranteed cost of insurance rates for standard simplified issues are based on the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980 CET). Guaranteed cost of insurance rates for standard preferred issues are based on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO). Guaranteed cost of insurance rates for substandard issues are based on appropriate percentage multiples of the 1980 CSO. These mortality tables are sex distinct. In addition, separate mortality tables will be used for standard and non-tobacco. For Policies issued in Texas, guaranteed cost of insurance rates for standard simplified issues ("Special Class-Simplified" in Texas) are based on 130% of the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO). The rate class of an Insured may affect the cost of insurance rate. The Company currently places Insureds into both standard rate classes and substandard rate classes that involve a higher mortality risk. In an otherwise identical Policy, an Insured in the standard rate class will have a lower cost of insurance than an Insured in a rate class with higher mortality risks. The Company may also issue certain Policies on a "simplified issue" basis to certain categories of individuals. Due to the underwriting criteria established for Policies issued on a simplified issue basis, actual rates for healthy individuals will be higher than the current cost of insurance rates being charged under otherwise identical Policies that are issued on a preferred basis. DEDUCTIONS FROM THE SUB-ACCOUNTS The Company will deduct, on a daily basis, certain charges from the assets of the Variable Account. On an annual basis, these charges are equivalent to:
Policy Years Policy Years 1-10 11+ Current 1.30% 1.00% Guaranteed Maximum 1.60% 1.30%
While the Company reserves the right to change current charges, it has no present intent to do so. These charges consist of the following items: - -Mortality and Expense Risk Charge The Company assumes certain risks for guaranteeing the Mortality and Expense Risk Charge. The mortality risk assumed under the Policies is that the Insured may not live as long as expected. The expense risk assumed is that the actual expenses incurred in issuing and administering the Policies may be greater than expected. In addition, the Company assumes risks associated with the nonrecovery of Policy issue, underwriting, and other administrative expenses due to Policies which lapse or are surrendered during the first ten years following each premium payment. To compensate the Company for assuming these risks associated with the Policies, the Company deducts a daily charge from the assets of the Sub-Accounts. This charge currently is equivalent to an effective annual rate of 0.75% of the average net assets of the Variable Account. To the extent that future levels of mortality and expenses are less than or equal to those expected, the Company may realize a profit from this charge. This charge is guaranteed not to exceed 0.90%. - -Administrative Expense Charge The Company deducts a daily Administrative Expense Charge to reimburse it for expenses related to issuance and maintenance of the Policies including underwriting, establishing Policy records, accounting and record keeping, and periodic reporting to Policy Owners. This charge is designed only to reimburse the Company for its actual administrative expenses. In the aggregate, the Company expects that the charges for administrative costs will be approximately equal to the related expenses. This charge is deducted daily from the assets of the Sub-Accounts. This charge currently is equivalent to an annual effective rate of 0.25%. This charge is guaranteed not to exceed 0.40%. 21 25 - -Premium Tax Recovery Charge Premium taxes are not deducted at the time a premium is paid. The Company pays any state premium taxes attributable to a particular Policy when incurred by the Company. The Company expects to pay an average state premium tax rate of approximately 2.5% of premiums for all states, although such tax rates generally can range from 0% to 4%. To reimburse the Company for the payment of state premium taxes associated with the Policies, during the first ten Policy Years the Company deducts a daily charge from the assets of the Sub-Accounts. This charge is computed on a daily basis, and is equivalent to an annual effective rate of 0.30% of the assets of the Variable Account during the first ten Policy Years, and 0% thereafter. This charge may be more or less than the amount actually assessed by the state in which a particular Policy Owner lives. The Company does not expect to make a profit from this charge. - -Income Tax Charge The Company does not currently assess any charge for income taxes incurred by the Company as a result of the operations of the Sub-Accounts (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. EXPENSES OF THE UNDERLYING MUTUAL FUNDS Underlying Mutual Fund shares are purchased at Net Asset Value, which reflects the deduction of investment management fees and certain other expenses. The management fees are charged by each Underlying Mutual Fund's investment adviser for managing the Underlying Mutual Fund and selecting its portfolio of securities. Other Underlying Mutual Fund expenses can include such items as interest expense on loans and contracts with transfer agents, custodians, and other companies that provide services to the Underlying Mutual Fund. The management fees and other expenses for each Underlying Mutual Fund for its most recently completed fiscal year, expressed as a percentage of the Underlying Mutual Fund's average assets, are as follows: UNDERLYING MUTUAL FUND ANNUAL EXPENSES (AFTER EXPENSE REIMBURSEMENT)
------------------------------------------- Management Other Total Fees Expenses Expenses - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc. - American Century VP 1.00% 0.00% 1.00% Balanced - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc. - American Century VP 1.00% 0.00% 1.00% Capital Appreciation - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc. - American Century VP 0.70% 0.00% 0.70% Income & Growth - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc. - American Century VP 1.50% 0.00% 1.50% International - ----------------------------------------------------------------------------------------------------------------- American Century Variable Portfolios, Inc. - American Century VP 1.00% 0.00% 1.00% Value - ----------------------------------------------------------------------------------------------------------------- The Dreyfus Socially Responsible Growth Fund 0.75% 0.01% 0.76% - ----------------------------------------------------------------------------------------------------------------- Dreyfus Stock Index Fund, Inc. 0.25% 0.03% 0.28% - ----------------------------------------------------------------------------------------------------------------- Dreyfus Variable Investment Fund- Capital Appreciation Portfolio 0.75% 0.05% 0.80% - ----------------------------------------------------------------------------------------------------------------- Dreyfus Variable Investment Fund- Growth & Income Portfolio. 0.75% 0.05% 0.80% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Equity-Income Portfolio 0.50% 0.07% 0.57% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Growth Portfolio 0.60% 0.07% 0.67% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP High Income Portfolio 0.59% 0.12% 0.71% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP Overseas Portfolio 0.75% 0.15% 0.90% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP II Asset Manager Portfolio 0.55% 0.09% 0.64% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP II Contrafund Portfolio 0.60% 0.08% 0.68% - ----------------------------------------------------------------------------------------------------------------- Fidelity VIP III Growth Opportunities Portfolio 0.60% 0.13% 0.73% - ----------------------------------------------------------------------------------------------------------------- Morgan Stanley Universal Funds, Inc.-Emerging Markets Debt Portfolio 0.04% 1.26% 1.30% - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust - Growth Portfolio 0.83% 0.07% 0.90% - -----------------------------------------------------------------------------------------------------------------
22 26
------------------------------------------- Management Other Total Fees Expenses Expenses - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust - Guardian Portfolio 0.60% 0.40% 1.00% - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust - Limited Maturity Bond 0.65% 0.12% 0.77% Portfolio - ----------------------------------------------------------------------------------------------------------------- Neuberger & Berman Advisers Management Trust - Partners Portfolio 0.80% 0.06% 0.86% - ----------------------------------------------------------------------------------------------------------------- NSAT - Capital Appreciation Fund 0.52% 0.04% 0.56% - ----------------------------------------------------------------------------------------------------------------- NSAT - Government Bond Fund 0.50% 0.03% 0.53% - ----------------------------------------------------------------------------------------------------------------- NSAT - Money Market Fund 0.48% 0.03% 0.51% - ----------------------------------------------------------------------------------------------------------------- NSAT - Nationwide Small Cap Value Fund 0.50% 0.55% 1.05% - ----------------------------------------------------------------------------------------------------------------- NSAT - Nationwide Small Company Fund 1.00% 0.11% 1.11% - ----------------------------------------------------------------------------------------------------------------- NSAT - Total Return Fund 0.52% 0.02% 0.54% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Bond Fund 0.73% 0.05% 0.78% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Global Securities Fund 0.70% 0.06% 0.76% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Growth Fund 0.73% 0.02% 0.75% - ----------------------------------------------------------------------------------------------------------------- Oppenheimer Variable Account Fund-Multiple Strategies 0.72% 0.03% 0.75% - ----------------------------------------------------------------------------------------------------------------- Strong Opportunity Fund II, Inc. 1.00% 0.15% 1.15% - ----------------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, Inc. - Discovery Fund II, Inc. 1.00% 0.18% 1.18% - ----------------------------------------------------------------------------------------------------------------- Strong Variable Insurance Funds, Inc. - International Stock Fund II 1.00% 0.51% 1.51% - ----------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Bond Fund 1.00% 0.12% 1.12% - ----------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Emerging Markets Fund 0.80% 0.00% 0.80% - ----------------------------------------------------------------------------------------------------------------- Van Eck Worldwide Insurance Trust-Worldwide Hard Assets Fund 1.00% 0.17% 1.17% - ----------------------------------------------------------------------------------------------------------------- Van Kampen American Capital Life Investment Trust - 1.00% 0.07% 1.07% Morgan Stanley Real Estate Securities Portfolio - ----------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-International Equity Portfolio 1.00% 0.35% 1.35% - ----------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Post-Venture Capital Portfolio 1.07% 0.33% 1.40% - ----------------------------------------------------------------------------------------------------------------- Warburg Pincus Trust-Small Company Growth Portfolio 0.90% 0.24% 1.14% - -----------------------------------------------------------------------------------------------------------------
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 Accumulation 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 fee waivers or expense reimbursement arrangements: - ------------------------------ ------------------------------------------------ FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER - ------------------------------ ------------------------------------------------ Fidelity VIP Equity Income The Management Fees, Other Expenses and Total Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.50%, Other Expenses would have equaled 0.08% and Total Portfolio Operating Expenses would have equaled 0.58% - ------------------------------ ------------------------------------------------ Fidelity VIP Growth Portfolio The Management Fees, Other Expenses and Total Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.60%, Other Expenses would have equaled 0.09% and Total Portfolio Operating Expenses would have equaled 0.69% - ------------------------------ ------------------------------------------------ 23 27 - ------------------------------ ------------------------------------------------ FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER - ------------------------------ ------------------------------------------------ Fidelity VIP Overseas The Management Fees, Other Expenses and Total Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.75%, Other Expenses would have equaled 0.17% and Total Portfolio Operating Expenses would have equaled 0.92% - ------------------------------ ------------------------------------------------ Fidelity VIP II Asset The Management Fees, Other Expenses and Total Manager Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.55%, Other Expenses would have equaled 0.10% and Total Portfolio Operating Expenses would have equaled 0.65% - ------------------------------ ------------------------------------------------ Fidelity VIP II Contrafund The Management Fees, Other Expenses and Total Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.60%, Other Expenses would have equaled 0.11% and Total Portfolio Operating Expenses would have equaled 0.71% - ------------------------------ ------------------------------------------------ Fidelity VIP III Growth The Management Fees, Other Expenses and Total Opportunities Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.60%, Other Expenses would have equaled 0.14% and Total Portfolio Operating Expenses would have equaled 0.74% - ------------------------------ ------------------------------------------------ Morgan Stanley Universal The Management Fees, Other Expenses and Total Funds, Inc. - Emerging Expenses are net of any fee waivers or expenses Markets Debt Portfolio reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.80%, Other Expenses would have equaled 1.26% and Total Portfolio Operating Expenses would have equaled 2.06% - ------------------------------ ------------------------------------------------ NSAT-Nationwide Small Cap The Management Fees, Other Expenses and Total Value Fund Expenses are net of any fee waivers or expense reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 1.30%, Other Expenses would have equaled 5.01% and Total Portfolio Operating Expenses would have equaled 6.31% - ------------------------------ ------------------------------------------------ Van Eck Worldwide Insurance The Management Fees, Other Expenses and Total Trust - Worldwide Hard Expenses are net of any fee waivers or expenses Assets Fund reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 1.00%, Other Expenses would have equaled 0.18% and Total Portfolio Operating Expenses would have equaled 1.18% - ------------------------------ ------------------------------------------------ Van Eck Worldwide The Management Fees, Other Expenses and Total Insurance Trust - Expenses are net of any fee waivers or expenses Worldwide Emerging reimbursements. The investment adviser has Markets Fund voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 1.00%, Other Expenses would have equaled 0.34% and Total Portfolio Operating Expenses would have equaled 1.34% - ------------------------------ ------------------------------------------------ 24 28 - ------------------------------ ------------------------------------------------ FUND EXPENSES WITHOUT REIMBURSEMENT OR WAIVER - ------------------------------ ------------------------------------------------ Warburg Pincus Trust - The Management Fees, Other Expenses and Total International Equity Expenses are net of any fee waivers or expenses Portfolio reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 1.00%, Other Expenses would have equaled 0.36% and Total Portfolio Operating Expenses would have equaled 1.36% - ------------------------------ ------------------------------------------------ Warburg Pincus Trust - Post- The Management Fees, Other Expenses and Total Venture Capital Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 1.25%, Other Expenses would have equaled 0.33% and Total Portfolio Operating Expenses would have equaled 1.58% - ------------------------------ ------------------------------------------------ Warburg Pincus Trust - Small The Management Fees, Other Expenses and Total Company Growth Portfolio Expenses are net of any fee waivers or expenses reimbursements. The investment adviser has voluntarily agreed to reimburse a portion of the management fees and/or other expenses resulting in a reduction of total expenses. Without such waivers or reimbursements, Management Fees would have equaled 0.90%, Other Expenses would have equaled 0.25% and Total Portfolio Operating Expenses would have equaled 1.15% - ------------------------------ ------------------------------------------------ The information relating to the Underlying Mutual Fund expenses was provided by the Underlying Mutual Fund and was not independently verified by the Company. HOW THE CASH VALUE VARIES On any date during the Policy Year, the Cash Value equals the Cash Value on the preceding Valuation Date, plus any premium applied since the previous Valuation Date, plus or minus any investment results, and less any Policy Charges. There is no guaranteed Cash Value. The Cash Value will vary with the investment experience of the Variable Account and/or the daily crediting of interest to the Fixed Account and Policy Loan Account, depending on the allocation of Cash Value by the Policy Owner. HOW THE INVESTMENT EXPERIENCE IS DETERMINED The Cash Value in each Sub-Account is converted to Accumulation Units of that Sub-Account. The conversion is accomplished by dividing the amount of Cash Value allocated to a Sub-Account by the value of an Accumulation Unit for the Sub-Account for the Valuation Period during which the allocation occurs. The value of an Accumulation Unit for each Sub-Account was arbitrarily set initially at $10 when the 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. Although the number of Accumulation Units will not change as a result of investment experience, the value of an Accumulation Unit may increase or decrease from Valuation Period to Valuation Period. NET INVESTMENT FACTOR The net investment factor for any Valuation Period is determined by dividing (a) by (b) and then subtracting (c) from the result where: (a) is the net of: (1) the Net Asset Value per share of the Underlying Mutual Fund option held in the Sub-Account determined at the end of the current Valuation Period; and (2) the per share amount of any dividend or income distributions made by the Underlying Mutual Fund held in the Sub-Account if the ex-dividend date occurs during the current Valuation Period. (b) is the Net Asset Value per share of the Underlying Mutual Fund held in the Sub-Account determined at the end of the immediately preceding Valuation Period. (c) is a factor representing the daily Mortality and Expense Risk Charge, Administration Expense Charge and any charge for premium tax recovery from the Variable Account. Such factor is equal to an annual rate of 1.30% for the first ten years and 1.00% thereafter of the daily net assets of the Variable Account. 25 29 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, Administration Expense Charge, and charges for premium tax recovery. DETERMINING THE CASH VALUE The Cash Value is the sum of the value of all Accumulation Units and amounts credited to the Fixed Account. The number of Accumulation Units credited to each Sub-Account is determined by dividing the net amount allocated to the Sub-Account by the Accumulation Unit value for the Sub-Account for the Valuation Period during which the premium is received by the Company. In the event part or all of the Cash Value is surrendered, or 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 rate for each account. VALUATION PERIODS AND VALUATION DATES A Valuation Period is the period commencing at the close of business on a Valuation Date and ending at the close of business for the next succeeding Valuation Date. A Valuation Date is each day that the New York Stock Exchange and the Home Office are open for business or any other day during which there is sufficient degree of trading that the current Net Asset Value of the Accumulation Units might be materially affected. SURRENDERING THE POLICY FOR CASH RIGHT TO SURRENDER The Policy Owner may surrender the Policy in full at any time while the Insured is living and receive its Cash Surrender Value. The cancellation will be effective as of the date the Company receives a proper written request for cancellation and the Policy. Such written request must be signed and, where permitted, the signature guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange, or by a commercial bank or 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 to the Fixed Account and the Policy Loan Account. The Cash Surrender Value equals the Cash Value next computed after the date the Company receives a proper written request for surrender of the Policy, minus any charges, indebtedness or other deductions due on that date, which may also include a Surrender Charge. PARTIAL SURRENDERS After the Policy has been in force for 5 Policy Years, the Policy Owner may request a partial surrender. Partial surrenders will be permitted only if they satisfy the following requirements: 1. The maximum partial surrender in any Policy Year is limited to 10% of the total premium payments; 2. Partial surrenders must not result in a reduction of the Cash Surrender Value below $10,000; and 3. After the partial surrender, the Policy continues to qualify as life insurance. When a partial surrender is made, the Cash Value is reduced by the amount of the partial surrender. Under death benefit Option 1, the Specified Amount is reduced by the amount of the partial surrender, unless the death benefit is based on the applicable percentage of Cash Value. In such a case, a partial surrender will decrease the Specified Amount by the amount by which the partial surrender exceeds the difference between the death benefit and Specified Amount. Partial surrender amounts must be first deducted from the values in the Sub-Accounts. Partial surrenders will be deducted from the Fixed Account only to the extent that insufficient values are available in the Sub-Accounts. 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"). 26 30 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 Cash Value, less any indebtedness. INCOME TAX WITHHOLDING Federal law requires the Company to withhold income tax from any portion of surrender proceeds that is subject to tax, unless the Policy Owner advises the Company, in writing, of his or her request not to withhold. If the Policy Owner requests that the Company not withhold taxes, or if the taxes withheld are insufficient, the Policy Owner may be liable for payment of an estimated tax. The Policy Owner should consult his or her tax advisor. In certain employer-sponsored life insurance arrangements, including equity split dollar arrangements, participants may be required to report for income tax purposes, one or more of the following: (1) the value each year of the life insurance protection provided; (2) an amount equal to any employer-paid premiums; or (3) some or all of the amount by which the current value of the contract exceeds the employer's interest in the contract. Participants should consult with the sponsor or the administrator of the plan, and/or with their personal tax or legal advisers, to determine the tax consequences, if any, of their employer-sponsored life insurance arrangements. POLICY LOANS TAKING A POLICY LOAN The Policy Owner may take a loan using the Policy as security. During the first year, maximum Policy indebtedness is limited to 50% of the Cash Surrender Value, less interest due on the next Policy Anniversary. After the first Policy Year, the maximum Policy indebtedness is limited to 90% of the Cash Surrender Value, less interest due on the next Policy Anniversary. The Company will not grant a loan for an amount less than $1,000 ($200 in Connecticut, $500 in New York). Should the death benefit become payable, the Policy be surrendered, or the Policy mature while a loan is outstanding, the amount of Policy indebtedness will be deducted from the death benefit, Cash Surrender Value or the maturity value, respectively. Maximum Policy indebtedness in Texas is limited to 90% of the Cash Surrender Value in the sub-accounts and 100% of the Cash Surrender Value in the Fixed Account, less interest due on the next Policy Anniversary. Any request for a Policy loan must be in written form satisfactory to the Company. The request must be signed and, where permitted, the signature guaranteed by a member firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchange; or by a commercial bank or a savings and loan which is a member of the Federal Deposit Insurance Corporation. Certain Policy loans may result in currently taxable income and tax penalties (see "Tax Matters"). EFFECT ON INVESTMENT PERFORMANCE When a loan is made, an amount equal to the amount of the loan is transferred from the Variable Account to the Policy Loan Account. If the assets relating to a Policy are held in more than one Sub-Account, withdrawals from Sub-Accounts will be made in proportion to the assets in each Sub-Account at the time of the loan. Policy loans will be transferred from the Fixed Account only when insufficient amounts are available in the Sub-Accounts. The amount taken out of the Variable Account will not be affected by the Variable Account's investment experience while the loan is outstanding. INTEREST Amounts transferred to the Policy Loan Account will earn interest daily from the date of transfer. Policy Loans will be currently credited interest daily at an annual effective rate of 5.0%. This rate is guaranteed never to be lower than 4%. The Company may change the current interest crediting rate on Policy loans at any time at its sole discretion. This earned interest is transferred from the Policy Loan Account to a Variable Account or the Fixed Account on each Policy Anniversary. It will be allocated according to the Underlying Mutual Fund allocation factors in effect at the time of the transfer. 27 31 The loan interest rate is 6% per year for all Policy loans. Interest is charged daily and is payable at the end of each Policy Year. Unpaid interest will be added to the existing Policy indebtedness as of the due date and will be charged interest at the same rate as the rest of the indebtedness. Whenever the total loan indebtedness plus accrued interest exceeds the Cash Value less any Surrender Charges, the Company will send a notice to the Policy Owner and the assignee, if any. The Policy will terminate without value 61 days after the mailing of the notice unless a sufficient repayment is made during that period. A repayment is sufficient if it is large enough to reduce the total loan indebtedness plus accrued interest to an amount equal to the total Cash Value less any Surrender Charges plus an amount sufficient to continue the Policy in force for 3 months. EFFECT ON DEATH BENEFIT AND CASH VALUE A Policy loan, whether or not repaid, will have a permanent effect on the death benefit and Cash Value because the investment results of the Variable Account or the Fixed Account will apply only to the non-loaned portion of the Cash Value. The longer the loan is outstanding, the greater the effect is likely to be. Depending on the investment results of the Variable Account or the Fixed Account while the loan is outstanding, the effect could be favorable or unfavorable. REPAYMENT All or part of a loan may be repaid at any time while the Policy is in force during the Insured's lifetime. Any payment intended as a loan repayment, rather than a premium payment, must be identified as such. Loan repayments will be credited to the Sub-Accounts and the Fixed Account in proportion to the Policy Owner's premium allocation in effect at the time of the repayment. Each repayment may not be less than $1,000 ($50 in Connecticut and New York). The Company reserves the right to require that any loan repayments resulting from Policy loans transferred from the Fixed Account must be first allocated to the Fixed Account. HOW THE DEATH BENEFIT VARIES - -Calculation of the Death Benefit At issue, the Specified Amount is determined by treating the initial premium as equal to 100% of the Guideline Single Premium. Additional premium payments, if accepted, may increase the Specified Amount. Guideline Single Premiums vary by attained age, sex, smoking classification, underwriting classification and total premium payments. The following table illustrates representative initial Specified Amounts, under death benefit Option 1, for non-tobacco:
Issue $25,000 Single Premium $50,000 Single Premium Age Male Female Male Female 35 $179,733 $208,354 $364,774 $423,008 40 143,373 166,704 290,792 338,264 45 114,856 134,300 232,769 272,332 50 92,583 108,739 187,452 220,323 55 75,306 88,601 152,298 179,349 60 62,112 72,636 125,453 146,866 65 52,094 59,930 105,070 121,014
Generally, for a given premium payment, the initial Specified Amount is greater for non-tobacco than standard, and females than males. The Specified Amount is shown in the Policy. While the Policy is in force, the death benefit will never be less than the Specified Amount. The death benefit may vary with the Cash Value of the Policy, which depends on investment performance. The Policy Owner may choose one of two death benefit Options. Under Option 1, the death benefit will be the greater of the Specified Amount or the applicable percentage of Cash Value. Under Option 1, the amount of the death benefit will ordinarily not change for several years to reflect the investment performance and may not change at all. If investment performance is favorable, the amount of the 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. 28 32 Policy Owners who are satisfied with the amount of their current insurance coverage and prefer to have favorable investment performance and any future premium payments reflected in increased Policy Cash Value should choose death benefit Option 1. Policy Owners who prefer to have favorable investment performance and any future premium payments increase death benefits should choose death benefit Option 2. The monthly cost of insurance for Option 1 will always be less than or equal to the monthly cost of insurance for the same Specified Amount under Option 2 (see "Cost of Insurance Charge"). The term "applicable percentage" means: 1. 250% when the Insured is Attained Age 40 or less at the beginning of a Policy Year; and 2. when the Insured is 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 outstanding Policy loans 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 modified single premium life insurance policy offered by the Company on the Policy Date. If not available, the new policy may be a flexible premium adjustable life insurance policy offered by the Company on the Policy Date. The benefits for the new policy will not vary with the investment experience of a separate account. The exchange must be elected within 24 months from the Policy Date. No evidence of insurability will be required. The policy owner and beneficiary under the new Policy will be the same as those under the exchanged Policy on the effective date of the exchange. The new policy will have a death benefit on the exchange date not more than the death benefit of the original Policy immediately prior to the exchange date. The new policy will have the same policy date and issue age as the original Policy. The initial specified amount and any increases in specified amount will have the same rate class as those of the original Policy. Any indebtedness may be transferred to the new policy. 29 33 The exchange may be subject to an equitable adjustment in rates and values to reflect variances, if any, in the rates and values between the two policies. After adjustment, if any excess is owed the Policy Owner, the Company will pay the excess to the Policy Owner in cash. The exchange may be subject to federal income tax withholding (see "Income Tax Withholding"). CHANGES OF INVESTMENT POLICY The Company may materially change the investment policy of the Variable Account. The Company must inform the Policy Owner and obtain all necessary regulatory approvals. Any change must be submitted to the various state insurance departments which may disapprove it if deemed detrimental to the interests of the Policy 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 Nationwide General Account Life Insurance Policy on the life of the Insured. The Policy Owner has the later of 60 days (6 months in Pennsylvania) from the date of the investment policy change or 60 days (6 months in Pennsylvania) from being informed of such change to make this conversion. The Company will not require evidence of insurability for this conversion. The new policy will not be affected by the investment experience of any separate account. The new policy will be for an amount of insurance not exceeding the death benefit of the Policy converted on the date of such conversion. GRACE PERIOD If the Cash Surrender Value in the Policy is insufficient to pay the Cost of Insurance Charge, Policy loan interest, or other charges which become due but are unpaid, a grace period of 61 days will be allowed for payment of sufficient premium to continue the Policy in force. The Company will notify the Policy Owner of the amount required to continue the Policy in force. If the required amount is not received within 61 days of the notice, the Policy will terminate without value. If the Insured dies during the grace period, the Company will pay the Death Proceeds. REINSTATEMENT If the grace period ends and the Policy Owner has neither paid the required premium nor surrendered the Policy for its Cash Surrender Value, the Policy Owner may reinstate the Policy by: 1. submitting a written request at any time within 3 years after the end of the grace period and prior to the Maturity Date: 2. providing evidence of insurability satisfactory to the Company; 3. paying sufficient premium to cover all Policy Charges that were due and unpaid during the grace period; 4. paying sufficient premium to keep the Policy in force for 3 months from the date of reinstatement; and 5. paying or reinstating any indebtedness against the Policy which existed at the end of the grace period. The effective date of a reinstated Policy will be the Monthly Anniversary Day on or next following the date the application for reinstatement is approved by the Company. If the Policy is reinstated, the Cash Value on the date of reinstatement, but prior to applying any premiums or loan repayments received, will be set equal to the appropriate Surrender Charge. Such Surrender Charge will be based on the length of time from the date of premium payments to the effective date of the reinstatement. Unless the Policy Owner has provided otherwise, the allocation of the amount of the Surrender Charge, additional premium payments, and any loan repayments will be based on the Underlying Mutual Fund allocation factors in effect at the start of the grace period. THE FIXED ACCOUNT OPTION Under exemptive and exclusionary provisions, interests in the General Account have not been registered under the Securities Act of 1933 and the General Account has not been registered as an investment company under the Investment Company Act of 1940. Accordingly, neither the General Account nor any interests therein are subject to the provisions of these Acts, and the Company has been advised that the staff of the SEC has not reviewed the disclosures in this prospectus relating to the Fixed Account. Disclosures regarding the General Account may, however, be subject to certain generally applicable provisions of the federal securities laws concerning the accuracy and completeness of statements made in prospectuses. 30 34 A Policy Owner may elect to allocate or transfer all or part of the Cash Value to the Fixed Account and the amount allocated or transferred becomes part of the General Account. The General Account consists of all assets of the Company other than those in the Variable Account and in other separate accounts that have been or may be established by the Company. Subject to applicable law, the Company has sole discretion over the investment of the assets of the General Account, and Policy Owners do not share in the investment experience of those assets. The Company guarantees that the part of the Cash Value invested under the Fixed Account will accrue interest daily at an effective annual rate that the Company declares periodically. The Fixed Account crediting rate will not be less than an effective annual rate of 4%. Upon request and in the annual statement, the Company will inform a Policy Owner of the then applicable rate. The Company is not obligated to credit interest at a higher rate. COVERAGE After the first Policy Year, the Policy Owner may request certain changes in the insurance coverage under the Policy. Any request must be in writing and received at the 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. CHANGES IN THE SPECIFIED AMOUNT Payment of additional premiums or changes in the death benefit option may require an increase to the Specified Amount (the minimum increase in the Specified Amount permitted by the Company is $10,000). An approved increase will have an effective date of the Monthly Anniversary Day on or next following the date the Company approves the supplemental application. The Company reserves the right to limit such increases to one per Policy Year, and to require satisfactory evidence of insurability for any increase in the Specified Amount. In addition, the rate class, rate class multiple and rate type for the increase in Specified Amount must be identical to those on the Policy Date. The Specified Amount cannot be decreased if, after the decrease, the Policy would fail to satisfy the definition of Life Insurance under Section 7702 of the Code. CHANGES IN THE DEATH BENEFIT OPTION The Policy Owner may change the death benefit option under the Policy. If the change is from Option 1 to Option 2, the Specified Amount will be decreased by the amount of the Cash Value. If the change is from Option 2 to Option 1, the Specified Amount will be increased by the amount of the Cash Value. Evidence of insurability is not required for a change from Option 2 to Option 1. The Company reserves the right to require evidence of insurability for a change from Option 1 to Option 2. The effective date of the change will be the Monthly Anniversary Day on or next following the date the Company approves the request for change. Only one change of option is permitted per Policy Year. A change in death benefit option will not be permitted if it results in the total premiums paid exceeding the then current maximum premium limitations prescribed by the IRS 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 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, 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 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. 31 35 If any Beneficiary predeceases the Insured, that Beneficiary's interest passes to any surviving Beneficiary, unless otherwise provided. Multiple Beneficiaries will be paid in equal shares, unless otherwise provided. If no named Beneficiary survives the Insured, the proceeds will 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 the Home Office. The Company is not responsible for any assignment not submitted for recording, nor is the Company responsible for the sufficiency or validity of any assignment. The assignment will be subject to any indebtedness owed to the Company before it was recorded. INCONTESTABILITY The Company will not contest a death benefit based on representations in any written application when such benefit has been in force, during the lifetime of the Insured, for two years. ERROR IN AGE OR SEX If the Insured's age, sex or both, as stated in the application, are incorrect, the affected benefits will be adjusted to reflect the correct age or sex. SUICIDE If the Insured dies by suicide within two years from the Policy Date, the Company will pay no more than the sum of the premiums, less any unpaid loan. If the Insured dies by suicide within two years from the date an application is accepted for an increase in the Specified Amount, the Company will pay no more than the amount paid for such additional benefit. NONPARTICIPATING POLICIES The Policies are nonparticipating. This means that they do not participate in any dividend distribution of the Company's surplus. RIDERS A rider may be added as an addition to the Policy. Riders currently include: 1. Accelerated Death Benefit Rider; and 2. Maturity Extension Endorsement. Rider availability varies by state. LEGAL CONSIDERATIONS On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v. Norris that certain annuity benefits provided by employers' retirement and fringe benefit programs may not vary between men and women on the basis of sex. This decision applies only to benefits derived from premiums made on or after August 1, 1983. The Policies offered by this prospectus are based upon actuarial tables which distinguish between men and women and thus the Policies provide different benefits to men and women of the same age. Accordingly, employers and employee organizations should consider, in consultation with legal counsel, the impact of Norris on any employment related insurance or benefit program before purchasing this Policy. DISTRIBUTION OF THE POLICIES The Policies will be sold by licensed insurance agents in those states where the Policies may lawfully be sold. Such agents will be registered representatives of broker-dealers registered under the Securities Exchange Act of 1934 who are members of the National Association of Securities Dealers, Inc. (NASD). The Policies will be distributed by the General Distributor, NAS. NAS acts as general distributor for the Nationwide Multi-Flex Variable Account, Nationwide DC Variable Account, Nationwide DCVA-II, Nationwide Variable Account-II, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Variable Account-8, Nationwide Variable Account-9, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-A, Nationwide VL Separate Account-B, Nationwide VL Separate Account-C, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4, NACo Variable Account and the 32 36 Nationwide Variable Account, all of which are separate investment accounts of the Company or its affiliates. NAS is a wholly owned subsidiary of the Company. NAS also acts as principal underwriter for the Nationwide Investing Foundation, Nationwide Separate Account Trust, Financial Horizons Investment Trust, and Nationwide Investing Foundation II, Nationwide Investing Foundation III and Nationwide Asset Allocation Trust, which are open-end management investment companies. Gross commissions paid by the Company on the sale of these Policies plus fees for marketing services provided by the General Distributor are not more than 7.50% of the premiums paid. CUSTODIAN OF ASSETS The Company serves as the custodian of the assets of the Variable Account. TAX MATTERS POLICY PROCEEDS Section 7702 of the Code provides that if certain tests are met, a policy will be treated as a life insurance policy for federal tax purposes. The Company will monitor compliance with these tests. The Policy should thus receive the same federal income tax treatment as fixed benefit life insurance. As a result, the life insurance proceeds payable under a Policy are excludable from gross income of the Beneficiary under Section 101 of the Code. The Policies described in this prospectus meet the definition of "modified endowment contracts" under Section 7702A of the Code. The Code defines modified endowment contracts as those policies issued or materially changed after June 21, 1988 on which the total premiums paid during the first seven years exceed the amount that would have been paid if the policy provided for paid up benefits after seven level annual premiums. The Policies offered in this prospectus typically fall within this definition. The Code provides for taxation of surrenders, partial surrenders, loans, collateral assignments and other pre-death distributions from modified endowment contracts (other than certain distributions made under a policy on the life of a "terminally ill individual") are subject to federal income taxes in a manner similar to the way annuities are taxed. Any distribution is taxable to the extent the cash value of the policy exceeds, at the time of the distribution, the premiums paid into the policy. The Code generally provides for a 10% tax penalty on the taxable portion of such distributions. That penalty is applicable unless the distribution is: 1) paid after the policy owner is 59 1/2 or disabled; or 2) the distribution is part of an annuity to the policy owner as defined in the Code. Under certain circumstances, certain distributions made under a policy on the life of a "terminally ill individual," as that term is defined in the Code, are excludible from gross income. Even though exchanges under Section 1035 of the Code qualify as material changes, certain exchanges of pre-June 22, 1988 policies may retain their non-modified endowment status. Therefore, the Policies offered by this prospectus may or may not be issued as modified endowment contracts. The Company will monitor premiums paid and will notify the Policy Owner when the Policy's non-modified endowment status is in jeopardy. If a Policy is not a modified endowment contract, a cash distribution during the first fifteen years after a Policy is issued which causes a reduction in death benefits may still become fully or partially taxable to the Policy Owner pursuant to Section 7702(f)(7) of the Code. The Policy Owner should carefully consider this potential effect and seek further information before initiating any changes in the terms of the Policy. Under certain conditions, a Policy may become a modified endowment as a result of certain material changes or a reduction in benefits as defined by Section 7702A(c) of the Code. In addition to meeting the tests required under Section 7702, Section 817(h) of the Code requires that the investments of separate accounts such as the Variable Account be adequately diversified. Regulations under 817 (h) provide that a variable life 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 IRS. The amount will be based on the tax that would have been paid by the policy owner if the income, for the period the policy was not diversified, had been received by the policy owner. If the failure to diversify is not corrected in this manner, the policy owner will be deemed the owner of the underlying securities and taxed on the earnings of his or her account. Representatives of the IRS have suggested, from time to time, that the number of underlying mutual funds available or the number of transfer opportunities available under a variable product may be relevant in determining whether the product qualifies for the desired tax treatment. No formal guidance has been issued in this area. Should the Secretary of the Treasury issue additional rules or regulations limiting the number of underlying mutual funds, transfers between underlying mutual funds, exchanges of underlying mutual funds or changes in investment objectives of underlying mutual funds such that the Policy would no longer qualify as life 33 37 insurance under Section 7702 of the Code, the Company will take whatever steps are available to remain in compliance. A total surrender or cancellation of the Policy by lapse may have adverse tax consequences depending on the circumstances. If the amount received by the Policy Owner plus total Policy indebtedness exceeds the premiums paid into the Policy, the excess generally will be treated as taxable income, regardless of whether or not the Policy is a modified endowment contract. Distributions of income from a modified endowment contract are subject to federal income tax withholding; however, the recipient may elect not to have the withholding taken from the distribution. A distribution of income from a modified endowment contract may be subject to mandatory back-up withholding which cannot be waived. The mandatory back-up withholding rate is 31% of the income that is distributed and will arise if no taxpayer identification number is provided to the Company, or if the IRS notifies the Company that back-up withholding is required. - - Federal Estate and Generation-Skipping Transfer Taxes The federal estate tax is integrated with the federal gift tax under a unified tax rate schedule. In general, in 1998, an estate of less than $625,000 (inclusive of certain pre-death gifts) will not incur a federal estate tax liability. In addition, an unlimited marital deduction may be available for federal estate tax purposes, for certain amounts that pass to the surviving spouse. When the Insured dies, the death benefit will generally be included in the 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 may be subject to the GSTT. Pursuant to regulations recently promulgated by the U.S. Treasury Department, the Company may be required to withhold a portion of the Death Proceeds and pay them directly to the IRS as the GSTT liability. The GSTT provisions generally apply to the same transfers that are subject to estate or gift taxes. The tax rate is a flat rate equal to the maximum estate tax rate (currently 55%), and there is a provision for an aggregate $1 million exemption. Due to the complexity of these rules, the Policy Owner should consult with counsel and other competent advisors regarding these taxes. - - Non-Resident Aliens Pre-death distributions from modified endowment contracts to nonresident aliens ("NRAs") are generally subject to federal income tax and tax withholding at a statutory rate of 30% of the amount of income that is distributed. The Company is required to withhold such amount from the distribution and remit it to the IRS. Distributions to certain NRAs may be subject to lower, or in certain instances zero, tax and withholding rates, if the United States has entered into an applicable treaty. However, in order to obtain the benefits of such treaty provisions, the NRA must give to the Company sufficient proof of his or her residency and citizenship in the form and manner prescribed by the IRS. For distributions, the NRA must obtain an individual taxpayer identification number from the IRS, and furnish that number to the Company prior to the distribution. If the Company does not have the proper proof of citizenship or residency and a proper individual taxpayer identification number prior to any distribution, the Company will be required to withhold 30% of the income, regardless of any treaty provision. A pre-death distribution may not be subject to withholding where the recipient sufficiently establishes to the Company that such payment is effectively connected to the recipient's conduct of a trade or business in the United States and that such payment is includable in the recipient's gross income for United States federal income tax purposes. Any such distributions may be subject to back-up withholding at the statutory rate (currently 31%) if no taxpayer identification number, or an incorrect taxpayer identification number, is provided. State and local estate, inheritance, income and other tax consequences of ownership or receipt of Policy proceeds depend on the circumstances of each Policy Owner or Beneficiary. 34 38 TAXATION OF THE COMPANY The Company is taxed as a life insurance company under the Code. Since the Variable Account is not a separate entity from the Company and its operations form a part of the Company, it will not be taxed separately as a "regulated investment company" under Sub-chapter M of the Code. Investment income and realized capital gains on the assets of the Variable Account are reinvested and taken into account in determining the value of Accumulation Units. As a result, such investment income and realized capital gains are automatically applied to increase reserves under the Policies. The Company does not initially expect to incur any federal income tax liability that would be chargeable to the Variable Account. Based upon these expectations, no charge is currently being made against the Variable Account for federal income taxes. If, however, the Company determines that on a separate company basis such taxes may be incurred, it reserves the right to assess a charge for such taxes against the Variable Account. The Company may also incur state and local taxes (in addition to premium taxes) in several states. At present, these taxes are not significant. If they increase, however, charges for such taxes may be made. TAX CHANGES The foregoing discussion, which is based on the Company's understanding of federal tax laws as they are currently interpreted by the IRS, is general and is not intended as tax advice. Recently, the Code has been subjected to numerous amendments and changes, and it is reasonable to believe that it will continue to be revised. The United States Congress has considered numerous legislative proposals that, if enacted, could change the tax treatment of the Policies. It is reasonable to believe that such proposals, and future proposals, may be enacted into law. 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) may affect the tax consequences of the Policies. If the Policy Owner, Insured, Beneficiary, or other person receiving any benefit or interest in or from the Policy is not both a resident and citizen of the United States, there may be a tax imposed by a foreign country, in addition to any tax imposed by the United States. The foreign law (including regulations, rulings, and case law) may change and impose additional taxes on the Policy, the death benefit, or other distributions and/or ownership of the Policy, or a treaty may be amended and all or part of the favorable treatment may be eliminated. Any or all of the foregoing may change 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, Nationwide Variable Account-9, MFS Variable Account, Nationwide Multi-Flex Variable Account, Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4, NACo Variable Account, Nationwide DC Variable Account and Nationwide DCVA-II, each of which is a registered investment company, 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 35 39 financial statements, the amount of policyholders' and stockholders' dividends, and the type of distribution of investments permitted. The Company operates in the highly competitive field of life insurance. There are approximately 2,300 stock, mutual and other types of insurers in the life insurance business in the United States, and a large number of them compete with the registrant in the sale of insurance policies. As is customary in insurance company groups, employees are shared with the other insurance companies in the group. In addition to its direct salaried employees, the Company shares employees with Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company. The Company does not presently own or lease any materially important physical properties when its property holdings are viewed in relation to its total assets. The Company shares Home Office, other facilities and equipment with Nationwide Mutual Insurance Company. COMPANY MANAGEMENT Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual Fire Insurance Company, Nationwide Property and Casualty Insurance Company and Nationwide General Insurance Company and their affiliated companies comprise the Nationwide Insurance Enterprise. The companies listed above have substantially common boards of directors and officers. Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of Nationwide Life Insurance Company. NFS serves as a holding company for other financial institutions. Nationwide Life Insurance Company is the sole owner of Nationwide Life and Annuity Insurance Company. Each of the directors and officers listed below is a director or officer respectively of at least one or more of the other major insurance affiliates of the Nationwide Insurance Enterprise. Messrs. McFerson, Gasper, Woodward, Fuellgraf and Weihl and Ms. Thomas are also trustees of one or more of the registered investment companies distributed by Nationwide Advisory Services, a registered broker-dealer affiliated with the Nationwide Insurance Enterprise. DIRECTORS OF THE COMPANY DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICERS WITH PRINCIPAL BUSINESS ADDRESS DEPOSITOR PRINCIPAL OCCUPATION Lewis J. Alphin Director Farm Owner and Operator (1) 519 Bethel Church Road Mount Olive, NC 28365 A. I. Bell Director Farm Owner and Operator (1) 4121 North River Road West Zanesville, OH 43701 Keith W. Eckel Director Partner, Fred W. Eckel Sons; 1647 Falls Road President, Eckel Farms, Inc. (1) Clarks Summit, PA 18411 Willard J. Engel Director Retired General Manager, Lyon County 301 East Marshall Street Co-operative Oil Company (1) Marshall, MN 44691 Fred C. Finney Director Owner and Operator, Moreland Fruit 1558 West Moreland Road Farm; Operator, Melrose Orchard (1) Wooster, OH 44691 Charles L. Fuellgraf, Jr. Director Chief Executive Officer, Fuellgraf 600 South Washington Street Electric Company (1) Butler, PA 16001 Joseph J. Gasper President and Chief Operating Officer President and Chief Operating Officer, One Nationwide Plaza and Director Nationwide Life Insurance Company and Columbus, OH 43215 Nationwide Life and Annuity Insurance Company (2)
36 40
DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICERS WITH DEPOSITOR PRINCIPAL OCCUPATION PRINCIPAL BUSINESS ADDRESS Dimon R. McFerson Chairman and Chief Executive Chairman and Chief Executive One Nationwide Plaza Officer-Nationwide Insurance Enterprise Officer-Nationwide Insurance Columbus, OH 43215 and Director Enterprise (2) David O. Miller Chairman of the Board and Director President, Owen Potato Farm, Inc.; 115 Sprague Drive Partner, M&M Enterprises (1) Hebron, OH 43025 Yvonne L. Montgomery Director Senior Vice President-General Manager Suite 1600 Southern Customer Operations for U.S. 2859 Paces Ferry Road Customer Operations, Xerox Corporation Atlanta, GA 30339 (2) C. Ray Noecker Director Owner and Operator, Noecker Farms (1) 2770 Winchester Southern S. Ashville, OH 43103 James F. Patterson Director Vice President, Pattersons, Inc.; 8765 Mulberry Road President, Patterson Farms, Inc. (1) Chesterland, OH 44026 Arden L. Shisler Director President and Chief Executive Officer, 1356 North Wenger Road K&B Transport, Inc. (1) Dalton, OH 44618 Robert L. Stewart Director Owner and Operator Sunnydale Farms and 88740 Fairview Road Mining (1) Jewett, OH 43986 Nancy C. Thomas Director Farm Owner and Operator, Da-Ma-Lor 10835 Georgetown Street NE Farms (1) Louisville, OH 44641 Harold W. Weihl Director Farm Owner and Operator, Weihl Farms 14282 King Road (1) Bowling Green, OH 43402
1) Principal Occupation for last 5 years 2) Prior to assuming this current position, held other executive management positions with the same or affiliated companies. Each of the directors is a director of the other major insurance affiliates of the Nationwide Insurance Enterprise, except Mr. Gasper who is a director only of the Company and Nationwide Life and Annuity Insurance Company. Messrs. McFerson and Gasper are directors of Nationwide Advisory Services, Inc., a registered broker-dealer. Messrs. McFerson, Miller, Patterson, Shisler and Fuellgraf are directors of Nationwide Financial Services, Inc. Messrs. Fuellgraf, McFerson, Ms. Thomas and Mr. Weihl are trustees of Nationwide Investing Foundation and Nationwide Investing Foundation III, registered investment companies. Messrs. McFerson, Gasper and Woodward are trustees of Nationwide Separate Account Trust and Nationwide Asset Allocation Trust, registered investment companies. Mr. McFerson is trustee of Financial Horizons Investment Trust and Nationwide Investing Foundation II, registered investment companies. Mr. Engel is a director of Western Cooperative Transport. 37 41
EXECUTIVE OFFICERS OF THE COMPANY OFFICERS OF THE DEPOSITOR NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR ----------------------------------- ------------------------ Robert A. Oakley Executive Vice President-Chief Financial Officer One Nationwide Plaza Columbus, OH 43215 Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer One Nationwide Plaza Columbus, OH 43215 W. Sidney Druen Senior Vice President and General Counsel and Assistant One Nationwide Plaza Secretary Columbus, OH 43215 Harvey S. Galloway, Jr. Senior Vice President and Chief Actuary, Health and Annuities One Nationwide Plaza Columbus, OH 43215 Richard A. Karas Senior Vice President - Sales and Financial Services One Nationwide Plaza Columbus, OH 43215 Susan A. Wolken Senior Vice President - Life Company Operations One Nationwide Plaza Columbus, OH 43215 Matthew S. Easley Vice President-Life Marketing and Administrative Services One Nationwide Plaza Columbus, OH 43215 Timothy E. Murphy Vice President-Strategic Marketing One Nationwide Plaza Columbus, OH 43215 R. Dennis Noice Vice President Retail Operations One Nationwide Plaza Columbus, OH 43215 Joseph P. Rath Vice President-Product and Market Compliance One Nationwide Plaza Columbus, OH 43215
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. 38 42 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, Cash Surrender Value, premiums paid and monthly charges deducted since the last report, the amounts invested in the Fixed Account and in the Variable Account and in each Sub-Account, and any Policy debt, as well as interest on the debt for the preceding year. Policy Owners will also be sent annual and semi-annual reports containing financial statements for the Variable Account as required by the 1940 Act. In addition, Policy Owners will receive statements of significant transactions, such as change in Specified Amount, change in death benefit option, changes in future premium allocation, transfers among Sub-Accounts, premium payments, loans, increase in loan principal, loan repayments, unpaid loan interest added to principal, reinstatement and termination. ADVERTISING The Company is ranked and rated by independent financial rating services, among which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of these ratings is to reflect the financial strength or claims-paying ability of the Company. The ratings are not intended to reflect the investment experience or financial strength of the Variable Account. The Company may advertise these ratings from time to time. In addition, the Company may include in certain advertisements endorsements in the form of a list of organizations, individuals or other parties which recommend the Company or the Policies. Furthermore, the Company may occasionally include in advertisements comparisons of currently taxable and tax deferred investment programs based on selected tax brackets or discussions of alternative investment vehicles and general economic conditions. YEAR 2000 COMPLIANCE ISSUES The Company has developed a plan to address issues related to the Year 2000. The problem relates to many existing computer programs using only two digits to identify a year in the date field. These programs were designed and developed without considering the impact of the upcoming change in the century. If not corrected, many computer applications could fail or create erroneous results by or at the Year 2000. The Company has been evaluating its exposure to the Year 2000 issue through a review of all of its operating systems as well as dependencies on the systems of others since 1996. The Company expects all system changes and replacements needed to achieve Year 2000 compliance to be completed by the end of 1998. Compliance testing will be completed in the first quarter of 1999. The Company charges all costs associated with these system changes as the costs are incurred. Operating expenses in 1997 include approximately $45 million on technology projects, which includes costs related to Year 2000 and the development of a new policy administration system for traditional life insurance products and other system enhancements. The Company anticipates spending a comparable amount in 1998 on technology projects, including Year 2000 initiatives. These expenses do not have an effect on the assets of the Variable Account and are not charged through to the Contract Owner. LEGAL PROCEEDINGS The Company is a party to litigation and arbitration proceedings in the ordinary course of its business, none of which is expected to have a material adverse effect on the Company. The General Distributor, NAS, is not engaged in any litigation of any material nature. In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits, relating to life insurance pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements. In February 1997, Nationwide Life Insurance Company was named as a defendant in a lawsuit filed in New York Supreme Court related to the sale of whole life policies on a "vanishing premium" basis (John H. Snyder v. Nationwide Life Insurance Co.). The plaintiff in such lawsuit seeks to represent a national class of Nationwide Life policyholders and claims unspecified compensatory and punitive damages. This lawsuit has not been certified as a class action. In April, 1997, a motion to dismiss the Snyder complaint in its entirety was filed by the defendants, and the plaintiff has opposed such motion. 39 43 In November 1997, two plaintiffs, one who was the owner of a variable life insurance contract and the other who was the owner of a variable annuity contract, commenced an action against Nationwide Life Insurance Company and the American Century group of defendants (Robert Young and David D. Distad v. Nationwide Life Insurance Company et al.). In this action, plaintiffs seek to represent a class of variable life insurance contract owners and variable annuity contract owners whom they claim were allegedly misled when purchasing these variable contracts into believing that some portion of their premiums were invested in a publicly traded mutual fund when, in fact, the premium monies were invested in a mutual fund whose shares may only be purchased by insurance companies. The complaint seeks unspecified compensatory, treble and punitive damages. In January 1998, both Nationwide Life Insurance Company and American Century filed motions to dismiss the entire complaint. Plaintiffs' counsel have opposed these motions and the federal court in Texas heard arguments on the motions to dismiss in April, 1998. This lawsuit is in an early stage and has not been certified as a class action. Nationwide Life Insurance Company intends to defend this case vigorously. There can be no assurance that any litigation relating to pricing and sales practices will not have a material adverse effect on the Company in the future. EXPERTS The audited financial statements and schedules have been included herein in reliance upon the reports of KPMG Peat Marwick LLP, independent certified public accountants, and upon the authority of said firm as experts in accounting and auditing. REGISTRATION STATEMENT A Registration Statement has been filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, with respect to the Policies offered hereby. This prospectus does not contain all the information set forth in the Registration Statement and amendments thereto and exhibits filed as a part thereof, to all of which reference is hereby made for further information concerning the Variable Account, the Company, and the Policies offered hereby. Statements contained in this prospectus as to the content of Policies and other legal instruments are summaries. For a complete statement of the terms thereof, reference is made to such instruments as filed. LEGAL OPINIONS Legal matters in connection with the Policies described herein are being passed upon by Druen, Dietrich, Reynolds & Koogler, One Nationwide Plaza, Columbus, Ohio 43215. All the members of such firm are employed by the Nationwide Mutual Insurance Company. 40 44 APPENDIX 1 ILLUSTRATIONS OF WHEN ADDITIONAL PREMIUM PAYMENTS ARE PERMITTED Example 1: A male non-tobacco, age 35, purchases a Policy with an initial premium of $25,000 and selects Death Benefit Option 1. The initial premium is treated as 100% of the Guideline Single Premium which results in a Specified Amount of $179,733. In the 12th and subsequent policy years, annual premiums of $2,177 may be paid without violating the premium limitations prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract. Additional premiums which increase the Specified Amount may be made at any time, subject to the $1,000 minimum. The Company reserves the right to require satisfactory evidence of insurability with any premium payment which increases the net amount at risk. In addition, premium payments may be made at any time if they are required to continue the Policy in force. Example 2: A male non-tobacco, age 55, purchases a Policy with an initial premium of $100,000 and selects Death Benefit Option 1. The initial premium is treated as 100% of the Guideline Single Premium which results in a Specified Amount of $306,283. In the 11th and subsequent policy years, annual premiums of $9,591 may be paid without violating the premium limitations prescribed by the Internal Revenue Service to qualify the Policy as a life insurance contract. Additional premiums which increase the Specified Amount may be made at any time, subject to the $1,000 minimum. The Company reserves the right to require satisfactory evidence of insurability with any premium payment which increases the net amount at risk. In addition, premium payments may be made at any time if they are required to continue the Policy in force. 41 45 APPENDIX 2 ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH BENEFITS The illustrations in this prospectus have been prepared to help show how values under the Policies change with investment performance. The illustrations illustrate how Cash Values, Cash Surrender Values and Death Benefits under a Policy would vary over time if the hypothetical gross investment rates of return were a uniform annual effective rate of either 0%, 6% or 12%. If the hypothetical gross investment rate of return averages 0%, 6% or 12% over a period of years, but fluctuates above or below those averages for individual years, the Cash Values, Cash Surrender Values and Death Benefits may be different. For hypothetical returns of 0% and 6%, the illustrations also illustrate when the Policies would go into default, at which time additional premium payments would be required to continue the Policy in force. The illustrations also assume there is no Policy Indebtedness, no additional premium payments are made, no Cash Values are allocated to the Fixed Account, and there are no changes in the Specified Amount or Death Benefit option. The amounts shown for the Cash Value, Cash Surrender Value and Death Benefit as of each Policy Anniversary reflect the fact that the net investment return on the assets held in the sub-accounts is lower than the gross return. This is due to the daily charges made against the assets of the sub-accounts for assuming mortality and expense risks, recovering premium taxes and providing for administrative expenses. On a current basis, these charges are equivalent to an annual effective rate of 1.30% in the first 10 policy years and 1.00% thereafter. On a guaranteed basis, these charges are equivalent to a maximum annual effective rate of 1.60% in the first 10 policy years and 1.30% thereafter. In addition, the net investment returns also reflect the deduction of Underlying Mutual Fund investment advisory fees and other expenses which are equivalent to an annual effective rate of 0.90%. 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 March 13, 1998. Taking account of the current charges for mortality and expense risks, recovering premium taxes and providing for administrative and Underlying Mutual Fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net investment experience at constant annual rates of -2.20, 3.80% and 9.80%, respectively, in policy years one through ten, and -1.90%, 4.10% and 10.10% thereafter. Taking account of guaranteed charges, gross annual rates of return of 0%, 6% and 12% correspond to net investment experience at constant annual rates of -2.50%, 3.50% and 9.50%, respectively, in policy years one through ten, and -2.20%, 3.80% and 9.80% thereafter. The illustrations also reflect the fact that the Company makes monthly charges for providing insurance protection. Current values reflect current cost of insurance charges and guaranteed values reflect the maximum cost of insurance charges guaranteed in the Policy. The values shown are for policies which are issued as standard. Policies issued on a substandard basis would result in lower Cash Values and Death Benefits than those illustrated. Death Benefit Option 1 has been assumed in all the illustrations. In addition, the illustrations reflect the fact that the Company deducts an annual administrative charge at the beginning of each Policy Year after the first. The illustrations also reflect the fact that no charges for federal or state income taxes are currently made against the Variable Account. If such a charge is made in the future, it will require a higher gross investment return than illustrated in order to produce the net after-tax returns shown in the illustrations. Upon request, the Company will furnish a comparable illustration based on the proposed Insured's age, sex, smoking classification, rating classification and premium payment requested. 42 46
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NEW YORK CURRENT VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 10,500 9,648 8,798 43,190 10,231 9,381 43,190 10,815 9,965 43,190 2 11,025 9,227 8,377 43,190 10,394 9,544 43,190 11,630 10,780 43,190 3 11,576 8,803 8,003 43,190 10,553 9,753 43,190 12,516 11,716 43,190 4 12,155 8,372 7,572 43,190 10,705 9,905 43,190 13,480 12,680 43,190 5 12,763 7,935 7,185 43,190 10,851 10,101 43,190 14,529 13,779 43,190 6 13,401 7,489 6,789 43,190 10,988 10,288 43,190 15,671 14,971 43,190 7 14,071 7,032 6,432 43,190 11,113 10,513 43,190 16,916 16,316 43,190 8 14,775 6,560 6,060 43,190 11,225 10,725 43,190 18,272 17,772 43,190 9 15,513 6,069 5,669 43,190 11,319 10,919 43,190 19,751 19,351 43,190 10 16,289 5,557 5,557 43,190 11,392 11,392 43,190 21,366 21,366 43,190 11 17,103 5,035 5,035 43,190 11,475 11,475 43,190 23,201 23,201 43,190 12 17,959 4,490 4,490 43,190 11,538 11,538 43,190 25,222 25,222 43,190 13 18,856 3,919 3,919 43,190 11,580 11,580 43,190 27,452 27,452 43,190 14 19,799 3,321 3,321 43,190 11,596 11,596 43,190 29,917 29,917 43,190 15 20,789 2,690 2,690 43,190 11,584 11,584 43,190 32,646 32,646 43,746 16 21,829 2,023 2,023 43,190 11,539 11,539 43,190 35,659 35,659 46,357 17 22,920 1,314 1,314 43,190 11,456 11,456 43,190 38,958 38,958 49,866 18 24,066 557 557 43,190 11,329 11,329 43,190 42,567 42,567 53,634 19 25,270 0 0 0 11,150 11,150 43,190 46,516 46,516 57,680 20 26,533 0 0 0 10,912 10,912 43,190 50,841 50,841 62,026 21 27,860 0 0 0 10,609 10,609 43,190 55,577 55,577 66,693 22 29,253 0 0 0 10,207 10,207 43,190 60,747 60,747 72,289 23 30,715 0 0 0 9,693 9,693 43,190 66,389 66,389 78,339 24 32,251 0 0 0 9,046 9,046 43,190 72,545 72,545 84,878 25 33,864 0 0 0 8,243 8,243 43,190 79,262 79,262 91,944 26 35,557 0 0 0 7,251 7,251 43,190 86,588 86,588 99,576 27 37,335 0 0 0 6,029 6,029 43,190 94,613 94,613 106,912 28 39,201 0 0 0 4,521 4,521 43,190 103,414 103,414 114,790 29 41,161 0 0 0 2,661 2,661 43,190 113,085 113,085 123,263 30 43,219 0 0 0 370 370 43,190 123,736 123,736 132,398
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 43 47
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NEW YORK GUARANTEED VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 10,500 9,607 8,757 43,190 10,188 9,338 43,190 10,770 9,920 43,190 2 11,025 9,091 8,241 43,190 10,247 9,397 43,190 11,472 10,622 43,190 3 11,576 8,573 7,773 43,190 10,295 9,495 43,190 12,229 11,429 43,190 4 12,155 8,050 7,250 43,190 10,330 9,530 43,190 13,046 12,246 43,190 5 12,763 7,520 6,770 43,190 10,351 9,601 43,190 13,930 13,180 43,190 6 13,401 6,981 6,281 43,190 10,355 9,655 43,190 14,885 14,185 43,190 7 14,071 6,429 5,829 43,190 10,338 9,738 43,190 15,917 15,317 43,190 8 14,775 5,861 5,361 43,190 10,297 9,797 43,190 17,033 16,533 43,190 9 15,513 5,273 4,873 43,190 10,226 9,826 43,190 18,240 17,840 43,190 10 16,289 4,659 4,659 43,190 10,122 10,122 43,190 19,547 19,547 43,190 11 17,103 4,028 4,028 43,190 10,009 10,009 43,190 21,028 21,028 43,190 12 17,959 3,360 3,360 43,190 9,853 9,853 43,190 22,642 22,642 43,190 13 18,856 2,653 2,653 43,190 9,650 9,650 43,190 24,408 24,408 43,190 14 19,799 1,899 1,899 43,190 9,390 9,390 43,190 26,343 26,343 43,190 15 20,789 1,089 1,089 43,190 9,066 9,066 43,190 28,469 28,469 43,190 16 21,829 216 216 43,190 8,667 8,667 43,190 30,813 30,813 43,190 17 22,920 0 0 0 8,181 8,181 43,190 33,404 33,404 43,190 18 24,066 0 0 0 7,590 7,590 43,190 36,263 36,263 45,692 19 25,270 0 0 0 6,876 6,876 43,190 39,380 39,380 48,831 20 26,533 0 0 0 6,017 6,017 43,190 42,770 42,770 52,180 21 27,860 0 0 0 4,988 4,988 43,190 46,462 46,462 55,754 22 29,253 0 0 0 3,762 3,762 43,190 50,467 50,467 60,056 23 30,715 0 0 0 2,307 2,307 43,190 54,814 54,814 64,680 24 32,251 0 0 0 582 582 43,190 59,530 59,530 69,650 25 33,864 0 0 0 0 0 0 64,645 64,645 74,988 26 35,557 0 0 0 0 0 0 70,193 70,193 80,722 27 37,335 0 0 0 0 0 0 76,248 76,248 86,161 28 39,201 0 0 0 0 0 0 82,870 82,870 91,985 29 41,161 0 0 0 0 0 0 90,128 90,128 98,240 30 43,219 0 0 0 0 0 0 98,112 98,112 104,979
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 44 48
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NON-NEW YORK CURRENT VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 10,500 9,662 8,812 41,661 10,246 9,396 41,661 10,831 9,981 41,661 2 11,025 9,233 8,383 41,661 10,400 9,550 41,661 11,636 10,786 41,661 3 11,576 8,801 8,001 41,661 10,550 9,750 41,661 12,513 11,713 41,661 4 12,155 8,367 7,567 41,661 10,697 9,897 41,661 13,469 12,669 41,661 5 12,763 7,928 7,178 41,661 10,838 10,088 41,661 14,510 13,760 41,661 6 13,401 7,482 6,782 41,661 10,973 10,273 41,661 15,646 14,946 41,661 7 14,071 7,028 6,428 41,661 11,098 10,498 41,661 16,885 16,285 41,661 8 14,775 6,564 6,064 41,661 11,213 10,713 41,661 18,238 17,738 41,661 9 15,513 6,085 5,685 41,661 11,314 10,914 41,661 19,715 19,315 41,661 10 16,289 5,589 5,589 41,661 11,399 11,399 41,661 21,330 21,330 41,661 11 17,103 5,089 5,089 41,661 11,500 11,500 41,661 23,168 23,168 41,661 12 17,959 4,569 4,569 41,661 11,584 11,584 41,661 25,192 25,192 41,661 13 18,856 4,028 4,028 41,661 11,650 11,650 41,661 27,425 27,425 41,661 14 19,799 3,462 3,462 41,661 11,696 11,696 41,661 29,893 29,893 41,661 15 20,789 2,869 2,869 41,661 11,717 11,717 41,661 32,620 32,620 43,711 16 21,829 2,243 2,243 41,661 11,712 11,712 41,661 35,618 35,618 46,303 17 22,920 1,582 1,582 41,661 11,675 11,675 41,661 38,899 38,899 49,790 18 24,066 877 877 41,661 11,600 11,600 41,661 42,489 42,489 53,537 19 25,270 124 124 41,661 11,481 11,481 41,661 46,420 46,420 57,561 20 26,533 (*) (*) (*) 11,313 11,313 41,661 50,725 50,725 61,884 21 27,860 (*) (*) (*) 11,088 11,088 41,661 55,440 55,440 66,528 22 29,253 (*) (*) (*) 10,780 10,780 41,661 60,589 60,589 72,101 23 30,715 (*) (*) (*) 10,377 10,377 41,661 66,211 66,211 78,129 24 32,251 (*) (*) (*) 9,863 9,863 41,661 72,349 72,349 84,648 25 33,864 (*) (*) (*) 9,218 9,218 41,661 79,049 79,049 91,696 26 35,557 (*) (*) (*) 8,415 8,415 41,661 86,360 86,360 99,314 27 37,335 (*) (*) (*) 7,420 7,420 41,661 94,370 94,370 106,638 28 39,201 (*) (*) (*) 6,187 6,187 41,661 103,157 103,157 114,504 29 41,161 (*) (*) (*) 4,662 4,662 41,661 112,811 112,811 122,964 30 43,219 (*) (*) (*) 2,782 2,782 41,661 123,442 123,442 132,083
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 45 49
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 NON-NEW YORK GUARANTEED VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 10,500 9,613 8,763 41,661 10,195 9,345 41,661 10,778 9,928 41,661 2 11,025 9,091 8,241 41,661 10,246 9,396 41,661 11,471 10,621 41,661 3 11,576 8,566 7,766 41,661 10,287 9,487 41,661 12,220 11,420 41,661 4 12,155 8,036 7,236 41,661 10,315 9,515 41,661 13,029 12,229 41,661 5 12,763 7,501 6,751 41,661 10,329 9,579 41,661 13,904 13,154 41,661 6 13,401 6,958 6,258 41,661 10,327 9,627 41,661 14,851 14,151 41,661 7 14,071 6,403 5,803 41,661 10,305 9,705 41,661 15,875 15,275 41,661 8 14,775 5,833 5,333 41,661 10,259 9,759 41,661 16,984 16,484 41,661 9 15,513 5,243 4,843 41,661 10,185 9,785 41,661 18,183 17,783 41,661 10 16,289 4,630 4,630 41,661 10,079 10,079 41,661 19,484 19,484 41,661 11 17,103 4,001 4,001 41,661 9,965 9,965 41,661 20,958 20,958 41,661 12 17,959 3,337 3,337 41,661 9,810 9,810 41,661 22,567 22,567 41,661 13 18,856 2,634 2,634 41,661 9,608 9,608 41,661 24,329 24,329 41,661 14 19,799 1,887 1,887 41,661 9,354 9,354 41,661 26,262 26,262 41,661 15 20,789 1,087 1,087 41,661 9,037 9,037 41,661 28,388 28,388 41,661 16 21,829 225 225 41,661 8,648 8,648 41,661 30,734 30,734 41,661 17 22,920 (*) (*) (*) 8,175 8,175 41,661 33,328 33,328 42,660 18 24,066 (*) (*) (*) 7,601 7,601 41,661 36,171 36,171 45,575 19 25,270 (*) (*) (*) 6,909 6,909 41,661 39,262 39,262 48,685 20 26,533 (*) (*) (*) 6,077 6,077 41,661 42,626 42,626 52,004 21 27,860 (*) (*) (*) 5,083 5,083 41,661 46,288 46,288 55,546 22 29,253 (*) (*) (*) 3,899 3,899 41,661 50,262 50,262 59,812 23 30,715 (*) (*) (*) 2,495 2,495 41,661 54,574 54,574 64,398 24 32,251 (*) (*) (*) 832 832 41,661 59,252 59,252 69,325 25 33,864 (*) (*) (*) (*) (*) (*) 64,327 64,327 74,620 26 35,557 (*) (*) (*) (*) (*) (*) 69,831 69,831 80,305 27 37,335 (*) (*) (*) (*) (*) (*) 75,838 75,838 85,697 28 39,201 (*) (*) (*) (*) (*) (*) 82,407 82,407 91,472 29 41,161 (*) (*) (*) (*) (*) (*) 89,608 89,608 97,672 30 43,219 (*) (*) (*) (*) (*) (*) 97,528 97,528 104,355
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 46 50
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 CURRENT VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 26,250 24,150 22,025 114,856 25,610 23,485 114,856 27,070 24,945 114,856 2 27,563 23,244 21,119 114,856 26,170 24,045 114,856 29,269 27,144 114,856 3 28,941 22,329 20,329 114,856 26,728 24,728 114,856 31,663 29,663 114,856 4 30,388 21,403 19,403 114,856 27,283 25,283 114,856 34,271 32,271 114,856 5 31,907 20,464 18,589 114,856 27,833 25,958 114,856 37,114 35,239 114,856 6 33,502 19,507 17,757 114,856 28,373 26,623 114,856 40,215 38,465 114,856 7 35,178 18,527 17,027 114,856 28,899 27,399 114,856 43,599 42,099 114,856 8 36,936 17,517 16,267 114,856 29,407 28,157 114,856 47,291 46,041 114,856 9 38,783 16,471 15,471 114,856 29,889 28,889 114,856 51,323 50,323 114,856 10 40,722 15,381 15,381 114,856 30,340 30,340 114,856 55,730 55,730 114,856 11 42,758 14,286 14,286 114,856 30,846 30,846 114,856 60,734 60,734 114,856 12 44,896 13,139 13,139 114,856 31,322 31,322 114,856 66,242 66,242 114,856 13 47,141 11,938 11,938 114,856 31,766 31,766 114,856 72,314 72,314 114,856 14 49,498 10,678 10,678 114,856 32,172 32,172 114,856 79,018 79,018 114,856 15 51,973 9,347 9,347 114,856 32,533 32,533 114,856 86,430 86,430 115,816 16 54,572 7,937 7,937 114,856 32,839 32,839 114,856 94,608 94,608 122,990 17 57,300 6,438 6,438 114,856 33,084 33,084 114,856 103,567 103,567 132,566 18 60,165 4,835 4,835 114,856 33,252 33,252 114,856 113,376 113,376 142,854 19 63,174 3,110 3,110 114,856 33,331 33,331 114,856 124,117 124,117 153,905 20 66,332 1,250 1,250 114,856 33,307 33,307 114,856 135,882 135,882 165,776 21 69,649 (*) (*) (*) 33,167 33,167 114,856 148,773 148,773 178,528 22 73,132 (*) (*) (*) 32,852 32,852 114,856 162,859 162,859 193,803 23 76,788 (*) (*) (*) 32,335 32,335 114,856 178,249 178,249 210,334 24 80,627 (*) (*) (*) 31,582 31,582 114,856 195,061 195,061 228,222 25 84,659 (*) (*) (*) 30,553 30,553 114,856 213,424 213,424 247,572 26 88,892 (*) (*) (*) 29,190 29,190 114,856 233,477 233,477 268,499 27 93,336 (*) (*) (*) 27,420 27,420 114,856 255,453 255,453 288,662 28 98,003 (*) (*) (*) 25,149 25,149 114,856 279,563 279,563 310,315 29 102,903 (*) (*) (*) 22,267 22,267 114,856 306,052 306,052 333,597 30 108,049 (*) (*) (*) 18,645 18,645 114,856 335,215 335,215 358,680
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 47 51
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45 GUARANTEED VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 26,250 23,986 21,861 114,856 25,439 23,314 114,856 26,893 24,768 114,856 2 27,563 22,886 20,761 114,856 25,785 23,660 114,856 28,855 26,730 114,856 3 28,941 21,772 19,772 114,856 26,108 24,108 114,856 30,974 28,974 114,856 4 30,388 20,639 18,639 114,856 26,405 24,405 114,856 33,264 31,264 114,856 5 31,907 19,484 17,609 114,856 26,671 24,796 114,856 35,740 33,865 114,856 6 33,502 18,299 16,549 114,856 26,900 25,150 114,856 38,418 36,668 114,856 7 35,178 17,077 15,577 114,856 27,084 25,584 114,856 41,314 39,814 114,856 8 36,936 15,808 14,558 114,856 27,211 25,961 114,856 44,449 43,199 114,856 9 38,783 14,478 13,478 114,856 27,271 26,271 114,856 47,841 46,841 114,856 10 40,722 13,080 13,080 114,856 27,252 27,252 114,856 51,518 51,518 114,856 11 42,758 11,635 11,635 114,856 27,224 27,224 114,856 55,675 55,675 114,856 12 44,896 10,093 10,093 114,856 27,095 27,095 114,856 60,212 60,212 114,856 13 47,141 8,443 8,443 114,856 26,855 26,855 114,856 65,178 65,178 114,856 14 49,498 6,670 6,670 114,856 26,485 26,485 114,856 70,627 70,627 114,856 15 51,973 4,750 4,750 114,856 25,961 25,961 114,856 76,618 76,618 114,856 16 54,572 2,661 2,661 114,856 25,260 25,260 114,856 83,226 83,226 114,856 17 57,300 376 376 114,856 24,351 24,351 114,856 90,539 90,539 115,890 18 60,165 (*) (*) (*) 23,193 23,193 114,856 98,577 98,577 124,207 19 63,174 (*) (*) (*) 21,739 21,739 114,856 107,322 107,322 133,080 20 66,332 (*) (*) (*) 19,937 19,937 114,856 116,838 116,838 142,542 21 69,649 (*) (*) (*) 17,729 17,729 114,856 127,197 127,197 152,637 22 73,132 (*) (*) (*) 15,048 15,048 114,856 138,440 138,440 164,743 23 76,788 (*) (*) (*) 11,819 11,819 114,856 150,639 150,639 177,754 24 80,627 (*) (*) (*) 7,945 7,945 114,856 163,876 163,876 191,735 25 84,659 (*) (*) (*) 3,298 3,298 114,856 178,237 178,237 206,755 26 88,892 (*) (*) (*) (*) (*) (*) 193,811 193,811 222,883 27 93,336 (*) (*) (*) (*) (*) (*) 210,810 210,810 238,215 28 98,003 (*) (*) (*) (*) (*) (*) 229,396 229,396 254,630 29 102,903 (*) (*) (*) (*) (*) (*) 249,769 249,769 272,248 30 108,049 (*) (*) (*) (*) (*) (*) 272,174 272,174 291,226
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 48 52
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55 CURRENT VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 105,000 96,739 88,239 306,283 102,589 94,089 306,283 108,440 99,940 306,283 2 110,250 93,383 84,883 306,283 105,137 96,637 306,283 117,585 109,085 306,283 3 115,763 89,974 81,974 306,283 107,694 99,694 306,283 127,568 119,568 306,283 4 121,551 86,501 78,501 306,283 110,252 102,252 306,283 138,476 130,476 306,283 5 127,628 82,946 75,446 306,283 112,803 105,303 306,283 150,407 142,907 306,283 6 134,010 79,293 72,293 306,283 115,336 108,336 306,283 163,474 156,474 306,283 7 140,710 75,523 69,523 306,283 117,841 111,841 306,283 177,802 171,802 306,283 8 147,746 71,608 66,608 306,283 120,302 115,302 306,283 193,535 188,535 306,283 9 155,133 67,519 63,519 306,283 122,700 118,700 306,283 210,839 206,839 306,283 10 162,889 63,229 63,229 306,283 125,021 125,021 306,283 229,907 229,907 306,283 11 171,034 58,892 58,892 306,283 127,633 127,633 306,283 251,719 251,719 306,283 12 179,586 54,277 54,277 306,283 130,163 130,163 306,283 275,838 275,838 328,247 13 188,565 49,358 49,358 306,283 132,599 132,599 306,283 302,264 302,264 356,672 14 197,993 44,099 44,099 306,283 134,926 134,926 306,283 331,200 331,200 387,504 15 207,893 38,450 38,450 306,283 137,120 137,120 306,283 362,883 362,883 420,944 16 218,287 32,346 32,346 306,283 139,149 139,149 306,283 397,573 397,573 457,209 17 229,202 25,701 25,701 306,283 140,972 140,972 306,283 435,649 435,649 492,283 18 240,662 18,410 18,410 306,283 142,534 142,534 306,283 477,469 477,469 529,991 19 252,695 10,359 10,359 306,283 143,780 143,780 306,283 523,444 523,444 570,554 20 265,330 1,439 1,439 306,283 144,661 144,661 306,283 574,048 574,048 614,231 21 278,596 (*) (*) (*) 145,132 145,132 306,283 629,829 629,829 661,320 22 292,526 (*) (*) (*) 144,926 144,926 306,283 690,887 690,887 725,432 23 307,152 (*) (*) (*) 143,931 143,931 306,283 757,697 757,697 795,582 24 322,510 (*) (*) (*) 142,010 142,010 306,283 830,766 830,766 872,304 25 338,635 (*) (*) (*) 138,970 138,970 306,283 910,637 910,637 956,169 26 355,567 (*) (*) (*) 134,551 134,551 306,283 997,885 997,885 1,047,779 27 373,346 (*) (*) (*) 128,402 128,402 306,283 1,093,114 1,093,114 1,147,770 28 392,013 (*) (*) (*) 120,049 120,049 306,283 1,196,957 1,196,957 1,256,805 29 411,614 (*) (*) (*) 108,884 108,884 306,283 1,310,077 1,310,077 1,375,581 30 432,194 (*) (*) (*) 94,130 94,130 306,283 1,433,178 1,433,178 1,504,837
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 49 53
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55 GUARANTEED VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 105,000 95,852 87,352 306,283 101,673 93,173 306,283 107,496 98,996 306,283 2 110,250 91,521 83,021 306,283 103,163 94,663 306,283 115,497 106,997 306,283 3 115,763 87,064 79,064 306,283 104,532 96,532 306,283 124,141 116,141 306,283 4 121,551 82,453 74,453 306,283 105,756 97,756 306,283 133,492 125,492 306,283 5 127,628 77,655 70,155 306,283 106,805 99,305 306,283 143,622 136,122 306,283 6 134,010 72,629 65,629 306,283 107,648 100,648 306,283 154,616 147,616 306,283 7 140,710 67,333 61,333 306,283 108,247 102,247 306,283 166,572 160,572 306,283 8 147,746 61,704 56,704 306,283 108,548 103,548 306,283 179,600 174,600 306,283 9 155,133 55,671 51,671 306,283 108,493 104,493 306,283 193,836 189,836 306,283 10 162,889 49,165 49,165 306,283 108,021 108,021 306,283 209,448 209,448 306,283 11 171,034 42,244 42,244 306,283 107,394 107,394 306,283 227,322 227,322 306,283 12 179,586 34,672 34,672 306,283 106,231 106,231 306,283 247,172 247,172 306,283 13 188,565 26,361 26,361 306,283 104,455 104,455 306,283 269,279 269,279 317,749 14 197,993 17,197 17,197 306,283 101,967 101,967 306,283 293,468 293,468 343,358 15 207,893 7,028 7,028 306,283 98,637 98,637 306,283 319,774 319,774 370,937 16 218,287 (*) (*) (*) 94,291 94,291 306,283 348,374 348,374 400,630 17 229,202 (*) (*) (*) 88,701 88,701 306,283 379,619 379,619 428,970 18 240,662 (*) (*) (*) 81,573 81,573 306,283 413,798 413,798 459,316 19 252,695 (*) (*) (*) 72,547 72,547 306,283 451,258 451,258 491,871 20 265,330 (*) (*) (*) 61,209 61,209 306,283 492,415 492,415 526,884 21 278,596 (*) (*) (*) 47,072 47,072 306,283 537,777 537,777 564,666 22 292,526 (*) (*) (*) 29,542 29,542 306,283 587,126 587,126 616,482 23 307,152 (*) (*) (*) 7,877 7,877 306,283 640,781 640,781 672,820 24 322,510 (*) (*) (*) (*) (*) (*) 699,082 699,082 734,036 25 338,635 (*) (*) (*) (*) (*) (*) 762,382 762,382 800,501 26 355,567 (*) (*) (*) (*) (*) (*) 831,040 831,040 872,592 27 373,346 (*) (*) (*) (*) (*) (*) 905,421 905,421 950,692 28 392,013 (*) (*) (*) (*) (*) (*) 985,884 985,884 1,035,178 29 411,614 (*) (*) (*) (*) (*) (*) 1,072,794 1,072,794 1,126,434 30 432,194 (*) (*) (*) (*) (*) (*) 1,166,530 1,166,530 1,224,857
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 50 54
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65 CURRENT VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 105,000 96,411 87,911 211,021 102,271 93,771 211,021 108,132 99,632 211,021 2 110,250 92,664 84,164 211,021 104,469 95,969 211,021 116,975 108,475 211,021 3 115,763 88,792 80,792 211,021 106,641 98,641 211,021 126,678 118,678 211,021 4 121,551 84,775 76,775 211,021 108,780 100,780 211,021 137,358 129,358 211,021 5 127,628 80,584 73,084 211,021 110,878 103,378 211,021 149,147 141,647 211,021 6 134,010 76,184 69,184 211,021 112,920 105,920 211,021 162,201 155,201 211,021 7 140,710 71,529 65,529 211,021 114,888 108,888 211,021 176,706 170,706 211,021 8 147,746 66,561 61,561 211,021 116,756 111,756 211,021 192,884 187,884 214,101 9 155,133 61,220 57,220 211,021 118,501 114,501 211,021 210,796 206,796 229,767 10 162,889 55,443 55,443 211,021 120,105 120,105 211,021 230,457 230,457 246,589 11 171,034 49,332 49,332 211,021 121,925 121,925 211,021 252,818 252,818 265,459 12 179,586 42,435 42,435 211,021 123,489 123,489 211,021 277,294 277,294 291,159 13 188,565 34,621 34,621 211,021 124,760 124,760 211,021 304,076 304,076 319,280 14 197,993 25,730 25,730 211,021 125,694 125,694 211,021 333,367 333,367 350,036 15 207,893 15,545 15,545 211,021 126,223 126,223 211,021 365,385 365,385 383,654 16 218,287 3,772 3,772 211,021 126,257 126,257 211,021 400,359 400,359 420,377 17 229,202 (*) (*) (*) 125,669 125,669 211,021 438,533 438,533 460,460 18 240,662 (*) (*) (*) 124,291 124,291 211,021 480,160 480,160 504,168 19 252,695 (*) (*) (*) 121,913 121,913 211,021 525,506 525,506 551,781 20 265,330 (*) (*) (*) 118,269 118,269 211,021 574,852 574,852 603,594 21 278,596 (*) (*) (*) 113,027 113,027 211,021 628,499 628,499 659,924 22 292,526 (*) (*) (*) 105,596 105,596 211,021 686,715 686,715 721,051 23 307,152 (*) (*) (*) 95,309 95,309 211,021 749,817 749,817 787,307 24 322,510 (*) (*) (*) 81,237 81,237 211,021 818,129 818,129 859,036 25 338,635 (*) (*) (*) 62,036 62,036 211,021 891,982 891,982 936,581 26 355,567 (*) (*) (*) 35,735 35,735 211,021 971,700 971,700 1,020,285 27 373,346 (*) (*) (*) (*) (*) (*) 1,059,640 1,059,640 1,102,026 28 392,013 (*) (*) (*) (*) (*) (*) 1,157,081 1,157,081 1,191,794 29 411,614 (*) (*) (*) (*) (*) (*) 1,265,587 1,265,587 1,290,898 30 432,194 (*) (*) (*) (*) (*) (*) 1,387,129 1,387,129 1,401,000
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN ANNUAL $50 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 51 55
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65 GUARANTEED VALUES 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN PREMIUMS PAID PLUS CASH CASH CASH POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT 1 105,000 95,034 86,534 211,021 100,868 92,368 211,021 106,704 98,204 211,021 2 110,250 89,719 81,219 211,021 101,432 92,932 211,021 113,852 105,352 211,021 3 115,763 84,082 76,082 211,021 101,737 93,737 211,021 121,598 113,598 211,021 4 121,551 78,062 70,062 211,021 101,741 93,741 211,021 130,038 122,038 211,021 5 127,628 71,581 64,081 211,021 101,390 93,890 211,021 139,285 131,785 211,021 6 134,010 64,533 57,533 211,021 100,607 93,607 211,021 149,475 142,475 211,021 7 140,710 56,782 50,782 211,021 99,297 93,297 211,021 160,780 154,780 211,021 8 147,746 48,149 43,149 211,021 97,330 92,330 211,021 173,422 168,422 211,021 9 155,133 38,424 34,424 211,021 94,556 90,556 211,021 187,699 183,699 211,021 10 162,889 27,369 27,369 211,021 90,802 90,802 211,021 203,946 203,946 11 171,034 14,785 14,785 211,021 86,146 86,146 211,021 222,686 222,686 233,820 12 179,586 260 260 211,021 80,087 80,087 211,021 243,073 243,073 255,226 13 188,565 0 0 0 72,333 72,333 211,021 265,238 265,238 278,500 14 197,993 0 0 0 62,500 62,500 211,021 289,323 289,323 303,789 15 207,893 0 0 0 50,057 50,057 211,021 315,472 315,472 331,246 16 218,287 0 0 0 34,257 34,257 211,021 343,835 343,835 361,027 17 229,202 0 0 0 14,056 14,056 211,021 374,561 374,561 393,289 18 240,662 0 0 0 0 0 0 407,800 407,800 428,190 19 252,695 0 0 0 0 0 0 443,702 443,702 465,887 20 265,330 0 0 0 0 0 0 482,423 482,423 506,544 21 278,596 0 0 0 0 0 0 524,126 524,126 550,332 22 292,526 0 0 0 0 0 0 568,982 568,982 597,431 23 307,152 0 0 0 0 0 0 617,167 617,167 648,026 24 322,510 0 0 0 0 0 0 668,864 668,864 702,308 25 338,635 0 0 0 0 0 0 724,248 724,248 760,460 26 355,567 0 0 0 0 0 0 783,477 783,477 822,651 27 373,346 0 0 0 0 0 0 849,021 849,021 882,982 28 392,013 0 0 0 0 0 0 921,956 921,956 949,615 29 411,614 0 0 0 0 0 0 1,003,596 1,003,596 1,023,667 30 432,194 0 0 0 0 0 0 1,095,621 1,095,621 1,106,577
ASSUMPTIONS: (1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE. (2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN ANNUAL $135 ADMINISTRATIVE EXPENSE CHARGE. (3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX. (*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN FORCE. THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER ANY PERIOD OF TIME. 52 56 APPENDIX 3 The following performance tables display historical investment results of the Underlying Mutual Fund Sub-Accounts. This information may be useful in helping potential investors in deciding which Underlying Mutual Fund sub-accounts to choose and in assessing the competence of the Underlying Mutual Funds' investment advisers. The performance figures shown should be considered in light of the investment objectives and policies, characteristics and quality of the underlying portfolios of the Underlying Mutual Funds, and the market conditions during the periods of time quoted. The performance figures should not be considered as estimates or predictions of future performance. Investment return and the principal value of the Underlying Mutual Fund sub-accounts are not guaranteed and will fluctuate so that a Policy Owner's units, when redeemed, may be worth more or less than their original cost. 53 57
FUND PERFORMANCE TABLE --------------------------------------------------------------------------------------------------------------- ANNUAL PERCENTAGE NON ANNUALIZED ANNUALIZED PERCENTAGE CHANGE PERCENTAGE CHANGE CHANGE - ------------------------------------------------------------------------------------------------------------------------------------ FUND 1 MO 1 YR 2 YRS 3 YRS. 5 YRS. INCEPTION 3 YRS. 5 YRS. INCEPTION UNDERLYING INCEPTION UNIT 1994 1995 1996 TO TO TO TO TO TO TO TO TO MUTUAL FUND DATE** VALUES 12/31/96 12/31/91 2/31/96 12/31/96 12/31/91 12/31/96 12/31/96 12/31/9 12/31/96 - ------------------------------------------------------------------------------------------------------------------------------------ American Century 05/01/91 14.3 -0.68 19.56 10.75 -2.57 10.75 32.42 31.51 29.62 61.3 9.56 5.33 8.81 VP Balanced - ------------------------------------------------------------------------------------------------------------------------------------ American Century 11/20/87 16.16 -2.44 29.41 -5.56 -3.23 -5.56 22.21 19.22 26.4 126.25 6.04 4.8 9.37 VP Capital Appreciation - ----------------------------------------------------------------------------------------------------------------------------------- American Century 05/01/94 11.75 N/A 10.77 12.92 1.94 12.92 25.08 N/A N/A 17.8 N/A N/A 6.34 VP International - ----------------------------------------------------------------------------------------------------------------------------------- American Century 05/01/96 10.14 N/A N/A N/A 0.61 N/A N/A N/A N/A 11.32 N/A N/A N/A VP Value - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Dreyfus Variable 05/02/94 9.99 N/A 59.87 18.08 -2.2 18.08 88.78 N/A N/A 83.25 N/A N/A 25.56 Investment Fund Growth & Income Fund - ----------------------------------------------------------------------------------------------------------------------------------- Dreyfus Socially 10/06/93 17.04 0.19 32.83 19.66 -3.55 19.66 58.94 59.23 N/A 70.42 16.77 N/A 17.92 Responsible Growth Fund - ----------------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock 09/29/89 16.47 -0.42 35.02 20.95 -2.15 20.95 63.3 62.62 85.51 130.6 17.59 13.16 12.21 Index Fund - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 09/06/89 20.05 -7.3 15.45 13.12 -1.57 13.12 30.59 21.06 59.71 104.27 6.58 9.82 10.25 II -Asset Manager Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 01/03/95 13.26 N/A N/A 19.73 -0.71 19.73 N/A N/A N/A 65.03 N/A N/A 28.6 II -Contrafund Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 10/09/86 24.42 5.69 33.35 12.8 -1.75 12.8 50.42 58.98 114.13 217.54 16.71 16.45 11.96 - - Equity-Income Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP Fund 10/09/86 23.77 -1.31 33.62 13.22 -3.19 13.22 51.28 49.3 89.79 259.72 14.29 13.67 13.34 - - Growth Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP Fund 09/19/85 25.2 -2.81 19.05 12.55 1.26 12.55 33.99 30.22 88.11 207.53 9.2 13.47 10.47 - - High Income Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP Fund 01/28/87 14.16 0.41 8.26 11.75 0.42 11.75 20.98 21.48 45.01 86.63 6.7 7.72 6.49 - - Overseas Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ NSAT Capital 04/15/92 17.98 -2.18 27.69 24.5 0.13 24.5 58.98 55.52 N/A 76.32 15.86 N/A 12.8 Appreciation Fund - ------------------------------------------------------------------------------------------------------------------------------------ NSAT Government 11/08/82 16.45 -4.48 17.22 2.14 -1.24 2.14 19.73 14.37 31.61 202.54 4.58 5.65 8.14 Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ NSAT Money Market 11/10/81 12.48 2.54 4.29 3.74 0.31 3.74 8.19 10.93 14.82 130.02 3.52 2.8 5.66 Fund - ------------------------------------------------------------------------------------------------------------------------------------ NSAT Small 10/23/96 13.83 N/A N/A 21.23 1.06 21.23 N/A N/A N/A 38.33 N/A N/A 31.4 Company Fund - ------------------------------------------------------------------------------------------------------------------------------------ NSAT Total Return 11/08/82 23.04 -0.23 27.43 20.26 0.03 20.26 53.25 52.9 78.72 526.54 15.2 12.31 13.85 Fund - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Neuberger & 09/10/84 17.52 -6.21 30.03 7.72 -0.69 7.72 40.07 31.37 49.7 275.91 9.52 8.4 11.36 Berman Advisers Management Trust - -Growth Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Neuberger & 09/10/84 14.09 -1.44 9.51 2.95 -0.18 2.95 12.74 11.11 21.38 127.25 3.58 3.95 6.9 Berman Advisers Management Trust - -Bond Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Neuberger & 03/22/94 17.26 N/A 34.71 27.89 0.07 27.89 72.28 N/A N/A 66.63 N/A N/A 20.21 Berman Advisers Management Trust - -Partners Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer 04/30/85 16.61 -3.2 15.49 3.44 -1.03 3.44 19.46 15.63 35.61 155.68 4.96 6.28 8.38 Variable Account Fund - Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer 11/12/90 13.27 -6.94 0.92 16.27 0.68 16.27 17.34 9.2 68.31 72.14 2.98 10.97 9.26 Variable Account Fund - Global Securities - ------------------------------------------------------------------------------------------------------------------------------------ Oppenheimer 02/09/87 18.7 -3.21 19.8 14 -0.62 14 36.56 32.18 62.73 158.51 9.75 10.23 10.08 Variable Account Fund - Multiple Strategies - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Strong Variable 05/08/92 16.13 -6.61 33.52 -0.5 -0.48 -0.5 32.85 24.07 N/A 61.34 7.45 N/A 10.85 Insurance Funds, Inc. -Discovery Fund II, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Strong Variable 10/20/95 11.14 N/A N/A 8.95 -0.91 8.95 N/A N/A N/A 11.52 N/A N/A 9.54 Insurance Funds, Inc. - -International Stock Fund II - ------------------------------------------------------------------------------------------------------------------------------------ Strong Special 05/08/92 21.08 2.26 24.2 16.62 -0.37 16.62 44.83 48.11 N/A 110.77 13.99 N/A 17.41 Fund II, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Van Eck Worldwide 09/01/89 16.58 -6.02 9.56 16.53 0.85 16.53 27.68 19.99 84.78 62.49 6.26 13.07 6.85 Insurance Trust - -Worldwide Emerging Markets Fund - ------------------------------------------------------------------------------------------------------------------------------------ Van Eck Worldwide 09/01/89 14.34 -2.59 15.79 1.19 -1.01 1.19 17.17 14.14 13.48 46.05 4.51 2.56 5.3 Insurance Trust - -Worldwide Bond Fund - ------------------------------------------------------------------------------------------------------------------------------------ Van Eck Worldwide 12/27/95 10.07 N/A N/A 25.09 0.94 25.09 N/A N/A N/A 23.83 N/A N/A 23.55 Insurance Trust - -Worldwide Hard Assets Fund - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Van Kampen 07/03/95 14.93 N/A N/A 38.71 10.94 38.71 N/A N/A N/A 49.33 N/A N/A 30.84 American Capital Life Investment Trust - American Capital Real Estate Securities Fund - ------------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------------ Warburg Pincus 06/30/95 11.57 N/A N/A 8.56 0.09 8.56 N/A N/A N/A 15.74 N/A N/A 10.29 Trust-International Equity Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Warburg Pincus 11/18/96 10.16 N/A N/A N/A -0.12 N/A N/A N/A N/A -2.55 N/A N/A N/A Trust-Post Venture Capital Portfolio - ------------------------------------------------------------------------------------------------------------------------------------ Warburg Pincus 06/30/96 13.98 N/A N/A 12.43 2.18 12.43 N/A N/A N/A 39.76 N/A N/A 25.15 Trust-Small Company Growth Portfolio - ------------------------------------------------------------------------------------------------------------------------------------
54 58 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 1.30% asset charge (and the deduction of applicable investment advisory fees and other expenses of the Underlying Mutual Funds). The total return figures shown in the Annual Percentage Change and Annualized Percentage Change columns represent annualized figures, i.e., they show the rate of growth that would have produced the corresponding cumulative return had performance been constant over the entire period quoted. The Non-Annualized Percentage Change total return figures are not annual return figures but instead represent the total percentage change in unit value over the stated periods without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO ACCOUNT THE SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY CHARGES" SECTION. THESE OTHER CHARGES INCLUDE 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 1.30% 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. 55 59
CASH VALUE PERFORMANCE TABLE ----------------------------------------------------------------------------------------------------------------- 1 Year to 2 Years to 3 Years to 5 Years to 10 Years to Inception to 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------------------------------------------------------------------------------------ FUND CASH CASH CASH CASH CASH Cash UNDERLYING INCEPTION ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM Surr. MUTUAL FUND DATE** VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE Value - ------------------------------------------------------------------------------------------------------------------------------------ American Century 05/01/91 $54,658 $50,408 $64,623 $60,373 $63,056 $59,056 $59,420 $55,670 NA NA $74,673 $71,173 VP Balanced - ----------------------------------------------------------------------------------------------------------------------------------- American Century 11/20/87 $46,568 $42,318 $59,736 $55,486 $57,206 $53,206 $58,395 $54,645 NA NA $102,271 $102,271 VP Capital Appreciation - ----------------------------------------------------------------------------------------------------------------------------------- American Century 05/01/94 $55,732 $51,482 $60,890 $56,640 NA NA NA NA NA NA $56,516 $52,516 VP International - ----------------------------------------------------------------------------------------------------------------------------------- American Century 05/01/94 NA NA NA NA NA NA NA NA NA NA $55,165 $50,915 VP Value - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Dreyfus Variable 05/02/94 $58,347 $54,097 $92,846 $88,596 NA NA NA NA NA NA $89,069 $85,069 Investment Fund Growth & Income Fund - ----------------------------------------------------------------------------------------------------------------------------------- Dreyfus Socially 10/06/93 $59,098 $54,848 $77,816 $73,566 $76,654 $72,654 NA NA NA NA $81,943 $77,943 Responsible Growth Fund - ----------------------------------------------------------------------------------------------------------------------------------- Dreyfus Stock 09/29/89 $59,728 $55,478 $79,982 $75,732 $78,281 $74,281 $86,703 $82,953 NA NA $104,768 $102,268 Index Fund - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 09/06/89 $55,832 $51,582 $63,666 $59,416 $57,768 $53,768 $74,834 $71,084 NA NA $93,347 $90,847 II -Asset Manager Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 01/03/95 $59,117 $54,867 NA NA NA NA NA NA NA NA $80,875 $76,625 II -Contrafund Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 10/09/86 $55,675 $51,425 $73,614 $69,364 $76,677 $72,677 $101,563$97,813$141,964 $141,96$140,829 $140,829 - - Equity-Income Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 10/09/86 $55,904 $51,654 $76,507 $72,257 $74,149 $70,149 $92,174 $88,424$169,144 $169,14$162,707 $162,707 - - Growth Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 09/19/85 $55,565 $51,315 $65,419 $61,169 $62,402 $58,402 $89,224 $85,474$108,810 $108,81$135,060 $135,060 - - High Income Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Fidelity VIP Fund 01/28/87 $55,157 $50,907 $58,875 $54,625 $58,133 $54,133 $67,399 $63,649 NA NA $79,118 $79,118 - - Overseas Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- NSAT Capital 04/15/92 $61,499 $57,249 $77,603 $73,353 $74,531 $70,531 NA NA NA NA $82,394 $78,644 Appreciation Fund - ----------------------------------------------------------------------------------------------------------------------------------- NSAT Government 11/08/82 $50,362 $46,112 $59,075 $54,825 $55,305 $51,305 $61,842 $58,092 $86,333 $86,333$129,204 $129,204 Bond Fund - ----------------------------------------------------------------------------------------------------------------------------------- NSAT Money Market 11/10/81 $51,179 $46,929 $52,413 $48,163 $52,860 $48,860 $52,653 $48,903 $64,711 $64,711 $92,972 $92,972 Fund - ----------------------------------------------------------------------------------------------------------------------------------- NSAT Small 10/23/95 $59,902 $55,652 NA NA NA NA NA NA NA NA $68,202 $63,952 Company Fund - ----------------------------------------------------------------------------------------------------------------------------------- NSAT Total Return 11/08/82 $59,383 $55,133 $74,893 $70,643 $73,455 $69,455 $83,535 $79,785$127,358 $127,35$287,487 $287,487 Fund - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Neuberger & 09/10/84 $53,154 $48,904 $68,535 $64,285 $62,984 $58,984 $69,644 $65,894$115,896 $115,89$170,971 $170,971 Berman Advisers Management Trust - -Growth Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Neuberger & 09/10/84 $50,775 $46,525 $54,856 $50,606 $53,072 $49,072 $56,072 $52,322 $71,419 $71,419 $97,924 $97,924 Berman Advisers Management Trust - -Bond Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Neuberger & 03/22/94 $63,183 $58,933 $84,414 $80,164 NA NA NA NA NA NA $80,362 $76,362 Berman Advisers Management Trust - -Partners Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Oppenheimer 04/30/85 $51,009 $46,759 $58,208 $53,958 $55,270 $51,270 $63,066 $59,316 $88,916 $88,916$112,121 $112,121 Variable Account Fund - Bond Fund - ----------------------------------------------------------------------------------------------------------------------------------- Oppenheimer 11/12/90 $57,407 $53,157 $57,023 $52,773 $51,951 $47,951 $79,155 $75,405 NA NA $79,021 $76,021 Variable Account Fund - Global Securities - ----------------------------------------------------------------------------------------------------------------------------------- Oppenheimer 02/09/87 $56,275 $52,025 $66,682 $62,432 $63,332 $59,332 $76,143 $72,393 NA NA $115,391 $115,391 Variable Account Fund - Multiple Strategies - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Strong Variable 05/08/92 $49,040 $44,790 $64,929 $60,679 $59,384 $55,384 NA NA NA NA $76,065 $72,315 Insurance Funds, Inc. -Discovery Fund II, Inc. - ----------------------------------------------------------------------------------------------------------------------------------- Strong Variable 10/20/95 $53,797 $49,547 NA NA NA NA NA NA NA NA $54,833 $50,583 Insurance Funds, Inc. - -International Stock Fund II - ----------------------------------------------------------------------------------------------------------------------------------- Strong Special 05/08/92 $57,573 $53,323 $70,763 $66,513 $71,223 $67,223 NA NA NA NA $100,525 $96,775 Fund II, Inc. - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide 09/01/89 $57,581 $53,331 $62,210 $57,960 $57,275 $53,275 $87,255 $83,505 NA NA $71,287 $68,787 Insurance Trust - -Worldwide Emerging Markets Fund - ----------------------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide 09/01/89 $49,891 $45,641 $57,111 $52,861 $54,572 $50,572 $51,940 $48,190 NA NA $65,263 $62,763 Insurance Trust - -Worldwide Bond Fund - ----------------------------------------------------------------------------------------------------------------------------------- Van Eck Worldwide 09/01/89 $61,825 $57,575 NA NA NA NA NA NA NA NA $61,067 $56,817 Insurance Trust - -Worldwide Hard Assets Fund - -----------------------------------------------------------------------------------------------------------------------------------
56 60
CASH VALUE PERFORMANCE TABLE ----------------------------------------------------------------------------------------------------------------- 1 Year to 2 Years to 3 Years to 5 Years to 10 Years to Inception to 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 12/31/96 - ------------------------------------------------------------------------------------------------------------------------------------ FUND CASH CASH CASH CASH CASH Cash UNDERLYING INCEPTION ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM Surr. MUTUAL FUND DATE** VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE Value - ------------------------------------------------------------------------------------------------------------------------------------ Van Kampen 12/27/95 $68,503 $64,253 NA NA NA NA NA NA NA NA $73,247 $68,997 American Capital Life Investment Trust - American Capital Real Estate Securities Fund - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus 06/30/95 $53,587 $49,337 NA NA NA NA NA NA NA NA $56,738 $52,488 Trust-International Equity Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus 11/18/96 NA NA NA NA NA NA NA NA NA NA $48,555 $44,305 Trust-Post Venture Capital Portfolio - ----------------------------------------------------------------------------------------------------------------------------------- Warburg Pincus 06/30/95 $55,521 $51,271 NA NA NA NA NA NA NA NA $68,754 $64,504 Trust-Small Company Growth Portfolio ===================------------------=======--------=========-------=======--------=======---------=======-----------------
The preceding cash value performance table shows the effect of the performance quoted on accumulated values and cash surrender values, based on a hypothetical annual premium of $50,000 for a 50 year-old male, non-tobacco simplified, with a level death benefit and an initial specified amount of $187,451.64. The cash surrender value figures reflect the deduction of all applicable Policy Charges, including a 1.30% asset charge, applicable cost of insurance charges, surrender charges, and an annual administrative charge (and the deduction of applicable investment advisory fees and other expenses of the Underlying Mutual Funds). See the "Policy Charges" section for more information about these charges. The cost of insurance charges may be higher or lower for purchasers who do not meet the profile of the hypothetical purchaser. Illustrations reflecting a potential purchaser's specific characteristics are available from the Company upon request. **The Underlying Mutual 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. 57 61 1 Independent Auditors' Report TheBoard of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide VLI Separate Account-2: We have audited the accompanying statement of assets, liabilities and contract owners' equity of Nationwide VLI Separate Account-2 as of December 31, 1997, and the related statements of operations and changes in contract owners' equity and schedules of changes in unit value for each of the years in the three year period then ended. These financial statements and schedules of changes in unit value are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules of changes in unit value based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules of changes in unit value are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures include confirmation of securities owned as of December 31, 1997, by correspondence with the transfer agents of the underlying mutual funds. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and schedules of changes in unit value referred to above present fairly, in all material respects, the financial position of Nationwide VLI Separate Account-2 as of December 31, 1997, and the results of its operations and its changes in contract owners' equity and schedules of changes in unit value for each of the years in the three year period then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Columbus, Ohio February 6, 1998 2 NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY DECEMBER 31, 1997
ASSETS: Investments at market value: American Century VP - American Century VP Balanced (ACVPBal) 450,365 shares (cost $3,528,940) ................................................... $ 3,711,009 American Century VP - American Century VP Capital Appreciation (ACVPCapAp) 1,251,568 shares (cost $13,536,259) ................................................ 12,115,182 American Century VP - American Century VP International (ACVPInt) 962,266 shares (cost $6,644,002) ................................................... 6,581,900 American Century VP - American Century VP Value (ACVPValue) 247,477 shares (cost $1,686,843) ................................................... 1,715,016 The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro) 288,951 shares (cost $6,988,377) ................................................... 7,215,109 Dreyfus Stock Index Fund (DryStkIx) 1,707,776 shares (cost $40,352,694) ................................................ 43,975,229 Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp) 15,469 shares (cost $435,161) ...................................................... 431,598 Dreyfus VIF - Growth and Income Portfolio (DryGrInc) 57,884 shares (cost $1,280,956) .................................................... 1,202,834 Fidelity VIP - Equity-Income Portfolio (FidVIPEI) 2,871,655 shares (cost $56,323,170) ................................................ 69,723,785 Fidelity VIP - Growth Portfolio (FidVIPGr) 2,020,415 shares (cost $67,005,105) ................................................ 74,957,386 Fidelity VIP - High Income Portfolio (FidVIPHI) 1,852,037 shares (cost $23,041,039) ................................................ 25,150,659 Fidelity VIP - Overseas Portfolio (FidVIPOv) 994,402 shares (cost $18,739,132) .................................................. 19,092,517 Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM) 1,569,275 shares (cost $23,423,853) ................................................ 28,262,651 Fidelity VIP-II - Contrafund Portfolio (FidVIPCon) 1,444,442 shares (cost $24,113,457) ................................................ 28,802,183 Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp) 57,717 shares (cost $1,083,502) .................................................... 1,112,204 Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt) 26,082 shares (cost $249,822) ...................................................... 252,215 Nationwide SAT - Capital Appreciation Fund (NSATCapAp) 1,025,559 shares (cost $21,432,535) ................................................ 21,752,099 Nationwide SAT - Government Bond Fund (NSATGvtBd) 792,837 shares (cost $9,071,723) ................................................... 9,022,484 Nationwide SAT - Money Market Fund (NSATMyMkt) 41,137,522 shares (cost $41,137,522) ............................................... 41,137,522
(Continued) 3 Nationwide SAT - Small Company Fund (NSATSmCo) 861,772 shares (cost $14,442,491) .......................................... 13,659,092 Nationwide SAT - Total Return Fund (NSATTotRe) 4,556,451 shares (cost $61,467,891) ........................................ 74,634,664 Neuberger &Berman AMT - Growth Portfolio (NBAMTGro) 574,343 shares (cost $16,246,741) .......................................... 17,540,438 Neuberger &Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat) 417,231 shares (cost $5,804,690) ........................................... 5,891,308 Neuberger &Berman AMT - Partners Portfolio (NBAMTPart) 1,394,479 shares (cost $26,115,621) ........................................ 28,726,274 Oppenheimer VAF - Bond Fund (OppBdFd) 740,592 shares (cost $8,732,177) ........................................... 8,820,455 Oppenheimer VAF - Global Securities Fund (OppGlSec) 774,702 shares (cost $13,493,381) .......................................... 16,555,373 Oppenheimer VAF - Growth Fund (OppGro) 19,076 shares (cost $615,472) .............................................. 618,841 Oppenheimer VAF - Multiple Strategies Fund (OppMult) 726,507 shares (cost $10,917,824) .......................................... 12,357,889 Strong Opportunity Fund II, Inc. (StOpp2) 1,170,744 shares (cost $20,723,927) ........................................ 25,405,139 Strong VIF - Strong Discovery Fund II (StDisc2) 627,226 shares (cost $7,206,442) ........................................... 7,545,529 Strong VIF - Strong International Stock Fund II (StIntStk2) 213,104 shares (cost $2,308,084) ........................................... 1,986,133 Van Eck WIT - Worldwide Bond Fund (VEWrldBd) 230,121 shares (cost $2,486,613) ........................................... 2,529,034 Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt) 218,008 shares (cost $3,213,391) ........................................... 2,398,087 Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs) 401,815 shares (cost $7,002,936) ........................................... 6,316,535 Van Kampen American Capital LIT - Morgan Stanley Real Estate Securities Portfolio (MSRESec) 480,988 shares (cost $7,935,817) ........................................... 7,623,661 Warburg Pincus Trust - International Equity Portfolio (WPIntEq) 950,953 shares (cost $11,329,279) .......................................... 9,975,497 Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap) 69,318 shares (cost $768,255) .............................................. 766,662 Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr) 947,893 shares (cost $15,514,842) .......................................... 15,621,270 ------------- Total investments ....................................................... 655,185,463 Accounts receivable .............................................................. 3,401,859 ------------- Total assets ............................................................ 658,587,322 ACCOUNTS PAYABLE .................................................................... - ------------- CONTRACT OWNERS' EQUITY (NOTE 8) .................................................... $ 658,587,322 =============
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, 1997, 1996 AND 1995
1997 1996 1995 ------------- ------------ ------------ INVESTMENT ACTIVITY: Reinvested dividends ................................ $ 9,547,366 6,387,808 4,182,333 Mortality and expense charges (note 3) Single Premium contracts issued prior to April 16, 1990 ............................. (17,545) (16,385) (15,723) Single Premium contracts issued on or after April 16, 1990 ............................. (1,003,388) (874,853) (670,173) Multiple Payment and Flexible Premium contracts (3,622,060) (2,092,228) (1,061,446) ------------- ------------ ------------ Net investment activity .......................... 4,904,373 3,404,342 2,434,991 ------------- ------------ ------------ Proceeds from mutual fund shares sold ............... 443,749,426 275,979,207 163,574,836 Cost of mutual funds sold ........................... (409,583,997) (266,008,543) (154,208,870) ------------- ------------ ------------ Realized gain on investments ..................... 34,165,429 9,970,664 9,365,966 Change in unrealized gain on investments ............ 31,280,650 12,175,328 17,134,325 ------------- ------------ ------------ Net gain on investments .......................... 65,446,079 22,145,992 26,500,291 ------------- ------------ ------------ Reinvested capital gains ............................ 19,594,720 10,584,883 2,581,875 ------------- ------------ ------------ Net increase in contract owners' equity resulting from operations ........... 89,945,172 36,135,217 31,517,157 ------------- ------------ ------------ EQUITY TRANSACTIONS: Purchase payments received from contract owners ..... 218,381,791 174,104,282 106,694,208 Surrenders .......................................... (11,960,967) (6,124,049) (4,970,867) Death benefits (note 4) ............................. (664,672) (730,700) (143,265) Policy loans (net of repayments) (note 5) ........... (9,898,715) (6,468,023) (2,529,830) Deductions for surrender charges (note 2d) .......... (1,603,674) (721,263) (364,725) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ..... (34,553,252) (24,075,896) (14,110,656) Deductions for asset charges (note 3) ............... (227,535) (20,037) -- ------------- ------------ ------------ Net increase in equity transactions ........... 159,472,976 135,964,314 84,574,865 ------------- ------------ ------------ NET CHANGE IN CONTRACT OWNERS' EQUITY .................. 249,418,148 172,099,531 116,092,022 CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ............ 409,169,174 237,069,643 120,977,621 ------------- ------------ ------------ CONTRACT OWNERS' EQUITY END OF PERIOD .................. $ 658,587,322 409,169,174 237,069,643 ============= ============ ============
See accompanying notes to financial statements. 5 NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1997, 1996 AND 1995 (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Organization and Nature of Operations The Nationwide VLI Separate Account-2 (the Account) was established pursuant to a resolution of the Board of Directors of Nationwide Life Insurance Company (the Company) on May 7, 1987. The Account has been registered as a unit investment trust under the Investment Company Act of 1940. The Company offers Modified Single Premium and Flexible Premium Variable Life Insurance Policies through the Account. The primary distribution for the contracts is through the brokerage community; however, other distributors may be utilized. (b) The Contracts Prior to December 31, 1990, only contracts without a front-end sales charge, but with a contingent deferred sales charge and certain other fees, were offered for purchase. Beginning December 31, 1990, contracts with a front-end sales charge, a contingent deferred sales charge and certain other fees, are offered for purchase. See note 2 for a discussion of policy charges, and note 3 for asset charges. Contract owners may invest in the following: Portfolios of the American Century Variable Portfolios, Inc. (American Century VP) (formerly TCI Portfolios, Inc.); American Century VP - American Century VP Balanced (ACVPBal) (formerly TCI Portfolios - TCI Balanced) American Century VP - American Century VP Capital Appreciation (ACVPCapAp) (formerly TCI Portfolios - TCI Growth) American Century VP - American Century VP International (ACVPInt) (formerly TCI Portfolios - TCI International) American Century VP - American Century VP Value (ACVPValue) (formerly TCI Portfolios - TCI Value) The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro) Dreyfus Stock Index Fund (DryStkIx) Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF); Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp) Dreyfus VIF - Growth and Income Portfolio (DryGrInc) Portfolios of the Fidelity Variable Insurance Products Fund (Fidelity VIP); Fidelity VIP - Equity-Income Portfolio (FidVIPEI) Fidelity VIP - Growth Portfolio (FidVIPGr) Fidelity VIP - High Income Portfolio (FidVIPHI) Fidelity VIP - Overseas Portfolio (FidVIPOv) Portfolios of the Fidelity Variable Insurance Products Fund II (Fidelity VIP-II); Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM) Fidelity VIP-II - Contrafund Portfolio (FidVIPCon) Portfolio of the Fidelity Variable Insurance Products Fund III (Fidelity VIP-III); Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp) 6 Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan Stanley); Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt) Funds of the Nationwide Separate Account Trust (Nationwide SAT) (managed for a fee by an affiliated investment advisor); Nationwide SAT - Capital Appreciation Fund (NSATCapAp) Nationwide SAT - Government Bond Fund (NSATGvtBd) Nationwide SAT - Money Market Fund (NSATMyMkt) Nationwide SAT - Small Company Fund (NSATSmCo) Nationwide SAT - Total Return Fund (NSATTotRe) Portfolios of the Neuberger & Berman Advisers Management Trust (Neuberger & Berman AMT); Neuberger & Berman AMT - Growth Portfolio (NBAMTGro) Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat) Neuberger & Berman AMT - Partners Portfolio (NBAMTPart) Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF); Oppenheimer VAF - Bond Fund (OppBdFd) Oppenheimer VAF - Global Securities Fund (OppGlSec) Oppenheimer VAF - Growth Fund (OppGro) Oppenheimer VAF - Multiple Strategies Fund (OppMult) Strong Opportunity Fund II, Inc. (StOpp2) (formerly Strong Special Fund II) Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF); Strong VIF - Strong Discovery Fund II (StDisc2) Strong VIF - Strong International Stock Fund II (StIntStk2) Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT); Van Eck WIT - Worldwide Bond Fund (VEWrldBd) Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt) Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs) (formerly Van Eck WIT - Gold and Natural Resources Fund) Portfolio of the Van Kampen American Capital Life Investment Trust (Van Kampen American Capital LIT); Van Kampen American Capital LIT - Morgan Stanley Real Estate Securities Portfolio (MSRESec) (formerly Van Kampen American Capital LIT - Real Estate Securities Fund) Portfolios of the Warburg Pincus Trust; Warburg Pincus Trust - International Equity Portfolio (WPIntEq) Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap) Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr) At December 31, 1997, contract owners have invested in all of the above funds. The contract owners' equity is affected by the investment results of each fund, equity transactions by contract owners and certain contract expenses (see notes 2 and 3). The accompanying financial statements include only contract owners' purchase payments pertaining to the variable portions of their contracts and exclude any purchase payments for fixed dollar benefits, the latter being included in the accounts of the Company. (c) Security Valuation, Transactions and Related Investment Income The market value of the underlying mutual funds is based on the closing net asset value per share at December 31, 1997. Fund purchases and sales are accounted for on the trade date (date the order to buy or sell is executed). The cost of investments sold is determined on a specific identification basis, and dividends (which include capital gain distributions) are accrued as of the ex-dividend date. (d) Federal Income Taxes Operations of the Account form a part of, and are taxed with, operations of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code. The Company does not provide for income taxes within the Account. Taxes are the responsibility of the contract owner upon termination or withdrawal. 7 (e) Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (f) Reclassifications Certain 1996 and 1995 amounts have been reclassified to conform with the current period presentation. (2) POLICY CHARGES (a) Deductions from Premiums For single premium contracts, no deduction is made from any premium at the time of payment. On multiple payment contracts and flexible premium contracts, the Company deducts a charge for state premium taxes equal to 2.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 3.5% of each premium payment. On last survivor flexible premium contracts, the Company deducts a charge for state premium taxes equal to 3.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 5% of each premium payment during the first ten years and 1.5% of each premium payment thereafter. The Company may at its sole discretion reduce this sales loading. (b) Cost of Insurance A cost of insurance charge is assessed monthly against each contract by liquidating units. The amount of the charge is based upon age, sex, rate class and net amount at risk (death benefit less total contract value). For last survivor flexible premium contracts, the monthly cost of insurance is determined in a manner that reflects the anticipated mortality of the two insureds and the fact that the death benefit is not payable until the death of the second insured policyholder. (c) Administrative Charges An administrative charge is assessed against each contract to recover policy maintenance, accounting, record keeping and other administrative expenses and is assessed against each contract by liquidating units. For single premium contracts, the Company deducts an annual administrative charge which is determined as follows: Contracts issued prior to April 16, 1990: Purchase payments totalling less than $25,000 - $10/month Purchase payments totalling $25,000 or more - none Contracts issued on or after April 16, 1990: Purchase payments totalling less than $25,000 - $90/year ($65/year in New York) Purchase payments totalling $25,000 or more - $50/year For multiple payment contracts, the Company currently deducts a monthly administrative charge of $5 (may deduct up to $7.50, maximum). For flexible premium contracts, the Company currently deducts a monthly administrative charge of $12.50 during the first policy year and $5 per month thereafter (may deduct up to $7.50, maximum). Additionally, the Company deducts an increase charge of $2.04 per year per $1,000 applied to any increase in the specified amount during the first 12 months after the increase becomes effective. 8 For modified single premium contracts, the monthly charge is equal to an annual rate of .30% multiplied by the policy's cash value. For policy years 11 and later, this monthly charge is reduced to an annual rate of 0.15% of the policy's cash value. The monthly charge is subject to a $10 minimum. For last survivor flexible premium contracts, the Company deducts a monthly administrative charge equal to the sum of the policy charge and the basic coverage charge. For policy years one through ten the policy charge is $10. Additionally, there is a $0.04 per $1000 basic coverage charge (not less than $20 or more than $80 per policy). For policy years eleven and after, the policy charge is $5. Additionally, there is a $0.02 per $1000 basic coverage charge (not less than $10 or more than $40 per policy). Additionally, the Company deducts a monthly increase charge of $2.40 per $1000 applied to any increase in the specified amount during the first 12 months after the increase becomes effective. The charge may be raised to $3.60 per $1000 of increase per year at the Company's discretion. (d) Surrender Charges Policy surrenders result in a redemption of the contract value from the Account and payment of the surrender proceeds to the contract owner or designee. The surrender proceeds consist of the contract value, less any outstanding policy loans, and less a surrender charge, if applicable. The charge is determined according to contract type. For single premium contracts, the charge is determined based upon a specified percentage of the original purchase payment. For single premium contracts issued prior to April 16, 1990, the charge is 8% in the first year and declines to 0% after the ninth year. For single premium contracts issued on or after April 16, 1990, the charge is 8.5% in the first year, and declines to 0% after the ninth year. For multiple payment contracts and flexible premium contracts, the amount charged is based upon a specified percentage of the initial surrender charge, which varies by issue age, sex and rate class. The charge is 100% of the initial surrender charge in the first year, declining to 0% after the ninth year. For modified single premium contracts, the amount charged is based on the original purchase payment. The charge is 10% in the first year, declining to 0% in the ninth year. For last survivor flexible premium contracts, the charge is 100% of the initial surrender charge, declining to 0% in the fourteenth year if the average issue age is 74 or less. The charge is 100% of the initial surrender charge, declining to 0% in the ninth year if the average issue age is 75 or greater. For last survivor flexible payment contracts, the initial surrender charge is comprised of two components, an underwriting surrender charge and a sales surrender charge. The Company may waive the surrender charge for certain contracts in which the sales expenses normally associated with the distribution of a contract are not incurred. (3) ASSET CHARGES For single premium contracts, the Company deducts a charge from the contract to cover mortality and expense risk charges related to operations, and to recover policy maintenance and premium tax charges. For contracts issued prior to April 16, 1990, the charge is equal to an annual rate of .95% during the first ten policy years, and .50% thereafter. A reduction of charges on these contracts is possible in policy years six through ten for those contracts achieving certain investment performance criteria. For single premium contracts issued on or after April 16, 1990, the charge is equal to an annual rate of 1.30% during the first ten policy years, and 1.00% thereafter. For multiple payment contracts and flexible premium contracts, the Company deducts a charge equal to an annual rate of .80%, with certain exceptions, to cover mortality and expense risk charges related to operations. The above charges are assessed through the daily unit value calculation. For modified single premium contracts, the Company deducts an annual rate of .90% charged against the cash value of the contracts. This charge is assessed monthly against each contract by liquidating units. For last survivor flexible premium contracts, the Company deducts an annual rate of .80% in policy years one through ten. This charge is assessed monthly by liquidating units. In policy years eleven and greater, the Company deducts an annual rate of .80% if the cash value of the contract is less than $100,000. If the cash value is greater than or equal to $100,000, the Company reduces the annual asset fee rate to .30%. 9 (4) DEATH BENEFITS Death benefits result in a redemption of the contract value from the Account and payment of the death benefit proceeds, less any outstanding policy loans (and policy charges), to the legal beneficiary. For last survivor flexible premium contracts, the proceeds are payable on the death of the last surviving insured. The excess of the death benefit proceeds over the contract value on the date of death is paid by the Company's general account. (5) POLICY LOANS (NET OF REPAYMENTS) Contract provisions allow contract owners to borrow up to 90% (50% during first year of single and modified single premium contracts) of a policy's cash surrender value. For single premium contracts issued prior to April 16, 1990, 6.5% interest is due and payable annually in advance. For single premium contracts issued on or after April 16, 1990, multiple payment, flexible premium, modified single and last survivor flexible premium contracts, 6% interest is due and payable in advance on the policy anniversary when there is a loan outstanding on the policy. At the time the loan is granted, the amount of the loan is transferred from the Account to the Company's general account as collateral for the outstanding loan. Collateral amounts in the general account are credited with the stated rate of interest in effect at the time the loan is made, subject to a guaranteed minimum rate. Loan repayments result in a transfer of collateral, including interest, back to the Account. (6) RELATED PARTY TRANSACTIONS The Company performs various services on behalf of the Mutual Fund Companies in which the Account invests and may receive fees for the services performed. These services include, among other things, shareholder communications, preparation, postage, fund transfer agency and various other record keeping and customer service functions. These fees are paid to an affiliate of the Company. (7) SCHEDULE I Schedule I presents the components of the change in the unit values, which are the basis for contract owners' equity. This schedule is presented for each series, as applicable, in the following format: - Beginning unit value - Jan. 1 - Reinvested capital gains and dividends (This amount reflects the increase in the unit value due to capital gain and dividend distributions from the underlying mutual funds.) - Unrealized gain (loss) (This amount reflects the increase (decrease) in the unit value resulting from the market appreciation (depreciation) of the underlying mutual funds.) - Asset charges (This amount reflects the decrease in the unit value due to the charges discussed in note 3.) - Ending unit value - Dec. 31 - Percentage increase (decrease) in unit value. 10 (8) COMPONENTS OF CONTRACT OWNERS' EQUITY The following is a summary of contract owners' equity at December 31, 1997, for each product in the accumulation phase.
Contract owners' equity represented by: ANNUAL UNITS UNIT VALUE RETURN --------- --------- -------- Single Premium contracts issued prior to April 16, 1990: American Century VP - American Century VP Capital Appreciation .......................... 8,329 $23.049846 $ 191,982 (4)% Dreyfus Stock Index Fund ............................ 9,956 21.945853 218,493 32% Fidelity VIP - Equity-Income Portfolio .............. 6,812 37.884780 258,071 27% Fidelity VIP - Growth Portfolio ..................... 5,177 42.050483 217,695 22% Fidelity VIP - High Income Portfolio ................ 3,493 28.548032 99,718 17% Fidelity VIP - Overseas Portfolio ................... 5,108 21.717871 110,935 11% Fidelity VIP-II - Asset Manager Portfolio ........... 1,203 24.530415 29,510 20% Fidelity VIP-II - Contrafund Portfolio .............. 3,331 16.387248 54,586 23% Nationwide SAT - Capital Appreciation Fund ........................ 2,373 24.356996 57,799 33% Nationwide SAT - Government Bond Fund ............................. 2,159 21.554629 46,536 9% Nationwide SAT - Money Market Fund .................. 9,301 15.508767 144,247 4% Nationwide SAT - Small Company Fund ................. 124 16.146794 2,002 16% Nationwide SAT - Total Return Fund .................. 2,904 34.253930 99,473 28% Neuberger &Berman AMT - Growth Portfolio ................................. 5,113 31.739871 162,286 28% Neuberger &Berman AMT - Limited Maturity Bond Portfolio .................. 5,557 17.375997 96,558 6% Neuberger & Berman AMT - Partners Portfolio ............................... 2,379 22.629887 53,837 30% Strong Opportunity Fund II, Inc. .................... 456 26.626359 12,142 24% Van Eck WIT - Worldwide Bond Fund ................... 22 14.891060 328 1% Van Eck WIT - Worldwide Hard Assets Fund ....................... 5,526 14.622970 80,807 (3)% Van Kampen American Capital LIT - Morgan Stanley Real Estate Securities Portfolio ............................. 4,138 18.062622 74,743 20% Warburg Pincus Trust - International Equity Portfolio ................... 1,792 11.264405 20,186 (3)% Warburg Pincus Trust - Small Company Growth Portfolio ................... 134 16.093971 2,157 15% Single Premium contracts issued on or after April 16, 1990: American Century VP - American Century VP Balanced ..................... 38,245 16.350628 625,330 14% American Century VP - American Century VP Capital Appreciation .......................... 129,674 15.434921 2,001,508 (5)%
(Continued) 11 American Century VP - American Century VP International .... 109,065 13.757328 1,500,443 17% American Century VP - American Century VP Value ............ 36,293 12.622928 458,124 24% The Dreyfus Socially Responsible Growth Fund, Inc. .................... 27,923 21.605205 603,282 27% Dreyfus Stock Index Fund ................ 252,267 21.622115 5,454,546 31% Dreyfus VIF - Capital Appreciation Portfolio ....... 8,365 10.192453 85,260 2%(a) Dreyfus VIF - Growth and Income Portfolio .......... 11,510 11.456116 131,860 15% Fidelity VIP - Equity-Income Portfolio .. 525,933 30.880183 16,240,907 26% Fidelity VIP - Growth Portfolio ......... 325,852 28.978553 9,442,719 22% Fidelity VIP - High Income Portfolio .... 160,493 29.267460 4,697,222 16% Fidelity VIP - Overseas Portfolio ....... 310,985 15.587449 4,847,463 10% Fidelity VIP-II - Asset Manager Portfolio 293,986 23.873730 7,018,542 19% Fidelity VIP-II - Contrafund Portfolio .. 257,262 16.244815 4,179,174 23% Fidelity VIP-III - Growth Opportunities Portfolio ....... 31,619 10.932562 345,677 9%(a) Morgan Stanley - Emerging Markets Debt Portfolio ...... 5,443 9.810873 53,401 (2)%(a) Nationwide SAT - Capital Appreciation Fund ............ 71,279 23.875030 1,701,788 33% Nationwide SAT - Government Bond Fund ................. 255,535 17.806978 4,550,306 8% Nationwide SAT - Money Market Fund ...... 1,051,590 12.964662 13,633,509 4% Nationwide SAT - Small Company Fund ..... 79,580 16.023638 1,275,161 16% Nationwide SAT - Total Return Fund ...... 149,445 29.430261 4,398,205 28% Neuberger &Berman AMT - Growth Portfolio ..................... 135,697 22.311330 3,027,581 27% Neuberger &Berman AMT - Limited Maturity Bond Portfolio ...... 169,876 14.844266 2,521,685 5% Neuberger &Berman AMT - Partners Portfolio ................... 233,445 22.361130 5,220,094 30% Oppenheimer VAF - Bond Fund ............. 89,920 17.910876 1,610,546 8% Oppenheimer VAF - Global Securities Fund ............... 113,733 16.036486 1,823,878 21% Oppenheimer VAF - Growth Fund ........... 10,788 10.428297 112,500 4%(a) Oppenheimer VAF - Multiple Strategies Fund ............. 152,543 21.638756 3,300,841 16% Strong Opportunity Fund II, Inc. ........ 132,285 26.101254 3,452,804 24% Strong VIF - Strong Discovery Fund II ... 68,152 17.738866 1,208,939 10% Strong VIF - Strong International Stock Fund II ... 40,251 9.511045 382,829 (15)% Van Eck WIT - Worldwide Bond Fund ....... 45,566 14.492332 660,358 1% Van Eck WIT - Worldwide Emerging Markets Fund ...... 35,382 8.793232 311,122 (13)% Van Eck WIT - Worldwide Hard Assets Fund ........... 142,782 16.093994 2,297,933 (3)%
12 Van Kampen American Capital LIT - Morgan Stanley Real Estate Securities Portfolio ................. 98,406 17.905659 1,762,024 20% Warburg Pincus Trust - International Equity Portfolio ....... 134,117 11.166430 1,497,608 (4)% Warburg Pincus Trust - Post Venture Capital Portfolio ....... 20,440 11.370593 232,415 12% Warburg Pincus Trust - Small Company Growth Portfolio ....... 175,452 15.954033 2,799,167 14% Multiple Payment contracts and Flexible Premium contracts: American Century VP - American Century VP Balanced ......... 162,980 16.822481 2,741,728 15% American Century VP - American Century VP Capital Appreciation .............. 655,176 14.709822 9,637,522 (4)% American Century VP - American Century VP International .... 333,719 13.994328 4,670,173 18% American Century VP - American Century VP Value ............ 81,237 12.687534 1,030,697 25% The Dreyfus Socially Responsible Growth Fund, Inc. .................... 275,028 22.067304 6,069,126 27% Dreyfus Stock Index Fund ................ 1,577,410 22.086039 34,838,739 32% Dreyfus VIF - Capital Appreciation Portfolio ....... 33,449 10.216196 341,722 2%(a) Dreyfus VIF - Growth and Income Portfolio .......... 74,022 11.514756 852,345 15% Fidelity VIP - Equity-Income Portfolio .. 1,533,661 32.007773 49,089,073 27% Fidelity VIP - Growth Portfolio ......... 2,133,432 29.627929 63,209,172 22% Fidelity VIP - High Income Portfolio .... 660,090 27.535006 18,175,582 17% Fidelity VIP - Overseas Portfolio ....... 801,447 16.959418 13,592,075 11% Fidelity VIP-II - Asset Manager Portfolio 930,767 21.747656 20,242,001 20% Fidelity VIP-II - Contrafund Portfolio .. 1,351,683 16.448700 22,233,428 23% Fidelity VIP-III - Growth Opportunities Portfolio ....... 55,769 10.958018 611,118 10%(a) Morgan Stanley - Emerging Markets Debt Portfolio ...... 16,674 9.833749 163,968 (2)%(a) Nationwide SAT - Capital Appreciation Fund ............ 755,171 24.563746 18,549,829 33% Nationwide SAT - Government Bond Fund ................. 237,476 16.735906 3,974,376 9% Nationwide SAT - Money Market Fund ...... 1,823,184 12.754301 23,253,438 4% Nationwide SAT - Small Company Fund ..... 690,077 16.199871 11,179,158 16% Nationwide SAT - Total Return Fund ...... 2,342,232 28.233403 66,129,180 28% Neuberger &Berman AMT - Growth Portfolio ..................... 628,860 22.117203 13,908,624 28% Neuberger &Berman AMT - Limited Maturity Bond Portfolio ...... 178,356 14.349688 2,559,353 6%
(Continued) 13 Neuberger &Berman AMT - Partners Portfolio ................ 928,663 22.746051 21,123,416 30% Oppenheimer VAF - Bond Fund .......... 381,236 17.086434 6,513,964 8% Oppenheimer VAF - Global Securities Fund ............ 855,620 16.380762 14,015,708 21% Oppenheimer VAF - Growth Fund ........ 40,779 10.452595 426,246 5%(a) Oppenheimer VAF - Multiple Strategies Fund .......... 387,094 21.450954 8,303,536 16% Strong Opportunity Fund II, Inc. ..... 791,884 26.851737 21,263,461 24% Strong VIF - Strong Discovery Fund II 337,867 18.249145 6,165,784 11% Strong VIF - Strong International Stock Fund II 140,532 9.615755 1,351,321 (14)% Van Eck WIT - Worldwide Bond Fund .... 121,423 13.690999 1,662,402 2% Van Eck WIT - Worldwide Emerging Markets Fund ... 222,956 8.838307 1,970,554 (12)% Van Eck WIT - Worldwide Hard Assets Fund ........ 212,577 17.834480 3,791,200 (2)% Van Kampen American Capital LIT - Morgan Stanley Real Estate Securities Portfolio .............. 275,704 18.130321 4,998,602 21% Warburg Pincus Trust - International Equity Portfolio .... 651,598 11.306660 7,367,397 (3)% Warburg Pincus Trust - Post Venture Capital Portfolio .... 44,199 11.428806 505,142 12% Warburg Pincus Trust - Small Company Growth Portfolio .... 712,489 16.154327 11,509,780 15% Modified Single Premium contracts and Last Survivor Flexible Premium contracts: American Century VP - American Century VP Balanced ...... 27,206 12.659036 344,402 16% American Century VP - American Century VP Capital Appreciation ........... 32,542 8.821378 287,065 (3)% American Century VP - American Century VP International . 32,515 12.781185 415,580 19% American Century VP - American Century VP Value ......... 17,691 12.791587 226,296 26% The Dreyfus Socially Responsible Growth Fund, Inc. ................. 37,804 14.359114 542,832 28% Dreyfus Stock Index Fund ............. 228,273 15.236658 3,478,118 33% Dreyfus VIF - Capital Appreciation Portfolio .... 450 10.254291 4,614 3%(a) Dreyfus VIF - Growth and Income Portfolio ....... 18,834 11.609215 218,648 16% Fidelity VIP - Equity-Income Portfolio 299,539 13.822981 4,140,522 28% Fidelity VIP - Growth Portfolio ...... 162,254 12.898986 2,092,912 23% Fidelity VIP - High Income Portfolio . 171,832 12.743794 2,189,792 18% Fidelity VIP - Overseas Portfolio .... 45,600 11.900892 542,681 12%
14 Fidelity VIP-II - Asset Manager Portfolio.. 73,280 13.298253 974,496 21% Fidelity VIP-II - Contrafund Portfolio .... 167,595 13.965921 2,340,619 24% Fidelity VIP-III - Growth Opportunities Portfolio ......... 13,840 10.998857 152,224 10%(a) Morgan Stanley - Emerging Markets Debt Portfolio ........ 3,497 9.870449 34,517 (1)%(a) Nationwide SAT - Capital Appreciation Fund .............. 92,414 15.614947 1,443,040 34% Nationwide SAT - Government Bond Fund ................... 38,575 11.711522 451,772 10% Nationwide SAT - Money Market Fund ........ 680,581 10.882768 7,406,605 5% Nationwide SAT - Small Company Fund ....... 99,062 12.350345 1,223,450 17% Nationwide SAT - Total Return Fund ........ 270,928 14.813042 4,013,268 29% Neuberger & Berman AMT - Growth Portfolio ....................... 35,081 12.732630 446,673 29% Neuberger & Berman AMT - Limited Maturity Bond Portfolio ........ 63,831 11.183579 713,859 7% Neuberger & Berman AMT - Partners Portfolio ..................... 154,752 15.062681 2,330,980 31% Oppenheimer VAF - Bond Fund ............... 60,188 11.629634 699,964 9% Oppenheimer VAF - Global Securities Fund ................. 53,741 13.263226 712,779 22% Oppenheimer VAF - Growth Fund ............. 7,635 10.491590 80,103 5%(a) Oppenheimer VAF - Multiple Strategies Fund ............... 58,544 12.821215 750,605 17% Strong Opportunity Fund II, Inc. .......... 50,153 13.507426 677,438 25% Strong VIF - Strong Discovery Fund II ..... 15,515 11.010302 170,825 11% Strong VIF - Strong International Stock Fund II ..... 28,984 8.695226 252,022 (14)% Van Eck WIT - Worldwide Bond Fund ......... 19,142 10.767851 206,118 2% Van Eck WIT - Worldwide Emerging Markets Fund ........ 13,242 8.910909 117,998 (12)% Van Eck WIT - Worldwide Hard Assets Fund ............. 14,793 9.887286 146,263 (2)% Van Kampen American Capital LIT - Morgan Stanley Real Estate Securities Portfolio ................... 47,746 16.610019 793,062 21% Warburg Pincus Trust - International Equity Portfolio ......... 112,574 9.710827 1,093,187 (2)% Warburg Pincus Trust - Post Venture Capital Portfolio ......... 2,527 11.522579 29,118 13% Warburg Pincus Trust - Small Company Growth Portfolio ......... 116,237 11.365509 1,321,093 16% ======= ========= ------------- $ 658,587,322 =============
(a) This investment option was not being utilized for the entire period. 15 Schedule I NATIONWIDE VLI SEPARATE ACCOUNT-2 Single Premium Contracts Issued Prior to April 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE Years Ended December 31, 1997, 1996 and 1995
ACVPCapAp DryStkIx FidVIPEI FidVIPGr FidVIPHI FidVIPOv ------------ ------------ ------------ ------------ ------------ ------------ 1997*** Beginning unit value - Jan. 1 $ 24.053649 16.663330 29.854628 34.379126 24.493313 19.654083 ------------ ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .485163 .958001 3.077613 1.268399 1.954453 1.709218 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) (1.263148) 4.511423 5.277194 6.771006 2.351846 .559210 ------------ ------------ ------------ ------------ ------------ ------------ Asset charges (.225818) (.186901) (.324655) (.368048) (.251580) (.204640) ------------ ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 23.049846 21.945853 37.884780 42.050483 28.548032 21.717871 ------------ ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value* (4)% 32% 27% 22% 17% 11% ============ ============ ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 $ 25.381408 ** 26.373971 30.259267 21.685282 17.526172 ------------ ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends 2.847171 1.217030 2.174262 1.977825 .431349 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) (3.934619) 2.528645 2.256603 1.050520 1.872575 ------------ ------------ ------------ ------------ ------------ ------------ Asset charges (.240311) (.265018) (.311006) (.220314) (.176013) ------------ ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 24.053649 29.854628 34.379126 24.493313 19.654083 ------------ ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value* (5)% 13% 14% 13% 12% ============ ============ ============ ============ ============ ============ 1995 Beginning unit value - Jan. 1 $ 19.544976 ** 19.708533 22.566466 18.151674 16.131866 ------------ ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .022491 1.542607 .124738 1.314664 .123427 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) 6.032555 5.341041 7.828480 2.410020 1.428229 ------------ ------------ ------------ ------------ ------------ ------------ Asset charges (.218614) (.218210) (.260417) (.191076) (.157350) ------------ ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 25.381408 26.373971 30.259267 21.685282 17.526172 ------------ ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value* 30% 34% 34% 19% 9% ============ ============ ============ ============ ============ ============
FidVIPAM FidVIPCon NSATCapAp NSATGvtBd ------------ ------------ ------------ ------------ 1997*** Beginning unit value - Jan. 1 20.525705 13.326381 18.283070 19.842234 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends 2.507226 .410019 .742935 1.267003 ------------ ------------ ------------ ------------ Unrealized gain (loss) 1.712461 2.792665 5.535524 .639911 ------------ ------------ ------------ ------------ Asset charges (.214977) (.141817) (.204533) (.194519) ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 24.530415 16.387248 24.356996 21.554629 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value* 20% 23% 33% 9% ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 18.081878 ** ** 19.357639 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends 1.189904 1.200383 ------------ ------------ ------------ ------------ Unrealized gain (loss) 1.435663 (.533024) ------------ ------------ ------------ ------------ Asset charges (.181740) (.182764) ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 20.525705 19.842234 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value* 14% 3% ============ ============ ============ ============ 1995 Beginning unit value - Jan. 1 15.607540 ** ** 16.457035 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .327932 1.167149 ------------ ------------ ------------ ------------ Unrealized gain (loss) 2.304058 1.903991 ------------ ------------ ------------ ------------ Asset charges (.157652) (.170536) ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 18.081878 19.357639 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value* 16% 18% ============ ============ ============ ============
* An annualized rate of return cannot be determined as asset charges do not include the policy charges discussed in note 2. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized. 16 Schedule I, continued NATIONWIDE VLI SEPARATE ACCOUNT-2 Single Premium Contracts Issued Prior to April 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE Years Ended December 31, 1997, 1996 and 1995
NSATMyMkt NSATSmCo NSATTotRe NBAMTGro NBAMTLMat NBAMTPart ------------ ------------ ------------ ------------ ------------ ------------ 1997*** Beginning unit value - Jan. 1 $ 14.875178 13.890860 26.717684 24.838185 16.433880 17.406201 ------------ ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .778864 .440845 1.558497 2.183777 .969363 .864780 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) .000000 1.957974 6.272453 4.993139 .133106 4.551693 ------------ ------------ ------------ ------------ ------------ ------------ Asset charges (.145275) (.142885) (.294704) (.275230) (.160352) (.192787) ------------ ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 15.508767 16.146794 34.253930 31.739871 17.375997 22.629887 ------------ ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) 4% 16% 28% 28% 6% 30% ============ ============ ============ ============ ============ ============ Beginning unit value - Jan. 1 $ 14.287454 ** 22.138653 22.976381 15.906671 ** ------------ ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .727569 1.479674 2.084651 1.338753 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) .000000 3.328301 .004126 (.659070) ------------ ------------ ------------ ------------ ------------ ------------ Asset charges (.139845) (.228944) (.226973) (.152474) ------------ ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 14.875178 26.717684 24.838185 16.433880 ------------ ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) 4% 21% 8% 3% ============ ============ ============ ============ ============ ============ 1995 Beginning unit value - Jan. 1 $ 13.652006 ** 17.312690 17.608267 14.475203 ** ------------ ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .768745 1.720678 .623265 .804090 ------------ ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) .000000 3.293404 4.945641 .771696 ------------ ------------ ------------ ------------ ------------ ------------ Asset charges (.133297) (.188119) (.200792) (.144318) ------------ ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 14.287454 22.138653 22.976381 15.906671 ------------ ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) 5% 28% 30% 10% ============ ============ ============ ============ ============ ============
StOpp2 VEWrldBd VEWrldHAs MSRESec ------------ ------------ ------------ ------------ 1997*** Beginning unit value - Jan. 1 21.426416 14.682655 15.014547 15.011508 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends 2.183305 .475835 .655044 2.041009 ------------ ------------ ------------ ------------ Unrealized gain (loss) 3.245388 (.129445) (.902356) 1.163065 ------------ ------------ ------------ ------------ Asset charges (.228750) (.137985) (.144265) (.152960) ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 26.626359 14.891060 14.622970 18.062622 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) 24% 1% (3)% 20% ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 18.309087 14.458585 12.839256 10.784280 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .861320 .394300 .272272 .288822 ------------ ------------ ------------ ------------ Unrealized gain (loss) 2.443023 (.034088) 2.040791 4.051625 ------------ ------------ ------------ ------------ Asset charges (.187014) (.136142) (.137772) (.113219) ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 21.426416 14.682655 15.014547 15.011508 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) 17% 2% 17% 39% ============ ============ ============ ============ 1995 Beginning unit value - Jan. 1 14.690448 12.443161 11.677805 10.000000 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends .761035 1.008475 .115292 .092106 ------------ ------------ ------------ ------------ Unrealized gain (loss) 3.013032 1.138120 1.160549 .740132 ------------ ------------ ------------ ------------ Asset charges (.155428) (.131171) (.114390) (.047958) ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 18.309087 14.458585 12.839256 10.784280 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) 25% 16% 10% 8%(b) ============ ============ ============ ============
* 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 Single Premium Contracts Issued Prior to April 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE Years Ended December 31, 1997, 1996 and 1995
WPIntEq WPSmCoGr ------------ ------------ 1997*** Beginning unit value - Jan. 1 $ 11.634515 14.048996 ------------ ------------ Reinvested capital gains and dividends .721426 .000000 ------------ ------------ Unrealized gain (loss) (.974429) 2.183432 ------------ ------------ Asset charges (.117107) (.138457) ------------ ------------ Ending unit value - Dec. 31 $ 11.264405 16.093971 ------------ ------------ Percentage increase (decrease) in unit value* (3)% 15% ============ ============ 1996 Beginning unit value - Jan. 1 $ 10.679811 ** ------------ ------------ Reinvested capital gains and dividends .226874 ------------ ------------ Unrealized gain (loss) .835595 ------------ ------------ Asset charges (.107765) ------------ ------------ Ending unit value - Dec. 31 $ 11.634515 ------------ ------------ Percentage increase (decrease) in unit value* 9% ============ ============ 1995 Beginning unit value - Jan. 1 ** ** ------------ ------------ Reinvested capital gains and dividends ------------ ------------ Unrealized gain (loss) ------------ ------------ Asset charges ------------ ------------ Ending unit value - Dec. 31 ------------ ------------ Percentage increase (decrease) in unit value* ============ ============
* An annualized rate of return cannot be determined as asset charges do not include the policy charges discussed in note 2. ** This investment option was not being utilized or was not available. *** No other investment options were being utilized. 18 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ACVPBAL ACVPCAPAP ACVPINT ACVPVALUE DRYSRGRO ---------- --------- ---------- ---------- ---------- 1997 Beginning unit value - Jan. 1 $14.303509 16.163625 11.748051 10.142583 17.041821 ---------- ---------- ---------- ---------- ---------- Reinvested capital gains and dividends .804637 .325754 .402865 .154473 .696492 ---------- ---------- ---------- ---------- ---------- Unrealized gain (loss) 1.443113 (.847176) 1.778602 2.474066 4.123199 ---------- ---------- ---------- ---------- ---------- Asset charges (.200631) (.207282) (.172190) (.148194) (.256307) ---------- ---------- ---------- ---------- ---------- Ending unit value - Dec. 31 $16.350628 15.434921 13.757328 12.622928 21.605205 ---------- ---------- ---------- ---------- ---------- Percentage increase (decrease) in unit value*(a) 14% (5)% 17% 24% 27% ========== ========== ========== ========== ========== 1996 Beginning unit value - Jan. 1 $12.914886 17.116040 10.403803 ** 14.242220 ---------- ---------- ---------- ---------- ---------- Reinvested capital gains and dividends .609960 1.918348 .247063 -- .735836 ---------- ---------- ---------- ---------- ---------- Unrealized gain (loss) .954721 (2.649394) 1.239275 -- 2.266937 ---------- --------- ---------- ---------- ---------- Asset charges (.176058) (.221369) (.142090) -- (.203172) ---------- ---------- ---------- ---------- ---------- Ending unit value - Dec. 31 $14.303509 16.163625 11.748051 -- 17.041821 ---------- ---------- ---------- ---------- ---------- Percentage increase (decrease) in unit value*(a) 11% (6)% 13% -- 20% ========== ========== ========== ========== ========== 1995 Beginning unit value - Jan. 1 $10.801955 13.226279 9.392654 ** 10.722275 ---------- ---------- ---------- ---------- ---------- Reinvested capital gains and dividends .305779 .015219 .000000 -- .392053 ---------- ---------- ---------- ---------- ---------- Unrealized gain (loss) 1.961461 4.076606 1.136602 -- 3.289798 ---------- ---------- ---------- ---------- ---------- Asset charges (.154309) (.202064) (.125453) -- (.161906) ---------- ---------- ---------- ---------- ---------- Ending unit value - Dec. 31 $12.914886 17.116040 10.403803 -- 14.242220 ---------- ---------- ---------- ---------- ---------- Percentage increase (decrease) in unit value*(a) 20% 29% 11% -- 33% ========== ========== ========== ========== ==========
DRYSTKIX DRYCAPAP DRYGRINC FIDVIPEI FIDVIPGR ---------- ---------- ---------- ---------- ---------- 1997 Beginning unit value - Jan. 1 16.474993 10.000000 9.986945 24.419978 23.774932 ---------- ---------- ---------- ---------- ---------- Reinvested capital gains and dividends .944651 .084439 .949964 2.516481 .876852 ---------- ---------- ---------- ---------- ---------- Unrealized gain (loss) 4.454866 .168744 .659324 4.306453 4.674425 ---------- ---------- ---------- ---------- ---------- Asset charges (.252395) (.060730) (.140117) (.362729) (.347656) ---------- ---------- ---------- ---------- ---------- Ending unit value - Dec. 31 21.622115 10.192453 11.456116 30.880183 28.978553 ---------- ---------- ---------- ---------- ---------- Percentage increase (decrease) in unit value*(a) 31% 2%(b) 15% 26% 22% ========== ========== ========== ========== ========== 1996 Beginning unit value - Jan. 1 13.621789 ** ** 21.648958 20.999607 ---------- ---------- ---------- ---------- ---------- Reinvested capital gains and dividends .587431 -- -- .998669 1.508424 ---------- ---------- ---------- ---------- ---------- Unrealized gain (loss) 2.459672 -- -- 2.069513 1.561724 ---------- ---------- ---------- ---------- ---------- Asset charges (.193899) -- -- (.297162) (.294823) ---------- ---------- ---------- ---------- ---------- Ending unit value - Dec. 31 16.474993 -- -- 24.419978 23.774932 ---------- ---------- ---------- ---------- ---------- Percentage increase (decrease) in unit value*(a) 21% -- -- 13% 13% ========== ========== ========== ========== ========== 1995 Beginning unit value - Jan. 1 10.088849 ** ** 16.234159 15.715602 ---------- ---------- ---------- ---------- ---------- Reinvested capital gains and dividends .361339 -- -- 1.269479 .086841 ---------- ---------- ---------- ---------- ---------- Unrealized gain (loss) 3.326196 -- -- 4.390826 5.444880 ---------- ---------- ---------- ---------- ---------- Asset charges (.154595) -- -- (.245506) (.247716) ---------- ---------- ---------- ---------- ---------- Ending unit value - Dec. 31 13.621789 -- -- 21.648958 20.999607 ---------- ---------- ---------- ---------- ---------- Percentage increase (decrease) in unit value*(a) 35% -- -- 33% 34% ========== ========== ========== ========== ==========
* 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. 19 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON FIDVIPGROP -------- -------- -------- --------- ---------- 1997 Beginning unit value - Jan. 1 $25.198564 14.155666 20.046209 13.256842 10.000000 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 2.010016 1.230611 2.447787 .407735 .000000 ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.412412 .402500 1.666528 2.772953 .995976 ---------- --------- --------- --------- --------- Asset charges (.353532) (.201328) (.286794) (.192715) (.063414) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $29.267460 15.587449 23.873730 16.244815 10.932562 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 16% 10% 19% 23% 9%(b) ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $22.388295 12.667544 17.721708 11.071965 ** ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 2.041281 .311669 1.165823 .104326 -- ---------- --------- --------- --------- --------- Unrealized gain (loss) 1.079684 1.350232 1.401973 2.236026 -- ---------- --------- --------- --------- --------- Asset charges (.310696) (.173779) (.243295) (.155475) -- ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $25.198564 14.155666 20.046209 13.256842 -- ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 13% 12% 13% 20% -- ========== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 $18.805616 11.700527 15.350115 10.000000 ** ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.361583 .089493 .322418 .142783 -- ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.491513 1.033414 2.260958 .998389 -- ---------- --------- --------- --------- --------- Asset charges (.270417) (.155890) (.211783) (.069207) -- ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $22.388295 12.667544 17.721708 11.071965 -- ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 19% 8% 15% 11%(b) -- ========== ========= ========= ========= =========
MSEMMKT NSATCAPAP NSATGVTBD NSATMYMKT NSATSMCO ------- --------- --------- --------- -------- 1997 Beginning unit value - Jan. 1 10.000000 17.984058 16.449774 12.479104 13.833221 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .380433 .728536 1.048107 .652320 .437491 --------- --------- --------- --------- --------- Unrealized gain (loss) (.509130) 5.437239 .529384 .000000 1.947285 --------- --------- --------- --------- --------- Asset charges (.060430) (.274803) (.220287) (.166762) (.194359) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 9.810873 23.875030 17.806978 12.964662 16.023638 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) (2)%(b) 33% 8% 4% 16% ======== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 ** 14.444672 16.104612 12.028786 11.410311 --------- --------- --------- --------- --------- Reinvested capital gains and dividends -- .749268 .996469 .611421 .133295 --------- --------- --------- --------- --------- Unrealized gain (loss) -- 2.998693 (.443598) .000000 2.456523 --------- --------- --------- --------- --------- Asset charges -- (.208575) (.207709) (.161103) (.166908) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 -- 17.984058 16.449774 12.479104 13.833221 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) -- 25% 2% 4% 21% ======== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 ** 11.312336 13.739287 11.534440 10.000000 --------- --------- --------- --------- --------- Reinvested capital gains and dividends -- .642275 .972265 .648458 .017459 --------- --------- --------- --------- --------- Unrealized gain (loss) -- 2.653961 1.587542 .000000 1.418328 --------- --------- --------- --------- --------- Asset charges -- (.163900) (.194482) (.154112) (.025476) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 -- 14.444672 16.104612 12.028786 11.410311 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) -- 28% 17% 4% 14%(b) ======== ========= ========= ========= =========
* 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. 20 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART OPPBDFD --------- -------- --------- --------- ------- 1997 Beginning unit value - Jan. 1 $23.035683 17.521012 14.088625 17.259712 16.608318 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.339626 1.539595 .830565 .857026 1.104155 ---------- --------- --------- --------- --------- Unrealized gain (loss) 5.402014 3.515921 .112862 4.505516 .420527 ---------- --------- --------- --------- --------- Asset charges (.347062) (.265198) (.187786) (.261124) (.222124) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $29.430261 22.311330 14.844266 22.361130 17.910876 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 28% 27% 5% 30% 8% ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $19.154939 16.264834 13.684722 13.495873 16.056725 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.276326 1.474851 1.151075 .549661 1.030165 ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.875006 .000818 (.567983) 3.411340 (.269155) ---------- --------- --------- --------- --------- Asset charges (.270588) (.219491) (.179189) (.197162) (.209417) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $23.035683 17.521012 14.088625 17.259712 16.608318 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 20% 8% 3% 28% 3% ========== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 $15.031721 12.508337 12.496729 10.018146 13.903136 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.489410 .442496 .693794 .081860 .956955 ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.856936 3.508824 .664378 3.550382 1.391543 ---------- --------- --------- --------- --------- Asset charges (.223128) (.194823) (.170179) (.154515) (.194909) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $19.154939 16.264834 13.684722 13.495873 16.056725 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 27% 30% 10% 35% 15% ========== ========= ========= ========= =========
OPPGISEC OPPGRO OPPMULT STOPP2 STDISC2 -------- ------ ------- ------ ------- 1997 Beginning unit value - Jan. 1 13.270426 10.000000 18.701076 21.077454 16.133543 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .168504 .000000 1.441360 2.145928 .000000 --------- --------- --------- --------- --------- Unrealized gain (loss) 2.793865 .491636 1.760353 3.185243 1.826618 --------- --------- --------- --------- --------- Asset charges (.196309) (.063339) (.264033) (.307371) (.221295) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 16.036486 10.428297 21.638756 26.101254 17.738866 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 21% 4%(b) 16% 24% 10% ========= ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 11.413379 ** 16.404926 18.074367 16.214896 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .000000 -- 1.247087 .849403 3.300617 --------- --------- --------- --------- --------- Unrealized gain (loss) 2.016448 -- 1.276232 2.405871 (3.177170) --------- --------- --------- --------- --------- Asset charges (.159401) -- (.227169) (.252187) (.204800) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 13.270426 -- 18.701076 21.077454 16.133543 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 16% -- 14% 17% (1)% ========= ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 11.309050 ** 13.693997 14.552799 12.144445 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .297396 -- 1.103154 .753037 .211667 --------- --------- --------- --------- --------- Unrealized gain (loss) (.045694) -- 1.805769 2.978850 4.042004 --------- --------- --------- --------- --------- Asset charges (.147373) -- (.197994) (.210319) (.183220) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 11.413379 -- 16.404926 18.074367 16.214896 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 1% -- 20% 24% 34% ========= ========= ========= ========= =========
* 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. 21 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 SINGLE PREMIUM CONTRACTS ISSUED ON OR AFTER APRIL 16, 1990 SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
STINTSTK2 VEWRLDBD VEWRLDEMKT VEWRLDHAS MSRESEC --------- -------- ---------- --------- ------- 1997 Beginning unit value - Jan. 1 $11.141803 14.339608 10.077849 16.582948 14.933196 ---------- --------- --------- --------- ---------- Reinvested capital gains and dividends .468352 .464588 .040302 .723268 2.023697 ---------- --------- --------- --------- ---------- Unrealized gain (loss) (1.953789) (.127783) (1.180028) (.994564) 1.156620 ---------- --------- --------- --------- ---------- Asset charges (.145321) (.184081) (.144891) (.217658) (.207854) ---------- --------- --------- --------- ---------- Ending unit value - Dec. 31 $ 9.511045 14.492332 8.793232 16.093994 17.905659 ---------- --------- --------- --------- ---------- Percentage increase (decrease) in unit value*(a) (15)% 1% (13)% (3)% 20% ========== ========= ========= ========= ========== 1996 Beginning unit value - Jan. 1 $10.226632 14.170551 ** 14.230388 10.765797 ---------- --------- --------- --------- ---------- Reinvested capital gains and dividends .050938 .385883 -- .301335 .287384 ---------- --------- --------- --------- ---------- Unrealized gain (loss) 1.007488 (.034573) -- 2.259820 4.034391 ---------- --------- --------- --------- ---------- Asset charges (.143255) (.182253) -- (.208595) (.154376) ---------- --------- --------- --------- ---------- Ending unit value - Dec. 31 $11.141803 14.339608 -- 16.582948 14.933196 ---------- --------- --------- --------- ---------- Percentage increase (decrease) in unit value*(a) 9% 1% -- 17% 39% ========== ========= ========= ========= ========== 1995 Beginning unit value - Jan. 1 $10.000000 12.237880 ** 12.988341 10.000000 ---------- --------- --------- --------- ---------- Reinvested capital gains and dividends .041085 .990055 -- .127947 .091962 ---------- --------- --------- --------- ---------- Unrealized gain (loss) .209467 1.118852 -- 1.287916 .739397 ---------- --------- --------- --------- ---------- Asset charges (.023920) (.176236) -- (.173816) (.065562) ---------- --------- --------- --------- ---------- Ending unit value - Dec. 31 $10.226632 14.170551 -- 14.230388 10.765797 ---------- --------- --------- --------- ---------- Percentage increase (decrease) in unit value*(a) 2%(b) 16% -- 10% 8%(b) ========== ========= ========= ========= ==========
WPINTEQ WPPVENCAP WPSMCOGR ------- --------- -------- 1997 Beginning unit value - Jan. 1 11.573771 10.163791 13.975650 --------- --------- --------- Reinvested capital gains and dividends .715241 .001645 .000000 --------- --------- --------- Unrealized gain (loss) (.963430) 1.343613 2.166520 --------- --------- --------- Asset charges (.159152) (.138456) (.188137) --------- --------- --------- Ending unit value - Dec. 31 11.166430 11.370593 15.954033 --------- --------- --------- Percentage increase (decrease) in unit value*(a) (4)% 12% 14% ========= ========= ========= 1996 Beginning unit value - Jan. 1 10.661502 ** 12.430586 --------- --------- --------- Reinvested capital gains and dividends .225731 -- .000000 --------- --------- --------- Unrealized gain (loss) .833478 -- 1.720228 --------- --------- --------- Asset charges (.146940) -- (.175164) --------- --------- --------- Ending unit value - Dec. 31 11.573771 -- 13.975650 --------- --------- --------- Percentage increase (decrease) in unit value*(a) 9% -- 12% ========= ========= ========= 1995 Beginning unit value - Jan. 1 10.000000 ** 10.000000 --------- --------- --------- Reinvested capital gains and dividends .077347 -- .000000 --------- --------- --------- Unrealized gain (loss) .650501 -- 2.501606 --------- --------- --------- Asset charges (.066346) -- (.071020) --------- --------- --------- Ending unit value - Dec. 31 10.661502 -- 12.430586 --------- --------- --------- Percentage increase (decrease) in unit value*(a) 7%(b) -- 24%(b) ========= ========= =========
* 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. 22 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
ACVPBAL ACVPCAPAP ACVPINT ACVPVALUE DRYSRGRO ------- --------- ------- --------- -------- 1997 Beginning unit value - Jan. 1 $14.642920 15.327392 11.890858 10.143687 17.319589 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .824605 .309262 .408237 .154643 .711304 ---------- --------- --------- --------- --------- Unrealized gain (loss) 1.481680 (.805571) 1.802759 2.480646 4.197125 ---------- --------- --------- --------- --------- Asset charges (.126724) (.121261) (.107526) (.091442) (.160714) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $16.822481 14.709822 13.994328 12.687534 22.067304 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 15% (4)% 18% 25% 27% ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $13.155049 16.149061 10.477472 10.000000 14.401809 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .622373 1.812196 .249286 .000000 .747630 ---------- --------- --------- --------- --------- Unrealized gain (loss) .976138 2.505020 1.252389 .145457 2.296912 ---------- --------- --------- --------- --------- Asset charges (.110640) (.128845) (.088289) (.001770) (.126762) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $14.642920 15.327392 11.890858 10.143687 17.319589 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 11% (5)% 13% 1%(b) 20% ========== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 $10.948128 12.417011 9.412116 ** 10.788547 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .310910 .014289 .000000 -- .396430 ---------- --------- --------- --------- --------- Unrealized gain (loss) 1.992508 3.834812 1.142911 -- 3.317353 ---------- --------- --------- --------- --------- Asset charges (.096497) (.117051) (.077555) -- (.100521) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $13.155049 16.149061 10.477472 -- 14.401809 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 20% 30% 11% -- 33% ========== ========= ========= ========= =========
DRYSTKIX DRYCAPAP DRYGRINC FIDVIPEI FIDVIPGR -------- -------- -------- -------- -------- 1997 Beginning unit value - Jan. 1 16.744674 10.000000 9.988034 25.185570 24.186560 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .963779 .084621 .953991 2.596690 .892486 --------- --------- --------- --------- --------- Unrealized gain (loss) 4.535869 .168989 .659188 4.456322 4.767095 --------- --------- --------- --------- --------- Asset charges (.158283) (.037414) (.086457) (.230809) (.218212) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 22.086039 10.216196 11.514756 32.007773 29.627929 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 32% 2%(b) 15% 27% 22% ========= ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 13.775382 ** ** 22.215745 21.256059 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .596225 -- -- 1.025291 1.527554 --------- --------- --------- --------- --------- Unrealized gain (loss) 2.494042 -- -- 2.132663 1.587071 --------- --------- --------- --------- --------- Asset charges (.120975) -- -- (.188129) (.184124) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 16.744674 -- -- 25.185570 24.186560 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 22% -- -- 13% 14% ========= ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 10.151919 ** ** 16.576413 15.828463 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .364933 -- -- 1.297971 .087506 --------- --------- --------- --------- --------- Unrealized gain (loss) 3.354508 -- -- 4.496038 5.494030 --------- --------- --------- --------- --------- Asset charges (.095978) -- -- (.154677) (.153940) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 13.775382 -- -- 22.215745 21.256059 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 36% -- -- 34% 34% ========= ========= ========= ========= =========
* 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. 23 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON FIDVIPGROP -------- -------- -------- --------- ---------- 1997 Beginning unit value - Jan. 1 $23.588786 15.324813 18.169993 13.356323 10.000000 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.882562 1.332926 2.219812 .411003 .000000 ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.267847 .436152 1.518239 2.801162 .997084 ---------- --------- --------- --------- --------- Asset charges (.204189) (.134473) (.160388) (.119788) (.039066) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $27.535006 16.959418 21.747656 16.448700 10.958018 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 17% 11% 20% 23% 10%(b) ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $20.852993 13.645033 15.982529 11.099135 ** ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.902180 .335875 1.051899 .104631 -- ---------- --------- --------- --------- --------- Unrealized gain (loss) 1.012148 1.459385 1.270941 2.248711 -- ---------- --------- --------- --------- --------- Asset charges (.178535) (.115480) (.135376) (.096154) -- ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $23.588786 15.324813 18.169993 13.356323 -- ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 13% 12% 14% 20% -- ========== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 $17.428943 12.540728 13.774855 10.000000 ** ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.262495 .095965 .289466 .143118 -- ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.316172 1.111417 2.035460 .998657 -- ---------- --------- --------- --------- --------- Asset charges (.154617) (.103077) (.117252) (.042640) -- ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $20.852993 13.645033 15.982529 11.099135 -- ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 20% 9% 16% 11%(b) -- ========== ========= ========= ========= =========
MSEMMKT NSATCAPAP NSATGVTBD NSATMYMKT NSATSMCO ------- --------- --------- --------- -------- 1997 Beginning unit value - Jan. 1 10.000000 18.410667 15.383251 12.214743 13.915643 -------- --------- --------- --------- --------- Reinvested capital gains and dividends .381254 .749108 .983193 .640005 .442290 -------- --------- --------- --------- --------- Unrealized gain (loss) (.510280) 5.577539 .496554 .000000 1.962570 -------- --------- --------- --------- --------- Asset charges (.037225) (.173568) (.127092) (.100447) (.120632) -------- --------- --------- --------- --------- Ending unit value - Dec. 31 9.833749 24.563746 16.735906 12.754301 16.199871 -------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) (2)%(b) 33% 9% 4% 16% ======== ========= ========= ========== ========= 1996 Beginning unit value - Jan. 1 ** 14.713230 14.984933 11.714295 11.420759 -------- --------- --------- --------- --------- Reinvested capital gains and dividends -- .766553 .930103 .596995 .133983 -------- --------- --------- --------- --------- Unrealized gain (loss) -- 3.061949 (.412550) .000000 2.463983 -------- --------- --------- --------- --------- Asset charges -- (.131065) (.119235) (.096547) (.103082) -------- --------- --------- --------- --------- Ending unit value - Dec. 31 -- 18.410667 15.383251 12.214743 13.915643 -------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) -- 25% 3% 4% 22% ======== ========= ========= ========== ========= 1995 Beginning unit value - Jan. 1 ** 11.465403 12.720514 11.176411 10.000000 -------- --------- --------- --------- --------- Reinvested capital gains and dividends -- .653781 .903001 .629782 .017475 -------- --------- --------- --------- --------- Unrealized gain (loss) -- 2.696528 1.472503 .000000 1.418968 -------- --------- --------- --------- --------- Asset charges -- (.102482) (.111085) (.091898) (.015684) -------- --------- --------- --------- --------- Ending unit value - Dec. 31 -- 14.713230 14.984933 11.714295 11.420759 -------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) -- 28% 18% 5% 14%(b) ======== ========= ========= ========== =========
* 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. 24 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART OPPBDFD --------- -------- --------- --------- ------- 1997 Beginning unit value - Jan. 1 $21.988773 17.282005 13.551318 17.469360 15.764821 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.284328 1.519798 .799524 .868124 1.051063 ---------- --------- --------- --------- --------- Unrealized gain (loss) 5.164704 3.476793 .110278 4.571636 .400626 ---------- --------- --------- --------- --------- Asset charges (.204402) (.161393) (.111432) (.163069) (.130076) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $28.233403 22.117203 14.349688 22.746051 17.086434 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 28% 28% 6% 30% 8% ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $18.192762 15.962482 13.096811 13.591346 15.164813 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.217547 1.448641 1.102543 .554011 .975830 ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.737018 .003774 (.542247) 3.446498 (.253799) ---------- --------- --------- --------- --------- Asset charges (.158554) (.132892) (.105789) (.122495) (.122023) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $21.988773 17.282005 13.551318 17.469360 15.764821 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 21% 8% 3% 29% 4% ========== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 $14.205723 12.214794 11.900389 10.038887 13.065574 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends 1.413734 .432461 .661221 .082096 .902009 ---------- --------- --------- --------- --------- Unrealized gain (loss) 2.703396 3.432609 .635177 3.565899 1.310232 ---------- --------- --------- --------- --------- Asset charges (.130091) (.117382) (.099976) (.095536) (.113002) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $18.192762 15.962482 13.096811 13.591346 15.164813 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 28% 31% 10% 35% 16% ========== ========= ========= ========= =========
OPPGISEC OPPGRO OPPMULT STOPP2 STDISC2 -------- ------ ------- ------ ------- 1997 Beginning unit value - Jan. 1 13.487753 10.000000 18.446363 21.575419 16.514861 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .171449 .000000 1.424675 2.199285 .000000 --------- --------- --------- --------- --------- Unrealized gain (loss) 2.844659 .491618 1.740590 3.271150 1.874039 --------- --------- --------- --------- --------- Asset charges (.123099) (.039023) (.160674) (.194117) (.139755) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 16.380762 10.452595 21.450954 26.851737 18.249145 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 21% 5%(b) 16% 24% 11% ========= ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 11.542134 ** 16.100377 18.408627 16.514850 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .000000 -- 1.226905 .866384 3.367146 --------- --------- --------- --------- --------- Unrealized gain (loss) 2.045080 -- 1.256649 2.458870 (.3.238459) --------- --------- --------- --------- --------- Asset charges (.099461) -- (.137568) (.158462) (.128676) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 13.487753 -- 18.446363 21.575419 16.514861 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 17% -- 15% 17% 0% ========= ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 11.379737 ** 13.372968 14.748256 12.307607 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .299595 -- 1.079776 .764407 .215562 --------- --------- --------- --------- --------- Unrealized gain (loss) (.045711) -- 1.766931 3.027469 4.106245 --------- --------- --------- --------- --------- Asset charges (.091487) -- (.119298) (.131505) (.114564) --------- --------- --------- --------- --------- Ending unit value - Dec. 31 11.542134 -- 16.100377 18.408627 16.514850 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 1% -- 20% 25% 34% ========= ========= ========= ========= =========
* 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. 25 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MULTIPLE PAYMENT CONTRACTS AND FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
STINTSTK2 VEWRLDBD VEWRLDEMKT VEWRLDHAS MSRESEC --------- -------- ---------- --------- ------- 1997 Beginning unit value - Jan. 1 $11.208230 13.479157 10.078948 18.284590 15.045195 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .471812 .436884 .040323 .797803 2.048475 ---------- --------- --------- --------- --------- Unrealized gain (loss) (1.974108) (.118284) (1.191572) (1.099846) 1.165854 ---------- --------- --------- --------- --------- Asset charges (.090179) (.106758) (.089392) (.148067) (.129203) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $ 9.615755 13.690999 8.838307 17.834480 18.130321 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) (14)% 2% (12)% (2)% 21% ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $10.236021 13.253457 10.000000 15.612002 10.792212 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .051144 .361660 .000000 .331277 .289441 ---------- --------- --------- --------- --------- Unrealized gain (loss) 1.009533 (.030793) .080699 2.482492 4.059026 ---------- --------- --------- --------- --------- Asset charges (.088468) (.105167) (.001751) (.141181) (.095484) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $11.208230 13.479157 10.078948 18.284590 15.045195 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 9% 2% 1%(b) 17% 39% ========== ========= ========= ========= ========= 1995 Beginning unit value - Jan. 1 $10.000000 11.388987 ** 14.178501 10.000000 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .041121 .923751 -- .140115 .092168 ---------- --------- --------- --------- --------- Unrealized gain (loss) .209625 1.041904 -- 1.410450 .740443 ---------- --------- --------- --------- --------- Asset charges (.014725) (.101185) -- (.117064) (.040399) ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $10.236021 13.253457 -- 15.612002 10.792212 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 2%(b) 16% -- 10% 8%(b) ========== ========= ========= ========= =========
WPINTEQ WPPVENCAP WPSMCOGR ------- --------- -------- 1997 Beginning unit value - Jan. 1 11.660648 10.164897 14.080553 --------- --------- --------- Reinvested capital gains and dividends .724094 .001654 .000000 --------- --------- --------- Unrealized gain (loss) (.979169) 1.347681 2.190720 --------- --------- --------- Asset charges (.098913) (.085426) (.116946) --------- --------- --------- Ending unit value - Dec. 31 11.306660 11.428806 16.154327 --------- --------- --------- Percentage increase (decrease) in unit value*(a) (3)% 12% 15% ========= ========= ========= 1996 Beginning unit value - Jan. 1 10.687672 ** 12.461074 --------- --------- --------- Reinvested capital gains and dividends .227366 -- .000000 --------- --------- --------- Unrealized gain (loss) .836487 -- 1.727810 --------- --------- --------- Asset charges (.090877) -- (.108331) --------- --------- --------- Ending unit value - Dec. 31 11.660648 -- 14.080553 --------- --------- --------- Percentage increase (decrease) in unit value*(a) 9% -- 13% ========= ========= ========= 1995 Beginning unit value - Jan. 1 10.000000 ** 10.000000 --------- --------- --------- Reinvested capital gains and dividends .077521 == .000000 --------- --------- --------- Unrealized gain (loss) .651025 -- 2.504833 --------- --------- --------- Asset charges (.040874) -- (.043759) --------- --------- --------- Ending unit value - Dec. 31 10.687672 -- 12.461074 --------- --------- --------- Percentage increase (decrease) in unit value*(a) 7%(b) -- 25%(b) ========= ========= =========
* 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. 26 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997 AND 1996
ACVPBAL ACVPCAPAP ACVPINT ACVPVALUE DRYSRGRO ------- --------- ------- --------- -------- 1997 Beginning unit value - Jan. 1 $10.931147 9.118427 10.773558 10.145455 11.180091 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .616626 .184328 .370567 .154914 .462754 ---------- --------- --------- --------- --------- Unrealized gain (loss) 1.111263 (.481377) 1.637060 2.491218 2.716269 ---------- --------- --------- --------- --------- Asset charges .000000 .000000 .000000 .000000 .000000 ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $12.659036 8.821378 12.781185 12.791587 14.359114 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 16% (3)% 19% 26% 28% ========== ========= ========= ========= ========= 1996 Beginning unit value - Jan. 1 $10.000000 10.000000 10.000000 ** 10.000000 ---------- --------- --------- --------- --------- Reinvested capital gains and dividends .122861 .000000 .224735 -- .482403 ---------- --------- --------- --------- --------- Unrealized gain (loss) .808286 (.881573) .548823 -- .697688 ---------- --------- --------- --------- --------- Asset charges .000000 .000000 .000000 -- .000000 ---------- --------- --------- --------- --------- Ending unit value - Dec. 31 $10.931147 9.118427 10.773558 -- 11.180091 ---------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 9%(b) (9)%(b) 8%(b) -- 12%(b) ========== ========= ========= ========= =========
DRYSTKIX DRYCAPAP DRYGRINC FIDVIPEI FIDVIPGR -------- -------- -------- -------- -------- 1997 Beginning unit value - Jan. 1 11.459856 10.000000 9.989781 10.790149 10.446167 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .663632 .084913 .960475 1.113391 .385777 --------- --------- --------- --------- --------- Unrealized gain (loss) 3.113170 .169378 .658959 1.919441 2.067042 --------- --------- --------- --------- --------- Asset charges .000000 .000000 .000000 .000000 .000000 --------- --------- --------- --------- --------- Ending unit value - Dec. 31 15.236658 10.254291 11.609215 13.822981 12.898986 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 33% 3%(b) 16% 28% 23% ========= ========= --------- ========= ========= 1996 Beginning unit value - Jan. 1 10.000000 ** ** 10.000000 10.000000 --------- --------- --------- --------- --------- Reinvested capital gains and dividends .358216 -- -- .000000 .000000 --------- --------- --------- --------- --------- Unrealized gain (loss) 1.101640 -- -- .790149 .446167 --------- --------- --------- --------- --------- Asset charges .000000 -- -- .000000 .000000 --------- --------- --------- --------- --------- Ending unit value - Dec. 31 11.459856 -- -- 10.790149 10.446167 --------- --------- --------- --------- --------- Percentage increase (decrease) in unit value*(a) 15%(b) -- -- 8%(b) 4%(b) ========= ========= --------- ========= =========
* 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. 27 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997 AND 1996
FIDVIPHI FIDVIPOV FIDVIPAM FIDVIPCON FIDVIPGROP ------------ ------------ ------------ ------------ ------------ 1997 Beginning unit value - Jan. 1 $ 10.830462 10.668178 11.022140 11.249999 10.000000 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ........... .865053 .928652 1.347657 .346467 .000000 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... 1.048279 .304062 .928456 2.369455 .998857 ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 12.743794 11.900892 13.298253 13.965921 10.998857 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ....... 18% 12% 21% 24% 10%(b) ============ ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 $ 10.000000 10.000000 10.000000 10.000000 ** ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ........... .000000 .000000 .000000 .000000 -- ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... .830462 .668178 1.022140 1.249999 -- ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 -- ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 10.830462 10.668178 11.022140 11.249999 -- ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ....... 8%(b) 7%(b) 10%(b) 12%(b) -- ============ ============ ============ ============ ============
MSEMMKT NSATCAPAP NSATGVTBD NSATMYMKT NSATSMCO ------------ ------------ ------------ ------------ ------------ 1997 Beginning unit value - Jan. 1 10.000000 11.610340 10.679205 10.339005 10.524418 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ........... .382570 .475750 .685934 .543763 .337176 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... (.512121) 3.528857 .346383 .000000 1.488751 ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 9.870449 15.614947 11.711522 10.882768 12.350345 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ....... (1)%(b) 34% 10% 5% 17% ============ ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 ** 10.000000 10.000000 10.000000 10.000000 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ........... -- .445367 .489314 .339005 .095576 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... -- 1.164973 .189891 .000000 .428842 ------------ ------------ ------------ ------------ ------------ Asset charges .............. -- .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 -- 11.610340 10.679205 10.339005 10.524418 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ....... -- 16%(b) 7%(b) 3%(b) 5%(b) ============ ============ ============ ============ ============
* 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. 28 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997 AND 1996
NSATTOTRE NBAMTGRO NBAMTLMAT NBAMTPART OPPBDFD ------------ ------------ ------------ ------------ ------------ 1997 Beginning unit value - Jan. 1 $ 11.444877 9.869834 10.477247 11.476324 10.644626 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .673155 .869066 .618940 .571031 .712931 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... 2.695010 1.993730 .087392 3.015326 .272077 ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 14.813042 12.732630 11.183579 15.062681 11.629634 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 29% 29% 7% 31% 9% ============ ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 $ 10.000000 10.000000 10.000000 10.000000 10.000000 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .580169 .000000 .000000 .000000 .479143 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... .864708 (.130166) .477247 1.476324 .165483 ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 11.444877 9.869834 10.477247 11.476324 10.644626 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 14%(b) (1)%(b) 5%(b) 15%(b) 6%(b) ============ ============ ============ ============ ============
OPPGISEC OPPGRO OPPMULT STOPP2 STDISC2 ------------ ------------ ------------ ------------ ------------ 1997 Beginning unit value - Jan. 1 10.833847 10.000000 10.937578 10.766829 9.884557 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .137952 .000000 .847553 1.099641 .000000 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... 2.291427 .491590 1.036084 1.640956 1.125745 ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 13.263226 10.491590 12.821215 13.507426 11.010302 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 22% 5%(b) 17% 25% 11% ============ ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 10.000000 ** 10.000000 10.000000 10.000000 ------------ ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .000000 -- .402281 .045100 .520758 ------------ ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... .833847 -- .535297 .721729 (.636201) ------------ ------------ ------------ ------------ ------------ Asset charges .............. .000000 -- .000000 .000000 .000000 ------------ ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 10.833847 -- 10.937578 10.766829 9.884557 ------------ ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 8%(b) -- 9%(b) 8%(b) (1)%(b) ============ ============ ============ ============ ============
* 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. 29 SCHEDULE I, CONTINUED NATIONWIDE VLI SEPARATE ACCOUNT-2 MODIFIED SINGLE PREMIUM AND LAST SURVIVOR FLEXIBLE PREMIUM CONTRACTS SCHEDULES OF CHANGES IN UNIT VALUE YEARS ENDED DECEMBER 31, 1997 AND 1996
STINTSTK2 VEWRLDBD VEWRLDEMKT VEWRLDHAS ------------ ------------ ------------ ------------ 1997 Beginning unit value - Jan. 1 $ 10.054422 10.516764 10.080710 10.056004 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .424202 .341084 .040355 .439048 ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... (1.783398) (.089997) (1.210156) (.607766) ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 8.695226 10.767851 8.910909 9.887286 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ (14)% 2% (12)% (2)% ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 $ 10.000000 10.000000 ** 10.000000 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .045738 .280847 -- .181335 ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... .008684 .235917 -- (.125331) ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 -- .000000 ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 $ 10.054422 10.516764 -- 10.056004 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 1%(b) 5%(b) -- 1%(b) ============ ============ ============ ============
MSRESEC WPINTEQ WPPVENCAP WPSMCOGR ------------ ------------ ------------ ------------ 1997 Beginning unit value - Jan. 1 13.673840 9.935018 10.166668 9.827590 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ 1.875805 .621718 .001667 .000000 ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... 1.060374 (.845909) 1.354244 1.537919 ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 .000000 .000000 ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 16.610019 9.710827 11.522579 11.365509 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 21% (2)% 13% 16% ============ ============ ============ ============ 1996 Beginning unit value - Jan. 1 10.000000 10.000000 ** 10.000000 ------------ ------------ ------------ ------------ Reinvested capital gains and dividends ............ .255666 .193639 -- .000000 ------------ ------------ ------------ ------------ Unrealized gain (loss) ..... 3.418174 (.258621) -- (.172410) ------------ ------------ ------------ ------------ Asset charges .............. .000000 .000000 -- .000000 ------------ ------------ ------------ ------------ Ending unit value - Dec. 31 13.673840 9.935018 -- 9.827590 ------------ ------------ ------------ ------------ Percentage increase (decrease) in unit value*(a) ........ 37%(b) (1)%(b) (2)%(b) ============ ============ ============ ============
* An annualized rate of return cannot be determined as: (a) Asset charges do not include the policy charges discussed in note 2; and (b) This investment option was not utilized for the entire year indicated. ** This investment option was not being utilized or was not available. See note 7. 62 1 INDEPENDENT AUDITORS' REPORT The Board of Directors Nationwide Life Insurance Company: We have audited the accompanying consolidated balance sheets of Nationwide Life Insurance Company and subsidiaries (collectively the Company), a wholly owned subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and 1996, and the related consolidated statements of income, shareholder's equity and cash flows for each of the years in the three-year period ended December 31, 1997. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Life Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1997, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Columbus, Ohio January 30, 1998 2 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Balance Sheets (in millions of dollars)
December 31, ----------------------------------- ASSETS 1997 1996 ------ ----------------- --------------- Investments: Securities available-for-sale, at fair value: Fixed maturity securities $13,204.1 $12,304.6 Equity securities 80.4 59.1 Mortgage loans on real estate, net 5,181.6 5,272.1 Real estate, net 311.4 265.8 Policy loans 415.3 371.8 Other long-term investments 25.2 28.7 Short-term investments 358.4 4.8 ---------- --------- 19,576.4 18,306.9 ---------- --------- Cash 175.6 43.8 Accrued investment income 210.5 210.2 Deferred policy acquisition costs 1,665.4 1,366.5 Investment in subsidiaries classified as discontinued operations - 485.7 Other assets 438.4 426.5 Assets held in Separate Accounts 37,724.4 26,926.7 ---------- --------- $59,790.7 $47,766.3 ========== ========= LIABILITIES AND SHAREHOLDER'S EQUITY ------------------------------------ Future policy benefits and claims $18,702.8 $17,600.6 Other liabilities 885.6 1,101.1 Liabilities related to Separate Accounts 37,724.4 26,926.7 ---------- --------- 57,312.8 45,628.4 ---------- --------- Commitments and contingencies (notes 7 and 13) Shareholder's equity: Common stock, $1 par value. Authorized 5.0 million shares; 3.8 million shares issued and outstanding 3.8 3.8 Additional paid-in capital 914.7 527.9 Retained earnings 1,312.3 1,432.6 Unrealized gains on securities available-for-sale, net 247.1 173.6 ---------- --------- 2,477.9 2,137.9 ---------- --------- $59,790.7 $47,766.3 ========== =========
See accompanying notes to consolidated financial statements. 3 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Income (in millions of dollars)
Years ended December 31, --------------------------------------------- 1997 1996 1995 ------------- ------------- -------------- Revenues: Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6 Traditional life insurance premiums 205.4 198.6 199.1 Net investment income 1,409.2 1,357.8 1,294.0 Realized gains (losses) on investments 11.1 (0.3) (1.7) Other 46.5 35.9 20.7 ---------- ---------- ---------- 2,217.4 1,992.9 1,798.7 ---------- ---------- ---------- Benefits and expenses: Interest credited to policyholder account balances 1,016.6 982.3 950.3 Other benefits and claims 178.2 178.3 165.2 Policyholder dividends on participating policies 40.6 41.0 39.9 Amortization of deferred policy acquisition costs 167.2 133.4 82.7 Other operating expenses 384.9 342.4 273.0 ---------- ---------- ---------- 1,787.5 1,677.4 1,511.1 ---------- ---------- ---------- Income from continuing operations before federal income tax expense 429.9 315.5 287.6 Federal income tax expense 150.2 110.9 99.8 ---------- ---------- ---------- Income from continuing operations 279.7 204.6 187.8 Income from discontinued operations (less federal income tax expense of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7 ---------- ---------- ---------- Net income $ 279.7 $ 215.9 $ 212.5 ========== ========== ==========
See accompanying notes to consolidated financial statements. 4 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Shareholder's Equity (in millions of dollars)
Unrealized gains (losses) Additional on securities Total Common paid-in Retained available- shareholder's stock capital earnings for-sale, net equity ----------- ------------- -------------- ---------------- ------------- December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5 Capital contribution - 51.0 - (4.1) 46.9 Net income - - 212.5 - 212.5 Dividends to shareholder - - (7.5) - (7.5) Unrealized gains on securities available- for-sale, net - - - 508.1 508.1 -------- -------- -------- -------- --------- December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5 Net income - - 215.9 - 215.9 Dividends to shareholder - (129.3) (366.5) (39.8) (535.6) Unrealized losses on securities available- for-sale, net - - - (170.9) (170.9) -------- -------- -------- -------- --------- December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9 Capital contribution - 836.8 - - 836.8 Net income - - 279.7 - 279.7 Dividends to shareholder - (450.0) (400.0) - (850.0) Unrealized gains on securities available- for-sale, net - - - 73.5 73.5 -------- -------- -------- -------- --------- December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9 ======== ======== ======== ======== =========
See accompanying notes to consolidated financial statements. 5 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Cash Flows (in millions of dollars)
Years ended December 31, ---------------------------------------------- 1997 1996 1995 ------------------------------ --------------- Cash flows from operating activities: Net income $ 279.7 $ 215.9 $ 212.5 Adjustments to reconcile net income to net cash provided by operating activities: Interest credited to policyholder account balances 1,016.6 982.3 950.3 Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3) Amortization of deferred policy acquisition costs 167.2 133.4 82.7 Amortization and depreciation (2.0) 7.0 10.2 Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3 (Increase) decrease in accrued investment income (0.3) 2.8 (16.9) (Increase) decrease in other assets (12.7) (38.9) 39.9 (Decrease) increase in policy liabilities (23.1) (151.0) 123.9 Increase in other liabilities 230.6 191.4 27.0 Other, net (10.9) (61.7) 1.8 ----------- --------- -------- Net cash provided by operating activities 1,146.1 858.3 1,113.4 ----------- --------- -------- Cash flows from investing activities: Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6 Proceeds from sale of securities available-for-sale 574.5 299.6 107.3 Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4 Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8 Proceeds from sale of real estate 34.8 18.5 48.3 Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6 Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4) Cost of fixed maturity securities held-to-maturity acquired - - (593.6) Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0) Cost of real estate acquired (24.9) (7.9) (10.9) Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9) Short-term investments, net (354.8) 28.0 77.8 ----------- --------- -------- Net cash used in investing activities (1,959.8) (771.3) (1,725.0) ----------- --------- -------- Cash flows from financing activities: Proceeds from capital contributions 836.8 - - Cash dividends paid - (50.0) (7.5) Increase in investment product and universal life insurance product account balances 2,488.5 1,781.8 1,883.7 Decrease in investment product and universal life insurance product account balances (2,379.8) (1,784.5) (1,258.7) ----------- --------- -------- Net cash provided by (used in) financing activities 945.5 (52.7) 617.5 ----------- --------- -------- Net increase in cash 131.8 34.3 5.9 Cash, beginning of year 43.8 9.5 3.6 ----------- --------- -------- Cash, end of year $ 175.6 $ 43.8 $ 9.5 =========== ========= =========
See accompanying notes to consolidated financial statements. 6 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements December 31, 1997, 1996 and 1995 (1) ORGANIZATION AND DESCRIPTION OF BUSINESS Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was wholly owned by Nationwide Corporation (Nationwide Corp.). On that date, Nationwide Corp. contributed the outstanding shares of NLIC's common stock to Nationwide Financial Services, Inc. (NFS), a holding company formed by Nationwide Corp. in November 1996 for NLIC and the other companies within the Nationwide Insurance Enterprise that offer or distribute long-term savings and retirement products. On March 11 1997, NFS completed an initial public offering of its Class A common stock. During 1996 and 1997, Nationwide Corp. and NFS completed certain transactions in anticipation of the initial public offering that focused the business of NFS on long-term savings and retirement products. On September 24, 1996, NLIC declared a dividend payable to Nationwide Corp. on January 1, 1997 consisting of the outstanding shares of common stock of certain subsidiaries that do not offer or distribute long-term savings or retirement products. In addition, during 1996, NLIC entered into two reinsurance agreements whereby all of NLIC's accident and health and group life insurance business was ceded to two affiliates effective January 1, 1996. These subsidiaries, through December 31, 1996, and all accident and health and group life insurance business have been accounted for as discontinued operations for all periods presented. See notes 11 and 15. Additionally, NLIC paid $900.0 million of dividends, $50.0 million to Nationwide Corp. on December 31, 1996 and $850.0 million to NFS, which then made an equivalent dividend to Nationwide Corp., on February 24, 1997. NFS contributed $836.8 million to the capital of NLIC during March 1997. Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC), Nationwide Advisory Services, Inc., Nationwide Investment Services Corporation and NWE, Inc. NLIC and its subsidiaries are collectively referred to as "the Company." The Company is a leading provider of long-term savings and retirement products. The Company is subject to regulation by the Insurance Departments of states in which it is licensed, and undergoes periodic examinations by those departments. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The significant accounting policies followed by the Company that materially affect financial reporting are summarized below. The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles, which differ from statutory accounting practices prescribed or permitted by regulatory authorities. Annual Statements for NLIC and NLAIC, filed with the Department of Insurance of the State of Ohio (the Department), are prepared on the basis of accounting practices prescribed or permitted by the Department. Prescribed statutory accounting practices include a variety of publications of the National Association of Insurance Commissioners (NAIC), as well as state laws, regulations and general administrative rules. Permitted statutory accounting practices encompass all accounting practices not so prescribed. The Company has no material permitted statutory accounting practices. 7 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ significantly from those estimates. The most significant estimates include those used in determining deferred policy acquisition costs, valuation allowances for mortgage loans on real estate and real estate investments and the liability for future policy benefits and claims. Although some variability is inherent in these estimates, management believes the amounts provided are adequate. (a) CONSOLIDATION POLICY The consolidated financial statements include the accounts of NLIC and its wholly owned subsidiaries. Subsidiaries that are classified and reported as discontinued operations are not consolidated but rather are reported as "Investment in subsidiaries classified as discontinued operations" in the accompanying consolidated balance sheets and "Income from discontinued operations" in the accompanying consolidated statements of income. All significant intercompany balances and transactions have been eliminated. (b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES The Company is required to classify its fixed maturity securities and equity securities as either held-to-maturity, available-for-sale or trading. Fixed maturity securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity and are stated at amortized cost. Fixed maturity securities not classified as held-to-maturity and all equity securities are classified as available-for-sale and are stated at fair value, with the unrealized gains and losses, net of adjustments to deferred policy acquisition costs and deferred federal income tax, reported as a separate component of shareholder's equity. The adjustment to deferred policy acquisition costs represents the change in amortization of deferred policy acquisition costs that would have been required as a charge or credit to operations had such unrealized amounts been realized. The Company has no fixed maturity securities classified as held-to-maturity or trading as of December 31, 1997 or 1996. Mortgage loans on real estate are carried at the unpaid principal balance less valuation allowances. The Company provides valuation allowances for impairments of mortgage loans on real estate based on a review by portfolio managers. The measurement of impaired loans is based on the present value of expected future cash flows discounted at the loan's effective interest rate or, as a practical expedient, at the fair value of the collateral, if the loan is collateral dependent. Loans in foreclosure and loans considered to be impaired are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate is included in interest income in the period received. Real estate is carried at cost less accumulated depreciation and valuation allowances. Other long-term investments are carried on the equity basis, adjusted for valuation allowances. Impairment losses are recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Realized gains and losses on the sale of investments are determined on the basis of specific security identification. Estimates for valuation allowances and other than temporary declines are included in realized gains and losses on investments. 8 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (c) REVENUES AND BENEFITS INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS: Investment products consist primarily of individual and group variable and fixed annuities. Universal life insurance products include universal life insurance, variable universal life insurance and other interest-sensitive life insurance policies. Revenues for investment products and universal life insurance products consist of net investment income, asset fees, cost of insurance, policy administration and surrender charges that have been earned and assessed against policy account balances during the period. Policy benefits and claims that are charged to expense include interest credited to policy account balances and benefits and claims incurred in the period in excess of related policy account balances. TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance products include those products with fixed and guaranteed premiums and benefits and consist primarily of whole life insurance, limited-payment life insurance, term life insurance and certain annuities with life contingencies. Premiums for traditional life insurance products are recognized as revenue when due. Benefits and expenses are associated with earned premiums so as to result in recognition of profits over the life of the contract. This association is accomplished by the provision for future policy benefits and the deferral and amortization of policy acquisition costs. (d) DEFERRED POLICY ACQUISITION COSTS The costs of acquiring new business, principally commissions, certain expenses of the policy issue and underwriting department and certain variable sales expenses have been deferred. For investment products and universal life insurance products, deferred policy acquisition costs are being amortized with interest over the lives of the policies in relation to the present value of estimated future gross profits from projected interest margins, asset fees, cost of insurance, policy administration and surrender charges. For years in which gross profits are negative, deferred policy acquisition costs are amortized based on the present value of gross revenues. Deferred policy acquisition costs are adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale as described in note 2(b). For traditional life insurance products, these deferred policy acquisition costs are predominantly being amortized with interest over the premium paying period of the related policies in proportion to the ratio of actual annual premium revenue to the anticipated total premium revenue. Such anticipated premium revenue was estimated using the same assumptions as were used for computing liabilities for future policy benefits. (e) SEPARATE ACCOUNTS Separate Account assets and liabilities represent contractholders' funds which have been segregated into accounts with specific investment objectives. For all but $365.5 million of separate account assets, the investment income and gains or losses of these accounts accrue directly to the contractholders. The activity of the Separate Accounts is not reflected in the consolidated statements of income and cash flows except for the fees the Company receives. (f) FUTURE POLICY BENEFITS Future policy benefits for investment products in the accumulation phase, universal life insurance and variable universal life insurance policies have been calculated based on participants' contributions plus interest credited less applicable contract charges. Future policy benefits for traditional life insurance policies have been calculated using a net level premium method based on estimates of mortality, morbidity, investment yields and withdrawals which were used or which were being experienced at the time the policies were issued, rather than the assumptions prescribed by state regulatory authorities. See note 4. 9 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (g) PARTICIPATING BUSINESS Participating business represents approximately 50% in 1997 (52% in 1996 and 54% in 1995) of the Company's life insurance in force, 77% in 1997 (78% in 1996 and 79% in 1995) of the number of life insurance policies in force, and 27% in 1997 (40% in 1996 and 47% in 1995) of life insurance statutory premiums. The provision for policyholder dividends is based on current dividend scales and is included in "Future policy benefits and claims" in the accompanying consolidated balance sheets. (h) FEDERAL INCOME TAX The Company files a consolidated federal income tax return with Nationwide Mutual Insurance Company (NMIC), the majority shareholder of Nationwide Corp. The members of the consolidated tax return group have a tax sharing arrangement which provides, in effect, for each member to bear essentially the same federal income tax liability as if separate tax returns were filed. The Company utilizes the asset and liability method of accounting for income tax. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under this method, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when necessary to reduce the deferred tax assets to the amounts expected to be realized. (i) REINSURANCE CEDED Reinsurance premiums ceded and reinsurance recoveries on benefits and claims incurred are deducted from the respective income and expense accounts. Assets and liabilities related to reinsurance ceded are reported on a gross basis. All of the Company's accident and health and group life insurance business is ceded to affiliates and is accounted for as discontinued operations. See notes 11 and 15. (j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING COMPREHENSIVE INCOME was issued in June 1997 and is effective for fiscal years beginning after December 15, 1997. The statement establishes standards for reporting and display of comprehensive income and its components in a full set of financial statements. Comprehensive income includes all changes in equity during a period except those resulting from investments by shareholders and distributions to shareholders and includes net income. Comprehensive income would be reported in addition to earnings amounts currently presented. The Company will adopt the statement and begin reporting comprehensive income in the first quarter of 1998. (k) RECLASSIFICATION Certain items in the 1996 and 1995 consolidated financial statements have been reclassified to conform to the 1997 presentation. 10 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (3) INVESTMENTS The amortized cost, gross unrealized gains and losses and estimated fair value of securities available-for-sale as of December 31, 1997 and 1996 were:
Gross Gross Amortized unrealized unrealized Estimated (in millions of dollars) cost gains losses fair value -------------- ------------ ------------- ------------ December 31, 1997: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7 Obligations of states and political subdivisions 1.6 - - 1.6 Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8 Corporate securities 8,698.7 355.5 (11.5) 9,042.7 Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3 ------------ --------- --------- ----------- Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1 Equity securities 67.8 12.9 (0.3) 80.4 ------------ --------- --------- ----------- $ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5 ============ ========= ========= =========== December 31, 1996: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2 Obligations of states and political subdivisions 6.2 0.5 - 6.7 Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9 Corporate securities 7,999.3 285.9 (33.7) 8,251.5 Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3 ------------ --------- --------- ----------- Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6 Equity securities 43.9 15.6 (0.4) 59.1 ------------ --------- --------- ----------- $ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7 ============ ========= ========= ===========
The amortized cost and estimated fair value of fixed maturity securities available-for-sale as of December 31, 1997, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
Amortized Estimated (in millions of dollars) cost fair value -------------- ---------- Fixed maturity securities available for sale: Due in one year or less $ 419.2 $ 422.1 Due after one year through five years 4,573.5 4,708.4 Due after five years through ten years 2,772.6 2,879.7 Due after ten years 1,333.4 1,443.6 ----------- ----------- 9,098.7 9,453.8 Mortgage-backed securities 3,634.2 3,750.3 ----------- ----------- $ 12,732.9 $ 13,204.1 =========== ===========
11 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The components of unrealized gains on securities available-for-sale, net, were as follows as of December 31:
(in millions of dollars) 1997 1996 ----------- ---------- Gross unrealized gains $ 483.8 $349.0 Adjustment to deferred policy acquisition costs (103.7) (81.9) Deferred federal income tax (133.0) (93.5) -------- ------- $ 247.1 $173.6 ======== =======
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:
(in millions of dollars) 1997 1996 1995 ----------- ------------- ----------- Securities available-for-sale: Fixed maturity securities $137.5 $(289.2) $876.3 Equity securities (2.7) 8.9 - Fixed maturity securities held-to-maturity - - 75.6 ------- ------- ------- $134.8 $(280.3) $ 951.9 ======= ======= =======
Proceeds from the sale of securities available-for-sale during 1997, 1996 and 1995 were $574.5 million, $299.6 million and $107.3 million, respectively. During 1997, gross gains of $9.9 million ($6.6 million and $4.8 million in 1996 and 1995, respectively) and gross losses of $18.0 million ($6.9 million and $2.1 million in 1996 and 1995, respectively) were realized on those sales. In addition, gross gains of $15.1 million and gross losses of $0.7 million were realized in 1997 when the Company paid a dividend to NFS, which then made an equivalent dividend to Nationwide Corp., consisting of securities having an aggregate fair value of $850.0 million. During 1995, the Company transferred fixed maturity securities classified as held-to-maturity with amortized cost of $25.4 million to available-for-sale securities due to evidence of a significant deterioration in the issuer's creditworthiness. The transfer of those fixed maturity securities resulted in a gross unrealized loss of $3.5 million. As permitted by the Financial Accounting Standards Board's Special Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November 1995, the Company transferred nearly all of its fixed maturity securities previously classified as held-to-maturity to available-for-sale. As of December 14, 1995, the date of transfer, the fixed maturity securities had amortized cost of $3.32 billion, resulting in a gross unrealized gain of $155.9 million. The recorded investment of mortgage loans on real estate considered to be impaired as of December 31, 1997 was $19.9 million ($51.8 million as of December 31, 1996), which includes $3.9 million ($41.7 million as of December 31, 1996) of impaired mortgage loans on real estate for which the related valuation allowance was $0.1 million ($8.5 million as of December 31, 1996) and $16.0 million ($10.1 million as of December 31, 1996) of impaired mortgage loans on real estate for which there was no valuation allowance. During 1997, the average recorded investment in impaired mortgage loans on real estate was approximately $31.8 million ($39.7 million in 1996) and interest income recognized on those loans was $1.0 million ($2.1 million in 1996), which is equal to interest income recognized using a cash-basis method of income recognition. 12 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Activity in the valuation allowance account for mortgage loans on real estate is summarized for the years ended December 31:
(in millions of dollars) 1997 1996 ------------- ------------- Allowance, beginning of year $51.0 $49.1 (Reductions) additions charged to operations (1.2) 4.5 Direct write-downs charged against the allowance (7.3) (2.6) ------ ------ Allowance, end of year $42.5 $51.0 ====== ======
Real estate is presented at cost less accumulated depreciation of $45.1 million as of December 31, 1997 ($30.3 million as of December 31, 1996) and valuation allowances of $11.1 million as of December 31, 1997 ($15.2 million as of December 31, 1996). Investments that were non-income producing for the twelve month period preceding December 31, 1997 amounted to $19.4 million ($26.8 million for 1996) and consisted of $3.0 million ($0.2 million in 1996) in securities available-for-sale, $16.4 million ($20.6 million in 1996) in real estate and none ($5.9 million in 1996) in other long-term investments. An analysis of investment income by investment type follows for the years ended December 31:
(in millions of dollars) 1997 1996 1995 ----------- --------- --------- Gross investment income: Securities available-for-sale: Fixed maturity securities $ 911.6 $ 917.1 $ 685.8 Equity securities 0.8 1.3 1.3 Fixed maturity securities held-to-maturity - - 201.8 Mortgage loans on real estate 457.7 432.8 395.5 Real estate 42.9 44.3 38.3 Short-term investments 22.7 4.2 10.6 Other 21.0 4.0 7.2 -------- -------- -------- Total investment income 1,456.7 1,403.7 1,340.5 Less investment expenses 47.5 45.9 46.5 -------- -------- -------- Net investment income $1,409.2 $1,357.8 $1,294.0 ======== ======== ========
An analysis of realized gains (losses) on investments, net of valuation allowances, by investment type follows for the years ended December 31:
(in millions of dollars) 1997 1996 1995 --------- --------- -------- Securities available-for-sale: Fixed maturity securities $ 3.6 $(3.5) $ 4.2 Equity securities 2.7 3.2 3.4 Mortgage loans on real estate 1.6 (4.1) (7.1) Real estate and other 3.2 4.1 (2.2) ------ ------ ------ $11.1 $(0.3) $(1.7) ====== ====== ======
Fixed maturity securities with an amortized cost of $6.2 million as of December 31, 1997 and 1996 were on deposit with various regulatory agencies as required by law. 13 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (4) FUTURE POLICY BENEFITS AND CLAIMS The liability for future policy benefits for investment contracts represents approximately 86% and 87% of the total liability for future policy benefits as of December 31, 1997 and 1996, respectively. The average interest rate credited on investment product policies was approximately 6.1%, 6.3% and 6.6% for the years ended December 31, 1997, 1996 and 1995, respectively. The liability for future policy benefits for traditional life insurance policies has been established based upon the following assumptions: INTEREST RATES: Interest rates vary by issue year and were 6.9% and 6.6% in 1997 and 1996, respectively. Interest rates have generally ranged from 6.0% to 10.5% for previous issue years. WITHDRAWALS: Rates, which vary by issue age, type of coverage and policy duration, are based on Company experience. MORTALITY: Mortality and morbidity rates are based on published tables, modified for the Company's actual experience. The Company has entered into a reinsurance contract to cede a portion of its general account individual annuity business to The Franklin Life Insurance Company (Franklin). Total recoveries due from Franklin were $220.2 million and $240.5 million as of December 31, 1997 and 1996, respectively. The contract is immaterial to the Company's results of operations. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder. Under the terms of the contract, Franklin has established a trust as collateral for the recoveries. The trust assets are invested in investment grade securities, the market value of which must at all times be greater than or equal to 102% of the reinsured reserves. The Company has reinsurance agreements with certain affiliates as described in note 11. All other reinsurance agreements are not material to either premiums or reinsurance recoverables. (5) FEDERAL INCOME TAX The Company's current federal income tax liability was $60.1 million and $30.2 million as of December 31, 1997 and 1996, respectively. 14 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The tax effects of temporary differences that give rise to significant components of the net deferred tax liability as of December 31, 1997 and 1996 are as follows:
(in millions of dollars) 1997 1996 ---------- ---------- Deferred tax assets: Future policy benefits $200.1 $183.0 Liabilities in Separate Accounts 242.0 188.4 Mortgage loans on real estate and real estate 19.0 23.4 Other assets and other liabilities 59.2 53.7 ------- ------ Total gross deferred tax assets 520.3 448.5 Less valuation allowance (7.0) (7.0) ------- ------ Net deferred tax assets 513.3 441.5 ------- ------ Deferred tax liabilities: Deferred policy acquisition costs 480.5 399.3 Fixed maturity securities 193.3 133.2 Deferred tax on realized investment gains 40.1 37.6 Equity securities and other long-term investments 7.5 8.2 Other 22.2 25.4 ------- ------ Total gross deferred tax liabilities 743.6 603.7 ------- ------ Net deferred tax liability $230.3 $162.2 ======= ======
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion of the total gross deferred tax assets will not be realized. Nearly all future deductible amounts can be offset by future taxable amounts or recovery of federal income tax paid within the statutory carryback period. There has been no change in the valuation allowance for the years ended December 31, 1997, 1996 and 1995. Federal income tax expense attributable to income from continuing operations for the years ended December 31 was as follows:
(in millions of dollars) 1997 1996 1995 --------- --------- --------- Currently payable $121.7 $116.5 $88.7 Deferred tax expense (benefit) 28.5 (5.6) 11.1 ------ ------ ------ $150.2 $110.9 $99.8 ====== ====== ======
Total federal income tax expense for the years ended December 31, 1997, 1996 and 1995 differs from the amount computed by applying the U.S. federal income tax rate to income before tax as follows:
1997 1996 1995 ---------------------- ---------------------- ---------------------- (in millions of dollars) Amount % Amount % Amount % ---------------------- ------------- -------- ------------- -------- Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0 Tax exempt interest and dividends received deduction - 0.0 (0.2) (0.1) - 0.0 Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3) ------ ---- ------ ---- ------ ---- Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7 ====== ==== ====== ==== ====== ====
Total federal income tax paid was $91.8 million, $115.8 million and $51.8 million during the years ended December 31, 1997, 1996 and 1995, respectively. 15 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (6) FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosures summarize the carrying amount and estimated fair value of the Company's financial instruments. Certain assets and liabilities are specifically excluded from the disclosure requirements of financial instruments. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The fair value of a financial instrument is defined as the amount at which the financial instrument could be exchanged in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is to be based on estimates using present value or other valuation techniques. Many of the Company's assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by management using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Although fair value estimates are calculated using assumptions that management believes are appropriate, changes in assumptions could cause these estimates to vary materially. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in the immediate settlement of the instruments. Although insurance contracts, other than policies such as annuities that are classified as investment contracts, are specifically exempted from the disclosure requirements, estimated fair value of policy reserves on life insurance contracts is provided to make the fair value disclosures more meaningful. The tax ramifications of the related unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. The following methods and assumptions were used by the Company in estimating its fair value disclosures: FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed maturity securities is based on quoted market prices, where available. For fixed maturity securities not actively traded, fair value is estimated using values obtained from independent pricing services or, in the case of private placements, is estimated by discounting expected future cash flows using a current market rate applicable to the yield, credit quality and maturity of the investments. The fair value for equity securities is based on quoted market prices. MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage loans on real estate is estimated using discounted cash flow analyses, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Loans with similar characteristics are aggregated for purposes of the calculations. Fair value for mortgage loans in default is the estimated fair value of the underlying collateral. POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount reported in the consolidated balance sheets for these instruments approximates their fair value. SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets held in Separate Accounts is based on quoted market prices. The fair value of liabilities related to Separate Accounts is the amount payable on demand, which includes certain surrender charges. INVESTMENT CONTRACTS: The fair value for the Company's liabilities under investment type contracts is disclosed using two methods. For investment contracts without defined maturities, fair value is the amount payable on demand. For investment contracts with known or determined maturities, fair value is estimated using discounted cash flow analysis. Interest rates used are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. 16 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are disclosures for individual life insurance, universal life insurance and supplementary contracts with life contingencies for which the estimated fair value is the amount payable on demand. Also included are disclosures for the Company's limited payment policies, which the Company has used discounted cash flow analyses similar to those used for investment contracts with known maturities to estimate fair value. COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have nominal fair value because of the short-term nature of such commitments. See note 13. Carrying amount and estimated fair value of financial instruments subject to disclosure requirements and policy reserves on life insurance contracts were as follows as of December 31:
1997 1996 ------------------------------ ------------------------------- Carrying Estimated Carrying Estimated (in millions of dollars) amount fair value amount fair value ------------------------------ --------------- --------------- Assets: Investments: Securities available-for-sale: Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6 Equity securities 80.4 80.4 59.1 59.1 Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9 Policy loans 415.3 415.3 371.8 371.8 Short-term investments 358.4 358.4 4.8 4.8 Cash 175.6 175.6 43.8 43.8 Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7 Liabilities: Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5 Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5 Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
(7) RISK DISCLOSURES The following is a description of the most significant risks facing life insurers and how the Company mitigates those risks: LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory environment in which an insurer operates will result in increased competition, reduce demand for a company's products, or create additional expenses not anticipated by the insurer in pricing its products. The Company mitigates this risk by offering a wide range of products and by operating throughout the United States, thus reducing its exposure to any single product or jurisdiction, and also by employing underwriting practices which identify and minimize the adverse impact of this risk. CREDIT RISK: The risk that issuers of securities owned by the Company or mortgagors on mortgage loans on real estate owned by the Company will default or that other parties, including reinsurers, which owe the Company money, will not pay. The Company minimizes this risk by adhering to a conservative investment strategy, by maintaining reinsurance and credit and collection policies and by providing for any amounts deemed uncollectible. 17 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued INTEREST RATE RISK: The risk that interest rates will change and cause a decrease in the value of an insurer's investments. This change in rates may cause certain interest-sensitive products to become uncompetitive or may cause disintermediation. The Company mitigates this risk by charging fees for non-conformance with certain policy provisions, by offering products that transfer this risk to the purchaser, and/or by attempting to match the maturity schedule of its assets with the expected payouts of its liabilities. To the extent that liabilities come due more quickly than assets mature, an insurer would have to borrow funds or sell assets prior to maturity and potentially recognize a gain or loss. FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business through management of its investment portfolio. These financial instruments include commitments to extend credit in the form of loans. These instruments involve, to varying degrees, elements of credit risk in excess of amounts recognized on the consolidated balance sheets. Commitments to fund fixed rate mortgage loans on real estate are agreements to lend to a borrower, and are subject to conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a deposit. Commitments extended by the Company are based on management's case-by-case credit evaluation of the borrower and the borrower's loan collateral. The underlying mortgage property represents the collateral if the commitment is funded. The Company's policy for new mortgage loans on real estate is to lend no more than 75% of collateral value. Should the commitment be funded, the Company's exposure to credit loss in the event of nonperformance by the borrower is represented by the contractual amounts of these commitments less the net realizable value of the collateral. The contractual amounts also represent the cash requirements for all unfunded commitments. Commitments on mortgage loans on real estate of $341.4 million extending into 1998 were outstanding as of December 31, 1997. The Company also had $63.9 million of commitments to purchase fixed maturity securities outstanding as of December 31, 1997. SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly commercial mortgage loans on real estate to customers throughout the United States. The Company has a diversified portfolio with no more than 20% (21% in 1996) in any geographic area and no more than 2% (2% in 1996) with any one borrower as of December 31, 1997. As of December 31, 1997, 46% (44% in 1996) of the remaining principal balance of the Company's commercial mortgage loan portfolio financed retail properties. The Company had a significant reinsurance recoverable balance from one reinsurer as of December 31, 1997 and 1996. See note 4. (8) PENSION PLAN The Company is a participant, together with other affiliated companies, in a pension plan covering all employees who have completed at least one year of service. Benefits are based upon the highest average annual salary of a specified number of consecutive years of the last ten years of service. The Company funds pension costs accrued for direct employees plus an allocation of pension costs accrued for employees of affiliates whose work efforts benefit the Company. Effective January 1, 1995, the plan was amended to provide enhanced benefits for participants who met certain eligibility requirements and elected early retirement no later than March 15, 1995. The entire cost of the enhanced benefit was borne by NMIC and certain of its property and casualty insurance company affiliates. 18 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Effective December 31, 1995, the Nationwide Insurance Companies and Affiliates Retirement Plan was merged with the Farmland Mutual Insurance Company Employees' Retirement Plan and the Wausau Insurance Companies Pension Plan to form the Nationwide Insurance Enterprise Retirement Plan (the Retirement Plan). Immediately prior to the merger, the plans were amended to provide consistent benefits for service after January 1, 1996. These amendments had no significant impact on the accumulated benefit obligation or projected benefit obligation as of December 31, 1995. Pension costs charged to operations by the Company during the years ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4 million and $10.5 million, respectively. The Company had no net accrued pension expense as of December 31, 1997 ($1.1 million as of December 31, 1996). The net periodic pension cost for the Retirement Plan as a whole for the years ended December 31, 1997 and 1996 and for the Nationwide Insurance Companies and Affiliates Retirement Plan as a whole for the year ended December 31, 1995 follows:
(in millions of dollars) 1997 1996 1995 ----------- ----------- ----------- Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5 Interest cost on projected benefit obligation 118.6 105.5 95.3 Actual return on plan assets (328.0) (210.6) (249.3) Net amortization and deferral 196.4 101.8 143.4 -------- -------- -------- $ 64.3 $ 72.2 $ 53.9 ======== ======== ========
Basis for measurements, net periodic pension cost:
1997 1996 1995 ----------- ----------- ----------- Weighted average discount rate 6.50% 6.00% 7.50% Rate of increase in future compensation levels 4.75% 4.25% 6.25% Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
Information regarding the funded status of the Retirement Plan as a whole as of December 31, 1997 and 1996 follows:
(in millions of dollars) 1997 1996 ----------- ----------- Accumulated benefit obligation: Vested $1,547.5 $1,338.6 Nonvested 13.5 11.1 -------- --------- $1,561.0 $1,349.7 ======== ========= Net accrued pension expense: Projected benefit obligation for services rendered to date $2,033.8 $1,847.8 Plan assets at fair value 2,212.9 1,947.9 --------- --------- Plan assets in excess of projected benefit obligation 179.1 100.1 Unrecognized prior service cost 34.7 37.9 Unrecognized net gains (330.7) (202.0) Unrecognized net asset at transition 33.3 37.2 --------- --------- $ (83.6) $ (26.8) ========= =========
19 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Basis for measurements, funded status of plan:
1997 1996 ----------- ----------- Weighted average discount rate 6.00% 6.50% Rate of increase in future compensation levels 4.25% 4.75%
Assets of the Retirement Plan are invested in group annuity contracts of NLIC and Employers Life Insurance Company of Wausau (ELICW). (9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS In addition to the defined benefit pension plan, the Company, together with other affiliated companies, participates in life and health care defined benefit plans for qualifying retirees. Postretirement life and health care benefits are contributory and generally available to full time employees who have attained age 55 and have accumulated 15 years of service with the Company after reaching age 40. Postretirement health care benefit contributions are adjusted annually and contain cost-sharing features such as deductibles and coinsurance. In addition, there are caps on the Company's portion of the per-participant cost of the postretirement health care benefits. These caps can increase annually, but not more than three percent. The Company's policy is to fund the cost of health care benefits in amounts determined at the discretion of management. Plan assets are invested primarily in group annuity contracts of NLIC. The Company elected to immediately recognize its estimated accumulated postretirement benefit obligation (APBO), however, certain affiliated companies elected to amortize their initial transition obligation over periods ranging from 10 to 20 years. The Company's accrued postretirement benefit expense as of December 31, 1997 and 1996 was $36.5 million and $34.9 million, respectively, and the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and 1995 was $3.0 million, $3.3 million and $3.1 million, respectively. Information regarding the funded status of the plan as a whole as of December 31, 1997 and 1996 follows:
(in millions of dollars) 1997 1996 ----------- ----------- Accrued postretirement benefit expense: Retirees $ 93.3 $ 93.0 Fully eligible, active plan participants 31.6 23.7 Other active plan participants 113.0 84.0 -------- -------- Accumulated postretirement benefit obligation 237.9 200.7 Plan assets at fair value 69.2 63.0 -------- -------- Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7) Unrecognized transition obligation of affiliates 1.5 1.7 Unrecognized net losses (gains) 1.6 (23.2) -------- -------- $(165.6) $(159.2) ======== ========
20 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The amount of NPPBC for the plan as a whole for the years ended December 31, 1997, 1996 and 1995 was as follows:
(in millions of dollars) 1997 1996 1995 ----------- ------------ ------------ Service cost (benefits attributed to employee service during the year) $ 7.0 $ 6.5 $ 6.2 Interest cost on accumulated postretirement benefit obligation 14.0 13.7 14.2 Actual return on plan assets (3.6) (4.3) (2.7) Amortization of unrecognized transition obligation of affiliates 0.2 0.2 3.0 Net amortization and deferral (0.5) 1.8 (1.6) ------- ------ ------ $17.1 $17.9 $19.1 ======= ====== ======
Actuarial assumptions used for the measurement of the APBO and the NPPBC for 1997, 1996 and 1995 were as follows:
1997 1996 1995 ----------- ----------- ----------- APBO: Discount rate 6.70% 7.25% 6.75% Assumed health care cost trend rate: Initial rate 12.13% 11.00% 11.00% Ultimate rate 6.12% 6.00% 6.00% Uniform declining period 12 Years 12 Years 12 Years NPPBC: Discount rate 7.25% 6.65% 8.00% Long term rate of return on plan assets, net of tax 5.89% 4.80% 8.00% Assumed health care cost trend rate: Initial rate 11.00% 11.00% 10.00% Ultimate rate 6.00% 6.00% 6.00% Uniform declining period 12 Years 12 Years 12 Years
For the plan as a whole, a one percentage point increase in the assumed health care cost trend rate would increase the APBO as of December 31, 1997 by $0.4 million and have no impact on the NPPBC for the year ended December 31, 1997. (10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS AND DIVIDEND RESTRICTIONS Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based capital requirements that were developed by the NAIC. The formulas for determining the amount of risk-based capital specify various weighting factors that are applied to financial balances or various levels of activity based on the perceived degree of risk. Regulatory compliance is determined by a ratio of the company's regulatory total adjusted capital, as defined by the NAIC, to its authorized control level risk-based capital, as defined by the NAIC. Companies below specific trigger points or ratios are classified within certain levels, each of which requires specified corrective action. NLIC and NLAIC each exceed the minimum risk-based capital requirements. 21 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The statutory capital and surplus of NLIC as of December 31, 1997, 1996 and 1995 was $1.13 billion, $1.00 billion and $1.36 billion, respectively. The statutory net income of NLIC for the years ended December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and $86.5 million, respectively. As a result of the $850.0 million dividend paid on February 24, 1997, any dividend paid by NLIC during the twelve-month period immediately following the $850.0 million dividend would be an extraordinary dividend under Ohio insurance laws. Accordingly, no such dividend could be paid without prior regulatory approval. The Company has no reason to believe that any reasonably foreseeable dividend to be paid by NLIC would not receive the required approval. In addition, the payment of dividends by NLIC may also be subject to restrictions set forth in the insurance laws of New York that limit the amount of statutory profits on NLIC's participating policies (measured before dividends to policyholders) that can inure to the benefit of the Company and its shareholder. The Company currently does not expect such regulatory requirements to impair its ability to pay operating expenses and shareholder dividends in the future. (11) TRANSACTIONS WITH AFFILIATES As part of the restructuring described in note 1, NLIC paid a dividend valued at $485.7 million to Nationwide Corp. on January 1, 1997 consisting of the outstanding shares of common stock of ELICW, National Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid an equivalent dividend to Nationwide Corp., consisting of securities having an aggregate fair value of $850.0 million. The Company recognized a gain of $14.4 million on the transfer of securities. The Company leases office space from NMIC and certain of its subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the Company made lease payments to NMIC and its subsidiaries of $8.4 million, $9.1 million and $9.0 million, respectively. Pursuant to a cost sharing agreement among NMIC and certain of its direct and indirect subsidiaries, including the Company, NMIC provides certain operational and administrative services, such as sales support, advertising, personnel and general management services, to those subsidiaries. Expenses covered by this agreement are subject to allocation among NMIC, the Company and other affiliates. Amounts allocated to the Company were $85.8 million, $101.6 million and $107.1 million in 1997, 1996 and 1995, respectively. The allocations are based on techniques and procedures in accordance with insurance regulatory guidelines. Measures used to allocate expenses among companies include individual employee estimates of time spent, special cost studies, salary expense, commissions expense and other methods agreed to by the participating companies that are within industry guidelines and practices. The Company believes these allocation methods are reasonable. In addition, the Company does not believe that expenses recognized under the inter-company agreements are materially different than expenses that would have been recognized had the Company operated on a stand alone basis. Amounts payable to NMIC from the Company under the cost sharing agreement were $20.5 million and $15.1 million as of December 31, 1997 and 1996, respectively. The Company also participates in intercompany repurchase agreements with affiliates whereby the seller will transfer securities to the buyer at a stated value. Upon demand or a stated period, the securities will be repurchased by the seller at the original sales price plus a price differential. Transactions under the agreements during 1997 and 1996 were not material. The Company believes that the terms of the repurchase agreements are materially consistent with what the Company could have obtained with unaffiliated parties. 22 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Intercompany reinsurance agreements exist between NLIC and, respectively, NMIC and ELICW whereby all of NLIC's accident and health and group life insurance business is ceded on a modified coinsurance basis. NLIC entered into the reinsurance agreements during 1996 because the accident and health and group life insurance business was unrelated to the Company's long-term savings and retirement products. Accordingly, the accident and health and group life insurance business has been accounted for as discontinued operations for all periods presented. Under modified coinsurance agreements, invested assets are retained by the ceding company and investment earnings are paid to the reinsurer. Under the terms of the Company's agreements, the investment risk associated with changes in interest rates is borne by ELICW or NMIC, as the case may be. Risk of asset default is retained by the Company, although a fee is paid by ELICW or NMIC, as the case may be, to the Company for the Company's retention of such risk. The agreements will remain in force until all policy obligations are settled. However, with respect to the agreement between NLIC and NMIC, either party may terminate the contract on January 1 of any year with prior notice. The ceding of risk does not discharge the original insurer from its primary obligation to the policyholder. The Company believes that the terms of the modified coinsurance agreements are consistent in all material respects with what the Company could have obtained with unaffiliated parties. Amounts ceded to NMIC and ELICW for the years ended December 31, 1997 and 1996 were:
1997 1996 ---------------------------- ---------------------------- (in millions of dollars) NMIC ELICW NMIC ELICW -------------- ------------- ---------------------------- Premiums $ 91.4 $199.8 $ 97.3 $224.2 Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8 Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
The Company and various affiliates entered into agreements with Nationwide Cash Management Company (NCMC), an affiliate, under which NCMC acts as a common agent in handling the purchase and sale of short-term securities for the respective accounts of the participants. Amounts on deposit with NCMC were $211.0 million and $4.8 million as of December 31, 1997 and 1996, respectively, and are included in short-term investments on the accompanying consolidated balance sheets. On March 1, 1995, Nationwide Corp. contributed all of the outstanding shares of common stock of Farmland Life Insurance Company (Farmland) to NLIC. Farmland merged into WCLIC effective June 30, 1995. The contribution resulted in a direct increase to consolidated shareholder's equity of $46.9 million. As discussed in note 15, WCLIC is accounted for as discontinued operations. Certain annuity products are sold through three affiliated companies, which are also subsidiaries of NFS. Total commissions and fees paid to these affiliates for the three years ended December 31, 1997 were $66.1 million, $76.9 million and $57.3 million, respectively. (12) BANK LINES OF CREDIT In August 1996, NLIC, along with NMIC, entered into a $600.0 million revolving credit facility which provides for a $600.0 million loan over a five year term on a fully revolving basis with a group of national financial institutions. The credit facility provides for several and not joint liability with respect to any amount drawn by either NLIC or NMIC. NLIC and NMIC pay facility and usage fees to the financial institutions to maintain the revolving credit facility. All previously existing line of credit agreements were canceled. In September 1997, the credit agreement was amended to include NFS as a party to and borrower under the agreement. 23 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (13) CONTINGENCIES The Company is a defendant in various lawsuits. In the opinion of management, the effects, if any, of such lawsuits are not expected to be material to the Company's financial position or results of operations. (14) SEGMENT INFORMATION The Company has three product segments: Variable Annuities, Fixed Annuities and Life Insurance. The Variable Annuities segment consists of annuity contracts that provide the customer with the opportunity to invest in mutual funds managed by the Company and independent investment managers, with the investment returns accumulating on a tax-deferred basis. The Fixed Annuities segment consists of annuity contracts that generate a return for the customer at a specified interest rate, fixed for a prescribed period, with returns accumulating on a tax-deferred basis. The Fixed Annuities segment also includes the fixed option under the Company's variable annuity contracts. The Life Insurance segment consists of insurance products that provide a death benefit and may also allow the customer to build cash value on a tax-deferred basis. In addition, the Company reports corporate expenses and investments, and the related investment income supporting capital not specifically allocated to its product segments in a Corporate and Other segment. In addition, all realized gains and losses and investment management fees and other revenue earned from mutual funds, other than the portion allocated to the variable annuities and life insurance segments, are reported in the Corporate and Other segment. The following table summarizes revenues and income from continuing operations before federal income tax expense for the years ended December 31, 1997, 1996 and 1995 and assets as of December 31, 1997, 1996 and 1995, by segment.
(in millions of dollars) 1997 1996 1995 ------------- ------------ ------------ Revenues: Variable Annuities $ 404.0 $ 284.6 $ 189.1 Fixed Annuities 1,141.4 1,092.6 1,052.0 Life Insurance 473.1 435.6 409.1 Corporate and Other 198.9 180.1 148.5 ----------- ---------- ---------- $ 2,217.4 $ 1,992.9 $ 1,798.7 =========== ========== ========== Income from continuing operations before federal income tax expense: Variable Annuities $ 150.9 $ 90.3 $ 50.8 Fixed Annuities 169.5 135.4 137.0 Life Insurance 70.9 67.2 67.6 Corporate and Other 38.6 22.6 32.2 ----------- ---------- ---------- $ 429.9 $ 315.5 $ 287.6 =========== ========== ========== Assets: Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0 Fixed Annuities 14,436.3 13,994.7 13,250.4 Life Insurance 3,901.4 3,353.3 3,027.4 Corporate and Other 6,174.3 5,348.6 4,896.8 ----------- ---------- ---------- $ 59,790.7 $ 47,766.3 $ 38,507.6 =========== ========== ==========
24 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (15) DISCONTINUED OPERATIONS As discussed in note 1, NFS is a holding company for NLIC and certain other companies within the Nationwide Insurance Enterprise that offer or distribute long-term savings and retirement products. Prior to the contribution by Nationwide Corp. of the outstanding common stock of NLIC to NFS, NLIC effected certain transactions with respect to certain subsidiaries and lines of business that were unrelated to long-term savings and retirement products. On September 24, 1996, NLIC's Board of Directors declared a dividend payable to Nationwide Corp. on January 1, 1997 consisting of the outstanding shares of common stock of three subsidiaries: ELICW, NCC and WCLIC. ELICW writes group accident and health and group life insurance business and maintains it offices in Wausau, Wisconsin. NCC is a property and casualty company with offices in Scottsdale, Arizona that serves as a fronting company for a property and casualty subsidiary of NMIC. WCLIC writes high dollar term life insurance policies and is located in San Francisco, California. ELICW, NCC and WCLIC have been accounted for as discontinued operations in the accompanying consolidated financial statements through December 31, 1996. The Company did not recognize any gain or loss on the disposal of these subsidiaries. Also, during 1996, NLIC entered into two reinsurance agreements whereby all of NLIC's accident and health and group life insurance business was ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a complete discussion of the reinsurance agreements. The Company has discontinued its accident and health and group life insurance business and in connection therewith has entered into reinsurance agreements to cede all existing and any future writings to other affiliated companies. NLIC's accident and health and group life insurance business is accounted for as discontinued operations for all periods presented. The Company did not recognize any gain or loss on the disposal of the accident and health and group life insurance business. The assets, liabilities, results of operations and activities of discontinued operations are distinguished physically, operationally and for financial reporting purposes from the remaining assets, liabilities, results of operations and activities of the Company. A summary of the results of operations of discontinued operations for the years ended December 31, 1997, 1996 and 1995 is as follows:
(in millions of dollars) 1997 1996 1995 -------------- ------------- ------------ Revenues $ - $ 668.9 $ 776.9 Net income $ - $ 11.3 $ 24.7
A summary of the assets and liabilities of discontinued operations as of December 31, 1997, 1996 and 1995 is as follows:
(in millions of dollars) 1997 1996 1995 -------------- ------------- ------------- Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7 Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
63 PART II - OTHER INFORMATION CONTENTS OF REGISTRATION STATEMENT This Post-Effective Amendment No. 16 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. Accountants' Consent The Signatures. The following exhibits required by Forms N-8B-2 and S-6: 1. Power of Attorney dated April 1, 1998. Attached hereto. 2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for the authorizing the establishment of the Registrant, adopted Nationwide VLI Separate Account-2, and hereby incorporated herein by reference. 3. Distribution Contracts Included with the Registration Statement on Form N-8B-2 for the Nationwide VLI Separate Account-2, and hereby incorporated herein by reference. 4. Form of Security Included with Post-Effective Amendment No. 3 and is hereby incorporated herein by reference. 5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for the Nationwide VLI Separate Account-2, and hereby incorporated herein by reference. 6. Application form of Security Included with Post-Effective Amendment No. 3 and is hereby incorporated herein by reference. 7. Opinion of Counsel Included with Post-Effective Amendment No. 3 and is hereby incorporated herein by reference.
111 64 REPRESENTATIONS AND UNDERTAKINGS The Registrant and the Company hereby make the following representations and undertakings: (a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment Company Act of 1940 (the "Act"). The Registrant and the Company elect to be governed by Rule 6e-3(T)(b)(13)(i)(B) under the Act with respect to the Policies described in the prospectus. The Policies have been designed in such a way as to qualify for the exemptive relief from various provisions of the Act afforded by Rule 6e-3(T). (b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the deduction of the mortality and expense risk charges ("risk charges") assumed by the Company under the Policies. The Company represents that the risk charges are within the range of industry practice for comparable policies and reasonable in relation to all of the risks assumed by the issuer under the Policies. Actuarial memoranda demonstrating the reasonableness of these charges are maintained by the Company, and will be made available to the Securities and Exchange Commission (the "Commission") on request. (c) The Company has concluded that there is a reasonable likelihood that the distribution financing arrangement of the separate account will benefit the separate account and the contractholders and will keep and make available to the Commission on request a memorandum setting forth the basis for this representation. (d) The Company represents that the separate account will invest only in management investment companies which have undertaken to have a board of directors, a majority of whom are not interested persons of the company, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. (e) Subject to the terms and conditions of Section 15(d) of the Securities Exchange Act of 1934, the Registrant hereby undertakes to file with the Commission such supplementary and periodic information, documents, and reports as may be prescribed by any rule or regulation of the Commission heretofore or hereafter duly adopted pursuant to authority conferred in that section. (f) The fees and charges deducted under the Policy in the aggregate are reasonable in relation to the services rendered, the expenses expected to be incurred, and the risks assumed by the Company. 112 65 INDEPENDENT AUDITORS' CONSENT The Board of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide VLI Separate Account-2: We consent to the use of our reports included herein and to the reference to our firm under the heading "Experts" in the prospectus. KPMG Peat Marwick LLP Columbus, Ohio April 29, 1998 113 66 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. 16 and has duly caused this Post-Effective Amendment No. 16 to be signed on its behalf by the undersigned thereunto duly authorized, and its seal to be hereunto affixed and attested, all in the City of Columbus, and State of Ohio, on this 29th day of April, 1998. NATIONWIDE VLI SEPARATE ACCOUNT-2 --------------------------------- (Registrant) NATIONWIDE LIFE INSURANCE COMPANY --------------------------------- Attest: (Sponsor) W. SIDNEY DRUEN By: JOSEPH P. RATH - ---------------------- ------------------------------------------------ W. Sidney Druen Joseph P. Rath Assistant Secretary Vice President-Product and Market Compliance Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment No. 16 has been signed below by the following persons in the capacities indicated on the 29th day of April, 1998.
SIGNATURE TITLE LEWIS J. ALPHIN Director - ------------------------------------------------- Lewis J. Alphin A. I. BELL Director - ------------------------------------------------- A. I. Bell KEITH W. ECKEL Director - ------------------------------------------------- Keith W. Eckel WILLARD J. ENGEL Director - ------------------------------------------------- Willard J. Engel FRED C. FINNEY Director - ------------------------------------------------- Fred C. Finney CHARLES L. FUELLGRAF, JR. Director - ------------------------------------------------- Charles L. Fuellgraf, Jr. JOSEPH J. GASPER President and Chief - ------------------------------------------------- Operating Office and Director Joseph J. Gasper DIMON R. McFERSON Chairman and Chief Executive Officer - ------------------------------------------------- Nationwide Insurance Enterprise and Director Dimon R. McFerson DAVID O. MILLER Chairman of the Board and Director - ------------------------------------------------- David O. Miller YVONNE L. MONTGOMERY Director - ------------------------------------------------- Yvonne L. Montgomery C. RAY NOECKER Director - ------------------------------------------------- C. Ray Noecker ROBERT A. OAKLEY Executive Vice President- - ------------------------------------------------- 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, and if applicable, of the Investment Company Act of 1940, as amended, various Registration Statements and amendments thereto for the registration under said Act of Individual Deferred Variable Annuity Contracts in connection with MFS Variable Account, Nationwide Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3, Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide Variable Account-9, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate Account-C and Nationwide VA Separate Account-Q; and the registration of fixed interest rate options subject to a market value adjustment offered under some or all of the aforementioned individual Variable Annuity Contracts in connection with Nationwide Multiple Maturity Separate Account and Nationwide Multiple Maturity Separate Account-A, and the registration of Group Flexible Fund Retirement Contracts in connection with Nationwide DC Variable Account, Nationwide DCVA-II, and NACo Variable Account; and the registration of Group Common Stock Variable Annuity Contracts in connection with Separate Account No. 1; and the registration of variable life insurance policies in connection with Nationwide VLI Separate Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4, Nationwide VL Separate Account-A and Nationwide VL Separate Account-B, Nationwide VL Separate Account-C, hereby constitutes and appoints Dimon R. McFerson, Joseph J. Gasper, W. Sidney Druen, Mark R. Thresher, and Joseph P. Rath, and each of them with power to act without the others, his/her attorney, with full power of substitution and resubstitution, for and in his/her name, place and stead, in any and all capacities, to approve, and sign such Registration Statements and any and all amendments thereto, with power to affix the corporate seal of said corporation thereto and to attest said seal and to file the same, with all exhibits thereto and other documents in connection therewith, with the U.S. Securities and Exchange Commission, hereby granting unto said attorneys, and each of them, full power and authority to do and perform all and every act and thing requisite to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming that which said attorneys, or any of them, may lawfully do or cause to be done by virtue hereof. This instrument may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned have herewith set their names and seals as of this 1st day of April, 1998.
/s/ Lewis J. Alphin /s/ Yvonne L. Montgomery - ------------------------------------------------- -------------------------------------------------- Lewis J. Alphin, Director Yvonne L. Montgomery, Director /s/ A. I. Bell /s/ C. Ray Noecker - ------------------------------------------------- ------------------------------------------------- A. I. Bell, Director C. Ray Noecker, Director /s/ Keith W. Eckel /s/ Robert A. Oakley - ------------------------------------------------- -------------------------------------------------- Keith W. Eckel, Director Robert A. Oakley, Executive Vice President - Chief Financial Officer /s/ Willard J. Engel /s/ James F. Patterson - ------------------------------------------------- -------------------------------------------------- Willard J. Engel, Director James F. Patterson, Director /s/ Fred C. Finney /s/ Arden L. Shisler - ------------------------------------------------- -------------------------------------------------- Fred C. Finney, Director Arden L. Shisler, Director /s/ Charles L. Fuellgraf /s/ Robert L. Stewart - ------------------------------------------------- -------------------------------------------------- Charles L. Fuellgraf, Jr., Director Robert L. Stewart, Director /s/ Joseph J. Gasper /s/ Nancy C. Thomas - ------------------------------------------------- -------------------------------------------------- Joseph J. Gasper, President and Chief Operating Officer Nancy C. Thomas, Director and Director /s/ Dimon R. McFerson /s/ Harold W. Weihl - ------------------------------------------------- -------------------------------------------------- Dimon R. McFerson, Chairman and Chief Executive Harold W. Weihl, Director Officer-Nationwide Insurance Enterprise and Director /s/ David O. Miller - ------------------------------------------------- David O. Miller, Chairman of the Board, Director
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