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Registration No. 33-35698
================================================================================
REGISTRATION STATEMENT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 10
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
(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 of
the Prospectus and the Financial Statements.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on May 1, 1999 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)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities being registered: Multiple Payment Variable Life Insurance
Policies.
Approximate date of proposed offering: Continuously on and after May 1, 1998.
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
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CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
1..............................................................................Nationwide Life Insurance Company
The Variable Account
2..............................................................................Nationwide Life Insurance Company
3..............................................................................Custodian of Assets
4..............................................................................Distribution of The Policies
5..............................................................................The Variable Account
6..............................................................................Not Applicable
7..............................................................................Not Applicable
8..............................................................................Not Applicable
9..............................................................................Legal Proceedings
10.............................................................................Information About The Policies;
How The Cash Value Varies; Right to Exchange
for a Fixed Benefit Policy; Reinstatement;
Other Policy Provisions
11 .............................................................................Investments of The Variable
Account
12..............................................................................The Variable Account
13..............................................................................Policy Charges
Reinstatement
14..............................................................................Underwriting and Issuance -
Premium Payments
Minimum Requirements for Issuance of a Policy
15..............................................................................Investments of the Variable
Account; Premium Payments
16..............................................................................Underwriting and Issuance -
Allocation of Cash Value
17..............................................................................Surrendering The Policy for Cash
18..............................................................................Reinvestment
19..............................................................................Not Applicable
20..............................................................................Not Applicable
21..............................................................................Policy Loans
22..............................................................................Not Applicable
23..............................................................................Not Applicable
24..............................................................................Not Applicable
25..............................................................................Nationwide Life Insurance Company
26..............................................................................Not Applicable
27..............................................................................Nationwide Life Insurance Company
28..............................................................................Company Management
29..............................................................................Company Management
30..............................................................................Not Applicable
31..............................................................................Not Applicable
32..............................................................................Not Applicable
33..............................................................................Not Applicable
34..............................................................................Not Applicable
35..............................................................................Nationwide Life Insurance Company
36..............................................................................Not Applicable
37..............................................................................Not Applicable
38..............................................................................Distribution of The Policies
39..............................................................................Distribution of The Policies
40..............................................................................Not Applicable
41(a)...........................................................................Distribution of The Policies
42..............................................................................Not Applicable
43..............................................................................Not Applicable
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
44..............................................................................How The Cash Value Varies
45..............................................................................Not Applicable
46..............................................................................How The Cash Value Varies
47..............................................................................Not Applicable
48..............................................................................Custodian of Assets
49..............................................................................Not Applicable
50..............................................................................Not Applicable
51..............................................................................Summary of The Policies;
Information About The Policies
52..............................................................................Substitution of Securities
53..............................................................................Taxation of The Company
54..............................................................................Not Applicable
55..............................................................................Not Applicable
56..............................................................................Not Applicable
57..............................................................................Not Applicable
58..............................................................................Not Applicable
59..............................................................................Financial Statements
</TABLE>
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NATIONWIDE LIFE INSURANCE COMPANY
Multiple Payment Variable Life Insurance Policies
Issued by Nationwide Life Insurance Company through its
Nationwide VLI Separate Account
The date of this prospectus is May 1, 1999
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the policies
before investing. Please read it and keep it for future reference.
The following underlying mutual funds are available under the policies:
VAN KAMPEN LIFE INVESTMENT TRUST
o Asset Allocation Portfolio (formerly "Multiple Strategy Fund")
o Domestic Income Portfolio (formerly Domestic Strategic Income Fund)
o Emerging Growth Portfolio
o Enterprise Portfolio (formerly "Common Stock Fund")
o Global Equity Portfolio
o Government Portfolio
o Money Market Portfolio
o Morgan Stanley Real Estate Securities Portfolio (formerly "Real Estate
Securities Fund")
To obtain copies of any underlying mutual fund prospectus, please call:
1-800-547-7548
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 182150
COLUMBUS, OHIO 43218-2150
Material incorporated by reference to this prospectus can be found on the SEC
website at:
www.sec.gov
THIS POLICY IS NOT:
o A BANK DEPOSIT;
o ENDORSED BY A BANK OR GOVERNMENT AGENCY;
o FEDERALLY INSURED; OR
o AVAILABLE IN EVERY STATE.
The life insurance policies offered by this prospectus are variable life
insurance policies. For policies offered in New York under a group contract,
references throughout this prospectus to "policy(ies)" will mean
"certificate(s)" and "policy owner(s)" will mean "certificate owner(s)." A cash
surrender value may be offered if the policy is terminated during the lifetime
of the insured.
The purpose of this policy is to provide life insurance protection for the
beneficiary named in the policy. No claim is made that the policy is in any way
similar or comparable to a systematic investment plan of a mutual fund.
The death benefit and cash value of this policy may vary to reflect the
experience of the Nationwide VLI Separate Account or the fixed account,
depending on how premium payments are invested.
Investors assume certain risks when investing in the policies, including the
risk of losing money.
Nationwide guarantees the death benefit for as long as the policy is in force.
The cash surrender value is not guaranteed. The policy will lapse if the cash
surrender value is insufficient to cover policy charges. During the first five
policy years, the total premiums less any policy indebtedness must be greater
than or equal to the minimum premium requirement in order to keep the policy in
force.
Benefits described in this prospectus may not be available in every jurisdiction
- - refer to your policy for specific benefit information.
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This prospectus is not an offering in any jurisdiction where 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.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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GLOSSARY OF SPECIAL 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.
FIXED ACCOUNT- An investment option which is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
GUIDELINE LEVEL PREMIUM- The level annual premiums required to mature the policy
under guaranteed mortality and expense charges with an interest rate of 4%. It
is calculated pursuant to Rule 6e-3(t) of the Investment Company Act of 1940.
GUIDELINE SINGLE PREMIUM- The single premium amount required to mature the
policy under guaranteed mortality and expense charges, and an interest rate of
6%. It is calculated pursuant to the Internal Revenue Code.
MATURITY DATE- The policy anniversary on or next following the insured's 95th
birthday.
NATIONWIDE- Nationwide Life Insurance Company.
NET AMOUNT AT RISK- Net amount at risk is the death benefit minus the cash
value. On a monthly anniversary day, the net amount at risk is the death benefit
minus the cash value prior to subtraction of the base policy cost of insurance
charge.
NET PREMIUMS- Net premiums are equal to the actual premiums minus the percent of
premium charges. The percent of premium charges are shown on the policy data
page.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units are separately maintained.
UNSCHEDULED PREMIUM- Additional premium payments which may be allowed under
certain conditions.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide VLI Separate Account, a separate account of
Nationwide Life Insurance Company that contains variable account allocations.
The variable account is divided into sub-accounts, each of which invests in
shares of a separate underlying mutual fund.
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TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.........................3
SUMMARY OF POLICY EXPENSES........................6
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES......................................7
SYNOPSIS OF THE POLICIES..........................8
NATIONWIDE LIFE INSURANCE COMPANY.................8
INVESTING IN THE POLICY...........................8
The Variable Account and Underlying
Mutual Funds
The Fixed Account
INFORMATION ABOUT THE POLICIES...................11
Minimum Requirements for Policy Issuance
Premium Payments
Pricing
POLICY CHARGES...................................12
Sales Load
Premium Expense Charge
Surrender Charges
Monthly Cost of Insurance
Monthly Administrative Charge
Mortality and Expense Risk Charge
Income Tax
SURRENDERING THE POLICY FOR CASH.................14
Surrender (Redemption)
Cash Surrender Value
Partial Surrenders
Income Tax Withholding
VARIATION IN CASH VALUE..........................15
POLICY PROVISIONS................................15
Policy Owner
Beneficiary
Changes in Existing Insurance Coverage
OPERATION OF THE POLICY..........................16
Allocation of Net Premium and Cash Value
How the Investment Experience is
Determined
Net Investment Factor
Determining the Cash Value
Transfers
RIGHT TO REVOKE..................................18
POLICY LOANS.....................................18
Taking a Policy Loan
Effect on Investment Performance
Interest
Effect on Death Benefit and Cash Value
Repayment
ASSIGNMENT.......................................19
POLICY OWNER SERVICES............................19
Dollar Cost Averaging
DEATH BENEFIT INFORMATION........................20
Calculation of the Death Benefit
Changes in the Death Benefit Option
Proceeds Payable on Death
Incontestability
Error in Age or Sex
Suicide
Maturity Proceeds
EXCHANGE RIGHTS..................................22
GRACE PERIOD ....................................22
First Five Policy Years
Policy Years Six and After
All Policy Years
Reinstatement
TAX MATTERS......................................23
Policy Proceeds
Withholding
Federal Estate and Generation-Skipping
Transfers Taxes
Non-Resident Aliens
Taxation of Nationwide
Tax Changes
LEGAL CONSIDERATIONS.............................27
YEAR 2000 COMPLIANCE ISSUES......................27
STATE REGULATION.................................28
REPORTS TO POLICY OWNERS.........................28
ADVERTISING......................................29
LEGAL PROCEEDINGS................................29
EXPERTS..........................................30
REGISTRATION STATEMENTS..........................30
LEGAL OPINIONS...................................30
DISTRIBUTION OF THE POLICIES.....................31
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ADDITIONAL INFORMATION ABOUT
NATIONWIDE..................................37
APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS ...............................44
APPENDIX B: ILLUSTRATION OF SURRENDER
CHARGES.....................................46
APPENDIX C: ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES, AND DEATH
BENEFITS ...................................48
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SUMMARY OF POLICY EXPENSES
Nationwide deducts certain charges from the policy. Charges are made for
administrative and sales expenses, tax expenses, providing life insurance
protection and assuming the mortality and expense risks.
Nationwide deducts a Sales Load and a Premium Expense Charge for state premium
taxes from premium payments. The sales load is guaranteed never to exceed 3.5%
of each premium payment. The charge for state premium tax is approximately 2.5%
of premiums for all states (see "Sales Load" and "Premium Expense Charge").
Nationwide deducts a Mortality and Expense Risk Charge from the sub-accounts of
the variable accounts. The Mortality and Expense Risk Charge is deducted daily
and is equal to an annual rate of 0.80% of the daily net assets of the variable
account (see "Mortality and Expense Risk Charge").
Nationwide deducts the following charges from the cash value of the policy:
o monthly Cost of Insurance Charge;
o monthly cost of any additional benefits provided by riders to
the policy; and
o Administrative Expense Charge(1).
(1) Currently, the Administrative Expense Charge is $5 per month. It is
guaranteed not to exceed $7.50 per month.
For policies which are surrendered during the first nine policy years,
Nationwide deducts a Surrender Charge (see "Surrender Charges").
For more information about any policy charge, see "Policy Charges" in this
prospectus.
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund net assets,
after expense reimbursement)
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
Van Kampen Life Investment Trust Asset Allocation 0.38% 0.00% 0.00% 0.38%
Portfolio
Van Kampen Life Investment Trust Domestic Income 0.01% 0.00% 0.00% 0.01%
Portfolio
Van Kampen Life Investment Trust Emerging Growth 0.18% 0.00% 0.00% 0.18%
Portfolio
Van Kampen Life Investment Trust Enterprise 0.44% 0.00% 0.00% 0.44%
Portfolio
Van Kampen Life Investment Trust Global Equity- 0.00% 0.00% 0.00% 0.00%
Portfolio
Van Kampen Life Investment Trust Government 0.35% 0.00% 0.00% 0.35%
Portfolio
Van Kampen Life Investment Trust Money Market 0.09% 0.00% 0.00% 0.09%
Portfolio
Van Kampen Life Investment Trust-Morgan Stanley 1.20% 0.00% 0.00% 1.20%
Real Estate Securities Portfolio
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
Van Kampen Life Investment Trust Asset Allocation 0.50% 0.00% 0.00% 0.50%
Portfolio
Van Kampen Life Investment Trust Domestic Income 0.48% 0.00% 0.00% 0.48%
Portfolio
Van Kampen Life Investment Trust Emerging Growth 0.39% 0.00% 0.00% 0.39%
Portfolio
Van Kampen Life Investment Trust Enterprise Portfolio 0.40% 0.00% 0.00% 0.40%
Van Kampen Life Investment Trust Global Equity- 0.96% 0.00% 0.00% 0.96%
Portfolio
Van Kampen Life Investment Trust Government Portfolio 0.47% 0.00% 0.00% 0.47%
Van Kampen Life Investment Trust Money Market Portfolio 0.41% 0.00% 0.00% 0.41%
</TABLE>
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SYNOPSIS OF THE POLICIES
The policy offered by this prospectus provides for life insurance coverage on
the insured. The death benefit and cash value of the policy may increase or
decrease to reflect the performance of the investment options chosen by the
policy owner (see "Death Benefit Information").
CASH SURRENDER VALUE
If the policy is terminated during the insured's lifetime, a cash surrender
value may be payable under the policy. However, there is no guaranteed cash
surrender value (see "Variation in Cash Value "). The policy will lapse without
value if the cash surrender value falls below what is needed to cover policy
charges. During the first five policy years, the total premium payments less any
policy indebtedness must be greater than or equal to the minimum premium
requirement in order to keep the policy in force. The minimum premium is equal
to the monthly minimum premium multiplied by the number of completed policy
months. The minimum monthly premium is shown on the policy data page.
PREMIUMS
The minimum initial premium for which a policy may be issued is $2,000.
The policies are designed to generally permit the payment of the Guideline
Single Premium in five annual installments for death benefit Option 1, and five
annual Guideline Level Premiums under death benefit Option 2 (see "Premium
Payments").
TAXATION
The policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code. Nationwide will
monitor compliance with the tests provided by Section 7702 to insure the
policies continue to receive this favored tax treatment (see "Tax Matters").
NONPARTICIPATING POLICIES
The policies are nonparticipating policies on which no dividends are payable.
The policies do not share in the profits or surplus earnings of Nationwide.
POLICY CANCELLATION
Policy owners may return the policy for any reason within certain time periods
and Nationwide will refund the policy value or the amount required by law (see
"Right to Revoke").
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under the laws of the
State of Ohio in March 1929, with its Home Office at One Nationwide Plaza,
Columbus, Ohio 43215. Nationwide is a provider of life insurance, annuities and
retirement products. It is admitted to do business in all states, the District
of Columbia and Puerto Rico.
CUSTODIAN OF ASSETS
Nationwide serves as the custodian of the assets of the variable account.
OTHER CONTRACTS ISSUED BY NATIONWIDE
Nationwide 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 Nationwide.
GENERAL DISTRIBUTOR
The policies are distributed by the general distributor, Van Kampen Funds, Inc.
INVESTING IN THE POLICY
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide VLI Separate Account is a separate account that invests in the
underlying mutual fund options listed in Appendix A. Nationwide established the
separate account on August 8, 1984, pursuant to Ohio law. Although the
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separate account is registered with the SEC as a unit investment trust pursuant
to the Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise
the management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to policy owners under the policies.
The variable account is divided into sub-accounts. Policy owners elect to have
net premiums allocated among the sub-accounts and the fixed account at the time
of application.
Nationwide uses the assets of each sub-account to buy shares of the underlying
mutual funds based on policy owner instructions. A policy's investment
performance depends upon the performance of the underlying mutual fund options
chosen by the policy owner.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. The underlying mutual fund options 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.
However the underlying mutual funds are NOT directly related to any publicly
traded mutual fund. Policy owners should not compare the performance of a
publicly traded fund with the performance of underlying mutual funds
participating in the variable account. The performance of the underlying mutual
funds could differ substantially from that of any publicly traded funds.
Changes of Investment Policy
Nationwide may materially change the investment policy of the variable account.
Nationwide must inform policy owners of any changes 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 Nationwide's operations
hazardous to the public. If a policy owner objects, the policy may be converted
to a substantially comparable general account life insurance policy offered by
Nationwide. 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 the change to make the conversion.
Nationwide 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 the conversion.
Voting Rights
Policy owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote policy owner shares at
special shareholder meetings based on policy owner instructions. However, if the
law changes allowing Nationwide to vote in its own right, it may elect to do so.
Policy owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholder's vote as soon as possible prior to
the shareholder meeting. Notification will contain proxy materials, and a form
to return to Nationwide with voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
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The number of shares which a policy owner may vote is determined by dividing the
cash value of the amount they have allocated to an underlying mutual fund by the
net asset value of that underlying mutual fund. Nationwide will designate a date
for this determination not more than 90 days before the shareholder meeting.
Substitution of Securities
Nationwide may substitute, eliminate and/or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occur:
1) shares of a current underlying mutual fund option are no longer
available for investment; or
2) further investment in an underlying mutual fund option is
inappropriate.
No substitution, elimination, and/or combination of shares may take place
without the prior approval of the SEC and state insurance departments.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. Premium payments will be allocated
to the fixed account by election of the policy owner. Under exemptive and
exclusionary provisions, Nationwide's general account has not been registered
under the Securities Act of 1933 and has not been registered as an investment
company under the Investment Company Act of 1940. Accordingly, neither the
general account nor any interest therein is subject to the provisions of these
Acts. Nationwide 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.
The investment income earned by the fixed account will be allocated to the
policies at varying rate(s) set by Nationwide. The guaranteed rate for any
premium payment will be effective for not less than twelve months. Nationwide
guarantees that the rate will not be less than 4.0% per year.
Any interest in excess of 4.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The policy owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
4.0% for any given year.
New premium payments deposited to the contract which are allocated to the fixed
account may receive a different rate if interest than amounts transferred from
the sub-accounts to the fixed account and amounts maturing in the fixed account.
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INFORMATION ABOUT THE POLICIES
MINIMUM REQUIREMENTS FOR POLICY ISSUANCE
The policies are designed to generally permit the payment of the Guideline
Single Premium in five annual installments under death benefit Option 1 and five
annual Guideline Level Premiums under death benefit Option 2. At issue, the
policy owner selects a scheduled premium level. This scheduled premium is used
to determine the initial specified amount. The minimum scheduled premium is
$2,000.
Policies may be issued to insureds with issue ages 75 or younger. Before issuing
any policy, Nationwide requires satisfactory evidence of insurability which may
include a medical examination.
PREMIUM PAYMENTS
Each premium payment must be at least equal to the monthly minimum premium. The
initial premium is payable in full at Nationwide's home office.
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of the continuing insurance coverage is dependent upon completion of
all underwriting requirements, payment of initial premium, and delivery of the
policy while the insured is still living.
Additional premium payments may be made at any time while the policy is in
force, subject to the following conditions:
o Nationwide may require satisfactory evidence of insurability before
accepting any additional premium payment which results in an increase
in the net amount at risk.
o During the first five policy years, the total premium payments less any
policy indebtedness must be greater than or equal to the minimum
premium requirement in order to keep the policy in force. (The monthly
minimum premium is shown in the policy data page.)
o Premium payments in excess of the premium limit established by the IRS
to qualify the policy as a contract for life insurance will be
refunded.
o Nationwide may require policy indebtedness be repaid prior to accepting
any additional premium payments.
Additional premium payments or other changes to the policy may jeopardize the
policy's non-modified endowment status. Nationwide will monitor premiums paid
and other policy transactions and will notify the policy owner when non-modified
endowment contract status is in jeopardy.
Nationwide will send scheduled premium payment reminder notices to policy owners
according to the premium mode shown on the policy data page.
PRICING
Premiums will not be priced when the New York Stock Exchange is closed or on the
following nationally recognized holidays:
o New Year's Day o Independence Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents' Day o Thanksgiving
o Good Friday o Christmas
o Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when conditions described in
(2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value may be affected since the policy owner would not have access to
their account.
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POLICY CHARGES
SALES LOAD
Nationwide deducts a Sales Load from each premium payment received. It is
guaranteed never to exceed 3.5% of each premium payment and may be reduced by
Nationwide at its sole discretion.
The total Sales Load actually deducted from any policy will be equal to the sum
of this front-end Sales Load plus any sales Surrender Charge.
PREMIUM EXPENSE CHARGE
Nationwide deducts a Premium Expense Charge equal to 2.50% from all premium
payments. This charge reimburses Nationwide for administrative expenses on an
aggregate basis including premium taxes imposed by various state and local
jurisdictions.
State tax rates can range from 0% to 4%. This charge may be more or less than
the amount actually assessed by the state in which a particular policy owner
lives.
Nationwide does not expect to make a profit from this charge.
SURRENDER CHARGES
Nationwide deducts a Surrender Charge from the cash value of any policy
surrendered during the first nine years. The initial Surrender Charge varies by
issue age, sex, and underwriting classification. The Surrender Charge is
calculated based on the initial specified amount.
The following table illustrates the initial Surrender Charge per $1,000 of
initial specified amount for policies which are issued on a standard basis (see
Appendix B for specific examples). Special guaranteed maximum surrender charges
apply in Pennsylvania (see Appendix B).
MALE FEMALE
ISSUE NON- NON- MALE FEMALE
AGE TOBACCO TOBACCO STANDARD STANDARD
25 $5.878 $5.537 $6.680 $5.945
35 7.260 6.712 8.559 7.373
45 11.159 10.160 13.244 11.151
55 15.275 13.375 18.373 14.686
65 23.821 20.553 27.943 22.165
The Surrender Charge is comprised of two components:
o an underwriting component; and
o sales component.
The underwriting component varies by issue age in the following manner:
ISSUE CHARGE PER $1,000 OF
AGE INITIAL SPECIFIED AMOUNT
0-39 $3.50
40-59 $5.00
60-75 $6.50
The underwriting component is designed to cover the administrative expenses
associated with underwriting and issuing policies, including the costs of:
o processing applications;
o conducting medical exams;
o determining insurability and the insured's underwriting class; and
o establishing policy records.
The remainder of the Surrender Charge that is not attributable to the
underwriting component represents the sales component. The purpose of the sales
component is to reimburse Nationwide for some of the expenses incurred in the
distribution of the policies.
The Surrender Charge may be insufficient to recover certain expenses related to
the sale of the policies. Unrecovered expenses are borne by Nationwide's general
assets which may include profits, if any, from the Mortality and Expense Risk
Charge. Additional premiums and/or income earned on assets in the variable
account have no effect on these charges.
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REDUCTIONS TO SURRENDER CHARGES
Surrender charges are reduced in subsequent policy years as follows:
COMPLETED POLICY SURRENDER CHARGE AS A % OF
YEARS INITIAL SURRENDER CHARGES
0 100%
1 100%
2 100%
3 95%
4 90%
5 85%
6 80%
7 75%
8 50%
9+ 0%
MONTHLY COST OF INSURANCE
The Cost of Insurance Charge for each policy month is determined by multiplying
the monthly cost of insurance rate by the net amount at risk. This deduction is
charged proportionately to the cash value in each sub-account and the fixed
account.
If death benefit Option 1 is in effect and there have been increases in the
specified amount, then the cash value will first be considered a part of the
initial specified amount. If the cash value exceeds the initial specified
amount, it will then be considered a part of the additional increases in
specified amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will not exceed those guaranteed in the policy.
Guaranteed cost of insurance rates for policies issued on a simplified basis are
based on the 1980 Commissioners Extended Term Mortality Table, Age Last Birthday
(1980 CET). Guaranteed cost of insurance rates for policies issued on a
preferred basis are based on the 1980 Commissioners Standard Ordinary Mortality
Table, Age Last Birthday (1980 CSO). Guaranteed cost of insurance rates for
policies issued on a substandard basis are based on appropriate percentage
multiples of the 1980 CSO. These mortality tables are sex distinct. In addition,
separate mortality tables will be used for standard and non-tobacco.
For policies issued in Texas, guaranteed cost of insurance rates for
standard-simplified issues ("special class-simplified" in Texas) are based on
130% of the 1980 Commissioners Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO).
The rates for policies issued on a simplified or preferred basis will not exceed
the rates in the appropriate table. The cost of insurance rate per $1,000 of net
amount at risk is less for policies issued on a preferred basis as compared to a
simplified basis.
The rate class of an insured may affect the cost of insurance rate. Nationwide
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. Nationwide may also
issue certain policies on a "simplified issue" basis to certain categories of
individuals. Due to the underwriting criteria established for policies issued on
a simplified issue basis, actual rates for healthy individuals will be higher
than the current cost of insurance rates being charged under otherwise identical
policies that are issued on a preferred basis.
MONTHLY ADMINISTRATIVE CHARGE
Nationwide deducts an Administrative Expense Charge proportionately to the cash
value in each sub-account and the fixed account on a monthly basis. This charge
reimburses Nationwide for certain actual administrative expenses. Nationwide
does not expect to recover any amount in excess of aggregate maintenance
expenses from this charge.
Currently, this charge is $5 per month. Nationwide may, at its sole discretion,
increase this charge. However, Nationwide guarantees that this charge will never
exceed $7.50 per month.
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk assumed under the policies is that the insured may not live
as long as
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<PAGE> 17
expected. The expense risk assumed is that the actual expenses incurred in
issuing and administering the policies may be greater than expected. In
addition, Nationwide assumes risks associated with the non-recovery of policy
issue, underwriting and other administrative expenses due to policies that lapse
or are surrendered in the early policy years. Nationwide deducts the Mortality
and Expense Risk Charge from the variable account on a daily basis. Mortality
and expense risk deductions will be charged proportionally to the cash value in
each sub-account. The Mortality and Expense Risk Charge compensates Nationwide
for assuming risks associated with mortality and administrative costs. The
charge is equivalent to an annual effective rate of 0.80% of the daily net
assets of the variable account. Policy owners receive quarterly and annual
statements, advising policy owners of the cancellation of accumulation units for
mortality and expense risk charges.
These charges are all guaranteed. Nationwide may realize a profit from these
charges.
INCOME TAX
No charge is assessed to policy owners for income taxes incurred by Nationwide
as a result of the operations of the sub-accounts. However, Nationwide reserves
the right to assess a charge for income taxes against the variable account if
income taxes are incurred.
SURRENDERING THE POLICY FOR CASH
SURRENDER (REDEMPTION)
Policies may be surrendered for the cash surrender value any time while the
insured is living. The cancellation will be effective as of the date Nationwide
receives the policy accompanied by a signed, written request for cancellation.
Nationwide may require the policy owner's signature to be guaranteed by a member
firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock
Exchanges, or by a commercial bank or a savings and loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases, Nationwide may require
additional documentation of a customary nature.
CASH SURRENDER VALUE
The cash surrender value increases or decreases daily to reflect the investment
experience of the variable account and the daily crediting of interest in the
fixed account and the policy loan account.
The cash surrender value equals the policy's cash value, next computed after the
date Nationwide receives a proper written request for surrender and the policy,
minus any charges, indebtedness or other deductions due on that date, which may
also include a Surrender Charge.
PARTIAL SURRENDERS
After the policy has been in force for five years, the policy owner may request
a partial surrender.
Partial surrenders are permitted if they satisfy the following requirements:
1) the minimum partial surrender is $500;
2) the maximum partial surrender in any policy year is limited to 10% of
the total premium payments; 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.
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<PAGE> 18
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").
INCOME TAX WITHHOLDING
Federal law requires Nationwide to withhold income tax from any portion of
surrender proceeds subject to tax. Nationwide will withhold income tax unless
the policy owner advises Nationwide, in writing, of his or her request not to
withhold. If a policy owner requests that taxes not be withheld, or if the taxes
withheld are insufficient, the policy owner may be liable for payment of an
estimated tax. Policy owners should consult a tax adviser.
In certain employer-sponsored life insurance arrangements, including equity
split dollar arrangements, participants may be required to report for income tax
purposes, one or more of the following:
(1) the value each year of the life insurance protection provided;
(2) an amount equal to any employer-paid premiums; or
(3) some or all of the amount by which the current value exceeds
the employer's interest in the policy.
Participants should consult with the sponsor or the administrator of the plan,
and/or with their personal tax or legal adviser, to determine the tax
consequences, if any, of their employer-sponsored life insurance arrangements.
VARIATION IN CASH VALUE
On any date during the policy year, the cash value equals the cash value on the
preceding valuation date, plus any net premiums applied since the previous
valuation date, minus any partial surrenders, plus or minus any investment
results, and less any policy charges.
There is no guaranteed cash value. The cash value will vary with the investment
experience of the variable account and/or the daily crediting of interest in the
fixed account and policy loan account depending on the allocation of cash value
by the policy owner.
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
Nationwide and recorded at Nationwide's home office. Once recorded, the change
will be effective when signed. The change will not affect any payment made or
action taken by Nationwide before it was recorded. Nationwide 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) will be as named in the application or as subsequently
changed, subject to assignment, if any.
The policy owner may name a new beneficiary(ies) while the insured is living.
Any change must be in a written form satisfactory to Nationwide and recorded at
Nationwide's home office. Once recorded, the change will be effective when
signed. The change will not affect any payment made or action taken by
Nationwide before it was recorded.
If any beneficiary predeceases the insured, that beneficiary's interest passes
to any surviving beneficiary(ies), unless otherwise provided. Multiple
beneficiaries will be paid in equal shares, unless otherwise provided. If no
named beneficiary survives the insured, the death proceeds will be paid to the
policy owner or the policy owner's estate.
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<PAGE> 19
CHANGES IN EXISTING INSURANCE COVERAGE
The policy owner may request certain changes in the insurance coverage under the
policy. Requests must be in writing and received by Nationwide. No change will
take effect unless the cash surrender value after the change is sufficient to
keep the policy in force for at least 3 months.
Specified Amount Increases
After the fifth policy year, the policy owner may request an increase to the
specified amount. Any increase will be subject to the following conditions:
1. the request must be applied for in writing;
2. satisfactory evidence of insurability must be provided;
3. the increase must be for a minimum of $10,000;
4. the cash surrender value is sufficient to continue the policy
in force for at least 3 months; and
5. age limits are the same as for a new issue.
Any approved increase will have an effective date of the monthly anniversary day
on or next following the date Nationwide approves the supplemental application.
Nationwide reserves the right to limit the number of specified amount increases
to one each policy year.
Specified Amount Decreases
After the fifth policy year, the policy owner may also request a decrease to the
specified amount. Any approved decrease will be effective on the monthly
anniversary day on or next following the date Nationwide receives the request.
Any such decrease shall reduce insurance in the following order:
1. against insurance provided by the most recent increase;
2. against the next most recent increases successively; and
3. against insurance provided under the original application.
Nationwide reserves the right to limit the number of specified amount decreases
to one each policy year. Nationwide will refuse a request for a decrease which
would:
1. reduce the specified amount to less than $10,000; or
2. disqualify the policy as a contract for life insurance.
OPERATION OF THE POLICY
ALLOCATION OF NET PREMIUM AND CASH VALUE
Nationwide allocates premium payments to sub-accounts or the fixed account, as
instructed by policy owners. Shares of the underlying mutual funds allocated to
the sub-accounts are purchased at net asset value, than converted into
accumulation units. All percentage allocations must be in whole numbers, and
must be at least 5%. The sum of allocations must equal 100%. Future premium
allocations may be changed by giving written notice to Nationwide.
Premiums allocated to a sub-account on the application are allocated to the Van
Kampen Life Investment Trust - Money Market Portfolio ("Money Market Portfolio")
during the period a policy owner may cancel the policy, unless specific states
require premiums to be allocated to the fixed account. At the expiration of the
cancellation period, these premiums are used to purchase shares of the
underlying mutual funds specified by the policy owner 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. Changes are subject to the terms and
conditions imposed by each underlying mutual fund and those found in this
prospectus. Net premiums allocated to the fixed account at the time of
application may not be transferred from the fixed account prior to the first
policy anniversary (see "Transfers").
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The accumulation unit value for a valuation period is determined by multiplying
the
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<PAGE> 20
accumulation unit value for each sub-account for the immediately preceding
valuation period by the net investment factor for the sub-account for the
subsequent valuation period. Though 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 subtracting (c) from the result where:
(a) is:
(1) the net asset value per share of the underlying mutual fund
held in the sub-account as of 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 (if the ex-dividend date
occurs during the current valuation period).
(b) is the net asset value per share of the underlying mutual fund
determined as of the end of the immediately preceding valuation period.
(c) is a factor representing the daily mortality and expense risk charge
deducted from the variable account. This factor is equal to an annual
rate of 0.80% of the daily net assets of the variable account.
The net investment factor may be greater or less than one; therefore, the value
of an accumulation unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the net asset value of underlying mutual fund shares, because of the
deduction for mortality and expense risk charge, and any charge or credit for
tax reserves.
DETERMINING THE CASH VALUE
The cash value is the sum of the value of all variable account accumulation
units attributable to the policy plus amounts credited to the fixed account and
the policy loan 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 Nationwide. 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 Nationwide periodically
declares. The annual effective rate will never be less than 4%. (For a
description of the annual effective credited rates, see "The Fixed Account" and
"Policy Loans.") Upon request, Nationwide will inform the policy owner of the
then applicable rates for each account.
TRANSFERS
Policy owners can transfer allocations without penalty or adjustment subject to
the following conditions:
o Nationwide reserves the right to restrict transfers between
the fixed account and the sub-accounts to one per policy year.
o Transfers made to the fixed account may not be made in the
first policy year.
o Nationwide reserves the right to restrict the amount
transferred from the fixed account each policy year (subject
to state restrictions). Policy owners who have entered into
Dollar Cost Averaging agreements with Nationwide may transfer
under the terms of that agreement.
o Nationwide reserves the right to restrict the amount
transferred to the fixed account to 25% of the cash value.
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o Transfers from the fixed account must be made within 30 days
after the end of an interest rate guarantee period.
o Transfers among the sub-accounts are limited to once per
valuation date.
Transfer Requests
Nationwide will accept transfer requests in writing or in those states allow,
over the telephone. Nationwide will use reasonable procedures to confirm that
telephone instructions are genuine and will not be liable for following
instructions it reasonably determined to be genuine. Nationwide may withdraw the
telephone exchange privilege upon 30 days written notice to policy owners.
RIGHT TO REVOKE
A policy owner may cancel the policy by returning it by the latest of:
o 10 days after receiving the policy;
o 45 days after signing the application; or
o 10 days after Nationwide delivers a Notice of Right of
Withdrawal.
The policy can be mailed to the registered representative who sold it, or
directly to Nationwide.
Returned policies are deemed void from the beginning. Nationwide will refund the
amount prescribed by the state in which the policy was issued within seven days
after it receives the policy. This right varies by state.
POLICY LOANS
TAKING A POLICY LOAN
After the first policy year, the policy owner may take a policy loan using the
policy as security. Maximum policy indebtedness is limited to 90% of the cash
surrender value in the sub-accounts and 100% of the cash surrender value in the
fixed account less interest due on the next policy anniversary. Maximum policy
indebtedness in Texas is limited to 90% of the cash surrender value in the
variable account sub-accounts and 100% of the cash surrender value in the fixed
account, less interest due on the next policy anniversary.
Nationwide will not grant a loan for an amount less than $1,000 ($200 in
Connecticut $500, in New York). Policy indebtedness will be deducted from the
death benefit, cash surrender value upon surrender, or the maturity proceeds.
Any request for a policy loan must be in written form. 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 Exchanges, 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.
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
sufficient amounts are not 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
The annual effective loan interest rate charged on policy loans is 6.0%.
On a current basis, the cash value in the policy loan account is credited with
an annual effective rate of 5.1%. This rate is guaranteed never to be lower than
5.1%. Nationwide may change the current interest crediting rate on the policy
loans at any time at its sole discretion.
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. The earned interest is transferred from the
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<PAGE> 22
policy loan account to a variable account or the fixed account on each policy
anniversary, or at the time of loan repayment. It will be allocated according to
the fund allocation factors in effect at the time of the transfer.
Interest is charged daily and is payable at the end of each policy year or at
the time of loan repayment. Unpaid interest will be added to the existing policy
indebtedness as of the due date and will be charged interest at the same rate as
the rest of the indebtedness.
Whenever the total policy indebtedness exceeds the cash value less any surrender
charges, Nationwide will send a notice to the policy owner and the assignee, if
any. The policy will terminate without value 61 days after the mailing of the
notice unless a sufficient repayment is made during that period. A repayment is
sufficient if it is large enough to reduce the total policy indebtedness to an
amount equal to the total cash value less any surrender charges plus an amount
sufficient to continue the policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A policy loan, whether or not repaid, will have a permanent effect on the death
benefit and cash value because the investment results of the variable account or
the fixed account will apply only to the non-loaned portion of the cash value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the variable account or the fixed account
while the loan is outstanding, the effect could be favorable or unfavorable.
REPAYMENT
All or part of the indebtedness may be repaid at any time while the policy is in
force during the insured's lifetime. Any payment intended as a loan repayment,
rather than a premium payment, must be identified as such. Loan repayments will
be credited to the sub-accounts and the fixed account in proportion to the
policy owner's underlying mutual fund allocation factors in effect at the time
of the repayment. Each repayment may not be less than $1,000 ($50 in Connecticut
and New York). Nationwide 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.
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 at Nationwide's home office. Prior to being recorded, assignments will
not affect any payments made or actions taken by Nationwide. Nationwide is not
responsible for any assignment not submitted for recording, nor is Nationwide
responsible for the sufficiency or validity of any assignment. Assignments are
subject to any indebtedness owed to Nationwide before being recorded.
POLICY OWNER SERVICES
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from the fixed account and/or certain sub-accounts into other
sub-accounts. Policy owners may participate in this program if their policy
value is at least $15,000. Nationwide does not guarantee that this program will
result in profit or protect policy owners from loss.
Policy owners direct Nationwide to automatically transfer specified amounts from
the fixed account and the Money Market Portfolio.
The minimum monthly transfer is $100. Transfers occur monthly or on another
frequency if permitted by Nationwide. Nationwide will process transfers until
either the value in the originating investment option is exhausted, or the
policy owner instructs Nationwide in writing to stop the transfers.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging
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<PAGE> 23
programs. Nationwide reserves the right to assess a processing fee for this
service.
DEATH BENEFIT INFORMATION
CALCULATION OF THE DEATH BENEFIT
At issue, the policy owner selects a desired scheduled premium level. The
scheduled premium is used to determine the initial specified amount.
Under death benefit Option 1, the initial specified amount is determined by
treating the scheduled premium as 20% of the Guideline Single Premium. Under
death benefit Option 2, the initial specified amount is determined by treating
the scheduled premium as the Guideline Level Premium. For either death benefit
option, the initial specified amount will be set at a level such that payment of
the scheduled premiums will not result in the policy being classified as a
modified endowment contract (see "Tax Matters").
The following tables illustrate the initial specified amount that results from a
$2,000 scheduled premium payment.
MALE NON-TOBACCO
ISSUE AGE OPTION 1 OPTION 2
30 $85,779 $75,378
35 $68,165 $61,559
40 $54,111 $50,082
45 $43,165 $40,605
50 $34,675 $32,791
55 $28,136 $26,852
60 $23,176 $22,867
65 $19,474 $19,474
FEMALE NON-TOBACCO
ISSUE AGE OPTION 1 OPTION 2
30 $99,541 $93,577
35 $79,212 $76,497
40 $63,070 $62,320
45 $50,599 $50,633
50 $40,824 $40,958
55 $33,171 $32,949
60 $27,141 $26,301
65 $22,369 $22,168
Generally, for a given scheduled premium, the initial specified amount is
greater for non-tobacco than standard and females than males. The specified
amount is shown in the policy.
While the policy is in force, the death benefit will never be less than the
specified amount. The death benefit may vary with the cash value of the policy,
which depends on investment performance.
The policy owner may choose one of two death benefit options.
OPTION 1: the death benefit will be the greater of the specified amount or the
applicable percentage of cash value. Under Option 1, the amount of the death
benefit will ordinarily not change for several years to reflect the investment
performance and may not change at all. If investment performance is favorable
the amount of death benefit may increase. To see how and when investment
performance will begin to affect death benefits, please see the illustrations in
Appendix C.
OPTION 2: the death benefit will be the greater of the specified amount plus the
cash value, or the applicable percentage of cash value and will vary directly
with the investment performance.
The term "applicable percentage" means:
1) 250% when the insured is attained age 40 or less at the
beginning of a policy year, and
2) when the insured is above attained age 40, the percentage
shown in the "Applicable Percentage of Cash Value" table.
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<PAGE> 24
APPLICABLE PERCENTAGE OF CASH VALUE
<TABLE>
<CAPTION>
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
41 243% 61 128% 81 105%
42 236% 62 126% 82 105%
43 229% 63 124% 83 105%
44 222% 64 122% 84 105%
45 215% 65 120% 85 105%
46 209% 66 119% 86 105%
47 203% 67 118% 87 105%
48 197% 68 117% 88 105%
49 191% 69 116% 89 105%
50 185% 70 115% 90 105%
51 178% 71 113% 91 104%
52 171% 72 111% 92 103%
53 164% 73 109% 93 102%
54 157% 74 107% 94 101%
55 150% 75 105% 95 100%
56 146% 76 105%
57 142% 77 105%
58 138% 78 105%
59 134% 79 105%
</TABLE>
CHANGES IN THE DEATH BENEFIT OPTION
After the fifth policy year, the policy owner may change the death benefit
option under the policy. If the change is from Option 1 to Option 2, the
specified amount will be decreased by the amount of the cash value. If the
change is from Option 2 to Option 1, the specified amount will be increased by
the amount of the cash value. Nationwide reserves the right to require evidence
of insurability for either change.
The effective date of the change will be the monthly anniversary day on or next
following the date Nationwide 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.
PROCEEDS PAYABLE ON DEATH
The actual death proceeds payable on the insured's death will be the death
benefit as described above, less any policy indebtedness, and less any unpaid
policy charges. Under certain circumstances, the death proceeds may be adjusted
(see "Incontestability," "Error in Age or Sex," and "Suicide").
INCONTESTABILITY
Nationwide will not contest payment of the death proceeds based on the initial
specified amount after the policy has been in force during the insured's
lifetime for 2 years from the policy date. For any increase in specified amount
requiring evidence of insurability, Nationwide will not contest
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<PAGE> 25
payment of the death proceeds based on such an increase after it has been in
force during the insured's lifetime for 2 years from its effective date.
ERROR IN AGE OR SEX
If the age or sex of the insured has been misstated, the affected benefits will
be adjusted.
The amount of the death benefit will be (1) multiplied by (2) and then the
result added to (3), where:
(1) is the amount of the death benefit at the time of the
insured's death reduced by the amount of the cash value at the
time of the insured's death;
(2) is the ratio of the monthly cost of insurance applied in the
policy month of death and the monthly cost of insurance that
should have been applied at the true age and sex in the policy
month of death; and
(3) is the cash value at the time of the insured's death.
SUICIDE
If the insured dies by suicide, while sane or insane, within two years from the
policy date, Nationwide will pay no more than the sum of the premiums paid, less
any indebtedness, and less any partial surrenders. If the insured dies by
suicide, while sane or insane, within two years from the date an application is
accepted for an increase in the specified amount, Nationwide will pay no more
than the amount paid for the additional benefit.
MATURITY PROCEEDS
The maturity date is the policy anniversary on or next following the insured's
95th birthday. If the policy is still in force, maturity proceeds are payable to
the policy owner on the maturity date. Maturity proceeds are equal to the amount
of the policy's cash value, less any indebtedness.
EXCHANGE RIGHTS
The policy owner may exchange the policy for a flexible premium adjustable life
insurance policy offered by Nationwide on the policy date. The benefits for the
new policy will not vary with the investment experience of a separate account.
The exchange must be elected within 24 months from the policy date. No evidence
of insurability will be required.
The policy owner and beneficiary under the new policy will be the same as those
under the exchanged policy on the effective date of the exchange. The new policy
will have a death benefit on the exchange date not more than the death benefit
of the original policy immediately prior to the exchange date. The new policy
will have the same policy date and issue age as the original policy. The initial
specified amount and any increases in specified amount will have the same rate
class as those of the original policy. Any indebtedness may be transferred to
the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two policies.
After adjustment, if any excess is owed the policy owner, Nationwide will pay
the excess to the policy owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
GRACE PERIOD
FIRST FIVE POLICY YEARS
This policy will not lapse during the first five policy years provided that on
each monthly anniversary day (1) is greater than or equal to (2) where:
(1) is the sum of all premiums paid to date minus any policy
indebtedness; and
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<PAGE> 26
(2) is the sum of monthly minimum premiums since the policy date
including the monthly minimum premium for the current monthly
anniversary day.
If (1) is less than (2), a grace period of 61 days from the monthly anniversary
day will be allowed for the payment of sufficient premium to satisfy the minimum
premium requirement. If sufficient premium is not paid by the end of the grace
period, the policy will lapse. The policy will be terminated with the return of
any available cash surrender value. The cash surrender value will be calculated
as of the beginning of the grace period. The policy owner may also elect in
writing to have the policy placed on Extended Term Insurance.
POLICY YEARS SIX AND AFTER
If the cash surrender value on a monthly anniversary day is not sufficient to
cover the current monthly deduction for insurance costs, administrative expenses
and other benefits, a grace period of 61 days from the monthly anniversary day
will be allowed for the payment of sufficient premium to cover the current
monthly deduction plus an amount equal to three times the current monthly
deduction.
ALL POLICY YEARS
Nationwide will send a notice at the start of the grace period to the policy
owner's last known address. If the insured dies during the grace period,
Nationwide 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 Nationwide;
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
Nationwide. If the policy is reinstated, the cash value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the lesser of:
1. the cash value at the end of the grace period; or
2. the surrender charge for the policy year in which the policy
was reinstated.
Unless the policy owner has provided otherwise, all amounts will be allocated
based on the underlying mutual fund allocation factors in effect at the start of
the grace period.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Internal Revenue Code provides that if certain tests are
met, a policy will be treated as a life insurance policy for federal tax
purposes. Nationwide will monitor compliance with these tests. The policy should
thus receive the same federal income tax treatment as fixed benefit life
insurance. As a result, the death proceeds payable under a policy are excludable
from gross income of the beneficiary under Section 101 of the Internal Revenue
Code.
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<PAGE> 27
Section 7702A of the Internal Revenue Code defines modified endowment contracts
as those policies issued or materially changed on or after June 21, 1988 on
which the total premiums paid during the first seven years exceed the amount
that would have been paid if the policy provided for paid up benefits after
seven level annual premiums. The Internal Revenue Code states that taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts (other than certain
distributions to terminally ill individuals) are subject to federal income taxes
in a manner similar to the way annuities are taxed. Modified endowment contract
distributions are defined by the Internal Revenue Code as amounts not received
as an annuity and are taxable to the extent the cash value of the policy
exceeds, at the time of distribution, the premiums paid into the policy. A 10%
tax penalty generally applies to the taxable portion of such distributions
unless the policy owner is over age 59 1/2 or disabled or the distribution is
part of an annuity to the policy owner as defined in the Internal Revenue 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 Internal
Revenue Code, are excludable from gross income.
The policies offered by this prospectus may or may not be issued as modified
endowment contracts. Nationwide will monitor premiums paid and will notify the
policy owner when the policy's non-modified endowment status is in jeopardy. If
a policy is not a modified endowment contract, a cash distribution during the
first 15 years after a policy is issued which causes a reduction in death
benefits may still become fully or partially taxable to the policy owner
pursuant to Section 7702(f)(7) of the Internal Revenue Code. The policy owner
should carefully consider this potential effect and seek further information
before initiating any changes in the terms of the policy. Under certain
conditions, a policy may become a modified endowment as a result of a material
change or a reduction in benefits as defined by Section 7702A(c) of the Internal
Revenue Code.
In addition to meeting the tests required under Section 7702, Section 817(h) of
the Internal Revenue 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 Nationwide 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 insurance under Section 7702 of the Internal Revenue
Code, Nationwide will take
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<PAGE> 28
whatever steps are available to remain in compliance.
Nationwide will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the sub-account investments
to remain in compliance.
A total surrender or cancellation of the policy by lapse or the maturity of the
policy on its maturity date may have adverse tax consequences. If the amount
received by the policy owner plus total policy indebtedness exceeds the premiums
paid into the policy, the excess generally will be treated as taxable income,
regardless of whether or not the policy is a modified endowment contract.
WITHHOLDING
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 of no Taxpayer Identification Number
is provided to Nationwide, or if the IRS notifies Nationwide 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 1999, an estate of less than $625,000
(inclusive of certain pre-death gifts) will not incur a federal estate tax
liability. In addition, an unlimited marital deduction may be available for
federal estate tax purposes, for certain amounts that pass to the surviving
spouse.
When the insured dies, the death benefit will generally be included in the
insured's federal gross estate if: (1) the proceeds were payable to or for the
benefit of the insured's estate; or (2) the insured held any "incident of
ownership" in the policy at death or at any time within three years of death. An
incident of ownership is, in general, any right that may be exercised by the
policy owner, such as the right to borrow on the policy, or the right to name a
new Beneficiary.
If the policy owner (whether or not he or she is the insured) transfers
ownership of the policy to another person, such transfer may be subject to a
federal gift tax. In addition, if such policy owner transfers the policy to
someone two or more generations younger than the policy owner, the transfer may
be subject to the federal generation-skipping transfer tax ("GSTT"), the taxable
amount being the value of the policy.
Similarly, if the beneficiary is two or more generations younger than the
insured, the payment of the death proceeds at the death of the insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the U.S.
Treasury Department, Nationwide 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
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<PAGE> 29
statutory rate of 30% of the amount of income that is distributed. Nationwide 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 Nationwide sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. In
addition, the NRA must obtain an individual Taxpayer Identification Number from
the IRS, and furnish that number to Nationwide prior to the distribution. If
Nationwide does not have the proper proof of citizenship or residency and a
proper individual Taxpayer Identification Number prior to any distribution,
Nationwide 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 Nationwide 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 includible 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.
TAXATION OF NATIONWIDE
Nationwide is taxed as a life insurance company under the Internal Revenue Code.
Since the variable account is not a separate entity from Nationwide and its
operations form a part of Nationwide, it will not be taxed separately as a
"regulated investment company" under Sub-chapter M of the Internal Revenue 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.
Nationwide 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, Nationwide 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.
Nationwide 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 Nationwide's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice.
The Internal Revenue Code has been subjected to numerous amendments and changes,
and it is reasonable to believe that it will continue to be revised. The United
States Congress has, in the past, considered numerous legislative proposals
that, if enacted, could change the tax treatment of the policies. It is
reasonable to believe that such proposals, and 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
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<PAGE> 30
be at variance with its current positions on these matters. In addition, current
state law (which is not discussed herein), and future amendments to state law,
may affect the tax consequences of the policy.
If the policy owner, insured, or beneficiary or other person receiving any
benefit or interest in or from the policy is not both a resident and citizen of
the United States, there may be a tax imposed by a foreign country, in addition
to any tax imposed by the United States. The foreign law (including regulations,
rulings, and case law) may change and impose additional taxes on the policy, the
death proceeds, 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, or 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.
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. 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.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. Conversions of existing
traditional life policies will continue through second quarter, 1999. In
addition, the shareholder services system that support our mutual fund products
will be fully deployed in the first quarter of 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has
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<PAGE> 31
tested and certified that each vendor product is Year 2000 compliant. Any vendor
products that could not be certified as Year 2000 compliant were replaced or
eliminated in 1998.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners including electronic interfaces. Processes
have been put in place and programs initiated to process data irrespective of
the format by converting non-compliant data into a Year 2000 compliant format.
Systems supporting Nationwide's infrastructure such as telecommunications, voice
and networks will be compliant by March 1999. Nationwide's assessment of Year
2000 issues has also included non-information technology systems with embedded
computer chips. Nationwide's building systems such as fire, security, elevators
and escalators supporting facilities in Columbus, Ohio have been tested and are
Year 2000 compliant.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for our variable annuity and life products. The
same action will continue during the first quarter of 1999 with wholesale
producers. Nationwide continues its efforts to identify external risk factors
and is planning to develop contingency plans as part of its ongoing risk
management strategy.
Operating expenses in 1998 and 1997 included approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending approximately $5 million on Year 2000
activities in 1999. These expenses have no affect on the assets of the variable
account and are not charged through to the policy owner.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction in operating expenses. Rather,
personnel and resources currently allocated to Year 2000 issues will be assigned
to other technology-related projects.
STATE REGULATION
Nationwide 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
Nationwide 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 Nationwide's contract liabilities and reserves so that the
Insurance Department may certify the items are correct. Nationwide'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, Nationwide is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
REPORTS TO POLICY OWNERS
Nationwide will mail to the policy owner at the last known address of record:
o an annual statement containing: the amount of the current
death benefit, cash value, cash surrender value, premiums
paid, monthly charges
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<PAGE> 32
deducted, amounts invested in the fixed account and the
sub-accounts, and policy indebtedness;
o annual and semi-annual reports containing all applicable
information and financial statements or their equivalent,
which must be sent to the underlying mutual fund beneficial
shareholders as required by the rules under the Investment
Company Act of 1940 for the variable account; and
o statements of significant transactions, such as changes in
specified amount, changes in death benefit options, changes in
future premium allocations, transfers among sub-accounts,
premium payments, loans, loan repayments, reinstatement and
termination.
ADVERTISING
Nationwide is ranked and rated by independent financial rating services,
including Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of
Nationwide. The ratings are not intended to reflect the investment experience or
financial strength of the variable account. Nationwide may advertise these
ratings from time to time. In addition, Nationwide may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend Nationwide or the policies. Furthermore,
Nationwide may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
Nationwide 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 Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In February 1997, Nationwide was named as a defendant in a lawsuit filed in New
York state court related to the sale of whole life policies on a "vanishing
premium" basis (John H. Snyder v. Nationwide Life Insurance Co.). In April 1998,
Nationwide was named as a defendant in a lawsuit filed in Ohio state court
similar to the Snyder case (David and Joan Mishler v. Nationwide Life Insurance
Co.). In August 1998, Nationwide Mutual Insurance Company and Nationwide and the
plaintiffs executed a stipulation of settlement and submitted it to the New York
state court for approval. On August 20, 1998, the court in the Snyder case
signed an order preliminarily approving a class for settlement purposes (which
would include the Mishler case) and scheduled a fairness hearing for December
17, 1998. At that hearing, the court reviewed the fairness and reasonableness of
the proposed settlement and issued a final order and judgment. The approved
settlement provides for dismissal of both the Snyder and Mishler cases, bars
class members from pursuing litigation against Nationwide Mutual Insurance
Company and its affiliates, including Nationwide and its subsidiaries, relating
to the allegations in the Snyder case, and provides class members with a
potential value of approximately $100 million in policy adjustments, discounted
premiums and discounted products.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance policy and the other who was the owner of a variable annuity contract,
commenced a
29
<PAGE> 33
lawsuit in a federal court in Texas against Nationwide and the American Century
group of defendants (Robert Young and David D. Distad v. Nationwide Life
Insurance Company et al.). In this lawsuit, plaintiffs seek to represent a class
of variable life insurance policy owners and variable annuity contract owners
whom they claim were allegedly misled when purchasing these variable contracts
into believing that the performance of their underlying mutual fund option
managed by American Century, whose shares may only be purchased by insurance
companies, would track the performance of a mutual fund, also managed by
American Century, whose shares are publicly traded. The amended complaint seeks
unspecified compensatory and punitive damages. On April 27, 1998, the district
court denied, in part, and granted, in part, Nationwide and American Century's
motions to dismiss the complaint. The remaining claims against Nationwide allege
securities fraud, common law fraud, civil conspiracy and breach of contract. On
December 2, 1998, the district court issued an order denying plaintiffs' motion
for class certification. On December 10, 1998, the district court stayed the
lawsuit pending plaintiffs' petition to the federal appeals court for
interlocutory review of the order denying class certification. On December 14,
1998, plaintiffs filed their petition for interlocutory review, on which the
federal appeals court has not yet ruled. Nationwide intends to defend the case
vigorously.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified compensatory and punitive damages. Nationwide
currently is evaluating this lawsuit, which has not been certified as a class.
Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
EXPERTS
The audited financial statements have been included herein in reliance upon the
reports of KPMG 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, Nationwide, 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 Dietrich, Reynolds & Koogler, LLP, One Nationwide Plaza, Columbus, Ohio
43215. All the members of such firm are employed by the Nationwide Mutual
Insurance Company.
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<PAGE> 34
DISTRIBUTION OF THE POLICIES
The policies will be sold by licensed insurance agents in those states where the
policies may lawfully be sold. Agents are registered representatives of broker
dealers registered under the Securities Exchange Act of 1934 who are member
firms of the National Association of Securities Dealers, Inc. ("NASD"). The
policies will be distributed by the general distributor, Van Kampen Funds, Inc.
Gross first year commissions plus any expense allowance payments paid by
Nationwide on the sale of these policies provided by the general distributor
will not exceed 26% of the scheduled premium plus 5% of any excess premium
payments. Gross renewal commissions paid by Nationwide will not exceed 5% of
actual premium payments.
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<PAGE> 35
OFFICERS - VAN KAMPEN FUNDS, INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Don G. Powell Chairman Houston, TX
Philip N. Duff Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman III President & Chief Operating Officer Oakbrook Terrace, IL
Douglas B. Gehrman Executive Vice President Houston, TX
Ronald A. Nyberg Executive Vice President, General Counsel & Oakbrook Terrace, IL
Assistant Secretary
William R. Rybak Executive Vice President & Chief
Financial Officer
Paul R. Wolkenberg Executive Vice President Oakbrook Terrace, IL
Laurence J. Althoff Sr. Vice President & Controller Oakbrook Terrace, IL
Gary R. DeMoss Sr. Vice President Oakbrook Terrace, IL
John E. Doyle Sr. Vice President Oakbrook Terrace,
IL
Richard G. Golod, Sr. Vice President Annapolis, MD
Scott E. Martin Sr. Vice President & Deputy General Oakbrook Terrace, IL
Counsel & Secretary
Mark T. McGannon Sr. Vice President Oakbrook Terrace, IL
Charles G. Millington Sr. Vice President & Treasurer Oakbrook Terrace, IL
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
Colette M. Saucedo Sr. Vice President Houston, TX
Frederick Shepherd Sr. Vice President Houston, TX
Steven P. Sorenson Sr. Vice President Oakbrook Terrace, IL
Michael L. Stallard Sr. Vice President Oakbrook Terrace, IL
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Edward G. Wood, III Sr. Vice President & Chief Operating Officer Oakbrook Terrace. IL
Glenn M. Cackovic 1st Vice President Laguna Niguel, CA
Eric J. Hargens 1st Vice President Orlando, FL
David S. Hogaboom 1st Vice President Oakbrook Terrace, IL
Dominic C. Martellaro 1st Vice President Danville, CA
Carl Mayfield 1st Vice President Lakewood, CO
Mark R. McClure 1st Vice President Oakbrook Terrace, IL
James J. Ryan 1st Vice President Oakbrook Terrace, IL
George J. Vogel 1st Vice President Oakbrook Terrace, IL
Patrick J. Woelfel 1st Vice President Oakbrook Terrace, IL
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Sheldon Barker Vice President Moon, PA
Patricia A. Bettlach Vice President Chesterfield, MO
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
</TABLE>
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<PAGE> 36
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Michael P. Boos Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Counsel & Oakbrook Terrace, IL
Assistant Secretary
Robert C. Brooks Vice President Oakbrook Terrace, IL
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Christine Cleary Byrum Vice President Tampa, FL
Joseph N. Caggiano Vice President New York, NY
Daniel R. Chambers Vice President Austin, TX
Richard J. Charlino Vice President Oakbrook Terrace, IL
Deanne Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Eleanor M. Cloud Vice President Oakbrook Terrace, IL
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Suzanne Cummings Vice President Oakbrook Terrace, IL
Nicholas Dalmaso Vice President, Associate General Counsel & Oakbrook Terrace, IL
Asst. Secretary
Daniel R. DeJong Vice President Oakbrook Terrace, IL
Tracey M. DeLusant Vice President New York, NY
Michael E. Eccleston Vice President Oakbrook Terrace, IL
Jonathan Eckard Vice President Tampa, FL
Huey P. Falgout, Jr. Vice President, Assistant Secretary & Sr. Houston, TX
Attorney
Charles Edward Fisher Vice President Naperville, IL
William J. Fow Vice President Redding, CT
Nicholas J. Foxhoven Vice President Englewood, CO
Charles Friday Vice President Gibsonia, PA
Richard G. Golod Vice President Annapolis, MD
Timothy D. Griffith Vice President Kirkland, WA
Dalton L. Gustafson Vice President Bolton, Ma
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John A. Hanhauser Vice President Philadelphia, PA
John G. Hansen Vice President Oakbrook Terrace, IL
Calvin B. Hays Vice President Richmond, VA
Joseph Hays Vice President Cherry Hill, NJ
Daniel M. Hazard Vice President Huntington Beach, CA
Gregory Heffington Vice President Ft. Collins, CO
Susan J. Hill Vice President Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Michael B. Hughes Vice President Oakbrook Terrace, IL
Robert S. Hunt Vice President Phoenix, MD
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
</TABLE>
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<PAGE> 37
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Steven T. Johnson Vice President Oakbrook Terrace, IL
Jeffrey S. Kinney Vice President Overland Park, KS
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
David R. Kowalski Vice President & Director of Compliance Oakbrook Terrace, IL
Richard D. Kozlowski Vice President Atlanta, GA
Bradford N. Langs Vice President Oakbrook Terrace, IL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
Tony E. Leal Vice President Daphne, AL
S. William Lehew III Vice President Charlotte, NC
Eric Levinson Vice President San Francisco, CA
Jonathan Linstra Vice President Oakbrook Terrace, IL
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Walter Lynn Vice President Flower Mound, TX
Linda S. MacAyeal Vice President Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Puyallup, WA
Anne Therese McGrath Vice President Los Gatos, CA
Maura A. McGrath Vice President New York, NY
John Mills Vice President Kenner, LA
Ted Morrow Vice President Dallas, TX
Robert Muller, Jr. Vice President Cypress, TX
Peter Nicholas Vice President Beverly, MA
Michael D. Ossmen Vice President Oakbrook Terrace, IL
Todd W. Page Vice President Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Anthony Piazza Vice President Old Bridge, NJ
Ronald E. Pratt Vice President Marietta, GA
Craig S. Prichard Vice President Fairlawn, OH
Daniel D. Reams Vice President Royal Oak, MI
Michael W. Rohr Vice President Oakbrook Terrace. IL
Jeffrey L. Rose Vice President Houston, TX
Suzette N. Rothberg Vice President Plymouth, MN
Jeffrey Rourke Vice President Oakbrook Terrace, IL
Thomas Rowley Vice President St. Louis, MO
Heather R. Sabo Vice President Richmond, VA
Stephanie Scarlata Vice President Bedford Corners, NY
Andrew J. Scherer Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Gwen L. Shaneyfalt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorenson Vice President Oakbrook Terrace, IL
Kimberly M. Spangler Vice President Fairfax, VA
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Gary R. Steele Vice President Philadelphia, PA
</TABLE>
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<PAGE> 38
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Richard Stefanec Vice President Los Angles, CA
James D. Stevens Vice President North Andover, MA
James M. Stilwell Vice President San Diego, CA
William C. Strafford Vice President Granger, IN
Mark A. Syswerda Vice President Oakbrook Terrace, IL
David A. Tabone Vice President Scottsdale, AZ
James C. Taylor Vice President Naperville, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Todd A. Volkman Vice President Austin, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Robert A. Watson Vice President Oakbrook Terrace. IL
Weston B. Wetherell Vice President, Assoc. General Counsel & Oakbrook Terrace, IL
Asst. Secretary
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Kirk Wiggins Vice President Arlington, TX
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
David M. Wynn Vice President Phoenix, AZ
James R. Yount Vice President Mercer Island, WA
Patrick M. Zacchea Vice President Oakbrook Terrace, IL
Scott F. Becker Asst. Vice President Oakbrook Terrace, IL
Brian E. Binder Asst. Vice President Oakbrook Terrace, IL
Joan E. Blackwood Asst. Vice President Oakbrook Terrace, IL
Billie J. Bronaugh Asst. Vice President Houston, TX
Gregory T. Brunk Asst. Vice President Oakbrook Terrace, IL
Gina Costello Asst. Vice President Oakbrook Terrace, IL
Sarah K. Geiser Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Oakbrook Terrace, IL
Valri G. Hamilton Asst. Vice President Houston, TX
Laurie L. Jones Asst. Vice President Houston, TX
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Ivan R. Lowe Asst. Vice President Houston, TX
Pamela D. Meyer Asst. Vice President Phoenix, AZ
Susan M. Mini Asst. Vice President Oakbrook Terrace, IL
Brian K. Mitchell Asst. Vice President Oakbrook Terrace, IL
Stuart R. Moehlman Asst. Vice President Houston, TX
Steven R. Norvid Asst. Vice President Oakbrook Terrace, IL
Vincent M. Pellegrini Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
David P. Robbins Asst. Vice President Oakbrook Terrace, IL
Regina Rosen Asst. Vice President Oakbrook Terrace, IL
Pamela S. Salley Asst. Vice President Houston, TX
Vanessa M. Sanchez Asst. Vice President Oakbrook Terrace, IL
Thomas J. Sauerborn Asst. Vice President New York, NY
Bruce Saxon Asst. Vice President Oakbrook Terrace, IL
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
</TABLE>
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<PAGE> 39
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Christina L. Schmieder Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Sharon M. C. Wells Asst. Vice President Oakbrook Terrace, IL
Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
Elizabeth M. Brown Officer Houston, TX
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
Sarah Kessler Officer Oakbrook Terrace, IL
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
Larry Vickrey Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
DIRECTORS - VAN KAMPEN FUNDS, INC.
<TABLE>
<CAPTION>
NAME/OFFICE LOCATION
<S> <C>
Don G. Powell, Chairman 2800 Post Oak Blvd.
Houston, TX 77056
Philip N. Duff, chief Executive Officer One Parkview Plaza
Oakbrook Terrace, IL 60181
William R. Rybak, Executive Vice President & Chief One Parkview Plaza
Financial Officer Oakbrook Terrace, IL 60181
John H. Zimmerman III, President & Chief Operating One Parkview Plaza
Officer Oakbrook Terrace, IL 60181
Ronald A. Nyberg, One Parkview Plaza
Executive Vice President, Oakbrook Terrace, IL 60181
General Counsel & Secretary
</TABLE>
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<PAGE> 40
ADDITIONAL INFORMATION ABOUT NATIONWIDE
The life insurance business, including annuities, is the only business in which
Nationwide is engaged.
Nationwide markets its policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
Nationwide serves as depositor for the following separate investment accounts,
each of which is a registered investment company:
o Nationwide Variable Account,
o Nationwide Variable Account-II,
o Nationwide Variable Account-3,
o Nationwide Variable Account-4,
o Nationwide Variable Account-5,
o Nationwide Variable Account-6,
o Nationwide Fidelity Advisor Variable Account,
o Nationwide Variable Account-9,
o MFS Variable Account,
o Nationwide Variable Account-10;
o Nationwide Multi-Flex Variable Account,
o Nationwide VLI Separate Account,
o Nationwide VLI Separate Account-2,
o Nationwide VLI Separate Account-3,
o Nationwide VLI Separate Account-4,
o Nationwide VLI Separate Account-5,
o NACo Variable Account, and the
o Nationwide DC Variable Account.
Nationwide, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in that state. In general,
all states have statutory administrative powers. Such regulation relates, among
other things, to licensing of insurers and their agents, the approval of policy
forms, the methods of computing reserves, the form and content of statutory
financial statements, the amount of policyholders' and stockholders' dividends,
and the type of distribution of investments permitted.
Nationwide 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, Nationwide shares employees
with Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance
Company.
Nationwide does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. Nationwide 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
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<PAGE> 41
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, 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.
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<PAGE> 42
DIRECTORS OF NATIONWIDE
<TABLE>
<CAPTION>
DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICES
PRINCIPAL BUSINESS ADDRESS WITH DEPOSITOR PRINCIPAL OCCUPATION
<S> <C> <C>
Lewis J. Alphin Director Farm Owner and Operator (1)
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director Farm Owner and Operator (1)
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director Farm Owner and Operator (1)
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director Partner, Fred W. Eckel Sons; President, Eckel
1647 Falls Road Farms, Inc. (1)
Clarks Summit, PA 18411
Willard J. Engel Director Retired General Manager, Lyon County Co-operative
301 East Marshall Street Oil Company (1)
Marshall, MN 44691
Fred C. Finney Director Owner and Operator, Moreland Fruit Farm; Operator,
1558 West Moreland Road Melrose Orchard (1)
Wooster, OH 44691
Joseph J. Gasper President and Chief President and Chief Operating Officer, Nationwide
One Nationwide Plaza Operating Officer and Life Insurance Company and Nationwide Life
Columbus, OH 43215 Director Insurance Company (2)
Dimon R. McFerson Chairman and Chief Chairman and Chief Executive Officer- (2)
One Nationwide Plaza Executive Officer and
Columbus, OH 43215 Director
David O. Miller Chairman of the Board and President, Owen Potato Farm, Inc.; Partner, M&M
115 Sprague Drive Director Enterprises (1)
Hebron, OH 43025
Yvonne L. Montgomery Director Senior Vice President-General Manager Southern
Suite 1600 Customer Operations for U.S. Customer Operations,
2859 Paces Ferry Road Xerox Corporation (2)
Atlanta, GA 30339
Ralph M. Paige Director Executive Director
2769 Church Street Federation of Southern Cooperatives/Land
East Point, Ga 30344 Assistance Fund
James F. Patterson Director Vice President, Pattersons, Inc.; President,
8765 Mulberry Road Patterson Farms, Inc. (1)
Chesterland, OH 44026
Arden L. Shisler Director President and Chief Executive Officer, K&B
1356 North Wenger Road Transport, Inc. (1)
Dalton, OH 44618
Robert L. Stewart Director Owner and Operator Sunnydale Farms and Mining (1)
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director Farm Owner and Operator, Da-Ma-Lor Farms (1)
1733A Westwood Avenue
Alliance, OH 44601
</TABLE>
(1) Principal occupation for last 5 years.
(2) Prior to assuming this current position, held other executive
management positions with the same or affiliated companies.
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
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
Company. Messrs. McFerson and Gasper are directors of Nationwide Advisory
Services, Inc., a registered broker-dealer.
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<PAGE> 43
Messrs. McFerson, Miller, Patterson and Shisler are directors of Nationwide
Financial Services, Inc. Mr. McFerson and Ms. Thomas are trustees of Nationwide
Mutual Funds, a registered investment company. Messrs. McFerson, Gasper and
Woodward are trustees of Nationwide Separate Account Trust and Nationwide Asset
Allocation Trust, registered investment companies. Mr. McFerson is trustee
Nationwide Mutual Funds, a registered investment company. Mr. Engel is a
director of Western Cooperative Transport.
EXECUTIVE OFFICERS OF NATIONWIDE
<TABLE>
<CAPTION>
OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
<S> <C>
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
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
James E. Brock Senior Vice President - Corporate Development
One Nationwide Plaza
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President - Chief Communications Officer
One Nationwide Plaza
Columbus, OH 43215
Phillip C. Gath Senior Vice President and Chief Actuary - Nationwide Financial
One Nationwide Plaza Services
Columbus, OH 43215
Richard D. Headley Senior Vice President - Chief Information Technology Officer
One Nationwide Plaza
Columbus, OH 43215
Donna A. James Senior Vice President - Human Resources
One Nationwide Plaza
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales and Financial Services
One Nationwide Plaza
Columbus, OH 43215
Doublas C. Robinette Senior Vice President - Marketing and Product Management
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life Company Operations
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
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EXECUTIVE OFFICERS OF NATIONWIDE (CONTINUED)
<TABLE>
<CAPTION>
OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
<S> <C>
Bruce C. Barnes Vice President - Technology Strategy and Planning
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Vice President - Enterprise Controller of Nationwide Financial
One Nationwide Plaza Services
Columbus, OH 43215
Matthew S. Easley Vice President - Investment Life Actuarial
One Nationwide Plaza
Columbus, OH 43215
R. Dennis Noice Vice President Systems - Nationwide Financial Services
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath Vice President - Product and Market Compliance
One Nationwide Plaza
Columbus, OH 43215
Mark R. Thresher Vice President - Finance and Treasurer
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
JOSEPH J. GASPER has been President and Chief Operating Officer of Nationwide
and Director since April 1996. Previously, he was Executive Vice President -
Property/Casualty Operations of Nationwide Mutual Insurance Company from April
1995 to April 1996. He was Senior Vice President - Property/Casualty Operations
of Nationwide Mutual Insurance Company from September 1993 to April 1995. Prior
to that time, Mr. Gasper held numerous positions within Nationwide. Mr. Gasper
has been with Nationwide for 32 years.
BRUCE C. BARNES has been Vice President - Technology Strategy and Planning since
May 1998. Previously, Mr. Barnes was Vice President - Information Systems from
February 1997 to May 1998. Mr. Barnes was Vice President - Life Systems from May
1996 to May 1998. Previously, he was Vice President - Investment Product Systems
from April 1995 to May 1996. Prior to that time, Mr. Barnes was Vice President -
Individual Investment Products/Common Systems from May 1994 to April 1995 and
Associate Vice President - Individual Investment Products/Common Systems from
May 1992 to May 1994. Mr. Barnes was Vice President - Information Services of
PHP Benefits Systems, Inc. from January 1987 to January 1992. Mr. Barnes has
been with Nationwide for 7 years.
A. I. BELL has been a Director of Nationwide since April, 1998. Mr. Bell has
served as a state trustee of the Ohio Farm Bureau Federation from 1991 to 1998
and as president that last four years. He oversees the Bell family farm in
Zanesville, Ohio. The farm is the hub of a multi-family swine network, in
addition to grain and beef operations. Mr. Bell has represented the Ohio Farm
Bureau at state and national level activities, and has traveled internationally
representing Ohio agriculture. In 1995, he was introduced into The Ohio State
University Department of Animal Sciences Hall of Fame.
JAMES E. BROCK has been Senior Vice President - Corporate Development since July
1997. Previously, he was Senior Vice President - Company Operations from
December 1996 to July 1997 and was also Senior Vice President - Life Company
Operations from April 1996 to July 1997. Mr. Brock was Senior Vice President -
Investment Products Operations from November 1990 to April 1996. Prior to that
time, Mr. Brock held several positions within Nationwide. Mr. Brock has been
with Nationwide for 29 years.
DENNIS W. CLICK has been Vice President - Secretary since December 1997.
Previously, he was Vice President - Assistant Secretary from December 1996 to
December 1997. Mr. Click
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<PAGE> 45
was Vice President - Assistant Secretary from August 1994 to December 1997. Mr.
Click was Associate Vice President and Assistant Secretary from August 1989 to
August 1994. Prior to that time, he held several positions within Nationwide.
Mr. Click has been with Nationwide for 38 years.
JOHN R. COOK, JR. has been Senior Vice President - Chief Communications Officer
since May 1997. Previously, Mr. Cook was Senior Vice President - Chief
Communications Officer of USAA from July 1989 to May 1997.
KENNETH D. DAVIS has been a Director of Nationwide since April 1999. Mr. Davis
has been Chairman of the Board of South Central Power Company since August 1979,
and currently oversees the Davis family farm located in Leesburg, Ohio. Mr.
Davis served as Director of the Farm Bureau Bancorp from October 1998 to March
1998. In addition, Mr. Davis has served in various officer positions with the
Ohio Farm Bureau Federation since December 1989, with his most recent position
as Trustee and President, a position he held from March 1998 to March 1999. Mr.
Davis also held officer positions with the Highland County Farm Bureau from June
1997 to September 1997, including Trustee and President from September 1984 to
September 1997.
DAVID A. DIAMOND has been Vice President - Enterprise Controller since August
1996. Previously, he was Vice President - Controller from October 1993 to August
1996. Prior to that time, Mr. Diamond held several positions within Nationwide.
Mr. Diamond has been with Nationwide for 10 years.
MATTHEW S. EASLEY has been Vice President - Investment Life Actuarial since June
1998. Mr. Easley was Vice President - Marketing and Administrative Services from
December 1996 to June 1998. Mr. Easley was Vice President - Life Marketing and
Administrative Services from May 1996 to June 1998. Mr. Easley was Vice
President - Annuity and Pension Actuarial from August 1989 to May 1996. Prior to
that time, Mr. Easley held several positions within Nationwide. Mr. Easley has
been with Nationwide for 16 years.
KEITH W. ECKEL has been a Director of Nationwide since April 1996. Mr. Eckel is
a partner of Fred W. Eckel Sons and president of Eckel Farms, Inc., in northeast
Pennsylvania. He received the Master Farmer award from Penn State University in
1982. He is a former president of the Pennsylvania Farm Bureau, a position he
held for 15 years, and the Lackawanna County Cooperative Extension Association.
Mr. Eckel has served as a board member and executive committee member of the
American Farm Bureau. He is a former vice president of the Pennsylvania Council
of Cooperative Extension Associations, and former board member of the
Pennsylvania Vegetable Grower's Association.
PHILIP C. GATH has been Senior Vice President - Chief Actuary since May 1998.
Previously, Mr. Gath was Vice President - Product Manager - Individual Variable
Annuity from July 1997 to May 1998. Mr. Gath was Vice President - Individual
Life Actuary from August 1989 to July 1997. Prior to that time, Mr. Gath held
several positions within Nationwide. Mr. Gath has been with Nationwide for 30
years.
RICHARD D. HEADLEY has been Senior Vice President - Chief Information Technology
Officer since October 1997. Previously, Mr. Headley was Chairman and Chief
Executive Officer of Banc One Services Corporation from 1992 to October 1997.
From January 1975 until 1992 Mr. Headley held several positions with Banc One
Corporation.
DONNA A. JAMES has been Senior Vice President - Human Resources since December
1997. Previously, she was Vice President - Human Resources from July 1996 to
December 1997. Prior to that time Ms. James was Vice President - Assistant to
the CEO from March 1996 to July 1996. From May 1994 to March 1996 she was
Associate Vice President - Assistant to the CEO. Prior to that time Ms. James
held several positions within Nationwide. Ms. James has been with Nationwide for
17 years.
RICHARD A. KARAS has been Senior Vice President - Sales - Financial Services
since March 1993. Previously, he was Vice President - Sales - Financial Services
from February 1989 to March 1993. Prior to that time, Mr. Karas held several
positions within Nationwide. Mr. Karas has been with Nationwide for 34 years.
DAVID O. MILLER has been a Director of Nationwide since November 1996. Mr.
Miller has been a farm owner and land developer since
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<PAGE> 46
1962. He is the President of the Owen Potato Farm Inc. and is a partner of M&M
Enterprises in Licking County, Ohio. He is Chairman of the Board of the Wausau
Insurance Companies and serves on the board of directors of several companies of
the Nationwide group. He is also a director of the National Cooperative Business
Association.
YVONNE L. MONTGOMERY has been a Director since April, 1998. Ms. Montgomery is
senior vice president/general manager of southern customer operations for United
States Customer Operations for Xerox Corporation. A resident of Atlanta,
Georgia, Ms. Montgomery oversees eight customer business units across the
southern United States as well as all business and marketing functions in the
regions. Ms. Montgomery joined Xerox in 1976 as a sales representative and
progressed through management positions, including Vice President - Field
Operations, and Executive Assistant to the Chairman and CEO.
R. DENNIS NOICE has been Vice President - Systems since April 1998. Previously,
he was Vice President - Retail Operations from March 1997 to April 1998. Prior
to that time, Mr. Noice was Vice President - Individual Investment Products from
October 1989 to March 1997. Prior to that time, Mr. Noice held several positions
within Nationwide. Mr. Noice has been with Nationwide for 27 years.
ROBERT A. OAKLEY has been Executive Vice President - Chief Financial Officer
since April 1995. Previously, he was Senior Vice President - Chief Financial
Officer from October 1993 to April 1995. Prior to that time, Mr. Oakley held
several positions within Nationwide. Mr. Oakley has been with Nationwide for 23
years.
RALPH M. PAIGE has been a Director of Nationwide since April 1999. Mr. Paige has
been the Executive Director of the Federation of Southern Cooperatives/Land
Assistance Fund since 1969. Mr. Paige also served as the National Field
Director/Georgia State Director from 1981 to 1984.
JOSEPH P. RATH has been Vice President - Product and Market Compliance since
April 1997. Previously, he was Vice President - Associate General Counsel from
October 1988 to April 1997. Prior to that time, Mr. Rath held several positions
within Nationwide. Mr. Rath has been with Nationwide for 22 years.
DOUGLAS C. ROBINETTE has been Senior Vice President - Marketing and Product
Management since May 1998. Previously, Mr. Robinette was Executive Vice
President, Customer Services of Employers Insurance of Wausau (Wausau), a member
of the Nationwide group until December 1998, from September 1996 to May 1998.
Prior to that time he was Executive Vice President, Finance and Insurance
Services of Wausau from May 1995 to September 1996. From November 1994 to May
1995 Mr. Robinette was Senior Vice President, Finance and Insurance Services of
Wausau. From May 1993 to November 1994 he was Senior Vice President, Finance of
Wausau. Prior to that time, Mr. Robinette held several positions within the
Nationwide group. Mr. Robinette has been with the Nationwide group for 12 years.
MARK R. THRESHER has been Vice President - Controller since August 1996. He was
Vice President and Treasurer from November 1996 to February 1997. Previously, he
was Vice President and Treasurer from June 1996 to August 1996. Prior to joining
Nationwide, Mr. Thresher served as a partner with KPMG LLP.
SUSAN A. WOLKEN has been Senior Vice President - Life Company Operations since
June 1997. Previously, she was Senior Vice President - Enterprise Administration
from July 1996 to June 1997. Prior to that time, she was Senior Vice President -
Human Resources from April 1995 to July 1996. From September 1993 to April 1995,
Ms. Wolken was Vice President - Human Resources. From October 1989 to September
1993 she was Vice President - Individual Life and Health Operations. Ms. Wolken
has been with Nationwide for 24 years.
ROBERT J. WOODWARD, JR. has been Executive Vice President - Chief Investment
Officer since August 1995. Previously, he was Senior Vice President - Fixed
Income Investments from March 1991 to August 1995. Prior to that time, Mr.
Woodward held several positions within Nationwide. Mr. Woodward has been with
Nationwide for 34 years.
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies.
There is no guarantee that the investment objectives will be met.
VAN KAMPEN LIFE INVESTMENT TRUST
The Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares of the Trust
are offered in separate Portfolios which are sold only to insurance companies to
provide funding for variable life insurance policies and variable annuity
contracts. Van Kampen Asset Management, Inc.
serves as the investment adviser for the Trust and its Portfolios.
-ASSET ALLOCATION PORTFOLIO
The investment objective of this Portfolio is to seek a high total investment
return consistent with prudent risk through a fully managed investment policy
utilizing equity, intermediate and long-term debt and money market
securities. Total investment return consists of current income, including
dividends, interest, discount accruals, and capital appreciation. The Advisor
may vary the composition of the portfolio from time to time based upon an
evaluation of economic and market trends and the anticipated relative total
return available from a particular type of security.
-DOMESTIC INCOME PORTFOLIO
The investment objective of this Portfolio is to seek current income as its
primary objective. Capital appreciation is a secondary objective. The
Portfolio attempts to achieve these objectives through investment primarily
in a diversified portfolio of fixed-income securities. The Portfolio may
invest in investment grade securities and lower rated and nonrated
securities. Lower rated securities are regarded by the rating agencies as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments.
-EMERGING GROWTH PORTFOLIO
The investment objective of this Portfolio is to seek capital appreciation by
investing in a portfolio of securities consisting principally of common
stocks of small and medium sized companies considered by the Advisor to be
emerging growth companies. Under normal market conditions, at least 65% of
the Portfolio's total assets will be invested in common stocks of small and
medium sized companies (less than $2 billion of market capitalization), both
domestic and foreign. The Portfolio may invest up to 20% of its total assets
in securities of foreign issuers. Additionally, the Portfolio may invest up
to 15% of the value of its assets in restricted securities (i.e., securities
which may not be sold without registration under the Securities Act of 1933)
and in other securities not having readily available market quotations.
-ENTERPRISE PORTFOLIO
The investment objective of this Portfolio is to seek capital appreciation by
investing in securities believed by the Advisor to have above average
potential for capital appreciation. Any income received on such securities is
incidental to the objective of capital appreciation.
-GLOBAL EQUITY PORTFOLIO
The investment objective of this Portfolio is to seek long term capital
growth through investments in an internationally diversified portfolio of
equity securities of companies of any nation including the United States. The
Portfolio intends to be invested in equity securities of companies of at
least three countries including the United States. Under
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<PAGE> 48
normal market conditions, at least 65% of the Portfolio's total assets are so
invested. Equity securities include common stocks, preferred stocks and
warrants or options to acquire such securities.
-GOVERNMENT PORTFOLIO
The investment objective of this Portfolio is to provide investors with a
high current return consistent with preservation of capital. The Government
Portfolio invests primarily in debt securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. In order to hedge against
changes in interest rates, the Government Portfolio may also purchase or sell
options and engage in transactions involving interest rate futures contracts
and options on such contracts.
-MONEY MARKET PORTFOLIO
The investment objective of this Portfolio is 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.
-MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
The investment objective of this Portfolio is to seek long-term capital
growth by investing in a diversified 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
Portfolio's total assets will be invested in Real Estate Securities,
primarily equity securities of real estate investment trusts. The Portfolio
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 Portfolio will achieve its investment objective.
45
<PAGE> 49
APPENDIX B: ILLUSTRATION OF SURRENDER CHARGES
Example 1: A female non-tobacco, age 45, purchases a policy with a scheduled
premium of $2,000 yielding a specified amount of $50,599. She now wishes to
surrender the policy during the first policy year. By using the initial
surrender charge table reproduced below, (also see "Surrender Charges") the
total surrender charge per thousand multiplied by the specified amount expressed
in thousands equals the total surrender charge of $514.09 ($10.160 x 50.599 =
$514.09).
Example 2: A male non-tobacco, age 35, purchases a policy with a scheduled
premium of $2,000 yielding a specified amount of $68,165. He now wants to
surrender the policy in the sixth policy year. The total initial surrender value
is calculated using the method illustrated above. (Specified amount in thousands
$68.165 x 7.260 = 494.88 total first year surrender charge). Because the fifth
policy year has been completed, the total initial surrender charge is reduced by
multiplying it by the applicable percentage factor from the "Reductions to
Surrender Charges" table below (also see "Reductions to Surrender Charges"). In
this case, $494.88 x 85% = $420.65 which is the amount Nationwide deducts as a
total surrender charge.
Initial Surrender Charge per $1,000 of initial Specified Amount
<TABLE>
<CAPTION>
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
<S> <C> <C> <C> <C>
25 $5.878 $5.537 $6.680 $5.945
35 7.260 6.712 8.559 7.373
45 11.159 10.160 13.244 11.151
55 15.275 13.375 18.373 14.686
65 23.821 20.553 27.943 22.165
</TABLE>
Reductions to Surrender Charges
<TABLE>
<CAPTION>
SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
<S> <C> <C> <C>
0 100% 5 85%
1 100% 6 80%
2 100% 7 75%
3 95% 8 50%
4 90% 9+ 0%
</TABLE>
The current Surrender Charges are the same for all states. However, in
Pennsylvania the guaranteed maximum Surrender Charges are 8% higher than those
shown on pages 7, 14, and 32. In addition, the guaranteed maximum Surrender
Charge in subsequent years in Pennsylvania are reduced in the following manner:
<TABLE>
<CAPTION>
COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE
POLICY YEARS AS A % OF INITIAL POLICY YEARS AS A % OF INITIAL POLICY YEARS AS A % OF INITIAL
SURRENDER CHARGES SURRENDER CHARGES SURRENDER CHARGES
<S> <C> <C> <C> <C> <C>
0 100% 5 83% 10 46%
1 98% 6 75% 11 37%
2 95% 7 70% 12 28%
3 92% 8 65% 13 14%
4 88% 9 55% 14+ 0%
</TABLE>
The illustrations of current values on page 13 are the same for Pennsylvania.
However, the guaranteed maximum Surrender Charges are slightly higher in
Pennsylvania. If this contract is issued in Pennsylvania, please contact
Nationwide for an illustration.
Nationwide has no plans to change the current Surrender Charges.
46
<PAGE> 50
APPENDIX C: 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 debt, no additional premium
payments are made, no cash values are allocated to the fixed account, and there
are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks. The Mortality and Expense Risk Charge is equivalent
to an annual effective rate of .80% of the daily net asset value of the variable
account. 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 0.80 % of the daily net asset value of
the variable account. Some underlying mutual funds are subject to expense
reimbursements and fee waivers. Absent expense reimbursement and fees waivers,
the annual effective rate would have been 0.61% Nationwide anticipates that the
expense reimbursement and fee waiver arrangements will continue past the current
year. Should there be an increase or decrease in the expense reimbursements and
fee waivers of these underlying mutual funds, such change will be reflected in
the net asset value of the corresponding underlying mutual fund.
Considering current charges for mortality and expense risks, and underlying
mutual fund expenses, gross annual rates of return of 0%, 6% and 12% correspond
to net investment experience at constant annual rates of -1.60%, 4.40% and
10.40%.
The illustrations also reflect the fact that Nationwide makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum Cost of Insurance
Charge guaranteed in the policy. The values shown are for policies which are
issued as standard (including non-tobacco). Policies issued on a substandard
basis would result in lower cash values and death benefits than those
illustrated.
In addition, the illustrations reflect the fact that Nationwide deducts an
Administrative Charge at the beginning of each policy month. This monthly charge
is currently $5 and is guaranteed not to exceed $7.50. 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, Nationwide will furnish a comparable illustration based on the
proposed Insured's age, sex, smoking classification, rating classification and
premium payment requested.
48
<PAGE> 51
DEATH BENEFIT OPTION 1
$2,000 ANNUAL PREMIUM: $43,165 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,100 1,669 1,187 43,165 1,774 1,293 43,165 1,880 1,398 43,165
2 4,305 3,309 2,827 43,165 3,623 3,142 43,165 3,950 3,469 43,165
3 6,620 4,920 4,438 43,165 5,550 5,068 43,165 6,231 5,749 43,165
4 9,051 6,503 6,046 43,165 7,559 7,101 43,165 8,746 8,288 43,165
5 11,604 8,056 7,623 43,165 9,652 9,218 43,165 11,518 11,084 43,165
6 12,184 7,723 7,314 43,165 9,865 9,455 43,165 12,495 12,086 43,165
7 12,793 7,382 6,997 43,165 10,076 9,691 43,165 13,566 13,181 43,165
8 13,433 7,032 6,670 43,165 10,285 9,924 43,165 14,741 14,379 43,165
9 14,105 6,672 6,431 43,165 10,492 10,252 43,165 16,031 15,790 43,165
10 14,810 6,299 6,299 43,165 10,694 10,694 43,165 17,448 17,448 43,165
15 18,901 4,212 4,212 43,165 11,602 11,602 43,165 27,019 27,019 43,165
20 24,124 1,479 1,479 43,165 12,112 12,112 43,165 42,818 42,818 52,238
25 30,788 (*) (*) (*) 11,629 11,629 43,165 68,225 68,225 79,141
30 39,295 (*) (*) (*) 8,751 8,751 43,165 108,941 108,941 116,567
35 50,151 (*) (*) (*) 407 407 43,165 174,797 174,797 183,537
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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
<PAGE> 52
DEATH BENEFIT OPTION 1
$2,000 ANNUAL PREMIUM: $43,165 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,100 1,576 1,095 43,165 1,679 1,197 43,165 1,781 1,300 43,165
2 4,305 3,120 2,639 43,165 3,423 2,941 43,165 3,739 3,257 43,165
3 6,620 4,632 4,151 43,165 5,237 4,755 43,165 5,891 5,409 43,165
4 9,051 6,112 5,655 43,165 7,123 6,665 43,165 8,260 7,803 43,165
5 11,604 7,561 7,127 43,165 9,085 8,651 43,165 10,870 10,437 43,165
6 12,184 7,114 6,705 43,165 9,152 8,743 43,165 11,662 11,252 43,165
7 12,793 6,650 6,265 43,165 9,202 8,817 43,165 12,520 12,135 43,165
8 13,433 6,164 5,803 43,165 9,229 8,868 43,165 13,450 13,089 43,165
9 14,105 5,651 5,411 43,165 9,230 8,989 43,165 14,459 14,218 43,165
10 14,810 5,108 5,108 43,165 9,199 9,199 43,165 15,553 15,553 43,165
15 18,901 1,768 1,768 43,165 8,372 8,372 43,165 22,695 22,695 43,165
20 24,124 (*) (*) (*) 5,535 5,535 43,165 34,256 34,256 43,165
25 30,788 (*) (*) (*) (*) (*) (*) 53,378 53,378 61,918
30 39,295 (*) (*) (*) (*) (*) (*) 83,544 83,544 89,392
35 50,151 (*) (*) (*) (*) (*) (*) 131,940 131,940 138,537
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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
<PAGE> 53
DEATH BENEFIT OPTION 2
$2,000 ANNUAL PREMIUM: $40,605 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,100 1,671 1,218 42,276 1,777 1,323 42,382 1,882 1,429 42,487
2 4,305 3,309 2,855 43,914 3,622 3,169 44,227 3,948 3,495 44,553
3 6,620 4,911 4,458 45,516 5,538 5,085 46,143 6,217 5,764 46,822
4 9,051 6,480 6,050 47,085 7,529 7,098 48,134 8,708 8,278 49,313
5 11,604 8,012 7,604 48,617 9,593 9,185 50,198 11,441 11,034 52,046
6 14,284 9,507 9,122 50,112 11,734 11,348 52,339 14,442 14,057 55,047
7 17,098 10,966 10,603 51,571 13,953 13,591 54,558 17,735 17,372 58,340
8 20,053 12,386 12,047 52,991 16,253 15,913 56,858 21,348 21,009 61,953
9 23,156 13,770 13,543 54,375 18,637 18,411 59,242 25,316 25,090 65,921
10 26,414 15,113 15,113 55,718 21,106 21,106 61,711 29,670 29,670 70,275
15 45,315 21,412 21,412 62,017 35,044 35,044 75,649 59,013 59,013 99,618
20 69,439 26,503 26,503 67,108 51,435 51,435 92,040 105,809 105,809 146,414
25 100,227 29,930 29,930 70,535 70,234 70,234 110,839 180,303 180,303 220,908
30 139,522 30,793 30,793 71,398 90,822 90,822 131,427 298,503 298,503 339,108
35 189,673 27,940 27,940 68,545 112,064 112,064 152,669 486,038 486,038 526,643
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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.
51
<PAGE> 54
DEATH BENEFIT OPTION 2
$2,000 ANNUAL PREMIUM: $40,605 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,100 1,580 1,127 42,185 1,682 1,229 42,287 1,785 1,332 42,390
2 4,305 3,120 2,667 43,725 3,422 2,969 44,027 3,737 3,283 44,342
3 6,620 4,621 4,167 45,226 5,221 4,768 45,826 5,871 5,418 46,476
4 9,051 6,080 5,649 46,685 7,080 6,649 47,685 8,206 7,775 48,811
5 11,604 7,497 7,089 48,102 8,999 8,592 49,604 10,759 10,351 51,364
6 14,284 8,870 8,485 49,475 10,980 10,595 51,585 13,551 13,165 54,156
7 17,098 10,197 9,834 50,802 13,020 12,658 53,625 16,601 16,239 57,206
8 20,053 11,474 11,134 52,079 15,120 14,780 55,725 19,934 19,594 60,539
9 23,156 12,698 12,472 53,303 17,276 17,050 57,881 23,573 23,346 64,178
10 26,414 13,867 13,867 54,472 19,488 19,488 60,093 27,545 27,545 68,150
15 45,315 18,766 18,766 59,371 31,320 31,320 71,925 53,567 53,567 94,172
20 69,439 21,628 21,628 62,233 44,037 44,037 84,642 93,736 93,736 134,341
25 100,227 21,418 21,418 62,023 56,475 56,475 97,080 155,346 155,346 195,951
30 139,522 16,390 16,390 56,995 66,311 66,311 106,916 249,280 249,280 289,885
35 189,673 3,583 3,583 44,188 69,068 69,068 109,673 391,346 391,346 431,951
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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
<PAGE> 55
DEATH BENEFIT OPTION 1
$5,000 ANNUAL PREMIUM: $114,019 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,250 4,293 3,021 114,019 4,561 3,288 114,019 4,828 3,556 114,019
2 10,763 8,513 7,241 114,019 9,313 8,041 114,019 10,146 8,873 114,019
3 16,551 12,658 11,386 114,019 14,266 12,994 114,019 16,004 14,732 114,019
4 22,628 16,733 15,524 114,019 19,430 18,221 114,019 22,462 21,254 114,019
5 29,010 20,731 19,586 114,019 24,810 23,665 114,019 29,580 28,435 114,019
6 30,460 20,015 18,934 114,019 25,500 24,418 114,019 32,232 31,150 114,019
7 31,983 19,281 18,264 114,019 26,196 25,178 114,019 35,141 34,123 114,019
8 33,582 18,527 17,572 114,019 26,896 25,942 114,019 38,334 37,380 114,019
9 35,261 17,752 17,115 114,019 27,603 26,967 114,019 41,845 41,208 114,019
10 37,024 16,948 16,948 114,019 28,309 28,309 114,019 45,702 45,702 114,019
15 47,254 12,443 12,443 114,019 31,810 31,810 114,019 71,779 71,779 114,019
20 60,309 6,547 6,547 114,019 34,848 34,848 114,019 114,729 114,729 139,970
25 76,971 (*) (*) (*) 36,354 36,354 114,019 183,892 183,892 213,315
30 98,237 (*) (*) (*) 33,866 33,866 114,019 294,989 294,989 315,639
35 125,378 (*) (*) (*) 22,476 22,476 114,019 474,843 474,843 498,585
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
53
<PAGE> 56
DEATH BENEFIT OPTION 1
$5,000 ANNUAL PREMIUM: $114,019 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,250 4,161 2,889 114,019 4,424 3,152 114,019 4,687 3,415 114,019
2 10,763 8,241 6,969 114,019 9,025 7,753 114,019 9,841 8,569 114,019
3 16,551 12,241 10,969 114,019 13,812 12,540 114,019 15,512 14,240 114,019
4 22,628 16,162 14,953 114,019 18,794 17,586 114,019 21,756 20,547 114,019
5 29,010 20,004 18,859 114,019 23,981 22,836 114,019 28,635 27,490 114,019
6 30,460 19,117 18,036 114,019 24,453 23,372 114,019 31,012 29,931 114,019
7 31,983 18,195 17,177 114,019 24,905 23,887 114,019 33,605 32,587 114,019
8 33,582 17,230 16,276 114,019 25,330 24,376 114,019 36,434 35,479 114,019
9 35,261 16,215 15,579 114,019 25,719 25,083 114,019 39,521 38,884 114,019
10 37,024 15,141 15,141 114,019 26,065 26,065 114,019 42,893 42,893 114,019
15 47,254 8,579 8,579 114,019 26,825 26,825 114,019 65,311 65,311 114,019
20 60,309 (*) (*) (*) 24,571 24,571 114,019 102,226 102,226 124,715
25 76,971 (*) (*) (*) 15,540 15,540 114,019 161,729 161,729 187,606
30 98,237 (*) (*) (*) (*) (*) (*) 256,231 256,231 274,167
35 125,378 (*) (*) (*) (*) (*) (*) 408,353 408,353 428,770
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
54
<PAGE> 57
DEATH BENEFIT OPTION 2
$5,000 ANNUAL PREMIUM: $103,521 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,250 4,308 3,153 107,829 4,576 3,420 108,097 4,843 3,688 108,364
2 10,763 8,532 7,377 112,053 9,332 8,177 112,853 10,165 9,009 113,686
3 16,551 12,670 11,515 116,191 14,275 13,120 117,796 16,010 14,855 119,531
4 22,628 16,725 15,627 120,246 19,413 18,315 122,934 22,434 21,337 125,955
5 29,010 20,688 19,649 124,209 24,745 23,705 128,266 29,487 28,447 133,008
6 35,710 24,564 23,583 128,085 30,282 29,300 133,803 37,235 36,253 140,756
7 42,746 28,350 27,425 131,871 36,028 35,104 139,549 45,743 44,819 149,264
8 50,133 32,043 31,176 135,564 41,990 41,123 145,511 55,088 54,222 158,609
9 57,889 35,646 35,068 139,167 48,176 47,599 151,697 65,356 64,778 168,877
10 66,034 39,152 39,152 142,673 54,589 54,589 158,110 76,630 76,630 180,151
15 113,287 55,710 55,710 159,231 90,922 90,922 194,443 152,747 152,747 256,268
20 173,596 69,432 69,432 172,953 134,022 134,022 237,543 274,557 274,557 378,078
25 250,567 79,355 79,355 182,876 184,141 184,141 287,662 469,203 469,203 572,724
30 348,804 83,552 83,552 187,073 240,371 240,371 343,892 779,427 779,427 882,948
35 474,182 79,551 79,551 183,072 300,799 300,799 404,320 1,273,881 1,273,881 1,377,402
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
55
<PAGE> 58
DEATH BENEFIT OPTION 2
$5,000 ANNUAL PREMIUM: $103,521 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,250 4,182 3,027 107,703 4,445 3,290 107,966 4,709 3,553 108,230
2 10,763 8,269 7,113 111,790 9,053 7,897 112,574 9,868 8,713 113,389
3 16,551 12,260 11,105 115,781 13,828 12,672 117,349 15,523 14,368 119,044
4 22,628 16,154 15,057 119,675 18,774 17,676 122,295 21,720 20,622 125,241
5 29,010 19,950 18,910 123,471 23,896 22,856 127,417 28,511 27,471 132,032
6 35,710 23,643 22,661 127,164 29,195 28,213 132,716 35,952 34,970 139,473
7 42,746 27,229 26,305 130,750 34,674 33,750 138,195 44,103 43,179 147,624
8 50,133 30,703 29,837 134,224 40,333 39,466 143,854 53,028 52,162 156,549
9 57,889 34,058 33,481 137,579 46,170 45,592 149,691 62,798 62,221 166,319
10 66,034 37,289 37,289 140,810 52,185 52,185 155,706 73,492 73,492 177,013
15 113,287 51,377 51,377 154,898 84,935 84,935 188,456 144,161 144,161 247,682
20 173,596 61,139 61,139 164,660 121,686 121,686 225,207 254,910 254,910 358,431
25 250,567 64,595 64,595 168,116 160,713 160,713 264,234 427,812 427,812 531,333
30 348,804 58,407 58,407 161,928 198,201 198,201 301,722 696,908 696,908 800,429
35 474,182 36,972 36,972 140,493 226,428 226,428 329,949 1,114,025 1,114,025 1,217,546
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
56
<PAGE> 59
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $301,625 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 17,228 12,621 301,625 18,300 13,692 301,625 19,372 14,765 301,625
2 43,050 34,166 29,559 301,625 37,380 32,772 301,625 40,722 36,115 301,625
3 66,203 50,834 46,226 301,625 57,297 52,689 301,625 64,285 59,677 301,625
4 90,513 67,231 62,854 301,625 78,091 73,714 301,625 90,300 85,923 301,625
5 116,038 83,344 79,198 301,625 99,792 95,645 301,625 119,028 114,881 301,625
6 121,840 80,575 76,659 301,625 102,734 98,818 301,625 129,942 126,026 301,625
7 127,932 77,711 74,026 301,625 105,712 102,026 301,625 141,953 138,268 301,625
8 134,329 74,723 71,267 301,625 108,706 105,251 301,625 155,177 151,721 301,625
9 141,045 71,598 69,294 301,625 111,714 109,410 301,625 169,759 167,455 301,625
10 148,097 68,341 68,341 301,625 114,748 114,748 301,625 185,877 185,877 301,625
15 189,014 48,497 48,497 301,625 129,367 129,367 301,625 296,579 296,579 344,032
20 241,235 18,045 18,045 301,625 140,748 140,748 301,625 477,065 477,065 510,460
25 307,884 (*) (*) (*) 144,237 144,237 301,625 769,507 769,507 807,982
30 392,947 (*) (*) (*) 130,130 130,130 301,625 1,235,396 1,235,396 1,297,166
35 501,511 (*) (*) (*) 69,897 69,897 301,625 1,968,588 1,968,588 2,067,018
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
57
<PAGE> 60
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $301,625 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 16,090 11,482 301,625 17,126 12,519 301,625 18,165 13,557 301,625
2 43,050 31,830 27,223 301,625 34,910 30,303 301,625 38,117 33,509 301,625
3 66,203 47,237 42,630 301,625 53,403 48,796 301,625 60,079 55,472 301,625
4 90,513 62,317 57,940 301,625 72,654 68,277 301,625 84,298 79,921 301,625
5 116,038 77,074 72,927 301,625 92,718 88,571 301,625 111,058 106,911 301,625
6 121,840 72,763 68,847 301,625 93,784 89,867 301,625 119,690 115,774 301,625
7 127,932 68,141 64,455 301,625 94,611 90,925 301,625 129,070 125,384 301,625
8 134,329 63,145 59,689 301,625 95,144 91,688 301,625 139,275 135,819 301,625
9 141,045 57,706 55,402 301,625 95,320 93,016 301,625 150,403 148,100 301,625
10 148,097 51,753 51,753 301,625 95,073 95,073 301,625 162,580 162,580 301,625
15 189,014 11,272 11,272 301,625 84,689 84,689 301,625 246,076 246,076 301,625
20 241,235 (*) (*) (*) 43,920 43,920 301,625 389,728 389,728 417,009
25 307,884 (*) (*) (*) (*) (*) (*) 621,406 621,406 652,476
30 392,947 (*) (*) (*) (*) (*) (*) 979,313 979,313 1,028,279
35 501,511 (*) (*) (*) (*) (*) (*) 1,514,963 1,514,963 1,590,711
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
58
<PAGE> 61
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $271,462 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 17,280 13,133 288,742 18,351 14,204 289,813 19,423 15,276 290,885
2 43,050 34,194 30,047 305,656 37,400 33,253 308,862 40,733 36,587 312,195
3 66,203 50,753 46,607 322,215 57,182 53,035 328,644 64,131 59,984 335,593
4 90,513 66,948 63,008 338,410 77,713 73,774 349,175 89,813 85,874 361,275
5 116,038 82,746 79,014 354,208 98,988 95,256 370,450 117,973 114,241 389,435
6 142,840 98,160 94,636 369,622 121,044 117,520 392,506 148,871 145,346 420,333
7 170,982 113,183 109,866 384,645 143,902 140,584 415,364 182,772 179,455 454,234
8 200,531 127,788 124,678 399,250 167,561 164,452 439,023 219,950 216,840 491,412
9 231,558 141,971 139,898 413,433 192,047 189,974 463,509 260,728 258,654 532,190
10 264,136 155,748 155,748 427,210 217,404 217,404 488,866 305,483 305,483 576,945
15 453,150 219,101 219,101 490,563 359,192 359,192 630,654 605,556 605,556 877,018
20 694,385 266,818 266,818 538,280 522,020 522,020 793,482 1,079,684 1,079,684 1,351,146
25 1,002,269 293,778 293,778 565,240 703,566 703,566 975,028 1,828,689 1,828,689 2,100,151
30 1,395,216 293,109 293,109 564,571 898,479 898,479 1,169,941 3,013,781 3,013,781 3,285,243
35 1,896,726 252,804 252,804 524,266 1,093,780 1,093,780 1,365,242 4,890,156 4,890,156 5,161,618
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
59
<PAGE> 62
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $271,462 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 16,193 12,046 287,655 17,229 13,082 288,691 18,266 14,120 289,728
2 43,050 31,902 27,755 303,364 34,968 30,821 306,430 38,158 34,012 309,620
3 66,203 47,121 42,974 318,583 53,224 49,077 324,686 59,828 55,682 331,290
4 90,513 61,830 57,891 333,292 71,992 68,053 343,454 83,429 79,490 354,891
5 116,038 76,005 72,273 347,467 91,260 87,528 362,722 109,123 105,391 380,585
6 142,840 89,618 86,093 361,080 111,013 107,489 382,475 137,087 133,562 408,549
7 170,982 102,640 99,322 374,102 131,232 127,915 402,694 167,510 164,193 438,972
8 200,531 115,021 111,911 386,483 151,877 148,767 423,339 200,584 197,474 472,046
9 231,558 126,715 124,642 398,177 172,906 170,833 444,368 236,518 234,445 507,980
10 264,136 137,676 137,676 409,138 194,280 194,280 465,742 275,545 275,545 547,007
15 453,150 180,048 180,048 451,510 304,839 304,839 576,301 527,159 527,159 798,621
20 694,385 194,577 194,577 466,039 413,296 413,296 684,758 904,420 904,420 1,175,882
25 1,002,269 166,771 166,771 438,233 499,862 499,862 771,324 1,463,805 1,463,805 1,735,267
30 1,395,216 78,274 78,274 349,736 534,756 534,756 806,218 2,291,535 2,291,535 2,562,997
35 1,896,726 (*) (*) (*) 464,768 464,768 736,230 3,508,317 3,508,317 3,779,779
</TABLE>
ASSUMPTIONS:
(1) ASSUMES NO POLICY HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT CURRENT COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE
IN THIS PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A
REPRESENTATION OF PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL
RATES OF RETURN MAY BE MORE OR LESS THAN THOSE SHOWN AND WILL DEPEND ON
A NUMBER OF FACTORS, INCLUDING THE INVESTMENT ALLOCATIONS MADE BY AN
OWNER, PREVAILING RATES AND RATES OF INFLATION. THE DEATH BENEFIT AND
CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM THOSE SHOWN IF THE
ACTUAL RATES OF RETURN AVERAGED 0%, 6%, AND 12% OVER A PERIOD OF YEARS
BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATION CAN BE MADE BY NATIONWIDE LIFE OR THE TRUST
THAT THESE HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE
YEAR OR SUSTAINED OVER ANY PERIOD OF TIME.
60
<PAGE> 63
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $205,135 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 16,627 11,741 205,135 17,682 12,796 205,135 18,738 13,852 205,135
2 43,050 32,966 28,080 205,135 36,120 31,234 205,135 39,403 34,516 205,135
3 66,203 49,042 44,155 205,135 55,385 50,499 205,135 62,250 57,363 205,135
4 90,513 64,862 60,220 205,135 75,539 70,897 205,135 87,560 82,918 205,135
5 116,038 80,462 76,064 205,135 96,683 92,285 205,135 115,688 111,290 205,135
6 121,840 77,069 72,915 205,135 98,991 94,838 205,135 125,984 121,831 205,135
7 127,932 73,432 69,523 205,135 101,238 97,329 205,135 137,375 133,466 205,135
8 134,329 69,528 65,863 205,135 103,419 99,754 205,135 150,035 146,370 205,135
9 141,045 65,316 62,873 205,135 105,521 103,078 205,135 164,166 161,723 205,135
10 148,097 60,735 60,735 205,135 107,517 107,517 205,135 180,008 180,008 205,135
15 189,014 30,003 30,003 205,135 115,209 115,209 205,135 289,775 289,775 304,263
20 241,235 (*) (*) (*) 115,939 115,939 205,135 464,975 464,975 488,224
25 307,884 (*) (*) (*) 98,785 98,785 205,135 740,693 740,693 777,728
30 392,947 (*) (*) (*) 26,156 26,156 205,135 1,183,353 1,183,353 1,195,186
35 501,511 (*) (*) (*) (*) (*) (*) 1,925,400 1,925,400 1,925,400
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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.
61
<PAGE> 64
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $205,135 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 14,214 9,327 205,135 15,197 10,311 205,135 16,183 11,297 205,135
2 43,050 28,097 23,210 205,135 30,979 26,093 205,135 33,987 29,100 205,135
3 66,203 41,686 36,799 205,135 47,438 42,551 205,135 53,684 48,798 205,135
4 90,513 55,014 50,372 205,135 64,676 60,034 205,135 75,604 70,962 205,135
5 116,038 68,111 63,713 205,135 82,814 78,416 205,135 100,144 95,746 205,135
6 121,840 61,803 57,650 205,135 81,644 77,490 205,135 106,295 102,142 205,135
7 127,932 54,756 50,847 205,135 79,847 75,938 205,135 112,910 109,001 205,135
8 134,329 46,792 43,127 205,135 77,269 73,604 205,135 120,052 116,387 205,135
9 141,045 37,698 35,255 205,135 73,722 71,279 205,135 127,819 125,376 205,135
10 148,097 27,236 27,236 205,135 68,994 68,994 205,135 136,356 136,356 205,135
15 189,014 (*) (*) (*) 16,457 16,457 205,135 200,805 200,805 210,845
20 241,235 (*) (*) (*) (*) (*) (*) 316,074 316,074 331,878
25 307,884 (*) (*) (*) (*) (*) (*) 488,573 488,573 513,002
30 392,947 (*) (*) (*) (*) (*) (*) 761,140 761,140 768,751
35 501,511 (*) (*) (*) (*) (*) (*) 1,238,097 1,238,097 1,238,097
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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.
62
<PAGE> 65
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $194,739 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 16,555 11,917 211,294 17,603 12,964 212,342 18,652 14,013 213,391
2 43,050 32,638 27,999 227,377 35,750 31,111 230,489 38,987 34,348 233,726
3 66,203 48,240 43,601 242,979 54,447 49,808 249,186 61,162 56,523 255,901
4 90,513 63,326 58,919 258,065 73,675 69,268 268,414 85,319 80,912 280,058
5 116,038 77,889 73,714 272,628 93,441 89,266 288,180 111,644 107,469 306,383
6 142,840 91,920 87,977 286,659 113,750 109,807 308,489 140,341 136,398 335,080
7 170,982 105,370 101,659 300,109 134,567 130,856 329,306 171,592 167,881 366,331
8 200,531 118,232 114,753 312,971 155,897 152,418 350,636 205,641 202,161 400,380
9 231,558 130,484 128,164 325,223 177,729 175,409 372,468 242,740 240,420 437,479
10 264,136 142,076 142,076 336,815 200,024 200,024 394,763 283,138 283,138 477,877
15 453,150 190,985 190,985 385,724 319,900 319,900 514,639 548,727 548,727 743,466
20 694,385 217,810 217,810 412,549 446,923 446,923 641,662 956,671 956,671 1,151,410
25 1,002,269 214,110 214,110 408,849 571,206 571,206 765,945 1,583,081 1,583,081 1,777,820
30 1,395,216 169,455 169,455 364,194 677,161 677,161 871,900 2,547,576 2,547,576 2,742,315
35 1,896,726 99,545 99,545 294,284 773,544 773,544 968,283 4,075,781 4,075,781 4,270,520
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND
AN ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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.
63
<PAGE> 66
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $194,739 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
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
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 21,000 14,073 9,434 208,812 15,041 10,402 209,780 16,011 11,373 210,750
2 43,050 27,456 22,818 222,195 30,250 25,611 224,989 33,164 28,525 227,903
3 66,203 40,126 35,487 234,865 45,598 40,959 240,337 51,536 46,897 246,275
4 90,513 52,048 47,641 246,787 61,046 56,639 255,785 71,206 66,799 265,945
5 116,038 63,172 58,997 257,911 76,533 72,358 271,272 92,240 88,065 286,979
6 142,840 73,431 69,488 268,170 91,978 88,034 286,717 114,693 110,750 309,432
7 170,982 82,738 79,027 277,477 107,274 103,563 302,013 138,601 134,890 333,340
8 200,531 90,981 87,502 285,720 122,287 118,808 317,026 163,981 160,502 358,720
9 231,558 98,052 95,732 292,791 136,873 134,554 331,612 190,849 188,530 385,588
10 264,136 103,860 103,860 298,599 150,903 150,903 345,642 219,241 219,241 413,980
15 453,150 111,861 111,861 306,600 208,760 208,760 403,499 386,776 386,776 581,515
20 694,385 74,182 74,182 268,921 228,548 228,548 423,287 600,159 600,159 794,898
25 1,002,269 (*) (*) (*) 171,861 171,861 366,600 853,968 853,968 1,048,707
30 1,395,216 (*) (*) (*) (*) (*) (*) 1,139,903 1,139,903 1,334,642
35 1,896,726 (*) (*) (*) (*) (*) (*) 1,445,143 1,445,143 1,639,882
</TABLE>
(1) NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES
AND AN ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL
GROSS INVESTMENT RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN
IN THE PROSPECTUS APPENDIX.
(*) UNLESS ADDITIONAL PREMIUM IS PAID, THE POLICY WILL NOT STAY IN
FORCE.
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.
64
<PAGE> 67
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide VLI Separate Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account as of December 31,
1998, and the related statements of operations and changes in contract owners'
equity for each of the years in the three year period then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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. Our procedures included
confirmation of securities owned as of December 31, 1998, 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 referred to above present fairly,
in all material respects, the financial position of Nationwide VLI Separate
Account as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for each of the years in the three year
period then ended in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments in Van Kampen American Capital Life
Investment Trust, at market value:
Asset Allocation Fund
2,126,544 shares (cost $24,460,017) .......... $ 28,453,153
Domestic Income Fund
206,556 shares (cost $1,710,302) ............. 1,817,689
Emerging Growth Fund
134,237 shares (cost $2,469,219) ............. 3,036,435
Enterprise Fund
1,665,257 shares (cost $26,231,773) .......... 37,285,097
Global Equity Fund
93,154 shares (cost $1,174,962) .............. 1,230,558
Government Fund
4,679,178 shares (cost $41,468,683) .......... 44,873,316
Money Market Fund
7,685,405 shares (cost $7,685,405) ........... 7,685,405
Morgan Stanley Real Estate Securities Portfolio
27,471 shares (cost $408,604) ................ 377,995
------------
Total investments ......................... 124,759,648
Accounts receivable ............................. 106,619
------------
Total assets .............................. 124,866,267
ACCOUNTS PAYABLE ...................................... --
------------
CONTRACT OWNERS' EQUITY ............................... $124,866,267
============
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
------- ------------ ---------
<S> <C> <C> <C> <C>
Single Premium contracts issued prior
to April 16, 1990 (policy years 1 through 10):
Asset Allocation Fund ......................... 3,396 $ 33.558419 $ 113,964 15%
Domestic Income Fund .......................... 1 21.385098 21 6%
Emerging Growth Fund .......................... 61 21.889427 1,335 36%
Enterprise Fund ............................... 216 44.564550 9,626 24%
Government Fund ............................... 836 22.405755 18,731 8%
Money Market Fund ............................. 29 17.657225 512 4%
Single Premium contracts issued prior to
April 16, 1990 (policy years 11 and thereafter):
Asset Allocation Fund ......................... 822,855 33.963724 27,947,220 15%
Domestic Income Fund .......................... 75,688 21.643457 1,638,150 6%
Emerging Growth Fund .......................... 136,620 22.153872 3,026,662 37%
Enterprise Fund ............................... 821,920 45.102754 37,070,856 24%
Global Equity Fund ............................ 73,657 16.598552 1,222,600 21%
Government Fund ............................... 1,976,655 22.677874 44,826,333 8%
Money Market Fund ............................. 425,955 17.870565 7,612,057 5%
Morgan Stanley Real Estate
Securities Portfolio ....................... 23,525 16.003545 376,483 (12)%
Single Premium contracts issued
on or after April 16, 1990:
Asset Allocation Fund ......................... 9,498 28.636938 271,994 14%
Domestic Income Fund .......................... 8,543 20.994729 179,358 6%
Emerging Growth Fund .......................... 380 21.623386 8,217 36%
Enterprise Fund ............................... 4,017 41.664754 167,367 23%
Global Equity Fund ............................ 486 16.201187 7,874 20%
Government Fund ............................... 1,485 16.812584 24,967 7%
Money Market Fund ............................. 5,428 12.968170 70,391 4%
Morgan Stanley Real Estate
Securities Portfolio ....................... 94 15.620311 1,468 (13)%
Multiple Payment and
Flexible Premium contracts:
Asset Allocation Fund ......................... 4,580 26.057831 119,345 15%
Enterprise Fund ............................... 4,177 36.087220 150,736 24%
========= ========= ------------
$124,866,267
============
</TABLE>
* The annual return does not include contract charges satisfied by surrendering
units.
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ASSET ALLOCATION FUND
1998 1997 1996 1998 1997
<S> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .......................... $ 897,565 4,695,756 5,220,160 28,407 1,019,770
Mortality and expense charges (note 3) ........ (629,010) (719,195) (1,030,085) (142,872) (163,786)
------------ ------------ ------------ ------------ -------------
Net investment activity ..................... 268,555 3,976,561 4,190,075 (114,465) 855,984
------------ ------------ ------------ ------------ -------------
Proceeds from mutual fund shares sold ......... 28,593,475 31,042,460 24,568,211 3,626,797 3,844,540
Cost of mutual fund shares sold ............... (25,877,789) (28,311,120) (22,544,406) (3,417,335) (3,541,593)
------------ ------------ ------------ ------------ -------------
Realized gain (loss) on investments ......... 2,715,686 2,731,340 2,023,805 209,462 302,947
Change in unrealized gain (loss)
on investments .............................. 12,059,082 3,917,689 (1,839,618) 2,953,327 1,002,579
------------ ------------ ------------ ------------ -------------
Net gain (loss) on investments .............. 14,774,768 6,649,029 184,187 3,162,789 1,305,526
------------ ------------ ------------ ------------ -------------
Reinvested capital gains ...................... 1,152,786 7,592,712 5,806,648 767,858 2,657,199
------------ ------------ ------------ ------------ -------------
Net change in contract owners'
equity resulting from operations ........ 16,196,109 18,218,302 10,180,910 3,816,182 4,818,709
------------ ------------ ------------ ------------ -------------
Equity transactions:
Purchase payment received from
contract owners ............................. 100,670 20,253 23,475 16,920 9,408
Transfers between funds ....................... -- -- -- (295,985) (21,271)
Surrenders .................................. (8,181,440) (15,789,351) (13,731,809) (1,209,391) (2,261,349)
Death benefits (note 4) ..................... (2,362,574) (2,575,326) (1,201,226) (300,509) (238,628)
Policy loans (net of repayments) (note 5) ..... 844,295 2,317,220 3,043,009 37,023 (21,513)
Deductions for surrender charges
(note 2d) ................................... (1,495) (6,591) (16,455) (221) (972)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ........................... (984,029) (1,430,627) (1,499,564) (141,477) (209,159)
------------ ------------ ------------ ------------ -------------
Net equity transactions ................... (10,584,573) (17,464,422) (13,382,570) (1,893,640) (2,743,484)
------------ ------------ ------------ ------------ -------------
Net change in contract owners' equity ......... 5,611,536 753,880 (3,201,660) 1,922,542 2,075,225
Contract owners' equity beginning
of period ................................... 119,254,731 118,500,851 121,702,511 26,529,981 24,454,756
------------ ------------ ------------ ------------ -------------
Contract owners' equity end of period ......... $124,866,267 119,254,731 118,500,851 28,452,523 26,529,981
============ ============ ============ ============ =============
</TABLE>
<TABLE>
<CAPTION>
ASSET ALLOCATION FUND DOMESTIC INCOME FUND
1996 1998 1997 1996
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................... $ 907,875 5,786 161,393 233,806
Mortality and expense charges (note 3) .... (215,038) (11,965) (14,107) (24,457)
------------ ------------ ------------ ------------
Net investment activity ................. 692,837 (6,179) 147,286 209,349
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ..... 4,020,284 679,224 1,322,378 1,403,146
Cost of mutual fund shares sold ........... (3,634,601) (669,892) (1,253,657) (1,532,100)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ..... 385,683 9,332 68,721 (128,954)
Change in unrealized gain (loss) ..........
on investments .......................... (786,397) 120,718 6,090 60,076
------------ ------------ ------------ ------------
Net gain (loss) on investments .......... (400,714) 130,050 74,811 (68,878)
------------ ------------ ------------ ------------
Reinvested capital gains .................. 2,644,432 -- -- --
------------ ------------ ------------ ------------
Net change in contract owners'
equity resulting from operations .... 2,936,555 123,871 222,097 140,471
------------ ------------ ------------ ------------
Equity transactions:
Purchase payment received from
contract owners ......................... 11,744 192 -- --
Transfers between funds ................... (292,324) 186,196 (27,385) (527,202)
Surrenders .............................. (2,375,530) (438,920) (883,951) (415,538)
Death benefits (note 4) ................. (269,603) -- (103,618) (62,339)
Policy loans (net of repayments) (note 5) . 268,378 908 127,843 80,825
Deductions for surrender charges
(note 2d) ............................... (2,843) (80) (364) (494)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ....................... (246,088) (23,714) (32,804) (58,167)
------------ ------------ ------------ ------------
Net equity transactions ............... (2,906,266) (275,418) (920,279) (982,915)
------------ ------------ ------------ ------------
Net change in contract owners' equity ..... 30,289 (151,547) (698,182) (842,444)
Contract owners' equity beginning
of period ............................... 24,424,467 1,969,076 2,667,258 3,509,702
------------ ------------ ------------ ------------
Contract owners' equity end of period ..... 24,454,756 1,817,529 1,969,076 2,667,258
============ ============ ============ ============
</TABLE>
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Emerging Growth Fund Enterprise Fund
1998 1997 1996 1998 1997
<S> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ........................ $ 870 -- -- 30,666 156,354
Mortality and expense charges (note 3) ...... (12,082) (11,006) (10,769) (177,854) (189,128)
----------- ----------- ----------- ----------- -----------
Net investment activity ................... (11,212) (11,006) (10,769) (147,188) (32,774)
----------- ----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ....... 3,294,533 2,545,651 1,149,028 6,594,364 6,775,251
Cost of mutual fund shares sold ............. (2,978,369) (2,360,427) (1,052,703) (4,852,264) (4,652,996)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ....... 316,164 185,224 96,325 1,742,100 2,122,255
Change in unrealized gain (loss)
on investments ............................ 447,416 98,252 199 5,583,645 1,561,213
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments ............ 763,580 283,476 96,524 7,325,745 3,683,468
----------- ----------- ----------- ----------- -----------
Reinvested capital gains .................... -- -- -- 376,105 4,664,918
----------- ----------- ----------- ----------- -----------
Net change in contract owners'
equity resulting from operations ...... 752,368 272,470 85,755 7,554,662 8,315,612
----------- ----------- ----------- ----------- -----------
Equity transactions:
Purchase payment received from
contract owners ........................... 13,566 -- -- 42,210 10,432
Transfers between funds ..................... 411,356 363,039 1,201,667 471,779 449,001
Surrenders .................................. (38,594) (97,105) (43,468) (2,526,694) (3,085,585)
Death benefits (note 4) ..................... (78,748) (68,157) (27,593) (691,661) (840,448)
Policy loans (net of repayments) (note 5) ... (49,579) (38,507) (74,189) 155,121 (411,649)
Deductions for surrender charges
(note 2d) ................................. (7) (42) (52) (462) (1,310)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ......................... (18,375) (21,822) (4,776) (226,356) (397,149)
----------- ----------- ----------- ----------- -----------
Net equity transactions ................. 239,619 137,406 1,051,589 (3,719,621) (4,276,708)
----------- ----------- ----------- ----------- -----------
Net change in contract owners' equity ....... 991,987 409,876 1,137,344 3,835,041 4,038,904
Contract owners' equity beginning
of period ................................. 2,044,227 1,634,351 497,007 33,563,544 29,524,640
----------- ----------- ----------- ----------- -----------
Contract owners' equity end of period ....... $ 3,036,214 2,044,227 1,634,351 37,398,585 33,563,544
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Enterprise Fund Global Equity Fund
1996 1998 1997 1996
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................... $ 183,010 13,847 9,630 15,873
Mortality and expense charges (note 3) ..... (247,774) (5,996) (5,726) (4,563)
------------ ----------- ----------- -----------
Net investment activity .................. (64,764) 7,851 3,904 11,310
------------ ----------- ----------- -----------
Proceeds from mutual fund shares sold ...... 5,329,568 607,261 740,054 149,678
Cost of mutual fund shares sold ............ (3,811,247) (594,475) (619,704) (133,665)
------------ ----------- ----------- -----------
Realized gain (loss) on investments ...... 1,518,321 12,786 120,350 16,013
Change in unrealized gain (loss)
on investments ........................... 1,437,260 203,001 (191,773) 40,489
------------ ----------- ----------- -----------
Net gain (loss) on investments ........... 2,955,581 215,787 (71,423) 56,502
------------ ----------- ----------- -----------
Reinvested capital gains ................... 3,146,281 -- 213,420 14,899
------------ ----------- ----------- -----------
Net change in contract owners'
equity resulting from operations ..... 6,037,098 223,638 145,901 82,711
------------ ----------- ----------- -----------
Equity transactions:
Purchase payment received from
contract owners .......................... 11,731 3,500 -- --
Transfers between funds .................... 332,379 135,066 354,759 748,238
Surrenders ................................. (2,588,860) (270,112) (170,802) --
Death benefits (note 4) .................... (214,955) (45,481) (54,190) --
Policy loans (net of repayments) (note 5) .. (222,241) (19,615) (49,035) (27,504)
Deductions for surrender charges
(note 2d) ................................ (3,132) (49) (71) --
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ........................ (290,268) (12,593) (16,552) (10,396)
------------ ----------- ----------- -----------
Net equity transactions ................ (2,975,346) (209,284) 64,109 710,338
------------ ----------- ----------- -----------
Net change in contract owners' equity ...... 3,061,752 14,354 210,010 793,049
Contract owners' equity beginning
of period ................................ 26,462,888 1,216,120 1,006,110 213,061
------------ ----------- ----------- -----------
Contract owners' equity end of period ...... $ 29,524,640 1,230,474 1,216,120 1,006,110
============ =========== =========== ===========
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
Government Fund Money Market Fund
1998 1997 1996 1998 1997
<S> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................... $ 462,730 2,932,295 3,445,448 354,362 399,015
Mortality and expense charges (note 3) ..... (238,350) (281,579) (446,756) (37,684) (51,809)
----------- ----------- ----------- ----------- -----------
Net investment activity .................. 224,380 2,650,716 2,998,692 316,678 347,206
----------- ----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ...... 6,495,585 8,542,298 8,432,924 6,735,285 7,096,782
Cost of mutual fund shares sold ............ (6,048,314) (8,651,252) (8,299,180) (6,735,285) (7,096,782)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ...... 447,271 (108,954) 133,744 -- --
Change in unrealized gain (loss)
on investments ........................... 2,807,612 1,444,456 (2,618,282) -- --
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments ........... 3,254,883 1,335,502 (2,484,538) -- --
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net change in contract owners'
equity resulting from operations ..... 3,479,263 3,986,218 514,154 316,678 347,206
----------- ----------- ----------- ----------- -----------
Equity transactions:
Purchase payment received from
contract owners .......................... 4,858 341 -- 19,417 72
Transfers between funds .................... (1,210,358) (1,240,286) (1,649,225) 1,442,677 (260,875)
Surrenders ................................. (2,842,711) (7,702,772) (7,203,733) (830,932) (1,580,839)
Death benefits (note 4) .................... (1,246,175) (862,940) (501,741) -- (407,345)
Policy loans (net of repayments) (note 5) .. 788,677 2,807,538 2,682,289 (80,573) (83,572)
Deductions for surrender charges
(note 2d) ................................ (520) (3,174) (8,619) (152) (655)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ........................ (423,865) (551,486) (705,516) (133,134) (194,010)
----------- ----------- ----------- ----------- -----------
Net equity transactions ................ (4,930,094) (7,552,779) (7,386,545) 417,303 (2,527,224)
----------- ----------- ----------- ----------- -----------
Net change in contract owners' equity ...... (1,450,831) (3,566,561) (6,872,391) 733,981 (2,180,018)
Contract owners' equity beginning
of period ................................ 46,320,862 49,887,423 56,759,814 6,948,979 9,128,997
----------- ----------- ----------- ----------- -----------
Contract owners' equity end of period ...... $44,870,031 46,320,862 49,887,423 7,682,960 6,948,979
=========== =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Morgan Stanley
Money Market Fund Real Estate Securities Portfolio
1996 1998 1997 1996
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................... 431,934 897 17,299 2,214
Mortality and expense charges (note 3) ..... (79,740) (2,207) (2,054) (988)
----------- ----------- ----------- -----------
Net investment activity .................. 352,194 (1,310) 15,245 1,226
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ...... 4,055,759 560,426 175,506 27,824
Cost of mutual fund shares sold ............ (4,055,759) (581,855) (134,709) (25,151)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ...... -- (21,429) 40,797 2,673
Change in unrealized gain (loss)
on investments ........................... -- (56,637) (3,128) 27,037
----------- ----------- ----------- -----------
Net gain (loss) on investments ........... -- (78,066) 37,669 29,710
----------- ----------- ----------- -----------
Reinvested capital gains ................... -- 8,823 57,175 1,036
----------- ----------- ----------- -----------
Net change in contract owners'
equity resulting from operations ..... 352,194 (70,553) 110,089 31,972
----------- ----------- ----------- -----------
Equity transactions:
Purchase payment received from
contract owners .......................... -- 7 -- --
Transfers between funds .................... 74,405 (197,173) 383,018 112,062
Surrenders ................................. (1,104,680) (24,086) (6,948) --
Death benefits (note 4) .................... (124,995) -- -- --
Policy loans (net of repayments) (note 5) .. 332,326 12,333 (13,885) 3,125
Deductions for surrender charges
(note 2d) ................................ (1,315) (4) (3) --
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ........................ (184,266) (4,515) (7,645) (87)
----------- ----------- ----------- -----------
Net equity transactions ................ (1,008,525) (213,438) 354,537 115,100
----------- ----------- ----------- -----------
Net change in contract owners' equity ...... (656,331) (283,991) 464,626 147,072
Contract owners' equity beginning
of period ................................ 9,785,328 661,942 197,316 50,244
----------- ----------- ----------- -----------
Contract owners' equity end of period ...... 9,128,997 377,951 661,942 197,316
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 7
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on August 8, 1984. The Account has been
registered as a unit investment trust under the Investment Company Act
of 1940.
The Company offers modified single premium, multiple payment and
flexible premium variable life insurance contracts 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 funds:
Funds of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Asset Allocation Fund
Van Kampen American Capital LIT - Domestic Income Fund
Van Kampen American Capital LIT - Emerging Growth Fund
Van Kampen American Capital LIT - Enterprise Fund
Van Kampen American Capital LIT - Global Equity Fund
Van Kampen American Capital LIT - Government Fund
Van Kampen American Capital LIT - Money Market Fund
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (formerly Van Kampen American Capital
LIT - Real Estate Securities Fund)
At December 31, 1998, contract owners have invested in all of the above
funds.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain policy
charges (see notes 2 and 3). The accompanying financial statements
include only contract owners' purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts of
the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. 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, 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.
<PAGE> 8
(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, 1998. 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.
(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 1997 and 1996 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. The Company may at
its sole discretion reduce this sales loading.
(b) Cost of Insurance
A cost of insurance charge is assessed monthly against each contract by
liquidating units. The amount of the charge is based upon age, sex,
rate class and net amount at risk (death benefit less total contract
value).
(c) Administrative Charges
For single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
<TABLE>
<S> <C>
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
</TABLE>
For multiple payment contracts the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.
For flexible premium contracts, the Company currently deducts a monthly
administrative charge of $12.50 during the first policy year and $5 per
month thereafter (may deduct up to $7.50, maximum) to recover policy
maintenance, accounting, record keeping and other administrative
expenses. Additionally, the Company deducts an increase charge of $2.04
per year per $1,000 applied to any increase in the specified amount
during the first 12 months after the increase becomes effective.
The above charges are assessed against each contract by liquidating
units.
<PAGE> 9
(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, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of a
contract are not incurred.
(3) ASSET CHARGES
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to operations,
and to recover policy maintenance and premium tax charges. For contracts
issued prior to April 16, 1990, the charge is equal to an annual rate of
.95% during the first ten policy years, and .50% thereafter. A reduction of
charges on these contracts is possible in policy years six through ten for
those contracts achieving certain investment performance criteria; for
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.
The following table provides mortality, expense and administration charges
by contract type for the period ended December 31, 1998:
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING
ALLOCATION INCOME GROWTH ENTERPRISE
TOTAL FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 58,812 46,484 8 545 3,926
Single Premium contracts issued
on or after April 16, 1990.... 9,184 3,414 2,251 103 2,102
Multiple Payment and Flexible
Premium contracts............. 1,950 862 - - 1,088
Reduced Fee..................... 559,064 92,112 9,706 11,434 170,738
------------ ------------ ------------ ------------ ------------
Total....................... $ 629,010 142,872 11,965 12,082 177,854
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
MORGAN STANLEY
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ - 7,640 209 -
Single Premium contracts issued
on or after April 16, 1990.... 99 313 884 18
Multiple Payment and Flexible
Premium contracts............. - - - -
Reduced Fee..................... 5,897 230,397 36,591 2,189
------------ ------------ ------------ ------------
Total....................... $ 5,996 238,350 37,684 2,207
============ ============ ============ ============
</TABLE>
<PAGE> 10
(4) DEATH BENEFITS
Death benefits result in a redemption of the contract value from the
Account and payment of the death benefit proceeds, less any outstanding
policy loans and policy charges, to the legal beneficiary. The excess of
the death benefit proceeds over the contract value on the date of death is
paid by the Company's general account.
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow up to 90% (50% during
first year of single premium contracts) of a policy's cash surrender value.
For single premium contracts issued prior to April 16, 1990, 6.5% interest
is due and payable annually in advance. For single premium contracts issued
on or after April 16, 1990, multiple payment contracts and flexible premium
contracts, 6% interest is due and payable in advance on the policy
anniversary when there is a loan outstanding on the policy.
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.
<PAGE> 68
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1998 and
1997, 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,
1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
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 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
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,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
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,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(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 10 and 14. 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, including variable annuities, fixed annuities and life
insurance.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "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, 1998 or 1997.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned 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. 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. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 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. The average interest rate credited on investment product
policy reserves was 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and 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.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) 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 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
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, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
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
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
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.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1998, 1997 and 1996.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(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.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
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 is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
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 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
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.
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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced 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.
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 $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
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 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: 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 $187.9 million and $220.2 million as of December 31,
1998 and 1997, 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.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
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. 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. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
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 the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
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 postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) 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.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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.
(10) 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, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 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 $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, 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 $31.9 million and $20.5 million as of
December 31, 1998 and 1997, 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 1998 and
1997 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
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, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
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, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) 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. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(13) Segment Information
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports 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 independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
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.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</TABLE>
-----------
(1) The Company's method of allocating net investment income results
in a charge (negative net investment income) to the Variable
Annuities segment which is recognized in the Corporate and Other
segment. The charge relates to non-invested assets which support
this segment on a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
(14) 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.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 10 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, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
<PAGE> 69
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment 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 101 pages.
Representations and Undertakings.
Independent Auditors' Consent.
Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<CAPTION>
<S> <C>
1. Power of Attorney dated April 1, 1999. Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for
authorizing the establishment of the Registrant, the Nationwide VLI Separate Account (File No. 811-4399),
adopted 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 (File
No. 811-4399), and hereby incorporated herein by
reference.
4. Form of Security Included with Pre-Effective Amendment No. 1 and hereby
incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account (File No. 811-4399),
and hereby incorporated herein by reference.
6. Application form of Security Included with Pre-Effective Amendment No. 1 and hereby
incorporated herein by reference.
7. Opinion of Counsel Included with Pre-Effective Amendment No. 1 and hereby
incorporated herein by reference.
</TABLE>
<PAGE> 70
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and Nationwide 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 "1940 Act"). The Registrant and Nationwide elect to be
governed by Rule 6e-3(T)(b)(13)(i)(A) under the 1940 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 1940
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
Nationwide under the policies. Nationwide 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
Nationwide, and will be made available to the Securities and Exchange Commission
(SEC) on request.
(c) Nationwide 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
SEC on request a memorandum setting forth the basis for this representation.
(d) Nationwide 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 Nationwide,
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 SEC such
supplementary and periodic information, documents, and reports as may be
prescribed by any rule or regulation of the SEC 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 Nationwide.
<PAGE> 71
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account:
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 LLP
Columbus, Ohio
April 29, 1999
<PAGE> 72
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NATIONWIDE VLI SEPARATE ACCOUNT, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment
and has duly caused this Post-Effective Amendment 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, 1999.
NATIONWIDE VLI SEPARATE ACCOUNT
------------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
Attest: ------------------------------------
(Sponsor)
GLENN W. SODEN By: JOSEPH P. RATH
- ---------------------- --------------------------------------------
Glenn W. Soden 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 has been signed below by the following persons in the capacities
indicated on the 29th day of April, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- -------------------------------------------------
Lewis J. Alphin
A. I. BELL Director
- -------------------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- -----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- -------------------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- -------------------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- -------------------------------------------------
Fred C. Finney
JOSEPH J. GASPER President/Chief
- ------------------------------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer-
- ------------------------------------------------- and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- -------------------------------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- -------------------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President-
- ------------------------------------------------- Chief Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
- --------------------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director By/s/JOSEPH P. RATH
- ------------------------------------------------- -----------------------------------
James F. Patterson Joseph P. Rath
ARDEN L. SHISLER Director Attorney-in-Fact
- -------------------------------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- -------------------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- -------------------------------------------------
Nancy C. Thomas
</TABLE>
<PAGE> 1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as directors
and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE LIFE AND
ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or will file
with the U.S. Securities and Exchange Commission under the provisions of the
Securities Act of 1933, as amended, 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 Variable Account-10, 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
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 VLI Separate Account-5, Nationwide
VL Separate Account-A and Nationwide VL Separate Account-B, Nationwide VL
Separate Account-C, Nationwide VL Separate Account-D, hereby constitutes and
appoints Dimon Richard McFerson, Joseph J. Gasper, Robert J. Woodward, Jr.,
Philip C. Gath Richard A. Karas, Edwin P. McCausland, Jr., Douglas C. Robinette,
Susan A. Wolken, Mark B. Koogler, Joseph P. Rath, and Mark R. Thresher, 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 gaining 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, 1999.
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------- -------------------------------------
Lewis J. Alphin, Director David O. Miller, Chairman of the
Board, Director
/s/ A. I. Bell /s/ Yvonne L. Montgomery
- ------------------------------------- -------------------------------------
A. I. Bell, Director Yvonne L. Montgomery, Director
/s/ Kenneth D. Davis /s/ Robert A. Oakley
- ------------------------------------- -------------------------------------
Kenneth D. Davis, Director Robert A. Oakley, Executive Vice
President and Chief Financial Officer
/s/ Keith W. Eckel /s/ Ralph M. Paige
- ------------------------------------- -------------------------------------
Keith W. Eckel, Director Ralph M. Paige, Director
/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/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------- -------------------------------------
Joseph J. Gasper, President and Robert L. Stewart, Director
Chief Operating Officer and Director
/s/ Dimon Richard McFerson /s/ Nancy C. Thomas
- ------------------------------------- -------------------------------------
Dimon Richard McFerson, Chairman and Nancy C. Thomas, Director
Chief Executive Officer and Director
