<PAGE> 1
Registration No. 33-00145
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
POST-EFFECTIVE AMENDMENT NO. 18
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)(i) of Rule 485
[ ] on (date) pursuant to paragraph (a)(i) of rule (485)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities being registered: Modified Single Premium Variable Life
Insurance Policies.
Approximate date of proposed offering: Continuously on and after May 1, 1999.
[ ] 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
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
38...........................................................................Distribution of The Policies
39...........................................................................Distribution of The Policies
40...........................................................................Not Applicable
41(a)........................................................................Distribution of The Policies
42...........................................................................Not Applicable
43...........................................................................Not Applicable
44...........................................................................How The Cash Value Varies
45...........................................................................Not Applicable
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
Modified Single Premium 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:
- - Asset Allocation Portfolio (formerly "Multiple Strategy Fund")
- - Domestic Income Portfolio (formerly Domestic Strategic Income Fund)
- - Emerging Growth Portfolio
- - Enterprise Portfolio (formerly "Common Stock Fund")
- - Global Equity Portfolio
- - Government Portfolio
- - Money Market Portfolio
- - 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
THIS POLICY IS NOT:
- - A BANK DEPOSIT;
- - ENDORSED BY A BANK OR GOVERNMENT AGENCY; FEDERALLY INSURED; OR
- - AVAILABLE IN EVERY STATE.
The life insurance policies offered by this prospectus are variable life
insurance policies. They provide life insurance coverage on the insured named in
the policy. For policies issued 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.
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 of money.
In Texas the policies are titled, "Flexible Premium Variable Life Insurance
Policies."
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Nationwide guarantees the death benefit will never be less than the specified
amount stated on the policy data page 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.
Benefits described in this prospectus may not be available in every jurisdiction
- - refer to your policy for specific benefit information.
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.
It may be disadvantageous for policy owners to:
- - replace existing insurance policies with the policy described in this
prospectus;
- - purchase a policy to obtain additional insurance protection if another
variable life insurance policy is owned; or
- - take policy loans or withdrawals from the policy prior to attaining age
59 1/2 (see "Tax Matters").
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.
2
<PAGE> 6
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 SINGLE PREMIUM- The single premium required to mature the policy under
guaranteed mortality and expense charges with an interest rate of 6%.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units are separately maintained.
MATURITY DATE- The policy anniversary on or next following the insured's 95th
birthday.
NATIONWIDE - Nationwide Life Insurance Company.
SPECIFIED AMOUNT- The dollar amount used to determine the death benefit under a
policy.
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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<PAGE> 7
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
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
Changes of Investment Policy
Voting Rights
Substitution of Securities
Material Conflicts
The Fixed Account
INFORMATION ABOUT THE POLICIES...................11
Minimum Requirements for Policy Issuance
Premium Payments
Pricing
POLICY CHARGES...................................12
Monthly Cost of Insurance
Annual Administrative Charge
Surrender Charges
Mortality and Expense Risk Charge
Administrative Expense Charge
Premium Expense Charge
Income Tax
SURRENDERING THE POLICY FOR CASH.................14
Surrender (Redemption)
Cash Surrender Value
Partial Surrenders
Income Tax Withholding
VARIATION IN CASH VALUE..........................15
Error in Age or Sex
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.......................................20
POLICY OWNER SERVICES............................20
Dollar Cost Averaging
DEATH BENEFIT INFORMATION........................20
Calculations of the Death Benefit
Changes in the Death Benefit
Proceeds Payable on Death
Incontestability
Suicide
Maturity Proceeds
EXCHANGE RIGHTS..................................23
GRACE PERIOD.....................................23
Reinstatement
TAX MATTERS......................................24
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.........................29
ADVERTISING......................................29
LEGAL PROCEEDINGS................................29
EXPERTS..........................................30
REGISTRATION STATEMENTS..........................30
LEGAL OPINIONS...................................31
</TABLE>
4
<PAGE> 8
<TABLE>
<CAPTION>
<S> <C>
DISTRIBUTION OF THE POLICIES.............................. 31
ADDITIONAL INFORMATION ABOUT
NATIONWIDE........................................... 37
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS........ 45
</TABLE>
5
<PAGE> 9
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.
No deductions are made from premium payments - 100% of each premium payment is
applied to the cash value.
Nationwide deducts the following charges from the cash value of the policy:
- - Monthly Cost of Insurance Charge;
- - Annual Administrative Charge1; and
- - Surrender Charge2.
1 The amount of Annual Administrative Charge is determined by the amount
of total net premium payments (see "Annual Administrative Charge"). The
current guaranteed maximum charges are:
- $135 ($120 in New York) for premiums of $10,000 but less than
$25,000; and
- $75 for net premiums of $25,000+.
2 Surrender Charges will not exceed 8.5% of the total premiums paid (see
"Surrender Charges").
Nationwide deducts the following charges from the assets of the variable
account:
- Mortality and Expense Risk Charge 3;
- Administrative Expense Charge4; and
- Premium Expense Charge5.
Annually, these charges are equal to:
<TABLE>
<CAPTION>
POLICY POLICY
YEARS YEARS
<S> <C> <C>
1-10 11+
CURRENT 1.30% 1.00%
GUARANTEED MAXIMUM
1.60% 1.30%
</TABLE>
3 The Mortality and Expense Risk Charge is equal to an annual effective rate of
0.75%. It is guaranteed not to exceed 0.90% (see "Mortality and Expense Risk
Charge").
4 The Administrative Expense Charge is equal to an annual effective rate of
0.25%. It is guaranteed not to exceed 0.40% (see "Administrative Expense
Charge").
5 The Premium Expense Charge is deducted during the first ten policy years and
is equivalent to an annual effective rate of 0.30% (see "Premium
Expense Charge").
For more information about any policy charge, see "Policy Charges" in this
prospectus.
6
<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of average net assets after expense reimbursement)
<TABLE>
<CAPTION>
MANAGEMENT FEES OTHER 12B-1 TOTAL MUTUAL
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 0.40% 0.00% 0.00% 0.40%
----- ----- ----- -----
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 0.41% 0.00% 0.00% 0.41%
----- ----- ----- -----
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 0.44% 0.00% 0.00% 0.44%
----- ----- ----- -----
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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<PAGE> 11
SYNOPSIS OF THE POLICIES
The policies offered by this prospectus provide 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.
PREMIUMS
The minimum initial premium for which a policy may be issued is $10,000 for
issue ages 75 or younger and $50,000 for issue ages 76 through 80.
Additional premium payments of $1,000 are permitted any time while the policy is
in force, subject to certain restrictions (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.
GENERAL DISTRIBUTOR
The policies are distributed by the general distributor, Van Kampen Funds, Inc.
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.
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 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.
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<PAGE> 12
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 before
the shareholder meeting. Notification will contain proxy materials, and a form
to return to Nationwide with voting instructions.
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<PAGE> 13
Nationwide will vote shares for which no instructions are received in the same
proportion as those that are received.
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 policy owners and those of other companies. If
a material conflict occurs, Nationwide will take whatever steps are necessary to
protect policy owners, 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.
Premiums will be allocated to the fixed account by election of the policy owner.
The investment income earned by the fixed account will be allocated to the
polices at varying rate(s) set by Nationwide.
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 general applicable provisions of the federal securities law concerning
the accuracy and completeness of statements made in prospectuses.
The investment income earned by the fixed account will be allocated to the
contracts at varying rate(s) set by Nationwide. The guaranteed rate for any
premiums will be effective for not less than twelve months. Nationwide
guarantees that the rate will not be less than 4.0% per year.
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<PAGE> 14
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 premiums deposited to the contract and allocated to the fixed account may
receive a different rate of interest than amounts transferred from the
sub-accounts to the fixed account and amounts maturing in the fixed account.
INFORMATION ABOUT THE POLICIES
MINIMUM REQUIREMENTS FOR ISSUANCE OF A POLICY
This policy provides life insurance coverage on the insured. Minimum
requirements for policy issuance include:
- the insured must be age 80 or younger;
- Nationwide may require satisfactory evidence of insurability
(including a medical exam); and
- the minimum initial premium of $10,000 for issue ages 75 and
younger, and $50,000 for issue ages 76 through 80.
Premium Payments
Each premium payment must be at least $10,000 for issue ages 75 and younger or
$50,000 for issue ages 76-80. The initial premium is payable in full at
Nationwide's home office or to an authorized agent of Nationwide.
The specified amount is determined by treating the initial premium as equal to
100% of the Guideline Single Premium.
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:
- Nationwide may require satisfactory evidence of insurability
before accepting any additional premium payment which results
in an increase in the net amount at risk.
- Additional premium payments must be $1,000 (except in
Virginia).
- 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.
- 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.
PRICING
Premiums will not be priced when the New York Stock Exchange is closed or on the
following nationally recognized holidays:
- - New Year's Day - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
Nationwide also will not price premium 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
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<PAGE> 15
(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 the conditions described
in (2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value nay be affected since the contract owner would not have access to
their account.
POLICY CHARGES
No deduction is made from premium payments - 100% of each premium payment is
applied to the cash value.
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. The net amount at
risk is the difference between the death benefit and the policy's cash value.
This deduction is charged proportionately to the cash value in each sub-account
and the fixed account.
The current Cost of Insurance Charge will not exceed the cost based on the
guaranteed cost of insurance rate and the policy's net amount at risk.
Guaranteed cost of insurance rates for standard simplified issues are based on
the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980
CET). Guaranteed cost of insurance rates for standard preferred issues are based
on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday
(1980 CSO). Guaranteed cost of insurance rates for substandard issues are based
on appropriate percentage multiples of the 1980 CSO.
These mortality tables are sex distinct. In addition, separate mortality tables
will be used for standard and non-tobacco.
For policies issued in Texas, guaranteed cost of insurance rates for standard
simplified issues ("Special Class-Simplified" in Texas) are based on 130% of the
1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980
CSO).
The rate class of an insured may affect the cost of insurance rate. 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.
ANNUAL ADMINISTRATIVE CHARGE
After the first policy year, Nationwide deducts an Annual Administrative
Charge. It is charged proportionately to the cash values in each sub-account and
the fixed account. The annual charge is determined by the total net premium
payments (premium payments less any previous partial surrenders):
<TABLE>
<CAPTION>
GUARANTEED
CURRENT MAXIMUM
TOTAL NET ADMINISTRATIVE ADMINISTRATIVE
PREMIUMS CHARGE CHARGE
<S> <C> <C>
$10,000 but $90* $135*
less than
$25,000
$25,000 $50 $75
</TABLE>
*For policies issued in New York, the current charge is $65 and the guaranteed
maximum is $120.
12
<PAGE> 16
SURRENDER CHARGES
Nationwide incurs certain expenses related to the sale of the policies. These
expenses include commissions paid to sales personnel, the cost of sales
literature and other promotional activity. Nationwide deducts a Surrender Charge
to cover these expenses. Unrecovered expenses are borne by Nationwide's general
assets which may include profits, if any, from the Mortality and Expense Risk
Charge.
Upon surrender, the initial premium payments and any subsequent premium payments
resulting in an increased net amount at risk will incur surrender charges. The
charge is less than or equal to 8.5% of that premium payment surrendered, as set
forth in the following chart:
<TABLE>
<CAPTION>
COMPLETED YEAR(S) CHARGES ON SURRENDER AS A
SINCE THE PAYMENT PERCENTAGE OF THE PAYMENT
<S> <C>
0 8.5%
1 8.5%
2 8.0%
3 8.0%
4 7.5%
5 7.0%
6 6.0%
7 5.0%
8 4.0%
9 0.0%
</TABLE>
Surrender Charges apply for nine years after the effective date of each premium
payment. Certain surrenders may result in adverse tax consequences.
The Surrender Charge deducted upon surrender will never exceed 8.5% of the total
premiums paid. Surrender Charges are deducted from the cash value in each
sub-account and the fixed account. Surrender Charges may be eliminated for
policies that are issued to an officer, director, former director, partner,
employee, or retired employee of Nationwide; or an employee of the general
distributor, Van Kampen Funds, Inc. or an employee of an affiliate of Nationwide
or Van Kampen Funds, Inc. or, a duly appointed representative of Nationwide who
receives no commission as a result of the purchase.
Surrender Charges are eliminated only when Nationwide does not incur sales or
administrative expenses normally incurred on the sale of a policy. In no event
will reduction of the Surrender Charge be permitted if a reduction would be
unfairly discriminatory to any person.
Nationwide deducts the following charges from the assets of the variable
account.
- - Mortality and Expense Risk Charge;
- - Administrative Expense Charge; and
- - Premium Expense Charge.
Annually, these charges are equal to:
<TABLE>
<CAPTION>
POLICY POLICY
YEARS YEARS
<S> <C> <C>
1-10 11+
CURRENT 1.30% 1.00%
GUARANTEED MAXIMUM 1.60% 1.30%
</TABLE>
MORTALITY AND EXPENSE RISK CHARGE
The mortality risk assumed under the policies is that the insured may not live
as long as expected. The expense risk assumed is that the actual expenses
incurred in issuing and administering the policies may be greater than expected.
In addition, 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. To compensate Nationwide for
assuming these risks, Nationwide deducts the Morality and Expense Risk Charge
from the variable account on a daily basis. It is deducted proportionally from
the cash value in each sub-account. The charge is equivalent to an annual
effective rate of 0.75% of the average net assets of the variable account. It is
guaranteed not to exceed 0.90%. Policy owners receive quarterly and annual
statements, advising
13
<PAGE> 17
policy owners of the cancellation of accumulation units for mortality and
expense risk charges.
ADMINISTRATIVE EXPENSE CHARGE
Nationwide deducts a daily Administrative Expense Charge from the assets of the
sub-accounts. This charge reimburses Nationwide for certain administrative
expenses related to the issuance and maintenance of the policies including
underwriting, record keeping, accounting and periodic reporting to policy
owners. Nationwide does not expect to recover any amount in excess of aggregate
maintenance expenses from this charge. Currently this charge is equivalent to an
annual effective rate of 0.25%. This charge is guaranteed not to exceed 0.40%.
PREMIUM EXPENSE CHARGE
Nationwide pays any state premium taxes attributable to a particular policy when
incurred by Nationwide. Nationwide expects to pay an average state premium tax
rate of approximately 2.50% of premiums for all states, although tax rates
generally can range from 0% to 4%.
During the first ten policy years Nationwide deducts a daily charge equivalent
to an annual effective rate of 0.30% of the assets of the variable account, and
0% thereafter. This charge remimburses Nationwide for administrative expenses on
an aggregate basis including premium taxes imposed by various state and local
jurisdictions. This charge is deducted proportionally from the cash value in
each sub-account and the fixed account. 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.
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:
14
<PAGE> 18
1) the minimum partial surrender in any policy year is limited to
10% of total premium payments;
2) after a partial surrender, the cash surrender value is greater
than $10,000; and
3) after the partial surrender, the policy continues to qualify
as life insurance.
When a partial surrender is made, the cash value will be 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 (see "Death Benefit
Information"). In that case, a partial surrender will decrease the specified
amount by the amount the partial surrender exceeds the difference between the
death benefit and specified amount. Partial surrenders are first deducted from
the values in the sub-accounts, then from the fixed account if there are
insufficient amounts in the sub-accounts.
Surrenders charges are waived for partial surrenders that satisfy the above
conditions. Certain partial surrenders may result in currently taxable income
and tax penalties.
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 premium applied since the previous
valuation date, minus any partial surrenders, plus or minus any investment
results, minus any surrender charge for decreases in specified amount, 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.
ERROR IN AGE OR SEX
If the age or sex of the insured has been misstated, the affected benefits will
be adjusted to reflect the correct age and sex.
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.
15
<PAGE> 19
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
actions 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 and names no contingent policy
owner, and dies before the insured, the policy owner's rights in this policy
belong to the policy owner's estate.
BENEFICIARY
The beneficiary(ies) will be as named in the application or as subsequently
changed, subject to assignment, if any.
The policy owner may name a new beneficiary while the insured is living. Any
change must be in a written form satisfactory to 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.
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 first policy year, the policy owner may request an increase to the
specified amount. Any increase will be subject to the following conditions:
1. the request must be applied for in writing;
2. satisfactory evidence of insurability must be provided;
3. the increase must be for a minimum of $10,000;
4. the rate class, rate class multiple, and rate type for the increase
must be identical to those on the policy date; and
5. Nationwide reserves the right to limit the number of increases to one
per policy year.
Any approved increase will have an effective date of the monthly anniversary day
on or next following the date Nationwide approves the supplemental application.
The specified amount cannot be decreased if the decrease would result in the
policy failing to meet the definition of life insurance under Section 7702 of
the Internal Revenue Code.
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, then converted in
accumulation units. All percentage allocations must be in whole numbers, and
must be at least 5%. The sum of allocations must equal 100%. Future
16
<PAGE> 20
premium allocations may be changed by giving written notice to Nationwide.
Premiums allocated to sub-accounts on the application will be allocated to the
Van Kampen Life Investment Trust - Money Market Portfolio ("Money Market
Portfolio") during the period that a policy owner can cancel the policy, unless
specific states require premiums to be allocated to the fixed account. At the
expiration of this 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 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
Net investment factor 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,
administration expense charge and premium tax charge. This factor is
equal to an annual rate of 1.30% of the daily net assets of the variable
account for the first ten policy years and 1.00% thereafter.
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, Administrative Expense Charge and Premium
Expense 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
17
<PAGE> 21
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 that 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 100% of allocations without penalty or adjustment
subject to the following conditions:
- - Nationwide reserves the right to restrict transfers between the fixed
account and the sub-accounts to one per policy year.
- - Transfers made to the fixed account may not be made in the first policy
year.
- - Nationwide reserves the right to restrict transfers from the fixed account
to 25% of the cash value attributable to the fixed account.
- - Nationwide reserves the right to restrict transfers to the fixed account to
25% of cash value.
Transfer Requests
Nationwide will accept transfer requests in writing or 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:
- - 10 days after receiving the policy;
- - 45 days after signing the application; or
- - 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
The policy owner may take a policy loan at any time after the first policy year
using the policy as security. During the first year, maximum policy indebtedness
is limited to 50% of the cash surrender value, less interest due on the next
policy anniversary. After the first year, maximum policy indebtedness is limited
to 90% of the cash surrender value, less interest due on the next policy
anniversary.
Nationwide will not grant a loan for an amount less than $1,000 ($500 in New
York and $200 in Connecticut). Policy indebtedness will be deducted from
18
<PAGE> 22
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
Currently, policy loans are credited with an annual effective rate of 5.0%.
Nationwide guarantees the rate will never be lower than 4%. Nationwide may
change the current interest crediting rate on policy loans at any time at its
sole discretion. The loan interest rate is 6% per year for all policy loans.
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. The earned interest is transferred from the policy loan
account to a variable account or the fixed account on each policy anniversary,
at the time a new loan is requested. 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. 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 plus accrued interest 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 years.
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 New York
and Connecticut). Nationwide
19
<PAGE> 23
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 certain sub-accounts and the fixed account 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 Van Kampen Life Investment Trust-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
programs. Nationwide reserves the right to assess a processing fee for this
service.
DEATH BENEFIT INFORMATION
CALCULATION OF THE DEATH BENEFIT
At issue, the specified amount is determined by treating the initial premium as
equal to 100% of the Guideline Single Premium. Additional premium payments, if
accepted, may increase the specified amount. Guideline Single Premiums vary by
attained age, sex, smoking classification, underwriting classification and total
premium payments. The following table illustrates representative initial
specified amounts, under death benefit Option 1, for non-tobacco:
20
<PAGE> 24
<TABLE>
<CAPTION>
ISSUE $25,000 SINGLE PREMIUM $50,000 SINGLE PREMIUM
AGE MALE FEMALE MALE FEMALE
<S> <C> <C> <C> <C> <C>
35 $179,733 $208,354 $364,774 $423,008
40 143,373 166,704 290,792 338,264
45 114,856 134,300 232,769 272,332
50 92,583 108,739 187,452 220,323
55 75,306 88,601 152,298 179,349
60 62,112 72,636 125,453 146,866
65 52,094 59,930 105,070 121,014
</TABLE>
Generally, for a given premium payment, the initial specified amount is greater
for non-tobacco than standard, and females than males. The specified amount is
shown in the policy.
While the policy is in force, the death benefit will never be less than the
specified amount. The death benefit may vary with the cash value of the policy,
which depends on investment performance.
The policy owner may choose one of two death benefit options:
OPTION 1: The death benefit will be the greater of the specified amount or the
applicable percentage of cash value. Under Option 1, the amount of the death
benefit will ordinarily not change for several years to reflect the investment
performance and may not change at all. If investment performance is favorable,
the amount of the death benefit may increase. To see how and when investment
performance will begin to affect death benefits, please see the illustrations.
OPTION 2: The death benefit will be the greater of the specified amount plus the
cash value, or the applicable percentage of cash value and will vary directly
with the investment performance.
Policy owners who are satisfied with the amount of their current insurance
coverage and prefer to have favorable investment
performance and any future premium payments reflected in increased policy cash
value should choose death benefit Option 1. Policy owners who prefer to have
favorable investment performance and any future
premium payments increase death benefits should choose death benefit Option 2.
The monthly cost of insurance for Option 1 will always be less than or equal to
the monthly cost of insurance for the same specified amount under Option 2.
21
<PAGE> 25
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
ATTAINED PERCENTAGE OF ATTAINED PERCENTAGE OF ATTAINED PERCENTAGE OF
AGE CASH VALUE AGE CASH VALUE AGE CASH VALUE
<S> <C> <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 first policy year, the policy owner may elect to change the death
benefit option under the policy from either Option 1 to Option 2, or from Option
2 to Option 1. Only one change of death benefit option is permitted per policy
year. The effective date of a change will be the monthly anniversary day
following the date the change is approved by Nationwide.
If the change is from Option 1 to Option 2, the specified amount will be
decreased by the amount of the cash value. Nationwide may require evidence of
insurability for a change from Option 1 to Option 2. If the change is from
Option 2 to Option 1, the specified amount will be increased by the amount of
the cash value.
A change in death benefit option will not be permitted if it results in the
total premiums paid exceeding the current maximum premium limitations under
Section 7702 of the Internal Revenue Code.
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
representations in any written application after the policy has been in force
during the insured's lifetime for 2 years from the policy date.
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 unpaid loan. 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,
22
<PAGE> 26
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. 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 premium life insurance policy
offered by Nationwide on the policy date. If not available, the new policy may
be 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(ies) 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
If the cash surrender value is insufficient to pay monthly policy charges or
policy loan interest, a grace period of 61 days is allowed for payment.
Nationwide will notify the policy owner of the amount needed to keep the policy
in force. If this amount is not received by Nationwide within 61 days of the
notice, the policy will lapse without value. 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 upaid during the grace period if the policy terminated in the
fourth or later policy year;
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
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<PAGE> 27
to applying any premiums or loan repayments received, will be set equal to the
appropriate surrender charge.
Amounts allocated to underlying mutual funds at the start of the grace period
will be reinstated, unless the policy owner provides otherwise.
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.
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.
Even though exchanges under Section 1035 of the Internal Revenue Code qualify as
material changes, certain exchange of pre-June 22, 1988 policies may retain
their non-modified endowment status. Therefore, the policies offered by this
prospectus may or may not be issued as modified endowment contracts. 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
24
<PAGE> 28
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 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 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 if 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
25
<PAGE> 29
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 advisers regarding these taxes.
NON-RESIDENT ALIENS
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
statutory rate of 30% of the amount of income that is distributed. 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.
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<PAGE> 30
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 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 advise, and should not
take the place of your independent legal, tax and/or financial adviser.
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
27
<PAGE> 31
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 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 do not have an effect 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
28
<PAGE> 32
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:
- - an annual statement containing: the amount of the current death benefit,
cash value, cash surrender value, premiums paid, monthly charges deducted,
amounts invested in the fixed account and the sub-accounts, and policy
indebtedness;
- - 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
- - 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 Company). 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
Company). 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
29
<PAGE> 33
preliminarily approving a class for settlement purposes (which would include the
Mishler case) and scheduled a fairness hearing for December 17, 1998. At the
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 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
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<PAGE> 34
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.
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 commissions paid by Nationwide on the sale of these policies plus fees for
marketing service provided by the general distributor are not more than 7.50% of
the premiums paid.
31
<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 Oakbrook Terrace, IL
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
Michael P. Boos Vice President Oakbrook Terrace, IL
James J. Boyne Vice President, Associate General Counsel & Oakbrook Terrace, IL
Assistant Secretary
</TABLE>
32
<PAGE> 36
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
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
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
</TABLE>
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<PAGE> 37
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
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
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
</TABLE>
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<PAGE> 38
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
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
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
</TABLE>
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<PAGE> 39
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
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
DIRECTORS - VAN KAMPEN FUNDS, INC.
</TABLE>
<TABLE>
<CAPTION>
NAME/OFFICE LOCATION
<S> <C>
Don G. Powell, Chaiman 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>
36
<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 accounts, each of
which is a registered investment company:
- - Nationwide Variable Account,
- - Nationwide Variable Account-II,
- - Nationwide Variable Account-3,
- - Nationwide Variable Account-4,
- - Nationwide Variable Account-5,
- - Nationwide Variable Account-6,
- - Nationwide Fidelity Advisor Variable Account,
- - Nationwide Variable Account-9,
- - Nationwide Variable Account -10,
- - MFS Variable Account,
- - Nationwide Multi-Flex Variable Account,
- - Nationwide VLI Separate Account,
- - Nationwide VLI Separate Account,
- - Nationwide VLI Separate Account-3,
- - Nationwide VLI Separate Account-4,
- - Nationwide VLI Separate Account-5,
- - NACO Variable Account, and the
- - Nationwide DCVA.
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 Nationwide Life and Annuity Insurance Company.
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<PAGE> 41
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
Nationwide. 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 Nationwide.
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<PAGE> 42
DIRECTORS OF NATIONWIDE
<TABLE>
<CAPTION>
DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICES WITH PRINCIPAL OCCUPATION
PRINCIPAL BUSINESS ADDRESS DEPOSITOR
<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, Ohio 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;
1558 West Moreland Road Operator, 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
Nationwide, 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 of
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 OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
<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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<PAGE> 44
EXECUTIVE OFFICERS OF NATIONWIDE (CONTINUED)
<TABLE>
<CAPTION>
OFFICERS OF THE DEPOSITOR OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
<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-Office of 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 Mr. 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.
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.
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.
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
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<PAGE> 45
Cooperative Extension Associations, and former board member of the Pennsylvania
Vegetable Grower's Association.
DAVID O. MILLER has been a Director of Nationwide since November 1996. Mr.
Miller has been a farm owner and land developer since 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. 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.
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.
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.
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.
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
Operation 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.
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.
PHILIP C. GATH has been Senior Vice President - Chief Actuary - Nationwide
Financial Services 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.
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<PAGE> 46
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.
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.
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.
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
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<PAGE> 47
been with Nationwide for 7 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 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.
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.
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.
JOSEPH P. RATH has been Vice President - Product and Market Compliance for
Nationwide 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.
MARK R. THRESHER has been Vice President - Controller of Nationwide 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
since July 1988.
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<PAGE> 48
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
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 Portfolio's
investment adviser.
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, and 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 securities believed by the Advisor to have above average
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 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 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
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<PAGE> 49
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 a high 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 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.
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APPENDIX B: ILLUSTRATIONS OF WHEN ADDITIONAL PREMIUM PAYMENTS ARE PERMITTED
Example 1: A male non-tobacco, age 35, purchases a policy with an initial
premium of $25,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a specified
amount of $179,733. In the 12th and subsequent policy years, annual premiums of
$2,177 may be paid without violating the premium limitations prescribed by the
IRS to qualify the policy as a life insurance contract. Additional premiums
which increase the specified amount may be made at any time, subject to the
$1,000 minimum. Nationwide reserves the right to require satisfactory evidence
of insurability with any premium payment which increases the net amount at risk.
In addition, premium payments may be made at any time if they are required to
continue the policy in force.
Example 2: A male non-tobacco, age 55, purchases a policy with an initial
premium of $100,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a specified
amount of $306,283. In the 11th and subsequent policy years, annual premiums of
$9,591 may be paid without violating the premium limitations prescribed by the
IRS to qualify the policy as a life insurance contract. Additional premiums
which increase the specified amount may be made at any time, subject to the
$1,000 minimum. Nationwide reserves the right to require satisfactory evidence
of insurability with any premium payment which increases the net amount at risk.
In addition, premium payments may be made at any time if they are required to
continue the policy in force.
47
<PAGE> 51
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 indebtedness, no additional premium
payments are made, no cash values are allocated to the fixed account, and there
are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks, recovering premium taxes and providing for
administrative expenses. On a current basis, these charges are equivalent to an
annual effective rate of 1.30% in the first 10 policy years and 1.00%
thereafter. On a guaranteed basis, these charges are equivalent to an annual
maximum effective rate of 1.60% in the first 10 policy years and 1.30%
thereafter. In addition, the net investment returns also reflect the deduction
of underlying mutual fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 0.80%. Some underlying mutual fund
expenses are subject to expense reimbursements and fee waivers. Absent expense
reimbursements and fee 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.
Taking account of the current charges for mortality and expense risks,
recovering premium taxes and providing for administrative and underlying mutual
fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net
investment experience at constant annual rates of -2.1%, 3.9%, and 9.9%
respectively, in policy years 1 through ten, and -1.8%, 4.2%, and 10.2%
thereafter. Taking account of guaranteed charges, gross annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -2.4%, 3.6%, and 9.6% respectively, in policy years 1 through 10, and
- -2.1%, 3.9% and 9.9% thereafter.
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
charges 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. Death Benefit Option 1 has been assumed in all the illustrations.
In addition, the illustrations reflect the fact that Nationwide deducts an
Annual Administrative Charge at the beginning of each policy year after the
first. The illustrations also reflect the fact that no charges for federal or
state income taxes are currently made against the variable account. If such a
charge is made in the future,
48
<PAGE> 52
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.
49
<PAGE> 53
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
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> <C>
1 10,500 9,657 8,807 43,190 10,242 9,392 43,190 10,826 9,976 43,190
2 11,025 9,246 8,396 43,190 10,415 9,565 43,190 11,654 10,804 43,190
3 11,576 8,830 8,030 43,190 10,585 9,785 43,190 12,555 11,755 43,190
4 12,155 8,408 7,608 43,190 10,750 9,950 43,190 13,536 12,736 43,190
5 12,763 7,978 7,228 43,190 10,908 10,158 43,190 14,605 13,855 43,190
6 13,401 7,539 6,839 43,190 11,059 10,359 43,190 15,771 15,071 43,190
7 14,071 7,088 6,488 43,190 11,199 10,599 43,190 17,043 16,443 43,190
8 14,775 6,622 6,122 43,190 11,325 10,825 43,190 18,430 17,930 43,190
9 15,513 6,136 5,736 43,190 11,435 11,035 43,190 19,946 19,546 43,190
10 16,289 5,629 5,629 43,190 11,525 11,525 43,190 21,603 21,603 43,190
11 17,103 5,112 5,112 43,190 11,627 11,627 43,190 23,488 23,488 43,190
12 17,959 4,571 4,571 43,190 11,710 11,710 43,190 25,566 25,566 43,190
13 18,856 4,004 4,004 43,190 11,772 11,772 43,190 27,862 27,862 43,190
14 19,799 3,408 3,408 43,190 11,811 11,811 43,190 30,403 30,403 43,190
15 20,789 2,780 2,780 43,190 11,822 11,822 43,190 33,219 33,219 44,513
16 21,829 2,114 2,114 43,190 11,801 11,801 43,190 36,323 36,323 47,220
17 22,920 1,407 1,407 43,190 11,745 11,745 43,190 39,724 39,724 50,846
18 24,066 651 651 43,190 11,646 11,646 43,190 43,448 43,448 54,745
19 25,270 (*) (*) (*) 11,497 11,497 43,190 47,528 47,528 58,935
20 26,533 (*) (*) (*) 11,292 11,292 43,190 52,000 52,000 63,440
21 27,860 (*) (*) (*) 11,023 11,023 43,190 56,902 56,902 68,283
22 29,253 (*) (*) (*) 10,659 10,659 43,190 62,259 62,259 74,088
23 30,715 (*) (*) (*) 10,186 10,186 43,190 68,110 68,110 80,370
24 32,251 (*) (*) (*) 9,583 9,583 43,190 74,502 74,502 87,167
25 33,864 (*) (*) (*) 8,829 8,829 43,190 81,482 81,482 94,520
26 35,557 (*) (*) (*) 7,891 7,891 43,190 89,104 89,104 102,469
27 37,335 (*) (*) (*) 6,728 6,728 43,190 97,461 97,461 110,130
28 39,201 (*) (*) (*) 5,286 5,286 43,190 106,635 106,635 118,365
29 41,161 (*) (*) (*) 3,501 3,501 43,190 116,725 116,725 127,230
30 43,219 (*) (*) (*) 1,296 1,296 43,190 127,847 127,847 136,797
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge. (
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
50
<PAGE> 54
<TABLE>
<CAPTION>
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
GUARANTEED VALUES
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,616 8,766 43,190 10,199 9,349 43,190 10,781 9,931 43,190
2 11,025 9,110 8,260 43,190 10,268 9,418 43,190 11,495 10,645 43,190
3 11,576 8,600 7,800 43,190 10,327 9,527 43,190 12,267 11,467 43,190
4 12,155 8,084 7,284 43,190 10,374 9,574 43,190 13,101 12,301 43,190
5 12,763 7,561 6,811 43,190 10,407 9,657 43,190 14,004 13,254 43,190
6 13,401 7,029 6,329 43,190 10,424 9,724 43,190 14,981 14,281 43,190
7 14,071 6,483 5,883 43,190 10,420 9,820 43,190 16,039 15,439 43,190
8 14,775 5,920 5,420 43,190 10,393 9,893 43,190 17,185 16,685 43,190
9 15,513 5,336 4,936 43,190 10,337 9,937 43,190 18,426 18,026 43,190
10 16,289 4,726 4,726 43,190 10,248 10,248 43,190 19,772 19,772 43,190
11 17,103 4,098 4,098 43,190 10,151 10,151 43,190 21,298 21,298 43,190
12 17,959 3,434 3,434 43,190 10,013 10,013 43,190 22,965 22,965 43,190
13 18,856 2,729 2,729 43,190 9,827 9,827 43,190 24,791 24,791 43,190
14 19,799 1,976 1,976 43,190 9,587 9,587 43,190 26,796 26,796 43,190
15 20,789 1,168 1,168 43,190 9,283 9,283 43,190 29,002 29,002 43,190
16 21,829 294 294 43,190 8,905 8,905 43,190 31,438 31,438 43,190
17 22,920 (*) (*) (*) 8,441 8,441 43,190 34,137 34,137 43,695
18 24,066 (*) (*) (*) 7,874 7,874 43,190 37,104 37,104 46,751
19 25,270 (*) (*) (*) 7,185 7,185 43,190 40,336 40,336 50,016
20 26,533 (*) (*) (*) 6,352 6,352 43,190 43,856 43,856 53,504
21 27,860 (*) (*) (*) 5,352 5,352 43,190 47,691 47,691 57,229
22 29,253 (*) (*) (*) 4,156 4,156 43,190 51,858 51,858 61,711
23 30,715 (*) (*) (*) 2,735 2,735 43,190 56,383 56,383 66,532
24 32,251 (*) (*) (*) 1,045 1,045 43,190 61,298 61,298 71,719
25 33,864 (*) (*) (*) (*) (*) (*) 66,636 66,636 77,298
26 35,557 (*) (*) (*) (*) (*) (*) 72,430 72,430 83,295
27 37,335 (*) (*) (*) (*) (*) (*) 78,761 78,761 89,000
28 39,201 (*) (*) (*) (*) (*) (*) 85,690 85,690 95,116
29 41,161 (*) (*) (*) (*) (*) (*) 93,292 93,292 101,689
30 43,219 (*) (*) (*) (*) (*) (*) 101,661 101,661 108,778
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an annual
$135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
51
<PAGE> 55
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
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> <C>
1 10,500 9,672 8,822 41,661 10,256 9,406 41,661 10,841 9,991 41,661
2 11,025 9,252 8,402 41,661 10,421 9,571 41,661 11,660 10,810 41,661
3 11,576 8,829 8,029 41,661 10,583 9,783 41,661 12,552 11,752 41,661
4 12,155 8,402 7,602 41,661 10,741 9,941 41,661 13,524 12,724 41,661
5 12,763 7,970 7,220 41,661 10,895 10,145 41,661 14,586 13,836 41,661
6 13,401 7,532 6,832 41,661 11,043 10,343 41,661 15,745 15,045 41,661
7 14,071 7,084 6,484 41,661 11,184 10,584 41,661 17,012 16,412 41,661
8 14,775 6,625 6,125 41,661 11,314 10,814 41,661 18,396 17,896 41,661
9 15,513 6,152 5,752 41,661 11,431 11,031 41,661 19,909 19,509 41,661
10 16,289 5,661 5,661 41,661 11,532 11,532 41,661 21,566 21,566 41,661
11 17,103 5,165 5,165 41,661 11,651 11,651 41,661 23,453 23,453 41,661
12 17,959 4,649 4,649 41,661 11,754 11,754 41,661 25,533 25,533 41,661
13 18,856 4,112 4,112 41,661 11,841 11,841 41,661 27,832 27,832 41,661
14 19,799 3,549 3,549 41,661 11,909 11,909 41,661 30,376 30,376 41,918
15 20,789 2,958 2,958 41,661 11,954 11,954 41,661 33,184 33,184 44,467
16 21,829 2,335 2,335 41,661 11,973 11,973 41,661 36,272 36,272 47,153
17 22,920 1,675 1,675 41,661 11,962 11,962 41,661 39,654 39,654 50,757
18 24,066 971 971 41,661 11,915 11,915 41,661 43,359 43,359 54,633
19 25,270 218 218 41,661 11,826 11,826 41,661 47,420 47,420 58,800
20 26,533 (*) (*) (*) 11,690 11,690 41,661 51,870 51,870 63,282
21 27,860 (*) (*) (*) 11,499 11,499 41,661 56,751 56,751 68,101
22 29,253 (*) (*) (*) 11,229 11,229 41,661 62,085 62,085 73,881
23 30,715 (*) (*) (*) 10,866 10,866 41,661 67,916 67,916 80,141
24 32,251 (*) (*) (*) 10,396 10,396 41,661 74,288 74,288 86,917
25 33,864 (*) (*) (*) 9,799 9,799 41,661 81,250 81,250 94,250
26 35,557 (*) (*) (*) 9,048 9,048 41,661 88,856 88,856 102,184
27 37,335 (*) (*) (*) 8,111 8,111 41,661 97,197 97,197 109,832
28 39,201 (*) (*) (*) 6,943 6,943 41,661 106,355 106,355 118,054
29 41,161 (*) (*) (*) 5,491 5,491 41,661 116,427 116,427 126,905
30 43,219 (*) (*) (*) 3,694 3,694 41,661 127,528 127,528 136,455
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
52
<PAGE> 56
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
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 10,500 9,623 8,773 41,661 10,206 9,356 41,661 10,788 9,938 41,661
2 11,025 9,109 8,259 41,661 10,267 9,417 41,661 11,494 10,644 41,661
3 11,576 8,592 7,792 41,661 10,319 9,519 41,661 12,258 11,458 41,661
4 12,155 8,071 7,271 41,661 10,359 9,559 41,661 13,084 12,284 41,661
5 12,763 7,543 6,793 41,661 10,385 9,635 41,661 13,979 13,229 41,661
6 13,401 7,006 6,306 41,661 10,396 9,696 41,661 14,948 14,248 41,661
7 14,071 6,457 5,857 41,661 10,387 9,787 41,661 15,997 15,397 41,661
8 14,775 5,892 5,392 41,661 10,355 9,855 41,661 17,135 16,635 41,661
9 15,513 5,306 4,906 41,661 10,295 9,895 41,661 18,369 17,969 41,661
10 16,289 4,697 4,697 41,661 10,204 10,204 41,661 19,708 19,708 41,661
11 17,103 4,071 4,071 41,661 10,107 10,107 41,661 21,228 21,228 41,661
12 17,959 3,410 3,410 41,661 9,968 9,968 41,661 22,889 22,889 41,661
13 18,856 2,710 2,710 41,661 9,785 9,785 41,661 24,711 24,711 41,661
14 19,799 1,964 1,964 41,661 9,549 9,549 41,661 26,714 26,714 41,661
15 20,789 1,165 1,165 41,661 9,252 9,252 41,661 28,920 28,920 41,661
16 21,829 303 303 41,661 8,884 8,884 41,661 31,358 31,358 41,661
17 22,920 (*) (*) (*) 8,434 8,434 41,661 34,053 34,053 43,588
18 24,066 (*) (*) (*) 7,884 7,884 41,661 36,997 36,997 46,617
19 25,270 (*) (*) (*) 7,217 7,217 41,661 40,203 40,203 49,852
20 26,533 (*) (*) (*) 6,412 6,412 41,661 43,694 43,694 53,307
21 27,860 (*) (*) (*) 5,446 5,446 41,661 47,499 47,499 56,999
22 29,253 (*) (*) (*) 4,293 4,293 41,661 51,632 51,632 61,442
23 30,715 (*) (*) (*) 2,922 2,922 41,661 56,121 56,121 66,223
24 32,251 (*) (*) (*) 1,295 1,295 41,661 60,996 60,996 71,366
25 33,864 (*) (*) (*) (*) (*) (*) 66,291 66,291 76,897
26 35,557 (*) (*) (*) (*) (*) (*) 72,038 72,038 82,843
27 37,335 (*) (*) (*) (*) (*) (*) 78,317 78,317 88,498
28 39,201 (*) (*) (*) (*) (*) (*) 85,190 85,190 94,561
29 41,161 (*) (*) (*) (*) (*) (*) 92,731 92,731 101,076
30 43,219 (*) (*) (*) (*) (*) (*) 101,032 101,032 108,104
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
53
<PAGE> 57
$25,000 INITIAL PREMIUM: $114,856 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 26,250 24,174 22,049 114,856 25,636 23,511 114,856 27,097 24,972 114,856
2 27,563 23,291 21,166 114,856 26,223 24,098 114,856 29,328 27,203 114,856
3 28,941 22,397 20,397 114,856 26,810 24,810 114,856 31,759 29,759 114,856
4 30,388 21,492 19,492 114,856 27,396 25,396 114,856 34,411 32,411 114,856
5 31,907 20,572 18,697 114,856 27,978 26,103 114,856 37,306 35,431 114,856
6 33,502 19,633 17,883 114,856 28,553 26,803 114,856 40,467 38,717 114,856
7 35,178 18,669 17,169 114,856 29,116 27,616 114,856 43,920 42,420 114,856
8 36,936 17,675 16,425 114,856 29,663 28,413 114,856 47,693 46,443 114,856
9 38,783 16,643 15,643 114,856 30,186 29,186 114,856 51,817 50,817 114,856
10 40,722 15,567 15,567 114,856 30,681 30,681 114,856 56,332 56,332 114,856
11 42,758 14,484 14,484 114,856 31,235 31,235 114,856 61,462 61,462 114,856
12 44,896 13,349 13,349 114,856 31,762 31,762 114,856 67,116 67,116 114,856
13 47,141 12,159 12,159 114,856 32,260 32,260 114,856 73,356 73,356 114,856
14 49,498 10,907 10,907 114,856 32,724 32,724 114,856 80,254 80,254 114,856
15 51,973 9,584 9,584 114,856 33,146 33,146 114,856 87,888 87,888 117,770
16 54,572 8,182 8,182 114,856 33,518 33,518 114,856 96,305 96,305 125,196
17 57,300 6,689 6,689 114,856 33,833 33,833 114,856 105,530 105,530 135,078
18 60,165 5,089 5,089 114,856 34,076 34,076 114,856 115,640 115,640 145,707
19 63,174 3,368 3,368 114,856 34,235 34,235 114,856 126,722 126,722 157,136
20 66,332 1,510 1,510 114,856 34,297 34,297 114,856 138,873 138,873 169,425
21 69,649 (*) (*) (*) 34,250 34,250 114,856 152,200 152,200 182,641
22 73,132 (*) (*) (*) 34,034 34,034 114,856 166,778 166,778 198,465
23 76,788 (*) (*) (*) 33,625 33,625 114,856 182,720 182,720 215,609
24 80,627 (*) (*) (*) 32,991 32,991 114,856 200,153 200,153 234,179
25 84,659 (*) (*) (*) 32,091 32,091 114,856 219,214 219,214 254,289
26 88,892 (*) (*) (*) 30,868 30,868 114,856 240,050 240,050 276,058
27 93,336 (*) (*) (*) 29,254 29,254 114,856 262,908 262,908 297,086
28 98,003 (*) (*) (*) 27,158 27,158 114,856 288,008 288,008 319,689
29 102,903 (*) (*) (*) 24,470 24,470 114,856 315,612 315,612 344,017
30 108,049 (*) (*) (*) 21,069 21,069 114,856 346,029 346,029 370,251
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
54
<PAGE> 58
$25,000 INITIAL PREMIUM: $114,856 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 26,250 24,010 21,885 114,856 25,465 23,340 114,856 26,920 24,795 114,856
2 27,563 22,932 20,807 114,856 25,837 23,712 114,856 28,914 26,789 114,856
3 28,941 21,839 19,839 114,856 26,189 24,189 114,856 31,070 29,070 114,856
4 30,388 20,726 18,726 114,856 26,515 24,515 114,856 33,402 31,402 114,856
5 31,907 19,589 17,714 114,856 26,813 24,938 114,856 35,927 34,052 114,856
6 33,502 18,421 16,671 114,856 27,075 25,325 114,856 38,663 36,913 114,856
7 35,178 17,214 15,714 114,856 27,293 25,793 114,856 41,626 40,126 114,856
8 36,936 15,959 14,709 114,856 27,457 26,207 114,856 44,836 43,586 114,856
9 38,783 14,642 13,642 114,856 27,555 26,555 114,856 48,317 47,317 114,856
10 40,722 13,254 13,254 114,856 27,577 27,577 114,856 52,095 52,095 114,856
11 42,758 11,820 11,820 114,856 27,592 27,592 114,856 56,370 56,370 114,856
12 44,896 10,287 10,287 114,856 27,510 27,510 114,856 61,045 61,045 114,856
13 47,141 8,645 8,645 114,856 27,318 27,318 114,856 66,169 66,169 114,856
14 49,498 6,877 6,877 114,856 26,999 26,999 114,856 71,799 71,799 114,856
15 51,973 4,962 4,962 114,856 26,531 26,531 114,856 78,001 78,001 114,856
16 54,572 2,876 2,876 114,856 25,887 25,887 114,856 84,854 84,854 114,856
17 57,300 592 592 114,856 25,041 25,041 114,856 92,441 92,441 118,325
18 60,165 (*) (*) (*) 23,949 23,949 114,856 100,752 100,752 126,948
19 63,174 (*) (*) (*) 22,565 22,565 114,856 109,801 109,801 136,153
20 66,332 (*) (*) (*) 20,838 20,838 114,856 119,657 119,657 145,981
21 69,649 (*) (*) (*) 18,711 18,711 114,856 130,397 130,397 156,477
22 73,132 (*) (*) (*) 16,118 16,118 114,856 142,065 142,065 169,057
23 76,788 (*) (*) (*) 12,984 12,984 114,856 154,740 154,740 182,593
24 80,627 (*) (*) (*) 9,213 9,213 114,856 168,506 168,506 197,152
25 84,659 (*) (*) (*) 4,678 4,678 114,856 183,456 183,456 212,810
26 88,892 (*) (*) (*) (*) (*) (*) 199,687 199,687 229,640
27 93,336 (*) (*) (*) (*) (*) (*) 217,419 217,419 245,684
28 98,003 (*) (*) (*) (*) (*) (*) 236,825 236,825 262,876
29 102,903 (*) (*) (*) (*) (*) (*) 258,116 258,116 281,347
30 108,049 (*) (*) (*) (*) (*) (*) 281,551 281,551 301,260
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
55
<PAGE> 59
$100,000 INITIAL PREMIUM: $306,283 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>
1 105,000 96,836 88,336 306,283 102,691 94,191 306,283 108,548 100,048 306,283
2 110,250 93,571 85,071 306,283 105,349 96,849 306,283 117,822 109,322 306,283
3 115,763 90,250 82,250 306,283 108,023 100,023 306,283 127,957 119,957 306,283
4 121,551 86,860 78,860 306,283 110,707 102,707 306,283 139,044 131,044 306,283
5 127,628 83,384 75,884 306,283 113,391 105,891 306,283 151,185 143,685 306,283
6 134,010 79,805 72,805 306,283 116,067 109,067 306,283 164,497 157,497 306,283
7 140,710 76,105 70,105 306,283 118,726 112,726 306,283 179,113 173,113 306,283
8 147,746 72,256 67,256 306,283 121,349 116,349 306,283 195,180 190,180 306,283
9 155,133 68,229 64,229 306,283 123,922 119,922 306,283 212,872 208,872 306,283
10 162,889 63,997 63,997 306,283 126,430 126,430 306,283 232,394 232,394 306,283
11 171,034 59,715 59,715 306,283 129,248 129,248 306,283 254,742 254,742 306,283
12 179,586 55,153 55,153 306,283 131,999 131,999 306,283 279,440 279,440 332,534
13 188,565 50,283 50,283 306,283 134,674 134,674 306,283 306,515 306,515 361,688
14 197,993 45,069 45,069 306,283 137,258 137,258 306,283 336,192 336,192 393,344
15 207,893 39,461 39,461 306,283 139,732 139,732 306,283 368,719 368,719 427,714
16 218,287 33,394 33,394 306,283 142,065 142,065 306,283 404,368 404,368 465,023
17 229,202 26,782 26,782 306,283 144,217 144,217 306,283 443,535 443,535 501,195
18 240,662 19,519 19,519 306,283 146,139 146,139 306,283 486,596 486,596 540,121
19 252,695 11,491 11,491 306,283 147,781 147,781 306,283 533,980 533,980 582,038
20 265,330 2,589 2,589 306,283 149,098 149,098 306,283 586,184 586,184 627,217
21 278,596 (*) (*) (*) 150,051 150,051 306,283 643,783 643,783 675,972
22 292,526 (*) (*) (*) 150,385 150,385 306,283 706,896 706,896 742,241
23 307,152 (*) (*) (*) 150,001 150,001 306,283 776,024 776,024 814,825
24 322,510 (*) (*) (*) 148,772 148,772 306,283 851,706 851,706 894,291
25 338,635 (*) (*) (*) 146,527 146,527 306,283 934,517 934,517 981,243
26 355,567 (*) (*) (*) 143,025 143,025 306,283 1,025,070 1,025,070 1,076,324
27 373,346 (*) (*) (*) 137,948 137,948 306,283 1,124,009 1,124,009 1,180,210
28 392,013 (*) (*) (*) 130,863 130,863 306,283 1,232,009 1,232,009 1,293,610
29 411,614 (*) (*) (*) 121,216 121,216 306,283 1,349,781 1,349,781 1,417,270
30 432,194 (*) (*) (*) 108,302 108,302 306,283 1,478,079 1,478,079 1,551,983
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
56
<PAGE> 60
$100,000 INITIAL PREMIUM: $306,283 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>
1 105,000 95,948 87,448 306,283 101,775 93,275 306,283 107,604 99,104 306,283
2 110,250 91,708 83,208 306,283 103,374 94,874 306,283 115,732 107,232 306,283
3 115,763 87,336 79,336 306,283 104,857 96,857 306,283 124,525 116,525 306,283
4 121,551 82,805 74,805 306,283 106,202 98,202 306,283 134,051 126,051 306,283
5 127,628 78,081 70,581 306,283 107,381 99,881 306,283 144,385 136,885 306,283
6 134,010 73,125 66,125 306,283 108,360 101,360 306,283 155,616 148,616 306,283
7 140,710 67,894 61,894 306,283 109,104 103,104 306,283 167,850 161,850 306,283
8 147,746 62,323 57,323 306,283 109,560 104,560 306,283 181,201 176,201 306,283
9 155,133 56,345 52,345 306,283 109,670 105,670 306,283 195,814 191,814 306,283
10 162,889 49,889 49,889 306,283 109,374 109,374 306,283 211,865 211,865 306,283
11 171,034 43,014 43,014 306,283 108,940 108,940 306,283 230,263 230,263 306,283
12 179,586 35,483 35,483 306,283 107,985 107,985 306,283 250,728 250,728 306,283
13 188,565 27,207 27,207 306,283 106,434 106,434 306,283 273,495 273,495 322,725
14 197,993 18,072 18,072 306,283 104,191 104,191 306,283 298,360 298,360 349,082
15 207,893 7,926 7,926 306,283 101,127 101,127 306,283 325,428 325,428 377,496
16 218,287 (*) (*) (*) 97,072 97,072 306,283 354,887 354,887 408,120
17 229,202 (*) (*) (*) 91,803 91,803 306,283 387,101 387,101 437,424
18 240,662 (*) (*) (*) 85,031 85,031 306,283 422,374 422,374 468,835
19 252,695 (*) (*) (*) 76,405 76,405 306,283 461,068 461,068 502,564
20 265,330 (*) (*) (*) 65,518 65,518 306,283 503,621 503,621 538,875
21 278,596 (*) (*) (*) 51,895 51,895 306,283 550,563 550,563 578,091
22 292,526 (*) (*) (*) 34,952 34,952 306,283 601,683 601,683 631,768
23 307,152 (*) (*) (*) 13,965 13,965 306,283 657,322 657,322 690,188
24 322,510 (*) (*) (*) (*) (*) (*) 717,842 717,842 753,734
25 338,635 (*) (*) (*) (*) (*) (*) 783,619 783,619 822,800
26 355,567 (*) (*) (*) (*) (*) (*) 855,039 855,039 897,791
27 373,346 (*) (*) (*) (*) (*) (*) 932,494 932,494 979,119
28 392,013 (*) (*) (*) (*) (*) (*) 1,016,372 1,016,372 1,067,191
29 411,614 (*) (*) (*) (*) (*) (*) 1,107,070 1,107,070 1,162,424
30 432,194 (*) (*) (*) (*) (*) (*) 1,204,998 1,204,998 1,265,248
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
57
<PAGE> 61
$100,000 INITIAL PREMIUM: $211,021 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>
1 105,000 96,508 88,008 211,021 102,374 93,874 211,021 108,241 99,741 211,021
2 110,250 92,854 84,354 211,021 104,682 96,182 211,021 117,213 108,713 211,021
3 115,763 89,070 81,070 211,021 106,972 98,972 211,021 127,070 119,070 211,021
4 121,551 85,137 77,137 211,021 109,240 101,240 211,021 137,933 129,933 211,021
5 127,628 81,027 73,527 211,021 111,476 103,976 211,021 149,940 142,440 211,021
6 134,010 76,704 69,704 211,021 113,668 106,668 211,021 163,251 156,251 211,021
7 140,710 72,123 66,123 211,021 115,796 109,796 211,021 178,060 172,060 211,021
8 147,746 67,225 62,225 211,021 117,840 112,840 211,021 194,591 189,591 215,996
9 155,133 61,951 57,951 211,021 119,777 115,777 211,021 212,875 208,875 232,034
10 162,889 56,238 56,238 211,021 121,591 121,591 211,021 232,962 232,962 249,269
11 171,034 50,190 50,190 211,021 123,647 123,647 211,021 255,820 255,820 268,611
12 179,586 43,354 43,354 211,021 125,474 125,474 211,021 280,866 280,866 294,909
13 188,565 35,600 35,600 211,021 127,041 127,041 211,021 308,299 308,299 323,714
14 197,993 26,767 26,767 211,021 128,308 128,308 211,021 338,333 338,333 355,249
15 207,893 16,637 16,637 211,021 129,219 129,219 211,021 371,196 371,196 389,756
16 218,287 4,918 4,918 211,021 129,691 129,691 211,021 407,131 407,131 427,488
17 229,202 (*) (*) (*) 129,613 129,613 211,021 446,394 446,394 468,714
18 240,662 (*) (*) (*) 128,837 128,837 211,021 489,252 489,252 513,715
19 252,695 (*) (*) (*) 127,175 127,175 211,021 535,989 535,989 562,788
20 265,330 (*) (*) (*) 124,397 124,397 211,021 586,902 586,902 616,247
21 278,596 (*) (*) (*) 120,215 120,215 211,021 642,311 642,311 674,426
22 292,526 (*) (*) (*) 114,104 114,104 211,021 702,504 702,504 737,629
23 307,152 (*) (*) (*) 105,486 105,486 211,021 767,818 767,818 806,209
24 322,510 (*) (*) (*) 93,550 93,550 211,021 838,603 838,603 880,533
25 338,635 (*) (*) (*) 77,123 77,123 211,021 915,212 915,212 960,973
26 355,567 (*) (*) (*) 54,481 54,481 211,021 997,997 997,997 1,047,897
27 373,346 (*) (*) (*) 23,024 23,024 211,021 1,089,398 1,089,398 1,132,973
28 392,013 (*) (*) (*) (*) (*) (*) 1,190,757 1,190,757 1,226,479
29 411,614 (*) (*) (*) (*) (*) (*) 1,303,713 1,303,713 1,329,788
30 432,194 (*) (*) (*) (*) (*) (*) 1,430,336 1,430,336 1,444,639
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
58
<PAGE> 62
$100,000 INITIAL PREMIUM: $211,021 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>
1 105,000 95,130 86,630 211,021 100,970 92,470 211,021 106,812 98,312 211,021
2 110,250 89,907 81,407 211,021 101,644 93,144 211,021 114,088 105,588 211,021
3 115,763 84,356 76,356 211,021 102,066 94,066 211,021 121,987 113,987 211,021
4 121,551 78,419 70,419 211,021 102,196 94,196 211,021 130,609 122,609 211,021
5 127,628 72,016 64,516 211,021 101,980 94,480 211,021 140,072 132,572 211,021
6 134,010 65,041 58,041 211,021 101,345 94,345 211,021 150,520 143,520 211,021
7 140,710 57,359 51,359 211,021 100,195 94,195 211,021 162,134 156,134 211,021
8 147,746 48,791 43,791 211,021 98,404 93,404 211,021 175,149 170,149 211,021
9 155,133 39,127 35,127 211,021 95,825 91,825 211,021 189,879 185,879 211,021
10 162,889 28,128 28,128 211,021 92,288 92,288 211,021 206,608 206,608 221,071
11 171,034 15,598 15,598 211,021 87,881 87,881 211,021 225,818 225,818 237,109
12 179,586 1,122 1,122 211,021 82,107 82,107 211,021 246,737 246,737 259,074
13 188,565 (*) (*) (*) 74,678 74,678 211,021 269,505 269,505 282,980
14 197,993 (*) (*) (*) 65,220 65,220 211,021 294,270 294,270 308,983
15 207,893 (*) (*) (*) 53,215 53,215 211,021 321,186 321,186 337,245
16 218,287 (*) (*) (*) 37,932 37,932 211,021 350,411 350,411 367,931
17 229,202 (*) (*) (*) 18,350 18,350 211,021 382,105 382,105 401,210
18 240,662 (*) (*) (*) (*) (*) (*) 416,427 416,427 437,249
19 252,695 (*) (*) (*) (*) (*) (*) 453,540 453,540 476,217
20 265,330 (*) (*) (*) (*) (*) (*) 493,610 493,610 518,290
21 278,596 (*) (*) (*) (*) (*) (*) 536,814 536,814 563,655
22 292,526 (*) (*) (*) (*) (*) (*) 583,336 583,336 612,502
23 307,152 (*) (*) (*) (*) (*) (*) 633,366 633,366 665,035
24 322,510 (*) (*) (*) (*) (*) (*) 687,104 687,104 721,459
25 338,635 (*) (*) (*) (*) (*) (*) 744,737 744,737 781,974
26 355,567 (*) (*) (*) (*) (*) (*) 806,444 806,444 846,766
27 373,346 (*) (*) (*) (*) (*) (*) 874,778 874,778 909,769
28 392,013 (*) (*) (*) (*) (*) (*) 950,870 950,870 979,396
29 411,614 (*) (*) (*) (*) (*) (*) 1,036,099 1,036,099 1,056,821
30 432,194 (*) (*) (*) (*) (*) (*) 1,132,229 1,132,229 1,143,552
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by nationwide life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
59
<PAGE> 63
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account-4:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account-4 as of December 31,
1998, and the related statement of operations and changes in contract owners'
equity for the period February 18, 1998 (commencement of operations) through
December 31, 1998. 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 audit.
We conducted our audit 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 audit provides 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-4 as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for the period February 18, 1998
(commencement of operations) through December 31, 1998, in conformity with
generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
<PAGE> 2
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Income & Growth (ACVPIncGr)
182,077 shares (cost $1,109,477) .......................................... $ 1,234,484
American Century VP - American Century VP International (ACVPInt)
325,182 shares (cost $2,318,120) .......................................... 2,477,888
American Century VP - American Century VP Value (ACVPValue)
93,159 shares (cost $598,683) ............................................. 626,960
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
44,142 shares (cost $1,263,578) ........................................... 1,371,933
Dreyfus Stock Index Fund (DryStkIx)
442,059 shares (cost $12,920,739) ......................................... 14,375,758
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
42,881 shares (cost $1,397,683) ........................................... 1,548,425
Fidelity VIP - Equity-Income Portfolio - Service Class (FidVIPEI)
227,239 shares (cost $5,320,426) .......................................... 5,769,608
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
79,605 shares (cost $3,087,212) ........................................... 3,567,896
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
306,210 shares (cost $3,487,179) .......................................... 3,524,474
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
53,655 shares (cost $1,006,403) ........................................... 1,074,716
Fidelity VIP-II - Contrafund Portfolio - Service Class (FidVIPCon)
194,290 shares (cost $4,096,142) .......................................... 4,744,555
Fidelity VIP-III - Growth Opportunities Portfolio - Service Class (FidVIPGrOp)
105,845 shares (cost $2,156,825) .......................................... 2,419,625
Morgan Stanley - Emerging Markets Debt Portfolio (VKMSEmMkt)
25,820 shares (cost $164,824) ............................................. 157,501
Nationwide SAT - Balanced Fund (NSATBal)
69,134 shares (cost $708,627) ............................................. 731,433
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
237,441 shares (cost $5,844,303) .......................................... 6,313,569
Nationwide SAT - Equity Income Fund (NSATEqInc)
21,275 shares (cost $229,007) ............................................. 244,028
Nationwide SAT - Global Equities Fund (NSATGlobEq)
42,042 shares (cost $455,810) ............................................. 493,998
Nationwide SAT - Government Bond Fund (NSATGvtBd)
401,958 shares (cost $4,783,321) .......................................... 4,698,885
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
96,723 shares (cost $963,155) ............................................. 971,097
Nationwide SAT - Money Market Fund (NSATMyMkt)
21,598,475 shares (cost $21,598,475) ...................................... 21,598,475
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
93,944 shares (cost $921,749) ............................................. 922,530
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
27,354 shares (cost $268,890) ............................................. 298,705
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
108,781 shares (cost $913,731) ............................................ 1,032,333
Nationwide SAT - Small Company Fund (NSATSmCo)
100,590 shares (cost $1,477,476) .......................................... 1,610,450
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
36,588 shares (cost $379,237) ............................................. 428,084
Nationwide SAT - Strategic Value Fund (NSATStrVal)
34,188 shares (cost $302,102) ............................................. 345,983
Nationwide SAT - Total Return Fund (NSATTotRe)
450,747 shares (cost $8,009,908) .......................................... 8,293,744
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
53,552 shares (cost $658,273) ............................................. 741,159
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
73,728 shares (cost $1,019,587) ........................................... 1,195,872
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
219,668 shares (cost $3,903,184) .......................................... 4,158,317
Oppenheimer VAF - Aggressive Growth Fund (OppAggGro)
25,508 shares (cost $988,141) ............................................. 1,143,545
Oppenheimer VAF - Growth Fund (OppGro)
55,781 shares (cost $1,790,387) ........................................... 2,045,484
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
79,472 shares (cost $1,547,267) ........................................... 1,627,592
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
40,617 shares (cost $270,845) ............................................. 289,192
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
16,765 shares (cost $156,341) ............................................. 154,239
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (VKMSRESec)
52,116 shares (cost $689,806) ............................................. 717,112
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
62,712 shares (cost $714,061) ............................................. 719,931
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
54,415 shares (cost $567,694) ............................................. 598,018
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
15,798 shares (cost $156,142) ............................................. 186,103
------------
Total investments ...................................................... 104,453,701
Accounts receivable ............................................................. 3,536,003
------------
Total assets ........................................................... 107,989,704
ACCOUNTS PAYABLE ................................................................... -
------------
CONTRACT OWNERS' EQUITY (NOTE 7) ................................................... $107,989,704
============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT - 4
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period February 18, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
Total ACVPIncGr ACVPInt ACVPValue
----- --------- ------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................... $ 795,996 5,125 355 169
Mortality and expense charges (note 3) ................. (7,523) (86) (173) (44)
-------------- --------- --------- -------
Net investment income ................................ 788,473 5,039 182 125
-------------- --------- --------- -------
Proceeds from mutual fund shares sold .................. 61,803,110 60,422 613,620 216,392
Cost of mutual fund shares sold ........................ (62,074,770) (58,667) (614,510) (220,562)
-------------- --------- --------- -------
Realized gain (loss) on investments .................. (271,660) 1,755 (890) (4,170)
Change in unrealized gain (loss) on investments ........ 6,208,890 125,007 159,768 28,277
-------------- --------- --------- -------
Net gain (loss) on investments ....................... 5,937,230 126,762 158,878 24,107
-------------- --------- --------- -------
Reinvested capital gains ............................... 597,466 - 3,644 1,997
-------------- --------- --------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 7,323,169 131,801 162,704 26,229
-------------- --------- --------- -------
Equity transactions:
Purchase payments received from
contract owners ...................................... 106,894,981 168,731 489,914 218,019
Transfers between funds ................................ - 959,762 1,905,042 409,201
Surrenders ............................................. (205,540) (64) - (20)
Death benefits - - - -
Policy loans (net of repayments) (note 5) .............. (1,093,563) - (2,833) (1,893)
Deductions for surrender charges (note 2d) ............. (2,405) (1) - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .................................... (4,765,148) (23,721) (73,254) (23,676)
Deductions for asset charges (note 3) .................. (161,790) (1,072) (2,800) (900)
-------------- --------- --------- -------
Net equity transactions ............................ 100,666,535 1,103,635 2,316,069 600,731
-------------- --------- --------- -------
Net change in contract owners' equity .................. 107,989,704 1,235,436 2,478,773 626,960
Contract owners' equity beginning of period ............ - - - -
-------------- --------- --------- -------
Contract owners' equity end of period .................. $ 107,989,704 1,235,436 2,478,773 626,960
============== ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
DrySRGro DryStkIx DryCapAp FidVIPEI
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................... 2,114 64,671 7,616 -
Mortality and expense charges (note 3) ................. (96) (1,001) (108) (402)
--------- ---------- --------- ---------
Net investment income ................................ 2,018 63,670 7,508 (402)
--------- ---------- --------- ---------
Proceeds from mutual fund shares sold .................. 292,403 2,855,607 191,690 1,186,510
Cost of mutual fund shares sold ........................ (279,293) (2,928,820) (192,584) (1,221,597)
--------- ---------- --------- ---------
Realized gain (loss) on investments .................. 13,110 (73,213) (894) (35,087)
Change in unrealized gain (loss) on investments ........ 108,355 1,455,019 150,742 449,182
--------- ---------- --------- ---------
Net gain (loss) on investments ....................... 121,465 1,381,806 149,848 414,095
--------- ---------- --------- ---------
Reinvested capital gains ............................... 47,900 12,311 - -
--------- ---------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 171,383 1,457,787 157,356 413,693
--------- ---------- --------- ---------
Equity transactions:
Purchase payments received from
contract owners ...................................... 544,259 3,047,695 381,182 1,622,388
Transfers between funds ................................ 721,262 10,358,645 1,070,054 3,964,871
Surrenders ............................................. (97) (430) (44) (401)
Death benefits ......................................... - - - -
Policy loans (net of repayments) (note 5) .............. (1,497) (9,416) (289) (6,242)
Deductions for surrender charges (note 2d) ............. (1) (5) (1) (5)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .................................... (61,633) (463,310) (58,099) (217,638)
Deductions for asset charges (note 3) .................. (1,748) (16,396) (1,734) (7,304)
--------- ---------- --------- ---------
Net equity transactions ............................ 1,200,545 12,916,783 1,391,069 5,355,669
--------- ---------- --------- ---------
Net change in contract owners' equity .................. 1,371,928 14,374,570 1,548,425 5,769,362
Contract owners' equity beginning of period ............ - - - -
--------- ---------- --------- ---------
Contract owners' equity end of period .................. 1,371,928 14,374,570 1,548,425 5,769,362
========= ========== ========= =========
</TABLE>
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT - 4
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period February 18, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI FidVIPOv FidVIPCon
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ - - - -
Mortality and expense charges (note 3) .................. (249) (245) (75) (330)
-------------- --------- --------- ---------
Net investment income ................................. (249) (245) (75) (330)
-------------- --------- --------- ---------
Proceeds from mutual fund shares sold ................... 759,197 848,212 528,529 974,276
Cost of mutual fund shares sold ......................... (750,697) (901,996) (553,402) (947,452)
-------------- --------- --------- ---------
Realized gain (loss) on investments ................... 8,500 (53,784) (24,873) 26,824
Change in unrealized gain (loss) on investments ......... 480,684 37,295 68,313 648,413
-------------- --------- --------- ---------
Net gain (loss) on investments ........................ 489,184 (16,489) 43,440 675,237
-------------- --------- --------- ---------
Reinvested capital gains ................................ - - - -
-------------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 488,935 (16,734) 43,365 674,907
-------------- --------- --------- ---------
Equity transactions:
Purchase payments received from
contract owners ....................................... 742,777 685,592 233,314 1,117,315
Transfers between funds ................................. 2,489,085 2,964,332 835,812 3,133,469
Surrenders .............................................. (1,445) - (16) (165)
Death benefits .......................................... - - - -
Policy loans (net of repayments) (note 5) ............... (5,968) (1,581) (1,574) (2,052)
Deductions for surrender charges (note 2d) .............. (17) - - (2)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (140,842) (103,400) (34,849) (173,162)
Deductions for asset charges (note 3) ................... (4,630) (3,733) (1,337) (5,764)
-------------- --------- --------- ---------
Net equity transactions ............................. 3,078,960 3,541,210 1,031,350 4,069,639
-------------- --------- --------- ---------
Net change in contract owners' equity ................... 3,567,895 3,524,476 1,074,715 4,744,546
Contract owners' equity beginning of period ............. - - - -
-------------- --------- --------- ---------
Contract owners' equity end of period ................... $ 3,567,895 3,524,476 1,074,715 4,744,546
============== ========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
FidVIPGrOp VKMSEmMkt NSATBal NSATCapAp
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... - 18,594 9,854 14,834
Mortality and expense charges (note 3) .................. (168) (11) (51) (440)
--------- ------- ------- ---------
Net investment income ................................. (168) 18,583 9,803 14,394
--------- ------- ------- ---------
Proceeds from mutual fund shares sold ................... 309,151 268,442 316,297 703,904
Cost of mutual fund shares sold ......................... (296,203) (301,322) (315,924) (686,965)
--------- ------- ------- ---------
Realized gain (loss) on investments ................... 12,948 (32,880) 373 16,939
Change in unrealized gain (loss) on investments ......... 262,800 (7,323) 22,806 469,266
--------- ------- ------- ---------
Net gain (loss) on investments ........................ 275,748 (40,203) 23,179 486,205
--------- ------- ------- ---------
Reinvested capital gains ................................ - - 2,184 174,093
--------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 275,580 (21,620) 35,166 674,692
--------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners ....................................... 584,874 41,423 87,905 1,531,297
Transfers between funds ................................. 1,646,479 144,407 640,480 4,379,971
Surrenders .............................................. (36) - - (118)
Death benefits .......................................... - - - -
Policy loans (net of repayments) (note 5) ............... 29 - (2,200) 731
Deductions for surrender charges (note 2d) .............. - - - (1)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (84,140) (6,534) (28,998) (265,208)
Deductions for asset charges (note 3) ................... (3,172) (166) (914) (7,790)
--------- ------- ------- ---------
Net equity transactions ............................. 2,144,034 179,130 696,273 5,638,882
--------- ------- ------- ---------
Net change in contract owners' equity ................... 2,419,614 157,510 731,439 6,313,574
Contract owners' equity beginning of period ............. - - - -
--------- ------- ------- ---------
Contract owners' equity end of period ................... 2,419,614 157,510 731,439 6,313,574
========= ======= ======= =========
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VLI SEPARATE ACCOUNT - 4
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period February 18, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
NSATEqInc NSATGlobEq NSATGvtBd NSATHIncBd
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................... $ 896 1,950 83,382 22,707
Mortality and expense charges (note 3) ................. (17) (34) (327) (68)
-------------- ------- --------- -------
Net investment income ................................ 879 1,916 83,055 22,639
-------------- ------- --------- -------
Proceeds from mutual fund shares sold .................. 18,085 57,978 1,043,507 206,929
Cost of mutual fund shares sold ........................ (17,928) (57,852) (1,033,771) (213,860)
-------------- ------- --------- -------
Realized gain (loss) on investments .................. 157 126 9,736 (6,931)
Change in unrealized gain (loss) on investments ........ 15,021 38,188 (84,436) 7,941
-------------- ------- --------- -------
Net gain (loss) on investments ....................... 15,178 38,314 (74,700) 1,010
-------------- ------- --------- -------
Reinvested capital gains ............................... 2,636 3,213 22,403 -
-------------- ------- --------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 18,693 43,443 30,758 23,649
-------------- ------- --------- -------
Equity transactions:
Purchase payments received from
contract owners .................................... 28,736 96,340 480,508 116,422
Transfers between funds .............................. 202,838 374,760 4,241,272 850,224
Surrenders ........................................... - (20) (58) -
Death benefits ....................................... - - - -
Policy loans (net of repayments) (note 5) ............ - (199) (822) -
Deductions for surrender charges (note 2d) ........... - - (1) -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .................................. (5,984) (19,705) (51,451) (18,455)
Deductions for asset charges (note 3) ................ (269) (621) (2,298) (823)
-------------- ------- --------- -------
Net equity transactions ............................ 225,321 450,555 4,667,150 947,368
-------------- ------- --------- -------
Net change in contract owners' equity .................. 244,014 493,998 4,697,908 971,017
Contract owners' equity beginning of period ............ - - - -
-------------- ------- --------- -------
Contract owners' equity end of period .................. $ 244,014 493,998 4,697,908 971,017
============== ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
NSATMyMkt NSATMSecBd NSATMidCap NSATSmCapV
--------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................... 506,347 20,456 782 -
Mortality and expense charges (note 3) ................. (1,751) (64) (21) (72)
---------- ------- ------- ---------
Net investment income ................................ 504,596 20,392 761 (72)
---------- ------- ------- ---------
Proceeds from mutual fund shares sold .................. 44,230,768 678,560 48,915 119,432
Cost of mutual fund shares sold ........................ (44,230,768) (682,489) (51,817) (127,976)
---------- ------- ------- ---------
Realized gain (loss) on investments .................. - (3,929) (2,902) (8,544)
Change in unrealized gain (loss) on investments ........ - 781 29,815 118,603
---------- ------- ------- ---------
Net gain (loss) on investments ....................... - (3,148) 26,913 110,059
---------- ------- ------- ---------
Reinvested capital gains ............................... - 691 - -
---------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 504,596 17,935 27,674 109,987
---------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners ...................................... 88,272,542 238,773 38,598 186,610
Transfers between funds ................................ (60,507,727) 687,922 239,349 774,453
Surrenders ............................................. (201,196) - - -
Death benefits ......................................... - - - -
Policy loans (net of repayments) (note 5) .............. (1,000,116) (427) - (2,782)
Deductions for surrender charges (note 2d) ............. (2,354) - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .................................... (1,866,745) (20,588) (6,590) (34,791)
Deductions for asset charges (note 3) .................. (63,919) (1,082) (314) (1,140)
---------- ------- ------- ---------
Net equity transactions ............................ 24,630,485 904,598 271,043 922,350
---------- ------- ------- ---------
Net change in contract owners' equity .................. 25,135,081 922,533 298,717 1,032,337
Contract owners' equity beginning of period ............ - - - -
---------- ------- ------- ---------
Contract owners' equity end of period .................. 25,135,081 922,533 298,717 1,032,337
========== ======= ======= =========
</TABLE>
<PAGE> 7
NATIONWIDE VLI SEPARATE ACCOUNT - 4
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period February 18, 1998 (commencement of operations)
Through December 31, 1998
<TABLE>
<CAPTION>
NSATSmCo NSATStrGro NSATStrVal NSATTotRe
-------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................. $ - - 1,052 27,487
Mortality and expense charges (note 3) (112) (30) (24) (578)
-------------- ------- ------- ---------
Net investment income ............................... (112) (30) 1,028 26,909
-------------- ------- ------- ---------
Proceeds from mutual fund shares sold ................. 303,745 150,535 81,326 1,201,208
Cost of mutual fund shares sold ....................... (310,124) (150,564) (89,165) (1,222,228)
-------------- ------- ------- ---------
Realized gain (loss) on investments ................. (6,379) (29) (7,839) (21,020)
Change in unrealized gain (loss) on investments ....... 132,974 48,847 43,881 283,836
-------------- ------- ------- ---------
Net gain (loss) on investments ...................... 126,595 48,818 36,042 262,816
-------------- ------- ------- ---------
Reinvested capital gains .............................. - - - 321,440
-------------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 126,483 48,788 37,070 611,165
-------------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners ..................................... 360,233 106,807 26,097 2,620,309
Transfers between funds ............................... 1,192,844 294,315 290,790 5,463,668
Surrenders ............................................ (43) - - (81)
Death benefits ........................................ - - - -
Policy loans (net of repayments) (note 5) ............. (2,442) (514) 368 (4,594)
Deductions for surrender charges (note 2d) ............ (1) - - (1)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ................................... (64,333) (20,594) (7,966) (385,652)
Deductions for asset charges (note 3) ................. (2,292) (715) (385) (10,992)
-------------- ------- ------- ---------
Net equity transactions ........................... 1,483,966 379,299 308,904 7,682,657
-------------- ------- ------- ---------
Net change in contract owners' equity ................. 1,610,449 428,087 345,974 8,293,822
Contract owners' equity beginning of period ........... - - - -
-------------- ------- ------- ---------
Contract owners' equity end of period ................. $ 1,610,449 428,087 345,974 8,293,822
============== ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
NBAMTGuard NBAMTMCGr NBAMTPart OppAggGro
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................. - - 114 26
Mortality and expense charges (note 3) ................ (83) (52) (290) (80)
--------- ------- --------- ---------
Net investment income ............................... (83) (52) (176) (54)
--------- ------- --------- ---------
Proceeds from mutual fund shares sold ................. 117,578 140,913 862,257 120,154
Cost of mutual fund shares sold ....................... (123,077) (137,009) (875,740) (118,908)
--------- ------- --------- ---------
Realized gain (loss) on investments ................. (5,499) 3,904 (13,483) 1,246
Change in unrealized gain (loss) on investments ....... 82,886 176,285 255,133 155,404
--------- ------- --------- ---------
Net gain (loss) on investments ...................... 77,387 180,189 241,650 156,650
--------- ------- --------- ---------
Reinvested capital gains .............................. - - 3,599 270
--------- ------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ................ 77,304 180,137 245,073 156,866
--------- ------- --------- ---------
Equity transactions:
Purchase payments received from
contract owners ..................................... 246,176 57,715 831,946 298,181
Transfers between funds ............................... 891,240 560,630 3,231,525 753,401
Surrenders ............................................ (2) (20) (16) (318)
Death benefits ........................................ - - - -
Policy loans (net of repayments) (note 5) ............. (318) (140) (174) (2,146)
Deductions for surrender charges (note 2d) ............ - - - (4)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ................................... (17,719) (55,646) (144,625) (60,958)
Deductions for asset charges (note 3) ................. (807) (1,530) (5,414) (1,492)
--------- ------- --------- ---------
Net equity transactions ........................... 1,118,570 561,009 3,913,242 986,664
--------- ------- --------- ---------
Net change in contract owners' equity ................. 1,195,874 741,146 4,158,315 1,143,530
Contract owners' equity beginning of period ........... - - - -
--------- ------- --------- ---------
Contract owners' equity end of period ................. 1,195,874 741,146 4,158,315 1,143,530
========= ======= ========= =========
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VLI SEPARATE ACCOUNT - 4
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period February 18, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
OppGro OppGrInc VEWrldEMkt VEWrldHAs
------ -------- ---------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ 8 29 - -
Mortality and expense charges (note 3) .................. (142) (113) (20) (11)
-------------- --------- ------- -------
Net investment income ................................. (134) (84) (20) (11)
-------------- --------- ------- -------
Proceeds from mutual fund shares sold ................... 412,555 698,919 70,482 46,572
Cost of mutual fund shares sold ......................... (391,820) (718,580) (84,625) (49,623)
-------------- --------- ------- -------
Realized gain (loss) on investments ................... 20,735 (19,661) (14,143) (3,051)
Change in unrealized gain (loss) on investments ......... 255,097 80,325 18,347 (2,102)
-------------- --------- ------- -------
Net gain (loss) on investments ........................ 275,832 60,664 4,204 (5,153)
-------------- --------- ------- -------
Reinvested capital gains ................................ 101 645 - -
-------------- --------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 275,799 61,225 4,184 (5,164)
-------------- --------- ------- -------
Equity transactions:
Purchase payments received from
contract owners ....................................... 522,163 284,513 90,144 23,363
Transfers between funds ................................. 1,352,464 1,343,627 207,921 144,721
Surrenders .............................................. (369) (418) - -
Death benefits .......................................... - - - -
Policy loans (net of repayments) (note 5) ............... (10,091) (16,228) 410 235
Deductions for surrender charges (note 2d) .............. (4) (5) - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (91,465) (43,383) (13,062) (8,707)
Deductions for asset charges (note 3) ................... (3,006) (1,749) (402) (203)
-------------- --------- ------- -------
Net equity transactions ............................. 1,769,692 1,566,357 285,011 159,409
-------------- --------- ------- -------
Net change in contract owners' equity ................... 2,045,491 1,627,582 289,195 154,245
Contract owners' equity beginning of period ............. - - - -
-------------- --------- ------- -------
Contract owners' equity end of period ................... $ 2,045,491 1,627,582 289,195 154,245
============== ========= ======= =======
</TABLE>
<TABLE>
<CAPTION>
VKMSRESec WPGrInc WPIntEq WPPVenCap
--------- ------- ------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... 34 4,521 2,873 -
Mortality and expense charges (note 3) .................. (50) (50) (42) (13)
------- ------- ------- -------
Net investment income ................................. (16) 4,471 2,831 (13)
------- ------- ------- -------
Proceeds from mutual fund shares sold ................... 357,742 345,457 277,515 87,326
Cost of mutual fund shares sold ......................... (388,797) (337,050) (301,573) (89,432)
------- ------- ------- -------
Realized gain (loss) on investments ................... (31,055) 8,407 (24,058) (2,106)
Change in unrealized gain (loss) on investments ......... 27,306 5,870 30,323 29,961
------- ------- ------- -------
Net gain (loss) on investments ........................ (3,749) 14,277 6,265 27,855
------- ------- ------- -------
Reinvested capital gains ................................ 339 - - -
------- ------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations .................. (3,426) 18,748 9,096 27,842
------- ------- ------- -------
Equity transactions:
Purchase payments received from
contract owners ....................................... 233,023 76,711 114,374 48,012
Transfers between funds ................................. 517,845 655,643 495,343 118,060
Surrenders .............................................. - - - (163)
Death benefits .......................................... - - - -
Policy loans (net of repayments) (note 5) ............... (834) (17,477) (891) 404
Deductions for surrender charges (note 2d) .............. - - - (2)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (28,277) (13,090) (19,101) (7,797)
Deductions for asset charges (note 3) ................... (1,214) (607) (798) (258)
------- ------- ------- -------
Net equity transactions ............................. 720,543 701,180 588,927 158,256
------- ------- ------- -------
Net change in contract owners' equity ................... 717,117 719,928 598,023 186,098
Contract owners' equity beginning of period ............. - - - -
------- ------- ------- -------
Contract owners' equity end of period 717,117 719,928 598,023 186,098
........................................................ ======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 9
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account-4 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on December 3, 1997. The Account has
been registered as a unit investment trust under the Investment Company
Act of 1940.
The Company offers Flexible Premium Variable Life Insurance Policies
through the Account.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees are offered for purchase.
See note 2 for a discussion of policy charges, and note 3 for asset
charges.
Contract owners may invest in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio - Service Class
(FidVIPEI)
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
Portfolio of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio - Service Class
(FidVIPCon)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio - Service
Class (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc.
(Morgan Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (VKMSEmMkt)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Balanced Fund (NSATBal)
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Equity Income Fund (NSATEqInc)
Nationwide SAT - Global Equity Fund (NSATGlobEq)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
<PAGE> 10
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Aggressive Growth Fund (OppAggGro)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen American Capital Life Investment
Trust (Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (VKMSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
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 contract expenses (see note 2). 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.
(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. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on 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 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.
<PAGE> 11
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(2) POLICY CHARGES
(a) Deductions from Premium
On flexible premium life insurance contracts, the Company deducts a
charge for state premium taxes not to exceed 2.5% of all premiums
received to cover the payment of these premium taxes. Additionally, the
Company deducts a front-end sales load of up to 3.5% from each premium
payment received. 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.
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 flexible premium contracts, the Company currently deducts a monthly
administrative charge of $10 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.
The above charges are assessed against each contract by liquidating
units.
(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 amount of the charge is based upon a specified
percentage of the initial surrender charge which varies by issue age,
sex and rate class. For flexible premium contracts, the charge is 100%
of the initial surrender charge in the first year, declining to 30% of
the initial surrender charge in the eighth year.
No surrender charge is assessed on any contract surrendered after the
eighth 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. No charges were deducted from the initial
funding, or from earnings thereon.
(3) ASSET CHARGES
For America's FUTURE Life Series, the Company deducts a charge equal to an
annual effective rate multiplied by the Cash Value attributable to the
Variable Account. The annual effective rate is 0.60% for the first $25,000
of Cash Value attributable to the Variable Account, 0.30% for the next
$225,000 of Cash Value attributable to the Variable Account and 0.10% for
all Cash Value attributable to the Variable Account in excess of $250,000.
This charge is assessed monthly against each contract by liquidating units.
For Corporate Variable Universal Life Series, the Company deducts on a
daily basis from the assets of the Variable Account, a charge to provide
for mortality and expense risks. This charge is guaranteed not to exceed an
annual effective rate of 0.75% of the daily net assets of the Variable
Account. On a current basis this rate will be 0.40% during the first
through fourth Policy Years, 0.25% during the fifth through twentieth
Policy Years, and 0.10% thereafter. This charge is assessed through the
daily unit value calculation.
<PAGE> 12
(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. There were no death benefits paid in
the current year.
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow 90% of a policy's cash
surrender value. Interest is charged on the outstanding loan and is due and
payable in advance on the policy anniversary.
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. Interest credited is paid by the
Company's general account to the Account. 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> 13
(7) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1998.
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
--------- ----------- -------
<S> <C> <C> <C> <C>
The BEST of AMERICA(R)
America's FUTURE Life Series(SM):
American Century VP - American
Century VP Income & Growth 97,382 $ 12.686493 $ 1,235,436 27%
American Century VP - American
Century VP International 206,063 11.875895 2,447,183 19%
American Century VP - American
Century VP Value 59,424 10.481205 622,835 5%
The Dreyfus Socially Responsible
Growth Fund, Inc. 105,696 12.938078 1,367,503 29%
Dreyfus Stock Index Fund 1,025,141 12.821142 13,143,478 28%
Dreyfus VIF -
Capital Appreciation Portfolio 110,355 13.021619 1,437,001 30%
Fidelity VIP - Equity-Income Portfolio -
Service Class 511,915 11.154137 5,709,970 12%
Fidelity VIP - Growth Portfolio -
Service Class 255,829 13.937692 3,565,666 39%
Fidelity VIP - High Income Portfolio -
Service Class 368,689 9.557602 3,523,783 (4)%
Fidelity VIP - Overseas Portfolio -
Service Class 92,817 11.263759 1,045,468 13%
Fidelity VIP-II - Contrafund Portfolio -
Service Class 362,774 12.993755 4,713,796 30%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class 193,229 12.450522 2,405,802 25%
Morgan Stanley -
Emerging Markets Debt Portfolio 21,992 7.162164 157,510 (28)%
Nationwide SAT - Balanced Fund 67,360 10.806799 727,946 8%
Nationwide SAT -
Capital Appreciation Fund 485,064 12.996420 6,304,095 30%
Nationwide SAT - Equity Income Fund 21,000 11.513398 241,781 15%
Nationwide SAT - Global Equity Fund 41,464 11.913908 493,998 19%
Nationwide SAT - Government Bond Fund 166,631 10.890820 1,814,748 9%
Nationwide SAT - High Income Bond Fund 79,031 10.579676 836,122 6%
Nationwide SAT - Money Market Fund 2,000,515 10.527225 21,059,872 5%
Nationwide SAT - Multi Sector Bond Fund 74,773 10.260092 767,178 3%
Nationwide SAT - Select Advisers Mid Cap Fund 26,958 11.080816 298,717 11%
Nationwide SAT - Small Cap Value Fund 106,497 9.693575 1,032,337 (3)%
Nationwide SAT - Small Company Fund 159,205 10.100944 1,608,121 1%
Nationwide SAT - Strategic Growth Fund 36,919 11.459357 423,068 15%
</TABLE>
(Continued)
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT - Strategic Value Fund 34,463 10.038994 345,974 0%
Nationwide SAT - Total Return Fund 702,365 11.807411 8,293,112 18%
Neuberger & Berman AMT -
Guardian Portfolio 55,695 13.166703 733,320 32%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio 85,802 13.928381 1,195,083 39%
Neuberger & Berman AMT -
Partners Portfolio 375,069 10.420882 3,908,550 4%
Oppenheimer VAF -
Aggressive Growth Fund 100,709 11.236019 1,131,568 12%
Oppenheimer VAF - Growth Fund 164,300 12.399968 2,037,315 24%
Oppenheimer VAF -
Growth & Income Fund 139,668 10.470163 1,462,347 5%
Van Eck WIT -
Worldwide Emerging Markets Fund 43,904 6.586990 289,195 (34)%
Van Eck WIT -
Worldwide Hard Assets Fund 22,344 6.903203 154,245 (31)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio 81,141 8.837916 717,117 (12)%
Warburg Pincus Trust -
Growth & Income Portfolio 49,891 11.212895 559,423 12%
Warburg Pincus Trust -
International Equity Portfolio 56,767 10.534701 598,023 5%
Warburg Pincus Trust -
Post Venture Capital Portfolio 16,634 10.651002 177,169 7%
The BEST of AMERICA(R)
Corporate Variable Universal Life Series(SM):
American Century VP - American
Century VP International 3,234 9.768200 31,590 (2)%
American Century VP - American
Century VP Value 440 9.374321 4,125 (6)%
The Dreyfus Socially Responsible
Growth Fund, Inc. 397 11.144998 4,425 11%
Dreyfus Stock Index Fund 111,613 11.030001 1,231,092 10%
Dreyfus VIF -
Capital Appreciation Portfolio 10,106 11.025485 111,424 10%
Fidelity VIP - Equity-Income Portfolio -
Service Class 5,995 9.906965 59,392 (1)%
Fidelity VIP - Growth Portfolio -
Service Class 185 12.048634 2,229 20%
Fidelity VIP - High Income Portfolio -
Service Class 77 9.003329 693 (10)%
Fidelity VIP - Overseas Portfolio -
Service Class 3,076 9.508092 29,247 (5)%
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fidelity VIP-II - Contrafund Portfolio -
Service Class 2,712 11.338370 30,750 13%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class 1,228 11.247664 13,812 12%
Nationwide SAT - Balanced Fund 349 10.009481 3,493 0%
Nationwide SAT -
Capital Appreciation Fund 847 11.191056 9,479 12%
Nationwide SAT - Equity Income Fund 211 10.581467 2,233 6%
Nationwide SAT - Government Bond Fund 270,361 10.664112 2,883,160 7%
Nationwide SAT - High Income Bond Fund 13,423 10.049520 134,895 0%
Nationwide SAT - Money Market Fund 394,891 10.319833 4,075,209 3%
Nationwide SAT - Multi Sector Bond Fund 15,549 9.991296 155,355 0%
Nationwide SAT - Small Company Fund 257 9.056852 2,328 (9)%
Nationwide SAT - Strategic Growth Fund 477 10.521882 5,019 5%
Nationwide SAT - Total Return Fund 70 10.144232 710 1%
Neuberger & Berman AMT -
Guardian Portfolio 838 9.338993 7,826 (7)%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio 70 11.296584 791 13%
Neuberger & Berman AMT -
Partners Portfolio 26,750 9.337008 249,765 (7)%
Oppenheimer VAF -
Aggressive Growth Fund 1,235 9.685930 11,962 (3)%
Oppenheimer VAF - Growth Fund 767 10.659314 8,176 7%
Oppenheimer VAF -
Growth & Income Fund 18,485 8.938847 165,235 (11)%
Warburg Pincus Trust -
Growth & Income Portfolio 16,145 9.941469 160,505 (1)%
Warburg Pincus Trust -
Post Venture Capital Portfolio 985 9.065227 8,929 (9)%
======= ========= -------------
$ 107,989,704
=============
</TABLE>
* This investment option was not being utilized for the entire period.
Accordingly, the period return was computed for such period as the investment
option was utilized and does not include contract charges satisfied by
surrendering units.
<PAGE> 64
<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> 65
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 96 pages.
Representations and Undertakings.
Independent Auditors' Consent.
Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C>
1. Power of Attorney dated April 1, 1999 Attached hereto.
2. Resolution of the Depositor's Board of Directors authorizing the Included with the Registration Statement on Form
establishment of the Registrant, adopted. N-8B-2 for the Nationwide VLI Separate Account,
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,
and hereby incorporated herein by reference.
4. Form of Security Included with Post-Effective Amendment No. 8 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,
and hereby incorporated herein by reference.
6. Application form of Security Included with Post-Effective Amendment No. 8 and
hereby incorporated herein by reference.
7. Opinion of Counsel Included with Post-Effective Amendment No. 8 and
hereby incorporated herein by reference.
</TABLE>
<PAGE> 66
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)(I)(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 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> 67
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the 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 28, 1999
<PAGE> 68
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 28th 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- Office of 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 28th 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
- -------------------------------------------------
Joseph J. Gasper President/Chief
Operating Office and Director
DIMON R. McFERSON Chairman and Chief Executive Officer-
- ------------------------------------------------- and Director
Dimon R. McFerson Chairman of the Board and Director
DAVID O. MILLER
- -------------------------------------------------
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
Attorney-in-Fact
ARDEN L. SHISLER Director
- -------------------------------------------------
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
