<PAGE> 1
NATIONWIDE(R) VLI
SEPARATE ACCOUNT
SEMI-ANNUAL REPORT
JUNE 30, 1999
- --------------------------------------------------------------------------------
INVESTMENT/LIFE(R)
VAN KAMPEN/
NATIONWIDE LIFE INSURANCE COMPANY
VLO-185-AB (6/99)
<PAGE> 2
[LOGO]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[PICTURE]
PRESIDENT'S MESSAGE
On behalf of Nationwide Life Insurance Company, we are pleased to present the
1999 semi-annual report of the Nationwide VLI Separate Account.
Equity investments performed well during the first half of 1999 with the major
market indices showing double-digit gains. Fixed income investments did not fare
as well during this period in the face of the Federal Reserve's inflation
cautiousness. The Fed is mindful of the resilient U.S. economy and the
increasingly tight labor pool that portends future wage inflation. Accordingly,
we have seen a ratcheting-up of short-term interest rates to dampen the momentum
of the current expansion. How aggressively the Fed may react to the perceived
inflation threat only adds uncertainty to the already jittery equity markets.
Over the long term, however, a slower but sustainable rate of growth, with low
inflation, provides a favorable environment for further advances in financial
assets.
At mid-year, we are pleased to report that all the mission-critical systems used
to service our variable annuity and variable life business have been internally
inventoried, assessed and tested as being Year 2000 compliant. We are currently
contacting our critical business partners to determine if they will be Year 2000
compliant. Contingency plans are being developed and are to be completed by the
end of the third quarter. All these steps are being taken to assure that
Nationwide Financial will be able to continue to serve your financial needs into
the Year 2000 and beyond.
Thank you for selecting Nationwide Financial to help you achieve your financial
planning and retirement savings goals. You have our commitment to provide the
consistent, high quality service you expect and deserve.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
August 19, 1999
2
<PAGE> 3
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
June 30, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in Van Kampen Life Investment Trust,
at market value:
Asset Allocation Fund
2,294,092 shares (cost $26,416,556) ................................................... $ 27,001,458
Domestic Income Fund
181,826 shares (cost $1,507,916) ...................................................... 1,447,339
Emerging Growth Fund
129,394 shares (cost $2,820,583) ...................................................... 3,569,983
Enterprise Fund
1,713,926 shares (cost $28,034,758) ................................................... 37,929,176
Global Equity Fund
81,921 shares (cost $1,026,436) ....................................................... 1,204,234
Government Fund
4,760,499 shares (cost $42,290,630) ................................................... 41,987,598
Money Market Fund
7,819,097 shares (cost $7,819,097) .................................................... 7,819,097
Morgan Stanley Real Estate Securities Portfolio
28,582 shares (cost $411,579) ......................................................... 396,999
-----------
Total investments .................................................................. 121,355,884
Accounts receivable ...................................................................... 115,665
-----------
Total assets ....................................................................... 121,471,549
Accounts payable .............................................................................. --
-----------
Contract owners' equity ....................................................................... $ 121,471,549
===========
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
Period
Contract owners' equity represented by: Units Unit Value Return(*)
---------- ---------- ---------
<S> <C> <C> <C> <C>
Single Premium contracts issued prior to April 16, 1990 (policy years 1
through 10):
Emerging Growth Fund ....................................... 61 $ 26.573717 $ 1,621 21%
Government Fund ............................................ 181 21.551318 3,901 (4)%
Single Premium contracts issued prior to April 16, 1990 (policy years 11 and
thereafter):
Asset Allocation Fund ...................................... 772,441 34.441262 26,603,843 1%
Domestic Income Fund ....................................... 66,865 20.923928 1,399,078 (3)%
Emerging Growth Fund ....................................... 132,154 26.954697 3,562,171 22%
Enterprise Fund ............................................ 786,912 47.989789 37,763,741 6%
Global Equity Fund ......................................... 64,883 18.479556 1,199,009 11%
Government Fund ............................................ 1,919,195 21.861809 41,957,072 (4)%
Money Market Fund .......................................... 427,828 18.211743 7,791,494 2%
Morgan Stanley Real Estate
Securities Portfolio .................................... 22,827 17.321079 395,388 8%
Single Premium contracts issued on or after April 16, 1990:
Asset Allocation Fund ...................................... 9,269 28.924679 268,103 1%
Domestic Income Fund ....................................... 2,381 20.216396 48,135 (3)%
Emerging Growth Fund ....................................... 228 26.205338 5,975 21%
Enterprise Fund ............................................ 2,732 44.156405 120,635 6%
Global Equity Fund ......................................... 284 17.965849 5,102 11%
Government Fund ............................................ 1,463 16.143388 23,618 (4)%
Money Market Fund .......................................... 2,055 13.163438 27,051 2%
Morgan Stanley Real Estate
Securities Portfolio .................................... 93 16.839423 1,566 8%
Multiple Payment and
Flexible Premium contracts:
Asset Allocation Fund ...................................... 4,838 26.384954 127,650 1%
Enterprise Fund ............................................ 4,340 38.340163 166,396 6%
========= ========= -----------
$121,471,549
===========
</TABLE>
(*) The period return does not include contract charges satisfied by
surrendering units.
See accompanying notes to financial statements.
4
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Six Month Periods Ended June 30,1999,1998 and 1997
(UNAUDITED)
Total Asset Allocation Fund
------------------------------------------ --------------------------------------
1999 1998 1997 1999 1998 1997
------------ ----------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................... $ 3,454,721 715,078 1,786,969 935,397 28,407 28,696
Mortality and expense charges (note 3) .... (299,305) (325,514) (254,157) (68,217) (73,528) (64,222)
------------ ----------- ----------- ---------- ---------- ----------
Net investment activity ................. 3,155,414 389,564 1,532,812 867,180 (45,121) (35,526)
------------ ----------- ----------- ---------- ---------- ----------
Proceeds from mutual fund shares sold ..... 11,822,267 15,248,208 16,577,761 2,594,934 1,635,617 2,149,403
Cost of mutual fund shares sold ........... (10,391,104) (13,621,860) (15,653,071) (2,502,817) (1,501,272) (2,019,385)
------------ ----------- ----------- ---------- ---------- ----------
Realized gain (loss) on investments ..... 1,431,163 1,626,348 924,690 92,117 134,345 130,018
Change in unrealized gain (loss)
on investments .......................... (8,122,354) 7,052,946 5,132,330 (3,408,234) 1,303,810 1,212,462
------------ ----------- ----------- ---------- ---------- ----------
Net gain (loss) on investments .......... (6,691,191) 8,679,294 6,057,020 (3,316,117) 1,438,155 1,342,480
------------ ----------- ----------- ---------- ---------- ----------
Reinvested capital gains .................. 5,475,769 1,152,786 890,649 2,818,636 767,858 490,390
------------ ----------- ----------- ---------- ---------- ----------
Net change in contract owners'
equity resulting from operations ... 1,939,992 10,221,644 8,480,481 369,699 2,160,892 1,797,344
------------ ----------- ----------- ---------- ---------- ----------
Equity transactions:
Purchase payment received from
contract owners ......................... 34,607 103,122 (64,839) 9,564 63,807 (137,012)
Transfers between funds ................... - - - (33,557) - -
Surrenders ................................ (5,061,144) (4,516,416) (9,899,337) (1,459,322) (709,440) (1,008,324)
Death benefits (note 4) ................... (696,850) (1,709,102) (861,880) (16,776) (180,870) (26,619)
Policy loans (net of repayments) (note 5) . 987,738 541,236 1,989,629 (218,439) 89,260 (110,352)
Deductions for surrender charges
(note 2d) ............................... (10,061) - (6,591) (2,901) - (671)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ....................... (589,000) (583,918) (687,968) (101,194) (94,956) (108,076)
------------ ----------- ----------- ---------- ---------- ----------
Net equity transactions .............. (5,334,710) (6,165,078) (9,530,986) (1,822,626) (832,199) (1,391,054)
------------ ----------- ----------- ---------- ---------- ----------
Net change in contract owners' equity ........ (3,394,718) 4,056,566 (1,050,505) (1,452,927) 1,328,693 406,290
Contract owners' equity beginning
of period .................................. 124,866,267 119,254,731 118,500,851 28,452,523 26,529,981 24,454,756
------------ ----------- ----------- ---------- ---------- ----------
Contract owners' equity end of period ........ $121,471,549 123,311,297 117,450,346 26,999,596 27,858,674 24,861,046
============ =========== =========== ========== ========== ==========
(Continued)
</TABLE>
<TABLE>
<CAPTION>
Domestic Income Fund
------------------------------------
1999 1998 1997
---------- -------- --------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ...................... $ 104,790 5,786 6,853
Mortality and expense charges (note 3) .... (4,128) (6,389) (5,105)
---------- -------- --------
Net investment activity ................. 100,662 (603) 1,748
---------- -------- --------
Proceeds from mutual fund shares sold ..... 370,517 119,986 894,155
Cost of mutual fund shares sold ........... (357,658) (117,715) (871,728)
---------- -------- --------
Realized gain (loss) on investments ..... 12,859 2,271 22,427
Change in unrealized gain (loss)
on investments .......................... (167,964) 82,391 68,833
---------- --------- --------
Net gain (loss) on investments .......... (155,105) 84,662 91,260
---------- --------- --------
Reinvested capital gains .................. - - -
---------- --------- --------
Net change in contract owners'
equity resulting from operations ... (54,443) 84,059 93,008
---------- --------- --------
Equity transactions:
Purchase payment received from
contract owners ......................... (1,982) 260,861 (110,847)
Transfers between funds ................... (22,182) - -
Surrenders ................................ (150,238) - (690,681)
Death benefits (note 4) ................... (114,882) - (65,290)
Policy loans (net of repayments) (note 5) . (3,073) (26,947) 147,991
Deductions for surrender charges
(note 2d) ............................... (299) - (460)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ....................... (23,216) (14,208) (18,782)
---------- --------- ---------
Net equity transactions .............. (315,872) 219,706 (738,069)
Net change in contract owners' equity ........ (370,315) 303,765 (645,061)
Contract owners' equity beginning
of period .................................. 1,817,529 1,969,076 2,667,258
---------- --------- ---------
Contract owners' equity end of period ....... $ 1,447,214 2,272,841 2,022,197
========== ========= =========
</TABLE>
5
<PAGE> 6
<TABLE>
<CAPTION>
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Six Month Periods Ended June 30, 1999, 1998 and 1997
(UNAUDITED)
Emerging Growth Fund Enterprise Fund
------------------------------------- --------------------------------------
1999 1998 1997 1999 1998 1997
----------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ...................... $ -- 870 -- 112,795 30,666 31,356
Mortality and expense charges (note 3) .... (7,551) (6,001) (3,634) (90,940) (92,852) (62,574)
----------- --------- --------- ---------- ---------- ----------
Net investment activity ................. (7,551) (5,131) (3,634) 21,855 (62,186) (31,218)
----------- --------- --------- ---------- ---------- ----------
Proceeds from mutual fund shares sold ..... 1,875,031 1,729,822 1,454,123 2,204,980 3,435,562 3,058,711
Cost of mutual fund shares sold ........... (1,439,003) (1,477,008) (1,440,077) (1,432,971) (2,464,313) (2,263,387)
----------- --------- --------- ---------- ---------- ----------
Realized gain (loss) on investments ..... 436,028 252,814 14,046 772,009 971,249 795,324
Change in unrealized gain (loss)
on investments .......................... 182,184 195,332 96,791 (1,158,906) 4,397,245 3,665,692
----------- --------- --------- ---------- ---------- ----------
Net gain (loss) on investments .......... 618,212 448,146 110,837 (386,897) 5,368,494 4,461,016
----------- --------- --------- ---------- ---------- ----------
Reinvested capital gains .................. -- -- -- 2,657,133 376,105 387,737
----------- --------- --------- ---------- ---------- ----------
Net change in contract owners'
equity resulting from operations ... 610,661 443,015 107,203 2,292,091 5,682,413 4,817,535
----------- --------- --------- ---------- ---------- ----------
Equity transactions:
Purchase payment received from
contract owners ......................... 158 219,229 338,963 34,568 14,183 (115,285)
Transfers between funds ................... 115,788 -- -- (139,926) -- --
Surrenders ................................ -- -- (84,171) (1,342,218) (1,442,827) (1,964,219)
Death benefits (note 4) ................... (5,049) (78,748) (415,629) (18,865) (559,647) (354,342)
Policy loans (net of repayments) (note 5) . (173,079) (59,637) (27,112) (30,420) 332,770 657,633
Deductions for surrender charges
(note 2d) ............................... -- -- (56) (2,668) -- (1,308)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ....................... (14,926) (11,426) (11,340) (140,376) (140,375) (147,936)
----------- --------- --------- ---------- ---------- ----------
Net equity transactions .............. (77,108) 69,418 (199,345) (1,639,905) (1,795,896) (1,925,457)
----------- --------- --------- ---------- ---------- ----------
Net change in contract owners' equity ........ 533,553 512,433 (92,142) 652,186 3,886,517 2,892,078
Contract owners' equity beginning
of period .................................. 3,036,214 2,044,227 1,634,351 37,398,585 33,563,544 29,524,640
----------- --------- --------- ----------- ---------- ----------
Contract owners' equity end of period ........ $ 3,569,767 2,556,660 1,542,209 38,050,771 37,450,061 32,416,718
=========== ========= ========= ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Global Equity Fund
------------------------------------
1999 1998 1997
---------- --------- ---------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ...................... $ 3,293 13,847 58
Mortality and expense charges (note 3) .... (2,772) (2,731) (1,208)
---------- --------- ---------
Net investment activity ................. 521 11,116 (1,150)
---------- --------- ---------
Proceeds from mutual fund shares sold ..... 198,485 303,232 243,885
Cost of mutual fund shares sold ........... (201,578) (297,041) (208,125)
---------- --------- ---------
Realized gain (loss) on investments ..... (3,093) 6,191 35,760
Change in unrealized gain (loss)
on investments .......................... 122,203 170,414 127,613
---------- --------- ---------
Net gain (loss) on investments .......... 119,110 176,605 163,373
---------- --------- ---------
Reinvested capital gains .................. -- -- 11,042
---------- --------- ---------
Net change in contract owners'
equity resulting from operations ... 119,631 187,721 173,265
---------- --------- ---------
Equity transactions:
Purchase payment received from
contract owners ......................... 3 104,570 301,624
Transfers between funds ................... (111,750) -- --
Surrenders ................................ -- (158,360) (30,839)
Death benefits (note 4) ................... (10,076) (45,481) --
Policy loans (net of repayments) (note 5) . (17,116) (7,620) (26,612)
Deductions for surrender charges
(note 2d) ............................... -- -- (21)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ....................... (7,056) (7,046) (7,011)
---------- --------- ---------
Net equity transactions .............. (145,995) (113,937) 237,141
---------- --------- ---------
Net change in contract owners' equity ........ (26,364) 73,784 410,406
Contract owners' equity beginning
of period .................................. 1,230,474 1,216,120 1,006,110
---------- --------- ---------
Contract owners' equity end of period ........ $ 1,204,110 1,289,904 1,416,516
========== ========= =========
</TABLE>
6
<PAGE> 7
<TABLE>
<CAPTION>
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF OPERATIONS AND CHANGES IN CONTRACT OWNERS' EQUITY
Six Month Periods Ended
June 30, 1999, 1998 and 1997
(UNAUDITED)
Government Fund Money Market Fund
--------------------------------------- ------------------------------------
1999 1998 1997 1999 1998 1997
----------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ......................... $ 2,097,895 462,730 1,510,551 175,600 171,875 208,723
Mortality and expense charges (note 3) ....... (104,720) (125,204) (95,555) (20,042) (17,708) (21,410)
----------- ---------- ---------- ---------- ---------- ----------
Net investment activity .................... 1,993,175 337,526 1,414,996 155,558 154,167 187,313
----------- ---------- ---------- ---------- ---------- ----------
Proceeds from mutual fund shares sold ........ 1,630,817 4,490,724 4,994,586 2,873,382 3,201,053 3,703,484
Cost of mutual fund shares sold .............. (1,498,122) (4,235,603) (5,086,783) (2,873,382) (3,201,053) (3,703,484)
----------- ---------- ---------- ---------- ---------- ----------
Realized gain (loss) on investments ........ 132,695 255,121 (92,197) -- -- --
Change in unrealized gain (loss)
on investments ............................. (3,707,666) 950,686 (46,986) -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net gain (loss) on investments ............. (3,574,971) 1,205,807 (139,183) -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Reinvested capital gains ..................... -- -- -- -- -- --
----------- ---------- ---------- ---------- ---------- ----------
Net change in contract owners'
equity resulting from operations ...... (1,581,796) 1,543,333 1,275,813 155,558 154,167 187,313
----------- ---------- ---------- ---------- ---------- ----------
Equity transactions:
Purchase payment received from
contract owners ............................ (8,344) (924,428) (2,074,561) 632 505,547 1,392,656
Transfers between funds ...................... (237,874) -- -- 436,411 -- --
Surrenders ................................... (1,093,130) (1,682,350) (5,225,059) (1,016,236) (523,439) (889,451)
Death benefits (note 4) ...................... (306,175) (844,356) -- (225,028) -- --
Policy loans (net of repayments) (note 5) .... 572,595 310,598 2,816,725 857,553 (108,232) (1,460,015)
Deductions for surrender charges
(note 2d) .................................. (2,173) -- (3,479) (2,020) -- (592)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .......................... (228,542) (239,691) (304,194) (71,286) (73,261) (88,360)
----------- ---------- ---------- ---------- ---------- ----------
Net equity transactions ................. (1,303,643) (3,380,227) (4,790,568) (19,973) (199,385) (1,045,762)
----------- ---------- ---------- ---------- ---------- ----------
Net change in contract owners' equity ........... (2,885,439) (1,836,894) (3,514,755) 135,585 (45,218) (858,449)
Contract owners' equity beginning
of period ..................................... 44,870,031 46,320,862 49,887,423 7,682,960 6,948,979 9,128,997
----------- ---------- ---------- ----------- ----------- ----------
Contract owners' equity end of period ........... $ 41,984,592 44,483,968 46,372,668 7,818,545 6,903,761 8,270,548
=========== ========== ========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Morgan Stanley
Real Estate Securities Portfolio
--------------------------------
1999 1998 1997
------- ------- -------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ......................... 24,951 897 732
Mortality and expense charges (note 3) ....... (937) (1,101) (449)
------- ------- -------
Net investment activity .................... 24,014 (204) 283
------- ------- -------
Proceeds from mutual fund shares sold ........ 74,121 332,212 79,414
Cost of mutual fund shares sold .............. (85,573) (327,855) (60,102)
------- ------- -------
Realized gain (loss) on investments ........ (11,452) 4,357 19,312
Change in unrealized gain (loss)
on investments ............................. 16,029 (46,932) 7,925
------- ------- -------
Net gain (loss) on investments ............. 4,577 (42,575) 27,237
------- ------- -------
Reinvested capital gains ..................... -- 8,823 1,480
------- ------- -------
Net change in contract owners'
equity resulting from operations ...... 28,591 (33,956) 29,000
------- ------- -------
Equity transactions:
Purchase payment received from
contract owners ............................ 9 (140,647) 339,623
Transfers between funds ...................... (6,910) --
Surrenders ................................... -- -- (6,593)
Death benefits (note 4) ...................... -- --
Policy loans (net of repayments) (note 5) .... (283) 11,044 (8,629)
Deductions for surrender charges
(note 2d) .................................. -- --
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .......................... (2,405) (2,955) (2,269)
------- ------- -------
Net equity transactions ................. (9,588) (132,970) 322,084
------- ------- -------
Net change in contract owners' equity ........... 19,003 (166,926) 351,084
Contract owners' equity beginning
of period ..................................... 377,951 661,942 197,316
------- ------- -------
Contract owners' equity end of period ........... 396,954 495,428 548,444
======== ======= =======
See accompanying notes to financial statements.
</TABLE>
7
<PAGE> 8
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
June 30, 1999, 1998 and 1997
(UNAUDITED)
(1) Summary of Significant Accounting Policies
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on August 8, 1984. The Account has
been registered as a unit investment trust under the Investment
Company Act of 1940.
The Company offers modified single premium, multiple payment and
flexible premium variable life insurance contracts through the
Account. The primary distribution for the contracts is through the
brokerage community; however, other distributors may be utilized.
(b) The Contracts
Prior to December 31, 1990, only contracts without a front-end sales
charge, but with a contingent deferred sales charge and certain other
fees, were offered for purchase. Beginning December 31, 1990,
contracts with a front-end sales charge, a contingent deferred sales
charge and certain other fees, are offered for purchase. See note 2
for a discussion of policy charges and note 3 for asset charges.
Contract owners may invest in the following funds:
Funds of the Van Kampen Life Investment Trust (Van Kampen LIT); Van
Kampen LIT - Asset Allocation Fund Van Kampen LIT - Domestic Income
Fund Van Kampen LIT - Emerging Growth Fund Van Kampen LIT - Enterprise
Fund Van Kampen LIT - Global Equity Fund Van Kampen LIT - Government
Fund Van Kampen LIT - Money Market Fund Van Kampen LIT - Morgan
Stanley Real Estate Securities Portfolio
At June 30, 1999, contract owners have invested in all of the above
funds.
The contract owners' equity is affected by the investment results of
each fund, equity transactions by contract owners and certain policy
charges (see notes 2 and 3). The accompanying financial statements
include only contract owners' purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts
of the Company.
A contract owner may choose from among a number of different
underlying mutual fund options. The underlying mutual fund options are
not available to the general public directly. The underlying mutual
funds are available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance
companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the underlying mutual funds have been established by
investment advisers which manage publicly traded mutual funds having
similar names and investment objectives. While some of the underlying
mutual funds may be similar to, and may in fact be modeled after,
publicly traded mutual funds, the underlying mutual funds are not
otherwise directly related to any publicly traded mutual
fund. Consequently, the investment performance of publicly traded
mutual funds and any corresponding underlying mutual funds may differ
substantially.
8
<PAGE> 9
(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 June 30, 1999.Fund purchases and
sales are accounted for on the trade date (date the order to buy or
sell is executed).The cost of investments sold is determined on a
specific identification basis, and dividends (which include capital
gain distributions) are accrued as of the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company, which is taxed as a life insurance company
under the provisions of the Internal Revenue Code.
The Company does not provide for income taxes within the Account.Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities,
if any, at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.Actual
results could differ from those estimates.
(f) Reclassifications
Certain 1997 amounts have been reclassified to conform with the
current period presentation.
(2) Policy Charges
(a) Deductions from Premiums
For single premium contracts, no deduction is made from any premium at
the time of payment.On multiple payment contracts and flexible premium
contracts, the Company deducts a charge for state premium taxes equal
to 2.5% of all premiums received to cover the payment of these premium
taxes. The Company also deducts a sales load from each premium payment
received not to exceed 3.5% of each premium payment.The Company may at
its sole discretion reduce this sales loading.
(b) Cost of Insurance
A cost of insurance charge is assessed monthly against each contract
by liquidating units. The amount of the charge is based upon age, sex,
rate class and net amount at risk (death benefit less total contract
value).
(c) Administrative Charges
For single premium contracts, the Company deducts an annual
administrative charge which is determined as follows:
Contracts issued prior to April 16, 1990:
Purchase payments totalling less than $25,000 - $10/month
Purchase payments totalling $25,000 or more - none
Contracts issued on or after April 16, 1990:
Purchase payments totalling less than $25,000 - $90/year ($65/year
in New York)
Purchase payments totalling $25,000 or more - $50/year
For multiple payment contracts the Company currently deducts a monthly
administrative charge of $5 (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.
For flexible premium contracts, the Company currently deducts a
monthly administrative charge of $12.50 during the first policy year
and $5 per month thereafter (may deduct up to $7.50, maximum) to
recover policy maintenance, accounting, record keeping and other
administrative expenses.Additionally, the Company deducts an increase
charge of $2.04 per year per $1,000 applied to any increase in the
specified amount during the first 12 months after the increase becomes
effective.
The above charges are assessed against each contract by liquidating
units.
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<PAGE> 10
(d) Surrender Charges
Policy surrenders result in a redemption of the contract value from
the Account and payment of the surrender proceeds to the contract
owner or designee. The surrender proceeds consist of the contract
value, less any outstanding policy loans, and less a surrender charge,
if applicable. The charge is determined according to contract type.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single
premium contracts issued prior to April 16, 1990, the charge is 8% in
the first year and declines to 0% after the ninth year. For single
premium contracts issued on or after April 16, 1990, the charge is
8.5% in the first year and declines to 0% after the ninth year.
For multiple payment contracts and flexible premium contracts, the
amount charged is based upon a specified percentage of the initial
surrender charge, which varies by issue age, sex and rate class. The
charge is 100% of the initial surrender charge in the first year, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of
a contract are not incurred.
(3) Asset Charges
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to operations,
and to recover policy maintenance and premium tax charges. For contracts
issued prior to April 16, 1990, the charge is equal to an annual rate of
.95% during the first ten policy years, and .50% thereafter. A reduction of
charges on these contracts is possible in policy years six through ten for
those contracts achieving certain investment performance criteria;for
contracts issued on or after April 16, 1990, the charge is equal to an
annual rate of 1.30% during the first ten policy years, and 1.00%
thereafter.
For multiple payment contracts and flexible premium contracts, the Company
deducts a charge equal to an annual rate of .80%, with certain exceptions,
to cover mortality and expense risk charges related to operations.
The above charges are assessed through the daily unit value calculation.
The following table provides mortality, expense and administration charges
by contract type for the period ended June 30, 1999:
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING
ALLOCATION INCOME GROWTH ENTERPRISE
TOTAL FUND FUND FUND FUND
----- ---------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990 ..... $ 70 -- -- 21 --
Single Premium contracts issued
on or after April 16, 1990 .. 3,642 1,952 351 44 878
Multiple Payment and Flexible
Premium contracts ........... 1,098 477 -- -- 621
Reduced Fee ................... 294,495 65,788 3,777 7,486 89,441
-------- ------- ----- ----- ------
Total $ .................. $ 299,305 68,217 4,128 7,551 90,940
======== ======= ===== ===== ======
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND PORTFOLIO
------- ---------- ------ -----------
Single Premium contracts Issued
prior to April 16, 1990 .... $ -- 49 -- --
Single Premium contracts issued
on or after April 16, 1990 . 37 172 197 11
Multiple Payment and Flexible
Premium contracts .......... -- -- -- --
Reduced Fee .................. 2,735 104,499 19,843 926
------- ------- ------ ---
Total .................... $ 2,772 104,720 20,040 937
======= ======= ====== ===
</TABLE>
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<PAGE> 11
(4) Death Benefits
Death benefits result in a redemption of the contract value from the
Account and payment of the death benefit proceeds, less any outstanding
policy loans and policy charges, to the legal beneficiary.The excess of the
death benefit proceeds over the contract value on the date of death is paid
by the Company's general account.
(5) Policy Loans (Net of Repayments)
Contract provisions allow contract owners to borrow up to 90% (50% during
first year of single premium contracts) of a policy's cash surrender
value.For single premium contracts issued prior to April 16, 1990, 6.5%
interest is due and payable annually in advance.For single premium
contracts issued on or after April 16, 1990, multiple payment contracts and
flexible premium contracts, 6% interest is due and payable in advance on
the policy anniversary when there is a loan outstanding on the policy.
At the time the loan is granted, the amount of the loan is transferred from
the Account to the Company's general account as collateral for the
outstanding loan.Collateral amounts in the general account are credited
with the stated rate of interest in effect at the time the loan is made,
subject to a guaranteed minimum rate.Loan repayments result in a transfer
of collateral, including interest, back to the Account.
(6) Related Party Transactions
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed.These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions.These fees are paid to
an affiliate of the Company.
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<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY
HOME OFFICE: ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
---------------
Bulk Rate
U.S. Postage
PAID
Columbus, Ohio
Permit No. 521
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Nationwide(R) is a registered federal service mark of Nationwide Mutual
Insurance Company
