<PAGE> 1
NATIONWIDE(R) VLI
SEPARATE ACCOUNT
ANNUAL REPORT
DECEMBER 31, 1999
- --------------------------------------------------------------------------------
INVESTMENT/LIFE(R)
VAN KAMPEN/
NATIONWIDE LIFE INSURANCE COMPANY
VLO-185-AC (12/99)
<PAGE> 2
[LOGO NATIONWIDE(R)]
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215-2220
[Picture of President Joseph J. Gasper]
PRESIDENT'S MESSAGE
We at Nationwide Life Insurance Company are pleased to bring you
the 1999 annual report of the Nationwide VLI Separate Account.
During 1999 equity investments extended their spirited advance
to a fifth consecutive year. The S&P 500 was the laggard of the
major indices with a year-over-year change of a respectable
19.53%. The NASDAQ topped the list at over 85% with the other
indices falling into line nearer the lower end of the range.
Fixed earnings investments did not fare as well in the current
environment of rising interest rates.
The U.S. economy remains strong, inflation remains docile and
the available labor pool is incessantly tight. Against this
good-news-bad-news backdrop, the Federal Reserve is increasingly
concerned that recent productivity gains will subside and ignite
wage inflation. To date, the Fed has hiked short-term interest
rates a quarter percentage point on four occasions since last
June. Prospectively, they may well become more aggressive in
their preemptive efforts to dampen economic growth and avoid a
new round of inflation.
We believe some caution may be warranted at this juncture.
Certain market sectors are well extended and may inevitably
retreat to less lofty valuation levels. However, we remain
bullish for the long-term prospects of financial assets. Your
variable insurance contract provides an excellent resource to
help you achieve your long-term retirement savings and financial
planning objectives.
We appreciate your trust in our company and in our investment
products, and we welcome and encourage your feedback.
/s/ Joseph J. Gasper
Joseph J. Gasper, President
February 10, 2000
3
<PAGE> 3
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments in Van Kampen Life Investment Trust, at market value:
Asset Allocation Fund
2,191,816 shares (cost $25,175,578) ...................... $ 26,630,569
Domestic Income Fund
161,246 shares (cost $1,337,889) ......................... 1,296,420
Emerging Growth Fund
150,833 shares (cost $4,265,371) ......................... 6,972,993
Enterprise Fund
1,649,183 shares (cost $27,518,734) ...................... 43,060,176
Global Equity Fund
106,894 shares (cost $1,446,648) ......................... 1,810,791
Government Fund
4,526,628 shares (cost $40,250,236) ...................... 39,924,859
Money Market Fund
6,714,710 shares (cost $6,714,710) ....................... 6,714,710
Morgan Stanley Real Estate Securities Portfolio
28,034 shares (cost $399,505) ............................ 346,782
------------
Total investments ..................................... 126,757,300
Accounts receivable ............................................ 137,112
------------
Total assets .......................................... 126,894,412
ACCOUNTS PAYABLE .................................................. -
------------
CONTRACT OWNERS' EQUITY (NOTE 7) .................................. $126,894,412
============
</TABLE>
4
<PAGE> 4
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
-------- ---------- ---------
<S> <C> <C> <C> <C>
Single Premium contracts issued prior
to April 16, 1990 (policy years 1 through 10):
Emerging Growth Fund ............................... 61 $ 44.315060 $ 2,703 102%
Government Fund .................................... 181 21.448313 3,882 (4)%
Single Premium contracts issued prior to
April 16, 1990 (policy years 11 and thereafter):
Asset Allocation Fund .............................. 739,841 35.463700 26,237,499 4%
Domestic Income Fund ............................... 59,529 21.081008 1,254,931 (2)%
Emerging Growth Fund ............................... 154,492 45.052150 6,960,197 102%
Enterprise Fund .................................... 759,568 56.478127 42,898,978 25%
Global Equity Fund ................................. 84,026 21.480044 1,804,882 29%
Government Fund .................................... 1,829,463 21.806759 39,894,659 (4)%
Money Market Fund .................................. 358,251 18.606015 6,665,623 4%
Morgan Stanley Real Estate
Securities Portfolio ............................ 22,446 15.386733 345,371 (4)%
Single Premium contracts issued
on or after April 16, 1990:
Asset Allocation Fund .............................. 8,868 29.663447 263,055 4%
Domestic Income Fund ............................... 2,038 20.286172 41,343 (3)%
Emerging Growth Fund ............................... 223 43.623938 9,728 102%
Enterprise Fund .................................... 2,231 51.757655 115,471 24%
Global Equity Fund ................................. 278 20.798972 5,782 28%
Government Fund .................................... 1,452 16.037897 23,287 (5)%
Money Market Fund .................................. 3,607 13.394302 48,313 3%
Morgan Stanley Real Estate
Securities Portfolio ............................ 92 14.898574 1,371 (5)%
Multiple Payment and
Flexible Premium contracts:
Asset Allocation Fund .............................. 4,721 27.127166 128,067 4%
Enterprise Fund .................................... 4,201 45.053542 189,270 25%
========== ============ -------------
$ 126,894,412
=============
</TABLE>
* The annual return does not include contract charges satisfied by surrendering
units.
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
5
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL ASSET ALLOCATION FUND
---------------------------------------------- -------------------------------
1999 1998 1997 1999 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................ $ 3,642,989 897,565 4,695,756 935,397 28,407
Mortality and expense charges (note 3) ...... (605,987) (629,010) (719,195) (135,844) (142,872)
-------------- -------------- -------------- -------------- -------------
Net investment activity.................... 3,037,002 268,555 3,976,561 799,553 (114,465)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold ....... 23,486,753 28,593,475 31,042,460 4,191,225 3,626,797
Cost of mutual fund shares sold ............. (20,473,513) (25,877,789) (28,311,120) (4,139,582) (3,417,335)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on investments ....... 3,013,240 2,715,686 2,731,340 51,643 209,462
Change in unrealized gain (loss)
on investments............................. 497,947 12,059,082 3,917,689 (2,538,143) 2,953,327
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments ............ 3,511,187 14,774,768 6,649,029 (2,486,500) 3,162,789
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..................... 5,493,564 1,152,786 7,592,712 2,818,636 767,858
-------------- -------------- -------------- -------------- -------------
Net change in contract owners'
equity resulting from operations ....... 12,041,753 16,196,109 18,218,302 1,131,689 3,816,182
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payment received from
contract owners............................ 79,010 100,670 20,253 10,703 16,920
Transfers between funds...................... - - - (277,168) (295,985)
Surrenders................................... (7,988,610) (8,181,440) (15,789,351) (1,923,278) (1,209,391)
Death benefits (note 4)...................... (2,258,865) (2,362,574) (2,575,326) (218,348) (300,509)
Policy loans (net of repayments) (note 5) ... 1,291,031 844,295 2,317,220 (355,822) 37,023
Deductions for surrender charges
(note 2d).................................. (10,061) (1,495) (6,591) (2,422) (221)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c).......................... (1,126,113) (984,029) (1,430,627) (189,256) (141,477)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.................. (10,013,608) (10,584,573) (17,464,422) (2,955,591) (1,893,640)
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... 2,028,145 5,611,536 753,880 (1,823,902) 1,922,542
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................................... 124,866,267 119,254,731 118,500,851 28,452,523 26,529,981
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 126,894,412 124,866,267 119,254,731 26,628,621 28,452,523
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
ASSET
ALLOCATION
FUND DOMESTIC INCOME FUND
-------------- ----------------------------------------------
1997 1999 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................ $ 1,019,770 104,790 5,786 161,393
Mortality and expense charges (note 3) ...... (163,786) (7,808) (11,965) (14,107)
-------------- -------------- -------------- --------------
Net investment activity.................... 855,984 96,982 (6,179) 147,286
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ....... 3,844,540 543,800 679,224 1,322,378
Cost of mutual fund shares sold ............. (3,541,593) (536,110) (669,892) (1,253,657)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ....... 302,947 7,690 9,332 68,721
Change in unrealized gain (loss)
on investments............................. 1,002,579 (148,856) 120,718 6,090
-------------- -------------- -------------- --------------
Net gain (loss) on investments ............ 1,305,526 (141,166) 130,050 74,811
-------------- -------------- -------------- --------------
Reinvested capital gains..................... 2,657,199 - - -
-------------- -------------- -------------- --------------
Net change in contract owners'
equity resulting from operations ....... 4,818,709 (44,184) 123,871 222,097
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payment received from
contract owners............ ............... 9,408 35 192 -
Transfers between funds...... ............... (21,271) (84,044) 186,196 (27,385)
Surrenders................... ............... (2,261,349) (225,604) (438,920) (883,951)
Death benefits (note 4)...... ............... (238,628) (124,349) - (103,618)
Policy loans (net of repayments) (note 5) ... (21,513) (8,370) 908 127,843
Deductions for surrender charges
(note 2d).................. ............... (972) (284) (80) (364)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c).......... ............... (209,159) (34,455) (23,714) (32,804)
-------------- -------------- -------------- --------------
Net equity transactions.. ............... (2,743,484) (477,071) (275,418) (920,279)
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... 2,075,225 (521,255) (151,547) (698,182)
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... ............... 24,454,756 1,817,529 1,969,076 2,667,258
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 26,529,981 1,296,274 1,817,529 1,969,076
============== ============== ============== ==============
</TABLE>
6
<PAGE> 6
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
EMERGING GROWTH FUND ENTERPRISE FUND
---------------------------------------------- -------------------------------
1999 1998 1997 1999 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................... $ - 870 - 112,795 30,666
Mortality and expense charges (note 3) ..... (18,439) (12,082) (11,006) (187,593) (177,854)
-------------- -------------- -------------- -------------- -------------
Net investment activity................... (18,439) (11,212) (11,006) (74,798) (147,188)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold ...... 3,555,112 3,294,533 2,545,651 4,465,163 6,594,364
Cost of mutual fund shares sold ............ (2,458,567) (2,978,369) (2,360,427) (2,771,060) (4,852,264)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on investments ...... 1,096,545 316,164 185,224 1,694,103 1,742,100
Change in unrealized gain (loss)
on investments............................ 2,140,406 447,416 98,252 4,488,118 5,583,645
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments ........... 3,236,951 763,580 283,476 6,182,221 7,325,745
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains.................... - - - 2,657,133 376,105
-------------- -------------- -------------- -------------- -------------
Net change in contract owners'
equity resulting from operations .... 3,218,512 752,368 272,470 8,764,556 7,554,662
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payment received from
contract owners........................... 117 13,566 - 59,346 42,210
Transfers between funds..................... 1,095,938 411,356 363,039 (85,385) (471,779)
Surrenders.................................. (29,316) (38,594) (97,105) (2,021,593) (2,526,694)
Death benefits (note 4)..................... (20,214) (78,748) (68,157) (328,352) (691,661)
Policy loans (net of repayments) (note 5) .. (295,503) (49,579) (38,507) (305,536) 155,121
Deductions for surrender charges
(note 2d)................................. (37) (7) (42) (2,546) (462)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c)......................... (33,083) (18,375) (21,822) (275,356) (226,356)
-------------- -------------- -------------- -------------- -------------
Net equity transactions................. 717,902 239,619 137,406 (2,959,422) (3,719,621)
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........ 3,936,414 991,987 409,876 5,805,134 3,835,041
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD................................... 3,036,214 2,044,227 1,634,351 37,398,585 33,563,544
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........ $ 6,972,628 3,036,214 2,044,227 43,203,719 37,398,585
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
ENTERPRISE FUND GLOBAL EQUITY FUND
-------------- ----------------------------------------------
1997 1999 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ....................... $ 156,354 3,293 13,847 9,630
Mortality and expense charges (note 3) ..... (189,128) (6,178) (5,996) (5,726)
-------------- -------------- -------------- --------------
Net investment activity................... (32,774) (2,885) 7,851 3,904
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold ...... 6,775,251 421,804 607,261 740,054
Cost of mutual fund shares sold ............ (4,652,996) (400,661) (594,475) (619,704)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments ...... 2,122,255 21,143 12,786 120,350
Change in unrealized gain (loss)
on investments............................ 1,561,213 308,547 203,001 (191,773)
-------------- -------------- -------------- --------------
Net gain (loss) on investments ........... 3,683,468 329,690 215,787 (71,423)
-------------- -------------- -------------- --------------
Reinvested capital gains.................... 4,664,918 17,795 - 213,420
-------------- -------------- -------------- --------------
Net change in contract owners'
equity resulting from operations .... 8,315,612 344,600 223,638 145,901
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payment received from
contract owners........................... 10,432 4,864 3,500 -
Transfers between funds..................... 449,001 327,061 135,066 354,759
Surrenders.................................. (3,085,585) - (270,112) (170,802)
Death benefits (note 4)..................... (840,448) (31,633) (45,481) (54,190)
Policy loans (net of repayments) (note 5) .. (411,649) (50,837) (19,615) (49,035)
Deductions for surrender charges
(note 2d)................................. (1,310) - (49) (71)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c)......................... (397,149) (13,865) (12,593) (16,552)
-------------- -------------- -------------- --------------
Net equity transactions................. (4,276,708) 235,590 (209,284) 64,109
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........ 4,038,904 580,190 14,354 210,010
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD................................... 29,524,640 1,230,474 1,216,120 1,006,110
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........ $ 33,563,544 1,810,664 1,230,474 1,216,120
============== ============== ============== ==============
(Continued)
</TABLE>
7
<PAGE> 7
NATIONWIDE VLI SEPARATE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
GOVERNMENT FUND MONEY MARKET FUND
---------------------------------------------- -------------------------------
1999 1998 1997 1999 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................... $ 2,097,895 462,730 2,932,295 363,868 354,362
Mortality and expense charges (note 3) ... (208,262) (238,350) (281,579) (40,003) (37,684)
-------------- -------------- -------------- -------------- -------------
Net investment activity................. 1,889,633 224,380 2,650,716 323,865 316,678
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund shares sold .... 4,009,993 6,495,585 8,542,298 6,199,614 6,735,285
Cost of mutual fund shares sold .......... (3,850,500) (6,048,314) (8,651,252) (6,199,614) (6,735,285)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on investments .... 159,493 447,271 (108,954) - -
Change in unrealized gain (loss)
on investments.......................... (3,730,011) 2,807,612 1,444,456 - -
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments ......... (3,570,518) 3,254,883 1,335,502 - -
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains.................. - - - - -
-------------- -------------- -------------- -------------- -------------
Net change in contract owners'
equity resulting from operations ... (1,680,885) 3,479,263 3,986,218 323,865 316,678
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payment received from
contract owners............ 2,587 4,858 341 1,358 19,417
Transfers between funds...... (817,042) (1,210,358) (1,240,286) (150,507) 1,442,677
Surrenders................... (2,570,772) (2,842,711) (7,702,772) (1,218,047) (830,932)
Death benefits (note 4)...... (862,741) (1,246,175) (862,940) (673,228) -
Policy loans (net of repayments) (note 5) 1,421,104 788,677 2,807,538 886,814 (80,573)
Deductions for surrender charges
(note 2d).................. (3,238) (520) (3,174) (1,534) (152)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c).......... (437,216) (423,865) (551,486) (137,745) (133,134)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. (3,267,318) (4,930,094) (7,552,779) (1,292,889) 417,303
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY (4,948,203) (1,450,831) (3,566,561) (969,024) 733,981
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 44,870,031 46,320,862 49,887,423 7,682,960 6,948,979
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 39,921,828 44,870,031 46,320,862 6,713,936 7,682,960
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
MONEY
MARKET MONEY MARKET MORGAN STANLEY
FUND REAL ESTATE SECURITIES PORTFOLIO
-------------- ----------------------------------------------
1997 1999 1998 1997
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ..................... $ 399,015 24,951 897 17,299
Mortality and expense charges (note 3) ... (51,809) (1,860) (2,207) (2,054)
-------------- -------------- -------------- --------------
Net investment activity................. 347,206 23,091 (1,310) 15,245
-------------- -------------- -------------- --------------
Proceeds from mutual fund shares sold .... 7,096,782 100,042 560,426 175,506
Cost of mutual fund shares sold .......... (7,096,782) (117,419) (581,855) (134,709)
-------------- -------------- -------------- --------------
Realized gain (loss) on investments .... - (17,377) (21,429) 40,797
Change in unrealized gain (loss)
on investments.......................... - (22,114) (56,637) (3,128)
-------------- -------------- -------------- --------------
Net gain (loss) on investments ......... - (39,491) (78,066) 37,669
-------------- -------------- -------------- --------------
Reinvested capital gains.................. - - 8,823 57,175
-------------- -------------- -------------- --------------
Net change in contract owners'
equity resulting from operations ... 347,206 (16,400) (70,553) 110,089
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payment received from
contract owners............ 72 - 7 -
Transfers between funds...... (260,875) (8,853) (197,173) 383,018
Surrenders................... (1,580,839) - (24,086) (6,948)
Death benefits (note 4)...... (407,345) - - -
Policy loans (net of repayments) (note 5) (83,572) (819) 12,333 (13,885)
Deductions for surrender charges
(note 2d).................. (655) - (4) (3)
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c).......... (194,010) (5,137) (4,515) (7,645)
-------------- -------------- -------------- --------------
Net equity transactions.. (2,527,224) (14,809) (213,438) 354,537
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY (2,180,018) (31,209) (283,991) 464,626
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 9,128,997 377,951 661,942 197,316
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 6,948,979 346,742 377,951 661,942
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
8
<PAGE> 8
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(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)
(formerly Van Kampen American Capital Life Investment Trust);
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 December 31, 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.
(Continued)
9
<PAGE> 9
NATIONWIDE VLI SEPARATE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(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, 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.
(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. For multiple and flexible premium contracts, 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.
10
<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 and expense risk charges by contract
type for the period ended December 31, 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....... $ 108 - - 44 -
Single Premium contracts issued
on or after April 16, 1990.... 6,983 3,613 568 134 1,586
Multiple Payment and Flexible
Premium contracts............. 2,271 917 - - 1,354
Reduced Fee on Single
Premium contracts issued
prior to April 16, 1999....... 596,625 131,314 7,240 18,261 184,653
------------ ------------ ------------ ------------ ------------
Total....................... $ 605,987 135,844 7,808 18,439 187,593
============ ============ ============ ============ ============
(Continued)
</TABLE>
11
<PAGE> 11
<TABLE>
<CAPTION>
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ - 64 - -
Single Premium contracts issued
on or after April 16, 1990.... 79 320 664 19
Multiple Payment and Flexible
Premium contracts............. - - - -
Reduced Fee on Single
Premium contracts issued
prior to April 16, 1999....... 6,099 207,878 39,339 1,841
------------ ------------ ------------ ------------
Total....................... $ 6,178 208,262 40,003 1,860
============ ============ ============ ============
</TABLE>
The following table provides mortality and expense risk charges by contract
type for the period ended December 31, 1998:
<TABLE>
<CAPTION>
ASSET DOMESTIC EMERGING
ALLOCATION INCOME GROWTH ENTERPRISE
TOTAL FUND FUND FUND FUND
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 58,812 46,484 8 545 3,926
Single Premium contracts issued
on or after April 16, 1990.... 9,184 3,414 2,251 103 2,102
Multiple Payment and Flexible
Premium contracts............. 1,950 862 - - 1,088
Reduced Fee on Single
Premium contracts issued
prior to April 16, 1999....... 559,064 92,112 9,706 11,434 170,738
------------ ------------ ------------ ------------ ------------
Total....................... $ 629,010 142,872 11,965 12,082 177,854
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ - 7,640 209 -
Single Premium contracts issued
on or after April 16, 1990.... 99 313 884 18
Multiple Payment and Flexible
Premium contracts............. - - - -
Reduced Fee on Single
Premium contracts issued
prior to April 16, 1999....... 5,897 230,397 36,591 2,189
------------ ------------ ------------ ------------
Total....................... $ 5,996 238,350 37,684 2,207
============ ============ ============ ============
</TABLE>
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<PAGE> 12
The following table provides mortality and expense risk charges by contract
type for the period ended December 31, 1997:
<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....... $ 245,990 56,021 4,825 3,765 64,688
Single Premium contracts issued
on or after April 16, 1990.... 4,007 912 79 61 1,054
Multiple Payment and Flexible
Premium contracts............. 1,712 390 33 26 451
Reduced Fee on Single
Premium contracts issued
prior to April 16, 1999....... 467,486 106,463 9,170 7,154 122,935
------------ ------------ ------------ ------------ ------------
Total....................... $ 719,195 163,786 14,107 11,006 189,128
============ ============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
GLOBAL MONEY REAL ESTATE
EQUITY GOVERNMENT MARKET SECURITIES
FUND FUND FUND PORTFOLIO
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 1,958 96,310 17,720 703
Single Premium contracts issued
on or after April 16, 1990.... 32 1,569 289 11
Multiple Payment and Flexible
Premium contracts............. 14 670 123 5
Reduced Fee on Single
Premium contracts issued
prior to April 16, 1999....... 3,722 183,030 33,677 1,335
------------ ------------ ------------ ------------
Total....................... $ 5,726 281,579 51,809 2,054
============ ============ ============ ============
</TABLE>
(4) DEATH BENEFITS
Death benefit proceeds result in a redemption of the contract value from
the Account and payment of those proceeds, less any outstanding policy
loans (and policy charges), to the legal beneficiary. For last survivor
flexible premium contracts, the proceeds are payable on the death of the
last surviving insured. In the event that the guaranteed death benefit
exceeds the contract value on the date of death, the excess 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> 13
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INDEPENDENT AUDITORS' REPORT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account (comprised of the
sub-accounts listed in note 1(b)) (collectively, "the Account") as of December
31, 1999, and the related statements of operations and changes in contract
owners' equity for each of the years in the three year period then ended. These
financial statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1999, and the results of its operations and its changes in contract owners'
equity for each of the years in the three year period then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 18, 2000
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NATIONWIDE LIFE INSURANCE COMPANY Bulk Rate
HOME OFFICE: ONE NATIONWIDE PLAZA - U.S. Postage
COLUMBUS, OHIO 43215-2220 PAID
Columbus, Ohio
Permit No. 521
Nationwide(R) is a registered federal service mark of
Nationwide Mutual Insurance Company
