<PAGE> 1
Registration No. 33-44290
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 11
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)
PATRICIA R. HATLER
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus and Financial Statements.
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on September 20, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) 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: Flexible Premium Variable Universal Life
Insurance Policies
Approximate date of proposed offering: Continuously on and after
September 20, 2000
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
================================================================================
<PAGE> 2
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
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
34.............................................................................Not Applicable
35.............................................................................Nationwide Life Insurance Company
36.............................................................................Not Applicable
37.............................................................................Not Applicable
38.............................................................................Distribution of The Policies
39.............................................................................Distribution of The Policies
40.............................................................................Not Applicable
41(a)..........................................................................Distribution of The Policies
42.............................................................................Not Applicable
43.............................................................................Not Applicable
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>
<PAGE> 4
SUPPLEMENT DATED SEPTEMBER 20, 2000, TO
PROSPECTUS DATED MAY 1, 2000, FOR
FLEXIBLE PREMIUM VARIABLE
UNIVERSAL LIFE INSURANCE POLICIES
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VLI SEPARATE ACCOUNT
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1 THE "SURRENDER (REDEMPTION)" PROVISION ON PAGE 15 OF YOUR PROSPECTUS IS
AMENDED TO INCLUDE THE FOLLOWING:
Nationwide is required by state law to reserve the right to postpone
payment of assets in the fixed account for a period of up to six
months from the date of the surrender request.
2. EFFECTIVE SEPTEMBER 25, 2000: MERGER OF VAN KAMPEN LIFE INVESTMENT TRUST -
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO INTO THE UNIVERSAL
INSTITUTIONAL FUNDS, INC. - U.S. REAL ESTATE PORTFOLIO.
Effective September 25, pursuant to shareholder vote, all shares of Van
Kampen Life Investment Trust - Morgan Stanley Real Estate Securities
Portfolio were exchanged for shares of The Universal Institutional Funds,
Inc. - U.S. Real Estate Portfolio. Any assets invested in Van Kampen Life
Investment Trust - Morgan Stanley Real Estate Securities Portfolio at the
close of business on September 22, 2000 will be exchanged for shares of The
Universal Institutional Funds, Inc. - U.S. Real Estate Portfolio. The value
of the shares received in the exchange equals the value of the shares held
in the Van Kampen Life Investment Trust - Morgan Stanley Real Estate
Securities Portfolio as of the close of business on September 22, 2000.
This exchange of shares will not otherwise affect any contract rights.
Contract owners are free to reallocate assets located in The Universal
Institutional Funds, Inc. - U.S. Real Estate Portfolio pursuant to the
terms of the contract.
Following the exchange, contract owners who had assets in the Van Kampen
Life Investment Trust - Morgan Stanley Real Estate Securities Portfolio
will have assets in The Universal Institutional Funds, Inc. - U.S. Real
Estate Portfolio and the Van Kampen Life Investment Trust - Morgan Stanley
Real Estate Securities Portfolio will be terminated in accordance with
Delaware state law.
3. EFFECTIVE SEPTEMBER 25, 2000, ALL REFERENCES IN YOUR PROSPECTUS TO VAN
KAMPEN LIFE INVESTMENT TRUST - MORGAN STANLEY REAL ESTATE SECURITIES
PORTFOLIO ARE DELETED AND PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE
THE FOLLOWING UNDERLYING MUTUAL FUND:
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
o U.S. Real Estate Portfolio
<PAGE> 5
4. EFFECTIVE SEPTEMBER 25, 2000, THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES"
TABLE ON PAGE 7 OF YOUR PROSPECTUS IS AMENDED AS FOLLOWS:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets,
after expense reimbursement)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Total Underlying
Management Other 12b-1 Mutual Fund
Fees Expenses Fees Expenses
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Universal Institutional Funds, Inc. 0.75% 0.35% 0.00% 1.10%
----- ----- ----- -----
-- U. S. Real Estate 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 in calculating 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>
-----------------------------------------------------------------------------------------------------
Total Underlying
Management Other 12b-1 Mutual Fund
Fees Expenses Fees Expenses
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Universal Institutional Funds, Inc. 0.80% 0.35% 0.00% 1.15%
----- ----- ----- -----
-- U. S. Real Estate Portfolio
-----------------------------------------------------------------------------------------------------
</TABLE>
5. EFFECTIVE SEPTEMBER 25, 2000, "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS" ON PAGE 45 OF YOUR PROSPECTUS IS AMENDED TO READ:
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
U. S. REAL ESTATE PORTFOLIO
Investment Objective: Long-term capital growth by investing
principally in a diversified portfolio of securities of companies
operating in the real estate industry ("Real Estate Securities").
Current income is a secondary consideration. Real Estate Securities
include equity securities, including common stocks and convertible
securities, as well as non-convertible preferred stocks and debt
securities of real estate industry companies. A "real estate industry
company" is a company that derives at least 50% of its assets (marked
to market), gross income or net profits from the ownership,
construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65%
of the Fund'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. Morgan Stanley Asset Management, Inc. serves as the
Fund's investment adviser.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY
Flexible Premium Variable Universal Life Insurance Policies
Issued by Nationwide Life Insurance Company through
its Nationwide VLI Separate Account
The date of this prospectus is May 1, 2000.
--------------------------------------------------------------------------------
This prospectus contains basic information you should know about the policies
before investing.
Please read it and keep it for future reference
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE AVAILABLE UNDER THE POLICIES:
VAN KAMPEN LIFE INVESTMENT TRUST:
o Asset Allocation Portfolio (formerly Multiple Strategy Fund)
o Domestic Income Portfolio (formerly Domestic Strategic Income Fund)
o Emerging Growth Portfolio
o Enterprise Portfolio (formerly Common Stock Fund)
o Global Equity Portfolio
o Government Portfolio
o Money Market Portfolio
o Morgan Stanley Real Estate Securities Portfolio (formerly Real Estate
Securities Fund)
For all general information or to obtain FREE copies of the:
o prospectus, annual report or semi-annual report for any underlying mutual
fund; and
o any required Nationwide forms,
call:
1-800-547-7548
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 182150
COLUMBUS, OHIO 43218-2150
Material incorporated by reference to this prospectus can be found on the SEC
website at:
www.sec.gov
THIS POLICY IS NOT:
o A BANK DEPOSIT;
o ENDORSED BY A BANK OR GOVERNMENT AGENCY;
o FEDERALLY INSURED; OR
o AVAILABLE IN EVERY STATE.
The life insurance policies offered by this prospectus are flexible premium
variable universal life insurance policies (flexible premium variable adjustable
life insurance policies in Puerto Rico). They provide flexibility with the
amount and frequency of premium payments. For policies issued in New York under
a group contract, references throughout this prospectus to "policy(ies)" will
mean "certificate(s)" and "policy owners(s)" will mean "certificate owners(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.
1
<PAGE> 7
Nationwide guarantees the death benefit for as long as the policy is in force.
Nationwide guarantees to keep the policy in force so long as minimum premium
requirements have been met.
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.
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> 8
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.
BREAK POINT PREMIUM- The level annual premium at which the sales load is reduced
on a current basis.
FIXED ACCOUNT- An investment option which is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
GUIDELINE LEVEL PREMIUM- The level annual premiums required to mature the policy
under reasonable mortality and expense charges with an annual effective interest
rate of 4%. It is calculated pursuant to Rule 6e-3(T) of the Investment Company
Act of 1940.
MATURITY DATE- The policy anniversary on or next following the insured's 95th
birthday.
NATIONWIDE- Nationwide Life Insurance Company.
NET PREMIUMS- Net premiums are equal to the actual premiums minus the percent of
premium charges. The percent of premium charges are shown on the policy data
page.
SPECIFIED AMOUNT- The dollar amount used to determine the death benefit under a
policy.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units are separately maintained.
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.
3
<PAGE> 9
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.............................................
SUMMARY OF POLICY EXPENSES............................................
UNDERLYING MUTUAL FUND ANNUAL EXPENSES................................
SYNOPSIS OF THE POLICIES..............................................
NATIONWIDE LIFE INSURANCE COMPANY.....................................
INVESTING IN THE POLICY...............................................
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........................................
Minimum Requirements for Policy Issuance
Premium Payments
Pricing
POLICY CHARGES........................................................
Sales Load
Tax Expense Charges
Surrender Charges
Reductions to Surrender Charges
Monthly Cost of Insurance
Monthly Administrative Charge
Increase Charge
Mortality and Expense Risk Charge
Income Tax
SURRENDERING THE POLICY FOR CASH......................................
Surrender (Redemption)
Cash Surrender Value
Partial Surrenders
Reduction of the Specified Amount
Income Tax Withholding
VARIATION IN CASH VALUE...............................................
Error in Age or Sex
POLICY PROVISIONS.....................................................
Policy Owner
Beneficiary
Changes in Existing Insurance Coverage
OPERATION OF THE POLICY...............................................
Allocation of Net Premium and Cash Value
How the Investment Experience is Determined
Net Investment Factor
Determining the Cash Value
Transfers
RIGHT TO REVOKE.......................................................
POLICY LOANS..........................................................
Taking a Policy Loan
Effect on Investment Performance
Interest
Effect on Death Benefit and Cash Value
Repayment
ASSIGNMENT............................................................
POLICY OWNER SERVICES.................................................
Dollar Cost Averaging
DEATH BENEFIT INFORMATION.............................................
Calculations of the Death Benefit
Changes in the Death Benefit Option
Proceeds Payable on Death
Incontestability
Suicide
Maturity Proceeds
EXCHANGE RIGHTS.......................................................
GRACE PERIOD..........................................................
Reinstatement
TAX MATTERS...........................................................
Policy Proceeds
Withholding
Federal Estate and Generation-Skipping
Transfers Taxes
Non-Resident Aliens
Taxation of Nationwide
Tax Changes
LEGAL CONSIDERATIONS..................................................
STATE REGULATION......................................................
REPORTS TO POLICY OWNERS..............................................
ADVERTISING...........................................................
EXPERTS...............................................................
REGISTRATION STATEMENTS...............................................
4
<PAGE> 10
LEGAL OPINIONS........................................................
DISTRIBUTION OF THE POLICIES..........................................
ADDITIONAL INFORMATION ABOUT NATIONWIDE...............................
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS....................
APPENDIX B: ILLUSTRATIONS OF SURRENDER CHARGES........................
APPENDIX C: ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES, AND DEATH BENEFITS........................
5
<PAGE> 11
SUMMARY OF POLICY EXPENSES
Nationwide deducts certain charges from the policy. Charges are made for
administrative and sales expenses, tax expenses, providing life insurance
protection and assuming the mortality and expense risks.
Nationwide deducts a sales load and a premium expense charge for state premium
taxes from premium payments.
The sales load is guaranteed never to exceed 3.5% of each premium payment.
Currently, the sales load is reduced to 1.5% on any portion of the annual
premium paid in excess of the annual break point premium (see "Sales Load").
The charge for state premium tax is equal to 2.5% of premiums for all states
(see "Premium Expense Charge").
Nationwide deducts a mortality and expense risk charge equal to an annual rate
of 0.80% from the daily net assets of the variable account.
Nationwide deducts the following charges from the cash value of the policy:
o monthly cost of insurance charge
o monthly cost of any additional benefits provided by riders to the policy
o administrative expense charge(1)
o increase charge (applied to increases in the specified amount)(2)
o surrender charge(3).
(1) Nationwide deducts an administrative expense charge of $12.50 per month in
the first year, $5 per month in renewal years. Nationwide guarantees this charge
will never exceed $25 per month in the first year and $7.50 per month in renewal
years.
(2) The increase charge is comprised of an underwriting and administration
component of $1.50 per year per $1,000 and a sales component of $0.54 per year
per $1,000 (see "Increase Charge")
(3) For policies surrendered during the first nine policy years (see "Surrender
Charges").
For more information about any policy charge, see "Policy Charges" in this
prospectus.
6
<PAGE> 12
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of average net assets after expense reimbursement)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
MANAGEMENT OTHER 12b-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Van Kampen Life Investment Trust: Asset Allocation 0.33% 0.27% 0.00% 0.60%
Portfolio (formerly Van Kampen Life Investment
Trust: Multiple Strategy Fund)
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Domestic Income 0.01% 0.60% 0.00% 0.61%
Portfolio (formerly Van Kampen Life Investment
Trust: Domestic Strategic Income Fund)(1)
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Emerging Growth 0.67% 0.18% 0.00% 0.85%
Portfolio
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Enterprise 0.48% 0.12% 0.00% 0.60%
Portfolio (formerly Van Kampen Life Investment
Trust: Common Stock Fund)
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Global Equity 0.00% 1.20% 0.00% 1.20%
Portfolio
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Government 0.36% 0.24% 0.00% 0.60%
Portfolio
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Money Market 0.19% 0.43% 0.00% 0.62%
Portfolio(2)
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Morgan Stanley 0.97% 0.13% 0.00% 1.10%
Real Estate Securities Portfolio (formerly Van
Kampen Life Investment Trust: Real Estate
Securities Fund)
-------------------------------------------------------------------------------------------------------------
</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 in calculating 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.
(1)The ratio of expenses to average net assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by 0.01% for the year end December 31, 1999.
(2)The ratio of expenses to average net assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by 0.02% for the year end December 31, 1999.
7
<PAGE> 13
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% 0.27% 0.00% 0.77%
Portfolio (formerly Van Kampen Life Investment Trust:
Multiple Strategy Fund)
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Domestic Income 0.50% 0.60% 0.00% 1.10%
Portfolio (formerly Van Kampen Life Investment Trust:
Domestic Strategic Income Fund) (1)
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Emerging Growth 0.70% 0.18% 0.00% 0.88%
Portfolio
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Enterprise Portfolio 0.50% 0.12% 0.00% 0.62%
(formerly Van Kampen Life Investment Trust: Common
Stock Fund)
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Global Equity 1.00% 3.84% 0.00% 4.84%
Portfolio
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Government Portfolio 0.50% 0.24% 0.00% 0.74%
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Money Market 0.50% 0.43% 0.00% 0.93%
Portfolio(2)
-------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust: Morgan Stanley Real 1.00% 0.13% 0.00 1.13%
Estate Securities Portfolio (formerly Van Kampen Life
Investment Trust: Real Estate Securities Fund)
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1)The ratio of expenses to average net assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by 0.01% for the year end December 31, 1999.
(2)The ratio of expenses to average net assets do not reflect credits earned on
overnight cash balances. If these credits were reflected as a reduction of
expenses, the ratio would decrease by 0.02% for the year end December 31, 1999.
8
<PAGE> 14
SYNOPSIS OF THE POLICIES
The policy offered by this prospectus provides for life insurance coverage on
the insured. The death benefit and cash value of the policy may increase or
decrease to reflect the performance of the investment options chosen by the
policy owner (see "Death Benefit Information").
CASH SURRENDER VALUE
If the policy is terminated during the insured's lifetime, a cash surrender
value may be payable under the policy. However, there is no guaranteed cash
surrender value (see "Variation in Cash Value "). The policy will lapse without
value if the cash surrender value falls below what is needed to cover policy
charges.
PREMIUMS
The minimum initial premium for which a policy may be issued is equal to the
minimum monthly premium. The initial premium is shown on the policy data page.
Each premium payment must be at least equal to the minimum monthly premium.
Additional premium payments may be made at 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. It is a member of the Nationwide group of companies
with its home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide
is a provider of life insurance, annuities and retirement products. It is
admitted to do business in all states, the District of Columbia and Puerto Rico.
CUSTODIAN OF ASSETS
Nationwide serves as the custodian of the assets of the variable account.
OTHER CONTRACTS ISSUED BY NATIONWIDE
Nationwide does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of Nationwide.
GENERAL DISTRIBUTOR
The policies are distributed by the general distributor, Van Kampen Funds, Inc.
INVESTING IN THE POLICY
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide VLI Separate Account is a separate account that invests in the
underlying mutual fund options listed in Appendix A. Nationwide established the
separate account on August 8, 1984, pursuant to Ohio law. Although the 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.
9
<PAGE> 15
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 of the underlying mutual fund options receives
investment advice from Van Kampen Asset Management, Inc., which is paid fees for
its services by the underlying mutual funds.
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.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract 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. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
10
<PAGE> 16
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.
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.
Under exemptive and exclusionary provisions, Nationwide's general account has
not been registered under the Securities Act of 1933 and has not been registered
as an investment company under the Investment Company Act of 1940. Accordingly,
neither the general account nor any interest therein is subject to the
provisions of these Acts. Nationwide has been advised that the staff of the SEC
has not reviewed the disclosures in this prospectus relating to the fixed
account. Disclosures regarding the general account may, however, be subject to
certain generally applicable provisions of the federal securities laws
concerning the accuracy and completeness of statements made in prospectuses.
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
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.
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.
11
<PAGE> 17
Information about the Policies
MINIMUM REQUIREMENTS FOR ISSUANCE OF A POLICY
This policy provides life insurance coverage with the flexibility to vary the
amount and frequency of premium payments. Minimum requirements for policy
issuance include:
o the insured must be age 80 or younger;
o Nationwide may require satisfactory evidence of insurability
(including a medical exam); and
o a minimum specified amount $50,000 ($100,00 in Pennsylvania).
Premium Payments
Each premium payment must be at least equal to the minimum monthly premium. The
initial premium is payable in full at Nationwide's home office or to an
authorized agent of Nationwide.
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of the continuing insurance coverage is dependent upon completion of
all underwriting requirements, payment of initial premium, and delivery of the
policy while the insured is still living.
Additional premium payments may be made at any time while the policy is in
force, subject to the following conditions:
o Nationwide may require satisfactory evidence of insurability before
accepting any additional premium payment which results in an increase
in the net amount at risk;
o during the first 3 policy years, the total premium payments, less any
policy indebtedness and less any partial surrenders, less any partial
surrender fee, must be greater than or equal to the minimum premium
requirement in order to guarantee the policy remain in force. (The
minimum premium requirement is shown on the policy data page.);
o premium payments in excess of the premium limit established by the IRS
to qualify the policy as a contract for life insurance will be
refunded; and
o Nationwide may require policy indebtedness be repaid prior to
accepting any additional premium payments.
Additional premium payments or other changes to the policy may jeopardize the
policy's non-modified endowment status. Nationwide will monitor premiums paid
and other policy transactions and will notify the policy owner when non-modified
endowment contract status is in jeopardy.
PRICING
Premiums will not be priced when the New York Stock Exchange is closed or on
the following nationally recognized holidays:
o New Year's Day
o Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving
o Christmas
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
(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 may be affected since the contract owner would not have access to
their account.
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<PAGE> 18
POLICY CHARGES
SALES LOAD
Nationwide deducts a sales load from each premium payment received. It is
guaranteed not to exceed 3.5% of each premium payment. Currently, the sales load
is reduced to 1.5% on any portion of the annual premium paid in excess of the
break point premium. The break point premium is located on the policy data page.
The total sales load actually deducted from any policy will be equal to the sum
of this front-end sales load plus any sales surrender charge.
TAX EXPENSE CHARGES
A charge equal to 3.5% is deducted from all premium payments when the premium
payments are received in order to compensate Nationwide for certain
administrative expenses which are incurred by Nationwide for taxes, which
include premium or other taxes imposed by various state and local jurisdictions,
as well as federal taxes imposed under Section 848 of the Internal Revenue Code.
These tax expenses consist of two components:
(1) a tax rate of 2.25% for state and local premium or other taxes; and
(2) a tax rate of 1.25% for federal taxes.
The amount charged 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 these charges.
SURRENDER CHARGES
Nationwide deducts a surrender charge from the cash value of any policy
surrendered during the first nine years. The maximum initial surrender charge
varies by issue age, sex, specified amount and underwriting classification. The
surrender charge is calculated based on the initial specified amount.
The following tables illustrate the maximum initial surrender charge per $1,000
of initial specified amount for policies which are issued on a standard basis
(see Appendix B for specific examples).
<TABLE>
<CAPTION>
INITIAL SPECIFIED AMOUNT $50,000-$99,999
--------------------------------------------------------
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--------------------------------------------------------
<S> <C> <C> <C> <C>
25 $ 7.776 $ 7.521 $ 8.369 $ 7.818
--------------------------------------------------------
35 $ 8.817 $ 8.398 $ 9.811 $ 8.891
--------------------------------------------------------
45 $12.191 $11.396 $13.887 $12.169
--------------------------------------------------------
55 $15.636 $14.011 $18.415 $15.116
--------------------------------------------------------
65 $22.295 $19.086 $26.577 $20.641
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
INITIAL SPECIFIED AMOUNT $100,000+
--------------------------------------------------------
Issue Male Female Male Female
Age Non-Tobacco Non-Tobacco Standard Standard
--------------------------------------------------------
<S> <C> <C> <C> <C>
25 $ 5.776 $ 5.521 $ 6.369 $ 5.818
--------------------------------------------------------
35 $ 6.817 $ 6.398 $ 7.811 $ 6.891
--------------------------------------------------------
45 $ 9.691 $ 8.896 $11.387 $ 9.669
--------------------------------------------------------
55 $13.136 $11.511 $15.915 $12.616
--------------------------------------------------------
65 $21.295 $18.086 $25.577 $19.641
--------------------------------------------------------
</TABLE>
The surrender charge is comprised of two components:
o an underwriting component; and
o sales component.
The underwriting component varies by issue age in the following manner:
<TABLE>
<CAPTION>
$1,000 OF INITIAL SPECIFIED AMOUNT
-------------------------------------------------------
Issue Specified Amounts Specified Amounts
Age less than $100,000 $100,000 or more
-------------------------------------------------------
<S> <C> <C>
0-35 $6.00 $4.00
-------------------------------------------------------
36-55 $7.50 $5.00
-------------------------------------------------------
56-80 $7.50 $6.50
-------------------------------------------------------
</TABLE>
The underwriting component is designed to cover the administrative expenses
associated with underwriting and issuing policies, including the costs of:
o processing applications;
o conducting medical exams;
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<PAGE> 19
o determining insurability and the insured's underwriting class; and
o establishing policy records.
The remainder of the surrender charge that is not attributable to the
underwriting component represents the sales component. In no event will this
component exceed 26 1/2% of the lesser of the Guideline Level Premium required
in the first year or the premiums actually paid in the first year. The purpose
of the sales component is to reimburse Nationwide for expenses incurred in the
distribution of the policies.
The surrender charge may be insufficient to recover certain expenses related to
the sale of the policies. Unrecovered expenses are borne by Nationwide's general
assets which may include profits, if any, from the mortality and expense risk
charge. Additional premiums and/or income earned on assets in the variable
account have no effect on these charges.
REDUCTIONS TO SURRENDER CHARGES
Surrender charges are reduced in subsequent policy years as follows:
<TABLE>
<CAPTION>
---------------------------------------------------
COMPLETED POLICY SURRENDER CHARGE AS A % OF
YEARS INITIAL SURRENDER CHARGES
---------------------------------------------------
<S> <C>
0 100%
---------------------------------------------------
1 100%
---------------------------------------------------
2 90%
---------------------------------------------------
3 80%
---------------------------------------------------
4 70%
---------------------------------------------------
5 60%
---------------------------------------------------
6 50%
---------------------------------------------------
7 40%
---------------------------------------------------
8 30%
---------------------------------------------------
9+ 0%
---------------------------------------------------
</TABLE>
The surrender charge is reduced by any partial surrender charge actually paid on
previous decreases in specified amount.
For the initial specified amount, a completed policy year (in the chart above)
is measured from the issue date. For any increase in specified amount, a
completed policy year (in the chart above) is measured from the effective date
of the increase.
Special guaranteed maximum surrender charges apply in Pennsylvania (see
Appendix B).
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,
each calculated at the beginning of the policy month. This deduction is charged
proportionately to the cash value in each sub-account and the fixed account.
If Death Benefit Option 1 is in effect and there have been increases in the
specified amount, then the cash value will first be considered a part of the
initial specified amount. If the cash value exceeds the initial specified
amount, it will then be considered a part of the additional increases in
specified amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will not exceed those guaranteed in the policy.
Guaranteed cost of insurance rates for policies issued on specified amounts less
than $100,000 are based on the 1980 Commissioner's Extended Term Mortality
Table, Age Last Birthday (1980 CET). Guaranteed cost of insurance rates for
policies issued on specified amounts $100,000 or more are based on the 1980
Commissioner's Standard Ordinary Mortality Table, Age Last Birthday (1980 CSO).
Guaranteed cost of insurance rates for policies issued on a substandard basis
are based on appropriate percentage multiples of the guaranteed cost of
insurance rate on a standard basis. These mortality tables are sex distinct. In
addition, separate mortality tables will be used for tobacco and non-tobacco.
For policies issued in Texas on a standard basis ("Special Class - Standard" in
Texas), guaranteed cost of insurance rates for specified amounts less than
$100,000 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
14
<PAGE> 20
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 "non-medical" basis to certain categories of individuals. Due to
the underwriting criteria established for policies issued on a non-medical
basis, actual rates will be higher than the current cost of insurance rates
being charged under policies that are medically underwritten.
MONTHLY ADMINISTRATIVE CHARGE
Nationwide deducts an administrative expense charge proportionately to the cash
value in each sub-account and the fixed account on a monthly basis. This charge
reimburses Nationwide for certain administrative expenses related to maintenance
of the policies including accounting and record keeping, 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
$12.50 per month in the first year, $5 per month in renewal years. Nationwide
may, at its sole discretion, increase this charge. However, Nationwide
guarantees this charge will never exceed $25 per month in the first year and
$7.50 per month in renewal years.
INCREASE CHARGE
The increase charge is deducted from cash value when the policy owner requests
an increase in the specified amount. It is used to cover the cost of
underwriting the requested increase and processing and distribution expenses
related to the increase.
The increase charge is comprised of two components: underwriting and
administration; and sales. The underwriting and administration component is
$1.50 per year per $1,000. The sales component is equal to $0.54 per year per
$1,000. Nationwide does not expect to realize a profit from this charge.
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.
Nationwide deducts a mortality and expense risk charge from the variable account
on a daily basis. The charge is equivalent to an annual effective rate of 0.80%
of the daily net assets of the variable account. Each policy anniversary
starting on the 10th anniversary, if the cash surrender value is $25,000 or
more, the mortality and expense risk charge is reduced to 0.50% on an annual
basis. Policy owners receive quarterly and annual statements, advising policy
owners of the cancellation of accumulation units for mortality and expense risk
charges.
All charges are guaranteed. Nationwide may realize a profit from policy charges.
INCOME TAX
No charge is assessed to policy owners for income taxes incurred by Nationwide
as a result of the operations of the sub-accounts. However, Nationwide reserves
the right to assess a charge for income taxes against the variable account if
income taxes are incurred.
SURRENDERING THE POLICY FOR CASH
SURRENDER (REDEMPTION)
Policies may be surrendered for the cash surrender value any time while the
insured is living. The cancellation will be effective as of the date Nationwide
receives the policy accompanied by a signed, written request for cancellation.
Nationwide may require the policy owner's signature to be guaranteed by a member
firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock
15
<PAGE> 21
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 one year, the policy owner may request a
partial surrender.
Partial surrenders are permitted if they satisfy the following requirements:
1) the minimum partial surrender is $500;
2) partial surrenders may not reduce the specified amount to less than
$50,000;
3) after a partial surrender, the cash surrender value is greater than
$500 or an amount equal to three times the current monthly deduction
if higher;
4) maximum total partial surrenders in any policy year are limited to 10%
of the total premium payments. Currently, this requirement is waived
beginning in the 15th year if the cash surrender value is $10,000 or
more after the withdrawal; and
5) 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 surrender amounts must be deducted
first from the sub-accounts. Deductions from the fixed account are made only if
there is insufficient amounts available in the sub-accounts. Nationwide reserves
the right to deduct a $25 fee from the partial surrender amount.
Surrenders charges are waived for partial surrenders that satisfy the above
conditions. Certain partial surrenders may result in currently taxable income
and tax penalties (see "Tax Matters").
REDUCTION OF THE SPECIFIED AMOUNT
When a partial surrender is made, in addition to the cash value being reduced by
the amount of the partial surrender, the specified amount may also be reduced,
(except in the case of a preferred partial surrender.) The reduction to the
specified amount will be made in the following order:
1) against the most recent increase in the specified amount;
2) against the next most recent increases in the specified amount in
succession; and
3) against the specified amount under the original application.
Nationwide reserves the right to deduct a fee from the partial surrender amount.
The maximum fee is $25.00. 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
16
<PAGE> 22
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 death benefit and cash
value will be adjusted. The cash value will be adjusted to reflect the cost of
insurance charges on the correct age and sex from the policy date.
POLICY PROVISIONS
POLICY OWNER
While the insured is living, all rights in this policy are vested in the policy
owner named in the application or as subsequently changed, subject to
assignment, if any.
The policy owner may name a contingent policy owner or a new policy owner while
the insured is living. Any change must be in a written form satisfactory to
Nationwide and recorded at Nationwide's home office. Once recorded, the change
will be effective when signed. The change will not affect any payment made or
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.
17
<PAGE> 23
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 cash surrender value is sufficient to continue the policy in force
for at least 3 months; and
5. age limits are the same as for a new issue.
Any approved increase will have an effective date of the monthly anniversary day
on or next following the date Nationwide approves the supplemental application.
Nationwide reserves the right to limit the number of specified amount increases
to one each policy year.
Specified Amount Decreases
After the first policy year, the policy owner may also request a decrease to the
specified amount. Any approved decrease will be effective on the monthly
anniversary day on or next following the date Nationwide receives the request.
Any such decrease shall reduce insurance in the following order:
1. against insurance provided by the most recent increase;
2. against the next most recent increases successively; and
3. against insurance provided under the original application.
Nationwide reserves the right to limit the number of specified amount decreases
to one each policy year. Nationwide will refuse a request for a decrease which
would:
1. reduce the specified amount to less than $50,000; or
2. disqualify the policy as a contract for life insurance.
OPERATION OF THE POLICY
ALLOCATION OF NET PREMIUM AND CASH VALUE
Nationwide allocates premium payments to sub-accounts or the fixed account, as
instructed by policy owners. Shares of the underlying mutual funds allocated to
the sub-accounts are purchased at net asset value, then converted into
accumulation units. All percentage allocations must be in whole numbers, and
must be at least 1%. The sum of allocations must equal 100%. Future 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
18
<PAGE> 24
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 for any valuation period is determined by dividing (a) by
(b) and subtracting (c) from the result where:
(a) is:
(1) the net asset value per share of the underlying mutual fund held in
the sub-account as of the end of the current valuation period; and
(2) the per share amount of any dividend or income distributions made by
the underlying mutual fund (if the "ex-dividend" date occurs during
the current valuation period);
(b) is the net asset value per share of the underlying mutual fund determined
as of the end of the immediately preceding valuation period; and
(c) is a factor representing the daily mortality and expense risk charge. This
factor is equal to an annual rate of 0.80% of the daily net assets of the
variable account. Each policy anniversary starting on the 10th the
mortality and expense risk charge is reduced to 0.50% on an annual basis of
the daily net assets of the variable account if the cash surrender value is
$25,000 or more on each anniversary.
The net investment factor may be greater or less than one; therefore, the value
of an accumulation unit may increase or decrease. Currently, Nationwide does not
maintain a tax reserve with respect to the policies since income with respect to
the underlying mutual funds is not taxable to Nationwide or the variable
account. Nationwide reserves the right to adjust the calculation of the net
investment factor to reflect a tax reserve should such income of other items
become taxable to Nationwide. 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 the
mortality and expense risk charge, and any charge or credit for tax reserves.
DETERMINING THE CASH VALUE
The cash value is the sum of the value of all variable account accumulation
units attributable to the policy plus amounts credited to the fixed account and
the policy loan account.
The number of accumulation units credited to each sub-account is determined by
dividing the net amount allocated to the sub-account by the accumulation unit
value for the sub-account for the valuation period during which the premium is
received by Nationwide. In the event 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:
o Nationwide reserves the right to restrict transfers between the fixed
account and the sub-accounts to one per policy year;
o transfers made to the fixed account may not be made in the first policy
year;
19
<PAGE> 25
o Nationwide reserves the right to restrict transfers from the fixed account
to 25% of the cash value attributable to the fixed account; and
o 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:
o 10 days after receiving the policy;
o 45 days after signing the application; or
o 10 days after Nationwide delivers a Notice of Right of Withdrawal.
The policy can be mailed to the registered representative who sold it, or
directly to Nationwide.
Returned policies are deemed void from the beginning. Nationwide will refund the
amount prescribed by the state in which the policy was issued within seven days
after it receives the policy. This right varies by state.
POLICY LOANS
TAKING A POLICY LOAN
The policy owner may take a policy loan at any time after the first policy year
using the policy as security. Maximum policy indebtedness is limited to 90% of
the cash value of the variable account, less any surrender charges, less
interest due on the next policy anniversary.
For policies issued in Texas, maximum policy indebtedness is limited to 90% of
the cash value in the sub-accounts and 100% of the cash value in the fixed
account, less surrender charges and interest due on the next policy anniversary.
Nationwide will not grant a loan for an amount less than $200. Policy
indebtedness will be deducted from the death benefit, cash surrender value upon
surrender or the maturity proceeds.
Any request for a policy loan must be in written form. The request must be
signed and, where permitted, the signature guaranteed by a member firm of the
New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchanges, or
by a commercial bank or a savings and loan which is a member of the Federal
Deposit Insurance Corporation. Certain policy loans may result in currently
taxable income and tax penalties.
A policy owner considering the use of policy loans in connection with his or her
retirement income plan should consult his or her personal tax adviser regarding
potential tax consequences that may arise if necessary payments are not made to
keep the policy from lapsing. The amount of the payments necessary to prevent
the policy from lapsing will increase with age.
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 5.1%
during policy years 2 through 14 and an annual effective rate of 6% during the
15th and subsequent policy
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years. Nationwide guarantees the rate will never be lower than 5.1%. 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.
If it is determined that such loans will be treated, as a result of the
differential between the interest crediting rate and the loan interest rate, as
taxable distributions under any applicable ruling, regulation, or court
decision, Nationwide retains the right to increase the net cost (by decreasing
the interest crediting rate) on all subsequent policy loans to an amount that
would result in the transaction being treated as a loan under federal tax law.
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 or at the time of loan repayment. It will be
allocated according to the fund allocation factors in effect at the time of the
transfer.
Interest is charged daily and is payable at the end of each policy year or at
the time of loan repayment. Unpaid interest will be added to the existing policy
indebtedness as of the due date and will be charged interest at the same rate as
the rest of the indebtedness.
Whenever the total policy indebtedness exceeds the cash value less any surrender
charges, Nationwide will send a notice to the policy owner and the assignee, if
any. The policy will terminate without value 61 days after the mailing of the
notice unless a sufficient repayment is made during that period. A repayment is
sufficient if it is large enough to reduce the total policy indebtedness to an
amount equal to the total cash value less any surrender charges plus an amount
sufficient to continue the policy in force for 3 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 $50. Nationwide reserves
the right to require that any loan repayments resulting from policy loans
transferred from the fixed account must be first allocated to the fixed account.
ASSIGNMENT
While the insured is living, the policy owner may assign his or her rights in
the policy. The assignment must be in writing, signed by the policy owner and
recorded at Nationwide's home office. Prior to being recorded, assignments will
not affect any payments made or actions taken by Nationwide. Nationwide is not
responsible for any assignment not submitted for recording, nor is Nationwide
responsible for the sufficiency or validity of any assignment. Assignments are
subject to any indebtedness owed to Nationwide before being recorded.
POLICY OWNER SERVICES
DOLLAR COST AVERAGING
Dollar cost averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from certain sub-accounts and the fixed account into
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other sub-accounts. Nationwide does not guarantee that this program will result
in profit or protect policy owners from loss.
Policy owners direct Nationwide to automatically transfer specified amounts from
the fixed account and the Money Market Portfolio.
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 policy owner selects the specified amount.
While the policy is in force, the death benefit will never be less than the
specified amount. The death benefit may vary with the cash value of the policy,
which depends on investment performance.
The policy owner may choose one of two death benefit options:
OPTION 1: The death benefit will be the greater of the specified amount or the
applicable percentage of cash value. Under Option 1 the amount of the death
benefit will ordinarily not change for several years to reflect the investment
performance and may not change at all. If investment performance is favorable,
the amount of death benefit may increase. To see how and when investment
performance will begin to affect death benefits, please see the illustrations.
OPTION 2: The death benefit will be the greater of the specified amount plus the
cash value, or the applicable percentage of cash value and will vary directly
with the investment performance.
The term "applicable percentage" means:
1. 250% when the insured has attained age 40 or less at the beginning of
a policy year; and
2. the percentage shown in the "Applicable Percentage of Cash Value"
Table when the insured is above age 40.
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<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>
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 the initial
specified amount after the policy has been in force during the insured's
lifetime for 2 years from the policy date. For any increase in specified amount
requiring evidence of insurability, Nationwide will not contest payment of the
death proceeds based on such an increase after it has been in force during the
insured's lifetime for 2 years from its effective date.
SUICIDE
If the insured dies by suicide, while sane or insane, within two years from the
policy date, Nationwide will pay no more than the sum of the premiums paid, less
any indebtedness. If the
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insured dies by suicide, while sane or insane, within two years from the date an
application is accepted for an increase in the specified amount, Nationwide will
pay no more than the amount paid for the additional benefit.
MATURITY PROCEEDS
The maturity date is the policy anniversary on or next following the insured's
95th birthday. If the policy is still in force, maturity proceeds are payable to
the policy owner on the maturity date. Maturity proceeds are equal to the amount
of the policy's cash value, less any indebtedness.
EXCHANGE RIGHTS
The policy owner may exchange the policy for a flexible premium adjustable life
insurance policy offered by Nationwide on the policy date. The benefits for the
new policy will not vary with the investment experience of a separate account.
The exchange must be elected within 24 months from the policy date. No evidence
of insurability will be required.
The policy owner and beneficiary(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
First Three Policy Years
The policies will not lapse during the first three policy years provided that on
each monthly anniversary day (1) is greater than or equal to (2), where:
(1) is the sum of all premiums paid to date minus any policy indebtedness,
minus any partial surrenders, and minus any partial surrender fee; and
(2) is the sum of monthly minimum premiums required since the minimum
premium, including the monthly minimum premium for the current monthly
anniversary day.
If (1) is less than (2) and the cash surrender value is less than zero, a grace
period of 61 days from the monthly anniversary day will be allowed for the
payment of sufficient premium to satisfy the minimum premium requirement. If
sufficient premium is not paid by the end of the grace period, the policy will
lapse without value. In any event, the policy will not lapse as long as there is
a positive cash surrender value.
Policy Years Four and After
If the cash surrender value on a monthly anniversary day is not sufficient to
cover the current policy charges, a grace period of 61 days from the monthly
anniversary day will be allowed for the payment of sufficient premium to cover
the current policy charges due, plus an amount equal to three times the current
monthly deduction.
All Policy Years
Nationwide will send a notice at the start of the grace period to the policy
owner's last known address. If the insured dies during the grace period,
Nationwide will pay the death proceeds.
REINSTATEMENT
If the grace period ends and the policy owner has neither paid the required
premium nor surrendered the policy for its cash surrender value, the policy
owner may reinstate the policy by:
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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 an amount of premium equal to the minimum monthly premiums
missed since the beginning of the grace period, if the policy
terminated to the first 3 policy years;
4. paying sufficient premium to cover all policy charges that were due
and unpaid during the grace period if the policy terminated in the
fourth or later policy year;
5. paying sufficient premium to keep the policy in force for 3 months
from the date of reinstatement; and
6. paying or reinstating any indebtedness against the policy which
existed at the end of the grace period.
The effective date of a reinstated policy will be the monthly anniversary day on
or next following the date the application for reinstatement is approved by
Nationwide. If the policy is reinstated, the cash value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the lesser of:
1. the cash value at the end of the grace period; or
2. the surrender charge for the policy year in which the policy was
reinstated.
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.
It may not be to the policy owner's advantage to replace an existing insurance
policy with the policy described in this prospectus, or to purchase a policy
described in this prospectus if another policy is already owned.
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
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<PAGE> 31
jeopardy. If a policy is not a modified endowment contract, a cash distribution
during the first 15 years after a policy is issued which causes a reduction in
death benefits may still become fully or partially taxable to the policy owner
pursuant to Section 7702(f)(7) of the Internal Revenue Code. The policy owner
should carefully consider this potential effect and seek further information
before initiating any changes in the terms of the policy. Under certain
conditions, a policy may become a modified endowment as a result of a material
change or a reduction in benefits as defined by Section 7702A(c) of the Internal
Revenue Code.
In addition to meeting the tests required under Section 7702, Section 817(h) of
the Internal Revenue Code requires that the investments of separate accounts
such as the variable account be adequately diversified. Regulations under 817(h)
provide that a variable life policy that fails to satisfy the diversification
standards will not be treated as life insurance unless such failure was
inadvertent, is corrected, and the policy owner or Nationwide pays an amount to
the IRS. The amount will be based on the tax that would have been paid by the
policy owner if the income, for the period the policy was not diversified, had
been received by the policy owner.
If the failure to diversify is not corrected in this manner, the policy owner
will be deemed the owner of the underlying securities and taxed on the earnings
of his or her account.
Representatives of the IRS have suggested, from time to time, that the number of
underlying mutual funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of underlying mutual funds, transfers between
underlying mutual funds, exchanges of underlying mutual funds or changes in
investment objectives of underlying mutual funds such that the policy would no
longer qualify as life insurance under Section 7702 of the Internal Revenue
Code, Nationwide will take whatever steps are available to remain in compliance.
Nationwide will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the sub-account investments
to remain in compliance.
A total surrender or cancellation of the policy by lapse or the maturity of the
policy on its maturity date may have adverse tax consequences. If the amount
received by the policy owner plus total policy indebtedness exceeds the premiums
paid into the policy, the excess generally will be treated as taxable income,
regardless of whether or not the policy is a modified endowment contract.
WITHHOLDING
Distributions of income from a modified endowment contract are subject to
federal income tax withholding; however, the recipient may elect not to have the
withholding taken from the distribution. A distribution of income from a
modified endowment contract may be subject to mandatory back-up withholding
(which cannot be waived). The mandatory back-up withholding rate is 31% of the
income that is distributed and will arise 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 2000, 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
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<PAGE> 32
or for the benefit of the insured's estate; or (2) the insured held any
"incident of ownership" in the policy at death or at any time within three years
of death. An incident of ownership is, in general, any right that may be
exercised by the policy owner, such as the right to borrow on the policy, or the
right to name a new beneficiary.
If the policy owner (whether or not he or she is the insured) transfers
ownership of the policy to another person, such transfer may be subject to a
federal gift tax. In addition, if such policy owner transfers the policy to
someone two or more generations younger than the policy owner, the transfer may
be subject to the federal generation-skipping transfer tax ("GSTT"), the taxable
amount being the value of the policy.
Similarly, if the beneficiary is two or more generations younger than the
insured, the payment of the death proceeds at the death of the insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the U.S.
Treasury Department, Nationwide may be required to withhold a portion of the
death proceeds and pay them directly to the IRS as the GSTT liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes.
The tax rate is a flat rate equal to the maximum estate tax rate (currently
55%), and there is a provision for an aggregate $1 million exemption. Due to the
complexity of these rules, the policy owner should consult with counsel and
other competent advisors regarding these taxes.
NON-RESIDENT ALIENS
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
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.
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<PAGE> 33
Nationwide does not initially expect to incur any federal income tax liability
that would be chargeable to the variable account. Based upon these expectations,
no charge is currently being made against the variable account for federal
income taxes. If, however, Nationwide determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the variable account.
Nationwide may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
TAX CHANGES
The foregoing discussion, which is based on Nationwide's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice.
The Internal Revenue Code has been subjected to numerous amendments and changes,
and it is reasonable to believe that it will continue to be revised. The United
States Congress has, in the past, considered numerous legislative proposals
that, if enacted, could change the tax treatment of the policies. It is
reasonable to believe that such proposals, and future proposals, may be enacted
into law. In addition, the U.S. Treasury Department may amend existing
regulations, issue new regulations, or adopt new interpretations of existing law
that may 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 advisor.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from premiums made on or after
August 1, 1983. The policies offered by this prospectus are based upon actuarial
tables which distinguish between men and women. Thus the policies provide
different benefits to men and women of the same age. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris on any employment related insurance or benefit program before
purchasing this policy.
STATE REGULATION
Nationwide is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering the operation of
Nationwide for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine Nationwide's contract
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<PAGE> 34
liabilities and reserves so that the Insurance Department may certify the items
are correct. Nationwide's books and accounts are subject to review by the
Insurance Department at all times and a full examination of its operations is
conducted periodically by the National Association of Insurance Commissioners.
Such regulation does not, however, involve any supervision of management or
investment practices or policies. In addition, Nationwide is subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
REPORTS TO POLICY OWNERS
Nationwide will mail to the policy owner at the last known address of record:
o an annual statement containing: the amount of the current death
benefit, cash value, cash surrender value, premiums paid, monthly
charges deducted, amounts invested in the fixed account and the
sub-accounts, and policy indebtedness;
o annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must be sent to
the underlying mutual fund beneficial shareholders as required by the
rules under the Investment Company Act of 1940 for the variable
account; and
o statements of significant transactions, such as changes in specified
amount, changes in death benefit options, changes in future premium
allocations, transfers among sub-accounts, premium payments, loans,
loan repayments, reinstatement and termination.
ADVERTISING
Nationwide is ranked and rated by independent financial rating services,
including Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of
Nationwide. The ratings are not intended to reflect the investment experience or
financial strength of the variable account. Nationwide may advertise these
ratings from time to time. In addition, Nationwide may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend Nationwide or the policies. Furthermore,
Nationwide may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits relating to life insurance and annuity
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced 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 sought to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that 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, motions to
dismiss the complaint filed by Nationwide and American
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<PAGE> 35
Century. The remaining claims against Nationwide allege securities fraud, common
law fraud, civil conspiracy, and breach of contract. The District Court, on
December 2, 1998, issued an order denying plaintiffs' motion for class
certification and the appeals court declined to review the order denying class
certification upon interlocutory appeal. On June 11, 1999, the District Court
denied the plaintiffs' motion to amend their complaint and reconsider class
certification. In January 2000, Nationwide and American Century settled this
lawsuit now limited to the claims of the two named plaintiffs. On February 9,
2000, the court dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was 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). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the court denied the motion to
dismiss the amended complaint filed by Nationwide and other named defendants.
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.
The general distributor, Van Kampen Funds, Inc., is not engaged in any
litigation of any material nature.
EXPERTS
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
REGISTRATION STATEMENT
A Registration Statement has been filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, with respect to the
policies offered hereby. This prospectus does not contain all the information
set forth in the Registration Statement and amendments thereto and exhibits
filed as a part thereof, to all of which reference is hereby made for further
information concerning the variable account, Nationwide, and the policies
offered hereby. Statements contained in this prospectus as to the content of
policies and other legal instruments are summaries. For a complete statement of
the terms thereof, reference is made to such instruments as filed.
DISTRIBUTION OF THE POLICIES
The policies will be sold by licensed insurance agents in those states where the
policies may lawfully be sold. Agents are registered representatives of broker
dealers registered under the Securities Exchange Act of 1934 who are member
firms of the National Association of Securities Dealers, Inc. ("NASD"). The
policies will be distributed by the General Distributor, Van Kampen Funds, Inc.
Gross first year commissions plus any expense allowance payments paid by
Nationwide on the sale of these policies provided by the General Distributor
will not exceed 80% of the target premium plus 4% of any excess premium
payments. Gross renewal commissions in years 2 through 10 paid by Nationwide
will not exceed 4% of actual premium payment, and will not exceed 1% in policy
years 11 and thereafter.
30
<PAGE> 36
OFFICERS
VAN KAMPEN FUNDS INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Richard F. Powers III Chairman & Chief Executive Officer Oakbrook Terrace, IL
John H. Zimmerman III President Oakbrook Terrace, IL
A. Thomas Smith III Executive Vice President, General
Counsel, and Secretary Oakbrook Terrace, IL
Steven M. Massoni Executive Vice President Oakbrook Terrace, IL
William R. Rybak Executive Vice President, Chief
Financial Officer & Treasurer Oakbrook Terrace, IL
Michael H. Santo Executive Vice President, Chief
Operations & Technology Officer Oakbrook Terrace, IL
Colette M. Saucedo Executive Vice President & Chief
Administrative Officer Houston, TX
David Michael Swanson Executive Vice President & Chief
Marketing Officer Oakbrook Terrace, IL
Laurence J. Althoff Senior Vice President & Controller Oakbrook Terrace, IL
Don J. Andrews Senior Vice President & Chief
Compliance Officer Oakbrook Terrace, IL
Sara Louise Badler Senior Vice President, Deputy General
Counsel & Assistant Secretary Oakbrook Terrace, IL
James J. Boyne Sr. Vice President, Deputy General
Counsel & Assistant Secretary Oakbrook Terrace, IL
Glenn M. Cackovit Sr. Vice President 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
Eric J. Hargens Sr. Vice President Oakbrook Terrace, IL
Dominic C. Martellaro Sr. Vice President Oakbrook Terrace, IL
Carl E. Mayfield Sr. Vice President Lakewood, CO
Mark R. McClure Sr. Vice President Oakbrook Terrace, IL
Robert F. Muller, Jr. Sr. Vice President Houston, TX
Walter E. Rein Sr. Vice President Oakbrook Terrace, IL
James J. Ryan Sr. Vice President Oakbrook Terrace, IL
Frederick Shepherd Sr. Vice President Houston, TX
Robert S. West Sr. Vice President Oakbrook Terrace, IL
Weston B. Wetherell Sr. Vice President & Asst. Secretary Oakbrook Terrace, IL
Patrick J. Woelfel Sr. Vice President Oakbrook Terrace, IL
Edward G. Wood, III Sr. Vice President & Chief Operating
Officer Oakbrook Terrace, IL
James Robert Yount Sr. Vice President Coto De Caza, CA
Patricia A. Bettlach 1st Vice President Chesterfield, MO
Gregory Heffington 1st Vice President Ft. Collins, CO
David S. Hogaboom 1st Vice President Oakbrook Terrace, IL
Maura A. McGrath 1st Vice President New York, NY
Thomas Rowley 1st Vice President Oakbrook Terrace, IL
</TABLE>
31
<PAGE> 37
<TABLE>
<S> <C> <C>
Andrew J. Scherer 1st Vice President Oakbrook Terrace, IL
James D. Stevens 1st Vice President North Andover, MA
James K. Ambrosio Vice President Massapequa, NY
Brian P. Arcara Vice President Buffalo, NY
Timothy R. Armstrong Vice President Wellington, FL
Matthew T. Baker Vice President Oakbrook Terrace, IL
Shakeel Anwar Barkat Vice President Annapolis, MD
Scott C. Bemstiel Vice President Plainsboro, NJ
Carol S. Biegel Vice President Oakbrook Terrace, IL
Christopher M. Bisaillon Vice President Oakbrook Terrace, IL
William Edward Bond Vice President New York, NY
Michael P. Boos Vice President Oakbrook Terrace, IL
Robert C. Brooks Vice President Oakbrook Terrace, IL
Elizabeth M. Brown Vice President Houston, TX
Michael Winston Brown Vice President Colleyville, TX
William F. Burke, Jr. Vice President Mendham, NJ
Loren Burket Vice President Plymouth, MN
Juanita E. Buss Vice President Kennesaw, GA
Christine Cleary Byrum Vice President Tampa, FL
Richard J. Charlino Vice President Houston, TX
Deanne Margaret Chiaro Vice President Oakbrook Terrace, IL
Scott A. Chriske Vice President Plano, TX
German Clavijo Vice President Atlanta, GA
Dominick Cogliandro Vice President & Asst. Treasurer New York, NY
Michael Colston Vice President Louisville, KY
Kevin J. Connors Vice President Oakbrook Terrace, IL
Gina M. Costello Vice President & Asst. Secretary Oakbrook Terrace, IL
Suzanne Cummings Vice President Oakbrook Terrace, IL
Michael E. Eccleston Vice President Oakbrook Terrace, IL
William J. Fow Vice President Redding, CT
Charles Friday Vice President Gibsonia, PA
Kyle D. Haas Vice President Oakbrook Terrace, IL
Daniel Hamilton Vice President Austin, TX
John G. Hansen Vice President Oakbrook Terrace, IL
Michael D. Hibsch Vice President Oakbrook Terrace, IL
Susan J. Hill Vice President & Senior Attorney Oakbrook Terrace, IL
Thomas R. Hindelang Vice President Gilbert, AZ
Bryn M. Hoggard Vice President Houston, TX
Michelle Huber Vice President Oakbrook Terrace, IL
Michael B. Hughes Vice President Oakbrook Terrace, IL
Lowell Jackson Vice President Norcross, GA
Kevin G. Jajuga Vice President Baltimore, MD
Laurie L. Jones Vice President Houston, TX
Robert Daniel Kendall Vice President Oakbrook Terrace, IL
Michael C. Kinney Vice President Oakbrook Terrace, IL
Dana R. Klein Vice President Oakbrook Terrace, IL
Frederick Kohly Vice President Miami, FL
Patricia D. Lathrop Vice President Tampa, FL
Brian Laux Vice President Staten Island, NY
</TABLE>
<PAGE> 38
<TABLE>
<S> <C> <C>
Tony E. Leal Vice President Houston, TX
S. William Lehew III Vice President Charlotte, NC
Ivan R. Lowe Vice President Houston, TX
Richard M. Lundgren Vice President Oakbrook Terrace, IL
Linda S. MacAyeal Vice President & Senior Attorney Oakbrook Terrace, IL
Kevin S. Marsh Vice President Bellevue, WA
Brooks D. McCartney Vice President Issaquah, WA
Anne Therese McGrath Vice President Los Gatos, CA
John Mills Vice President Kenner, LA
Stuart R. Moehlman Vice President Houston, TX
Carin Elizabeth Morgan Vice President Oakbrook Terrace, IL
Ted Morrow Vice President Plano, TX
Lance O'Brian Murphy Vice President Houston, TX
Peter Nicholas Vice President Beverly, MA
James A. O'Brien Vice President New York, NY
Allyn Maureen O'Connor Vice President & Assc. General Counsel Oakbrook Terrace, IL
Gregory S. Parker Vice President Houston, TX
Christopher Petrungaro Vice President Oakbrook Terrace, IL
Richard J. Poli Vice President Dowington
Ronald E. Pratt Vice President Marietta, GA
Theresa Marie Renn Vice President Oakbrook Terrace, IL
Kevin Wayne Reszel Vice President Oakbrook Terrace, IL
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
Heather R. Sabo Vice President Richmond, VA
Thomas J. Sauerborn Vice President New York, NY
Diane Saxon Vice President & Assistant Treasurer Oakbrook Terrace, IL
Stephanie Scarlata Vice President Bedford Corners, NY
Timothy M. Scholten Vice President Oakbrook Terrace, IL
Ronald J. Schuster Vice President Tampa, FL
Jeffrey M. Scott Vice President Oakbrook Terrace, IL
Gwen L. Shaneyfalt Vice President Oakbrook Terrace, IL
Jeffrey C. Shirk Vice President Swampscott, MA
Traci T. Sorenson Vice President Oakbrook Terrace, IL
Darren D. Stabler Vice President Phoenix, AZ
Christopher J. Staniforth Vice President Leawood, KS
Richard Stefanec Vice President Los Angles, CA
William C. Strafford Vice President Granger, IN
Charles S. Thompson Vice President Oakbrook Terrace, IL
John F. Tierney Vice President Oakbrook Terrace, IL
Curtis L. Ulvestad Vice President Red Wing, MN
Brett Alan VanBortel Vice President Oakbrook Terrace, IL
Larry Brian Vickrey Vice President Houston, TX
Daniel B. Waldron Vice President Oakbrook Terrace, IL
Jeff Warland Vice President Oakbrook Terrace, IL
Robert A. Watson Vice President Oakbrook Terrace, IL
Sharon M. Wells Coicou Vice President New York, NY
</TABLE>
33
<PAGE> 39
<TABLE>
<S> <C> <C>
Frank L. Wheeler Vice President Oakbrook Terrace, IL
Harold Whitworth, III Vice President Oakbrook Terrace, IL
Joel John Wilczewski Vice President Oakbrook Terrace, IL
Thomas M. Wilson Vice President Oakbrook Terrace, IL
Barbara A. Withers Vice President Oakbrook Terrace, IL
David M. Wynn Vice President Phoenix, AZ
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
Billie J. Bronaugh Asst. Vice President Houston, TX
Lynn Chadderton Asst. Vice President Valnco, FL
Phillip C. Ciulla Asst. Vice President Oakbrook Terrace, IL
Amy Cooper Asst. Vice President Oakbrook Terrace, IL
Paula M. Duerr Asst. Vice President Oakbrook Terrace, IL
Tammy Echevarria-Davis Asst. Vice President Oakbrook Terrace, IL
Walter C. Gray Asst. Vice President Houston, TX
Nancy Johannsen Asst. Vice President Oakbrook Terrace, IL
Thomas G. Johnson Asst. Vice President New York, NY
Tara Gay Jones Asst. Vice President Oakbrook Terrace, IL
Robin R. Jordan Asst. Vice President Oakbrook Terrace, IL
Holly Kay Lieberman Asst. Vice President Oakbrook Terrace, IL
Gregory Todd Mino Asst. Vice President Oakbrook Terrace, IL
Barbara Novak Asst. Vice President Oakbrook Terrace, IL
Christopher Perozek Asst. Vice President Oakbrook Terrace, IL
Christine K. Putong Asst. Vice President & Asst. Secretary Oakbrook Terrace, IL
Leah Richardson Asst. Vice President 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
David T. Saylor Asst. Vice President Oakbrook Terrace, IL
Katherine P. Scherer Asst. Vice President Oakbrook Terrace, IL
Heather K. Schmitt Asst. Vice President Oakbrook Terrace, IL
Lisa Schultz Asst. Vice President Oakbrook Terrace, IL
Laurel H. Shipes Asst. Vice President Oakbrook Terrace, IL
Lauren B. Sinai Asst. Vice President Oakbrook Terrace, IL
Scott Stevens Asst. Vice President Oakbrook Terrace, IL
Kristen L. Transier Asst. Vice President Houston, TX
Damienne C. Trippiedi Asst. Vice President Oakbrook Terrace, IL
Michael Trizil Asst. Vice President Oakbrook Terrace, IL
David H. Villarreal Asst. Vice President Oakbrook Terrace, IL
Judy W. Woolley Asst. Vice President Houston, TX
Cathy Napoli Assistant Secretary Oakbrook Terrace, IL
John Browning Officer Oakbrook Terrace, IL
Leticia George Officer Houston, TX
William D. McLaughlin Officer Houston, TX
Rebecca Newman Officer Houston, TX
John Yovanovic Officer Houston, TX
</TABLE>
34
<PAGE> 40
DIRECTORS
VAN KAMPEN FUNDS INC.
<TABLE>
<CAPTION>
NAME OFFICE LOCATION
<S> <C> <C>
Richard F. Powers III Chairman & Chief 1 Parkview Plaza
Executive Officer P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
A. Thomas Smith III Executive Vice President, 1 Parkview Plaza
General Counsel & P.O. Box 5555
Secretary Oakbrook Terrace, IL 60181-5555
William R. Rybak Executive Vice President, 1 Parkview Plaza
Chief Financial Officer P.O. Box 5555
& Treasurer Oakbrook Terrace, IL 60181-5555
John H. Zimmerman III President 1 Parkview Plaza
P.O. Box 5555
Oakbrook Terrace, IL 60181-5555
</TABLE>
35
<PAGE> 41
ADDITIONAL INFORMATION ABOUT NATIONWIDE
The life insurance business, including annuities, is the only business in which
Nationwide is engaged.
Nationwide markets its policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
Nationwide serves as depositor for the following separate investment accounts,
each of which is a registered investment company:
o Nationwide Variable Account;
o Nationwide Variable Account-II;
o Nationwide Variable Account-3;
o Nationwide Variable Account-4;
o Nationwide Variable Account-5;
o Nationwide Variable Account-6;
o Nationwide Fidelity Advisor Variable Account;
o Nationwide Variable Account-8;
o Nationwide Variable Account-9;
o Nationwide Variable Account-10;
o Nationwide Variable Account-11;
o MFS Variable Account;
o Nationwide Multi-Flex Variable Account;
o Nationwide VLI Separate Account;
o Nationwide VLI Separate Account-2;
o Nationwide VLI Separate Account-3;
o Nationwide VLI Separate Account-4;
o Nationwide VLI Separate Account-5;
o NACo Variable Account;
o Nationwide DC Variable Account; and
o Nationwide DCVA II
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 its 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 group of companies. The companies listed above have substantially
common boards of directors and officers.
Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of
Nationwide Life Insurance Company. NFS serves as a holding company for other
financial institutions. Nationwide Life Insurance Company is the sole owner of
Nationwide Life and Annuity Insurance Company.
Each of the directors and officers listed below is a director or officer
respectively of at least one or more of the other major insurance affiliates of
the Nationwide group of companies. Messrs,
36
<PAGE> 42
McFerson, Gasper, Woodward, and Ms. Thomas are also trustees of one or more of
the registered investment companies distributed by Nationwide Investment
Services Corporation, a registered broker-dealer affiliated with the Nationwide
group of companies.
<TABLE>
<CAPTION>
DIRECTORS OF NATIONWIDE
----------------------------------------------------------------------------------------------------------------------
DIRECTORS OF THE DEPOSITOR POSITIONS AND OFFICES
NAME AND PRINCIPAL BUSINESS ADDRESS WITH DEPOSITOR PRINCIPAL OCCUPATION
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Lewis J. Alphin Director Farm Owner and Operator, Bell Farms(1)
519 Bethel Church Road
Mount Olive, NC 28365-6107
----------------------------------------------------------------------------------------------------------------------
A. I. Bell Director Farm Owner and Operator(1)
4121 North River Road West
Zanesville, OH 43701
----------------------------------------------------------------------------------------------------------------------
Kenneth D. Davis Director Farm Owner and Operator(1)
7229 Woodmansee Road
Leesburg, OH 45135
----------------------------------------------------------------------------------------------------------------------
Keith W. Eckel Director Partner, Fred W. Eckel Sons; President, Eckel
1647 Falls Road Farms, Inc.(1)
Clarks Summit, PA 18411
----------------------------------------------------------------------------------------------------------------------
Willard J. Engel Director Retired General Manager, Lyon County Co-operative
301 East Marshall Street Oil Company(1)
Marshall, MN 56258
----------------------------------------------------------------------------------------------------------------------
Fred C. Finney Director Owner and Operator, Moreland Fruit Farm; Operator,
1558 West Moreland Road Melrose Orchard(1)
Wooster, OH 44691
----------------------------------------------------------------------------------------------------------------------
Joseph J. Gasper President and Chief President and Chief Operating Officer, Nationwide
One Nationwide Plaza Operating Officer and Life Insurance Company and Nationwide Life and
Columbus, OH 43215 Director Annuity 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 President, Owen Potato Farm, Inc.; Partner, M&M
115 Sprague Drive and Director Enterprises(1)
Hebron, OH 43025
----------------------------------------------------------------------------------------------------------------------
Yvonne L. Montgomery Director Senior Vice President and General Manager, Public
Xerox Corporation Sector Worldwide/Document Solutions Group
Suite 200 Xerox Corporation(2)
1401 H Street NW
Washington, DC 20007
----------------------------------------------------------------------------------------------------------------------
Ralph M. Paige Director Executive Director Federation of Southern
Federation of Southern Cooperatives/Land Assistance Fund
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
----------------------------------------------------------------------------------------------------------------------
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
----------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 43
<TABLE>
<CAPTION>
DIRECTORS OF NATIONWIDE
----------------------------------------------------------------------------------------------------------------------
DIRECTORS OF THE DEPOSITOR POSITIONS AND OFFICES
NAME AND PRINCIPAL BUSINESS ADDRESS WITH DEPOSITOR PRINCIPAL OCCUPATION
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert L. Stewart Director Owner and Operator Sunnydale Farms and Mining(1)
88740 Fairview Road
Jewett, OH 43986
----------------------------------------------------------------------------------------------------------------------
Nancy C. Thomas Director Co-owner, Thomas Farms(2)
1767D Westwood Avenue
Alliance, OH 44601
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Principal occupation for last 5 years.
(2) Prior to assuming this current position, held other executive
management positions with the same or affiliated companies.
Each of the directors is a director of the other major insurance affiliates of
the Nationwide group of companies 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 NISC, a registered
broker-dealer.
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
Financial Horizons Investment Trust and Nationwide Mutual Funds, registered
investment companies.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF NATIONWIDE
-------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
-------------------------------------------------------------------------------------------------------------------
<S> <C>
Richard D. Headley Executive Vice President - Chief Information Technology Officer
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
-------------------------------------------------------------------------------------------------------------------
Charles A. Bryan Senior Vice President - Chief Actuary - Property and Casualty
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
John R. Cook, Jr. Senior Vice President - Chief Communications Officer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
David A. Diamond Senior Vice President - Corporate Controller
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Philip C. Gath Senior Vice President - Chief Actuary - Nationwide Financial
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 44
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF NATIONWIDE
-------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
-------------------------------------------------------------------------------------------------------------------
<S> <C>
Patricia R. Hatler Senior Vice President, General Counsel and Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
David K. Hollingsworth Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
David R. Jahn Senior Vice President - Commercial Insurance
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Donna A. James Senior Vice President - Chief Human Resources Officer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Richard A. Karas Senior Vice President - Sales - Financial Services
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Gregory S. Lashutka Senior Vice President - Corporate Relations
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Edwin P. McCausland, Jr. Senior Vice President - Fixed Income Securities
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Mark D. Phelan Senior Vice President - Technology Services
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Douglas C. Robinette Senior Vice President - Claims and Financial Services
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President - Finance - Nationwide Financial
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Richard M. Waggoner Senior Vice President - Operations
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Susan A. Wolken Senior Vice President - Product Management and Nationwide
One Nationwide Plaza Financial Marketing
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
</TABLE>
DIMON R. MCFERSON has been a Director since April 1988 and Chairman and Chief
Executive Officer since April 1996. He was elected Chief Executive Officer in
December 1992, and President and Chief Executive Officer in December 1993. He
was President and General Manager of Nationwide Mutual Insurance Company from
April 1988 to April 1991; President and Chief Operating Officer of Nationwide
Mutual Insurance Company from April 1991 to December 1992; and President and
Chief Executive Officer of Nationwide Mutual Insurance Company from December
1992 to April 1996. Mr. McFerson has been with Nationwide for 20 years.
JOSEPH J. GASPER has been President and Chief Operating Officer and Director of
Nationwide since April 1996. Previously, he was Executive Vice President -
Property/Casualty Operations of Nationwide
39
<PAGE> 45
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 33 years.
LEWIS J. ALPHIN has been a Director of Nationwide since 1993. Mr. Alphin owns
and operates an 800-acre farm in Mt. Olive, NC. He taught agriculture business
at James Sprunt Community Collegy in Kenansville, NC for more than 22 years
before retiring in 1994. He is the former board chairman of the Cape Fear Farm
Credit Association, a member and former vice president, secretary/treasurer, and
director of the Duplin County Agribusiness Council, and a former board member of
the Southern States Cooperative (1986 to 1993). Mr. Alphin is a member of the
Duplin County Farm Bureau, the North Carolina Farm Bureau, ad the Farm Credit
Council. He is a member and former director of the Oak Wolfe Fire Department.
A. I. BELL has been a Director of Nationwide since April, 1998. Mr. Bell has
served as a state trustee of the Ohio Farm Bureau Federation from 1991 to 1998
and as president that last four years. He oversees the Bell family farm in
Zanesville, Ohio. The farm is the hub of a multi-family swine network, in
addition to grain and beef operations. Mr. Bell has represented the Ohio Farm
Bureau at state and national level activities, and has traveled internationally
representing Ohio agriculture. In 1995, he was introduced into The Ohio State
University Department of Animal Sciences Hall of Fame.
JAMES E. BROCK has been Senior Vice President - Corporate Development since July
1997. Previously, he was Senior Vice President - Company Operations from
December 1996 to July 1997 and was also Senior Vice President - Life Company
Operations from April 1996 to July 1997. Mr. Brock was Senior Vice President -
Investment Products Operations from November 1990 to April 1996. Prior to that
time, Mr. Brock held several positions within Nationwide. Mr. Brock has been
with Nationwide for 30 years.
CHARLES A. BRYAN has been a Senior Vice President - Chief Actuary - Property and
Casualty since 1998. Prior to joining Nationwide, Mr. Bryan was president, Chief
Operating Officer of Direct Response Corporation from 1996 to 1998. Prior to
that time, Mr. Bryan was a partner with Ernst & Young.
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. Mr. Cook has been
with Nationwide for 2 years.
KENNETH D. DAVIS has been a Director of Nationwide since April 1999. Mr. Davis
is the immediate past president of the Ohio Farm Bureau Federation. He served as
a member of the Ohio Farm Bureau Federation's board of trustees from 1989 until
1999. He served as first vice president of the board from 1994 until 1998. Mr.
Davis serves on the board of directors of his local rural electric cooperatives
and is a member of many agriculture organizations including the Ohio Corn
Growers, Ohio Cattlemen's and Ohio Soybean associations.
DAVID A. DIAMOND has been Senior Vice President - Corporate Controller since
August 1999. He was Vice President-Controller from August 1996 to August 1999.
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 11 years.
40
<PAGE> 46
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. Mr. Eckel is a member of the Pennsylvania Agricultural Land Preservation
Board. He is a former president of the Pennsylvania Farm Bureau, a position he
held for 15 years, and the Lackawanna County Cooperative Extension Association.
He has served as a board member and executive committee member of the American
Farm Bureau Federation. He is a former vice president of the Pennsylvania
Council of Cooperative Extension Associations and former board member of the
Pennsylvania Vegetable Growers Association.
WILLARD J. ENGEL has been a Director of Nationwide since 1994. Mr. Engel served
as general manager of Lyon County Co-Operative Oil Co. in Marshall, MN from 1975
to 1997, and occasionally serves on a consulting basis. He previously was a
division manager of the Truman Farmers Elevator. He is a former director of the
Western Co-op Transport in Montevideo, MN, a former director and legislative
committee chairman of the Northwest Petroleum Association in St. Paul, and a
former director of Farmland Industries in Kansas City.
FRED C. FINNEY has been a Director of Nationwide since 1992. Mr. Finney is the
owner and operator of the Moreland Fruit Farm and operator of Melrose Orchard in
Wooster, OH. He is past president of the Ohio Farm Bureau Federation, the Ohio
Fruit Growers Society, Wayne County Farm Bureau, and the Westwood Ruritan Club.
He is a member of the American Berry Cooperative.
PHILIP C. GATH has been Senior Vice President - Chief Actuary - Nationwide
Financial 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 31 years.
PATRICIA R. HATLER has been Senior Vice President, General Counsel and Secretary
since April 2000. Previously, she was Senior Vice President and General Counsel
from July 1999 to April 2000. Prior to that time, she was General Counsel and
Corporate Secretary of Independence Blue Cross from 1983 to July 1999.
DAVID K. HOLLINGSWORTH has been Senior Vice President - Multi Channel and
Sponsor Relations since August 1999. Previously, he was Senior Vice President -
Marketing from June 1999 to August 1999. Prior to that time, has held numerous
positions within the Nationwide group of companies. Mr. Hollingsworth has been
with Nationwide for 25 years.
DAVID R. JAHN has been Senior Vice President - Commercial Insurance since March
1998. Previously, he was Vice President - Property/Casualty Operations and Vice
President - Resource Management from March 1996 to January 1998. Prior to that
time, Mr. Jahn has held numerous positions within the Nationwide group of
companies. Mr. Jahn has been with Nationwide for 28 years.
DONNA A. JAMES has been Senior Vice President - Chief Human Resources Officer
since May 1999. She was Senior Vice President - Human Resources from December
1997 to May 1999. 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 of Nationwide from March 1996 to July 1996. From May 1994
to March 1996 she was Associate Vice President - Assistant to the CEO for
41
<PAGE> 47
Nationwide. Previously Ms. James held several positions within Nationwide. Ms.
James has been with Nationwide for 18 years.
RICHARD D. HEADLEY has been Executive Vice President - Chief Information
Technology Officer since May 1999. He was Senior Vice President - Chief
Information Technology Officer from October 1997 to May 1999. 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. Mr. Headly has been with
Nationwide for 2 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 35 years.
GREGORY S. LASHUTKA has been Senior Vice President - Corporate Relations since
January 2000. Previously, he was the Mayor of the City of Columbus (Ohio) from
January 1992 to December 1999. From January 1986 to December 1991, Mr. Lashutka
was a Partner with Squire, Sanders & Dempsey. From January 1978 to December
1985, he was City Attorney for the City of Columbus (Ohio).
EDWIN P. MCCAUSLAND, JR. has been Senior Vice President - Fixed Income
Securities since 1999. Mr. McCausland has 29 years of experience in insurance
investments beginning his career in 1970 with Connecticut Mutual Life Insurance
Company. He joined Phoenix Mutual Life Insurance Company in 1981 as second Vice
President of Bond Investments and rising to Vice President of Pension
Operations. He was Vice President and Managing Director of Mass Mutual Life
Insurance Company prior to joining Nationwide.
DAVID O. MILLER has been a Director of Nationwide since November 1996. Mr.
Miller has been Chairman of the Board since 1998. Mr. Miller is president of
Owen Potato Farm, Inc. and a partner of M&M Enterprises in Licking County, OH.
He is a director and board chairman of the National Cooperative Business
Association, director of Cooperative Business International and the
International Cooperative Alliance, and serves on the educational executive
committee of the National Council of Farmer Cooperatives. He was president of
the Ohio Farm Bureau Federation from 1981 to 1985 and was vice president for six
years. Mr. Miller served a two year term on the board of the American Farm
Bureau Association. He is past president of the Ohio Vegetable and Potato
Growers Association, and was a director of Landmark, Inc., a farm supply
cooperative which is now part of Indianapolis-based Countrymark.
YVONNE L. MONTGOMERY has been a Director of Nationwide since April, 1998. Ms.
Montgomery is senior vice president/general manager - Public Sector
Worldwide/Document Solutions Group for Xerox Corporation. A resident of
Washington, DC, Ms. Montgomery is in charge of providing an integrated,
industry-focused portfolio of document solutions and services to the public
sector worldwide. 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.
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
42
<PAGE> 48
within Nationwide. Mr. Oakley has been with Nationwide for 24 years.
RALPH M. PAIGE has been a Director of Nationwide since April 1999. Mr. Paige has
been the Executive Director of the Federation of Southern Cooperatives/Land
Assistance Fund since 1969. Mr. Paige also served as the National Field
Director/Georgia State Director from 1981 to 1984.
JAMES F. PATTERSON has been a Director of Nationwide since April 1989. Mr.
Patterson is president of Patterson Farms, Inc. and has operated Patterson Fruit
Farm in Chesterland, OH since 1964. Mr. Patterson is on the boards of The Ohio
State University Hospitals Health System in Cleveland, Geauga Hospital, Inc. and
the National Cooperative Business Association. He is past president of the Ohio
Farm Bureau Federation and former member of Cleveland Foundation's Lake and
Geauga Advisory Committees.
MARK D. PHELAN has been Senior Vice President - Technology Services since 1998.
His previous management experience includes five years (1977-1982) with the data
processing division's sales group at IBM Corporation. From 1982 through 1990,
Mr. Phelan served as director of AT&T's Consumer Communications Services Group
and he was subsequently promoted to sales vice president for the Eastern Region
of the Business Communications Services Division. In 1992, he became executive
vice president-sales and marketing for the Electronic Commerce Division of
Checkfree Corporation, a position he held for five years. From 1997 until 1998,
he was in private consulting.
DOUGLAS C. ROBINETTE has been Senior Vice President - Claims and Financial
Services since 1999. Previously, he was Senior Vice President - Marketing and
Product Management from May 1998 to 1999. 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 13 years.
ARDEN L. SHISLER has been a Director of Nationwide since 1984. Mr. Shisler is
president and chief executive officer of K&B Transport, Inc., a trucking firm in
Dalton, OH. He is a director of the National Cooperative Business Association in
Washington, DC. He is a former board member and vice president of the Ohio Farm
Bureau Federation and past president of the Ohio Agricultural Marketing
Association, an Ohio Farm Bureau Federation subsidiary. He is a member of the
Ohio Trucking Association, the Ohio Trucking Safety Council, the Wayne County
Farm Bureau, Cornerstone Community Church, the Advisory Committee of The Ohio
State University Agriculture Technical Institute and a board member of the
Wilderness Center.
ROBERT L. STEWART has been a Director of Nationwide since 1989. Mr. Stewart is
the owner and operator of Sunnydale Farms and Mining in Jewett, OH. He served on
the board of the Ohio Farm Bureau Federation and as president of the Ohio
Holstein Association board. Mr. Stewart was a director of the Ohio Agricultural
Stabilization and Conservation Service board and Landmark, Inc. a farm supply
cooperative which is now part of Indianapolis-based Countrymark.
43
<PAGE> 49
NANCY C. THOMAS has been a Director of Nationwide since 1986. Mrs. Thomas is a
board member of Farm Credit Services' 4th District and serves on the advisory
board of Walsh University in North Canton, OH. She is a past president and
former director of the Ohio Agricultural Marketing Association and served on the
boards of the Ohio Farm Bureau Federation and Landmark, Inc., a farm supply
cooperative which is now part of Indianapolis-based Countrymark, and as the
Midwest regional representative on the American Farm Bureau women's committee.
MARK R. THRESHER has been Senior Vice President - Finance - Nationwide Financial
since May 1999. He was Vice President - Controller from August 1996 to May 1999.
He was Vice President and Treasurer from November 1996 to February 1997.
Previously, he was Vice President and Treasurer from June 1996 to November 1996.
Prior to joining Nationwide, Mr. Thresher served as a partner with KPMG LLP from
July 1988 to June 1996.
RICHARD M. WAGGONER has been Senior Vice President - Operations since May 1999.
Previously, he was President of Nationwide Services from May 1997 to May 1999.
Prior to that time, Mr. Waggoner has held numerous positions within the
Nationwide group of companies. Mr. Waggoner has been with Nationwide for 23
years.
SUSAN A. WOLKEN has been Senior Vice President - Product Management and
Nationwide Financial Marketing since May 1999. Previously, Ms. Wolken was Senior
Vice President - Life Company Operations from June 1997 to May 1999. 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 25 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 35 years.
44
<PAGE> 50
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies.
There is no guarantee that the investment objectives will be met.
VAN KAMPEN LIFE INVESTMENT TRUST
The Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares of the Trust
are offered in separate Portfolios which are sold only to insurance companies to
provide funding for variable life insurance policies and variable annuity
contracts. Van Kampen Asset Management, Inc. serves as the Portfolio's
investment adviser.
ASSET ALLOCATION PORTFOLIO (FORMERLY MULTIPLE STRATEGY FUND)
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 Adviser 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 (FORMERLY DOMESTIC STRATEGIC INCOME FUND)
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 Adviser 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 (FORMERLY COMMON STOCK FUND)
The investment objective of this Portfolio is to seek capital appreciation
by investing securities believed by the Adviser 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
45
<PAGE> 51
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 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 (FORMERLY REAL ESTATE
SECURITIES FUND)
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.
46
<PAGE> 52
APPENDIX B: ILLUSTRATION OF SURRENDER CHARGES
Example 1: A female non-tobacco, age 45, purchases a policy with a specified
amount of $50,000 and a scheduled premium of $750. She now wishes to surrender
the policy during the first policy year. By using the "Initial Surrender Charge"
table reproduced below, (also see "Surrender Charges") the total Surrender
Charge per thousand, multiplied by the specified amount expressed in thousands,
equals the total surrender charge of $569.80 ($11.396 x 50=$569.80).
Example 2: A male non-tobacco, age 35, purchases a policy with a specified
amount of $100,000 and a scheduled premium of $1,100. He now wants to surrender
the policy in the sixth policy year. The total initial surrender charge is
calculated using the method illustrated above. (Surrender Charge per $1,000:
$6.817 x 100=$681.70 maximum initial surrender charge). Because the fifth policy
year has been completed, the maximum initial surrender charge is reduced by
multiplying it by the applicable percentage factor from the "Reductions to
Surrender Charges" table below. (Also see "Reductions to Surrender Charges"). In
this case, $681.70 x 60%=$409.02 which is the amount Nationwide deducts as a
total surrender charge.
Maximum surrender charge per $1,000 of initial specified amount for policies
which are issued on a standard basis.
Initial Specified Amount $50,000-$99,999
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25 $ 7.776 $ 7.521 $ 8.369 $ 7.818
-----------------------------------------------------------------------------------------------------------
35 8.817 8.398 9.811 8.891
-----------------------------------------------------------------------------------------------------------
45 12.191 11.396 13.887 12.169
-----------------------------------------------------------------------------------------------------------
55 15.636 14.011 18.415 15.116
-----------------------------------------------------------------------------------------------------------
65 22.295 19.086 26.577 20.641
-----------------------------------------------------------------------------------------------------------
</TABLE>
Initial Specified Amount $100,000+
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
-----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
25 $ 5.776 $ 5.521 $ 6.369 $ 5.818
-----------------------------------------------------------------------------------------------------------
35 6.817 6.398 7.811 6.891
-----------------------------------------------------------------------------------------------------------
45 9.691 8.896 11.387 9.669
-----------------------------------------------------------------------------------------------------------
55 13.136 11.511 15.915 12.616
-----------------------------------------------------------------------------------------------------------
65 21.295 18.086 25.577 19.641
-----------------------------------------------------------------------------------------------------------
</TABLE>
Reductions to Surrender Charges
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
0 100% 5 60%
------------------------------------------------------------------------------------------------
1 100% 6 50%
------------------------------------------------------------------------------------------------
2 90% 7 40%
------------------------------------------------------------------------------------------------
3 80% 8 30%
------------------------------------------------------------------------------------------------
4 70% 9+ 0%
------------------------------------------------------------------------------------------------
</TABLE>
47
<PAGE> 53
The current surrender charges are the same for all states. However, in
Pennsylvania, the guaranteed maximum surrender charges are spread out over 14
years.
The guaranteed maximum surrender charges in subsequent years in Pennsylvania are
reduced in the following manner:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE COMPLETED SURRENDER CHARGE
POLICY AS A % OF INITIAL POLICY AS A % OF INITIAL POLICY AS A % OF INITIAL
YEARS SURRENDER CHARGES YEARS SURRENDER CHARGES YEARS SURRENDER CHARGES
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0 100% 5 60% 10 20%
-------------------------------------------------------------------------------------------------------------------
1 100% 6 50% 11 15%
-------------------------------------------------------------------------------------------------------------------
2 90% 7 40% 12 10%
-------------------------------------------------------------------------------------------------------------------
3 80% 8 30% 13 5%
-------------------------------------------------------------------------------------------------------------------
4 70% 9 25% 14+ 0%
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The illustrations of current values in this prospectus are the same for
Pennsylvania. However, the illustrations of guaranteed values in this prospectus
do not reflect guaranteed maximum surrender charges which are spread out over 14
years. If this policy is issued in Pennsylvania, please contact Nationwide for
an illustration.
Nationwide has no plans to change the current surrender charges.
48
<PAGE> 54
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. The mortality and expense risk charge is equivalent
to an annual effective rate of 0.80% of the daily net assets of the variable
account. On each policy anniversary beginning with the 10th, the mortality and
expense risk charge is reduced to 0.50% on an annual basis of the daily net
assets of the variable account, provided the cash surrender value is $25,000 or
more on such anniversary. In addition, the net investment returns also reflect
the deduction of underlying mutual fund investment advisory fees and other
expenses which are equivalent to an annual effective rate of 0.90% of the daily
net assets of the variable account. This effective rate is based on the average
of the fund expenses after expense reimbursement, for the preceding year for all
underlying mutual fund options available under the policy as of December 31,
1999. Some underlying mutual funds 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.
Considering current charges for mortality and expense risks and underlying
mutual fund expenses, gross annual rates of return of 0%, 6% and 12% correspond
to net investment experience at constant annual rates of -1.70%, 4.30% and
10.30%. On each policy anniversary beginning with the 10th, the gross annual
rates of return of 0%, 6%, and 12% correspond to net investment experience at
constant annual rates of -1.50%, 4.60%, and 10.60%, provided the cash surrender
value is $25,000 or more on such anniversary. This is due to a guaranteed
reduction in the mortality and expense risk charge from an annual effective rate
of 0.80% to an annual effective rate of 0.50% if the aforementioned conditions
apply.
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. Policies issued on a substandard basis would result in lower
cash values and death benefits than those illustrated.
The illustrations also reflect the fact that Nationwide deducts a sales load
from each
49
<PAGE> 55
premium payment. Current values reflect a deduction of 3.5% of each premium
payment up to break point premium and 1.5% of any excess. Guaranteed values
reflect a deduction of 3.5% of each premium payment. The illustrations also
reflect the fact that Nationwide deducts a charge for state premium taxes equal
to 2.5% of all premium payments.
The cash surrender values shown in the illustrations reflect the fact that
Nationwide will deduct a surrender charge from the cash value for any policy
surrendered in full during the first nine years.
In addition, the illustrations reflect the fact that Nationwide deducts an
administrative charge at the beginning of each policy month. This monthly
administrative expense charge is $12.50 per month in the first year, $5 per
month in renewal years. The illustrations assume a monthly administrative
expense charge of $25 per month in the first year and $7.50 per month in renewal
years. The illustrations also reflect the fact that no charges for federal or
state income taxes are currently made against the variable account. If such a
charge is made in the future, it will require a higher gross investment return
than illustrated in order to produce the net after-tax returns shown in the
illustrations.
Upon request, Nationwide will furnish a comparable illustration based on the
proposed insured's age, sex, smoking classification, rating classification and
premium payment requested.
50
<PAGE> 56
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 390 0 50,000 422 0 50,000 454 0 50,000
2 1,614 853 280 50,000 944 371 50,000 1,039 466 50,000
3 2,483 1,299 783 50,000 1,479 962 50,000 1,674 1,158 50,000
4 3,394 1,722 1,263 50,000 2,021 1,562 50,000 2,359 1,900 50,000
5 4,351 2,123 1,721 50,000 2,571 2,170 50,000 3,098 2,696 50,000
6 5,357 2,502 2,158 50,000 3,131 2,786 50,000 3,899 3,555 50,000
7 6,412 2,866 2,579 50,000 3,705 3,418 50,000 4,774 4,487 50,000
8 7,520 3,208 2,979 50,000 4,290 4,061 50,000 5,727 5,497 50,000
9 8,683 3,531 3,359 50,000 4,887 4,715 50,000 6,765 6,593 50,000
10 9,905 3,833 3,833 50,000 5,496 5,496 50,000 7,900 7,900 50,000
11 11,188 4,109 4,109 50,000 6,114 6,114 50,000 9,137 9,137 50,000
12 12,535 4,361 4,361 50,000 6,739 6,739 50,000 10,488 10,488 50,000
13 13,949 4,582 4,582 50,000 7,370 7,370 50,000 11,963 11,963 50,000
14 15,434 4,769 4,769 50,000 8,002 8,002 50,000 13,573 13,573 50,000
15 16,993 4,914 4,914 50,000 8,628 8,628 50,000 15,329 15,329 50,000
16 18,630 5,018 5,018 50,000 9,249 9,249 50,000 17,251 17,251 50,000
17 20,349 5,072 5,072 50,000 9,858 9,858 50,000 19,354 19,354 50,000
18 22,154 5,068 5,068 50,000 10,448 10,448 50,000 21,658 21,658 50,000
19 24,049 5,005 5,005 50,000 11,018 11,018 50,000 24,192 24,192 50,000
20 26,039 4,875 4,875 50,000 11,560 11,560 50,000 26,985 26,985 50,000
21 28,129 4,670 4,670 50,000 12,071 12,071 50,000 30,167 30,167 50,000
22 30,323 4,383 4,383 50,000 12,543 12,543 50,000 33,710 33,710 50,000
23 32,626 4,001 4,001 50,000 12,966 12,966 50,000 37,671 37,671 50,000
24 35,045 3,511 3,511 50,000 13,329 13,329 50,000 42,118 42,118 50,000
25 37,585 2,910 2,910 50,000 13,630 13,630 50,000 47,087 47,087 54,621
26 40,252 2,181 2,181 50,000 13,857 13,857 50,000 52,551 52,551 60,434
27 43,052 1,293 1,293 50,000 13,984 13,984 50,000 58,577 58,577 66,192
28 45,992 235 235 50,000 14,003 14,003 50,000 65,229 65,229 72,404
29 49,079 (*) (*) (*) 13,898 13,898 50,000 72,584 72,584 79,117
30 52,321 (*) (*) (*) 13,648 13,648 50,000 80,729 80,729 86,380
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(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> 57
DEATH BENEFIT OPTION 1
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 175 0 50,000 200 0 50,000 226 0 50,000
2 1,614 540 0 50,000 608 34 50,000 679 105 50,000
3 2,483 881 365 50,000 1,015 498 50,000 1,161 644 50,000
4 3,394 1,198 739 50,000 1,420 961 50,000 1,672 1,213 50,000
5 4,351 1,489 1,087 50,000 1,823 1,421 50,000 2,216 1,814 50,000
6 5,357 1,751 1,407 50,000 2,219 1,875 50,000 2,792 2,448 50,000
7 6,412 1,982 1,695 50,000 2,605 2,318 50,000 3,401 3,115 50,000
8 7,520 2,178 1,948 50,000 2,977 2,748 50,000 4,044 3,814 50,000
9 8,683 2,333 2,161 50,000 3,330 3,157 50,000 4,718 4,546 50,000
10 9,905 2,445 2,445 50,000 3,657 3,657 50,000 5,425 5,425 50,000
11 11,188 2,509 2,509 50,000 3,955 3,955 50,000 6,166 6,166 50,000
12 12,535 2,521 2,521 50,000 4,217 4,217 50,000 6,940 6,940 50,000
13 13,949 2,477 2,477 50,000 4,440 4,440 50,000 7,751 7,751 50,000
14 15,434 2,373 2,373 50,000 4,615 4,615 50,000 8,600 8,600 50,000
15 16,993 2,199 2,199 50,000 4,731 4,731 50,000 9,486 9,486 50,000
16 18,630 1,948 1,948 50,000 4,780 4,780 50,000 10,409 10,409 50,000
17 20,349 1,610 1,610 50,000 4,747 4,747 50,000 11,369 11,369 50,000
18 22,154 1,168 1,168 50,000 4,614 4,614 50,000 12,363 12,363 50,000
19 24,049 608 608 50,000 4,361 4,361 50,000 13,389 13,389 50,000
20 26,039 (*) (*) (*) 3,966 3,966 50,000 14,446 14,446 50,000
21 28,129 (*) (*) (*) 3,403 3,403 50,000 15,533 15,533 50,000
22 30,323 (*) (*) (*) 2,646 2,646 50,000 16,653 16,653 50,000
23 32,626 (*) (*) (*) 1,662 1,662 50,000 17,811 17,811 50,000
24 35,045 (*) (*) (*) 411 411 50,000 19,009 19,009 50,000
25 37,585 (*) (*) (*) (*) (*) (*) 20,249 20,249 50,000
26 40,252 (*) (*) (*) (*) (*) (*) 21,532 21,532 50,000
27 43,052 (*) (*) (*) (*) (*) (*) 22,856 22,856 50,000
28 45,992 (*) (*) (*) (*) (*) (*) 24,219 24,219 50,000
29 49,079 (*) (*) (*) (*) (*) (*) 25,623 25,623 50,000
30 52,321 (*) (*) (*) (*) (*) (*) 27,165 27,165 50,000
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(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> 58
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 389 0 50,389 420 0 50,420 452 0 50,452
2 1,614 848 275 50,848 939 365 50,939 1,033 460 51,033
3 2,483 1,289 772 51,289 1,467 951 51,467 1,661 1,145 51,661
4 3,394 1,705 1,246 51,705 2,000 1,541 52,000 2,334 1,875 52,334
5 4,351 2,096 1,694 52,096 2,538 2,136 52,538 3,057 2,655 53,057
6 5,357 2,463 2,119 52,463 3,080 2,736 53,080 3,834 3,490 53,834
7 6,412 2,813 2,526 52,813 3,633 3,347 53,633 4,679 4,392 54,679
8 7,520 3,138 2,908 53,138 4,192 3,962 54,192 5,590 5,360 55,590
9 8,683 3,440 3,268 53,440 4,755 4,583 54,755 6,575 6,403 56,575
10 9,905 3,719 3,719 53,719 5,324 5,324 55,324 7,641 7,641 57,641
11 11,188 3,970 3,970 53,970 5,893 5,893 55,893 8,791 8,791 58,791
12 12,535 4,191 4,191 54,191 6,460 6,460 56,460 10,031 10,031 60,031
13 13,949 4,378 4,378 54,378 7,020 7,020 57,020 11,366 11,366 61,366
14 15,434 4,526 4,526 54,526 7,568 7,568 57,568 12,799 12,799 62,799
15 16,993 4,627 4,627 54,627 8,092 8,092 58,092 14,330 14,330 64,330
16 18,630 4,681 4,681 54,681 8,593 8,593 58,593 15,971 15,971 65,971
17 20,349 4,680 4,680 54,680 9,060 9,060 59,060 17,722 17,722 67,722
18 22,154 4,614 4,614 54,614 9,479 9,479 59,479 19,582 19,582 69,582
19 24,049 4,483 4,483 54,483 9,848 9,848 59,848 21,563 21,563 71,563
20 26,039 4,279 4,279 54,279 10,156 10,156 60,156 23,666 23,666 73,666
21 28,129 3,997 3,997 53,997 10,393 10,393 60,393 25,897 25,897 75,897
22 30,323 3,628 3,628 53,628 10,546 10,546 60,546 28,346 28,346 78,346
23 32,626 3,162 3,162 53,162 10,600 10,600 60,600 30,944 30,944 80,944
24 35,045 2,589 2,589 52,589 10,538 10,538 60,538 33,695 33,695 83,695
25 37,585 1,910 1,910 51,910 10,355 10,355 60,355 36,613 36,613 86,613
26 40,252 1,115 1,115 51,115 10,032 10,032 60,032 39,704 39,704 89,704
27 43,052 177 177 50,177 9,535 9,535 59,535 42,955 42,955 92,955
28 45,992 (*) (*) (*) 8,854 8,854 58,854 46,382 46,382 96,382
29 49,079 (*) (*) (*) 7,970 7,970 57,970 49,992 49,992 99,992
30 52,321 (*) (*) (*) 6,860 6,860 56,860 53,789 53,789 103,789
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(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> 59
DEATH BENEFIT OPTION 2
$750 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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>
1 788 173 0 50,173 198 0 50,198 224 0 50,224
2 1,614 534 0 50,534 602 28 50,602 672 99 50,672
3 2,483 870 354 50,870 1,002 486 51,002 1,146 630 51,146
4 3,394 1,179 720 51,179 1,398 939 51,398 1,646 1,187 51,646
5 4,351 1,460 1,058 51,460 1,787 1,385 51,787 2,172 1,770 52,172
6 5,357 1,710 1,366 51,710 2,165 1,821 52,165 2,723 2,379 52,723
7 6,412 1,925 1,638 51,925 2,529 2,242 52,529 3,299 3,012 53,299
8 7,520 2,102 1,873 52,102 2,871 2,642 52,871 3,896 3,667 53,896
9 8,683 2,236 2,064 52,236 3,187 3,015 53,187 4,512 4,340 54,512
10 9,905 2,323 2,323 52,323 3,471 3,471 53,471 5,142 5,142 55,142
11 11,188 2,358 2,358 52,358 3,715 3,715 53,715 5,784 5,784 55,784
12 12,535 2,339 2,339 52,339 3,913 3,913 53,913 6,434 6,434 56,434
13 13,949 2,261 2,261 52,261 4,059 4,059 54,059 7,087 7,087 57,087
14 15,434 2,120 2,120 52,120 4,146 4,146 54,146 7,740 7,740 57,740
15 16,993 1,909 1,909 51,909 4,161 4,161 54,161 8,382 8,382 58,382
16 18,630 1,620 1,620 51,620 4,093 4,093 54,093 9,003 9,003 59,003
17 20,349 1,245 1,245 51,245 3,929 3,929 53,929 9,592 9,592 59,592
18 22,154 772 772 50,772 3,650 3,650 53,650 10,129 10,129 60,129
19 24,049 188 188 50,188 3,237 3,237 53,237 10,596 10,596 60,596
20 26,039 (*) (*) (*) 2,670 2,670 52,670 10,970 10,970 60,970
21 28,129 (*) (*) (*) 1,928 1,928 51,928 11,229 11,229 61,229
22 30,323 (*) (*) (*) 993 993 50,993 11,346 11,346 61,346
23 32,626 (*) (*) (*) (*) (*) (*) 11,297 11,297 61,297
24 35,045 (*) (*) (*) (*) (*) (*) 11,046 11,046 61,046
25 37,585 (*) (*) (*) (*) (*) (*) 10,552 10,552 60,552
26 40,252 (*) (*) (*) (*) (*) (*) 9,760 9,760 59,760
27 43,052 (*) (*) (*) (*) (*) (*) 8,602 8,602 58,602
28 45,992 (*) (*) (*) (*) (*) (*) 6,997 6,997 56,997
29 49,079 (*) (*) (*) (*) (*) (*) 4,854 4,854 54,854
30 52,321 (*) (*) (*) (*) (*) (*) 2,076 2,076 52,076
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(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> 60
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 642 0 50,000 694 1 50,000 746 53 50,000
2 2,583 1,343 650 50,000 1,490 797 50,000 1,643 950 50,000
3 3,972 2,009 1,385 50,000 2,295 1,672 50,000 2,607 1,984 50,000
4 5,431 2,635 2,081 50,000 3,108 2,554 50,000 3,644 3,089 50,000
5 6,962 3,214 2,729 50,000 3,920 3,435 50,000 4,752 4,266 50,000
6 8,570 3,749 3,333 50,000 4,733 4,317 50,000 5,942 5,526 50,000
7 10,259 4,230 3,883 50,000 5,540 5,193 50,000 7,218 6,872 50,000
8 12,032 4,650 4,373 50,000 6,332 6,055 50,000 8,583 8,305 50,000
9 13,893 5,010 4,802 50,000 7,111 6,903 50,000 10,050 9,842 50,000
10 15,848 5,302 5,302 50,000 7,870 7,870 50,000 11,627 11,627 50,000
11 17,901 5,522 5,522 50,000 8,604 8,604 50,000 13,328 13,328 50,000
12 20,056 5,662 5,662 50,000 9,306 9,306 50,000 15,167 15,167 50,000
13 22,318 5,711 5,711 50,000 9,967 9,967 50,000 17,160 17,160 50,000
14 24,694 5,660 5,660 50,000 10,579 10,579 50,000 19,326 19,326 50,000
15 27,189 5,507 5,507 50,000 11,139 11,139 50,000 21,698 21,698 50,000
16 29,808 5,239 5,239 50,000 11,638 11,638 50,000 24,308 24,308 50,000
17 32,559 4,827 4,827 50,000 12,051 12,051 50,000 27,187 27,187 50,000
18 35,447 4,267 4,267 50,000 12,373 12,373 50,000 30,485 30,485 50,000
19 38,479 3,540 3,540 50,000 12,590 12,590 50,000 34,195 34,195 50,000
20 41,663 2,625 2,625 50,000 12,685 12,685 50,000 38,404 38,404 50,000
21 45,006 1,490 1,490 50,000 12,630 12,630 50,000 43,214 43,214 50,000
22 48,517 92 92 50,000 12,391 12,391 50,000 48,757 48,757 51,195
23 52,202 (*) (*) (*) 11,928 11,928 50,000 54,936 54,936 57,683
24 56,073 (*) (*) (*) 11,198 11,198 50,000 61,732 61,732 64,818
25 60,136 (*) (*) (*) 10,143 10,143 50,000 69,201 69,201 72,661
26 64,403 (*) (*) (*) 8,692 8,692 50,000 77,405 77,405 81,276
27 68,883 (*) (*) (*) 6,751 6,751 50,000 86,413 86,413 90,733
28 73,587 (*) (*) (*) 4,212 4,212 50,000 96,295 96,295 101,109
29 78,527 (*) (*) (*) 916 916 50,000 107,129 107,129 112,485
30 83,713 (*) (*) (*) (*) (*) (*) 118,997 118,997 124,946
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(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> 61
DEATH BENEFIT OPTION 1
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 288 0 50,000 328 0 50,000 369 0 50,000
2 2,583 730 37 50,000 835 142 50,000 947 254 50,000
3 3,972 1,113 490 50,000 1,312 689 50,000 1,530 907 50,000
4 5,431 1,434 879 50,000 1,752 1,198 50,000 2,117 1,563 50,000
5 6,962 1,683 1,198 50,000 2,146 1,661 50,000 2,700 2,215 50,000
6 8,570 1,855 1,439 50,000 2,485 2,069 50,000 3,272 2,856 50,000
7 10,259 1,940 1,594 50,000 2,756 2,409 50,000 3,824 3,478 50,000
8 12,032 1,926 1,649 50,000 2,943 2,666 50,000 4,344 4,066 50,000
9 13,893 1,798 1,590 50,000 3,028 2,820 50,000 4,814 4,607 50,000
10 15,848 1,542 1,542 50,000 2,991 2,991 50,000 5,220 5,220 50,000
11 17,901 1,142 1,142 50,000 2,810 2,810 50,000 5,541 5,541 50,000
12 20,056 582 582 50,000 2,463 2,463 50,000 5,758 5,758 50,000
13 22,318 (*) (*) (*) 1,922 1,922 50,000 5,846 5,846 50,000
14 24,694 (*) (*) (*) 1,151 1,151 50,000 5,773 5,773 50,000
15 27,189 (*) (*) (*) 106 106 50,000 5,495 5,495 50,000
16 29,808 (*) (*) (*) (*) (*) (*) 4,953 4,953 50,000
17 32,559 (*) (*) (*) (*) (*) (*) 4,064 4,064 50,000
18 35,447 (*) (*) (*) (*) (*) (*) 2,722 2,722 50,000
19 38,479 (*) (*) (*) (*) (*) (*) 784 784 50,000
20 41,663 (*) (*) (*) (*) (*) (*) (*) (*) (*)
21 45,006 (*) (*) (*) (*) (*) (*) (*) (*) (*)
22 48,517 (*) (*) (*) (*) (*) (*) (*) (*) (*)
23 52,202 (*) (*) (*) (*) (*) (*) (*) (*) (*)
24 56,073 (*) (*) (*) (*) (*) (*) (*) (*) (*)
25 60,136 (*) (*) (*) (*) (*) (*) (*) (*) (*)
26 64,403 (*) (*) (*) (*) (*) (*) (*) (*) (*)
27 68,883 (*) (*) (*) (*) (*) (*) (*) (*) (*)
28 73,587 (*) (*) (*) (*) (*) (*) (*) (*) (*)
29 78,527 (*) (*) (*) (*) (*) (*) (*) (*) (*)
30 83,713 (*) (*) (*) (*) (*) (*) (*) (*) (*)
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(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> 62
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 636 0 50,636 688 0 50,688 739 46 50,739
2 2,583 1,326 633 51,326 1,471 778 51,471 1,622 929 51,622
3 3,972 1,975 1,351 51,975 2,257 1,633 52,257 2,563 1,939 52,563
4 5,431 2,578 2,023 52,578 3,040 2,485 53,040 3,562 3,008 53,562
5 6,962 3,126 2,641 53,126 3,809 3,324 53,809 4,615 4,130 54,615
6 8,570 3,620 3,204 53,620 4,566 4,151 54,566 5,728 5,312 55,728
7 10,259 4,052 3,706 54,052 5,300 4,953 55,300 6,897 6,550 56,897
8 12,032 4,412 4,135 54,412 5,997 5,720 55,997 8,116 7,839 58,116
9 13,893 4,701 4,493 54,701 6,658 6,450 56,658 9,390 9,182 59,390
10 15,848 4,909 4,909 54,909 7,269 7,269 57,269 10,714 10,714 60,714
11 17,901 5,034 5,034 55,034 7,822 7,822 57,822 12,087 12,087 62,087
12 20,056 5,065 5,065 55,065 8,306 8,306 58,306 13,504 13,504 63,504
13 22,318 4,993 4,993 54,993 8,704 8,704 58,704 14,956 14,956 64,956
14 24,694 4,807 4,807 54,807 9,002 9,002 59,002 16,436 16,436 66,436
15 27,189 4,509 4,509 54,509 9,193 9,193 59,193 17,944 17,944 67,944
16 29,808 4,089 4,089 54,089 9,261 9,261 59,261 19,471 19,471 69,471
17 32,559 3,520 3,520 53,520 9,172 9,172 59,172 20,988 20,988 70,988
18 35,447 2,803 2,803 52,803 8,917 8,917 58,917 22,494 22,494 72,494
19 38,479 1,928 1,928 51,928 8,476 8,476 58,476 23,974 23,974 73,974
20 41,663 886 886 50,886 7,830 7,830 57,830 25,413 25,413 75,413
21 45,006 (*) (*) (*) 6,943 6,943 56,943 26,864 26,864 76,864
22 48,517 (*) (*) (*) 5,780 5,780 55,780 28,222 28,222 78,222
23 52,202 (*) (*) (*) 4,303 4,303 54,303 29,452 29,452 79,452
24 56,073 (*) (*) (*) 2,480 2,480 52,480 30,520 30,520 80,520
25 60,136 (*) (*) (*) 269 269 50,269 31,382 31,382 81,382
26 64,403 (*) (*) (*) (*) (*) (*) 31,989 31,989 81,989
27 68,883 (*) (*) (*) (*) (*) (*) 32,288 32,288 82,288
28 73,587 (*) (*) (*) (*) (*) (*) 32,225 32,225 82,225
29 78,527 (*) (*) (*) (*) (*) (*) 31,727 31,727 81,727
30 83,713 (*) (*) (*) (*) (*) (*) 30,709 30,709 80,709
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(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> 63
DEATH BENEFIT OPTION 2
$1,200 ANNUAL PREMIUM: $50,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,260 280 0 50,280 320 0 50,320 361 0 50,361
2 2,583 710 17 50,710 813 120 50,813 921 228 50,921
3 3,972 1,074 450 51,074 1,266 643 51,266 1,478 854 51,478
4 5,431 1,368 814 51,368 1,674 1,119 51,674 2,023 1,468 52,023
5 6,962 1,585 1,100 51,585 2,023 1,538 52,023 2,546 2,061 52,546
6 8,570 1,718 1,302 51,718 2,304 1,888 52,304 3,036 2,620 53,036
7 10,259 1,758 1,411 51,758 2,504 2,157 52,504 3,481 3,134 53,481
8 12,032 1,693 1,415 51,693 2,605 2,327 52,605 3,860 3,582 53,860
9 13,893 1,510 1,302 51,510 2,588 2,380 52,588 4,151 3,943 54,151
10 15,848 1,199 1,199 51,199 2,434 2,434 52,434 4,332 4,332 54,332
11 17,901 747 747 50,747 2,123 2,123 52,123 4,378 4,378 54,378
12 20,056 146 146 50,146 1,638 1,638 51,638 4,261 4,261 54,261
13 22,318 (*) (*) (*) 957 957 50,957 3,953 3,953 53,953
14 24,694 (*) (*) (*) 56 56 50,056 3,417 3,417 53,417
15 27,189 (*) (*) (*) (*) (*) (*) 2,609 2,609 52,609
16 29,808 (*) (*) (*) (*) (*) (*) 1,471 1,471 51,471
17 32,559 (*) (*) (*) (*) (*) (*) (*) (*) (*)
18 35,447 (*) (*) (*) (*) (*) (*) (*) (*) (*)
19 38,479 (*) (*) (*) (*) (*) (*) (*) (*) (*)
20 41,663 (*) (*) (*) (*) (*) (*) (*) (*) (*)
21 45,006 (*) (*) (*) (*) (*) (*) (*) (*) (*)
22 48,517 (*) (*) (*) (*) (*) (*) (*) (*) (*)
23 52,202 (*) (*) (*) (*) (*) (*) (*) (*) (*)
24 56,073 (*) (*) (*) (*) (*) (*) (*) (*) (*)
25 60,136 (*) (*) (*) (*) (*) (*) (*) (*) (*)
26 64,403 (*) (*) (*) (*) (*) (*) (*) (*) (*)
27 68,883 (*) (*) (*) (*) (*) (*) (*) (*) (*)
28 73,587 (*) (*) (*) (*) (*) (*) (*) (*) (*)
29 78,527 (*) (*) (*) (*) (*) (*) (*) (*) (*)
30 83,713 (*) (*) (*) (*) (*) (*) (*) (*) (*)
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(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> 64
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 948 51 100,000 1,017 120 100,000 1,087 189 100,000
2 3,229 1,950 1,052 100,000 2,150 1,252 100,000 2,358 1,461 100,000
3 4,965 2,916 2,108 100,000 3,311 2,504 100,000 3,740 2,933 100,000
4 6,788 3,847 3,129 100,000 4,504 3,786 100,000 5,245 4,527 100,000
5 8,703 4,746 4,118 100,000 5,731 5,103 100,000 6,888 6,259 100,000
6 10,713 5,612 5,073 100,000 6,994 6,455 100,000 8,683 8,144 100,000
7 12,824 6,435 5,987 100,000 8,284 7,835 100,000 10,636 10,187 100,000
8 15,040 7,206 6,847 100,000 9,592 9,233 100,000 12,756 12,397 100,000
9 17,367 7,926 7,657 100,000 10,921 10,652 100,000 15,061 14,792 100,000
10 19,810 8,585 8,585 100,000 12,262 12,262 100,000 17,566 17,566 100,000
11 22,376 9,198 9,198 100,000 13,630 13,630 100,000 20,305 20,305 100,000
12 25,069 9,771 9,771 100,000 15,034 15,034 100,000 23,312 23,312 100,000
13 27,898 10,308 10,308 100,000 16,477 16,477 100,000 26,622 26,622 100,000
14 30,868 10,788 10,788 100,000 17,946 17,946 100,000 30,346 30,346 100,000
15 33,986 11,197 11,197 100,000 19,425 19,425 100,000 34,439 34,439 100,000
16 37,261 11,537 11,537 100,000 20,921 20,921 100,000 38,953 38,953 100,000
17 40,699 11,803 11,803 100,000 22,430 22,430 100,000 43,940 43,940 100,000
18 44,309 11,979 11,979 100,000 23,942 23,942 100,000 49,453 49,453 100,000
19 48,099 12,062 12,062 100,000 25,454 25,454 100,000 55,563 55,563 100,000
20 52,079 12,055 12,055 100,000 27,057 27,057 100,000 62,357 62,357 100,000
21 56,258 11,945 11,945 100,000 28,669 28,669 100,000 69,925 69,925 100,000
22 60,646 11,704 11,704 100,000 30,271 30,271 100,000 78,374 78,374 100,000
23 65,253 11,322 11,322 100,000 31,862 31,862 100,000 87,826 87,826 103,635
24 70,091 10,772 10,772 100,000 33,425 33,425 100,000 98,270 98,270 114,976
25 75,170 10,042 10,042 100,000 34,957 34,957 100,000 109,764 109,764 127,326
26 80,504 9,121 9,121 100,000 36,458 36,458 100,000 122,416 122,416 140,779
27 86,104 7,967 7,967 100,000 37,905 37,905 100,000 136,375 136,375 154,104
28 91,984 6,563 6,563 100,000 39,297 39,297 100,000 151,792 151,792 168,489
29 98,158 4,881 4,881 100,000 40,625 40,625 100,000 168,837 168,837 184,032
30 104,641 2,870 2,870 100,000 41,868 41,868 100,000 187,705 187,705 200,844
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
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> 65
DEATH BENEFIT OPTION 1
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 751 0 100,000 814 0 100,000 878 0 100,000
2 3,229 1,675 777 100,000 1,854 956 100,000 2,041 1,144 100,000
3 4,965 2,558 1,750 100,000 2,913 2,105 100,000 3,298 2,490 100,000
4 6,788 3,399 2,681 100,000 3,989 3,271 100,000 4,655 3,937 100,000
5 8,703 4,196 3,567 100,000 5,082 4,453 100,000 6,122 5,494 100,000
6 10,713 4,945 4,406 100,000 6,187 5,649 100,000 7,707 7,168 100,000
7 12,824 5,642 5,193 100,000 7,302 6,853 100,000 9,417 8,969 100,000
8 15,040 6,282 5,923 100,000 8,421 8,062 100,000 11,262 10,903 100,000
9 17,367 6,858 6,588 100,000 9,537 9,268 100,000 13,251 12,982 100,000
10 19,810 7,365 7,365 100,000 10,646 10,646 100,000 15,395 15,395 100,000
11 22,376 7,797 7,797 100,000 11,742 11,742 100,000 17,709 17,709 100,000
12 25,069 8,148 8,148 100,000 12,818 12,818 100,000 20,208 20,208 100,000
13 27,898 8,416 8,416 100,000 13,872 13,872 100,000 22,915 22,915 100,000
14 30,868 8,593 8,593 100,000 14,896 14,896 100,000 25,848 25,848 100,000
15 33,986 8,667 8,667 100,000 15,879 15,879 100,000 29,121 29,121 100,000
16 37,261 8,627 8,627 100,000 16,809 16,809 100,000 32,691 32,691 100,000
17 40,699 8,461 8,461 100,000 17,675 17,675 100,000 36,596 36,596 100,000
18 44,309 8,149 8,149 100,000 18,457 18,457 100,000 40,873 40,873 100,000
19 48,099 7,670 7,670 100,000 19,135 19,135 100,000 45,570 45,570 100,000
20 52,079 7,003 7,003 100,000 19,687 19,687 100,000 50,746 50,746 100,000
21 56,258 6,126 6,126 100,000 20,091 20,091 100,000 56,477 56,477 100,000
22 60,646 5,016 5,016 100,000 20,325 20,325 100,000 62,854 62,854 100,000
23 65,253 3,648 3,648 100,000 20,362 20,362 100,000 69,989 69,989 100,000
24 70,091 1,991 1,991 100,000 20,171 20,171 100,000 78,019 78,019 100,000
25 75,170 (*) (*) (*) 19,705 19,705 100,000 87,111 87,111 101,049
26 80,504 (*) (*) (*) 18,907 18,907 100,000 97,230 97,230 111,815
27 86,104 (*) (*) (*) 17,698 17,698 100,000 108,378 108,378 122,467
28 91,984 (*) (*) (*) 15,976 15,976 100,000 120,674 120,674 133,948
29 98,158 (*) (*) (*) 13,620 13,620 100,000 134,258 134,258 146,341
30 104,641 (*) (*) (*) 10,491 10,491 100,000 149,298 149,298 159,749
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
60
<PAGE> 66
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 945 47 100,945 1,014 116 101,014 1,083 185 101,083
2 3,229 1,939 1,042 101,939 2,138 1,241 102,138 2,346 1,448 102,346
3 4,965 2,895 2,087 102,895 3,287 2,480 103,287 3,713 2,905 103,713
4 6,788 3,812 3,094 103,812 4,462 3,744 104,462 5,195 4,477 105,195
5 8,703 4,691 4,063 104,691 5,663 5,035 105,663 6,804 6,176 106,804
6 10,713 5,534 4,995 105,534 6,893 6,355 106,893 8,554 8,015 108,554
7 12,824 6,329 5,880 106,329 8,140 7,692 108,140 10,445 9,996 110,445
8 15,040 7,064 6,705 107,064 9,393 9,034 109,393 12,480 12,121 112,480
9 17,367 7,741 7,472 107,741 10,652 10,383 110,652 14,674 14,405 114,674
10 19,810 8,350 8,350 108,350 11,907 11,907 111,907 17,031 17,031 117,031
11 22,376 8,904 8,904 108,904 13,169 13,169 113,169 19,582 19,582 119,582
12 25,069 9,413 9,413 109,413 14,447 14,447 114,447 22,354 22,354 122,354
13 27,898 9,878 9,878 109,878 15,744 15,744 115,744 25,371 25,371 125,371
14 30,868 10,279 10,279 110,279 17,038 17,038 117,038 28,724 28,724 128,724
15 33,986 10,596 10,596 110,596 18,308 18,308 118,308 32,348 32,348 132,348
16 37,261 10,834 10,834 110,834 19,557 19,557 119,557 36,276 36,276 136,276
17 40,699 10,986 10,986 110,986 20,776 20,776 120,776 40,531 40,531 140,531
18 44,309 11,035 11,035 111,035 21,943 21,943 121,943 45,129 45,129 145,129
19 48,099 10,978 10,978 110,978 23,052 23,052 123,052 50,099 50,099 150,099
20 52,079 10,820 10,820 110,820 24,103 24,103 124,103 55,486 55,486 155,486
21 56,258 10,547 10,547 110,547 25,079 25,079 125,079 61,317 61,317 161,317
22 60,646 10,129 10,129 110,129 26,023 26,023 126,023 67,604 67,604 167,604
23 65,253 9,559 9,559 109,559 26,846 26,846 126,846 74,385 74,385 174,385
24 70,091 8,809 8,809 108,809 27,512 27,512 127,512 81,681 81,681 181,681
25 75,170 7,872 7,872 107,872 28,004 28,004 128,004 89,536 89,536 189,536
26 80,504 6,743 6,743 106,743 28,304 28,304 128,304 98,000 98,000 198,000
27 86,104 5,385 5,385 105,385 28,363 28,363 128,363 107,095 107,095 207,095
28 91,984 3,793 3,793 103,793 28,161 28,161 128,161 116,877 116,877 216,877
29 98,158 1,951 1,951 101,951 27,665 27,665 127,665 127,400 127,400 227,400
30 104,641 (*) (*) (*) 26,822 26,822 126,822 138,700 138,700 238,700
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
61
<PAGE> 67
DEATH BENEFIT OPTION 2
$1,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 1,575 748 0 100,748 810 0 100,810 873 0 100,873
2 3,229 1,664 766 101,664 1,842 944 101,842 2,028 1,131 102,028
3 4,965 2,536 1,728 102,536 2,887 2,080 102,887 3,269 2,461 103,269
4 6,788 3,361 2,643 103,361 3,944 3,226 103,944 4,602 3,884 104,602
5 8,703 4,137 3,509 104,137 5,009 4,381 105,009 6,033 5,405 106,033
6 10,713 4,861 4,322 104,861 6,079 5,540 106,079 7,567 7,029 107,567
7 12,824 5,525 5,077 105,525 7,146 6,697 107,146 9,209 8,760 109,209
8 15,040 6,126 5,767 106,126 8,204 7,845 108,204 10,961 10,602 110,961
9 17,367 6,655 6,386 106,655 9,243 8,974 109,243 12,826 12,557 112,826
10 19,810 7,108 7,108 107,108 10,257 10,257 110,257 14,809 14,809 114,809
11 22,376 7,476 7,476 107,476 11,235 11,235 111,235 16,913 16,913 116,913
12 25,069 7,754 7,754 107,754 12,169 12,169 112,169 19,143 19,143 119,143
13 27,898 7,939 7,939 107,939 13,051 13,051 113,051 21,507 21,507 121,507
14 30,868 8,022 8,022 108,022 13,869 13,869 113,869 24,007 24,007 124,007
15 33,986 7,992 7,992 107,992 14,608 14,608 114,608 26,644 26,644 126,644
16 37,261 7,838 7,838 107,838 15,250 15,250 115,250 29,508 29,508 129,508
17 40,699 7,549 7,549 107,549 15,777 15,777 115,777 32,528 32,528 132,528
18 44,309 7,104 7,104 107,104 16,162 16,162 116,162 35,696 35,696 135,696
19 48,099 6,484 6,484 106,484 16,376 16,376 116,376 39,005 39,005 139,005
20 52,079 5,673 5,673 105,673 16,391 16,391 116,391 42,448 42,448 142,448
21 56,258 4,653 4,653 104,653 16,178 16,178 116,178 46,019 46,019 146,019
22 60,646 3,409 3,409 103,409 15,709 15,709 115,709 49,712 49,712 149,712
23 65,253 1,927 1,927 101,927 14,952 14,952 114,952 53,519 53,519 153,519
24 70,091 187 187 100,187 13,874 13,874 113,874 57,429 57,429 157,429
25 75,170 (*) (*) (*) 12,425 12,425 112,425 61,419 61,419 161,419
26 80,504 (*) (*) (*) 10,549 10,549 110,549 65,453 65,453 165,453
27 86,104 (*) (*) (*) 8,173 8,173 108,173 69,480 69,480 169,480
28 91,984 (*) (*) (*) 5,208 5,208 105,208 73,431 73,431 173,431
29 98,158 (*) (*) (*) 1,562 1,562 101,562 77,230 77,230 177,230
30 104,641 (*) (*) (*) (*) (*) (*) 80,800 80,800 180,800
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
62
<PAGE> 68
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,535 372 100,000 1,649 487 100,000 1,764 601 100,000
2 5,381 3,109 1,947 100,000 3,436 2,274 100,000 3,778 2,615 100,000
3 8,275 4,635 3,589 100,000 5,279 4,232 100,000 5,977 4,931 100,000
4 11,314 6,094 5,164 100,000 7,160 6,230 100,000 8,364 7,434 100,000
5 14,505 7,471 6,657 100,000 9,065 8,252 100,000 10,941 10,128 100,000
6 17,855 8,769 8,072 100,000 11,002 10,304 100,000 13,739 13,041 100,000
7 21,373 9,986 9,404 100,000 12,968 12,386 100,000 16,777 16,196 100,000
8 25,066 11,106 10,641 100,000 14,951 14,486 100,000 20,075 19,610 100,000
9 28,945 12,128 11,780 100,000 16,952 16,603 100,000 23,664 23,315 100,000
10 33,017 13,059 13,059 100,000 18,980 18,980 100,000 27,588 27,588 100,000
11 37,293 13,886 13,886 100,000 21,028 21,028 100,000 31,982 31,982 100,000
12 41,782 14,585 14,585 100,000 23,076 23,076 100,000 36,807 36,807 100,000
13 46,497 15,149 15,149 100,000 25,123 25,123 100,000 42,125 42,125 100,000
14 51,446 15,556 15,556 100,000 27,238 27,238 100,000 48,000 48,000 100,000
15 56,644 15,797 15,797 100,000 29,349 29,349 100,000 54,519 54,519 100,000
16 62,101 15,867 15,867 100,000 31,457 31,457 100,000 61,792 61,792 100,000
17 67,831 15,730 15,730 100,000 33,544 33,544 100,000 69,936 69,936 100,000
18 73,848 15,377 15,377 100,000 35,613 35,613 100,000 79,108 79,108 100,000
19 80,165 14,786 14,786 100,000 37,663 37,663 100,000 89,498 89,498 100,000
20 86,798 13,919 13,919 100,000 39,677 39,677 100,000 101,229 101,229 108,315
21 93,763 12,738 12,738 100,000 41,651 41,651 100,000 114,235 114,235 119,947
22 101,076 11,162 11,162 100,000 43,548 43,548 100,000 128,560 128,560 134,988
23 108,755 9,123 9,123 100,000 45,351 45,351 100,000 144,330 144,330 151,546
24 116,818 6,546 6,546 100,000 47,044 47,044 100,000 161,682 161,682 169,767
25 125,284 3,326 3,326 100,000 48,601 48,601 100,000 180,765 180,765 189,803
26 134,173 (*) (*) (*) 50,001 50,001 100,000 201,739 201,739 211,826
27 143,506 (*) (*) (*) 51,225 51,225 100,000 224,778 224,778 236,017
28 153,307 (*) (*) (*) 52,236 52,236 100,000 250,068 250,068 262,572
29 163,597 (*) (*) (*) 52,993 52,993 100,000 277,811 277,811 291,701
30 174,402 (*) (*) (*) 53,425 53,425 100,000 308,214 308,214 323,625
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
63
<PAGE> 69
DEATH BENEFIT OPTION 1
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,212 50 100,000 1,316 154 100,000 1,421 258 100,000
2 5,381 2,542 1,380 100,000 2,832 1,670 100,000 3,135 1,973 100,000
3 8,275 3,778 2,732 100,000 4,340 3,294 100,000 4,953 3,906 100,000
4 11,314 4,913 3,983 100,000 5,833 4,903 100,000 6,878 5,948 100,000
5 14,505 5,937 5,123 100,000 7,301 6,488 100,000 8,915 8,101 100,000
6 17,855 6,842 6,145 100,000 8,735 8,037 100,000 11,070 10,372 100,000
7 21,373 7,617 7,036 100,000 10,121 9,540 100,000 13,348 12,767 100,000
8 25,066 8,245 7,780 100,000 11,443 10,978 100,000 15,753 15,288 100,000
9 28,945 8,708 8,359 100,000 12,682 12,333 100,000 18,289 17,940 100,000
10 33,017 8,989 8,989 100,000 13,818 13,818 100,000 20,963 20,963 100,000
11 37,293 9,072 9,072 100,000 14,833 14,833 100,000 23,790 23,790 100,000
12 41,782 8,937 8,937 100,000 15,706 15,706 100,000 26,787 26,787 100,000
13 46,497 8,566 8,566 100,000 16,418 16,418 100,000 30,071 30,071 100,000
14 51,446 7,933 7,933 100,000 16,940 16,940 100,000 33,600 33,600 100,000
15 56,644 7,002 7,002 100,000 17,234 17,234 100,000 37,407 37,407 100,000
16 62,101 5,723 5,723 100,000 17,249 17,249 100,000 41,532 41,532 100,000
17 67,831 4,029 4,029 100,000 16,917 16,917 100,000 46,021 46,021 100,000
18 73,848 1,834 1,834 100,000 16,150 16,150 100,000 50,934 50,934 100,000
19 80,165 (*) (*) (*) 14,844 14,844 100,000 56,355 56,355 100,000
20 86,798 (*) (*) (*) 12,880 12,880 100,000 62,409 62,409 100,000
21 93,763 (*) (*) (*) 10,125 10,125 100,000 69,263 69,263 100,000
22 101,076 (*) (*) (*) 6,416 6,416 100,000 77,145 77,145 100,000
23 108,755 (*) (*) (*) 1,550 1,550 100,000 86,357 86,357 100,000
24 116,818 (*) (*) (*) (*) (*) (*) 97,284 97,284 102,148
25 125,284 (*) (*) (*) (*) (*) (*) 109,545 109,545 115,023
26 134,173 (*) (*) (*) (*) (*) (*) 122,982 122,982 129,132
27 143,506 (*) (*) (*) (*) (*) (*) 137,691 137,691 144,575
28 153,307 (*) (*) (*) (*) (*) (*) 153,770 153,770 161,459
29 163,597 (*) (*) (*) (*) (*) (*) 171,323 171,323 179,889
30 174,402 (*) (*) (*) (*) (*) (*) 190,458 190,458 199,981
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
64
<PAGE> 70
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,522 360 101,522 1,636 473 101,636 1,749 587 101,749
2 5,381 3,073 1,910 103,073 3,396 2,234 103,396 3,734 2,571 103,734
3 8,275 4,563 3,517 104,563 5,196 4,149 105,196 5,883 4,836 105,883
4 11,314 5,973 5,043 105,973 7,014 6,084 107,014 8,191 7,261 108,191
5 14,505 7,283 6,469 107,283 8,832 8,018 108,832 10,653 9,839 110,653
6 17,855 8,499 7,801 108,499 10,652 9,954 110,652 13,289 12,591 113,289
7 21,373 9,613 9,032 109,613 12,465 11,884 112,465 16,106 15,525 116,106
8 25,066 10,609 10,144 110,609 14,254 13,789 114,254 19,106 18,641 119,106
9 28,945 11,484 11,135 111,484 16,011 15,662 116,011 22,299 21,951 122,299
10 33,017 12,243 12,243 112,243 17,739 17,739 117,739 25,711 25,711 125,711
11 37,293 12,873 12,873 112,873 19,421 19,421 119,421 29,437 29,437 129,437
12 41,782 13,343 13,343 113,343 21,020 21,020 121,020 33,398 33,398 133,398
13 46,497 13,647 13,647 113,647 22,525 22,525 122,525 37,606 37,606 137,606
14 51,446 13,758 13,758 113,758 23,900 23,900 123,900 42,058 42,058 142,058
15 56,644 13,668 13,668 113,668 25,130 25,130 125,130 46,769 46,769 146,769
16 62,101 13,372 13,372 113,372 26,281 26,281 126,281 51,756 51,756 151,756
17 67,831 12,835 12,835 112,835 27,230 27,230 127,230 57,008 57,008 157,008
18 73,848 12,050 12,050 112,050 27,958 27,958 127,958 62,541 62,541 162,541
19 80,165 11,003 11,003 111,003 28,437 28,437 128,437 68,365 68,365 168,365
20 86,798 9,659 9,659 109,659 28,613 28,613 128,613 74,471 74,471 174,471
21 93,763 7,994 7,994 107,994 28,445 28,445 128,445 80,858 80,858 180,858
22 101,076 5,937 5,937 105,937 27,835 27,835 127,835 87,471 87,471 187,471
23 108,755 3,446 3,446 103,446 26,715 26,715 126,715 94,288 94,288 194,288
24 116,818 482 482 100,482 25,014 25,014 125,014 101,277 101,277 201,277
25 125,284 (*) (*) (*) 22,643 22,643 122,643 108,396 108,396 208,396
26 134,173 (*) (*) (*) 19,454 19,454 119,454 115,606 115,606 215,606
27 143,506 (*) (*) (*) 15,447 15,447 115,447 122,875 122,875 222,875
28 153,307 (*) (*) (*) 10,521 10,521 110,521 130,142 130,142 230,142
29 163,597 (*) (*) (*) 4,573 4,573 104,573 137,341 137,341 237,341
30 174,402 (*) (*) (*) (*) (*) (*) 144,363 144,363 244,363
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$12.50 administrative expense charge for the first policy year and $5
thereafter. Current values reflect a 6% of premium charge on all premiums
up to the break point premium and 4% on premiums in excess of break point
for any single policy year.
(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.
65
<PAGE> 71
DEATH BENEFIT OPTION 2
$2,500 ANNUAL PREMIUM: $100,000 SPECIFIED AMOUNT
MALE: NON-TOBACCO: 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 2,625 1,197 35 101,197 1,300 138 101,300 1,404 241 101,404
2 5,381 2,500 1,338 102,500 2,785 1,623 102,785 3,083 1,921 103,083
3 8,275 3,693 2,647 103,693 4,242 3,196 104,242 4,840 3,794 104,840
4 11,314 4,768 3,838 104,768 5,660 4,730 105,660 6,671 5,741 106,671
5 14,505 5,715 4,901 105,715 7,024 6,211 107,024 8,571 7,758 108,571
6 17,855 6,523 5,825 106,523 8,319 7,622 108,319 10,534 9,836 110,534
7 21,373 7,179 6,598 107,179 9,527 8,946 109,527 12,549 11,968 112,549
8 25,066 7,665 7,200 107,665 10,622 10,157 110,622 14,600 14,135 114,600
9 28,945 7,962 7,613 107,962 11,578 11,229 111,578 16,669 16,320 116,669
10 33,017 8,052 8,052 108,052 12,366 12,366 112,366 18,734 18,734 118,734
11 37,293 7,920 7,920 107,920 12,960 12,960 112,960 20,776 20,776 120,776
12 41,782 7,549 7,549 107,549 13,332 13,332 113,332 22,770 22,770 122,770
13 46,497 6,927 6,927 106,927 13,453 13,453 113,453 24,694 24,694 124,694
14 51,446 6,033 6,033 106,033 13,290 13,290 113,290 26,517 26,517 126,517
15 56,644 4,841 4,841 104,841 12,798 12,798 112,798 28,282 28,282 128,282
16 62,101 3,314 3,314 103,314 11,918 11,918 111,918 29,856 29,856 129,856
17 67,831 1,404 1,404 101,404 10,581 10,581 110,581 31,164 31,164 131,164
18 73,848 (*) (*) (*) 8,701 8,701 108,701 32,109 32,109 132,109
19 80,165 (*) (*) (*) 6,188 6,188 106,188 32,583 32,583 132,583
20 86,798 (*) (*) (*) 2,956 2,956 102,956 32,479 32,479 132,479
21 93,763 (*) (*) (*) (*) (*) (*) 31,686 31,686 131,686
22 101,076 (*) (*) (*) (*) (*) (*) 30,090 30,090 130,090
23 108,755 (*) (*) (*) (*) (*) (*) 27,570 27,570 127,570
24 116,818 (*) (*) (*) (*) (*) (*) 23,984 23,984 123,984
25 125,284 (*) (*) (*) (*) (*) (*) 19,082 19,082 119,082
26 134,173 (*) (*) (*) (*) (*) (*) 12,713 12,713 112,713
27 143,506 (*) (*) (*) (*) (*) (*) 4,601 4,601 104,601
28 153,307 (*) (*) (*) (*) (*) (*) (*) (*) (*)
29 163,597 (*) (*) (*) (*) (*) (*) (*) (*) (*)
30 174,402 (*) (*) (*) (*) (*) (*) (*) (*) (*)
</TABLE>
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and a
monthly $25 administrative expense charge for the first policy year and
$7.50 thereafter. Guaranteed values reflect a 6% of premium charge on all
premiums.
(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.
66
<PAGE> 72
<PAGE> 1
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account (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
--------------------------------------------------------------------------------
<PAGE> 2
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>
<PAGE> 3
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
-------- ---------- ---------
<S> <C> <C> <C> <C>
Single Premium contracts issued prior
to April 16, 1990 (policy years 1 through 10):
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.
--------------------------------------------------------------------------------
<PAGE> 4
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>
<PAGE> 5
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>
<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>
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.
--------------------------------------------------------------------------------
<PAGE> 7
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)
<PAGE> 8
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.
<PAGE> 9
(d) Surrender Charges
Policy surrenders result in a redemption of the contract value from the
Account and payment of the surrender proceeds to the contract owner or
designee. The surrender proceeds consist of the contract value, less
any outstanding policy loans, and less a surrender charge, if
applicable. The charge is determined according to contract type.
For single premium contracts, the charge is determined based upon a
specified percentage of the original purchase payment. For single
premium contracts issued prior to April 16, 1990, the charge is 8% in
the first year and declines to 0% after the ninth year. For single
premium contracts issued on or after April 16, 1990, the charge is 8.5%
in the first year and declines to 0% after the ninth year.
For multiple payment contracts and flexible premium contracts, the
amount charged is based upon a specified percentage of the initial
surrender charge, which varies by issue age, sex and rate class. The
charge is 100% of the initial surrender charge in the first year, with
certain exceptions, declining to 0% after the ninth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of a
contract are not incurred.
(3) ASSET CHARGES
For single premium contracts, the Company deducts a charge from the
contract to cover mortality and expense risk charges related to operations,
and to recover policy maintenance and premium tax charges. For contracts
issued prior to April 16, 1990, the charge is equal to an annual rate of
.95% during the first ten policy years, and .50% thereafter. A reduction of
charges on these contracts is possible in policy years six through ten for
those contracts achieving certain investment performance criteria; for
contracts issued on or after April 16, 1990, the charge is equal to an
annual rate of 1.30% during the first ten policy years, and 1.00%
thereafter.
For multiple payment contracts and flexible premium contracts, the Company
deducts a charge equal to an annual rate of .80%, with certain exceptions,
to cover mortality and expense risk charges related to operations.
The above charges are assessed through the daily unit value calculation.
The following table provides mortality 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>
<PAGE> 10
<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>
<PAGE> 11
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.
--------------------------------------------------------------------------------
<PAGE> 73
<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, 1999 and
1998, 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,
1999. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
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, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
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
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</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, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(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.
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. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(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 accumulated other comprehensive income in
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, 1999 or 1998.
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.
(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.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(d) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 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 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, 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 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) 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.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 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. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
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
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, 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) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
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 Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</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) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</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, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<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, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
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) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) 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 fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
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 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
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>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) 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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
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 and derivative financial instruments. 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 $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
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 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 $143.6 million and $187.9 million as of December 31,
1999 and 1998, 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.
(9) 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.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
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,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
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
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance 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). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
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, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 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, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 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, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
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.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, 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
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
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. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 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 such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 1999 and
1998 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.
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 $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company 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.
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, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to 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 any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was 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).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) 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.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. 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, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. 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, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</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) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 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 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 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) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 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
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</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.
<PAGE> 74
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 11 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 102 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 July 26, 2000 Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for
authorizing the establishment of the Registrant, the Nationwide VLI Separate Account (File No. 811-4399),
adopted and hereby incorporated herein by reference.
3. Distribution Contracts Included with Post-Effective Amendment No. 10 and hereby
incorporated herein by reference.
4. Form of Security Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account (File No. 811-4399),
and hereby incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account (File No. 811-4399),
and hereby incorporated herein by reference.
6. Application Form of Security Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account (File No. 811-4399),
and hereby incorporated herein by reference.
7. Opinion of Counsel Included with the Registration Statement on Form N-8B-2 for
the Nationwide VLI Separate Account (File No. 811-4399),
and hereby incorporated herein by reference.
</TABLE>
<PAGE> 75
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 Charge ("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> 76
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG LLP
Columbus, Ohio
April 28, 2000
<PAGE> 77
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
No. 11 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
20th day of September, 2000.
<TABLE>
<S> <C>
NATIONWIDE VLI SEPARATE ACCOUNT
----------------------------------------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
----------------------------------------------------------------
Attest: (Depositor)
By: /s/ GLENN W. SODEN By: /s/ STEVEN SAVINI
---------------------------------------------- ----------------------------------------------------------------
Glenn W. Soden Steven Savini, Esq.
Assistant Secretary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 11 has been signed below by the following persons in the
capacities indicated on the 20th day of September, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
----------------------------------------
Lewis J. Alphin
A. I. BELL Director
----------------------------------------
A. I. Bell
NANCY C. BREIT Director
----------------------------------------
Nancy C. Breit
KENNETH D. DAVIS Director
----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
----------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
----------------------------------------
Willard J. Engel
FRED C. FINNEY Director
----------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief Operating
---------------------------------------- Officer and Director
Joseph J. Gasper
W.G. JURGENSEN Chief Executive Officer Elect
---------------------------------------- and Director
W.G. Jurgensen
DIMON R. MCFERSON Chairman and Chief Executive
---------------------------------------- Officer and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and
---------------------------------------- Director
David O. Miller
YVONNE L. MONTGOMERY Director
----------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
---------------------------------------- Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
----------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
----------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /s/ STEVEN SAVINI
---------------------------------------- --------------------------------------
Arden L. Shisler Steven Savini
Attorney-in-Fact
ROBERT L. STEWART Director
----------------------------------------
Robert L. Stewart
</TABLE>
