<PAGE> 1
Registration No. 33-16999
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
POST-EFFECTIVE AMENDMENT NO. 20
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-2
(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 the Financial Statements.
It is proposed that this filing will become effective (check appropriate box).
[ ] 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)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities being registered: Modified Single Premium Variable Life
Insurance Policies
Approximate date of proposed offering: Continuously on and after 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
34............................... Not Applicable
35............................... Nationwide Life Insurance Company
36............................... Not Applicable
37............................... Not Applicable
38............................... Distribution of The Policies
39............................... Distribution of The Policies
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
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
MODIFIED SINGLE PREMIUM VARIABLE
LIFE INSURANCE POLICIES
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VLI SEPARATE ACCOUNT - 2
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1. AN APPLICATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
("SEC") FOR AN ORDER PERMITTING THE SUBSTITUTION OF SHARES OF THE
UNDERLYING MUTUAL FUNDS IN COLUMN A ("EXISTING FUND") OF THE FOLLOWING
TABLE WITH SHARES OF THE UNDERLYING MUTUAL FUNDS IN COLUMN B ("REPLACEMENT
FUND"). UNTIL AN ORDER IS GRANTED BY THE SEC, BOTH INVESTMENT OPTIONS WILL
BE AVAILABLE TO ALL CONTRACT OWNERS AS UNDERLYING MUTUAL FUND OPTIONS. IF
AN ORDER IS GRANTED, INFORMATION WILL BE SENT TO ALL CONTRACT OWNERS
REGARDING THE "EXCHANGE DATE" ON WHICH THE EXISTING FUNDS WILL BE
ELIMINATED AS INVESTMENT OPTIONS AND SUBSTITUTED WITH THE REPLACEMENT
FUNDS.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
Column A Column B
Existing Fund Replacement Fund
--------------------------------------------------------------------------------
<S> <C>
Strong Variable Insurance Funds, Inc. - Strong Strong Opportunity Fund II, Inc.
Discovery Fund II, Inc.
--------------------------------------------------------------------------------
</TABLE>
2. THE "SURRENDER (REDEMPTION)" PROVISION ON PAGE 17 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.
3. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 44 OF YOUR
PROSPECTUS IS AMENDED TO READ:
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST ("AMT")
Neuberger Berman AMT is an open-end, diversified management investment
company that offers its portfolios in connection with variable annuity
contracts and variable life insurance policies, and certain qualified
plans. Prior to May 1, 2000, the portfolios invested through a two-tier
master/feeder structure, whereby each portfolio invested its assets in
another fund that served as a corresponding "master series;" the master
series invested in securities. Effective May 1, 2000, the portfolios
converted to a conventional one-tier structure, whereby each portfolio
holds its securities directly. Neuberger Berman Management Inc. is the
investment adviser.
GROWTH PORTFOLIO
Investment Objective: Capital growth. The portfolio pursues this goal
by investing mainly in the common stocks of mid-capitalization
companies. The managers look for fast-growing companies that are in
new or rapidly evolving industries and seek to reduce risk by
diversifying among many companies, industries and sectors.
<PAGE> 5
GUARDIAN PORTFOLIO
Investment Objective: Long-term capital growth, with current income as
a secondary objective. The portfolio pursues these goals by investing
mainly in common stocks of large-capitalization companies.
LIMITED MATURITY BOND PORTFOLIO
Investment Objective: The highest available current income consistent
with liquidity and low risk to principal; total return is a secondary
objective. The portfolio pursues these goals by investing mainly in
investment-grade bonds and other debt securities from U.S. government
and corporate issuers.
PARTNERS PORTFOLIO
Investment Objective: Capital growth. The portfolio pursues its goal
by investing mainly in common stocks of mid- to large-capitalization
companies.
4. 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.
5. 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
6. EFFECTIVE SEPTEMBER 25, 2000, THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES"
TABLE ON PAGE 8 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
<PAGE> 6
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>
7. EFFECTIVE SEPTEMBER 25, 2000, "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS" ON PAGE 44 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.
8. EFFECTIVE OCTOBER 2, 2000, PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE
THE FOLLOWING UNDERLYING MUTUAL FUNDS:
NATIONWIDE SEPARATE ACCOUNT TRUST
o Gartmore NSAT Emerging Markets Fund
o Gartmore NSAT Global Technology and Communications Fund
o Gartmore NSAT International Growth Fund
o Turner NSAT Growth Focus Fund
9. EFFECTIVE OCTOBER 2, 2000, THE FOLLOWING UNDERLYING MUTUAL FUNDS HAVE
CHANGED NAMES. ALL REFERENCES IN YOUR PROSPECTUS TO THE OLD NAME WILL BE
REPLACED WITH THE NEW NAME AS DESCRIBED BELOW:
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
ALL REFERENCES TO... ARE REPLACED WITH...
--------------------------------------------------------------------------------
<S> <C>
NSAT - Nationwide Mid Cap Index Fund NSAT - Dreyfus NSAT Mid Cap Index Fund
--------------------------------------------------------------------------------
NSAT - Nationwide Multi Sector Bond Fund NSAT - MAS NSAT Multi Sector Bond Fund
--------------------------------------------------------------------------------
NSAT - Nationwide Strategic Growth Fund NSAT - Strong NSAT Mid Cap Growth Fund
--------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
10. EFFECTIVE OCTOBER 2, 2000, WADDELL & REED INVESTMENT MANAGEMENT COMPANY
WILL REPLACE FRANKLIN ADVISERS, INC. AS ONE OF THE SUBADVISERS OF THE
NATIONWIDE SEPARATE ACCOUNT TRUST - NATIONWIDE SMALL CAP GROWTH FUND. THERE
IS NO CHANGE IN THE FUND'S OBJECTIVE AS IS STATED IN THE PROSPECTUS DATED
MAY 1, 2000.
11. EFFECTIVE OCTOBER 2, 2000, THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES"
TABLE ON PAGE 8 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>
NSAT - Gartmore NSAT Emerging 0.87% 0.88% 0.00% 1.75%
Markets Fund
---------------------------------------------------------------------------------
NSAT - Gartmore NSAT Global 0.62% 0.73% 0.00% 1.35%
Technology and Communications Fund
---------------------------------------------------------------------------------
NSAT - Gartmore NSAT International 0.72% 0.88% 0.00% 1.60%
Growth Fund
---------------------------------------------------------------------------------
NSAT - Nationwide Small Cap Value 0.88% 0.37% 0.00% 1.25%
Fund
---------------------------------------------------------------------------------
NSAT - Turner NSAT Growth Focus 0.59% 0.76% 0.00% 1.35%
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.
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>
NSAT - Gartmore NSAT Emerging 1.15% 0.88% 0.00% 2.03%
Markets Fund
-------------------------------------------------------------------------------------
NSAT - Gartmore NSAT Global 0.98% 0.73% 0.00% 1.71%
Technology and Communications Fund
-------------------------------------------------------------------------------------
NSAT - Gartmore NSAT International 1.00% 0.88% 0.00% 1.88%
Growth Fund
-------------------------------------------------------------------------------------
NSAT - Nationwide Small Cap Value Fund 0.90% 0.37% 0.00% 1.27%
-------------------------------------------------------------------------------------
NSAT - Turner NSAT Growth Focus Fund 0.90% 0.76% 0.00% 1.66%
-------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
12. EFFECTIVE OCTOBER 2, 2000, "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS" ON PAGE 44 OF YOUR PROSPECTUS IS AMENDED TO READ:
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
GARTMORE NSAT EMERGING MARKETS FUND
(subadviser: Gartmore Global Partners)
Investment Objective: Long term capital growth by investing primarily
in equity securities of companies located in emerging market
countries.
GARTMORE NSAT GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND
(subadviser: Gartmore Global Partners)
Investment Objective: Long term capital appreciation by investing
primarily and at least 65% of its total assets in equity securities
issued by U.S. and foreign companies with business operations in
technology and communications and technology and communication related
industries.
GARTMORE NSAT INTERNATIONAL GROWTH FUND
(subadviser: Gartmore Global Partners)
Investment Objective: Long term capital growth by investing primarily
in equity securities of companies in Europe, Australia, the Far East
and other regions, including developing countries.
TURNER NSAT GROWTH FOCUS FUND
(subadviser: Turner Investment Partners, Inc.)
Investment Objective: Long term capital appreciation by investing
primarily in U.S. common stocks, ADRs and foreign companies that
demonstrate strong earnings growth potential.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY
Modified Single Premium Variable Life Insurance Policies
Issued by Nationwide Life Insurance Company through its Nationwide VLI Separate
Account-2
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:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
o American Century VP Balanced
o American Century VP Income & Growth
o American Century VP International
o American Century VP Value
DREYFUS
o Dreyfus Investment Portfolios - European Equity Portfolio
o Dreyfus Stock Index Fund, Inc
o The Dreyfus Socially Responsible Growth Fund, Inc.
DREYFUS VARIABLE INVESTMENT FUND
o Appreciation Portfolio (formerly, Dreyfus Variable Investment Fund -
Capital Appreciation Portfolio)
o Growth & Income Portfolio*
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
o VIP Equity-Income Portfolio
o VIP Growth Portfolio
o VIP High Income Portfolio*
o VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
o VIP II Asset Manager Portfolio
o VIP II Contrafund(R) Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
o VIP III Growth Opportunities Portfolio
JANUS
o Janus Aspen Series - Capital Appreciation Portfolio: Service Shares
o Janus Aspen Series - Global Technology Portfolio: Service Shares
o Janus Aspen Series - International Growth Portfolio: Service Shares
MORGAN STANLEY THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (FORMERLY, MORGAN STANLEY
DEAN WITTER UNIVERSAL FUNDS, INC.)
o Emerging Markets Debt Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
o Capital Appreciation Fund
o Government Bond Fund
o Money Market Fund
o Total Return Fund
o Nationwide Mid Cap Index Fund (subadviser: The Dreyfus Corporation)
o Nationwide Multi Sector Bond Fund (subadviser: Miller, Anderson & Sherrerd,
LLP)
o Nationwide Small Cap Growth Fund (subadvisers: Franklin Advisers, Inc.,
Miller, Anderson & Sherrerd, LLP, Neuberger Berman, LLC.)
o Nationwide Small Cap Value Fund (subadvisers: The Dreyfus Corporation)
o Nationwide Small Company Fund (subadvisers: The Dreyfus Corporation,
Neuberger Berman, LLC, Lazard Asset Management and Strong Capital
Management, Inc.)
o Nationwide Strategic Growth Fund (subadvisers: Strong Capital Management,
Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
o AMT Growth Portfolio
o AMT Guardian Portfolio
o AMT Limited Maturity Bond Portfolio
o AMT Partners Portfolio
1
<PAGE> 10
OPPENHEIMER VARIABLE ACCOUNTS FUNDS
o Oppenheimer Aggressive Growth Fund/VA
o Oppenheimer Bond Fund/VA
o Oppenheimer Global Securities Fund/VA
o Oppenheimer Capital Appreciation Fund/VA (formerly, Oppenheimer Growth
Fund)
o Oppenheimer Main Street Growth & Income Fund/VA
o Oppenheimer Multiple Strategies Fund/VA
STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG SPECIAL FUND II, INC.)
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Bond Fund
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
VAN KAMPEN LIFE INVESTMENT TRUST
o Morgan Stanley Real Estate Securities Portfolio
WARBURG PINCUS TRUST
o Small Company Growth Portfolio
NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER SEPTEMBER 27, 1999:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
o American Century VP Capital Appreciation
STRONG VARIABLE INSURANCE FUNDS, INC.
o Strong Discovery Fund II, Inc.
o International Stock Fund II
WARBURG PINCUS TRUST
o International Equity Portfolio
o Global Post-Venture Capital Portfolio (formerly, Post-Venture Capital
Portfolio)
*These underlying mutual funds invest in lower quality debt securities commonly
referred to as junk bonds.
In Texas the policies are titled, "Flexible Premium Variable Life Insurance
Policies."
For 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
Information about this and other Best of America Products can be found on the
world-wide web at:
WWW.BESTOFAMERICA.COM
THIS POLICY IS NOT:
o A BANK DEPOSIT;
o ENDORSED BY A BANK OR GOVERNMENT AGENCY;
o FEDERALLY INSURED; OR
o AVAILABLE IN EVERY STATE.
The life insurance policies offered by this prospectus are variable life
insurance policies. They provide life insurance coverage on the insured named in
the policy. For policies offered in New York under a group contract, references
throughout this prospectus to "policy will mean "certificate" and references to
"policy owner" will mean "certificate owner." 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-2 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.
2
<PAGE> 11
Nationwide guarantees the death benefit will never be less than the specified
amount stated on the policy data page for as long as the policy is in force.
The cash surrender value is not guaranteed. The policy will lapse if the cash
surrender value is insufficient to cover policy charges.
Benefits described in this prospectus may not be available in every jurisdiction
- refer to your policy for specific benefit information.
This prospectus is not an offering in any jurisdiction where such offering may
not lawfully be made. No person is authorized to make any representations in
connection with this offering other than those contained in this prospectus.
It may be disadvantageous for policy owners to:
o replace existing insurance policies with the policy described in this
prospectus;
o purchase a policy to obtain additional insurance protection if another
variable life insurance policy is owned; or
o take policy loans or withdrawals from the policy prior to attaining age
591/2(see "Tax Matters").
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE> 12
GLOSSARY OF SPECIAL TERMS
ATTAINED AGE- The insured's age on the policy date, plus the number of full
years since the policy date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the cash
value of the variable account.
FIXED ACCOUNT- An investment option which is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
GUIDELINE SINGLE PREMIUM- The single premium required to mature the policy under
guaranteed mortality and expense charges with an interest rate of 6%.
MATURITY DATE- The policy anniversary on or next following the insured's 95th
birthday.
NATIONWIDE- Nationwide Life Insurance Company.
SPECIFIED AMOUNT- The dollar amount used to determine the death benefit under a
policy.
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-2, 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.
4
<PAGE> 13
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.........................4
SUMMARY OF POLICY EXPENSES........................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES............8
SYNOPSIS OF THE POLICIES.........................11
NATIONWIDE LIFE INSURANCE COMPANY................11
NATIONWIDE INVESTMENT SERVICES
CORPORATION.................................11
INVESTING IN THE POLICY..........................12
The Variable Account and Underlying
Mutual Funds
Changes of Investment Policy
Substitution of Securities
Voting Rights
Material Conflicts
The Fixed Account
INFORMATION ABOUT THE POLICIES...................14
Minimum Requirements for Policy Issuance
Premium Payments
Pricing
POLICY CHARGES...................................15
Monthly Cost of Insurance
Annual Administrative Charge
Surrender Charges
Mortality and Expense Risk Charge
Administrative Expense Charge
Tax Expense Charge
Income Tax
SURRENDERING THE POLICY FOR CASH.................17
Surrender (Redemption)
Cash Surrender Value
Partial Surrenders
Reduction of the Specified Amount
Income Tax Withholding
VARIATION IN CASH VALUE..........................18
Error in Age or Sex
POLICY PROVISIONS................................18
Policy Owner
Beneficiary
Changes in Existing Insurance Coverage
OPERATION OF THE POLICY..........................19
Allocation of Net Premium and Cash Value
How the Investment Experience is
Determined
Net Investment Factor
Determining the Cash Value
Transfers
RIGHT TO REVOKE..................................21
POLICY LOANS.....................................22
Taking a Policy Loan
Effect on Investment Performance
Interest
Effect on Death Benefit and Cash Value
Repayment
ASSIGNMENT.......................................23
POLICY OWNER SERVICES............................23
Dollar Cost Averaging
DEATH BENEFIT INFORMATION........................23
Calculations of the Death Benefit
Changes in the Death Benefit
Proceeds Payable on Death
Incontestability
Suicide
Maturity Proceeds
EXCHANGE RIGHTS..................................25
GRACE PERIOD.....................................26
Reinstatement
TAX MATTERS......................................26
Policy Proceeds
Withholding
Federal Estate and Generation-Skipping
Transfers Taxes
Non-Resident Aliens
Taxation of Nationwide
Tax Changes
LEGAL CONSIDERATIONS.............................29
STATE REGULATION.................................30
REPORTS TO POLICY OWNERS.........................30
ADVERTISING......................................30
LEGAL PROCEEDINGS................................30
EXPERTS..........................................31
REGISTRATION STATEMENTS..........................32
DISTRIBUTION OF THE POLICIES.....................32
</TABLE>
5
<PAGE> 14
<TABLE>
<S> <C>
ADDITIONAL INFORMATION ABOUT
NATIONWIDE..................................34
APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS................................44
APPENDIX B: WHEN ADDITIONAL PREMIUM
PAYMENTS ARE PERMITTED......................55
APPENDIX C: ILLUSTRATIONS OF CASH VALUES
CASH SURRENDER VALUES, AND
DEATH BENEFITS..............................56
</TABLE>
6
<PAGE> 15
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 mortality and expense risks.
No deductions are made from premium payments - 100% of each premium payment is
applied to cash value.
Nationwide deducts the following charges from the cash value of the policy:
o monthly cost of insurance
o annual administrative charge(1)
o surrender charges(2).
(1) The amount of annual administrative charge is determined by the amount of
total net premium payments (see "Annual Administrative Charge"). The current
guaranteed maximum charges are:
o $135 ($120 in New York) for premiums of $10,000 but less than $25,000;
and
o $75 for net premiums of $25,000+.
(2) Surrender charges will not exceed 8.5% of the total premiums paid (see
"Surrender Charges").
Nationwide deducts the following charges from the assets of the variable
account:
o mortality and expense risk charge(3)
o administrative expense charge(4)
o tax expense charge(5).
Annually, these charges are equal to:
<TABLE>
<CAPTION>
---------------------------------------
POLICY POLICY
YEARS YEARS
---------------------------------------
1-10 11+
---------------------------------------
<S> <C> <C>
CURRENT 1.30% 1.00%
---------------------------------------
GUARANTEED
MAXIMUM 1.60% 1.30%
---------------------------------------
</TABLE>
(3) The mortality and expense risk charge is charged daily and is equal to an
annual effective rate of 0.75%. It is guaranteed not to exceed 0.90% (see
"Mortality and Expense Risk Charge").
(4) The administrative expense charge is charged daily and is equal to an annual
effective rate of 0.25% . It is guaranteed not to exceed 0.40% (see
"Administrative Expense Charge").
(5) The daily tax expense charge is deducted during the first ten policy years
and is equivalent to an annual effective rate of 0.30% (see "Tax Expense
Charge").
For more information about any policy charge, see "Policy Charge" in this
prospectus.
7
<PAGE> 16
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund net assets, after expense
reimbursement)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
MANAGEMENT OTHER 12B-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, 0.90% 0.00% 0.00% 0.90%
Inc. - American Century VP Balanced
-------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 0.00% 1.00%
Inc. - American Century VP Capital
Appreciation
-------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 0.70% 0.00% 0.00% 0.70%
Inc. - American Century VP Income & Growth
-------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.34% 0.00% 0.00% 1.34%
Inc. - American Century VP International
-------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 0.00% 1.00%
Inc. - American Century VP Value
-------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 0.75% 0.04% 0.00% 0.79%
Fund, Inc.
-------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European 1.00% 0.25% 0.00% 1.25%
Equity Portfolio
-------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
-------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - 0.43% 0.35% 0.00% 0.78%
Appreciation Portfolio (formerly, Dreyfus
Variable Investment Fund - Capital
Appreciation Portfolio)
-------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Growth 0.75% 0.04% 0.00% 0.79%
& Income Portfolio
-------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio 0.48% 0.08% 0.00% 0.56%
-------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0.58% 0.07% 0.00% 0.65%
-------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0.58% 0.11% 0.00% 0.69%
-------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.14% 0.00% 0.87%
-------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0.53% 0.09% 0.00% 0.62%
-------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R)Portfolio 0.58% 0.07% 0.00% 0.65%
-------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities 0.58% 0.10% 0.00% 0.68%
Portfolio
-------------------------------------------------------------------------------------------------------
Janus Aspen Series - Capital Appreciation 0.65% 0.04% 0.25% 0.94%
Portfolio: Service Shares
-------------------------------------------------------------------------------------------------------
Janus Aspen Series - Global Technology 0.65% 0.13% 0.25% 1.03%
Portfolio: Service Shares
-------------------------------------------------------------------------------------------------------
Janus Aspen Series - International Growth 0.65% 0.11% 0.25% 1.01%
Portfolio: Service Shares
-------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Growth Portfolio 0.84% 0.08% 0.00% 0.92%
-------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
-------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Limited Maturity 0.65% 0.11% 0.00% 0.76%
Bond Portfolio
-------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 0.80% 0.07% 0.00% 0.87%
-------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.60% 0.14% 0.00% 0.74%
-------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.50% 0.15% 0.00% 0.65%
-------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.39% 0.15% 0.00% 0.54%
-------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.58% 0.14% 0.00% 0.72%
-------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.88% 0.15% 0.00% 1.03%
-------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 17
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
MANAGEMENT OTHER 12B-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
----------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund 1.10% 0.20% 0.00% 1.30%
----------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
----------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 0.98% 0.17% 0.00% 1.15%
----------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.66% 0.01% 0.00% 0.67%
Oppenheimer Aggressive Growth Fund/VA
----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.72% 0.01% 0.00% 0.73%
Oppenheimer Bond Fund/VA
----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.67% 0.02% 0.00% 0.69%
Oppenheimer Global Securities Fund/VA
----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.68% 0.02% 0.00% 0.70%
Oppenheimer Capital Appreciation Fund/VA
(formerly, Oppenheimer Variable Account
Funds - Oppenheimer Growth Fund)
----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.73% 0.05% 0.00% 0.78%
Oppenheimer Main Street Growth & Income
Fund/VA
----------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.72% 0.01% 0.00% 0.73%
Oppenheimer Multiple Strategies Fund/VA
----------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00% 0.14% 0.00% 1.14%
(formerly, Strong Special Fund II, Inc.)
----------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. - 1.00% 0.14% 0.00% 1.14%
Strong Discovery Fund II, Inc.
----------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, Inc. - 1.00% 0.16% 0.00% 1.16%
International Stock Fund II
----------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. 0.45% 0.98% 0.00% 1.43%
- Emerging Markets Debt Portfolio
(formerly, Morgan Stanley Dean Witter
Universal Funds, Inc. - Emerging Markets
Debt Portfolio)
----------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 1.00% 0.22% 0.00% 1.22%
Worldwide Bond Fund
----------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 1.00% 0.34% 0.00% 1.34%
Worldwide Emerging Markets Fund
----------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 1.00% 0.26% 0.00% 1.26%
Worldwide Hard Assets Fund
----------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - 0.97% 0.13% 0.00% 1.10%
Morgan Stanley Real Estate Securities
Portfolio
----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International 1.00% 0.32% 0.00% 1.32%
Equity Portfolio
----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Global 1.07% 0.33% 0.00% 1.40%
Post-Venture Capital Portfolio
(formerly, Warburg Pincus Trust -
Post-Venture Capital Portfolio)
----------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Small Company 0.90% 0.24% 0.00% 1.14%
Growth Portfolio
----------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 18
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>
-------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund Expenses
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio 0.48% 0.09% 0.00% 0.57%
-------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 0.58% 0.08% 0.00% 0.66%
-------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio 0.73% 0.18% 0.00% 0.91%
-------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio 0.53% 0.10% 0.00% 0.63%
-------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R)Portfolio 0.58% 0.09% 0.00% 0.67%
-------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.11% 0.00% 0.69%
-------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.88% 0.86% 0.00% 1.74%
-------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.27% 0.00% 1.02%
-------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund 1.10% 1.30% 0.00% 2.40%
-------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.33% 0.00% 1.23%
-------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.37% 0.00% 1.27%
-------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging 0.80% 0.98% 0.00% 1.78%
Markets Debt Portfolio (formerly, Morgan Stanley
Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio)
-------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.54% 0.00% 1.54%
Emerging Markets Fund
-------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley 1.00% 0.13% 0.00% 1.13%
Real Estate Securities Portfolio
-------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Global Post-Venture Capital 1.25% 0.33% 0.00% 1.58%
Portfolio (formerly, Warburg Pincus Trust -
Post-Venture Capital Portfolio)
-------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 19
SYNOPSIS OF THE POLICIES
The policies offered by this prospectus provide for life insurance coverage on
the insured. The death benefit and cash value of the policy may increase or
decrease to reflect the performance of the investment options chosen by the
policy owner (see "Death Benefit Information").
CASH SURRENDER VALUE
If the policy is terminated during the insured's lifetime, a cash surrender
value may be payable under the policy. However, there is no guaranteed cash
surrender value (see "Variation in Cash Value "). The policy will lapse without
value if the cash surrender value falls below what is needed to cover policy
charges.
PREMIUMS
The minimum initial premium for which a policy may be issued is $10,000 for
issue ages 75 or younger and $50,000 for issue ages 76 through 80.
Additional premium payments of $1,000 are permitted any time while the policy is
in force, subject to certain restrictions (see "Premium Payments").
TAXATION
The policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code. Nationwide will
monitor compliance with the tests provided by Section 7702 to insure the
policies continue to receive this favored tax treatment (see "Tax Matters").
NONPARTICIPATING POLICIES
The policies are nonparticipating policies on which no dividends are payable.
The policies do not share in the profits or surplus earnings of Nationwide.
RIDERS
A rider may be added to the policy (availability varies by state).
Riders currently include the:
o Maturity Extension Endorsement; and
o Accelerated Death Benefit Rider.
POLICY CANCELLATION
Policy owners may return the policy for any reason within certain time periods
and Nationwide will refund the policy value or the amount required by law (see
"Right to Revoke").
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under the laws of the
State of Ohio in March 1929, with its home office at One Nationwide Plaza,
Columbus, Ohio 43215. Nationwide is a provider of life insurance, annuities and
retirement products. It is admitted to do business in all states, the District
of Columbia and Puerto Rico.
CUSTODIAN OF ASSETS
Nationwide serves as the custodian of the assets of the variable account.
OTHER CONTRACTS ISSUED BY NATIONWIDE
Nationwide does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of Nationwide.
NATIONWIDE INVESTMENT SERVICES CORPORATION
The policies are distributed by Nationwide Investment Services Corporation
("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. (For policies issued in
the State of Michigan, all references to NISC shall mean Nationwide Investment
Svcs. Corporation.) NISC is a wholly owned subsidiary of Nationwide.
11
<PAGE> 20
INVESTING IN THE POLICY
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide VLI Separate Account-2 is a separate account that invests in the
underlying mutual fund options listed in Appendix A. Nationwide established the
separate account on May 7, 1987, 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.
Income, gains, and losses credited to, or charged against the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to policy owners under the policies.
The variable account is divided into sub-accounts. Policy owners elect to have
net premiums allocated among the sub-accounts and the fixed account at the time
of application.
Nationwide uses the assets of each sub-account to buy shares of the underlying
mutual funds based on policy owner instructions. A policy's investment
performance depends upon the performance of the underlying mutual fund options
chosen by the policy owner.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. The underlying mutual fund options are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans.
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. Policy owners should not compare the performance of a publicly traded fund
with the performance of underlying mutual funds participating in the variable
account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Changes of Investment Policy
Nationwide may materially change the investment policy of the variable account.
Nationwide must inform policy owners 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
12
<PAGE> 21
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.
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.
Premium payments 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
policies at varying rate(s) set by Nationwide. The
13
<PAGE> 22
guaranteed rate for any premium payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 4.0%
per year.
Any interest in excess of 4.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The policy owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
4.0% for any given year.
New premium payments deposited to the contract which are allocated to the fixed
account may receive a different rate of interest than amounts transferred from
the sub-accounts to the fixed account and amounts maturing in the fixed account.
INFORMATION ABOUT THE POLICIES
MINIMUM REQUIREMENTS FOR ISSUANCE OF A POLICY
This policy provides life insurance coverage on the insured. Minimum
requirements for policy issuance include:
o the insured must be age 80 or younger;
o Nationwide may require satisfactory evidence of insurability
(including a medical exam); and
o minimum initial premium of $10,000 for issue ages 75 and younger, and
$50,000 for issue ages 76 through 80.
Premium Payments
Each premium payment must be at least $10,000 for issue ages 75 and younger or
$50,000 for issue ages 76-80. The initial premium is payable in full at
Nationwide's home office or to an authorized agent of Nationwide.
The specified amount is determined by treating the initial premium as equal to
100% of the Guideline Single Premium.
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of the continuing insurance coverage is dependent upon completion of
all underwriting requirements, payment of initial premium, and delivery of the
policy while the insured is still living.
Additional premium payments may be made at any time while the policy is in
force, subject to the following conditions:
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 Additional premium payments must be $1,000 (except in Virginia).
o Premium payments in excess of the premium limit established by the IRS
to qualify the policy as a contract for life insurance will be
refunded.
o Nationwide may require policy indebtedness be repaid prior to
accepting any additional premium payments.
Additional premium payments or other changes to the policy may jeopardize the
policy's non-modified endowment status. Nationwide will monitor premiums paid
and other policy transactions and will notify the policy owner when non-modified
endowment contract status is in jeopardy.
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 Memorial Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents' Day o Christmas
o Good Friday o Thanksgiving
o Independence Day
Nationwide also will not price premium payments if:
1) trading on the New York Stock Exchange is restricted;
2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
14
<PAGE> 23
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.
POLICY CHARGES
No deduction is made from premium payments - 100% of each premium payment is
applied to the cash value.
MONTHLY COST OF INSURANCE
The monthly cost of insurance charge for each policy month is determined by
multiplying the monthly cost of insurance rate by the net amount at risk. The
net amount at risk is the difference between the death benefit and the policy's
cash value. This deduction is charged proportionately to the cash value in each
sub-account and the fixed account.
Current cost of insurance charges will not exceed the cost based on the
guaranteed cost of insurance rate and the policy's net amount at risk.
Guaranteed cost of insurance rates for standard simplified issues are based on
the 1980 Commissioner's Extended Term Mortality Table, Age Last Birthday (1980
CET). Guaranteed cost of insurance rates for standard preferred issues are based
on the 1980 Commissioner's Standard Ordinary Mortality Table, Age Last Birthday
(1980 CSO). Guaranteed cost of insurance rates for substandard issues are based
on appropriate percentage multiples of the 1980 CSO.
These mortality tables are sex distinct. In addition, separate mortality tables
will be used for standard and non-tobacco.
For policies issued in Texas, guaranteed cost of insurance rates for standard
simplified issues ("Special Class-Simplified" in Texas) are based on 130% of the
1980 CSO.
The rate class of an insured may affect the cost of insurance rate. Nationwide
currently places insureds into both standard rate classes and substandard rate
classes that involve a higher mortality risk. In an otherwise identical policy,
an insured in the standard rate class will have a lower cost of insurance than
an insured in a rate class with higher mortality risks. Nationwide may also
issue certain policies on a "simplified issue" basis to certain categories of
individuals. Due to the underwriting criteria established for policies issued on
a simplified issue basis, actual rates for healthy individuals will be higher
than the current cost of insurance rates being charged under otherwise identical
policies that are issued on a preferred basis.
ANNUAL ADMINISTRATIVE CHARGE
Nationwide deducts an annual administrative charge at the beginning of each
policy year after the first. It is charged proportionately to the cash values in
each sub-account and the fixed account. The annual charge is determined by the
total net premium payments (premium payments less any previous partial
surrenders):
<TABLE>
<CAPTION>
---------------------------------------------------
GUARANTEED
CURRENT MAXIMUM
TOTAL NET ADMINISTRATIVE ADMINISTRATIVE
PREMIUMS CHARGE CHARGE
---------------------------------------------------
<S> <C> <C>
$10,000 but $90* $135*
less than
$25,000
---------------------------------------------------
$25,000 or more $50 $ 75
---------------------------------------------------
</TABLE>
*For policies issued in New York, the current charge is $65 and the guaranteed
maximum is $120.
SURRENDER CHARGES
Nationwide incurs certain expenses related to the sale of the policies. These
expenses include commissions paid to sales personnel, the cost of sales
literature and other promotional activity. Nationwide deducts a
15
<PAGE> 24
surrender charge to cover these expenses. Unrecovered expenses are borne by
Nationwide's general assets which may include profits, if any, from the
mortality and expense risk charge.
The initial premium payment and any subsequent premium payment resulting in an
increased net amount at risk will incur surrender charges upon surrender. The
charge is less than or equal to 8.5% of that premium payment, as set forth in
the following chart:
<TABLE>
<CAPTION>
------------------------------------------------
COMPLETED YEAR(S) CHARGES ON SURRENDER AS A
SINCE THE PAYMENT PERCENTAGE OF THE PAYMENT
------------------------------------------------
<S> <C>
0 8.5%
------------------------------------------------
1 8.5%
------------------------------------------------
2 8.0%
------------------------------------------------
3 8.0%
------------------------------------------------
4 7.5%
------------------------------------------------
5 7.0%
------------------------------------------------
6 6.0%
------------------------------------------------
7 5.0%
------------------------------------------------
8 4.0%
------------------------------------------------
9 0.0%
------------------------------------------------
</TABLE>
Surrender charges apply for nine years after the effective date of each premium
payment. Certain surrenders may result in adverse tax consequences.
The surrender charge deducted upon surrender will never exceed 8.5% of the total
premiums paid. Surrender charges may be eliminated for policies that are issued
to an officer, director, former director, partner, employee, or retired employee
of Nationwide; or an employee of Nationwide Investment Services Corporation
("NISC") the general distributor, or an employee of an affiliate of Nationwide
or NISC; or, a duly appointed representative of Nationwide who receives no
commission as a result of the purchase.
Surrender charges are eliminated only when Nationwide does not incur sales or
administrative expenses normally incurred on the sale of a policy. In no event
will reduction of the surrender charge be permitted if a reduction would be
unfairly discriminatory to any person.
Nationwide deducts the following charges from the assets of the variable
account:
o mortality and expense risk charge;
o administrative expense charge; and
o tax expense charge.
Annually, these charges are equal to:
<TABLE>
<CAPTION>
---------------------------------------
POLICY POLICY
YEARS YEARS
1-10 11+
---------------------------------------
<S> <C> <C>
CURRENT 1.30% 1.00%
---------------------------------------
GUARANTEED
MAXIMUM 1.60% 1.30%
---------------------------------------
</TABLE>
MORTALITY AND EXPENSE RISK CHARGE
Nationwide assumes certain risks in guaranteering mortality and expense risk
charges. 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 the morality and expense risk charge from the variable
account on a daily basis. It is charged proportionally to the assets in the
sub-accounts. This charge is equivalent to an annual effective rate of 0.75% of
the average net assets of the variable account. This charge is guaranteed not to
exceed 0.90%. Policy owners receive quarterly and annual statements, advising
policy owners of the cancellation of accumulation units for mortality and
expense risk charges.
ADMINISTRATIVE EXPENSE CHARGE
Nationwide deducts a daily administrative expense charge from the assets of the
sub-accounts. This charge reimburses Nationwide for certain actual expenses
related to issuance and maintenance of the policies including underwriting,
record
16
<PAGE> 25
keeping, accounting and periodic reporting to policy owners. Nationwide does not
expect to recover any amount in excess of aggregate maintenance expenses from
this charge. Currently this charge is equivalent to an annual effective rate of
0.25%. This charge is guaranteed not to exceed 0.40%.
TAX EXPENSE CHARGE
During the first ten policy years, Nationwide takes a daily charge to compensate
for certain administrative expenses that on an aggregate basis are incurred by
Nationwide. These expenses include premium taxes, or other taxes, imposed by
various state and local jurisdictions, and federal taxes imposed by Section 848
of the Internal Revenue Code. This daily charge includes a state, a local, and
federal component equivalent to an annual effective rate of 0.30% of the assets
of the variable account. This charge is deducted from the account in the same
proportion that both, the value of the fixed account and the values of each
sub-account, have in relation to the total account value. Nationwide does not
expect to make a profit from this daily tax charge.
INCOME TAX
No charge is assessed to policy owners for income taxes incurred by Nationwide
as a result of the operations of the sub-accounts. However, Nationwide reserves
the right to assess a charge for income taxes against the variable account if
income taxes are incurred.
SURRENDERING THE POLICY FOR CASH
SURRENDER (REDEMPTION)
Policies may be surrendered for the cash surrender value any time while the
insured is living. The cancellation will be effective as of the date Nationwide
receives the policy accompanied by a signed, written request for cancellation.
Nationwide may require the policy owner's signature to be guaranteed by a member
firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock
Exchanges, or by a commercial bank or a savings and loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases, Nationwide may require
additional documentation of a customary nature.
Cash Surrender Value
The cash surrender value increases or decreases daily to reflect the investment
experience of the variable account and the daily crediting of interest in the
fixed account and the policy loan account. The cash surrender value equals the
policy's cash value, next computed after the date Nationwide receives a proper
written request for surrender and the policy, minus any charges, indebtedness or
other deductions due on that date, which may also include a surrender charge.
Partial Surrenders
After the policy has been in force for five years, the policy owner may request
a partial surrender.
Partial surrenders are permitted if they satisfy the following requirements:
1) the minimum partial surrender in any policy year is limited to 10% of
total premium payments;
2) after a partial surrender, the cash surrender value is greater than
$10,000; and
3) after the partial surrender, the policy continues to qualify as life
insurance.
When a partial surrender is made, the cash value will be reduced by the amount
of the partial surrender. Under Death Benefit Option 1, the specified amount is
reduced by the amount of the partial surrender, unless the death benefit is
based on the applicable percentage of cash value. In that case, a partial
surrender will decrease the specified amount by the amount the partial surrender
exceeds the difference between the death benefit and specified amount. Partial
surrenders are first deducted from the values in the sub-accounts, then from the
fixed
17
<PAGE> 26
account if there are insufficient amounts in the sub-accounts.
Surrenders charges are waived for partial surrenders that satisfy the above
conditions. Certain partial surrenders may result in currently taxable income
and tax penalties.
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. Certain partial surrenders may result in currently
taxable income and tax penalties.
INCOME TAX WITHHOLDING
Federal law requires Nationwide to withhold income tax from any portion of
surrender proceeds subject to tax. Nationwide will withhold income tax unless
the policy owner advises Nationwide, in writing, of his or her request not to
withhold. If a policy owner requests that taxes not be withheld, or if the taxes
withheld are insufficient, the policy owner may be liable for payment of an
estimated tax. Policy owners should consult a tax advisor.
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 advisor, to determine the tax
consequences, if any, of their employer-sponsored life insurance arrangements.
VARIATION IN CASH VALUE
On any date during the policy year, the cash value equals the cash value on the
preceding valuation date plus any net premium applied since the previous
valuation date, minus any partial surrenders, plus or minus any investment
results, minus any surrender charge for decreases in specified amount, and less
any policy charges.
There is no guaranteed cash value. The cash value will vary with the investment
experience of the variable account and/or the daily crediting of interest in the
fixed account and policy loan account depending on the allocation of cash value
by the policy owner.
ERROR IN AGE OR SEX
If the age or sex of the insured has been misstated, the affected benefits will
be adjusted to reflect the correct age and sex.
POLICY PROVISIONS
POLICY OWNER
While the insured is living, all rights in this policy are vested in the policy
owner named in the application or as subsequently changed, subject to
assignment, if any.
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
18
<PAGE> 27
payment made or action taken by Nationwide before it was recorded. Nationwide
may require that the policy be submitted for endorsement before making a change.
If the policy owner is other than the insured and names no contingent policy
owner, and dies before the insured, the policy owner's rights in this policy
belong to the policy owner's estate.
BENEFICIARY
The beneficiary(ies) will be as named in the application or as subsequently
changed, subject to assignment, if any.
The policy owner may name a new beneficiary while the insured is living. Any
change must be in a written form satisfactory to Nationwide and recorded at
Nationwide's home office. Once recorded, the change will be effective when
signed. The change will not affect any payment made or action taken by
Nationwide before it was recorded.
If any beneficiary predeceases the insured, that beneficiary's interest passes
to any surviving beneficiary(ies), unless otherwise provided. Multiple
beneficiaries will be paid in equal shares, unless otherwise provided. If no
named beneficiary survives the insured, the death proceeds will be paid to the
policy owner or the policy owner's estate.
CHANGES IN EXISTING INSURANCE COVERAGE
The policy owner may request certain changes in the insurance coverage under the
policy. Requests must be in writing and received by Nationwide. No change will
take effect unless the cash surrender value after the change is sufficient to
keep the policy in force for at least 3 months.
Specified Amount Increases
After the first policy year, the policy owner may request an increase to the
specified amount. Any increase will be subject to the following conditions:
1. the request must be applied for in writing;
2. satisfactory evidence of insurability must be provided;
3. the increase must be for a minimum of $10,000;
4. the rate class, rate class multiple, and rate type for the increase
must be identical to those on the policy date; and
5. Nationwide reserves the right to limit the number of increases to one
per policy year.
Any approved increase will have an effective date of the monthly anniversary day
on or next following the date Nationwide approves the supplemental application.
The specified amount cannot be decreased if the decrease would result in the
policy failing to meet the definition of life insurance under Section 7702 of
the Internal Revenue Code.
OPERATION OF THE POLICY
ALLOCATION OF NET PREMIUM AND CASH VALUE
Nationwide allocates premium payments to sub-accounts or the fixed account, as
instructed by policy owners. Shares of the underlying mutual funds allocated to
the sub-accounts are purchased at net asset value, than 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
NSAT Money Market Fund during the period that a policy owner can cancel the
policy, unless specific state 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
19
<PAGE> 28
underlying mutual funds specified by the policy owner at net asset value for the
respective sub-account(s).
The policy owner may change the allocation of net premiums or may transfer cash
value from one sub-account to another. Changes are subject to the terms and
conditions imposed by each underlying mutual fund and those found in this
prospectus. Net premiums allocated to the fixed account at the time of
application may not be transferred from the fixed account prior to the first
policy anniversary (see "Transfers").
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The accumulation unit value for a valuation period is determined by multiplying
the accumulation unit value for each sub-account for the immediately preceding
valuation period by the net investment factor for the sub-account for the
subsequent valuation period. Though the number of accumulation units will not
change as a result of investment experience, the value of an accumulation unit
may increase or decrease from valuation period to valuation period. The number
of accumulation units will not change as a result of investment experience.
NET INVESTMENT FACTOR
Net investment factor is determined by dividing (a) by (b) and subtracting (c)
from the result where:
(a) is:
(1) the net asset value per share of the underlying mutual fund held in
the sub-account as of the end of the current valuation period; and
(2) the per share amount of any dividend or income distributions made by
the underlying mutual fund (if the "ex-dividend" date occurs during
the current valuation period);
(b) is the net asset value per share of the underlying mutual fund determined
as of the end of the immediately preceding valuation period; and
(c) is a factor representing the daily mortality and expense risk charge,
administration expense charge and premium tax charge. This factor is equal
to an annual rate of 1.30% of the daily net assets of the variable account
for the first ten policy years and 1.00% thereafter.
The net investment factor may be greater or less than one; therefore, the value
of an accumulation unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the net asset value of underlying mutual fund shares because of the deduction
for mortality and expense risk charge, administrative expense charge and premium
tax charge.
DETERMINING THE CASH VALUE
The cash value is the sum of the value of all variable account accumulation
units attributable to the policy plus amounts credited to the fixed account and
the policy loan account.
The number of accumulation units credited to each sub-account is determined by
dividing the net amount allocated to the sub-account by the accumulation unit
value for the sub-account for the valuation period during which the premium is
received by Nationwide. In the event part or all of the cash value is
surrendered or charges or deductions are made against the cash value, an
appropriate number of accumulation units from the variable account and an
appropriate amount from the fixed account will be deducted in the same
proportion that the policy owner's interest in the variable account and the
fixed account bears to the total cash value.
The cash value in the fixed account and the policy loan account is credited with
interest daily at an effective annual rate which Nationwide periodically
declares. The
20
<PAGE> 29
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.
o Nationwide reserves the right to restrict transfers from the fixed account
to 25% of the cash value attributable to the fixed account.
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.
Market-Timing Firms
Some policy owners may use market-timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market-timing firms will submit transfer requests on behalf of
multiple policy owners at the same time. Sometimes this can result in unusually
large transfers of funds. These large transfers might interfere with the ability
of Nationwide or the underlying mutual fund to process transactions. This can
potentially disadvantage policy owners not using market-timing firms. To avoid
this, Nationwide may modify the transfer rights of policy owners who use
market-timing firms (or other third parties) to initiate transfers on their
behalf.
The transfer rights of individual policy owners will not be modified in any way
when instructions are submitted directly by the policy owner, or by the policy
owner's representative (as authorized by the execution of a valid Nationwide
Limited Power of Attorney Form).
To protect policy owners, Nationwide may refuse transfer requests:
o submitted by any agent acting under a power of attorney on behalf of
more than one policy owner; or
o submitted on behalf of individual policy owners who have executed
pre-authorized exchange forms which are submitted by market-timing
firms (or other third parties) on behalf of more than one policy owner
at the same time.
Nationwide will not restrict transfer rights unless Nationwide believes it to be
necessary for the protection of all 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.
21
<PAGE> 30
POLICY LOANS
TAKING A POLICY LOAN
The policy owner may take a policy loan at any time after the first policy year
using the policy as security. During the first year, maximum policy indebtedness
is limited to 50% of the cash surrender value, less interest due on the next
policy anniversary. After the first year, maximum policy indebtedness is limited
to 90% of the cash surrender value, less interest due on the next policy
anniversary.
Nationwide will not grant a loan for an amount less than $1,000 ($500 in New
York and $200 in Connecticut). Policy indebtedness will be deducted from the
death benefit, cash surrender value upon surrender, or the maturity proceeds.
Any request for a policy loan must be in written form. The request must be
signed and, where permitted, the signature guaranteed by a member firm of the
New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchanges, or
by a commercial bank or a savings and loan which is a member of the Federal
Deposit Insurance Corporation. Certain policy loans may result in currently
taxable income and tax penalties.
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the variable account to the policy loan account. If the assets relating to
a policy are held in more than one sub-account, withdrawals from sub-accounts
will be made in proportion to the assets in each sub-account at the time of the
loan. Policy loans will be transferred from the fixed account only when
sufficient amounts are not available in the sub-accounts.
The amount taken out of the variable account will not be affected by the
variable account's investment experience while the loan is outstanding.
INTEREST
Currently, policy loans are credited with an annual effective rate of 5.0%.
Nationwide guarantees the rate will never be lower than 4%. Nationwide may
change the current interest crediting rate on policy loans at any time at its
sole discretion. The loan interest rate is 6% per year for all policy loans.
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. The earned interest is transferred from the policy loan
account to a variable account or the fixed account on each policy anniversary,
at the time a new loan is requested. It will be allocated according to the fund
allocation factors in effect at the time of the transfer.
Interest is charged daily and is payable at the end of each policy year. Unpaid
interest will be added to the existing policy indebtedness as of the due date
and will be charged interest at the same rate as the rest of the indebtedness.
Whenever the total policy indebtedness plus accrued interest exceeds the cash
value less any surrender charges, Nationwide will send a notice to the policy
owner and the assignee, if any. The policy will terminate without value 61 days
after the mailing of the notice unless a sufficient repayment is made during
that period. A repayment is sufficient if it is large enough to reduce the total
policy indebtedness to an amount equal to the total cash value less any
surrender charges plus an amount sufficient to continue the policy in force for
3 years.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A policy loan, whether or not repaid, will have a permanent effect on the death
benefit and cash value because the investment results of the variable account or
the fixed account will apply only to the non-loaned portion of the cash value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the variable account or the fixed account
while the loan is outstanding, the effect could be favorable or unfavorable.
22
<PAGE> 31
REPAYMENT
All or part of the indebtedness may be repaid at any time while the policy is in
force during the insured's lifetime. Any payment intended as a loan repayment,
rather than a premium payment, must be identified as such. Loan repayments will
be credited to the sub-accounts and the fixed account in proportion to the
policy owner's underlying mutual fund allocation factors in effect at the time
of the repayment. Each repayment may not be less than $1,000 ($50 in New York
and Connecticut). Nationwide reserves the right to require that any loan
repayments resulting from policy loans transferred from the fixed account must
be first allocated to the fixed account.
ASSIGNMENT
While the insured is living, the policy owner may assign his or her rights in
the policy. The assignment must be in writing, signed by the policy owner and
recorded at Nationwide's home office. Prior to being recorded, assignments will
not affect any payments made or actions taken by Nationwide. Nationwide is not
responsible for any assignment not submitted for recording, nor is Nationwide
responsible for the sufficiency or validity of any assignment. Assignments are
subject to any indebtedness owed to Nationwide before being recorded.
POLICY OWNER SERVICES
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from certain sub-accounts and the fixed account into other
sub-accounts. 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 following underlying mutual fund options: Fidelity VIP
High Income Portfolio; NSAT Government Bond Fund; Neuberger Berman AMT Limited
Maturity Bond Portfolio; and the NSAT Money Market Fund.
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested.
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
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. 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 as of the date of death, or the applicable percentage of cash value
and will vary directly with investment performance
The "Applicable Percentage" for the Guideline Premium/Cash Value Corridor Test
is set forth in the Table below:
The term "applicable percentage" means:
23
<PAGE> 32
1. 250% when the insured is attained age 40 or less at the beginning of a
policy year; and
2. when the insured is above attained age 40, the percentage shown in the
"Applicable Percentage of Cash Value Table."
The monthly cost of insurance for Option 1 will always be less than or equal to
the monthly cost of insurance for the same amount under Option 2.
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE TABLE
------------------------------------------------------------------------------------------
ATTAINED AGE PERCENTAGE OF ATTAINED PERCENTAGE OF ATTAINED PERCENTAGE OF
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>
24
<PAGE> 33
CHANGES IN THE DEATH BENEFIT OPTION
After the first policy year, the policy owner may elect to change the death
benefit option under the policy from either Option 1 to Option 2, or from Option
2 to Option 1. Only one change of death benefit option is permitted per policy
year. The effective date of a change will be the monthly anniversary day
following the date the change is approved by Nationwide.
If the change is from Option 1 to Option 2, the specified amount will be
decreased by the amount of the cash value. Nationwide may require evidence of
insurability for a change from Option 1 to Option 2. If the change is from
Option 2 to Option 1, the specified amount will be increased by the amount of
the cash value.
A change in death benefit option will not be permitted if it results in the
total premiums paid exceeding the current maximum premium limitations under
Section 7702 of the Internal Revenue Code.
PROCEEDS PAYABLE ON DEATH
The actual death proceeds payable on the insured's death will be the death
benefit as described above, less any policy indebtedness and less any unpaid
policy charges. Under certain circumstances, the death proceeds may be adjusted
(see "Incontestability," "Error in Age or Sex," and "Suicide").
INCONTESTABILITY
Nationwide will not contest payment of the death proceeds based on
representations in any written application after the policy has been in force
during the insured's lifetime for 2 years from the policy date.
SUICIDE
If the insured dies by suicide, while sane or insane, within two years from the
policy date, Nationwide will pay no more than the sum of the premiums paid, less
any unpaid loan. If the insured dies by suicide, while sane or insane, within
two years from the date an application is accepted for an increase in the
specified amount, 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 modified single premium life
insurance policy offered by Nationwide on the policy date. If not available, the
new policy may be a flexible premium adjustable life insurance policy offered by
Nationwide on the policy date. The benefits for the new policy will not vary
with the investment experience of a separate account. The exchange must be
elected within 24 months from the policy date. No evidence of insurability will
be required.
The policy owner and beneficiary 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").
25
<PAGE> 34
GRACE PERIOD
If the cash surrender value is insufficient to pay monthly policy charges or
policy loan interest, a grace period of 61 days is allowed for payment.
Nationwide will notify the policy owner of the amount needed to keep the policy
in force. If this amount is not received by Nationwide within 61 days of the
notice, the policy will lapse without value. If the insured dies during the
grace period, Nationwide will pay the death proceeds.
REINSTATEMENT
If the grace period ends and the policy owner has neither paid the required
premium nor surrendered the policy for its cash surrender value, the policy
owner may reinstate the policy by:
1. submitting a written request at any time within 3 years after the end
of the grace period and prior to the maturity date;
2. providing evidence of insurability satisfactory to Nationwide;
3. paying sufficient premium to cover all policy charges that were due
and unpaid during the grace period if the policy terminated in the
fourth or later policy year;
4. paying sufficient premium to keep the policy in force for 3 months
from the date of reinstatement; and
5. paying or reinstating any indebtedness against the policy which
existed at the end of the grace period.
The effective date of a reinstated policy will be the monthly anniversary day on
or next following the date the application for reinstatement is approved by
Nationwide. If the policy is reinstated, the cash value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the appropriate surrender charge.
Amounts allocated to underlying mutual funds at the start of the grace period
will be reinstated, unless the policy owner provides otherwise.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Internal Revenue Code provides that if certain tests are
met, a policy will be treated as a life insurance policy for federal tax
purposes. Nationwide will monitor compliance with these tests. The policy should
thus receive the same federal income tax treatment as fixed benefit life
insurance. As a result, the death proceeds payable under a policy are excludable
from gross income of the beneficiary under Section 101 of the Internal Revenue
Code.
Section 7702A of the Internal Revenue Code defines modified endowment contracts
as those policies issued or materially changed on or after June 21, 1988 on
which the total premiums paid during the first seven years exceed the amount
that would have been paid if the policy provided for paid up benefits after
seven level annual premiums. The Internal Revenue Code states that taxation of
surrenders, partial surrenders, loans, collateral assignments and other
pre-death distributions from modified endowment contracts (other than certain
distributions to terminally ill individuals) are subject to federal income taxes
in a manner similar to the way annuities are taxed.
Modified endowment contract distributions are defined by the Internal Revenue
Code as amounts not received as an annuity and are taxable to the extent the
cash value of the policy exceeds, at the time of distribution, the premiums paid
into the policy. A 10% tax penalty generally applies to the taxable portion of
such distributions unless the policy owner is over age 59 1/2 or disabled, or
the distribution is part of an annuity to the policy owner as defined in the
Internal Revenue Code. Under certain circumstances, certain distributions made
under a policy on the life of a "terminally ill individual", as that term is
defined in the Internal Revenue Code, are excludable from gross income.
26
<PAGE> 35
Even though exchanges under Section 1035 of the Internal Revenue Code qualify as
material changes, certain exchange of pre-June 22, 1988 policies may retain
their non-modified endowment status. Therefore, the policies offered by this
prospectus may or may not be issued as modified endowment contracts. Nationwide
will monitor premiums paid and will notify the policy owner when the policy's
non-modified endowment status is in jeopardy. If a policy is not a modified
endowment contract, a cash distribution during the first 15 years after a policy
is issued which causes a reduction in death benefits may still become fully or
partially taxable to the policy owner pursuant to Section 7702(f)(7) of the
Internal Revenue Code. The policy owner should carefully consider this potential
effect and seek further information before initiating any changes in the terms
of the policy. Under certain conditions, a policy may become a modified
endowment as a result of a material change or a reduction in benefits as defined
by Section 7702A(c) of the Internal Revenue Code.
In addition to meeting the tests required under Section 7702, Section 817(h) of
the Internal Revenue Code requires that the investments of separate accounts
such as the variable account be adequately diversified. Regulations under 817(h)
provide that a variable life policy that fails to satisfy the diversification
standards will not be treated as life insurance unless such failure was
inadvertent, is corrected, and the policy owner or Nationwide pays an amount to
the IRS. The amount will be based on the tax that would have been paid by the
policy owner if the income, for the period the policy was not diversified, had
been received by the policy owner.
If the failure to diversify is not corrected in this manner, the policy owner
will be deemed the owner of the underlying securities and taxed on the earnings
of his or her account.
Representatives of the IRS have suggested, from time to time, that the number of
underlying mutual funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of underlying mutual funds, transfers between
underlying mutual funds, exchanges of underlying mutual funds or changes in
investment objectives of underlying mutual funds such that the policy would no
longer qualify as life insurance under Section 7702 of the Internal Revenue
Code, Nationwide will take whatever steps are available to remain in compliance.
Nationwide will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the Sub-Account investments
to remain in compliance.
A total surrender or cancellation of the policy by lapse may have adverse tax
consequences. If the amount received by the policy owner plus total policy
indebtedness exceeds the premiums paid into the policy, the excess generally
will be treated as taxable income, regardless of whether or not the policy is a
modified endowment contract.
WITHHOLDING
Distributions of income from a modified endowment contract are subject to
federal income tax withholding; however, the recipient may elect not to have the
withholding taken from the distribution. A distribution of income from a
modified endowment contract may be subject to mandatory back-up withholding
(which cannot be waived). The mandatory back-up withholding rate is 31% of the
income that is distributed and will arise of no Taxpayer Identification Number
is provided to Nationwide, or if the IRS notifies Nationwide that back-up
withholding is required.
27
<PAGE> 36
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 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 advisers regarding these taxes.
NON-RESIDENT ALIENS
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
statutory rate of 30% of the amount of income that is distributed. Nationwide is
required to withhold such amount from the distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances
zero, tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to Nationwide sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. In
addition, the NRA must obtain an individual Taxpayer Identification Number from
the IRS, and furnish that number to Nationwide prior to the distribution. If
Nationwide does not have the proper proof of citizenship or residency and a
proper individual Taxpayer Identification Number prior to any distribution,
Nationwide will be required to withhold 30% of the income, regardless of any
treaty provision.
A pre-death distribution may not be subject to withholding where the recipient
sufficiently establishes to Nationwide that such payment is effectively
connected to the recipient's conduct of a trade or business in the United States
and that such payment is includible in the recipient's gross income for United
States federal income tax purposes, Any such distributions may be subject to
back-up withholding at the statutory rate (currently 31%) if no Taxpayer
Identification Number, or an incorrect Taxpayer Identification Number, is
provided.
State and local estate, inheritance, income and other tax consequences of
ownership or
28
<PAGE> 37
receipt of policy proceeds depend on the circumstances of each policy owner or
beneficiary.
TAXATION OF NATIONWIDE
Nationwide is taxed as a life insurance company under the Internal Revenue Code.
Since the variable account is not a separate entity from Nationwide and its
operations form a part of Nationwide, it will not be taxed separately as a
"regulated investment company" under Sub-chapter M of the Internal Revenue Code.
Investment income and realized capital gains on the assets of the variable
account are reinvested and taken into account in determining the value of
accumulation units. As a result, such investment income and realized capital
gains are automatically applied to increase reserves under the policies.
Nationwide does not initially expect to incur any federal income tax liability
that would be chargeable to the variable account. Based upon these expectations,
no charge is currently being made against the variable account for federal
income taxes. If, however, Nationwide determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the variable account.
Nationwide may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
TAX CHANGES
The foregoing discussion, which is based on Nationwide's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice.
The Internal Revenue Code has been subjected to numerous amendments and changes,
and it is reasonable to believe that it will continue to be revised. The United
States Congress has, in the past, considered numerous legislative proposals
that, if enacted, could change the tax treatment of the policies. It is
reasonable to believe that such proposals, and future proposals, may be enacted
into law. In addition, the U.S. Treasury Department may amend existing
regulations, issue new regulations, or adopt new interpretations of existing law
that may 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
29
<PAGE> 38
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 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
30
<PAGE> 39
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 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 the 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, NISC, 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.
31
<PAGE> 40
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, Nationwide
Investment Services Corporation ("NISC"). NISC is a wholly owned subsidiary of
Nationwide and a member of the NASD. NISC was organized as an Oklahoma
corporation on March 19, 1974.
NISC acts as general distributor for the following separate accounts, all of
which are separate investment accounts of Nationwide or its affiliates:
o Nationwide Multi-Flex Variable Account;
o NACo Variable Account;
o Nationwide DC Variable Account;
o Nationwide DCVA-II;
o Nationwide Variable Account;
o Nationwide Variable Account-II;
o Nationwide Variable Account-5;
o Nationwide Variable Account-6;
o Nationwide Variable Account-8;
o Nationwide Variable Account-9;
o Nationwide Variable Account-10;
o Nationwide Variable Account-11;
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 Nationwide VA Separate Account-A;
o Nationwide VA Separate Account-B;
o Nationwide VA Separate Account-C;
o Nationwide VL Separate Account-A;
o Nationwide VL Separate Account-B;
o Nationwide VL Separate Account-C; and
o Nationwide VL Separate Account-D.
Gross commissions paid by Nationwide on the sale of these policies plus fees for
marketing service provided by the general distributor are not more than 7.50% of
the premiums paid.
No underwriting commissions have been paid by Nationwide to NISC.
32
<PAGE> 41
<TABLE>
<CAPTION>
NISC DIRECTORS AND OFFICERS
------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper Chairman of the Board and
One Nationwide Plaza Director
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Duane C. Meek President
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Philip C. Gath Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Robert J. Woodard, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President and Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Barbara J. Shane Vice President - Compliance Officer
Two Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
Glenn W. Soden Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------
</TABLE>
33
<PAGE> 42
<TABLE>
<CAPTION>
NISC DIRECTORS AND OFFICERS (CONTINUED)
--------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
--------------------------------------------------------------------------
<S> <C>
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
--------------------------------------------------------------------------
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
--------------------------------------------------------------------------
</TABLE>
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
34
<PAGE> 43
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. NFS serves as a holding company for other financial institutions.
Nationwide 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. McFerson, Gasper, Woodward and Ms.
Thomas are also trustees of one or more of the registered investment companies
distributed by NISC, a registered broker-dealer affiliated with the Nationwide
group of companies.
<TABLE>
<CAPTION>
DIRECTORS OF NATIONWIDE
--------------------------------------------------------------------------------------------------------------------
DIRECTORS OF THE DEPOSITOR NAME AND
PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES
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
--------------------------------------------------------------------------------------------------------------------
</TABLE>
35
<PAGE> 44
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
DIRECTORS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS POSITIONS AND OFFICES
ADDRESS WITH DEPOSITOR PRINCIPAL OCCUPATION
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
David O. Miller Chairman of the Board and President, Owen Potato Farm, Inc.; Partner, M&M
115 Sprague Drive Director Enterprises(1)
Hebron, OH 43025
-------------------------------------------------------------------------------------------------------------------
Yvonne L. Montgomery Director Senior Vice President 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
-------------------------------------------------------------------------------------------------------------------
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.
36
<PAGE> 45
<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
------------------------------------------------------------------------------------------------------------------
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
------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 46
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF NATIONWIDE (CONTINUED)
------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
------------------------------------------------------------------------------------------------------------------
<S> <C>
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 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
38
<PAGE> 47
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.
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.
39
<PAGE> 48
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
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).
40
<PAGE> 49
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 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.
41
<PAGE> 50
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.
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
42
<PAGE> 51
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.
43
<PAGE> 52
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.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
American Century Variable Portfolios, Inc. (formerly "TCI Portfolios, Inc.") was
organized as a Maryland corporation in 1987. It is a diversified, open-end
management company, designed only to provide investment vehicles for variable
annuity and variable life insurance products of insurance companies. A member of
the American Century(SM) Family of Investments, American Century Variable
Portfolios, Inc. is managed by American Century Investment Management, Inc.
AMERICAN CENTURY VP BALANCED
Investment Objective: Capital growth and current income. The Fund will seek
to achieve its objective by maintaining approximately 60% of the assets of
the Fund in common stocks (including securities convertible into common
stocks and other equity equivalents) that are considered by management to
have better-than-average prospects for appreciation and approximately 40%
in fixed income securities. There can be no assurance that the Fund will
achieve its investment objective.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S & P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S & P 500 Stock Index. Such a management technique known as "portfolio
optimization" may cause the Fund to be more heavily invested in some
industries than in others. However, the Fund may not invest more than 25%
of its total assets in companies whose principal business activities are in
the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. Securities of United
States issuers may be included in the portfolio from time to time. Although
the primary investment of the Fund will be common stocks (defined to
include depository receipts for common stocks), the Fund may also invest in
other types of securities consistent with the Fund's objective. When the
manager believes that the total return potential of other securities equals
or exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities. There can be no assurance that
the Fund will achieve its objectives.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. Under normal market
conditions, the Fund expects to invest at least 80% of the value of its
total asset in equity securities, including common and preferred stock,
convertible preferred stock and convertible debt obligations. The equity
securities in which the Fund will invest will be primarily securities of
well-established companies
44
<PAGE> 53
with intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase.
(Although the Statement of Additional Information concerning American
Century Variable Portfolios, Inc., refers to redemptions of securities in
kind under certain conditions, all surrendering or redeeming Policy Owners
will receive cash from the Company.)
DREYFUS INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management investment
company known as a mutual fund. Shares are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies to
fund variable annuity contracts and variable life insurance policies and to
qualified pension and retirement plans. Individuals may not purchase shares
directly from the Fund. The Dreyfus Corporation serves as the Fund's investment
adviser.
EUROPEAN EQUITY PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth. To
pursue this goal, the Portfolio generally invests at least 80% of its total
assets in stocks included within the universe of the 300 largest European
companies. The Portfolio may invest up to 10% of its total assets in the
stocks of non-European companies. The Portfolio's stock investments may
include common stocks, preferred stocks and convertible securities.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND
The Dreyfus Socially Responsible Growth Fund is an open-end, diversified,
management investment company. It was incorporated under Maryland law on July
20, 1992, and commenced operations on October 7, 1993. The Dreyfus Corporation
("Dreyfus") serves as the Fund's investment advisor. NCM Capital Management
Group, Inc. serves as the Fund's sub-investment adviser and provides day-to-day
management of the Fund's portfolio. Investment Objective: The Fund's primary
goal is to provide capital growth through equity investment in companies that,
in the opinion of the Fund's management, not only meet traditional investment
standards, but which also show evidence that they conduct their business in a
manner that contributes to the enhancement of the quality of life in America.
Current income is secondary to the primary goal.
DREYFUS STOCK INDEX FUND, INC.
Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management
investment company. It was incorporated under Maryland law on January 24, 1989,
and commenced operations on September 29, 1989. Mellon Equity Associates serves
as the Fund's index fund manager. As of May 1, 1994, Dreyfus Life and Annuity
Index Fund began doing business as Dreyfus Stock Index Fund.
Investment Objective: To provide investment results that correspond to the price
and yield performance of publicly traded common stocks in the aggregate, as
represented by the Standard & Poor's 500 Composite Stock Price Index. The Fund
is neither sponsored by nor affiliated with Standard & Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund (the "Fund") is an open-end, management
investment company. It was organized as an unincorporated business trust under
the laws of the Commonwealth of Massachusetts on October 29,1986 and commenced
operations August 31, 1990. The Fund offers its shares only as investment
vehicles for variable annuity and variable life insurance products of insurance
companies. Dreyfus serves as the Fund's manager. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon
Bank Corporation.
APPRECIATION PORTFOLIO (FORMERLY, CAPITAL APPRECIATION PORTFOLIO)
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This Portfolio
invests primarily in the common stocks of domestic and foreign issuers.
45
<PAGE> 54
GROWTH AND INCOME PORTFOLIO
Investment Objective: To provide long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The
Portfolio invests in equity securities, debt securities and money market
instruments of domestic and foreign issuers. The proportion of the
Portfolio's assets invested in each type of security will vary from time to
time in accordance with Dreyfus' assessment of economic conditions and
investment opportunities. In purchasing equity securities, Dreyfus will
invest in common stocks, preferred stocks and securities convertible into
common stocks, particularly those which offer opportunities for capital
appreciation and growth of earnings, while paying current dividends. The
Portfolio will generally invest in investment-grade debt obligations,
except that it may invest up to 35% of the value of its net assets in
convertible debt securities rated not lower than Caa by Moody's Investor
Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors
Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed to
be of comparable quality by Dreyfus. These securities are considered to
have predominantly speculative characteristics with respect to capacity to
pay interest and repay principal and are considered to be of poor standing.
See "Investment Considerations and Risks-Lower Rated Securities" in the
Portfolio's prospectuses.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
Fidelity Variable Insurance Products Fund ("VIP") is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. VIP's shares are purchased by insurance companies to fund
benefits under variable insurance and annuity policies. Fidelity Management &
Research Company ("FMR") is VIP's manager.
VIP EQUITY-INCOME PORTFOLIO
Investment Objective: To seek reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
VIP GROWTH PORTFOLIO
Investment Objective: Seeks to achieve capital appreciation. This Portfolio
will invest in the securities of both well-known and established companies,
and smaller, less well-known companies which may have a narrow product line
or whose securities are thinly traded. These latter securities will often
involve greater risk than may be found in the ordinary investment security.
FMR's analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other mutual funds. It is also important
to point out that the Portfolio makes most sense for you if you can afford
to ride out changes in the stock market, because it invests primarily in
common stocks. FMR also can make temporary investments in securities such
as investment-grade bonds, high-quality preferred stocks and short-term
notes, for defensive purposes when it believes market conditions warrant.
VIP HIGH INCOME PORTFOLIO
Investment Objective: Seeks to obtain a high level of current income by
investing primarily in high-risk, high-yielding, lower-rated, fixed-income
securities, while also considering growth of capital. The portfolio's
manager will seek high current income normally by investing the Portfolio's
assets as follows:
- at least 65% in income-producing debt securities and preferred stocks,
including convertible securities, zero coupon securities, and
mortgage-backed and asset-backed securities.
- up to 20% in common stocks and other equity securities when consistent
with the
46
<PAGE> 55
Portfolio's primary objective or acquired as part of a unit combining
fixed-income and equity securities.
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's; BB or lower by Standard & Poor's and may be deemed to be of a
speculative nature. The Portfolio may also purchase lower-quality bonds
such as those rated Ca3 by Moody's or C- by Standard & Poor's which provide
poor protection for payment of principal and interest (commonly referred to
as "junk bonds"). For a further discussion of lower-rated securities,
please see the "Risks of Lower-Rated Debt Securities" section of the
Portfolio's prospectus.
VIP OVERSEAS PORTFOLIO
Investment Objective: To seek long term growth of capital primarily through
investments in foreign securities. The Overseas Portfolio provides a means
for investors to diversify their own portfolios by participating in
companies and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
Fidelity Variable Insurance Products Fund II ("VIP II") is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II shares are purchased by insurance companies to
fund benefits under variable insurance and annuity policies. FMR is the manager
of VIP II.
VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek to obtain high total return with reduced risk
over the long-term by allocating its assets among domestic and foreign
stocks, bonds and short-term fixed income instruments.
VIP II CONTRAFUND(R) PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the fund manager believes to be undervalued due to an
overly pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The fund primarily invests in common stock and
securities convertible into common stock, but it has the flexibility to
invest in any type of security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS
FUND III
VIP III is an open-end, diversified, management investment company organized as
a Massachusetts business trust on July 14, 1994. VIP III's name was changed from
Fidelity Advisor Annuity Fund to Variable Insurance Products Fund III on
December 30, 1996. VIP III shares are purchased by insurance companies to fund
benefits under variable life insurance and annuity contracts. Fidelity
Management & Research Company ("FMR") is the manager of VIP III.
VIP III GROWTH OPPORTUNITIES PORTFOLIO
Investment Objective: To provide capital growth by investing primarily in
common stocks and securities convertible into common stocks. The Portfolio,
under normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth potential.
Although the Portfolio invests primarily in common stock and securities
convertible into common stock, it has the ability to purchase other
securities, such as preferred stock and bonds, that may produce capital
growth. The Portfolio may invest in foreign securities without limitation.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in common stocks selected for their growth
47
<PAGE> 56
potential. The Portfolio may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.
GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies selected for
their growth potential. Under normal circumstances, the portfolio invests
at least 65% of its total assets in securities of companies that the
portfolio manager believes will benefit significantly from advances or
improvements in technology.
INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing at
least 65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the Portfolio
intends to invest substantially all of its assets in issuers located
outside the United States, it may invest in U.S. issuers and it may at
times invest all of its assets in fewer than five countries, or even a
single country.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Villanova Mutual
Fund Capital Trust ("VMF"), an indirect subsidiary of Nationwide Financial
Services, Inc.
NSAT CAPITAL APPRECIATION FUND
Investment Objective: The Capital Appreciation Fund seeks long-term capital
appreciation.
NSAT GOVERNMENT BOND FUND
Investment Objective: To provide as high a level of income as is consistent
with capital preservation through investing primarily in bonds and
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
NSAT MONEY MARKET FUND
Investment Objective: The Fund seeks as high a level of current income as
is consistent with the preservation of capital and maintenance of
liquidity.
NSAT TOTAL RETURN FUND
Investment Objective: The investment objective of the Fund is to obtain a
reasonable, long-term total return on invested capital.
SUBADVISED NATIONWIDE FUNDS
NSAT NATIONWIDE MID CAP INDEX FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. The Fund seeks to match the
performance of the Standard & Poor's MidCap 400 Index. To pursue this
goal, the Fund generally is fully invested in all 400 stocks included in
this index in proportion to their weighting in the index, and in futures
whose performance is tied to the index. The Fund is neither sponsored by
nor affiliated with Standard & Poor's Corporation.
NSAT NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Miller, Anderson & Sherrerd, LLP
Investment Objective: Primarily seeks a high level of current income.
Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in a globally diverse portfolio of
fixed-income investments and by giving the subadviser broad discretion to
deploy the Fund's assets among certain segments of the fixed-income
market that the subadviser believes will best contribute to achievement
of the Fund's investment objectives. The Fund reserves the right to
invest predominantly in securities rated in
48
<PAGE> 57
medium or lower categories, or as determined by the subadviser to be of
comparable quality, commonly referred to as "junk bonds." Although the
subadviser has the ability to invest up to 100% of the Fund's assets in
lower-rated securities, the subadviser does not anticipate investing in
excess of 75% of the Fund's assets in such securities.
NSAT NATIONWIDE SMALL CAP GROWTH FUND
Subadvisers: Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC.
Investment Objective: Seeks capital growth by investing in a broadly
diversified portfolio of equity securities issued by U.S. and foreign
companies with market capitalizations in the range of companies
represented by the Russell 2000, known has small cap companies. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in the equity securities of small cap companies. The balance of
the Fund's assets may be invested in equity securities of larger cap
companies.
NSAT NATIONWIDE SMALL CAP VALUE FUND
Subadviser:The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. The Fund intends to
pursue its investment objective by investing, under normal market
conditions, at least 75% of the Fund's total assets in equity securities
of companies whose equity market capitalizations at the time of
investment are similar to the market capitalizations of companies in the
Russell 2000 Small Stock Index. The Fund will invest in equity securities
of domestic and foreign issuers characterized as "value" companies
according to criteria established by The Dreyfus Corporation, the Fund's
subadviser.
NSAT NATIONWIDE SMALL COMPANY FUND
Investment Objective: Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities of
investment are similar to the market capitalizations of companies in the
Russell 2000 Small Stock Index. The Fund's adviser, has contracted with a
group of sub-advisers, each of which will manage a portion of the Fund's
portfolio. These sub-advisers are Dreyfus, Neuberger Berman, LLC, Lazard
Asset Management and Strong Capital Management, Inc. The sub-advisers
were chosen because they utilize a number of different investment styles
when investing in small company stocks. By utilizing a number of
investment styles, The investment adviser hopes to increase prospects for
investment return and to reduce market risk and volatility.
NSAT NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser
extent, in companies in which significant further growth is not
anticipated but whose market value is thought to be undervalued. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities, including common stocks, preferred stocks,
and securities convertible into common or preferred stocks, such as
warrants and convertible bonds. The Fund may invest up to 35% of its
total assets in debt obligations, including intermediate- to long-term
corporate or U.S. Government debt securities.
49
<PAGE> 58
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust is an open-end diversified management
investment company established as a Massachusetts business trust on December 14,
1983. Shares of the Trust are offered in connection with certain variable
annuity contracts and variable life insurance policies issued through life
insurance company separate accounts and are also offered directly to qualified
pension and retirement plans outside of the separate account context. The
investment adviser is Neuberger Berman Management Incorporated.
AMT GROWTH PORTFOLIO
Investment Objective: The Portfolio seeks capital growth through
investments in common stocks of companies that the investment adviser
believes will have above average earnings or otherwise provide investors
with above average potential for capital appreciation. To maximize this
potential, the investment adviser may also utilize, from time to time,
securities convertible into common stocks, warrants and options to purchase
such stocks.
AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current income.
The Portfolio and its corresponding series seek to achieve these objectives
by investing in common stocks of long-established, high-quality companies.
Neuberger & Berman Management uses a value-oriented investment approach in
selecting securities, looking for low price-to-earnings ratios, strong
balance sheets, solid management, and consistent earnings.
AMT LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide the high level of current income,
consistent with low risk to principal and liquidity. As a secondary
objective, it also seeks to enhance its total return through capital
appreciation when market factors, such as falling interest rates and rising
bond prices, indicate that capital appreciation may be available without
significant risk to principal. It seeks to achieve its objectives through
investments in a diversified portfolio of limited maturity debt securities.
The Portfolio invests in securities which are at least investment grade and
does not invest in junk bonds.
AMT PARTNERS PORTFOLIO
Investment Objective: To seek capital growth. This Portfolio will seek to
achieve its objective by investing primarily in the common stock of
established companies. Its investment program seeks securities believed to
be undervalued based on fundamentals such as low price-to-earnings ratios,
consistent cash flows, and support from asset values. The objective of the
Partners Portfolio is not fundamental and can be changed by the Trustees of
the Trust without shareholder approval. Shareholders will, however, receive
at least 30 days prior notice thereof. There is no assurance the investment
objective will be met.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds is an open-ended, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. OppenheimerFunds, Inc. is the Funds'
investment advisor.
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The Fund may also invest in cyclical
industries in "special situations" that OppenheimerFunds, Inc. believes
present opportunities for capital growth.
50
<PAGE> 59
OPPENHEIMER BOND FUND/VA
Investment Objective: Seeks a high level of current income by investing at
least 65% of its total assets in investment grade debt securities, U.S.
government securities and money market instruments. Investment grade debt
securities would include those rated in one of the four highest ranking
categories by any nationally-recognized rating organization or if unrated
or split-rated (rated investment grade and below investment grade by
different rating organizations), determined by OppenheimerFunds, Inc. to be
of comparable quality. The Fund may invest up to 35% of its total assets in
debt securities rated less than investment grade when consistent with the
Fund's investment objectives. The Fund seeks capital growth as a secondary
objective when consistent with its primary objective.
OPPENHEIMER GLOBAL SECURITIES FUND/VA
Investment Objective: To seek long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not an
objective. These securities may be considered to be speculative.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA (FORMERLY, OPPENHEIMER GROWTH
FUND)
Investment Objective: The Fund seeks to achieve capital appreciation by
investing in securities of well-known established companies. In seeking its
objective of capital appreciation, the Fund will emphasize investments in
securities of well-known and established companies. Such securities
generally have a history of earnings and dividends and are issued by
seasoned companies (having an operating history of at least five years
including predecessors). Current income is a secondary consideration in the
selection of the Fund's portfolio securities.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG SPECIAL FUND II, INC.)
The Strong Opportunity Fund II, Inc. is a diversified, open-end management
company commonly called a Mutual Fund. The Strong Opportunity Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. is the
investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
51
<PAGE> 60
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (FORMERLY, MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC.)
The Universal Institutional Funds, Inc. (the "Fund") is a mutual fund designed
to provide investment vehicles for variable annuity contracts and variable life
insurance policies and for certain tax-qualified investors. The Fund is an
open-end management investment company, or mutual fund. At present it offers 17
separate investment portfolios, each with a distinct investment objective.
EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: The Portfolio seeks high total return by investing
primarily in dollar- and non-dollar denominated Fixed Income Securities of
government and private-sector issuers located in emerging market countries,
in order to provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a "business trust" under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of the Trust are offered only to
separate accounts of various insurance companies to fund benefits of variable
insurance and annuity policies. The assets of the Trust are managed by Van Eck
Associates Corporation.
WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities. The Fund does not
invest in junk bonds.
WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund specifically emphasizes investment in countries that, compared to the
world's major economies, exhibit relatively low gross national product per
capita, as well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing globally,
primarily in "Hard Assets Securities." Hard assets are tangible, finite
assets, such as real estate, energy, timber, and industrial and precious
metals. Income is a secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
The Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Massachusetts business trust on June 3, 1985.
The Trust offers shares in separate funds 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 Fund's
investment adviser.
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: 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, 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 Fund 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 Fund
will achieve its investment objective.
52
<PAGE> 61
WARBURG PINCUS TRUST
The Warburg Pincus Trust ("Trust") is an open-end management investment company
organized in March 1995 as a business trust under the laws of The Commonwealth
of Massachusetts. The Trust offers its shares to insurance companies for
allocation to separate accounts for the purpose of funding variable annuity and
variable life contracts. Trust portfolios are managed by Credit Suisse Asset
Management, LLC. ("Credit Suisse").
SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: To seek capital growth by investing in a portfolio of
equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks or
warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NO LONGER AVAILABLE AS INVESTMENT
OPTIONS FOR POLICIES ISSUED ON OR AFTER SEPTEMBER 27, 1999:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP CAPITAL APPRECIATION
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the Fund's investment manager, better than average potential for
appreciation. The Fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when it is
unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least three
years continuous operation. There can be no assurance that the Fund will
achieve its investment objective.
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end management
investment company commonly referred to as a mutual fund. Incorporated in the
State of Wisconsin, the Corporation has been authorized to issue shares of
common stock and series and classes of series of common stock. The International
Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds") are offered by
the Corporation to insurance company separate accounts for the purpose of
funding variable life insurance policies and variable annuity contracts. Strong
Capital Management, Inc. is the investment advisor to the Funds.
STRONG DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of its
total assets in equity securities including common stocks, preferred stocks
and securities convertible into common or preferred stocks. Although the
Fund normally emphasizes investment in equity securities, the Fund has the
flexibility to
53
<PAGE> 62
invest in any type of security that the Advisor believes has the potential
for capital appreciation including up to 100% of its total assets in debt
obligations, including intermediate to long-term corporate or U.S.
government debt securities.
INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in the
equity securities of issuers located outside the United States.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. The Portfolios are managed by Credit Suisse Asset Management,
LLC.
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing primarily
in a broadly diversified portfolio of equity securities of companies,
wherever organized, that in the judgment of Warburg have their principal
business activities and interests outside the United States. The Portfolio
will ordinarily invest substantially all of its assets, but no less than
65% of its total assets, in common stocks, warrants and securities
convertible into or exchangeable for common stocks. The Portfolio intends
to invest principally in the securities of financially strong companies
with opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
GLOBAL POST-VENTURE CAPITAL PORTFOLIO (FORMERLY, POST-VENTURE CAPITAL
PORTFOLIO)
Investment Objective: Seeks long term growth of capital by investing
primarily in equity securities of U.S. and foreign companies considered to
be in their post-venture capital stage of development. The Portfolio will
invest in at least three countries, including the United States.
54
<PAGE> 63
APPENDIX B: WHEN ADDITIONAL PREMIUM PAYMENTS ARE PERMITTED
EXAMPLE 1: A male non-tobacco, age 35, purchases a policy with an initial
premium of $25,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a specified
amount of $179,733. In the 12th and subsequent policy years, annual premiums of
$2,177 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the policy as a life insurance contract.
Additional premiums which increase the specified amount may be made at any time,
subject to the $1,000 minimum. Nationwide reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time if
they are required to continue the policy in force.
EXAMPLE 2: A male non-tobacco, age 55, purchases a policy with an initial
premium of $100,000 and selects Death Benefit Option 1. The initial premium is
treated as 100% of the Guideline Single Premium which results in a specified
amount of $306,283. In the 11th and subsequent policy years, annual premiums of
$9,591 may be paid without violating the premium limitations prescribed by the
Internal Revenue Service to qualify the policy as a life insurance contract.
Additional premiums which increase the specified amount may be made at any time,
subject to the $1,000 minimum. Nationwide reserves the right to require
satisfactory evidence of insurability with any premium payment which increases
the net amount at risk. In addition, premium payments may be made at any time if
they are required to continue the policy in force.
55
<PAGE> 64
APPENDIX C: ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES, AND DEATH
BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the policies change with investment performance. The illustrations
illustrate how cash values, cash surrender values and death benefits under a
policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%.
If the hypothetical gross investment rate of return averages 0%, 6% or 12% over
a period of years, but fluctuates above or below those averages for individual
years, the cash values, cash surrender values and death benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the policies would go into default, at which time additional
premium payments would be required to continue the policy in force.
The illustrations also assume there is no policy indebtedness, no additional
premium payments are made, no cash values are allocated to the fixed account,
and there are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks, recovering premium taxes and providing for
administrative expenses. On a current basis, these charges are equivalent to an
annual effective rate of 1.30% in the first 10 policy years and 1.00%
thereafter. On a guaranteed basis, these charges are equivalent to a maximum
annual effective rate of 1.60% in the first 10 policy years and 1.30%
thereafter. In addition, the net investment returns also reflect the deduction
of underlying mutual fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 0.90%. This effective rate is based on
the average of the fund expenses, after expense reimbursement, for the preceding
year for all 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 0.95%. Nationwide anticipates that the expense
reimbursement and fee waiver arrangements will continue past the current year.
Should there be an increase or decrease in the expense reimbursements and fee
waivers of these underlying mutual funds, such change will be reflected in the
net asset value of the corresponding underlying mutual fund.
Taking account of the current charges for mortality and expense risks,
recovering premium taxes and providing for administrative and underlying mutual
fund expenses, gross annual rates of return of 0%, 6% and 12% correspond to net
investment experience at constant annual rates of -2.20, 3.80% and 9.80%,
respectively, in policy years one through ten, and -1.90%, 4.10% and 10.10%
thereafter. Taking account of guaranteed charges, gross annual rates of return
of 0%, 6% and 12% correspond to net investment experience at constant annual
rates of -2.50%, 3.50% and 9.50%, respectively, in policy years one through ten,
and -2.20%, 3.80% and 9.80% thereafter.
The illustrations also reflect the fact that Nationwide makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the policy. The values shown are for policies which are
issued as standard. Policies issued on a substandard basis would result in lower
cash values and death benefits than those illustrated. Death Benefit Option 1
has been assumed in all the illustrations. In addition, the illustrations
reflect the fact that Nationwide deducts an annual administrative charge at the
beginning of each policy year after the first. The illustrations also reflect
the fact that no charges for federal or state income taxes are currently made
against the variable account. If such a charge is made in the future, 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.
56
<PAGE> 65
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,648 8,798 43,190 10,231 9,381 43,190 10,815 9,965 43,190
2 11,025 9,227 8,377 43,190 10,394 9,544 43,190 11,630 10,780 43,190
3 11,576 8,803 8,003 43,190 10,553 9,753 43,190 12,516 11,716 43,190
4 12,155 8,372 7,572 43,190 10,705 9,905 43,190 13,480 12,680 43,190
5 12,763 7,935 7,185 43,190 10,851 10,101 43,190 14,529 13,779 43,190
6 13,401 7,489 6,789 43,190 10,988 10,288 43,190 15,671 14,971 43,190
7 14,071 7,032 6,432 43,190 11,113 10,513 43,190 16,916 16,316 43,190
8 14,775 6,560 6,060 43,190 11,225 10,725 43,190 18,272 17,772 43,190
9 15,513 6,069 5,669 43,190 11,319 10,919 43,190 19,751 19,351 43,190
10 16,289 5,557 5,557 43,190 11,392 11,392 43,190 21,366 21,366 43,190
11 17,103 5,035 5,035 43,190 11,475 11,475 43,190 23,201 23,201 43,190
12 17,959 4,490 4,490 43,190 11,538 11,538 43,190 25,222 25,222 43,190
13 18,856 3,919 3,919 43,190 11,580 11,580 43,190 27,452 27,452 43,190
14 19,799 3,321 3,321 43,190 11,596 11,596 43,190 29,917 29,917 43,190
15 20,789 2,690 2,690 43,190 11,584 11,584 43,190 32,646 32,646 43,746
16 21,829 2,023 2,023 43,190 11,539 11,539 43,190 35,659 35,659 46,357
17 22,920 1,314 1,314 43,190 11,456 11,456 43,190 38,958 38,958 49,866
18 24,066 557 557 43,190 11,329 11,329 43,190 42,567 42,567 53,634
19 25,270 * * * 11,150 11,150 43,190 46,516 46,516 57,680
20 26,533 * * * 10,912 10,912 43,190 50,841 50,841 62,026
21 27,860 * * * 10,609 10,609 43,190 55,577 55,577 66,693
22 29,253 * * * 10,207 10,207 43,190 60,747 60,747 72,289
23 30,715 * * * 9,693 9,693 43,190 66,389 66,389 78,339
24 32,251 * * * 9,046 9,046 43,190 72,545 72,545 84,878
25 33,864 * * * 8,243 8,243 43,190 79,262 79,262 91,944
26 35,557 * * * 7,251 7,251 43,190 86,588 86,588 99,576
27 37,335 * * * 6,029 6,029 43,190 94,613 94,613 106,912
28 39,201 * * * 4,521 4,521 43,190 103,414 103,414 114,790
29 41,161 * * * 2,661 2,661 43,190 113,085 113,085 123,263
30 43,219 * * * 370 370 43,190 123,736 123,736 132,398
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
57
<PAGE> 66
$10,000 INITIAL PREMIUM: $43,190 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,607 8,757 43,190 10,188 9,338 43,190 10,770 9,920 43,190
2 11,025 9,091 8,241 43,190 10,247 9,397 43,190 11,472 10,622 43,190
3 11,576 8,573 7,773 43,190 10,295 9,495 43,190 12,229 11,429 43,190
4 12,155 8,050 7,250 43,190 10,330 9,530 43,190 13,046 12,246 43,190
5 12,763 7,520 6,770 43,190 10,351 9,601 43,190 13,930 13,180 43,190
6 13,401 6,981 6,281 43,190 10,355 9,655 43,190 14,885 14,185 43,190
7 14,071 6,429 5,829 43,190 10,338 9,738 43,190 15,917 15,317 43,190
8 14,775 5,861 5,361 43,190 10,297 9,797 43,190 17,033 16,533 43,190
9 15,513 5,273 4,873 43,190 10,226 9,826 43,190 18,240 17,840 43,190
10 16,289 4,659 4,659 43,190 10,122 10,122 43,190 19,547 19,547 43,190
11 17,103 4,028 4,028 43,190 10,009 10,009 43,190 21,028 21,028 43,190
12 17,959 3,360 3,360 43,190 9,853 9,853 43,190 22,642 22,642 43,190
13 18,856 2,653 2,653 43,190 9,650 9,650 43,190 24,408 24,408 43,190
14 19,799 1,899 1,899 43,190 9,390 9,390 43,190 26,343 26,343 43,190
15 20,789 1,089 1,089 43,190 9,066 9,066 43,190 28,469 28,469 43,190
16 21,829 216 216 43,190 8,667 8,667 43,190 30,813 30,813 43,190
17 22,920 * * * 8,181 8,181 43,190 33,404 33,404 43,190
18 24,066 * * * 7,590 7,590 43,190 36,263 36,263 45,692
19 25,270 * * * 6,876 6,876 43,190 39,380 39,380 48,831
20 26,533 * * * 6,017 6,017 43,190 42,770 42,770 52,180
21 27,860 * * * 4,988 4,988 43,190 46,462 46,462 55,754
22 29,253 * * * 3,762 3,762 43,190 50,467 50,467 60,056
23 30,715 * * * 2,307 2,307 43,190 54,814 54,814 64,680
24 32,251 * * * 582 582 43,190 59,530 59,530 69,650
25 33,864 * * * * * * 64,645 64,645 74,988
26 35,557 * * * * * * 70,193 70,193 80,722
27 37,335 * * * * * * 76,248 76,248 86,161
28 39,201 * * * * * * 82,870 82,870 91,985
29 41,161 * * * * * * 90,128 90,128 98,240
30 43,219 * * * * * * 98,112 98,112 104,979
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
58
<PAGE> 67
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,662 8,812 41,661 10,246 9,396 41,661 10,831 9,981 41,661
2 11,025 9,233 8,383 41,661 10,400 9,550 41,661 11,636 10,786 41,661
3 11,576 8,801 8,001 41,661 10,550 9,750 41,661 12,513 11,713 41,661
4 12,155 8,367 7,567 41,661 10,697 9,897 41,661 13,469 12,669 41,661
5 12,763 7,928 7,178 41,661 10,838 10,088 41,661 14,510 13,760 41,661
6 13,401 7,482 6,782 41,661 10,973 10,273 41,661 15,646 14,946 41,661
7 14,071 7,028 6,428 41,661 11,098 10,498 41,661 16,885 16,285 41,661
8 14,775 6,564 6,064 41,661 11,213 10,713 41,661 18,238 17,738 41,661
9 15,513 6,085 5,685 41,661 11,314 10,914 41,661 19,715 19,315 41,661
10 16,289 5,589 5,589 41,661 11,399 11,399 41,661 21,330 21,330 41,661
11 17,103 5,089 5,089 41,661 11,500 11,500 41,661 23,168 23,168 41,661
12 17,959 4,569 4,569 41,661 11,584 11,584 41,661 25,192 25,192 41,661
13 18,856 4,028 4,028 41,661 11,650 11,650 41,661 27,425 27,425 41,661
14 19,799 3,462 3,462 41,661 11,696 11,696 41,661 29,893 29,893 41,661
15 20,789 2,869 2,869 41,661 11,717 11,717 41,661 32,620 32,620 43,711
16 21,829 2,243 2,243 41,661 11,712 11,712 41,661 35,618 35,618 46,303
17 22,920 1,582 1,582 41,661 11,675 11,675 41,661 38,899 38,899 49,790
18 24,066 877 877 41,661 11,600 11,600 41,661 42,489 42,489 53,537
19 25,270 124 124 41,661 11,481 11,481 41,661 46,420 46,420 57,561
20 26,533 * * * 11,313 11,313 41,661 50,725 50,725 61,884
21 27,860 * * * 11,088 11,088 41,661 55,440 55,440 66,528
22 29,253 * * * 10,780 10,780 41,661 60,589 60,589 72,101
23 30,715 * * * 10,377 10,377 41,661 66,211 66,211 78,129
24 32,251 * * * 9,863 9,863 41,661 72,349 72,349 84,648
25 33,864 * * * 9,218 9,218 41,661 79,049 79,049 91,696
26 35,557 * * * 8,415 8,415 41,661 86,360 86,360 99,314
27 37,335 * * * 7,420 7,420 41,661 94,370 94,370 106,638
28 39,201 * * * 6,187 6,187 41,661 103,157 103,157 114,504
29 41,161 * * * 4,662 4,662 41,661 112,811 112,811 122,964
30 43,219 * * * 2,782 2,782 41,661 123,442 123,442 132,083
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
59
<PAGE> 68
$10,000 INITIAL PREMIUM: $41,661 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
NON-NEW YORK
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 10,500 9,613 8,763 41,661 10,195 9,345 41,661 10,778 9,928 41,661
2 11,025 9,091 8,241 41,661 10,246 9,396 41,661 11,471 10,621 41,661
3 11,576 8,566 7,766 41,661 10,287 9,487 41,661 12,220 11,420 41,661
4 12,155 8,036 7,236 41,661 10,315 9,515 41,661 13,029 12,229 41,661
5 12,763 7,501 6,751 41,661 10,329 9,579 41,661 13,904 13,154 41,661
6 13,401 6,958 6,258 41,661 10,327 9,627 41,661 14,851 14,151 41,661
7 14,071 6,403 5,803 41,661 10,305 9,705 41,661 15,875 15,275 41,661
8 14,775 5,833 5,333 41,661 10,259 9,759 41,661 16,984 16,484 41,661
9 15,513 5,243 4,843 41,661 10,185 9,785 41,661 18,183 17,783 41,661
10 16,289 4,630 4,630 41,661 10,079 10,079 41,661 19,484 19,484 41,661
11 17,103 4,001 4,001 41,661 9,965 9,965 41,661 20,958 20,958 41,661
12 17,959 3,337 3,337 41,661 9,810 9,810 41,661 22,567 22,567 41,661
13 18,856 2,634 2,634 41,661 9,608 9,608 41,661 24,329 24,329 41,661
14 19,799 1,887 1,887 41,661 9,354 9,354 41,661 26,262 26,262 41,661
15 20,789 1,087 1,087 41,661 9,037 9,037 41,661 28,388 28,388 41,661
16 21,829 225 225 41,661 8,648 8,648 41,661 30,734 30,734 41,661
17 22,920 * * * 8,175 8,175 41,661 33,328 33,328 42,660
18 24,066 * * * 7,601 7,601 41,661 36,171 36,171 45,575
19 25,270 * * * 6,909 6,909 41,661 39,262 39,262 48,685
20 26,533 * * * 6,077 6,077 41,661 42,626 42,626 52,004
21 27,860 * * * 5,083 5,083 41,661 46,288 46,288 55,546
22 29,253 * * * 3,899 3,899 41,661 50,262 50,262 59,812
23 30,715 * * * 2,495 2,495 41,661 54,574 54,574 64,398
24 32,251 * * * 832 832 41,661 59,252 59,252 69,325
25 33,864 * * * * * * 64,327 64,327 74,620
26 35,557 * * * * * * 69,831 69,831 80,305
27 37,335 * * * * * * 75,838 75,838 85,697
28 39,201 * * * * * * 82,407 82,407 91,472
29 41,161 * * * * * * 89,608 89,608 97,672
30 43,219 * * * * * * 97,528 97,528 104,355
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
60
<PAGE> 69
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 24,150 22,025 114,856 25,610 23,485 114,856 27,070 24,945 114,856
2 27,563 23,244 21,119 114,856 26,170 24,045 114,856 29,269 27,144 114,856
3 28,941 22,329 20,329 114,856 26,728 24,728 114,856 31,663 29,663 114,856
4 30,388 21,403 19,403 114,856 27,283 25,283 114,856 34,271 32,271 114,856
5 31,907 20,464 18,589 114,856 27,833 25,958 114,856 37,114 35,239 114,856
6 33,502 19,507 17,757 114,856 28,373 26,623 114,856 40,215 38,465 114,856
7 35,178 18,527 17,027 114,856 28,899 27,399 114,856 43,599 42,099 114,856
8 36,936 17,517 16,267 114,856 29,407 28,157 114,856 47,291 46,041 114,856
9 38,783 16,471 15,471 114,856 29,889 28,889 114,856 51,323 50,323 114,856
10 40,722 15,381 15,381 114,856 30,340 30,340 114,856 55,730 55,730 114,856
11 42,758 14,286 14,286 114,856 30,846 30,846 114,856 60,734 60,734 114,856
12 44,896 13,139 13,139 114,856 31,322 31,322 114,856 66,242 66,242 114,856
13 47,141 11,938 11,938 114,856 31,766 31,766 114,856 72,314 72,314 114,856
14 49,498 10,678 10,678 114,856 32,172 32,172 114,856 79,018 79,018 114,856
15 51,973 9,347 9,347 114,856 32,533 32,533 114,856 86,430 86,430 115,816
16 54,572 7,937 7,937 114,856 32,839 32,839 114,856 94,608 94,608 122,990
17 57,300 6,438 6,438 114,856 33,084 33,084 114,856 103,567 103,567 132,566
18 60,165 4,835 4,835 114,856 33,252 33,252 114,856 113,376 113,376 142,854
19 63,174 3,110 3,110 114,856 33,331 33,331 114,856 124,117 124,117 153,905
20 66,332 1,250 1,250 114,856 33,307 33,307 114,856 135,882 135,882 165,776
21 69,649 * * * 33,167 33,167 114,856 148,773 148,773 178,528
22 73,132 * * * 32,852 32,852 114,856 162,859 162,859 193,803
23 76,788 * * * 32,335 32,335 114,856 178,249 178,249 210,334
24 80,627 * * * 31,582 31,582 114,856 195,061 195,061 228,222
25 84,659 * * * 30,553 30,553 114,856 213,424 213,424 247,572
26 88,892 * * * 29,190 29,190 114,856 233,477 233,477 268,499
27 93,336 * * * 27,420 27,420 114,856 255,453 255,453 288,662
28 98,003 * * * 25,149 25,149 114,856 279,563 279,563 310,315
29 102,903 * * * 22,267 22,267 114,856 306,052 306,052 333,597
30 108,049 * * * 18,645 18,645 114,856 335,215 335,215 358,680
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
61
<PAGE> 70
$25,000 INITIAL PREMIUM: $114,856 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 26,250 23,986 21,861 114,856 25,439 23,314 114,856 26,893 24,768 114,856
2 27,563 22,886 20,761 114,856 25,785 23,660 114,856 28,855 26,730 114,856
3 28,941 21,772 19,772 114,856 26,108 24,108 114,856 30,974 28,974 114,856
4 30,388 20,639 18,639 114,856 26,405 24,405 114,856 33,264 31,264 114,856
5 31,907 19,484 17,609 114,856 26,671 24,796 114,856 35,740 33,865 114,856
6 33,502 18,299 16,549 114,856 26,900 25,150 114,856 38,418 36,668 114,856
7 35,178 17,077 15,577 114,856 27,084 25,584 114,856 41,314 39,814 114,856
8 36,936 15,808 14,558 114,856 27,211 25,961 114,856 44,449 43,199 114,856
9 38,783 14,478 13,478 114,856 27,271 26,271 114,856 47,841 46,841 114,856
10 40,722 13,080 13,080 114,856 27,252 27,252 114,856 51,518 51,518 114,856
11 42,758 11,635 11,635 114,856 27,224 27,224 114,856 55,675 55,675 114,856
12 44,896 10,093 10,093 114,856 27,095 27,095 114,856 60,212 60,212 114,856
13 47,141 8,443 8,443 114,856 26,855 26,855 114,856 65,178 65,178 114,856
14 49,498 6,670 6,670 114,856 26,485 26,485 114,856 70,627 70,627 114,856
15 51,973 4,750 4,750 114,856 25,961 25,961 114,856 76,618 76,618 114,856
16 54,572 2,661 2,661 114,856 25,260 25,260 114,856 83,226 83,226 114,856
17 57,300 376 376 114,856 24,351 24,351 114,856 90,539 90,539 115,890
18 60,165 * * * 23,193 23,193 114,856 98,577 98,577 124,207
19 63,174 * * * 21,739 21,739 114,856 107,322 107,322 133,080
20 66,332 * * * 19,937 19,937 114,856 116,838 116,838 142,542
21 69,649 * * * 17,729 17,729 114,856 127,197 127,197 152,637
22 73,132 * * * 15,048 15,048 114,856 138,440 138,440 164,743
23 76,788 * * * 11,819 11,819 114,856 150,639 150,639 177,754
24 80,627 * * * 7,945 7,945 114,856 163,876 163,876 191,735
25 84,659 * * * 3,298 3,298 114,856 178,237 178,237 206,755
26 88,892 * * * * * * 193,811 193,811 222,883
27 93,336 * * * * * * 210,810 210,810 238,215
28 98,003 * * * * * * 229,396 229,396 254,630
29 102,903 * * * * * * 249,769 249,769 272,248
30 108,049 * * * * * * 272,174 272,174 291,226
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
62
<PAGE> 71
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,739 88,239 306,283 102,589 94,089 306,283 108,440 99,940 306,283
2 110,250 93,383 84,883 306,283 105,137 96,637 306,283 117,585 109,085 306,283
3 115,763 89,974 81,974 306,283 107,694 99,694 306,283 127,568 119,568 306,283
4 121,551 86,501 78,501 306,283 110,252 102,252 306,283 138,476 130,476 306,283
5 127,628 82,946 75,446 306,283 112,803 105,303 306,283 150,407 142,907 306,283
6 134,010 79,293 72,293 306,283 115,336 108,336 306,283 163,474 156,474 306,283
7 140,710 75,523 69,523 306,283 117,841 111,841 306,283 177,802 171,802 306,283
8 147,746 71,608 66,608 306,283 120,302 115,302 306,283 193,535 188,535 306,283
9 155,133 67,519 63,519 306,283 122,700 118,700 306,283 210,839 206,839 306,283
10 162,889 63,229 63,229 306,283 125,021 125,021 306,283 229,907 229,907 306,283
11 171,034 58,892 58,892 306,283 127,633 127,633 306,283 251,719 251,719 306,283
12 179,586 54,277 54,277 306,283 130,163 130,163 306,283 275,838 275,838 328,247
13 188,565 49,358 49,358 306,283 132,599 132,599 306,283 302,264 302,264 356,672
14 197,993 44,099 44,099 306,283 134,926 134,926 306,283 331,200 331,200 387,504
15 207,893 38,450 38,450 306,283 137,120 137,120 306,283 362,883 362,883 420,944
16 218,287 32,346 32,346 306,283 139,149 139,149 306,283 397,573 397,573 457,209
17 229,202 25,701 25,701 306,283 140,972 140,972 306,283 435,649 435,649 492,283
18 240,662 18,410 18,410 306,283 142,534 142,534 306,283 477,469 477,469 529,991
19 252,695 10,359 10,359 306,283 143,780 143,780 306,283 523,444 523,444 570,554
20 265,330 1,439 1,439 306,283 144,661 144,661 306,283 574,048 574,048 614,231
21 278,596 * * * 145,132 145,132 306,283 629,829 629,829 661,320
22 292,526 * * * 144,926 144,926 306,283 690,887 690,887 725,432
23 307,152 * * * 143,931 143,931 306,283 757,697 757,697 795,582
24 322,510 * * * 142,010 142,010 306,283 830,766 830,766 872,304
25 338,635 * * * 138,970 138,970 306,283 910,637 910,637 956,169
26 355,567 * * * 134,551 134,551 306,283 997,885 997,885 1,047,779
27 373,346 * * * 128,402 128,402 306,283 1,093,114 1,093,114 1,147,770
28 392,013 * * * 120,049 120,049 306,283 1,196,957 1,196,957 1,256,805
29 411,614 * * * 108,884 108,884 306,283 1,310,077 1,310,077 1,375,581
30 432,194 * * * 94,130 94,130 306,283 1,433,178 1,433,178 1,504,837
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
63
<PAGE> 72
$100,000 INITIAL PREMIUM: $306,283 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,852 87,352 306,283 101,673 93,173 306,283 107,496 98,996 306,283
2 110,250 91,521 83,021 306,283 103,163 94,663 306,283 115,497 106,997 306,283
3 115,763 87,064 79,064 306,283 104,532 96,532 306,283 124,141 116,141 306,283
4 121,551 82,453 74,453 306,283 105,756 97,756 306,283 133,492 125,492 306,283
5 127,628 77,655 70,155 306,283 106,805 99,305 306,283 143,622 136,122 306,283
6 134,010 72,629 65,629 306,283 107,648 100,648 306,283 154,616 147,616 306,283
7 140,710 67,333 61,333 306,283 108,247 102,247 306,283 166,572 160,572 306,283
8 147,746 61,704 56,704 306,283 108,548 103,548 306,283 179,600 174,600 306,283
9 155,133 55,671 51,671 306,283 108,493 104,493 306,283 193,836 189,836 306,283
10 162,889 49,165 49,165 306,283 108,021 108,021 306,283 209,448 209,448 306,283
11 171,034 42,244 42,244 306,283 107,394 107,394 306,283 227,322 227,322 306,283
12 179,586 34,672 34,672 306,283 106,231 106,231 306,283 247,172 247,172 306,283
13 188,565 26,361 26,361 306,283 104,455 104,455 306,283 269,279 269,279 317,749
14 197,993 17,197 17,197 306,283 101,967 101,967 306,283 293,468 293,468 343,358
15 207,893 7,028 7,028 306,283 98,637 98,637 306,283 319,774 319,774 370,937
16 218,287 * * * 94,291 94,291 306,283 348,374 348,374 400,630
17 229,202 * * * 88,701 88,701 306,283 379,619 379,619 428,970
18 240,662 * * * 81,573 81,573 306,283 413,798 413,798 459,316
19 252,695 * * * 72,547 72,547 306,283 451,258 451,258 491,871
20 265,330 * * * 61,209 61,209 306,283 492,415 492,415 526,884
21 278,596 * * * 47,072 47,072 306,283 537,777 537,777 564,666
22 292,526 * * * 29,542 29,542 306,283 587,126 587,126 616,482
23 307,152 * * * 7,877 7,877 306,283 640,781 640,781 672,820
24 322,510 * * * * * * 699,082 699,082 734,036
25 338,635 * * * * * * 762,382 762,382 800,501
26 355,567 * * * * * * 831,040 831,040 872,592
27 373,346 * * * * * * 905,421 905,421 950,692
28 392,013 * * * * * * 985,884 985,884 1,035,178
29 411,614 * * * * * * 1,072,794 1,072,794 1,126,434
30 432,194 * * * * * * 1,166,530 1,166,530 1,224,857
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
64
<PAGE> 73
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 96,411 87,911 211,021 102,271 93,771 211,021 108,132 99,632 211,021
2 110,250 92,664 84,164 211,021 104,469 95,969 211,021 116,975 108,475 211,021
3 115,763 88,792 80,792 211,021 106,641 98,641 211,021 126,678 118,678 211,021
4 121,551 84,775 76,775 211,021 108,780 100,780 211,021 137,358 129,358 211,021
5 127,628 80,584 73,084 211,021 110,878 103,378 211,021 149,147 141,647 211,021
6 134,010 76,184 69,184 211,021 112,920 105,920 211,021 162,201 155,201 211,021
7 140,710 71,529 65,529 211,021 114,888 108,888 211,021 176,706 170,706 211,021
8 147,746 66,561 61,561 211,021 116,756 111,756 211,021 192,884 187,884 214,101
9 155,133 61,220 57,220 211,021 118,501 114,501 211,021 210,796 206,796 229,767
10 162,889 55,443 55,443 211,021 120,105 120,105 211,021 230,457 230,457 246,589
11 171,034 49,332 49,332 211,021 121,925 121,925 211,021 252,818 252,818 265,459
12 179,586 42,435 42,435 211,021 123,489 123,489 211,021 277,294 277,294 291,159
13 188,565 34,621 34,621 211,021 124,760 124,760 211,021 304,076 304,076 319,280
14 197,993 25,730 25,730 211,021 125,694 125,694 211,021 333,367 333,367 350,036
15 207,893 15,545 15,545 211,021 126,223 126,223 211,021 365,385 365,385 383,654
16 218,287 3,772 3,772 211,021 126,257 126,257 211,021 400,359 400,359 420,377
17 229,202 * * * 125,669 125,669 211,021 438,533 438,533 460,460
18 240,662 * * * 124,291 124,291 211,021 480,160 480,160 504,168
19 252,695 * * * 121,913 121,913 211,021 525,506 525,506 551,781
20 265,330 * * * 118,269 118,269 211,021 574,852 574,852 603,594
21 278,596 * * * 113,027 113,027 211,021 628,499 628,499 659,924
22 292,526 * * * 105,596 105,596 211,021 686,715 686,715 721,051
23 307,152 * * * 95,309 95,309 211,021 749,817 749,817 787,307
24 322,510 * * * 81,237 81,237 211,021 818,129 818,129 859,036
25 338,635 * * * 62,036 62,036 211,021 891,982 891,982 936,581
26 355,567 * * * 35,735 35,735 211,021 971,700 971,700 1,020,285
27 373,346 * * * * * * 1,059,640 1,059,640 1,102,026
28 392,013 * * * * * * 1,157,081 1,157,081 1,191,794
29 411,614 * * * * * * 1,265,587 1,265,587 1,290,898
30 432,194 * * * * * * 1,387,129 1,387,129 1,401,000
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and an annual $50
administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
65
<PAGE> 74
$100,000 INITIAL PREMIUM: $211,021 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
<TABLE>
<CAPTION>
0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
PREMIUMS
PAID PLUS CASH CASH CASH
POLICY INTEREST CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 95,034 86,534 211,021 100,868 92,368 211,021 106,704 98,204 211,021
2 110,250 89,719 81,219 211,021 101,432 92,932 211,021 113,852 105,352 211,021
3 115,763 84,082 76,082 211,021 101,737 93,737 211,021 121,598 113,598 211,021
4 121,551 78,062 70,062 211,021 101,741 93,741 211,021 130,038 122,038 211,021
5 127,628 71,581 64,081 211,021 101,390 93,890 211,021 139,285 131,785 211,021
6 134,010 64,533 57,533 211,021 100,607 93,607 211,021 149,475 142,475 211,021
7 140,710 56,782 50,782 211,021 99,297 93,297 211,021 160,780 154,780 211,021
8 147,746 48,149 43,149 211,021 97,330 92,330 211,021 173,422 168,422 211,021
9 155,133 38,424 34,424 211,021 94,556 90,556 211,021 187,699 183,699 211,021
10 162,889 27,369 27,369 211,021 90,802 90,802 211,021 203,946 203,946
11 171,034 14,785 14,785 211,021 86,146 86,146 211,021 222,686 222,686 233,820
12 179,586 260 260 211,021 80,087 80,087 211,021 243,073 243,073 255,226
13 188,565 * * * 72,333 72,333 211,021 265,238 265,238 278,500
14 197,993 * * * 62,500 62,500 211,021 289,323 289,323 303,789
15 207,893 * * * 50,057 50,057 211,021 315,472 315,472 331,246
16 218,287 * * * 34,257 34,257 211,021 343,835 343,835 361,027
17 229,202 * * * 14,056 14,056 211,021 374,561 374,561 393,289
18 240,662 * * * * * * 407,800 407,800 428,190
19 252,695 * * * * * * 443,702 443,702 465,887
20 265,330 * * * * * * 482,423 482,423 506,544
21 278,596 * * * * * * 524,126 524,126 550,332
22 292,526 * * * * * * 568,982 568,982 597,431
23 307,152 * * * * * * 617,167 617,167 648,026
24 322,510 * * * * * * 668,864 668,864 702,308
25 338,635 * * * * * * 724,248 724,248 760,460
26 355,567 * * * * * * 783,477 783,477 822,651
27 373,346 * * * * * * 849,021 849,021 882,982
28 392,013 * * * * * * 921,956 921,956 949,615
29 411,614 * * * * * * 1,003,596 1,003,596 1,023,667
30 432,194 * * * * * * 1,095,621 1,095,621 1,106,577
</TABLE>
Assumptions:
(1) no policy loans and no partial withdrawals have been made.
(2) guaranteed values reflect guaranteed cost of insurance charges and an
annual $135 administrative expense charge.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
(*) unless additional premium is paid, the policy will not stay in force.
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide Life or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
66
<PAGE> 75
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account-2:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account-2 (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-2
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS:
Investments at market value:
<S> <C>
American Century VP - American Century VP Balanced (ACVPBal)
795,028 shares (cost $6,183,088)................................................................. $ 6,193,268
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
1,310,237 shares (cost $14,199,026).............................................................. 19,443,915
American Century VP - American Century VP Income & Growth (ACVPIncGr)
602,907 shares (cost $4,444,143)................................................................. 4,823,253
American Century VP - American Century VP International (ACVPInt)
1,980,383 shares (cost $17,427,212).............................................................. 24,754,794
American Century VP - American Century VP Value (ACVPValue)
494,054 shares (cost $3,183,580)................................................................. 2,939,619
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
496,132 shares (cost $16,849,441)................................................................ 19,383,887
Dreyfus Stock Index Fund (DryStkIx)
2,927,576 shares (cost $90,937,184).............................................................. 112,565,296
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
197,915 shares (cost $7,452,341)................................................................. 7,890,857
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
111,700 shares (cost $2,578,826)................................................................. 2,846,128
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
3,387,044 shares (cost $77,450,139).............................................................. 87,080,913
Fidelity VIP - Growth Portfolio (FidVIPGr)
3,224,217 shares (cost $141,002,558)............................................................. 177,106,228
Fidelity VIP - High Income Portfolio (FidVIPHI)
2,300,605 shares (cost $25,431,881).............................................................. 26,019,837
Fidelity VIP - Overseas Portfolio (FidVIPOv)
1,124,389 shares (cost $24,103,083).............................................................. 30,853,234
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
1,773,556 shares (cost $28,218,185).............................................................. 33,112,294
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
2,444,413 shares (cost $57,111,827).............................................................. 71,254,625
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
288,757 shares (cost $6,421,936)................................................................. 6,684,726
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
101,527 shares (cost $703,568)................................................................... 701,555
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
1,679,347 shares (cost $42,896,304).............................................................. 43,176,002
Nationwide SAT - Government Bond Fund (NSATGvtBd)
1,238,554 shares (cost $13,874,328).............................................................. 13,363,999
Nationwide SAT - Money Market Fund (NSATMyMkt)
55,921,557 shares (cost $55,921,557)............................................................. 55,921,557
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
311,019 shares (cost $3,169,694)................................................................. 3,023,109
(Continued)
</TABLE>
<PAGE> 3
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, CONTINUED
<TABLE>
<S> <C>
Nationwide SAT - Small Company Fund (NSATSmCo)
1,192,188 shares (cost $19,570,277)........................................................... 26,371,195
Nationwide SAT - Total Return Fund (NSATTotRe)
5,531,257 shares (cost $88,844,610)........................................................... 104,042,949
Neuberger &Berman AMT - Growth Portfolio (NBAMTGro)
833,852 shares (cost $22,437,375)............................................................. 31,077,667
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
143,260 shares (cost $2,173,246).............................................................. 2,270,679
Neuberger &Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
372,342 shares (cost $5,060,841).............................................................. 4,929,804
Neuberger &Berman AMT - Partners Portfolio (NBAMTPart)
1,568,835 shares (cost $30,264,190)........................................................... 30,811,928
Oppenheimer VAF - Bond Fund (OppBdFd)
1,018,671 shares (cost $12,427,086)........................................................... 11,735,087
Oppenheimer VAF - Global Securities Fund (OppGlSec)
1,040,808 shares (cost $22,818,708)........................................................... 34,773,392
Oppenheimer VAF - Growth Fund (OppGro)
246,543 shares (cost $10,439,601)............................................................. 12,287,705
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
855,203 shares (cost $13,847,823)............................................................. 14,931,853
Strong Opportunity Fund II, Inc. (StOpp2)
1,620,714 shares (cost $33,089,344)........................................................... 42,122,346
Strong VIF - Strong Discovery Fund II (StDisc2)
605,084 shares (cost $6,549,719).............................................................. 6,885,853
Strong VIF - Strong International Stock Fund II (StIntStk2)
456,221 shares (cost $6,079,530).............................................................. 7,468,345
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
254,593 shares (cost $2,789,543).............................................................. 2,721,595
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
711,484 shares (cost $8,097,955).............................................................. 10,145,756
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
391,871 shares (cost $4,137,692).............................................................. 4,294,901
Van Kampen LIT - Morgan Stanley Real Estate Securities Portfolio (VKMSRESec)
412,750 shares (cost $5,453,427).............................................................. 5,105,716
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
818,526 shares (cost $10,822,846)............................................................. 13,669,390
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
230,203 shares (cost $3,879,342).............................................................. 4,433,707
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
974,376 shares (cost $17,318,114)............................................................. 25,528,664
--------------
Total investments.......................................................................... 1,144,747,628
Accounts receivable -
--------------
Total assets............................................................................... 1,144,747,628
ACCOUNTS PAYABLE....................................................................................... 132,236
--------------
CONTRACT OWNERS' EQUITY (NOTE 7)....................................................................... $ 1,144,615,392
--------------
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL ACVPBal
--------------------------------------------- -------------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 14,098,293 11,649,564 9,547,366 104,861 73,602
Mortality and expense charges
(note 3)................... (7,660,149) (6,238,523) (4,642,993) (43,480) (38,972)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... 6,438,144 5,411,041 4,904,373 61,381 34,630
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 955,670,735 760,513,313 443,749,426 971,140 1,247,480
Cost of mutual funds sold.... (897,919,980) (729,684,314) (409,583,997) (1,022,836) (1,152,261)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 57,750,755 30,828,999 34,165,429 (51,696) 95,219
Change in unrealized gain (loss)
on investments............. 93,482,590 26,818,372 31,280,650 (209,153) 37,264
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 151,233,345 57,647,371 65,446,079 (260,849) 132,483
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 39,898,769 43,742,310 19,594,720 723,542 456,397
-------------- -------------- -------------- -------------- -------------
Net change in contract owners'
equity resulting from
operations........ 197,570,258 106,800,722 89,945,172 524,074 623,510
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 155,876,754 213,764,519 218,381,791 765,352 617,960
Transfers between funds ..... - - - (71,304) 1,045,491
Surrenders................... (29,241,082) (20,881,099) (11,960,967) (170,759) (139,847)
Death benefits (note 4)...... (5,189,106) (1,636,729) (664,672) (3,696) (12,665)
Policy loans (net of repayments)
(note 5)................... (16,840,767) (15,272,227) (9,898,715) (109,266) (97,880)
Deductions for surrender charges
(note 2d).................. (4,371,271) (2,374,941) (1,603,674) (25,527) (16,788)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (46,509,797) (44,274,845) (34,553,252) (273,361) (164,907)
Asset charges (note 3):
MSP contracts ............. (560,395) (433,211) (203,697) (4,829) (2,706)
LSFP contracts ............ (275,681) (123,032) (23,838) (912) (769)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 52,888,655 128,768,435 159,472,976 105,698 1,227,889
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 250,458,913 235,569,157 249,418,148 629,772 1,851,399
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 894,156,479 658,587,322 409,169,174 5,562,859 3,711,460
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 1,144,615,392 894,156,479 658,587,322 6,192,631 5,562,859
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
ACVPBal ACVPCapAp
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ 32,123 - - -
Mortality and expense charges
(note 3)................... (27,654) (108,580) (82,384) (104,781)
-------------- -------------- -------------- --------------
Net investment activity.... 4,469 (108,580) (82,384) (104,781)
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 2,604,070 22,591,735 5,476,348 32,724,781
Cost of mutual funds sold.... (2,212,633) (21,828,544) (6,203,432) (32,719,977)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 391,437 763,191 (727,084) 4,804
Change in unrealized gain (loss)
on investments............. (79,247) 6,761,369 (95,403) (649,578)
-------------- -------------- -------------- --------------
Net gain (loss) on investments 312,190 7,524,560 (822,487) (644,774)
-------------- -------------- -------------- --------------
Reinvested capital gains..... 126,772 - 626,545 235,181
-------------- -------------- -------------- --------------
Net change in contract owners'
equity resulting from
operations........ 443,431 7,415,980 (278,326) (514,374)
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 560,697 1,955,940 2,567,119 2,396,050
Transfers between funds ..... 402,250 261,755 (1,460,314) (731,351)
Surrenders................... (201,818) (723,035) (537,440) (294,647)
Death benefits (note 4)...... (18,479) (23,318) (1,791) (279)
Policy loans (net of repayments)
(note 5)................... (62,819) (241,323) (208,014) (317,723)
Deductions for surrender charges
(note 2d).................. (27,058) (108,087) (63,643) (39,505)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (31,708) (687,205) (533,669) (354,495)
Asset charges (note 3):
MSP contracts ............. (1,148) (3,806) (5,721) (3,748)
LSFP contracts ............ (134) (1,392) (1,625) (439)
-------------- -------------- -------------- --------------
Net equity transactions.. 619,783 429,529 (245,098) 653,863
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 1,063,214 7,845,509 (523,424) 139,489
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 2,648,246 11,594,653 12,118,077 11,978,588
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD 3,711,460 19,440,162 11,594,653 12,118,077
============== ============== ============== ==============
</TABLE>
<PAGE> 5
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ACVPIncGr ACVPInt
--------------------------------------------- -------------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 655 7,293 - - 48,574
Mortality and expense charges
(note 3)................... (27,101) (7,590) - (123,973) (100,304)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (26,446) (297) - (123,973) (51,730)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 4,520,179 579,403 - 25,003,227 26,953,998
Cost of mutual funds sold.... (4,059,023) (585,659) - (22,517,439) (26,717,868)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 461,156 (6,256) - 2,485,788 236,130
Change in unrealized gain (loss)
on investments............. 247,602 131,508 - 6,850,984 538,699
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 708,758 125,252 - 9,336,772 774,829
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... - - - - 498,647
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 682,312 124,955 - 9,212,799 1,221,746
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 482,154 115,227 - 1,793,620 1,075,296
Transfers between funds ..... 2,244,545 1,333,797 - 1,521,029 5,394,451
Surrenders................... (56,332) (9,343) - (363,715) (91,333)
Death benefits (note 4)...... - (1) - (15,489) (11,988)
Policy loans (net of repayments)
(note 5)................... 49,802 (3,122) - (508,785) (25,253)
Deductions for surrender charges
(note 2d).................. (8,421) (970) - (54,372) (7,357)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (109,013) (14,226) - (578,192) (371,602)
Asset charges (note 3):
MSP contracts ............. (3,326) (527) - (9,808) (6,965)
LSFP contracts ............ (4,278) (150) - (5,962) (1,978)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 2,595,131 1,420,685 - 1,778,326 5,953,271
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 3,277,443 1,545,640 - 10,991,125 7,175,017
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 1,545,640 - - 13,761,213 6,586,196
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 4,823,083 1,545,640 - 24,752,338 13,761,213
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
ACVPInt ACVPValue
-------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ 39,611 26,285 14,238 1,245
Mortality and expense charges
(note 3)................... (43,589) (20,993) (19,998) (7,498)
-------------- -------------- -------------- --------------
Net investment activity.... (3,978) 5,292 (5,760) (6,253)
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 12,528,472 10,125,505 3,978,821 2,118,031
Cost of mutual funds sold.... (11,671,277) (10,140,086) (4,072,379) (1,966,550)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 857,195 (14,581) (93,558) 151,481
Change in unrealized gain (loss)
on investments............. (221,309) (279,501) 7,367 28,166
-------------- -------------- -------------- --------------
Net gain (loss) on investments 635,886 (294,082) (86,191) 179,647
-------------- -------------- -------------- --------------
Reinvested capital gains..... 76,392 249,026 169,984 2,540
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 708,300 (39,764) 78,033 175,934
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 827,281 536,794 402,104 111,600
Transfers between funds ..... 1,897,413 (10,220) 705,143 1,429,037
Surrenders................... (37,650) (44,773) (64,948) (4,196)
Death benefits (note 4)...... - (18,972) (2) -
Policy loans (net of repayments)
(note 5)................... (123,364) (46,175) (39,222) (2,706)
Deductions for surrender charges
(note 2d).................. (5,048) (6,693) (5,005) (563)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (116,507) (138,847) (76,187) (2,525)
Asset charges (note 3):
MSP contracts ............. (2,038) (3,246) (1,389) (531)
LSFP contracts ............ (238) (1,972) (394) (62)
-------------- -------------- -------------- --------------
Net equity transactions.. 2,439,849 265,896 920,100 1,530,054
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 3,148,149 226,132 998,133 1,705,988
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 3,438,047 2,713,250 1,715,117 9,129
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD 6,586,196 2,939,382 2,713,250 1,715,117
============== ============== ============== ==============
</TABLE>
<PAGE> 6
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
DrySRGro DryStkix
---------------------------------------------- --------------------------------
1999 1998 1997 1999 1998
-------------- -------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 2,403 18,491 24,764 1,066,045 840,788
Mortality and expense charges
(note 3)................... (114,846) (76,955) (44,201) (719,164) (508,329)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (112,443) (58,464) (19,437) 346,881 332,459
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 17,180,969 30,530,607 6,036,906 20,339,759 34,044,658
Cost of mutual funds sold.... (15,391,528) (29,068,944) (5,411,329) (15,264,747) (26,882,152)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 1,789,441 1,461,663 625,577 5,075,012 7,162,506
Change in unrealized gain (loss)
on investments............. 1,688,692 619,023 301,151 11,113,462 6,892,116
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 3,478,133 2,080,686 926,728 16,188,474 14,054,622
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 646,972 429,304 192,785 920,361 156,109
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 4,012,662 2,451,526 1,100,076 17,455,716 14,543,190
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 2,602,017 2,646,682 1,226,366 13,344,420 8,792,308
Transfers between funds ..... 2,581,796 1,547,337 2,303,963 11,928,413 15,454,943
Surrenders................... (387,508) (808,738) (145,994) (2,827,148) (489,388)
Death benefits (note 4)...... (31,507) (3,645) (6,412) (157,295) (395,851)
Policy loans (net of repayments)
(note 5)................... (488,829) (431,011) (107,480) (1,610,756) (500,204)
Deductions for surrender charges
(note 2d).................. (57,929) (101,807) (19,574) (422,632) (44,357)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (879,312) (448,348) (82,935) (4,097,507) (2,263,707)
Asset charges (note 3):
MSP contracts ............. (7,129) (5,343) (2,232) (54,699) (35,299)
LSFP contracts ............ (5,332) (1,518) (261) (48,577) (10,025)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 3,326,267 2,393,609 3,165,441 16,054,219 20,508,420
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 7,338,929 4,845,135 4,265,517 33,509,935 35,051,610
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 12,060,375 7,215,240 2,949,723 79,041,506 43,989,896
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 19,399,304 12,060,375 7,215,240 112,551,441 79,041,506
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
DryStkix DryCapAp
-------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 488,743 43,739 24,846 4,780
Mortality and expense charges
(note 3)................... (258,618) (57,406) (27,124) (1,877)
-------------- -------------- -------------- --------------
Net investment activity.... 230,125 (13,667) (2,278) 2,903
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 12,995,115 6,550,844 20,319,146 3,153,711
Cost of mutual funds sold.... (10,012,154) (6,135,399) (19,666,415) (3,172,025)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 2,982,961 415,445 652,731 (18,314)
Change in unrealized gain (loss)
on investments............. 2,734,985 269,060 173,020 (3,579)
-------------- -------------- -------------- --------------
Net gain (loss) on investments 5,717,946 684,505 825,751 (21,893)
-------------- -------------- -------------- --------------
Reinvested capital gains..... 1,196,951 29,215 1,151 400
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 7,145,022 700,053 824,624 (18,590)
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 6,007,824 1,147,358 502,552 26,933
Transfers between funds ..... 16,661,441 2,166,937 3,058,005 425,397
Surrenders................... (380,643) (296,009) (44,456) (1,058)
Death benefits (note 4)...... (33,328) (13,006) (4) -
Policy loans (net of repayments)
(note 5)................... (210,457) (134,352) (18,317) (33)
Deductions for surrender charges
(note 2d).................. (51,035) (44,251) (5,020) (142)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (618,664) (299,558) (77,478) (762)
Asset charges (note 3):
MSP contracts ............. (13,606) (3,070) (1,883) (133)
LSFP contracts ............ (1,592) (2,988) (535) (16)
-------------- -------------- -------------- --------------
Net equity transactions.. 21,359,940 2,521,061 3,412,864 450,186
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 28,504,962 3,221,114 4,237,488 431,596
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 15,484,934 4,669,084 431,596 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 43,989,896 7,890,198 4,669,084 431,596
============== ============== ============== ==============
</TABLE>
<PAGE> 7
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
DryGrInc FidVIPEi
--------------------------------------------- ------------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 16,508 17,968 8,082 1,233,625 997,915
Mortality and expense charges
(note 3)................... (15,950) (15,042) (5,230) (714,035) (614,949)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... 558 2,926 2,852 519,590 382,966
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 1,753,038 2,469,056 2,254,831 21,969,547 6,996,930
Cost of mutual funds sold.... (1,678,061) (2,437,658) (2,197,145) (15,562,997) (4,750,633)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 74,977 31,398 57,686 6,406,550 2,246,297
Change in unrealized gain (loss)
on investments............. 230,049 115,375 (78,166) (5,267,170) 1,497,328
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 305,026 146,773 (20,480) 1,139,380 3,743,625
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 87,323 29,897 70,270 2,726,961 3,551,403
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 392,907 179,596 52,642 4,385,931 7,677,994
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 430,878 1,960,370 186,196 10,203,955 10,207,531
Transfers between funds ..... 18,919 533,213 972,727 (3,247,107) 2,383,113
Surrenders................... (34,300) (701,730) (2,948) (2,431,139) (904,020)
Death benefits (note 4)...... (18,064) (2) - (137,938) (80,375)
Policy loans (net of repayments)
(note 5)................... (18,736) (801,908) (3,749) (1,117,875) (597,978)
Deductions for surrender charges
(note 2d).................. (5,128) (90,325) (395) (363,433) (83,892)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (129,582) (66,760) (1,204) (3,725,075) (4,711,838)
Asset charges (note 3):
MSP contracts ............. (3,346) (1,044) (372) (46,610) (42,703)
LSFP contracts ............ (1,645) (297) (44) (17,059) (12,127)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 238,996 831,517 1,150,211 (882,281) 6,157,711
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 631,903 1,011,113 1,202,853 3,503,650 13,835,705
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 2,213,966 1,202,853 - 83,564,278 69,728,573
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 2,845,869 2,213,966 1,202,853 87,067,928 83,564,278
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPEi FidVIPGr
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 783,723 215,538 398,089 370,457
Mortality and expense charges
(note 3)................... (498,094) (1,145,435) (759,610) (560,322)
-------------- -------------- -------------- --------------
Net investment activity.... 285,629 (929,897) (361,521) (189,865)
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 6,293,311 91,394,903 85,473,779 46,683,280
Cost of mutual funds sold.... (4,356,281) (75,684,409) (75,903,979) (40,913,295)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 1,937,030 15,710,494 9,569,800 5,769,985
Change in unrealized gain (loss)
on investments............. 7,168,421 17,198,414 10,952,975 5,352,235
-------------- -------------- -------------- --------------
Net gain (loss) on investments 9,105,451 32,908,908 20,522,775 11,122,220
-------------- -------------- -------------- --------------
Reinvested capital gains..... 3,940,387 13,551,946 10,413,177 1,658,235
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 13,331,467 45,530,957 30,574,431 12,590,590
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 11,073,470 15,418,413 11,800,595 12,214,633
Transfers between funds ..... 7,046,924 13,284,488 6,611,922 1,631,518
Surrenders................... (1,110,322) (3,962,266) (1,541,170) (1,311,193)
Death benefits (note 4)...... (73,247) (299,356) (54,733) (86,298)
Policy loans (net of repayments)
(note 5)................... (781,383) (3,173,351) (593,726) (970,109)
Deductions for surrender charges
(note 2d).................. (148,867) (592,322) (161,482) (175,799)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (4,404,162) (6,220,078) (4,387,847) (2,800,521)
Asset charges (note 3):
MSP contracts ............. (21,566) (50,059) (52,749) (23,186)
LSFP contracts ............ (2,524) (23,234) (14,980) (2,713)
-------------- -------------- -------------- --------------
Net equity transactions.. 11,578,323 14,382,235 11,605,830 8,476,332
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 24,909,790 59,913,192 42,180,261 21,066,922
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 44,818,783 117,142,759 74,962,498 53,895,576
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 69,728,573 177,055,951 117,142,759 74,962,498
============== ============== ============== ==============
</TABLE>
<PAGE> 8
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
FidVIPHi FidVIPOv
--------------------------------------------- --------------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 2,570,090 1,930,736 1,246,428 332,184 372,727
Mortality and expense charges
(note 3)................... (197,828) (211,621) (183,573) (199,894) (167,806)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... 2,372,262 1,719,115 1,062,855 132,290 204,921
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 29,571,691 16,168,581 10,300,446 34,092,869 23,614,905
Cost of mutual funds sold.... (32,450,313) (16,734,695) (9,520,272) (31,976,653) (22,518,443)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. (2,878,622) (566,114) 780,174 2,116,216 1,096,462
Change in unrealized gain (loss)
on investments............. 2,437,032 (3,958,695) 1,203,652 6,394,423 2,343
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments (441,590) (4,524,809) 1,983,826 8,510,639 1,098,805
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 96,078 1,226,822 154,053 535,780 1,098,564
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 2,026,750 (1,578,872) 3,200,734 9,178,709 2,402,290
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners..... 3,767,754 5,333,328 6,155,268 2,603,811 3,170,855
Transfers between funds ..... (4,726,508) 1,830,834 2,316,320 (1,140,865) (323,986)
Surrenders................... (711,931) (481,342) (255,542) (511,027) (367,369)
Death benefits (note 4)...... (83,542) (9,509) (22,399) (42,803) (33,198)
Policy loans (net of repayments)
(note 5)................... (257,597) (379,699) (282,232) (436,230) (393,533)
Deductions for surrender charges
(note 2d).................. (106,427) (54,547) (34,262) (76,394) (41,687)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (1,219,918) (2,449,174) (2,961,119) (936,056) (1,268,155)
Asset charges (note 3):
MSP contracts ............. (29,175) (14,696) (7,782) (9,310) (11,653)
LSFP contracts ............ (7,937) (4,173) (911) (4,398) (3,309)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. (3,375,281) 3,771,022 4,907,341 (553,272) 727,965
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY (1,348,531) 2,192,150 8,108,075 8,625,437 3,130,255
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 27,354,464 25,162,314 17,054,239 22,223,409 19,093,154
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 26,005,933 27,354,464 25,162,314 30,848,846 22,223,409
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPOv FidVIPAM
------------ ---------------------------------------------
1997 1999 1998 1997
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 285,975 1,040,155 894,977 787,310
Mortality and expense charges
(note 3)................... (153,477) (270,444) (239,207) (219,940)
------------- -------------- -------------- --------------
Net investment activity.... 132,498 769,711 655,770 567,370
------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 13,404,627 4,829,331 3,554,904 2,514,749
Cost of mutual funds sold.... (11,354,404) (3,813,802) (2,948,897) (2,201,452)
------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 2,050,223 1,015,529 606,007 313,297
Change in unrealized gain (loss)
on investments............. (1,243,832) 26,818 28,492 1,651,903
------------- -------------- -------------- --------------
Net gain (loss) on investments 806,391 1,042,347 634,499 1,965,200
------------- -------------- -------------- --------------
Reinvested capital gains..... 1,135,234 1,317,530 2,684,931 1,974,948
------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 2,074,123 3,129,588 3,975,200 4,507,518
------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners..... 3,466,918 2,909,351 2,483,246 2,672,468
Transfers between funds ..... (393,971) (2,311,042) 115,769 284,292
Surrenders................... (496,949) (832,733) (1,327,378) (659,510)
Death benefits (note 4)...... (56,932) (42,640) (17,947) (43,658)
Policy loans (net of repayments)
(note 5)................... (309,770) (659,859) (195,419) (323,969)
Deductions for surrender charges
(note 2d).................. (66,629) (124,486) (149,118) (88,424)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (1,319,172) (1,199,744) (874,287) (389,701)
Asset charges (note 3):
MSP contracts ............. (5,905) (11,668) (16,611) (8,742)
LSFP contracts ............ (691) (2,332) (4,717) (1,023)
------------- -------------- -------------- --------------
Net equity transactions.. 816,899 (2,275,153) 13,538 1,441,733
------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 2,891,022 854,435 3,988,738 5,949,251
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 16,202,132 32,253,287 28,264,549 22,315,298
------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD 19,093,154 33,107,722 32,253,287 28,264,549
============= ============== ============== ==============
</TABLE>
<PAGE> 9
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
FidVIPCon FidVIPGrOp
---------------------------------------------- ---------------------------
1999 1998 1997 1999 1998
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 261,343 208,958 131,312 58,964 20,203
Mortality and expense charges
(note 3)................... (460,248) (316,241) (184,659) (47,088) (35,749)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (198,905) (107,283) (53,347) 11,876 (15,546)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 25,340,625 5,270,262 2,972,056 3,165,507 6,596,939
Cost of mutual funds sold.... (16,733,032) (3,518,595) (2,266,444) (2,711,647) (6,370,749)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 8,607,593 1,751,667 705,612 453,860 226,190
Change in unrealized gain (loss)
on investments............. 2,632,252 6,821,820 3,432,249 (343,328) 577,416
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 11,239,845 8,573,487 4,137,861 110,532 803,606
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 1,916,516 1,537,336 347,039 110,237 70,230
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 12,957,456 10,003,540 4,431,553 232,645 858,290
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 8,483,644 7,814,633 4,330,090 1,132,717 3,299,608
Transfers between funds ..... 5,291,011 7,442,220 7,341,211 12,561 3,732,648
Surrenders................... (1,395,137) (1,418,496) (274,806) (135,968) (1,598,688)
Death benefits (note 4)...... (199,019) (122,001) (39,015) (53,293) (9,225)
Policy loans (net of repayments)
(note 5)................... (834,500) (1,095,851) (292,640) (44,200) (1,157,827)
Deductions for surrender charges
(note 2d).................. (208,560) (175,050) (36,845) (20,326) (205,666)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (2,643,787) (1,378,370) (300,404) (320,411) (136,692)
Asset charges (note 3):
MSP contracts ............. (36,244) (21,960) (8,910) (5,191) (2,482)
LSFP contracts ............ (18,084) (6,237) (1,043) (2,905) (705)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 8,439,324 11,038,888 10,717,638 562,984 3,920,971
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 21,396,780 21,042,428 15,149,191 795,629 4,779,261
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 49,850,235 28,807,807 13,658,616 5,888,280 1,109,019
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 71,247,015 49,850,235 28,807,807 6,683,909 5,888,280
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPGrOp MSEmMkt
--------------- -----------------------------------------
<S> <C> <C> <C> <C>
1997 1999 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - 84,322 37,885 11,378
Mortality and expense charges
(note 3)................... (4,822) (3,195) (2,400) (1,095)
-------------- -------------- -------------- --------------
Net investment activity.... (4,822) 81,127 35,485 10,283
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 1,418,908 1,067,995 2,208,004 1,348,011
Cost of mutual funds sold.... (1,383,237) (1,041,803) (2,302,818) (1,367,276)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 35,671 26,192 (94,814) (19,265)
Change in unrealized gain (loss)
on investments............. 28,661 29,379 (33,784) 2,383
-------------- -------------- -------------- --------------
Net gain (loss) on investments 64,332 55,571 (128,598) (16,882)
-------------- -------------- -------------- --------------
Reinvested capital gains..... - - - 4,938
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 59,510 136,698 (93,113) (1,661)
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 43,645 106,804 398,199 10,188
Transfers between funds ..... 1,013,974 158,219 133,381 247,359
Surrenders................... (2,852) (6,693) (214,691) (617)
Death benefits (note 4)...... - - (9) -
Policy loans (net of repayments)
(note 5)................... (2,231) (7,238) (92,787) (2,742)
Deductions for surrender charges
(note 2d).................. (382) (1,001) (27,689) (83)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (2,262) (24,247) (14,797) (471)
Asset charges (note 3):
MSP contracts ............. (343) (425) (167) (78)
LSFP contracts ............ (40) (885) (47) (9)
-------------- -------------- -------------- --------------
Net equity transactions.. 1,049,509 224,534 181,393 253,547
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 1,109,019 361,232 88,280 251,886
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - 340,166 251,886 -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 1,109,019 701,398 340,166 251,886
============== ============== ============== ==============
</TABLE>
<PAGE> 10
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
NSATCapAp NSATGvtBd
--------------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 277,922 246,198 157,773 787,049 635,908
Mortality and expense charges
(note 3)................... (323,069) (258,178) (130,365) (121,678) (111,282)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (45,147) (11,980) 27,408 665,371 524,626
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 14,859,491 41,145,976 22,800,149 29,946,083 43,945,372
Cost of mutual funds sold.... (13,314,168) (37,562,739) (19,539,881) (30,797,415) (43,540,184)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 1,545,323 3,583,237 3,260,268 (851,332) 405,188
Change in unrealized gain (loss)
on investments............. (2,937,651) 2,897,785 41,944 (301,600) (159,490)
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments (1,392,328) 6,481,022 3,302,212 (1,152,932) 245,698
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 2,820,485 1,139,693 463,551 25,753 67,018
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 1,383,010 7,608,735 3,793,171 (461,808) 837,342
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 6,414,922 4,921,929 2,643,340 755,607 1,866,413
Transfers between funds ..... (902,464) 9,212,515 8,096,052 381,498 3,757,206
Surrenders................... (1,464,698) (339,981) (225,077) (310,304) (140,551)
Death benefits (note 4)...... (26,646) (12,217) (5,534) (3,017) (50,211)
Policy loans (net of repayments)
(note 5)................... (839,186) (247,383) (353,707) (495,291) (220,482)
Deductions for surrender charges
(note 2d).................. (218,959) (30,979) (30,177) (46,387) (15,200)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (2,416,248) (1,558,711) (385,883) (500,735) (989,812)
Asset charges (note 3):
MSP contracts ............. (26,238) (17,928) (6,728) (13,045) (7,727)
LSFP contracts ............ (15,764) (5,092) (787) (2,382) (2,195)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 504,719 11,922,153 9,731,499 (234,056) 4,197,441
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 1,887,729 19,530,888 13,524,670 (695,864) 5,034,783
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 41,283,344 21,752,456 8,227,786 14,057,773 9,022,990
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 43,171,073 41,283,344 21,752,456 13,361,909 14,057,773
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
NSATGvtBd NSATMyMkt
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 492,781 2,607,883 2,517,296 2,001,810
Mortality and expense charges
(note 3)................... (68,282) (415,133) (414,977) (359,665)
-------------- -------------- -------------- --------------
Net investment activity.... 424,499 2,192,750 2,102,319 1,642,145
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 10,818,170 257,299,024 213,040,345 122,915,553
Cost of mutual funds sold.... (10,417,945) (257,299,024) (213,040,345) (122,915,553)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 400,225 - - -
Change in unrealized gain (loss)
on investments............. (140,391) - - -
-------------- -------------- -------------- --------------
Net gain (loss) on investments 259,834 - - -
-------------- -------------- -------------- --------------
Reinvested capital gains..... - - - -
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 684,333 2,192,750 2,102,319 1,642,145
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 1,870,588 33,970,462 87,844,599 117,478,803
Transfers between funds ..... 1,527,412 (20,060,327) (81,357,019) (103,571,498)
Surrenders................... (132,876) (2,949,962) (1,151,432) (2,413,548)
Death benefits (note 4)...... (6,196) (1,748,315) (5,841) (37,820)
Policy loans (net of repayments)
(note 5)................... (245,452) 257,119 (233,125) (1,758,491)
Deductions for surrender charges
(note 2d).................. (17,815) (440,992) (117,086) (323,598)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (1,333,897) (2,710,844) (3,968,229) (4,837,509)
Asset charges (note 3):
MSP contracts ............. (2,790) (55,122) (28,816) (13,745)
LSFP contracts ............ (327) (32,642) (8,184) (1,608)
-------------- -------------- -------------- --------------
Net equity transactions.. 1,658,647 6,229,377 974,867 4,520,986
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 2,342,980 8,422,127 3,077,186 6,163,131
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 6,680,010 47,514,985 44,437,799 38,274,668
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 9,022,990 55,937,112 47,514,985 44,437,799
============== ============== ============== ==============
</TABLE>
<PAGE> 11
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
NSATSmCapV NSATSmCo
--------------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - - - - -
Mortality and expense charges
(note 3)................... (12,857) (3,508) - (133,984) (115,584)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (12,857) (3,508) - (133,984) (115,584)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 38,165,993 1,549,129 - 12,258,303 12,262,712
Cost of mutual funds sold.... (37,730,603) (1,489,413) - (11,935,965) (13,098,101)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 435,390 59,716 - 322,338 (835,389)
Change in unrealized gain (loss)
on investments............. (178,227) 31,642 - 6,521,648 1,062,670
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 257,163 91,358 - 6,843,986 227,281
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 463,979 - - 1,017,362 -
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 708,285 87,850 - 7,727,364 111,697
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 205,584 495,836 - 3,047,229 2,534,601
Transfers between funds ..... 1,364,159 742,114 - 108,189 2,008,259
Surrenders................... (9,301) (342,834) - (506,958) (175,480)
Death benefits (note 4)...... - (1) - (58,447) (24,329)
Policy loans (net of repayments)
(note 5)................... (17,764) (92,219) - (304,105) (112,094)
Deductions for surrender charges
(note 2d).................. (1,390) (44,169) - (75,786) (19,078)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (60,914) (5,642) - (1,042,927) (497,764)
Asset charges (note 3):
MSP contracts ............. (3,844) (244) - (14,377) (8,027)
LSFP contracts ............ (2,270) (69) - (6,706) (2,279)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 1,474,260 752,772 - 1,146,112 3,703,809
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 2,182,545 840,622 - 8,873,476 3,815,506
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 840,622 - - 17,495,277 13,679,771
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 3,023,167 840,622 - 26,368,753 17,495,277
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
NSATSmCo NSATTotRe
------------- ----------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - 663,979 923,892 906,286
Mortality and expense charges
(note 3)................... (251,559) (774,887) (673,496) (342,466)
-------------- -------------- -------------- --------------
Net investment activity.... (251,559) (110,908) 250,396 563,820
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 16,417,304 7,683,042 17,758,523 7,806,204
Cost of mutual funds sold.... (14,437,205) (4,796,181) (10,907,631) (5,268,505)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 1,980,099 2,886,861 6,850,892 2,537,699
Change in unrealized gain (loss)
on investments............. (943,075) (615,625) 2,647,189 8,597,412
-------------- -------------- -------------- --------------
Net gain (loss) on investments 1,037,024 2,271,236 9,498,081 11,135,111
-------------- -------------- -------------- --------------
Reinvested capital gains..... 371,914 3,857,973 3,859,922 2,381,668
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 1,157,379 6,018,301 13,608,399 14,080,599
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 2,031,832 14,477,695 18,994,728 21,089,542
Transfers between funds ..... 5,027,832 (3,544,992) 6,079,393 12,507,830
Surrenders................... (161,763) (2,714,451) (1,330,528) (993,966)
Death benefits (note 4)...... (40,234) (233,861) (120,757) (73,080)
Policy loans (net of repayments)
(note 5)................... (171,323) (2,351,544) (809,785) (1,397,247)
Deductions for surrender charges
(note 2d).................. (21,689) (405,785) (122,860) (133,267)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (47,754) (6,266,041) (11,763,303) (12,793,173)
Asset charges (note 3):
MSP contracts ............. (4,231) (46,751) (46,769) (23,085)
LSFP contracts ............ (495) (17,691) (13,282) (2,702)
-------------- -------------- -------------- --------------
Net equity transactions.. 6,612,175 (1,103,421) 10,866,837 18,180,852
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 7,769,554 4,914,880 24,475,236 32,261,451
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 5,910,217 99,115,362 74,640,126 42,378,675
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 13,679,771 104,030,242 99,115,362 74,640,126
============== ============== ============== ==============
</TABLE>
<PAGE> 12
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
NBAMTGro NBAMTGuard
--------------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - - - 4,569 -
Mortality and expense charges
(note 3)................... (183,268) (153,887) (131,622) (12,787) (4,780)
------------- -------------- -------------- -------------- -------------
Net investment activity.... (183,268) (153,887) (131,622) (8,218) (4,780)
------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 90,781,328 28,296,554 11,391,328 8,197,327 1,186,919
Cost of mutual funds sold.... (88,544,143) (30,054,251) (10,218,717) (8,110,096) (1,243,303)
------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 2,237,185 (1,757,697) 1,172,611 87,231 (56,384)
Change in unrealized gain (loss)
on investments............. 7,073,105 273,491 1,144,227 43,771 53,662
------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 9,310,290 (1,484,206) 2,316,838 131,002 (2,722)
------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 1,124,154 4,778,935 1,172,597 - -
------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 10,251,176 3,140,842 3,357,813 122,784 (7,502)
------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 2,741,841 3,124,257 2,009,831 241,772 149,649
Transfers between funds ..... (2,585,171) 3,739,437 498,211 1,149,560 831,617
Surrenders................... (733,093) (1,015,843) (419,539) (18,129) (64,538)
Death benefits (note 4)...... (1,410,172) (13,565) (7,880) (281) (1)
Policy loans (net of repayments)
(note 5)................... (530,684) (1,132,396) (305,567) (19,356) (25,325)
Deductions for surrender charges
(note 2d).................. (109,591) (120,721) (56,250) (2,710) (8,207)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (1,049,294) (741,732) (249,631) (59,481) (17,066)
Asset charges (note 3):
MSP contracts ............. (9,624) (10,686) (5,427) (1,168) (332)
LSFP contracts ............ (4,427) (3,035) (635) (701) (94)
------------- -------------- -------------- -------------- -------------
Net equity transactions.. (3,690,215) 3,825,716 1,463,113 1,289,506 865,703
------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 6,560,961 6,966,558 4,820,926 1,412,290 858,201
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 24,511,722 17,545,164 12,724,238 858,201 -
------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 31,072,683 24,511,722 17,545,164 2,270,491 858,201
============= ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
NBAMTGuard NBAMTLMat
-------------- ---------------------------------------------
1997 1999 1998 1997
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - 277,113 365,591 166,562
Mortality and expense charges
(note 3)................... - (35,738) (42,729) (37,669)
-------------- -------------- -------------- --------------
Net investment activity.... - 241,375 322,862 128,893
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ - 1,296,663 3,525,682 1,060,839
Cost of mutual funds sold.... - (1,370,958) (3,557,763) (1,087,427)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. - (74,295) (32,081) (26,588)
Change in unrealized gain (loss)
on investments............. - (128,665) (88,989) 99,993
-------------- -------------- -------------- --------------
Net gain (loss) on investments - (202,960) (121,070) 73,405
-------------- -------------- -------------- --------------
Reinvested capital gains..... - - - -
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ - 38,415 201,792 202,298
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... - 418,414 1,227,568 568,335
Transfers between funds ..... - (166,249) (1,104,263) 2,560,467
Surrenders................... - (82,093) (340,366) (49,744)
Death benefits (note 4)...... - (50,646) (168,478) (6,820)
Policy loans (net of repayments)
(note 5)................... - (66,552) (490,348) (50,416)
Deductions for surrender charges
(note 2d).................. - (12,272) (43,208) (6,669)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. - (161,822) (151,014) (95,419)
Asset charges (note 3):
MSP contracts ............. - (7,656) (2,967) (1,822)
LSFP contracts ............ - (487) (843) (213)
-------------- -------------- -------------- --------------
Net equity transactions.. - (129,363) (1,073,919) 2,917,699
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY - (90,948) (872,127) 3,119,997
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - 5,019,328 5,891,455 2,771,458
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ - 4,928,380 5,019,328 5,891,455
============== ============== ============== ==============
</TABLE>
<PAGE> 13
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
NBAMTPart OppBdFd
--------------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 395,343 123,869 38,636 563,814 177,251
Mortality and expense charges
(note 3)................... (234,549) (254,428) (171,233) (91,553) (91,564)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... 160,794 (130,559) (132,597) 472,261 85,687
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 10,213,406 16,262,946 14,044,895 3,691,017 25,959,216
Cost of mutual funds sold.... (10,762,285) (15,129,583) (11,426,520) (3,697,719) (25,616,936)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. (548,879) 1,133,363 2,618,375 (6,702) 342,280
Change in unrealized gain (loss)
on investments............. 1,854,882 (3,917,798) 1,495,768 (794,086) 13,809
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 1,306,003 (2,784,435) 4,114,143 (800,788) 356,089
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 687,554 3,901,869 594,994 54,146 160,413
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 2,154,351 986,875 4,576,540 (274,381) 602,189
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 5,441,082 5,722,483 3,058,953 1,530,602 1,446,313
Transfers between funds ..... (8,211,478) 2,646,725 11,362,270 (747,631) 2,081,829
Surrenders................... (949,302) (676,703) (291,383) (352,928) (168,318)
Death benefits (note 4)...... (94,956) (11,051) - (9,225) (24,489)
Policy loans (net of repayments)
(note 5)................... (473,894) (1,178,884) (215,128) (214,389) (23,153)
Deductions for surrender charges
(note 2d).................. (141,912) (78,170) (39,067) (52,759) (19,765)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (1,823,914) (1,174,585) (364,291) (496,721) (348,809)
Asset charges (note 3):
MSP contracts ............. (23,724) (17,668) (8,885) (9,861) (6,358)
LSFP contracts ............ (10,391) (5,018) (1,040) (1,060) (1,806)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. (6,288,489) 5,227,129 13,501,429 (353,972) 2,935,444
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY (4,134,138) 6,214,004 18,077,969 (628,353) 3,537,633
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 34,942,331 28,728,327 10,650,358 12,362,107 8,824,474
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 30,808,193 34,942,331 28,728,327 11,733,754 12,362,107
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
OppBdFd OppGlSec
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 444,589 255,944 389,267 139,580
Mortality and expense charges
(note 3)................... (64,328) (190,529) (147,592) (115,087)
-------------- -------------- -------------- --------------
Net investment activity.... 380,261 65,415 241,675 24,493
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 6,493,858 6,535,136 4,690,056 2,123,253
Cost of mutual funds sold.... (6,309,717) (4,397,501) (3,335,880) (1,585,760)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 184,141 2,137,635 1,354,176 537,493
Change in unrealized gain (loss)
on investments............. 7,331 9,595,322 (702,629) 1,880,371
-------------- -------------- -------------- --------------
Net gain (loss) on investments 191,472 11,732,957 651,547 2,417,864
-------------- -------------- -------------- --------------
Reinvested capital gains..... 20,983 717,222 1,465,275 -
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 592,716 12,515,594 2,358,497 2,442,357
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 1,185,778 3,377,203 2,591,457 2,244,408
Transfers between funds ..... 1,429,093 127,319 1,052,407 2,806,084
Surrenders................... (151,014) (755,080) (390,303) (332,828)
Death benefits (note 4)...... (6,177) (44,903) (12,688) (1,951)
Policy loans (net of repayments)
(note 5)................... (97,629) (343,214) (265,465) (260,746)
Deductions for surrender charges
(note 2d).................. (20,247) (112,877) (46,476) (44,624)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (74,240) (1,110,398) (696,092) (209,063)
Asset charges (note 3):
MSP contracts ............. (2,730) (9,874) (10,249) (5,120)
LSFP contracts ............ (319) (4,111) (2,911) (599)
-------------- -------------- -------------- --------------
Net equity transactions.. 2,262,515 1,124,065 2,219,680 4,195,561
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 2,855,231 13,639,659 4,578,177 6,637,918
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 5,969,243 21,130,542 16,552,365 9,914,447
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 8,824,474 34,770,201 21,130,542 16,552,365
============== ============== ============== ==============
</TABLE>
<PAGE> 14
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
OppGro OppMult
--------------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 16,006 9,433 - 480,400 116,421
Mortality and expense charges
(note 3)................... (48,619) (26,246) (2,691) (115,579) (104,971)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (32,613) (16,813) (2,691) 364,821 11,450
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 25,212,861 5,173,603 346,058 2,796,637 1,906,489
Cost of mutual funds sold.... (24,502,814) (4,835,421) (340,426) (2,391,468) (1,502,365)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 710,047 338,182 5,632 405,169 404,124
Change in unrealized gain (loss)
on investments............. 1,735,399 109,336 3,346 10,270 (366,305)
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 2,445,446 447,518 8,978 415,439 37,819
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 175,824 113,813 - 694,901 675,242
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 2,588,657 544,518 6,287 1,475,161 724,511
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 1,214,511 1,452,830 32,403 1,717,678 3,243,119
Transfers between funds ..... 3,004,317 4,492,087 586,430 (1,101,933) 706,703
Surrenders................... (60,102) (576,151) (2,135) (382,853) (1,061,880)
Death benefits (note 4)...... (6,703) (5) - (36,757) (182,084)
Policy loans (net of repayments)
(note 5)................... (111,846) (312,911) (3,203) (234,710) (1,005,743)
Deductions for surrender charges
(note 2d).................. (8,985) (73,520) (286) (57,233) (126,681)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (351,903) (116,339) (433) (646,532) (435,809)
Asset charges (note 3):
MSP contracts ............. (4,217) (1,822) (192) (8,700) (7,289)
LSFP contracts ............ (3,718) (518) (22) (1,730) (2,070)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 3,671,354 4,863,651 612,562 (752,770) 1,128,266
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 6,260,011 5,408,169 618,849 722,391 1,852,777
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 6,027,018 618,849 - 14,207,759 12,354,982
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 12,287,029 6,027,018 618,849 14,930,150 14,207,759
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
OppMult StOpp2
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 401,123 - 71,635 79,875
Mortality and expense charges
(note 3)................... (88,369) (283,101) (220,760) (185,205)
-------------- -------------- -------------- --------------
Net investment activity.... 312,754 (283,101) (149,125) (105,330)
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 1,256,650 6,031,119 3,215,306 3,417,734
Cost of mutual funds sold.... (1,026,967) (4,291,744) (2,191,788) (2,305,866)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 229,683 1,739,375 1,023,518 1,111,868
Change in unrealized gain (loss)
on investments............. 697,954 5,430,662 (1,078,872) 1,866,652
-------------- -------------- -------------- --------------
Net gain (loss) on investments 927,637 7,170,037 (55,354) 2,978,520
-------------- -------------- -------------- --------------
Reinvested capital gains..... 329,608 3,541,869 3,488,003 1,736,733
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 1,569,999 10,428,805 3,283,524 4,609,923
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 1,361,025 4,448,212 5,452,015 3,291,881
Transfers between funds ..... 1,935,508 (12,621) 470,365 1,720,221
Surrenders................... (189,727) (1,148,838) (1,037,130) (584,361)
Death benefits (note 4)...... (18,581) (104,927) (143,979) (46,618)
Policy loans (net of repayments)
(note 5)................... (138,576) (753,805) (1,307,454) (446,793)
Deductions for surrender charges
(note 2d).................. (25,438) (171,741) (121,009) (78,349)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (102,354) (1,589,094) (946,709) (237,366)
Asset charges (note 3):
MSP contracts ............. (3,822) (9,653) (15,330) (7,857)
LSFP contracts ............ (447) (4,177) (4,354) (920)
-------------- -------------- -------------- --------------
Net equity transactions.. 2,817,588 653,356 2,346,415 3,609,838
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 4,387,587 11,082,161 5,629,939 8,219,761
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 7,967,395 31,035,784 25,405,845 17,186,084
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 12,354,982 42,117,945 31,035,784 25,405,845
============== ============== ============== ==============
(Continued)
</TABLE>
<PAGE> 15
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
StDisc2 StintStk2
--------------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - - - 7,958 22,725
Mortality and expense charges
(note 3)................... (53,820) (58,150) (62,162) (22,468) (15,028)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (53,820) (58,150) (62,162) (14,510) 7,697
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 8,370,593 4,234,899 6,947,379 12,615,085 4,328,033
Cost of mutual funds sold.... (9,362,894) (3,682,201) (7,014,226) (11,285,141) (4,573,810)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. (992,301) 552,698 (66,847) 1,329,944 (245,777)
Change in unrealized gain (loss)
on investments............. 125,370 (128,321) 897,855 1,572,604 138,162
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments (866,931) 424,377 831,008 2,902,548 (107,615)
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... 1,035,670 120,028 - - -
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 114,919 486,255 768,846 2,888,038 (99,918)
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 1,126,745 686,440 1,157,860 428,882 1,319,108
Transfers between funds ..... (2,017,437) 154,482 (800,200) 2,309,650 (186,236)
Surrenders................... (201,408) (128,257) (159,830) (56,239) (444,664)
Death benefits (note 4)...... (1,033) (23,649) (17,470) (4,048) (5,993)
Policy loans (net of repayments)
(note 5)................... (115,906) (104,497) (79,472) 52,892 (462,567)
Deductions for surrender charges
(note 2d).................. (30,109) (15,109) (21,429) (8,407) (56,530)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (340,295) (244,196) (50,118) (125,810) (61,036)
Asset charges (note 3):
MSP contracts ............. (1,300) (4,038) (2,334) (2,085) (1,044)
LSFP contracts ............ (513) (1,147) (273) (1,753) (296)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. (1,581,256) 320,029 26,734 2,593,082 100,742
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY (1,466,337) 806,284 795,580 5,481,120 824
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 8,351,832 7,545,548 6,749,968 1,986,996 1,986,172
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 6,885,495 8,351,832 7,545,548 7,468,116 1,986,996
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
StintStk2 VEWrldBd
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 35,008 135,225 24,030 73,945
Mortality and expense charges
(note 3)................... (16,592) (25,601) (26,599) (20,793)
-------------- -------------- -------------- --------------
Net investment activity.... 18,416 109,624 (2,569) 53,152
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 1,180,714 4,442,114 7,510,962 1,289,613
Cost of mutual funds sold.... (1,254,173) (4,822,035) (7,101,791) (1,326,687)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. (73,459) (379,921) 409,171 (37,074)
Change in unrealized gain (loss)
on investments............. (320,243) (74,747) (35,624) 23,130
-------------- -------------- -------------- --------------
Net gain (loss) on investments (393,702) (454,668) 373,547 (13,944)
-------------- -------------- -------------- --------------
Reinvested capital gains..... 54,007 60,420 - -
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ (321,279) (284,624) 370,978 39,208
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 396,577 232,837 173,889 303,361
Transfers between funds ..... 159,418 (449,720) 663,078 89,247
Surrenders................... (39,345) (98,243) (47,678) (109,226)
Death benefits (note 4)...... - (25,665) (35,715) -
Policy loans (net of repayments)
(note 5)................... (28,189) (70,184) (21,466) (20,191)
Deductions for surrender charges
(note 2d).................. (5,275) (14,686) (5,615) (14,645)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (4,583) (113,947) (77,084) (10,312)
Asset charges (note 3):
MSP contracts ............. (614) (1,809) (1,847) (782)
LSFP contracts ............ (72) (145) (525) (92)
-------------- -------------- -------------- --------------
Net equity transactions.. 477,917 (541,562) 647,037 237,360
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 156,638 (826,186) 1,018,015 276,568
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 1,829,534 3,547,221 2,529,206 2,252,638
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 1,986,172 2,721,035 3,547,221 2,529,206
============== ============== ============== ==============
</TABLE>
<PAGE> 16
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
VEWrldEMkt VEWrldHAs
--------------------------------------------- --------------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ - 20,182 1,791 61,762 35,945
Mortality and expense charges
(note 3)................... (32,044) (14,186) (10,449) (36,567) (38,345)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... (32,044) 5,996 (8,658) 25,195 (2,400)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 26,145,515 4,758,410 3,744,118 19,298,812 13,571,199
Cost of mutual funds sold.... (24,002,878) (6,579,731) (3,668,967) (18,689,697) (17,132,731)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 2,142,637 (1,821,321) 75,151 609,115 (3,561,532)
Change in unrealized gain (loss)
on investments............. 1,939,640 923,464 (815,392) 199,401 644,209
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 4,082,277 (897,857) (740,241) 808,516 (2,917,323)
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... - 17,939 - - 882,647
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 4,050,233 (873,922) (748,899) 833,711 (2,037,076)
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 580,564 701,612 585,373 602,994 1,602,107
Transfers between funds ..... 4,022,991 (173,962) 2,650,105 (822,875) (1,198,538)
Surrenders................... (107,435) (41,678) (8,373) (289,205) (132,778)
Death benefits (note 4)...... - (4,922) - (1,818) (3,026)
Policy loans (net of repayments)
(note 5)................... (70,361) (80,091) (71,376) 77,240 (200,964)
Deductions for surrender charges
(note 2d).................. (16,061) (5,094) (1,123) (43,233) (13,168)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (157,046) (68,777) (8,419) (189,825) (199,756)
Asset charges (note 3):
MSP contracts ............. (3,494) (985) (742) (1,809) (2,663)
LSFP contracts ............ (1,983) (280) (87) (322) (756)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 4,247,175 325,823 3,145,358 (668,853) (149,542)
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 8,297,408 (548,099) 2,396,459 164,858 (2,186,618)
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 1,851,575 2,399,674 3,215 4,129,585 6,316,203
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 10,148,983 1,851,575 2,399,674 4,294,443 4,129,585
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
VEWrldHAs VKMSRESec
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 118,188 400,217 12,298 193,749
Mortality and expense charges
(note 3)................... (54,934) (44,010) (52,029) (47,059)
-------------- -------------- -------------- --------------
Net investment activity.... 63,254 356,207 (39,731) 146,690
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 19,348,273 6,089,310 4,635,925 8,117,619
Cost of mutual funds sold.... (18,769,875) (7,139,977) (5,200,298) (7,257,679)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 578,398 (1,050,667) (564,373) 859,940
Change in unrealized gain (loss)
on investments............. (898,401) 478,383 (513,939) (625,237)
-------------- -------------- -------------- --------------
Net gain (loss) on investments (320,003) (572,284) (1,078,312) 234,703
-------------- -------------- -------------- --------------
Reinvested capital gains..... 160,126 - 121,016 641,054
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ (96,623) (216,077) (997,027) 1,022,447
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 840,495 1,006,759 1,337,143 827,543
Transfers between funds ..... (282,076) (1,435,388) (908,402) 2,852,464
Surrenders................... (171,081) (187,346) (163,286) (100,507)
Death benefits (note 4)...... (99) (2,653) (22,389) -
Policy loans (net of repayments)
(note 5)................... (124,185) (131,155) (78,704) (85,370)
Deductions for surrender charges
(note 2d).................. (22,938) (28,007) (19,126) (13,476)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (142,112) (432,919) (232,710) (65,828)
Asset charges (note 3):
MSP contracts ............. (1,953) (4,975) (3,613) (2,360)
LSFP contracts ............ (229) (2,459) (1,026) (276)
-------------- -------------- -------------- --------------
Net equity transactions.. 95,822 (1,218,143) (92,113) 3,412,190
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY (801) (1,434,220) (1,089,140) 4,434,637
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 6,317,004 6,539,291 7,628,431 3,193,794
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 6,316,203 5,105,071 6,539,291 7,628,431
============== ============== ============== ==============
</TABLE>
<PAGE> 17
NATIONWIDE VLI SEPARATE ACCOUNT-2
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
WPIntEq WPPVenCap
----------------------------------------- -----------------------------
1999 1998 1997 1999 1998
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 106,392 50,333 79,669 - -
Mortality and expense charges
(note 3)................... (70,225) (72,995) (79,873) (13,686) (6,193)
-------------- -------------- -------------- -------------- -------------
Net investment activity.... 36,167 (22,662) (204) (13,686) (6,193)
-------------- -------------- -------------- -------------- -------------
Proceeds from mutual fund
shares sold................ 19,261,615 9,538,799 7,769,039 11,451,361 4,879,898
Cost of mutual funds sold.... (18,047,381) (9,941,358) (7,238,368) (10,619,693) (4,873,755)
-------------- -------------- -------------- -------------- -------------
Realized gain (loss) on
investments.............. 1,214,234 (402,559) 530,671 831,668 6,143
Change in unrealized gain (loss)
on investments............. 3,271,039 929,287 (1,377,503) 489,466 66,492
-------------- -------------- -------------- -------------- -------------
Net gain (loss) on investments 4,485,273 526,728 (846,832) 1,321,134 72,635
-------------- -------------- -------------- -------------- -------------
Reinvested capital gains..... - - 551,360 - -
-------------- -------------- -------------- -------------- -------------
Net change in contract
owners' equity resulting
from operations........ 4,521,440 504,066 (295,676) 1,307,448 66,442
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 1,411,984 1,111,024 1,506,986 139,661 105,973
Transfers between funds ..... (167,066) (1,578,624) 674,324 2,043,854 180,265
Surrenders................... (642,724) (168,491) (113,178) (28,894) (1,367)
Death benefits (note 4)...... (124,597) (7,848) (16,165) - (1)
Policy loans (net of repayments)
(note 5)................... (83,407) (259,475) (84,201) (72,651) 4,787
Deductions for surrender charges
(note 2d).................. (96,081) (18,111) (15,174) (4,319) (7)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (427,942) (265,303) (65,212) (50,521) (21,553)
Asset charges (note 3):
MSP contracts ............. (8,596) (5,069) (3,086) (847) (430)
LSFP contracts ............ (3,905) (1,439) (361) (855) (122)
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. (142,334) (1,193,336) 1,883,933 2,025,428 267,545
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 4,379,106 (689,270) 1,588,257 3,332,876 333,987
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... 9,289,108 9,978,378 8,390,121 1,100,662 766,675
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 13,668,214 9,289,108 9,978,378 4,433,538 1,100,662
============== ============== ============== ============== =============
</TABLE>
<TABLE>
<CAPTION>
WPPVenCap WPSmCoGr
------------- ---------------------------------------------
1997 1999 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........ $ 70 - - -
Mortality and expense charges
(note 3)................... (3,334) (114,737) (106,735) (99,826)
-------------- -------------- -------------- --------------
Net investment activity.... (3,264) (114,737) (106,735) (99,826)
-------------- -------------- -------------- --------------
Proceeds from mutual fund
shares sold................ 1,898,871 12,560,036 11,652,539 13,210,500
Cost of mutual funds sold.... (1,856,944) (11,995,881) (11,657,359) (11,590,838)
-------------- -------------- -------------- --------------
Realized gain (loss) on
investments.............. 41,927 564,155 (4,820) 1,619,662
Change in unrealized gain (loss)
on investments............. (1,622) 8,391,845 (287,723) 18,436
-------------- -------------- -------------- --------------
Net gain (loss) on investments 40,305 8,956,000 (292,543) 1,638,098
-------------- -------------- -------------- --------------
Reinvested capital gains..... - 709,970 - -
-------------- -------------- -------------- --------------
Net change in contract
owners' equity resulting
from operations........ 37,041 9,551,233 (399,278) 1,538,272
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received
from contract owners....... 70,984 2,658,532 2,471,813 2,516,266
Transfers between funds ..... 668,066 (248,812) (1,849,405) 4,654,236
Surrenders................... (2,034) (301,023) (200,485) (128,687)
Death benefits (note 4)...... - (60,498) (10,544) -
Policy loans (net of repayments)
(note 5)................... (5,947) (288,744) 19,268 (162,099)
Deductions for surrender charges
(note 2d).................. (273) (45,000) (20,649) (17,254)
Redemptions to pay cost of insurance
charges and administration
charges (notes 2b and 2c).. (897) (902,731) (454,770) (88,146)
Asset charges (note 3):
MSP contracts ............. (237) (9,685) (7,412) (4,835)
LSFP contracts ............ (28) (5,597) (2,105) (566)
-------------- -------------- -------------- --------------
Net equity transactions.. 729,634 796,442 (54,289) 6,768,915
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT OWNERS' EQUITY 766,675 10,347,675 (453,567) 8,307,187
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - 15,178,630 15,632,197 7,325,010
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END OF PERIOD $ 766,675 25,526,305 15,178,630 15,632,197
============== ============== ============== ==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 18
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999, 1998 AND 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLISeparate Account-2 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on May 7, 1987. The Account has been
registered as a unit investment trust under the Investment Company Act
of 1940.
The Company offers Single Premium, Modified Single Premium, Flexible
Premium and Last Survivor Flexible Premium Variable Life Insurance
Policies 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:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Balanced (ACVPBal)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp)
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
<PAGE> 19
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Bond Fund (OppBdFd)
Oppenheimer VAF - Global Securities Fund (OppGlSec)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
Strong Opportunity Fund II, Inc. (StOpp2)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen Life Investment Trust (Van Kampen
LIT);
Van Kampen LIT - Morgan Stanley Real Estate Securities Portfolio
(VKMSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
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 contract expenses (see notes 2 and 3). The accompanying
financial statements include only contract owners' purchase payments
pertaining to the variable portions of their contracts and exclude any
purchase payments for fixed dollar benefits, the latter being included
in the accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
<PAGE> 20
(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.
(f) Reclassifications
Certain prior year amounts have been reclassified to conform with the
current year presentation.
(2) POLICY CHARGES
(a) Deductions from Premiums
For single premium contracts, no deduction is made from any premium at
the time of payment. On multiple payment contracts and flexible premium
contracts, the Company deducts a charge for state premium taxes equal
to 2.5% of all premiums received to cover the payment of these premium
taxes. The Company also deducts a sales load from each premium payment
received not to exceed 3.5% of each premium payment.
On last survivor flexible premium contracts, the Company deducts a
charge for state premium taxes equal to 3.5% of all premiums received
to cover the payment of these premium taxes. The Company also deducts a
sales load from each premium payment received not to exceed 5% of each
premium payment during the first ten years and 1.5% of each premium
payment thereafter.
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).
For last survivor flexible premium contracts, the monthly cost of
insurance is determined in a manner that reflects the anticipated
mortality of the two insureds and the fact that the death benefit is
not payable until the death of the second insured policyholder.
(c) Administrative Charges
An administrative charge is assessed against each contract to recover
policy maintenance, accounting, record keeping and other administrative
expenses and is assessed against each contract by liquidating units.
(Continued)
<PAGE> 21
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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).
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). 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.
For modified single premium contracts, the monthly charge is equal to
an annual rate of .30% multiplied by the policy's cash value. For
policy years 11 and later, this monthly charge is reduced to an annual
rate of 0.15% of the policy's cash value. The monthly charge is subject
to a $10 minimum.
For last survivor flexible premium contracts, the Company deducts a
monthly administrative charge equal to the sum of the policy charge and
the basic coverage charge. For policy years one through ten the policy
charge is $10. Additionally, there is a $0.04 per $1000 basic coverage
charge (not less than $20 or more than $80 per policy). For policy
years eleven and after, the policy charge is $5. Additionally, there is
a $0.02 per $1000 basic coverage charge (not less than $10 or more than
$40 per policy). Additionally, the Company deducts a monthly increase
charge of $2.40 per $1000 applied to any increase in the specified
amount during the first 12 months after the increase becomes effective.
The charge may be raised to $3.60 per $1000 of increase per year at the
Company's discretion.
(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,
declining to 0% after the ninth year.
For modified single premium contracts, the amount charged is based on
the original purchase payment. The charge is 10% in the first year,
declining to 0% in the ninth year.
For last survivor flexible premium contracts, the charge is 100% of the
initial surrender charge, declining to 0% in the fourteenth year if the
average issue age is 74 or less. The charge is 100% of the initial
surrender charge, declining to 0% in the ninth year if the average
issue age is 75 or greater. For last survivor flexible payment
contracts, the initial surrender charge is comprised of two components,
an underwriting surrender charge and a sales surrender charge.
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.
<PAGE> 22
(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
single premium 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 and are
reflected in the table below.
For modified single premium contracts (MSP), the Company deducts an annual
rate of .90% charged against the cash value of the contracts. This charge
is assessed monthly against each contract by liquidating units.
For last survivor flexible premium contracts (LSFP), the Company deducts an
annual rate of .80% in policy years one through ten. This charge is
assessed monthly by liquidating units. In policy years eleven and greater,
the Company deducts an annual rate of .80% if the cash value of the
contract is less than $100,000. If the cash value is greater than or equal
to $100,000, the Company reduces the annual asset fee rate to .30%. This
charge is assessed monthly against each contract by liquidating units.
The following table provides mortality and expense risk charges for all
single premium contracts and multiple payment and flexible payment
contracts for the year ended December 31, 1999:
<TABLE>
<CAPTION>
TOTAL ACVPBal ACVCapAp ACVPincGr ACVPint
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 22,217 126 315 79 360
Single Premium contracts issued
on or after April 16, 1990.... 1,597,906 9,070 22,650 5,653 25,861
Multiple Payment and Flexible
Premium contracts............. 6,040,026 34,284 85,615 21,369 97,752
------------ ------------ ------------ ------------ ------------
Total....................... $ 7,660,149 43,480 108,580 27,101 123,973
============ ============ ============ ============ ============
ACVPValue DrySRGro DryStkix DryCapAp DryGrinc
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 61 333 2,086 166 46
Single Premium contracts issued
on or after April 16, 1990.... 4,379 23,957 150,018 11,975 3,327
Multiple Payment and Flexible
Premium contracts............. 16,553 90,556 567,060 45,265 12,577
------------ ------------ ------------ ------------ ------------
Total....................... $ 20,993 114,846 719,164 57,406 15,950
============ ============ ============ ============ ============
FidVIPEI FidVIPGr FidVIPHI FidVIPOv FidVIPAM
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 2,071 3,322 574 580 784
Single Premium contracts issued
on or after April 16, 1990.... 148,948 238,938 41,267 41,698 56,415
Multiple Payment and Flexible
Premium contracts............. 563,016 903,175 155,987 157,616 213,245
------------ ------------ ------------ ------------ ------------
Total....................... $ 714,035 1,145,435 197,828 199,894 270,444
============ ============ ============ ============ ============
(Continued)
</TABLE>
<PAGE> 23
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
FidVIPCon FidVIPGrOp MSEmMkt NSATCapAp NSATGvtBd
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 1,335 137 9 937 352
Single Premium contracts issued
on or after April 16, 1990.... 96,008 9,823 666 67,386 25,386
Multiple Payment and Flexible
Premium contracts............. 362,905 37,128 2,520 254,746 95,940
------------ ------------ ------------ ------------ ------------
Total....................... $ 460,248 47,088 3,195 323,069 121,678
============ ============ ============ ============ ============
NSATMyMkt NSATSmCapV NSATSmCo NSATTotRe NBAMTGro
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 1,204 37 389 2,247 531
Single Premium contracts issued
on or after April 16, 1990.... 86,597 2,682 27,949 161,641 38,230
Multiple Payment and Flexible
Premium contracts............. 327,332 10,138 105,646 610,999 144,507
------------ ------------ ------------ ------------ ------------
Total....................... $ 415,133 12,857 133,984 774,887 183,268
============ ============ ============ ============ ============
NBAMTGuard NBAMTLMat NBAMTPart OppBdFd OppGlSec
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 37 104 680 266 553
Single Premium contracts issued
on or after April 16, 1990.... 2,667 7,455 48,927 19,098 39,744
Multiple Payment and Flexible
Premium contracts............. 10,083 28,179 184,942 72,189 150,232
------------ ------------ ------------ ------------ ------------
Total....................... $ 12,787 35,738 234,549 91,553 190,529
============ ============ ============ ============ ============
OppGro OppMult StOpp2 StDisc2 StintStk2
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 141 335 821 156 65
Single Premium contracts issued
on or after April 16, 1990.... 10,142 24,110 59,055 11,227 4,687
Multiple Payment and Flexible
Premium contracts............. 38,336 91,134 223,225 42,437 17,716
------------ ------------ ------------ ------------ ------------
Total....................... $ 48,619 115,579 283,101 53,820 22,468
============ ============ ============ ============ ============
VEWrldBd VEWrldEMkt VEWrldHAs VKMSRESec WPintEq
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 74 93 106 128 204
Single Premium contracts issued
on or after April 16, 1990.... 5,340 6,684 7,628 9,180 14,649
Multiple Payment and Flexible
Premium contracts............. 20,187 25,267 28,833 34,702 55,372
------------ ------------ ------------ ------------ ------------
Total....................... $ 25,601 32,044 36,567 44,010 70,225
============ ============ ============ ============ ============
WPPVenCap WPSMCoGr
------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 40 333
Single Premium contracts issued
on or after April 16, 1990.... 2,855 23,934
Multiple Payment and Flexible
Premium contracts............. 10,791 90,470
------------ ------------
Total....................... $ 13,686 114,737
============ ============
</TABLE>
<PAGE> 24
The following table provides mortality and expense risk charges for all
single premium contracts and multiple payment and flexible payment
contracts for the year ended December 31, 1998:
<TABLE>
<CAPTION>
TOTAL ACVPBal ACVCapAp ACVPincGr ACVPint
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 19,963 - 1,274 - -
Single Premium contracts issued
on or after April 16, 1990.... 1,519,080 10,112 21,146 2,536 34,065
Multiple Payment and Flexible
Premium contracts............. 4,699,480 28,860 59,964 5,054 66,239
------------ ------------ ------------ ------------ ------------
Total....................... $ 6,238,523 38,972 82,384 7,590 100,304
============ ============ ============ ============ ============
ACVPValue DrySRGro DryStkix DryCapAp DryGrinc
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ - - 3,655 102 -
Single Premium contracts issued
on or after April 16, 1990.... 4,104 9,572 112,048 10,336 2,255
Multiple Payment and Flexible
Premium contracts............. 15,894 67,383 392,626 16,686 12,787
------------ ------------ ------------ ------------ ------------
Total....................... $ 19,998 76,955 508,329 27,124 15,042
============ ============ ============ ============ ============
FidVIPEI FidVIPGr FidVIPHI FidVIPOv FidVIPAM
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 2,438 2,343 842 1,068 296
Single Premium contracts issued
on or after April 16, 1990.... 194,440 188,365 49,966 53,993 86,061
Multiple Payment and Flexible
Premium contracts............. 418,071 568,902 160,813 112,745 152,850
------------ ------------ ------------ ------------ ------------
Total....................... $ 614,949 759,610 211,621 167,806 239,207
============ ============ ============ ============ ============
FidVIPCon FidVIPGrOp MSEmMkt NSATCapAp NSATGvtBd
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 128 - - 654 305
Single Premium contracts issued
on or after April 16, 1990.... 71,967 10,876 635 43,608 65,744
Multiple Payment and Flexible
Premium contracts............. 244,146 24,873 1,765 213,916 45,233
------------ ------------ ------------ ------------ ------------
Total....................... $ 316,241 35,749 2,400 258,178 111,282
============ ============ ============ ============ ============
NSATMyMkt NSATSmCapV NSATSmCo NSATTotRe NBAMTGro
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 1,358 - - 1,584 1,581
Single Premium contracts issued
on or after April 16, 1990.... 137,439 3,094 13,672 58,566 43,543
Multiple Payment and Flexible
Premium contracts............. 276,180 414 101,912 613,346 108,763
------------ ------------ ------------ ------------ ------------
Total....................... $ 414,977 3,508 115,584 673,496 153,887
============ ============ ============ ============ ============
NBAMTGuard NBAMTLMat NBAMTPart OppBdFd OppGlSec
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ - 930 - - -
Single Premium contracts issued
on or after April 16, 1990.... 553 14,562 50,988 20,073 20,102
Multiple Payment and Flexible
Premium contracts............. 4,227 27,237 203,440 71,491 127,490
------------ ------------ ------------ ------------ ------------
Total....................... $ 4,780 42,729 254,428 91,564 147,592
============ ============ ============ ============ ============
(Continued)
</TABLE>
<PAGE> 25
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
OppGro OppMult StOpp2 StDisc2 StintStk2
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ - - 120 - -
Single Premium contracts issued
on or after April 16, 1990.... 4,182 31,490 41,028 13,873 4,013
Multiple Payment and Flexible
Premium contracts............. 22,064 73,481 179,612 44,277 11,015
------------ ------------ ------------ ------------ ------------
Total....................... $ 26,246 104,971 220,760 58,150 15,028
============ ============ ============ ============ ============
VEWrldBd VEWrldEMkt VEWrldHAs VKMSRESec WPintEq
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 39 - 486 575 185
Single Premium contracts issued
on or after April 16, 1990.... 11,374 1,792 17,613 13,117 13,450
Multiple Payment and Flexible
Premium contracts............. 15,186 12,394 20,246 38,337 59,360
------------ ------------ ------------ ------------ ------------
Total....................... $ 26,599 14,186 38,345 52,029 72,995
============ ============ ============ ============ ============
WPPVenCap WPSMCoGr
------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ - -
Single Premium contracts issued
on or after April 16, 1990.... 3,460 29,267
Multiple Payment and Flexible
Premium contracts............. 2,733 77,468
------------ ------------
Total....................... $ 6,193 106,735
============ ============
The following table provides mortality and expense risk charges for all
single premium contracts and multiple payment and flexible payment
contracts for the year ended December 31, 1997:
TOTAL ACVPBal ACVCapAp ACVPint ACVPValue
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 17,545 105 396 165 28
Single Premium contracts issued
on or after April 16, 1990.... 1,003,388 5,976 22,644 9,420 1,620
Multiple Payment and Flexible
Premium contracts............. 3,622,060 21,573 81,741 34,004 5,850
------------ ------------ ------------ ------------ ------------
Total....................... $ 4,642,993 27,654 104,781 43,589 7,498
============ ============ ============ ============ ============
DryCapAp DrySRGro DryStkix DryGrinc FidVIPEI
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 7 167 977 20 1,882
Single Premium contracts issued
on or after April 16, 1990.... 406 9,552 55,889 1,130 107,642
Multiple Payment and Flexible
Premium contracts............. 1,464 34,482 201,752 4,080 388,570
------------ ------------ ------------ ------------ ------------
Total....................... $ 1,877 44,201 258,618 5,230 498,094
============ ============ ============ ============ ============
</TABLE>
<PAGE> 26
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI FidVIPOv FidVIPAM FidVIPCon
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Single Premium contracts Issued
prior to April 16, 1990....... $ 2,117 694 580 831 698
Single Premium contracts issued
on or after April 16, 1990.... 121,090 39,672 33,168 47,531 39,906
Multiple Payment and Flexible
Premium contracts............. 437,115 143,207 119,729 171,578 144,055
------------ ------------ ------------ ------------ ------------
Total....................... $ 560,322 183,573 153,477 219,940 184,659
============ ============ ============ ============ ============
FidVIPGrOp MSEmMkt NSATCapAp NSATGvtBd NSATMyMkt
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 18 4 493 258 1,358
Single Premium contracts issued
on or after April 16, 1990.... 1,042 237 28,173 14,750 77,730
Multiple Payment and Flexible
Premium contracts............. 3,762 854 101,699 53,274 280,577
------------ ------------ ------------ ------------ ------------
Total....................... $ 4,822 1,095 130,365 68,282 359,665
============ ============ ============ ============ ============
NSATSmCo NSATTotRe NBAMTGro NBAMTLMat NBAMTPart
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 951 1,294 497 142 647
Single Premium contracts issued
on or after April 16, 1990.... 54,364 74,010 28,445 8,141 37,005
Multiple Payment and Flexible
Premium contracts............. 196,244 267,162 102,680 29,386 133,581
------------ ------------ ------------ ------------ ------------
Total....................... $ 251,559 342,466 131,622 37,669 171,233
============ ============ ============ ============ ============
OppBdFd OppGlSec OppGro OppMult StOpp2
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 243 435 10 334 700
Single Premium contracts issued
on or after April 16, 1990.... 13,902 24,871 582 19,097 40,024
Multiple Payment and Flexible
Premium contracts............. 50,183 89,781 2,099 68,938 144,481
------------ ------------ ------------ ------------ ------------
Total....................... $ 64,328 115,087 2,691 88,369 185,205
============ ============ ============ ============ ============
StDisc2 StintStk2 VEWrldBd VEWrldEMkt VEWrldHAs
------------ ------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 235 63 79 39 208
Single Premium contracts issued
on or after April 16, 1990.... 13,434 3,586 4,494 2,258 11,872
Multiple Payment and Flexible
Premium contracts............. 48,493 12,943 16,220 8,152 42,854
------------ ------------ ------------ ------------ ------------
Total....................... $ 62,162 16,592 20,793 10,449 54,934
============ ============ ============ ============ ============
VKMSRESec WPintEq WPPVenCap WPSMCoGr
------------ ------------ ------------ ------------
Single Premium contracts Issued
prior to April 16, 1990....... $ 178 302 13 377
Single Premium contracts issued
on or after April 16, 1990.... 10,170 17,261 721 21,573
Multiple Payment and Flexible
Premium contracts............. 36,711 62,310 2,600 77,876
------------ ------------ ------------ ------------
Total....................... $ 47,059 79,873 3,334 99,826
============ ============ ============ ============
(Continued)
</TABLE>
<PAGE> 27
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(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 and modified 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,
flexible premium, modified single and last survivor 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> 28
(7) Components of contract owners' equity
The following is a summary of contract owners' equity at December 31, 1999,
for each product in the accumulation phase.
Contract owners' equity represented by:
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
--------- ----------- ---------
<S> <C> <C> <C> <C>
Single Premium contracts issued prior to April 16, 1990:
American Century VP - American Century
VP Capital Appreciation 6,108 $ 36.406768 $ 222,373 63%
American Century VP -
American Century VP International 2,459 26.614141 65,444 62%
The Dreyfus Socially Responsible
Growth Fund, Inc. 1,699 36.209915 61,521 29%
Dreyfus Stock Index Fund 16,208 33.296352 539,667 19%
Dreyfus VIF -
Capital Appreciation Portfolio 868 14.538186 12,619 10%
Fidelity VIP - Equity-Income Portfolio 5,082 44.120448 224,220 5%
Fidelity VIP - Growth Portfolio 3,009 79.099308 238,010 36%
Fidelity VIP - High Income Portfolio 2,115 28.983767 61,301 7%
Fidelity VIP - Overseas Portfolio 4,084 34.268141 139,951 41%
Fidelity VIP-II - Asset Manager Portfolio 1,185 30.762893 36,454 10%
Fidelity VIP-II - Contrafund Portfolio 677 25.968332 17,581 23%
Fidelity VIP-III -
Growth Opportunities Portfolio 1,477 13.960952 20,620 3%
Morgan Stanley -
Emerging Markets Debt Portfolio 1,518 8.934183 13,562 28%
Nationwide SAT -
Capital Appreciation Fund 1,979 32.388538 64,097 3%
Nationwide SAT -
Government Bond Fund 1,747 22.492327 39,294 (3)%
Nationwide SAT - Money Market Fund 16,350 16.794246 274,586 4%
Nationwide SAT - Small Cap Value Fund 2,201 10.825871 23,828 27%
Nationwide SAT - Small Company Fund 913 23.047417 21,042 43%
Nationwide SAT - Total Return Fund 4,738 42.439374 201,078 6%
Neuberger & Berman AMT -
Growth Portfolio 3,041 54.109841 164,548 49%
Neuberger & Berman AMT -
Guardian Portfolio 561 10.593122 5,943 14%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio 5,986 18.060558 108,111 1%
Strong Opportunity Fund II, Inc. 450 40.018322 18,008 34%
Van Eck WIT - Worldwide Bond Fund 1,325 15.185599 20,121 (9)%
Van Eck WIT -
Worldwide Emerging Markets Fund 6,267 11.423096 71,589 98%
Van Eck WIT -
Worldwide Hard Assets Fund 10 11.984540 120 20%
(Continued)
</TABLE>
<PAGE> 29
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
---------- ----------- ----------
<S> <C> <C> <C> <C>
Single Premium contracts issued on or after April 16, 1990:
American Century VP -
American Century VP Balanced 36,043 20.298769 731,629 9%
American Century VP - American Century
VP Capital Appreciation 134,822 24.209204 3,263,933 62%
American Century VP - American Century
VP Income & Growth 53,220 12.612413 671,233 16%
American Century VP -
American Century VP International 162,982 26.114709 4,256,228 62%
American Century VP -
American Century VP Value 26,781 12.781220 342,294 (2)%
The Dreyfus Socially Responsible
Growth Fund, Inc. 31,488 35.428815 1,115,583 28%
Dreyfus Stock Index Fund 315,343 32.576553 10,272,788 19%
Dreyfus VIF -
Capital Appreciation Portfolio 81,279 14.413356 1,171,503 10%
Dreyfus VIF -
Growth and Income Portfolio 9,941 14.588194 145,021 15%
Fidelity VIP - Equity-Income Portfolio 395,355 35.712129 14,118,969 5%
Fidelity VIP - Growth Portfolio 355,884 54.130524 19,264,187 36%
Fidelity VIP - High Income Portfolio 105,520 29.506936 3,113,572 7%
Fidelity VIP - Overseas Portfolio 213,601 24.423718 5,216,931 41%
Fidelity VIP-II - Asset Manager Portfolio 211,956 29.730624 6,301,584 10%
Fidelity VIP-II - Contrafund Portfolio 290,335 25.563198 7,421,891 23%
Fidelity VIP-III -
Growth Opportunities Portfolio 21,868 13.841079 302,677 3%
Morgan Stanley -
Emerging Markets Debt Portfolio 6,540 8.857388 57,927 28%
Nationwide SAT -
Capital Appreciation Fund 62,075 31.526314 1,956,996 3%
Nationwide SAT -
Government Bond Fund 240,383 18.452016 4,435,551 (4)%
Nationwide SAT - Money Market Fund 1,082,615 13.940225 15,091,897 3%
Nationwide SAT - Small Cap Value Fund 23,585 10.762831 253,841 26%
Nationwide SAT - Small Company Fund 66,890 22.712185 1,519,218 42%
Nationwide SAT - Total Return Fund 115,322 36.208762 4,175,667 6%
Neuberger &Berman AMT -
Growth Portfolio 97,552 37.771042 3,684,641 48%
Neuberger & Berman AMT -
Guardian Portfolio 2,945 10.531438 31,015 13%
Neuberger &Berman AMT -
Limited Maturity Bond Portfolio 58,827 15.321478 901,317 0%
</TABLE>
<PAGE> 30
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
--------- ----------- --------
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Partners Portfolio 69,118 24.377639 1,684,934 6%
Oppenheimer VAF - Bond Fund 70,351 18.355321 1,291,315 (3)%
Oppenheimer VAF -
Global Securities Fund 99,036 28.256521 2,798,413 56%
Oppenheimer VAF - Growth Fund 60,384 17.847892 1,077,727 40%
Oppenheimer VAF -
Multiple Strategies Fund 106,259 25.139330 2,671,280 10%
Strong Opportunity Fund II, Inc. 102,073 38.955700 3,976,325 33%
Strong VIF - Strong Discovery Fund II 32,996 19.481837 642,823 4%
Strong VIF -
Strong International Stock Fund II 142,490 16.519505 2,353,864 85%
Van Eck WIT - Worldwide Bond Fund 34,273 14.675886 502,987 (9)%
Van Eck WIT -
Worldwide Emerging Markets Fund 123,914 11.302972 1,400,596 98%
Van Eck WIT -
Worldwide Hard Assets Fund 71,735 13.098076 939,590 19%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio 39,678 14.898574 591,146 (5)%
Warburg Pincus Trust -
International Equity Portfolio 81,838 17.586224 1,439,221 51%
Warburg Pincus Trust -
Post Venture Capital Portfolio 88,739 19.293144 1,712,054 61%
Warburg Pincus Trust -
Small Company Growth Portfolio 114,996 25.533360 2,936,234 67%
Multiple Payment contracts and
Flexible Premium contracts:
American Century VP -
American Century VP Balanced 222,611 21.094348 4,695,834 9%
American Century VP - American Century
VP Capital Appreciation 643,372 23.303640 14,992,909 63%
American Century VP - American Century
VP Income & Growth 235,223 12.717991 2,991,564 17%
American Century VP -
American Century VP International 649,836 26.831062 17,435,790 63%
American Century VP -
American Century VP Value 156,791 12.975752 2,034,481 (2)%
The Dreyfus Socially Responsible
Growth Fund, Inc. 450,901 36.549891 16,480,382 29%
Dreyfus Stock Index Fund 2,592,791 33.609618 87,142,715 20%
Dreyfus VIF -
Capital Appreciation Portfolio 404,377 14.591996 5,900,668 11%
Dreyfus VIF -
Growth and Income Portfolio 138,815 14.810164 2,055,873 16%
</TABLE>
<PAGE> 31
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
--------- ----------- ----------
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio 1,750,754 37.388084 65,457,338 5%
Fidelity VIP - Growth Portfolio 2,613,902 55.899014 146,114,544 36%
Fidelity VIP - High Income Portfolio 672,537 28.039263 18,857,442 7%
Fidelity VIP - Overseas Portfolio 863,446 26.840170 23,175,037 41%
Fidelity VIP-II - Asset Manager Portfolio 917,098 27.355020 25,087,234 10%
Fidelity VIP-II - Contrafund Portfolio 2,151,780 26.143948 56,256,024 23%
Fidelity VIP-III -
Growth Opportunities Portfolio 385,372 14.012663 5,400,088 3%
Morgan Stanley -
Emerging Markets Debt Portfolio 43,728 8.967304 392,122 28%
Nationwide SAT -
Capital Appreciation Fund 1,104,444 32.761545 36,183,292 3%
Nationwide SAT -
Government Bond Fund 402,906 17.516435 7,057,477 (3)%
Nationwide SAT - Money Market Fund 2,312,418 13.853330 32,034,690 4%
Nationwide SAT - Small Cap Value Fund 165,130 10.852975 1,792,152 27%
Nationwide SAT - Small Company Fund 907,754 23.192622 21,053,195 43%
Nationwide SAT - Total Return Fund 2,622,351 35.085217 92,005,754 6%
Neuberger & Berman AMT -
Growth Portfolio 660,524 37.818375 24,979,944 49%
Neuberger & Berman AMT -
Guardian Portfolio 181,217 10.619652 1,924,461 14%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio 203,409 14.959827 3,042,963 1%
Neuberger & Berman AMT -
Partners Portfolio 1,008,241 25.046437 25,252,845 7%
Oppenheimer VAF - Bond Fund 520,266 17.686402 9,201,634 (2)%
Oppenheimer VAF -
Global Securities Fund 1,018,848 29.152831 29,702,304 57%
Oppenheimer VAF - Growth Fund 535,283 18.069110 9,672,087 41%
Oppenheimer VAF -
Multiple Strategies Fund 437,927 25.171538 11,023,296 11%
Strong Opportunity Fund II, Inc. 898,106 40.478200 36,353,714 34%
Strong VIF - Strong Discovery Fund II 296,260 20.243703 5,997,399 4%
Strong VIF -
Strong International Stock Fund II 219,407 16.868902 3,701,155 86%
Van Eck WIT - Worldwide Bond Fund 143,676 14.003753 2,012,003 (9)%
Van Eck WIT -
Worldwide Emerging Markets Fund 576,742 11.474995 6,618,112 99%
Van Eck WIT -
Worldwide Hard Assets Fund 206,979 14.660562 3,034,428 20%
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
--------- ----------- ----------
<S> <C> <C> <C> <C>
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio 246,788 15.237208 3,760,360 (4)%
Warburg Pincus Trust -
International Equity Portfolio 555,966 17.985801 9,999,494 52%
Warburg Pincus Trust -
Post Venture Capital Portfolio 123,907 19.586645 2,426,922 62%
Warburg Pincus Trust -
Small Company Growth Portfolio 754,487 26.113570 19,702,349 68%
Modified Single Premium contracts and
Last Survivor Flexible Premium contracts:
American Century VP -
American Century VP Balanced 47,439 16.129489 765,167 10%
American Century VP - American Century
VP Capital Appreciation 67,671 14.200282 960,947 65%
American Century VP - American Century
VP Income & Growth 90,023 12.888778 1,160,286 18%
American Century VP -
American Century VP International 120,278 24.899615 2,994,876 64%
American Century VP -
American Century VP Value 42,323 13.293167 562,607 (1)%
The Dreyfus Socially Responsible
Growth Fund, Inc. 72,077 24.166067 1,741,818 30%
Dreyfus Stock Index Fund 619,532 23.560156 14,596,271 21%
Dreyfus VIF -
Capital Appreciation Portfolio 54,118 14.882433 805,408 11%
Dreyfus VIF -
Growth and Income Portfolio 42,510 15.172345 644,976 17%
Fidelity VIP - Equity-Income Portfolio 442,948 16.406894 7,267,401 6%
Fidelity VIP - Growth Portfolio 462,592 24.728511 11,439,211 37%
Fidelity VIP - High Income Portfolio 301,341 13.186454 3,973,619 8%
Fidelity VIP - Overseas Portfolio 121,065 19.137888 2,316,928 43%
Fidelity VIP-II - Asset Manager Portfolio 98,987 16.996678 1,682,450 11%
Fidelity VIP-II - Contrafund Portfolio 334,798 22.555449 7,551,519 24%
Fidelity VIP-III -
Growth Opportunities Portfolio 67,209 14.291602 960,524 4%
Morgan Stanley -
Emerging Markets Debt Portfolio 25,999 9.146001 237,787 29%
Nationwide SAT -
Capital Appreciation Fund 234,699 21.161942 4,966,687 4%
Nationwide SAT -
Government Bond Fund 146,891 12.455412 1,829,588 (2)%
Nationwide SAT - Money Market Fund 710,620 12.011954 8,535,935 5%
Nationwide SAT - Small Cap Value Fund 86,677 10.998838 953,346 28%
(Continued)
</TABLE>
<PAGE> 33
NATIONWIDE VLI SEPARATE ACCOUNT-2
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
--------- ----------- -------
<S> <C> <C> <C> <C>
Nationwide SAT - Small Company Fund 210,131 17.966399 3,775,297 44%
Nationwide SAT - Total Return Fund 408,867 18.704720 7,647,743 7%
Neuberger & Berman AMT -
Growth Portfolio 101,415 22.122463 2,243,550 50%
Neuberger & Berman AMT -
Guardian Portfolio 28,718 10.762335 309,073 15%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio 73,941 11.847132 875,989 1%
Neuberger & Berman AMT -
Partners Portfolio 229,651 16.853460 3,870,414 7%
Oppenheimer VAF - Bond Fund 101,438 12.232154 1,240,805 (2)%
Oppenheimer VAF -
Global Securities Fund 94,622 23.984739 2,269,484 58%
Oppenheimer VAF - Growth Fund 83,414 18.428739 1,537,215 42%
Oppenheimer VAF -
Multiple Strategies Fund 80,822 15.287602 1,235,575 12%
Strong Opportunity Fund II, Inc. 85,543 20.690172 1,769,899 35%
Strong VIF - Strong Discovery Fund II. 19,763 12.410693 245,273 5%
Strong VIF -
Strong International Stock Fund II 91,170 15.499580 1,413,097 87%
Van Eck WIT - Worldwide Bond Fund 16,613 11.191476 185,924 (8)%
Van Eck WIT -
Worldwide Emerging Markets Fund 175,122 11.755719 2,058,685 100%
Van Eck WIT -
Worldwide Hard Assets Fund 38,783 8.258894 320,305 21%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio 53,125 14.184757 753,565 (3)%
Warburg Pincus Trust -
International Equity Portfolio 142,042 15.696053 2,229,499 53%
Warburg Pincus Trust -
Post Venture Capital Portfolio 14,680 20.065541 294,562 63%
Warburg Pincus Trust -
Small Company Growth Portfolio 154,684 18.668523 2,887,722 69%
======= ========= --------------
$1,144,615,392
==============
</TABLE>
* The annual return does not include contract charges satisfied by
surrendering units.
<PAGE> 76
<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> 77
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment to Form S-6 Registration Statement comprises the
following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 125 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 the
authorizing the establishment of the Registrant, Nationwide VLI Separate Account-2, and hereby incorporated
adopted herein by reference.
3. Distribution Contracts Included with Post-Effective Amendment No. 19 and is hereby
incorporated herein by reference.
4. Form of Security Included with Post-Effective Amendment No. 3 and is 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-2, and hereby incorporated herein
by reference.
6. Application form of Security Included with Post-Effective Amendment No. 3 and is hereby
incorporated herein by reference.
7. Opinion of Counsel Included with Post-Effective Amendment No. 3 and is hereby
incorporated herein by reference.
</TABLE>
<PAGE> 78
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 "Act"). The Registrant and Nationwide
elect to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the Act with
respect to the policies described in the prospectus. The policies have
been designed in a way as to qualify for the exemptive relief from
various provisions of the Act afforded by Rule 6e-3(T).
(b) Paragraph (b)(13)(iii)(F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by Nationwide under the policies. Nationwide represents that the
risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by Nationwide, and will be
made available to the Securities and Exchange Commission ("SEC") on
request.
(c) Nationwide has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit
the separate account and the contractholders and will keep and make
available to the SEC on request a memorandum setting forth the basis for
this representation.
(d) Nationwide represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of the company,
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> 79
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account-2:
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> 80
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
NATIONWIDE VLI SEPARATE ACCOUNT-2, certifies that it meets the requirements of
Securities Act Rule 485(b) for effectiveness of this Post-Effective Amendment-20
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.
NATIONWIDE VLI SEPARATE ACCOUNT-2
---------------------------------
(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
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in the capacities
indicated on the 20th day of September, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
/s/ LEWIS J. ALPHIN Director
-------------------------
Lewis J. Alphin
/s/ A. I. BELL Director
-------------------------
A. I. Bell
/s/ NANCY C. BREIT Director
-------------------------
Nancy C. Breit
/s/ KENNETH D. DAVIS Director
-------------------------
Kenneth D. Davis
/s/ KEITH W. ECKEL Director
-------------------------
Keith W. Eckel
/s/ WILLARD J. ENGEL Director
-------------------------
Willard J. Engel
/s/ FRED C. FINNEY Director
-------------------------
Fred C. Finney
/s/ JOSEPH J. GASPER President and Chief Operating
------------------------- Officer and Director
Joseph J. Gasper
/s/ W.G. JURGENSEN Chief Executive Officer Elect
------------------------- and Director
W.G. Jurgensen
/s/ DIMON R. MCFERSON Chairman and Chief Executive
------------------------- Officer and Director
Dimon R. McFerson
/s/ DAVID O. MILLER Chairman of the Board and
------------------------- Director
David O. Miller
/s/ YVONNE L. MONTGOMERY Director
-------------------------
Yvonne L. Montgomery
/s/ ROBERT A. OAKLEY Executive Vice President and Chief
------------------------- Financial Officer
Robert A. Oakley
/s/ RALPH M. PAIGE Director
-------------------------
Ralph M. Paige
/s/ JAMES F. PATTERSON Director
-------------------------
James F. Patterson
/s/ ARDEN L. SHISLER Director By /s/ STEVEN SAVINI
------------------------- ---------------------------
Arden L. Shisler Steven Savini
Attorney-in-Fact
/s/ ROBERT L. STEWART Director
-------------------------
Robert L. Stewart
</TABLE>
