<PAGE> 1
Registration Statement No. 33-35783
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 12
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 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: Multiple Payment 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
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
N-8B-2 ITEM CAPTION IN PROSPECTUS
<S> <C>
37.....................................................................Not Applicable
38.....................................................................Distribution of The Policies
39.....................................................................Distribution of The Policies
40.....................................................................Not Applicable
41(a)..................................................................Distribution of The Policies
42.....................................................................Not Applicable
43.....................................................................Not Applicable
44.....................................................................How The Cash Value Varies
45.....................................................................Not Applicable
46.....................................................................How The Cash Value Varies
47.....................................................................Not Applicable
48.....................................................................Custodian of Assets
49.....................................................................Not Applicable
50.....................................................................Not Applicable
51.....................................................................Summary of The Policies;
Information About The Policies
52.....................................................................Substitution of Securities
53.....................................................................Taxation of The Company
54.....................................................................Not Applicable
55.....................................................................Not Applicable
56.....................................................................Not Applicable
57.....................................................................Not Applicable
58.....................................................................Not Applicable
59.....................................................................Financial Statements
</TABLE>
<PAGE> 4
SUPPLEMENT DATED SEPTEMBER 20, 2000, TO
PROSPECTUS DATED MAY 1, 2000, FOR
MULTIPLE PAYMENT 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 FUNDS") OF THE FOLLOWING
TABLE WITH SHARES OF THE UNDERLYING MUTUAL FUNDS IN COLUMN B ("REPLACEMENT
FUNDS"). 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.
Column A Column B
Existing Fund Replacement Fund
Strong Variable Insurance Funds, Inc. - Strong Opportunity Fund II, Inc.
Strong Discovery Fund II, Inc.
2. THE "SURRENDER (REDEMPTION)" PROVISION ON PAGE 15 OF YOUR PROSPECTUS IS
AMENDED TO INCLUDE THE FOLLOWING:
Nationwide is required by state law to reserve the right to postpone
payment of assets in the fixed account for a period of up to six months
from the date of the surrender request.
3. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 40 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.
VLOB- 0017-7
<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.
4. EFFECTIVE OCTOBER 2, 2000, PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE
THE FOLLOWING UNDERLYING MUTUAL FUNDS:
NATIONWIDE SEPARATE ACCOUNT TRUST
- Gartmore NSAT Emerging Markets Fund
- Gartmore NSAT Global Technology and Communications Fund
- Gartmore NSAT International Growth Fund
- Turner NSAT Growth Focus Fund
5. EFFECTIVE OCTOBER 2, 2000, THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES"
TABLE ON PAGE 13 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>
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund Expenses
<S> <C> <C> <C> <C>
NSAT - Gartmore NSAT Emerging Markets Fund 0.87% 0.88% 0.00% 1.75%
NSAT - Gartmore NSAT Global Technology and 0.62% 0.73% 0.00% 1.35%
Communications Fund
NSAT - Gartmore NSAT International Growth 0.72% 0.88% 0.00% 1.60%
Fund
NSAT - Nationwide Small Cap Value Fund 0.88% 0.37% 0.00% 1.25%
NSAT - Turner NSAT Growth Focus Fund 0.59% 0.76% 0.00% 1.35%
</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.
<PAGE> 6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets, before expense
reimbursement)
<TABLE>
<CAPTION>
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund Expenses
<S> <C> <C> <C> <C>
NSAT - Gartmore NSAT Emerging Markets Fund 1.15% 0.88% 0.00% 2.03%
NSAT - Gartmore NSAT Global Technology and 0.98% 0.73% 0.00% 1.71%
Communications Fund
NSAT - Gartmore NSAT International Growth 1.00% 0.88% 0.00% 1.88%
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>
6. EFFECTIVE OCTOBER 2, 2000, "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS" ON PAGE 40 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> 7
NATIONWIDE LIFE INSURANCE COMPANY
Multiple Payment 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:
- American Century VP Balanced
- American Century VP Income & Growth
FIDELITY VARIABLE INSURANCE PRODUCTS FUND (VIP):
- VIP Equity-Income Portfolio
- VIP Growth Portfolio
- VIP High Income Portfolio*
- VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II (VIP II):
- VIP II Asset Manager Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST (NSAT):
- Capital Appreciation Fund
- Government Bond Fund
- Money Market Fund
- Total Return Fund
- Nationwide Small Cap Value Fund (subadviser: The Dreyfus Corporation)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST:
- AMT Growth Portfolio
- AMT Guardian Portfolio
- AMT Limited Maturity Bond Portfolio
OPPENHEIMER VARIABLE ACCOUNTS FUNDS:
- Oppenheimer Bond Fund/VA
- Oppenheimer Multiple Strategies Fund/VA
STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG SPECIAL FUND II, INC.)
VAN ECK WORLDWIDE INSURANCE TRUST:
- Worldwide Bond Fund
- Worldwide Hard Assets Fund
Not available for policies issued on or after September 27, 1999:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC.
- American Century VP Capital Appreciation
STRONG VARIABLE INSURANCE FUNDS, INC.
- Strong Discovery Fund II, Inc.
*The VIP High Income Portfolio may invest in lower quality debt securities
commonly call junk bonds.
For general information or to obtain FREE copies of the:
- prospectus, annual report or semi-annual report for any underlying mutual
fund; and
- 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 product and other Best of America products can be found
at:
www.bestofamerica.com
1
<PAGE> 8
THIS POLICY IS NOT:
- A BANK DEPOSIT;
- ENDORSED BY A BANK OR GOVERNMENT AGENCY;
- FEDERALLY INSURED; OR
- AVAILABLE IN EVERY STATE.
The life insurance policies offered by this prospectus are multiple payment
variable life insurance policies. A cash surrender value may be offered if the
policy is terminated during the lifetime of the insured.
The purpose of this policy is to provide life insurance protection for the
beneficiary named in the policy. 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 (the "variable account") or
the fixed account, depending on how premium payments are invested.
Investors assume certain risks when investing in the policies, including the
risk of losing money.
Nationwide guarantees the death benefit 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. During the first five
policy years, the total premiums less any policy indebtedness must be greater
than or equal to the minimum premium requirement in order to keep the policy in
force.
Benefits described in this prospectus may not be available in every jurisdiction
- refer to your policy for specific benefit information.
THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION WHERE SUCH OFFERING MAY
NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 9
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 LEVEL PREMIUM- The level annual premiums required to mature the policy
under guaranteed mortality and expense charges with an interest rate of 4%. It
is calculated pursuant to the Internal Revenue Code.
GUIDELINE SINGLE PREMIUM- The single premium amount required to mature the
policy under guaranteed mortality and expense charges, and an interest rate of
6%. It is calculated pursuant to the Internal Revenue Code.
MATURITY DATE- The policy anniversary on or next following the insured's 95th
birthday.
MINIMUM PREMIUM- The Minimum Premium is shown on the policy data page. It is
used to measure the total amount that must be paid during the first five Policy
Years to continue the Policy in force.
MONTHLY ANNIVERSARY DAY- The same day as the Policy Date for each succeeding
month.
NATIONWIDE- Nationwide Life Insurance Company.
NET AMOUNT AT RISK- Net amount at risk is the death benefit minus the cash
value. On a monthly anniversary day, the net amount at risk is the death benefit
minus the cash value prior to subtraction of the base policy cost of insurance
charge.
NET PREMIUMS- Net premiums are equal to the actual premiums minus the percent of
premium charges. The percent of premium charges are shown on the policy data
page.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units are separately maintained.
UNSCHEDULED PREMIUM- Additional premium payments which may be allowed under
certain conditions.
VALUATION PERIOD- Each day the New York Stock Exchange is open.
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.
3
<PAGE> 10
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.........................3
SUMMARY OF POLICY EXPENSES........................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES............7
SYNOPSIS OF THE POLICIES..........................9
NATIONWIDE LIFE INSURANCE COMPANY.................9
NATIONWIDE INVESTMENT SERVICES
CORPORATION.......................................9
INVESTING IN THE POLICY...........................9
The Variable Account and Underlying
Mutual Funds
The Fixed Account
INFORMATION ABOUT THE POLICIES...................11
Minimum Requirements for Policy Issuance
Premium Payments
Pricing
POLICY CHARGES...................................12
Sales Load
Tax Expense Charge
Surrender Charges
Monthly Cost of Insurance
Monthly Administrative Charge
Mortality and Expense Risk Charge
Income Tax
SURRENDERING THE POLICY FOR CASH.................15
Surrender (Redemption)
Cash Surrender Value
Partial Surrenders
Income Tax Withholding
VARIATION IN CASH VALUE..........................16
POLICY PROVISIONS................................16
Policy Owner
Beneficiary
Changes in Existing Insurance Coverage
OPERATION OF THE POLICY..........................17
Allocation of Net Premium and Cash Value
How the Investment Experience is Determined
Net Investment Factor
Determining the Cash Value
Transfers
RIGHT TO REVOKE..................................19
POLICY LOANS.....................................19
Taking a Policy Loan
Effect on Investment Performance
Interest
Effect on Death Benefit and Cash Value
Repayment
ASSIGNMENT.......................................20
POLICY OWNER SERVICES............................20
Dollar Cost Averaging
DEATH BENEFIT INFORMATION........................21
Calculation of the Death Benefit
Changes in the Death Benefit Option
Proceeds Payable on Death
Incontestability
Error in Age or Sex
Suicide
Maturity Proceeds
EXCHANGE RIGHTS..................................23
GRACE PERIOD ....................................24
First Five Policy Years
Policy Years Six and After
All Policy Years
Reinstatement
TAX MATTERS......................................25
Policy Proceeds
Withholding
Federal Estate and Generation-Skipping
Transfers Taxes
Non-Resident Aliens
Taxation of Nationwide
Tax Changes
LEGAL CONSIDERATIONS.............................28
STATE REGULATION.................................28
REPORTS TO POLICY OWNERS.........................28
ADVERTISING......................................28
LEGAL PROCEEDINGS................................29
EXPERTS..........................................29
REGISTRATION STATEMENTS..........................29
DISTRIBUTION OF THE POLICIES.....................30
ADDITIONAL INFORMATION ABOUT
NATIONWIDE..................................32
4
<PAGE> 11
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS.......................................40
APPENDIX B: ILLUSTRATION OF SURRENDER CHARGES....45
APPENDIX C: ILLUSTRATIONS OF CASH VALUES, CASH
SURRENDER VALUES, AND DEATH BENEFITS........47
5
<PAGE> 12
SUMMARY OF POLICY EXPENSES
Nationwide deducts certain charges from the policy. Charges are made for
administrative and sales expenses, tax expenses, providing life insurance
protection and assuming the mortality and expense risks.
Nationwide deducts a sales load and tax expense charge from premium payments.
The sales load is guaranteed never to exceed 3.5% of each premium payment. The
tax expense charge is 2.5% of premiums for all states (see "Sales Load" and "Tax
Expense Charge").
Nationwide deducts the following charges from the cash value of the policy:
- monthly cost of insurance
- monthly cost of any additional benefits provided by riders to the policy
- administrative expense charge(1)
- mortality and expense risk charge
For policies which are surrendered during the first nine policy years,
Nationwide deducts a surrender charge (see "Surrender Charges").
Nationwide deducts a mortality and expense risk charge from the sub-accounts of
the variable account.
The mortality and expense risk charge is deducted daily and is equal to an
annual rate of 0.80% of the daily net assets of the variable account.
For more information about any policy charge, see "Policy Charges" in this
prospectus.
(1) Currently, the administrative expense charge is $5 per month. It is
guaranteed not to exceed $7.50 per month.
6
<PAGE> 13
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund net assets, after expense
reimbursement)
<TABLE>
<CAPTION>
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - 0.90% 0.00% 0.00% 0.90%
American Century VP Balanced
American Century Variable Portfolios, Inc. - 1.00% 0.00% 0.00% 1.00%
American Century VP Capital Appreciation
American Century Variable Portfolios, Inc. - 0.70% 0.00% 0.00% 0.70%
American Century VP Income & Growth
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%
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 Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
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 Bond 0.65% 0.11% 0.00% 0.76%
Portfolio
Oppenheimer Bond Fund/VA 0.72% 0.01% 0.00% 0.73%
Oppenheimer Multiple Strategies Fund/VA 0.72% 0.01% 0.00% 0.73%
Strong Variable Insurance Funds, Inc., Strong 1.00% 0.14% 0.00% 1.14%
Discovery Fund II, Inc.
Strong Opportunity Fund II, Inc. (formerly, 1.00% 0.14% 0.00% 1.14%
Strong Special Fund II, Inc.)
Van Eck Worldwide Insurance Trust -Worldwide 1.00% 0.22% 0.00% 1.22%
Bond Fund
Van Eck Worldwide Insurance Trust-Worldwide Hard 1.00% 0.34% 0.00% 1.34%
Assets 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.
7
<PAGE> 14
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 Total Underlying
Fees Expenses 12b-1 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% 0.14% 0.00% 0.87%
Fidelity VIP II Asset Manager Portfolio 0.53% 0.10% 0.00% 0.63%
NSAT Nationwide Small Cap Value Fund 0.90% 0.37% 0.00% 1.27%
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.54% 0.00% 1.54%
Hard Assets Fund
</TABLE>
8
<PAGE> 15
SYNOPSIS OF THE POLICIES
The policy offered by this prospectus provides for life insurance coverage on
the insured. The death benefit and cash value of the policy may increase or
decrease to reflect the performance of the investment options chosen by the
policy owner (see "Death Benefit Information").
CASH SURRENDER VALUE
If the policy is terminated during the insured's lifetime, a cash surrender
value may be payable under the policy. However, there is no guaranteed cash
surrender value (see "Variation in Cash Value "). The policy will lapse without
value if the cash surrender value falls below what is needed to cover policy
charges. During the first five policy years, the total premium payments less any
policy indebtedness must be greater than or equal to the minimum premium
requirement in order to keep the policy in force. The minimum premium is equal
to the monthly minimum premium multiplied by the number of completed policy
months. The minimum monthly premium is shown on the policy data page.
PREMIUMS
The minimum initial premium for which a policy may be issued is $2,000.
The policies are designed to generally permit the payment of the Guideline
Single Premium in five annual installments for death benefit Option 1, and five
annual Guideline Level Premiums under death benefit Option 2 (see "Premium
Payments").
TAXATION
The policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code. Nationwide will
monitor compliance with the tests provided by Section 7702 to insure the
policies continue to receive this favored tax treatment (see "Tax Matters").
NONPARTICIPATING POLICIES
The policies are nonparticipating policies on which no dividends are payable.
The policies do not share in the profits or surplus earnings of Nationwide.
POLICY CANCELLATION
Policy owners may return the policy for any reason within certain time periods
and Nationwide will refund the policy value or the amount required by law (see
"Right to Revoke").
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. It is a member of the Nationwide group of
companies with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
CUSTODIAN OF ASSETS
Nationwide serves as the custodian of the assets of the variable account.
OTHER CONTRACTS ISSUED BY NATIONWIDE
Nationwide does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of Nationwide.
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, references to NISC shall mean Nationwide Investment Svcs.
Corporation.) NISC is a wholly owned subsidiary of Nationwide.
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
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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 in general 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. They are only 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 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 prior to
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
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mutual fund by the net asset value of that underlying mutual fund. Nationwide
will designate a date for this determination not more than 90 days before the
shareholder meeting.
Substitution of Securities
Nationwide may substitute, eliminate and/or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occur:
1) shares of a current underlying mutual fund option are no longer available
for investment; or
2) further investment in an underlying mutual fund option is inappropriate.
No substitution, elimination, and/or combination of shares may take place
without the prior approval of the SEC and state insurance departments.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, 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. Premium payments will be allocated
to the fixed account by election of the policy owner.
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.
The investment income earned by the fixed account will be allocated to the
policies at varying rate(s) set by Nationwide. The 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 an annual effective rate of 4.0%.
Any interest in excess of an annual effective rate 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 an annual effective rate 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 if 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 POLICY ISSUANCE
The policies are designed to generally permit the payment of the Guideline
Single Premium in five annual installments under death benefit
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Option 1 and five annual Guideline Level Premiums under death benefit Option 2.
At issue, the policy owner selects a scheduled premium level. This scheduled
premium is used to determine the initial specified amount. The minimum scheduled
premium is $2,000.
Policies may be issued to insureds with issue ages 75 or younger. Before issuing
any policy, Nationwide requires satisfactory evidence of insurability which may
include a medical examination.
PREMIUM PAYMENTS
Each premium payment must be at least equal to the monthly minimum premium. The
initial premium is payable in full at Nationwide's home office or to an
authorized agent of Nationwide.
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of the continuing insurance coverage is dependent upon completion of
all underwriting requirements, payment of initial premium, and delivery of the
policy while the insured is still living.
Additional premium payments may be made at any time while the policy is in
force, subject to the following conditions:
- Nationwide may require satisfactory evidence of insurability before
accepting any additional premium payment which results in an increase in the
net amount at risk.
- During the first five policy years, the total premium payments less any
policy indebtedness must be greater than or equal to the minimum premium
requirement in order to keep the policy in force. (The monthly minimum
premium is shown in the policy data page.)
- Premium payments in excess of the premium limit established by the IRS to
qualify the policy as a contract for life insurance will be refunded.
- Nationwide may require policy indebtedness be repaid prior to accepting any
additional premium payments.
Additional premium payments or other changes to the policy may jeopardize the
policy's non-modified endowment status. Nationwide will monitor premiums paid
and other policy transactions and will notify the policy owner when non-modified
endowment contract status is in jeopardy.
Nationwide will send scheduled premium payment reminder notices to policy owners
according to the premium mode shown on the policy data page.
PRICING
Premium payments will not be priced when the New York Stock Exchange is closed
on the following nationally recognized holidays:
- New Year's Day - Independence Day
- Martin Luther King, Jr. Day - Labor Day
- Presidents' Day - Thanksgiving
- Good Friday - Christmas
- Memorial Day
Nationwide also will not price premium payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in the
variable account impracticable; or
(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, policy value may be affected since the policy owner would not
have access to their account.
POLICY CHARGES
SALES LOAD
Nationwide deducts a sales load from each premium payment received. It is
guaranteed never to exceed 3.5% of each premium payment and may be reduced by
Nationwide at its sole discretion.
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The total sales load actually deducted from any policy will be equal to the sum
of this front-end sales load plus any sales surrender charge.
TAX EXPENSE CHARGE
A charge equal to 2.5% is deducted from all premium payments when the premium
payments are received in order to compensate Nationwide for certain
administrative expenses which are incurred by Nationwide for taxes, which
include premium or other taxes imposed by various state and local jurisdictions,
as well as federal taxes imposed under Section 848 of the Internal Revenue Code.
The amount charged may be more or less than the amount actually assessed by the
state in which a particular policy owner lives. Nationwide does not expect to
make a profit from this charge.
SURRENDER CHARGES
Nationwide deducts a surrender charge from the cash value of any policy
surrendered during the first nine years. The deduction is taken proportionally
from the cash value in each sub-account and the fixed account.
The initial surrender charge varies by issue age, sex, and underwriting
classification. The surrender charge is calculated based on the initial
specified amount. The following table illustrates the initial surrender charge
per $1,000 of initial specified amount for policies which are issued on a
standard basis (see Appendix B for specific examples). Special guaranteed
maximum surrender charges apply in Pennsylvania (see Appendix B).
MALE FEMALE
ISSUE NON- NON- MALE FEMALE
AGE TOBACCO TOBACCO STANDARD STANDARD
25 $5.878 $5.537 $6.680 $5.945
35 7.260 6.712 8.559 7.373
45 11.159 10.160 13.244 11.151
55 15.275 13.375 18.373 14.686
65 23.821 20.553 27.943 22.165
The surrender charge is comprised of two components:
- an underwriting component; and
- sales component.
The underwriting component varies by issue age in the following manner:
ISSUE CHARGE PER $1,000 OF
AGE INITIAL SPECIFIED AMOUNT
0-39 $3.50
40-59 $5.00
60-75 $6.50
The underwriting component is designed to cover the administrative expenses
associated with underwriting and issuing policies, including the costs of:
- processing applications;
- conducting medical exams;
- determining insurability and the insured's
underwriting class; and
- establishing policy records.
The remainder of the surrender charge that is not attributable to the
underwriting component represents the sales component. The purpose of the sales
component is to reimburse Nationwide for some of the expenses incurred in the
distribution of the policies.
The surrender charge may be insufficient to recover certain expenses related to
the sale of the policies. Unrecovered expenses are borne by Nationwide's general
assets which may include profits, if any, from mortality and expense risk
charges. Additional premiums and/or income earned on assets in the variable
account have no effect on these charges.
Reductions to Surrender Charges
Surrender charges are reduced in subsequent policy years as follows:
COMPLETED SURRENDER CHARGE AS A % OF
POLICY YEARS INITIAL SURRENDER CHARGES
0 100%
1 100%
2 100%
3 95%
4 90%
5 85%
6 80%
7 75%
8 50%
9+ 0%
Special guaranteed maximum surrender charges apply in Pennsylvania (see Appendix
B).
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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. This
deduction is charged proportionately to the cash value in each sub-account and
the fixed account.
If death benefit Option 1 is in effect and there have been increases in the
specified amount, then the cash value will first be considered a part of the
initial specified amount. If the cash value exceeds the initial specified
amount, it will then be considered a part of the additional increases in
specified amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will not exceed those guaranteed in the policy.
Guaranteed cost of insurance rates for policies issued on a simplified basis are
based on the 1980 Commissioners Extended Term Mortality Table, Age Last Birthday
(1980 CET). Guaranteed cost of insurance rates for policies issued on a
preferred basis are based on the 1980 Commissioners Standard Ordinary Mortality
Table, Age Last Birthday (1980 CSO). Guaranteed cost of insurance rates for
policies issued on a substandard basis are based on appropriate percentage
multiples of the 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 Commissioners Standard Ordinary Mortality Table, Age Last
Birthday (1980 CSO).
The rates for policies issued on a simplified or preferred basis will not exceed
the rates in the appropriate table. The cost of insurance rate per $1,000 of net
amount at risk is less for policies issued on a preferred basis as compared to a
simplified basis.
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.
MONTHLY ADMINISTRATIVE CHARGE
Nationwide deducts an administrative expense charge proportionately from the
cash value in each sub-account and the fixed account on a monthly basis. This
charge reimburses Nationwide for certain actual administrative expenses.
Nationwide does not expect to recover any amount in excess of aggregate
maintenance expenses from this charge. Currently, this charge is $5 per month.
Nationwide may, at its sole discretion, increase this charge. However,
Nationwide guarantees that this charge will never exceed $7.50 per month.
MORTALITY AND EXPENSE RISK CHARGE
Nationwide assumes certain risks for guaranteeing the mortality and expense
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 mortality and expense risk charge from the variable
account on a daily basis. Mortality and expense risk deductions will be charged
proportionally to the cash value in each sub-account. The mortality and expense
risk charge compensates Nationwide for assuming risks associated with mortality
and administrative costs. The charge is equivalent to an annual effective rate
of 0.80% of the daily net assets of the variable account.
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These charges are all guaranteed. Nationwide may realize a profit from these
charges. Unrecovered expenses are borne by Nationwide's general assets, which
may include profits, if any, from mortality and expense risk charges. Policy
owners receive quarterly and annual statement advising policy owners of the
cancellation of accumulation units for mortality and expense risk charges.
INCOME TAX
No charge is assessed to policy owners for income taxes incurred by Nationwide
as a result of the operations of the sub-accounts. However, Nationwide reserves
the right to assess a charge for income taxes against the variable account if
income taxes are incurred.
SURRENDERING THE POLICY FOR CASH
SURRENDER (REDEMPTION)
Policies may be surrendered for the cash surrender value any time while the
insured is living. The cancellation will be effective as of the date Nationwide
receives the policy accompanied by a signed, written request for cancellation.
Nationwide may require the policy owner's signature to be guaranteed by a member
firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock
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 is $500;
2) the maximum partial surrender in any policy year is limited to 10% of the
total premium payments; and
3) after the partial surrender, the policy continues to qualify as life
insurance.
When a partial surrender is made, the cash value is 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 such a case, a partial surrender will
decrease the specified amount by the amount by which the partial surrender
exceeds the difference between the death benefit and specified amount.
Partial surrender amounts must be first deducted from the values in the
sub-accounts. Partial surrenders will be deducted from the fixed account only to
the extent that insufficient values are available in the sub-accounts.
Surrender charges will be waived for any partial surrenders which satisfy the
above conditions.
Certain partial surrenders may result in currently taxable income and tax
penalties (see "Tax Matters").
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
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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 premiums applied since the previous
valuation date, minus any partial surrenders, plus or minus any investment
results, 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.
POLICY PROVISIONS
POLICY OWNER
While the insured is living, all rights in this policy are vested in the policy
owner named in the application or as subsequently changed, subject to
assignment, if any.
The policy owner may name a contingent policy owner or a new policy owner while
the insured is living. Any change must be in a written form satisfactory to
Nationwide and recorded at Nationwide's home office. Once recorded, the change
will be effective when signed. The change will not affect any payment made or
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, 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 fifth 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;
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<PAGE> 23
(4) the cash surrender value is sufficient to continue the policy in force for
at least 3 months; and
(5) age limits are the same as for a new issue.
Any approved increase will have an effective date of the monthly anniversary day
on or next following the date Nationwide approves the supplemental application.
Nationwide reserves the right to limit the number of specified amount increases
to one each policy year.
Specified Amount Decreases
After the fifth policy year, the policy owner may also request a decrease to the
specified amount. Any approved decrease will be effective on the monthly
anniversary day on or next following the date Nationwide receives the request.
Any such decrease shall reduce insurance in the following order:
(1) against insurance provided by the most recent increase;
(2) against the next most recent increases successively; and
(3) against insurance provided under the original application.
Nationwide reserves the right to limit the number of specified amount decreases
to one each policy year. Nationwide will refuse a request for a decrease which
would:
(1) reduce the specified amount to less than $10,000; or
(2) disqualify the policy as a contract for life insurance.
Changes in the death benefit option may have an effect on the specified amount.
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. 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 a sub-account on the application are allocated to the NSAT
Money Market Fund during the period a policy owner may cancel the policy, unless
specific states require premiums to be allocated to the fixed account. At the
expiration of the cancellation period, these premiums are used to purchase
shares of the underlying mutual funds specified by the policy owner at net asset
value for the respective sub-account(s).
The policy owner may change the allocation of net premiums or may transfer cash
value from one sub-account to another. Changes are subject to the terms and
conditions imposed by each underlying mutual fund and those found in this
prospectus. Net premiums allocated to the fixed account at the time of
application may not be transferred from the fixed account prior to the first
policy anniversary (see "Transfers").
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The accumulation unit value for a valuation period is determined by multiplying
the accumulation unit value for each sub-account for the immediately preceding
valuation period by the net investment factor for the sub-account for the
subsequent valuation period. Though the number of accumulation units will not
change as a result of investment experience, the value of an accumulation unit
may increase or decrease from valuation period to valuation period. 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);
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<PAGE> 24
(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.
Nationwide will determine the value of the assets in a variable account at the
end of each Valuation period. The cash value will be determined at least
monthly.
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 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 allocations without penalty or adjustment subject to
the following conditions:
- Nationwide reserves the right to restrict transfers between the fixed
account and the sub-accounts to one per policy year.
- Transfers made to the fixed account may not be made in the first policy
year.
- Nationwide reserves the right to restrict the amount transferred from the
fixed account each policy year (subject to state restrictions). Policy
owners who have entered into Dollar Cost Averaging agreements with
Nationwide may transfer under the terms of that agreement.
- Nationwide reserves the right to restrict the amount transferred to the
fixed account to 25% of the cash value.
- Transfers from the fixed account must be made within 30 days after the
end of an interest rate guarantee period.
- Transfers among the sub-accounts are limited to once per valuation date.
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 telephone instructions that it
reasonably determined to be genuine. Nationwide may withdraw the telephone
exchange privilege upon 30 days written notice to contract 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
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<PAGE> 25
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:
- submitted by any agent acting under a power of attorney on behalf of more
than one policy owner; or
- 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:
- 10 days after receiving the policy;
- 45 days after signing the application; or
- 10 days after Nationwide delivers a Notice of Right of Withdrawal.
The policy can be mailed to the registered representative who sold it, or
directly to Nationwide.
Returned policies are deemed void from the beginning. Nationwide will refund the
amount prescribed by the state in which the policy was issued within seven days
after it receives the policy. The refunded policy value will reflect the
deduction of any policy charges, unless otherwise required by law. This right
varies by state.
POLICY LOANS
TAKING A POLICY LOAN
After the first policy year, the policy owner may take a policy loan using the
policy as security. Maximum policy indebtedness is limited to 90% of the cash
surrender value in the sub-accounts and 100% of the cash surrender value in the
fixed account less interest due on the next policy anniversary. Nationwide will
not grant a loan for an amount less than $1,000 ($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.
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INTEREST
The loan interest rate is 6.0% per year for all Policy loans.
On a current basis, the cash value in the policy loan account is credited with
an annual effective rate of 5.1%. The interest rate credited is guaranteed to
never be lower than 4.0%. Nationwide may change the current interest crediting
rate on the policy loans at any time at its sole discretion.
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,
or at the time of loan repayment. It will be allocated according to the fund
allocation factors in effect at the time of the transfer.
Interest is charged daily and is payable at the end of each policy year or at
the time of loan repayment. Unpaid interest will be added to the existing policy
indebtedness as of the due date and will be charged interest at the same rate as
the rest of the indebtedness.
Whenever the total policy indebtedness exceeds the cash value less any surrender
charges, Nationwide will send a notice to the policy owner and the assignee, if
any. The policy will terminate without value 61 days after the mailing of the
notice unless a sufficient repayment is made during that period. A repayment is
sufficient if it is large enough to reduce the total policy indebtedness to an
amount equal to the total cash value less any surrender charges plus an amount
sufficient to continue the policy in force for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A policy loan, whether or not repaid, will have a permanent effect on the death
benefit and cash value because the investment results of the variable account or
the fixed account will apply only to the non-loaned portion of the cash value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the variable account or the fixed account
while the loan is outstanding, the effect could be favorable or unfavorable.
REPAYMENT
All or part of the indebtedness may be repaid at any time while the policy is in
force during the insured's lifetime. Any payment intended as a premium payment,
rather than a loan repayment, 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 Connecticut
and New York). 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 the fixed account and/or certain sub-accounts into other
sub-accounts. Nationwide does not guarantee that this program will result in
profit or protect policy owners from loss.
Policy owners participating in Dollar Cost Averaging may direct Nationwide to
automatically transfer specified amounts from the fixed account or one of the
following underlying mutual fund options: Fidelity VIP-High Income Portfolio,
Neuberger Berman
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AMT Limited Maturity Bond Portfolio, NSAT Government Bond Fund 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
At issue, the policy owner selects a desired scheduled premium level. The
scheduled premium is used to determine the initial specified amount.
Under death benefit Option 1, the initial specified amount is determined by
treating the scheduled premium as 20% of the Guideline Single Premium. Under
death benefit Option 2, the initial specified amount is determined by treating
the scheduled premium as the Guideline Level Premium. For either death benefit
option, the initial specified amount will be set at a level such that payment of
the scheduled premiums will not result in the policy being classified as a
modified endowment contract (see "Tax Matters").
The following tables illustrate the initial specified amount that results from a
$2,000 scheduled premium payment.
MALE NON-TOBACCO
ISSUE AGE OPTION 1 OPTION 2
30 $85,779 $75,378
35 $68,165 $61,559
40 $54,111 $50,082
45 $43,165 $40,605
50 $34,675 $32,791
55 $28,136 $26,852
60 $23,176 $22,867
65 $19,474 $19,474
FEMALE NON-TOBACCO
ISSUE AGE OPTION 1 OPTION 2
30 $99,541 $93,577
35 $79,212 $76,497
40 $63,070 $62,320
45 $50,599 $50,633
50 $40,824 $40,958
55 $33,171 $32,949
60 $27,141 $26,301
65 $22,369 $22,168
Generally, for a given scheduled premium, the initial specified amount is
greater for non-tobacco than standard and females than males. The specified
amount is shown in the policy.
While the policy is in force, the death benefit will never be less than the
specified amount. The death benefit may vary with the cash value of the policy,
which depends on investment performance.
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The policy owner may choose one of two death benefit options.
OPTION 1: the death benefit will be the greater of the specified amount or the
applicable percentage of cash value. Under Option 1, the amount of the death
benefit will ordinarily not change for several years to reflect the investment
performance and may not change at all. If investment performance is favorable
the amount of death benefit may increase. To see how and when investment
performance will begin to affect death benefits, please see the illustrations in
Appendix C.
OPTION 2: the death benefit will be the greater of the specified amount plus the
cash value, or the applicable percentage of cash value and will vary directly
with the investment performance.
The term "applicable percentage" means:
1) 250% when the insured 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.
APPLICABLE PERCENTAGE OF CASH VALUE
<TABLE>
<CAPTION>
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of 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>
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CHANGES IN THE DEATH BENEFIT OPTION
After the fifth policy year, the policy owner may change the death benefit
option under the policy. If the change is from Option 1 to Option 2, the
specified amount will be decreased by the amount of the cash value. If the
change is from Option 2 to Option 1, the specified amount will be increased by
the amount of the cash value. Nationwide reserves the right to require evidence
of insurability for either change.
The effective date of the change will be the monthly anniversary day on or next
following the date Nationwide approves the request for change. Only one change
of option is permitted per policy year. A change in death benefit option will
not be permitted if it results in the total premiums paid exceeding the then
current maximum premium limitations prescribed by the IRS to qualify the policy
as a life insurance contract.
PROCEEDS PAYABLE ON DEATH
The actual death proceeds payable on the insured's death will be the death
benefit as described above, less any policy indebtedness, and less any unpaid
policy charges. Under certain circumstances, the death proceeds may be adjusted
(see "Incontestability," "Error in Age or Sex," and "Suicide").
INCONTESTABILITY
Nationwide will not contest payment of the death proceeds based on the initial
specified amount after the policy has been in force during the insured's
lifetime for 2 years from the policy date. For any increase in specified amount
requiring evidence of insurability, Nationwide will not contest payment of the
death proceeds based on such an increase after it has been in force during the
insured's lifetime for 2 years from its effective date.
ERROR IN AGE OR SEX
If the age or sex of the insured has been misstated, the affected benefits will
be adjusted.
The amount of the death benefit will be (1) multiplied by (2) and then the
result added to (3), where:
(1) is the amount of the death benefit at the time of the insured's death
reduced by the amount of the cash value at the time of the insured's
death;
(2) is the ratio of the monthly cost of insurance applied in the policy month
of death and the monthly cost of insurance that should have been applied
at the true age and sex in the policy month of death; and
(3) is the cash value at the time of the insured's death.
SUICIDE
If the insured dies by suicide, while sane or insane, within two years from the
policy date, Nationwide will pay no more than the sum of the premiums paid, less
any indebtedness, and less any partial surrenders. 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 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
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have a death benefit on the exchange date not more than the death benefit
of the original policy immediately prior to the exchange date. The new policy
will have the same policy date and issue age as the original policy. The initial
specified amount and any increases in specified amount will have the same rate
class as those of the original policy. Any indebtedness may be transferred to
the new policy.
The exchange may be subject to an equitable adjustment in rates and values to
reflect variances, if any, in the rates and values between the two policies.
After adjustment, if any excess is owed the policy owner, Nationwide will pay
the excess to the policy owner in cash. The exchange may be subject to federal
income tax withholding (see "Income Tax Withholding").
GRACE PERIOD
FIRST FIVE POLICY YEARS
This policy will not lapse during the first five policy years provided that on
each monthly anniversary day (1) is greater than or equal to (2) where:
(1) is the sum of all premiums paid to date minus any policy indebtedness;
and
(2) is the sum of monthly minimum premiums since the policy date including
the monthly minimum premium for the current monthly anniversary day.
If (1) is less than (2), a grace period of 61 days from the monthly anniversary
day will be allowed for the payment of sufficient premium to satisfy the minimum
premium requirement. If sufficient premium is not paid by the end of the grace
period, the policy will lapse. The policy will be terminated with the return of
any available cash surrender value. The cash surrender value will be calculated
as of the beginning of the grace period. The policy owner may also elect in
writing to have the policy placed on Extended Term Insurance.
POLICY YEARS SIX AND AFTER
If the cash surrender value on a monthly anniversary day is not sufficient to
cover the current monthly deduction for insurance costs, administrative expenses
and other benefits, a grace period of 61 days from the monthly anniversary day
will be allowed for the payment of sufficient premium to cover the current
monthly deduction plus an amount equal to three times the current monthly
deduction.
ALL POLICY YEARS
Nationwide will send a notice at the start of the grace period to the policy
owner's last known address. If the insured dies during the grace period,
Nationwide will pay the death proceeds.
REINSTATEMENT
If the grace period ends and the policy owner has neither paid the required
premium nor surrendered the policy for its cash surrender value, the policy
owner may reinstate the policy by:
(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;
(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 lesser of:
(1) the cash value at the end of the grace period; or
(2) the surrender charge for the policy year in which the policy was
reinstated.
Unless the policy owner has provided otherwise, all amounts will be allocated
based on the underlying mutual fund allocation factors in effect at the start of
the grace period.
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<PAGE> 31
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 (see "Information about the Policies"). 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.
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 U.S. 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
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<PAGE> 32
whatever steps are available to remain in compliance.
Nationwide will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the sub-account investments
to remain in compliance.
A total surrender or cancellation of the policy by lapse or the maturity of the
policy on its maturity date may have adverse tax consequences. If the amount
received by the policy owner plus total policy indebtedness exceeds the premiums
paid into the policy, the excess generally will be treated as taxable income,
regardless of whether or not the policy is a modified endowment contract.
WITHHOLDING
Distributions of income from a modified endowment contract are subject to
federal income tax withholding; however, the recipient may elect not to have the
withholding taken from the distribution. A distribution of income from a
modified endowment contract may be subject to mandatory back-up withholding
(which cannot be waived). The mandatory back-up withholding rate is 31% of the
income that is distributed and will arise of no Taxpayer Identification Number
is provided to Nationwide, or if the IRS notifies Nationwide that back-up
withholding is required.
FEDERAL ESTATE AND GENERATION-SKIPPING TRANSFER TAXES
The federal estate tax is integrated with the federal gift tax under a unified
tax rate schedule. In general, in 2000, an estate of less than $625,000
(inclusive of certain pre-death gifts) will not incur a federal estate tax
liability. In addition, an unlimited marital deduction may be available for
federal estate tax purposes, for certain amounts that pass to the surviving
spouse.
When the insured dies, the death benefit will generally be included in the
insured's federal gross estate if: (1) the proceeds were payable to 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.
Secretary of the Treasury, Nationwide may be required to withhold a portion of
the death proceeds and pay them directly to the IRS as the GSTT liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes.
The tax rate is a flat rate equal to the maximum estate tax rate (currently
55%), and there is a provision for an aggregate $1 million exemption. Due to the
complexity of these rules, the policy owner should consult with counsel and
other competent advisors regarding these taxes.
NON-RESIDENT ALIENS
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
statutory rate of 30% of the amount of income that is distributed. Nationwide is
required to withhold such amount from the distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances
zero, tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to Nationwide sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. In
addition, the NRA must obtain an individual Taxpayer Identification Number from
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<PAGE> 33
the IRS, and furnish that number to Nationwide prior to the distribution. If
Nationwide does not have the proper proof of citizenship or residency and a
proper individual Taxpayer Identification Number prior to any distribution,
Nationwide will be required to withhold 30% of the income, regardless of any
treaty provision.
A pre-death distribution may not be subject to withholding where the recipient
sufficiently establishes to Nationwide that such payment is effectively
connected to the recipient's conduct of a trade or business in the United States
and that such payment is includible in the recipient's gross income for United
States federal income tax purposes, Any such distributions may be subject to
back-up withholding at the statutory rate (currently 31%) if no Taxpayer
Identification Number, or an incorrect Taxpayer Identification Number, is
provided.
State and local estate, inheritance, income and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
policy owner or beneficiary.
TAXATION OF NATIONWIDE
Nationwide is taxed as a life insurance company under the Internal Revenue Code.
Since the variable account is not a separate entity from Nationwide and its
operations form a part of Nationwide, it will not be taxed separately as a
"regulated investment company" under Sub-chapter M of the Internal Revenue Code.
Investment income and realized capital gains on the assets of the variable
account are reinvested and taken into account in determining the value of
accumulation units. As a result, such investment income and realized capital
gains are automatically applied to increase reserves under the policies.
Nationwide does not initially expect to incur any federal income tax liability
that would be chargeable to the variable account. Based upon these expectations,
no charge is currently being made against the variable account for federal
income taxes. If, however, Nationwide determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the variable account.
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.
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<PAGE> 34
The foregoing is a general explanation as to certain tax matters pertaining to
insurance policies. It is not intended to be legal or tax advice, and should not
take the place of your independent legal, tax and/or financial advisor.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from premiums made on or after
August 1, 1983. The policies offered by this prospectus are based upon actuarial
tables which distinguish between men and women. Thus the policies provide
different benefits to men and women of the same age. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris on any employment related insurance or benefit program before
purchasing this policy.
STATE REGULATION
Nationwide is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is filed with the Insurance Department each year covering the operation of
Nationwide for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine Nationwide's contract liabilities and reserves so that the
Insurance Department may certify the items are correct. Nationwide's books and
accounts are subject to review by the Insurance Department at all times and a
full examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. Such regulation does not, however,
involve any supervision of management or investment practices or policies. In
addition, Nationwide is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
REPORTS TO POLICY OWNERS
Nationwide will mail to the policy owner at the last known address of record:
- an annual statement containing: the amount of the current death benefit,
cash value, cash surrender value, premiums paid, monthly charges
deducted, amounts invested in the fixed account and the sub-accounts, and
policy indebtedness;
- annual and semi-annual reports containing all applicable information and
financial statements or their equivalent, which must be sent to the
underlying mutual fund shareholders as required by the rules under the
Investment Company Act of 1940 for the variable account; and
- statements of significant transactions, such as changes in specified
amount, changes in death benefit options, changes in future premium
allocations, transfers among sub-accounts, premium payments, loans, loan
repayments, reinstatement and termination.
ADVERTISING
Nationwide is ranked and rated by independent financial rating services,
including Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of
Nationwide. The ratings are not intended to reflect the investment experience or
financial strength of the variable account. Nationwide may advertise these
ratings from time to time. In addition, Nationwide may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend Nationwide or the policies. Furthermore,
Nationwide may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
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<PAGE> 35
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits relating to life insurance and annuity
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide and
the American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs sought to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the District Court denied, in part, and granted, in part, motions to
dismiss the complaint filed by Nationwide and American 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.
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
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<PAGE> 36
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, NISC. NISC was
organized as an Oklahoma corporation on March 19, 1974. NISC is a wholly owned
subsidiary of Nationwide and a member of the NASD.
NISC acts as general distributor for the following separate accounts, all of
which are separate investment accounts of Nationwide or its affiliates:
- Nationwide Multi-Flex Variable Account;
- NACo Variable Account;
- Nationwide DC Variable Account;
- Nationwide DCVA II;
- Nationwide Variable Account;
- Nationwide Variable Account-II;
- Nationwide Variable Account-5;
- Nationwide Variable Account-6;
- Nationwide Variable Account-8;
- Nationwide Variable Account-9;
- Nationwide Variable Account-10;
- Nationwide Variable Account-11;
- Nationwide VLI Separate Account-2;
- Nationwide VLI Separate Account-3;
- Nationwide VLI Separate Account-4;
- Nationwide VLI Separate Account-5;
- Nationwide VA Separate Account-A;
- Nationwide VA Separate Account-B;
- Nationwide VA Separate Account-C;
- Nationwide VL Separate Account-A;
- Nationwide VL Separate Account-B;
- Nationwide VL Separate Account-C; and
- Nationwide VL Separate Account-D.
Gross first year commissions plus any expense allowance payments paid by
Nationwide on the sale of these policies provided by the general distributor are
not more than 26% of the scheduled premium plus 5% of any excess premium
payments. Gross renewal commissions paid by Nationwide will not exceed 5% of
actual premium payments.
No underwriting commissions have been paid by Nationwide to NISC.
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<PAGE> 37
NISC DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper Chairman of the Board and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer and Director
One Nationwide Plaza
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 - 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
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
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
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<PAGE> 38
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:
- Nationwide Variable Account;
- Nationwide Variable Account-II;
- Nationwide Variable Account-3;
- Nationwide Variable Account-4;
- Nationwide Variable Account-5;
- Nationwide Variable Account-6;
- Nationwide Fidelity Advisor Variable Account;
- Nationwide Variable Account-8;
- Nationwide Variable Account-9;
- Nationwide Variable Account-10;
- Nationwide Variable Account-11;
- MFS Variable Account;
- Nationwide Multi-Flex Variable Account;
- Nationwide VLI Separate Account;
- Nationwide VLI Separate Account-2;
- Nationwide VLI Separate Account-3;
- Nationwide VLI Separate Account-4;
- Nationwide VLI Separate Account-5;
- NACo Variable Account;
- Nationwide DC Variable Account; and
- Nationwide DCVA-II.
Nationwide, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in that state. In general,
all states have statutory administrative powers. Such regulation relates, among
other things, to licensing of insurers and their agents, the approval of policy
forms, the methods of computing reserves, the form and content of statutory
financial statements, the amount of policyholders' and stockholders' dividends,
and the type of distribution of investments permitted.
Nationwide operates in the highly competitive field of life insurance. There are
approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete with
the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the other
insurance companies in the group. In addition to its direct salaried employees,
Nationwide shares employees with Nationwide Mutual Insurance Company and
Nationwide Mutual Fire Insurance Company.
Nationwide does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. Nationwide shares its home office, other facilities and equipment with
Nationwide Mutual Insurance Company.
Company Management
Nationwide 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.
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<PAGE> 39
<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
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>
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<PAGE> 40
(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 and Nationwide Life and Annuity Insurance Company. Messrs. McFerson
and Gasper are directors of NISC, a registered broker-dealer.
Messrs. McFerson, Miller, Patterson, and Shisler are directors of Nationwide
Financial Services, Inc. Mr. McFerson and Ms. Thomas are trustees of Nationwide
Mutual Funds, a registered investment company. Messrs. McFerson, Gasper and
Woodward are trustees of Nationwide Separate Account Trust and Nationwide Asset
Allocation Trust, registered investment companies. Mr. McFerson is trustee of
Financial Horizons Investment Trust and Nationwide Mutual Funds, registered
investment companies
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF NATIONWIDE
OFFICERS OF THE DEPOSITOR OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
<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
</TABLE>
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<PAGE> 41
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS OF NATIONWIDE
OFFICERS OF THE DEPOSITOR OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
<S> <C>
Donna A. James Senior Vice President - Chief Human Resources Officer
One Nationwide Plaza
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales - Financial Services
One Nationwide Plaza
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President - Corporate Relations
One Nationwide Plaza
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President - Fixed Income Securities
One Nationwide Plaza
Columbus, OH 43215
Mark D. Phelan Senior Vice President - Technology Services
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President - Claims and Financial Services
One Nationwide Plaza
Columbus, OH 43215
Mark R. Thresher Senior Vice President - Finance - Nationwide Financial
One Nationwide Plaza
Columbus, OH 43215
Richard M. Waggoner Senior Vice President - Operations
One Nationwide Plaza
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product Management and Nationwide
One Nationwide Plaza Financial Marketing
Columbus, OH 43215
</TABLE>
DIMON R. MCFERSON has been a Director since April 1988 and Chairman and Chief
Executive Officer since April 1996. He was elected Chief Executive Officer in
December 1992, and President and Chief Executive Officer in December 1993. He
was President and General Manager of Nationwide Mutual Insurance Company from
April 1988 to April 1991; President and Chief Operating Officer of Nationwide
Mutual Insurance Company from April 1991 to December 1992; and President and
Chief Executive Officer of Nationwide Mutual Insurance Company from December
1992 to April 1996. Mr. McFerson has been with Nationwide for 20 years.
JOSEPH J. GASPER has been President and Chief Operating Officer and Director of
Nationwide since April 1996. Previously, he was Executive Vice President -
Property/Casualty Operations of Nationwide 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
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<PAGE> 42
North Carolina Farm Bureau, ad the Farm Credit Council. He is a member and
former director of the Oak Wolfe Fire Department.
A. I. BELL has been a Director of Nationwide since April, 1998. Mr. Bell has
served as a state trustee of the Ohio Farm Bureau Federation from 1991 to 1998
and as president that last four years. He oversees the Bell family farm in
Zanesville, Ohio. The farm is the hub of a multi-family swine network, in
addition to grain and beef operations. Mr. Bell has represented the Ohio Farm
Bureau at state and national level activities, and has traveled internationally
representing Ohio agriculture. In 1995, he was introduced into The Ohio State
University Department of Animal Sciences Hall of Fame.
JAMES E. BROCK has been Senior Vice President - Corporate Development since July
1997. Previously, he was Senior Vice President - Company Operations from
December 1996 to July 1997 and was also Senior Vice President - Life Company
Operations from April 1996 to July 1997. Mr. Brock was Senior Vice President -
Investment Products Operations from November 1990 to April 1996. Prior to that
time, Mr. Brock held several positions within Nationwide. Mr. Brock has been
with Nationwide for 30 years.
CHARLES A. BRYAN has been a Senior Vice President - Chief Actuary - Property and
Casualty since 1998. Prior to joining Nationwide, Mr. Bryan was president, Chief
Operating Officer of Direct Response Corporation from 1996 to 1998. Prior to
that time, Mr. Bryan was a partner with Ernst & Young.
JOHN R. COOK, JR. has been Senior Vice President - Chief Communications Officer
since May 1997. Previously, Mr. Cook was Senior Vice President - Chief
Communications Officer of USAA from July 1989 to May 1997. Mr. Cook has been
with Nationwide for 2 years.
KENNETH D. DAVIS has been a Director of Nationwide since April 1999. Mr. Davis
is the immediate past president of the Ohio Farm Bureau Federation. He served as
a member of the Ohio Farm Bureau Federation's board of trustees from 1989 until
1999. He served as first vice president of the board from 1994 until 1998. Mr.
Davis serves on the board of directors of his local rural electric cooperatives
and is a member of many agriculture organizations including the Ohio Corn
Growers, Ohio Cattlemen's and Ohio Soybean associations.
DAVID A. DIAMOND has been Senior Vice President - Corporate Controller since
August 1999. He was Vice President-Controller from August 1996 to August 1999.
Previously, he was Vice President - Controller from October 1993 to August 1996.
Prior to that time, Mr. Diamond held several positions within Nationwide. Mr.
Diamond has been with Nationwide for 11 years.
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.
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<PAGE> 43
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).
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<PAGE> 44
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.
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
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<PAGE> 45
(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 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..
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<PAGE> 46
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. 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, the Fund 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. A minimum of 25% of the fixed income portion of
the Fund will be invested in fixed income senior securities.
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. 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.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO
Investment Objective: 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: 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 underlying mutual funds. It is also
important to point out that this Portfolio makes most sense for you if you
can afford
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<PAGE> 47
to ride out changes in the stock market, because it invests primarily in
common stocks. FMR can also 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: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR 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;
- up to 20% in common stocks and other equity securities when consistent
with the 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 Investor Services, Inc. ("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: Long-term capital growth primarily through
investments in foreign securities. This 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
The 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's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek 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.
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.
CAPITAL APPRECIATION FUND
Investment Objective: Seeks long-term capital appreciation.
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.
MONEY MARKET FUND
Investment Objective: Seeks as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable long-term total return on
invested capital.
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<PAGE> 48
SUBADVISED NATIONWIDE FUNDS
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.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust ("NB AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of NB AMT 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 Guardian Portfolio of NB AMT invest all of its investable assets in a
corresponding series of Advisers Managers Trust managed by Neuberger Berman
Management Incorporated ("NB Management"). Each series then invests in
securities in accordance with an investment objective, policies and limitations
identical to those of the Portfolio. This "master/feeder fund" structure is
different from that of many other investment companies which directly acquire
and manage their own portfolios of securities. (For more information regarding
"master/feeder fund" structure, see "Special Information Regarding Organization,
Capitalization, and Other Matters" in the underlying mutual fund prospectus.)
The investment advisor is NB Management.
AMT GROWTH PORTFOLIO
Investment Objective: 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 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.
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.
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<PAGE> 49
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 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.)
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. 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.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck 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 Van Eck Trust are
offered only to separate accounts of various insurance companies to fund the
benefits of life insurance policies and variable annuity contracts. The
investment advisor and manager is 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.
WORLDWIDE HARD ASSETS FUND
Investment Description: Long-term capital appreciation by investing,
primarily in "Hard Assets Securities." For the Fund's purpose, "Hard
Assets" are real estate, energy, timber, and industrial and precious
metals. Income is a secondary consideration.
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
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<PAGE> 50
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 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.
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<PAGE> 51
APPENDIX B: ILLUSTRATION OF SURRENDER CHARGES
EXAMPLE 1: A female non-tobacco, age 45, purchases a policy with a scheduled
premium of $2,000 yielding a specified amount of $50,599. She now wishes to
surrender the policy during the first policy year. By using the initial
surrender charge table reproduced below (also see "Surrender Charges"), the
total surrender charge per thousand multiplied by the specified amount expressed
in thousands equals the total surrender charge of $514.09 ($10.160 x 50.599 =
$514.09).
EXAMPLE 2: A male non-tobacco, age 35, purchases a policy with a scheduled
premium of $2,000 yielding a specified amount of $68,165. He now wants to
surrender the policy in the sixth policy year. The total initial surrender value
is calculated using the method illustrated above. (Specified amount in thousands
is $68.165 x 7.260 = $494.88 total first year surrender charge.) Because the
fifth policy year has been completed, the total initial surrender charge is
reduced by multiplying it by the applicable percentage factor from the
"Reductions to Surrender Charges" table below (also see "Reductions to Surrender
Charges"). In this case, $494.88 x 85% = $420.65, which is the amount Nationwide
deducts as a total surrender charge.
Initial surrender charge per $1,000 of initial specified amount for policies
which are issued on a standard basis.
<TABLE>
<CAPTION>
ISSUE MALE FEMALE MALE FEMALE
AGE NON-TOBACCO NON-TOBACCO STANDARD STANDARD
<S> <C> <C> <C> <C>
25 $5.878 $5.537 $6.680 $5.945
35 7.260 6.712 8.559 7.373
45 11.159 10.160 13.244 11.151
55 15.275 13.375 18.373 14.686
65 23.821 20.553 27.943 22.165
Reductions to surrender charges.
SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
0 100% 5 85%
1 100% 6 80%
2 100% 7 75%
3 95% 8 50%
4 90% 9+ 0%
</TABLE>
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<PAGE> 52
The current surrender charges are the same for all states. However, in
Pennsylvania the guaranteed maximum surrender charges are 8% higher than those
shown. In addition, the guaranteed maximum surrender charge in subsequent years
in Pennsylvania are reduced in the following manner:
<TABLE>
<CAPTION>
SURRENDER CHARGE SURRENDER CHARGE SURRENDER CHARGE
COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL COMPLETED AS A % OF INITIAL
POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES POLICY YEARS SURRENDER CHARGES
<S> <C> <C> <C> <C> <C>
0 100% 5 83% 10 46%
1 98% 6 75% 11 37%
2 95% 7 70% 12 28%
3 92% 8 65% 13 14%
4 88% 9 55% 14+ 0%
</TABLE>
The illustrations of current values are the same for Pennsylvania. However, the
guaranteed maximum surrender charges are slightly higher in Pennsylvania. If
this policy is issued in Pennsylvania, please contact Nationwide's home office
for an illustration.
Nationwide has no plans to change the current surrender charges.
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<PAGE> 53
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 debt, no additional premium
payments are made, no cash values are allocated to the fixed account, and their
are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks. The mortality and expense risk charges are
equivalent to an annual effective rate of 0.80% of the daily net assets of the
variable account. In addition, the net investment returns also reflect the
deduction of fund investment advisory fees and other expenses which are
equivalent to an annual effective rate of 0.83% (after expense reimbursement) of
the daily net assets of the variable account. 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 0.85%. This effective
rate is based on the average of fund expenses for the preceding year for all
underlying mutual fund options available under the policy as of December 31,
1999. 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 or fee waivers of these underlying mutual
funds, such change will be reflected in the net asset value of the corresponding
underlying mutual fund.
Considering current charges for mortality and expense risks and fund expenses,
gross annual rates of return of 0%, 6% and 12% correspond to net investment
experience at constant annual rates of -1.80%, 4.20% and 10.20%.
The illustrations also reflect the fact that Nationwide makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the policy. The values shown are for policies which are
issued as standard (including non-tobacco). Policies issued on a substandard
basis would result in lower cash values and death benefits than those
illustrated.
In addition, the illustrations reflect the fact that Nationwide deducts a
monthly administrative charge at the beginning of each policy month. This
monthly administrative expense charge is $5 and is guaranteed not to exceed
$7.50. Current values reflect a current monthly administrative expense charge of
$5 and guaranteed values reflect the $7.50 maximum monthly administrative charge
under the policy. 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.
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<PAGE> 54
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$2,000 ANNUAL PREMIUM: $43,165 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,668 1,186 43,165 1,773 1,292 43,165 1,879 1,397 43,165
2 2,000 4,305 3,307 2,825 43,165 3,620 3,139 43,165 3,947 3,465 43,165
3 2,000 6,620 4,915 4,433 43,165 5,544 5,062 43,165 6,225 5,743 43,165
4 2,000 9,051 6,495 6,037 43,165 7,549 7,091 43,165 8,734 8,277 43,165
5 2,000 11,604 8,044 7,611 43,165 9,636 9,203 43,165 11,499 11,066 43,165
6 0 12,184 7,707 7,298 43,165 9,844 9,434 43,165 12,468 12,059 43,165
7 0 12,793 7,363 6,977 43,165 10,049 9,664 43,165 13,530 13,144 43,165
8 0 13,433 7,009 6,648 43,165 10,252 9,891 43,165 14,693 14,331 43,165
9 0 14,105 6,646 6,405 43,165 10,452 10,211 43,165 15,970 15,729 43,165
10 0 14,810 6,270 6,270 43,165 10,647 10,647 43,165 17,371 17,371 43,165
15 0 18,901 4,172 4,172 43,165 11,510 11,510 43,165 26,820 26,820 43,165
20 0 24,124 1,433 1,433 43,165 11,959 11,959 43,165 42,382 42,382 51,706
25 0 30,788 (*) (*) (*) 11,388 11,388 43,165 67,360 67,360 78,138
30 0 39,295 (*) (*) (*) 8,375 8,375 43,165 107,288 107,288 114,798
35 0 50,151 (*) (*) (*) (*) (*) (*) 171,712 171,712 180,297
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
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<PAGE> 55
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$2,000 ANNUAL PREMIUM: $43,165 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,575 1,094 43,165 1,678 1,196 43,165 1,780 1,299 43,165
2 2,000 4,305 3,118 2,636 43,165 3,420 2,939 43,165 3,736 3,254 43,165
3 2,000 6,620 4,627 4,146 43,165 5,231 4,749 43,165 5,885 5,403 43,165
4 2,000 9,051 6,105 5,647 43,165 7,113 6,656 43,165 8,249 7,791 43,165
5 2,000 11,604 7,549 7,116 43,165 9,070 8,637 43,165 10,852 10,419 43,165
6 0 12,184 7,099 6,690 43,165 9,133 8,723 43,165 11,636 11,227 43,165
7 0 12,793 6,632 6,246 43,165 9,176 8,791 43,165 12,485 12,100 43,165
8 0 13,433 6,143 5,781 43,165 9,198 8,837 43,165 13,405 13,044 43,165
9 0 14,105 5,627 5,386 43,165 9,192 8,951 43,165 14,401 14,160 43,165
10 0 14,810 5,082 5,082 43,165 9,154 9,154 43,165 15,481 15,481 43,165
15 0 18,901 1,733 1,733 43,165 8,288 8,288 43,165 22,508 22,508 43,165
20 0 24,124 (*) (*) (*) 5,399 5,399 43,165 33,826 33,826 43,165
25 0 30,788 (*) (*) (*) (*) (*) (*) 52,553 52,553 60,962
30 0 39,295 (*) (*) (*) (*) (*) (*) 82,040 82,040 87,783
35 0 50,151 (*) (*) (*) (*) (*) (*) 129,233 129,233 135,695
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
49
<PAGE> 56
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$2,000 ANNUAL PREMIUM: $40,605 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,670 1,217 42,276 1,776 1,322 42,381 1,881 1,428 42,486
2 2,000 4,305 3,306 2,853 43,911 3,619 3,166 44,225 3,945 3,492 44,551
3 2,000 6,620 4,906 4,453 45,512 5,533 5,080 46,138 6,210 5,757 46,816
4 2,000 9,051 6,472 6,041 47,077 7,519 7,089 48,124 8,697 8,266 49,302
5 2,000 11,604 8,000 7,592 48,605 9,578 9,170 50,183 11,423 11,015 52,028
6 2,000 14,284 9,491 9,106 50,096 11,712 11,327 52,317 14,414 14,029 55,020
7 2,000 17,098 10,944 10,582 51,549 13,924 13,561 54,529 17,695 17,333 58,301
8 2,000 20,053 12,359 12,019 52,964 16,214 15,875 56,820 21,295 20,955 61,900
9 2,000 23,156 13,736 13,509 54,341 18,588 18,361 59,193 25,244 25,018 65,850
10 2,000 26,414 15,072 15,072 55,677 21,043 21,043 61,649 29,576 29,576 70,182
15 2,000 45,315 21,328 21,328 61,934 34,889 34,889 75,494 58,723 58,723 99,328
20 2,000 69,439 26,366 26,366 66,971 51,122 51,122 91,728 105,084 105,084 145,690
25 2,000 100,227 29,734 29,734 70,339 69,680 69,680 110,285 178,686 178,686 219,292
30 2,000 139,522 30,537 30,537 71,143 89,915 89,915 130,520 295,140 295,140 335,746
35 2,000 189,673 27,631 27,631 68,237 110,666 110,666 151,271 479,373 479,373 519,978
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
50
<PAGE> 57
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$2,000 ANNUAL PREMIUM: $40,605 SPECIFIED AMOUNT
MALE: NON-TOBACCO: SIMPLIFIED ISSUE: AGE 45
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 2,000 2,100 1,579 1,126 42,184 1,681 1,228 42,287 1,784 1,331 42,389
2 2,000 4,305 3,118 2,665 43,723 3,420 2,966 44,025 3,734 3,281 44,339
3 2,000 6,620 4,616 4,163 45,221 5,216 4,763 45,821 5,865 5,412 46,470
4 2,000 9,051 6,072 5,641 46,677 7,071 6,640 47,676 8,195 7,764 48,800
5 2,000 11,604 7,485 7,077 48,091 8,985 8,577 49,591 10,741 10,334 51,347
6 2,000 14,284 8,854 8,469 49,459 10,959 10,574 51,565 13,524 13,139 54,130
7 2,000 17,098 10,176 9,814 50,781 12,993 12,630 53,598 16,564 16,202 57,170
8 2,000 20,053 11,448 11,108 52,053 15,083 14,743 55,689 19,883 19,543 60,488
9 2,000 23,156 12,666 12,440 53,272 17,229 17,003 57,835 23,505 23,278 64,110
10 2,000 26,414 13,828 13,828 54,434 19,429 19,429 60,035 27,456 27,456 68,062
15 2,000 45,315 18,689 18,689 59,294 31,176 31,176 71,781 53,297 53,297 93,902
20 2,000 69,439 21,506 21,506 62,111 43,754 43,754 84,359 93,070 93,070 133,675
25 2,000 100,227 21,252 21,252 61,857 55,986 55,986 96,591 153,879 153,879 194,485
30 2,000 139,522 16,189 16,189 56,794 65,535 65,535 106,140 246,274 246,274 286,879
35 2,000 189,673 3,371 3,371 43,976 67,920 67,920 108,526 385,475 385,475 426,080
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
51
<PAGE> 58
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$5,000 ANNUAL PREMIUM: $114,019 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,291 3,019 114,019 4,558 3,286 114,019 4,825 3,553 114,019
2 5,000 10,763 8,507 7,234 114,019 9,306 8,034 114,019 10,138 8,866 114,019
3 5,000 16,551 12,646 11,373 114,019 14,251 12,979 114,019 15,987 14,715 114,019
4 5,000 22,628 16,712 15,503 114,019 19,405 18,196 114,019 22,433 21,224 114,019
5 5,000 29,010 20,700 19,555 114,019 24,772 23,626 114,019 29,532 28,387 114,019
6 0 30,460 19,975 18,893 114,019 25,447 24,365 114,019 32,163 31,082 114,019
7 0 31,983 19,232 18,214 114,019 26,127 25,109 114,019 35,047 34,029 114,019
8 0 33,582 18,468 17,514 114,019 26,811 25,857 114,019 38,211 37,257 114,019
9 0 35,261 17,685 17,049 114,019 27,500 26,864 114,019 41,688 41,052 114,019
10 0 37,024 16,873 16,873 114,019 28,186 28,186 114,019 45,506 45,506 114,019
15 0 47,254 12,337 12,337 114,019 31,571 31,571 114,019 71,267 71,267 114,019
20 0 60,309 6,421 6,421 114,019 34,445 34,445 114,019 113,599 113,599 138,591
25 0 76,971 (*) (*) (*) 35,716 35,716 114,019 181,626 181,626 210,686
30 0 98,237 (*) (*) (*) 32,871 32,871 114,019 290,627 290,627 310,971
35 0 125,378 (*) (*) (*) 20,885 20,885 114,019 466,657 466,657 489,989
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
52
<PAGE> 59
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$5,000 ANNUAL PREMIUM: $114,019 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,159 2,886 114,019 4,422 3,149 114,019 4,685 3,413 114,019
2 5,000 10,763 8,235 6,962 114,019 9,018 7,746 114,019 9,834 8,561 114,019
3 5,000 16,551 12,229 10,956 114,019 13,798 12,526 114,019 15,496 14,223 114,019
4 5,000 22,628 16,142 14,933 114,019 18,770 17,561 114,019 21,727 20,518 114,019
5 5,000 29,010 19,974 18,829 114,019 23,944 22,798 114,019 28,589 27,444 114,019
6 0 30,460 19,078 17,996 114,019 24,402 23,320 114,019 30,945 29,864 114,019
7 0 31,983 18,147 17,129 114,019 24,839 23,821 114,019 33,514 32,496 114,019
8 0 33,582 17,174 16,220 114,019 25,247 24,293 114,019 36,314 35,360 114,019
9 0 35,261 16,151 15,514 114,019 25,619 24,983 114,019 39,369 38,732 114,019
10 0 37,024 15,069 15,069 114,019 25,947 25,947 114,019 42,703 42,703 114,019
15 0 47,254 8,481 8,481 114,019 26,597 26,597 114,019 64,815 64,815 114,019
20 0 60,309 (*) (*) (*) 24,190 24,190 114,019 101,107 101,107 123,350
25 0 76,971 (*) (*) (*) 14,938 14,938 114,019 159,556 159,556 185,085
30 0 98,237 (*) (*) (*) (*) (*) (*) 252,154 252,154 269,805
35 0 125,378 (*) (*) (*) (*) (*) (*) 400,851 400,851 420,893
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
53
<PAGE> 60
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$5,000 ANNUAL PREMIUM: $103,521 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,306 3,151 107,827 4,573 3,418 108,094 4,841 3,685 108,362
2 5,000 10,763 8,526 7,371 112,047 9,325 8,170 112,847 10,157 9,002 113,678
3 5,000 16,551 12,658 11,502 116,179 14,261 13,105 117,782 15,993 14,838 119,515
4 5,000 22,628 16,704 15,606 120,225 19,388 18,291 122,909 22,404 21,307 125,926
5 5,000 29,010 20,657 19,618 124,179 24,707 23,667 128,228 29,439 28,400 132,961
6 5,000 35,710 24,522 23,540 128,043 30,227 29,245 133,748 37,164 36,182 140,685
7 5,000 42,746 28,293 27,369 131,815 35,953 35,029 139,474 45,643 44,718 149,164
8 5,000 50,133 31,971 31,105 135,493 41,890 41,024 145,411 54,950 54,084 158,471
9 5,000 57,889 35,558 34,980 139,079 48,048 47,471 151,569 65,171 64,593 168,692
10 5,000 66,034 39,046 39,046 142,567 54,428 54,428 157,949 76,389 76,389 179,910
15 5,000 113,287 55,493 55,493 159,014 90,520 90,520 194,042 152,000 152,000 255,521
20 5,000 173,596 69,077 69,077 172,598 133,213 133,213 236,734 272,686 272,686 376,207
25 5,000 250,567 78,844 78,844 182,366 182,703 182,703 286,224 465,021 465,021 568,542
30 5,000 348,804 82,881 82,881 186,402 238,011 238,011 341,532 770,716 770,716 874,238
35 5,000 474,182 78,731 78,731 182,252 297,141 297,141 400,662 1,256,583 1,256,583 1,360,104
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
54
<PAGE> 61
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$5,000 ANNUAL PREMIUM: $103,521 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 45
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 5,000 5,250 4,180 3,024 107,701 4,443 3,288 107,964 4,706 3,551 108,227
2 5,000 10,763 8,262 7,107 111,783 9,046 7,890 112,567 9,861 8,705 113,382
3 5,000 16,551 12,248 11,092 115,769 13,813 12,658 117,334 15,507 14,351 119,028
4 5,000 22,628 16,134 15,036 119,655 18,750 17,652 122,271 21,691 20,593 125,212
5 5,000 29,010 19,920 18,880 123,441 23,858 22,819 127,380 28,465 27,425 131,986
6 5,000 35,710 23,602 22,620 127,123 29,142 28,160 132,663 35,883 34,901 139,405
7 5,000 42,746 27,175 26,251 130,696 34,601 33,677 138,122 44,005 43,081 147,526
8 5,000 50,133 30,634 29,768 134,156 40,236 39,370 143,757 52,894 52,027 156,415
9 5,000 57,889 33,974 33,396 137,495 46,046 45,468 149,567 62,619 62,042 166,140
10 5,000 66,034 37,187 37,187 140,708 52,030 52,030 155,551 73,258 73,258 176,779
15 5,000 113,287 51,171 51,171 154,692 84,551 84,551 188,072 143,444 143,444 246,965
20 5,000 173,596 60,809 60,809 164,330 120,924 120,924 224,445 253,129 253,129 356,650
25 5,000 250,567 64,135 64,135 167,656 159,381 159,381 262,902 423,868 423,868 527,389
30 5,000 348,804 57,829 57,829 161,350 196,058 196,058 299,579 688,770 688,770 792,291
35 5,000 474,182 36,319 36,319 139,840 223,193 223,193 326,714 1,098,021 1,098,021 1,201,543
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
55
<PAGE> 62
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $301,625 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 17,219 12,612 301,625 18,290 13,683 301,625 19,362 14,755 301,625
2 20,000 43,050 34,140 29,533 301,625 37,351 32,744 301,625 40,691 36,083 301,625
3 20,000 66,203 50,782 46,175 301,625 57,238 52,630 301,625 64,217 59,610 301,625
4 20,000 90,513 67,147 62,770 301,625 77,990 73,613 301,625 90,181 85,804 301,625
5 20,000 116,038 83,219 79,072 301,625 99,636 95,490 301,625 118,836 114,689 301,625
6 0 121,840 80,411 76,495 301,625 102,519 98,603 301,625 129,664 125,748 301,625
7 0 127,932 77,510 73,824 301,625 105,434 101,748 301,625 141,575 137,889 301,625
8 0 134,329 74,485 71,030 301,625 108,359 104,904 301,625 154,679 151,223 301,625
9 0 141,045 71,326 69,022 301,625 111,293 108,990 301,625 169,121 166,817 301,625
10 0 148,097 68,037 68,037 301,625 114,247 114,247 301,625 185,075 185,075 301,625
15 0 189,014 48,054 48,054 301,625 128,364 128,364 301,625 294,478 294,478 341,595
20 0 241,235 17,507 17,507 301,625 138,985 138,985 301,625 472,509 472,509 505,585
25 0 307,884 (*) (*) (*) 141,234 141,234 301,625 760,267 760,267 798,281
30 0 392,947 (*) (*) (*) 124,862 124,862 301,625 1,217,535 1,217,535 1,278,412
35 0 501,511 (*) (*) (*) 59,677 59,677 301,625 1,935,318 1,935,318 2,032,083
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY OR THE TRUST THAT THESE
HYPOTHETICAL RATES OF RETURN CAN BE ACHIEVED FOR ANY ONE YEAR OR SUSTAINED OVER
ANY PERIOD OF TIME.
56
<PAGE> 63
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $301,625 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,081 11,474 301,625 17,117 12,510 301,625 18,155 13,548 301,625
2 20,000 43,050 31,805 27,198 301,625 34,883 30,275 301,625 38,086 33,479 301,625
3 20,000 66,203 47,188 42,581 301,625 53,347 48,740 301,625 60,015 55,408 301,625
4 20,000 90,513 62,237 57,860 301,625 72,558 68,181 301,625 84,184 79,807 301,625
5 20,000 116,038 76,955 72,808 301,625 92,570 88,423 301,625 110,875 106,728 301,625
6 0 121,840 72,607 68,691 301,625 93,579 89,663 301,625 119,426 115,509 301,625
7 0 127,932 67,951 64,265 301,625 94,347 90,661 301,625 128,709 125,023 301,625
8 0 134,329 62,922 59,466 301,625 94,816 91,360 301,625 138,800 135,345 301,625
9 0 141,045 57,453 55,149 301,625 94,923 92,619 301,625 149,795 147,491 301,625
10 0 148,097 51,472 51,472 301,625 94,602 94,602 301,625 161,814 161,814 301,625
15 0 189,014 10,890 10,890 301,625 83,750 83,750 301,625 243,970 243,970 301,625
20 0 241,235 (*) (*) (*) 42,243 42,243 301,625 385,307 385,307 412,279
25 0 307,884 (*) (*) (*) (*) (*) (*) 612,829 612,829 643,471
30 0 392,947 (*) (*) (*) (*) (*) (*) 963,397 963,397 1,011,567
35 0 501,511 (*) (*) (*) (*) (*) (*) 1,486,642 1,486,642 1,560,974
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 64
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $271,462 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 17,271 13,125 288,733 18,342 14,195 289,804 19,413 15,266 290,875
2 20,000 43,050 34,168 30,021 305,630 37,371 33,224 308,833 40,702 36,555 312,164
3 20,000 66,203 50,702 46,556 322,164 57,123 52,977 328,585 64,064 59,918 335,526
4 20,000 90,513 66,864 62,925 338,326 77,613 73,674 349,075 89,694 85,755 361,156
5 20,000 116,038 82,622 78,890 354,084 98,834 95,102 370,296 117,783 114,051 389,245
6 20,000 142,840 97,989 94,465 369,451 120,824 117,299 392,286 148,588 145,063 420,050
7 20,000 170,982 112,959 109,641 384,421 143,600 140,283 415,062 182,370 179,052 453,832
8 20,000 200,531 127,503 124,393 398,965 167,163 164,053 438,625 219,397 216,287 490,859
9 20,000 231,558 141,620 139,547 413,082 191,536 189,463 462,998 259,988 257,915 531,450
10 20,000 264,136 155,325 155,325 426,787 216,763 216,763 488,225 304,517 304,517 575,979
15 20,000 453,150 218,239 218,239 489,701 357,592 357,592 629,054 602,578 602,578 874,040
20 20,000 694,385 265,419 265,419 536,881 518,819 518,819 790,281 1,072,248 1,072,248 1,343,710
25 20,000 1,002,269 291,795 291,795 563,257 697,917 697,917 969,379 1,812,137 1,812,137 2,083,599
30 20,000 1,395,216 290,557 290,557 562,019 889,293 889,293 1,160,756 2,979,455 2,979,455 3,250,917
35 20,000 1,896,726 249,775 249,775 521,237 1,079,693 1,079,693 1,351,155 4,822,266 4,822,266 5,093,728
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 65
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $271,462 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 55
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL PREMIUMS CASH NET CASH NET CASH NET
CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,184 12,038 287,646 17,220 13,073 288,682 18,257 14,110 289,719
2 20,000 43,050 31,877 27,730 303,339 34,940 30,794 306,402 38,128 33,982 309,590
3 20,000 66,203 47,072 42,926 318,534 53,168 49,022 324,630 59,765 55,618 331,227
4 20,000 90,513 61,751 57,812 333,213 71,898 67,958 343,360 83,317 79,378 354,779
5 20,000 116,038 75,889 72,157 347,351 91,116 87,384 362,578 108,945 105,213 380,407
6 20,000 142,840 89,459 85,934 360,921 110,807 107,282 382,269 136,821 133,297 408,283
7 20,000 170,982 102,431 99,114 373,893 130,950 127,633 402,413 167,134 163,817 438,596
8 20,000 200,531 114,758 111,648 386,220 151,507 148,397 422,969 200,069 196,959 471,531
9 20,000 231,558 126,392 124,318 397,854 172,434 170,361 443,896 235,832 233,759 507,294
10 20,000 264,136 137,288 137,288 408,750 193,690 193,690 465,152 274,652 274,652 546,114
15 20,000 453,150 179,287 179,287 450,749 303,404 303,404 574,866 524,459 524,459 795,921
20 20,000 694,385 193,401 193,401 464,863 410,516 410,516 681,978 897,812 897,812 1,169,274
25 20,000 1,002,269 165,230 165,230 436,692 495,149 495,149 766,611 1,449,402 1,449,402 1,720,864
30 20,000 1,395,216 76,531 76,531 347,993 527,482 527,482 798,944 2,262,330 2,262,330 2,533,792
35 20,000 1,896,726 (*) (*) (*) 454,371 454,371 725,833 3,451,917 3,451,917 3,723,379
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 66
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $205,135 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,618 11,732 205,135 17,673 12,786 205,135 18,728 13,842 205,135
2 20,000 43,050 32,941 28,054 205,135 36,092 31,206 205,135 39,372 34,485 205,135
3 20,000 66,203 48,992 44,105 205,135 55,327 50,441 205,135 62,184 57,297 205,135
4 20,000 90,513 64,779 60,137 205,135 75,440 70,798 205,135 87,442 82,800 205,135
5 20,000 116,038 80,339 75,941 205,135 96,529 92,131 205,135 115,498 111,100 205,135
6 0 121,840 76,906 72,753 205,135 98,778 94,625 205,135 125,708 121,555 205,135
7 0 127,932 73,232 69,323 205,135 100,961 97,052 205,135 136,997 133,088 205,135
8 0 134,329 69,291 65,627 205,135 103,072 99,407 205,135 149,534 145,869 205,135
9 0 141,045 65,045 62,602 205,135 105,098 102,654 205,135 163,519 161,076 205,135
10 0 148,097 60,430 60,430 205,135 107,010 107,010 205,135 179,187 179,187 205,135
15 0 189,014 29,550 29,550 205,135 114,133 114,133 205,135 287,698 287,698 302,083
20 0 241,235 (*) (*) (*) 113,840 113,840 205,135 460,496 460,496 483,521
25 0 307,884 (*) (*) (*) 94,478 94,478 205,135 731,738 731,738 768,325
30 0 392,947 (*) (*) (*) 15,855 15,855 205,135 1,166,147 1,166,147 1,177,808
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 67
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 1
$20,000 ANNUAL PREMIUM: $205,135 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL CASH NET CASH NET CASH NET
PREMIUMS CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 14,205 9,319 205,135 15,188 10,302 205,135 16,174 11,288 205,135
2 20,000 43,050 28,074 23,187 205,135 30,954 26,067 205,135 33,958 29,072 205,135
3 20,000 66,203 41,640 36,754 205,135 47,385 42,499 205,135 53,624 48,737 205,135
4 20,000 90,513 54,939 50,297 205,135 64,586 59,944 205,135 75,496 70,854 205,135
5 20,000 116,038 67,999 63,601 205,135 82,675 78,277 205,135 99,971 95,573 205,135
6 0 121,840 61,657 57,503 205,135 81,451 77,297 205,135 106,042 101,889 205,135
7 0 127,932 54,577 50,668 205,135 79,596 75,686 205,135 112,561 108,652 205,135
8 0 134,329 46,582 42,917 205,135 76,953 73,288 205,135 119,588 115,924 205,135
9 0 141,045 37,460 35,016 205,135 73,337 70,894 205,135 127,215 124,772 205,135
10 0 148,097 26,972 26,972 205,135 68,532 68,532 205,135 135,581 135,581 205,135
15 0 189,014 (*) (*) (*) 15,446 15,446 205,135 198,356 198,356 208,274
20 0 241,235 (*) (*) (*) (*) (*) (*) 311,439 311,439 327,011
25 0 307,884 (*) (*) (*) (*) (*) (*) 480,207 480,207 504,217
30 0 392,947 (*) (*) (*) (*) (*) (*) 746,244 746,244 753,706
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 68
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $194,739 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
CURRENT VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL PREMIUMS CASH NET CASH NET CASH NET
CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 16,547 11,908 211,285 17,594 12,955 212,332 18,642 14,003 213,381
2 20,000 43,050 32,613 27,974 227,351 35,722 31,083 230,460 38,957 34,318 233,695
3 20,000 66,203 48,191 43,552 242,929 54,391 49,752 249,129 61,097 56,458 255,836
4 20,000 90,513 63,246 58,839 257,984 73,579 69,172 268,318 85,205 80,798 279,943
5 20,000 116,038 77,770 73,595 272,509 93,294 89,119 288,032 111,462 107,287 306,201
6 20,000 142,840 91,757 87,814 286,496 113,540 109,596 308,278 140,070 136,127 334,809
7 20,000 170,982 105,157 101,446 299,895 134,280 130,569 329,019 171,208 167,497 365,947
8 20,000 200,531 117,963 114,484 312,701 155,519 152,040 350,258 205,115 201,636 399,853
9 20,000 231,558 130,153 127,834 324,892 177,246 174,926 371,984 242,039 239,720 436,778
10 20,000 264,136 141,679 141,679 336,418 199,420 199,420 394,159 282,225 282,225 476,963
15 20,000 453,150 190,197 190,197 384,936 318,421 318,421 513,160 545,952 545,952 740,690
20 20,000 694,385 216,571 216,571 411,309 444,024 444,024 638,763 949,833 949,833 1,144,572
25 20,000 1,002,269 212,426 212,426 407,165 566,208 566,208 760,946 1,568,052 1,568,052 1,762,790
30 20,000 1,395,216 167,420 167,420 362,158 669,255 669,255 863,994 2,516,798 2,516,798 2,711,536
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) CURRENT VALUES REFLECT CURRENT COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $5 PER MONTH.
(3) NET INVESTMENT RETURNS ARE CALCULATED AS THE HYPOTHETICAL GROSS INVESTMENT
RETURN LESS ALL CHARGES AND DEDUCTIONS SHOWN IN THE PROSPECTUS APPENDIX.
THE HYPOTHETICAL INVESTMENT RATES OF RETURN SHOWN ABOVE AND ELSEWHERE IN THIS
PROSPECTUS ARE ILLUSTRATIVE ONLY AND SHOULD NOT BE DEEMED A REPRESENTATION OF
PAST OR FUTURE INVESTMENT RATES OF RETURN. ACTUAL RATES OF RETURN MAY BE MORE OR
LESS THAN THOSE SHOWN AND WILL DEPEND ON A NUMBER OF FACTORS, INCLUDING THE
INVESTMENT ALLOCATIONS MADE BY AN OWNER, PREVAILING RATES AND RATES OF
INFLATION. THE DEATH BENEFIT AND CASH VALUE FOR A POLICY WOULD BE DIFFERENT FROM
THOSE SHOWN IF THE ACTUAL RATES OF RETURN AVERAGED 0%, 6% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 69
<TABLE>
<CAPTION>
DEATH BENEFIT OPTION 2
$20,000 ANNUAL PREMIUM: $194,739 SPECIFIED AMOUNT
MALE: NON-TOBACCO: PREFERRED ISSUE: AGE 65
GUARANTEED VALUES
0.00% HYPOTHETICAL 6.00% HYPOTHETICAL 12.00% HYPOTHETICAL
GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN GROSS INVESTMENT RETURN
ANNUAL PREMIUMS CASH NET CASH NET CASH NET
CASH SURR DEATH CASH SURR DEATH CASH SURR DEATH
YEAR PAID AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 20,000 21,000 14,065 9,426 208,804 15,033 10,394 209,771 16,003 11,364 210,741
2 20,000 43,050 27,434 22,795 222,172 30,225 25,586 224,964 33,136 28,497 227,875
3 20,000 66,203 40,082 35,444 234,821 45,548 40,910 240,287 51,479 46,840 246,217
4 20,000 90,513 51,978 47,571 246,716 60,962 56,555 255,700 71,106 66,699 265,844
5 20,000 116,038 63,071 58,896 257,810 76,406 72,231 271,145 92,083 87,908 286,822
6 20,000 142,840 73,294 69,351 268,032 91,798 87,855 286,537 114,461 110,518 309,200
7 20,000 170,982 82,559 78,848 277,298 107,032 103,321 301,771 138,276 134,565 333,014
8 20,000 200,531 90,758 87,279 285,497 121,972 118,493 316,710 163,539 160,060 358,278
9 20,000 231,558 97,782 95,462 292,520 136,475 134,155 331,213 190,265 187,945 385,003
10 20,000 264,136 103,541 103,541 298,279 150,410 150,410 345,149 218,487 218,487 413,225
15 20,000 453,150 111,282 111,282 306,020 207,629 207,629 402,368 384,589 384,589 579,328
20 20,000 694,385 73,398 73,398 268,136 226,517 226,517 421,255 595,047 595,047 789,786
25 20,000 1,002,269 (*) (*) (*) 168,760 168,760 363,499 843,370 843,370 1,038,109
30 20,000 1,395,216 (*) (*) (*) (*) (*) (*) 1,119,536 1,119,536 1,314,275
</TABLE>
(1) ASSUMES NO POLICY LOANS AND NO PARTIAL WITHDRAWALS HAVE BEEN MADE.
(2) GUARANTEED VALUES REFLECT GUARANTEED COST OF INSURANCE CHARGES AND AN
ADMINISTRATIVE EXPENSE CHARGE OF $7.50 PER MONTH.
(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% OR 12% OVER A PERIOD
OF YEARS BUT ALSO FLUCTUATED ABOVE OR BELOW THOSE AVERAGES FOR INDIVIDUAL POLICY
YEARS. NO REPRESENTATIONS CAN BE MADE BY THE COMPANY 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> 70
<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> 71
<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> 72
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Post-Effective Amendment No. 11 to Form S-6 Registration Statement
comprises the following papers and documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 122 pages.
Representations and Undertakings.
Independent Auditors' Consent.
The Signatures.
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<CAPTION>
<S> <C>
1. Power of Attorney dated July 26, 2000. Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for
authorizing the establishment of the Registrant, the Nationwide VL Separate Account-A (File No. 811-6137),
adopted. and hereby incorporated herein by reference.
3. Distribution Contracts Included with the Registration Statement on Form N-8B-2 for
the Nationwide VL Separate Account-A (File No. 811-6137),
and hereby incorporated herein by reference.
4. Form of Security Included with Pre-Effective Amendment No. 1 and hereby
incorporated herein by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for
the Nationwide VL Separate Account-A (File No. 811-6137),
and hereby incorporated herein by reference.
6. Application form of Security Included with Pre-Effective Amendment No. 1 and hereby
incorporated herein by reference.
7. Opinion of Counsel Included with Pre-Effective Amendment No. 1 and hereby
incorporated herein by reference.
</TABLE>
64
<PAGE> 73
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and Nationwide hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940 (the "1940 Act"). The Registrant and
Nationwide elect to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the
1940 Act with respect to the policies described in the prospectus. The
policies have been designed in such a way as to qualify for the exemptive
relief from various provisions of the 1940 Act afforded by Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by Nationwide under the policies. Nationwide represents that the
risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by Nationwide, and will be
made available to the Securities and Exchange Commission (the
"Commission") 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 Commission on request a memorandum setting forth the
basis for this representation.
(d) Nationwide represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of Nationwide,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and
reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred in
that section.
(f) Represent that the fees and charges deducted under the contract in the
aggregate are reasonable in relation to the services rendered, the
expenses expected to be incurred, and the risks assumed by Nationwide.
65
<PAGE> 74
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
66
<PAGE> 75
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
the Securities Act Rule 485(b) for effectiveness of the Post-Effective Amendment
No. 12 and has duly caused this Post-Effective Amendment No. 12 to be signed on
its behalf by the undersigned thereunto duly authorized and its seal to hereunto
affixed and attested, all in the City of Columbus, and State of Ohio, on this
20TH day of SEPTEMBER, 2000.
<TABLE>
<CAPTION>
<S> <C>
NATIONWIDE VLI SEPARATE ACCOUNT-2
--------------------------------------------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
Attest: --------------------------------------------------------------------
(Depositor)
By: /s/ GLENN W. SODEN By: STEVEN SAVINI, ESQ.
---------------------------------------------- ----------------------------------------------------------------
Glenn W. Soden Steven Savini, Esq.
Assistant Secretary
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment No. 12 has been signed below by the following persons in the
capacities indicated on the 20TH day of SEPTEMBER, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
----------------------------------------
Lewis J. Alphin
A. I. BELL Director
----------------------------------------
A. I. Bell
NANCY C. BREIT Director
----------------------------------------
Nancy C. Breit
KENNETH D. DAVIS Director
----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
----------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
----------------------------------------
Willard J. Engel
FRED C. FINNEY Director
----------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief Operating
----------------------------------------
Joseph J. Gasper Officer and Director
W.G. JURGENSEN Chief Executive Officer Elect
----------------------------------------
W.G. Jurgensen and Director
DIMON R. MCFERSON Chairman and Chief Executive
----------------------------------------
Dimon R. McFerson Officer and Director
DAVID O. MILLER Chairman of the Board and
----------------------------------------
David O. Miller Director
YVONNE L. MONTGOMERY Director
----------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
----------------------------------------
Robert A. Oakley Financial Officer
RALPH M. PAIGE Director
----------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
----------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /s/ STEVEN SAVINI
---------------------------------------- --------------------------------------
Arden L. Shisler Steven Savini
ROBERT L. STEWART Director Attorney-in-Fact
----------------------------------------
Robert L. Stewart
</TABLE>
67
