Registration No. 333-69160
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
PRE-EFFECTIVE AMENDMENT NO. 1 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-4
(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)
----------------------------
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement. December 31, 2001 requested.)
The Registrant hereby agrees to amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
1.....................................................................Nationwide Life Insurance Company
The Variable Account
2.....................................................................Nationwide Life Insurance Company
3.....................................................................Custodian of Assets
4.....................................................................Distribution of the Policies
5.....................................................................The Variable Account
6.....................................................................Not Applicable
7.....................................................................Not Applicable
8.....................................................................Not Applicable
9.....................................................................Legal Proceedings
10.....................................................................Information About the Policies; How the Cash Value
Varies; Right to Exchange for a Fixed Benefit
Policy; Reinstatement; Other Policy Provisions
11 Investments of the Variable Account
12.....................................................................The Variable Account
13.....................................................................Policy Charges
Reinstatement
14.....................................................................Underwriting and Issuance - Premium Payments,
Minimum Requirements for Issuance of a Policy
15.....................................................................Investments of the Variable Account; Premium
Payments
16.....................................................................Underwriting and Issuance - Allocation of Cash Value
17.....................................................................Surrendering the Policy for Cash
18.....................................................................Reinvestment
19.....................................................................Not Applicable
20.....................................................................Not Applicable
21.....................................................................Policy Loans
22.....................................................................Not Applicable
23.....................................................................Not Applicable
24.....................................................................Not Applicable
25.....................................................................Nationwide Life Insurance Company
26.....................................................................Not Applicable
27.....................................................................Nationwide Life Insurance Company
28.....................................................................Company Management
29.....................................................................Company Management
30.....................................................................Not Applicable
31.....................................................................Not Applicable
32.....................................................................Not Applicable
33.....................................................................Not Applicable
34.....................................................................Not Applicable
35.....................................................................Nationwide Life Insurance Company
36.....................................................................Not Applicable
37.....................................................................Not Applicable
N-8B-2 ITEM CAPTION IN PROSPECTUS
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 OF CONTENTS
- - What should I know about this and other variable life insurance products before purchasing a variable life insurance
policy?........................................................................................................................
- - How can I obtain additional information about Nationwide and this variable life insurance policy? .........................
- - GLOSSARY OF SPECIAL TERMS..................................................................................................
- - POLICY EXPENSES
- - How much does this variable life insurance policy cost?....................................................................
- - INVESTMENT OPTIONS
- - What underlying mutual funds are available in this variable life insurance policy and how much does each fund cost, after
expense reimbursement?.........................................................................................................
- - What are the underlying mutual fund expenses before expense reimbursement? ................................................
- - Are there any other investment options available to me?....................................................................
- - MORE INFORMATION ABOUT THIS POLICY
- - Ok. Now that I know a little more about where I can invest my money, describe this policy in detail.......................
- - Are there any criteria for purchasing this policy?.........................................................................
- - What is the minimum amount of premium you will accept?.....................................................................
- - Tell me more about the charges I must pay in order to make sure a death benefit is paid if the insured dies. ..............
- - RIGHT TO CANCEL
- - What if I decide I don't want this policy after I purchase it?.............................................................
- - ALLOCATION OF PREMIUM PAYMENTS
- - I've decided I want to purchase this policy. What happens after I send in my initial premium payment?.....................
- - When will my premium payments be allocated to my requested sub-account options? ...........................................
- - VALUING ACCOUNT VALUES
- - Once my premium payments can be applied to my policy, how much can my premium purchase?....................................
- - TRANSFERRING ALLOCATIONS
- - May I make transfers between investment options?...........................................................................
- - How do I make transfers? ..................................................................................................
- - CASH VALUE AND SURRENDERS
- - Does my policy have any value besides death benefit value?.................................................................
- - What if I want to take a partial or total surrender? What happens next?...................................................
- - Will partial surrenders have any effect on my policy's cash value?.........................................................
- - Will I have to pay taxes on any amounts surrendered?.......................................................................
- - POLICY LOANS
- - May I take a loan against my policy?.......................................................................................
- - Will my loan have any effect on investment performance?....................................................................
- - What about interest?.......................................................................................................
- - Will a loan have any effect on my death benefit amount or cash value amount?...............................................
- - When and how do I make loan repayments?....................................................................................
- - DEATH BENEFIT
- - Do I have a choice of death benefit options?...............................................................................
- - May I ever change the specified amount after my policy is issued?..........................................................
- - May I change my death benefit option after my policy is issued?............................................................
- - What happens once the insured dies?........................................................................................
- - How is the death benefit distributed?......................................................................................
- - Earlier you mentioned a maturity date. What is the maturity date?..........................................................
- - What if I don't want to get paid the policy's cash value on the maturity date? May I extend the maturity date? ...........
- - ASSIGNMENT
- - May I ever assign my policy?...............................................................................................
- - POLICY LAPSE AND REINSTATEMENT
- - Can my policy ever lapse and what happens if it does?......................................................................
- - PERIODIC INFORMATION
- - Will I ever receive periodic information from you about my policy?.........................................................
- - POLICY OWNER AND BENEFICIARY
- - Tell me more about my rights as policy owner as well as the rights of the beneficiary. Does the insured have any rights
under the policy if I am not the insured?..................................................................................
- - TAX INFORMATION
- - Tell me more about how my life insurance policy is taxed. What should I look out for?.....................................
- - MORE INFORMATION ABOUT NATIONWIDE
- - Tell me a little more about Nationwide and the variable account............................................................
- - OTHER GENERAL INFORMATION
- - Legal Considerations.......................................................................................................
- - State Regulation...........................................................................................................
- - Advertising................................................................................................................
- - Legal Proceedings..........................................................................................................
- - Experts....................................................................................................................
- - Registration Statement.....................................................................................................
- - Who is the general distributor (principal underwriter) for this policy?....................................................
- - How are the policies sold (distributed)?...................................................................................
APPENDIX A: OBJECTIVES FOR THE UNDERLYING MUTUAL FUNDS.........................................................................
APPENDIX B: PERFORMANCE SUMMARY INFORMATION....................................................................................
APPENDIX C: FINANCIAL STATEMENTS...............................................................................................
NATIONWIDE LIFE INSURANCE COMPANY
Flexible Premium Variable Universal Life Insurance Policies
Issued by Nationwide Life Insurance Company through its
Nationwide VLI Separate Account-4
The date of this prospectus is December 31, 2001.
WHAT SHOULD I KNOW ABOUT THIS AND OTHER VARIABLE LIFE INSURANCE PRODUCTS BEFORE
PURCHASING A VARIABLE LIFE INSURANCE POLICY?
Variable life insurance policies are complex products with unique benefits and
advantages that may be particularly useful for certain individuals with life
insurance and estate planning needs. There are, however, costs and charges
associated with benefits that variable life insurance products provide - costs
and charges that may not be present in term or universal life insurance
policies, as well as other investment products such as mutual funds or
annuities. With help from a financial consultant, you are encouraged to evaluate
your particular needs - whether estate planning, investment or otherwise - in
order to determine if a variable life insurance policy is the right financial
instrument to meet your needs. This process will aid you in determining whether
the purchase of the variable life insurance policy described in this prospectus
is consistent with your goals, risk tolerance, time horizon, family situation,
tax situation and other personal needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THIS VARIABLE
LIFE INSURANCE POLICY BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY
AND KEEP IT FOR FUTURE REFERENCE.
The life insurance policies offered by this prospectus are flexible premium
variable universal life insurance policies (flexible premium variable adjustable
life insurance policies in Puerto Rico). They provide flexibility to vary the
amount and frequency of premium payments. A cash surrender value may be offered
if you terminate your policy 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-4 (the "variable account") or
the fixed account, depending on how premium payments are invested.
PLEASE REMEMBER THAT THIS POLICY:
- - IS NOT A BANK DEPOSIT
- - IS NOT FDIC INSURED
- - IS NOT INSURED OR ENDORSED BY A BANK OR ANY FEDERAL GOVERNMENT AGENCY
- - IS NOT AVAILABLE IN EVERY STATE
- - MAY GO DOWN IN VALUE
You assume certain risks when investing in the policies, including the risk of
losing money.
We guarantee to keep your policy in force so long as minimum premium
requirements have been met. We guarantee the death benefit for as long as your
policy is in force. The cash surrender value is not guaranteed. Your policy will
lapse if the cash surrender value is insufficient to cover policy charges.
Benefits described in this prospectus may not be available in every jurisdiction
- - please 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.
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.
HOW CAN I OBTAIN ADDITIONAL INFORMATION ABOUT NATIONWIDE AND THIS VARIABLE LIFE
INSURANCE POLICY?
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 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 in this prospectus can be found on the SEC
website at:
www.sec.gov
Information about this and other Best of America products can be found on the
worldwide web at:
www.bestofamerica.com
2
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.
BENEFICIARY- The person to whom death benefit proceeds are paid.
CASH VALUE- The sum of the value of all variable account accumulation units
attributable to your policy plus amounts credited to the fixed account and your
policy loan account, if any.
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.
INSURED- The person whose life is covered by this policy.
MATURITY DATE- The policy anniversary on or next following the insured's 100th
birthday.
MINIMUM REQUIRED DEATH BENEFIT- The lowest death benefit that will qualify the
policy as life insurance under Section 7702 of the Internal Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company. "We", "our" and "us" refer to
Nationwide.
NET AMOUNT AT RISK- The death benefit minus the cash value. On the monthly
anniversary date, the net amount at risk is the death benefit minus the cash
value prior to subtraction of the base policy cost of insurance charge (which
consists of the administrative charge, per unit charge, and Mortality and
Expense Risk fee).
NET PREMIUMS- The actual premiums minus the percent of premium charges. The
percent of premium charges are shown on the policy data page.
POLICY OWNER- The policy owner has all rights under this policy. The policy
owner is the person or entity whose name is on the application unless later
changed. "You" or "your" refer to the policy owner.
SPECIFIED AMOUNT- The dollar amount used to determine the death benefit of your
policy. Your specified amount is listed on your 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.
VALUATION PERIOD- Each day the New York Stock Exchange is open.
VARIABLE ACCOUNT- Nationwide VLI Separate Account-4, a separate account of
Nationwide 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
POLICY EXPENSES
HOW MUCH DOES THIS VARIABLE LIFE INSURANCE POLICY COST?
There are certain charges associated with the policy, in addition to those
charges assessed by the underlying mutual funds. Below is a summary of those
charges. A detailed summary of the charges assessed to your individual policy
can be found on the policy data page that is issued with your policy.
SOME CHARGES ARE TAKEN MONTHLY. THOSE CHARGES ARE:
THE MORTALITY AND EXPENSE RISK CHARGE
The amount charged for mortality and expense risks depends on how long you have
owned your policy.
- - For policy years 1-15, a charge at an annualized rate of 0.80% of the
policy's variable account assets are assessed on each monthly anniversary
day.
- - For policy years 16 and after, a charge at an annualized rate of 0.30% of
the policy's variable account assets are assessed on each monthly
anniversary day.
PER $1,000 OF SPECIFIED AMOUNT CHARGE................................................maximum of $0.30 per $1,000 of specified amount
(This charge is assessed monthly during the first two policy years only)
MONTHLY POLICY EXPENSE CHARGE.................................................................................... a maximum of $7.50
COST OF INSURANCE CHARGE...............................................................................varies based on insurability.
SOME CHARGES ARE TAKEN AS A RESULT OF AN ACTION TAKEN BY YOU. FOR INSTANCE, A
SURRENDER CHARGE IS ASSESSED IF YOU SURRENDER A PART OR ALL OF YOUR POLICY PRIOR
TO THE END OF THE SURRENDER PERIOD. THE CHARGES THAT FALL WITHIN THIS CATEGORY
ARE:
MAXIMUM SURRENDER CHARGE.................................................22.50% multiplied by the lesser of (a) or (b),where:
(a)= the specified amount selected by
the policy owner multiplied by the
rate indicated on Chart 1 below,
divided by 1,000; and
(b) = premiums paid by the policy
owner during the first two policy
years
Plus (c) multiplied by (d) where:
(c) = the specified amount divided by
1,000; and
(d) = the administrative target
component as illustrated by Chart 2
below; this factor allows the
company to account for the
probability (at various ages) that
death will occur and no CDSC will
be recouped.
CHART 1
AGE MALE FEMALE MALE FEMALE
NON-TOBACCO NON-TOBACCO TOBACCO TOBACCO
18 $5.21 $4.36 $6.91 $5.17
19 5.40 4.54 7.17 5.39
20 5.63 4.76 7.47 5.65
21 5.84 4.96 7.76 5.90
22 6.07 5.17 8.06 6.15
23 6.31 5.39 8.38 6.42
24 6.56 5.62 8.73 6.70
AGE MALE FEMALE MALE FEMALE
NON-TOBACCO NON-TOBACCO TOBACCO TOBACCO
25 $6.84 $5.86 $9.11 $7.00
26 7.13 6.12 9.51 7.32
27 7.45 6.39 9.94 7.65
28 7.78 6.68 10.41 8.01
29 8.14 6.99 10.90 8.38
30 8.56 7.34 11.46 8.81
31 8.96 7.68 12.03 9.22
32 9.39 8.04 12.62 9.66
4
AGE MALE FEMALE MALE FEMALE
NON-TOBACCO NON-TOBACCO TOBACCO TOBACCO
33 $ 9.85 $ 8.42 $13.26 $10.12
34 0.34 8.82 13.93 10.61
35 10.85 9.24 14.65 11.13
36 11.39 9.69 15.41 11.67
37 11.97 10.16 16.21 12.24
38 12.58 10.66 17.06 12.85
39 13.23 11.18 17.96 13.48
40 13.95 11.77 18.94 14.17
41 14.67 12.35 19.95 14.86
42 15.44 12.95 21.00 15.58
43 16.26 13.60 22.12 16.34
44 17.12 14.27 23.30 17.13
45 18.04 14.99 24.55 17.96
46 19.02 15.74 25.86 18.83
47 20.06 16.55 27.26 19.75
48 21.16 17.39 28.74 20.72
49 22.34 18.29 30.31 21.75
50 23.64 19.29 32.02 22.87
51 24.98 20.30 33.79 24.02
52 26.41 21.38 35.67 25.23
53 27.93 22.52 37.66 26.50
54 29.56 23.73 39.76 27.85
55 31.29 25.02 41.99 29.27
56 33.14 26.40 44.34 30.79
57 35.11 27.87 46.83 32.40
58 37.22 29.44 49.48 34.13
59 39.49 31.14 52.30 35.98
AGE MALE FEMALE MALE FEMALE
NON-TOBACCO NON-TOBACCO TOBACCO TOBACCO
60 $ 42.01 $ 33.07 $ 55.42 $ 38.09
61 44.61 35.05 58.63 40.26
62 47.40 37.18 62.04 42.59
63 50.38 39.47 65.65 45.08
64 53.58 41.92 69.47 47.74
65 56.99 44.55 73.51 50.56
66 60.65 47.37 77.78 53.58
67 64.57 50.41 82.30 56.81
68 68.78 53.71 87.12 60.31
69 73.33 57.30 92.26 64.13
70 78.52 61.49 98.10 68.57
71 83.82 65.79 103.99 73.14
72 89.50 70.49 110.27 78.11
73 95.58 75.59 116.89 83.47
74 102.05 81.11 123.85 89.23
75 108.92 87.06 131.11 95.38
76 116.22 93.48 138.65 101.95
77 123.91 100.35 146.41 108.92
78 132.14 107.81 154.56 116.44
79 141.00 115.96 163.19 124.59
80 150.61 124.91 172.42 133.51
81 160.93 134.65 182.18 143.16
82 172.06 145.31 192.54 153.68
83 183.91 156.85 203.37 165.03
84 196.41 169.27 214.56 177.14
85 209.46 182.58 226.02 189.97
CHART 2
ISSUE AGE ADMINISTRATIVE TARGET
COMPONENT
0 through 35 4.00
36 through 55 5.00
56 through 85 6.50
5
MAXIMUM PREMIUM LOAD...................................................................7.50% for policy years 1-15, currently 5.50%
(for policy years 16 and after the, the
maximum premium load is guaranteed to never
exceed 6.00%)
PARTIAL SURRENDER PROCESSING FEE (PER PARTIAL SURRENDER)...............................lesser of $25 or 2% of the amount surrendered
IF YOU DECIDE TO TAKE A LOAN, INTEREST IS APPLIED TO THE LOANED AMOUNT. THE
AMOUNT OF INTEREST APPLIED IS GUARANTEED NEVER TO BE GREATER THAN THE PERCENTAGE
SHOWN BELOW.
INTEREST ASSESSED ON LOANED AMOUNTS.............................................................................................4.5%
DETAILED DESCRIPTIONS OF EACH CHARGE SHOWN ABOVE CAN BE FOUND LATER IN THIS
PROSPECTUS.
INVESTMENT OPTIONS
WHAT UNDERLYING MUTUAL FUNDS ARE AVAILABLE IN THIS VARIABLE LIFE INSURANCE
POLICY AND HOW MUCH DOES EACH FUND COST, AFTER EXPENSE REIMBURSEMENT?
The following underlying mutual funds are available under the policies:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS AFTER EXPENSE
REIMBURSEMENTS)
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund
Expenses
American Century Variable Portfolios, Inc. - American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 1.23% 0.00% 0.00% 1.23%
Century VP International
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 0.00% 1.00%
Century VP Value
Credit Suisse Warburg Pincus Trust - Global Post-Venture 1.14% 0.26% 0.00% 1.40%
Capital Portfolio
Credit Suisse Warburg Pincus Trust - International Equity 1.00% 0.30% 0.00% 1.30%
Portfolio
Credit Suisse Warburg Pincus Trust - Value Portfolio 0.48% 0.52% 0.00% 1.00%
Dreyfus Investment Portfolios - European Equity Portfolio - 1.00% 0.25% 0.00% 1.25%
Initial Shares
The Dreyfus Socially Responsible Growth Fund, Inc. - Initial 0.75% 0.03% 0.00% 0.78%
Shares
Dreyfus Stock Index Fund, Inc. - Initial Shares 0.25% 0.01% 0.00% 0.26%
Dreyfus Variable Investment Fund - Appreciation Portfolio - 0.75% 0.03% 0.00% 0.78%
Initial Shares
Federated Insurance Series - Federated Quality Bond Fund II 0.28% 0.42% 0.00% 0.70%
Fidelity VIP Equity-Income Portfolio: Service Class(1) 0.48% 0.08% 0.10% 0.66%
Fidelity VIP Growth Portfolio: Service Class(1) 0.57% 0.09% 0.10% 0.76%
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.10% 0.10% 0.78%
Fidelity VIP Overseas Portfolio: Service Class(1) 0.72% 0.17% 0.10% 0.99%
Fidelity VIP II Contrafund(R) Portfolio: Service Class(1) 0.57% 0.09% 0.10% 0.76%
Fidelity VIP III Growth Opportunities Portfolio: Service 0.58% 0.11% 0.10% 0.79%
Class(1)
Janus Aspen Series - Capital Appreciation Portfolio: 0.65% 0.02% 0.25% 0.92%
Service Shares
6
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund
Expenses
Janus Aspen Series - Global Technology Portfolio: Service 0.65% 0.04% 0.25% 0.94%
Shares
Janus Aspen Series - International Growth Portfolio: 0.65% 0.06% 0.25% 0.96%
Service Shares
NSAT Capital Appreciation Fund 0.60% 0.20% 0.00% 0.80%
NSAT Dreyfus NSAT Mid Cap Index Fund 0.50% 0.15% 0.00% 0.65%
NSAT Federated NSAT Equity Income Fund 0.80% 0.15% 0.00% 0.95%
NSAT Federated NSAT High Income Bond Fund 0.80% 0.15% 0.00% 0.95%
NSAT Gartmore NSAT Emerging Markets Fund 1.15% 0.60% 0.00% 1.75%
NSAT Gartmore NSAT Global Technology and Communications Fund 0.98% 0.37% 0.00% 1.35%
NSAT Gartmore NSAT International Growth Fund 1.00% 0.60% 0.00% 1.60%
NSAT Government Bond Fund 0.50% 0.16% 0.00% 0.66%
NSAT J.P. Morgan NSAT Balanced Fund (formerly, Nationwide 0.75% 0.15% 0.00% 0.90%
Balanced Fund)
NSAT MAS NSAT Multi-Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
NSAT Money Market Fund 0.39% 0.16% 0.00% 0.55%
NSAT Nationwide Global 50 Fund 1.00% 0.20% 0.00% 1.20%
NSAT Nationwide Small Cap Growth Fund 1.10% 0.20% 0.00% 1.30%
NSAT Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
NSAT Nationwide Small Company Fund 0.93% 0.28% 0.00% 1.21%
NSAT Nationwide Strategic Value Fund 0.90% 0.10% 0.00% 1.00%
NSAT Strong NSAT Mid Cap Growth Fund 0.90% 0.10% 0.00% 1.00%
NSAT Total Return Fund 0.58% 0.20% 0.00% 0.78%
NSAT Turner NSAT Growth Focus Fund 0.90% 0.45% 0.00% 1.35%
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.84% 0.14% 0.00% 0.98%
Neuberger Berman AMT Partners Portfolio 0.82% 0.10% 0.00% 0.92%
Oppenheimer Variable Account Funds - Oppenheimer Aggressive 0.62% 0.02% 0.00% 0.64%
Growth Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer Capital 0.64% 0.03% 0.00% 0.67%
Appreciation Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer Global 0.64% 0.04% 0.00% 0.68%
Securities Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer Main Street 0.70% 0.03% 0.00% 0.73%
Growth & Income Fund/VA
Strong Opportunity Fund II, Inc. 1.00% 0.11% 0.00% 1.11%
The Universal Institutional Funds, Inc. - Emerging Markets 0.59% 0.81% 0.00% 1.40%
Debt Portfolio
The Universal Institutional Funds, Inc. - Mid Cap Growth 0.00% 1.05% 0.00% 1.05%
Portfolio
The Universal Institutional Funds, Inc. - U. S. Real Estate 0.74% 0.36% 0.00% 1.10%
Portfolio
Van Eck Worldwide Insurance Trust - Worldwide Emerging 1.00% 0.26% 0.00% 1.26%
Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets 1.00% 0.14% 0.00% 1.14%
Fund
(1) Actual annual class operating expenses were lower because a portion of the
brokerage commissions that the Fund paid was used to reduce the Fund's expenses,
and/or because through arrangements with the Fund's custodian, credits realized
as a result of the uninvested cash balances were used to reduce a portion of the
Fund's custodian expenses. See the underlying mutual fund prospectus for
details.
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
7
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.
WHAT ARE THE UNDERLYING MUTUAL FUND EXPENSES BEFORE EXPENSE REIMBURSEMENT?
Some underlying mutual funds are subject to fee waivers, expense reimbursements
and/or custodial credits. The following chart shows what the expenses would have
been for such funds without fee waivers, expense reimbursements or custodial
credits.
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund net assets, before expense
reimbursements)
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund
Expenses
Credit Suisse Warburg Pincus Trust - Global Post-Venture 1.25% 0.28% 0.00% 1.53%
Capital Portfolio
Credit Suisse Warburg Pincus Trust - International Equity 1.00% 0.32% 0.00% 1.32%
Portfolio
Credit Suisse Warburg Pincus Trust- Value Portfolio 0.75% 0.54% 0.00% 1.29%
Dreyfus Investment Portfolios - European Equity Portfolio - 1.00% 0.60% 0.00% 1.60%
Initial Shares
Federated Insurance Series - Federated Quality Bond Fund II 0.60% 0.67% 0.25% 1.52%
NSAT Capital Appreciation Fund 0.60% 0.23% 0.00% 0.83%
NSAT Dreyfus NSAT Mid Cap Index Fund 0.50% 0.40% 0.00% 0.90%
NSAT Federated NSAT Equity Income Fund 0.80% 0.31% 0.00% 1.11%
NSAT Federated NSAT High Income Bond Fund 0.80% 0.32% 0.00% 1.12%
NSAT Gartmore NSAT Emerging Markets Fund 1.15% 2.94% 0.00% 4.09%
NSAT Gartmore NSAT Global Technology and Communications Fund 0.98% 1.59% 0.00% 2.57%
NSAT Gartmore NSAT International Growth Fund 1.00% 1.88% 0.00% 2.88%
NSAT Government Bond Fund 0.50% 0.23% 0.00% 0.73%
NSAT J.P. Morgan NSAT Balanced Fund (formerly, Nationwide 0.75% 0.32% 0.00% 1.07%
Balanced Fund)
NSAT MAS NSAT Multi Sector Bond Fund (formerly, Nationwide 0.75% 0.34% 0.00% 1.09%
Multi Sector Bond Fund)
NSAT Money Market Fund 0.39% 0.22% 0.00% 0.61%
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide 1.00% 0.42% 0.00% 1.42%
Global Equity Fund)
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT 1.10% 0.50% 0.00% 1.60%
Nationwide Select Advisers Small Cap Growth Fund)
NSAT Nationwide Small Cap Value Fund 0.90% 0.30% 0.00% 1.20%
NSAT Nationwide Strategic Value Fund 0.90% 0.36% 0.00% 1.26%
NSAT Strong NSAT Mid Cap Growth Fund (formerly, Nationwide 0.90% 0.27% 0.00% 1.17%
Strategic Growth Fund)
NSAT Total Return Fund 0.58% 0.23% 0.00% 0.81%
NSAT Turner NSAT Growth Focus Fund 0.90% 4.13% 0.00% 5.03%
Strong Opportunity Funds II, Inc. 1.00% 0.18% 0.00% 1.18%
The Universal Institutional Funds, Inc. - Emerging Markets 0.80% 0.81% 0.00% 1.61%
Debt Portfolio
The Universal Institutional Funds, Inc. - Mid Cap Growth 0.75% 1.54% 0.00% 2.29%
Portfolio
The Universal Institutional Funds, Inc. - U. S. Real Estate 0.80% 0.36% 0.00% 1.16%
Portfolio
Van Eck Worldwide Insurance Trust - Worldwide Emerging 1.00% 0.33% 0.00% 1.33%
Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund 1.00% 0.16% 0.00% 1.16%
8
No charge is assessed to you for income taxes incurred by us as a result of the
operations of the sub-accounts. However, we reserve the right to assess a charge
for income taxes against the sub-accounts of the variable account if income
taxes are incurred.
YOU CAN FIND THE OBJECTIVES FOR EACH OF THE FUNDS LISTED ABOVE IN APPENDIX A.
PLEASE TAKE A LOOK AT APPENDIX B IF YOU WOULD LIKE TO SEE THE MOST RECENT
HISTORICAL PERFORMANCE FOR EACH OF THE FUNDS LISTED ABOVE.
ARE THERE ANY OTHER INVESTMENT OPTIONS AVAILABLE TO ME?
Yes. You may also invest in the fixed account option available in your policy.
The fixed account is an investment option that is funded by assets of our
general account. The general account contains all of our assets other than those
in this and our other separate accounts. The general account is used to support
our annuity and insurance obligations and may contain compensation for mortality
and expense risks. The general account is not subject to the same laws as the
variable account and the SEC has not reviewed material in this prospectus
relating to the fixed account. However, information relating to the fixed
account is subject to federal securities laws relating to accuracy and
completeness of prospectus disclosure.
Premiums will be allocated to the fixed account as elected by you, subject to
the limits disclosed in this prospectus.
The investment income earned by the fixed account will be allocated to the
policies at varying guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
- - Portfolio Rate - The rate credited on the fixed account net of policy
loans. This rate is a weighted average of all investments in the fixed
account made over time at different rates of return and is subject to
change based on market conditions. The Dollar Cost Averaging Rate is the
same as the Portfolio Rate.
- - Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. You will be notified of this
rate in a letter issued with the quarterly statements when any of the money
in your fixed account matures. At that time, you will have an opportunity
to leave the money in the fixed account and receive the Renewal Rate or you
can move the money to any of the sub-accounts.
- - Enhanced Dollar Cost Averaging Rate - From time to time, we may offer a
more favorable rate for an initial premium into a new policy when used in
conjunction with an enhanced dollar cost averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during which the 12 month anniversary of the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to your policy on a daily basis. As
a result, the credited interest rate is compounded daily to achieve the stated
effective yield.
The guaranteed rate for any premium payment will be effective for not less than
twelve months. We guarantee that the rate will not be less than 3.0% per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
our sole discretion. You assume the risk that interest credited to fixed account
allocations may not exceed the minimum guarantee of 3.0% for any given year.
We guarantee that the fixed account value will not be less than the amount of
the premium allocated to the fixed account, plus interest credited as described
above, less any surrenders and any applicable charges.
OK. NOW THAT I KNOW A LITTLE MORE ABOUT WHERE I CAN INVEST MY MONEY, DESCRIBE
THIS POLICY IN DETAIL.
The policy described in this application meets the definition of "life
insurance" as defined in Section 7702 of the Internal Revenue Code. We
continually monitor this policy to make sure that it continues to meet the
requirements of Section 7702.
If you purchase this policy, you will not be paid dividends from us. This policy
is not a participating policy. It does not share in the profits or surplus
earnings of Nationwide like traditional term or universal life insurance
policies. In addition, any dividends paid by the underlying mutual funds will be
automatically reinvested in that fund.
With variable life insurance policies, including the policy described in this
prospectus, the cash value and the death benefit vary with the investment
performance of the investment options you select, however, remember that the
death benefit cannot fall below the amount you've specified, often called the
"specified amount." The specified amount will be reflected on your policy data
page.
In this policy, you request the amount of specified amount you feel you need
upon the death of the named insured - such insured could be you or another named
person. In return for our guarantee that a death benefit will be paid upon the
death of the named insured while
9
the policy is in force, you must deposit a minimum amount of premium, in
addition to paying certain costs.
ARE THERE ANY CRITERIA FOR PURCHASING THIS POLICY?
Minimum requirements for policy issuance include:
- the insured must be 85 or younger;
- we may require satisfactory evidence of insurability (including a
medical exam); and
- you must specify a death benefit amount of at least $100,000.
WHAT IS THE MINIMUM AMOUNT OF PREMIUM YOU WILL ACCEPT?
The minimum amount of premium you must pay depends on how much life insurance
you specify, however, each premium payment must be at least $50. The initial
premium is payable in full at our home office or to our authorized agent.
TELL ME MORE ABOUT THE CHARGES I MUST PAY IN ORDER TO MAKE SURE A DEATH BENEFIT
IS PAID IF THE INSURED DIES.
In order to make sure the policy does not lapse, you will need to pay the
following charges:
- - Cost of Insurance Charge
- - Mortality and Expense Risk Charge
- - Per $1,000 of Specified Amount Charge
- - Monthly Policy Expense Charge
- - Premium Load
Each of the charges shown above are discussed in further detail below.
COST OF INSURANCE CHARGE
We deduct a Cost of Insurance Charge from the cash value on a monthly basis.
This charge is determined by multiplying the monthly cost of insurance rate by
the net amount at risk (the death benefit minus the policy's cash value). This
deduction is charged proportionately to the cash value in each sub-account and
the fixed account, unless you elect otherwise.
If you elect to increase the specified amount (the amount used to calculate the
death benefit), the net amount at risk will also increase. In order for us to
support this increased risk, we will assess an additional Cost of Insurance
Charge to the increase. The underwriting criteria, such as the insured's age and
health, may be different at the time of the specified amount increase than at
the time of application. Therefore, the monthly cost of insurance rate we use to
calculate the Cost of Insurance Charge for the increase may be different than
the rate we used to calculate the Cost of Insurance Charge for the initial
specified amount.
Monthly cost of insurance rates will not exceed those guaranteed in the policy.
Guaranteed cost of insurance rates are based on the 1980 Commissioners' Standard
Ordinary Mortality Table, Age Last Birthday (1980 CSO). These mortality tables
are sex distinct. In addition, separate mortality tables will be used for
tobacco and non-tobacco.
MORTALITY AND EXPENSE RISK CHARGE
We assume certain risks for guaranteeing the mortality and expense charges. The
mortality risk assumed under this policy 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 this policy may be greater than expected. In
addition, we assume 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.
In exchange for assuming the risks described above, we deduct a Mortality and
Expense Risk Charge from the variable account on a monthly basis. For each
policy in years 1-15, this charge is equal to an annualized rate of 0.80% of the
policy's variable account assets on each monthly anniversary day. For policy
years 16 and after, this charge is equal to an annualized rate of 0.30% of the
policy's variable account assets on each monthly anniversary day. Mortality and
Expense Risk Charge deductions will be charged proportionally to the cash value
in each sub-account in which you invest unless you tell us otherwise.
PER $1,000 OF SPECIFIED AMOUNT CHARGE
We deduct a charge from the cash value on a monthly basis for the first two
policy years only. The amount of the charge varies with the age of the insured
at the time of policy issuance in accordance with the following chart:
ISSUE AGE CHARGE PER ISSUE AGE CHARGE PER
$1,000 OF $1,000 OF
SPECIFIED SPECIFIED
AMOUNT AMOUNT
0-19 $0.05 78 $0.26
20-29 $0.075 79 $0.24
30-39 $0.10 80 $0.23
40-49 $0.125 81 $0.21
50-59 $0.15 82 $0.20
60-69 $0.20 83 $0.19
70-76 $0.30 84 $0.18
77 $0.28 85 $0.16
This charge is taken on each monthly anniversary day. This charge compensates us
for sales expenses and
10
expenses associated with underwriting, issuing and distributing the policy.
Sales expenses include actual expenses paid to the broker or agent who is
servicing you.
Issue expenses include costs associated with the underwriting process.
MONTHLY POLICY EXPENSE CHARGE
We deduct a Policy Expense Charge from the cash value in the amount of $5.00 per
month. This charge is guaranteed to never go above $7.50 per month. The Policy
Expense Charge is taken proportionately against the sub-accounts of the variable
account and the fixed account on each monthly contract anniversary day. The
Monthly Policy Expense Charge compensates us for administrative expenses.
Administrative expenses include actual expenses related to the maintenance of
the policies including account and record-keeping, and providing you with
periodic reports.
Neither we nor Nationwide Investment Services Corporation (nor any of the
affiliates of either) receive profits or other benefits not included in the
charges described in this section.
MAXIMUM PREMIUM LOAD
We deduct a premium load from the cash value in the amount of 7.5% for policy
years 1-15 and 5.5% for policy years 16 and after. The maximum premium load is
assessed monthly and is guaranteed not to exceed 6.0% for policy years 16 and
after. The premium load compensates us for tax expenses.
The Premium Load compensates Nationwide for tax expenses including state premium
and other state and local taxes as well as federal taxes imposed under Section
848 of the Internal Revenue Code. This charge is not a sales charge. The amount
charged may be more or less than the amount actually assessed by the state in
which you live.
RIGHT TO CANCEL
WHAT IF I DECIDE I DON'T WANT THIS POLICY AFTER I PURCHASE IT?
You 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 we deliver a Notice of Right of Withdrawal.
If you decide to cancel, the policy can be mailed to the registered
representative who sold it you or returned directly to us. The cancellation will
be effective as of the date the request to cancel is postmarked, or if you
return the policy and the request to cancel directly to us, the date we receive
the returned policy and request to cancel.
Returned policies are deemed void from the beginning. We will refund the amount
prescribed by the state in which the policy was issued within 7 days after we
receive the policy. (For policies issued in New York, we will refund any
premiums paid.) The refunded amount will reflect the policy's investment
experience from the time of issuance to the time of termination, as well as the
deduction of any policy charges, unless the state in which the policy was issued
requires another amount to be refunded.
In addition you may, at any time during the first 24 months after your policy is
issued, submit a written request to us for an irrevocable one-time election to
transfer all sub-account cash value to the fixed account. This right of
conversion is subject to state availability.
ALLOCATION OF PREMIUM PAYMENTS
I'VE DECIDED I WANT TO PURCHASE THIS POLICY. WHAT HAPPENS AFTER I SEND IN MY
INITIAL PREMIUM PAYMENT?
Initial premiums allocated to a sub-account on the application are allocated to
the NSAT Money Market Fund during the period in which you may cancel the policy,
unless your state requires premiums to be allocated to the fixed account. (In
New York, premiums are allocated to either the NSAT Money Market Fund or the
fixed account based on your election. If you make no election, premiums are
allocated to the NSAT Money Market Fund.) At the expiration of this period, the
premiums are used to purchase shares of the underlying mutual funds you
specified at net asset value for the respective sub-account(s).
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of continuing insurance coverage is dependent upon completion of all
underwriting requirements, payment of the 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:
- - we may require satisfactory evidence of insurability before accepting any
additional premium payment which results in an increase in the net amount
at risk; and
- - 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.
11
Additional premium payments or other changes to the policy may jeopardize the
policy remaining within the definition of "life insurance" as defined by the
Internal Revenue Code. We will monitor premiums paid and other policy
transactions and will notify you when we believe your policy may be in jeopardy
of violating the life insurance guidelines.
We will send scheduled premium payment reminder notices to you according to the
premium mode shown on your policy data page.
We allocate premium payments to the sub-accounts and/or the fixed account, as
you instruct. 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 us written notice.
You may change the allocation of premiums or may transfer cash value from one
sub-account to another. Cash value transferred to the variable account from the
fixed account, or between sub-accounts, will receive the accumulation unit value
next determined after the transfer request is received. 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.
WHEN WILL MY PREMIUM PAYMENTS BE ALLOCATED TO MY REQUESTED SUB-ACCOUNT OPTIONS?
Premium payments received by us in good order will be applied to the
sub-accounts and/or fixed account within 2 business days of receipt. Premiums
will not be used to purchase accumulation units when the New York Stock Exchange
is closed or 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
We will not use premiums to purchase accumulation units 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 we are closed on days when the New York Stock Exchange
is open, your cash value may be affected since you would not have access to your
account.
VALUING ACCOUNT VALUES
ONCE MY PREMIUM PAYMENTS CAN BE APPLIED TO MY POLICY, HOW MUCH CAN MY PREMIUM
PURCHASE?
The number of "units" your premium can purchase is determined primarily by
policy charges and the net asset value of the underlying mutual funds as of the
date your premium is allocated to those funds.
How we determine your Variable Account Value - Valuing an Accumulation Unit
Premium payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
We use the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including
underlying charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b) where:
a) is the sum of:
1) the net asset value of the underlying mutual fund 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 date of the dividend or income
distribution occurs during the current valuation period).
b) is the net asset value per share of the underlying mutual fund determined
as of the end of the immediately preceding valuation period.
We currently do not maintain a tax reserve with respect to the policies since
income with respect to the underlying mutual funds is not taxable to us or the
variable account. We do, however, reserve the right to adjust the calculation of
the net investment factor to reflect a tax reserve should such income or other
items become taxable to us. Based on the change in the net
12
investment factor, the value of an accumulation unit may increase or decrease.
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
of variable account charges.
Determining Fixed Account Value
We determine the value of the fixed account by:
1) adding all amounts allocated to the fixed account; minus
2) amounts previously withdrawn or transferred from the fixed account to
the sub-accounts; plus
3) any interest earned on the amounts allocated; minus
4) charges deducted in accordance with the policy.
TRANSFERRING ALLOCATIONS
MAY I MAKE TRANSFERS BETWEEN INVESTMENT OPTIONS?
Yes. You may make transfers among investment options after your policy is issued
provided you meet the criteria listed below.
Transfers from the Fixed Account to the Sub-Accounts
Fixed account allocations may be transferred to the sub-accounts only upon
reaching the end of an interest rate guaranteed period. Normally, we will permit
100% of fixed account allocations to be transferred to the variable account.
However, we may under certain economic conditions and at our discretion, limit
the maximum transferable amount. In addition, we reserve the right to restrict
transfers between the fixed account and the sub-accounts to one per policy year.
Under no circumstances will the maximum transferable amount be less than 20% of
the portion of cash value attributable to the fixed account as of the end of the
previous policy year (subject to state restrictions). Those of you who have
entered into dollar cost averaging agreements with us may transfer under the
terms of that agreement.
Transfers of the fixed account allocations must be made within 30 days after
reaching the end of an interest rate guarantee period.
Transfers to the Fixed Account
Transfers to the fixed account may not be made prior to the first policy
anniversary or within 12 months of any prior transfer. We reserve the right to
restrict the amount transferred to the fixed account to 25% of the portion of
cash value attributable to the sub-accounts as of the close of business of the
prior valuation period. In addition, we reserve the right to refuse a transfer
to the fixed account if the fixed account value before the transfer is greater
than or equal to 30% of your policy's cash value.
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation period.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 30 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the sub-accounts. We will determine the amount that may be transferred and will
declare this amount at the end of the guarantee period.
For new premium payments allocated to the fixed account, or transfers to the
fixed account from the sub-accounts, this period begins on the date of deposit
or transfer and ends on the one year anniversary of the deposit or transfer. The
guaranteed interest rate period may last for up to 3 months beyond the 1 year
anniversary because a guaranteed term ends on the last day of a calendar
quarter.
During an interest rate guarantee period, transfers cannot be made from the
fixed account and amounts transferred to the fixed account must remain on
deposit.
Dollar Cost Averaging Program
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. This program is not available in the State of New York. We do not
guarantee that this program will result in profit or protect you from loss.
If you elect this option, you must direct us via the instructions below to
automatically transfer amounts from the fixed account, Federated Insurance
Series - Federated Quality Bond Fund II, Fidelity VIP High Income Portfolio:
Service Class, NSAT Government Bond Fund, NSAT Federated NSAT High Income Bond
Fund, and the NSAT Money Market Fund to any other specified sub-account(s).
Transfers will occur monthly or on another frequency if permitted by us. We will
process transfers until either the value in the originating investment option is
exhausted, or you instruct us in writing to stop the transfers.
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.
No charge is assessed for using a Dollar Cost Averaging program. We reserve the
right to stop establishing new Dollar Cost Averaging programs at any time.
Enhanced Dollar Cost Averaging Program
13
We may from time to time, offer enhanced rate dollar cost averaging programs.
Dollar cost averaging transfers for this program may only be made from the fixed
account. Such enhanced rate dollar cost averaging programs allow you to earn a
higher rate of interest on assets in the fixed account than would normally be
credited when not participating in the program. Each enhanced interest rate is
guaranteed for as long as the corresponding program is in effect. We will
process transfers until either amounts in the enhanced rate fixed account are
exhausted or you instruct us in writing to stop the transfers. For this program
only, when a written request to discontinue transfers is received, we will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund. We are 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.
HOW DO I MAKE TRANSFERS?
We will accept transfer requests in writing, over the telephone or via the
internet. See the following table for specific contact information.
Form of Request Contact Information
Written request Nationwide Life Insurance Company
P.O. Box 182150
Columbus, OH 43218-2150
Telephone request 1-800-547-7548
TDD 1-800-238-3035
Internet request www.bestofamerica.com
Transfer requests may be submitted at any time. Requests received by us after
the close of business of a valuation period will be processed the next valuation
period.
We will use reasonable procedures to confirm that instructions received are
genuine and will not be liable for following instructions we reasonably
determine to be genuine. We may withdraw the telephone and/or internet exchange
privilege upon 30 days written notice to you.
Market-Timing Firms
Some policy owners may use market-timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market-timing firms will submit transfer requests on behalf of
multiple policy owners at the same time. Sometimes this can result in unusually
large transfers of funds. These large transfers might interfere with our ability
or the underlying mutual fund's ability to process transactions. This can
potentially disadvantage policy owners not using market-timing firms. To avoid
this, we may modify the transfer rights of policy owners who use market-timing
firms (or other third parties) to initiate transfers on their behalf.
Your individual transfer rights will not be modified in any way when
instructions are submitted directly by you, or by your representative (as
authorized by the execution of a valid Nationwide Limited Power of Attorney
Form).
To protect you, we 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.
We will not restrict transfer rights unless we believe it to be necessary for
the protection of all policy owners.
CASH VALUE AND SURRENDERS
DOES MY POLICY HAVE ANY VALUE BESIDES DEATH BENEFIT VALUE?
Yes. Your policy has cash value if you have paid all the required premiums to
keep the policy in force. Assuming your policy is not in a grace period, you may
take partial surrenders of the cash value, total surrenders or take a policy
loan.
Cash Value
Cash value is the sum of the value of all variable account accumulation units
attributable to your policy plus amounts credited to the fixed account and your
policy loan account, if any. We will determine the value of the assets in your
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 us. In the event part or all of the cash value is surrendered, we
will deduct an appropriate number of accumulation units from the variable
account sub-accounts in the same proportion that your interest in the variable
account sub-accounts are allocated, unless otherwise directed by you. Deductions
will be taken from the fixed account only to the extent that there are
insufficient assets in the sub-accounts.
The cash value in the fixed account and the policy loan account is credited with
interest daily at an effective annual rate which we periodically declare. The
annual effective rate will never be less than 3%. Upon request,
14
we will inform you of the applicable rates for each account.
On any date during the policy year, the cash value equals:
1) the cash value on the preceding valuation date; plus
2) any new premium applied since the previous valuation date; plus
3) any interest added to assets in the fixed account; plus
4) any interest added to assets in the policy loan account, if
applicable; plus or minus
5) any investment results for assets invested in the sub-accounts; minus
6) policy charges; minus
7) partial surrenders, if applicable; minus
8) any surrender charges, if applicable.
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 your investment allocations.
Cash Surrender Value
It's important to remember that if your policy is terminated during the
insured's lifetime, a cash surrender value may be payable to you under the
policy, however, the amount of the cash surrender value is not guaranteed by us.
Your policy will lapse without value if the cash surrender value falls below
what is needed to cover policy charges.
You may surrender your policy for the cash surrender value any time while the
insured is living. The cancellation will be effective as of the date we receive
the policy accompanied by a signed, written request for cancellation. In some
cases, we may require additional documentation of a customary nature.
We are required by state law to reserve the right to postpone payment of assets
in the fixed account for a period of up to 6 months from the date of the
surrender request.
The cash surrender value equals the policy's cash value, next computed after the
date we receive 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.
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.
If, at any time, the policy's cash surrender value falls below zero and the
policy continuation provision is not in effect, the grace period will begin. You
will be notified that your policy has negative cash surrender value and will be
given the opportunity to pay premiums to bring the policy out of the grace
period
WHAT IF I WANT TO TAKE A PARTIAL OR TOTAL SURRENDER? WHAT HAPPENS NEXT?
If you wish to totally or partially surrender your policy, you may be assessed a
surrender charge. The following information explains in detail what charges you
will incur for surrendering a portion or all of your policy.
Total Surrenders
You may surrender your policy and receive your policy's cash surrender value,
which is the policy's cash value, less indebtedness or other deductions. If you
elect to surrender the entire policy during the first 14 policy years, we will
deduct a surrender charge from your policy's cash value. The charge is deducted
proportionally from the cash value in each sub-account and the fixed account.
The maximum initial surrender charge varies by issue age, sex, specified amount
and underwriting classification. The maximum initial surrender charge will not
exceed 22.5% multiplied by the lesser of:
(a) or (b), where:
(a) = the specified amount multiplied by the rate indicated on Chart 1, divided
by 1,000;
(b) = premiums paid during the first two policy years;
Plus (c) multiplied by (d), where:
(c) = the specified amount divided by 1,000; and
(d) = the administrative target component as illustrated by Chart 2 as
follows, this factor allows the company to account for the probability
(at various ages) that death will occur and no CDSC will be recouped.
In certain scenarios, usually involving decreases in your policy value, your
policy's surrender charge may equal all of your policy's cash surrender value.
In other scenarios, usually involving a large initial premium or significant
additions of premium after the second policy year, your policy's surrender
charge may be nominal relative to the premiums you have paid.
15
CHART 1
AGE MALE FEMALE MALE FEMALE
NON-TOBACCO NON-TOBACCO TOBACCO TOBACCO
18 $5.21 $4.36 $6.91 $5.17
19 5.40 4.54 7.17 5.39
20 5.63 4.76 7.47 5.65
21 5.84 4.96 7.76 5.90
22 6.07 5.17 8.06 6.15
23 6.31 5.39 8.38 6.42
24 6.56 5.62 8.73 6.70
25 6.84 5.86 9.11 7.00
26 7.13 6.12 9.51 7.32
27 7.45 6.39 9.94 7.65
28 7.78 6.68 10.41 8.01
29 8.14 6.99 10.90 8.38
30 8.56 7.34 11.46 8.81
31 8.96 7.68 12.03 9.22
32 9.39 8.04 12.62 9.66
33 9.85 8.42 13.26 10.12
34 10.34 8.82 13.93 10.61
35 10.85 9.24 14.65 11.13
36 11.39 9.69 15.41 11.67
37 11.97 10.16 16.21 12.24
38 12.58 10.66 17.06 12.85
39 13.23 11.18 17.96 13.48
40 13.95 11.77 18.94 14.17
41 14.67 12.35 19.95 14.86
42 15.44 12.95 21.00 15.58
43 16.26 13.60 22.12 16.34
44 17.12 14.27 23.30 17.13
45 18.04 14.99 24.55 17.96
46 19.02 15.74 25.86 18.83
47 20.06 16.55 27.26 19.75
48 21.16 17.39 28.74 20.72
49 22.34 18.29 30.31 21.75
50 23.64 19.29 32.02 22.87
51 24.98 20.30 33.79 24.02
52 26.41 21.38 35.67 25.23
53 27.93 22.52 37.66 26.50
54 29.56 23.73 39.76 27.85
AGE MALE FEMALE MALE FEMALE
NON-TOBACCO NON-TOBACCO TOBACCO TOBACCO
55 $31.29 $25.02 $41.99 $29.27
56 33.14 26.40 44.34 30.79
57 35.11 27.87 46.83 32.40
58 37.22 29.44 49.48 34.13
59 39.49 31.14 52.30 35.98
60 42.01 33.07 55.42 38.09
61 44.61 35.05 58.63 40.26
62 47.40 37.18 62.04 42.59
63 50.38 39.47 65.65 48.08
64 53.58 41.92 69.47 47.74
65 56.99 44.55 73.51 50.56
66 60.65 47.37 77.78 53.58
67 64.57 50.41 82.30 56.81
68 68.78 53.71 87.12 60.31
69 73.33 57.30 92.26 64.13
70 78.52 61.49 98.10 68.57
71 83.82 65.79 103.99 73.14
72 89.50 70.49 110.27 78.11
73 95.58 75.59 116.89 83.47
74 102.05 81.11 123.85 89.23
75 108.92 87.06 131.11 95.38
76 116.22 93.48 138.65 101.95
77 123.91 100.35 146.41 108.92
78 132.14 107.81 154.56 116.44
79 141.00 115.96 163.19 124.59
80 150.61 124.91 172.42 133.51
81 160.93 134.65 182.18 143.16
82 172.06 145.31 192.54 153.68
83 183.91 156.85 203.37 165.03
84 196.41 169.27 214.56 177.14
85 209.46 182.58 226.02 189.97
CHART 2
Issue Age Administrative Target
Component
0 through 35 4.00
36 through 55 5.00
56 through 85 6.50
Surrender charges for years 2-15 are a percentage of the initial surrender
charge as shown in the following chart:
16
POLICY SURRENDER POLICY SURRENDER
YEAR CHARGE YEAR CHARGE
1 100% of initial 9 30% of initial
surrender charge surrender
charge
2 95% of initial 10 25% of initial
surrender charge surrender
charge
3 85% of initial 11 20% of initial
surrender charge surrender
4 80% of initial 12 15% of initial
surrender charge surrender
5 70% of initial 13 10% of initial
surrender charge surrender
6 60% of initial 14 5% of initial
surrender charge surrender
charge
7 50% of initial 15 0% of initial
surrender charge surrender
charge
8 40% of initial
surrender charge
The surrender charge schedule will be fixed at the end of the second policy year
and will remain the same for the life of the policy, unless the specified amount
is increased. The surrender charge schedule will not vary due to changes in
specified amount or cash value.
Surrender charges reimburse us for certain expenses related to the sale of the
policies, including commissions, costs of sales literature, and other
promotional activity. The surrender charges may be insufficient to recover
certain expenses related to the sale of the policies. Unrecovered expenses are
borne by our 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.
If, at any time, your policy's cash surrender value is less than or equal to
zero, the grace period will begin, unless the policy is covered by the policy
continuation provision. You will be notified that your policy has negative cash
surrender value and will be given the opportunity to pay premiums to bring the
policy out of the grace period.
Partial Surrenders
After your policy has been in force for one year, you may request a partial
surrender. Such requests must be made in writing. Partial surrenders will be
deducted proportionately from the assets in each sub-account, unless otherwise
directed by you. Amounts will be deducted from the fixed account only to the
extent that there are insufficient assets in the variable account.
When you take a partial surrender, we reduce the policy's cash value by the
amount of the partial surrender.
Partial surrenders are permitted if they satisfy the following:
1) the minimum partial surrender is $200;
2) during the first 10 policy years, the sum of all partial surrenders in
a given year may not exceed 10% of your policy's cash surrender value
as of the beginning of that policy year;
3) after your 10th policy year, the maximum partial surrender is limited
to the cash surrender value less the greater of $500 or 3 month's
policy charges;
4) a partial surrender may not cause the total specified amount to be
reduced below the minimum specified amount as shown on the policy data
page; and
5) after the partial surrender, your policy continues to qualify as life
insurance.
We reserve the right to limit the number of partial surrenders to one in each
policy year. Certain partial surrenders may result in currently taxable income
and tax penalties.
Currently, we do not assess a fee for processing partial surrenders. However, we
reserve the right to assess a Partial Surrender Processing Fee equal to the
lesser of $25 or 2% of the amount surrendered for each partial surrender.
WILL PARTIAL SURRENDERS HAVE ANY EFFECT ON MY POLICY'S CASH VALUE?
Yes. When a partial surrender is taken, we will reduce the cash value by the
partial surrender amount withdrawn and any surrender fees taken. In addition, we
will reduce the Specified Amount by the amount necessary to prevent an increase
in the net amount at risk. Any decrease will reduce your insurance in the
following order:
1) against the insurance provided by the most recent increase;
17
2) against the most recent increase successively; and
3) against the insurance under the original application.
WILL I HAVE TO PAY TAXES ON ANY AMOUNTS SURRENDERED?
Federal law requires us to withhold income tax from any portion of surrender
proceeds subject to tax. We will withhold income tax unless you advise us, in
writing, of your request not to withhold. If you request that taxes not be
withheld, or if the taxes withheld are insufficient, you may be liable for
payment of an estimated tax. You should consult a tax adviser.
If your policy is an employer-sponsored life insurance arrangement, you 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.
You should consult with the sponsor or the administrator of your plan, and/or
with their personal tax or legal adviser, to determine the tax consequences, if
any, of your employer-sponsored life insurance arrangement.
POLICY LOANS
MAY I TAKE A LOAN AGAINST MY POLICY?
Yes, provided your policy meets certain criteria. After the first policy year,
you may request a policy loan using your policy as security. Any request for a
policy loan must be in written form and signed by you. Certain policy loans may
result in current taxable income and tax penalties. Policy loans are subject to
the following:
- - we will not grant a loan for an amount less than $200.
- - the maximum total amount that may be borrowed, including any outstanding
loans, as of the date the loan is processed, is:
a) 90% of the cash value in the sub-accounts; plus
b) 100% of the cash value in the fixed account; plus
c) 100% of the cash value in the policy loan account; minus
d) 100% of the surrender charge.
- if the cash value is less than or equal to $0, no additional loans may
be taken.
- if total indebtedness ever equals or exceeds the cash value less
surrender charges, your policy will terminate without value, subject
to the grace period provisions.
Policy indebtedness will be deducted from the death benefit, cash surrender
value upon surrender, or the maturity proceeds.
If you are considering getting a policy loan in connection with your retirement
income plan, you should consult your personal tax adviser regarding potential
tax consequences that may arise if necessary payments are not made to keep the
policy from lapsing. The amount of the payments necessary to prevent your policy
from lapsing will increase with age.
WILL MY LOAN HAVE ANY EFFECT ON INVESTMENT PERFORMANCE?
Yes. 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 your policy are held in more than one sub-account, withdrawals from
the sub-accounts will be made in proportion to the assets in each sub-account at
the time of the loan, unless otherwise directed by you. 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.
WHAT ABOUT INTEREST?
The annual effective loan interest rate charged on policy loans is guaranteed to
never be greater than 4.50%.
If it is determined that such loans will be treated, as a result of the
differential between the interest crediting rate and the loan interest rate, as
taxable distributions under any applicable ruling, regulation, or court
decision, we retain the right to increase the net cost (by decreasing the
interest crediting rate) on all subsequent policy loans to an amount that would
result in the transaction being treated as a loan under federal tax law. If this
amount is not prescribed by such ruling, regulation, or court decision, the
amount will be an amount which we consider to be more likely to result in the
transaction being treated as a loan under federal tax law.
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. The earned interest is transferred from the policy loan
account to the variable account or the fixed account on each policy anniversary,
at the time a new loan is requested, or at the
18
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, we will send a notice to you and the assignee, if any. Your 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 charge plus an amount sufficient to
continue your policy in force for 3 months.
WILL A LOAN HAVE ANY EFFECT ON MY DEATH BENEFIT AMOUNT OR CASH VALUE AMOUNT?
Yes. A policy loan, whether or not repaid, will have a permanent effect on your
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.
WHEN AND HOW DO I MAKE LOAN REPAYMENTS?
All or part of the indebtedness may be repaid at any time while your policy is
in force during the insured's lifetime. Any payment intended as a loan
repayment, rather than a premium payment, must be identified as such. Loan
repayments will be credited to the sub-accounts and the fixed account in
proportion to your underlying mutual fund allocation factors in effect at the
time of the repayment. Each repayment must be at least $50. We reserve 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.
DEATH BENEFIT
DO I HAVE A CHOICE OF DEATH BENEFIT OPTIONS?
Yes. In fact you may choose one of three death benefit options. All the death
benefit options listed below qualify as life insurance using the guideline
premium/cash value corridor test under Section 7702 of the Internal Revenue
Code.
Keep in mind that whatever death benefit option you choose, the death benefit
will never be less than the specified amount, less partial withdrawals and/or
policy indebtedness. The death benefit may vary with the cash value of the
policy, which depends on investment performance.
The death benefit options you may choose are as follows:
Option 1. If you elect Option 1 and the insured dies, the amount of the death
benefit will be equal the greater of:
1) the specified amount on the date death proceeds become payable; or
2) the applicable percentage of cash value, as indicated in the chart
below, as of the date death proceeds become payable.
Option 2. If you elect Option 2 and the insured dies, the amount of the death
benefit will be equal to the greater of:
1) the specified amount plus the cash value on the date death proceeds
become payable; or
2) the applicable percentage of the cash value, as indicated on the chart
below, as of the date the death proceeds become payable.
Option 3. If you elect Option 3 and the insured dies, the amount of the death
benefit will be equal to the greater of:
1) the specified amount plus the accumulated premium amount on the date
death proceeds become payable; or
2) the applicable percentage of cash value, as indicated on the chart
below, as of the date the death proceeds become payable.
The accumulated premium amount is all premium payments accumulated to
the date of death less any partial surrenders accumulated to the date
of death. The accumulations will be calculated based on the interest
rate declared at the time the policy is issued. In no event will the
accumulated premium amount be less than zero ($0) or greater than the
maximum increase as shown on the policy data page.
The cost of insurance you will pay varies based on the Death Benefit Option you
select. For example, Option 1 provides for a death benefit without the
opportunity for your beneficiaries to receive any proceeds in excess of the face
amount. Thus, with Option 1 you will incur a lower cost of insurance than if you
elect Option 2 which provides a death benefit of the specified amount plus any
cash value you have accrued in the policy. Similarly, Option 3 provides for a
death benefit that may exceed the specified amount of premium you have paid.
Therefore, with Option 1 you will incur a lower cost of insurance than if you
elect Option 3. The cost of insurance for Option 2 may be higher or lower than
the cost of insurance for Option 3 depending on whether or not your policy's
cash value exceeds the amount of premium you have paid plus any interest
credited on that premium.
19
Percentage of Cash Value
Section 7702 of the Internal Revenue Code under the Guideline Premium/Cash Value
Corridor Test, requires that the death benefit be greater than or equal to the
cash value multiplied by the applicable percentages shown on the following
table:
ATTAINED APPLICABLE ATTAINED APPLICABLE
AGE PERCENTAGE AGE PERCENTAGE
31-40 250% 70 115%
41 243% 71 113%
42 236% 72 111%
43 229% 73 109%
44 222% 74 107%
45 215% 75 105%
46 209% 76 105%
47 203% 77 105%
48 197% 78 105%
49 191% 79 105%
50 185% 80 105%
51 178% 81 105%
52 171% 82 105%
53 164% 83 105%
54 157% 84 105%
55 150% 85 105%
56 146% 86 105%
57 142% 87 105%
58 138% 88 105%
59 134% 89 105%
60 130% 90 105%
61 128% 91 104%
62 126% 92 103%
63 124% 93 102%
64 122% 94 101%
65 120% 95 100%
66 119% 96 100%
67 118% 97 100%
68 117% 98 100%
69 116% 99 100%
100 100%
MAY I EVER CHANGE THE SPECIFIED AMOUNT AFTER MY POLICY IS ISSUED?
Yes. You may request certain changes in the insurance coverage under your
policy. Requests must be in writing and received by us at our home office. No
change in specified amount will take effect unless the cash surrender value,
after the change, is sufficient to keep your policy in force for at least 3
months.
Specified Amount Increases
After the first policy year, you may request an increase to the specified
amount. Any increase will be subject to the following conditions:
1) the request must be applied for in writing;
2) satisfactory evidence of insurability must be provided;
3) the increase must be for a minimum of $10,000;
4) the cash surrender value is sufficient to keep the policy in force for
at least 3 months; and
5) the insured must be 85 or younger.
Any approved increase will have an effective date of the monthly anniversary day
or on the next day we approve the supplemental application. We reserve the right
to limit the number of specified amount increases to one each policy year.
Specified Amount Decreases
After the first policy year, you may request a decrease to the specified amount.
Any approved decrease will be effective on the monthly anniversary day or on the
next day we receive the request. Any such decrease will reduce the 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.
We reserve the right to limit the number of specified amount decreases to one
each policy year. We will refuse a request for a decrease which would:
1) reduce the specified amount below the minimum issue amount as is shown
on the policy data page; or on the initial application; or
2) disqualify the policy as a contract for life insurance.
3) result in both:
(a) a negative guideline single premium; and
(b) an aggregate guideline level premium that would be negative at
any time prior to the maturity of the policy.
The "guideline single premium" and "guideline level premium" are defined in
Section 7702 of the Internal Revenue Code. The guideline single premium is
calculated at the time your policy is issued and equals the premium necessary to
fund the future benefits under the policy, based on the assumption of a level 6%
rate of
20
return, current expenses, and reasonable mortality charges. The guideline level
premium equals the level annual amount to be paid over a period that ends when
the insured becomes 100 years old, based on the same assumptions, except with a
level 4% rate of return. Please note that these premium levels do NOT guarantee
that your policy will stay in force. Rather, these premium levels are used to
ensure your policy meets the Internal Revenue Code's definition of life
insurance.
Also, if you take a partial surrender, your cash value may not be enough to
avoid causing your policy to lapse (see Policy Lapse and Reinstatement below).
To avoid lapsing your policy, you may reduce your policy's specified amount to a
level where the cash value is sufficient to keep the policy in force. Keep in
mind, however, the reduction in the specified amount must meet the requirements
of this Specified Amount Decreases section.
MAY I CHANGE MY DEATH BENEFIT OPTION AFTER MY POLICY IS ISSUED?
Yes. After the first policy year, you may elect to change the death benefit
option under your policy. Only one change of death benefit option is permitted
per policy year. The effective date of a change will be the monthly anniversary
day following the date the change is approved by us.
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.
If the change is from Option 3 to Option 1:
The specified amount will be increased by the amount of the accumulated premium
account.
If the change is from Option 3 to Option 2:
The specified amount will be adjusted by the amount of the difference between
cash value and the accumulated premium account. If the cash value is greater
than the accumulated premium account, this will result in a decrease to the
specified amount. If the cash value is less than the accumulated premium
account, the option change will result in an increase in specified amount. WE
WILL NOT ALLOW DEATH BENEFIT OPTION CHANGES FROM OPTION 1 TO OPTION 3 OR OPTION
2 TO OPTION 3.
In order for any change in the death benefit option to become effective, the
cash surrender value, after the change, must be sufficient to keep the policy in
force for at least 3 months.
We will adjust the specified amount so that the net amount at risk remains
constant before and after the death benefit option change. 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 under the guideline
premium/cash value corridor test of Section 7702 of the Internal Revenue Code.
WHAT HAPPENS ONCE THE INSURED DIES?
If the insured dies while your policy is in force and prior to the maturity
date, death proceeds will be payable to the beneficiary(ies). The amount of the
death proceeds is equal to:
1) the death benefit provided by the policy; plus
2) any insurance that may be provided by riders to the policy; minus
3) any indebtedness; minus
4) any due and unpaid monthly deductions accruing during a grace period.
We will pay the death proceeds to the beneficiary after receipt of proof of
death of the insured, at the home office in a satisfactory format. Death
proceeds may be adjusted under certain conditions (see "Error in Age or Sex" and
"Suicide").
Incontestability
We 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. We will not contest payment of the death proceeds
based on an increase in specified amount requiring evidence of insurability
after the increase 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 death benefit and cash
value will be adjusted. The cash value will be adjusted to reflect the cost of
insurance charges on the correct age and sex from the policy date.
Suicide
If the insured dies by suicide, while sane or insane, within 2 years from the
policy date, we 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 2 years from the date we accept an application for
an increase in the specified amount, we will pay no more than the death benefit
associated with the initial specified amount, plus the Cost of Insurance Charges
associated with the increase in specified amount.
HOW IS THE DEATH BENEFIT DISTRIBUTED?
21
Death benefit proceeds may be paid in lump sum or in any form of distribution
listed in this provision. If the beneficiary of the death benefit does not
specify the method of payment, we will pay it in a lump sum. Proceeds from any
optional form of distribution will be paid from our general account and
therefore will not be affected by the investment experience of any sub-account.
One or a combination of settlement options may be chosen if the total amount
placed under the option is at least $2,000 and each payment is at least $20.
A settlement option election may be changed at any time by proper written
request to our home office. Once recorded, the request will be effective on the
date it was requested. We may require proof of the age and sex of any person to
be paid under a settlement option. While the policy is in force, you may choose
or change settlement options at any time. If no settlement option has been
chosen prior to the date the death proceeds become payable, the beneficiary may
choose one. A change in beneficiary automatically revokes any settlement option
in effect.
When death proceeds become payable under any option, a settlement contract is
issued in exchange for this policy. The new contract's effective date is the
date death proceeds become payable or the date on which the policy is
surrendered.
Settlement option payments may not be assigned. To the extent permitted by law,
settlement option payments are not subject to the claims of creditors or to
legal process.
For any settlement options, payments may be made annually, semi-annually,
quarterly or monthly. Under Options 1, 2 and 4 below, withdrawal of any
outstanding balance may be made by written request to us. No amount left with us
under Options 3, 5 or 6 may be withdrawn.
Options 1, 2, 4 and the guaranteed period of Option 3, provide for payment of
interest at a guaranteed minimum interest rate of 2.5% per year, compounded
annually. Any interest to be paid in excess of this rate will be determined once
a year.
OPTION 1. INTEREST INCOME. In this Option, proceeds remain with us to earn
interest. This interest may be left to accumulate or to be paid periodically.
OPTION 2. INCOME FOR A FIXED PERIOD. In this Option, proceeds remaining with us
will be paid over a specified number of years, not to exceed 30 years. Each
payment consists of a portion of the death benefit proceeds plus a portion of
the interest credited on the outstanding balance.
OPTION 3. LIFE INCOME WITH PAYMENTS GUARANTEED. In this Option, payments are
made for a guaranteed period of 10, 15 or 20 years, and thereafter for the
remainder of a payee's lifetime. The amount payable monthly for each $1,000 left
with us will be determined according to the payee's sex and age on the effective
date of the Option.
OPTION 4. FIXED INCOME FOR VARYING PERIODS. In this Option, death benefit
proceeds may be left on deposit with us at interest with payments of a fixed
amount being paid at specified intervals until the principal and interest have
been exhausted. The last payment will be for the balance only. The total amount
payable each year may not be less than 5% of the original proceeds (i.e., not
less than $50 per annum of each $1,000 of original proceeds).
OPTION 5. JOINT AND SURVIVOR LIFE INCOME. In this Option, equal payments will be
made for the longer of the lives of two named payees.
OPTION 6. ALTERNATE LIFE INCOME. In this Option, we will use the proceeds to
purchase an annuity. The amount payable will be 102% of our current individual
immediate annuity purchase rate on the effective date of the settlement
contract. We reserve the right to change the current annuity rates at any time.
However, once this Option has been selected and the settlement contract is
issued, any revision in rates will not affect payment to a payee or payees. Upon
request, we will quote the amount currently payable under this settlement
option.
EARLIER YOU MENTIONED A MATURITY DATE. WHAT IS THE MATURITY DATE?
The maturity date is the policy anniversary on or next following the insured's
100th birthday. If your policy is still in force, maturity proceeds may be
payable to you on the maturity date. If paid, maturity proceeds are equal to the
amount of the policy's cash value, less any indebtedness.
WHAT IF I DON'T WANT TO GET PAID THE POLICY'S CASH VALUE ON THE MATURITY DATE?
MAY I EXTEND THE MATURITY DATE?
Yes. If the insured is alive on the original maturity date of the policy, you
may extend the maturity date. Unless you elect otherwise, the maturity date will
automatically be extended until the date the insured dies, subject to the
following:
1) no premium payments will be allowed after the original maturity date;
2) increases to the specified amount will not be permitted after the
original maturity date;
3) death benefit option changes will not be permitted after the original
maturity date;
22
4) on the original maturity date, 100% of the cash value in the
sub-accounts will be transferred to the fixed account;
5) after the original maturity date, transfers from the fixed account to
the sub-accounts will not be permitted;
6) no further monthly deductions will be taken after the original
maturity date (the cost of insurance charges will be $0);
7) the specified amount for the maturity date extension will be equal to
the specified amount on the insured's 85th birthday, less (a) and (b)
where:
(a) is any decrease to the specified amount on or after the
insured's attained age 85; and
(b) is an adjustment for partial withdrawals taken after the
insured's attained age 85.
INSURED'S ATTAINED AGE
86-90 91 and Older
Death Benefit Amount by which Amount proportionate
Option 1 the base policy to the ratio of the
specified withdrawal to the
amount is policy value prior
reduced due to to the withdrawal
the withdrawal
Death Benefit $0 $0
Option 2 or 3
ASSIGNMENT
MAY I EVER ASSIGN MY POLICY?
Yes. While the insured is living, you may assign your rights in the policy. The
assignment must be in writing in a form acceptable to us, signed by you and
received at our home office. Assignments will not affect any payments made or
actions taken by us prior to our receipt of the assignment request. We are not
responsible for any assignment not submitted, nor are we responsible for the
sufficiency or validity of any assignment. Assignments are subject to any
indebtedness owed to us before being recorded. The interest of any beneficiary
will be subject to the rights of any assignee of record on file at our home
office.
POLICY LAPSE AND REINSTATEMENT
CAN MY POLICY EVER LAPSE AND WHAT HAPPENS IF IT DOES?
It is possible that your policy could lapse if your cash surrender value is
insufficient to cover all policy charges. If the cash surrender value on a
monthly anniversary day is not sufficient to cover that month's policy charges,
and premium payments required under the "Guaranteed Policy Continuation"
provision have not been met, a grace period will be allowed for the payment of a
premium. Such premium must equal or exceed the lesser of 3 times the monthly
charges and the premium required to bring the guaranteed policy continuation
provision into effect.
We will send you a notice at the start of the grace period, at the address on
the application or another address specified by you, stating the amount of
premium required. The grace period will end 61 days after the date the notice is
mailed. We will send an additional reminder notice at least 31 days prior to the
end of the grace period. If sufficient premium is not received by us by the end
of the grace period, your policy will lapse without value. If death proceeds
become payable during the grace period, we will pay the death proceeds.
Guaranteed Policy Continuation Period
We will not lapse the policy, if on each monthly anniversary day (1) is greater
than (2), where:
(1) is the sum of all premiums paid to date, minus any indebtedness and
minus any partial surrenders; and
(2) is the sum of the monthly death benefit guarantee premiums due since
the policy date including any premium for the current monthly
anniversary day.
If (1) is not greater than or equal to (2), then the guaranteed policy
continuation provision is not in effect and the policy will go into the grace
period. The monthly death benefit guarantee premiums and the death benefit
guarantee period are shown on the policy data page. The monthly death benefit
guarantee premiums may vary by policy duration and may be affected by changes to
the policy.
This policy has two levels of guaranteed policy continuation guarantees, the
Initial Death Benefit Guarantee and the Limited Death Benefit Guarantee. Each
level of guarantee has its own minimum premium requirement. Each level of
premium and the period in which it applies is shown on the policy data page. The
Limited Death Benefit Guarantee will be permanently lost when premium payments
fall below those required to maintain this benefit unless sufficient premiums
are paid within a 61-day grace period.
23
Reinstatement
If the grace period ends and you have neither paid the required premium nor
surrendered your policy for its cash surrender value, you 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 us;
3) paying sufficient premium to cover all policy charges that were due
and unpaid during the grace period;
4) paying sufficient premium to keep your 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 or
on the next date the application for reinstatement is approved by us. If the
policy is reinstated, the cash value on the date of reinstatement, but prior to
applying any premiums or loan repayments, 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 your policy is
reinstated.
Unless otherwise specified, all amounts will be invested according to the
investment instructions in effect at the start of the grace period.
PERIODIC INFORMATION
WILL I EVER RECEIVE PERIODIC INFORMATION FROM YOU ABOUT MY POLICY?
Yes. We will mail to you 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, as well as 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 beneficial 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.
POLICY OWNER AND BENEFICIARY
TELL ME MORE ABOUT MY RIGHTS AS POLICY OWNER AS WELL AS THE RIGHTS OF THE
BENEFICIARY. DOES THE INSURED HAVE ANY RIGHTS UNDER THE POLICY IF I AM NOT THE
INSURED?
The insured does not have any rights in the policy, unless the insured is also
the policy owner (you). You have all rights under the policy until the insured
dies.
Policy Owner
While the insured is living, all rights in this policy are vested in the policy
owner (you) named on the application or as subsequently changed, subject to
assignment, if any.
You 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 us and received
at our home office. Once received, the change will be effective when signed. The
change will not affect any payment made or action taken by us before request was
received. We may require that your policy be submitted for endorsement before
making a change.
If you are someone other than the insured, name no contingent policy owner, and
die before the insured, your rights in this policy belong to your estate.
Beneficiary
The beneficiary(ies) and/or contingent beneficiary will be as named on the
application or as subsequently changed, subject to assignment, if any.
You may name a new beneficiary and/or contingent beneficiary while the insured
is living. Any change must be in a written form satisfactory to us and received
at our home office. Once received, the change will be effective when signed. The
change will not affect any payment made or action taken by us before it was
received. We may require that your policy be submitted for endorsement before
making a change.
If any beneficiary predeceases the insured, that beneficiary's interest passes
to any surviving beneficiary(ies), or contingent beneficiaries 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 you or your estate.
24
TAX INFORMATION
TELL ME MORE ABOUT HOW MY LIFE INSURANCE POLICY IS TAXED. WHAT SHOULD I LOOK OUT
FOR?
First, we should state that we are not providing tax advice. For any tax advice,
you should contact your personal tax adviser.
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. As we stated earlier, we will monitor compliance with these tests.
This policy should thus receive the same federal income tax treatment as fixed
benefit life insurance. As a result, the death proceeds payable under this
policy are generally excludable from gross income of the beneficiary under
Section 101 of the Internal Revenue Code. However, if the policy is transferred
for valuable consideration, then a portion of the death proceeds may be
includable in the beneficiary's gross income.
Section 7702A of the Internal Revenue Code defines modified endowment contracts
as those life insurance 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.
As a general rule, distributions from a life insurance policy (other than a
modified endowment contract) during the life of the insured are treated as the
non-taxable return of premium, to the extent of premiums previously paid. For
this purpose, dividends that are used to purchase paid-up additions or to reduce
premiums are not treated as distributions. Aggregate amounts distributed in
excess of aggregate premiums paid are generally treated as taxable ordinary
income. A loan from a life insurance policy that is not a modified endowment
contract generally is not treated as a taxable distribution. However, if the
total loan is not repaid and is forgiven (such as if the life insurance policy
lapses or is surrendered), then the amount of the outstanding loan balance is
treated as a distribution to you and may be treated as ordinary income in whole
or in part.
The Internal Revenue Code provides special rules for the 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). Under these special rules, such
transactions are taxable to the extent the cash value of the policy exceeds, at
the time of distribution, the premiums paid into the policy. In addition, a 10%
tax penalty generally applies to the taxable portion of such distributions
unless you are over age 59 1/2 or disabled, or the distribution is part of a
series of substantially equal periodic payments 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 treated as death proceeds and are subject to the death benefit
rules of Section 101 of the Internal Revenue Code, described above.
The policies offered by this prospectus may or may not be issued as modified
endowment contracts. If the policy is not issued as a modified endowment
contract, we will monitor the premium payment and will notify you when your
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 you pursuant to Section 7702(f)(7) of the Internal
Revenue Code. You 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, or may
become subject to a new 7 year testing period, 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 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 you or we pay an amount to the IRS. The amount will be based on
the tax that would have been paid by you if the income, for the period the
policy was not diversified, had been received by you.
If the failure to diversify is not corrected in this manner, you will be deemed
to be the owner of the underlying securities and taxed on the earnings of your
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
25
the Internal Revenue Code, we will take whatever steps are available to remain
in compliance.
We 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 you plus total policy indebtedness exceeds the premiums paid into
the policy, then 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 life insurance policy (including a modified
endowment contract) are subject to federal income tax withholding. The recipient
may elect not to have the withholding taken from the distribution. In some
instances, however, a distribution may be subject to mandatory back-up
withholding (the recipients cannot waive this withholding). The mandatory
back-up withholding rate is 30.5% of the income that is distributed. Mandatory
back-up withholding will occur if no taxpayer identification number is provided
to us, or if the IRS notifies us 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 2002, an estate of less than $1,000,000
(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 3 years of death. An incident of ownership is, in
general, any right that may be exercised by you, such as the right to
borrow on the policy, or the right to name a new beneficiary.
If you (whether or not you are an insured) transfer ownership of your policy to
another person, such transfer may be subject to a federal gift tax. In addition,
if you transfer the policy to someone two or more generations younger than you,
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, we 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, you 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. We are
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 us sufficient proof of his or her residency and
citizenship in the form and manner prescribed by the IRS. In addition, the NRA
must obtain an individual taxpayer identification number from the IRS, and
furnish that number to us prior to the distribution. If we do not have the
proper proof of citizenship or residency and a proper individual taxpayer
identification number prior to any distribution, we 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 us 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 includable 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
We are taxed as a life insurance company under the Internal Revenue Code. Since
the variable account is not a separate entity from us and its operations form a
26
part of us, 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.
We do 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, we determine that on a separate company basis such taxes may be
incurred, we reserve the right to assess a charge for such taxes against the
variable account.
We 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 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 you, the insured, or the beneficiary or other person receiving any benefit or
interest in or from the policy is not both a resident and citizen of the United
States, there may be a tax imposed by a foreign country, in addition to any tax
imposed by the United States. The foreign law (including regulations, rulings,
and case law) may change and impose additional taxes on the policy, the death
proceeds, or other distributions and/or ownership of the policy, or a treaty may
be amended and all or part of the favorable treatment may be eliminated.
Any or all of the foregoing may change from time to time without any notice, and
the tax consequences arising out of a policy may be changed retroactively. There
is no way of predicting if, when, or to what extent any such change may take
place. No representation is made as to the likelihood of the continuation of
these current laws, interpretations, and policies.
The foregoing is a general explanation as to certain tax matters pertaining to
insurance policies. It is not intended to be legal or tax advice. You should
consult with your independent legal, tax and/or financial adviser for more
information.
MORE INFORMATION ABOUT NATIONWIDE
TELL ME A LITTLE MORE ABOUT NATIONWIDE AND THE VARIABLE ACCOUNT.
We are a stock life insurance company organized under the laws of the State of
Ohio in March 1929 with our home office at One Nationwide Plaza, Columbus, Ohio
43215. We are a provider of life insurance, annuities and retirement products.
We are admitted to do business in all states, the District of Columbia and
Puerto Rico.
Custodian of Assets
We serve as the custodian of the assets of the variable account.
Other Contracts Issued by Nationwide
We offer variable contracts and policies with benefits that vary in accordance
with the investment experience of various separate accounts of Nationwide.
The Variable Account and Underlying Mutual Funds
Nationwide VLI Separate Account-4 is a separate account that invests in the
underlying mutual funds listed in Appendix A. We established the separate
account on December 3, 1987 pursuant to Ohio law. Although the separate account
is registered with the SEC as a unit investment trust pursuant to the Investment
Company Act of 1940 ("1940 Act"), the SEC does not supervise the management of
us 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 our other assets. The variable account's assets are held
separately from our assets and in general are not chargeable with liabilities
incurred in any of our other businesses. We are obligated to pay all amounts
promised to you under the policy.
The variable account is divided into sub-accounts. You elect to have premiums
allocated among the sub-accounts and the fixed account at the time of
application.
We use the assets of each sub-account to buy shares of the underlying mutual
funds based on your instructions. A policy's investment performance depends upon
the performance of the underlying mutual funds chosen by you.
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.
27
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 objectives. However the underlying
mutual funds are NOT directly related to any publicly traded mutual fund. YOU
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
We may materially change the investment policy of the variable account. We must
inform you 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 overall interests of the policy owners or if it
renders our operations hazardous to the public. If you object, the policy may be
converted to a substantially comparable general account life insurance policy
offered by us. You have 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. We will not require
evidence of insurability for this conversion.
Upon electing such a policy conversion, we will transfer the cash value of the
policy (as of the conversion date) to the new policy, which will provide for an
amount of insurance not exceeding the death benefit of the original policy. The
new policy will not be affected by the investment experience of any separate
account.
Voting Rights
If you have allocated assets to the underlying mutual funds, you are entitled to
certain voting rights. We will vote your shares at special shareholder meetings
based on your instructions. However, if the law changes allowing us to vote in
its own right, we may elect to do so.
If you have voting interests in an underlying mutual fund, you 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 us with your voting instructions. We will vote shares for which no
instructions are received in the same proportion as those that are received.
The number of shares which you may vote is determined by dividing the cash value
of the amount they have allocated to an underlying mutual fund by the net asset
value of that underlying mutual fund. We will designate a date for this
determination not more than 90 days before the shareholder meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through our other separate accounts. We do not
anticipate any disadvantage 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, we will take whatever steps are necessary to
protect you and payees, including withdrawal of the variable account from
participation in the underlying mutual fund(s) involved in the conflict.
Substitution of Securities
We 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.
OTHER GENERAL INFORMATION
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
28
impact of Norris on any employment related insurance or benefit program before
purchasing this policy.
STATE REGULATION
We are 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 our operations
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 our contract liabilities and reserves so that the Insurance Department
may certify the items are correct. Our 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, We are subject to
regulation under the insurance laws of other jurisdictions in which it may
operate.
ADVERTISING
We are 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 our financial strength or claims-paying ability. The ratings are
not intended to reflect the investment experience or financial strength of the
variable account. We may advertise these ratings from time to time. In addition,
we may include in certain advertisements, endorsements in the form of a list of
organizations, individuals or other parties which recommend us or the policies.
Furthermore, we may occasionally include in advertisements comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
LEGAL PROCEEDINGS
We are 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
us.
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.
On October 29, 1998, we were 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 us 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, we 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 us and other named defendants. We intend 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 us in the future.
The general distributor, Nationwide Investment Services Corporation, is not
engaged in any litigation of any material nature.
EXPERTS
The financial statements of Nationwide Life Insurance Company and Nationwide VLI
Separate Account- 4 have been included herein in reliance upon the reports of
KPMG LLP, independent certified public accountants, appearing elsewhere herein,
and upon the authority of said firm as experts in accounting and auditing.
REGISTRATION STATEMENT
We have filed a registration statement with the SEC under the Securities Act of
1933, as amended, for the policies discussed in this prospectus. However, the
prospectus does not contain all the information included in the registration
statement. The registration statement may also contain amendments and exhibits
that are not included in the prospectus. The prospectus is meant to be a summary
and explanation of the policy, which is the legal binding instrument for the
policies. Please refer to your policy for additional information.
WHO IS THE GENERAL DISTRIBUTOR (PRINCIPAL UNDERWRITER) FOR THIS POLICY?
The general distributor (principal underwriter) for this policy is Nationwide
Investment Services Corporation ("NISC" or "Nationwide Investment Scvs.
Corporation for policies issued in the State of Michigan), Two Nationwide Plaza,
Columbus, Ohio 43215. NISC is our wholly owned subsidiary. NISC was organized as
an Oklahoma corporation on March 19, 1974.
29
HOW ARE THE POLICIES SOLD (DISTRIBUTED)?
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 pursuant to an
agreement with us dated May 1, 2000. 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 VLI Separate Account-2;
- Nationwide VLI Separate Account-3;
- Nationwide VLI Separate Account-4;
- Nationwide VLI Separate Account-5;
- Nationwide Multi-Flex Variable Account;
- Nationwide Variable Account;
- Nationwide Variable Account-II;
- Nationwide Variable Account-4;
- Nationwide Variable Account-5;
- Nationwide Variable Account-6;
- Nationwide Variable Account-8;
- Nationwide Variable Account-9;
- Nationwide Variable Account-10;
- 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 paid by us on the sale of these policies plus fees
for marketing services are not more than 90% of the premiums paid up to
commission target premium, 3% of premium in excess of commission target premium.
Commission target premium is equal to the IRS guideline level premium.
No underwriting commissions have been paid by us to NISC.
NATIONWIDE INVESTMENT SERVICES CORPORATION DIRECTORS AND OFFICERS
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
W.G. Jurgensen Chief Executive Officer and
One Nationwide Plaza Director
Columbus, OH 43215
Joseph J. Gasper Chairman of the Board 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
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John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Glenn W. Soden Associate Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
Carol L. Dove Associate Vice President -Treasury Services and Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
ADDITIONAL INFORMATION ABOUT NATIONWIDE
The life insurance business, including annuities, is the only business in which
we are engaged.
We market our policies through independent insurance brokers, general agents,
and registered representatives of registered NASD broker/dealer firms.
We serve 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;
- - 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; and
- - Nationwide VLI Separate Account-5.
We, like other insurance companies, are 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.
We operate 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,
we share employees with Nationwide Mutual Insurance Company and Nationwide
Mutual Fire Insurance Company.
We do not presently own or lease any materially important physical properties
when its property holdings are viewed in relation to its total assets. We share
our home office, other facilities and equipment with Nationwide Mutual Insurance
Company.
COMPANY MANAGEMENT
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual
Fire Insurance Company, Nationwide Property and Casualty Insurance Company and
Nationwide General Insurance Company and their affiliated companies comprise the
Nationwide group of companies. The companies listed above have substantially
common boards of directors and officers.
Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of
Nationwide. 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. Gasper and Woodward are also trustees
of one or more of the registered investment
31
companies distributed by NISC, a registered broker-dealer affiliated with the
Nationwide group of companies.
DIRECTORS OF NATIONWIDE
DIRECTORS OF THE DEPOSITOR NAME AND POSITIONS AND OFFICES
PRINCIPAL BUSINESS ADDRESS WITH DEPOSITOR PRINCIPAL OCCUPATION
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
Yvonne M. Curl Director Vice President, Chief Marketing Officer for Avaya Inc.(2)
Avaya Inc.
Room 3C322
211 Mt. Airy Road
Basing Ridge, NJ 07920
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 Farms, Inc.(1)
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director Retired General Manager, Lyon County Co-operative Oil Company(1)
301 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director Owner and Operator, Moreland Fruit Farm; Operator, Melrose
1558 West Moreland Road Orchard(1)
Wooster, OH 44691
Joseph J. Gasper President and Chief President and Chief Operating Officer, Nationwide Life Insurance
One Nationwide Plaza Operating Officer and Company and Nationwide Life and Annuity Insurance Company(1)
Columbus, OH 43215 Director
W.G. Jurgensen Chief Executive Chairman and Chief Executive Officer(3)
One Nationwide Plaza Officer and Director
Columbus, OH 43215
David O. Miller Chairman of the Board President, Owen Potato Farm, Inc.; Partner, M&M Enterprises(1)
115 Sprague Drive and Director
Hebron, OH 43025
Ralph M. Paige Director Executive Director Federation of Southern Cooperatives/Land
Federation of Southern Assistance Fund (1)
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director Vice President, Pattersons, Inc.; President, Patterson Farms, Inc.
8765 Mulberry Road (1)
Chesterland, OH 44026
Arden L. Shisler Director President and Chief Executive Officer, K&B Transport, Inc.(1)
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director Owner and Operator Sunnydale Farms and Mining(1)
88740 Fairview Road
Jewett, OH 43986
(1) Principal occupation for last 5 years.
(2) Prior to assuming this current position, Ms. Curl held other executive
management positions with the Xerox Corporation.
(3) Prior to assuming this current position, Mr. Jurgensen was Executive Vice
President of Bank One Corporation. Prior to that, Mr. Jurgensen was
Executive Vice President of First Chicago NBD.
Each of the directors is a director of the other major insurance affiliates of
the Nationwide group of companies except Mr. Gasper who is a director only of
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
Company. Mr. Gasper is a director of NISC, a registered broker-dealer.
32
Messrs. Miller, Patterson, and Shisler are directors of Nationwide Financial
Services, Inc. Messrs. Gasper and Woodward are trustees of Nationwide Separate
Account Trust and Nationwide Asset Allocation Trust, registered investment
companies.
EXECUTIVE OFFICERS OF NATIONWIDE
OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
Richard D. Headley Executive Vice President
One Nationwide Plaza
Columbus, OH 43215
Michael S. Helfer Executive Vice President - Corporate Strategy
One Nationwide Plaza
Columbus, OH 43215
Donna A. James Executive Vice President - Chief Administrative Officer
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President - Chief Financial Officer and Treasurer
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment Officer
One Nationwide Plaza
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President - Chief Communications Officer
One Nationwide Plaza
Columbus, OH 43215
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Senior Vice President - Corporate Strategy
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 - Business Development and Sponsor Relations
One Nationwide Plaza
Columbus, OH 43215
David R. Jahn Senior Vice President - Product Management
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 and Operations
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President - Claims
One Nationwide Plaza
Columbus, OH 43215
Mark R. Thresher Senior Vice President - Finance - Nationwide Financial
One Nationwide Plaza
Columbus, OH 43215
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OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS OFFICES OF THE DEPOSITOR
Susan A. Wolken Senior Vice President - Product Management and Nationwide Financial
One Nationwide Plaza Marketing
Columbus, OH 43215
Richard M. Waggoner Senior Vice President - Operations
One Nationwide Plaza
Columbus, OH 43215
W.G. JURGENSEN has been a Director and Chief Executive Officer since 2000.
Previously, he was Executive Vice President of Bank One Corporation from 1998 to
May 2000. Prior to Bank One's merger with First Chicago NBD, Mr. Jurgensen
served from 1990 to 1998 as Executive Vice President with First Chicago, leading
various business units. For 17 years, Mr. Jurgensen was with Norwest
Corporation, beginning as a corporate banking officer and serving in
increasingly responsible roles including president and CEO of Norwest Investment
Services and management of the treasury function. Mr. Jurgensen's final post was
Executive Vice President - Corporate Banking.
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 34 years.
LEWIS J. ALPHIN has been a Director of Nationwide since 1993. Mr. Alphin owns
and operates an 800-acre farm in Mt. Olive, NC. He taught agriculture business
at James Sprunt Community Collegy in Kenansville, NC for more than 22 years
before retiring in 1994. He is the former board chairman of the Cape Fear Farm
Credit Association, a member and former vice president, secretary/treasurer, and
director of the Duplin County Agribusiness Council, and a former board member of
the Southern States Cooperative (1986 to 1993). Mr. Alphin is a member of the
Duplin County Farm Bureau, the North Carolina Farm Bureau, ad the Farm Credit
Council. He is a member and former director of the Oak Wolfe Fire Department.
A. I. BELL has been a Director of Nationwide since April, 1998. Mr. Bell has
served as a state trustee of the Ohio Farm Bureau Federation from 1991 to 1998
and as president that last four years. He oversees the Bell family farm in
Zanesville, Ohio. The farm is the hub of a multi-family swine network, in
addition to grain and beef operations. Mr. Bell has represented the Ohio Farm
Bureau at state and national level activities, and has traveled internationally
representing Ohio agriculture. In 1995, he was introduced into The Ohio State
University Department of Animal Sciences Hall of Fame.
YVONNE M. CURL has been a Director of Nationwide since April 1998. Ms. Curl is
Vice President - Chief Marketing Officer for Avaya Inc. located in Basking
Ridge, NJ. Prior to joining Avaya Inc. in November 2000, she was employed by the
Xerox Corporation. She joined Xerox in 1976 as a sales representative and
progressed through management positions, including vice president - field
operations; executive assistant to the chairman and CEO; and as corporate vice
president serving as senior vice president and general manager, public sector
worldwide/global solutions group.
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 3 years.
THOMAS L. CRUMRINE has been Senior Vice President of Nationwide since September
1997. Previously he was Senior Vice President - Property/Casualty from March
1996 to September 1997. Prior to that time, he was Senior Vice President -
Claims from April 1995 to March 1996, Vice President - Claims from 1993 to March
1996, Vice President - Agency Sales from 1991 to 1993 and Vice President -
Agency Services from 1989 to 1991. Prior to 1989 Mr. Crumrine held several
positions with Nationwide.
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 Strategy since
December 11, 2000. Previously, Mr. Diamond was Senior Vice President - Corporate
Controller from August 1999 to December
34
2000. He was Vice President - Controller from October 1993 to August 1999. Prior
to that time, Mr. Diamond held several positions within Nationwide. Mr. Diamond
has been with Nationwide for 12 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.
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 32 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.
RICHARD D. HEADLEY has been Executive Vice President for Nationwide since July
2000. Previously, he was Executive Vice President - Chief Information Technology
Officer from May 1999 to July 2000. He was Senior Vice President - Chief
Information Technology Officer from October 1997 to May 1999. Previously, Mr.
Headly 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. Headley has been with
Nationwide for 3 years.
MICHAEL S. HELFER has been Executive Vice President - Corporate Strategy since
August 2000. He is a former partner and head of the financial institutions group
at Wilmer, Cutler and Pickering, a 350-lawyer international law firm
headquartered in Washington, D.C. He served as that firm's Chairman and Chief
Executive Officer from 1995 to 1998.
DAVID K. HOLLINGSWORTH has been Senior Vice President - Business Development and
Sponsor Relations since April 2000. Previouly, he was Senior Vice President -
Multi Channel and Sponsor relations from August 1999 until April 2000.
Previously, he was Senior Vice President - Marketing from June 1999 to August
1999. Prior to that time, Mr. Hollingsworth held numerous positions within
Nationwide. Mr. Hollingsworth has been with Nationwide for 26 years.
DAVID R. JAHN has been Senior Vice President - Product Management since November
2000. Previously, he was Senior Vice President - Commercial Insurance from March
1998 to November 2000. 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
Nationwide. Mr. Jahn has been with Nationwide for 29 years.
DONNA A. JAMES has been Executive Vice President - Chief Administrative Officer
since July 2000. Previously, she was Senior Vice President - Chief Human
Resources Officer from May 1999 to July 2000. 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 of Nationwide. Previously, Ms. James held several
positions within Nationwide. Ms. James has been with Nationwide for 19 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
35
Nationwide. Mr. Karas has been with Nationwide for 36 years.
GREGORY S. LASHUTKA has been Senior Vice President - Corporate Relations since
January 2000. Previously, he was the Mayor of the City of Columbus (Ohio) from
January 1992 to December 1999. From January 1986 to December 1991, Mr. Lashutka
was a Partner with Squire, Sanders & Dempsey. From January 1978 to December
1985, he was City Attorney for the City of Columbus (Ohio).
EDWIN P. MCCAUSLAND, JR. has been Senior Vice President - Fixed Income
Securities since 1999. Mr. McCausland has 29 years of experience in insurance
investments beginning his career in 1970 with Connecticut Mutual Life Insurance
Company. He joined Phoenix Mutual Life Insurance Company in 1981 as second Vice
President of Bond Investments and rising to Vice President of Pension
Operations. He was Vice President and Managing Director of Mass Mutual Life
Insurance Company prior to joining Nationwide.
DAVID O. MILLER has been a Director of Nationwide since November 1996. Mr.
Miller has been Chairman of the Board since 1998. Mr. Miller is president of
Owen Potato Farm, Inc. and a partner of M&M Enterprises in Licking County, OH.
He is a director and board chairman of the National Cooperative Business
Association, director of Cooperative Business International and the
International Cooperative Alliance, and serves on the educational executive
committee of the National Council of Farmer Cooperatives. He was president of
the Ohio Farm Bureau Federation from 1981 to 1985 and was vice president for six
years. Mr. Miller served a two-year term on the board of the American Farm
Bureau Association. He is past president of the Ohio Vegetable and Potato
Growers Association, and was a director of Landmark, Inc., a farm supply
cooperative which is now part of Indianapolis-based Countrymark.
ROBERT A. OAKLEY has been Executive Vice President - Chief Financial Officer and
Treasurer since December 2000. Previously, Mr. Oakley was Executive Vice
President - Chief Financial Officer from April 1995 to December 2000. Prior to
that, Mr. Oakley 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 25 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 and Operations since
December 2000. Previously, he was Senior Vice President - Technology Services
from 1998 to December 2000. 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 since November
2000. Previously he was Senior Vice President - Claims and Financial Services
from 1999 to November 2000. Prior to that time, Mr. Robinette was Senior Vice
President - Marketing and Product Management from May 1998 to 1999. Mr.
Robinette was Executive Vice President, Customer Services of Employers Insurance
of Wausau, a member of the Nationwide group until 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 Nationwide
for 14 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
36
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.
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 Finance 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 24
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 26 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 36 years.
37
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 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 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.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: Capital growth. The Fund will seek to achieve its
investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities.
AMERICAN CENTURY VP VALUE
Investment Objective: Long-term capital growth; income is a secondary
objective. The equity securities in which the Fund will invest will be
primarily securities of well-established companies with
intermediate-to-large market capitalizations that are believed by
management to be undervalued at the time of purchase. Under normal market
conditions, the Fund expects to invest at least 80% of the value of its
total assets in equity securities, including common and preferred stock,
convertible preferred stock and convertible debt obligations.
DREYFUS INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management investment
company known as a mutual fund. Shares are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies to
fund variable annuity contracts and variable life insurance policies and to
qualified pension and retirement plans. Individuals may not purchase shares
directly from the Fund. The Dreyfus Corporation serves as the Fund's investment
adviser.
EUROPEAN EQUITY PORTFOLIO: INITIAL SHARES
Investment Objective: Long-term capital growth. To pursue this goal, the
Portfolio generally invests at least 80% of its total assets in stocks
included within the universe of the 300 largest European companies. The
Portfolio's stock investments may include common stocks, preferred stocks
and convertible securities.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.:
INITIAL SHARES
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM Capital Management Group, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment
38
standards, but which also show evidence that they conduct their business in
a manner that contributes to the enhancement of the quality of life in
America. Current income is secondary to the primary goal.
DREYFUS STOCK INDEX FUND, INC.: INITIAL SHARES
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly owned subsidiary of
Mellon Bank, N.A., which is a wholly owned subsidiary of Mellon Bank
Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
The Dreyfus Corporation serves as the Fund's manager. Fayez Sarofim & Company
serves as the sub-adviser and provides day-to-day management of the portfolio.
APPRECIATION PORTFOLIO: INITIAL SHARES
Investment Objective: Primarily long-term capital growth consistent with
the preservation of capital; current income is a secondary investment
objective. This Portfolio invests primarily in the common stocks of
domestic and foreign issuers.
FEDERATED INSURANCE SERIES
Federated Insurance Series (the "Trust"), an open-end management investment
company, was established as a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Trust offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Federated Investment Management Company serves as the
investment adviser.
FEDERATED QUALITY BOND FUND II
Investment Objective: Current income by investing in investment grade fixed
income securities.
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: SERVICE CLASS
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: SERVICE CLASS
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 sense for you if you can
afford 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: SERVICE CLASS
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; and
39
- 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 Service, 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: SERVICE CLASS
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 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. Fidelity Management & Research Company ("FMR") is the manager of VIP
II and its portfolios.
VIP II CONTRAFUND(R) PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation by investing primarily in
companies that FMR believes to be undervalued due to an overly pessimistic
appraisal by the public. This strategy can lead to investments in domestic
or foreign companies, small and large, many of which may not be well known.
The Portfolio primarily invests in common stock and securities convertible
into common stock, but it has the flexibility to invest in any type of
security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III ("VIP III") is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares 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 of VIP
III and it's portfolios.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio, under
normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth potential.
Although the Portfolio invests primarily in common stock and securities
convertible into common stock, it has the ability to purchase other
securities, such as preferred stock and bonds that may produce capital
growth. The Portfolio may invest in foreign securities without limitation.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Long-term growth of capital by investing primarily in
common stocks selected for their growth potential. The Portfolio may invest
in companies of any size, from larger, well-established companies to
smaller, emerging growth companies.
GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Long-term growth of capital by investing primarily in
equity securities of U.S. and foreign companies selected for their growth
potential. Under normal circumstances, the Portfolio invests at least 65%
of its total assets in securities of companies that the Portfolio manager
believes will benefit significantly from advances or improvements in
technology.
INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Long-term growth of capital by investing at least 65%
of its total assets in securities of issuers from at least five different
countries, excluding the United States. Although the Portfolio intends to
invest substantially all of its assets in issuers located outside the
United States, it may invest in U.S. issuers and it may at times invest all
of its assets in fewer than five countries, or even a single country.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be
40
sold primarily to separate accounts to fund the benefits under variable life
insurance policies and variable annuity contracts issued by life insurance
companies. Villanova Global Asset Management Trust, an indirect subsidiary of
Nationwide Mutual Insurance Company, manages the assets of the Gartmore NSAT
Emerging Markets Fund and Gartmore NSAT International Growth Fund. The remaining
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: Long-term capital appreciation.
DREYFUS NSAT MID CAP INDEX FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. The Fund seeks to match the
performance of the Standard & Poor's MidCap 400 Index. To pursue this goal,
the Fund generally is fully invested in all 400 stocks included in this
index in proportion to their weighting in the index, and in futures whose
performance is tied to the index. The Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation.
FEDERATED NSAT EQUITY INCOME FUND
Subadviser: Federated Investment Counseling
Investment Objective: Above average income and capital appreciation by
investing primarily in income producing U.S. and foreign equity securities
and securities that are convertible into common stock.
FEDERATED NSAT HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: High current income by investing at least 65% of the
Fund's total assets in corporate bonds that are rated BBB or lower by a
rating agency or that are unrated but of comparable quality. Such funds are
commonly referred to as "junk bonds."
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
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. The Fund invests at least 65% of
its assets in established companies located in at least three countries
other than the U.S.
GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing at least 65% of its total assets in
U.S. government and agency bonds, bills and notes.
J.P. MORGAN NSAT BALANCED FUND
Subadviser: J.P. Morgan Investment Management, Inc.
Investment Objective: High total return from a diversified portfolio of
equity and fixed income securities. Under normal circumstances, the Fund
invests approximately 60% of its assets in equity securities and 40% of its
assets in fixed income securities. The equity securities held by the Fund
generally are common stocks of large and medium sized companies included in
the Standard & Poor's 500 Index. Generally, most of the Fund's fixed income
securities will consist of "investment grade" securities, but the Fund may
invest in securities rated below investment grade or determined by the
subadviser to be of comparable quality. These securities are commonly known
as junk bonds.
MAS NSAT MULTI SECTOR BOND FUND
Subadviser: Miller, Anderson & Sherrerd, LLP
Investment Objective: Primarily, above average total return over a market
cycle of three to five years. The Fund invests in a diversified portfolio
of U.S. and foreign fixed income securities, including high yield
securities (commonly referred to as "junk bonds") and emerging markets
securities. The subadviser will use futures, swaps and other derivatives in
managing the Fund.
MONEY MARKET FUND
Investment Objective: As high a level of current income as is considered
consistent with the preservation of capital and maintenance of liquidity.
NATIONWIDE GLOBAL 50 FUND
Subadviser: J. P. Morgan Investment Management, Inc.
Investment Objective: High total return from a globally diversified
portfolio of equity securities. The Fund seeks its investment objective
through stock selection and management of currency exposure. The Fund
invests in approximately fifty stocks of primarily large and midcap
companies located throughout the world.
41
NATIONWIDE SMALL CAP GROWTH FUND
Subadvisers: Miller Anderson & Sherrerd, LLP, Neuberger Berman, LLC,
Waddell & Reed Investment Management Company Investment Objective: Capital
growth by investing in a broadly diversified portfolio of equity securities
issued by U.S. and foreign companies with market capitalizations in the
range of companies represented by the Russell 2000, known as small cap
companies. Under normal market conditions, the Fund will invest at least
65% of its total assets in the equity securities of small cap companies.
The balance of the Fund's assets may be invested in equity securities of
larger cap companies. The Fund may also invest in foreign securities.
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 medial
market capitalization of approximately $1 billion. 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
Index.
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Gartmore
Global Partners, Strong Capital Management, Inc., Waddell & Reed Investment
Management Company Investment Objective: Long-term growth of capital. Under
normal market conditions, the Fund will invest at least 65% of its 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 Index.
STRONG NSAT MID CAP GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by focusing on common stocks of U.S.
and foreign companies that the subadviser believes are reasonably priced
and have above-average growth potential. The Fund invests primarily in
stocks of medium sized companies but its portfolio can include stocks of
companies of any size.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
TURNER NSAT GROWTH FOCUS FUND
Subadviser: Turner Investment Partners, Inc.
Investment Objective: Long-term capital appreciation by investing primarily
in U.S. common stocks, American depository receipts and foreign companies
that demonstrate strong earnings growth potential. The Fund is
non-diversified and typically focuses its investments in a core group of 20
to 30 common stocks.
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.
AMT 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.
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital growth. The Portfolio pursues this goal by
investing mainly in 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.
AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth. The Portfolio pursues its goal by
investing mainly in common stocks of mid- to large-capitalization
companies.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold to provide benefits under variable life insurance policies
and variable annuity contracts. OppenheimerFunds, Inc. is the investment
adviser.
OPPENHEIMER AGGRESSIVE GROWTH FUND/VA
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The
42
Fund may also invest in cyclical industries in "special situations" that
OppenheimerFunds, Inc. believes present opportunities for capital growth.
OPPENHEIMER CAPITAL APPRECIATION FUND/VA
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (companies
which have an operating history of at least five years including
predecessors). Current income is a secondary consideration in the selection
of the Fund's portfolio securities.
OPPENHEIMER GLOBAL SECURITIES FUND/VA
Investment Objective: Long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special appreciation
possibilities. These securities may be considered speculative.
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
STRONG OPPORTUNITY FUND II, INC.
The Strong Opportunity Fund II, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Strong Opportunity Fund II, Inc. was
incorporated in Wisconsin and may only be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management, Inc. is the
investment adviser for the Fund.
Investment Objective: Capital appreciation through investments in a
diversified portfolio of equity securities.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
The Universal Institutional Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors.
EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located. Morgan Stanley Dean Witter Investment Management,
Inc. is the Portfolio's investment adviser.
MID CAP GROWTH PORTFOLIO
Investment Objective: Long-term capital growth by investing primarily in
common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the Standard &
Poor's Rating Group ("S&P") MidCap 400 Index. Such range is generally $500
million to $6 billion but the range fluctuates over time with changes in
the equity market. Miller, Anderson & Sherrerd, LLP is the Portfolio's
investment adviser.
U. S. REAL ESTATE PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified portfolio of securities of companies operating in the real
estate industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of
its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65% of the
Portfolio's total assets will be invested in Real Estate Securities,
primarily equity securities of real estate investment trusts. The Portfolio
may invest up to 25% of its total assets in securities issued by foreign
issuers, some or all of which may also be Real Estate Securities. Morgan
Stanley Asset Management, Inc. serves as the Portfolio's investment
adviser.
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.
43
Shares of Van Eck Trust are offered only to separate accounts of insurance
companies to fund the benefits of variable life insurance policies and variable
annuity contracts. The investment advisor and manager is Van Eck Associates
Corporation.
WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Long-term capital appreciation by investing primarily
in equity securities in emerging markets around the world. The Fund
emphasizes investment in countries that, compared to the world's major
economies, exhibit relatively low gross national product per capita, as
well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing primarily
in "Hard Asset Securities." For the Fund's purpose, "Hard Assets" are real
estate, energy, timber, and industrial and precious metals. Income is a
secondary consideration.
44
APPENDIX B: PERFORMANCE SUMMARY INFORMATION
The following performance tables display historical investments results of
the underlying mutual fund sub-accounts. This information may be useful in
helping potential investors in deciding which underlying mutual fund
sub-accounts to choose and in assessing the competence of the underlying
mutual funds' investment advisers. The performance figures shown be
considered in light of the investment objectives and policies,
characteristics and quality of the underlying portfolios of the underlying
mutual funds, and the market conditions during the periods of time quoted.
The performance figures should not be considered as estimates or
predictions of future performance. Investment return and the principal
value of the underlying mutual fund sub-accounts are not guaranteed and
will fluctuate so that a policy owner's units, when redeemed, may be worth
more or less than their original cost.
45
Annual Percentage Non Annualized
Change Percentage Change
UNDERLYING INVESTMENT Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs.
OPTIONS Inception Values 1998 1999 2000 To to to to
Date 9/30/01 9/30/00 9/30/00 9/30/00 9/30/00
American Century VP Inc & 10/30/97 11.15 26.86 18.02 -10.62 -7.85 -22.60 -15.29 6.90
Growth
American Century VP 05/01/94 11.15 18.76 64.04 -16.83 -7.65 -34.85 -15.57 8.85
International
American Century VP Value 05/01/96 12.21 4.81 -0.85 18.14 -7.34 12.46 15.77 29.41
JP Morgan NSAT Balanced Fnd 10/31/97 9.84 8.07 0.87 -0.35 -4.73 -11.95 -8.87 -3.26
Nationwide Global 50 Fund 10/31/97 9.52 19.14 22.92 -12.32 -10.11 -30.94 -25.21 -4.80
Dreyfus European Equity 04/30/99 8.71 NA NA -2.00 -10.44 -29.51 -12.99 NA
Port.
Dreyfus Stock Index Fund 09/29/89 11.14 28.21 20.60 -9.28 -8.11 -26.83 -17.30 5.33
Dreyfus Socially 10/06/93 10.57 29.38 30.08 -11.03 -9.52 -38.37 -24.71 1.15
Responsible Growth Fund
Dreyfus Variable 04/05/93 12.18 30.22 11.46 -0.65 -4.53 -16.88 -6.89 12.95
Investment Fund Capital
Appreciation Fund
Dreyfus NSAT Mid Cap Index 10/31/97 12.93 10.81 20.92 15.21 -12.60 -20.03 12.75 38.57
Fund
Federated Quality Bond 04/22/99 11.84 NA NA 10.45 1.07 12.91 19.45 NA
Fund II
NSAT Equity Income 10/31/97 9.89 15.13 18.49 -10.62 -6.94 -30.13 -17.11 -0.23
NSAT High Income Bond 10/31/97 9.78 5.80 3.19 -8.28 -6.75 -8.77 -8.10 -4.13
Fidelity VIP Equity-Income 10/09/86 11.15 11.54 6.25 8.30 -8.19 -9.73 -2.81 15.27
Port Iservice Class
Fidelity VIP Growth 10/09/86 11.98 39.38 37.29 -11.07 -12.52 -38.26 -22.66 6.85
Portfolio
Service Class
Fidelity VIP High 09/15/85 6.86 -4.42 8.07 -22.61 -8.54 -26.43 -31.07 -25.02
IncomePort
Service Class
Fidelity VIP Overseas 01/28/87 9.30 12.64 42.46 -19.15 -11.71 -34.17 -27.72 -2.57
Portfolio
Service Class
Fidelity VIP II Contraband 01/03/95 12.35 29.94 24.15 -6.71 -5.53 -23.36 -10.19 17.37
Port
Service Class
Fidelity VIP III Growth 01/03/95 8.21 24.51 4.18 -17.18 -8.78 -32.07 -32.64 -20.39
Opportunity Port. Service
Class
Gartmore NSAT 08/30/00 6.35 NA NA NA -7.66 -36.13 NA NA
International Growth Fund
Gartmore NSAT Emerging 08/30/00 6.41 NA NA NA -17.17 -36.81 NA NA
Markets Fund
Gartmore NSAT Global Tech 06/30/00 2.92 NA NA NA -15.20 -71.59 NA NA
& Comm.Fund
Janus Aspen Series Capital 05/01/97 5.78 58.11 66.95 -19.35 -8.55 -42.08 -19.72 26.65
Appreciation Port. Srvc
Shrs
Janus Aspen Series Global 01/18/00 3.15 NA NA NA -20.05 -66.18 NA NA
Portfolio: Srvc Shrs
Janus Aspen Series Intl. 05/02/94 5.56 17.24 82.31 -16.97 -10.37 -41.47 -11.54 18.67
Growth Port. Srvc Shrs
MAS NSAT Multi Sector Bond 10/31/97 11.22 2.60 1.56 5.65 -2.00 4.35 9.90 12.22
Morgan Stanley UIF 06/16/97 10.47 -28.38 29.37 11.39 -3.04 2.47 28.39 62.23
Emerging Markets Debt
Portfolio
Morgan Stanley UIF Mid Cap 11/08/82 5.23 NA NA -7.33 -13.89 -50.10 NA NA
Growth Port.
Morgan Stanley UIF-US Real 07/03/95 11.44 -11.62 -3.37 28.06 -5.08 7.28 31.28 32.59
Estate Portfolio
Nationwide Small-Cap 05/03/99 12.51 NA NA -16.17 -15.69 -41.08 0.23 NA
Growth Fund (Multi Manager)
Nationwide Small Cap Value 10/31/97 13.72 -3.06 27.84 11.20 -18.17 -3.49 22.28 78.85
NSAT Small Company Fund 10/23/95 12.73 1.01 44.02 8.90 -13.56 -21.04 14.94 48.74
NSAT Capital Appreciation 04/15/92 6.19 29.96 4.28 -26.53 -8.25 -53.77 -52.19 -42.67
Fund
NSAT Government Bond Fund 11/08/82 12.92 8.91 -2.35 12.54 1.56 13.38 20.66 17.80
NSAT Money Market Fund 11/10/81 12.07 5.27 4.85 6.03 0.24 4.71 10.71 16.05
NSAT Total Return Fund 11/08/82 9.78 18.07 6.94 -2.12 -8.79 -25.50 -16.43 -3.14
Turner NSAT Return Fund 07/03/95 3.19 NA NA NA -19.57 -69.33 NA NA
Neuberger & Berman AMT 11/03/97 13.71 31.67 14.93 1.13 -7.88 -14.42 5.39 29.06
Guardian Portfolio
Neuberger & Berman AMT 11/03/97 12.42 39.28 53.89 -7.46 -16.04 -52.50 -13.86 18.39
Mid Cap Growth Portfolios
Neuberger & Berman AMT 03/22/94 9.43 4.21 7.37 0.70 -10.77 -15.81 -8.26 4.68
Partners Port folio
Oppenheimer Variable 08/15/86 11.58 12.36 83.60 -11.24 -6.98 -56.39 -18.17 28.47
Account Fund - Aggressive
Growth
Annualized
Percentage Change
UNDERLYING INVESTMENT 5 yrs. Inception 3 Yrs. 5 yrs. Inception
OPTIONS to to to to To
9/30/00 9/30/00 9/30/00 9/30/00 9/30/01
American Century VP Inc & NA 20.14 2.25 NA 4.79
Growth
American Century VP 39.97 61.26 2.87 6.96 6.66
International
American Century VP Value 67.49 72.90 8.97 10.87 10.64
JP Morgan NSAT Balanced Fnd NA -0.14 -1.10 NA -0.04
Nationwide Global 50 Fund NA -3.68 -1.63 NA -0.95
Dreyfus European Equity NA -12.92 NA NA -5.57
Port.
Dreyfus Stock Index Fund 60.30 275.45 1.74 9.90 11.65
Dreyfus Socially 42.29 141.18 0.38 7.31 11.66
Responsible Growth Fund
Dreyfus Variable 68.80 187.53 4.14 11.04 13.25
Investment Fund Capital
Appreciation Fund
Dreyfus NSAT Mid Cap Index NA 28.85 11.49 NA 6.69
Fund
Federated Quality Bond NA 17.53 NA NA 6.85
Fund II
NSAT Equity Income NA 0.63 -0.08 NA 0.16
NSAT High Income Bond NA 0.05 -1.40 NA 0.01
Fidelity VIP Equity-Income 52.21 418.17 4.85 8.76 11.61
Port Iservice Class
Fidelity VIP Growth 51.01 508.43 2.23 8.59 12.81
Portfolio
Service Class
Fidelity VIP High -17.69 191.20 -9.15 -3.82 6.89
IncomePort
Service Class
Fidelity VIP Overseas 8.63 120.45 -0.86 1.67 5.53
Portfolio
Service Class
Fidelity VIP II Contraband 66.35 159.46 5.48 10.72 15.19
Port
Service Class
Fidelity VIP III Growth 16.48 67.27 -7.32 3.10 7.93
Opportunity Port. Service
Class
Gartmore NSAT NA -40.73 NA NA -38.22
International Growth Fund
Gartmore NSAT Emerging NA -44.66 NA NA -42.00
Markets Fund
Gartmore NSAT Global Tech NA -63.55 NA NA -55.40
& Comm.Fund
Janus Aspen Series Capital NA 89.21 8.19 NA 15.54
Appreciation Port. Srvc
Shrs
Janus Aspen Series Global NA -68.52 NA NA -49.30
Portfolio: Srvc Shrs
Janus Aspen Series Intl. 51.57 127.82 5.87 8.67 11.75
Growth Port. Srvc Shrs
MAS NSAT Multi Sector Bond NA 13.35 3.92 NA 3.25
Morgan Stanley UIF NA 5.52 17.50 NA 1.26
Emerging Markets Debt
Portfolio
Morgan Stanley UIF Mid Cap NA -22.74 NA NA -12.38
Growth Port.
Morgan Stanley UIF-US Real 66.57 111.54 9.86 10.74 12.75
Estate Portfolio
Nationwide Small-Cap NA 25.09 NA NA 9.74
Growth Fund (Multi Manager)
Nationwide Small Cap Value NA 34.98 21.38 NA 7.96
NSAT Small Company Fund 53.63 109.93 14.15 8.97 13.30
NSAT Capital Appreciation -9.13 55.97 -16.93 -1.90 4.81
Fund
NSAT Government Bond Fund 45.88 402.28 5.61 7.84 8.92
NSAT Money Market Fund 28.63 262.58 5.09 5.16 6.69
NSAT Total Return Fund 37.26 854.40 -1.06 6.54 12.68
Turner NSAT Return Fund NA -70.00 NA NA -61.83
Neuberger & Berman AMT NA 44.27 8.87 NA 9.83
Guardian Portfolio
Neuberger & Berman AMT NA 45.60 5.79 NA 10.09
Mid Cap Growth Portfolios
Neuberger & Berman AMT 37.40 113.90 1.54 6.56 10.63
Partners Port folio
Oppenheimer Variable 25.35 485.59 8.71 4.62 12.39
Account Fund - Aggressive
Growth
46
Annual Percentage Non Annualized
Change Percentage Change
UNDERLYING INVESTMENT Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Inception
OPTIONS Inception Values 1998 1999 2000 To to to to to to
Date* 9/30/01 9/30/00 9/30/00 9/30/00 9/30/00 9/30/00 9/30/00
Oppenheimer Variable 04/03/85 13.26 24.00 41.66 -0.23 -12.10 -30.64 -3.00 35.55 77.37 726.74
Account Fund - Capital
Apprevciation
Oppenheimer Global 06/30/95 7.22 14.10 58.48 5.09 -13.16 -27.38 8.29 51.07 84.59 226.48
Securities Fund /VA
Oppenheimer Main Street 07/05/95 9.68 4.70 21.71 -8.78 -6.08 -24.92 -15.07 10.33 37.34 112.95
Growth & Income Fund/VA
NSAT Mid Cap Growth Fund 10/31/97 10.28 14.59 84.75 -15.38 -21.09 -56.44 -30.87 8.29 NA 5.03
Strong Opportunity Fund 06/30/95 7.90 13.54 34.91 6.35 -13.82 -19.41 0.55 34.89 77.61 266.93
II, Inc
Nationwide Strategic Value 10/31/97 8.38 0.39 -3.07 7.61 -13.88 -20.16 -7.74 5.46 NA -14.88
Fund
Van Eck Worldwide 12/27/95 5.95 -34.13 100.28 -41.87 -13.46 -40.35 -29.26 9.17 -45.72 -33.98
Insurance Trust -
Worldwide Emerging Markets
Fund
Van Eck Worldwide 09/01/89 7.66 -30.97 21.00 11.40 -10.88 -15.62 -5.50 9.23 -19.19 34.74
Insurance Trust -
Worldwide Hard Assets Fund
Warburg Pincus Trust - 10/31/97 11.98 12.13 6.24 8.91 -7.35 -3.40 0.56 24.03 NA 24.49
Value Portfolio
Warburg Pincus Trust - 06/30/95 8.55 5.35 53.43 -25.90 -11.14 -35.89 -30.15 -9.12 -14.12 -1.37
International Equity
Portfolio
Warburg Pincus Trust - 09/30/96 8.47 6.51 63.50 -18.94 -14.36 -56.80 -26.26 -2.34 -6.33 -6.33
Post Venture Capital
Portfolio
Annualized
Percentage Change
UNDERLYING INVESTMENT 3 Yrs. 5 yrs. Inception
OPTIONS to to To
9/30/00 9/30/00 9/30/01
Oppenheimer Variable 10.67 12.14 13.66
Account Fund - Capital
Apprevciation
Oppenheimer Global 14.74 13.04 11.48
Securities Fund /VA
Oppenheimer Main Street 3.33 6.55 12.89
Growth & Income Fund/VA
NSAT Mid Cap Growth Fund 2.69 NA 1.26
Strong Opportunity Fund 10.49 12.17 14.84
II, Inc
Nationwide Strategic Value 1.79 NA -4.03
Fund
Van Eck Worldwide 2.97 -11.50 -6.93
Insurance Trust -
Worldwide Emerging Markets
Fund
Van Eck Worldwide 2.99 -4.17 2.50
Insurance Trust -
Worldwide Hard Assets Fund
Warburg Pincus Trust - 7.44 NA 5.75
Value Portfolio
Warburg Pincus Trust - -3.14 -3.00 -0.22
International Equity
Portfolio
Warburg Pincus Trust - -0.79 -1.30 -1.30
Post Venture Capital
Portfolio
**The underlying mutual fund Inception Date is the date the underlying mutual
fund first became effective, which is not necessarily the same date the
underlying mutual fund was first made available through the variable account.
For those underlying mutual funds which have not been offered as sub-accounts
through the variable account for one of the quoted periods, the cash values will
show the investment performance such underlying mutual funds would have achieved
(reduced by any applicable variable account and policy charges, and underlying
mutual fund investment advisory fees and expenses) had they been offered as
sub-accounts through the variable account for the period quoted. Certain
underlying mutual funds are not as old as some of the periods quoted, therefore,
the cash values may not be available for all of the periods shown. The preceding
table displays three types of total return. Simply stated, total return shows
the percentage change in unit values, with dividends and capital gains
reinvested, after the deduction of a 0.80% asset charge (and the deduction of
applicable investment advisory fees and other expenses of the underlying mutual
funds). The total return figures shown in the Annual Percentage Change and
Annualized Percentage Change columns represent annualized figures; i.e., they
show the rate of growth that would have produced the corresponding cumulative
return had performance been constant over the entire period. The Non-Annualized
Percentage Change total return figures are not annual return figures but instead
represent the total percentage change in unit value over the stated periods
without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO ACCOUNT THE
SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY CHARGES"
SECTION. THESE OTHER CHARGES INCLUDE DEDUCTIONS FROM PREMIUMS, COST OF INSURANCE
CHARGES, SURRENDER CHARGES AND A MONTHLY ADMINISTRATIVE CHARGE.
47
1 YEAR TO 2 YEARS TO 3 YEARS TO
09/30/01 09/30/01 09/30/01
UNDERLYING INVESTMENT FUND CASH CASH CASH
OPTIONS INCEPTION ACCUM SURR. ACCUM SURR. ACCUM SURR.
DATE** VALUE VALUE VALUE VALUE VALUE VALUE
American Century VP 10/30/97 $6,186 $2,256 $12,934 $9,200 $22,016 $18,675
Inc &
Growth
American Century VP 05/01/94 $5,138 $1,207 $12,024 $8,290 $21,213 $17,872
International
American Century VP 05/01/96 $9,258 $5,327 $18,363 $14,629 $29,203 $25,862
Value
JP Morgan NSAT 10/31/97 $7,095 $3,164 $14,293 $10,559 $22,445 $19,104
Balanced Fnd
Nationwide Global 50 10/31/97 $5,469 $1,539 $11,430 $7,696 $19,537 $16,195
Fund
Dreyfus European 04/30/99 $5,629 $1,698 $12,679 $8,945 NA NA
Equity Port
Dreyfus Stock Index 09/29/89 $5,828 $1,897 $12,433 $8,699 $21,385 $18,044
Fund
Dreyfus Socially 10/06/93 $4,840 $0,909 $10,885 $7,151 $19,491 $16,150
Responsible Growth Fund
Dreyfus Variable 04/05/93 $6,686 $2,755 $14,120 $10,385 $23,690 $20,349
Investment Fund
Capital Appreciation
Fund
Dreyfus NSAT Mid Cap 10/31/97 $6,421 $2,490 $15,548 $11,814 $27,159 $23,817
Index Fund
Federated Quality Bond 04/22/99 $9,212 $5,281 $18,659 $14,925 NA NA
Fund II
NSAT Equity Income 10/31/97 $5,509 $1,578 $12,145 $8,411 $20,614 $17,273
NSAT High Income Bond 10/31/97 $7,359 $3,428 $14,604 $10,869 $22,676 $19,335
Fidelity VIP 10/09/86 $7,331 $3,400 $15,014 $11,280 $24,734 $21,392
Equity-Income Port
Iservice Class
Fidelity VIP Growth 10/09/86 $4,861 $0,930 $11,103 $7,369 $20,186 $16,845
Portfolio
Service Class
Fidelity VIP High 09/15/85 $5,833 $1,902 $11,236 $7,502 $17,637 $14,296
IncomePort
Service Class
Fidelity VIP Overseas 01/28/87 $5,222 $1,291 $11,014 $7,279 $19,282 $15,941
Portfolio
Service Class
Fidelity VIP II 01/03/95 $6,092 $2,161 $13,284 $9,549 $23,246 $19,905
Contraband Port
Service Class
Fidelity VIP III 01/03/95 $5,363 $1,433 $10,665 $6,931 $17,491 $14,149
Growth Opportunity
Port. Service Class
Gartmore NSAT 08/30/00 $5,035 $1,104 NA NA NA NA
International Growth
Fund
Gartmore NSAT Emerging 08/30/00 $5,021 $1,090 NA NA NA NA
Markets Fund
Gartmore NSAT Global 06/30/00 $1,948 $0,000 NA NA NA NA
Tech & Comm.Fund
Janus Aspen Series 05/01/97 $4,500 $0,570 $11,035 $7,301 $21,849 $18,508
Capital Appreciation
Port. Srvc Shrs
Janus Aspen Series 01/18/00 $2,499 $0,000 NA NA NA
Global Portfolio: Srvc
Shrs
Janus Aspen Series 05/02/94 $4,584 $0,653 $11,883 $8,148 $21,867 $18,526
Intl. Growth Port
Srvc Shrs
MAS NSAT Multi Sector 10/31/97 $8,485 $4,554 $17,189 $13,455 $26,558 $23,217
Bond
Morgan Stanley UIF 06/16/97 $8,323 $4,392 $18,667 $14,932 $32,224 $28,883
Emerging Markets Debt
Portfolio
Morgan Stanley UIF Mid 11/08/82 $3,848 $0,000 NA NA NA NA
Cap Growth Port
Morgan Stanley UIF-US 07/03/95 $8,729 $4,798 $19,168 $15,434 $30,171 $26,830
Real Estate Portfolio
Nationwide Small-Cap 05/03/99 $4,589 $0,658 $12,891 $9,157 NA NA
Growth Fund (Multi
Manager)
Nationwide Small-Cap 10/31/97 $7,932 $4,001 $17,778 $14,044 $32,786 $29,445
Value
NSAT Small Company Fund 10/23/95 $6,345 $2,414 $15,737 $12,003 $28,150 $24,809
NSAT Capital 04/15/92 $3,477 $0,000 $7,219 $3,485 $12,210 $8,869
Appreciation Fund
NSAT Government Bond 11/08/82 $9,254 $5,323 $18,803 $15,069 $28,585 $25,243
Fund
NSAT Money Market Fund 11/10/81 $8,509 $4,578 $17,276 $13,542 $26,960 $23,618
NSAT Total Return Fund 11/08/82 $5,945 $2,014 $12,593 $8,858 $20,811 $17,470
Turner NSAT Growth 07/03/95 $2,174 $0,000 NA NA NA NA
Focus
Neuberger & Berman 11/03/97 $6,904 $2,974 $15,390 $11,656 $26,324 $22,982
AMT Guardian Portfolio
Neuberger & Berman 11/03/97 $3,616 $0,000 $10,723 $6,988 $20,720 $17,379
AMT Mid Cap Growth
Portfolios
Neuberger & Berman AMT 03/22/94 $6,813 $2,882 $14,113 $10,379 $22,968 $19,627
Partners Port folio
5 YEARS TO 10 YEARS TO INCEPTION TO
09/30/01 09/30/01 09/30/01
UNDERLYING INVESTMENT CASH CASH CASH
OPTIONS ACCUM SURR. ACCUM SURR. ACCUM SURR.
VALUE VALUE VALUE VALUE VALUE VALUE
American Century VP NA NA NA NA $31,888 $28,743
Inc &
Growth
American Century VP $41,310 $38,559 NA NA $74,037 $72,465
International
American Century VP $52,827 $50,076 NA NA $62,234 $59,875
Value
JP Morgan NSAT NA NA NA NA $30,356 $27,211
Balanced Fnd
Nationwide Global 50 NA NA NA NA $26,824 $23,679
Fund
Dreyfus European NA NA NA NA $19,098 $15,757
Equity Port
Dreyfus Stock Index $43,761 $41,010 $146,207 $145,224 $207,002 $206,413
Fund
Dreyfus Socially $39,575 $36,823 NA NA $89,761 $88,189
Responsible Growth Fund
Dreyfus Variable $47,518 $44,766 NA NA $122,174 $120,995
Investment Fund
Capital Appreciation
Fund
Dreyfus NSAT Mid Cap NA NA NA NA $36,871 $33,726
Index Fund
Federated Quality Bond NA NA NA NA $28,110 $24,769
Fund II
NSAT Equity Income NA NA NA NA $28,193 $25,049
NSAT High Income Bond NA NA NA NA $31,481 $28,337
Fidelity VIP $46,421 $43,670 $146,498 $145,515 $311,325 $311,325
Equity-Income Port
Iservice Class
Fidelity VIP Growth $41,986 $39,234 $142,187 $141,205 $337,747 $337,747
Portfolio
Service Class
Fidelity VIP High $29,931 $27,180 $78,227 $77,244 $183,683 $183,683
IncomePort
Service Class
Fidelity VIP Overseas $35,114 $32,363 $90,883 $89,900 $164,668 $164,668
Portfolio
Service Class
Fidelity VIP II $46,623 $43,872 NA NA $79,037 $77,072
Contraband Port
Service Class
Fidelity VIP III $33,937 $31,185 NA NA $55,618 $53,653
Growth Opportunity
Port. Service Class
Gartmore NSAT NA NA NA NA $13,080 $9,346
International Growth
Fund
Gartmore NSAT Emerging NA NA NA NA $11,893 $8,159
Markets Fund
Gartmore NSAT Global NA NA NA NA $8,887 $5,153
Tech & Comm.Fund
Janus Aspen Series NA NA NA NA $42,750 $39,998
Capital Appreciation
Port. Srvc Shrs
Janus Aspen Series NA NA NA NA NA $6,335 $2,601
Global Portfolio: Srvc
Shrs
Janus Aspen Series $43,407 $40,656 NA NA $87,890 $86,318
Intl. Growth Port
Srvc Shrs
MAS NSAT Multi Sector NA NA NA NA $35,917 $32,773
Bond
Morgan Stanley UIF NA NA NA NA $45,065 $42,313
Emerging Markets Debt
Portfolio
Morgan Stanley UIF Mid NA NA NA NA $10,161 $6,427
Cap Growth Port
Morgan Stanley UIF-US $53,372 $50,620 NA NA $79,659 $77,693
Real Estate Portfolio
Nationwide Small-Cap NA NA NA NA $22,367 $19,025
Growth Fund (Multi
Manager)
Nationwide Small-Cap NA NA NA NA $42,525 $39,380
Value
NSAT Small Company Fund $50,282 $47,530 NA NA $67,234 $64,876
NSAT Capital $24,786 $22,034 NA NA $78,785 $77,803
Appreciation Fund
NSAT Government Bond $51,291 $48,539 $120,134 $119,152 $359,258 $359,258
Fund
NSAT Money Market Fund $47,346 $44,595 $104,097 $103,114 $281,609 $281,609
NSAT Total Return Fund $40,022 $37,270 $123,261 $122,278 $481,113 $481,113
Turner NSAT Growth NA NA NA NA $8,363 $4,628
Focus
Neuberger & Berman NA NA NA NA $36,150 $33,005
AMT Guardian Portfolio
Neuberger & Berman NA NA NA NA $32,205 $29,060
AMT Mid Cap Growth
Portfolios
Neuberger & Berman AMT $41,843 $39,091 NA NA $84,296 $82,723
Partners Port folio
48
1 Year to 2 Years to 3 Years to 5 Years to
09/30/01 09/30/01 09/30/01 09/30/01
UNDERLYING INVESTMENT FUND CASH CASH CASH CASH
OPTIONS INCEPTION ACCUM SURR. ACCUM SURR. ACCUM SURR. ACCUM SURR.
DATE** VALUE VALUE VALUE VALUE VALUE VALUE VALUE VALUE
Oppenheimer Variable 08/15/86 $3,214 $0,000 $9,966 $6,232 $20,846 $17,505 $39,424 $36,673
Account Fund -
Aggressive Growth
Oppenheimer Variable 04/03/85 $5,528 $1,597 $13,432 $9,697 $24,885 $21,544 $49,782 $47,031
Account Fund - Capital
Appreciation
Oppenheimer Global 06/30/95 $5,800 $1,870 $14,683 $10,948 $27,363 $24,022 $53,685 $50,933
Securities Fund /VA
Oppenheimer Main 07/05/95 $5,968 $2,037 $12,737 $9,003 $22,106 $18,765 $41,398 $38,647
Street Growth & Income
Fund/VA
NSAT Mid Cap Growth 10/31/97 $3,318 $0,000 $8,982 $5,247 $18,143 $14,802 NA NA
Fund
Strong Opportunity 06/30/95 $6,525 $2,594 $14,643 $10,909 $25,992 $22,650 $50,911 $48,159
Fund II, Inc
Nationwide Strategic 10/31/97 $6,457 $2,526 $13,807 $10,073 $22,747 $19,406 NA NA
Value Fund
Van Eck Worldwide 12/27/95 $4,662 $0,732 $10,423 $6,689 $19,759 $16,418 $27,639 $24,887
Insurance Trust -
Worldwide Emerging
Markets Fund
Van Eck Worldwide 09/01/89 $6,822 $2,891 $14,306 $10,572 $23,412 $20,071 $35,339 $32,587
Insurance Trust -
Worldwide Hard Assets
Fund
Credit Suisse Warburg 10/31/97 $7,874 $3,944 $15,791 $12,057 $26,245 $22,904 NA NA
Pincus Trust-Value
Portfolio
Credit Suisse Warburg 06/30/95 $5,042 $1,111 $10,651 $6,917 $18,358 $15,017 $31,247 $28,495
Pincus Trust -
International Equity
Portfolio
Credit Suisse Warburg 09/30/96 $3,244 $0,000 $9,309 $5,575 $17,578 $14,237 $31,613 $28,862
Pincus Trust - Post
Venture Capital
Portfolio
10 Years to Inception to
09/30/01 09/30/01
UNDERLYING INVESTMENT CASH CASH
OPTIONS ACCUM SURR. ACCUM SURR.
VALUE VALUE VALUE VALUE
Oppenheimer Variable $131,973 $130,990 $317,850 $317,850
Account Fund -
Aggressive Growth
Oppenheimer Variable $172,082 $171,099 $449,053 $449,053
Account Fund - Capital
Appreciation
Oppenheimer Global $154,439 $153,456 $179,184 $178,398
Securities Fund /VA
Oppenheimer Main NA NA $65,378 $63,413
Street Growth & Income
Fund/VA
NSAT Mid Cap Growth NA NA $26,559 $23,414
Fund
Strong Opportunity NA NA $147,954 $146,971
Fund II, Inc
Nationwide Strategic NA NA $28,373 $25,228
Value Fund
Van Eck Worldwide NA NA $32,893 $30,534
Insurance Trust -
Worldwide Emerging
Markets Fund
Van Eck Worldwide $80,397 $79,415 $100,045 $99,455
Insurance Trust -
Worldwide Hard Assets
Fund
Credit Suisse Warburg NA NA $35,638 $32,494
Pincus Trust-Value
Portfolio
Credit Suisse Warburg NA NA $44,945 $42,980
Pincus Trust -
International Equity
Portfolio
Credit Suisse Warburg NA NA $31,613 $28,862
Pincus Trust - Post
Venture Capital
Portfolio
**The underlying mutual fund Inception Date is the date the underlying mutual
fund first became effective, which is not necessarily the same date the
underlying mutual fund was first made available through the variable account.
For those underlying mutual funds which have not been offered as sub-accounts
through the variable account for one of the quoted periods, the cash values will
show the investment performance such underlying mutual funds would have achieved
(reduced by any applicable variable account and policy charges, and underlying
mutual fund investment advisory fees and expenses) had they been offered as
sub-accounts through the variable account for the period quoted. Certain
underlying mutual funds are not as old as some of the periods quoted, therefore,
the cash values may not be available for all of the periods shown. The preceding
table displays three types of total return. Simply stated, total return shows
the percentage change in unit values, with dividends and capital gains
reinvested, after the deduction of a 0.80% asset charge (and the deduction of
applicable investment advisory fees and other expenses of the underlying mutual
funds). The total return figures shown in the Annual Percentage Change and
Annualized Percentage Change columns represent annualized figures; i.e., they
show the rate of growth that would have produced the corresponding cumulative
return had performance been constant over the entire period. The Non-Annualized
Percentage Change total return figures are not annual return figures but instead
represent the total percentage change in unit value over the stated periods
without annualization. THE TOTAL RETURN FIGURES DO NOT TAKE INTO ACCOUNT THE
SEVERAL OTHER POLICY CHARGES WHICH ARE DESCRIBED IN THE "POLICY CHARGES"
SECTION. THESE OTHER CHARGES INCLUDE DEDUCTIONS FROM PREMIUMS, COST OF INSURANCE
CHARGES, SURRENDER CHARGES AND A MONTHLY ADMINISTRATIVE CHARGE.
49
1
- --------------------------------------------------------------------------------
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide VLI Separate Account-4:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VLI Separate Account-4 (comprised of the
sub-accounts listed in note 1(b)) (collectively, "the Account") as of December
31, 2000, and the related statements of operations and changes in contract
owners' equity for each of the years in the two year period then ended and for
the period February 18, 1998 (commencement of operations) through December 31,
1998, and the financial highlights for each of the years in the two year period
then ended and for the period February 18, 1998 (commencement of operations)
through December 31, 1998. These financial statements and financial highlights
are the responsibility of the Account's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights 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, 2000, 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 and financial highlights referred
to above present fairly, in all material respects, the financial position of the
Account as of December 31, 2000, the results of its operations and its changes
in contract owners' equity for each of the years in the two year period then
ended and for the period February 18, 1998 (commencement of operations) through
December 31, 1998, and the finan- cial highlights for each of the years in the
two year period then ended and for the period February 18, 1998 (commencement of
operations) through December 31, 1998, in conformity with accounting principles
generally accepted in the United States of America.
KPMG LLP
Columbus, Ohio
February 16, 2001
- --------------------------------------------------------------------------------
2
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 2000
ASSETS:
Investments at fair value:
American Century VP - American Century VP Income & Growth (ACVPIncGr)
3,520,844 shares (cost $26,492,915) ............................................... $ 25,033,199
American Century VP - American Century VP International (ACVPInt)
4,327,440 shares (cost $50,107,521) ............................................... 44,269,706
American Century VP - American Century VP Value (ACVPValue)
1,110,522 shares (cost $6,655,647) ................................................ 7,407,179
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGr)
478,283 shares (cost $17,868,978) ................................................. 16,486,409
Dreyfus Stock Index Fund (DryStkIx)
6,822,189 shares (cost $247,280,744) .............................................. 231,954,425
Dreyfus IP - European Equity Portfolio (DryEuroEq)
97,382 shares (cost $1,422,509) ................................................... 1,458,779
Dreyfus VIF - Appreciation Portfolio (DryVApp)
829,567 shares (cost $32,580,787) ................................................. 32,278,459
Federated Insurance Series - Quality Bond Fund II (FedQualBd2)
4,888,937 shares (cost $49,393,596) ............................................... 52,409,408
Fidelity VIP - Equity-Income Portfolio - Service Class (FidVEqInS)
1,123,826 shares (cost $26,958,864) ............................................... 28,601,378
Fidelity VIP - Growth Portfolio - Service Class (FidVGrS)
2,288,448 shares (cost $112,282,101) .............................................. 99,547,490
Fidelity VIP - High Income Portfolio - Service Class (FidVHiInS)
1,742,262 shares (cost $17,700,937) ............................................... 14,199,438
Fidelity VIP - Overseas Portfolio - Service Class (FidVOvSeS)
1,219,554 shares (cost $26,879,872) ............................................... 24,317,914
Fidelity VIP-II - Contrafund Portfolio - Service Class (FidVConS)
2,001,473 shares (cost $50,647,030) ............................................... 47,374,866
Fidelity VIP-III - Growth Opportunities Portfolio - Service Class (FidVGrOpS)
800,720 shares (cost $16,998,621) ................................................. 14,172,737
Gartmore NSAT - Emerging Markets Fund (NSATEmMGM)
2,782 shares (cost $20,588) ....................................................... 20,895
Gartmore NSAT - Global Technology & Communications Fund (NSATGTecGM)
75,628 shares (cost $751,824) ..................................................... 555,867
Gartmore NSAT - International Growth Fund (NSATIntGGM)
2,891 shares (cost $24,686) ....................................................... 24,946
3
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, CONTINUED
Janus Aspen Series - Capital Appreciation Portfolio - Service Shares (JanACapApS)
835,840 shares (cost $25,584,669) ................................................. 22,183,187
Janus Aspen Series - Global Technology Portfolio - Service Shares (JanAGlTchS)
2,391,105 shares (cost $21,271,695) ............................................... 15,661,738
Janus Aspen Series - International Growth Portfolio - Service Shares (JanAIntGrS)
607,844 shares (cost $21,433,733) ................................................. 18,624,342
Nationwide SAT - Balanced Fund - J.P. Morgan (NSATBalJPM)
679,412 shares (cost $7,039,214) .................................................. 6,787,329
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
1,479,309 shares (cost $34,225,912) ............................................... 21,716,260
Nationwide SAT - Equity Income Fund - Federated (NSATEqIFED)
180,950 shares (cost $2,405,433) .................................................. 2,169,595
Nationwide SAT - Global 50 Fund (NSATGlob50)
2,316,205 shares (cost $30,284,783) ............................................... 26,983,784
Nationwide SAT - Government Bond Fund (NSATGvtBd)
4,350,728 shares (cost $48,110,219) ............................................... 49,772,326
Nationwide SAT - High Income Bond Fund - Federated (NSATHiIFED)
1,949,660 shares (cost $17,083,991) ............................................... 15,363,317
Nationwide SAT - Mid Cap Growth Fund - Strong (NSATMCpSTR)
1,663,974 shares (cost $34,257,943) ............................................... 27,671,892
Nationwide SAT - Mid Cap Index Fund - Dreyfus (NSATMCIxDR)
494,827 shares (cost $6,960,647) .................................................. 6,704,912
Nationwide SAT - Money Market Fund (NSATMMkt)
232,950,632 shares (cost $232,950,632) ............................................ 232,950,632
Nationwide SAT - Multi Sector Bond Fund - MAS (NSATMBdMAS)
2,835,859 shares (cost $26,553,198) ............................................... 26,316,776
Nationwide SAT - Small Cap Growth Fund (NSATSmCapG)
433,027 shares (cost $7,290,920) .................................................. 7,032,358
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
1,751,521 shares (cost $17,697,372) ............................................... 15,238,231
Nationwide SAT - Small Company Fund (NSATSmCo)
2,150,419 shares (cost $46,873,187) ............................................... 43,008,379
Nationwide SAT - Strategic Value Fund (NSATStrVal)
122,367 shares (cost $1,221,340) .................................................. 1,228,560
Nationwide SAT - Total Return Fund (NSATTotRtn)
2,841,975 shares (cost $46,180,109) ............................................... 33,080,588
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
341,544 shares (cost $5,466,763) .................................................. 5,440,792
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
1,637,648 shares (cost $43,888,979) ............................................... 36,814,318
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
601,581 shares (cost $10,164,616) ................................................. 9,727,567
4
Oppenheimer Aggressive Growth Fund/VA (OppAggGrVA)
805,091 shares (cost $73,635,576) ................................................................ 56,976,278
Oppenheimer Capital Appreciation Fund/VA (OppCapApVA)
966,962 shares (cost $47,676,455) ................................................................ 45,089,423
Oppenheimer Global Securities Fund/VA (OppGlSecVA)
132,214 shares (cost $3,939,556) ................................................................. 4,010,040
Oppenheimer Main Street Growth & Income Fund/VA (OppMGrInVA)
981,886 shares (cost $22,848,695) ................................................................ 20,874,887
Strong Opportunity Fund II, Inc. (StOpp2)
211,464 shares (cost $5,540,840) ................................................................. 5,062,438
Turner NSAT - Growth Focus Fund (NSATGFocTU)
13,155 shares (cost $82,744) ..................................................................... 78,534
The Universal Institutional Funds, Inc. - Emerging Markets Debt Portfolio ((MSUEmMkt)
(formerly Morgan Stanley - Emerging Markets Debt Portfolio)
216,626 shares (cost $1,602,945) .................................................................. 1,496,887
The Universal Institutional Funds, Inc. - Mid Cap Growth Portfolio (MSUMCapGr)
(formerly Morgan Stanley - Mid Cap Growth Portfolio)
68,097 shares (cost $939,349) ..................................................................... 840,998
The Universal Institutional Funds, Inc. - U.S. Real Estate Portfolio (MSUUSRealE)
(formerly Van Kampen American Capital - Morgan Stanley U.S. Real Estate Portfolio)
437,348 shares (cost $4,980,785) .................................................................. 5,033,881
Van Eck WIT - Worldwide Emerging Markets Fund (VEWwEmgMkt)
435,385 shares (cost $4,582,831) ................................................................. 3,609,340
Van Eck WIT - Worldwide Hard Assets Fund (VEWwHrdAst)
109,063 shares (cost $1,275,365) ................................................................. 1,316,394
Warburg Pincus Trust - Global Post Venture Capital Portfolio (WPTGloPVC)
191,645 shares (cost $2,340,455) ................................................................. 2,431,981
Warburg Pincus Trust - International Equity Portfolio (WPTIntEq)
225,970 shares (cost $3,107,770) ................................................................. 2,424,657
Warburg Pincus Trust - Value Portfolio (WPTValue)
81,531 shares (cost $1,588,695) .................................................................. 1,110,451
-----------
Total investments.............................................................................. 1,414,946,167
Accounts receivable .................................................................................... -
-----------
Total assets .................................................................................. 1,414,946,167
ACCOUNTS PAYABLE........................................................................................... 53,726
-----------
CONTRACT OWNERS' EQUITY (NOTE 7) .......................................................................... $ 1,414,892,441
===========
See accompanying notes to financial statements.
5
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
Total ACVPincGr
------------------------------------------- -------------------------------
2000 1999 1998 2000 1999
------------- ------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 21,039,631 6,784,764 795,996 89,434 345
Mortality and expense risk charges (note 3) ... (1,473,980) (382,102) (7,523) (33,218) (4,870)
------------- ------------- ------------- ------------- -------------
Net investment income ....................... 19,565,651 6,402,662 788,473 56,216 (4,525)
------------- ------------- ------------- ------------- -------------
Proceeds from mutual funds shares sold ...... 537,305,272 201,999,339 61,803,110 4,190,922 4,238,041
Cost of mutual fund shares sold ............. (520,733,854) (195,191,587) (62,074,770) (4,127,013) (3,971,748)
------------- ------------- ------------- ------------- -------------
Realized gain (loss) on investment .......... 16,571,418 6,807,752 (271,660) 63,909 266,293
Change in unrealized gain (loss)
on investments .............................. (178,984,942) 42,568,531 6,208,890 (2,277,235) 692,513
------------- ------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (162,413,524) 49,376,283 5,937,230 (2,213,326) 958,806
------------- ------------- ------------- ------------- -------------
Reinvested capital gains ...................... 50,385,356 6,941,880 597,466 -- --
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (92,462,517) 62,720,825 7,323,169 (2,157,110) 954,281
============= ============= ============= ============= =============
ACVPincGr ACVPint
--------------- ---------------------------------------------
1998 2000 1999 1998
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 5,125 29,817 -- 355
Mortality and expense risk charges (note 3) ... (86) (43,822) (3,029) (173)
------------- ------------- ------------- -------------
Net investment income ....................... 5,039 (14,005) (3,029) 182
------------- ------------- ------------- -------------
Proceeds from mutual funds shares sold ...... 60,422 11,287,808 2,517,615 613,620
Cost of mutual fund shares sold ............. (58,667) (8,439,891) (1,889,551) (614,510)
------------- ------------- ------------- -------------
Realized gain (loss) on investment .......... 1,755 2,847,917 628,064 (890)
Change in unrealized gain (loss)
on investments .............................. 125,007 (10,029,310) 4,031,727 159,768
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 126,762 (7,181,393) 4,659,791 158,878
------------- ------------- ------------- -------------
Reinvested capital gains ...................... -- 445,800 -- 3,644
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 131,801 (6,749,598) 4,656,762 162,704
============= ============= ============= =============
ACVPValue DrySRGr
---------------------------------------------- --------------------------------
2000 1999 1998 2000 1999
------------- ------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 29,260 9,053 169 133,052 1,039
Mortality and expense risk charges (note 3) ... (2,491) (698) (44) (5,466) (849)
------------- ------------- ------------- ------------- -------------
Net investment income ....................... 26,769 8,355 125 127,586 190
------------- ------------- ------------- ------------- -------------
Proceeds from mutual funds shares sold ........ 5,835,158 1,027,473 216,392 1,524,094 620,665
Cost of mutual fund shares sold ............... (5,829,916) (1,065,502) (220,562) (1,237,290) (483,300)
------------- ------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... $ 5,242 (38,029) (4,170) 286,804 137,365
Change in unrealized gain (loss)
on investments .............................. 865,295 (142,040) 28,277 (2,392,732) 901,808
------------- ------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 870,537 (180,069) 24,107 (2,105,928) 1,039,173
------------- ------------- ------------- ------------- -------------
Reinvested capital gains ...................... 74,870 85,768 1,997 -- 279,678
------------- ------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 972,176 (85,946) 26,229 (1,978,342) 1,319,041
============= ============= ============= ============= =============
DrySRGr DryStkix
----------- ----------------------------------------------
1998 2000 1999 1998
------------ ------------- ------------- -------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 2,114 1,776,028 694,199 64,671
Mortality and expense risk charges (note 3) ... (96) (301,447) (80,224) (1,001)
------------ ------------- ------------- -------------
Net investment income ....................... 2,018 1,474,581 613,975 63,670
------------ ------------- ------------- -------------
Proceeds from mutual funds shares sold ........ 292,403 17,394,755 3,651,059 2,855,607
Cost of mutual fund shares sold ............... (279,293) (13,809,069) (3,038,322) (2,928,820)
------------ ------------- ------------- -------------
Realized gain (loss) on investments ......... 13,110 3,585,686 612,737 (73,213)
Change in unrealized gain (loss)
on investments .............................. 108,355 (27,898,576) 11,117,238 1,455,019
------------ ------------- ------------- -------------
Net gain (loss) on investments .............. 121,465 (24,312,890) 11,729,975 1,381,806
------------ ------------- ------------- -------------
Reinvested capital gains ...................... 47,900 3,654,055 672,634 12,311
------------ ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 171,383 (19,184,254) 13,016,584 1,457,787
============ ============= ============= =============
6
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
DryEuroEq DryVApp
---------------------------------------- -------------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 3,040 266 -- 209,082 102,225
Mortality and expense risk charges (note 3) ... (647) -- -- (61,134) (19,902)
----------- ----------- ----------- ----------- -----------
Net investment income ....................... 2,393 266 -- 147,948 82,323
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 4,915,237 9,724 -- 5,802,885 6,596,135
Cost of mutual fund shares sold ............... (4,976,743) (9,364) -- (5,449,137) (6,226,765)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (61,506) 360 -- 353,748 369,370
Change in unrealized gain (loss)
on investments .............................. 26,273 9,997 -- (1,102,409) 649,339
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (35,233) 10,357 -- (748,661) 1,018,709
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... 39,799 1,251 -- 355,671 68,742
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 6,959 11,874 -- (245,042) 1,169,774
=========== =========== =========== =========== ===========
DryVApp FedQualBd2
------------- ----------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 7,616 284,124 -- --
Mortality and expense risk charges (note 3) ... (108) (36,034) (3,162) --
----------- ----------- ----------- -----------
Net investment income ....................... 7,508 248,090 (3,162) --
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 191,690 5,070,565 193,269 --
Cost of mutual fund shares sold ............... (192,584) (4,943,810) (195,176) --
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (894) 126,755 (1,907) --
Change in unrealized gain (loss)
on investments .............................. 150,742 2,975,611 40,201 --
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 149,848 3,102,366 38,294 --
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 157,356 3,350,456 35,132 --
=========== =========== =========== ===========
FidVEqinS FidVGrS
---------------------------------------- ------------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 275,597 97,065 -- 46,538 8,639
Mortality and expense risk charges (note 3) ... (12,713) (3,265) (402) (106,544) (12,917)
----------- ----------- ----------- ----------- -----------
Net investment income ....................... 262,884 93,800 (402) (60,006) (4,278)
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 8,769,366 2,794,623 1,186,510 8,193,032 1,070,026
Cost of mutual fund shares sold ............... (9,316,337) (2,491,032) (1,221,597) (6,947,939) (923,816)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (546,971) 303,591 (35,087) 1,245,093 146,210
Change in unrealized gain (loss)
on investments .............................. 1,470,791 (277,459) 449,182 (19,309,179) 6,093,883
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 923,820 26,132 414,095 (18,064,086) 6,240,093
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... 1,063,019 214,564 -- 5,556,689 543,154
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 2,249,723 334,496 413,693 (12,567,403) 6,778,969
=========== =========== =========== =========== ===========
FidVGrS FidVHiInS
------------- ----------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- 711,532 364,862 --
Mortality and expense risk charges (note 3) ... (249) (21,719) (1,521) (245)
----------- ----------- ----------- -----------
Net investment income ....................... (249) 689,813 363,341 (245)
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 759,197 5,669,988 926,716 848,212
Cost of mutual fund shares sold ............... (750,697) (6,842,047) (1,041,180) (901,996)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 8,500 (1,172,059) (114,464) (53,784)
Change in unrealized gain (loss)
on investments .............................. 480,684 (3,641,858) 103,063 37,295
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 489,184 (4,813,917) (11,401) (16,489)
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- 13,640 --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 488,935 (4,124,104) 365,580 (16,734)
=========== =========== =========== ===========
(Continued)
7
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
FidVOvSeS FidVConS
------------------------------------------- --------------------------------
2000 1999 1998 2000 1999
------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 217,766 21,110 -- 93,712 26,713
Mortality and expense risk charges (note 3) ... (49,878) (9,859) (75) (27,798) (4,360)
------------ ------------ ------------ ------------ ------------
Net investment income ....................... 167,888 11,251 (75) 65,914 22,353
------------ ------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 23,478,026 7,592,272 528,529 2,681,172 1,218,202
Cost of mutual fund shares sold ............... (25,243,216) (6,861,807) (553,402) (2,152,820) (1,003,352)
------------ ------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... (1,765,190) 730,465 (24,873) 528,352 214,850
Change in unrealized gain (loss)
on investments .............................. (4,479,931) 1,849,661 68,313 (6,926,956) 3,006,379
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .............. $ (6,245,121) 2,580,126 43,440 (6,398,604) 3,221,229
------------ ------------ ------------ ------------ ------------
Reinvested capital gains ...................... 1,409,432 34,048 -- 3,401,735 195,897
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (4,667,801) 2,625,425 43,365 (2,930,955) 3,439,479
============ ============ ============ ============ ============
FidVConS FidVGrOpS
-------------- -----------------------------------------
1998 2000 1999 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .................... $ -- 125,878 28,246 --
Mortality and expense risk
charges (note 3) ....................... (330) (11,570) (3,130) (168)
------------ ------------ ------------ ------------
Net investment income ................. (330) 114,308 25,116 (168)
------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold .. 974,276 2,790,417 613,535 309,151
Cost of mutual fund shares sold ......... (947,452) (2,995,674) (559,981) (296,203)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ... 26,824 (205,257) 53,554 12,948
Change in unrealized gain (loss)
on investments ........................ 648,413 (3,225,818) 137,134 262,800
------------ ------------ ------------ ------------
Net gain (loss) on investments ........ 675,237 (3,431,075) 190,688 275,748
------------ ------------ ------------ ------------
Reinvested capital gains ................ -- 662,022 55,207 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract
owners' equity resulting from
operations ........................ $ 674,907 (2,654,745) 271,011 275,580
============ ============ ============ ============
NSATEmMGM NSATGTecGM
------------------------------------------- --------------------------------
2000 1999 1998 2000 1999
------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- -- --
Mortality and expense risk charges (note 3) ... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Net investment income ....................... -- -- -- -- --
------------ ------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 641,425 -- -- 9,643 --
Cost of mutual fund shares sold ............... (644,443) -- -- (14,069) --
------------ ------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... (3,018) -- -- (4,426) --
Change in unrealized gain (loss)
on investments .............................. 336 -- -- (195,957) --
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (2,682) -- -- (200,383) --
------------ ------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- -- 10,013 --
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (2,682) -- -- (190,370) --
============ ============ ============ ============ ============
NSATGTecGM NSATIntGGm
------------ ---------------------------------------------
1998 2000 1999 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- --
Mortality and expense risk charges (note 3) ... -- -- -- --
------------ ------------ ------------ ------------
Net investment income ....................... -- -- -- --
------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ -- 355,202 -- --
Cost of mutual fund shares sold ............... -- (354,541) -- --
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... -- 661 -- --
Change in unrealized gain (loss)
on investments .............................. -- 260 -- --
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. -- 921 -- --
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ -- 921 -- --
============ ============ ============ ============
8
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
JanACapApS JanAGlTchS
---------------------------------------- ----------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 135,185 -- -- 94,337 --
Mortality and expense risk charges (note 3) ... (5,130) -- -- (5,864) --
----------- ----------- ----------- ----------- -----------
Net investment income ....................... 130,055 -- -- 88,473 --
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 2,667,595 -- -- 6,627,712 --
Cost of mutual fund shares sold ............... (3,199,056) -- -- (8,282,161) --
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (531,461) -- -- (1,654,449) --
Change in unrealized gain (loss)
on investments .............................. (3,401,482) -- -- (5,609,957) --
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (3,932,943) -- -- (7,264,406) --
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $(3,802,888) -- -- (7,175,933) --
=========== =========== =========== =========== ===========
JanAGlTchS JanAintGrS
-------------- ----------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- 482,954 -- --
Mortality and expense risk charges (note 3) ... -- (5,407) -- --
----------- ----------- ----------- -----------
Net investment income ....................... -- 477,547 -- --
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ -- 8,802,259 -- --
Cost of mutual fund shares sold ............... -- (10,182,763) -- --
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... -- (1,380,504) -- --
Change in unrealized gain (loss)
on investments .............................. -- (2,809,392) -- --
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. -- (4,189,896) -- --
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ -- (3,712,349) -- --
=========== =========== =========== ===========
NSATBalJPM NSATCapAp
---------------------------------------- ----------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 172,981 80,095 9,854 41,174 96,180
Mortality and expense risk charges (note 3) ... (5,434) (1,605) (51) (10,414) (2,498)
----------- ----------- ----------- ----------- -----------
Net investment income ....................... 167,547 78,490 9,803 30,760 93,682
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 5,501,271 2,788,299 316,297 6,534,873 4,176,681
Cost of mutual fund shares sold ............... (5,437,733) (2,830,503) (315,924) (7,187,743) (3,638,494)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 63,538 (42,204) 373 (652,870) 538,187
Change in unrealized gain (loss)
on investments .............................. (241,628) (33,063) 22,806 (11,341,220) (1,637,699)
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (178,090) (75,267) 23,179 (11,994,090) (1,099,512)
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- 495 2,184 4,845,304 1,352,393
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (10,543) 3,718 35,166 (7,118,026) 346,563
=========== =========== =========== =========== ===========
NSATCapAp NSATEqIFED
------------ ----------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 14,834 15,802 1,722 896
Mortality and expense risk charges (note 3) ... (440) (1,543) (71) (17)
----------- ----------- ----------- -----------
Net investment income ....................... 14,394 14,259 1,651 879
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 703,904 1,130,737 116,995 18,085
Cost of mutual fund shares sold ............... (686,965) (1,084,332) (100,117) (17,928)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 16,939 46,405 16,878 157
Change in unrealized gain (loss)
on investments .............................. 469,266 (334,972) 84,114 15,021
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 486,205 (288,567) 100,992 15,178
----------- ----------- ----------- -----------
Reinvested capital gains ...................... 174,093 -- 202 2,636
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 674,692 (274,308) 102,845 18,693
=========== =========== =========== ===========
(Continued)
9
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATGlob50 NSATGvtBd
------------------------------------------- ------------------------------
2000 1999 1998 2000 1999
------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 199,386 8,364 1,950 2,182,498 798,788
Mortality and expense risk charges (note 3) ... (37,311) (10,207) (34) (99,138) (37,827)
------------ ------------ ------------ ------------ ------------
Net investment income ....................... 162,075 (1,843) 1,916 2,083,360 760,961
------------ ------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 5,122,679 1,039,009 57,978 5,456,678 10,418,680
Cost of mutual fund shares sold ............... (5,037,852) (930,501) (57,852) (5,620,925) (11,072,171)
------------ ------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 84,827 108,508 126 (164,247) (653,491)
Change in unrealized gain (loss)
on investments .............................. (4,336,580) 997,392 38,188 2,189,054 (442,511)
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (4,251,753) 1,105,900 38,314 2,024,807 (1,096,002)
------------ ------------ ------------ ------------ ------------
Reinvested capital gains ...................... 945,098 456,545 3,213 -- 35,939
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (3,144,580) 1,560,602 43,443 4,108,167 (299,102)
============ ============ ============ ============ ============
NSATGvtBd NSATHiIFED
------------- --------------------------------------------
1998 2000 1999 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 83,382 1,119,466 308,481 22,707
Mortality and expense risk charges (note 3) ... (327) (9,331) (3,120) (68)
------------ ------------ ------------ ------------
Net investment income ....................... 83,055 1,110,135 305,361 22,639
------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 1,043,507 3,240,993 689,933 206,929
Cost of mutual fund shares sold ............... (1,033,771) (3,550,410) (687,767) (213,860)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 9,736 (309,417) 2,166 (6,931)
Change in unrealized gain (loss)
on investments .............................. (84,436) (1,573,020) (155,595) 7,941
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (74,700) (1,882,437) (153,429) 1,010
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 22,403 -- 645 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 30,758 (772,302) 152,577 23,649
============ ============ ============ ============
NSATMCpSTR NSATMCIxDR
------------------------------------------- ------------------------------
2000 1999 1998 2000 1999
------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- 24,820 1,219
Mortality and expense risk charges (note 3) ... (36,857) (2,128) (30) (1,304) (9)
------------ ------------ ------------ ------------ ------------
Net investment income ....................... (36,857) (2,128) (30) 23,516 1,210
------------ ------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 10,455,471 2,132,323 150,535 3,068,344 104,264
Cost of mutual fund shares sold ............... (9,038,986) (1,804,973) (150,564) (2,777,066) (89,446)
------------ ------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 1,416,485 327,350 (29) 291,278 14,818
Change in unrealized gain (loss)
on investments .............................. (7,958,483) 1,323,586 48,847 (336,854) 51,305
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (6,541,998) 1,650,936 48,818 (45,576) 66,123
------------ ------------ ------------ ------------ ------------
Reinvested capital gains ...................... 922,208 515,885 -- 238,697 47,431
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (5,656,647) 2,164,693 48,788 216,637 114,764
============ ============ ============ ============ ============
NSATMCIxDR NSATMMkt
------------ --------------------------------------------
1998 2000 1999 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 782 10,355,160 3,376,535 506,347
Mortality and expense risk charges (note 3) ... (21) (307,209) (139,891) (1,751)
------------ ------------ ------------ ------------
Net investment income ....................... 761 10,047,951 3,236,644 504,596
------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 48,915 263,535,916 104,229,444 44,230,768
Cost of mutual fund shares sold ............... (51,817) (263,535,916) (104,229,444) (44,230,768)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... (2,902) -- -- --
Change in unrealized gain (loss)
on investments .............................. 29,815 -- -- --
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 26,913 -- -- --
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 27,674 10,047,951 3,236,644 504,596
============ ============ ============ ============
10
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATMBdMAS NSATSmCapG
---------------------------------------- ----------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,380,209 405,079 20,456 -- --
Mortality and expense risk charges (note 3) ... (35,618) (8,904) (64) (1,793) (31)
----------- ----------- ----------- ----------- -----------
Net investment income ....................... 1,344,591 396,175 20,392 (1,793) (31)
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 1,457,359 824,473 678,560 4,671,162 11,249,953
Cost of mutual fund shares sold ............... (1,524,119) (850,875) (682,489) (4,701,490) (11,295,118)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (66,760) (26,402) (3,929) (30,328) (45,165)
Change in unrealized gain (loss)
on investments .............................. (112,147) (125,056) 781 (1,279,267) 1,020,705
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (178,907) (151,458) (3,148) (1,309,595) 975,540
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- 691 72,445 101,886
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 1,165,684 244,717 17,935 (1,238,943) 1,077,395
=========== =========== =========== =========== ===========
NSATSmCapG NSATSmCapV
------------- ------------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- --
Mortality and expense risk charges (note 3) ... -- (6,507) (609) (72)
----------- ----------- ----------- -----------
Net investment income ....................... -- (6,507) (609) (72)
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ -- 5,713,553 1,400,366 119,432
Cost of mutual fund shares sold ............... -- (5,334,666) (1,184,849) (127,976)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... -- 378,887 215,517 (8,544)
Change in unrealized gain (loss)
on investments .............................. -- (2,383,146) (194,598) 118,603
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. -- (2,004,259) 20,919 110,059
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- 2,830,882 651,318 --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ -- 820,116 671,628 109,987
=========== =========== =========== ===========
NSATSmCo NSATStrVal
---------------------------------------- ----------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 6,404 -- -- 12,032 5,676
Mortality and expense risk charges (note 3) ... (24,879) (4,091) (112) (439) (137)
----------- ----------- ----------- ----------- -----------
Net investment income ....................... (18,475) (4,091) (112) 11,593 5,539
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 5,986,277 1,854,552 303,745 6,700,644 173,459
Cost of mutual fund shares sold ............... (4,024,143) (1,415,009) (310,124) (6,640,337) (155,571)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 1,962,134 439,543 (6,379) 60,307 17,888
Change in unrealized gain (loss)
on investments .............................. (6,709,330) 2,711,547 132,974 33,455 (70,115)
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (4,747,196) 3,151,090 126,595 93,762 (52,227)
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... 6,779,344 500,536 -- -- 22,264
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 2,013,673 3,647,535 126,483 105,355 (24,424)
=========== =========== =========== =========== ===========
NSATStrVal NSATTotRtn
------------ ------------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,052 193,418 96,396 27,487
Mortality and expense risk charges (note 3) ... (24) (5,805) (606) (578)
----------- ----------- ----------- -----------
Net investment income ....................... 1,028 187,613 95,790 26,909
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 81,326 3,055,349 806,876 1,201,208
Cost of mutual fund shares sold ............... (89,165) (2,710,595) (784,668) (1,222,228)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (7,839) 344,754 22,208 (21,020)
Change in unrealized gain (loss)
on investments .............................. 43,881 (13,348,541) (33,899) 283,836
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 36,042 (13,003,787) (11,691) 262,816
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- 11,991,779 809,302 321,440
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 37,070 (824,395) 893,401 611,165
=========== =========== =========== ===========
(Continued)
11
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NBAMTGuard NBAMTMCGr
-------------------------------------------- ------------------------------
2000 1999 1998 2000 1999
------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 16,882 3,977 -- -- --
Mortality and expense risk charges (note 3) ... (1,965) (679) (83) (41,606) (7,463)
------------ ------------ ------------ ------------ ------------
Net investment income ....................... 14,917 3,298 (83) (41,606) (7,463)
------------ ------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 1,626,130 807,995 117,578 13,583,260 7,840,757
Cost of mutual fund shares sold ............... (1,517,104) (670,629) (123,077) (9,016,924) (6,652,007)
------------ ------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 109,026 137,366 (5,499) 4,566,336 1,188,750
Change in unrealized gain (loss)
on investments .............................. (185,904) 77,047 82,886 (10,290,829) 3,039,884
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (76,878) 214,413 77,387 (5,724,493) 4,228,634
------------ ------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- -- 6,497 37,807
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (61,961) 217,711 77,304 (5,759,602) 4,258,978
============ ============ ============ ============ ============
BAMTMCGr NBAMTPart
------------ ----------------------------------------------
1998 2000 1999 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- 55,679 56,853 114
Mortality and expense risk charges (note 3) ... $ (52) (5,009) (2,109) (290)
------------ ------------ ------------ ------------
Net investment income ....................... (52) 50,670 54,744 (176)
------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 140,913 3,401,374 787,143 862,257
Cost of mutual fund shares sold ............... (137,009) (3,678,166) (785,895) (875,740)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 3,904 (276,792) 1,248 (13,483)
Change in unrealized gain (loss)
on investments .............................. 176,285 (888,222) 196,040 255,133
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 180,189 (1,165,014) 197,288 241,650
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- 1,184,100 98,874 3,599
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 180,137 69,756 350,906 245,073
============ ============ ============ ============
OppAggGrVA OppCapApVA
-------------------------------------------- ------------------------------
2000 1999 1998 2000 1999
------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- 26 26,876 10,044
Mortality and expense risk charges (note 3) ... (52,493) (2,942) (80) (35,238) (4,168)
------------ ------------ ------------ ------------ ------------
Net investment income ....................... (52,493) (2,942) (54) (8,362) 5,876
------------ ------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 13,833,125 1,971,772 120,154 6,304,788 993,762
Cost of mutual fund shares sold ............... (9,344,555) (1,353,384) (118,908) (4,511,928) (802,267)
------------ ------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 4,488,570 618,388 1,246 1,792,860 191,495
Change in unrealized gain (loss)
on investments .............................. (19,721,439) 2,906,737 155,404 (5,403,446) 2,561,317
------------ ------------ ------------ ------------ ------------
Net gain (loss) on investments .............. (15,232,869) 3,525,125 156,650 (3,610,586) 2,752,812
------------ ------------ ------------ ------------ ------------
Reinvested capital gains ...................... 950,033 -- 270 1,434,225 110,334
------------ ------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $(14,335,329) 3,522,183 156,866 (2,184,723) 2,869,022
============ ============ ============ ============ ============
OppCapApVA OppGlSecVA
------------ --------------------------------------------
1998 2000 1999 1998
------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 8 -- -- --
Mortality and expense risk charges (note 3) ... (142) (1,051) -- --
------------ ------------ ------------ ------------
Net investment income ....................... (134) (1,051) -- --
------------ ------------ ------------ ------------
Proceeds from mutual funds shares sold ........ 412,555 3,569,728 -- --
Cost of mutual fund shares sold ............... (391,820) (3,708,378) -- --
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 20,735 (138,650) -- --
Change in unrealized gain (loss)
on investments .............................. 255,097 70,484 -- --
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 275,832 (68,166) -- --
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 101 -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 275,799 (69,217) -- --
============ ============ ============ ============
12
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
OppMGrInVA StOpp2
---------------------------------------- ------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ---------- --------
INVESTMENT ACTIVITY:
Reinvested dividends ........................ $ 38,554 10,187 29 -- -- --
Mortality and expense risk charges (note 3) . (10,265) (2,014) (113) (1,449) -- --
----------- ----------- ----------- ----------- ---------- --------
Net investment income ..................... 28,289 8,173 (84) (1,449) -- --
----------- ----------- ----------- ----------- ---------- --------
Proceeds from mutual funds shares sold ...... 1,958,100 570,677 698,919 2,262,742 -- --
Cost of mutual fund shares sold ............. (1,608,534) (582,947) (718,580) (2,255,273) -- --
----------- ----------- ----------- ----------- ---------- --------
Realized gain (loss) on investments ....... 349,566 (12,270) (19,661) 7,469 -- --
Change in unrealized gain (loss)
on investments ............................ (2,767,885) 713,752 80,325 (478,402) -- --
----------- ----------- ----------- ----------- ---------- --------
Net gain (loss) on investments ............ (2,418,319) 701,482 60,664 (470,933) -- --
----------- ----------- ----------- ----------- ---------- --------
Reinvested capital gains .................... 509,013 17,163 645 501,505 -- --
----------- ----------- ----------- ----------- ---------- --------
Net increase (decrease) in contract owners'
equity resulting from operations ..... $(1,881,017) 726,818 61,225 29,123 -- --
=========== =========== =========== =========== ========== =========
NSATGFocTU
----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- --
Mortality and expense risk charges (note 3) ... -- -- --
----------- ----------- -----------
Net investment income ....................... -- -- --
----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 290,188 -- --
Cost of mutual fund shares sold ............... (317,405) -- --
----------- ----------- -----------
Realized gain (loss) on investments ......... (27,217) -- --
Change in unrealized gain (loss)
on investments .............................. (4,210) -- --
----------- ----------- -----------
Net gain (loss) on investments .............. (31,427) -- --
----------- ----------- -----------
Reinvested capital gains ...................... -- -- --
----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (31,427) -- --
=========== =========== ===========
MSUEmMkt MSUMCapGr
---------------------------------------- -------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ---------- ---------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 151,314 85,097 18,594 -- -- --
Mortality and expense risk charges (note 3) ... (963) (166) (11) (162) -- --
----------- ----------- ----------- ----------- ---------- ----------
Net investment income ....................... 150,351 84,931 18,583 (162) -- --
----------- ----------- ----------- ----------- ---------- ----------
Proceeds from mutual funds shares sold ........ 1,344,335 218,023 268,442 769,277 -- --
Cost of mutual fund shares sold ............... (1,256,230) (200,881) (301,322) (782,583) -- --
----------- ----------- ----------- ----------- ---------- ----------
Realized gain (loss) on investments ......... 88,105 17,142 (32,880) (13,306) -- --
Change in unrealized gain (loss)
on investments .............................. (119,691) 20,955 (7,323) (98,350) -- --
----------- ----------- ----------- ----------- ---------- ----------
Net gain (loss) on investments .............. (31,586) 38,097 (40,203) (111,656) -- --
----------- ----------- ----------- ----------- ---------- ----------
Reinvested capital gains ...................... -- -- -- 800 -- --
----------- ----------- ----------- ----------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 118,765 123,028 (21,620) (111,018) -- --
=========== =========== =========== =========== ========== ==========
MSUUSRealE
----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 265,214 54,408 34
Mortality and expense risk charges (note 3) ... (2,123) (1,163) (50)
----------- ----------- -----------
Net investment income ....................... 263,091 53,245 (16)
----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 10,682,231 10,399,298 357,742
Cost of mutual fund shares sold ............... (10,383,636) (10,439,502) (388,797)
----------- ----------- -----------
Realized gain (loss) on investments ......... 298,595 (40,204) (31,055)
Change in unrealized gain (loss)
on investments .............................. 155,839 (130,048) 27,306
----------- ----------- -----------
Net gain (loss) on investments .............. 454,434 (170,252) (3,749)
----------- ----------- -----------
Reinvested capital gains ...................... 25,130 -- 339
----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ 742,655 (117,007) (3,426)
=========== =========== ===========
(Continued)
13
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF OPERATIONS, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
VEWwEmgMkt VEWwHrdAst
----------------------------------------- ----------------------------
2000 1999 1998 2000 1999
----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- 6,160 2,469
Mortality and expense risk charges (note 3) ... (1,640) (139) (20) (124) (295)
----------- ----------- ----------- ----------- -----------
Net investment income ....................... (1,640) (139) (20) 6,036 2,174
----------- ----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 8,541,759 1,092,848 70,482 6,042,759 718,765
Cost of mutual fund shares sold ............... (8,950,297) (857,511) (84,625) (6,013,577) (692,370)
----------- ----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (408,538) 235,337 (14,143) 29,182 26,395
Change in unrealized gain (loss)
on investments .............................. (1,655,251) 663,413 18,347 20,687 22,444
----------- ----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (2,063,789) 898,750 4,204 49,869 48,839
----------- ----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- -- -- --
----------- ----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $(2,065,429) 898,611 4,184 55,905 51,013
=========== =========== =========== =========== ===========
VEWwHrdAst WPTGloPVC
------------ ----------------------------------------
1998 2000 1999 1998
----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- 25,366 10,150 4,521
Mortality and expense risk charges (note 3) ... (11) (2,889) (1,209) (50)
----------- ----------- ----------- -----------
Net investment income ....................... (11) 22,477 8,941 4,471
----------- ----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 46,572 1,991,744 372,724 345,457
Cost of mutual fund shares sold ............... (49,623) (1,898,600) (375,164) (337,050)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... (3,051) 93,144 (2,440) 8,407
Change in unrealized gain (loss)
on investments .............................. (2,102) 87,894 (2,238) 5,870
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. (5,153) 181,038 (4,678) 14,277
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- 23,283 18,278 --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (5,164) 226,798 22,541 18,748
=========== =========== =========== ===========
WPTInteq
-----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 12,900 19,282 2,873
Mortality and expense risk charges (note 3) ... (1,340) (81) (42)
----------- ----------- -----------
Net investment income ....................... 11,560 19,201 2,831
----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 992,359 785,974 277,515
Cost of mutual fund shares sold ............... (749,434) (670,363) (301,573)
----------- ----------- -----------
Realized gain (loss) on investments ......... 242,925 115,611 (24,058)
Change in unrealized gain (loss)
on investments .............................. (1,294,832) 581,395 30,323
----------- ----------- -----------
Net gain (loss) on investments .............. (1,051,907) 697,006 6,265
----------- ----------- -----------
Reinvested capital gains ...................... 310,165 -- --
----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (730,182) 716,207 9,096
=========== =========== ===========
WPTValue
----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- --
Mortality and expense risk charges (note 3) ... (1,199) (154) (13)
----------- ----------- -----------
Net investment income ....................... (1,199) (154) (13)
----------- ----------- -----------
Proceeds from mutual funds shares sold ........ 1,772,806 364,939 87,326
Cost of mutual fund shares sold ............... (1,546,982) (278,265) (89,432)
----------- ----------- -----------
Realized gain (loss) on investments ......... 225,824 86,674 (2,106)
Change in unrealized gain (loss)
on investments .............................. (716,480) 208,276 29,961
----------- ----------- -----------
Net gain (loss) on investments .............. (490,656) 294,950 27,855
----------- ----------- -----------
Reinvested capital gains ...................... 141,743 -- --
----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ $ (350,112) 294,796 27,842
=========== =========== ===========
See accompanying notes to financial statements.
14
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
Total ACVPincGr
---------------------------------------------- ----------------------------------------------
2000 1999 1998 2000 1999 1998
-------------- -------------- -------------- -------------- ------------- -------------
INVESTMENT ACTIVITY:
Net investment income............... $ 19,565,651 6,402,662 788,473 56,216 (4,525) 5,039
Realized gain (loss) on investments 16,571,418 6,807,752 (271,660) 63,909 266,293 1,755
Change in unrealized gain (loss)
on investments.................... (178,984,942) 42,568,531 6,208,888 (2,277,235) 692,513 125,007
Reinvested capital gains............ 50,385,356 6,941,880 597,466 - - -
-------------- -------------- -------------- -------------- ------------- ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (92,462,517) 62,720,825 7,323,167 (2,157,110) 954,281 131,801
-------------- -------------- -------------- -------------- ------------- ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners................... 947,537,536 515,112,072 106,894,981 9,141,279 4,843,884 168,731
Transfers between funds............. - - - 7,485,967 5,659,068 959,762
Surrenders.......................... (10,694,705) (2,953,250) (205,540) (307,329) (25,955) (64)
Death benefits...................... (65,736) (165,946) - (1,577) (1,531) -
Policy loans (net of repayments)
(note 5).......................... (9,821,909) (4,792,558) (1,093,563) (57,111) (99,683) -
Deductions for surrender charges
(note 2d)......................... (1,692,311) (378,228) (2,405) (48,631) (3,324) (1)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c)................. (63,687,230) (28,207,228) (4,765,148) (1,117,246) (410,626) (23,721)
Asset charges (note 3):
FPVUL & VEL contracts............. (1,989,545) (882,295) (148,735) (32,044) (13,701) (985)
MSP contracts..................... (359,299) (49,709) (535) (6,176) (1,582) (4)
SL contracts...................... (165,436) (99,794) (12,520) (4,637) (1,422) (83)
-------------- -------------- -------------- -------------- ------------- ------------
Net equity transactions......... 859,061,365 477,583,064 100,666,535 15,052,495 9,945,128 1,103,635
-------------- -------------- -------------- -------------- ------------- ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY...................... 766,598,848 540,303,889 107,989,702 12,895,385 10,899,409 1,235,436
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD........................... 648,293,593 107,989,704 - 12,134,845 1,235,436 -
-------------- -------------- -------------- -------------- ------------- ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD........................... $1,414,892,441 648,293,593 107,989,702 25,030,230 12,134,845 1,235,436
============== ============== ============== ============== ============= ============
CHANGES IN UNITS:
Beginning units.............. 50,045,344 9,506,248 - 874,749 97,382 -
------------ -------------- -------------- -------------- ------------- --------------
Units purchased.............. 109,550,329 66,964,330 16,180,186 1,358,922 990,326 99,550
Units redeemed............... (43,498,824) (26,425,234) (6,673,938) (125,099) (212,959) (2,168
------------ -------------- -------------- -------------- ------------- --------------
Ending units................. 116,096,849 50,045,344 9,506,248 2,108,572 874,749 97,382
============ ============== ============== ============== ============= ==============
ACVPint
-----------------------------------------------
2000 1999 1998
-------------- -------------- --------------
INVESTMENT ACTIVITY:
Net investment income........ ........ $ (14,005) (3,029) 182
Realized gain (loss) on investments .. 2,847,917 628,064 (890)
Change in unrealized gain (loss)
on investments...................... (10,029,310) 4,031,727 159,768
Reinvested capital gains.............. 445,800 - 3,644
-------------- -------------- --------------
Net increase (decrease) in
contract owners' equity
resulting from operations ........ (6,749,598) 4,656,762 162,704
-------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners..................... 17,266,035 3,440,338 489,914
Transfers between funds............... 20,394,660 5,542,573 1,905,042
Surrenders............................ (174,891) (6,193) -
Death benefits........................ (5,691) (3,352) -
Policy loans (net of repayments)
(note 5)............................ (199,083) (114,731) (2,833)
Deductions for surrender charges
(note 2d)........................... (27,674) (793) -
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c)................... (1,602,834) (514,310) (73,254)
Asset charges (note 3):
FPVUL & VEL contracts............... (60,820) (21,791) (2,574)
MSP contracts....................... (7,381) (570) (9)
SL contracts........................ (7,846) (1,478) (217)
-------------- -------------- --------------
Net equity transactions........... 35,574,475 8,319,693 2,316,069
-------------- -------------- --------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY........................ 28,824,877 12,976,455 2,478,773
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD............................. 15,455,228 2,478,773 -
-------------- -------------- --------------
CONTRACT OWNERS' EQUITY END
OF PERIOD............................. $ 44,280,105 15,455,228 2,478,773
============== ============== ==============
CHANGES IN UNITS:
Beginning units.............. 830,394 209,297 -
-------------- -------------- --------------
Units purchased.............. 2,368,251 682,334 216,428
Units redeemed............... (135,307) (61,237) (7,131)
-------------- -------------- --------------
Ending units................. 3,063,338 830,394 209,297
============== ============== ==============
(Continued)
15
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
ACVPValue DrySRGr
-------------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ----------
INVESTMENT ACTIVITY:
Net investment income .............. $ 26,769 8,355 125 127,586 190 2,018
Realized gain (loss) on investments 5,242 (38,029) (4,170) 286,804 137,365 13,110
Change in unrealized gain (loss)
on investments ................... 865,295 (142,040) 28,277 (2,392,732) 901,808 108,355
Reinvested capital gains ........... 74,870 85,768 1,997 -- 279,678 47,900
------------ ------------ ------------ ------------ ------------ ----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 972,176 (85,946) 26,229 (1,978,342) 1,319,041 171,383
------------ ------------ ------------ ------------ ------------ ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 2,380,936 698,376 218,019 5,340,142 2,335,241 544,259
Transfers between funds ............ 2,477,656 905,970 409,201 6,492,229 4,065,765 721,262
Surrenders ......................... (104,084) (7,715) (20) (161,374) (13,484) (97)
Death benefits ..................... -- -- -- 17,714 (18,063) --
Policy loans (net of repayments)
(note 5) ......................... (8,731) (15,452) (1,893) (253,461) (33,299) (1,497)
Deductions for surrender charges
(note 2d) ........................ (16,470) (988) -- (25,536) (1,727) (1)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (264,459) (132,120) (23,676) (1,388,349) (506,680) (61,633)
Asset charges (note 3):
FPVUL & VEL contracts ............ (10,699) (5,363) (827) (49,907) (17,385) (1,607)
MSP contracts .................... (992) (203) (3) (4,193) (332) (6)
SL contracts ..................... (751) (147) (70) (2,607) (913) (135)
------------ ------------ ------------ ------------ ------------ ----------
Net equity transactions ........ 4,452,406 1,442,358 600,731 9,964,658 5,809,123 1,200,545
------------ ------------ ------------ ------------ ------------ ----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 5,424,582 1,356,412 626,960 7,986,316 7,128,164 1,371,928
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 1,983,372 626,960 -- 8,500,092 1,371,928 --
------------ ------------ ------------ ------------ ------------ ----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 7,407,954 1,983,372 626,960 16,486,408 8,500,092 1,371,928
============ ============ ============ ============ ============ ==========
CHANGES IN UNITS:
Beginning units .................... 193,386 59,864 -- 509,172 106,093 --
------------ ------------ ------------ ------------ ------------ ----------
Units purchased .................... 464,887 171,328 62,522 741,714 445,091 111,810
Units redeemed ..................... (40,889) (37,806) (2,658) (118,327) (42,012) (5,717)
------------ ------------ ------------ ------------ ------------ ----------
Ending units ....................... 617,384 193,386 59,864 1,132,559 509,172 106,093
============ ============ ============ ============ ============ ==========
DryStkIx
-----------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. $ 1,474,581 613,975 63,670
Realized gain (loss) on investments 3,585,686 612,737 (73,213)
Change in unrealized gain (loss)
on investments ................... (27,898,576) 11,117,238 1,455,019
Reinvested capital gains ........... 3,654,055 672,634 12,311
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (19,184,254) 13,016,584 1,457,787
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 68,654,997 41,330,848 3,047,695
Transfers between funds ............ 72,727,790 57,817,925 10,358,645
Surrenders ......................... (1,341,027) (626,906) (430)
Death benefits ..................... 2,224 (24,555) --
Policy loans (net of repayments)
(note 5) ......................... (792,260) (192,790) (9,416)
Deductions for surrender charges
(note 2d) ........................ (212,202) (80,289) (5)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (8,955,356) (4,045,059) (463,310)
Asset charges (note 3):
FPVUL & VEL contracts ............ (279,995) (134,875) (15,073)
MSP contracts .................... (49,600) (4,126) (54)
SL contracts ..................... (28,362) (11,443) (1,269)
------------ ------------ ------------
Net equity transactions ........ 129,726,209 94,028,730 12,916,783
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 110,541,955 107,045,314 14,374,570
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 121,419,884 14,374,570 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $231,961,839 121,419,884 14,374,570
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 8,707,267 1,136,754 --
------------ ------------ ------------
Units purchased .................... 11,088,744 7,959,543 1,180,333
Units redeemed ..................... (888,358) (389,030) (43,579)
------------ ------------ ------------
Ending units ....................... 18,907,653 8,707,267 1,136,754
============ ============ ============
16
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
DryEuroEq DryVApp
-------------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- -------------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. $ 2,393 266 -- 147,948 82,323 7,508
Realized gain (loss) on investments (61,506) 360 -- 353,748 369,370 (894)
Change in unrealized gain (loss)
on investments ................... 26,273 9,997 -- (1,102,409) 649,339 150,742
Reinvested capital gains ........... 39,799 1,251 -- 355,671 68,742 --
----------- ----------- -------------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 6,959 11,874 -- (245,042) 1,169,774 157,356
----------- ----------- -------------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 298,004 8,625 -- 13,754,528 12,955,621 381,182
Transfers between funds ............ 1,063,297 114,306 -- 1,480,475 4,076,889 1,070,054
Surrenders ......................... (23) -- -- (176,111) (56,786) (44)
Death benefits ..................... -- -- -- -- (6,440) --
Policy loans (net of repayments)
(note 5) ......................... (310) -- -- (114,896) (32,681) (289)
Deductions for surrender charges
(note 2d) ........................ (4) -- -- (27,867) (7,273) (1)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (41,463) (92) -- (1,277,668) (701,318) (58,099)
Asset charges (note 3):
FPVUL & VEL contracts ............ (1,518) (32) -- (33,727) (17,976) (1,594)
MSP contracts .................... (296) (8) -- (5,950) (683) (6)
SL contracts ..................... (300) -- -- (1,121) (1,755) (134)
----------- ----------- -------------- ----------- ----------- -----------
Net equity transactions ........ 1,317,387 122,799 -- 13,597,663 16,207,598 1,391,069
----------- ----------- -------------- ----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 1,324,346 134,673 -- 13,352,621 17,377,372 1,548,425
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 134,673 -- -- 18,925,797 1,548,425 --
----------- ----------- -------------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 1,459,019 134,673 -- 32,278,418 18,925,797 1,548,425
=========== =========== ============== =========== =========== ===========
CHANGES IN UNITS:
Beginning units .................... 10,415 -- -- 1,466,981 120,461 --
----------- ----------- -------------- ----------- ----------- -----------
Units purchased .................. 110,285 10,455 -- 1,345,193 1,811,470 125,573
Units redeemed ................... (5,477) (40) -- (224,132) (464,950) (5,112)
----------- ----------- -------------- ----------- ----------- -----------
Ending units ....................... 115,223 10,415 -- 2,588,042 1,466,981 120,461
=========== =========== ============== =========== =========== ===========
FedQualBd2
---------------------------------------------
2000 1999 1998
----------- ----------- --------------
INVESTMENT ACTIVITY:
Net investment income .............. 248,090 (3,162) --
Realized gain (loss) on investments 126,755 (1,907) --
Change in unrealized gain (loss)
on investments ................... 2,975,611 40,201 --
Reinvested capital gains ........... -- -- --
----------- ----------- --------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 3,350,456 35,132 --
----------- ----------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 18,965,217 3,119,190 --
Transfers between funds ............ 19,532,260 8,049,110 --
Surrenders ......................... -- -- --
Death benefits ..................... (5,851) -- --
Policy loans (net of repayments)
(note 5) ......................... (6,815) -- --
Deductions for surrender charges
(note 2d) ........................ -- -- --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (606,106) (20,060) --
Asset charges (note 3):
FPVUL & VEL contracts ............ (2,155) (31) --
MSP contracts .................... (611) (21) --
SL contracts ..................... (235) -- --
----------- ----------- --------------
Net equity transactions ........ 37,875,704 11,148,188 --
----------- ----------- --------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 41,226,160 11,183,320 --
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 11,183,320 -- --
----------- ----------- --------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 52,409,480 11,183,320 --
=========== =========== ==============
CHANGES IN UNITS:
Beginning units .................... 1,133,916 -- --
Units purchased ...................... 3,748,621 1,141,400 --
Units redeemed ....................... (63,800) (7,484) --
----------- ----------- --------------
Ending units ....................... 4,818,737 1,133,916 --
=========== =========== ==============
(Continued)
17
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
FIDVEQINS FIDVGRS
-------------------------------------------- --------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. $ 262,884 93,800 (402) (60,006) (4,278) (249)
Realized gain (loss) on investments (546,971) 303,591 (35,087) 1,245,093 146,210 8,500
Change in unrealized gain (loss)
on investments ................... 1,470,791 (277,459) 449,182 (19,309,179) 6,093,883 480,684
Reinvested capital gains ........... 1,063,019 214,564 -- 5,556,689 543,154 --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 2,249,723 334,496 413,693 (12,567,403) 6,778,969 488,935
------------ ------------ ------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 7,850,333 4,448,956 1,622,388 37,211,019 13,666,314 742,777
Transfers between funds ............ 4,967,158 6,896,656 3,964,871 39,402,444 20,406,545 2,489,085
Surrenders ......................... (341,944) (80,452) (401) (572,831) (63,057) (1,445)
Death benefits ..................... (6,617) (1,391) -- (17,086) (10,491) --
Policy loans (net of repayments)
(note 5) ......................... (315,976) (144,802) (6,242) (799,676) (177,397) (5,968)
Deductions for surrender charges
(note 2d) ........................ (54,109) (10,304) (5) (90,644) (8,076) (17)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,698,463) (1,124,439) (217,638) (5,241,119) (1,671,275) (140,842)
Asset charges (note 3):
FPVUL & VEL contracts ............ (68,189) (43,634) (6,715) (178,345) (55,807) (4,257)
MSP contracts .................... (4,739) (1,965) (24) (24,381) (2,486) (15)
SL contracts ..................... (5,991) (1,316) (565) (12,861) (3,848) (358)
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions ........ 10,321,463 9,937,309 5,355,669 69,676,520 32,080,422 3,078,960
------------ ------------ ------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 12,571,186 10,271,805 5,769,362 57,109,117 38,859,391 3,567,895
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 16,041,167 5,769,362 -- 42,427,286 3,567,895 --
------------ ------------ ------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 28,612,353 16,041,167 5,769,362 99,536,403 42,427,286 3,567,895
============ ============ ============ ============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 1,374,484 517,910 -- 2,322,709 256,014 --
------------ ------------ ------------ ------------ ------------ ------------
Units purchased .................... 1,252,718 975,907 540,577 4,664,500 2,192,613 268,539
Units redeemed ..................... (329,618) (119,333) (22,667) (425,983) (125,918) (12,525)
------------ ------------ ------------ ------------ ------------ ------------
Ending units ....................... 2,297,584 1,374,484 517,910 6,561,226 2,322,709 256,014
============ ============ ============ ============ ============ ============
FIDVHIINS
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. 689,813 363,341 (245)
Realized gain (loss) on investments (1,172,059) (114,464) (53,784)
Change in unrealized gain (loss)
on investments ................... (3,641,858) 103,063 37,295
Reinvested capital gains ........... -- 13,640 --
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (4,124,104) 365,580 (16,734)
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 7,533,788 2,442,012 685,592
Transfers between funds ............ 3,220,351 3,417,897 2,964,332
Surrenders ......................... (716,896) (30,819) --
Death benefits ..................... -- (1,204) --
Policy loans (net of repayments)
(note 5) ......................... (1,732) (134,160) (1,581)
Deductions for surrender charges
(note 2d) ........................ (113,440) (3,947) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (677,508) (455,068) (103,400)
Asset charges (note 3):
FPVUL & VEL contracts ............ (22,619) (18,072) (3,432)
MSP contracts .................... (3,871) (1,135) (12)
SL contracts ..................... (2,510) (1,596) (289)
------------ ------------ ------------
Net equity transactions ........ 9,215,563 5,213,908 3,541,210
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 5,091,459 5,579,488 3,524,476
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 9,103,964 3,524,476 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 14,195,423 9,103,964 3,524,476
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 895,631 368,766 --
------------ ------------ ------------
Units purchased .................... 1,222,377 623,361 380,291
Units redeemed ..................... (310,119) (96,496) (11,525)
------------ ------------ ------------
Ending units ....................... 1,807,889 895,631 368,766
============ ============ ============
18
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
FIDVOVSES FIDVCONS
------------------------------------------ --------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. $ 167,888 11,251 (75) 65,914 22,353 (330)
Realized gain (loss) on investments (1,765,190) 730,465 (24,873) 528,352 214,850 26,824
Change in unrealized gain (loss)
on investments ................... (4,479,931) 1,849,661 68,313 (6,926,956) 3,006,379 648,413
Reinvested capital gains ........... 1,409,432 34,048 -- 3,401,735 195,897 --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (4,667,801) 2,625,425 43,365 (2,930,955) 3,439,479 674,907
------------ ------------ ------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 8,505,042 1,371,398 233,314 13,331,258 6,884,353 1,117,315
Transfers between funds ............ 8,652,600 8,415,589 835,812 16,551,717 11,647,164 3,133,469
Surrenders ......................... (105,541) (26,372) (16) (475,190) (454,009) (165)
Death benefits ..................... (10,322) (308) -- (21,261) (4,599) --
Policy loans (net of repayments)
(note 5) ......................... (59,458) (21,644) (1,574) (383,633) (155,019) (2,052)
Deductions for surrender charges
(note 2d) ........................ (16,701) (3,377) -- (75,193) (58,146) (2)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,042,254) (318,257) (34,849) (3,087,387) (1,389,362) (173,162)
Asset charges (note 3):
FPVUL & VEL contracts ............ (27,681) (10,339) (1,230) (119,105) (50,526) (5,299)
MSP contracts .................... (7,325) (724) (4) (13,801) (1,103) (19)
SL contracts ..................... (2,147) (955) (103) (4,789) (2,492) (446)
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions ........ 15,886,213 9,405,011 1,031,350 25,702,616 16,416,261 4,069,639
------------ ------------ ------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 11,218,412 12,030,436 1,074,715 22,771,661 19,855,740 4,744,546
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 13,105,151 1,074,715 -- 24,600,286 4,744,546 --
------------ ------------ ------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 24,323,563 13,105,151 1,074,715 47,371,947 24,600,286 4,744,546
============ ============ ============ ============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 897,019 95,893 -- 1,555,137 365,486 --
------------ ------------ ------------ ------------ ------------ ------------
Units purchased .................... 1,314,737 863,392 99,416 2,019,106 1,338,819 381,598
Units redeemed ..................... (114,723) (62,266) (3,523) (278,479) (149,168) (16,112)
------------ ------------ ------------ ------------ ------------ ------------
Ending units ....................... 2,097,033 897,019 95,893 3,295,764 1,555,137 365,486
============ ============ ============ ============ ============ ============
FIDVGROPS
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. 114,308 25,116 (168)
Realized gain (loss) on investments (205,257) 53,554 12,948
Change in unrealized gain (loss)
on investments ................... (3,225,818) 137,134 262,800
Reinvested capital gains ........... 662,022 55,207 --
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (2,654,745) 271,011 275,580
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 4,026,349 3,045,388 584,874
Transfers between funds ............ 4,007,402 5,377,081 1,646,479
Surrenders ......................... (106,913) (191,409) (36)
Death benefits ..................... (14,827) (1,216) --
Policy loans (net of repayments)
(note 5) ......................... (182,797) (42,620) 29
Deductions for surrender charges
(note 2d) ........................ (16,918) (24,514) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,045,761) (632,760) (84,140)
Asset charges (note 3):
FPVUL & VEL contracts ............ (39,737) (23,008) (2,917)
MSP contracts .................... (3,764) (1,943) (10)
SL contracts ..................... (3,068) (1,552) (245)
------------ ------------ ------------
Net equity transactions ........ 6,619,966 7,503,447 2,144,034
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 3,965,221 7,774,458 2,419,614
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 10,194,072 2,419,614 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 14,159,293 10,194,072 2,419,614
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 798,468 194,457 --
------------ ------------ ------------
Units purchased .................... 797,422 679,802 202,309
Units redeemed ..................... (236,089) (75,791) (7,852)
------------ ------------ ------------
Ending units ....................... 1,359,801 798,468 194,457
============ ============ ============
(Continued)
19
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATEMMGM NSATGTECGM
---------------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
-------------- -------------- ------------ -------------- --------- -------------
INVESTMENT ACTIVITY:
Net investment income....... $ - - - - - -
Realized gain (loss) on investments (3,018) - - (4,426) - -
Change in unrealized gain (loss)
on investments............. 336 - - (195,957) - -
Reinvested capital gains..... - - - 10,013 - -
-------------- -------------- ---------- -------------- ---------- ------------
Net increase (decrease) in
contract owners' equity
resulting from operations (2,682) - - (190,370) - -
-------------- -------------- ---------- -------------- ---------- ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners............ 430 - - 36,330 - -
Transfers between funds...... 23,571 - - 719,894 - -
Surrenders................... - - - - - -
Death benefits............... - - - - - -
Policy loans (net of repayments)
(note 5)................... - - - (22) - -
Deductions for surrender charges
(note 2d).................. - - - - - -
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c).......... (398) - - (14,760) - -
Asset charges (note 3):
FPVUL & VEL contracts...... (17) - - (358) - -
MSP contracts.............. - - - (4) - -
SL contracts............... (73) - - (108) - -
-------------- -------------- ---------- -------------- ---------- ------------
Net equity transactions.. 23,513 - - 740,972 - -
-------------- -------------- ---------- -------------- ---------- ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY............... 20,831 - - 550,602 - -
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - - - - - -
-------------- -------------- ---------- -------------- ---------- ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD.................... $20,831 - - 550,602 - -
============== ============== ========== ============== ========== ============
CHANGES IN UNITS:
Beginning units.............. - - - - -
-------------- -------------- ---------- -------------- ---------- ------------
Units purchased.............. 2,438 - - 92,911 - -
Units redeemed............... (47) - - (1,413) - -
-------------- -------------- ---------- -------------- ---------- -----------
Ending units................. 2,391 - - 91,498 - -
============== ============== ========== ============== ========== ============
NSATINTGGM
---------------------------------------------
2000 1999 1998
------------- -------------- --------------
INVESTMENT ACTIVITY:
Net investment income....... - - -
Realized gain (loss) on investments 661 - -
Change in unrealized gain (loss)
on investments............. 260 - -
Reinvested capital gains..... - - -
-------------- -------------- --------------
Net increase (decrease) in
contract owners' equity
resulting from operations 921 - -
-------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners............ 1,248 - -
Transfers between funds...... 23,447 - -
Surrenders................... - - -
Death benefits............... - - -
Policy loans (net of repayments)
(note 5)................... - - -
Deductions for surrender charges
(note 2d).................. - - -
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c).......... (576) - -
Asset charges (note 3):
FPVUL & VEL contracts...... (20) - -
MSP contracts.............. - - -
SL contracts............... (73) - -
-------------- -------------- --------------
Net equity transactions.. 24,026 - -
-------------- -------------- --------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY............... 24,947 - -
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - - -
-------------- -------------- --------------
CONTRACT OWNERS' EQUITY END
OF PERIOD.................... 24,947 - -
============== ============== ==============
CHANGES IN UNITS:
Beginning units.............. - - -
-------------- -------------- --------------
Units purchased.............. 2,770 - -
Units redeemed............... (73) - -
-------------- -------------- --------------
Ending units................. 2,697 - -
============== ============== ==============
20
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
JANACAPAPS JANAGLTCHS
--------------------------------------------- --------------------------------
2000 1999 1998 2000 1999
-------------- -------------- -------------- -------------- -------------
INVESTMENT ACTIVITY:
Net investment income........ $ 130,055 - - 88,473 -
Realized gain (loss) on investments (531,461) - - (1,654,449) -
Change in unrealized gain (loss)
on investments............. (3,401,482) - - (5,609,957) -
Reinvested capital gains..... - - - - -
-------------- -------------- -------------- -------------- -------------
Net increase (decrease) in
contract owners' equity
resulting from operations (3,802,888) - - (7,175,933) -
-------------- -------------- -------------- -------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners............ 4,655,897 - - 5,576,181 -
Transfers between funds...... 22,374,018 - - 18,371,062 -
Surrenders................... (74,366) - - (65,589) -
Death benefits............... - - - (282) -
Policy loans (net of repayments)
(note 5)................... (27,728) - - (67,411) -
Deductions for surrender charges
(note 2d).................. (11,767) - - (10,379) -
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c).......... (892,334) - - (930,882) -
Asset charges (note 3):
FPVUL & VEL contracts...... (33,096) - - (32,832) -
MSP contracts.............. (4,072) - - (5,353) -
SL contracts............... (1,406) - - (670) -
-------------- -------------- -------------- -------------- -------------
Net equity transactions.. 25,985,146 - - 22,833,845 -
-------------- -------------- -------------- -------------- -------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY............... 22,182,258 - - 15,657,912 -
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - - - - -
-------------- -------------- -------------- -------------- -------------
CONTRACT OWNERS' EQUITY END
OF PERIOD.................... $22,182,258 - - 15,657,912 -
============== ============== ============== ============== =============
CHANGES IN UNITS:
Beginning units.............. - - - - -
-------------- -------------- -------------- -------------- -------------
Units purchased.............. 2,815,308 - - 2,513,806 -
Units redeemed............... (120,018) - - (133,644) -
-------------- -------------- -------------- -------------- -------------
Ending units................. 2,695,290 - - 2,380,162 -
============== ============== ============== ============== =============
JANAGLTCHS JANAINTGRS
--------------- ----------------------------------------------
1998 2000 1999 1998
-------------- -------------- -------------- --------------
INVESTMENT ACTIVITY:
Net investment income........ - 477,547 - -
Realized gain (loss) on investments - (1,380,504) - -
Change in unrealized gain (loss)
on investments............. - (2,809,392) - -
Reinvested capital gains..... - - - -
-------------- -------------- -------------- --------------
Net increase (decrease) in
contract owners' equity
resulting from operations - (3,712,349) - -
-------------- -------------- -------------- --------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners............ - 3,860,854 - -
Transfers between funds...... - 19,317,238 - -
Surrenders................... - (64,857) - -
Death benefits............... - (1,321) - -
Policy loans (net of repayments)
(note 5)................... - (44,077) - -
Deductions for surrender charges
(note 2d).................. - (10,263) - -
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c).......... - (688,560) - -
Asset charges (note 3):
FPVUL & VEL contracts...... - (25,778) - -
MSP contracts.............. - (2,921) - -
SL contracts............... - (733) - -
-------------- -------------- -------------- --------------
Net equity transactions.. - 22,339,582 - -
-------------- -------------- -------------- --------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY............... - 18,627,233 - -
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD.................... - - - -
-------------- -------------- -------------- --------------
CONTRACT OWNERS' EQUITY END
OF PERIOD.................... - 18,627,233 - -
============== ============== ============== ==============
CHANGES IN UNITS:
Beginning units.............. - - - -
-------------- -------------- -------------- --------------
Units purchased.............. - 2,353,803 - -
Units redeemed............... - (100,741) - -
-------------- -------------- -------------- --------------
Ending units................. - 2,253,062 - -
============== ============== ============== ==============
(Continued)
21
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATBALJPM NSATCAPAP
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY
Net investment income .............. $ 167,547 78,490 9,803 30,760 93,682 14,394
Realized gain (loss) on investments 63,538 (42,204) 373 (652,870) 538,187 16,939
Change in unrealized gain (loss)
on investments ................... (241,628) (33,063) 22,806 (11,341,220) (1,637,699) 469,266
Reinvested capital gains ........... -- 495 2,184 4,845,304 1,352,393 174,093
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (10,543) 3,718 35,166 (7,118,026) 346,563 674,692
----------- ----------- ----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 1,988,633 1,611,897 87,905 8,485,213 9,062,429 1,531,297
Transfers between funds ............ 1,908,503 1,487,269 640,480 1,967,580 7,693,905 4,379,971
Surrenders ......................... (157,913) (107,959) -- (306,983) (206,070) (118)
Death benefits ..................... (11,305) -- -- 10,787 (17,696) --
Policy loans (net of repayments)
(note 5) ......................... (49,949) (10,080) (2,200) (245,557) (72,988) 731
Deductions for surrender charges
(note 2d) ........................ (24,988) (13,826) -- (48,576) (26,392) (1)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (312,300) (211,528) (28,998) (2,322,085) (1,637,150) (265,208)
Asset charges (note 3):
FPVUL & VEL contracts ............ (10,757) (6,440) (840) (83,996) (57,366) (7,161)
MSP contracts .................... (2,649) (439) (3) (5,475) (1,785) (26)
SL contracts ..................... (1,847) (638) (71) (4,898) (1,205) (603)
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ........ 3,325,428 2,748,256 696,273 7,446,010 14,735,682 5,638,882
----------- ----------- ----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 3,314,885 2,751,974 731,439 327,984 15,082,245 6,313,574
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 3,483,413 731,439 -- 21,395,819 6,313,574 --
----------- ----------- ----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 6,798,298 3,483,413 731,439 21,723,803 21,395,819 6,313,574
=========== =========== =========== =========== =========== ===========
CHANGES IN UNITS:
Beginning units .................... 327,982 67,709 -- 1,644,036 485,911 --
----------- ----------- ----------- ----------- ----------- -----------
Units purchased .................... 449,447 353,956 70,786 1,198,867 1,379,462 509,866
Units redeemed ..................... (129,366) (93,683) (3,077) (494,498) (221,337) (23,955)
----------- ----------- ----------- ----------- ----------- -----------
Ending units ....................... 648,063 327,982 67,709 2,348,405 1,644,036 485,911
=========== =========== =========== =========== =========== ===========
NSATEQIFED
-----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY
Net investment income .............. 14,259 1,651 879
Realized gain (loss) on investments 46,405 16,878 157
Change in unrealized gain (loss)
on investments ................... (334,972) 84,114 15,021
Reinvested capital gains ........... -- 202 2,636
----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (274,308) 102,845 18,693
----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 473,028 100,722 28,736
Transfers between funds ............ 1,253,216 527,196 202,838
Surrenders ......................... (6,869) (207) --
Death benefits ..................... -- -- --
Policy loans (net of repayments)
(note 5) ......................... (32,403) (1,768) --
Deductions for surrender charges
(note 2d) ........................ (1,087) (26) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (157,503) (48,952) (5,984)
Asset charges (note 3):
FPVUL & VEL contracts ............ (5,044) (1,993) (247)
MSP contracts .................... (589) (80) (1)
SL contracts ..................... (503) (77) (21)
----------- ----------- -----------
Net equity transactions ........ 1,522,246 574,815 225,321
----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 1,247,938 677,660 244,014
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 921,674 244,014 --
----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 2,169,612 921,674 244,014
=========== =========== ===========
CHANGES IN UNITS:
Beginning units .................... 67,642 21,211 --
----------- ----------- -----------
Units purchased .................... 135,367 51,440 21,799
Units redeemed ..................... (22,437) (5,009) (588)
----------- ----------- -----------
Ending units ....................... 180,572 67,642 21,211
=========== =========== ===========
22
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATGLOB50 NSATGVTBD
-------------------------------------------- --------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. $ 162,075 (1,843) 1,916 2,083,360 760,961 83,055
Realized gain (loss) on investments 84,827 108,508 126 (164,247) (653,491) 9,736
Change in unrealized gain (loss)
on investments ................... (4,336,580) 997,392 38,188 2,189,054 (442,511) (84,436)
Reinvested capital gains ........... 945,098 456,545 3,213 -- 35,939 22,403
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (3,144,580) 1,560,602 43,443 4,108,167 (299,102) 30,758
------------ ------------ ------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 12,463,148 1,045,536 96,340 17,668,928 5,188,264 480,508
Transfers between funds ............ 2,956,853 12,602,010 374,760 9,887,594 10,824,196 4,241,272
Surrenders ......................... (17,060) (149,120) (20) (72,334) (7,882) (58)
Death benefits ..................... -- (783) -- (652) (779) --
Policy loans (net of repayments)
(note 5) ......................... (18,038) (3,556) (199) (103,358) (10,210) (822)
Deductions for surrender charges
(note 2d) ........................ (2,700) (19,098) -- (11,446) (1,010) (1)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (486,956) (215,865) (19,705) (1,298,442) (747,310) (51,451)
Asset charges (note 3):
FPVUL & VEL contracts ............ (10,018) (4,771) (571) (21,054) (13,896) (2,112)
MSP contracts .................... (54,582) (78) (2) (3,139) (3,046) (8)
SL contracts ..................... (649) (8,899) (48) (7,679) (1,057) (178)
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions ........ 14,829,998 13,245,376 450,555 26,038,418 15,227,270 4,667,150
------------ ------------ ------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 11,685,418 14,805,978 493,998 30,146,585 14,928,168 4,697,908
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 15,299,976 493,998 -- 19,626,076 4,697,908 --
------------ ------------ ------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 26,985,394 15,299,976 493,998 49,772,661 19,626,076 4,697,908
============ ============ ============ ============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 1,116,697 41,464 -- 1,882,004 436,992 --
------------ ------------ ------------ ------------ ------------ ------------
Units purchased .................... 1,201,157 1,104,898 43,495 2,670,982 1,601,216 442,110
Units redeemed ..................... (61,297) (29,665) (2,031) (282,166) (156,204) (5,118)
------------ ------------ ------------ ------------ ------------ ------------
Ending units ....................... 2,256,557 1,116,697 41,464 4,270,820 1,882,004 436,992
============ ============ ============ ============ ============ ============
NSATHIIFED
--- -----------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. 1,110,135 305,361 22,639
Realized gain (loss) on investments (309,417) 2,166 (6,931)
Change in unrealized gain (loss)
on investments ................... (1,573,020) (155,595) 7,941
Reinvested capital gains ........... -- 645 --
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (772,302) 152,577 23,649
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 5,531,190 4,145,976 116,422
Transfers between funds ............ 2,945,536 3,041,733 850,224
Surrenders ......................... (202,047) (1,402) --
Death benefits ..................... (243) -- --
Policy loans (net of repayments)
(note 5) ......................... 27,348 (1,976) --
Deductions for surrender charges
(note 2d) ........................ (31,972) (180) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (295,849) (134,672) (18,455)
Asset charges (note 3):
FPVUL & VEL contracts ............ (5,820) (4,222) (756)
MSP contracts .................... (873) (16) (3)
SL contracts ..................... (176) (549) (64)
------------ ------------ ------------
Net equity transactions ........ 7,967,094 7,044,692 947,368
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 7,194,792 7,197,269 971,017
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 8,168,286 971,017 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 15,363,078 8,168,286 971,017
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 805,022 92,454 --
------------ ------------ ------------
Units purchased .................... 918,997 756,587 94,321
Units redeemed ..................... (63,618) (44,019) (1,867)
------------ ------------ ------------
Ending units ....................... 1,660,401 805,022 92,454
============ ============ ============
(Continued)
23
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATMCPSTR NSATMCIXDR
-------------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. $ (36,857) (2,128) (30) 23,516 1,210 761
Realized gain (loss) on investments 1,416,485 327,350 (29) 291,278 14,818 (2,902)
Change in unrealized gain (loss)
on investments ................... (7,958,483) 1,323,586 48,847 (336,854) 51,305 29,815
Reinvested capital gains ........... 922,208 515,885 -- 238,697 47,431 --
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (5,656,647) 2,164,693 48,788 216,637 114,764 27,674
------------ ------------ ------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 11,164,429 2,422,960 106,807 1,349,384 29,706 38,598
Transfers between funds ............ 12,673,990 6,109,550 294,315 4,514,754 418,208 239,349
Surrenders ......................... (176,519) (8,289) -- (1,416) (445) --
Death benefits ..................... (276) (1,613) -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (111,058) (24,425) (514) (1,227) (3,245) --
Deductions for surrender charges
(note 2d) ........................ (27,932) (1,062) -- (224) (57) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,032,843) (166,998) (20,594) (182,757) (35,179) (6,590)
Asset charges (note 3):
FPVUL & VEL contracts ............ (33,805) (5,799) (658) (7,127) (2,054) (289)
MSP contracts .................... (2,152) (79) (2) (2,018) (35) (1)
SL contracts ..................... (1,262) (147) (55) (272) (34) (24)
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions ........ 22,452,572 8,324,098 379,299 5,669,097 406,865 271,043
------------ ------------ ------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 16,795,925 10,488,791 428,087 5,885,734 521,629 298,717
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 10,916,878 428,087 -- 820,346 298,717 --
------------ ------------ ------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 27,712,803 10,916,878 428,087 6,706,080 820,346 298,717
============ ============ ============ ============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 580,219 37,396 -- 61,224 26,958 --
------------ ------------ ------------ ------------ ------------ ------------
Units purchased .................... 1,233,405 556,514 39,590 399,626 37,816 27,645
Units redeemed ..................... (97,413) (13,691) (2,194) (13,571) (3,550) (687)
------------ ------------ ------------ ------------ ------------ ------------
Ending units ....................... 1,716,211 580,219 37,396 447,279 61,224 26,958
============ ============ ============ ============ ============ ============
NSATMMKT
-----------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. 10,047,951 3,236,644 504,596
Realized gain (loss) on investments -- -- --
Change in unrealized gain (loss)
on investments ................... -- -- --
Reinvested capital gains ........... -- -- --
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 10,047,951 3,236,644 504,596
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 551,344,398 352,373,390 88,272,542
Transfers between funds ............ (450,193,315) (230,478,324) (60,507,727)
Surrenders ......................... (1,793,468) (235,503) (201,196)
Death benefits ..................... -- (27,182) --
Policy loans (net of repayments)
(note 5) ......................... (3,989,346) (2,684,887) (1,000,116)
Deductions for surrender charges
(note 2d) ........................ (283,795) (30,161) (2,354)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (11,953,409) (7,099,744) (1,866,745)
Asset charges (note 3):
FPVUL & VEL contracts ............ (251,927) (155,882) (58,762)
MSP contracts .................... (45,487) (18,983) (210)
SL contracts ..................... (26,948) (43,454) (4,947)
------------ ------------ ------------
Net equity transactions ........ 82,806,703 111,599,270 24,630,485
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 92,854,654 114,835,914 25,135,081
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 139,970,995 25,135,081 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 232,825,649 139,970,995 25,135,081
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 13,058,280 2,395,406 --
------------ ------------ ------------
Units purchased .................... 44,348,389 33,458,797 8,773,206
Units redeemed ..................... (36,845,146) (22,795,923) (6,377,800)
------------ ------------ ------------
Ending units ....................... 20,561,523 13,058,280 2,395,406
============ ============ ============
24
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATMBDMAS NSATSMCAPG
-------------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ----------
INVESTMENT ACTIVITY:
Net investment income .............. $ 1,344,591 396,175 20,392 (1,793) (31) --
Realized gain (loss) on investments (66,760) (26,402) (3,929) (30,328) (45,165) --
Change in unrealized gain (loss)
on investments ................... (112,147) (125,056) 781 (1,279,267) 1,020,705 --
Reinvested capital gains ........... -- -- 691 72,445 101,886 --
------------ ------------ ------------ ------------ ------------ ----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 1,165,684 244,717 17,935 (1,238,943) 1,077,395 --
------------ ------------ ------------ ------------ ------------ ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 9,346,749 3,583,938 238,773 1,154,557 1,120,048 --
Transfers between funds ............ 3,298,958 8,648,087 687,922 4,644,251 516,673 --
Surrenders ......................... (62,839) (4,080) -- (1,187) -- --
Death benefits ..................... -- 21 -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (10,119) (7,035) (427) (11,214) -- --
Deductions for surrender charges
(note 2d) ........................ (9,943) (523) -- (188) -- --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (538,746) (202,496) (20,588) (216,886) (3,049) --
Asset charges (note 3):
FPVUL & VEL contracts ............ (8,327) (5,111) (994) (7,874) (190) --
MSP contracts .................... (37,227) (340) (4) (1,016) (16) --
SL contracts ..................... (891) (6,384) (84) (401) (68) --
------------ ------------ ------------ ------------ ------------ ----------
Net equity transactions ........ 11,977,615 12,006,077 904,598 5,560,042 1,633,398 --
------------ ------------ ------------ ------------ ------------ ----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 13,143,299 12,250,794 922,533 4,321,099 2,710,793 --
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 13,173,327 922,533 -- 2,710,793 -- --
------------ ------------ ------------ ------------ ------------ ----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 26,316,626 13,173,327 922,533 7,031,892 2,710,793 --
============ ============ ============ ============ ============ ==========
CHANGES IN UNITS:
Beginning units .................... 1,283,724 90,322 -- 132,226 -- --
------------ ------------ ------------ ------------ ------------ ----------
Units purchased .................... 1,242,287 1,252,855 96,867 290,611 132,396 --
Units redeemed ..................... (92,882) (59,453) (6,545) (13,237) (170) --
------------ ------------ ------------ ------------ ------------ ----------
Ending units ....................... 2,433,129 1,283,724 90,322 409,600 132,226 --
============ ============ ============ ============ ============ ==========
NSATSMCAPV
---------------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. (6,507) (609) (72)
Realized gain (loss) on investments 378,887 215,517 (8,544)
Change in unrealized gain (loss)
on investments ................... (2,383,146) (194,598) 118,603
Reinvested capital gains ........... 2,830,882 651,318 --
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 820,116 671,628 109,987
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 4,858,757 837,148 186,610
Transfers between funds ............ 6,033,116 2,112,202 774,453
Surrenders ......................... (80,683) (7,439) --
Death benefits ..................... -- 222 --
Policy loans (net of repayments)
(note 5) ......................... (42,449) (13,801) (2,782)
Deductions for surrender charges
(note 2d) ........................ (12,767) (953) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (687,469) (244,824) (34,791)
Asset charges (note 3):
FPVUL & VEL contracts ............ (26,379) (10,039) (1,048)
MSP contracts .................... (2,432) (356) (4)
SL contracts ..................... (1,182) (386) (88)
------------ ------------ ------------
Net equity transactions ........ 10,038,512 2,671,774 922,350
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 10,858,628 3,343,402 1,032,337
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 4,375,739 1,032,337 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 15,234,367 4,375,739 1,032,337
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 354,123 106,497 --
------------ ------------ ------------
Units purchased .................... 821,558 273,364 110,966
Units redeemed ..................... (69,600) (25,738) (4,469)
------------ ------------ ------------
Ending units ....................... 1,106,081 354,123 106,497
============ ============ ============
(Continued)
25
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NSATSMCO NSATSTRVAL
-------------------------------------------- ------------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ----------
INVESTMENT ACTIVITY:
Net investment income .............. $ (18,475) (4,091) (112) 11,593 5,539 1,028
Realized gain (loss) on investments 1,962,134 439,543 (6,379) 60,307 17,888 (7,839)
Change in unrealized gain (loss)
on investments ................... (6,709,330) 2,711,547 132,974 33,455 (70,115) 43,881
Reinvested capital gains ........... 6,779,344 500,536 -- -- 22,264 --
------------ ------------ ------------ ------------ ------------ ----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 2,013,673 3,647,535 126,483 105,355 (24,424) 37,070
------------ ------------ ------------ ------------ ------------ ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 13,832,839 2,908,526 360,233 217,062 113,739 26,097
Transfers between funds ............ 15,651,034 5,337,212 1,192,844 36,281 555,257 290,790
Surrenders ......................... (181,834) (6,177) (43) (2,555) (534) --
Death benefits ..................... (2,655) (1,172) -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (173,061) (23,244) (2,442) 5,717 (6,758) 368
Deductions for surrender charges
(note 2d) ........................ (28,773) (791) (1) (404) (68) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,154,682) (349,442) (64,333) (70,189) (38,618) (7,966)
Asset charges (note 3):
FPVUL & VEL contracts ............ (39,974) (13,385) (2,107) (3,692) (2,342) (354)
MSP contracts .................... (4,563) (382) (8) (245) (47) (1)
SL contracts ..................... (2,226) (788) (177) (704) (54) (30)
------------ ------------ ------------ ------------ ------------ ----------
Net equity transactions ........ 27,896,105 7,850,357 1,483,966 181,271 620,575 308,904
------------ ------------ ------------ ------------ ------------ ----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 29,909,778 11,497,892 1,610,449 286,626 596,151 345,974
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 13,108,341 1,610,449 -- 942,125 345,974 --
------------ ------------ ------------ ------------ ------------ ----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 43,018,119 13,108,341 1,610,449 1,228,751 942,125 345,974
============ ============ ============ ============ ============ ==========
CHANGES IN UNITS:
Beginning units .................... 900,802 159,462 -- 96,897 34,463 --
------------ ------------ ------------ ------------ ------------ ----------
Units purchased .................... 1,953,863 777,178 167,063 45,789 67,374 35,384
Units redeemed ..................... (108,007) (35,838) (7,601) (25,096) (4,940) (921)
------------ ------------ ------------ ------------ ------------ ----------
Ending units ....................... 2,746,658 900,802 159,462 117,590 96,897 34,463
============ ============ ============ ============ ============ ==========
NSATTOTRTN
-----------------------------------------
2000 1999 1998
------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. 187,613 95,790 26,909
Realized gain (loss) on investments 344,754 22,208 (21,020)
Change in unrealized gain (loss)
on investments ................... (13,348,541) (33,899) 283,836
Reinvested capital gains ........... 11,991,779 809,302 321,440
------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (824,395) 893,401 611,165
------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 10,272,164 7,871,786 2,620,309
Transfers between funds ............ 4,280,493 9,589,090 5,463,668
Surrenders ......................... (358,609) (153,144) (81)
Death benefits ..................... 16,036 (25,003) --
Policy loans (net of repayments)
(note 5) ......................... (580,464) (318,100) (4,594)
Deductions for surrender charges
(note 2d) ........................ (56,746) (19,613) (1)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (3,360,137) (2,208,818) (385,652)
Asset charges (note 3):
FPVUL & VEL contracts ............ (122,772) (73,719) (10,105)
MSP contracts .................... (6,483) (3,448) (36)
SL contracts ..................... (10,831) (2,037) (851)
------------ ------------ ------------
Net equity transactions ........ 10,072,651 14,656,994 7,682,657
------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 9,248,256 15,550,395 8,293,822
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 23,844,217 8,293,822 --
------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 33,092,473 23,844,217 8,293,822
============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 1,894,394 702,435 --
------------ ------------ ------------
Units purchased .................... 1,307,532 1,426,646 740,122
Units redeemed ..................... (485,526) (234,687) (37,687)
------------ ------------ ------------
Ending units ....................... 2,716,400 1,894,394 702,435
============ ============ ============
26
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
NBAMTGUARD NBAMTMCGR
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. $ 14,917 3,298 (83) (41,606) (7,463) (52)
Realized gain (loss) on investments 109,026 137,366 (5,499) 4,566,336 1,188,750 3,904
Change in unrealized gain (loss)
on investments ................... (185,904) 77,047 82,886 (10,290,829) 3,039,884 176,285
Reinvested capital gains ........... -- -- -- 6,497 37,807 --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (61,961) 217,711 77,304 (5,759,602) 4,258,978 180,137
----------- ----------- ----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 791,413 436,993 246,176 15,764,083 9,784,832 57,715
Transfers between funds ............ 2,086,291 1,360,544 891,240 16,272,282 (2,147,643) 560,630
Surrenders ......................... (37,547) (62,331) (2) (82,297) (16,427) (20)
Death benefits ..................... -- -- -- (5,370) (4,321) --
Policy loans (net of repayments)
(note 5) ......................... (16,305) (3,869) (318) (106,262) (67,280) (140)
Deductions for surrender charges
(note 2d) ........................ (5,941) (7,983) -- (13,023) (2,104) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (259,871) (169,963) (17,719) (1,383,172) (350,946) (55,646)
Asset charges (note 3):
FPVUL & VEL contracts ............ (12,978) (8,142) (742) (48,371) (11,378) (1,407)
MSP contracts .................... (543) (127) (3) (5,311) (459) (5)
SL contracts ..................... (579) (100) (62) (2,701) (716) (118)
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ........ 2,543,940 1,545,022 1,118,570 30,389,858 7,183,558 561,009
----------- ----------- ----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 2,481,979 1,762,733 1,195,874 24,630,256 11,442,536 741,146
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 2,958,607 1,195,874 -- 12,183,682 741,146 --
----------- ----------- ----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... $ 5,440,586 2,958,607 1,195,874 36,813,938 12,183,682 741,146
=========== =========== =========== =========== =========== ===========
CHANGES IN UNITS:
Beginning units .................... 202,892 56,533 -- 640,951 85,872 --
----------- ----------- ----------- ----------- ----------- -----------
Units purchased .................... 252,130 167,370 58,160 1,560,513 995,573 90,761
Units redeemed ..................... (58,231) (21,011) (1,627) (79,404) (440,494) (4,889)
----------- ----------- ----------- ----------- ----------- -----------
Ending units ....................... 396,791 202,892 56,533 2,122,060 640,951 85,872
=========== =========== =========== =========== =========== ===========
NBAMTPART
---------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. 50,670 54,744 (176)
Realized gain (loss) on investments (276,792) 1,248 (13,483)
Change in unrealized gain (loss)
on investments ................... (888,222) 196,040 255,133
Reinvested capital gains ........... 1,184,100 98,874 3,599
----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 69,756 350,906 245,073
----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 2,034,154 2,049,277 831,946
Transfers between funds ............ 1,022,755 1,699,822 3,231,525
Surrenders ......................... (165,342) (78,561) (16)
Death benefits ..................... (502) (2,713) --
Policy loans (net of repayments)
(note 5) ......................... (95,808) (216,206) (174)
Deductions for surrender charges
(note 2d) ........................ (26,163) (10,061) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (540,817) (464,515) (144,625)
Asset charges (note 3):
FPVUL & VEL contracts ............ (25,778) (22,616) (4,977)
MSP contracts .................... (3,445) (622) (18)
SL contracts ..................... (1,681) (1,766) (419)
----------- ----------- -----------
Net equity transactions ........ 2,197,373 2,952,039 3,913,242
----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 2,267,129 3,302,945 4,158,315
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 7,461,260 4,158,315 --
----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD .......................... 9,728,389 7,461,260 4,158,315
=========== =========== ===========
CHANGES IN UNITS:
Beginning units .................... 676,989 401,819 --
----------- ----------- -----------
Units purchased .................... 383,557 382,626 417,585
Units redeemed ..................... (170,279) (107,456) (15,766)
----------- ----------- -----------
Ending units ....................... 890,267 676,989 401,819
=========== =========== ===========
(Continued)
27
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
OPPAGGGRVA OPPCAPAPVA
------------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ ------------ ------------
INVESTMENT ACTIVITY:
Net investment income .............. $ (52,493) (2,942) (54) (8,362) 5,876 (134)
Realized gain (loss) on investments 4,488,570 618,388 1,246 1,792,860 191,495 20,735
Change in unrealized gain (loss)
on investments ................... (19,721,439) 2,906,737 155,404 (5,403,446) 2,561,317 255,097
Reinvested capital gains ........... 950,033 -- 270 1,434,225 110,334 101
------------ ------------ ------------ ------------ ------------ ------------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (14,335,329) 3,522,183 156,866 (2,184,723) 2,869,022 275,799
------------ ------------ ------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 24,690,515 2,894,019 298,181 12,133,627 2,754,479 522,163
Transfers between funds ............ 38,617,778 4,290,831 753,401 25,912,373 7,064,837 1,352,464
Surrenders ......................... (184,820) (25,306) (318) (1,774,425) (254,161) (369)
Death benefits ..................... (6,793) 295 -- (7,097) (300) --
Policy loans (net of repayments)
(note 5) ......................... (384,286) (37,694) (2,146) (290,219) (72,268) (10,091)
Deductions for surrender charges
(note 2d) ........................ (29,245) (3,241) (4) (280,781) (32,551) (4)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (2,643,790) (416,901) (60,958) (2,024,385) (655,772) (91,465)
Asset charges (note 3):
FPVUL & VEL contracts ............ (84,929) (13,629) (1,372) (73,662) (23,800) (2,763)
MSP contracts .................... (14,660) (182) (5) (8,607) (983) (10)
SL contracts ..................... (7,197) (488) (115) (4,224) (390) (233)
------------ ------------ ------------ ------------ ------------ ------------
Net equity transactions ........ 59,952,573 6,687,704 986,664 33,582,600 8,779,091 1,769,692
------------ ------------ ------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 45,617,244 10,209,887 1,143,530 31,397,877 11,648,113 2,045,491
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 11,353,417 1,143,530 -- 13,693,604 2,045,491 --
------------ ------------ ------------ ------------ ------------ ------------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 56,970,661 11,353,417 1,143,530 45,091,481 13,693,604 2,045,491
============ ============ ============ ============ ============ ============
CHANGES IN UNITS:
Beginning units .................... 570,019 101,944 -- 806,675 165,067 --
------------ ------------ ------------ ------------ ------------ ------------
Units purchased .................... 3,007,222 544,229 108,530 2,290,226 715,374 174,797
Units redeemed ..................... (149,167) (76,154) (6,586) (257,837) (73,766) (9,730)
------------ ------------ ------------ ------------ ------------ ------------
Ending units ....................... 3,428,074 570,019 101,944 2,839,064 806,675 165,067
============ ============ ============ ============ ============ ============
OPPGLSECVA
-----------------------------------------
2000 1999 1998
------------ --------- ---------
INVESTMENT ACTIVITY:
Net investment income .............. (1,051) -- --
Realized gain (loss) on investments (138,650) -- --
Change in unrealized gain (loss)
on investments ................... 70,484 -- --
Reinvested capital gains ........... -- -- --
------------ --------- ---------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (69,217) -- --
------------ --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 756,191 -- --
Transfers between funds ............ 3,400,619 -- --
Surrenders ......................... (1,589) -- --
Death benefits ..................... -- -- --
Policy loans (net of repayments)
(note 5) ......................... (2,407) -- --
Deductions for surrender charges
(note 2d) ........................ (252) -- --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (70,452) -- --
Asset charges (note 3):
FPVUL & VEL contracts ............ (1,673) -- --
MSP contracts .................... (1,076) -- --
SL contracts ..................... (94) -- --
------------ --------- ---------
Net equity transactions ........ 4,079,267 -- --
------------ --------- ---------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 4,010,050 -- --
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... -- -- --
------------ --------- ---------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 4,010,050 -- --
============ ========= =========
CHANGES IN UNITS:
Beginning units .................... -- -- --
------------ --------- ---------
Units purchased .................... 426,089 -- --
Units redeemed ..................... (8,082) -- --
------------ --------- ---------
Ending units ....................... 418,007 -- --
============ ========= =========
28
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
OPPMGRINVA STOPP2
-------------------------------------------- ---------------------------------------
2000 1999 1998 2000 1999 1998
------------ ------------ ------------ ------------ --------- ---------
INVESTMENT ACTIVITY:
Net investment income .............. $ 28,289 8,173 (84) (1,449) -- --
Realized gain (loss) on investments 349,566 (12,270) (19,661) 7,469 -- --
Change in unrealized gain (loss)
on investments ................... (2,767,885) 713,752 80,325 (478,402) -- --
Reinvested capital gains ........... 509,013 17,163 645 501,505 -- --
------------ ------------ ------------ ------------ --------- ---------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (1,881,017) 726,818 61,225 29,123 -- --
------------ ------------ ------------ ------------ --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 6,051,658 1,687,758 284,513 1,381,833 -- --
Transfers between funds ............ 11,215,475 3,276,499 1,343,627 3,738,013 -- --
Surrenders ......................... (108,972) (24,107) (418) (11,246) -- --
Death benefits ..................... 7,734 (9,603) -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (207,915) (23,549) (16,228) (10,320) -- --
Deductions for surrender charges
(note 2d) ........................ (17,244) (3,088) (5) (1,779) -- --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,065,069) (314,964) (43,383) (61,655) -- --
Asset charges (note 3):
FPVUL & VEL contracts ............ (39,206) (12,409) (1,608) (1,167) -- --
MSP contracts .................... (6,649) (626) (6) (206) -- --
SL contracts ..................... (3,480) (620) (135) (147) -- --
------------ ------------ ------------ ------------ --------- ---------
Net equity transactions ........ 15,826,332 4,575,291 1,566,357 5,033,326 -- --
------------ ------------ ------------ ------------ --------- ---------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 13,945,315 5,302,109 1,627,582 5,062,449 -- --
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 6,929,691 1,627,582 -- -- -- --
------------ ------------ ------------ ------------ --------- ---------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 20,875,006 6,929,691 1,627,582 5,062,449 -- --
============ ============ ============ ============ ========= =========
CHANGES IN UNITS:
Beginning units .................... 558,424 158,153 -- -- -- --
------------ ------------ ------------ ------------ --------- ---------
Units purchased .................... 1,423,961 436,576 164,578 523,047 -- --
Units redeemed ..................... (119,721) (36,305) (6,425) (8,938) -- --
------------ ------------ ------------ ------------ --------- ---------
Ending units ....................... 1,862,664 558,424 158,153 514,109 -- --
============ ============ ============ ============ ========= =========
NSATGFOCTU
-----------------------------------------
2000 1999 1998
------------ --------- ---------
INVESTMENT ACTIVITY:
Net investment income .............. -- -- --
Realized gain (loss) on investments (27,217) -- --
Change in unrealized gain (loss)
on investments ................... (4,210) -- --
Reinvested capital gains ........... -- -- --
------------ --------- ---------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (31,427) -- --
------------ --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 8,564 -- --
Transfers between funds ............ 102,537 -- --
Surrenders ......................... -- -- --
Death benefits ..................... -- -- --
Policy loans (net of repayments)
(note 5) ......................... -- -- --
Deductions for surrender charges
(note 2d) ........................ -- -- --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (1,091) -- --
Asset charges (note 3):
FPVUL & VEL contracts ............ (35) -- --
MSP contracts .................... (4) -- --
SL contracts ..................... (8) -- --
------------ --------- ---------
Net equity transactions ........ 109,963 -- --
------------ --------- ---------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 78,536 -- --
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... -- -- --
------------ --------- ---------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 78,536 -- --
============ ========= =========
CHANGES IN UNITS:
Beginning units .................... -- -- --
------------ --------- ---------
Units purchased .................... 12,533 -- --
Units redeemed ..................... (154) -- --
------------ --------- ---------
Ending units ....................... 12,379 -- --
============ ========= =========
(Continued)
29
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
MSUEMMKT MSUMCAPGR
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ------------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. $ 150,351 84,931 18,583 (162) -- --
Realized gain (loss) on investments 88,105 17,142 (32,880) (13,306) -- --
Change in unrealized gain (loss)
on investments ................... (119,691) 20,955 (7,323) (98,350) -- --
Reinvested capital gains ........... -- -- -- 800 -- --
----------- ----------- ----------- ----------- ------------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 118,765 123,028 (21,620) (111,018) -- --
----------- ----------- ----------- ----------- ------------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 423,869 176,047 41,423 88,544 -- --
Transfers between funds ............ 353,545 265,717 144,407 877,199 -- --
Surrenders ......................... (956) (137) -- (650) -- --
Death benefits ..................... -- -- -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (6,273) (792) -- (83) -- --
Deductions for surrender charges
(note 2d) ........................ (151) (17) -- (103) -- --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (78,727) (30,191) (6,534) (12,506) -- --
Asset charges (note 3):
FPVUL & VEL contracts ............ (3,151) (1,369) (152) (300) -- --
MSP contracts .................... (105) (2) (1) (74) -- --
SL contracts ..................... (173) (2) (13) (2) -- --
----------- ----------- ----------- ----------- ------------- -----------
Net equity transactions ........ 687,878 409,254 179,130 952,025 -- --
----------- ----------- ----------- ----------- ------------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 806,643 532,282 157,510 841,007 -- --
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 689,792 157,510 -- -- -- --
----------- ----------- ----------- ----------- ------------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 1,496,435 689,792 157,510 841,007 -- --
=========== =========== =========== =========== ============= ===========
CHANGES IN UNITS: ....................
Beginning units .................... 75,186 21,992 -- -- -- --
-- -- -- -- -- --
Units purchased .................... 90,977 57,926 22,914 98,221 -- --
Units redeemed ..................... (19,742) (4,732) (922) (1,379) -- --
-- -- -- -- -- --
Ending units ....................... 146,421 75,186 21,992 96,842 -- --
=========== =========== =========== =========== ============= ===========
MSUUSREALE
-----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. 263,091 53,245 (16)
Realized gain (loss) on investments 298,595 (40,204) (31,055)
Change in unrealized gain (loss)
on investments ................... 155,839 (130,048) 27,306
Reinvested capital gains ........... 25,130 -- 339
----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 742,655 (117,007) (3,426)
----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 1,587,036 754,790 233,023
Transfers between funds ............ 1,297,880 440,087 517,845
Surrenders ......................... (14,855) (8,017) --
Death benefits ..................... (503) (1,020) --
Policy loans (net of repayments)
(note 5) ......................... 8,244 (8,547) (834)
Deductions for surrender charges
(note 2d) ........................ (2,351) (1,027) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (156,453) (188,335) (28,277)
Asset charges (note 3):
FPVUL & VEL contracts ............ (7,652) (4,322) (1,116)
MSP contracts .................... (893) (107) (4)
SL contracts ..................... (715) (227) (94)
----------- ----------- -----------
Net equity transactions ........ 2,709,738 983,275 720,543
----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 3,452,393 866,268 717,117
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 1,583,385 717,117 --
----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 5,035,778 1,583,385 717,117
=========== =========== ===========
CHANGES IN UNITS: ....................
Beginning units .................... 185,170 81,141 --
-- -- --
Units purchased .................... 321,028 119,546 84,716
Units redeemed ..................... (50,354) (15,517) (3,575)
-- -- --
Ending units ....................... 455,844 185,170 81,141
=========== =========== ===========
30
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
VEWWEMGMKT VEWWHRDAST
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. $ (1,640) (139) (20) 6,036 2,174 (11)
Realized gain (loss) on investments (408,538) 235,337 (14,143) 29,182 26,395 (3,051)
Change in unrealized gain (loss)
on investments ................... (1,655,251) 663,413 18,347 20,687 22,444 (2,102)
Reinvested capital gains ........... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (2,065,429) 898,611 4,184 55,905 51,013 (5,164)
----------- ----------- ----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 1,719,241 322,588 90,144 140,736 201,802 23,363
Transfers between funds ............ 1,679,789 1,279,757 207,921 728,352 69,474 144,721
Surrenders ......................... (45,027) (1,334) -- (5,248) (679) --
Death benefits ..................... -- (1,149) -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (19,011) (5,485) 410 3,590 216 235
Deductions for surrender charges
(note 2d) ........................ (7,125) (171) -- (831) (87) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (324,544) (90,731) (13,062) (48,413) (29,846) (8,707)
Asset charges (note 3):
FPVUL & VEL contracts ............ (13,663) (4,040) (370) (2,162) (1,079) (186)
MSP contracts .................... (1,248) (151) (1) (343) (2) (1)
SL contracts ..................... (1,292) (184) (31) (135) (159) (16)
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ........ 2,987,120 1,499,100 285,011 815,546 239,640 159,409
----------- ----------- ----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 921,691 2,397,711 289,195 871,451 290,653 154,245
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 2,686,906 289,195 -- 444,898 154,245 --
----------- ----------- ----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 3,608,597 2,686,906 289,195 1,316,349 444,898 154,245
=========== =========== =========== =========== =========== ===========
CHANGES IN UNITS: .................... 204,110 43,904 -- 53,265 22,344 --
Beginning units .................... -- -- -- -- -- --
316,404 171,741 46,042 106,332 51,882 23,601
Units purchased .................... (53,994) (11,535) (2,138) (18,085) (20,961) (1,257)
Units redeemed ..................... -- -- -- -- -- --
466,520 204,110 43,904 141,512 53,265 22,344
Ending units ....................... ============== ============== ============== ============== ============= ============
WPTGLOPVC
-----------------------------------------
2000 1999 1998
----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. 22,477 8,941 4,471
Realized gain (loss) on investments 93,144 (2,440) 8,407
Change in unrealized gain (loss)
on investments ................... 87,894 (2,238) 5,870
Reinvested capital gains ........... 23,283 18,278 --
----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... 226,798 22,541 18,748
----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 576,937 486,214 76,711
Transfers between funds ............ 628,024 (106) 655,643
Surrenders ......................... (4,490) (2,612) --
Death benefits ..................... -- -- --
Policy loans (net of repayments)
(note 5) ......................... (20,705) (3,476) (17,477
Deductions for surrender charges
(note 2d) ........................ (710) (334) --
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (131,580) (53,820) (13,090
Asset charges (note 3):
FPVUL & VEL contracts ............ (4,272) (2,591) (558
MSP contracts .................... (428) (46) (2
SL contracts ..................... (681) (57) (47
----------- ----------- -----------
Net equity transactions ........ 1,042,095 423,172 701,180
----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 1,268,893 445,713 719,928
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 1,165,641 719,928 --
----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 2,434,534 1,165,641 719,928
=========== =========== ===========
CHANGES IN UNITS: .................... 102,845 66,036 --
Beginning units .................... -- -- --
114,059 67,676 69,022
Units purchased .................... (16,387) (30,867) (2,986
Units redeemed ..................... -- -- --
200,517 102,845 66,036
Ending units ....................... ============== ============== ==============
(Continued)
31
NATIONWIDE VLI SEPARATE ACCOUNT-4
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
YEARS ENDED DECEMBER 31, 2000 AND 1999 AND FOR THE PERIOD FEBRUARY 18, 1998
(COMMENCEMENT OF OPERATIONS) THROUGH DECEMBER 31, 1998
WPTINTEQ WPTVALUE
----------------------------------------- -----------------------------------------
2000 1999 1998 2000 1999 1998
----------- ----------- ----------- ----------- ----------- -----------
INVESTMENT ACTIVITY:
Net investment income .............. $ 11,560 19,201 2,831 (1,199) (154) (13)
Realized gain (loss) on investments 242,925 115,611 (24,058) 225,824 86,674 (2,106)
Change in unrealized gain (loss)
on investments ................... (1,294,832) 581,395 30,323 (716,480) 208,276 29,961
Reinvested capital gains ........... 310,165 -- -- 141,743 -- --
----------- ----------- ----------- ----------- ----------- -----------
Net increase (decrease) in
contract owners' equity
resulting from operations ...... (730,182) 716,207 9,096 (350,112) 294,796 27,842
----------- ----------- ----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .................. 467,135 386,407 114,374 381,654 170,257 48,012
Transfers between funds ............ 625,009 716,698 495,343 297,999 306,681 118,060
Surrenders ......................... (33,371) (6,378) -- (12,588) (1,792) (163)
Death benefits ..................... -- -- -- -- -- --
Policy loans (net of repayments)
(note 5) ......................... (16,955) (4,356) (891) (6,839) (2,901) 404
Deductions for surrender charges
(note 2d) ........................ (5,281) (817) -- (1,992) (229) (2)
Redemptions to pay cost of insurance
charges and administrative charges
(notes 2b and 2c) ................ (157,048) (114,080) (19,101) (83,921) (61,093) (7,797)
Asset charges (note 3):
FPVUL & VEL contracts ............ (8,846) (5,328) (733) (4,492) (1,843) (237)
MSP contracts .................... (866) (367) (3) (481) (24) (1)
SL contracts ..................... (834) (328) (62) (736) (63) (20)
----------- ----------- ----------- ----------- ----------- -----------
Net equity transactions ........ 868,943 971,451 588,927 568,604 408,993 158,256
----------- ----------- ----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT
OWNERS' EQUITY ..................... 138,761 1,687,658 598,023 218,492 703,789 186,098
CONTRACT OWNERS' EQUITY BEGINNING
OF PERIOD .......................... 2,285,681 598,023 -- 889,887 186,098 --
----------- ----------- ----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END
OF PERIOD....................$ ..... 2,424,442 2,285,681 598,023 1,108,379 889,887 186,098
=========== =========== =========== =========== =========== ===========
CHANGES IN UNITS: .................... 141,958 56,767 -- 51,860 17,619 --
----------- ----------- ----------- ----------- ----------- -----------
Beginning units .................... -- -- -- -- -- --
84,215 98,872 58,807 43,425 38,599 18,507
Units purchased .................... (15,819) (13,681) (2,040) (15,055) (4,358) (888)
Units redeemed ..................... -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- -----------
210,354 141,958 56,767 80,230 51,860 17,619
Ending units ....................... ============== ============== ============== ============== ============= ==============
See accompanying notes to financial statements.
32
- --------------------------------------------------------------------------------
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VLI Separate Account-4 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on December 3, 1997. The Account has
been registered as a unit investment trust under the Investment Company
Act of 1940. On May 3, 1999, the Company (Depositor) transferred to the
Account 100,000 shares of the Nationwide SAT - Small Cap Growth Fund
for which the Account was credited with 100,000 units of the Nationwide
SAT - Small Cap Growth Fund. The value of the units purchased by the
Company on May 3, 1999 was $1,000,000.
The Company offers Flexible Premium, Modified Single Premium and
Survivorship Life Variable Life Insurance Policies through the Account.
(b) The Contracts
Only contracts without a front-end sales charge, but with 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 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. (DrySRGr)
Dreyfus Stock Index Fund (DryStkIx)
Dreyfus IP - European Equity Portfolio (DryEuroEq)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Appreciation Portfolio (DryVApp)
Federated Insurance Series - Quality Bond Fund II (FedQualBd2)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio - Service Class
(FidVEqInS)
Fidelity VIP - Growth Portfolio - Service Class (FidVGrS)
Fidelity VIP - High Income Portfolio - Service Class (FidVHiInS)
Fidelity VIP - Overseas Portfolio - Service Class (FidVOvSeS)
Portfolio of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio - Service Class
(FidVConS)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio - Service
Class (FidVGrOpS)
Funds of the Gartmore NSAT;
Gartmore NSAT - Emerging Markets Fund (NSATEmMGM)
Gartmore NSAT - Global Technology & Communication Fund
(NSATGTecGM)
Gartmore NSAT - International Growth Fund (NSATIntGGM)
(Continued)
33
Portfolios of Janus Aspen Series;
Janus Aspen Series - Capital Appreciation Portfolio - Service
Shares (JanACapApS)
Janus Aspen Series - Global Technology Portfolio - Service
Shares (JanAGlTchS)
Janus Aspen Series - International Growth Portfolio - Service
Shares (JanAIntGrS)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Balanced Fund - J.P. Morgan (NSATBalJPM)
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Equity Income Fund - Federated (NSATEqIFED)
Nationwide SAT - Global 50 Fund (NSATGlob50)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund - Federated (NSATHiIFED)
Nationwide SAT - Mid Cap Growth Fund - Strong (NSATMCpSTR)
Nationwide SAT - Mid Cap Index Fund - Dreyfus (NSATMCIxDR)
Nationwide SAT - Money Market Fund (NSATMMkt)
Nationwide SAT - Multi Sector Bond Fund - MAS (NSATMBdMAS)
Nationwide SAT - Small Cap Growth Fund (NSATSmCapG)
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRtn)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds;
Oppenheimer Aggressive Growth Fund/VA (OppAggGrVA)
Oppenheimer Capital Appreciation Fund/VA (OppCapApVA)
Oppenheimer Global Securities Fund/VA (OppGlSecVA)
Oppenheimer Growth & Income Fund/VA (OppMGrInVA)
Strong Opportunity Fund II, Inc. (StOpp2)
Turner NSAT - Growth Focus Fund (NSATGFocTU)
Portfolios of The Universal Institutional Funds, Inc.
The Universal Institutional Funds, Inc. - Emerging Markets Debt
Portfolio (MSUEmMkt)
(formerly Morgan Stanley - Emerging Markets Debt Portfolio)
The Universal Institutional Funds, Inc. - Mid Cap Growth
Portfolio (MSUMCapGr)
(formerly Morgan Stanley - Mid Cap Growth Portfolio)
The Universal Institutional Funds, Inc. - U.S. Real Estate
Portfolio (MSUUSRealE)
(formerly Van Kampen Morgan Stanley - U.S. Real Estate
Portfolio)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWwEmgMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWwHrdAst)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - Global Post - Venture Capital Portfolio
(WPTGloPVC)
Warburg Pincus Trust - International Equity Portfolio (WPTIntEq)
Warburg Pincus Trust - Value Portfolio (WPTValue)
34
At December 31, 2000, 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.
(c) Security Valuation, Transactions and Related Investment Income
The fair value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 2000. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on 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 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 accounting
principles generally accepted in the United States may require
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities, if any, at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(2) POLICY CHARGES
(a) Deductions from Premium
On flexible premium, modified single premium and survivorship life
variable life insurance contracts, the Company deducts a charge for
state premium taxes not to exceed 2.5% of all premiums received to
cover the payment of these premium taxes. Additionally, the Company
deducts a front-end sales load of up to 3.5% from each premium payment
received. 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.
The amount of the charge is based upon age, sex, rate class and net
amount at risk (death benefit less total contract value).
(Continued)
35
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
(c) Administrative Charges
For flexible premium, modified single premium and survivorship life
variable life insurance contracts, the Company currently deducts a
monthly administrative charge of $10 during the first policy year and
$5 per month thereafter (may deduct up to $7.50, maximum) to recover
policy maintenance, accounting, record keeping and other administrative
expenses.
The above charges are assessed against each contract by liquidating
units.
(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 amount of the charge is based upon a specified
percentage of the initial surrender charge which varies by issue age,
sex and rate class. For flexible premium contracts, the charge is 100%
of the initial surrender charge in the first year, declining to 30% of
the initial surrender charge in the eighth year.
No surrender charge is assessed on any contract surrendered after the
eighth year.
The Company may waive the surrender charge for certain contracts in
which the sales expenses normally associated with the distribution of a
contract are not incurred. No charges were deducted from the initial
funding, or from earnings thereon.
(3) ASSET CHARGES
For flexible premium variable universal life (FPVUL) and variable executive
life (VEL) contracts, the Company deducts a charge equal to an annual
effective rate multiplied by the Cash Value attributable to the Variable
Account. The annual effective rate is 0.60% for the first $25,000 of Cash
Value attributable to the Variable Account, 0.30% for the next $225,000 of
Cash Value attributable to the Variable Account and 0.10% for all Cash
Value attributable to the Variable Account in excess of $250,000. This
charge is assessed monthly against each contract by liquidating units.
For modified single premium contracts (MSP), the Company deducts an annual
rate of .70% charged against the cash value of the contracts. This charge
is assessed monthly against each contract by liquidating units.
For surivorship life contracts (SL), the Company deducts an annual rate of
.55% in policy years one through ten. In policy years eleven and greater,
the Company deducts an annual rate of .55% if the cash value of the
contract is less than $25,000. If the cash value is greater than $25,000
but less than $100,000, the Company reduces the annual rate to .35%. If the
cash value is greater than $100,000, the company reduces the annual rate to
.20%. This charge is assessed monthly by liquidating units.
For Corporate Variable Universal Life Series, the Company deducts on a
daily basis from the assets of the Variable Account, a charge to provide
for mortality and expense risks. This charge is guaranteed not to exceed an
annual effective rate of 0.75% of the daily net assets of the Variable
Account. Currently, this rate is 0.40% during the first through fourth
Policy Years, 0.25% during the fifth through twentieth Policy Years, and
0.10% thereafter. This charge is assessed through the daily unit value
calculation.
Nationwide may reduce or eliminate certain charges where the size or nature
of the group results in savings in sales, underwriting, administrative or
other costs to Nationwide. These charges may be reduced in certain group
sponsored arrangements or special exchange programs made available by
Nationwide.
36
(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 90% of a policy's cash
surrender value. Interest is charged on the outstanding loan and is due and
payable in advance on the policy anniversary.
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. Interest credited is paid by the
Company's general account to the Account. 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.
(Continued)
37
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
(7) FINANCIAL HIGHLIGHTS
The following is a summary of units, unit fair values and contract owners'
equity outstanding for variable life and annuity contracts as of the end of
the period indicated, and the expense ratios and total return for each of
the years in the period ended December 31, 2000, and the period February
18, 1998 (commencement of operations) through December 1998.
The following is a summary for 2000:
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
The BEST of AMERICA(R)
America's FUTURE Life Series(SM):
American Century VP -
American Century VP Income & Growth .............. 804,658 $13.383115 $10,768,831 0.00% (10.62)%
American Century VP -
American Century VP International ................ 1,252,780 16.203538 20,299,468 0.00% (16.83)%
American Century VP -
American Century VP Value ........................ 380,941 12.277397 4,676,964 0.00% 18.14%
The Dreyfus Socially Responsible
Growth Fund, Inc. ................................ 953,352 14.972899 14,274,443 0.00% (11.03)%
Dreyfus Stock Index Fund .......................... 6,631,938 14.027609 93,030,233 0.00% (9.28)%
Dreyfus IP - European Equity Portfolio ............ 70,183 12.672265 889,378 0.00% (0.65)%
Dreyfus VIF - Appreciation Portfolio .............. 721,134 14.418721 10,397,830 0.00% (2.00)%
Federated Insurance Series -
Quality Bond Fund II ............................. 184,168 10.900349 2,007,495 0.00% 10.45%
Fidelity VIP -
Equity-Income Portfolio - Service Class .......... 1,731,014 12.835974 22,219,251 0.00% 8.30%
Fidelity VIP - Growth Portfolio - Service Class ... 3,245,205 17.016859 55,223,196 0.00% (11.07)%
Fidelity VIP -
High Income Portfolio - Service Class ............ 775,357 7.993621 6,197,910 0.00% (22.61)%
Fidelity VIP -
Overseas Portfolio - Service Class ............... 709,131 12.973519 9,199,925 0.00% (19.15)%
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............. 2,414,828 15.048072 36,338,506 0.00% (6.71)%
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class .................................... 959,519 10.743116 10,308,224 0.00% (17.18)%
Gartmore NSAT Emerging Markets Fund ............... 2,391 8.712299 20,831 0.00% (51.70)%***
Gartmore NSAT Global Technology &
Communications Fund .............................. 91,498 6.017639 550,602 0.00% (159.83)%***
Gartmore NSAT International Growth Fund ........... 2,697 9.249730 24,947 0.00% (30.10)%***
Janus Aspen Series - Capital Appreciation
Portfolio - Service Shares ....................... 2,083,464 8.236248 17,159,926 0.00% (18.95)%***
38
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Janus Aspen Series -
Global Technology Portfolio - Service Shares ....... 1,878,974 6.582411 12,368,179 0.00% (36.72)%***
Janus Aspen Series - International Growth
Portfolio - Service Shares ......................... 1,639,208 8.273482 13,561,958 0.00% (18.55)%***
Nationwide SAT - Balanced Fund ...................... 382,020 10.862308 4,149,619 0.00% (0.35)%
Nationwide SAT - Capital Appreciation Fund .......... 1,582,653 9.956531 15,757,734 0.00% (26.53)%
Nationwide SAT - Equity Income Fund ................. 150,717 12.193117 1,837,710 0.00% (10.62)%
Nationwide SAT - Global 50 Fund ..................... 1,172,113 12.840541 15,050,565 0.00% (12.32)%
Nationwide SAT - Government Bond Fund ............... 796,198 11.968657 9,529,421 0.00% 12.54%
Nationwide SAT - High Income Bond Fund .............. 167,390 10.013612 1,676,179 0.00% (8.28)%
Nationwide SAT - Mid Cap Growth Portfolio
(formerly Nationwide SAT -
Strategic Growth Portfolio) ........................ 569,923 17.915535 10,210,475 0.00% (15.38)%
Nationwide SAT - Mid Cap Index Fund ................. 312,214 15.436663 4,819,542 0.00% 15.21%
Nationwide SAT - Money Market Fund .................. 6,735,623 11.702768 78,825,433 0.00% 6.03%
Nationwide SAT - Multi Sector Bond Fund ............. 1,105,931 11.008804 12,174,978 0.00% 5.65%
Nationwide SAT - Small Cap Growth Fund .............. 220,651 17.186287 3,792,171 0.00% (16.17)%
Nationwide SAT - Small Cap Growth Fund
Initial Funding by Depositor (note 1a) ............. 100,000 17.186295 1,718,630 0.00% (16.17)%
Nationwide SAT - Small Cap Value Fund ............... 731,305 13.779795 10,077,233 0.00% 11.20%
Nationwide SAT - Small Company Fund ................. 922,404 15.841678 14,612,427 0.00% 8.90%
Nationwide SAT - Strategic Value Fund ............... 114,604 10.471261 1,200,048 0.00% 7.61%
Nationwide SAT - Total Return Fund .................. 2,459,963 12.359389 30,403,640 0.00% (2.12)%
Neuberger & Berman AMT - Guardian Portfolio ......... 253,627 15.303939 3,881,492 0.00% 1.13%
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................... 903,690 19.835316 17,924,977 0.00% (7.46)%
Neuberger & Berman AMT - Partners Portfolio ......... 648,616 11.267369 7,308,196 0.00% 0.70%
Oppenheimer Aggressive Growth Fund / VA ............. 1,531,755 18.311377 28,048,543 0.00% (11.24)%
Oppenheimer Capital Appreciation Fund / VA .......... 1,394,931 17.524709 24,445,760 0.00% (0.23)%
Oppenheimer Global Securities Fund / VA ............. 228,958 9.598100 2,197,562 0.00% (5.99)%***
Oppenheimer
Main Street Growth & Income / VA ................... 1,325,991 11.624742 15,414,303 0.00% (8.78)%
Strong Opportunity Fund II, Inc. .................... 156,475 9.854316 1,541,954 0.00% (1.83)%***
The Universal Institutional Funds, Inc. -
Emerging Markets Debt Portfolio
(formerly Morgan Stanley -
Emerging Markets Debt Portfolio) ................... 116,206 10.321107 1,199,375 0.00% 11.39%
The Universal Institutional Funds, Inc. -
Mid Cap Growth Portfolio
(formerly Morgan Stanley -
Mid Cap Growth Portfolio) ........................ 38,928 8.689212 338,254 0.00% (19.54)%***
(Continued)
39
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
The Universal Institutional Funds, Inc. -
U.S. Real Estate Portfolio
(formerly Van Kampen American Capital -
Morgan Stanley U.S. Real Estate Portfolio) ....... 320,762 10.935907 3,507,823 0.00% 15.43%***
Turner NSAT Growth Focus Fund ..................... 12,379 6.344311 78,536 0.00% (146.74)%***
Van Eck WIT -
Worldwide Emerging Markets Fund .................. 408,641 7.669407 3,134,034 0.00% (41.87)%
Van Eck WIT - Worldwide Hard Assets Fund .......... 138,471 9.305371 1,288,524 0.00% 11.40%
Warburg Pincus Trust -
Global Post-Venture Capital Portfolio ............ 93,621 12.974256 1,214,663 0.00% (18.94)%
Warburg Pincus Trust -
International Equity Portfolio ................... 161,421 11.977804 1,933,469 0.00% (25.90)%
Warburg Pincus Trust - Value Portfolio ............ 69,236 14.116099 977,342 0.00% 8.91%
The BEST of AMERICA(R)
Corporate Variable Universal Life SeriesSM:
American Century VP -
American Century VP Income & Growth .............. 763,555 11.398555 8,703,424 0.31% (10.97)%
American Century VP -
American Century VP International ................ 1,191,245 13.221985 15,750,624 0.30% (17.16)%
American Century VP -
American Century VP Value ........................ 111,911 10.893612 1,219,115 0.16% 17.67%
The Dreyfus Socially Responsible
Growth Fund, Inc. ................................ 136,511 12.795380 1,746,710 0.40% (11.39)%
Dreyfus Stock Index Fund .......................... 7,299,831 11.972080 87,394,161 0.28% (9.64)%
Dreyfus IP - European Equity Portfolio ............ 8,448 12.608842 106,519 0.23% (1.05)%
Dreyfus VIF - Appreciation Portfolio .............. 1,368,457 12.111451 16,574,000 0.34% (2.39)%
Federated Insurance Series -
Quality Bond Fund II ............................. 607,272 10.828312 6,575,731 0.14% 10.01%
Fidelity VIP -
Equity-Income Portfolio - Service Class .......... 351,542 11.310203 3,976,011 0.30% 7.87%
Fidelity VIP - Growth Portfolio - Service Class ... 2,131,137 14.593603 31,100,967 0.34% (11.42)%
Fidelity VIP -
High Income Portfolio - Service Class ............ 441,041 7.470194 3,294,662 0.32% (22.92)%
Fidelity VIP -
Overseas Portfolio - Service Class ............... 1,216,616 10.864367 13,217,763 0.44% (19.47)%
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............. 671,658 13.026647 8,749,452 0.37% (7.09)%
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class .................................... 397,095 9.628054 3,823,252 0.43% (17.51)%
Janus Aspen Series -
Capital Appreciation Portfolio - Service Class ... 535,891 8.205940 4,397,489 0.22%*** (19.27)%***
40
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Janus Aspen Series -
Global Technology Portfolio - Service Class ..... 343,351 6.558143 2,251,745 0.38%*** (36.98)%***
Janus Aspen Series -
International Growth Portfolio - Service Class .. 383,403 8.243024 3,160,400 0.23%*** (18.87)%***
Nationwide SAT - Balanced Fund ................... 117,858 9.980967 1,176,337 0.30% (0.75)%
Nationwide SAT - Capital Appreciation Fund ....... 178,360 8.505270 1,517,000 0.23% (26.82)%
Nationwide SAT - Equity Income Fund .............. 29,855 11.117142 331,902 0.90% (10.98)%
Nationwide SAT - Global 50 Fund .................. 942,496 11.093053 10,455,158 0.40% (12.67)%
Nationwide SAT - Government Bond Fund ............ 3,170,399 11.626380 36,860,264 0.36% 12.09%
Nationwide SAT - High Income Bond Fund ........... 224,564 9.436226 2,119,037 0.10% (8.64)%
Nationwide SAT - Mid Cap Growth Fund ............. 647,094 16.319202 10,560,058 0.42% (15.72)%
Nationwide SAT - Mid Cap Index Fund .............. 38,007 13.573326 515,881 0.14% 14.75%
Nationwide SAT - Money Market Fund ............... 5,646,634 11.380873 64,263,624 0.24% 5.60%
Nationwide SAT - Multi Sector Bond Fund .......... 1,055,243 10.635225 11,222,747 0.36% 5.23%
Nationwide SAT - Small Cap Growth Fund ........... 59,757 17.072794 1,020,219 0.24% (16.50)%
Nationwide SAT - Small Cap Value Fund ............ 152,675 12.101060 1,847,529 0.24% 10.76%
Nationwide SAT - Small Company Fund .............. 493,035 14.091380 6,947,544 0.15% 8.47%
Nationwide SAT - Strategic Value Fund ............ 2,481 9.402302 23,327 0.59% 7.18%
Nationwide SAT - Total Return Fund ............... 212,989 10.534111 2,243,650 0.36% (2.51)%
Neuberger & Berman AMT - Guardian Portfolio ...... 86,066 10.768698 926,819 0.20% 0.73%
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 827,220 15.959556 13,202,064 0.31% (7.83)%
Neuberger & Berman AMT - Partners Portfolio ...... 241,651 10.015242 2,420,193 0.30% 0.03%
Oppenheimer Aggressive Growth Fund / VA .......... 1,068,591 15.659821 16,733,944 0.32% (11.59)%
Oppenheimer Capital Appreciation Fund / VA ....... 911,021 14.945030 13,615,236 0.28% (0.63)%
Oppenheimer Global Securities Fund / VA .......... 43,440 9.572769 415,841 0.17%*** (6.37)%***
Oppenheimer
Main Street Growth & Income / VA ................ 327,513 9.845729 3,224,604 0.28% (9.14)%
Strong Opportunity Fund II, Inc. ................. 72,473 9.828296 712,286 0.28% (1.49)%
The Universal Institutional Funds, Inc. -
Emerging Markets Debt Portfolio ................. 28,939 9.671636 279,887 0.47% 10.94%
The Universal Institutional Funds, Inc. -
Mid Cap Growth Portfolio ....................... 8,201 8.666239 71,072 0.54%*** (19.89)%***
The Universal Institutional Funds, Inc. -
U.S. Real Estate Portfolio ...................... 111,390 10.960329 1,220,871 0.38%*** 15.00%***
Van Eck WIT - Worldwide Emerging Markets Fund .... 41,537 7.303734 303,375 0.49% (42.10)%
Van Eck WIT - Worldwide Hard Assets Fund ......... 3,041 9.149843 27,825 0.83% 10.96%
(Continued)
41
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Warburg Pincus Trust -
Global Post-Venture Capital Portfolio ........... 106,896 11.411760 1,219,871 0.59% (19.26)%
Warburg Pincus Trust -
International Equity Portfolio .................. 48,933 10.033586 490,973 0.50% (26.19)%
Warburg Pincus Trust - Value Portfolio ........... 10,994 11.918959 131,037 0.35% 8.48%
The BEST of AMERICA(R)
Corporate Variable Universal Life SeriesSM:
Reduced Fee Tier:
American Century VP -
American Century VP Income & Growth ............. 540,359 10.285709 5,557,975 0.42% (10.70)%
American Century VP -
American Century VP International ............... 619,313 13.288939 8,230,013 0.37% (16.91)%
American Century VP -
American Century VP Value ....................... 124,532 12.140456 1,511,875 0.18% 18.02%
The Dreyfus Socially Responsible
Growth Fund, Inc. ............................... 42,696 10.896922 465,255 0.49% (11.12)%
Dreyfus Stock Index Fund ......................... 4,975,884 10.357445 51,537,445 0.34% (9.37)%
Dreyfus IP - European Equity Portfolio ........... 36,592 12.656379 463,122 0.23% (0.75)%
Dreyfus VIF - Appreciation Portfolio ............. 498,451 10.646157 5,306,588 0.45% (2.10)%
Federated Insurance Series -
Quality Bond Fund II ............................... 4,027,297 10.882300 43,826,254 0.11% 10.34%
Fidelity VIP -
Equity-Income Portfolio - Service Class ......... 215,028 11.240819 2,417,091 0.32% 8.20%
Fidelity VIP - Growth Portfolio - Service Class .. 1,184,884 11.150661 13,212,240 0.48% (11.16)%
Fidelity VIP -
High Income Portfolio - Service Class ........... 591,491 7.950841 4,702,851 0.54% (22.69)%
Fidelity VIP -
Overseas Portfolio - Service Class .............. 171,286 11.126859 1,905,875 0.66% (19.23)%
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............ 209,278 10.913660 2,283,989 0.50% (6.81)%
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class ................................... 3,187 8.728402 27,817 0.60% (17.26)%
Janus Aspen Series -
Capital Appreciation Portfolio - Service Class .. 75,935 8.228654 624,843 0.22%*** (19.03)%***
Janus Aspen Series -
Global Technology Portfolio - Service Class ..... 157,837 6.576328 1,037,988 0.38%*** (36.78)%***
Janus Aspen Series -
International Growth Portfolio - Service Class .. 230,451 8.265856 1,904,875 0.23%*** (18.63)%***
Nationwide SAT - Balanced Fund ................... 148,185 9.935839 1,472,342 0.29% (0.45)%
Nationwide SAT - Capital Appreciation Fund ....... 587,392 7.574275 4,449,069 0.23% (26.61)%
Nationwide SAT - Global 50 Fund .................. 141,948 10.424035 1,479,671 0.44% (12.41)%
42
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Nationwide SAT - Government Bond Fund ............ 304,223 11.120055 3,382,976 0.42% 12.43%
Nationwide SAT - High Income Bond Fund ........... 1,268,447 9.119705 11,567,862 0.09% (8.37)%
Nationwide SAT - Mid Cap Growth Fund ............. 499,194 13.906958 6,942,270 0.42% (15.46)%
Nationwide SAT - Mid Cap Index Fund .............. 97,058 14.122042 1,370,657 0.14% 15.09%
Nationwide SAT - Money Market Fund ............... 8,179,266 10.971228 89,736,592 0.26% 5.92%
Nationwide SAT - Multi Sector Bond Fund .......... 271,955 10.733031 2,918,901 0.28% 5.55%
Nationwide SAT - Small Cap Growth Fund ........... 29,192 17.157856 500,872 0.24% (16.25)%
Nationwide SAT - Small Cap Value Fund ............ 222,101 14.901350 3,309,605 0.25% 11.09%
Nationwide SAT - Small Company Fund .............. 1,331,219 16.119172 21,458,148 0.13% 8.79%
Nationwide SAT - Strategic Value Fund ............ 505 10.645991 5,376 0.53% 7.50%
Nationwide SAT - Total Return Fund ............... 43,448 10.246333 445,183 0.43% (2.22)%
Neuberger & Berman AMT - Guardian Portfolio ...... 57,098 11.073505 632,275 0.25% 1.03%
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 391,150 14.538915 5,686,897 0.39% (7.55)%
Oppenheimer Aggressive Growth Fund / VA .......... 827,728 14.724854 12,188,174 0.36% (11.33)%
Oppenheimer Capital Appreciation Fund / VA ....... 533,112 13.187632 7,030,485 0.34% (0.33)%
Oppenheimer Global Securities Fund / VA .......... 145,609 9.591764 1,396,647 0.17%*** (6.08)%***
Oppenheimer
Main Street Growth & Income / VA ................ 209,160 10.690852 2,236,099 0.38% (8.87)%
Strong Opportunity Fund II, Inc. ................. 285,161 9.847803 2,808,209 0.12%*** (1.94)%***
The Universal Institutional Funds, Inc. -
Emerging Markets Debt Portfolio ................. 1,276 13.458822 17,173 0.65% 11.28%
The Universal Institutional Funds, Inc. -
Mid Cap Growth Portfolio ....................... 49,713 8.683462 431,681 0.46%*** (19.63)%***
The Universal Institutional Funds, Inc. -
U.S. Real Estate Portfolio ...................... 23,692 12.961511 307,084 0.39%*** 15.33%***
Van Eck WIT -
Worldwide Emerging Markets Fund ................. 16,342 10.475365 171,188 0.69% (41.92)%
======== ==========
$1,414,892,441
==============
The following is a summary for 1999:
The BEST of AMERICA(R)
America's FUTURE Life Series(SM):
American Century VP -
American Century VP Income & Growth ............. 463,779 $14.972547 $ 6,943,953 0.00% 18.02%
American Century VP -
American Century VP International ............... 625,339 19.481449 12,182,510 0.00% 64.04%
American Century VP -
American Century VP Value ....................... 169,333 10.392110 1,759,727 0.00% (0.85)%
(Continued)
43
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
The Dreyfus Socially Responsible
Growth Fund, Inc. ............................... 480,241 16.829763 8,082,342 0.00% 30.08%
Dreyfus Stock Index Fund ......................... 3,757,311 15.462782 58,098,481 0.00% 20.60%
Dreyfus IP - European Equity Portfolio ........... 10,415 12.930654 134,673 0.00% 11.46%
Dreyfus VIF - Appreciation Portfolio ............. 505,299 14.513370 7,333,591 0.00% 111.52%***
Federated Insurance Series -
Quality Bond Fund II ............................ 3,972 9.869090 39,200 0.00% (1.97)%***
Fidelity VIP -
Equity-Income Portfolio - Service Class ......... 1,196,502 11.851816 14,180,722 0.00% 6.25%
Fidelity VIP - Growth Portfolio - Service Class .. 1,564,447 19.134456 29,934,842 0.00% 37.29%
Fidelity VIP -
High Income Portfolio - Service Class ........... 664,736 10.329299 6,866,257 0.00% 8.07%
Fidelity VIP -
Overseas Portfolio - Service Class .............. 392,522 16.046561 6,298,628 0.00% 42.46%
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............ 1,324,909 16.131283 21,372,482 0.00% 24.15%
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class ................................... 673,044 12.971233 8,730,211 0.00% 4.18%
Morgan Stanley -
Emerging Markets Debt Portfolio ................. 62,633 9.266040 580,360 0.00% 29.37%
Nationwide SAT - Balanced Fund ................... 224,583 10.900657 2,448,102 0.00% 0.87%
Nationwide SAT - Capital Appreciation Fund ....... 1,343,877 13.552350 18,212,691 0.00% 4.28%
Nationwide SAT - Equity Income Fund .............. 66,677 13.642236 909,623 0.00% 18.49%
Nationwide SAT - Global 50 Fund .................. 595,841 14.645021 8,726,104 0.00% 22.92%
Nationwide SAT - Government Bond Fund ............ 509,816 10.635188 5,421,989 0.00% (2.35)%
Nationwide SAT - High Income Bond Fund ........... 130,767 10.917180 1,427,607 0.00% 3.19%
Nationwide SAT - Mid Cap Index Fund .............. 61,224 13.399089 820,346 0.00% 20.92%
Nationwide SAT - Money Market Fund ............... 4,602,015 11.037591 50,795,159 0.00% 4.85%
Nationwide SAT - Multi Sector Bond Fund .......... 590,762 10.419701 6,155,563 0.00% 1.56%
Nationwide SAT - Small Cap Growth Fund ........... 32,108 20.501257 658,254 0.00% 157.84%***
Nationwide SAT - Small Cap Growth Fund
Initial Funding by Depositor (note 1a) .......... 100,000 20.501257 2,050,126 0.00% 157.84%***
Nationwide SAT - Small Cap Value Fund ............ 345,575 12.391945 4,282,346 0.00% 27.84%
Nationwide SAT - Small Company Fund .............. 393,286 14.547287 5,721,244 0.00% 44.02%
Nationwide SAT - Strategic Growth Fund ........... 211,257 21.171385 4,472,603 0.00% 84.75%
Nationwide SAT - Strategic Value Fund ............ 96,106 9.730781 935,186 0.00% (3.07)%
Nationwide SAT - Total Return Fund ............... 1,852,310 12.627200 23,389,489 0.00% 6.94%
Neuberger & Berman AMT - Guardian Portfolio ...... 177,738 15.132896 2,689,691 0.00% 14.93%
44
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 280,847 21.434231 6,019,739 0.00% 53.89%
Neuberger & Berman AMT - Partners Portfolio ...... 582,704 11.188893 6,519,813 0.00% 7.37%
Oppenheimer Aggressive Growth Fund / VA .......... 431,151 20.629873 8,894,590 0.00% 83.60%
Oppenheimer Capital Appreciation Fund / VA ....... 618,285 17.565274 10,860,345 0.00% 41.66%
Oppenheimer
Main Street Growth & Income / VA ................ 460,733 12.743006 5,871,123 0.00% 21.71%
Van Eck WIT -
Worldwide Emerging Markets Fund ................. 194,066 13.192491 2,560,214 0.00% 100.28%
Van Eck WIT - Worldwide Hard Assets Fund ......... 53,013 8.353043 442,820 0.00% 21.00%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio ................... 146,473 8.539870 1,250,860 0.00% (3.37)%
Warburg Pincus Trust -
Global Post-Venture Capital Portfolio ........... 46,879 17.414110 816,356 0.00% 63.50%
Warburg Pincus Trust -
Growth & Income Portfolio ....................... 60,100 11.912913 715,966 0.00% 6.24%
Warburg Pincus Trust -
International Equity Portfolio .................. 138,513 16.163464 2,238,850 0.00% 53.43%
The BEST of AMERICA(R)
Corporate Variable Universal Life SeriesSM:
American Century VP -
American Century VP Income & Growth ............. 355,846 12.803106 4,555,934 0.19% 17.55%
American Century VP -
American Century VP International ............... 204,837 15.960157 3,269,231 0.18% 63.39%
American Century VP -
American Century VP Value ....................... 23,107 9.257533 213,914 0.61% (1.25)%
The Dreyfus Socially Responsible
Growth Fund, Inc. ............................... 28,931 14.439525 417,750 0.40% 29.56%
Dreyfus Stock Index Fund ......................... 3,707,136 13.249543 49,117,858 0.25% 20.12%
Dreyfus VIF - Appreciation Portfolio ............. 843,808 12.239522 10,327,807 0.34% 11.01%
Federated Insurance Series -
Quality Bond Fund II ............................ 18 9.842943 177 0.39%*** (2.36)%***
Fidelity VIP -
Equity-Income Portfolio - Service Class ......... 118,952 10.484615 1,247,166 0.34% 5.83%
Fidelity VIP - Growth Portfolio - Service Class .. 758,262 16.475102 12,492,444 0.21% 36.74%
Fidelity VIP -
High Income Portfolio - Service Class ........... 230,895 9.691447 2,237,707 0.14% 7.64%
Fidelity VIP -
Overseas Portfolio - Service Class .............. 504,007 13.491426 6,799,773 0.29% 41.89%
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............ 230,228 14.020034 3,227,804 0.27% 23.65%
(Continued)
45
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class ................................... 125,424 11.671298 1,463,861 0.42% 3.77%
Morgan Stanley -
Emerging Markets Debt Portfolio ................. 12,553 8.717559 109,432 0.30% 28.86%
Nationwide SAT - Balanced Fund ................... 43,881 10.056111 441,272 0.31% 0.47%
Nationwide SAT - Capital Appreciation Fund ....... 65,598 11.623180 762,457 0.16% 3.86%
Nationwide SAT - Equity Income Fund .............. 965 12.487973 12,051 0.99% 18.02%
Nationwide SAT - Global 50 Fund .................. 468,148 12.702408 5,946,607 0.31% 22.43%
Nationwide SAT - Government Bond Fund ............ 1,312,872 10.372218 13,617,395 0.44% (2.74)%
Nationwide SAT - High Income Bond Fund ........... 80,137 10.328712 827,712 0.08% 2.78%
Nationwide SAT - Money Market Fund ............... 3,786,796 10.776865 40,809,789 0.29% 4.43%
Nationwide SAT - Multi Sector Bond Fund .......... 460,632 10.106222 4,655,249 0.25% 1.15%
Nationwide SAT - Small Cap Growth Fund ........... 118 20.447188 2,413 0.64%*** 157.03%***
Nationwide SAT - Small Cap Value Fund ............ 8,548 10.925665 93,393 0.65% 27.33%
Nationwide SAT - Small Company Fund .............. 72,698 12.991606 944,464 0.11% 43.45%
Nationwide SAT - Strategic Growth Fund ........... 128,669 19.361969 2,491,285 0.37% 84.02%
Nationwide SAT - Strategic Value Fund ............ 791 8.772237 6,939 0.37% (3.46)%
Nationwide SAT - Total Return Fund ............... 42,084 10.805244 454,728 0.27% 6.52%
Neuberger & Berman AMT - Guardian Portfolio ...... 25,154 10.690765 268,916 0.49% 14.47%
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 315,266 17.314889 5,458,796 0.24% 53.28%
Neuberger & Berman AMT - Partners Portfolio ...... 94,285 9.985118 941,447 0.35% 6.94%
Oppenheimer Aggressive Growth Fund / VA .......... 138,018 17.712996 2,444,712 0.24% 82.87%
Oppenheimer Capital Appreciation Fund / VA ....... 188,390 15.039330 2,833,259 0.29% 41.09%
Oppenheimer
Main Street Growth & Income / VA ................ 97,691 10.835877 1,058,568 0.33% 21.22%
Van Eck WIT -
Worldwide Emerging Markets Fund ................. 10,044 12.613718 126,692 0.22% 99.48%
Van Eck WIT - Worldwide Hard Assets Fund ......... 252 8.246159 2,078 0.70% 20.52%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio ................ 38,697 8.593033 332,525 0.70% (3.76)%
Warburg Pincus Trust -
Global Post-Venture Capital Portfolio ........... 4,981 14.762349 73,531 0.37% 62.85%
Warburg Pincus Trust -
Growth & Income Portfolio ....................... 42,745 10.519954 449,675 0.40% 5.82%
Warburg Pincus Trust -
International Equity Portfolio .................. 3,445 13.593893 46,831 0.35% 52.82%
46
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
The BEST of AMERICA(R)
Corporate Variable Universal Life SeriesSM:
Reduced Fee Tier:
American Century VP -
American Century VP Income & Growth ............. 55,124 11.518727 634,958 0.25%*** 20.10%***
American Century VP -
American Century VP International ............... 218 15.993145 3,487 0.25%*** 79.60%***
American Century VP -
American Century VP Value ....................... 946 10.286399 9,731 0.83%*** 3.80%***
Dreyfus Stock Index Fund ......................... 1,242,820 11.428481 14,203,545 0.34%*** 18.97%***
Dreyfus VIF - Appreciation Portfolio ............. 117,874 10.726699 1,264,399 0.46%*** 9.66%***
Federated Insurance Series -
Quality Bond Fund II ............................ 1,129,926 9.862542 11,143,943 0.08%*** (1.82)%***
Fidelity VIP -
Equity-Income Portfolio - Service Class ......... 59,030 10.389282 613,279 0.47%*** 5.17%***
Fidelity VIP -
Overseas Portfolio - Service Class .............. 490 13.776193 6,750 0.38%*** 50.15%***
Nationwide SAT - Balanced Fund ................... 59,518 9.980828 594,039 0.41%*** (0.25)%***
Nationwide SAT - Capital Appreciation Fund ....... 234,561 10.320007 2,420,671 0.21%*** 4.25%***
Nationwide SAT - Global 50 Fund .................. 52,708 11.900760 627,265 0.41%*** 25.25%***
Nationwide SAT - Government Bond Fund ............ 59,316 9.890955 586,692 0.71%*** (1.45)%***
Nationwide SAT - High Income Bond Fund ........... 594,118 9.952512 5,912,967 0.12%*** (0.62)%***
Nationwide SAT - Money Market Fund ............... 4,669,469 10.357933 48,366,047 0.41%*** 4.72%***
Nationwide SAT - Multi Sector Bond Fund .......... 232,330 10.168791 2,362,515 0.34%*** 2.24%***
Nationwide SAT - Small Company Fund .............. 434,818 14.816849 6,442,633 0.15%*** 63.98%***
Nationwide SAT - Strategic Growth Fund ........... 240,293 16.450708 3,952,990 0.09%*** 85.68%***
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 44,838 15.726546 705,147 0.32%*** 76.06%***
Oppenheimer Aggressive Growth Fund / VA .......... 850 16.605768 14,115 0.32%*** 87.74%***
======== ==========
$648,293,593
============
The following is a summary for 1998:
The BEST of AMERICA(R)
America's FUTURE Life Series(SM):
American Century VP -
American Century VP Income & Growth ............. 97,382 $12.686493 $ 1,235,436 0.00% 26.86%
American Century VP -
American Century VP International .................. 206,063 11.875895 2,447,183 0.00% 18.76%
American Century VP -
American Century VP Value ....................... 59,424 10.481205 622,835 0.00% 4.81%
(Continued)
47
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
The Dreyfus Socially Responsible
Growth Fund, Inc. ............................... 105,696 12.938078 1,367,503 0.00% 29.38%
Dreyfus Stock Index Fund ......................... 1,025,141 12.821142 13,143,478 0.00% 28.21%
Dreyfus VIF - Appreciation Portfolio ............. 110,355 13.021619 1,437,001 0.00% 30.22%
Fidelity VIP -
Equity-Income Portfolio - Service Class ......... 511,915 11.154137 5,709,970 0.00% 11.54%
Fidelity VIP - Growth Portfolio - Service Class .. 255,829 13.937692 3,565,666 0.00% 39.38%
Fidelity VIP -
High Income Portfolio - Service Class ........... 368,689 9.557602 3,523,783 0.00% (4.42)%
Fidelity VIP -
Overseas Portfolio - Service Class .............. 92,817 11.263759 1,045,468 0.00% 12.64%
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............ 362,774 12.993755 4,713,796 0.00% 29.94%
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class ................................... 193,229 12.450522 2,405,802 0.00% 24.51%
Morgan Stanley -
Emerging Markets Debt Portfolio ................. 21,992 7.162164 157,510 0.00% (28.38)%
Nationwide SAT - Balanced Fund ................... 67,360 10.806799 727,946 0.00% 8.07%
Nationwide SAT - Capital Appreciation Fund ....... 485,064 12.996420 6,304,095 0.00% 29.96%
Nationwide SAT - Equity Income Fund .............. 21,000 11.513398 241,781 0.00% 15.13%
Nationwide SAT - Global 50 Fund .................. 41,464 11.913908 493,998 0.00% 19.14%
Nationwide SAT - Government Bond Fund ............ 166,631 10.890820 1,814,748 0.00% 8.91%
Nationwide SAT - High Income Bond Fund ........... 79,031 10.579676 836,122 0.00% 5.80%
Nationwide SAT - Mid Cap Index Fund .............. 26,958 11.080816 298,717 0.00% 10.81%
Nationwide SAT - Money Market Fund ............... 2,000,515 10.527225 21,059,872 0.00% 5.27%
Nationwide SAT - Multi Sector Bond Fund .......... 74,773 10.260092 767,178 0.00% 2.60%
Nationwide SAT - Small Cap Value Fund ............ 106,497 9.693575 1,032,337 0.00% (3.06)%
Nationwide SAT - Small Company Fund .............. 159,205 10.100944 1,608,121 0.00% 1.01%
Nationwide SAT - Strategic Growth Fund ........... 36,919 11.459357 423,068 0.00% 14.59%
Nationwide SAT - Strategic Value Fund ............ 34,463 10.038994 345,974 0.00% 0.39%
Nationwide SAT - Total Return Fund ............... 702,365 11.807411 8,293,112 0.00% 18.07%
Neuberger & Berman AMT - Guardian Portfolio ...... 55,695 13.166703 733,320 0.00% 31.67%
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 85,802 13.928381 1,195,083 0.00% 39.28%
Neuberger & Berman AMT - Partners Portfolio ...... 375,069 10.420882 3,908,550 0.00% 4.21%
Oppenheimer Aggressive Growth Fund / VA .......... 100,709 11.236019 1,131,568 0.00% 12.36%
Oppenheimer Capital Appreciation Fund / VA ....... 164,300 12.399968 2,037,315 0.00% 24.00%
48
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Oppenheimer
Main Street Growth & Income / VA ................ 139,668 10.470163 1,462,347 0.00% 4.70%
Van Eck WIT -
Worldwide Emerging Markets Fund ................. 43,904 6.586990 289,195 0.00% (34.13)%
Van Eck WIT - Worldwide Hard Assets Fund ......... 22,344 6.903203 154,245 0.00% (30.97)%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio ................ 81,141 8.837916 717,117 0.00% (11.62)%
Warburg Pincus Trust -
Global Post-Venture Capital Portfolio ........... 16,634 10.651002 177,169 0.00% 6.51%
Warburg Pincus Trust -
Growth & Income Portfolio ....................... 49,891 11.212895 559,423 0.00% 12.13%
Warburg Pincus Trust -
International Equity Portfolio .................. 56,767 10.534701 598,023 0.00% 5.35%
The BEST of AMERICA(R)
Corporate Variable Universal Life SeriesSM:
American Century VP -
American Century VP International ............... 3,234 9.768200 31,590 0.16%*** (3.46)%***
American Century VP -
American Century VP Value ....................... 440 9.374321 4,125 0.23%*** (9.33)%***
The Dreyfus Socially Responsible
Growth Fund, Inc. ............................... 397 11.144998 4,425 0.18%*** 17.07%***
Dreyfus Stock Index Fund ......................... 111,613 11.030001 1,231,092 0.24%*** 15.36%***
Dreyfus VIF - Appreciation Portfolio ............. 10,106 11.025485 111,424 0.29%*** 15.28%***
Fidelity VIP -
Equity-Income Portfolio - Service Class ......... 5,995 9.906965 59,392 0.20%*** (1.39)%***
Fidelity VIP - Growth Portfolio - Service Class .. 185 12.048634 2,229 0.26%*** 30.55%***
Fidelity VIP -
High Income Portfolio - Service Class ........... 77 9.003329 693 0.21%*** (14.86)%***
Fidelity VIP -
Overseas Portfolio - Service Class .............. 3,076 9.508092 29,247 0.16%*** (7.33)%***
Fidelity VIP-II -
Contrafund Portfolio - Service Class ............ 2,712 11.338370 30,750 0.16%*** 19.95%***
Fidelity VIP-III - Growth Opportunities Portfolio -
Service Class ................................... 1,228 11.247664 13,812 0.18%*** 18.61%***
Nationwide SAT - Balanced Fund ................... 349 10.009481 3,493 0.21%*** 0.13%***
Nationwide SAT - Capital Appreciation Fund ....... 847 11.191056 9,479 0.20%*** 17.76%***
Nationwide SAT - Equity Income Fund .............. 211 10.581467 2,233 0.22%*** 8.66%***
Nationwide SAT - Government Bond Fund ............ 270,361 10.664112 2,883,160 0.23%*** 9.90%***
Nationwide SAT - High Income Bond Fund ........... 13,423 10.049520 134,895 0.15%*** 0.75%***
Nationwide SAT - Money Market Fund ............... 394,891 10.319833 4,075,209 0.13%*** 4.75%***
Nationwide SAT - Multi Sector Bond Fund .......... 15,549 9.991296 155,355 0.12%*** (0.13)%***
(Continued)
49
NATIONWIDE VLI SEPARATE ACCOUNT-4
NOTES TO FINANCIAL STATEMENTS, Continued
UNIT CONTRACT TOTAL
UNITS FAIR VALUE OWNERS' EQUITY EXPENSES* RETURN**
----------- ----------- -------------- --------- ---------
Nationwide SAT - Small Company Fund .............. 257 9.056852 2,328 0.20%*** (14.06)%***
Nationwide SAT - Strategic Growth Fund ........... 477 10.521882 5,019 0.17%*** 7.78%***
Nationwide SAT - Total Return Fund ............... 70 10.144232 710 0.14%*** 2.15%***
Neuberger & Berman AMT - Guardian Portfolio ...... 838 9.338993 7,826 0.15%*** (9.85)%***
Neuberger & Berman AMT -
Mid Cap Growth Portfolio ........................ 70 11.296584 791 0.22%*** 19.34%***
Neuberger & Berman AMT - Partners Portfolio ...... 26,750 9.337008 249,765 0.35%*** (9.88)%***
Oppenheimer Aggressive Growth Fund / VA .......... 1,235 9.685930 11,962 0.19%*** (4.68)%***
Oppenheimer Capital Appreciation Fund / VA ....... 767 10.659314 8,176 0.25%*** 9.82%***
Oppenheimer
Main Street Growth and Income / VA .............. 18,485 8.938847 165,235 0.16%*** (15.82)%***
Warburg Pincus Trust -
Global Post-Venture Capital Portfolio ........... 985 9.065227 8,929 0.15%*** (13.94)%***
Warburg Pincus Trust -
Growth & Income Portfolio ....................... 16,145 9.941469 160,505 0.18%*** (0.88)%***
========= =========
$107,989,704
============
* This represents expenses as a percentage of the average net assets of the
variable account for the period indicated and includes only those expenses
that are charged through a reduction in the unit values. Excluded are
expenses of the underlying fund portfolios and charges made directly to
contract owner accounts through the redemption of units.
** This represents the annual total return for the period indicated and
includes a deduction only for expenses assessed through the daily unit
value calculation. The total return does not include any expenses assessed
through the redemption of units; inclusion of these expenses in the
calculation would result in a reduction of the total return presented.
*** Annualized as this investment option was not utilized for the entire period
indicated.
- --------------------------------------------------------------------------------
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, 2000 and
1999, 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,
2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000 and 1999, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 2000, in conformity with accounting
principles generally accepted in the United States of America.
KPMG LLP
January 26, 2001
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)
December 31,
------------------------------------
2000 1999
============================================================================================================================
ASSETS
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 15,443.0 $ 15,294.0
Equity securities 109.0 92.9
Mortgage loans on real estate, net 6,168.3 5,786.3
Real estate, net 310.7 254.8
Policy loans 562.6 519.6
Other long-term investments 101.8 73.8
Short-term investments 442.6 416.0
- ----------------------------------------------------------------------------------------------------------------------------
23,138.0 22,437.4
- ----------------------------------------------------------------------------------------------------------------------------
Cash 18.4 4.8
Accrued investment income 251.4 238.6
Deferred policy acquisition costs 2,865.6 2,554.1
Other assets 396.7 305.9
Assets held in separate accounts 65,897.2 67,135.1
- ----------------------------------------------------------------------------------------------------------------------------
$ 92,567.3 $ 92,675.9
============================================================================================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Future policy benefits and claims $ 22,183.6 $ 21,861.6
Short-term borrowings 118.7 -
Other liabilities 1,164.9 914.2
Liabilities related to separate accounts 65,897.2 67,135.1
- ----------------------------------------------------------------------------------------------------------------------------
89,364.4 89,910.9
- ----------------------------------------------------------------------------------------------------------------------------
Commitments and contingencies (notes 9 and 14)
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 646.1 766.1
Retained earnings 2,436.3 2,011.0
Accumulated other comprehensive income (loss) 116.7 (15.9)
- ----------------------------------------------------------------------------------------------------------------------------
3,202.9 2,765.0
- ----------------------------------------------------------------------------------------------------------------------------
$ 92,567.3 $ 92,675.9
============================================================================================================================
See accompanying notes to consolidated financial statements.
3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
Years ended December 31,
---------------------------------------------
2000 1999 1998
===========================================================================================================================
Revenues:
Policy charges $ 1,091.4 $ 895.5 $ 698.9
Life insurance premiums 240.0 220.8 200.0
Net investment income 1,654.9 1,520.8 1,481.6
Realized (losses) gains on investments (19.4) (11.6) 28.4
Other 17.0 66.1 66.8
- ---------------------------------------------------------------------------------------------------------------------------
2,983.9 2,691.6 2,475.7
- ---------------------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Interest credited to policyholder account balances 1,182.4 1,096.3 1,069.0
Other benefits and claims 241.6 210.4 175.8
Policyholder dividends on participating policies 44.5 42.4 39.6
Amortization of deferred policy acquisition costs 352.1 272.6 214.5
Interest expense on short-term borrowings 1.3 - -
Other operating expenses 479.0 463.4 419.7
- ---------------------------------------------------------------------------------------------------------------------------
2,300.9 2,085.1 1,918.6
- ---------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense 683.0 606.5 557.1
Federal income tax expense 207.7 201.4 190.4
- ---------------------------------------------------------------------------------------------------------------------------
Net income $ 475.3 $ 405.1 $ 366.7
===========================================================================================================================
See accompanying notes to consolidated financial statements.
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, 2000, 1999 and 1998
(in millions)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income (loss) equity
=========================================================================================================================
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
Return of capital to shareholder - (175.0) - - (175.0)
Dividends to shareholder - - (61.0) - (61.0)
- -------------------------------------------------------------------------------------------------------------------------
December 31, 1999 3.8 766.1 2,011.0 (15.9) 2,765.0
=========================================================================================================================
Comprehensive income:
Net income - - 475.3 - 475.3
Net unrealized gains on securities
available-for-sale arising during
the year - - - 132.6 132.6
---------------
Total comprehensive income 607.9
---------------
Return of capital to shareholder - (120.0) - - (120.0)
Dividends to shareholder - - (50.0) - (50.0)
- -------------------------------------------------------------------------------------------------------------------------
December 31, 2000 $ 3.8 $ 646.1 $ 2,436.3 $ 116.7 $ 3,202.9
=========================================================================================================================
See accompanying notes to consolidated financial statements.
5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
Years ended December 31,
----------------------------------------------
2000 1999 1998
==============================================================================================================================
Cash flows from operating activities:
Net income $ 475.3 $ 405.1 $ 366.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,182.4 1,096.3 1,069.0
Capitalization of deferred policy acquisition costs (778.9) (637.0) (584.2)
Amortization of deferred policy acquisition costs 352.1 272.6 214.5
Amortization and depreciation (12.7) 2.4 (8.5)
Realized losses (gains) on invested assets, net 19.4 11.6 (28.4)
Increase in accrued investment income (12.8) (7.9) (8.2)
(Increase) decrease in other assets (92.0) 122.9 16.4
Decrease in policy liabilities (0.3) (20.9) (8.3)
Increase (decrease) in other liabilities 229.3 149.7 (34.8)
Other, net 22.3 (8.6) (11.3)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,384.1 1,386.2 982.9
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,988.7 2,307.9 1,557.0
Proceeds from sale of securities available-for-sale 602.0 513.1 610.5
Proceeds from repayments of mortgage loans on real estate 911.7 696.7 678.2
Proceeds from sale of real estate 18.7 5.7 103.8
Proceeds from repayments of policy loans and sale of other invested assets 79.3 40.9 23.6
Cost of securities available-for-sale acquired (3,475.5) (3,724.9) (3,182.8)
Cost of mortgage loans on real estate acquired (1,318.0) (971.4) (829.1)
Cost of real estate acquired (7.1) (14.2) (0.8)
Short-term investments, net (26.6) (27.5) 69.3
Other, net (182.3) (110.9) (88.4)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (409.1) (1,284.6) (1,058.7)
- ------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Capital returned to shareholder (120.0) (175.0) -
Net proceeds from issuance of short-term borrowings (commercial paper) 118.7 - -
Cash dividends paid (100.0) (13.5) (100.0)
Increase in investment product and universal life insurance
product account balances 4,517.0 3,799.4 2,682.1
Decrease in investment product and universal life insurance
product account balances (5,377.1) (3,711.1) (2,678.5)
- ------------------------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (961.4) (100.2) (96.4)
- ------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 13.6 1.4 (172.2)
Cash, beginning of year 4.8 3.4 175.6
- ------------------------------------------------------------------------------------------------------------------------------
Cash, end of year $ 18.4 $ 4.8 $ 3.4
==============================================================================================================================
See accompanying notes to consolidated financial statements.
6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Nationwide Life Insurance Company (NLIC, or collectively with its
subsidiaries, the Company) 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 individual
annuities, private and public sector pension plans and other investment
products sold to institutions and life insurance. 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 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.
(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 accounting principles generally accepted in the United
States of America 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, the liability for
future policy benefits and claims and federal income taxes. 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.
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. The Company classifies fixed
maturity and equity securities as available-for-sale.
Available-for-sale securities 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.
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.
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 $1.12 billion and $915.4
million of separate account assets at December 31, 2000 and 1999,
respectively, 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.
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.
(g) PARTICIPATING BUSINESS
Participating business represents approximately 21% in 2000 (29%
in 1999 and 40% in 1998) of the Company's life insurance in force,
66% in 2000 (69% in 1999 and 74% in 1998) of the number of life
insurance policies in force, and 8% in 2000 (13% in 1999 and 14%
in 1998) 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 NFS. 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.
9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities (SFAS
133). SFAS 133, as amended by SFAS 137, Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective
Date of FASB Statement No. 133 and SFAS 138, Accounting for
Certain Derivative Instruments and Certain Hedging Activities, is
effective for the Company as of January 1, 2001.
SFAS 133 establishes accounting and reporting standards for
derivative instruments and hedging activities. It requires an
entity to recognize all derivatives as either assets or
liabilities on the balance sheet and measure those instruments at
fair value.
As of January 1, 2001, the Company had $755.4 million notional
amount of freestanding derivatives with a market value of ($7.0)
million. All other derivatives qualified for hedge accounting
under SFAS 133. Adoption of SFAS 133 will result in the Company
recording a net transition adjustment loss of $4.8 million (net of
related income tax of $2.6 million) in net income. In addition, a
net transition adjustment loss of $3.6 million (net of related
income tax of $2.0 million) will be recorded in accumulated other
comprehensive income at January 1, 2001. The adoption of SFAS 133
will result in the Company derecognizing $17.0 million of deferred
assets related to hedges, recognizing $10.9 million of additional
derivative instrument liabilities and $1.3 million of additional
firm commitment assets, while also decreasing hedged future policy
benefits by $3.0 million and increasing the carrying amount of
hedged investments by $10.6 million. Further, the adoption of SFAS
133 will result in the Company reporting total derivative
instrument assets and liabilities of $44.8 million and $107.1
million, respectively.
Also, the Company expects that the adoption of SFAS 133 will
increase the volatility of reported earnings and other
comprehensive income. The amount of volatility will vary with the
level of derivative and hedging activities and fluctuations in
market interest rates and foreign currency exchange rates during
any period.
(k) RECLASSIFICATION
Certain items in the 1999 and 1998 consolidated financial
statements have been reclassified to conform to the 2000
presentation.
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, 2000 and
1999 were:
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
=========================================================================================================================
December 31, 2000
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies $ 277.5 $ 33.4 $ 0.1 $ 310.8
Obligations of states and political subdivisions 8.6 0.2 - 8.8
Debt securities issued by foreign governments 94.1 1.5 0.1 95.5
Corporate securities 9,758.3 235.0 135.1 9,858.2
Mortgage-backed securities - U.S. Government backed 2,719.1 46.1 3.8 2,761.4
Asset-backed securities 2,388.2 36.3 16.2 2,408.3
-------------------------------------------------------------------------------------------------------------------------
Total fixed maturity securities 15,245.8 352.5 155.3 15,443.0
Equity securities 103.5 9.5 4.0 109.0
-------------------------------------------------------------------------------------------------------------------------
$ 15,349.3 $ 362.0 $ 159.3 $ 15,552.0
=========================================================================================================================
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 9,390.4 110.3 179.9 9,320.8
Mortgage-backed securities - U.S. Government backed 3,423.1 25.8 30.3 3,418.6
Asset-backed securities 2,024.0 8.6 38.6 1,994.0
-------------------------------------------------------------------------------------------------------------------------
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
=========================================================================================================================
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 2000, 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.
11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Amortized Estimated
(in millions) cost fair value
===========================================================================================================
Fixed maturity securities available for sale:
Due in one year or less $ 1,288.7 $ 1,287.0
Due after one year through five years 4,577.9 4,572.4
Due after five years through ten years 3,071.3 3,136.6
Due after ten years 1,200.6 1,277.3
-----------------------------------------------------------------------------------------------------------
10,138.5 10,273.3
Mortgage-backed securities 2,719.1 2,761.4
Asset-backed securities 2,388.2 2,408.3
-----------------------------------------------------------------------------------------------------------
$ 15,245.8 $ 15,443.0
===========================================================================================================
The components of unrealized gains (losses) on securities available-for-sale, net, were as follows as of
each December 31:
(in millions)
2000 1999
===========================================================================================================
Gross unrealized gains (losses) $ 202.7 $ (75.3)
Adjustment to deferred policy acquisition costs (23.2) 50.9
Deferred federal income tax (62.8) 8.5
-----------------------------------------------------------------------------------------------------------
$ 116.7 $ (15.9)
===========================================================================================================
An analysis of the change in gross unrealized gains (losses) on securities available-for-sale for the years
ended December 31:
(in millions) 2000 1999 1998
===========================================================================================================
Securities available-for-sale:
Fixed maturity securities $ 280.5 $ (607.1) $ 52.6
Equity securities (2.5) (8.8) 4.2
-----------------------------------------------------------------------------------------------------------
$ 278.0 $ (615.9) $ 56.8
===========================================================================================================
Proceeds from the sale of securities available-for-sale during 2000,
1999 and 1998 were $602.0 million, $513.1 million and $610.5 million,
respectively. During 2000, gross gains of $12.1 million ($10.4 million
and $9.0 million in 1999 and 1998, respectively) and gross losses of
$25.6 million ($28.0 million and $7.6 million in 1999 and 1998,
respectively) were realized on those sales.
The Company had $13.0 million and $15.6 million of real estate
investments at December 31, 2000 and 1999, respectively, that were
non-income producing the preceding twelve months.
Real estate is presented at cost less accumulated depreciation of $25.7
million as of December 31, 2000 ($24.8 million as of December 31, 1999)
and valuation allowances of $5.2 million as of December 31, 2000 ($5.5
million as of December 31, 1999).
12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The recorded investment of mortgage loans on real estate considered to
be impaired was $9.8 million as of December 31, 2000 ($3.7 million as
of December 31, 1999), which includes $5.3 million (none as of December
31, 1999) of impaired mortgage loans on real estate for which the
related valuation allowance was $1.6 million (none as of December 31,
1999) and $4.5 million ($3.7 million as of December 31, 1999) of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 2000, the average recorded investment in impaired
mortgage loans on real estate was $7.7 million ($3.7 million in 1999)
and interest income recognized on those loans totaled $0.4 million in
2000 (none in 1999) which is equal to interest income recognized using
a cash-basis method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
(in millions) 2000 1999 1998
===========================================================================================================
Allowance, beginning of year $ 44.4 $ 42.4 $ 42.5
Additions (reductions) charged to operations 4.1 0.7 (0.1)
Direct write-downs charged against the allowance (3.2) -- --
Allowance on acquired mortgage loans -- 1.3 --
-----------------------------------------------------------------------------------------------------------
Allowance, end of year $ 45.3 $ 44.4 $ 42.4
===========================================================================================================
An analysis of investment income by investment type follows for the years ended December 31:
(in millions) 2000 1999 1998
===========================================================================================================
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 1,095.5 $ 1,031.3 $ 982.5
Equity securities 2.6 2.5 0.8
Mortgage loans on real estate 494.5 460.4 458.9
Real estate 32.2 28.8 40.4
Short-term investments 27.0 18.6 17.8
Other 53.2 26.5 30.7
-----------------------------------------------------------------------------------------------------------
Total investment income 1,705.0 1,568.1 1,531.1
Less investment expenses 50.1 47.3 49.5
-----------------------------------------------------------------------------------------------------------
Net investment income $ 1,654.9 $ 1,520.8 $ 1,481.6
===========================================================================================================
An analysis of realized gains (losses) on investments, net of valuation allowances, by investment type
follows for the years ended December 31:
(in millions) 2000 1999 1998
===========================================================================================================
Securities available-for-sale:
Fixed maturity securities $ (18.2) $ (25.0) $ (0.7)
Equity securities 4.7 7.4 2.1
Mortgage loans on real estate (4.2) (0.6) 3.9
Real estate and other (1.7) 6.6 23.1
-----------------------------------------------------------------------------------------------------------
$ (19.4) $ (11.6) $ 28.4
===========================================================================================================
Fixed maturity securities with an amortized cost of $12.8 million and
$9.1 million were on deposit with various regulatory agencies as
required by law as of December 31, 2000 and 1999, respectively.
13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) SHORT-TERM BORROWINGS
NLIC established a $300 million commercial paper program in October
2000. Borrowings under the commercial paper program are unsecured and
are issued for terms of 364 days or less. As of December 31, 2000 the
Company had $118.7 million of commercial paper outstanding at an
average effective rate of 6.48%. See also note 13.
(5) 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 and foreign currency 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. See note 2 (j)
regarding accounting for derivatives under SFAS 133 effective January
1, 2001.
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. Currently, 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 and cross currency swaps hedging foreign
denominated debt instruments, 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. 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. 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.
14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The notional amount of derivative financial instruments outstanding as
of December 31, 2000 and 1999 were as follows:
(in millions ) 2000 1999
===========================================================================================================
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $ 934.8 $ 362.7
Pay variable/receive fixed rate swaps hedging investments 98.8 28.5
Pay variable/receive variable rate swaps hedging investments 184.0 9.0
Other contracts hedging investments 20.4 10.1
Pay variable/receive fixed rate swaps hedging liabilities 965.3 577.2
Pay variable/receive variable rate swaps hedging liabilities 546.9 --
Foreign currency swaps
Hedging foreign currency denominated investments $ 30.5 $ 14.8
Hedging foreign currency denominated liabilities 1,542.2 577.2
Interest rate futures contracts $ 5,659.8 $ 781.6
-----------------------------------------------------------------------------------------------------------
(6) 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, 2000 and 1999 were as follows:
(in millions) 2000 1999
===========================================================================================================
Deferred tax assets:
Fixed maturity securities $ -- $ 5.3
Future policy benefits 34.7 149.5
Liabilities in separate accounts 462.7 373.6
Mortgage loans on real estate and real estate 18.8 18.5
Other assets and other liabilities 40.3 51.1
-----------------------------------------------------------------------------------------------------------
Total gross deferred tax assets 556.5 598.0
Valuation allowance (7.0) (7.0)
-----------------------------------------------------------------------------------------------------------
Net deferred tax assets 549.5 591.0
-----------------------------------------------------------------------------------------------------------
Deferred tax liabilities:
Fixed maturity securities 98.8 --
Equity securities and other long-term investments 6.4 10.8
Deferred policy acquisition costs 783.7 724.4
Deferred tax on realized investment gains 29.0 34.7
Other 38.1 26.5
-----------------------------------------------------------------------------------------------------------
Total gross deferred tax liabilities 956.0 796.4
-----------------------------------------------------------------------------------------------------------
Net deferred tax liability $ 406.5 $ 205.4
===========================================================================================================
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. Future taxable
amounts or recovery of federal income tax paid within the statutory
carryback period can offset nearly all future deductible amounts. The
valuation allowance was unchanged for the years ended December 31,
2000, 1999 and 1998.
15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Company's current federal income tax liability was $108.9 million
and $104.7 million as of December 31, 2000 and 1999, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 2000 1999 1998
===========================================================================================================
Currently payable $ 78.0 $ 53.6 $ 186.1
Deferred tax expense 129.7 147.8 4.3
-----------------------------------------------------------------------------------------------------------
$ 207.7 $ 201.4 $ 190.4
===========================================================================================================
Total federal income tax expense for the years ended December 31, 2000,
1999 and 1998 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
2000 1999 1998
---------------------- ---------------------- ----------------------
(in millions) Amount % Amount % Amount %
==================================================================================================================
Computed (expected) tax expense $239.1 35.0 $212.3 35.0 $195.0 35.0
Tax exempt interest and dividends
received deduction (24.7) (3.6) (7.3) (1.2) (4.9) (0.9)
Income tax credits (8.0) (1.2) (4.3) (0.7) - -
Other, net 1.3 0.2 0.7 0.1 0.3 0.1
------------------------------------------------------------------------------------------------------------------
Total (effective rate of each year) $207.7 30.4 $201.4 33.2 $190.4 34.2
==================================================================================================================
Total federal income tax paid was $74.6 million, $29.8 million and
$173.4 million during the years ended December 31, 2000, 1999 and 1998,
respectively.
(7) 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 for the years ended December 31, 2000, 1999 and 1998 were as
follows:
(in millions) 2000 1999 1998
===========================================================================================================
Unrealized gains (losses) on securities available-for-sale arising
during the period:
Gross $ 264.5 $ (665.3) $ 58.2
Adjustment to deferred policy acquisition costs (74.0) 167.5 (12.9)
Related federal income tax (expense) benefit (66.7) 171.4 (15.9)
-----------------------------------------------------------------------------------------------------------
Net 123.8 (326.4) 29.4
-----------------------------------------------------------------------------------------------------------
Reclassification adjustment for net (gains) losses on securities
available-for-sale realized during the period:
Gross 13.5 17.6 (1.4)
Related federal income tax expense (benefit) (4.7) (6.2) 0.5
-----------------------------------------------------------------------------------------------------------
Net 8.8 11.4 (0.9)
-----------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income (Loss) $ 132.6 $ (315.0) $ 28.5
===========================================================================================================
16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(8) 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.
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 Company in estimating its fair value disclosures used the following
methods and assumptions:
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 impaired mortgage loans 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 based on one of 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.
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.
SHORT-TERM BORROWINGS: The carrying amount reported in the
consolidated balance sheets for these instruments approximates
their 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 9.
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:
2000 1999
------------------------------- -------------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
==============================================================================================================
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $ 15,451.3 $ 15,451.3 $ 15,289.7 $ 15,289.7
Equity securities 109.0 109.0 92.9 92.9
Mortgage loans on real estate, net 6,168.3 6,327.8 5,786.3 5,745.5
Policy loans 562.6 562.6 519.6 519.6
Short-term investments 442.6 442.6 416.0 416.0
Cash 18.4 18.4 4.8 4.8
Assets held in separate accounts 65,897.2 65,897.2 67,135.1 67,135.1
Liabilities:
Investment contracts (16,815.3) (15,979.8) (16,977.7) (16,428.6)
Policy reserves on life insurance contracts (5,368.4) (5,128.5) (4,883.9) (4,607.9)
Short-term borrowings (118.7) (118.7) -- --
Liabilities related to separate accounts (65,897.2) (64,237.6) (67,135.1) (66,318.7)
Derivative financial instruments:
Interest rate swaps hedging assets (8.3) (8.3) 4.3 4.3
Interest rate swaps hedging liabilities (26.2) (32.2) (11.5) (24.2)
Foreign currency swaps (24.3) (30.9) (11.8) (11.8)
Futures contracts (16.0) (16.0) 1.3 1.3
--------------------------------------------------------------------------------------------------------------
(9) RISK DISCLOSURES
The following is a description of the most significant risks
facing life insurers and how the Company mitigates those risks:
18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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.
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 could
potentially 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 $360.6 million
extending into 2001 were outstanding as of December 31, 2000. The
Company also had $55.6 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 2000.
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. As of December 31,
2000, NLIC's credit risk from these derivative financial instruments
was $44.8 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 22% (23% in 1999) in any geographic area and no more than 1% (2%
in 1999) with any one borrower as of December 31, 2000. As of December
31, 2000, 36% (39% in 1999) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
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 reinsurance contracts to cede
a portion of its individual annuity business to The Franklin Life
Insurance Company (Franklin) and beginning in 2000 with Security
Benefit Life Insurance Company (SBL). Total recoveries due from
Franklin were $97.7 million and $143.6 million as of December 31, 2000
and 1999, respectively, while amounts due from SBL totaled $45.4
million at December 31, 2000. The contracts are 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 and SBL have each 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% and 100% of the reinsured
reserves for Franklin and SBL, respectively.
(10) 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 and who have met certain age requirements. Plan
contributions are invested in a group annuity contract of NLIC.
Benefits are based upon the highest average annual salary of a
specified number of consecutive years of the last ten years 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.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 2000, 1999 and 1998 were $1.9 million, $(8.3)
million and $2.0 million, respectively. The Company has recorded a
prepaid pension asset of $13.6 million and $13.3 million as of December
31, 2000 and 1999, 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,
2000 and 1999 was $51.0 million and $49.6 million, respectively and the
net periodic postretirement benefit cost (NPPBC) for 2000, 1999 and
1998 was $3.8 million, $4.9 million and $4.1 million, respectively.
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, 2000 and 1999 follows:
Pension Benefits Postretirement Benefits
---------------------------- ---------------------------
(in millions) 2000 1999 2000 1999
===================================================================================================================
Change in benefit obligation:
Benefit obligation at beginning of year $ 1,811.4 $ 2,185.0 $ 239.8 $ 270.1
Service cost 81.4 80.0 12.2 14.2
Interest cost 125.3 109.9 18.7 17.6
Actuarial loss (gain) 34.8 (95.0) 16.1 (64.4)
Plan settlement -- (396.1) -- --
Benefits paid (71.2) (72.4) (10.4) (11.0)
Acquired companies -- -- -- 13.3
-------------------------------------------------------------------------------------------------------------------
Benefit obligation at end of year 1,981.7 1,811.4 276.4 239.8
-------------------------------------------------------------------------------------------------------------------
Change in plan assets:
Fair value of plan assets at beginning of year 2,247.6 2,541.9 91.3 77.9
Actual return on plan assets 140.9 161.8 12.2 3.5
Employer contribution -- 12.4 26.3 20.9
Plan curtailment in 2000/settlement in 1999 19.8 (396.1) -- --
Benefits paid (71.2) (72.4) (10.4) (11.0)
-------------------------------------------------------------------------------------------------------------------
Fair value of plan assets at end of year 2,337.1 2,247.6 119.4 91.3
-------------------------------------------------------------------------------------------------------------------
Funded status 355.4 436.2 (157.0) (148.5)
Unrecognized prior service cost 25.0 28.2 -- --
Unrecognized net gains (311.7) (402.0) (34.1) (46.7)
Unrecognized net (asset) obligation at transition (6.4) (7.7) 1.0 1.1
-------------------------------------------------------------------------------------------------------------------
Prepaid (accrued) benefit cost $ 62.3 $ 54.7 $ (190.1) $ (194.1)
===================================================================================================================
Assumptions used in calculating the funded status of the pension plan
and postretirement life and health care benefit plan were as follows:
Pension Benefits Postretirement Benefits
--------------------------- ---------------------------
2000 1999 2000 1999
===================================================================================================================
Weighted average discount rate 6.75% 7.00% 7.50% 7.80%
Rate of increase in future compensation levels 5.00% 5.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 5.50%
Uniform declining period -- -- 5 Years 5 Years
-------------------------------------------------------------------------------------------------------------------
21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of net periodic pension cost for the pension plan as a
whole for the years ended December 31, 2000, 1999 and 1998 were as
follows:
(in millions) 2000 1999 1998
=========================================================================================================
Service cost (benefits earned during the period) $ 81.4 $ 80.0 $ 87.6
Interest cost on projected benefit obligation 125.3 109.9 123.4
Expected return on plan assets (184.5) (160.3) (159.0)
Recognized gains (11.8) (9.1) (3.8)
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.3) (1.4) 4.2
---------------------------------------------------------------------------------------------------------
$ 12.3 $ 22.3 $ 55.6
=========================================================================================================
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide and employees of WSC ended participation in
the plan resulting in a curtailment gain of $67.1 million. During 1999,
the Plan transferred assets to settle its obligation related to WSC
employees, resulting in a gain of $32.9 million. The spin-off of
liabilities and assets was completed in the year 2000, resulting in an
adjustment to the curtailment gain of $19.8 million.
Assumptions used in calculating the net periodic pension cost for the
pension plan were as follows:
2000 1999 1998
================================================================================================================
Weighted average discount rate 7.00% 6.08% 6.00%
Rate of increase in future compensation levels 5.25% 4.33% 4.25%
Expected long-term rate of return on plan assets 8.25% 7.33% 7.25%
----------------------------------------------------------------------------------------------------------------
The components of NPPBC for the postretirement benefit plan as a whole for the years ended December 31, 2000,
1999 and 1998 were as follows:
(in millions) 2000 1999 1998
================================================================================================================
Service cost (benefits attributed to employee service during the year) $ 12.2 $ 14.2 $ 9.8
Interest cost on accumulated postretirement benefit obligation 18.7 17.6 15.4
Expected return on plan assets (7.9) (4.8) (4.4)
Amortization of unrecognized transition obligation of affiliates 0.6 0.6 0.2
Net amortization and deferral (1.3) (0.5) 0.6
----------------------------------------------------------------------------------------------------------------
$ 22.3 $ 27.1 $ 21.6
================================================================================================================
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 2000, 1999 and 1998 were as follows:
2000 1999 1998
================================================================================================================
Discount rate 7.80% 6.65% 6.70%
Long-term rate of return on plan assets, net of tax in 1999 and 1998 8.30% 7.15% 5.83%
Assumed health care cost trend rate:
Initial rate 15.00% 15.00% 12.00%
Ultimate rate 5.50% 5.50% 6.00%
Uniform declining period 5 Years 5 Years 12 Years
----------------------------------------------------------------------------------------------------------------
22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Because current plan costs are very close to the employer dollar caps,
the health care cost trend has an immaterial effect on plan obligations
for the postretirement benefit plan as a whole. For this reason, the
effect of a one percentage point increase or decrease in the assumed
health care cost trend rate on the APBO as of December 31, 2000 and on
the NPPBC for the year ended December 31, 2000 was not calculated.
(11) 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, 2000, 1999
and 1998 was $1.28 billion, $1.35 billion and $1.32 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 2000, 1999 and 1998 was $158.7 million, $276.2 million and
$171.0 million, respectively.
The NAIC completed a project to codify statutory accounting principles
(Codification), which is effective January 1, 2001 for NLIC and its
insurance company subsidiary. The resulting change to NLIC's January 1,
2001 surplus was an increase of approximately $80.0 million. The
significant change for NLIC, as a result of Codification, was the
recording of deferred taxes, which were not recorded prior to the
adoption of Codification.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 2000
no dividends could be paid by NLIC without prior approval.
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 shareholders.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(12) 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 net income in 1999.
23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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, 2000, 1999 and 1998 were $170.1 million, $193.0
million, and $216.9 million, respectively, while benefits, claims and
expenses ceded were $168.0 million, $197.3 million and $259.3 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, 2000, 1999 and 1998, the Company made
payments to NMIC and Nationwide Services Company totaling $150.3
million, $124.1 million, and $95.0 million, respectively. 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, 2000, 1999 and 1998, the
Company made lease payments to NMIC and its subsidiaries of $14.1
million, $9.9 million and $8.0 million, respectively.
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 after a stated period, the
seller will repurchase the securities at the original sales price plus
a price differential. Transactions under the agreements during 2000,
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 $321.1 million and $411.7 million as
of December 31, 2000 and 1999, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
Certain annuity products are sold through affiliated companies, which
are also subsidiaries of NFS. Total commissions and fees paid to these
affiliates for the three years ended December 31, 2000 were $65.0
million, $79.7 million and $74.9 million, respectively.
24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) BANK LINES OF CREDIT
Also available as a source of funds to the Company is a $1 billion
revolving credit facility entered into by NFS, NLIC and NMIC. The
facility is comprised of a five year $700 million agreement and a 364
day $300 million agreement with a group of national financial
institutions. The facility provides for several and not joint liability
with respect to any amount drawn by any party. The facility provides
covenants, including, but not limited to, requirements that NLIC
maintain statutory surplus in excess of $935 million. The Company had
no amounts outstanding under this agreement as of December 31, 2000. Of
the total facility, $300 million is designated to back NLIC's $300
million commercial paper program. Therefore, borrowing capacity under
this facility would be reduced by the amount of any commercial paper
outstanding.
(14) 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.
(15) SEGMENT INFORMATION
The Company has redefined its business segments in order to align this
disclosure with the way management currently views its core operations.
This updated view better reflects the different economics of the
Company's various businesses and also aligns well with the current
market focus. As a result, the Company now reports three product
segments: Individual Annuity, Institutional Products and Life
Insurance. In addition, the Company reports certain other revenues and
expenses in a Corporate segment. All 1999 and 1998 amounts have been
restated to reflect the new business segments.
The Individual Annuity segment consists of both variable and fixed
annuity contracts. Individual annuity contracts provide the customer
with tax-deferred accumulation of savings and flexible payout options
including lump sum, systematic withdrawal or a stream of payments for
life. In addition, variable annuity contracts provide the customer with
access to a wide range of investment options and asset protection in
the event of an untimely death, while fixed annuity contracts generate
a return for the customer at a specified interest rate fixed for a
prescribed period. The Company's individual annuity products consist of
single premium deferred annuities, flexible premium deferred annuities
and single premium immediate annuities.
The Institutional Products segment is comprised of the Company's group
pension and payroll deduction business, both public and private
sectors, and medium-term note program. The public sector includes the
457 business in the form of fixed and variable annuities. The private
sector includes the 401(k) business generated through fixed and
variable annuities.
The Life Insurance segment consists of insurance products, including
universal life insurance, corporate-owned life insurance and bank-owned
life insurance products, which provide a death benefit and also allow
the customer to build cash value on a tax-advantaged basis.
25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition to the product segments, the Company reports a Corporate
segment. The Corporate segment includes net investment income not
allocated to the three product segments, certain revenues and expenses
of the Company's investment advisory and broker/dealer subsidiary,
unallocated expenses and interest expense on short-term borrowings. In
addition to these operating revenues and expenses, the Company also
reports net realized gains and losses on investments in the Corporate
segment.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 2000, 1999 and 1998.
Individual Institutional Life
(in millions) Annuity Products Insurance Corporate Total
===================================================================================================================
2000:
Net investment income $ 483.2 $ 827.4 $ 289.2 $ 55.1 $ 1,654.9
Other operating revenue 625.9 251.6 453.9 17.0 1,348.4
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 1,109.1 1,079.0 743.1 72.1 3,003.3
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 396.4 628.8 157.2 -- 1,182.4
Amortization of deferred policy
acquisition costs 238.7 49.2 64.2 -- 352.1
Interest expense on short-term
borrowings -- -- -- 1.3 1.3
Other benefits and expenses 192.3 170.3 368.8 33.7 765.1
-------------------------------------------------------------------------------------------------------------------
Total expenses 827.4 848.3 590.2 35.0 2,300.9
-------------------------------------------------------------------------------------------------------------------
Operating income before
federal income tax 281.7 230.7 152.9 37.1 702.4
Realized losses on investments -- -- -- (19.4) (19.4)
-------------------------------------------------------------------------------------------------------------------
Income before
federal income tax $ 281.7 $ 230.7 $ 152.9 $ 17.7 $ 683.0
===================================================================================================================
Assets as of year end $45,422.5 $37,217.3 $ 8,103.3 $ 1,824.2 $92,567.3
-------------------------------------------------------------------------------------------------------------------
1999:
Net investment income $ 458.9 $ 771.2 $ 253.1 $ 37.6 $ 1,520.8
Other operating revenue 511.4 211.9 393.0 66.1 1,182.4
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 970.3 983.1 646.1 103.7 2,703.2
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 384.9 580.9 130.5 -- 1,096.3
Amortization of deferred policy
acquisition costs 170.9 41.6 60.1 -- 272.6
Other benefits and expenses 155.3 142.8 334.7 83.4 716.2
-------------------------------------------------------------------------------------------------------------------
Total expenses 711.1 765.3 525.3 83.4 2,085.1
-------------------------------------------------------------------------------------------------------------------
Operating income before
federal income tax 259.2 217.8 120.8 20.3 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
-------------------------------------------------------------------------------------------------------------------
Income before
federal income tax $ 259.2 $ 217.8 $ 120.8 $ 8.7 $ 606.5
===================================================================================================================
Assets as of year end $45,667.8 $39,045.1 $ 6,616.7 $ 1,346.3 $92,675.9
-------------------------------------------------------------------------------------------------------------------
26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Individual Institutional Life
(in millions) Annuity Products Insurance Corporate Total
===================================================================================================================
1998:
Net investment income $ 431.7 $ 784.7 $ 225.6 $ 39.6 $ 1,481.6
Other operating revenue 412.6 167.8 318.5 66.8 965.7
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 844.3 952.5 544.1 106.4 2,447.3
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 357.9 595.7 115.4 -- 1,069.0
Amortization of deferred policy
acquisition costs 129.2 38.9 46.4 -- 214.5
Other benefits and expenses 125.7 137.5 293.5 78.4 635.1
-------------------------------------------------------------------------------------------------------------------
Total expenses 612.8 772.1 455.3 78.4 1,918.6
-------------------------------------------------------------------------------------------------------------------
Operating income before federal
income tax 231.5 180.4 88.8 28.0 528.7
Realized gains on investments -- -- -- 28.4 28.4
-------------------------------------------------------------------------------------------------------------------
Income before
federal income tax $ 231.5 $ 180.4 $ 88.8 $ 56.4 $ 557.1
===================================================================================================================
Assets as of year end $36,641.8 $30,618.4 $ 5,187.6 $ 1,894.3 $74,342.1
-------------------------------------------------------------------------------------------------------------------
----------
1 Excludes net 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.
PART I - FINANCIAL INFORMATION
ITEM 1 UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(Unaudited)
(in millions)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------------------------------------
2001 2000 2001 2000
==============================================================================================================================
REVENUES
Policy charges $ 243.9 $ 284.8 $ 768.0 $ 823.5
Life insurance premiums 59.4 51.7 189.8 180.7
Net investment income 435.0 412.6 1,286.8 1,229.6
Net realized gains (losses) on investments, hedging instruments
and hedged items 36.7 (2.1) 34.9 (15.9)
Other 3.3 3.6 12.4 12.8
- ------------------------------------------------------------------------------------------------------------------------------
778.3 750.6 2,291.9 2,230.7
- ------------------------------------------------------------------------------------------------------------------------------
BENEFITS AND EXPENSES
Interest credited to policyholder account balances 314.8 292.4 923.9 876.9
Other benefits and claims 66.8 56.2 209.0 185.2
Policyholder dividends on participating policies 9.5 8.3 31.1 31.8
Amortization of deferred policy acquisition costs 85.2 91.6 265.2 263.7
Interest expense on short-term borrowings 0.8 - 4.7 -
Other operating expenses 109.8 125.2 327.3 365.7
- ------------------------------------------------------------------------------------------------------------------------------
586.9 573.7 1,761.2 1,723.3
- ------------------------------------------------------------------------------------------------------------------------------
Income before federal income tax expense and cumulative effect
of adoption of accounting principles 191.4 176.9 530.7 507.4
Federal income tax expense 52.8 50.9 141.9 157.2
- ------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of adoption of accounting
principles 138.6 126.0 388.8 350.2
Cumulative effect of adoption of accounting principles, net of tax - - (7.1) -
- ------------------------------------------------------------------------------------------------------------------------------
Net income $ 138.6 $ 126.0 $ 381.7 $ 350.2
==============================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
(UNAUDITED)
SEPTEMBER 30, DECEMBER 31,
2001 2000
==============================================================================================================================
ASSETS
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities (cost $16,964.3 in 2001; $15,245.8 in 2000) $ 17,573.4 $ 15,443.0
Equity securities (cost $106.3 in 2001; $103.5 in 2000) 96.5 109.0
Mortgage loans on real estate, net 6,809.7 6,168.3
Real estate, net 191.3 310.7
Policy loans 586.8 562.6
Other long-term investments 117.9 101.8
Short-term investments 771.2 442.6
- ------------------------------------------------------------------------------------------------------------------------------
26,146.8 23,138.0
- ------------------------------------------------------------------------------------------------------------------------------
Cash 24.9 18.4
Accrued investment income 308.0 251.4
Deferred policy acquisition costs 3,035.1 2,865.6
Other assets 753.1 396.7
Assets held in separate accounts 54,526.6 65,897.2
- ------------------------------------------------------------------------------------------------------------------------------
$ 84,794.5 $ 92,567.3
==============================================================================================================================
LIABILITIES AND SHAREHOLDER'S EQUITY
Future policy benefits and claims $ 24,764.0 $ 22,183.6
Short-term borrowings 25.0 118.7
Other liabilities 1,743.5 1,164.9
Liabilities related to separate accounts 54,526.6 65,897.2
- ------------------------------------------------------------------------------------------------------------------------------
81,059.1 89,364.4
- ------------------------------------------------------------------------------------------------------------------------------
Shareholder's equity:
Capital shares, $1 par value. Authorized 5.0 million shares, issued and
outstanding 3.8 million shares 3.8 3.8
Additional paid-in capital 646.1 646.1
Retained earnings 2,783.0 2,436.3
Accumulated other comprehensive income 302.5 116.7
- ------------------------------------------------------------------------------------------------------------------------------
3,735.4 3,202.9
- ------------------------------------------------------------------------------------------------------------------------------
$ 84,794.5 $ 92,567.3
==============================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(Unaudited)
Nine Months Ended September 30, 2001 and 2000
(in millions)
ACCUMULATED
ADDITIONAL OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE SHAREHOLDER'S
STOCK CAPITAL EARNINGS INCOME (LOSS) EQUITY
==================================================================================================================================
Balance as of January 1, 2000 $ 3.8 $ 766.1 $ 2,011.0 $ (15.9) $ 2,765.0
Comprehensive income:
Net income - - 350.2 - 350.2
Net unrealized gains on securities available-for-
sale arising during the period, net of tax - - - 45.5 45.5
-----------------
Total comprehensive income 395.7
Dividends to shareholder - - (90.0) - (90.0)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance as of September 30, 2000 $ 3.8 $ 766.1 $ 2,271.2 $ 29.6 $ 3,070.7
==================================================================================================================================
BALANCE AS OF JANUARY 1, 2001 $ 3.8 $ 646.1 $ 2,436.3 $ 116.7 $ 3,202.9
Comprehensive income:
Net income - - 381.7 - 381.7
Net unrealized gains on securities available-for-
sale arising during the period, net of tax - - - 176.1 176.1
Cumulative effect of adoption of accounting
principles, net of tax - - - 5.9 5.9
Accumulated net gains on cash flow hedges,
net of tax - - - 3.8 3.8
-----------------
Total comprehensive income 567.5
Dividends to shareholder - - (35.0) - (35.0)
- ----------------------------------------------------------------------------------------------------------------------------------
BALANCE AS OF SEPTEMBER 30, 2001 $ 3.8 $ 646.1 $ 2,783.0 $ 302.5 $ 3,735.4
==================================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended September 30, 2001 and 2000
(in millions)
2001 2000
============================================================================================================================
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 381.7 $ 350.2
Adjustments to reconcile net income to net cash provided by operating activities:
Interest credited to policyholder account balances 923.9 876.9
Capitalization of deferred policy acquisition costs (556.9) (586.8)
Amortization of deferred policy acquisition costs 265.2 263.7
Amortization and depreciation (23.4) (7.4)
Realized (gains) losses on investments, hedging instruments and hedged items (34.9) 15.9
Cumulative effect of adoption of accounting principles 10.9 -
Increase in accrued investment income (56.6) (9.2)
Increase in other assets (186.8) (53.3)
Increase in policy liabilities 21.1 0.5
Increase in other liabilities 248.6 269.7
Other, net 2.4 27.4
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 995.2 1,147.6
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of securities available-for-sale 3,076.6 2,479.2
Proceeds from sale of securities available-for-sale 247.7 432.3
Proceeds from repayments of mortgage loans on real estate 639.8 609.4
Proceeds from sale of real estate 168.5 2.2
Proceeds from repayments of policy loans and sale of other invested assets 57.3 17.2
Cost of securities available-for-sale acquired (4,958.7) (2,345.8)
Cost of mortgage loans on real estate acquired (1,246.8) (950.1)
Cost of real estate acquired (0.3) (6.1)
Short-term investments, net (328.6) (197.3)
Other, net (150.9) (116.8)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (2,495.4) (75.8)
- ----------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds from issuance of short-term borrowings (93.7) -
Cash dividends paid (35.0) (140.0)
Increase in investment and universal life insurance product account balances 4,517.3 3,609.4
Decrease in investment and universal life insurance product account balances (2,881.9) (4,544.0)
- ----------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 1,506.7 (1,074.6)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash 6.5 (2.8)
Cash, beginning of period 18.4 4.8
- ----------------------------------------------------------------------------------------------------------------------------
Cash, end of period $ 24.9 $ 2.0
============================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements
Nine Months Ended September 30, 2001
(1) Basis of Presentation
---------------------
The accompanying unaudited consolidated financial statements of
Nationwide Life Insurance Company and subsidiaries (NLIC or
collectively, the Company) have been prepared in accordance with
accounting principles generally accepted in the United States of
America (GAAP), which differ from statutory accounting practices
prescribed or permitted by regulatory authorities, for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all
information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial
statements. The financial information included herein reflects all
adjustments (all of which are normal and recurring in nature) which
are, in the opinion of management, necessary for a fair presentation
of financial position and results of operations. Operating results for
all periods presented are not necessarily indicative of the results
that may be expected for the full year. All significant intercompany
balances and transactions have been eliminated. The accompanying
unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
related notes for the year ended December 31, 2000 included in the
Company's annual report on Form 10-K.
(2) New Accounting Principles
-------------------------
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, Accounting
for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133,
as amended by SFAS 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FASB Statement
No. 133, and SFAS 138, Accounting for Certain Derivative Instruments
and Certain Hedging Activities, was adopted by the Company effective
January 1, 2001.
SFAS 133 establishes accounting and reporting standards for derivative
instruments and hedging activities. It requires an entity to recognize
all derivatives as either assets or liabilities on the balance sheet
and measure those instruments at fair value.
As of January 1, 2001, the Company had $755.4 million notional amount
of freestanding derivatives with a market value of ($7.0) million. All
other derivatives qualified for hedge accounting under SFAS 133. The
adoption of SFAS 133 resulted in the Company recording a net transition
adjustment loss of $4.8 million (net of related income tax of $2.6
million) in net income. In addition, a net transition adjustment loss
of $3.6 million (net of related income tax of $2.0 million) was
recorded in accumulated other comprehensive income at January 1, 2001.
The adoption of SFAS 133 resulted in the Company derecognizing $17.0
million of deferred assets related to hedges, recognizing $10.9 million
of additional derivative instrument liabilities and $1.3 million of
additional firm commitment assets, while also decreasing hedged future
policy benefits by $3.0 million and increasing the carrying amount of
hedged investments by $10.6 million. Further, the adoption of SFAS 133
resulted in the Company reporting total derivative instrument assets
and liabilities of $44.8 million and $107.1 million, respectively, as
of January 1, 2001.
The Company expects that the adoption of SFAS 133 will increase the
volatility of reported earnings and other comprehensive income. The
amount of volatility will vary with the level of derivative and hedging
activities and fluctuations in market interest rates and foreign
currency exchange rates during any period.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
In November 1999, the Emerging Issues Task Force (EITF) issued EITF
Issue No. 99-20, Recognition of Interest Income and Impairment on
Purchased and Retained Beneficial Interests in Securitized Financial
Assets (EITF 99-20). The Company adopted EITF 99-20 on April 1, 2001.
EITF 99-20 establishes the method of recognizing interest income and
impairment on asset-backed investment securities. EITF 99-20 requires
the Company to update the estimate of cash flows over the life of
certain retained beneficial interests in securitization transactions
and purchased beneficial interests in securitized financial assets.
Pursuant to EITF 99-20, based on current information and events, if the
Company estimates that the fair value of its beneficial interests is
not greater than or equal to its carrying value and if there has been a
decrease in the estimated cash flows since the last revised estimate,
considering both timing and amount, then an other-than-temporary
impairment should be recognized. The cumulative effect, net of tax,
upon adoption of EITF 99-20 on April 1, 2001 decreased net income by
$2.3 million with a corresponding increase to accumulated other
comprehensive income.
In July 2001, the FASB issued Statement of Financial Accounting
Standards No. 141, Business Combinations (SFAS 141) and Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142).
SFAS 141 requires that the purchase method of accounting be used for
all business combinations initiated after June 30, 2001 and the use of
the pooling-of-interests method has been eliminated.
SFAS 142 applies to all acquired intangible assets whether acquired
singularly, as part of a group, or in a business combination. SFAS 142
supersedes APB Opinion No. 17, Intangible Assets, and will carry
forward provisions in Opinion 17 related to internally developed
intangible assets. SFAS 142 changes the accounting for goodwill and
intangible assets with indefinite lives from an amortization method to
an impairment-only approach. The amortization of goodwill from past
business combinations will cease upon adoption of this statement, which
will be January 1, 2002 for the Company. Companies will also be
required to evaluate all existing goodwill and intangible assets with
indefinite lives for impairment within six months of adoption. Any
transitional impairment losses will be recognized in the first interim
period in the year of adoption and will be recognized as the effect of
a change in accounting principle.
The Company does not expect any material impact of adopting SFAS 141
and SFAS 142 on the results of operations and financial position.
In October 2001, the FASB issued Statement of Financial Accounting
Standards No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets (SFAS 144). SFAS 144 supersedes SFAS 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, and APB Opinion No. 30, Reporting the Results of
Operations - Reporting the Effects of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events
and Transactions. SFAS 144 is effective for fiscal years beginning
after December 15, 2001 (January 1, 2002 for the Company) and will
carry forward many of the provisions of SFAS 121 and Opinion 30. Under
SFAS 144, if a long-lived asset is part of a group that includes other
assets and liabilities, then the provisions of SFAS 144 apply to the
entire group. In addition, SFAS 144 does not apply to goodwill and
other intangible assets that are not amortized. Management does not
expect the adoption of SFAS 144 to have a material impact on the
results of operations or financial position of the Company.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
(3) Derivatives
-----------
QUALITATIVE DISCLOSURE
Interest Rate Risk Management
The Company is exposed to changes in the fair value of fixed rate
investments (commercial mortgage loans and corporate bonds) due to
changes in interest rates. To manage this risk, the Company enters into
various types of derivative instruments to minimize fluctuations in
fair values resulting from changes in interest rates. The Company
principally uses interest rate swaps and short Eurodollar futures to
manage this risk.
Under interest rate swaps, the Company receives variable interest rate
payments and makes fixed rate payments, thereby creating floating rate
investments.
Short Eurodollar futures change the fixed rate cash flow exposure to
variable rate cash flows. With short Eurodollar futures, if interest
rates rise (fall), the gains (losses) on the futures adjust the fixed
rate income on the investments, thereby creating floating rate
investments.
As a result of entering into commercial mortgage loan and private
placement commitments, the Company is exposed to changes in the fair
value of the commitment due to changes in interest rates during the
commitment period. To manage this risk, the Company enters into short
Treasury futures.
With short Treasury futures, if interest rates rise (fall), the gains
(losses) on the futures will offset the change in fair value of the
commitment.
Floating rate investments (commercial mortgage loans and corporate
bonds) expose the Company to fluctuations in cash flow and investment
income due to changes in interest rates. To manage this risk, the
Company enters into receive fixed, pay variable over-the-counter
interest rate swaps or long Eurodollar futures strips to convert the
variable rate investments to a fixed rate.
In using interest rate swaps, the Company receives fixed interest rate
payments and makes variable rate payments, thereby creating fixed rate
assets.
The long Eurodollar futures change the variable rate cash flow exposure
to fixed rate cash flows. With long Eurodollar futures, if interest
rates rise (fall), the losses (gains) on the futures are used to reduce
the variable rate income on the investments, thereby creating fixed
rate investments.
Foreign Currency Risk Management
In conjunction with the Company's medium-term note programs, from time
to time, the Company issues both fixed and variable rate liabilities
denominated in foreign currencies. As a result, the Company is exposed
to changes in fair value of the liabilities due to changes in foreign
currency exchange rates and interest rates. To manage these risks, the
Company enters into cross-currency interest rate swaps to convert these
liabilities to a variable US dollar rate.
For a fixed rate liability, the cross-currency interest rate swap is
structured to receive a fixed rate, in the foreign currency, and pay a
variable US dollar rate, generally 3-month libor. For a variable rate
foreign liability, the cross-currency interest rate swap is structured
to receive a variable rate, in the foreign currency, and pay a variable
US dollar rate, generally 3-month libor.
The Company is exposed to changes in fair value of fixed rate
investments denominated in a foreign currency due to changes in foreign
currency exchange rates and interest rates. To manage this risk, the
Company uses cross-currency interest rate swaps to convert these assets
to variable US dollar rate instruments.
Cross-currency interest rate swaps on assets are structured to pay a
fixed rate, in the foreign currency, and receive a variable US dollar
rate, generally 3-month libor.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
Non-Hedging Derivatives
The Company may enter into over-the-counter basis swaps (receive one
variable rate, pay another variable rate) to change the rate
characteristics of a specific investment to better match the variable
rate paid on a liability. While the pay-side terms of the basis swap
will line up with the terms of the asset, the Company may not be able
to match the receive-side terms of the derivative to a specific
liability; therefore, basis swaps may not receive hedge accounting
treatment.
QUANTITATIVE DISCLOSURE
Fair Value Hedges
Changes in the fair value of derivative instruments designated as fair
value hedges, and the corresponding changes in the fair value of the
hedged asset or liability, attributable to the risk being hedged, are
included in net realized gains and losses on investments, hedging
instruments and hedged items in the consolidated statements of income.
Amounts receivable or payable under interest rate swaps are recognized
as an adjustment to net investment income or interest credited to
policyholder account balances consistent with the nature of the hedged
item.
During the three and nine months ended September 30, 2001, losses of
$4.2 million and $3.2 million, respectively, were recognized in net
realized gains and losses on investments, hedging instruments and
hedged items. This represents the ineffective portion of the fair value
hedging relationships. There were no gains or losses attributable to
the portion of the derivative instrument's change in value excluded
from the assessment of hedge effectiveness. There were also no gains or
losses recognized in earnings as a result of hedged firm commitments no
longer qualifying as fair value hedges.
Cash Flow Hedges
Changes in the fair value of derivative instruments designated as cash
flow hedges are reported in accumulated other comprehensive income
(AOCI). Amounts receivable or payable under interest rate swaps are
recognized as an adjustment to net investment income or interest
credited to policyholder account balances consistent with the nature of
the hedged item. In the event that a derivative instrument was
liquidated and the hedged item remained on the books, the gain or loss
on the derivative would be reclassified out of AOCI over the life of
the underlying asset. The Company is not anticipating any
reclassifications out of AOCI over the next 12-month period.
The ineffective portion of cash flow hedges is included in net realized
gains and losses on investments, hedging instruments and hedged items
in the consolidated statements of income. For the three months ended
September 30, 2001, the ineffective portion of cash flow hedges was
less than $0.1 million. There were no gains or losses attributable to
the portion of the derivative instruments' change in value excluded
from the assessment of hedge effectiveness.
Other Derivative Instruments, Including Embedded Derivatives
Net realized gains and losses on investments, hedging instruments and
hedged items for the three and nine months ended September 30, 2001
include a gain of $0.4 million and a loss of $1.4 million,
respectively, related to other derivative instruments, including
embedded derivatives. For the three and nine months ended September 30,
2001 a $50.6 million gain and a $14.2 million loss, respectively, were
recorded on the change in value of cross-currency interest rate swaps
hedging variable rate medium-term notes denominated in foreign
currencies. An offsetting loss of $50.4 million and a gain of $12.6
million were recorded to reflect the change in spot rates during the
three and nine months ended September 30, 2001 on these variable rate
liabilities.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
(4) Comprehensive Income (Loss)
---------------------------
Comprehensive income (loss) includes net income as well as certain
items that are reported directly within a separate component of
shareholder's equity that bypass net income. Other comprehensive income
(loss) is comprised of unrealized gains (losses) on securities
available-for-sale and accumulated net gains on cash flow hedges. The
related before and after federal income tax amounts are as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------------------------------------------------------------------
(in millions) 2001 2000 2001 2000
===================================================================================================================
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Transition adjustment - EITF 99-20 $ - $ - $ 3.5 $ -
Gross 229.3 116.0 381.4 86.6
Adjustment to deferred policy acquisition costs (78.1) (34.9) (122.2) (25.8)
Related federal income tax expense (52.9) (28.4) (91.9) (21.3)
-------------------------------------------------------------------------------------------------------------------
Net 98.3 52.7 170.8 39.5
-------------------------------------------------------------------------------------------------------------------
Reclassification adjustment for net losses (gains)
on securities available-for-sale realized during
the period:
Gross 6.4 (2.9) 11.7 9.2
Related federal income tax (benefit) expense (2.2) 1.0 (4.1) (3.2)
-------------------------------------------------------------------------------------------------------------------
Net 4.2 (1.9) 7.6 6.0
-------------------------------------------------------------------------------------------------------------------
Other comprehensive income on securities
available-for-sale 102.5 50.8 178.4 45.5
-------------------------------------------------------------------------------------------------------------------
Accumulated net gain on cash flow hedges:
Transition adjustment - FAS 133 - - 5.6 -
Gross 5.0 - 5.8 -
Related federal income tax expense (1.8) - (4.0) -
-------------------------------------------------------------------------------------------------------------------
Other comprehensive income on cash
flow hedges 3.2 - 7.4 -
-------------------------------------------------------------------------------------------------------------------
Total Other Comprehensive Income $ 105.7 $ 50.8 $ 185.8 $ 45.5
===================================================================================================================
(5) Segment Disclosures
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Individual Annuity, Institutional Products and Life Insurance.
The Individual Annuity segment consists of both variable and fixed
annuity contracts. Individual annuity contracts provide the customer
with tax-deferred accumulation of savings and flexible payout options
including lump sum, systematic withdrawal or a stream of payments for
life. In addition, variable annuity contracts provide the customer with
access to a wide range of investment options and asset protection in
the event of an untimely death, while fixed annuity contracts generate
a return for the customer at a specified interest rate fixed for a
prescribed period. The Company's individual annuity products consist of
single premium deferred annuities, flexible premium deferred annuities
and single premium immediate annuities.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
The Institutional Products segment is comprised of the Company's group
pension and payroll deduction business, both public and private
sectors, and medium-term note programs. The public sector includes the
457 business in the form of fixed and variable annuities. The private
sector includes the 401(k) business generated through fixed and
variable annuities.
The Life Insurance segment consists of insurance products, including
universal life insurance, corporate-owned life insurance (COLI) and
bank-owned life insurance (BOLI) products, which provide a death
benefit and also allow the customer to build cash value on a
tax-advantaged basis.
In addition to the product segments, the Company reports a Corporate
segment. The Corporate segment includes net investment income not
allocated to the three product segments, certain revenues and expenses
of the Company's broker/dealer subsidiary, unallocated expenses and
interest expense on short-term borrowings. In addition to these
operating revenues and expenses, the Company also reports net realized
gains and losses on investments, hedging instruments and hedged items
in the Corporate segment.
The following table summarizes the financial results of the Company's
business segments for the three months ended September 30, 2001 and
2000.
INDIVIDUAL INSTITUTIONAL LIFE
(in millions) ANNUITY PRODUCTS INSURANCE CORPORATE TOTAL
===================================================================================================================
2001
Net investment income $ 135.7 $ 211.8 $ 80.7 $ 6.8 $ 435.0
Other operating revenue 134.4 47.3 121.6 3.3 306.6
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 270.1 259.1 202.3 10.1 741.6
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 111.0 159.2 44.6 - 314.8
Amortization of deferred policy
acquisition costs 53.0 10.4 21.8 - 85.2
Interest expense on short-term
borrowings - - - 0.8 0.8
Other benefits and expenses 52.7 40.5 92.5 0.4 186.1
-------------------------------------------------------------------------------------------------------------------
Total expenses 216.7 210.1 158.9 1.2 586.9
-------------------------------------------------------------------------------------------------------------------
Operating income before federal
income tax expense(1) 53.4 49.0 43.4 8.9 154.7
Net realized gains on investments,
hedging instruments and hedged
items - - - 36.7 36.7
-------------------------------------------------------------------------------------------------------------------
Income before federal income tax
expense and cumulative effect of
adoption of accounting principles $ 53.4 $ 49.0 $ 43.4 $ 45.6 $ 191.4
===================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
INDIVIDUAL INSTITUTIONAL LIFE
(in millions) ANNUITY PRODUCTS INSURANCE CORPORATE TOTAL
===================================================================================================================
2000
Net investment income $ 119.5 $ 203.7 $ 73.5 $ 15.9 $ 412.6
Other operating revenue 153.6 68.9 114.0 3.6 340.1
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 273.1 272.6 187.5 19.5 752.7
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 98.8 153.6 40.0 - 292.4
Amortization of deferred policy
acquisition costs 60.9 15.2 15.5 - 91.6
Other benefits and expenses 41.6 46.0 92.9 9.2 189.7
-------------------------------------------------------------------------------------------------------------------
Total expenses 201.3 214.8 148.4 9.2 573.7
-------------------------------------------------------------------------------------------------------------------
Operating income before federal
income tax expense(1) 71.8 57.8 39.1 10.3 179.0
Net realized losses on investments,
hedging instruments and hedged
items - - - (2.1) (2.1)
-------------------------------------------------------------------------------------------------------------------
Income (loss) before federal
income tax expense and
cumulative effect of adoption of
accounting principles $ 71.8 $ 57.8 $ 39.1 $ 8.2 $ 176.9
===================================================================================================================
--------------
(1) Excludes net realized gains and losses on investments, hedging
instruments and hedged items.
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's
business segments for the nine months ended September 30, 2001 and
2000.
INDIVIDUAL INSTITUTIONAL LIFE
(in millions) ANNUITY PRODUCTS INSURANCE CORPORATE TOTAL
===================================================================================================================
2001
Net investment income $ 387.3 $ 635.3 $ 241.7 $ 22.5 $ 1,286.8
Other operating revenue 422.8 158.6 376.7 12.1 970.2
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 810.1 793.9 618.4 34.6 2,257.0
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 316.4 476.0 131.5 - 923.9
Amortization of deferred policy
acquisition costs 164.2 36.2 64.8 - 265.2
Interest expense on short-term
borrowings - - - 4.7 4.7
Other benefits and expenses 152.4 123.3 286.2 5.5 567.4
-------------------------------------------------------------------------------------------------------------------
Total expenses 633.0 635.5 482.5 10.2 1,761.2
-------------------------------------------------------------------------------------------------------------------
Operating income before federal
income tax expense(1) 177.1 158.4 135.9 24.4 495.8
Net realized gains on investments,
hedging instruments and hedged
items - - - 34.9 34.9
-------------------------------------------------------------------------------------------------------------------
Income before federal income tax
expense and cumulative effect of
adoption of accounting principles $ 177.1 $ 158.4 $ 135.9 $ 59.3 $ 530.7
===================================================================================================================
Assets as of period end $ 39,944.9 $ 33,120.7 $ 8,548.1 $ 3,180.8 $ 84,794.5
===================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Unaudited Consolidated Financial Statements, Continued
INDIVIDUAL INSTITUTIONAL LIFE
(in millions) ANNUITY PRODUCTS INSURANCE CORPORATE TOTAL
===================================================================================================================
2000
Net investment income $ 361.1 $ 612.2 $ 214.2 $ 42.1 $ 1,229.6
Other operating revenue 476.0 192.7 335.5 12.8 1,017.0
-------------------------------------------------------------------------------------------------------------------
Total operating revenue(1) 837.1 804.9 549.7 54.9 2,246.6
-------------------------------------------------------------------------------------------------------------------
Interest credited to policyholder
account balances 296.8 465.5 114.6 - 876.9
Amortization of deferred policy
acquisition costs 175.1 39.2 49.4 - 263.7
Other benefits and expenses 150.6 127.4 276.8 27.9 582.7
-------------------------------------------------------------------------------------------------------------------
Total expenses 622.5 632.1 440.8 27.9 1,723.3
-------------------------------------------------------------------------------------------------------------------
Operating income before federal
income tax expense(1) 214.6 172.8 108.9 27.0 523.3
Net realized losses on investments,
hedging instruments and hedged
items - - - (15.9) (15.9)
-------------------------------------------------------------------------------------------------------------------
Income before federal income tax
expense and cumulative effect of
adoption of accounting principles $ 214.6 $ 172.8 $ 108.9 $ 11.1 $ 507.4
===================================================================================================================
Assets as of period end $ 47,255.8 $ 40,005.9 $ 7,939.0 $ 2,486.5 $ 97,687.2
===================================================================================================================
----------
(1) Excludes net realized gains and losses on investments, hedging
instruments and hedged items.
(6) 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.
ITEM 2 MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
INTRODUCTION
The following analysis of unaudited consolidated results of
operations of the Company should be read in conjunction with the
unaudited consolidated financial statements and related notes
included elsewhere herein.
Management's discussion and analysis contains certain
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 with respect to the
results of operations and businesses of the Company. These
forward-looking statements involve certain risks and
uncertainties. Factors that may cause actual results to differ
materially from those contemplated or projected, forecast,
estimated or budgeted in such forward looking statements include,
among others, the following possibilities: (i) the potential
impact on the Company's reported net income that could result from
the adoption of certain accounting standards issued by the
Financial Accounting Standards Board; (ii) tax law changes
impacting the tax treatment of life insurance and investment
products; (iii) heightened competition, including specifically the
intensification of price competition, the entry of new competitors
and the development of new products by new and existing
competitors; (iv) adverse state and federal legislation and
regulation, including limitations on premium levels, increases in
minimum capital and reserves, and other financial viability
requirements; (v) failure to expand distribution channels in order
to obtain new customers or failure to retain existing customers;
(vi) inability to carry out marketing and sales plans, including,
among others, development of new products and/or changes to
certain existing products and acceptance of the new and/or revised
products in the market; (vii) changes in interest rates and the
capital markets causing a reduction of investment income and/or
asset fees, reduction in the value of the Company's investment
portfolio or a reduction in the demand for the Company's products;
(viii) general economic and business conditions which are less
favorable than expected; (ix) unanticipated changes in industry
trends and ratings assigned by nationally recognized rating
organizations; and (x) inaccuracies in assumptions regarding
future persistency, mortality, morbidity and interest rates used
in calculating reserve amounts.
RESULTS OF OPERATIONS
Revenues
Total operating revenues, which exclude net realized gains and
losses on investments, hedging instruments and hedged items for
third quarter 2001 increased to $741.6 million compared to $752.7
million for the same period in 2000. For the first nine months of
2001 and 2000, total operating revenues were $2.26 billion and
$2.25 billion, respectively.
Policy charges include asset fees, which are primarily earned from
separate account assets generated from sales of individual and
group variable annuities and investment life insurance products;
cost of insurance charges earned on universal life insurance
products; administration fees, which include fees charged per
contract on a variety of the Company's products and premium loads
on universal life insurance products; and surrender fees, which
are charged as a percentage of premiums withdrawn during a
specified period of annuity and certain life insurance contracts.
Policy charges for the comparable periods of 2001 and 2000 were as
follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=====================================================================================================
Asset fees $ 149.7 $ 185.6 $ 466.6 $ 541.5
Cost of insurance charges 51.5 40.4 147.7 112.5
Administrative fees 26.4 35.7 98.8 99.6
Surrender fees 16.3 23.1 54.9 69.9
-----------------------------------------------------------------------------------------------------
Total policy charges $ 243.9 $ 284.8 $ 768.0 $ 823.5
=====================================================================================================
The decline in asset fees reflects a decrease in total average
separate account assets of $12.07 billion (18%) and $5.28 billion
(8%) for the three and nine months ended September 30, 2001,
respectively, compared to the same periods a year ago. Market
depreciation on variable annuity and investment life insurance
products, partially offset by net flows into these products, have
resulted in the decrease in average separate account balances.
Cost of insurance charges are assessed on the net amount at risk
on universal life insurance policies. The net amount at risk is
equal to a policy's death benefit minus the related policyholder
account value. The amount charged is based on the insured's age
and other underwriting factors. The increase in cost of insurance
charges is due primarily to growth in the net amount at risk
related to corporate and individual investment life insurance
reflecting expanded distribution and increased acceptance by
producers and consumers. The net amount at risk related to
corporate and individual investment life insurance grew to $32.0
billion as of September 30, 2001 compared to $26.30 billion a year
ago.
The decline in administrative fees in third quarter 2001 compared
to a year ago is partially attributable to a decrease in premiums
on individual investment life policies and certain corporate-owned
life policies where the Company collects a premium load. Also
contributing to the decline are case terminations in the
Institutional Products segment that generated additional
administrative fees in third quarter 2000. Surrender charges
decreased as a result of continued improvement in customer
retention in the Individual Annuity segment in the first nine
months of 2001 compared to the same period a year ago.
Net investment income includes the investment income earned on
investments supporting fixed annuities and certain life insurance
products as well as the yield on the Company's general account
invested assets which are not allocated to product segments, net
of related investment expenses. General account assets supporting
insurance products are closely correlated to the underlying
reserves on these products. Net investment income grew from $412.6
million in the third quarter of 2000 to $435.0 million in the
third quarter of 2001 and from $1.23 billion in the first nine
months of 2000 to $1.29 billion in the first nine months of 2001.
The increases were primarily due to increased invested assets to
support growth in individual fixed annuity, institutional products
and life insurance policy reserves, partially offset by lower
yields. General account reserves supporting these products
increased $2.96 billion to $24.76 billion as of the end of third
quarter 2001 compared to $21.80 billion a year ago.
Realized gains and losses on investments, hedging instruments and
hedged items are not considered by the Company to be recurring
components of earnings. The Company makes decisions concerning the
sale of invested assets based on a variety of market, business,
tax and other factors. In addition, included in this caption are
changes in the fair value of items qualifying as fair value
hedges, the related hedged items and the ineffective portion of
cash flow hedges, all of which are not considered recurring
components of earnings.
Other income includes management fees, commissions and other
income earned by subsidiaries of the Company that provide
investment management, marketing, distribution and administration
services.
Benefits and Expenses
Interest credited to policyholder account balances totaled $314.8
million in third quarter 2001 compared to $292.4 million in third
quarter 2000, while year-to-date 2001 interest credited totaled
$923.9 million compared to $876.9 million a year ago and
principally relates to fixed annuities, both individual and
institutional, and investment life insurance products. The growth
in interest credited reflects the increase in policy reserves for
these products, partially offset by lower crediting rates in the
Institutional segment.
The decline in amortization of deferred policy acquisition costs
(DAC), which totaled $85.2 million and $91.6 million in the third
quarter of 2001 and 2000, respectively, is consistent with lower
earnings in the Individual Annuity segment. On a year-to-date
basis, DAC amortization totaled $265.2 million in 2001 compared
to $263.7 million in 2000.
Operating expenses decreased 12% to $109.8 million in third
quarter 2001 compared to $125.2 million in third quarter 2000. For
the first nine months of 2001, operating expenses were $327.3
million, down 11% from $365.7 million for the first nine months of
2000. The decrease reflects the Company's commitment to aggressive
expense management in response to volatile equity markets.
Federal income tax expense was $52.8 million in third quarter 2001
compared to $50.9 million in third quarter 2000, representing
effective tax rates of 27.6% and 28.8% for third quarter 2001 and
2000 respectively. For the first nine months of 2001 and 2000
federal income tax expense was $141.9 million and $157.2 million,
representing effective tax rates of 26.7% and 31.0%, respectively.
An increase in tax exempt income and investment tax credits
resulted in the decrease in effective rates.
Other Data
In managing business, the Company analyzes operating performance
using a non-GAAP measure called net operating income. The Company
calculates net operating income by adjusting net income to exclude
net realized gains and losses on investments, hedging instruments
and hedged items and cumulative effect of change in accounting
principles. Net operating income or similar measures are commonly
used in the insurance industry as a measure of ongoing earnings
performance.
The excluded items are important in understanding the Company's
overall results of operations. Net operating income should not be
viewed as a substitute for net income determined in accordance
with GAAP, and you should note that the Company's definition of
net operating income may differ from that used by other companies.
However, the Company believes that the presentation of net
operating income as it is measured for management purposes
enhances the understanding of the Company's results of operations
by highlighting the results from ongoing operations and the
underlying profitability factors of the Company's business. The
Company excludes net realized gains and losses on investments,
hedging instruments and hedged items from net operating income
because the timing of transactions resulting in recognition of
gains or losses is largely at the Company's discretion and the
amount of these gains and losses is heavily influenced by and
fluctuates in part according to the availability of market
opportunities. Including the fluctuating effects of these
transactions could distort trends in the underlying profitability
of the Company's business.
The following table reconciles the Company's reported net income
to net operating income for the periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------
(in millions) 2001 2000 2001 2000
===========================================================================================================
Net income $ 138.6 $ 126.0 $ 381.7 $ 350.2
Net realized (gains) losses on investments,
hedging instruments and hedged items, net of tax (23.9) 1.3 (22.7) 10.3
Cumulative effect of adoption of accounting principles,
net of tax - - 7.1 -
-----------------------------------------------------------------------------------------------------------
Net operating income $ 114.7 $ 127.3 $ 366.1 $ 360.5
===========================================================================================================
Recently Issued Accounting Pronouncements
See note 2 to the unaudited consolidated financial statements for
a discussion of recently issued accounting pronouncements.
Sales Information
In managing business, the Company regularly monitors and reports a
non-GAAP measure titled sales. Sales or similar measures are
commonly used in the insurance industry as a measure of business
generated in the period.
Sales should not be viewed as a substitute for revenues determined
in accordance with GAAP, and the Company's definition of sales
might differ from that used by other companies. Sales generate
assets, which ultimately drive revenues from policy charges. Sales
are comprised of statutory premiums or deposits on annuities,
pension plans and life insurance products sold to a wide variety
of customer bases. Statutory premiums and deposits are calculated
in accordance with accounting practices prescribed or permitted by
regulatory authorities and then adjusted to arrive at sales. Sales
also include deposits on administration only group pension plans.
Sales are stated net of internal replacements, which in the
Company's opinion provides a more meaningful disclosure of sales.
In addition, sales exclude: funding agreements issued to secure
notes issued to foreign and domestic investors through an
unrelated third party trust under the Company's two medium-term
note programs; BOLI; large case pension plan acquisitions; and
deposits into Nationwide employee and agent benefit plans.
Although these products contribute to asset and earnings growth,
they do not produce steady production flow that lends itself to
meaningful comparisons and are therefore excluded from sales.
The Company believes that the presentation of sales as measured
for management purposes enhances the understanding of the
Company's business and helps depict trends that may not be
apparent in the results of operations due to differences between
the timing of sales and revenue recognition.
The Company's flagship products are marketed under The BEST of
AMERICA(R) brand, and include individual and group variable
annuities and variable life insurance. The BEST of AMERICA
products allow customers to choose from investment options managed
by premier mutual fund managers. The Company has also developed
private label variable and fixed annuity products in conjunction
with other financial services providers which allow those
providers to sell products to their own customer bases under their
own brand name.
The Company also markets group deferred compensation retirement
plans to employees of state and local governments for use under
Internal Revenue Code (IRC) Section 457. The Company utilizes its
sponsorship by the National Association of Counties and The United
States Conference of Mayors when marketing IRC Section 457
products.
Sales by product and segment for the comparable periods of
2001 and 2000 are summarized as follows:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------------------------------------------
(in millions) 2001 2000 2001 2000
======================================================================================================
The BEST of AMERICA products $ 895.1 $ 1,398.3 $ 2,948.3 $ 4,282.1
Private label annuities 359.7 235.6 1,116.7 784.3
Other - 5.8 2.8 81.0
------------------------------------------------------------------------------------------------------
Total individual variable annuity sales 1,254.8 1,639.7 4,067.8 5,147.4
------------------------------------------------------------------------------------------------------
Deferred fixed annuities 543.7 133.5 1,296.9 325.0
Immediate fixed annuities 29.4 26.2 102.5 95.8
------------------------------------------------------------------------------------------------------
Total individual fixed annuity sales 573.1 159.7 1,399.4 420.8
------------------------------------------------------------------------------------------------------
Total individual annuity sales $ 1,827.9 $ 1,799.4 $ 5,467.2 $ 5,568.2
======================================================================================================
The BEST of AMERICA products $ 716.4 $ 897.3 $ 2,425.0 $ 3,046.4
Other 16.6 11.1 43.9 37.4
------------------------------------------------------------------------------------------------------
Total private sector pension plan sales 733.0 908.4 2,468.9 3,083.8
------------------------------------------------------------------------------------------------------
Total public sector pension plan sales -
IRC Section 457 annuities 366.8 427.5 1,156.9 1,732.8
------------------------------------------------------------------------------------------------------
Total institutional products sales $ 1,099.8 $ 1,335.9 $ 3,625.8 $ 4,816.6
======================================================================================================
The BEST of AMERICA variable life series $ 120.4 $ 155.8 $ 409.9 $ 419.2
Corporate-owned life insurance 78.0 152.9 593.7 476.2
Traditional/Universal life insurance 56.7 59.2 178.9 179.8
------------------------------------------------------------------------------------------------------
Total life insurance sales $ 255.1 $ 367.9 $ 1,182.5 $ 1,075.2
======================================================================================================
The Company sells its products through a broad distribution
network. Unaffiliated entities that sell the Company's products to
their own customer base include independent broker/dealers,
brokerage firms, financial institutions, pension plan
administrators and life insurance specialists. Representatives of
the Company who market products directly to a customer base
identified by the Company consists of Nationwide Retirement
Solutions. The Company also distributes savings products through
the agency distribution force of its ultimate parent company,
Nationwide Mutual Insurance Company.
Sales by distribution channel are summarized as follows.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=====================================================================================================
Independent broker/dealers $ 937.2 $ 1,456.2 $ 3,198.7 $ 4,593.4
Brokerage firms 568.5 294.5 1,598.2 902.7
Financial institutions 818.8 736.6 2,361.8 2,148.1
Pension plan administrators 224.7 228.7 767.8 819.6
Life insurance specialists 78.1 154.9 593.8 482.5
Nationwide agents 171.2 184.6 533.7 619.5
Nationwide Retirement Solutions 384.3 447.7 1,221.5 1,894.2
-----------------------------------------------------------------------------------------------------
The decrease in sales in the independent broker/dealer channel
reflects lower demand for variable annuities due to volatile
equity markets and a shift in private sector pension plan sales
from group annuities issued by the Company to trust products
issued by an affiliate, Nationwide Trust Company.
Sales through brokerage firms increased 93% in third quarter 2001
compared to third quarter 2000 and are up 77% for the first nine
months, principally due to the addition of Waddell & Reed as a
distributor.
Sales through financial institutions grew 11% in third quarter
2001 compared to a year ago, and grew 10% for the first nine
months of 2001 compared to the first nine months of 2000, driven
mainly by the appointment of new distributors in the bank channel
who sell fixed annuity products.
The increase in sales through life insurance specialists during
the first nine months of 2001 compared to the same period a year
ago reflects increased sales of COLI products that occurred in the
first half of 2001. Third quarter 2001 sales through this channel
were impacted by the volatile economic climate as fewer businesses
are creating new employee benefit programs.
Nationwide Retirement Solutions sales reached $384.3 million
during third quarter 2001, a 14% decrease from a year ago. In this
channel, sales declined from a year ago reflecting the impact of
previously lost cases on recurring deposits. The decline in sales
is also attributable to a shift in both Private and Public sector
sales from group annuity contracts issued by the Company to
administration only and Trust Company products provided by
affiliates. Lower sales through this channel for the first nine
months of 2001 compared to the same period a year ago reflects the
impact of previously lost cases on recurring deposits.
BUSINESS SEGMENTS
The Company reports three product segments: Individual Annuity,
Institutional Products and Life Insurance. In addition, the
Company reports certain other revenues and expenses in a Corporate
segment.
The following table summarizes operating income before federal
income tax expense for the Company's business segments for the
periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=================================================================================================================
Individual Annuity $ 53.4 $ 71.8 $ 177.1 $ 214.6
Institutional Products 49.0 57.8 158.4 172.8
Life Insurance 43.4 39.1 135.9 108.9
Corporate 8.9 10.3 24.4 27.0
-----------------------------------------------------------------------------------------------------------------
Operating income before federal income tax expense $ 154.7 $ 179.0 $ 495.8 $ 523.3
=================================================================================================================
Individual Annuity
The Individual Annuity segment consists of both variable and fixed
annuity contracts. Individual annuity contracts provide the
customer with tax-deferred accumulation of savings and flexible
payout options including lump sum, systematic withdrawal or a
stream of payments for life. In addition, variable annuity
contracts provide the customer with access to a wide range of
investment options and asset protection in the event of an
untimely death, while fixed annuity contracts generate a return
for the customer at a specified interest rate fixed for a
prescribed period. The Company's individual annuity products
consist of single premium deferred annuities, flexible premium
deferred annuities and single premium immediate annuities.
The following table summarizes certain selected financial data for
the Company's Individual Annuity segment for the periods
indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=================================================================================================================
INCOME STATEMENT DATA
Revenues:
Policy charges $ 120.2 $ 147.0 $ 374.9 $ 437.8
Net investment income 135.7 119.5 387.3 361.1
Premiums on immediate annuities 14.2 6.6 47.9 38.2
-----------------------------------------------------------------------------------------------------------------
270.1 273.1 810.1 837.1
-----------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Interest credited to policyholder account balances 111.0 98.8 316.4 296.8
Other benefits 16.4 7.5 52.0 39.4
Amortization of deferred policy acquisition costs 53.0 60.9 164.2 175.1
Other operating expenses 36.3 34.1 100.4 111.2
-----------------------------------------------------------------------------------------------------------------
216.7 201.3 633.0 622.5
-----------------------------------------------------------------------------------------------------------------
Operating income before federal income tax expense $ 53.4 $ 71.8 $ 177.1 $ 214.6
=================================================================================================================
OTHER DATA
Sales:
Individual variable annuities $ 1,254.8 $ 1,639.7 $ 4,067.8 $ 5,147.4
Individual fixed annuities 573.1 159.7 1,399.4 420.8
-----------------------------------------------------------------------------------------------------------------
Total individual annuity sales $ 1,827.9 $ 1,799.4 $ 5,467.2 $ 5,568.2
=================================================================================================================
Average account balances:
General account $ 7,808.8 $ 6,893.1 $ 7,336.1 $ 6,965.6
Separate account 32,754.8 39,008.8 34,006.6 38,146.1
-----------------------------------------------------------------------------------------------------------------
Total average account balances $ 40,563.6 $ 45,901.9 $ 41,342.7 $ 45,111.7
=================================================================================================================
Account balances as of period end:
Individual variable annuities $ 32,758.2 $ 41,645.8
Individual fixed annuities 5,164.1 3,792.0
-----------------------------------------------------------------------------------------------------------------
Total account balances $ 37,922.3 $ 45,437.8
=================================================================================================================
Return on average equity 12.0% 21.5% 14.3% 20.9%
Pre-tax operating income to average account balances 0.53% 0.63% 0.57% 0.63%
------------------------------------------------------------------------------------ -----------------------------
Pre-tax operating earnings totaled $53.4 million in third quarter
2001, down 26% compared to a year ago earnings of $71.8 million.
For the first nine months of 2001 pre-tax operating earnings were
$177.1 million compared to $214.6 million for the first nine
months of 2000.
Asset fees decreased to $103.1 million in the third quarter of
2001, down 17% from $124.1 million in the same period a year ago.
For the first nine months of 2001, asset fees totaled $318.7
million down 12% from the first nine months of 2000 total of
$361.9 million. Asset fees are calculated daily and charged as a
percentage of separate account assets. The decrease in asset fees
is due to market depreciation on investments underlying reserves.
For the three and nine months ended September 30, 2001, average
separate account assets decreased 16% to $32.75 billion and 11% to
$34.01 billion respectively, compared to the same periods a year
ago.
Surrender fees decreased by $5.6 million to $12.8 million in the
third quarter of 2001 compared to a year ago. For the first nine
months of 2001, surrender fees totaled $42.3 million compared to
$61.3 million in the same period a year ago. These decreases were
due to improved persistency in individual variable and fixed
annuities.
Operating expenses were $36.3 million in third quarter 2001, an
increase of 6% over third quarter 2000. During the first nine
months of 2001, operating expenses totaled $100.4 million, a
decrease of 10% over the first nine months of 2000 total of $111.2
million reflecting management's focus on expense management in
response to volatile equity markets.
The following table depicts the interest spread on average general
account reserves in the Individual Annuity segment for the periods
indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
2001 2000 2001 2000
========================================================================================================
Net investment income 7.50% 7.89% 7.65% 7.84%
Interest credited 5.69 5.73 5.75 5.68
--------------------------------------------------------------------------------------------------------
Interest spread 1.81% 2.16% 1.90% 2.16%
========================================================================================================
Interest spreads narrowed in the third quarter of 2001 and on a
year-to-date basis compared to the prior year. A combination of
the current competitive environment, a sharp decline in interest
rates and a by-product of the Company's investment strategy all
contributed to the reduction in spreads. As a strategic move to
maintain market share, the Company did not lower crediting rates
in the third quarter as quickly as earned rates declined. In
addition, throughout 2001, the Company had a significant increase
in cash flows in the general account due to strong fixed annuity
sales. During the time between when a commitment is made to
purchase a commercial mortgage loan or private placement bond and
closing, typically 30 to 60 days, the cash is invested short-term.
This strategy, while sound over the long-term, can provide
short-term pressure on spreads, especially in a declining interest
rate environment.
Led by variable product deposits of $1.42 billion offset by
withdrawals and surrenders of $1.09 billion, Individual Annuity
segment deposits in third quarter 2001 of $1.99 billion offset by
withdrawals and surrenders totaling $1.17 billion generated net
flows of $825.7 million compared to the $641.1 million achieved a
year ago. Despite the competitive nature of the individual annuity
market, the Company has demonstrated the ability to generate
positive net flows by expanding its broad distribution network and
innovative product development resources.
The decrease in pre-tax operating income to average assets in
third quarter and the first nine months of 2001 compared to the
same periods in 2000 is primarily a result of the Company's
expense structure not being as elastic as the revenue stream.
Individual Annuity sales, which exclude internal replacements,
during third quarter 2001 were $1.83 billion, up slightly from
$1.80 billion in the year ago quarter, while year-to-date 2001
sales of individual annuities were $5.47 billion compared to $5.57
billion in 2000. The addition of new selling arrangements and
volatile equity markets drove the growth in sales of deferred
fixed annuities which totaled $543.7 million in the third quarter
2001 compared to $133.5 million in third quarter 2000, offsetting
the decline in variable annuity sales. Sales of deferred fixed
annuities for the first nine months of 2001 were $1.30 billion
compared to $325.0 million for the first nine months of 2000.
Institutional Products
The Institutional Products segment is comprised of the Company's
group pension and payroll deduction business, both public and
private sectors, and medium-term note programs. The public sector
includes the 457 business in the form of fixed and variable
annuities. The private sector includes the 401(k) business
generated through fixed and variable annuities. The sales figures
do not include business generated through the Company's two
medium-term note programs, large case pension plan acquisitions
and Nationwide employee and agent benefit plans, however the
income statement data does reflect this business.
The following table summarizes certain selected financial data for
the Company's Institutional Products segment for the periods
indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=================================================================================================================
INCOME STATEMENT DATA
Revenues:
Asset fees $ 42.4 $ 57.2 $ 135.4 $ 167.8
Net investment income 211.8 203.7 635.3 612.2
Other 4.9 11.7 23.2 24.9
-----------------------------------------------------------------------------------------------------------------
259.1 272.6 793.9 804.9
-----------------------------------------------------------------------------------------------------------------
Benefits and expenses:
Interest credited to policyholder account balances 159.2 153.6 476.0 465.5
Other benefits and expenses 50.9 61.2 159.5 166.6
-----------------------------------------------------------------------------------------------------------------
210.1 214.8 635.5 632.1
-----------------------------------------------------------------------------------------------------------------
Operating income before federal income tax expense $ 49.0 $ 57.8 $ 158.4 $ 172.8
=================================================================================================================
OTHER DATA
Sales:
Private sector pension plans $ 733.0 $ 908.4 $ 2,468.9 $ 3,083.8
Public sector pension plans 366.8 427.5 1,156.9 1,732.8
-----------------------------------------------------------------------------------------------------------------
Total institutional products sales $ 1,099.8 $ 1,335.9 $ 3,625.8 $ 4,816.6
=================================================================================================================
Average account balances:
General account $ 11,769.0 $ 10,344.4 $ 11,427.7 $ 10,461.6
Separate account 22,714.2 28,628.2 23,692.3 28,220.0
-----------------------------------------------------------------------------------------------------------------
Total average account balances $ 34,483.2 $ 38,972.6 $ 35,120.0 $ 38,681.6
=================================================================================================================
Account balances as of period end:
Private sector pension plans $ 15,334.0 $ 19,482.3
Public sector pension plans 14,600.5 18,950.4
Medium-term notes 2,880.5 1,287.2
-----------------------------------------------------------------------------------------------------------------
Total account balances $ 32,815.0 $ 39,719.9
=================================================================================================================
Return on average equity 20.6% 26.9% 22.8% 26.0%
Pre-tax operating income to average account balances 0.57% 0.59% 0.60% 0.60%
-----------------------------------------------------------------------------------------------------------------
Asset fees declined 26% to $42.4 million in the quarter ended
September 30, 2001 compared to a year ago, while year-to-date 2001
asset fees were $135.4 million compared to $167.8 million in 2000.
The decline was driven by a 21% decrease in average separate
account assets in the quarter compared to the quarter ended a year
ago and a 16% drop in year-to-date average separate account assets
for the first nine months of 2001 compared to the same period a
year ago.
Net investment income increased to $211.8 million (4%) in the
third quarter of 2001 compared to a year ago. Year-to-date net
investment income also increased 4% from the same period a year
ago. Driving these increases were 14% and 9% increases in the
average general account balance in the third quarter and first
nine months of 2001, respectively, compared to the same periods a
year ago, offset by lower yields.
Institutional Products segment results reflect an increase in
interest spread income attributable to growth in average general
account assets. Interest spread is the differential between net
investment income and interest credited to policyholder account
balances. Interest spreads vary depending on crediting rates
offered by competitors, performance of the investment portfolio,
including the rate of prepayments, changes in market interest
rates and other factors.
The following table depicts the interest spread on average general
account reserves in the Institutional Products segment for the
periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
2001 2000 2001 2000
=====================================================================================================
Net investment income 7.20% 7.88% 7.41% 7.80%
Interest credited 5.41 5.94 5.55 5.93
-----------------------------------------------------------------------------------------------------
Interest spread 1.79% 1.94% 1.86% 1.87%
=====================================================================================================
Interest spread on average general account reserves decreased from
the prior year for the quarter and year-to-date. For Institutional
pension products, the Company sets interest crediting rates prior
to the start of the quarter. In addition, the time between when a
deposit is received and an investment commitment is made, and the
actual close on a commercial mortgage loan or private placement
bond can be 30 to 60 days. These practices will put pressure on
spreads in a declining interest rate environment. In addition,
the Company experienced a significant amount of transfers into
the general account placing further pressure on spreads.
Other benefits and expenses in third quarter 2001 decreased 17%
compared to a year ago. For the first nine months of 2001 other
benefits and expenses totaled $159.5 million, down 4% from the
first nine months of 2000. The decreases are the result of expense
reductions in the group public sector pension business in
response to a lower revenue base.
Institutional Product sales during third quarter 2001 reached
$1.10 billion compared to sales of $1.34 billion in third quarter
2000. For the first nine months of 2001, sales reached $3.63
billion compared to sales of $4.82 billion for the same period a
year ago. The Private Sector continues to be impacted by the
volatile equity markets, which reduced the average plan size of
take-over cases and a slowing economy, which has resulted in
reduced demand for new cases. In the Public Sector, sales declined
from a year ago reflecting the impact of previously lost cases on
recurring deposits.
Institutional Products segment deposits in third quarter 2001 of
$1.13 billion offset by participant withdrawals and surrenders
totaling $918.7 million generated net flows from participant
activity of $214.7 million, a 18% increase over third quarter
2000. Year-to-date 2001 net flows decreased 8% to $426.5 million
compared to year-to-date 2000 net flows of $464.3 million.
Life Insurance
The Life Insurance segment consists of insurance products,
including universal life insurance, COLI and BOLI products, which
provide a death benefit and also allow the customer to build cash
value on a tax-advantaged basis.
The following table summarizes certain selected financial data for
the Company's Life Insurance segment for the periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=================================================================================================================
INCOME STATEMENT DATA
Revenues:
Total policy charges $ 76.3 $ 68.9 $ 234.5 $ 193.0
Net investment income 80.7 73.5 241.7 214.2
Other 45.3 45.1 142.2 142.5
-----------------------------------------------------------------------------------------------------------------
202.3 187.5 618.4 549.7
-----------------------------------------------------------------------------------------------------------------
Benefits 104.6 97.0 319.6 292.2
Operating expenses 54.3 51.4 162.9 148.6
-----------------------------------------------------------------------------------------------------------------
158.9 148.4 482.5 440.8
-----------------------------------------------------------------------------------------------------------------
Operating income before federal income tax expense $ 43.4 $ 39.1 $ 135.9 $ 108.9
=================================================================================================================
OTHER DATA
Sales:
The BEST of AMERICA variable life series $ 120.4 $ 155.8 $ 409.9 $ 419.2
Corporate-owned life insurance 78.0 152.9 593.7 476.2
Traditional/Universal life insurance 56.7 59.2 178.9 179.8
-----------------------------------------------------------------------------------------------------------------
Total life insurance sales $ 255.1 $ 367.9 $ 1,182.5 $ 1,075.2
=================================================================================================================
Policy reserves as of period end:
Corporate investment life insurance $ 2,981.6 $ 2,378.8
Individual investment life insurance 1,944.7 2,152.1
Traditional life insurance 1,853.2 1,807.0
Universal life insurance 779.4 770.7
-----------------------------------------------------------------------------------------------------------------
Total policy reserves $ 7,558.9 $ 7,108.6
=================================================================================================================
Return on average equity 10.8% 12.6% 12.0% 12.1%
-----------------------------------------------------------------------------------------------------------------
Life Insurance segment results reflect increased revenues driven
by growth in investment life insurance in force. Life Insurance
segment earnings increased 11% to $43.4 million for the third
quarter 2001, up from $39.1 million a year ago. On a year-to-date
basis segment earnings increased 25% to $135.9 million in 2001
from $108.9 million in 2000. The increase in Life Insurance
segment earnings is attributable to strong sales and increased
investment life earnings due to reserve growth in both individual
and corporate investment life insurance products.
Driven primarily by increased policy charges, revenues from
investment life products increased to $97.6 million in third
quarter 2001 compared to $83.9 million in third quarter 2000,
while year-to-date revenues increased to $296.9 million for 2001
compared to $232.9 million for 2000. The revenue growth reflects
significantly increased policy reserve levels driven by corporate
investment life reserves, which include both BOLI and COLI
products, which reached $2.98 billion as of September 30, 2001, up
from $2.38 billion in the same period a year ago.
Pre-tax operating earnings from investment life products totaled
$25.1 million in third quarter 2001 a 20% increase from $20.9
million in third quarter 2000, while the first nine months of 2001
reached $77.4 compared to $61.1 million a year ago, a 27%
increase. The strong revenue growth discussed previously was
offset by higher life insurance benefits due to the growth in the
number of policies in-force in the third quarter and first nine
months of 2001.
Traditional/Universal life pre-tax operating earnings increased
slightly to $18.3 million in third quarter 2001 compared to $18.2
million in the same period a year ago. For the first nine months
of 2001, pre-tax operating earnings increased 22% to $58.5 million
compared to $47.8 million for the first nine months of 2000,
reflecting higher investment earnings and lower operating
expenses.
Total life insurance sales, excluding BOLI and Nationwide employee
and agent benefit plan sales, decreased 31% to $255.1 million in
third quarter 2001 compared to $367.9 million during the same
period in 2000. For the first nine months of 2001, total life
insurance sales, excluding BOLI and Nationwide employee and agent
benefit plan sales, increased $107.3 million over 2000 and totaled
$1.18 billion. In the quarter, individual market sales were
adversely impacted by uncertainty surrounding estate planning.
While the number of applications and policies issued are in line
with prior year, the average size is down. COLI sales are down
given the depressed economic environment where corporations are
not forming new executive benefit plans and existing plans are
being funded at lower levels.
Corporate
The following table summarizes certain selected financial data for
the Company's Corporate segment for the periods indicated.
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------------------------------------------
(in millions) 2001 2000 2001 2000
=================================================================================================================
INCOME STATEMENT DATA
Operating revenues(1) $ 10.1 $ 19.5 $ 34.6 $ 54.9
Operating expenses 1.2 9.2 10.2 27.9
-----------------------------------------------------------------------------------------------------------------
Operating income before federal income tax expense(1) $ 8.9 $ 10.3 $ 24.4 $ 27.0
=================================================================================================================
----------
(1) Excludes net realized gains and losses on investments, hedging
instruments and hedged items.
The Corporate segment consists of net investment income on
invested assets not allocated to the three product segments,
unallocated expenses and interest expense on short-term
borrowings. The decline in revenues reflects a decrease in net
investment income on real estate investments and fewer investments
retained in the corporate segment as more capital and the related
investments earnings are allocated to the product segments to
support growth.
In addition to these operating revenues and expenses, the Company
also reports net realized gains and losses on investments, hedging
instruments and hedged items in the Corporate segment. The Company
realized net investment gains of $37.4 million and net losses on
hedges and hedged items of $0.7 million during the third quarter
of 2001 compared to realized net investment losses of $2.1 million
during the third quarter of 2000. For the first nine months of
2001, the Company realized net investment gains of $33.0 million
and net gains on hedges and hedged items of $1.9 million compared
to realized net investment losses of $15.9 million during the
first nine months of 2000. During the third quarter and first nine
months of 2001, a net investment gain of $44.4 million was
realized upon the reduction of an interest in a real estate
partnership investment. In addition, the Company realized an after
tax loss of $4.8 million related to the adoption of FAS 133 in
first quarter 2001 and an after tax loss of $2.3 related to the
adoption of EITF 99-20 in second quarter 2001.
ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Omitted due to reduced disclosure format.
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This 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 147 pages.
- Representations and Undertakings.
- Signatures.
- Independent Auditors' Consent
The following exhibits required by Forms N-8B-2 and S-6:
1. Power of Attorney dated April 4, 2001. Filed previously in connection with Securities and Exchange Commission
File No. 333-69160 and is hereby incorporated by reference.
2. Resolution of the Depositor's Board of Filed previously in connection with Securities and Exchange Commission
Directors authorizing the establishment of File No. 333-31725 and is hereby incorporated by reference.
the Registrant, adopted
3. Distribution Contracts Filed previously in connection with Securities and Exchange Commission
File No. 333-66572 (Post-Effective Amendment No. 1) and is hereby
incorporated by reference.
4. Form of Security Filed previously in connection with Securities and Exchange Commission
File No. 333-53728 (Pre-Effective Amendment No. 1) and hereby
incorporated by reference.
5. Articles of Incorporation of Depositor Filed previously in connection with Securities and Exchange Commission
File No. 333-27133 and is hereby incorporated by reference.
6. Application form of Security Filed previously in connection with Securities and Exchange Commission
File No. 333-69160 and is hereby incorporated by reference.
7. Opinion of Counsel Filed previously in connection with Securities and Exchange Commission
File No. 333-69160 and is hereby incorporated by reference.
8. Code of Ethics Applicable to the Separate Attached hereto.
Account
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and Nationwide hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the Investment
Company Act of 1940 (the "Act"). The Registrant and Nationwide elect to be
governed by Rule 6e-3(T)(b)(13)(i)(A) under the Act with respect to the
policies described in the prospectus. The policies have been designed in a
way as to qualify for the exemptive relief from various provisions of the
Act afforded by Rule 6e-3(T).
(b) Paragraph (b)(13)(iii)(F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by Nationwide under the policies. Nationwide represents that the
risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by Nationwide, and will be
made available to the Securities and Exchange Commission (the "SEC") on
request.
(c) Nationwide has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit the
separate account and the contractholders and will keep and make available
to the SEC on request a memorandum setting forth the basis for this
representation.
(d) Nationwide represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of Nationwide,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the SEC
such supplementary and periodic information, documents, and reports as may
be prescribed by any rule or regulation of the SEC heretofore or hereafter
duly adopted pursuant to authority conferred in that section.
(f) The fees and charges deducted under the policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by Nationwide.
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of Nationwide VLI Separate Account-4:
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
December 21, 2001
SIGNATURES
As required by the Securities Act of 1933, the Registrant, Nationwide VLI
Separate Account-4 has caused this Registration Statement to be signed on its
behalf in the City of Columbus, and the State of Ohio, on this 21st day of
December, 2001.
NATIONWIDE VLI SEPARATE ACCOUNT-4
-----------------------------------------------------------------------------
(Registrant)
(Seal) NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------------------------------------------
Attest: (Depositor)
By: /s/ GLENN W. SODEN By: /s/STEVEN SAVINI
- ---------------------------------------------- -----------------------------------------------------------------------------
Glenn W. Soden Steven Savini
Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the 21st day of December, 2001.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- ----------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ----------------------------------------
A. I. Bell
YVONNE M. CURL Director
- ----------------------------------------
Yvonne M. Curl
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
- ----------------------------------------
W.G. Jurgensen And Director
DAVID O. MILLER Chairman of the Board and
- ----------------------------------------
David O. Miller Director
RALPH M. PAIGE Director
- ----------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- ----------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /S/ Steven Savini
- ---------------------------------------- ----------------------------------------------
Arden L. Shisler Steven Savini
ATTORNEY-IN-FACT
ROBERT L. STEWART Director
- ----------------------------------------
Robert L. Stewart