-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EN9z1iEhgQnweXqKyi87KzDHMfccU0zumgmF4wIWch5cMib+M8hz5rMOTmRroIld Mcm5pqnz8vm5AoogTXx0gg== 0001190903-03-000294.txt : 20030429 0001190903-03-000294.hdr.sgml : 20030429 20030429152515 ACCESSION NUMBER: 0001190903-03-000294 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20030429 EFFECTIVENESS DATE: 20030429 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONWIDE VLI SEPARATE ACCOUNT 2 CENTRAL INDEX KEY: 0000820914 IRS NUMBER: 314156830 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1940 Act SEC FILE NUMBER: 811-05311 FILM NUMBER: 03669348 BUSINESS ADDRESS: STREET 1: NATIONWIDE LIFE INSURANCE CO STREET 2: ONE NATIONWIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 614-249-7111 MAIL ADDRESS: STREET 1: NATIONWIDE LIFE INSURANCE CO STREET 2: ONE NATIONWIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NATIONWIDE VLI SEPARATE ACCOUNT 2 CENTRAL INDEX KEY: 0000820914 IRS NUMBER: 314156830 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: 1933 Act SEC FILE NUMBER: 033-62795 FILM NUMBER: 03669349 BUSINESS ADDRESS: STREET 1: NATIONWIDE LIFE INSURANCE CO STREET 2: ONE NATIONWIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43215 BUSINESS PHONE: 614-249-7111 MAIL ADDRESS: STREET 1: NATIONWIDE LIFE INSURANCE CO STREET 2: ONE NATIONWIDE PLAZA CITY: COLUMBUS STATE: OH ZIP: 43215 485BPOS 1 mspvl.txt BOA MSPVL [MAIN DOCUMENT] '33 Act File No. 33- 62795 '40 Act File No. 811-5311 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM N-6 REGISTRATION UNDER THE SECURITIES ACT OF 1933 |_| PRE-EFFECTIVE AMENDMENT NO. ___ |_| POST-EFFECTIVE AMENDMENT NO. 13 |X| and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_| AMENDMENT NO. 13 |X| (Check appropriate box or boxes.) NATIONWIDE VLI SEPARATE ACCOUNT-2 (Exact Name of Registrant) NATIONWIDE LIFE INSURANCE COMPANY (Name of Depositor) ONE NATIONWIDE PLAZA COLUMBUS, OHIO 43215 (Address of Depositor's Principal Executive Offices) (Zip Code) Depositor's Telephone Number, including Area Code: (614) 249-7111 PATRICIA R. HATLER, ESQ. With Copies To: SECRETARY JOHN S. (SCOTT) KREIGHBAUM, ESQ. ONE NATIONWIDE PLAZA MICHAEL R. MOSER, ESQ. COLUMBUS, OHIO 43215-2220 ONE NATIONWIDE PLAZA, 1-09-V3 (Name and Address of Agent for Service) COLUMBUS, OHIO 43215-2220 Approximate Date of Proposed Public Offering: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT'S EFFECTIVE DATE. It is proposed that this filing will become effective (check appropriate box) |_| Immediately upon filing pursuant to paragraph (b) |X| On May 1, 2003 pursuant to paragraph (b) |_| 60 days after filing pursuant to paragraph (a)(1) |_| On (date) pursuant to paragraph (a)(1) of Rule 485. If appropriate, check the following box: |X| This post-effective amendment designates a new effective date for a previously filed post-effective amendment. 1 MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES Issued By NATIONWIDE LIFE INSURANCE COMPANY Through NATIONWIDE VLI SEPARATE ACCOUNT-2 The Date Of This Prospectus Is May 1, 2003 PLEASE KEEP THIS PROSPECTUS FOR FUTURE REFERENCE. Variable life insurance is complex, and this prospectus is designed to help you become as fully informed as possible in making your decision to purchase or not to purchase the variable life insurance policy it describes. Prior to your purchase, we encourage you to take the time you need to understand the policy, its potential benefits and risks, and how it might or might not benefit you. In consultation with your financial advisor, you should use this prospectus to compare the benefits and risks of this policy versus those of other life insurance policies and alternative investment instruments. Please read this entire prospectus and consult with a trusted financial adviser. If you have policy specific questions or need additional information, contact us. Also, contact us for free copies of the prospectuses for the mutual funds available under the policy. TELEPHONE: 1-800-547-7548 TDD: 1-800-238-3035 INTERNET: www.bestofamerica.com U.S. MAIL: Nationwide Life Insurance Company One Nationwide Plaza, RR1-04-D4 Columbus, OH 43215-2220 PLEASE UNDERSTAND THAT THE POLICY TERMS WILL GOVERN THE WAY THE POLICY WORKS AND ALL RIGHTS AND OBLIGATIONS. 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. THIS POLICY IS NOT: FDIC INSURED; A BANK DEPOSIT; AVAILABLE IN EVERY STATE; OR INSURED OR ENDORSED BY A BANK OR ANY FEDERAL GOVERNMENT AGENCY. THIS POLICY MAY DECREASE IN VALUE TO THE POINT OF BEING VALUELESS. THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION WHERE SUCH OFFERING MAY NOT LAWFULLY BE MADE. The purpose of this policy is to provide life insurance protection for the beneficiary you name. IF YOUR PRIMARY NEED IS NOT LIFE INSURANCE PROTECTION, THEN PURCHASING THIS POLICY MAY NOT BE IN YOUR BEST INTERESTS. We make no claim that the policy is in any way similar or comparable to a systematic investment plan of a mutual fund. In thinking about buying this policy to replace existing life insurance, please carefully consider its advantages versus those of the policy you intend to replace, as well as any replacement costs. As always, consult your financial adviser. Not all terms, conditions, benefits, programs, features and investment options are available or approved for use in every state. - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS...................................I IN SUMMARY: POLICY BENEFITS.........................1 IN SUMMARY: POLICY RISKS............................2 IN SUMMARY: VARIABLE UNIVERSAL LIFE INSURANCE AND THE POLICY............................3 IN SUMMARY: FEE TABLES..............................5 THE POLICY..........................................8 Policy Owner.....................................8 The Beneficiaries................................8 To Purchase......................................9 Coverage.........................................9 Coverage Effective Date..........................9 Temporary Insurance Coverage.....................9 To Cancel (Examination Right)....................9 To Change Coverage..............................10 Sub-Account Portfolio Transfers.................10 Fixed Account Transfers.........................10 Modes To Effect A Transfer......................11 To Irrevocably Transfer Cash Value Or Exchange The Policy.............................11 To Terminate Or Surrender.......................12 To Assign.......................................12 Proceeds Upon Maturity..........................12 Reminders, Reports And Illustrations............13 Errors Or Misstatements.........................13 Incontestability................................14 If We Modify The Policy.........................14 RIDER..............................................14 Long-term Care Rider............................14 PREMIUM............................................14 Initial Premium.................................15 Subsequent Premiums.............................15 CHARGES............................................16 Tax Expense.....................................16 Surrender Charges...............................16 Cost Of Insurance...............................17 Mortality And Expense Risk......................17 Administrative Expense..........................17 Policy Loan Interest............................17 Long-term Care Rider............................18 TO ALLOCATE PREMIUM AND SUB-ACCOUNT VALUATION......18 Variable Investment Options.....................18 The Fixed Investment Option.....................19 Allocation Of Premium And Cash Value............19 When Sub-Account Units Are Valued...............19 How Investment Experience Is Determined.........20 Cash Value......................................20 Dollar Cost Averaging...........................21 Asset Rebalancing...............................22 THE DEATH BENEFIT..................................23 Calculation Of The Death Benefit Proceeds.......23 Death Benefit ..................................23 Suicide.........................................23 SURRENDERS.........................................23 Full Surrender..................................23 Partial Surrender...............................24 THE PAYOUT OPTIONS.................................24 Interest Income.................................25 Income For A Fixed Period.......................25 Life Income With Payments Guaranteed............25 Fixed Income For Varying Periods................25 Joint And Survivor Life.........................25 Alternate Life Income...........................26 POLICY LOANS.......................................26 Loan Amount And Interest........................26 Collateral And Interest.........................26 Repayment.......................................27 i Effect Of Policy Loans..........................27 LAPSE..............................................27 Grace Period....................................27 Reinstatement...................................28 TAXES..............................................28 Types Of Taxes Of Which To Be Aware.............28 Buying The Policy...............................29 Investment Gain In The Policy...................30 Periodic Withdrawals, Non-Periodic Withdrawals And Loans...........................30 Terminal Illness................................31 Surrender Of The Policy.........................31 Withholding.....................................32 Exchanging The Policy For Another Life Insurance Policy................................32 Taxation Of Death Benefits......................32 Taxes And The Value Of Your Policy..............33 Tax Changes.....................................33 NATIONWIDE LIFE INSURANCE COMPANY..................34 NATIONWIDE VLI SEPARATE ACCOUNT-2..................34 Organization, Registration And Operation........34 Addition, Deletion, Or Substitution Of Mutual Funds....................................35 Voting Rights...................................36 LEGAL PROCEEDINGS..................................36 Nationwide Life Insurance Company...............36 Nationwide Investment Services Corporation.....................................37 FINANCIAL STATEMENTS...............................37 APPENDIX A: DEFINITIONS...........................A-1 APPENDIX B: SUB-ACCOUNT PORTFOLIOS................B-1 ii IN SUMMARY: POLICY BENEFITS Appendix A defines certain words and phrases we use in this prospectus. DEATH BENEFIT The primary benefit of your policy is life insurance coverage. While the policy is In Force, we will pay the proceeds to your beneficiary when the Insured dies. The Death Benefit is THE GREATER OF the Specified Amount OR the applicable percentage of cash value under federal tax law. For more information, see "The Death Benefit" beginning on page 23. YOUR OR YOUR BENEFICIARY'S CHOICE OF POLICY PROCEEDS You or your beneficiary may choose to receive the Policy Proceeds in a lump sum, or there are a variety of options that will pay out over time. For more information, see "The Payout Options" beginning on page 24. COVERAGE FLEXIBILITY Subject to conditions, you may choose to: |X| Change your beneficiaries; and |X| Change who owns the policy. For more information, see "The Beneficiaries" beginning on page 8; and "To Assign" beginning on page 12. ACCESS TO CASH VALUE Subject to conditions, you may choose to borrow against, or withdraw, the Cash Value of your policy: |X| Take a policy loan of an amount no greater in the first year than 50% of the policy's Cash Value, less surrender charge, and no greater than 90% of the policy's Cash Value, less surrender charge, in the following years . The minimum amount is $1,000. For more information, see "Policy Loans" beginning on page 26. |X| After the fifth year, take a partial surrender of no less than $500, but no more than 10% of total Premium payments or 100% of Cash Value less total Premium payments less any loan amount at the time of the partial surrender , so long as it does not reduce the policy's Cash Surrender Value below $10,000. For more information, see "Partial Surrender" beginning on page 24. |X| Surrender the policy at any time while the Insured is alive. The Cash Surrender Value will be the Cash Values of the Sub-Account portfolios and fixed account, less any policy loans and surrender charges. You may choose to receive the Cash Surrender Value in a lump sum, or you will have available the same payout options as if it constituted a Death Benefit. For more information, see "Full Surrender" beginning on page 23 and "The Payout Options" beginning on page 24. ADDITIONAL PREMIUM Though the policy is designed to be a single Premium policy, you make additional Premium payments subject to conditions. The minimum initial Premium is $10,000 for policies where the Insured is less than 71 years of age and $50,000 where the Insured is between the ages of 71 and 80. For more information, see "Premium" beginning on page 14. INVESTMENT OPTIONS You may choose to allocate your Premiums after charges to a fixed or variable investment options in any proportion: 1 |X| The fixed investment option will earn interest daily at an annual effective rate of at least 3%. |X| The variable investment options constitute the limitedly available mutual funds and we have divided Nationwide VLI Separate Account-2 into an equal number of Sub-Account portfolios, identified in Appendix B, to account for your allocations. Your investment return will depend on the Investment Experience of the Sub-Account portfolios you have chosen. For more information, see "To Allocate Net Premium And Sub-Account Valuation" beginning on page 18 and "Appendix B: Sub-Account Portfolios" beginning on page B-1. TRANSFERS BETWEEN AND AMONG INVESTMENT OPTIONS You may transfer between the fixed and variable investment options, subject to conditions. You may transfer among the Sub-Account portfolios within limits. For more information, see "Sub-Account Portfolio Transfer" beginning on page 10. We also offer dollar cost averaging, an automated investment strategy that spreads out transfers over time to try to reduce the investment risks of market fluctuations. For more information, see "Dollar Cost Averaging" beginning on page 21. TAXES Unless you make a withdrawal, you will generally not be taxed on any earnings while your policy remains In Force. This is known as tax deferral. Also, your beneficiary will generally not include the Proceeds as taxable income. For more information, see "Taxes" beginning on page 28. ASSIGNMENT You may assign the policy as collateral for a loan or another obligation while the Insured is alive. For more information, see "To Assign" beginning on page 12. EXAMINATION RIGHT For a limited time, you may cancel the policy, and you will receive a refund. For more information, see "To Cancel (Examination Right)" beginning on page 9. RIDER You may purchase a Long-term Care Rider to the policy. Availability will vary by state. For more information, see "Rider" beginning on page 14. IN SUMMARY: POLICY RISKS IMPROPER USE Variable universal life insurance is not suitable as an investment vehicle for short-term savings. It is designed for long-term financial planning. You should not purchase the policy if you expect that you will need to access its Cash Value in the near future because substantial surrender charges will apply in the first several years from the Policy Date. UNFAVORABLE INVESTMENT EXPERIENCE The variable investment options to which you have chosen to allocate Net Premium may not generate a sufficient, let alone a positive, return, especially after the deductions for policy and Sub-Account portfolio charges. Besides Premium payments, Investment Experience will impact the Cash Value, and poor Investment Experience (in conjunction with your flexibility to make changes to the policy and deviate from your chosen premium payment plan) could cause the Cash Value of your policy to decrease, resulting in could cause the Cash Value of your policy to decrease, and could cause a Lapse of insurance coverage sooner than might have been foreseen. 2 EFFECT OF PARTIAL SURRENDERS AND POLICY LOANS ON INVESTMENT RETURNS Partial surrenders or policy loans may accelerate a Lapse because the amount of either or both will no longer be available to generate any investment return. A partial surrender will reduce the amount of Cash Value allocated among the Sub-Account portfolios you have chosen. If the partial surrender amount exceeds the Cash Value in the Sub-Account portfolios, the fixed account will be reduced as well. As collateral for a policy loan, we will transfer an equal amount of Cash Value to the policy loan account, which will also reduce the Cash Value allocated between and among your chosen investment options. Thus, the remainder of your policy's Cash Value is all that would be available to generate enough of an investment return to cover policy and Sub-Account portfolio charges and keep the policy In Force, at least until you repay the policy loan or make another Premium payment. There will always be a Grace Period, and the opportunity to reinstate insurance coverage. Under certain circumstances, however, the policy could terminate without value, and insurance coverage would cease. REDUCTION OF THE DEATH BENEFIT A partial surrender or a policy loan will impact the policy's Death Benefit. For more information, see "Surrenders" beginning on page 23 and "Effect of Policy Loans" beginning on page 27. ADVERSE TAX CONSEQUENCES Existing federal tax laws that benefit this policy may change at any time. These changes could alter the favorable federal income tax treatment the policy enjoys, such as the deferral of taxation on the gains in the policy's Cash Value and the exclusion from taxable income of the Proceeds we pay to the policy's beneficiaries. Also, not all policies are afforded the same tax treatment. For more information, see "Periodic Withdrawals, Non-Periodic Withdrawals And Loans," beginning on page 30. For example, distributions from the policy may be taxed differently. Special rules will apply for a policy that is considered a "modified endowment contract," including that a 10% penalty tax may be imposed on distributions, including any policy loan. In addition, there are federal estate and gift taxes, and state and local taxes, with which you should be aware. You should consult a qualified tax advisor on all tax matters involving your policy. FIXED ACCOUNT TRANSFER RESTRICTIONS AND LIMITATIONS We will not honor a request to transfer Cash Value to or from the fixed account until after the first year. Then, we will only honor a transfer request from the fixed account that is made within 30 days of the end of a calendar quarter, but not within 12 months of a previous request. We may also limit what percentage of Cash Value you will be permitted to transfer to or from the fixed account. For more information, see "The Fixed Investment Option" beginning on page 19. SUB-ACCOUNT PORTFOLIO LIMITATIONS You may request 20 transfers among Sub-Account portfolios a year via the Internet, telephone, facsimile or the U.S. mail. Afterwards, you will only be able to make a transfer request via the U.S. mail through the end of the calendar year. The number of requests is not cumulative, and this limitation automatically resets at the beginning of every calendar year. For more information, see "Sub-Account Portfolio Transfers" beginning on page 10. SUB-ACCOUNT PORTFOLIO INVESTMENT RISK A comprehensive discussion of the risks of the mutual funds held by each Sub-Account portfolio may be found in that mutual fund's prospectus. You should read the mutual fund's prospectus carefully before investing. IN SUMMARY: VARIABLE UNIVERSAL LIFE INSURANCE AND THE POLICY VARIABLE UNIVERSAL LIFE INSURANCE, IN GENERAL, MAY BE IMPORTANT TO YOU IN TWO WAYS. |X| It will provide economic protection to a beneficiary. |X| It may build Cash Value. Why would you want to purchase this type of life insurance? How will you allocate the Net Premium among the variable investment options and the fixed investment option? Your reasons and decisions will affect the insurance and Cash Value aspects. While variable universal life insurance is designed primarily to provide life insurance protection, the Cash Value of a policy will be important to you in that it may impair (with poor investment results) or enhance (with favorable investment results) your ability to pay the costs of keeping the insurance In Force. Apart from the life insurance protection features, you will have an interest in maximizing the value of the policy as a financial asset. IT IS SIMILAR TO, BUT ALSO DIFFERENT FROM, UNIVERSAL LIFE INSURANCE. |X| You will pay one or more Premiums for life insurance coverage on the Insured. |X| The policy will provide for the accumulation of a Cash Surrender Value if you were to surrender it at any time while the Insured is alive. |X| The Cash Surrender Value could be substantially lower than the Premiums you have paid. What makes the policy different from universal life insurance is your opportunity to allocate Premiums after charges to the Sub-Account portfolios you have chosen (and the fixed account). Also, that its value will vary depending on the market performance of the Sub-Account portfolios, and you will bear this risk. FROM THE TIME WE ISSUE THE POLICY THROUGH THE INSURED'S DEATH, HERE IS A BASIC OVERVIEW. (BUT PLEASE READ THE REMAINDER OF THIS PROSPECTUS FOR THE DETAILS.) |X| At issue, the policy will require a minimum initial Premium payment. Among other considerations, this amount will be based on: the Insured's age and sex; the underwriting class; any substandard ratings; the Specified Amount; and the choice of the Rider. |X| You will then be able to allocate the Premium between and among a fixed and the variable investment options. |X| From the policy's Cash Value each month, we will deduct other charges to help cover the mortality risks we assumed, and the sales and administrative costs. We call these charges periodic charges. |X| So long as there is enough Cash Surrender Value to cover the policy's periodic charges as they come due, the policy will remain In Force. |X| The policy will pay a Death Benefit to the beneficiary. |X| Prior to the Insured's death, you may withdraw all, or a portion (after the fifth policy year), of the policy's Cash Surrender Value. Or you may borrow against the Cash Surrender Value. Withdrawals and loans are subject to restrictions, may reduce the Death Benefit and increase the likelihood of the policy Lapsing. There also could be adverse tax consequences. 4 IN SUMMARY: FEE TABLES THE FOLLOWING TABLES DESCRIBE THE FEE AND EXPENSES THAT YOU WILL PAY WHEN BUYING, OWNING AND SURRENDERING THE POLICY. THE FIRST TABLE DESCRIBES THE FEE THAT YOU WILL PAY AT THE TIME THAT YOU SURRENDER THE POLICY. FOR MORE INFORMATION, SEE "Charges," BEGINNING ON PAGE 16.
=================================================================================================================================== TRANSACTION FEES =================================================================================================================================== ============================ =============================== ====================================================================== Charge When Charge Is Deducted Amount Deducted - ---------------------------- ------------------------------- --------------------------- ------------------------------------------ SURRENDER CHARGES(1) Maximum Guaranteed Charge Upon Full Surrender or Lapse - ---------------------------- ------------------------------- ------------------------------------------ ------------------------------------------ 10% of Initial Premium Payments - ---------------------------- ------------------------------- --------------------------- ------------------------------------------ - ---------------------------- ------------------------------- --------------------------- ------------------------------------------ - ---------------------------- ------------------------------- --------------------------- ------------------------------------------ - ---------------------------- ------------------------------- ---------------------------------------------------------------------- From The Policy's Cash Value - ---------------------------- ------------------------------- ---------------------------------------------------------------------- - ---------------------------- ------------------------------- ---------------------------------- ----------------------------------- ILLUSTRATION CHARGE Upon Requesting an Maximum Guaranteed Charge Currently Illustration - ---------------------------- ------------------------------- ---------------------------------- ----------------------------------- - ---------------------------- ------------------------------- ---------------------------------- ----------------------------------- $25 0 - ---------------------------- ------------------------------- ---------------------------------- ----------------------------------- - ---------------------------- ------------------------------- ---------------------------------------------------------------------- Proportionately From Policy's Cash Value - ---------------------------- ------------------------------- ----------------------------------------------------------------------
(1)The amount of the charge we would deduct begins to decrease each year after the second from the Policy Date. For the second year from the Policy Date the charge is 9% of initial Premium, for the third year it is 8%, for the fourth year it is 7%, for the fifth year it is 6%, for the sixth year it is 5%, for the seventh year it is 4%, for the eighth year it is 3%, and, thereafter, there is no charge. Initial Premium may vary by: the Insured's sex; age (when the policy was issued); underwriting class and the Specified Amount (and any increases). THE NEXT TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU WILL PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE POLICY, NOT INCLUDING SUB-ACCOUNT PORTFOLIO OPERATING EXPENSES.
=================================================================================================================================== PERIODIC CHARGES OTHER THAN SUB-ACCOUNT PORTFOLIO OPERATING EXPENSES =================================================================================================================================== ============================== ======================= ============================================================================ Charge When Charge Is Amount Deducted Deducted From Cash Values - ------------------------------ ----------------------- ---------------------------------------------------------------------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- COST OF INSURANCE(2), (3) (4) Monthly GUARANTEED Representative - For An Age 35 Male With A Long-term Care Specified Amount Of $500,000 ---------------------------------------------------------------------------- - ------------------------------ ----------------------- --------------------------- --------------------- -------------------------- Minimum Maximum Representative(5) --------------------------- --------------------- -------------------------- - ------------------------------ ----------------------- --------------------------- --------------------- -------------------------- $0.06 $83.33 $0.18 --------------------------- --------------------- -------------------------- ---------------------------------------------------------------------------
5
Per $1,000 of Net Amount at Risk (Death Benefit less Cash Value) --------------------------------------------------------------------------- ------------------------------------- -------------------------------------- - ------------------------------ ----------------------- ------------------------------------- -------------------------------------- - ------------------------------ ----------------------- ------------------------------------- -------------------------------------- Proportionately From Your Chosen Variable And Fixed Investment Options - ------------------------------ ----------------------- ---------------------------------------------------------------------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- MORTALITY AND EXPENSE RISK Monthly Maximum And Current Charge - ------------------------------ ----------------------- ---------------------------------------------------------------------------- $0.75 Per $1,000 Of Cash Value - ------------------------------ ----------------------- ---------------------------------------------------------------------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- Proportionately From Your Chosen Variable Investment Options - ------------------------------ ----------------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- TAX EXPENSE(6) Monthly Maximum And Current Charges - ------------------------------ ----------------------- ------------------------------------ --------------------------------------- $0.42 Per $1,000 Of Cash Value(6) - ------------------------------ ----------------------- ------------------------------------ --------------------------------------- - ------------------------------ ----------------------- ------------------------------------ --------------------------------------- ---------------------------------------------------------------------------- Proportionately From Your Chosen Variable And Fixed Investment Options - ------------------------------ ----------------------- ---------------------------------------------------------------------------- - ------------------------------ ----------------------- ------------------------------------ --------------------- ----------------- ADMINISTRATIVE EXPENSE(7) Monthly Maximum - ------------------------------ ----------------------- ------------------------------------ --------------------- ----------------- - ------------------------------ ----------------------- --------------------- ----------------- The Greater Of:$10 Or $0.25 Per $1,000 Of Cash Value - ------------------------------ ----------------------- ------------------------------------ --------------------- ----------------- - ------------------------------ ----------------------- - ------------------------------ ----------------------- ------------------------------------ --------------------- ----------------- - ------------------------------ ----------------------- - ------------------------------ ----------------------- ------------------------------------ --------------------- ----------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- Proportionately From Your Chosen Variable And Fixed Investment Options - ------------------------------ ----------------------- ---------------------------------------------------------------------------- - ------------------------------ ----------------------- ----------------------------------- ---------------------------------------- LOAN AMOUNT Annually Maximum Guaranteed Currently INTEREST RATE(8) (Accrues Daily) - ------------------------------ ----------------------- ----------------------------------- ---------------------------------------- - ------------------------------ ----------------------- ----------------------------------- ---------------------------------------- $60 6.0% $60 6.0% - ------------------------------ ----------------------- ----------------------------------- ---------------------------------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- Per $1,000 Of An Outstanding Policy Loan - ------------------------------ ----------------------- ---------------------------------------------------------------------------- - ------------------------------ ----------------------- ---------------------------------- ------------------- --------------------- LONG-TERM CARE RIDER(9) Monthly Minimum Maximum Representative Representative - For An Age 35 Male With A Long-term Care Specified Amount Of $500,000 - ------------------------------ ----------------------- ---------------------------------- ------------------- --------------------- - ------------------------------ ----------------------- ---------------------------------- ------------------- --------------------- $0.02 $5.73 $0.02 - ------------------------------ ----------------------- ---------------------------------- ------------------- --------------------- - ------------------------------ ----------------------- ---------------------------------------------------------------------------- Per $1,000 Of Rider Net Amount At Risk - Proportionately From Your Chosen Variable And Fixed Investment Options - ------------------------------ ----------------------- ----------------------------------------------------------------------------
6 _______________________________________ (2) This charge varies by: the Insured's sex; age; underwriting class; any substandard ratings; the year from the Policy Date and the Specified Amount. (3) Ask for a policy illustration, or see your Policy Data Page for information on your cost. (4) The current cost of insurance charge is calculated based on your policy's cash value and is equal to $0.54 per $1,000 of Cash Value for each month for the first ten years from the Policy Date and for all policies with Cash Value less than $100,000. For polices with at least $100,000 of Cash Value, for years after the tenth from the Policy Date, the charge is equal to $0.25 per $1,000 of Cash Value for each month. In New York, the current cost of insurance charge is $0.54 per $1,000 of Cash Value for each month in all years. (5) The representative charge may not be representative of the charge that a particular policy owner pays. (6) This charge applies for the first ten years from the Policy Date. (7) The administrative charge is calculated based on your policy's cash value. It is guaranteed never to exceed $0.25 per $1,000 of Cash Value each month. Currently it is equal to $0.25 per $1,000 of Cash Value each month for the first ten years from the Policy Date and for all policies with Cash Value less than $100,000. For polices with at least $100,000 of Cash Value, for years after the tenth from the Policy Date, the current charge is equal to $0.13 per $1,000 of Cash Value. The charge, however, is not less than $10 per month. In New York, the administrative charge is $0.25 per $1,000 of Cash Value each month in all years, subject to a maximum of $7.50 per month. (8) We charge interest on the amount of an outstanding policy loan, at the rate of 6% per annum, which accrues daily and becomes due and payable at the end of the year from the Policy Date. If left unpaid, we will add it to the loan account. As collateral or security for repayment, we transfer an equal amount of Cash Value to the loan account, on which interest accrues and is credited daily. The minimum guaranteed interest crediting rate is 4.0% per annum. The effect is a net cost of no more than 2% per annum for regular loans, based on the minimum guaranteed interest crediting rates. Preferred loans may be available that have a net cost of -0- (i.e., 6% loan interest rate less a 6% loan crediting rate). For more information, see "Policy Loans," beginning on page 26. (9) This charge varies by any substandard ratings. The continuation of a Rider is contingent on the policy being In Force. THE NEXT ITEM SHOWS THE MINIMUM AND MAXIMUM TOTAL OPERATING EXPENSES CHARGED BY THE SUB-ACCOUNT PORTFOLIOS THAT YOU MAY PAY PERIODICALLY DURING THE TIME THAT YOU OWN THE POLICY. MORE DETAIL CONCERNING THE MUTUAL FUND THAT CORRESPONDS TO THE SUB-ACCOUNT PORTFOLIO. PLEASE CONTACT US, AT THE TELEPHONE NUMBERS OR ADDRESS ON THE COVER PAGE OF THIS PROSPECTUS, FOR FREE COPIES OF THE PROSPECTUSES FOR THE MUTUAL FUNDS AVAILABLE UNDER THE POLICY. ALSO, APPENDIX B IDENTIFIES THE AVAILABLE MUTUAL FUNDS, BY NAME, INVESTMENT TYPE AND ADVISER, AND INCLUDES EXPENSE INFORMATION FOR EACH MUTUAL FUND.
TOTAL ANNUAL SUB-ACCOUNT PORTFOLIO OPERATING EXPENSES Minimum Maximum (expenses that are deducted from the Sub-Account portfolio assets, including 0.27% 4.37% management fees, distribution (12b-1) fees, and other expenses)
7 THE POLICY The policy is a legal contract between you and us. You may exercise all policy rights and options while the Insured is alive. Generally, the policy is available for an insured between the ages of 0-80 (although these ages may vary in your state). It is nonparticipating, meaning we will not be contributing any operating profits or surplus earnings toward the Proceeds from the policy. The policy will comprise and be evidenced by: a written contract; any Riders; any endorsements; and the application, including any supplemental application. We will consider the statements you make in the application as representations. We will rely on them as being true and complete. However, we will not void the policy or deny a claim unless a statement is a material misrepresentation. No person in any capacity may change the policy or waive any provision. If we were to decide to change the policy, we would effect the change in a writing, signed by our president and secretary, attached to, or endorsed on, the policy. POLICY OWNER The policy belongs to the owner named in the application. You may also name a contingent policy owner. A contingent owner will become the owner if the owner dies before any Proceeds become payable. Otherwise, ownership will pass to the owner's estate, if the owner is not the Insured. To the extent permitted by law, policy benefits are not subject to any legal process for the payment of any claim, and no right or benefit will be subject to claims of creditors (except as may be provided by assignment). You may name different owners or contingent owners (so long as the Insured is alive) by submitting your written request to us at our Home Office, which will become effective when signed, rather than the date on which we received it. There may be adverse tax consequences. For more information, see "Taxes" beginning on page 28. THE BENEFICIARIES The principal right of a beneficiary is to receive Proceeds constituting the Death Benefit upon the Insured's death. So long as the Insured is alive, you may: name more than one beneficiary; designate primary and contingent beneficiaries; change or add beneficiaries; and provide for another distribution than the following. If a primary beneficiary dies before the Insured, we will pay the Death Benefit to the remaining primary beneficiaries. We will pay multiple primary beneficiaries in equal shares. A contingent beneficiary will become the primary beneficiary if all primary beneficiaries die before the Insured, and before any Proceeds become payable. You may name more than one contingent beneficiary. We will also pay multiple contingent beneficiaries in equal shares. To change or add beneficiaries, you must submit your written request to us at our Home Office, which will become effective when signed, rather than the date on which we received it. The change will not affect any payment we made, or action we took, before we recorded the change. 8 TO PURCHASE To purchase the policy, you must submit to us a completed application and an initial Premium payment. We must receive evidence of insurability that satisfies our underwriting standards (this may require a medical examination) before we will issue a policy. We can provide you with the details of our underwriting standards. We reserve the right to reject an application for any reason permitted by law. Also, we reserve the right to modify our underwriting standards at any time. COVERAGE We will issue the policy only if the underwriting process has been completed, we have approved the application and the proposed Insured is alive and in the same condition of health as described in the application. However, full insurance coverage will take effect only after you have paid the minimum initial Premium. We begin to deduct monthly charges from your policy Cash Value on the Policy Date. COVERAGE EFFECTIVE DATE Insurance coverage will begin and be In Force on the Policy Date shown on the policy data page. It will end upon the Insured's death, once we begin to pay the Proceeds, or when the policy matures. It could end if the policy were to Lapse. TEMPORARY INSURANCE COVERAGE Temporary insurance coverage, equal to the Specified Amount up to $1,000,000, may be available for no charge before full insurance coverage takes effect. You must submit a temporary insurance agreement and make an initial Premium payment. The amount of the initial Premium will depend on the initial Specified Amount, and your choice of Death Benefit options and any Riders, for purposes of the policy. During this time, we hold onto your initial Premium payment. Temporary insurance coverage will remain In Force for no more than 60 days from the date of the temporary insurance agreement. Before then, temporary insurance coverage will terminate on the date full insurance coverage takes effect, or five days from the date we mail a termination notice (accompanied by refund of the Premium payment). If we issue the policy, what we do with the Net Premium depends on the right to examine law of the state in which you live. TO CANCEL (EXAMINATION RIGHT) You may cancel your policy during the free look period. The free look period expires ten days after you receive the policy or longer if required by state law. If you decide to cancel during the free look period, return the policy to the sales representative who sold it, or to us at our Home Office, along with your written cancellation request. Within seven days, we will refund the amount prescribed by the law of the state in which we issued the policy. We will treat the policy as if we never issued it. Because of the free look period, when we actually allocate Net Premium to the Sub-Account portfolios based on your choices depends on the right to examine law of the state in which you live. For more information, see "To Allocate Premium And Sub-Account Valuation" beginning on page 18. Any premium payments we receive after your right to cancel the policy expires will be allocated to the Sub-Accounts choices in effect when we receive that premium payment. 9 TO CHANGE COVERAGE If you choose to make additional premium payments, then we may need to increase the Specified Amount to maintain the policy as life insurance under the "Code." In this case, we will not accept the Premium and make the corresponding increase the Specified Amount, unless: 1) you provide us with evidence of the Insured's insurability; and 2) the Insured is in same underwriting rate class and in the same underwriting rate class multiple as when the policy was purchased. If you take a partial surrender, we reduce the Specified Amount, as well as the Cash Value, by the amount of the partial surrender. SUB-ACCOUNT PORTFOLIO TRANSFERS Prior to the policy's Maturity Date, you may make transfers among the available Sub-Account portfolios. You will be able to submit transfer requests among the Sub-Account portfolios in writing by U.S. mail. On a daily basis, we will group transfer requests into transfer events. A "transfer event" is any Valuation Period on which allocations are moved between investment options, regardless of the quantity of reallocations. For example, if you move the Policy's Cash Value between 20 Sub-Account portfolios in one day, the entire reallocation only counts as one transfer event. Transfer events include transfers made pursuant to any dollar cost averaging or asset rebalancing program you have elected. For more information, see "Dollar Cost Averaging" beginning on page 21. and "Asset Rebalancing" beginning on page 22. With the first 20 transfer events of a calendar year, you may choose to submit transfer requests over the telephone, or via the Internet. Afterwards, you must submit all transfer requests in writing by U.S. mail. We will process a transfer at the end of the Valuation Period on which we receive your request. We will determine the amount you have available for transfers among the Sub-Account portfolios in Units based on the Net Asset Value (NAV) per share of the mutual fund in which a Sub-Account portfolio invests. The mutual fund will determine its NAV once daily as of the close of the regular business session of the New York Stock Exchange (usually 4:00 p.m. Eastern time). A Unit will not equal the NAV of the mutual fund in which the Sub-Account portfolio invests, however, because the Unit value will reflect the deduction for any periodic charges. For more information, see "In Summary: Fee Tables" beginning on page 5, and "How Investment Experience Is Determined" beginning on page 20. FIXED ACCOUNT TRANSFERS Prior to the policy's Maturity Date, you may also make transfers involving the fixed account. These transfers will be in dollars, and we reserve the right to limit their timing and amount, including that you may not request a transfer involving the fixed account before the end of the first year from the Policy Date. Also, you may not make more than one transfer every 12 months. However, during the first 24 months following the initial Policy Date you may irrevocably elect to transfer all of the Cash Value to the fixed account. On transfers to the fixed account, you may request a transfer of up to 100% of the Cash Value allocated to the Sub-Account portfolios as of the close of 10 business of the prior Valuation Period, but we may limit the transfer to 25%. On transfers from the fixed account, we reserve the right to limit the amount of the policy's cash value that you may transfer from the fixed account in a given policy year. We will declare the limit that may be transferred at the end of each interest rate guarantee period. An interest rate guaranteed period is the time that a stated interest rate is guaranteed to remain in effect. The period begins at the time of the transfer and ends on the last day of the calendar quarter. Each successive period is three months. Any transfers you make from the fixed account must be within 30 days of the end of a period. MODES TO EFFECT A TRANSFER TO MAKE A TRANSFER REQUEST, CONTACT US AT THE TELEPHONE NUMBERS OR ADDRESS ON THE COVER PAGE OF THIS PROSPECTUS. We will consider each request by any means as a single transfer regardless of the number of Sub-Accounts involved. We will employ reasonable procedures to confirm that instructions are genuine, including: o requiring forms of personal identification before acting upon instructions; o providing you with written confirmation of completed transactions; and/or o recording telephone instructions. If we follow these procedures, we will not be liable for any loss, damage, cost or expense from complying with what we reasonably believe to be genuine instructions. Rather, you will bear the risk of loss. Any computer system or telephone, whether it is yours, your service provider's, your representative's, or ours, can experience slowdowns or outages for a variety of reasons. These slowdowns or outages may delay or prevent our ability to process your request. Although we have taken precautions to help our system handle heavy usage, we cannot promise complete reliability under all circumstances. If you are experiencing problems, you should make your request in writing. TO IRREVOCABLY TRANSFER CASH VALUE OR EXCHANGE THE POLICY During the first 24 months of coverage, you have a right to irrevocably elect to transfer 100% of the policy's cash value to the fixed account. After this election, you no longer will be able to participate in the Investment Experience of the Sub-Account portfolios. Rather, the policy's Cash Value will be credited with the fixed account's interest rate. You must make your request on our official forms to the Home Office. You may also surrender the policy after the first 24 months and use the Cash Surrender Value to purchase a new policy on the same Insured's life, but subject to evidence of insurability that satisfies our underwriting standards. The new policy may be one of our available flexible premium adjustable life insurance policies. It may not have a greater Death Benefit than that of this policy immediately prior to the exchange date. It will have the same Specified Amount, Policy Date, and issue age. We will base Premiums on our rates in effect for the same sex, Attained Age and premium class of the Insured on the exchange date. You must make your request on our official forms to the Home Office. The policy must be In Force and not in a Grace Period. You must pay the associated surrender charge before we will effect the exchange. For more information, see In Summary: Fee Tables beginning on page 5. The exchange may have tax consequences. For more information, 11 see Exchanging The Policy For Another Life Insurance Policy beginning on page 32. TO TERMINATE OR SURRENDER You have the right to terminate the policy. At any time, you may surrender the policy for its Cash Surrender Value. The policy will automatically terminate when the Insured dies, the policy matures, or the Grace Period ends. For more information, see "Surrenders" beginning on page 23. Generally, if the policy has a Cash Surrender Value in excess of the Premiums you have paid, the excess upon surrender will be included in your income for federal tax purposes. For more information, see "Surrender Of The Policy" beginning on page 31. The Cash Surrender Value will be reduced by the amount of a policy loan, if any. For more information see, "Policy Loans" beginning on page 26. TO ASSIGN You may assign any rights under the policy while the Insured is alive. If you do, your beneficiary's interest will be subject to the person(s) to whom you have assigned rights. Your assignment must be in writing, and it must be recorded at our Home Office before it will become effective. Your assignment will be subject to any outstanding policy loans. Please see the "Policy Loans" section of this prospectus. For more information see, "Policy Loans" beginning on page 26. PROCEEDS UPON MATURITY If the policy is In Force on the Maturity Date, we will pay you the Proceeds. Normally, we will pay the Proceeds within seven days after we receive your written request at our Home Office. The payment will be postponed, however, when: the New York Stock Exchange is closed; the SEC restricts trading or declares an emergency; the SEC permits us to defer it for the protection of our policy owners; or the Proceeds are to be paid from the fixed account. The Proceeds will equal the policy's Cash Value minus any indebtedness. After we pay the Proceeds, the policy is terminated. We may offer to extend the Maturity Date to coincide with the Insured's death, after which we will pay the Proceeds to your beneficiary. During this time, you will still be able to request partial surrenders, and you will still have in effect the long-term care Rider (though you will not be charged for it), the termination of benefits under which will coincide with the policy's extended Maturity Date (unless you decide otherwise). If you accept this offer, either to extend the Maturity Date for the policy value (as defined below), or for the Specified Amount (subject to the law of the state in which you lived at the time you purchased the policy), the policy will be endorsed so that: > no additional Premium payments will be allowed; > no changes to the amount of the Specified Amount will be allowed; > no additional periodic charges will be deducted; > the Death Benefit will equal the Cash Value; > 100% of the Cash Value will be transferred to the policy's fixed account; 12 > If the extension is for the policy value, your Proceeds will either consist of the Cash Value or the balance of your accumulated premium account, depending on the applicable Death Benefit option. Under the terms of the offer, if you originally had chosen Death Benefit Option Two, this will change to Death Benefit Option One (if it already was, it remains as is), and the Proceeds your beneficiary will receive will be the policy's Cash Value. If your Death Benefit option was Option Three, the Proceeds your beneficiary will receive will be the balance of your accumulated premium account; > If the extension is for the Specified Amount, the Specified Amount will be adjusted to what it was when the Insured reached Attained Age 70, but subject to any partial surrenders, which will affect the Specified Amount of a policy with Death Benefit Option One based on the Insured's Attained Age at the time the request for a partial surrender is made. While the Insured is between the Attained Ages of 71 and 90, a partial surrender will decrease the Specified Amount directly. If the Insured is over Attained Age 90, a partial surrender will reduce the Proceeds by the proportion that the partial surrender reduced the policy's Cash Value. Notwithstanding, the Proceeds will be the greater of the policy's Specified Amount or Cash Value; and > the Maturity Date will not be extended where the policy will fail the definition of life insurance. For more information, see "The Payout Options" beginning on page 24, and "The Death Benefit" beginning on page 23. REMINDERS, REPORTS AND ILLUSTRATIONS We will send you scheduled Premium payment reminders and transaction confirmations. We will also send you semi-annual and annual reports that show: o the Specified Amount o the current Cash Value o Premiums paid o the Cash Surrender Value o all charges since the last report o outstanding policy indebtedness We will send these reminders and reports to the address you provide on the application, or to another you may specify. At any time, you may ask for an illustration of future benefits and values under the policy. While we do not at present, we may charge if you ask for more than one illustration per year from the Policy Date. ERRORS OR MISSTATEMENTS If you make an error or misstatement in completing the application, we will adjust the Death Benefit accordingly. To determine the adjusted Death Benefit, we will recalculate the Specified Amount as of the date of issue using the Insured's true age and sex. 13 INCONTESTABILITY We will not contest payment of the Death Benefit based on the initial Specified Amount after the policy has been In Force for two years from the Policy Date. For any change in Specified Amount requiring evidence of insurability, we will not contest payment of the Death Benefit based on such an increase after two years from the effective date. IF WE MODIFY THE POLICY Any modification (or waiver) of our rights or requirements under the policy must be in writing and signed by our president or corporate secretary. No agent may bind us by making any promise not contained in the policy. We may modify the policy, our operations, or the separate account's operations to meet the requirements of any law (or regulation issued by a government agency) to which the policy, our company, or the separate account is subject. We may modify the policy to assure that it continues to qualify as a life insurance contract under the federal tax laws. We will notify you of all modifications, and we will make appropriate endorsements to the policy. RIDER A Rider is available for you to purchase to design the policy to meet your specific needs. Once the policy is In Force, we may require further evidence of insurability before you may add a Rider. Availability will vary by state. You will incur an additional charge so long as the policy remains in effect and the Rider's term has not expired, we paid the benefit, or you decide you no longer need the benefit and let us know in writing at our Home Office. For more information on the costs of the Rider, see "In Summary: Fee Tables" beginning on page 5, and "Charges" beginning on page 16. LONG-TERM CARE RIDER This Rider is available to purchase at any time only within six months from the Policy Date. Upon meeting the eligibility requirements, the Insured is paid a monthly benefit after 90 days of being confined to a care facility (other than a hospital) or provided personal assistance at home while under a physician's care. The benefit may not cover all of your long term-care costs. The benefits paid under the Rider are intended to be "qualified long-term care insurance" under federal tax law and generally the benefits may not be taxable to the payee. See your tax adviser about the use of this Rider in your situation. You will be charged for this Rider: so long as the policy remains In Force through maturity; until we have paid the benefit; or you decide you no longer need the benefit and let us know in writing at our Home Office. Because we deduct the charge for this benefit from the policy's Cash Value, your purchase of this Rider could reduce the amount of Proceeds payable under Death Benefit Option Two. Otherwise, the benefit of this Rider and the Death Benefit are independent of one another. PREMIUM This policy is designed to be a single premium policy and it does not require a scheduled payment of Premium to keep it In Force. The policy will remain in effect as long as the conditions that cause the policy to Lapse do not exist. Upon request, we will furnish Premium receipts. 14 INITIAL PREMIUM The initial premium must be at least $10,000 for issue ages 0-70 and $50,000 for issue ages 71-80. The amount of your initial Premium will depend on the initial Specified Amount of insurance and any Riders you select. Generally, the higher the required initial Specified Amount, the higher the initial Premium will be. Also, the age, health, and activities of the Insured will affect our determination of the risk of issuing the policy. In general, the greater this risk, the higher the initial Premium will be, or the lower the Specified Amount will be. Whether we will issue full insurance coverage depends on the Insured meeting all underwriting requirements, you paying the initial Premium, and our delivery of the policy while the Insured is alive. We will not delay delivery of the policy to increase the likelihood that the Insured is not still living. Depending on the outcome of our underwriting process, more or less Premium may be necessary for us to issue the policy. We also retain the right to not issue the policy, after which, if we exercise this right, we will return your payment within two business days, thereafter. You may pay the initial Premium to our Home Office or to our authorized representative. SUBSEQUENT PREMIUMS While the policy is not designed for multiple Premium payments, you may make additional Premium payments at any time while the policy is In Force, subject to the following: > We may require satisfactory evidence of insurability before accepting any additional Premium payment that results in an increase in the policy's Net Amount At Risk. Payments of additional Premium may require an in increase in the Specified Amount. For more information see, "To Change Coverage" beginning on page 10. The Insured must be in the same underwriting rate class and in the same underwriting rate class multiple as when the policy was purchased; > We will refund any portion of Premium payments that exceed the applicable premium limit established by the IRS to qualify the policy as a contract for life insurance. As discussed in the "Taxes" section of this prospectus, additional Premium payments or other changes to the policy may jeopardize the policy's non-modified endowment contract status. We will monitor Premiums paid and other policy transactions and will notify you when the policy's non-modified endowment contract status is in jeopardy; and > We may require that policy indebtedness be repaid prior to accepting any additional Premium payments. Some, but not all, of the situations when we might exercise this right include when interest rates are low, when your policy loans exceed 90% of value of the Sub-Account portfolio allocations, or when a Premium payment may alter the character of the policy for tax purposes. For more information, see "Lapse" beginning on page 27. We will let you know ahead of time. If you decide to make a subsequent Premium payment, you must send it to our Home Office. Generally, each Premium payment must be at least $1,000, but we will accept a Premium payment of any amount required to keep the policy In Force. 15 CHARGES PLEASE READ AND CONSIDER THE FOLLOWING, WHICH WE INTEND TO BE AN AMPLIFICATION (BUT IT MAY ALSO BE DUPLICATIVE), IN CONJUNCTION WITH THE FEE TABLES, AND THE ACCOMPANYING FOOTNOTES, APPEARING EARLIER IN THE PROSPECTUS. SEE "IN SUMMARY: FEE TABLES," BEGINNING ON PAGE 5. ALSO, SEE THE POLICY, INCLUDING THE POLICY DATA PAGE, AND THE RIDERS, FOR MORE INFORMATION.. We will make deductions under the policy to compensate us for: the services and benefits we provide; the costs and expenses we incur; and the risks we assume. Every time you make a Premium payment, we will charge against that Premium payment a Premium Load, which is composed of the sales load and premium taxes. We will deduct all other charges from the policy's Cash Value (rather than a Premium payment), except for mortality and expense risk and loan amount interest, in proportion to the balances of your Sub-Account portfolio, and the fixed account, allocations. We will only deduct the mortality and expense risk charge from the Cash Value of the Sub-Account portfolios, and we will only deduct the loan amount interest charge from the Cash Value of the loan account. There are also charges associated with the Sub-Account portfolios. While you will not pay them directly, they will affect the value of the assets in the Sub-Account portfolios. On a daily basis, the manager of each mutual fund that comprises the policy's available variable investment options deducts operating charges from that mutual fund's assets before calculating the NAV. (We use NAV to calculate the value of your corresponding Sub-Account portfolio allocation in Units.) More detail about these charges is contained in the prospectus for the mutual fund. TAX EXPENSE To reimburse us for taxes imposed by federal, state and local governments. The monthly charge is computed by multiplying 0.5% on an annualized basis by the policy's Cash Value. This charge is incurred in policy years 1-10. SURRENDER CHARGES The surrender charge is a percentage of initial Premium you pay at the time we issue the policy, rather than any subsequent Premiums you pay. This charge covers our policy underwriting and sales expenses, including for: processing the application; conducting any medical exams; determining insurability (and the Insured's underwriting class); and establishing policy records. The charge will apply if you surrender or lapse the policy. We will assess the surrender charge based on the following schedule: - ------------------------------- ---------------------------- Surrender Charge As A Number of Completed Percentage Of Initial Policy Year Premium Payment - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 0 10% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 1 10% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 2 9% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 3 8% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 4 7% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 5 6% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 6 5% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 7 4% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 8 3% - ------------------------------- ---------------------------- - ------------------------------- ---------------------------- 16 9 or more 0 - ------------------------------- ---------------------------- COST OF INSURANCE The cost of insurance charge compensates us for providing insurance protection under the policy. The monthly charge is computed by multiplying 0.65% on an annualized basis by the policy's Cash Value. In New York, we will assess this charge for all years. In other states, we may reduce the charge to 0.30% on an annualized basis (and expect to do so for policy years 11 and later for policies with at least $100,000 of Cash Surrender Value. This charge will never exceed the policy's Net Amount at Risk times the guaranteed cost of insurance rate based on the 1980 Commissioner's Standard Ordinary Table. We base the cost of insurance rates on our expectations as to future mortality and expense experience. The cost of insurance rate will vary by: the Insured's sex; age; underwriting class; any substandard ratings; for how long the policy has been In Force and the Specified Amount. MORTALITY AND EXPENSE RISK This charge compensates us for assuming risks associated with mortality and expense costs. The mortality risk is that the Insured does not live as long as expected. The expense risk is that the costs of issuing and administering the policy are more than expected. We will deduct this charge proportionately from the Cash Values of each Sub-Account portfolio. The monthly charge is computed by multiplying 0.90% on an annualized basis by the policy's Sub-Account Cash Value. We may realize a profit from these charges. ADMINISTRATIVE EXPENSE This charge reimburses us for the costs of maintaining the policy, including for accounting and record-keeping. We will determine this monthly charge by multiplying .030% on an annualized basis by the policy's Cash Value. In New York, we will assess this charge for all years, but the charge will not exceed $7.50 per month. In other states, we may reduce the charge to 0.15% on an annualized basis and expect to do so for policy years 11 and later. This charge may be subject to a minimum of $10.00 per month. POLICY LOAN INTEREST We charge interest on the amount of an outstanding policy loan, at the rate of 6% per annum, which will accrue daily and become due and payable at the end of each year from the Policy Date. If left unpaid, we will add it to the policy's outstanding indebtedness. As collateral or security for repayment, we will transfer an equal amount of Cash Value to the loan account on which will interest will accrue and be credited daily. The minimum guaranteed interest crediting rate is 4% per annum. The effect of the 6% interest on the loan balance and the 4% crediting on the policy loan account is a net cost of no more than 2% per annum. 17 LONG-TERM CARE RIDER The charge for this Rider compensates us for providing long-term care coverage beginning 90 days after the Insured is confined to a care facility (other than a hospital) or provided personal assistance at home while under a physician's care. The charge is the product of the Net Amount At Risk of the Rider and a long-term care rate cost of insurance rate. Because this Rider has no Cash Value, we define its Net Amount At Risk as the lesser of the Specified Amount of the Rider and the Net Amount At Risk of the policy. We base the long-term care cost of insurance rate on our expectations as to your need for long-term care over time. The long-term care cost of insurance rate will vary by: the Insured's sex; Attained Age; underwriting class; and any substandard ratings. TO ALLOCATE PREMIUM AND SUB-ACCOUNT VALUATION You may allocate all or a portion of your Premium to any Sub-Account. The separate account is divided into Sub-Accounts that invest in shares of one or more portfolios of the different mutual funds available under the policy. Or you may allocate all or a portion of your Premium to the fixed investment option that is funded by the assets of our general account. Based on the right to examine law, some states require that we refund the initial Premium if you exercise your right to cancel the policy. Others require that we return the Cash Value. If yours is a state that requires us to refund the initial Premium, we will hold the initial Net Premium in the GVIT Gartmore GVIT Money Market Fund: Class I. Once your examination right ends, we will transfer the Cash Value to your Sub-Account allocations in effect at the time of the transfer. If yours is a state that requires us to refund the Cash Value, we will allocate the Net Premiums to the Sub-Account choices in effect when we receive the Premium payment. VARIABLE INVESTMENT OPTIONS The variable investment options constitute the limitedly available mutual funds, and we have divided the separate account into an equal number of Sub-Account portfolios to account for your allocations. Each Sub-Account portfolio invests in a mutual fund that is registered with the SEC. This registration does not involve supervision of the management or investment practices or policies of the portfolios or mutual funds by the SEC. Appendix B identifies the available mutual funds, by name, investment type and adviser, and includes expense information for each. Each Sub-Account portfolio's assets are held separately from the assets of the other Sub-Account portfolios, and each Sub-Account portfolio has investment objectives and policies that are different from those of the other Sub-Account portfolios. Thus, each Sub-Account portfolio operates as a separate investment fund, and the income or losses of one Sub-Account portfolio generally have no effect on the investment performance of any other Sub-Account portfolio. THE FIXED INVESTMENT OPTION The Premium you allocate to the fixed investment option is held in the fixed account, which is part of our general account. The general account contains all of our assets other than those in the separate accounts and funds the fixed investment option. These assets are subject to our general liabilities from business operations. The general account is used to support our insurance and annuity obligations. Any amounts in excess of the separate account liabilities are deposited into our general account. We bear the full investment risk for all amounts allocated to the fixed account. We guarantee that the amounts you allocate to the fixed investment option will be credited interest daily at a net effective annual interest rate of no less than the stated interest crediting rate on the policy data page. We will credit any interest in excess of the guaranteed interest crediting rate at our sole discretion. You assume the risk that the actual rate may not exceed the guaranteed interest crediting rate in any given year. The amounts you allocate to the fixed investment option will not share in the investment performance of our general account. Rather, the investment income you earn on your allocations will be based on varying rates we set. The general account is not subject to the same laws as the separate account, and the SEC has not reviewed the disclosures in this prospectus relating to the fixed account. However, information about the fixed account is subject to federal securities laws relating to the accuracy and completeness of statements made by prospectus disclosure. Interest rates are set at the beginning of each calendar quarter and will be effective for at least three months. You may receive a different interest rate on Premium versus a transfer of Units from a Sub-Account portfolio. In honoring your request to transfer an amount out of the fixed account, we will do so on a last-in, first out basis (LIFO). ALLOCATION OF PREMIUM AND CASH VALUE We allocate your Premium payments to Sub-Accounts or the fixed account per your instructions. You must specify your Premium payments in whole percentages. The sum of allocations must equal 100%. WHEN SUB-ACCOUNT UNITS ARE VALUED We will price Sub-Account Units on any day the New York Stock Exchange (NYSE) is open for business, unless we are closed. We will not price Sub-Account Units on these recognized holidays. >New Year's Day >Independence Day >Martin Luther King, Jr. Day >Labor Day >Presidents' Day >Thanksgiving >Good Friday >Christmas >Memorial Day In addition, we will not price Sub-Account Units if: > trading on the New York Stock Exchange is restricted; > an emergency exists making disposal or valuation of securities held in the 19 separate account impracticable; or > the SEC, by order, permits a suspension or postponement for the protection of security holders. SEC rules and regulations govern when the conditions described above exist. If we are closed on days when the New York Stock Exchange is open, you may not effect transactions. If you try, we will neither price the Sub-Account Units, nor effect the transaction, until the next day we, and the New York Stock Exchange, are open for business. Any transaction you try to effect when we are closed will not happen until the next day the NYSE and we are both open for business. HOW INVESTMENT EXPERIENCE IS DETERMINED Though the number of Sub-Account Units will not change as a result of Investment Experience, changes in the net investment factor may cause the value of a Sub-Account Unit to increase or decrease from Valuation Period to Valuation Period. Changes in the net investment factor may not be directly proportional to changes in the NAV of the mutual fund shares, because of the deduction for mortality and expense risk charge, and any charge or credit for tax reserves. We determine the change in Sub-Account values at the end of a Valuation Period. The Sub-Account Unit value for a Valuation Period is determined by multiplying the Sub-Account Unit value as of the prior Valuation Period by the net investment factor for the Sub-Account for the current Valuation Period. We determine the net investment factor for any Valuation Period by dividing (a) by (b) where: (a) is the sum of: > the NAV per share of the mutual fund held in the Sub-Account as of the end of the current Valuation Period; and > the per share amount of any dividend or income distributions made by the mutual fund (if the date of the dividend or income distribution occurs during the current Valuation Period). > a per share charge or credit for any taxes reserved for as a result of the Sub-Account's investment operations. (b) is the NAV per share of the mutual fund determined as of the end of the immediately preceding Valuation Period. CASH VALUE The policy has a Cash Value. There is no guaranteed Cash Value. Rather, it will be based on the values, and vary with the Investment Experience of the Sub-Account portfolios to which you have allocated Net Premium, as well as the values of, and any daily crediting of interest to, the policy loan and fixed accounts. It will also vary because we deduct the policy's periodic charges from the Cash Value. So, if the policy's Cash Value is part of the Death Benefit option you have chosen, then your Death Benefit will fluctuate. We will determine the value of the assets in the separate account at the end of each Valuation Period. We will determine the Cash Value at least monthly. To determine the number of Sub-Account Units credited to each Sub-Account, we divide the net amount you allocate to the Sub-Account by the 20 Sub-Account Unit value for the Sub-Account (using the next Valuation Period following when we receive the Premium). If you surrender part or all of the policy, we will deduct a number of Sub-Account Units from the separate account and an amount from the fixed account that corresponds to the surrendered amount. Thus, your policy's Cash Value will be reduced by the surrendered amount. Similarly, when we assess charges or deductions, a number of Sub-Account Units from the separate account and an amount from the fixed account that corresponds with the charge or deduction will be deducted from the policy's Cash Value. We make these deductions in the same proportion that your interests in the separate account and the fixed account bear to the policy's total Cash Value. The Cash Value in the policy loan and fixed accounts will be credited interest daily at the guaranteed minimum annual effective rate stated on the policy data page. We may decide to credit interest in excess of the guaranteed minimum annual effective rate. For the fixed account, we will guarantee the current rate in effect through the end of the calendar quarter. Upon request, we will inform you of the current applicable rates for each account. For more information, see "The Fixed Investment Option" on page 19 and "Loan Amount And Interest" on page 26. On any date during the policy year, the Cash Value equals the Cash Value on the preceding Valuation Period, plus any Premium applied since the previous Valuation Period, minus any policy charges, plus or minus any investment results, and minus any partial surrenders. DOLLAR COST AVERAGING You may elect to participate in a dollar cost averaging program. Dollar cost averaging is an investment strategy designed to reduce the investment risks associated with market fluctuations, which will promote a more stable Cash Value and Death Benefit over time. The strategy spreads the allocation of your Premium among the Sub-Account portfolios and the fixed investment option over a period of time to allow you to potentially reduce the risk of investing most of your Premium into the Sub-Accounts at a time when prices are high. There is no charge for dollar cost averaging, but it does count as a transfer event. For more information, see "Sub-Account Portfolio Transfers," beginning on page 10. On a monthly basis (or another frequency we may permit), a specified dollar amount of your Premium is systematically and automatically transferred from the fixed account to a Sub-Account portfolio. You may also have Premium transferred from the - Federated Insurance Series - Federated Quality Bond Fund II: Primary Shares, Fidelity Variable Insurance Products - VIP High 21 Income Portfolio: Service Class (available only for policy issued prior to May 1, 2003), , GVIT Gartmore GVIT Government Bond Fund: Class I, GVIT Federated GVIT High Income Bond Fund: Class I and the GVIT Gartmore GVIT Money Market Fund: Class I. We will continue to process transfers until there is no more value left in the fixed account or the originating mutual fund(s). You may also instruct us in writing to stop the transfers. If you have Premium transferred from the fixed account, the amount must be no more than 1/30th of the fixed account value at the time you elect to participate in the program. Either you elect to participate in the dollar cost averaging program upon application or by submitting an election form before the beginning of the month. A dollar cost averaging program may not be available in all states. We do not assure the success of these strategies; success depends on market trends. We cannot guarantee that dollar cost averaging will result in a profit or protect against loss. You should carefully consider your financial ability to continue these programs over a long enough period of time to purchase Units when their value is low, as well as when it is high. We may modify, suspend or discontinue these programs at any time. We will notify you in writing 30 days before we do so. ASSET REBALANCING You may elect to set up asset rebalancing. To do so, you must complete the Asset Rebalancing Program Form and submit it to our Home Office. (You will use the same form to change your investment allocation choices, or terminate asset rebalancing, too.) Thereafter, automatically, on a periodic basis, the Cash Value of your chosen Sub-Account portfolios (up to 20), having fluctuated with Investment Experience, will be rebalanced in proportion to your investment allocation choices. There is no charge for asset rebalancing, but it does count as a transfer event. For more information, see "Sub-Account Portfolio Transfers," beginning on page 10. You can schedule asset rebalancing to occur every three, six, or twelve months on days when we price Sub-Account Units. For more information, see "When Sub-Account Units Are Valued," beginning on page 19. Unless you elect otherwise, asset rebalancing will not affect the allocation of Net Premiums you pay after beginning the program. We reserve the right to modify, suspend or discontinue asset rebalancing at any time. 22 THE DEATH BENEFIT CALCULATION OF THE DEATH BENEFIT PROCEEDS We will calculate the Death Benefit and pay it to the beneficiary when we receive at our Home Office proof that the Insured has died, as well as other customary information. We will not dispute the payment of the Death Benefit after the policy has been In Force for two years from the Policy Date. The Death Benefit may be subject to an adjustment if you make an error or misstatement upon application, or if the Insured dies by suicide. While the policy is In Force, the Death Benefit will never be less than the Specified Amount. The Death Benefit may vary with the Cash Value of the policy, which will depend on investment performance and may take into account any insurance provided by any Riders, as well as outstanding indebtedness and any due and unpaid monthly deductions that accrued during a Grace Period. DEATH BENEFIT The Death Benefit under the policy is the greater of the Specified Amount and the "applicable percentage of cash value." The applicable percentage of Cash Value is the lowest Death Benefit that will qualify the policy as life insurance under the guideline premium/cash value corridor test of Section 7702 of the Code. For this policy, this is the tax test for life insurance that we will use. This tax test for life insurance generally requires that the policy have a significant element of life insurance and not be primarily an investment vehicle. The test reaches this result by comparing the Death Benefit to an applicable percentage of the Cash Value. These percentages are set out in the Code, and vary only by the Attained Age of the Insured. We will monitor compliance to assure that the policy meets the statutory definition of life insurance for federal tax purposes. As a result, the Proceeds payable under a policy should be excludable from gross income of the beneficiary for federal income tax purposes. SUICIDE If the Insured dies by suicide, while sane or insane, within two 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. SURRENDERS FULL SURRENDER You may surrender the policy for the Cash Surrender Value at any time while the Insured is alive. We calculate the Cash Surrender Value based on the policy's Cash Value. For more information, see "Cash Value," beginning on page 20. To derive the Cash Surrender Value, we will deduct from the Cash Value Indebtedness and the surrender charge. The effective date of surrender will coincide with the date on which we receive the policy and your written request at our Home Office. We reserve the right to postpone payment of that portion of the Cash Surrender Value attributable to the fixed account for 23 up to six months. PARTIAL SURRENDER You may request a partial surrender at any time after the policy has been In Force for five years from the Policy Date. We permit partial surrenders if the partial surrender satisfies the following requirements: > the minimum partial surrender is $500; > the maximum partial surrender in any policy year is the maximum of: o 10% of the total Premium payments, and o 100% of cumulative earnings (Cash Value less total Premium payments less any loan amount at the time of the partial surrender). > after the partial surrender, the policy's Cash Surrender Value is at least $10,000; and > after the partial surrender, the policy continues to qualify as life insurance. We will reduce the Cash Value and the Specified Amount of the policy by the amount of any partial surrender in the same proportion as how you have allocated Cash Value among the Sub-Accounts. We will only reduce the Cash Value attributable to the fixed account when that of the Sub-Account is insufficient to cover the amount of the partial surrender. Certain partial surrenders may result in currently taxable income and tax penalties. For more information see, "Surrender Of The Policy" beginning on page 31. THE PAYOUT OPTIONS You have a number of options of receiving Proceeds, besides in a lump sum, which you may elect upon application. We will pay the Proceeds from our general account. If you do not make an election, when the Insured dies, the beneficiary may do so. If the beneficiary does not make an election, we will pay the 24 Proceeds in a lump sum. Normally, we will make the lump sum payment within seven days after we receive your written request at our Home Office. We will postpone any payment of Proceeds, however, on the days we are unable to price Sub-Account Units. For more information, see "When Sub-Account Units Are Valued," beginning on page 19. . Please note that for the remainder of The Payout Options section, "you" means the person we are obligated to pay. INTEREST INCOME You keep the Proceeds with us to earn interest at a specified rate. The Proceeds can be paid at the end of 12-, six-, three- or one-month intervals. You may withdraw any outstanding balance by making a written request of us at our Home Office. We will pay interest on the outstanding balance at a rate of at least 2.5% per year. We will determine annually if we will pay any interest in excess of 2.5%. Upon your death, we will pay any outstanding balance to your estate. INCOME FOR A FIXED PERIOD You keep the Proceeds with us, but are paid at specified intervals over a number of years (no more than 30). Each payment will consist of a portion of the Proceeds plus interest at a guaranteed rate. The Proceeds can be paid at the beginning of 12-, six-, three- or one-month intervals. You may withdraw any outstanding balance by making a written request of us at our Home Office. We will pay interest at an annually determined rate of at least 2.5% per year. We will determine annually if we will pay any interest in excess of 2.5%. Upon your death, we will pay any outstanding balance to your estate. LIFE INCOME WITH PAYMENTS GUARANTEED We pay you the Proceeds at specified intervals for a guaranteed period (10, 15 or 20 years), and, then, for the rest of your life, if you have outlived the guaranteed period. The Proceeds can be paid at the beginning of 12-, six-, three- or one-month intervals. During the guaranteed period, we will pay interest on the outstanding balance at a rate of at least 2.5% per year. We will determine annually if we will pay any interest in excess of 2.5%. As the payments are based on your lifetime, you cannot withdraw any amount you designate to this option after payments begin. Also, payments will cease upon your death. If you die before the guaranteed period has elapsed, we will make the remaining payments to your estate. If you die after the guaranteed period has elapsed, we will make no payments to your estate. FIXED INCOME FOR VARYING PERIODS You keep the Proceeds with us, but are paid a fixed amount at specified intervals. The total amount payable each year may not be less than 5% of the original Proceeds. The Proceeds can be paid at the beginning of 12-, six-, three- or one-month intervals. You may withdraw any outstanding balance by making a written request of us at our Home Office. We will pay interest on the outstanding balance at a rate of at least 2.5% per year. We will determine annually if we will pay any interest in excess of 2.5%. Upon your death, we will pay any outstanding balance to your estate. JOINT AND SURVIVOR LIFE We pay you the Proceeds in equal payments at specified intervals for the life of the payee who lives longer. The Proceeds can be paid at the beginning of 12-, six-, three- or one-month intervals. As the payments are based on the lifetimes of the payees, you cannot withdraw any amount you designate to this option after payments begin. Also, payments will cease upon the death of the last surviving payee. We will make no payments to the last surviving 25 payee's estate. ALTERNATE LIFE INCOME We use the Proceeds to purchase an annuity with the payee as annuitant. The amount payable will be 102% of our current individual immediate annuity purchase rate on the date you choose this settlement option. The Proceeds can be paid at the end of 12-, six-, three- or one-month intervals. As the payments are based on your lifetime, you cannot withdraw any amount you designate to this option after payments begin. Also, payments will cease upon your death. We will make no payments to your estate. POLICY LOANS While the policy is In Force, you may take an advance of money from the Cash Value otherwise only available upon surrender or maturity, or upon payment of the Death Benefit. We call this advance a policy loan. You may increase your risk of Lapse if you take a policy loan. There also may be adverse tax consequences. You should obtain competent tax advice before you decide to take a policy loan. LOAN AMOUNT AND INTEREST The minimum policy loan you may take is $1,000. You may take no more than the maximum loan value. To determine your maximum loan amount for the first policy year, multiply 50% by the difference between the Cash Value and any surrender charges. After the first, from the Policy Dates, multiply 90% by the difference between the Cash Value and any surrender charges. On the loan amount, we will charge interest, which will accrue daily and be payable at the end of each policy year. If you do not pay the interest, we will add it to the loan amount. The guaranteed policy loan amount interest rate in all policy years is 6%. COLLATERAL AND INTEREST As collateral or security, we will transfer to the loan account an amount equal to the amount of the policy loan. You may request that we transfer this amount from specific Sub-Account portfolios. We will only make a transfer from the fixed investment option if the loan amount exceeds 90% of the Cash Value you have allocated to Sub-Account portfolios. Total policy indebtedness is composed of two components: i) preferred loans; and ii) regular loans. The amount in the policy loan account will be treated as a preferred loan to the extent such amount is less than or equal to the cash value minus the result of: o the premiums excluding any 1035 Exchange amount; less o any withdrawals not taxed as distributions; plus o any loans previously taxed as distributions; plus o any amounts reported to Nationwide as cost basis attributable to exchanges under Section 1035 of the Internal Revenue Code. Any additional loan amounts will be treated as regular loans. Preferred and regular loan amounts will be determined once a year and at any 26 time a new loan is requested. On a current basis, preferred loans will be credited interest daily at an annualized effective rate of 6%, and regular loans will be credited interest daily at an annualized effective rate of 4%. The credited rate for all policy loan accounts is guaranteed never to be lower than 4%. REPAYMENT You may repay all or part of a policy loan at any time while your policy is In Force during the Insured's lifetime. The minimum repayment is $1,000. Interest on the loan amount will be due and payable at the end of each policy year from the Policy Date. If left unpaid, we will add it to the loan amount. While your policy loan is outstanding, we will credit all payments you make as Premium payments, unless you provide written notice that they are to be applied as loan repayments. If you do not specify any Sub-Account portfolios to allocate loan repayments, we will transfer the amount from the policy loan account to the Sub-Account portfolios and fixed investment option based on your allocations as of the date of repayment. EFFECT OF POLICY LOANS We will charge interest on the loan amount at the same time as the collateral amount will be credited interest. In effect, we will net the loan amount interest rate against the interest crediting rate, so that your actual cost of a policy loan will be less than the loan amount interest rate. For more information, see "In Summary: Fee Tables," in particular, the footnotes, beginning on page 5. Nevertheless, keep in mind that the Cash Value we transfer to our loan account as collateral for a policy loan will neither be affected by the investment performance of the Sub-Account portfolios, nor credited with the interest rates accruing on the fixed account. Whether repaid, a policy loan will affect the policy, the net Cash Surrender Value and the Death Benefit. Repaying a policy loan will cause the Death Benefit less outstanding policy loans and net Cash Surrender Value to increase by the repayment amount. LAPSE So long as your policy's Cash Surrender Value is enough to cover the deduction of charges on each monthly anniversary from the Policy Date, the policy will remain In Force. The Cash Surrender Value could be below the amount of a monthly deduction, for example, because you have not paid enough Premium, or because Investment Experience has decreased the Cash Surrender Value, or both. We do not guarantee that paying the initial or subsequent Premiums will offset adverse Investment Experience so that the policy will remain In Force. Stated another way, this policy will Lapse when the Grace Period ends before you make a required Premium payment as stated in a notice. GRACE PERIOD We will send you a notice when the Grace Period begins. The notice will state an amount of Premium required to avoid Lapse that is equal to three times the current monthly deductions or, if it is less, the Premium that will bring the guaranteed policy continuation provision back into effect. If you do not pay this Premium within 61 days, the policy and all Riders will Lapse. The Grace Period will not alter the operation of the policy or the payment of Proceeds. REINSTATEMENT You may reinstate a Lapsed policy by: > submitting a written request at any time within three years after the end of the Grace Period and prior to the Maturity Date; > providing evidence of insurability satisfactory to us; > paying sufficient Premium to cover all policy charges that were due and unpaid during the Grace Period; > paying additional Premiums at least equal to 3 times the maximum guaranteed cost of insurance charges; For more information, see "In Summary: Fee Tables" beginning on page 5. > repaying any indebtedness against the policy which existed at the end of the Grace Period. At the same time, you may also reinstate any Riders, but subject to evidence of insurability satisfactory to us. The effective date of a reinstated policy will be the monthly anniversary date on or next following the date we approve the application for reinstatement. If the policy is reinstated, the Cash Value on the date of reinstatement will be set equal to a surrender charge calculated for the period between the initial Policy Date and the date of reinstatement. We will then add any Premiums or loan repayments that you made to reinstate the policy. The allocations to Sub-Account portfolios in effect at the start of the Grace Period will be reinstated, unless you provide otherwise. TAXES The tax treatment of life insurance policies under the Code is a multifaceted subject. The tax treatment of your policy will depend on your particular circumstances. We urge you to seek competent tax advice regarding the tax treatment of the policy given your situation. The following discussion provides an overview of the Code's provisions relating to certain common transactions involving the policy. It is not and cannot be comprehensive. It cannot replace consulting with a competent tax professional. TYPES OF TAXES OF WHICH TO BE AWARE Federal Income Tax. Generally, the United States assesses a tax on income which is broadly defined to include all items of income from whatever source, unless the item is specifically excluded. Certain expenditures can reduce income for tax purposes and correspondingly the amount of tax payable. These expenditures are called deductions. While there are many more income tax concepts under the Code, the concepts of "income" and "deduction" are the most fundamental to the federal income tax treatment that pertains to this policy. Federal Transfer Tax. In addition to the income tax, the United States also assesses a tax on some or all of the value of certain transfers of wealth made by gift while a person is living (the federal gift tax), and by bequest or otherwise at the time of a person's death (the federal estate tax). The federal estate tax is integrated with the federal gift tax under a unified tax rate 28 schedule. In general, in 2003, an estate of less than $1,000,000 (inclusive of certain pre-death gifts) will not incur a federal estate tax liability. The $1 million amount increases to $1.5 million in 2004 and 2005; $2 million in 2006, 2007, and 2008; and $3.5 million in 2009. The federal estate tax is scheduled to be repealed effective after 2009; however, unless Congress acts to make that repeal permanent, the estate tax is scheduled to be reinstated with respect to decedents who die after December 31, 2010. Also, an unlimited marital deduction may be available for federal estate tax purposes for certain amounts that pass to the surviving spouse. In addition, if the transfer is made to someone two or more generations younger than the transferor, the transfer may be subject to the federal generation-skipping transfer tax ("GSTT"). The GSTT provisions generally apply to the same transfers that are subject to estate or gift taxes. The tax is imposed at a flat rate equal to the maximum estate tax rate (for 2003, 49%, decreasing by 1 percentage point each year until 2007, when it will be 45%), and there is a provision for an aggregate $1 million exemption. The GSTT estate tax is scheduled to be repealed effective after 2009; however, unless Congress acts to make that repeal permanent, the GSTT tax is scheduled to be reinstated on January 1, 2011 at a rate of 55%. State and Local Taxes. 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. While these taxes may or may not be substantial in your case, the specific nature of these taxes preclude a useful description of them in this prospectus. BUYING THE POLICY Note to Non-Resident Aliens. Specific tax laws and rules apply to non-resident aliens of the United States including certain withholding requirements with respect to pre-death distributions from the policy. In addition, foreign law may impose additional taxes on the policy, the Death Benefit, or other distributions and/or ownership of the policy. If you are a non-resident alien, you should confer with a competent tax professional with respect to the tax treatment of this policy. Federal Income Tax. Generally, the Code treats life insurance Premiums as a personal expense. This means that under the general rule you cannot deduct from your taxable income the Premiums paid to purchase the policy. Federal Transfer Tax. Generally, the Code treats the payment of Premiums on a life insurance policy as a gift when the Premium payment benefits someone else, like the policy owner. Gifts are not generally included in the recipient's taxable income. If you (whether or not you are the Insured) transfer ownership of the policy to another person, the transfer may be subject to a federal gift tax. The tax is imposed at a flat rate equal to the maximum estate tax rate (for 2003, 49%, decreasing by 1 percentage point each year until 2007, when it will be 45%), and there is a provision for an aggregate $1 million exemption. The GSTT estate tax is scheduled to be repealed effective after 2009; however, unless Congress acts to make that repeal permanent, the GSTT tax is scheduled to be reinstated on January 1, 2011. In addition, if you transfer the policy to someone two or more generations younger than you, the transfer may be subject to the GSTT, with the taxable amount equaling the value of the policy. 29 INVESTMENT GAIN IN THE POLICY The income tax treatment of changes in the policy's Cash Value depends on whether the policy is "life insurance" under the Code. If the policy meets the definition of life insurance, then the increase in the policy's Cash Value is not included in your taxable income for federal income tax purposes. To qualify as life insurance, the policy must meet certain tests set out in Section 7702 of the Code. In addition to meeting the tests required under Section 7702, Section 817(h) of the Code requires that the investments of the separate account be adequately diversified. Regulations under Code Section 817(h) provide that a variable life policy that fails to satisfy the diversification standards will not be treated as life insurance unless such failure was inadvertent, is corrected, and the policy owner or the issuer pays an amount to the IRS. If the failure to diversify is not corrected, you will be deemed to be the owner of the underlying securities and taxed on the earnings of your policy's account. Representatives of the IRS have suggested, from time to time, that the number of Sub-Account portfolios 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 Sub-Account portfolios, transfers between Sub-Account portfolios, exchanges of Sub-Account portfolios or changes in investment objectives of Sub-Account portfolios such that the policy would no longer qualify as life insurance under Section 7702 of the Code, we will take whatever steps are available to remain in compliance. We will monitor compliance with the Code Section 817(h) and the regulations applicable to Section 817(h) and, to the extent necessary, will change the objectives or assets of the Sub-Account investments to remain in compliance. We will also monitor the Policy's compliance with Code Section 7702. Thus, the policy should receive federal income tax treatment as life insurance. PERIODIC WITHDRAWALS, NON-PERIODIC WITHDRAWALS AND LOANS The tax treatment described in this section applies to withdrawals and loans you choose to take from the policy. It also applies to Premiums we accept but then return to meet the Code's definition of life insurance. The income tax treatment of distributions of cash from the policy depends on whether the policy is also a "modified endowment contract" under the Code. Generally, the income tax consequences of owning a life insurance contract that is not a modified endowment contract are more advantageous than the tax consequences of owning a life insurance contract that is a modified endowment contract. The policies offered by this prospectus may or may not be issued as modified endowment contracts. If a contract is issued as a modified endowment contract, it will always be a modified endowment contract; a contract that is not issued as a modified endowment contract can become a modified endowment contract due to subsequent transactions with respect to the contract, such as payment of additional Premiums. When the Policy is Life Insurance that is a Modified Endowment Contract. Section 7702A of the Code defines modified endowment contracts as those 30 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. Under certain conditions, a policy may become a modified endowment contract, 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 Code. The Code provides special rules for the taxation of surrenders, partial surrenders, loans, collateral assignments and other pre-death distributions from modified endowment contracts. 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 the policy owner is over age 59 1/2, disabled, or the distribution is part of a series of substantially equal periodic payments as defined in the Code. When the Policy is Life Insurance that is NOT a Modified Endowment Contract. If the policy is not issued as a modified endowment contract, Nationwide will monitor Premiums paid and will notify the policy owner when the policy is in jeopardy of becoming a modified endowment contract. If a policy is not a modified endowment contract, a cash distribution during the first 15 years after a policy is issued which causes a reduction in Death Benefits may still become fully or partially taxable to the policy owner pursuant to Section 7702(f)(7) of the Code. You should carefully consider this potential tax ramification and seek further information before initiating any changes in the terms of the policy. Distributions from life insurance contracts that are not modified endowment contracts are treated as being (a) from the Premiums paid into the contract, and then (b) from the income in the contract. Because Premium payments are generally nondeductible, distributions not in excess of aggregate Premium payments are generally not includible in income; instead, they reduce the owner's "cost basis" in the contract. In addition, a loan from life insurance contracts that are not modified endowment contracts are not taxable when made, although it can be treated as a distribution if it is forgiven during the owner's lifetime. Contracts that are not modified endowment contracts are not subject to the 10% early distribution penalty tax. TERMINAL ILLNESS Certain distributions made under a policy on the life of a "terminally ill individual," as that term is defined in the Code, are treated as death proceeds. These distributions from the policy are subject to the Death Benefit rules of Section 101 of the Code described below in this section on Taxes under the heading "Taxation Of Death Benefits." SURRENDER OF THE POLICY 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 you receive 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. 31 WITHHOLDING Distributions of income from a life insurance policy, including a life insurance policy that is a modified endowment contract, are subject to federal income tax withholding. Generally, the recipient may elect not to have the withholding taken from the distribution. 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. A distribution of income from a contract may be subject to mandatory back-up withholding. Mandatory back-up withholding means we are required to withhold taxes on a distribution at the rate established by section 3406 of the Code and the recipient cannot elect to receive the entire distribution. Mandatory backup withholding may arise if we have not been provided a taxpayer identification number, or if the IRS notifies us that back-up withholding is required. In certain employer-sponsored life insurance arrangements, participants may be required to report for income tax purposes, one or more of the following: > the value each year of the life insurance protection provided; > an amount equal to any employer-paid Premiums; or > some or all of the amount by which the current value exceeds the employer's interest in the policy. Participants in an employer sponsored plan relating to this policy should consult with the sponsor or the administrator of the plan, and/or with their personal tax or legal adviser, to determine the tax consequences, if any, of their employer-sponsored life insurance arrangements. EXCHANGING THE POLICY FOR ANOTHER LIFE INSURANCE POLICY As described in the section "Surrenders," you ordinarily will pay taxes on amounts that you receive in excess of your Premium payments when you completely surrender the policy. If, however, you exchange the policy for another life insurance policy, a modified endowment contract or an annuity contract, you will not be taxed on the excess amount if the exchange meets the requirements of Code Section 1035. To meet Section 1035 requirements, the Insured named in the policy must be the Insured for the new policy or contract. Also, the new policy or contract cannot extend the Maturity Date of the policy or otherwise delay a distribution that would extend when tax would be payable under the policy. Generally, the new policy or contract will be treated as having the same date of issue and tax basis as the old contract. TAXATION OF DEATH BENEFITS Federal Income Tax. The amount of the Death Benefit payable under a policy generally is excludable from gross income of the beneficiary under Section 101 of the Code. However, if the policy is transferred for valuable consideration, then a portion of the Death Benefit may be includable in the beneficiary's gross income. Federal Transfer Taxes. When the Insured dies, the Death Benefit will generally be included in such Insured's federal gross estate if: (1) the Proceeds were payable to or for the benefit of the Insured's estate; or (2) the 32 Insured held any "incident of ownership" in the policy at death or at any time within three years of death. An incident of ownership is, in general, any right that may be exercised by the policy owner, such as the right to borrow on the policy, or the right to name a new beneficiary. If the beneficiary is two or more generations younger than the Insured, the payment of the Proceeds at the death of the Insured may be subject to the GSTT. Pursuant to regulations issued by the U.S. Secretary of the Treasury, we may be required to withhold a portion of the Proceeds and pay them directly to the IRS as the GSTT liability. TAXES AND THE VALUE OF YOUR POLICY As discussed in "Charges," the Units you hold in the separate account are adjusted to reflect a Premium Tax charge for certain taxes assessed by federal and state taxing authorities. This charge relates to taxes associated with the payment of Premium or certain other policy acquisition costs. This charge decreases your Unit values. For federal income tax purposes, the separate account is not a separate entity from Nationwide Life Insurance Company. Thus, the tax status of the separate account is not distinct from our status as a life insurance company. Investment income and realized capital gains on the assets of the separate account are reinvested and taken into account in determining the value of Sub-Account Units. As a result, such investment income and realized capital gains are automatically applied to increase reserves under the policies. At present, we do not initially expect to incur any federal income tax liability that would be chargeable to the Units you hold in the separate account. Based upon these expectations, no charge is currently being made against your Units in the separate account for federal income taxes. If, however, we determine that taxes may be incurred, we reserve the right to assess a charge for taxes. We may also incur state and local taxes (in addition to those described in the discussion of the Premium Taxes) in several states. At present, these taxes are not significant. If they increase, however, charges for such taxes may be made that would decrease the value of your Units in the separate account. TAX CHANGES The foregoing discussion, which is based on our understanding of federal tax laws as currently interpreted by the IRS, is general and is not intended as tax advice. The 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. 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, 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 33 imposed by the United States. The foreign law (including regulations, rulings, and case law) may change and impose additional taxes on the policy, payment of the Death Benefit, 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. We make no representation as to the likelihood of the continuation of these current laws, interpretations, and policies. In 2001, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) was enacted into law. EGTRRA contained numerous changes to the federal income, gift, estate and generation skipping transfer taxes, many of which are not scheduled to become effective until a future date. Among other matters, EGTRRA provides for the repeal of the federal estate and generation skipping transfer taxes after 2009; however, unless Congress and the President enact additional legislation, EGTRRA also provides that all of those changes will "sunset" after 2010, and the estate and generation skipping transfer taxes will be reinstated as if EGTRRA had never been enacted. 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 your independent legal, tax and/or financial adviser. NATIONWIDE LIFE INSURANCE COMPANY We are a stock life insurance company organized under Ohio law. We were founded in March 1929 and our Home Office is One Nationwide Plaza, Columbus, Ohio 43215. We provide long-term savings products by issuing life insurance, annuities and other retirement products. NATIONWIDE VLI SEPARATE ACCOUNT-2 ORGANIZATION, REGISTRATION AND OPERATION Nationwide VLI Separate Account-2 is a separate account established under Ohio law. We own the assets in this account, and we are obligated to pay all benefits under the policies. We may use the account to support other variable life insurance policies we issue. It is registered with the SEC as a unit investment trust under the Investment Company Act of 1940 ("1940 Act") and qualifies as a "separate account" within the meaning of the federal securities laws. This registration, however, does not involve the SEC's supervision of this account's management or investment practice or policies. It is divided into Sub-Accounts that may invest in shares of the available Sub-Account portfolios. We buy and sell the Sub-Account portfolio shares at NAV. Any dividends and distributions from a Sub-Account portfolio are reinvested at NAV in shares of that Sub-Account portfolio. Income, gains, and losses, whether or not realized, from the assets in the account will be credited to, or charged against, the account without regard to our other income, gains, or losses. Income, gains, and losses credited to, or charged against, a Sub-Account reflect the Sub-Account's own Investment Experience and not the Investment Experience of our other assets. Its assets 34 are held separately from our other assets and are not part of our general account. We may not use the separate account's assets to pay any of our liabilities other than those arising from the policies. If the separate account's assets exceed the required reserves and its other liabilities, we may transfer the excess to our general account. The separate account may include other Sub-Accounts that are not available under the policies, and are not discussed in this prospectus. If investment in the mutual funds or a particular portfolio is no longer possible, in our judgment becomes inappropriate for the purposes of the policy, or for any other reason in our sole discretion, we may substitute another mutual fund or portfolio without your consent. The substituted mutual fund or portfolio may have different fees and expenses. Substitution may be made with respect to existing investments or the investments of future Premium, or both. We will comply with federal securities laws to effect a substitution. Furthermore, we may close Sub-Accounts to allocations of Premiums or policy value, or both, at any time in our sole discretion. The mutual funds, which sell their shares to the Sub-Accounts pursuant to participation agreements, also may terminate these agreements and discontinue offering their shares to the Sub-Accounts. In addition, we reserve the right to make other structural and operational changes affecting this separate account. We do not guarantee any money you place in this separate account. The value of each Sub-Account will increase or decrease, depending on the investment performance of the corresponding portfolio. You could lose some or all of your money. ADDITION, DELETION, OR SUBSTITUTION OF MUTUAL FUNDS Where permitted by applicable law, we reserve the right to: > remove, combine, or add Sub-Accounts and make new Sub-Accounts available to you; > substitute shares of another mutual fund, which may have different fees and expenses, for shares of an existing mutual fund; > substitute or close Sub-Accounts to allocations; > transfer assets supporting the policies from one Sub-Account to another or from the separate account to another separate account; > combine the separate account with other separate accounts, and/or create new separate accounts; > deregister the separate account under the 1940 Act, or operate the separate account as a management investment company under the 1940 Act, or as any other form permitted by the law; and > modify the policy provisions to reflect changes in the Sub-Accounts and the separate account to comply with applicable law. The portfolios that sell their shares to the Sub-Accounts pursuant to participation agreements also may terminate these agreements and discontinue offering their shares to the Sub-Accounts. We will not make any such changes without receiving necessary approval of the SEC and applicable state insurance departments. We will notify you of any changes. 35 VOTING RIGHTS Unless there is a change in existing law, on all matters submitted to shareholders, we will vote our portfolio shares attributable to your allocations in a Sub-Account only as you instruct. Before a vote of a portfolio's shareholders occurs, you will have the right to instruct us based on the number of portfolio shares that corresponds to the amount of policy account value you have in the portfolio (as of a date set by the portfolio). We will vote shares for which no instructions are received in the same proportion as those that are received. The number of shares which a policy owner may vote is determined by dividing the Cash Value of the amount they have allocated to an underlying mutual fund by the Net Asset Value of that underlying mutual fund. We will designate a date for this determination not more than 90 days before the shareholder meeting. LEGAL PROCEEDINGS NATIONWIDE LIFE INSURANCE COMPANY Nationwide is a party to litigation and arbitration proceedings in the ordinary course of its business, none of which is expected to have a material adverse effect on Nationwide. In recent years, life insurance companies have been named as defendants in lawsuits, including class action lawsuits relating to life insurance and annuity pricing and sales practices. A number of these lawsuits have resulted in substantial jury awards or settlements. On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court related to the sale of deferred annuity products for use as investments in tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company). On May 3, 1999, the complaint was amended to, among other things, add Marcus Shore as a second plaintiff. The amended complaint is brought as a class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by Nationwide and the other named Nationwide affiliates, which were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. On June 11, 1999, Nationwide and the other named defendants filed a motion to dismiss the amended complaint. On March 8, 2000, the Court denied the motion to dismiss the amended complaint filed by Nationwide and the other named defendants. On January 25, 2002, the plaintiffs filed a motion for leave to amend their complaint to add three new named plaintiffs. On February 9, 2002, the plaintiffs filed a motion for class certification. On April 16, 2002, Nationwide filed a motion for summary judgment on the individual claims of plaintiff Mercedes Castillo. On May 28, 2002, the Court granted the motion of Marcus Shore to withdraw as a named plaintiff and denied plaintiffs' motion to add new persons as named plaintiffs, so the action is now proceeding with Mercedes Castillo as the only named plaintiff. On November 4, 2002, the Court issued a decision granting Nationwide's motion for summary judgment on all of plaintiff Mercedes Castillo's individual claims, and ruling that plaintiff's motion for class certification is moot. Judgment for Nationwide was entered on November 15, 36 2002. On December 16, 2002, plaintiff Mercedes Castillo filed a notice of appeal from the Court's orders (a) granting Nationwide's motion for summary judgment; and (b) denying Castillo's motion for leave to amend the complaint to add three new named plaintiffs. Nationwide's responsive brief is due by April 23, 2003 and plaintiff's reply brief is due by May 12, 2003. Nationwide intends to defend this lawsuit vigorously. On August 15, 2001, Nationwide was named in a lawsuit filed in Connecticut federal court titled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. On September 6, 2001, the plaintiffs amended their complaint to include class action allegations. The plaintiffs seek to represent a class of retirement plans that purchased variable annuities from Nationwide to fund qualified ERISA retirement plans. The amended complaint alleges that the retirement plans purchased variable annuity contracts from Nationwide that allowed plan participants to invest in funds that were offered by separate mutual fund companies; that Nationwide was a fiduciary under ERISA and that Nationwide breached its fiduciary duty when it accepted certain fees from the mutual fund companies that purportedly were never disclosed by Nationwide; and that Nationwide violated ERISA by replacing many of the funds originally included in the plaintiffs' annuities with "inferior" funds because the new funds purportedly paid higher fees to Nationwide. The amended complaint seeks disgorgement of the fees allegedly received by Nationwide and other unspecified compensatory damages, declaratory and injunctive relief and attorney's fees. On December 3, 2001, the plaintiffs filed a motion for class certification. Nationwide is opposing that motion. Nationwide's Motion to Dismiss was denied on September 11, 2002. On January 14, 2003, plaintiffs filed a motion to file a second amended complaint and the motion was granted on February 21, 2003. The second amended complaint removes the claims asserted against Nationwide concerning a violation of ERISA through the replacement of many of the funds originally included in the plaintiffs' annuities with "inferior" funds that purportedly paid higher fees to Nationwide. Nationwide intends to defend this lawsuit vigorously. There can be no assurance that any such litigation will not have a material adverse effect on Nationwide in the future. NATIONWIDE INVESTMENT SERVICES CORPORATION The general distributor, Nationwide Investment Services Corporation, is not engaged in litigation of a material nature. FINANCIAL STATEMENTS The Statement of Additional Information (SAI) contains financial statements of Nationwide Life Insurance Company and subsidiaries and Nationwide VLI Separate Account - 2. You may obtain a copy of the SAI FREE OF CHARGE by contacting us at the address or telephone number on the first page of this prospectus. You should distinguish the financial statements of the company and subsidiaries from the financial statements of the separate account. Please consider the financial statements of the company only as bearing on our ability to meet the obligations under the policy. You should not consider the financial statements of the company and subsidiaries as affecting the investment performance of the assets of the separate account. 37 APPENDIX A: DEFINITIONS ATTAINED AGE - The Insured's age upon the issue of full insurance coverage plus the number of full years since the Policy Date. CASH SURRENDER VALUE - The Cash Value, subject to Indebtedness and the surrender charge. CASH VALUE - The total of the Sub-Accounts you have chosen, which will vary with Investment Experience, and the policy loan and fixed accounts, to which interest will be credited daily. We will deduct partial surrenders and the policy's periodic charges from the Cash Value. CODE - The Internal Revenue Code of 1986, as amended. DEATH BENEFIT - The amount we pay to the beneficiary upon the Insured's death, before payment of any unpaid outstanding loan balances or charges. GRACE PERIOD - A 61-day period after which the Policy will Lapse if you do not make sufficient payment. HOME OFFICE - Our Home Offices are located at One Nationwide Plaza, Columbus, Ohio 43215. IN FORCE - The insurance coverage is in effect. INDEBTEDNESS - The total amount of all outstanding policy loans, including principal and interest due. INSURED - The person whose life we insure under the policy, and whose death triggers the Death Benefit. INVESTMENT EXPERIENCE - The performance of a mutual fund in which a Sub-Account portfolio invests. LAPSE - The policy terminates without value. MATURITY DATE - The policy anniversary on or next following the Insured's 100th birthday. NET AMOUNT AT RISK - The policy's base Death Benefit minus the policy's Cash Value. A-1 NET ASSET VALUE (NAV) - The price of each share of a mutual fund in which a Sub-Account portfolio invests. It is calculated by subtracting the mutual fund's liabilities from its total assets, and dividing that figure by the number of shares outstanding. We use NAV to calculate the value of Units. NAV does not reflect deductions we make for charges we take from Sub-Accounts. Unit values do reflect these deductions. POLICY DATA PAGE(S) - The Policy Data Page contains more detailed information about the policy, some of which is unique and particular to the owner, the beneficiary and the Insured. POLICY DATE - The date the policy takes effect as shown on the policy data page. Policy years and months are measured from this date. POLICY PROCEEDS OR PROCEEDS - Policy Proceeds may constitute the Death Benefit, or the amount payable if the policy matures or you choose to surrender the policy adjusted to account for any unpaid charges or policy loans and Rider benefits. PREMIUM - The amount of money you pay to begin and continue the policy. RIDER - An optional benefit you may purchase under the policy. SEC - The Securities and Exchange Commission. SPECIFIED AMOUNT - The dollar or face amount of insurance the owner selects. SUB-ACCOUNTS - The mechanism we use to account for your allocations of Premium and Cash Value among the policy's variable investment options. UNIT - The measure of your investment in, or share of, a Sub-Account after we deduct for transaction fees and periodic charges. Initially, we set the Unit value at $10 for each Sub-Account. US, WE, OUR or the COMPANY - Nationwide Life Insurance Company. VALUATION PERIOD - The period during which we determine the change in the value of the Sub-Accounts. One Valuation Period ends and another begins with the close of normal trading on the New York Stock Exchange. A-2 YOU, YOUR or the POLICY OWNER OR OWNER - The person named as the owner in the application, or the person assigned ownership rights. A-3 - -------------------------------------------------------------------------------- APPENDIX B: SUB-ACCOUNT PORTFOLIOS - -------------------------------------------------------------------------------- The Sub-Account portfolios listed below are designed primarily as investments for variable annuity contracts and variable life insurance policies issued by insurance companies. There is no guarantee that the investment objectives will be met. Total Sub-Account Portfolio Annual Operating Expenses are expenses that are deducted from Sub-Account portfolio assets, including management fees, distribution (12b-1) fees, and other expenses. Please refer to the prospectus for each Sub-Account portfolio for more detailed information.
AIM VARIABLE INSURANCE FUNDS, INC. - AIM V.I. BASIC VALUE FUND: SERIES I SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: AIM Advisors, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.16% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. - AIM V.I. CAPITAL APPRECIATION FUND: SERIES I SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: AIM Advisors, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Growth of capital. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.85% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. - AIM V.I. CAPITAL DEVELOPMENT FUND: SERIES I SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: AIM Advisors, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.14% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. - ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO: CLASS A - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Alliance Capital Management, L.P. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.41%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive certain expenses associated with the sub-account portfolio to prevent total expenses, on an annualized basis, from exceeding 1.20%. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.13%. ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. - ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO: CLASS A - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Alliance Capital Management, L.P. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Current income and capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.68% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-1
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP BALANCED FUND: CLASS I (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth and current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.90% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP CAPITAL APPRECIATION FUND: CLASS I (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER SEPTEMBER 27, 1999) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.00% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP INCOME & GROWTH FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.70% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP INTERNATIONAL FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.30% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP ULTRA FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.00% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP VALUE FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.95% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- AMERICAN CENTURY VARIABLE PORTFOLIOS II, INC. - AMERICAN CENTURY VP INFLATION PROTECTION FUND: CLASS II - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term total return using a strategy that seeks to protect against U.S. inflation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.76% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-2
CREDIT SUISSE TRUST - GLOBAL POST-VENTURE CAPITAL PORTFOLIO (NOT AVAILABLE TO RECEIVE TRANSFERS OR NEW PREMIUM PAYMENTS EFFECTIVE MAY 1, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Credit Suisse Asset Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.71%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.40%. The investment adviser may discontinue the reimbursements and waivers at any time. CREDIT SUISSE TRUST - INTERNATIONAL FOCUS PORTFOLIO (NOT AVAILABLE TO RECEIVE TRANSFERS OR NEW PREMIUM PAYMENTS EFFECTIVE MAY 1, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Credit Suisse Asset Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.42% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- CREDIT SUISSE TRUST - SMALL CAP GROWTH PORTFOLIO (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Credit Suisse Asset Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.14% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- DREYFUS INVESTMENT PORTFOLIOS - SMALL CAP STOCK INDEX PORTFOLIO: SERVICE SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: To match performance of the S&P Small Cap 600 Index. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.60% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- DREYFUS STOCK INDEX FUND, INC.: INITIAL SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: To match total return of S&P 500 Composite Stock Price Index. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.27% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND - APPRECIATION PORTFOLIO: INITIAL SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.78% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND - DEVELOPING LEADERS PORTFOLIO: INITIAL SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Maximum capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.81% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-3
DREYFUS VARIABLE INVESTMENT FUND - GROWTH AND INCOME PORTFOLIO: INITIAL SHARES (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth, current income and growth of income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.80% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.: INITIAL SHARES (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth with current income as a secondary goal. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.80% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FEDERATED INSURANCE SERIES - FEDERATED AMERICAN LEADERS FUND II: PRIMARY SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Federated Investment Management Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.13%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.88%. The investment adviser may discontinue the reimbursements and waivers at any time. FEDERATED INSURANCE SERIES - FEDERATED CAPITAL APPRECIATION FUND II: PRIMARY SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Federated Investment Management Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 4.37%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.90%. The investment adviser may discontinue the reimbursements and waivers at any time. FEDERATED INSURANCE SERIES - FEDERATED QUALITY BOND FUND II: PRIMARY SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Federated Investment Management Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.23%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.70%. The investment adviser may discontinue the reimbursements and waivers at any time. FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Reasonable income and capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.67% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP GROWTH PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.77% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-4
FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP HIGH INCOME PORTFOLIO: SERVICE CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of current income and capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.80% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP OVERSEAS PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management and Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.00% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - VIP II ASSET MANAGER PORTFOLIO: INITIAL CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.63% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - VIP II CONTRAFUND(R) PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.78% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - VIP II INVESTMENT GRADE BOND PORTFOLIO: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.54% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND III - VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.80% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND III - VIP III MID CAP PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.80% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-5
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III - VIP III VALUE STRATEGIES PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.52%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.10%. The investment adviser may discontinue the reimbursements and waivers at any time. FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - FRANKLIN RISING DIVIDENDS SECURITIES FUND: CLASS 1 - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Franklin Advisory Services, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.79%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the Sub-Account Portfolio. Net of such waivers and reimbursements, total Sub-Account Portfolio annual operating expenses are 0.78%. The reimbursements and waivers are guaranteed to remain in effect until December 31, 2003. FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - FRANKLIN SMALL CAP VALUE SECURITIES FUND: CLASS 1 - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Franklin Advisory Services, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.79%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.76%. The reimbursements and waivers are guaranteed to remain in effect until December 31, 2003. FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - TEMPLETON FOREIGN SECURITIES FUND: CLASS 1 - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Templeton Investment Counsel, Inc - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.90%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.88%. The reimbursements and waivers are guaranteed to remain in effect until December 31, 2003. GARTMORE VARIABLE INSURANCE TRUST - COMSTOCK GVIT VALUE FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Van Kampen Asset Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth and income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.11% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-6
GARTMORE VARIABLE INSURANCE TRUST - DREYFUS GVIT INTERNATIONAL VALUE FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.01%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *Sub-account portfolio annual expenses are estimated. GARTMORE VARIABLE INSURANCE TRUST - DREYFUS GVIT MID CAP INDEX FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.75% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - FEDERATED GVIT HIGH INCOME BOND FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Federated Investment Counseling - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.98% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT EMERGING MARKETS FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Global Asset Management Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Gartmore Global Partners, an indirect subsidiary of Nationwide Mutual Insurance Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.41%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The sub-account portfolio operates under an expense cap of 1.41%. The expense cap is guaranteed to remain in effect until July 1, 2003. GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT MID CAP GROWTH FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.16% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-7
GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL FINANCIAL SERVICES FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Global Asset Management Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Gartmore Global Partners, an indirect subsidiary of Nationwide Mutual Insurance Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.40%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The sub-account portfolio operates under an expense cap of 1.40%. The expense cap is guaranteed to remain in effect until July 1, 2003. GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL HEALTH SCIENCES FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.30%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The sub-account portfolio operates under an expense cap of 1.30%. The expense cap is guaranteed to remain in effect until July 1, 2003. GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.39%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.38%. The reimbursements and waivers are guaranteed to remain in effect until July 1, 2003. GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL UTILITIES FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Global Asset Management Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Gartmore Global Partners, an indirect subsidiary of Nationwide Mutual Insurance Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.24%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.20%. The reimbursements and waivers are guaranteed to remain in effect until July 1, 2003.
B-8
GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GOVERNMENT BOND FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.73% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GROWTH FUND: CLASS I (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.85% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT INTERNATIONAL GROWTH FUND: CLASS I (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Global Asset Management Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Gartmore Global Partners, an indirect subsidiary of Nationwide Mutual Insurance Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.33%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.30%. The reimbursements and waivers are guaranteed to remain in effect until July 1, 2003.
B-9
GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT INVESTOR DESTINATIONS FUNDS - --------------------------- ------------------------------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - --------------------------- ------------------------------------------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return by seeking income and, DESTINATIONS CONSERVATIVE secondarily, long term growth of capital. The Fund invests in a FUND target allocation mix of 10% large cap U.S. stocks, 5% mid cap U.S. stocks, 5% international stocks, 35% bonds, and 45% short-term investments. - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- Total Sub-Account Portfolio 0.56%* Annual Operating Expenses: - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return by seeking income and, DESTINATIONS MODERATELY secondarily, growth of capital. The Fund invests in a target CONSERVATIVE FUND allocation mix of 20% large cap U.S. stocks, 10% mid cap U.S. stocks, 10% international stocks, 35% bonds, and 25% short-term investments. - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- Total Sub-Account Portfolio 0.56%* Annual Operating Expenses: - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return by seeking growth of capital DESTINATIONS MODERATE FUND and income. The Fund invests in a target allocation mix of 30% large cap U.S. stocks, 10% mid cap U.S. stocks, 5% small cap U.S. stocks, 15% international stocks, 25% bonds, and 15% short-term investments. - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- Total Sub-Account Portfolio 0.56%* Annual Operating Expenses: - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return primarily by seeking growth of DESTINATIONS MODERATELY capital, but also income. The Fund invests in a target allocation AGGRESSIVE FUND mix of 35% large cap U.S. stocks, 15% mid cap U.S. stocks, 5% small cap U.S. stocks, 25% international stocks, 15% bonds, and 5% short-term investments. - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- Total Sub-Account Portfolio 0.56%* Annual Operating Expenses: - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return primarily by seeking growth of DESTINATIONS AGGRESSIVE capital. The Fund invests in a target allocation mix of 40% large FUND cap U.S. stocks, 15% mid cap U.S. stocks, 10% small cap U.S. stocks, 30% international funds, and 5% bonds. - --------------------------- ----------------------------------- ------------------------------------------------------------------- - --------------------------- ----------------------------------- ------------------------------------------------------------------- Total Sub-Account Portfolio 0.56%* Annual Operating Expenses: - --------------------------- ----------------------------------- ------------------------------------------------------------------- *The sub-account portfolios operate under an expense cap of 0.56%. The expense cap is guaranteed to remain in effect until May 1, 2003. The Investor Destination Funds are designed to provide diversification and asset allocation across several types of investments and asset classes, primarily by investing in underlying funds. Therefore, in addition to the expense of the Investor Destination Funds, a contract owner will be indirectly paying a proportionate share of the applicable fees and expenses of the underlying funds. GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT MONEY MARKET FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.62% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-10
GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT NATIONWIDE LEADERS FUND: CLASS I (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.18%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The sub-account portfolio operates under an expense cap of 1.18%. The expense cap is guaranteed to remain in effect until July 1, 2003. GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT NATIONWIDE FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.84% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT U.S. GROWTH LEADERS FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.18%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The sub-account portfolio operates under an expense cap of 1.18%. The expense cap is guaranteed to remain in effect until July 1, 2003. GARTMORE VARIABLE INSURANCE TRUST - GVIT SMALL CAP GROWTH FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-advisers: Neuberger Berman, LLC; Waddell & Reed Investment Management Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.35% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GVIT SMALL CAP VALUE FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: The Dreyfus Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.11% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-11
GARTMORE VARIABLE INSURANCE TRUST - GVIT SMALL COMPANY FUND: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-advisers: The Dreyfus Corporation; Gartmore Global Partners, an indirect subsidiary of Nationwide Mutual Insurance Company; Neuberger Berman, LLC; Strong Capital Management, Inc.; Waddell & Reed Investment Management Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.18% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - VAN KAMPEN GVIT MULTI SECTOR BOND FUND: CLASS II - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Morgan Stanley Investment Management Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Above average total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.27%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *sub-account portfolio annual expenses are estimated. GARTMORE VARIABLE INSURANCE TRUST - TURNER GVIT GROWTH FOCUS FUND: CLASS I (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER JANUARY 25, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an indirect subsidiary of Nationwide Financial Services, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Sub-adviser: Turner Investment Partners, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.05%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The sub-account portfolio operates under an expense cap of 1.05%. The expense cap is guaranteed to remain in effect until July 1, 2003. JANUS ASPEN SERIES - BALANCED PORTFOLIO: SERVICE SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.92% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- JANUS ASPEN SERIES - CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.92% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- JANUS ASPEN SERIES - GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.97% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-12
JANUS ASPEN SERIES - INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.99% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- MFS(R) VARIABLE INSURANCE TRUST - MFS INVESTORS GROWTH STOCK SERIES: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Massachusetts Financial Services Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth and future income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.88% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- MFS(R) VARIABLE INSURANCE TRUST - MFS VALUE SERIES: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Massachusetts Financial Services Company - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation and reasonable income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 2.94%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.90%. A reimbursement of 0.15% is guaranteed to remain in effect until January 1, 2005; the remainder of the waivers and reimbursements may be discontinued at any time. NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT FASCIANO PORTFOLIO: CLASS S - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.90%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.40%. The reimbursements and waivers are guaranteed to remain in effect until December 31, 2006. NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT GROWTH PORTFOLIO (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.96% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT GUARDIAN PORTFOLIO (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.98% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT LIMITED MATURITY BOND PORTFOLIO: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Highest available current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.76% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-13
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT MID-CAP GROWTH PORTFOLIO: CLASS S - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.23% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT PARTNERS PORTFOLIO (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.91% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT SOCIALLY RESPONSIVE PORTFOLIO - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.30% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER AGGRESSIVE GROWTH FUND/VA: INITIAL CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.68% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BOND FUND/VA: INITIAL CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.73% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND/VA: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation and current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.66% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND/VA: SERVICE CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.90% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND/VA: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.77% Annual Operating Expenses: - ------------------------------------------------ ----------------------------------------------------------------------------------
B-14
OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MAIN STREET(R) FUND/VA: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.69% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MAIN STREET(R) SMALL CAP FUND/VA: INITIAL CLASS - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.00% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MULTIPLE STRATEGIES FUND/VA: INITIAL CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Total investment return; current income and capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.74% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- PUTNAM VARIABLE TRUST - PUTNAM VT GROWTH & INCOME FUND: CLASS IB - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Putnam Investment Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth and current income. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.77% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- PUTNAM VARIABLE TRUST - PUTNAM VT INTERNATIONAL EQUITY FUND: CLASS IB - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Putnam Investment Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.24% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- PUTNAM VARIABLE TRUST - PUTNAM VT VOYAGER FUND: CLASS IB - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Putnam Investment Management, LLC - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.85% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- STRONG OPPORTUNITY FUND II, INC.: INVESTOR CLASS (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2003) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Strong Capital Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.38%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.09%. The investment adviser may discontinue the reimbursements and waivers at any time.
B-15
STRONG VARIABLE INSURANCE FUNDS, INC. - STRONG DISCOVERY FUND II, INC. (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER SEPTEMBER 27, 1999) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Strong Capital Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.23%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.19%. The investment adviser may discontinue the reimbursements and waivers at any time. THE UNIVERSAL INSTITUTIONAL FUNDS, INC. - CORE PLUS FIXED INCOME PORTFOLIO: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Morgan Stanley Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Above-average total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 0.73%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 0.70%. The investment adviser may discontinue the reimbursements and waivers at any time. THE UNIVERSAL INSTITUTIONAL FUNDS, INC. - EMERGING MARKETS DEBT PORTFOLIO: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Morgan Stanley Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.22% Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- THE UNIVERSAL INSTITUTIONAL FUNDS, INC. - U.S. REAL ESTATE PORTFOLIO: CLASS I - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Morgan Stanley Investment Management, Inc. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Above average current income and long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.12%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, total sub-account portfolio annual operating expenses are 1.10%. The investment adviser may discontinue the reimbursements and waivers at any time. VAN ECK WORLDWIDE INSURANCE TRUST - WORLDWIDE BOND FUND (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Van Eck Associates Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.24%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, excluding interest expense, total sub-account Portfolio annual operating expenses are 1.21%. The investment adviser may discontinue the reimbursements and waivers at any time.
B-16
VAN ECK WORLDWIDE INSURANCE TRUST - WORLDWIDE EMERGING MARKETS FUND (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Van Eck Associates Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.36%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, excluding interest expense, total sub-account portfolio annual operating expenses are 1.30%. The investment adviser may discontinue the reimbursements and waivers at any time. VAN ECK WORLDWIDE INSURANCE TRUST - WORLDWIDE HARD ASSETS FUND (NOT AVAILABLE FOR POLICIES ISSUED ON OR AFTER MAY 1, 2002) - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Adviser: Van Eck Associates Corporation - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ---------------------------------------------------------------------------------- - ------------------------------------------------ ---------------------------------------------------------------------------------- Total Sub-Account Portfolio 1.23%* Annual Operating Expenses: - ------------------------------------------------ ---------------------------------------------------------------------------------- *The investment adviser has agreed to waive or reimburse certain expenses associated with the sub-account portfolio. Net of such waivers and reimbursements, excluding interest expense, total sub-account portfolio annual operating expenses are 1.20%. The investment adviser may discontinue the reimbursements and waivers at any time.
B-17 OUTSIDE BACK COVER PAGE To learn more about this policy, you should read the Statement of Additional Information (the "SAI") dated the same date as this prospectus. For a free copy of the SAI, to receive personalized illustrations of Death Benefits, net Cash Surrender Values, and Cash Values, and to request other information about this policy please call our Service Center at 1-800-547-7548 (TDD: 1-800-238-3035) or write to us at our Service Center at Nationwide Life Insurance Company, One Nationwide Plaza, RR1-04-D4, Columbus, OH 43215-2220. The SAI has been filed with the SEC and is incorporated by reference into this prospectus. The SEC maintains an Internet website (http://www.sec.gov) that contains the SAI and other information about us and the policy. Information about us and the policy (including the SAI) may also be reviewed and copied at the SEC's Public Reference Room in Washington, D.C., or may be obtained, upon payment of a duplicating fee, by writing the Public Reference Section of the SEC, 450 Fifth Street, NW, Washington, D.C. 20549-0102. Additional information on the operation of the Public Reference Room may be obtained by calling the SEC at (202) 942-8090. Investment Company Act of 1940 Registration File No. 811-5311. NATIONWIDE VLI SEPARATE ACCOUNT-2 (REGISTRANT) NATIONWIDE LIFE INSURANCE COMPANY (DEPOSITOR) One Nationwide Plaza, RR1-04-D4 Columbus, OH 43215-2220 1-800-547-7548 TDD: 1-800-238-3035 STATEMENT OF ADDITIONAL INFORMATION FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES This Statement of Additional Information ("SAI") contains additional information regarding the individual flexible premium variable universal life insurance policy offered by us, Nationwide Life Insurance Company. This SAI is not a prospectus and should be read together with the policy prospectus dated May 1, 2003 and the prospectuses for the policy's variable investment options . You may obtain a copy of these prospectuses by writing or calling us at our address or phone number shown above. The date of this Statement of Additional Information is May 1, 2003. TABLE OF CONTENTS NATIONWIDE LIFE INSURANCE COMPANY NATIONWIDE VLI SEPARATE ACCOUNT-2 NATIONWIDE INVESTMENT SERVICES CORPORATION (NISC) SERVICES UNDERWRITING PROCEDURE FINANCIAL STATEMENTS ILLUSTRATIONS ADVERTISING PERFORMANCE DATA - PERFORMANCE TABLE - TOTAL RETURN TAX DEFINITION OF LIFE INSURANCE NATIONWIDE LIFE INSURANCE COMPANY 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 provide life insurance, annuities and retirement products. We are admitted to do business in all states, the District of Columbia and Puerto Rico. Nationwide is a member of the Nationwide group of companies and all of our common stock is owned by Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has two classes of common stock outstanding with different voting rights enabling Nationwide Corporation (the holder of all of the outstanding Class B Common Stock) to control NFS. Nationwide Corporation is a holding company, as well. All of the common stock is held by Nationwide Mutual Insurance Company (95.24%) and Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling persons of the Nationwide group of companies. The Nationwide group of companies is one of America's largest insurance and financial services family of companies, with combined assets of over $129 billion as of December 31, 2002. NATIONWIDE VLI SEPARATE ACCOUNT-2 Nationwide VLI Separate Account-2 is a separate account that invests in mutual funds offered and sold to insurance companies and certain retirement plans. We established the separate account on May 7, 1987 pursuant to Ohio law. Although the separate account is registered with the SEC as a unit investment trust pursuant to the Investment Company Act of 1940 the SEC does not supervise our management or the management of the variable account. We serve as the custodian of the assets of the variable account. NATIONWIDE INVESTMENT SERVICES CORPORATION (NISC) The policies are distributed by Nationwide Investment Services Corporation ("NISC"), One Nationwide Plaza, Columbus, Ohio 43215, a wholly owned subsidiary of Nationwide. For contracts issued in Michigan, all references to NISC will mean Nationwide Investment Svcs. Corporation. NISC was organized as an Oklahoma corporation in 1981. The policies will be sold on a continuous basis 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"). Gross first year commissions plus any expense allowance payments paid by Nationwide on the sale of these policies provided by NISC will not exceed 99% of the target premium plus 4% of any excess premium payments. We pay gross renewal commissions in years 2 through 10 on the sale of the policies provided by NISC that will not exceed 4% of actual premium payment, and that will not exceed 2% in policy years 11 and thereafter. We have paid no underwriting commissions to NISC for each of the separate account's last three fiscal years. SERVICES We have responsibility for administration of the policies and the variable account. We also maintain the records of the name, address, taxpayer identification number, and other pertinent information for each policy owner and the number and type of policy issued to each policy owner and records with respect to the policy value of each policy. We are the custodian of the assets of the variable account. We will maintain a record of all purchases and redemption of shares of the mutual funds. We or our affiliates may have entered into agreements with either the investment adviser or distributor for the mutual funds. The agreements relate to administrative services we or our affiliate furnish and provide for an annual fee based on the average aggregate net assets of the variable account (and our affiliate life insurance company subsidiaries' other separate accounts) invested in particular mutual funds. These fees in no way affect the NAV of the mutual funds or fees paid by the policy owner. The financial statements of Nationwide Life Insurance Company and subsidiaries and Nationwide VLI Separate Account-2 for the periods indicated 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. KPMG LLP is located at 191 West Nationwide Blvd., Columbus, Ohio 43215. UNDERWRITING PROCEDURE We underwrite the policies issued through Nationwide VLI Separate Account-2. The policy's Specified Amount depends upon the Insured's sex, issue age, risk class, and length of time the policy has been In Force. The Specified Amount will vary depending upon other risk factors. 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). Guaranteed cost of insurance rates for policies issued on a substandard basis are based on appropriate percentage multiples of the guaranteed cost of insurance rate on a standard basis. That is, guaranteed cost of insurance rates for substandard risks are guaranteed cost of insurance rates for standard risks times a percentage greater than 100%. These mortality tables are sex distinct. FINANCIAL STATEMENTS ================================================================================ Independent Auditors' Report The Board of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide VLI Separate Account-2: We have audited the accompanying statement of assets, liabilities and contract owners' equity of Nationwide VLI Separate Account-2 (comprised of the sub-accounts listed in note 1(b)) (collectively, "the Account") as of December 31, 2002, and the related statements of operations and changes in contract owners' equity, and the financial highlights for each of the periods indicated herein. 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, 2002, 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, 2002, and the results of its operations, changes in contract owners' equity, and financial highlights for each of the periods indicated herein, in conformity with accounting principles generally accepted in the United States of America. KPMG LLP Columbus, Ohio February 20, 2003 ================================================================================ ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY December 31, 2002 Assets: Investments at fair value: American Century VP Balanced Fund - Class I (ACVPBal) 801,943 shares (cost $5,656,504) ............................................ $ 4,659,290 American Century VP Capital Appreciation Fund - Class I (ACVPCapAp) 1,945,532 shares (cost $17,492,259) ......................................... 11,498,096 American Century VP Income & Growth Fund - Class I (ACVPIncGr) 587,665 shares (cost $3,353,202) ............................................ 3,032,352 American Century VP International Fund - Class I (ACVPInt) 2,010,543 shares (cost $13,709,549) ......................................... 10,474,929 American Century VP Ultra Fund - Class I (ACVPUltra) 11,715 shares (cost $89,451) ................................................ 86,105 American Century VP Value Fund - Class I (ACVPVal) 1,779,551 shares (cost $12,300,551) ......................................... 10,890,849 Credit Suisse Trust - Global Post-Venture Capital Portfolio (CSGPVen) 198,879 shares (cost $1,295,745) ............................................. 1,272,826 Credit Suisse Trust - International Focus Portfolio (CSIntEq) 755,859 shares (cost $6,311,048) ............................................ 5,049,135 Credit Suisse Trust - Small Cap Growth Portfolio (CSSmCapGr) 1,120,598 shares (cost $13,021,120) ......................................... 10,410,356 Dreyfus GVIT Mid Cap Index Fund - Class I (DryMidCapIx) 348,652 shares (cost $4,251,187) ............................................ 3,842,150 Dreyfus IP - Small Cap Stock Index Portfolio - Service Class (DrySmCapIxS) 11,559 shares (cost $110,904) ............................................... 110,732 Dreyfus Socially Responsible Growth Fund, Inc.- Initial Shares (DrySRGro) 449,004 shares (cost $15,832,492) ........................................... 8,486,176 Dreyfus Stock Index Fund (DryStkIx) 2,840,236 shares (cost $92,131,093) ......................................... 63,820,103 Dreyfus VIF - Appreciation Portfolio - Initial Shares (DryVIFApp) 199,210 shares (cost $6,969,155) ............................................ 5,733,255 Dreyfus VIF - Growth and Income Portfolio - Initial Shares (DryVIFGrInc) 128,054 shares (cost $2,964,332) ............................................ 2,056,554 Federated Quality Bond Fund II - Primary Shares (FedQualBd) 107,824 shares (cost $1,223,432) ............................................ 1,262,614 Fidelity(R) VIP - Equity-Income Portfolio: Initial Class (FidVIPEI) 3,290,117 shares (cost $78,587,366) ......................................... 59,748,530
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, Continued Fidelity(R) VIP - Growth Portfolio: Initial Class (FidVIPGr) 3,228,024 shares (cost $144,518,289) ........................................ $ 75,664,882 Fidelity(R) VIP - High Income Portfolio: Initial Class (FidVIPHI) 3,491,745 shares (cost $21,254,491) ......................................... 20,706,048 Fidelity(R) VIP - Overseas Portfolio: Initial Class (FidVIPOv) 1,131,045 shares (cost $14,026,304) ......................................... 12,418,870 Fidelity(R) VIP II - Asset Manager: Growth Portfolio: Service Class (FidVIPAM) 1,752,540 shares (cost $28,225,173) ......................................... 22,344,890 Fidelity(R) VIP II - Contrafund Portfolio: Initial Class (FidVIPCon) 2,435,055 shares (cost $58,919,728) ......................................... 44,074,497 Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class (FidVIPGrOP) 259,186 shares (cost $4,687,107) ............................................ 3,035,073 Fidelity(R) VIP III - Value Strategies Portfolio: Service Class (FidVIPValStS) 12,126 shares (cost $100,369) ............................................... 95,795 Gartmore GVIT Emerging Markets Fund - Class I (GVITEmMrkts) 45,721 shares (cost $265,471) ............................................... 273,866 Gartmore GVIT Global Financial Services Fund - Class I (GVITGlFin) 7,198 shares (cost $65,092) ................................................. 64,493 Gartmore GVIT Global Health Sciences Fund - Class I (GVITGlHlth) 19,013 shares (cost $160,513) ............................................... 155,718 Gartmore GVIT Global Technology and Communications Fund - Class I (GVITGlTech) 109,247 shares (cost $297,708) .............................................. 261,099 Gartmore GVIT Global Utilities Fund - Class I (GVITGlUtl) 4,838 shares (cost $35,931) ................................................. 35,898 Gartmore GVIT Government Bond Fund - Class I (GVITGvtBd) 1,822,582 shares (cost $22,381,883) ......................................... 22,381,304 Gartmore GVIT Growth Fund - Class I (GVITGrowth) 1,783,486 shares (cost $35,389,535) ......................................... 13,411,811 Gartmore GVIT ID Aggressive Fund (GVITIDAgg) 17,970 shares (cost $151,843) ............................................... 146,454 Gartmore GVIT ID Conservative Fund (GVITIDCon) 32,305 shares (cost $318,902) ............................................... 317,558 Gartmore GVIT ID Moderate Fund (GVITIDMod) 60,817 shares (cost $555,107) ............................................... 543,706 Gartmore GVIT ID Moderately Aggressive Fund (GVITIDModAgg) 111,036 shares (cost $983,549) .............................................. 942,693 Gartmore GVIT ID Moderately Conservative Fund (GVITIDModCon) 28,515 shares (cost $268,756) ............................................... 268,898 Gartmore GVIT International Growth Fund - Class I (GVITIntGro) 11,815 shares (cost $54,981) ................................................ 55,060 Gartmore GVIT Money Market Fund - Class I (GVITMyMkt) 46,792,122 shares (cost $46,792,122) ...................................... 46,792,122
Gartmore GVIT Nationwide(R) Leaders Fund - Class I (GVITLead) 12,186 shares (cost $119,650) ............................................... $ 115,036 Gartmore GVIT Small Cap Growth Fund - Class I (GVITSmCapGr) 130,327 shares (cost $1,258,761) ............................................ 1,258,963 Gartmore GVIT Small Cap Value Fund - Class I (GVITSmCapVal) 1,257,909 shares (cost $10,440,968) ......................................... 9,270,789 Gartmore GVIT Small Company Fund - Class I (GVITSmComp) 1,303,370 shares (cost $25,439,211) ......................................... 20,084,934 Gartmore GVIT Total Return Fund - Class I (GVITTotRt) 7,447,693 shares (cost $108,778,380) ........................................ 60,326,315 Gartmore GVIT U.S.Growth Leaders Fund - Class I (GVITUSGro) 10,703 shares (cost $86,695) ................................................ 80,916 Janus AS - Capital Appreciation Portfolio - Service Shares (JanCapAp) 130,734 shares (cost $2,547,268) ............................................ 2,253,862 Janus AS - Global Technology Portfolio - Service Shares (JanGITech) 365,018 shares (cost $1,330,443) ............................................ 879,694 Janus AS - International Growth Portfolio - Service Shares (JanIntGro) 86,262 shares (cost $1,406,454) ............................................. 1,481,988 MAS GVIT (formerly Nationwide(R) SAT) Multi Sector Bond Fund - Class I (MGVITMultiSec) 145,329 shares (cost $1,321,403) ............................ 1,348,649 Neuberger Berman AMT - Balanced Portfolio (NBAMTBal) 5,895 shares (cost $53,981) ................................................. 46,042 Neuberger Berman AMT - Growth Portfolio (NBAMTGro) 1,639,255 shares (cost $18,156,068) ......................................... 12,999,290 Neuberger Berman AMT - Guardian Portfolio (NBAMTGuard) 150,081 shares (cost $1,965,607) ............................................ 1,605,870 Neuberger Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat) 499,371 shares (cost $6,637,610) ............................................ 6,741,510 Neuberger Berman AMT - Partners Portfolio (NBAMTPart) 1,469,553 shares (cost $23,439,914) ......................................... 16,752,910 Oppenheimer Aggressive Growth Fund/VA - Initial Class (OppAggGro) 39,629 shares (cost $1,194,611) ............................................. 1,158,359 Oppenheimer Bond Fund/VA - Initial Class (OppBdFd) 1,238,497 shares (cost $13,676,927) ......................................... 14,007,406 Oppenheimer Capital Appreciation Fund/VA - Initial Class (OppCapAp) 436,418 shares (cost $14,624,748) ........................................... 11,617,436 Oppenheimer Global Securities Fund/VA - Initial Class (OppGlSec) 1,354,751 shares (cost $34,505,876) ......................................... 23,979,084 Oppenheimer Main Street Growth & Income Fund/VA - Initial Class (OppMSGrInc) 65,281 shares (cost $1,100,078) ............................................. 1,000,105 Oppenheimer Multiple Strategies Fund/VA - Initial Class (OppMultStr) 931,561 shares (cost $14,862,945) ........................................... 12,259,340 Strong GVIT Mid Cap Growth Fund - Class I (SGVITMdCpGr) 161,396 shares (cost $1,224,382) ............................................ 1,178,193
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, Continued Strong Opportunity Fund II, Inc.(StOpp2) 2,062,101 shares (cost $43,507,913) ......................................... $ 28,601,343 Strong VIF - Strong Discovery Fund II (StDisc2) 632,953 shares (cost $6,163,997) ............................................ 5,747,211 Strong VIF - Strong International Stock Fund II (StIntStk2) 301,378 shares (cost $1,593,079) ............................................ 1,600,317 Turner GVIT Growth Focus Fund - Class I (TurnGVITGro) 100,299 shares (cost $231,268) .............................................. 208,621 Van Eck WIT - Worldwide Bond Fund (VEWrldBd) 401,121 shares (cost $4,460,312) ............................................ 4,596,845 Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt) 482,795 shares (cost $3,574,826) ............................................ 3,809,250 Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs) 433,470 shares (cost $4,301,133) ............................................ 4,464,742 Van Kampen UIF - Emerging Markets Debt Portfolio (VKEmMkt) 207,695 shares (cost $1,505,361) ............................................ 1,468,407 Van Kampen UIF - U.S. Real Estate Portfolio (VKUSRealEst) 853,177 shares (cost $10,535,739) ........................................... 9,666,498 ------------ Total Investments ........................................................ 727,034,712 Accounts Receivable ............................................................... -- ------------ Total Assets ............................................................. 727,034,712 Accounts Payable ..................................................................... 11,376 ------------ Contract Owners' Equity (note 7) ..................................................... $727,023,336 ============
See accompanying notes to financial statements. ================================================================================ ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS Year Ended December 31, 2002
Investment activity: Total ACVPBal ACVPCapAp ACVPIncGr ------------- ---------- ---------- ---------- Reinvested dividends ............................ $ 11,224,371 129,042 -- 40,246 Mortality and expense risk charges (note 3) ..... (6,274,145) (35,990) (106,678) (25,965) ------------- ---------- ---------- ---------- Net investment income (loss) ................. 4,950,226 93,052 (106,678) 14,281 ------------- ---------- ---------- ---------- Proceeds from mutual fund shares sold ........... 602,027,151 915,970 2,827,633 2,395,242 Cost of mutual fund shares sold ................. (681,710,216) (1,208,619) (7,819,371) (3,385,790) ------------- ---------- ---------- ---------- Realized gain (loss) on investments .......... (79,683,065) (292,649) (4,991,738) (990,548) Change in unrealized gain (loss) on investments ............................... (101,227,231) (326,154) 1,749,350 154,381 ------------- ---------- ---------- ---------- Net gain (loss) on investments ............... (180,910,296) (618,803) (3,242,388) (836,167) ------------- ---------- ---------- ---------- Reinvested capital gains ........................ 3,918,828 -- -- -- ------------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ....... $(172,041,242) (525,751) (3,349,066) (821,886) ============= ========== ========== ========== Investment activity: ACVPInt ACVPUltra ACVPVal CSGPVen ----------- --------- ----------- ---------- Reinvested dividends ............................ 99,034 197 104,776 -- Mortality and expense risk charges (note 3) ..... (92,274) (193) (88,516) (7,766) ----------- --------- ----------- ---------- Net investment income (loss) ................. 6,760 4 16,260 (7,766) ----------- --------- ----------- ---------- Proceeds from mutual fund shares sold ........... 6,025,094 675,095 16,069,044 1,310,207 Cost of mutual fund shares sold ................. (10,012,861) (683,848) (16,462,825) (2,143,494) ----------- --------- ----------- ---------- Realized gain (loss) on investments .......... (3,987,767) (8,753) (393,781) (833,287) Change in unrealized gain (loss) on investments ............................... 1,109,135 (3,345) (2,130,437) 398,641 ----------- --------- ----------- ---------- Net gain (loss) on investments ............... (2,878,632) (12,098) (2,524,218) (434,646) ----------- -------- ----------- ---------- Reinvested capital gains ........................ -- -- 677,932 -- ----------- --------- ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ....... (2,871,872) (12,094) (1,830,026) (442,412) =========== ========= =========== ==========
Investment activity: CSIntEq CSSmCapGr DryMidCapIx DryEuroEq ----------- ----------- ----------- --------- Reinvested dividends ............................ $ -- -- 14,978 -- Mortality and expense risk charges (note 3) ..... (44,098) (96,995) (30,539) (420) ----------- ----------- ---------- -------- Net investment income (loss) ................. (44,098) (96,995) (15,561) (420) ----------- ----------- ---------- -------- Proceeds from mutual fund shares sold ........... 9,327,428 11,367,712 7,708,678 847,954 Cost of mutual fund shares sold ................. (9,158,449) (17,523,948) (8,080,966) (866,141) ----------- ----------- ---------- -------- Realized gain (loss) on investments .......... 168,979 (6,156,236) (372,288) (18,187) Change in unrealized gain (loss) on investments ............................... (1,412,977) 434,119 (455,988) (639) ----------- ----------- ---------- -------- Net gain (loss) on investments ............... (1,243,998) (5,722,117) (828,276) (18,826) ----------- ----------- ---------- -------- Reinvested capital gains ........................ -- -- 33,555 -- ----------- ----------- ---------- -------- Net increase (decrease) in contract owners' equity resulting from operations ....... $(1,288,096) (5,819,112) (810,282) (19,246) =========== =========== ========== ======== Investment activity: DrySmCapIxS DrySRGro DryStkIx DryVIFApp ----------- ---------- ----------- ---------- Reinvested dividends ............................ 151 22,787 999,637 71,007 Mortality and expense risk charges (note 3) ..... (143) (80,117) (540,105) (47,867) -------- ---------- ----------- ---------- Net investment income (loss) ................. 8 (57,330) 459,532 23,140 -------- ---------- ----------- ---------- Proceeds from mutual fund shares sold ........... 516,724 2,049,958 10,909,443 2,281,401 Cost of mutual fund shares sold ................. (523,482) (3,119,466) (11,850,321) (2,852,698) -------- ---------- ----------- ---------- Realized gain (loss) on investments .......... (6,758) (1,069,508) (940,878) (571,297) Change in unrealized gain (loss) on investments ............................... (172) (2,683,067) (19,311,189) (691,267) -------- ---------- ----------- ---------- Net gain (loss) on investments ............... (6,930) (3,752,575) (20,252,067) (1,262,564) -------- ---------- ----------- ---------- Reinvested capital gains ........................ -- -- -- -- -------- ---------- ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ....... (6,922) (3,809,905) (19,792,535) (1,239,424) ======== ========== =========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2002
Investment activity: DryVIFGrInc FedQualBd FidVIPEI FidVIPGr ----------- --------- ----------- ----------- Reinvested dividends ............................. $ 14,860 -- 1,208,679 246,550 Mortality and expense risk charges (note 3) ...... (16,207) (3,977) (537,891) (744,059) --------- -------- ----------- ----------- Net investment income (loss) .................. (1,347) (3,977) 670,788 (497,509) --------- -------- ----------- ----------- Proceeds from mutual fund shares sold ............ 421,769 644,784 9,823,910 11,165,923 Cost of mutual fund shares sold .................. (553,233) (627,123) (11,656,529) (17,641,401) --------- -------- ----------- ----------- Realized gain (loss) on investments ........... (131,464) 17,661 (1,832,619) (6,475,478) Change in unrealized gain (loss) on investments ................................ (602,115) 39,181 (13,879,079) (28,601,357) --------- -------- ----------- ----------- Net gain (loss) on investments ................ (733,579) 56,842 (15,711,698) (35,076,835) --------- -------- ----------- ----------- Reinvested capital gains ......................... -- -- 1,645,146 -- --------- -------- ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ........ $(734,926) 52,865 (13,395,764) (35,574,344) ========= ======== =========== =========== Investment activity: FidVIPHI FidVIPOv FidVIPAM FidVIPCon ----------- ----------- ---------- ---------- Reinvested dividends ............................. 1,734,540 122,990 972,983 410,513 Mortality and expense risk charges (note 3) ...... (123,743) (121,341) (202,126) (366,518) ----------- ----------- ---------- ---------- Net investment income (loss) .................. 1,610,797 1,649 770,857 43,995 ----------- ----------- ---------- ---------- Proceeds from mutual fund shares sold ............ 9,869,641 17,038,725 2,868,341 7,324,604 Cost of mutual fund shares sold .................. (16,104,845) (27,046,026) (3,477,339) (8,496,079) ----------- ----------- ---------- ---------- Realized gain (loss) on investments ........... (6,235,204) (10,007,301) (608,998) (1,171,475) Change in unrealized gain (loss) on investments ................................ 5,128,915 6,676,168 (2,677,633) (3,976,205) ----------- ----------- ---------- ---------- Net gain (loss) on investments ................ (1,106,289) (3,331,133) (3,286,631) (5,147,680) ----------- ----------- ---------- ---------- Reinvested capital gains ......................... -- -- -- -- ----------- ----------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ........ 504,508 (3,329,484) (2,515,774) (5,103,685) =========== =========== ========== ==========
Investment activity: FidVIPGrOP FidVIPValStS GVITEmMrkts GVITGIFin ---------- ------------ ----------- --------- Reinvested dividends ............................. $ 38,177 -- 597 26 Mortality and expense risk charges (note 3) ...... (24,743) (316) (3,838) (145) -------- -------- ----------- ------- Net investment income (loss) .................. 13,434 (316) (3,241) (119) -------- -------- ----------- ------- Proceeds from mutual fund shares sold ............ 601,596 406,712 19,418,119 40,488 Cost of mutual fund shares sold .................. (989,550) (416,259) (19,408,629) (40,375) -------- -------- ----------- ------- Realized gain (loss) on investments ........... (387,954) (9,547) 9,490 113 Change in unrealized gain (loss) on investments ................................ (537,034) (4,574) (24,239) (599) -------- -------- ----------- ------- Net gain (loss) on investments ................ (924,988) (14,121) (14,749) (486) -------- -------- ----------- ------- Reinvested capital gains ......................... -- -- -- -- -------- -------- ----------- ------- Net increase (decrease) in contract owners' equity resulting from operations ........ $(911,554) (14,437) (17,990) (605) ========= ======== =========== ======= Investment activity: GVITGIHlth GVITGITech GVITGlUtl GVITGvtBd ---------- ---------- --------- ----------- Reinvested dividends ............................. -- 1,788 96 908,336 Mortality and expense risk charges (note 3) ...... (397) (2,238) (63) (167,720) ------- ---------- -------- ----------- Net investment income (loss) .................. (397) (450) 33 740,616 ------- ---------- -------- ----------- Proceeds from mutual fund shares sold ............ 93,707 4,145,126 9,712 37,174,051 Cost of mutual fund shares sold .................. (94,318) (4,333,546) (10,008) (36,407,644) ------- ---------- -------- ----------- Realized gain (loss) on investments ........... (611) (188,420) (296) 766,407 Change in unrealized gain (loss) on investments ................................ (4,795) (19,032) (33) 254,202 ------- ---------- -------- ----------- Net gain (loss) on investments ................ (5,406) (207,452) (329) 1,020,609 ------- ---------- -------- ----------- Reinvested capital gains ......................... -- -- -- 177,046 ------- ---------- -------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ........ (5,803) (207,902) (296) 1,938,271 ======= ========== ======= ===========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2002
Investment activity: GVITGrowth GVITIDAgg GVITIDCon GVITIDMod ----------- ---------- --------- --------- Reinvested dividends .......................... $ -- 1,340 4,440 4,684 Mortality and expense risk charges (note 3) ... (115,653) (965) (731) (1,253) ----------- ---------- ------ ------- Net investment income (loss) ............... (115,653) 375 3,709 3,431 ----------- ---------- ------ ------- Proceeds from mutual fund shares sold ......... 1,208,840 1,114,097 4,761 35,931 Cost of mutual fund shares sold ............... (3,575,493) (1,117,860) (4,845) (39,287) ----------- ---------- ------ ------- Realized gain (loss) on investments ........ (2,366,653) (3,763) (84) (3,356) Change in unrealized gain (loss) on investments ............................. (3,021,176) (5,389) (1,344) (11,401) ----------- ---------- ------ ------- Net gain (loss) on investments ............. (5,387,829) (9,152) (1,428) (14,757) ----------- ---------- ------ ------- Reinvested capital gains ...................... -- 22 154 436 ----------- ---------- ------ ------- Net increase (decrease) in contract owners' equity resulting from operations ........ $(5,503,482) (8,755) 2,435 (10,890) =========== ========== ====== ======= Investment activity: GVITIDModAgg GVITIDModCon GVITIntGro GVITMyMkt ------------ ------------ ---------- ------------ Reinvested dividends .......................... 7,309 3,155 -- 618,185 Mortality and expense risk charges (note 3) ... (3,289) (781) (333) (383,850) -------- ---------- -------- ------------ Net investment income (loss) ............... 4,020 2,374 (333) 234,335 -------- ---------- -------- ------------ Proceeds from mutual fund shares sold ......... 219,780 1,141,624 274,737 155,367,677 Cost of mutual fund shares sold ............... (249,821) (1,145,957) (279,666) (155,367,677) -------- ---------- -------- ------------ Realized gain (loss) on investments ........ (30,041) (4,333) (4,929) -- Change in unrealized gain (loss) on investments ............................. (40,857) 142 (759) -- -------- ---------- -------- ------------ Net gain (loss) on investments ............. (70,898) (4,191) (5,688) -- -------- ---------- -------- ------------ Reinvested capital gains ...................... 1,303 402 -- -- -------- ---------- -------- ------------ Net increase (decrease) in contract owners' equity resulting from operations ........ (65,575) (1,415) (6,021) 234,335 ======== ========== ======== ============
Investment activity: GVITLead GVITSmCapGr GVITSmCapVal GVITSmComp --------- ----------- ------------ ----------- Reinvested dividends .......................... $ 679 -- 1,062 -- Mortality and expense risk charges (note 3) ... (455) (9,005) (93,187) (166,099) --------- ---------- ----------- ----------- Net investment income (loss) ............... 224 (9,005) (92,125) (166,099) --------- ---------- ----------- ----------- Proceeds from mutual fund shares sold ......... 131,535 2,824,398 22,556,068 8,458,813 Cost of mutual fund shares sold ............... (141,430) (3,363,506) (26,224,110) (10,890,206) --------- ---------- ----------- ----------- Realized gain (loss) on investments ........ (9,895) (539,108) (3,668,042) (2,431,393) Change in unrealized gain (loss) on investments ............................. (4,614) (10,392) (1,169,384) (2,049,393) --------- ---------- ----------- ----------- Net gain (loss) on investments ............. (14,509) (549,500) (4,837,426) (4,480,786) --------- ---------- ----------- ----------- Reinvested capital gains ...................... -- -- 308,760 -- --------- ---------- ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ........ $ (14,285) (558,505) (4,620,791) (4,646,885) ========= ========== =========== =========== Investment activity: GVITTotRt GVITUSGro JanCapAp JanGITech ----------- --------- ---------- ---------- Reinvested dividends .......................... 586,269 -- 7,399 -- Mortality and expense risk charges (note 3) ... (523,210) (119) (17,694) (8,887) ----------- ------- ---------- ---------- Net investment income (loss) ............... 63,059 (119) (10,295) (8,887) ----------- ------- ---------- ---------- Proceeds from mutual fund shares sold ......... 4,850,756 14,868 1,664,649 1,622,565 Cost of mutual fund shares sold ............... (7,523,937) (15,131) (2,082,123) (1,892,120) ----------- ------- ---------- ---------- Realized gain (loss) on investments ........ (2,673,181) (263) (417,474) (269,555) Change in unrealized gain (loss) on investments ............................. (11,054,460) (5,779) (28,278) (427,636) ----------- ------- ---------- ---------- Net gain (loss) on investments ............. (13,727,641) (6,042) (445,752) (697,191) ----------- ------- ---------- ---------- Reinvested capital gains ...................... -- -- -- -- ----------- ------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ........ (13,664,582) (6,161) (456,047) (706,078) =========== ======= ========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2002
Investment activity: JanIntGro MGVITMultiSec NBAMTBal NBAMTGro ------------ ------------- -------- ----------- Reinvested dividends ............................ $ 11,471 44,645 1,209 -- Mortality and expense risk charges (note 3) ..... (16,107) (5,749) (346) (127,464) ------------ ---------- ------ ----------- Net investment income (loss) ................. (4,636) 38,896 863 (127,464) ------------ ---------- ------ ----------- Proceeds from mutual fund shares sold ........... 22,746,381 2,246,256 2,045 10,571,945 Cost of mutual fund shares sold ................. (23,154,096) (2,253,457) (2,388) (15,486,936) ------------ ---------- ------ ----------- Realized gain (loss) on investments .......... (407,715) (7,201) (343) (4,914,991) Change in unrealized gain (loss) on investments ............................... (16,485) 27,886 (8,064) (1,658,364) ------------ ---------- ------ ----------- Net gain (loss) on investments ............... (424,200) 20,685 (8,407) (6,573,355) ------------ ---------- ------ ----------- Reinvested capital gains ........................ -- -- -- -- ------------ ---------- ------ ----------- Net increase (decrease) in contract owners' equity resulting from operations ....... $ (428,836) 59,581 (7,544) (6,700,819) ============ ========== ====== =========== Investment activity: NBAMTGuard NBAMTLMat NBAMTPart OppAggGro ---------- ---------- ---------- ---------- Reinvested dividends ............................ 16,715 287,017 107,193 9,567 Mortality and expense risk charges (note 3) ..... (14,696) (48,631) (139,794) (10,711) ---------- ---------- ---------- ---------- Net investment income (loss) ................. 2,019 238,386 (32,601) (1,144) ---------- ---------- ---------- ---------- Proceeds from mutual fund shares sold ........... 1,749,166 3,116,450 4,461,872 5,757,349 Cost of mutual fund shares sold ................. (2,313,860) (3,087,101) (6,079,454) (6,347,648) ---------- ---------- ---------- ---------- Realized gain (loss) on investments .......... (564,694) 29,349 (1,617,582) (590,299) Change in unrealized gain (loss) on investments ............................... (142,270) (464) (3,978,892) 91,747 ---------- ---------- ---------- ---------- Net gain (loss) on investments ............... (706,964) 28,885 (5,596,474) (498,552) ---------- ---------- ---------- ---------- Reinvested capital gains ........................ -- -- -- -- ---------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ....... (704,945) 267,271 (5,629,075) (499,696) ========== ========== ========== ==========
Investment activity: OppBdFd OppCapAp OppGlSec OppMSGrInc ----------- ----------- ----------- ---------- Reinvested dividends ............................ $ 983,059 90,717 160,367 6,068 Mortality and expense risk charges (note 3) ..... (100,620) (106,222) (222,185) (6,295) ----------- ----------- ----------- -------- Net investment income (loss) ................. 882,439 (15,505) (61,818) (227) ----------- ----------- ----------- -------- Proceeds from mutual fund shares sold ........... 3,540,279 9,035,702 12,554,932 601,997 Cost of mutual fund shares sold ................. (3,890,965) (15,787,560) (13,334,521) (746,829) ----------- ----------- ----------- -------- Realized gain (loss) on investments .......... (350,686) (6,751,858) (779,589) (144,832) Change in unrealized gain (loss) on investments ............................... 535,188 2,058,407 (6,436,152) (63,259) ----------- ----------- ----------- -------- Net gain (loss) on investments ............... 184,502 (4,693,451) (7,215,741) (208,091) ----------- ----------- ----------- -------- Reinvested capital gains ........................ -- -- -- -- ----------- ----------- ----------- -------- Net increase (decrease) in contract owners' equity resulting from operations ....... $ 1,066,941 (4,708,956) (7,277,559) (208,318) =========== =========== =========== ======== Investment activity: OppMultStr SGVITMdCpGr StOpp2 StDisc2 ---------- ----------- ----------- ---------- Reinvested dividends ............................ 482,824 -- 134,661 -- Mortality and expense risk charges (note 3) ..... (104,868) (8,153) (281,682) (52,203) ---------- ----------- ----------- ---------- Net investment income (loss) ................. 377,956 (8,153) (147,021) (52,203) ---------- ----------- ----------- ---------- Proceeds from mutual fund shares sold ........... 1,923,628 9,929,998 6,815,816 2,521,635 Cost of mutual fund shares sold ................. (2,389,427) (10,327,868) (8,983,726) (2,784,109) ---------- ----------- ----------- ---------- Realized gain (loss) on investments .......... (465,799) (397,870) (2,167,910) (262,474) Change in unrealized gain (loss) on investments ............................... (1,738,579) (56,058) (9,845,255) (594,143) ---------- ----------- ----------- ---------- Net gain (loss) on investments ............... (2,204,378) (453,928) (12,013,165) (856,617) ---------- ----------- ----------- ---------- Reinvested capital gains ........................ 200,398 -- 644,398 -- ---------- ----------- ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ....... (1,626,024) (462,081) (11,515,788) (908,820) ========== =========== =========== ==========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2002
Investment activity: StIntStk2 TurnGVITGro VEWrldBd VEWrldEMkt ------------ ----------- ----------- ----------- Reinvested dividends .......................... $ 78,570 -- -- 7,400 Mortality and expense risk charges (note 3) ... (14,801) (1,483) (26,814) (30,885) ------------ ---------- ----------- ----------- Net investment income (loss) ............... 63,769 (1,483) (26,814) (23,485) ------------ ---------- ----------- ----------- Proceeds from mutual fund shares sold ......... 17,308,084 4,410,212 26,600,658 31,531,644 Cost of mutual fund shares sold ............... (18,102,623) (4,528,531) (26,107,130) (31,914,730) ------------ ---------- ----------- ----------- Realized gain (loss) on investments ........ (794,539) (118,319) 493,528 (383,086) Change in unrealized gain (loss) on investments ............................. 177,975 (25,065) 184,996 111,183 ------------ ---------- ----------- ----------- Net gain (loss) on investments ............. (616,564) (143,384) 678,524 (271,903) ------------ ---------- ----------- ----------- Reinvested capital gains ...................... -- -- -- -- ------------ ---------- ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ........................... $ (552,795) (144,867) 651,710 (295,388) ============ ========== =========== =========== Investment activity: VEWrldHAs VKEmMkt VKUSRealEst ----------- ---------- ----------- Reinvested dividends .......................... 26,316 94,838 305,222 Mortality and expense risk charges (note 3) ... (29,414) (9,626) (76,897) ----------- ---------- ---------- Net investment income (loss) ............... (3,098) 85,212 228,325 ----------- ---------- ---------- Proceeds from mutual fund shares sold ......... 15,276,547 4,115,133 7,443,532 Cost of mutual fund shares sold ............... (15,676,332) (4,125,475) (7,377,098) ----------- ---------- ---------- Realized gain (loss) on investments ........ (399,785) (10,342) 66,434 Change in unrealized gain (loss) on investments ............................. 176,398 14,386 (813,789) ----------- ---------- ---------- Net gain (loss) on investments ............. (223,387) 4,044 (747,355) ----------- ---------- ---------- Reinvested capital gains ...................... -- -- 229,276 ----------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ........................... (226,485) 89,256 (289,754) =========== ========== ==========
See accompanying notes to financial statements. ================================================================================ ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY Years Ended December 31, 2002 and 2001
Total ACVPBal ----------------------------- --------------------- Investment activity: 2002 2001 2002 2001 ------------- ------------- --------- --------- Net investment income (loss) ................. $ 4,950,226 7,051,683 93,052 109,967 Realized gain (loss) on investments .......... (79,683,065) (95,706,913) (292,649) (149,134) Change in unrealized gain (loss) on investments ............................ (101,227,231) (102,443,273) (326,154) (374,866) Reinvested capital gains ..................... 3,918,828 59,973,994 -- 177,314 ------------- ------------- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations ............................. (172,041,242) (131,124,509) (525,751) (236,719) ------------- ------------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) .................. 89,852,157 103,755,686 655,414 537,559 Transfers between funds ...................... -- -- (19,192) (18,553) Surrenders (note 6) .......................... (68,413,303) (47,591,030) (261,495) (274,881) Death benefits (note 4) ...................... (2,878,265) (3,310,640) (12,043) (19,851) Policy loans (net of repayments) (note 5) .... (1,274,925) (8,284,301) (29,194) (7,043) Deductions for surrender charges (note 2d) ... (3,761,910) (4,259,124) (14,379) (24,600) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (47,105,562) (46,802,944) (278,409) (264,440) Asset charges (note 3): MSP contracts ............................. (404,175) (487,482) (4,131) (4,877) LSFP contracts ............................ (354,416) (374,976) (1,525) (1,571) ------------- ------------- --------- --------- Net equity transactions ................ (34,340,399) (7,354,811) 35,046 (78,257) ------------- ------------- --------- --------- Net change in contract owners' equity ........... (206,381,641) (138,479,320) (490,705) (314,976) Contract owners' equity beginning of period ..... 933,404,977 1,071,884,297 5,149,974 5,464,950 ------------- ------------- --------- --------- Contract owners' equity end of period ........... $ 727,023,336 933,404,977 4,659,269 5,149,974 ============= ============= ========= ========= CHANGES IN UNITS: Beginning units .............................. 44,510,163 44,184,383 275,968 280,165 ------------- ------------- --------- --------- Units purchased .............................. 7,977,095 8,105,043 42,350 32,188 Units redeemed ............................... (9,292,490) (7,779,263) (41,028) (36,385) ------------- ------------- --------- --------- Ending units ................................. 43,194,768 44,510,163 277,290 275,968 ============= ============= ========= ========= ACVPCapAp ACVPIncGr ------------------------ ---------------------- Investment activity: 2002 2001 2002 2001 ---------- ----------- ---------- --------- Net investment income (loss) ................. (106,678) (157,084) 14,281 4,371 Realized gain (loss) on investments .......... (4,991,738) (9,558,196) (990,548) (367,434) Change in unrealized gain (loss) on investments ............................ 1,749,350 (5,254,647) 154,381 (36,896) Reinvested capital gains ..................... -- 7,598,012 -- -- ---------- ----------- ---------- --------- Net increase (decrease) in contract owners' equity resulting from operations ............................. (3,349,066) (7,371,915) (821,886) (399,959) ---------- ----------- ---------- --------- Equity transactions: Purchase payments received from contract owners (note 6) .................. 1,491,221 1,922,090 405,497 463,372 Transfers between funds ...................... (1,137,628) (3,106,083) (269,573) (30,266) Surrenders (note 6) .......................... (823,146) (994,264) (341,450) (128,813) Death benefits (note 4) ...................... (65,672) (26,610) -- -- Policy loans (net of repayments) (note 5) .... (9,534) (266,547) (16,672) (177) Deductions for surrender charges (note 2d) ... (45,263) (88,981) (18,776) (11,528) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (853,298) (917,212) (177,476) (171,662) Asset charges (note 3): MSP contracts ............................. (5,655) (8,721) (2,339) (2,384) LSFP contracts ............................ (3,142) (4,237) (1,896) (2,139) ---------- ----------- ---------- --------- Net equity transactions ................ (1,452,117) (3,490,565) (422,685) 116,403 ---------- ----------- ---------- --------- Net change in contract owners' equity ........... (4,801,183) (10,862,480) (1,244,571) (283,556) Contract owners' equity beginning of period ..... 16,299,104 27,161,584 4,276,892 4,560,448 ---------- ----------- ---------- --------- Contract owners' equity end of period ........... 11,497,921 16,299,104 3,032,321 4,276,892 ========== =========== ========== ========= CHANGES IN UNITS: Beginning units .............................. 945,180 1,120,543 416,289 403,910 ---------- ----------- ---------- --------- Units purchased .............................. 116,117 114,186 56,087 56,641 Units redeemed ............................... (222,060) (289,549) (104,314) (44,262) ---------- ----------- ---------- --------- Ending units ................................. 839,237 945,180 368,062 416,289 ========== =========== ========== =========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
ACVPInt ACVPUltra ------------------------ -------------- Investment activity: 2002 2001 2002 2001 ----------- ---------- ------- ---- Net investment income (loss) ................. $ 6,760 (115,508) 4 -- Realized gain (loss) on investments .......... (3,987,767) (6,339,097) (8,753) -- Change in unrealized gain (loss) on investments ............................ 1,109,135 (1,840,599) (3,345) -- Reinvested capital gains ..................... -- 1,789,528 -- -- ----------- ---------- ------- --- Net increase (decrease) in contract owners' equity resulting from operations ............................. (2,871,872) (6,505,676) (12,094) -- ----------- ---------- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) .................. 1,372,078 1,563,930 5,058 -- Transfers between funds ...................... (973,520) (1,610,440) 124,302 -- Surrenders (note 6) .......................... (877,609) (411,527) (26,672) -- Death benefits (note 4) ...................... (3,330) (16,220) -- -- Policy loans (net of repayments) (note 5) .... (127,897) (123,790) -- -- Deductions for surrender charges (note 2d) ... (48,258) (36,829) (1,467) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (616,258) (668,820) (2,866) -- Asset charges (note 3): MSP contracts ............................. (4,054) (7,104) (25) -- LSFP contracts ............................ (7,145) (10,541) (136) -- ----------- ---------- ------- --- Net equity transactions ................ (1,285,993) (1,321,341) 98,194 -- ----------- ---------- ------- --- Net change in contract owners' equity ........... (4,157,865) (7,827,017) 86,100 -- Contract owners' equity beginning of period .................................... 14,630,605 22,457,622 -- -- ----------- ---------- ------- --- Contract owners' equity end of period ........... $10,472,740 14,630,605 86,100 -- =========== ========== ======= === CHANGES IN UNITS: Beginning units .............................. 950,787 1,027,636 -- -- ----------- ---------- ------- --- Units purchased .............................. 102,635 97,198 11,128 -- Units redeemed ............................... (192,984) (174,047) (368) -- ----------- ---------- ------- --- Ending units ................................. 860,438 950,787 10,760 -- =========== ========== ======= === ACVPVal CSGPVen ----------------------- ---------------------- Investment activity: 2002 2001 2002 2001 ---------- ---------- --------- ---------- Net investment income (loss) ................. 16,260 22,955 (7,766) (15,488) Realized gain (loss) on investments .......... (393,781) 272,565 (833,287) (1,234,999) Change in unrealized gain (loss) on investments ............................ (2,130,437) 549,875 398,641 471,352 Reinvested capital gains ..................... 677,932 -- -- -- ---------- ---------- --------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ............................. (1,830,026) 845,395 (442,412) (779,135) ---------- ---------- --------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) .................. 1,048,504 582,884 123,418 175,113 Transfers between funds ...................... 1,006,877 4,815,841 70,901 (290,162) Surrenders (note 6) .......................... (962,466) (424,152) (231,349) (95,856) Death benefits (note 4) ...................... (6,357) (32,416) -- (2,390) Policy loans (net of repayments) (note 5) .... (99,706) 258,803 98,610 36,298 Deductions for surrender charges (note 2d) ... (52,924) (37,959) (12,721) (8,579) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (502,028) (320,328) (56,152) (90,037) Asset charges (note 3): MSP contracts ............................. (7,417) (5,886) (394) (952) LSFP contracts ............................ (7,578) (4,940) (512) (980) ---------- ---------- --------- ---------- Net equity transactions ................ 416,905 4,831,847 (8,199) (277,545) ---------- ---------- --------- ---------- Net change in contract owners' equity ........... (1,413,121) 5,677,242 (450,611) (1,056,680) Contract owners' equity beginning of period .................................... 12,303,843 6,626,601 1,723,423 2,780,103 ---------- ---------- --------- ---------- Contract owners' equity end of period ........... 10,890,722 12,303,843 1,272,812 1,723,423 ========== ========== ========= ========== CHANGES IN UNITS: Beginning units .............................. 721,884 435,109 154,238 176,075 ---------- ---------- --------- ---------- Units purchased .............................. 134,241 340,692 51,890 20,442 Units redeemed ............................... (120,528) (53,917) (31,794) (42,279) ---------- ---------- --------- ---------- Ending units ................................. 735,597 721,884 174,334 154,238 ========== ========== ========= ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
CSIntEq CSSmCapGr ------------------------ ------------------------ Investment activity: 2002 2001 2002 2001 ----------- ---------- ---------- ----------- Net investment income (loss) .................... $ (44,098) (56,285) (96,995) (138,697) Realized gain (loss) on investments ............. 168,979 (3,960,661) (6,156,236) (11,329,224) Change in unrealized gain (loss) on investments .................................. (1,412,977) 2,099,268 434,119 7,104,902 Reinvested capital gains ........................ -- -- -- -- ----------- ---------- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations .......... (1,288,096) (1,917,678) (5,819,112) (4,363,019) ----------- ---------- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) ..................................... 716,930 1,047,183 1,742,231 2,168,671 Transfers between funds ......................... (401,475) (704,029) (1,876,740) (3,347,967) Surrenders (note 6) ............................. (411,253) (368,264) (1,026,223) (805,855) Death benefits (note 4) ......................... (17,485) (7,251) (16,016) (86,645) Policy loans (net of repayments) (note 5) ....... 39,755 (66,856) 41,216 (1,349) Deductions for surrender charges (note 2d) ...... (22,614) (32,958) (56,430) (72,120) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ..... (329,478) (361,742) (794,609) (922,151) Asset charges (note 3): MSP contracts ................................ (3,900) (5,243) (6,478) (9,810) LSFP contracts ............................... (4,265) (4,614) (6,974) (8,705) ----------- ---------- ---------- ----------- Net equity transactions ................... (433,785) (503,774) (2,000,023) (3,085,931) ----------- ---------- ---------- ----------- Net change in contract owners' equity .............. (1,721,881) (2,421,452) (7,819,135) (7,448,950) Contract owners' equity beginning of period ........ 6,770,955 9,192,407 18,229,025 25,677,975 ----------- ---------- ---------- ----------- Contract owners' equity end of period .............. $ 5,049,074 6,770,955 10,409,890 18,229,025 =========== ========== ========== =========== CHANGES IN UNITS: Beginning units ................................. 679,600 711,440 1,084,722 1,272,956 ----------- ---------- ---------- ----------- Units purchased ................................. 89,777 110,791 144,963 137,229 Units redeemed .................................. (132,055) (142,631) (297,014) (325,463) ----------- ---------- ---------- ----------- Ending units .................................... 637,322 679,600 932,671 1,084,722 =========== ========== ========== =========== DryMidCapIx DryEuroEq --------------------- ----------------- Investment activity: 2002 2001 2002 2001 --------- --------- ------- ------- Net investment income (loss) .................... (15,561) (4,071) (420) (736) Realized gain (loss) on investments ............. (372,288) (255,703) (18,187) 2,841 Change in unrealized gain (loss) on investments .................................. (455,988) 115,892 (639) (878) Reinvested capital gains ........................ 33,555 25,776 -- -- --------- --------- ------- ------- Net increase (decrease) in contract owners' equity resulting from operations .......... (810,282) (118,106) (19,246) 1,227 --------- --------- ------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ..................................... 351,967 190,528 9,123 12,657 Transfers between funds ......................... 1,472,727 1,669,130 (69,351) (35,400) Surrenders (note 6) ............................. (278,698) (44,557) (161) (1,022) Death benefits (note 4) ......................... (1,826) (7,174) -- -- Policy loans (net of repayments) (note 5) ....... (9,157) (24,551) 117 (300) Deductions for surrender charges (note 2d) ...... (15,325) (3,988) (9) (91) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ..... (202,705) (116,906) (2,401) (6,296) Asset charges (note 3): MSP contracts ................................ (3,190) (1,953) -- (46) LSFP contracts ............................... (1,934) (578) 1 (3) --------- --------- ------- ------- Net equity transactions ................... 1,311,859 1,659,951 (62,681) (30,501) --------- --------- ------- ------- Net change in contract owners' equity .............. 501,577 1,541,845 (81,927) (29,274) Contract owners' equity beginning of period ........ 3,340,634 1,798,789 81,927 111,201 --------- --------- ------- ------- Contract owners' equity end of period .............. 3,842,211 3,340,634 -- 81,927 ========= ========= ======= ======= CHANGES IN UNITS: Beginning units ................................. 325,991 171,893 12,374 11,957 --------- --------- ------- ------- Units purchased ................................. 165,799 173,353 1,810 6,654 Units redeemed .................................. (45,969) (19,255) (14,184) (6,237) --------- --------- ------- ------- Ending units .................................... 445,821 325,991 -- 12,374 ========= ========= ======= =======
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
DrySmCapIxS DrySRGro --------------- ----------------------- Investment activity: 2002 2001 2002 2001 -------- ---- ---------- ---------- Net investment income (loss) .................... $ 8 -- (57,330) (109,204) Realized gain (loss) on investments ............. (6,758) -- (1,069,508) (369,365) Change in unrealized gain (loss) on investments ............................... (172) -- (2,683,067) (3,939,932) Reinvested capital gains ........................ -- -- -- -- -------- ---- ---------- ---------- Net increase (decrease) in contract owners'equity resulting from operations ................................ (6,922) -- (3,809,905) (4,418,501) -------- ---- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ..................... 35,798 -- 1,704,096 2,143,427 Transfers between funds ......................... 96,048 -- (1,126,297) (1,098,629) Surrenders (note 6) ............................. (12,292) -- (924,256) (891,852) Death benefits (note 4) ......................... -- -- (43,454) (23,643) Policy loans (net of repayments) (note 5) ....... 314 -- (20,791) (372,581) Deductions for surrender charges (note 2d) ...... (676) -- (50,823) (79,816) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................ (1,475) -- (847,059) (968,162) Asset charges (note 3): MSP contracts ................................ (62) -- (4,062) (6,768) LSFP contracts ............................... (3) -- (3,757) (5,485) -------- ---- ---------- ---------- Net equity transactions ................... 117,652 -- (1,316,403) (1,303,509) -------- ---- ---------- ---------- Net change in contract owners' equity .............. 110,730 -- (5,126,308) (5,722,010) Contract owners' equity beginning of period ........ -- -- 13,612,330 19,334,340 -------- ---- ---------- ---------- Contract owners' equity end of period .............. $110,730 -- 8,486,022 13,612,330 ======== ==== ========== ========== CHANGES IN UNITS: Beginning units ................................. -- -- 573,971 629,857 -------- ---- ---------- ---------- Units purchased ................................. 14,878 -- 87,917 83,928 Units redeemed .................................. (407) -- (156,667) (139,814) -------- ---- ---------- ---------- Ending units .................................... 14,471 -- 505,221 573,971 ======== ==== ========== ========== DryStkIx DryVIFApp ------------------------- ---------------------- Investment activity: 2002 2001 2002 2001 ----------- ----------- ---------- --------- Net investment income (loss) .................... 459,532 332,575 23,140 8,180 Realized gain (loss) on investments ............. (940,878) 9,935 (571,297) (93,890) Change in unrealized gain (loss) on investments ............................... (19,311,189) (13,687,873) (691,267) (617,829) Reinvested capital gains ........................ -- 467,526 -- -- ----------- ----------- ---------- --------- Net increase (decrease) in contract owners' equity resulting from operations .......... (19,792,535) (12,877,837) (1,239,424) (703,539) ----------- ----------- ---------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ..................... 8,299,700 10,603,012 608,427 775,908 Transfers between funds ......................... (4,186,916) 1,384,992 308,413 107,630 Surrenders (note 6) ............................. (4,818,700) (4,146,012) (292,680) (233,967) Death benefits (note 4) ......................... (104,303) (431,669) (12,604) (642) Policy loans (net of repayments) (note 5) ....... 60,616 (379,222) (52,352) (93,305) Deductions for surrender charges (note 2d) ...... (264,971) (371,045) (16,094) (20,939) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................ (4,116,114) (4,015,363) (311,263) (325,049) Asset charges (note 3): MSP contracts ................................ (28,802) (40,868) (2,257) (2,606) LSFP contracts ............................... (51,509) (56,827) (5,846) (6,023) ----------- ----------- ---------- --------- Net equity transactions ................... (5,210,999) 2,546,998 223,744 201,007 ----------- ----------- ---------- --------- Net change in contract owners' equity .............. (25,003,534) (10,330,839) (1,015,680) (502,532) Contract owners' equity beginning of period ........ 88,822,689 99,153,528 6,748,865 7,251,397 ----------- ----------- ---------- --------- Contract owners' equity end of period .............. 63,819,155 88,822,689 5,733,185 6,748,865 =========== =========== ========== ========= CHANGES IN UNITS: Beginning units ................................. 3,551,969 3,460,355 520,418 503,469 ----------- ----------- ---------- --------- Units purchased ................................. 427,978 525,479 82,728 85,636 Units redeemed .................................. (662,623) (433,865) (68,347) (68,687) ----------- ----------- ---------- --------- Ending units .................................... 3,317,324 3,551,969 534,799 520,418 =========== =========== ========== =========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
DryVIFGrInc FedQualBd ---------------------- ---------------- Investment activity: 2002 2001 2002 2001 ---------- --------- --------- ---- Net investment income (loss) ................. $ (1,347) (4,914) (3,977) -- Realized gain (loss) on investments .......... (131,464) (7,978) 17,661 -- Change in unrealized gain (loss) on investments ............................ (602,115) (258,534) 39,181 -- Reinvested capital gains ..................... -- 45,863 -- -- ---------- --------- --------- --- Net increase (decrease) in contract owners' equity resulting from operations ............................. (734,926) (225,563) 52,865 -- ---------- --------- --------- --- Equity transactions: Purchase payments received from contract owners (note 6) .................. 229,396 293,388 34,259 -- Transfers between funds ...................... (67,132) 103,859 1,229,802 -- Surrenders (note 6) .......................... (99,306) (217,868) (24,623) -- Death benefits (note 4) ...................... (7,828) (317) -- -- Policy loans (net of repayments) (note 5) .... (3,538) (34,479) 2,487 -- Deductions for surrender charges (note 2d) ... (5,461) (19,498) (1,354) --- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (138,671) (138,857) (30,500) -- Asset charges (note 3): MSP contracts ............................. (2,335) (3,439) (175) -- LSFP contracts ............................ (1,850) (2,419) (146) -- ---------- --------- --------- --- Net equity transactions ................ (96,725) (19,630) 1,209,750 -- ---------- --------- --------- --- Net change in contract owners' equity ........... (831,651) (245,193) 1,262,615 -- Contract owners' equity beginning of period .................................... 2,888,177 3,133,370 -- -- ---------- --------- --------- --- Contract owners' equity end of period ........... $2,056,526 2,888,177 1,262,615 -- ========== ========= ========= === CHANGES IN UNITS: Beginning units .............................. 217,273 220,323 -- -- ---------- --------- --------- --- Units purchased .............................. 26,066 34,265 122,888 -- Units redeemed ............................... (34,757) (37,315) (5,210) -- ---------- --------- --------- --- Ending units ................................. 208,582 217,273 117,678 -- ========== ========= ========= === FidVIPEI FidVIPGr ------------------------ -------------------------- Investment activity: 2002 2001 2002 2001 ----------- ---------- ----------- ----------- Net investment income (loss) ................. 670,788 720,232 (497,509) (929,341) Realized gain (loss) on investments .......... (1,832,619) 55,848 (6,475,478) (4,273,764) Change in unrealized gain (loss) on investments ............................ (13,879,079) (9,359,446) (28,601,357) (33,423,042) Reinvested capital gains ..................... 1,645,146 3,782,228 -- 10,107,480 ----------- ---------- ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ............................. (13,395,764) (4,801,138) (35,574,344) (28,518,667) ----------- ---------- ----------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) .................. 6,296,828 7,191,894 10,702,893 13,007,093 Transfers between funds ...................... (1,326,155) 1,446,582 (5,909,456) (8,018,175) Surrenders (note 6) .......................... (4,013,742) (3,544,539) (6,576,671) (5,631,639) Death benefits (note 4) ...................... (512,295) (225,553) (303,488) (304,251) Policy loans (net of repayments) (note 5) .... (325,234) (805,494) 53,735 (1,189,965) Deductions for surrender charges (note 2d) ... (220,708) (317,216) (361,638) (504,000) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (3,720,031) (3,630,378) (5,684,040) (6,302,082) Asset charges (note 3): MSP contracts ............................. (33,789) (39,422) (29,451) (46,539) LSFP contracts ............................ (22,051) (22,617) (26,493) (31,178) ----------- ---------- ----------- ----------- Net equity transactions ................ (3,877,177) 53,257 (8,134,609) (9,020,736) ----------- ---------- ----------- ----------- Net change in contract owners' equity ........... (17,272,941) (4,747,881) (43,708,953) (37,539,403) Contract owners' equity beginning of period .................................... 77,024,402 81,772,283 119,372,389 156,911,792 ----------- ---------- ----------- ----------- Contract owners' equity end of period ........... 59,751,461 77,024,402 75,663,436 119,372,389 =========== ========== =========== =========== CHANGES IN UNITS: Beginning units .............................. 2,285,562 2,276,206 3,226,113 3,462,746 ---------- ---------- ----------- ----------- Units purchased .............................. 239,009 280,800 408,396 354,493 Units redeemed ............................... (378,277) (271,444) (711,656) (591,126) ---------- ---------- ----------- ----------- Ending units ................................. 2,146,294 2,285,562 2,922,853 3,226,113 ========== ========== =========== ===========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
FidVIPHI FidVIPOv ------------------------ ------------------------ Investment activity: 2002 2001 2002 2001 ----------- ---------- ----------- ---------- Net investment income (loss)................. $ 1,610,797 2,247,137 1,649 938,954 Realized gain (loss) on investments.......... (6,235,204) (4,705,027) (10,007,301) (2,848,287) Change in unrealized gain (loss) on investments............................ 5,128,915 (27,924) 6,676,168 (4,902,933) Reinvested capital gains..................... -- -- -- 1,740,234 ----------- ---------- ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. 504,508 (2,485,814) (3,329,484) (5,072,032) ----------- ---------- ----------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 1,686,100 2,363,311 1,803,973 2,097,571 Transfers between funds...................... 3,942,862 603,870 (1,055,151) (1,327,939) Surrenders (note 6).......................... (973,008) (908,331) (1,283,924) (1,006,514) Death benefits (note 4)...................... (26,392) (56,917) (62,516) (101,240) Policy loans (net of repayments) (note 5).... (25,575) (38,801) (63,624) (85,860) Deductions for surrender charges (note 2d)... (53,504) (81,290) (70,600) (90,077) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (970,512) (953,764) (781,093) (832,760) Asset charges (note 3): MSP contracts............................. (12,568) (14,190) (4,418) (5,818) LSFP contracts............................ (8,051) (8,038) (5,086) (6,533) ----------- ---------- ----------- ---------- Net equity transactions................ 3,559,352 905,850 (1,522,439) (1,359,170) ----------- ---------- ----------- ---------- Net change in contract owners' equity........... 4,063,860 (1,579,964) (4,851,923) (6,431,202) Contract owners' equity beginning of period.................................... 16,642,189 18,222,153 17,277,545 23,708,747 ----------- ---------- ----------- ---------- Contract owners' equity end of period .......... $20,706,049 16,642,189 12,425,622 17,277,545 =========== ========== =========== ========== CHANGES IN UNITS: Beginning units.............................. 1,017,739 972,429 1,067,775 1,146,574 ----------- ---------- ----------- ---------- Units purchased.............................. 325,331 170,800 127,166 129,935 Units redeemed............................... (136,840) (125,490) (226,360) (208,734) ----------- ---------- ----------- ---------- Ending units................................. 1,206,230 1,017,739 968,581 1,067,775 =========== ========== =========== ========== FidVIPAM FidVIPCon ----------------------- ------------------------ Investment activity: 2002 2001 2002 2001 ---------- ---------- ---------- ----------- Net investment income (loss)................. 770,857 946,367 43,995 43,587 Realized gain (loss) on investments.......... (608,998) (197,074) (1,171,475) (197,444) Change in unrealized gain (loss) on investments............................ (2,677,633) (2,656,974) (3,976,205) (9,738,153) Reinvested capital gains..................... -- 442,307 -- 1,612,865 ---------- ---------- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations............................. (2,515,774) (1,465,374) (5,103,685) (8,279,145) ---------- ---------- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6).................. 1,668,475 1,952,879 5,127,914 5,795,249 Transfers between funds...................... (727,846) (924,825) (2,166,207) (3,613,770) Surrenders (note 6).......................... (1,466,623) (1,051,266) (3,296,014) (2,048,334) Death benefits (note 4)...................... (24,631) (24,025) (105,306) (148,293) Policy loans (net of repayments) (note 5).... 38,282 (139,132) (145,249) (442,265) Deductions for surrender charges (note 2d)... (80,647) (94,082) (181,241) (183,314) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (1,151,383) (1,110,503) (2,602,068) (2,534,714) Asset charges (note 3): MSP contracts............................. (8,709) (10,168) (22,569) (28,667) LSFP contracts............................ (3,308) (3,155) (21,973) (22,235) ---------- ---------- ---------- ----------- Net equity transactions................ (1,756,390) (1,404,277) (3,412,713) (3,226,343) ---------- ---------- ---------- ----------- Net change in contract owners' equity........... (4,272,164) (2,869,651) (8,516,398) (11,505,488) Contract owners' equity beginning of period.................................... 26,615,885 29,485,536 52,593,790 64,099,278 ---------- ---------- ---------- ----------- Contract owners' equity end of period .......... 22,343,721 26,615,885 44,077,392 52,593,790 ========== ========== ========== =========== CHANGES IN UNITS: Beginning units.............................. 1,094,419 1,150,637 2,539,821 2,697,733 ---------- ---------- ---------- ----------- Units purchased.............................. 94,132 95,668 270,926 300,960 Units redeemed............................... (174,616) (151,886) (446,360) (458,872) ---------- ---------- ---------- ----------- Ending units................................. 1,013,935 1,094,419 2,364,387 2,539,821 ========== ========== ========== ===========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
FidVIPGrOp FidVIPValStS GVITEmMrkts GVITGIFin ------------------------ -------------- ------------------ ------------- Investment activity: 2002 2001 2002 2001 2002 2001 2002 2001 ----------- ---------- ------- ---- -------- ------- ------ ---- Net investment income (loss)................. $ 13,434 (13,820) (316) -- (3,241) 75 (119) -- Realized gain (loss) on investments.......... (387,954) (634,796) (9,547) -- 9,490 (24,506) 113 -- Change in unrealized gain (loss) on investments............................ (537,034) (126,832) (4,574) -- (24,239) 33,345 (599) -- Reinvested capital gains..................... -- -- -- -- -- -- -- -- ----------- ---------- ------- ---- -------- ------- ------ ---- Net increase (decrease) in contract owners' equity resulting from operations............................. (911,554) (775,448) (14,437) -- (17,990) 8,914 (605) -- ----------- ---------- ------- ---- -------- ------- ------ ---- Equity transactions: Purchase payments received from contract owners (note 6).................. 560,969 793,729 6,353 -- 30,715 5,169 368 -- Transfers between funds...................... (326,009) (496,644) 107,296 -- (75,118) 413,987 66,328 -- Surrenders (note 6).......................... (159,570) (258,771) -- -- (25,350) (2,213) -- -- Death benefits (note 4)...................... (4,698) (237) -- -- (1,829) -- -- -- Policy loans (net of repayments) (note 5).... (22,423) (39,475) (930) -- (40,241) 198 (972) -- Deductions for surrender charges (note 2d)... (8,774) (23,158) -- -- (1,394) (198) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (218,076) (236,312) (2,342) -- (21,884) (7,221) (625) -- Asset charges (note 3): MSP contracts............................. (1,654) (2,717) (137) -- (498) (295) (3) -- LSFP contracts............................ (2,257) (2,557) (5) -- (121) (7) -- -- ----------- ---------- ------- ---- -------- ------- ------ ---- Net equity transactions................ (182,492) (266,142) 110,235 -- (135,720) 409,420 65,096 -- ----------- ---------- ------- ---- -------- ------- ------ ---- Net change in contract owners' equity........ (1,094,046) (1,041,590) 95,798 -- (153,710) 418,334 64,491 -- Contract owners' equity beginning of period................................. 4,129,080 5,170,670 -- -- 427,577 9,243 -- -- ----------- ---------- ------- ---- -------- ------- ------ ---- Contract owners' equity end of period........ $ 3,035,034 4,129,080 95,798 -- 273,867 427,577 64,491 -- =========== ========== ======= ==== ======== ======= ====== ==== CHANGES IN UNITS: Beginning units.............................. 420,111 446,913 -- -- 52,012 1,063 -- -- ----------- ---------- ------- ---- -------- ------- ------ ---- Units purchased.............................. 72,484 82,751 13,276 -- 17,002 52,164 7,678 -- Units redeemed............................... (94,587) (109,553) (450) -- (29,306) (1,215) (183) -- ----------- ---------- ------- ---- -------- ------- ------ ---- Ending units................................. 398,008 420,111 12,826 -- 39,708 52,012 7,495 -- =========== ========== ======= ==== ======== ======= ====== ====
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
GVITGIHlth GVITGITech GVITGlUlt GVITGvtBd --------------- ------------------- ------------- ----------------------- Investment activity: 2002 2001 2002 2001 2002 2001 2002 2001 -------- ---- -------- -------- ------ ---- ---------- ---------- Net investment income (loss)................. $ (397) -- (450) (2,955) 33 -- 740,616 682,702 Realized gain (loss) on investments.......... (611) -- (188,420) (424,935) (296) -- 766,407 690,349 Change in unrealized gain (loss) on investments............................ (4,795) -- (19,032) 215,502 (33) -- 254,202 (567,238) Reinvested capital gains..................... -- -- -- -- -- -- 177,046 25,190 -------- ---- -------- -------- ------ ---- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. (5,803) -- (207,902) (212,388) (296) -- 1,938,271 831,003 -------- ---- -------- -------- ------ ---- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 17,502 -- 45,556 75,992 75 -- 1,267,894 1,047,084 Transfers between funds...................... 155,423 -- 130,870 172,244 36,282 -- 5,104,395 6,329,761 Surrenders (note 6).......................... -- -- (56,652) (3,862) -- -- (3,160,509) (497,629) Death benefits (note 4)...................... -- -- -- -- -- -- (56,328) (69,873) Policy loans (net of repayments) (note 5).... (8,938) -- 26,213 (58,752) -- -- (301,152) (1,259,271) Deductions for surrender charges (note 2d)... -- -- (3,115) (346) -- -- (173,790) (44,535) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (2,414) -- (23,648) (29,002) (152) -- (897,183) (627,606) Asset charges (note 3): MSP contracts............................. (12) -- (196) (90) (5) -- (18,203) (13,288) LSFP contracts............................ (50) -- (9) -- -- -- (8,831) (8,008) -------- ---- -------- -------- ------ ---- ---------- ---------- Net equity transactions................ 161,511 -- 119,019 156,184 36,200 -- 1,756,293 4,856,635 -------- ---- -------- -------- ------ ---- ---------- ---------- Net change in contract owners' equity........... 155,708 -- (88,883) (56,204) 35,904 -- 3,694,564 5,687,638 Contract owners' equity beginning of period.................................... -- -- 349,973 406,177 -- -- 18,686,828 12,999,190 -------- ---- -------- -------- ------ ---- ---------- ---------- Contract owners' equity end of period........... $155,708 -- 261,090 349,973 35,904 -- 22,381,392 18,686,828 ======== ==== ======== ======== ====== ==== ========== ========== CHANGES IN UNITS: Beginning units.............................. -- -- 102,616 67,646 -- -- 940,162 696,947 -------- ---- -------- -------- ------ ---- ---------- ---------- Units purchased.............................. 20,531 -- 61,493 65,702 4,184 -- 256,619 377,562 Units redeemed............................... (1,726) -- (29,460) (30,732) (20) -- (172,710) (134,347) -------- ---- -------- -------- ------ ---- ---------- ---------- Ending units................................. 18,805 -- 134,649 102,616 4,164 -- 1,024,071 940,162 ======== ==== ======== ======== ====== ==== ========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
GVITGrowth GVITIDAgg GVITIDCon GVITIDMod ------------------------ -------------- -------------- -------------- Investment activity: 2002 2001 2002 2001 2002 2001 2002 2001 ----------- ---------- ------- ---- ------- ---- ------- ---- Net investment income (loss)................. $ (115,653) (149,321) 375 -- 3,709 -- 3,431 -- Realized gain (loss) on investments.......... (2,366,653) (4,280,310) (3,763) -- (84) -- (3,356) -- Change in unrealized gain (loss) on investments............................ (3,021,176) (3,202,773) (5,389) -- (1,344) -- (11,401) -- Reinvested capital gains..................... -- -- 22 -- 154 -- 436 -- ----------- ---------- ------- --- ------- --- ------- --- Net increase (decrease) in contract owners' equity resulting from operations ............................ (5,503,482) (7,632,404) (8,755) -- 2,435 -- (10,890) -- ----------- ---------- ------- --- ------- --- ------- --- Equity transactions: Purchase payments received from contract owners (note 6).................. 3,550,411 4,054,677 30,018 -- 7,502 -- 40,643 -- Transfers between funds...................... (1,039,416) (1,301,931) 147,481 -- 332,814 -- 528,483 -- Surrenders (note 6).......................... (919,629) (1,215,938) (6,575) -- (29,580) -- (2,844) -- Death benefits (note 4)...................... (51,849) (94,201) -- -- -- -- -- -- Policy loans (net of repayments) (note 5).... 194,094 (469,940) (4,029) -- 12,073 -- 1,352 -- Deductions for surrender charges (note 2d)... (50,568) (108,820) (362) -- (1,627) -- (156) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (1,432,973) (1,486,232) (11,321) -- (5,634) -- (12,601) -- Asset charges (note 3): MSP contracts............................. (5,160) (8,664) -- -- (260) -- (292) -- LSFP contracts............................ (8,210) (9,001) -- -- (167) -- -- -- ----------- ---------- ------- --- ------- --- ------- --- Net equity transactions................ 236,700 (640,050) 155,212 -- 315,121 -- 554,585 -- ----------- ---------- ------- --- ------- --- ------- --- Net change in contract owners' equity........... (5,266,782) (8,272,454) 146,457 -- 317,556 -- 543,695 -- Contract owners' equity beginning of period.................................... 18,678,345 26,950,799 -- -- -- -- -- -- ----------- ---------- ------- --- ------- --- ------- --- Contract owners' equity end of period .......... $13,411,563 18,678,345 146,457 -- 317,556 -- 543,695 -- =========== ========== ======= === ======= === ======= === CHANGES IN UNITS: Beginning units ............................. 1,157,307 1,201,390 -- -- -- -- -- -- ----------- ---------- ------- --- ------- --- ------- --- Units purchased ............................. 296,325 245,018 20,524 -- 34,708 -- 61,992 -- Units redeemed .............................. (283,603) (289,101) (2,814) -- (2,954) -- (2,173) -- ----------- ---------- ------- --- ------- --- ------- --- Ending units ................................ 1,170,029 1,157,307 17,710 -- 31,754 -- 59,819 -- =========== ========== ======= === ======= === ======= ===
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
GVITIDModAgg GVITIDModCon GVITIntGro GVITMyMkt ----------------- -------------- ---------------- ------------------------ Investment activity: 2002 2001 2002 2001 2002 2001 2002 2001 ---------- ---- ------- ---- ------- ------ ----------- ---------- Net investment income (loss)................. $ 4,020 -- 2,374 -- (333) (165) 234,335 1,471,308 Realized gain (loss) on investments.......... (30,041) -- (4,333) -- (4,929) (3,090) -- -- Change in unrealized gain (loss) on investments............................ (40,857) -- 142 -- (759) 1,005 -- -- Reinvested capital gains..................... 1,303 -- 402 -- -- -- -- -- ---------- ---- ------- ---- ------- ------ ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. (65,575) -- (1,415) -- (6,021) (2,250) 234,335 1,471,308 ---------- ---- ------- ---- ------- ------ ----------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 51,389 -- 10,547 -- 37,116 2,587 4,228,147 7,038,540 Transfers between funds...................... 981,852 -- 353,136 -- 46,984 52,127 8,868,792 (1,799,877) Surrenders (note 6).......................... (3,304) -- (83,408) -- (70,278) (14) (15,813,066) (6,733,123) Death benefits (note 4)...................... -- -- (4,459) -- -- -- (100,051) (323,940) Policy loans (net of repayments) (note 5).... 12,741 -- 3,617 -- (1,483) (105) 856,428 312,202 Deductions for surrender charges (note 2d)... (182) -- (4,586) -- (3,864) (1) (869,528) (602,577) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (34,114) -- (4,367) -- (2,650) (1,273) (2,203,711) (2,220,627) Asset charges (note 3): MSP contracts............................. (29) -- (169) -- -- -- (47,444) (44,176) LSFP contracts............................ (89) -- (4) -- -- -- (40,196) (38,727) ---------- ---- ------- ---- ------- ------ ----------- ---------- Net equity transactions................ 1,008,264 -- 270,307 -- 5,825 53,321 (5,120,629) (4,412,305) ---------- ---- ------- ---- ------- ------ ----------- ---------- Net change in contract owners' equity........... 942,689 -- 268,892 -- (196) 51,071 (4,886,294) (2,940,997) Contract owners' equity beginning of period.................................... -- -- -- -- 55,253 4,182 51,650,867 54,591,864 ---------- ---- ------- ---- ------- ------ ----------- ---------- Contract owners' equity end of period........... $ 942,689 -- 268,892 -- 55,057 55,253 46,764,573 51,650,867 ========== ==== ======= ==== ======= ====== =========== ========== CHANGES IN UNITS: Beginning units.............................. -- -- -- -- 8,456 453 3,540,015 3,829,526 ---------- ---- ------- ---- ------- ------ ----------- ---------- Units purchased.............................. 113,991 -- 28,835 -- 9,592 8,228 649,115 732,398 Units redeemed............................... (4,780) -- (808) -- (6,815) (225) (1,008,060) (1,021,909) ---------- ---- ------- ---- ------- ------ ----------- ---------- Ending units................................. 109,211 -- 28,027 -- 11,233 8,456 3,181,070 3,540,015 ========== ==== ======= ==== ======= ====== =========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
GVITLead GVITSmCapGr --------------- --------------------- Investment activity: 2002 2001 2002 2001 -------- ---- --------- --------- Net investment income (loss)................. $ 224 -- (9,005) (8,611) Realized gain (loss) on investments.......... (9,895) -- (539,108) (223,133) Change in unrealized gain (loss) on investments............................ (4,614) -- (10,392) 178,447 Reinvested capital gains..................... -- -- -- -- -------- ---- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations............................. (14,285) -- (558,505) (53,297) -------- ---- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6).................. 7,788 -- 619,612 104,712 Transfers between funds...................... 141,311 -- 134,653 646,697 Surrenders (note 6).......................... (12,363) -- (162,779) (30,141) Death benefits (note 4)...................... -- -- (17,654) -- Policy loans (net of repayments) (note 5).... (2,325) -- (2,166) (30,450) Deductions for surrender charges (note 2d)... (680) -- (8,951) (2,697) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (4,331) -- (76,901) (61,379) Asset charges (note 3): MSP contracts............................. (79) -- (476) (635) LSFP contracts............................ -- -- (667) (264) -------- ---- --------- --------- Net equity transactions................ 129,321 -- 484,671 625,843 -------- ---- --------- --------- Net change in contract owners' equity........... 115,036 -- (73,834) 572,546 Contract owners' equity beginning of period.................................... -- -- 1,332,775 760,229 -------- ---- --------- --------- Contract owners' equity end of period........... $115,036 -- 1,258,941 1,332,775 ======== ==== ========= ========= CHANGES IN UNITS: Beginning units.............................. -- -- 186,280 94,113 -------- ---- --------- --------- Units purchased.............................. 14,429 -- 120,635 113,449 Units redeemed .............................. (750) -- (41,152) (21,282) -------- ---- --------- --------- Ending units................................. 13,679 -- 265,763 186,280 ======== ==== ========= ========= GVITSmCapVal GVITSmComp ----------------------- ----------------------- Investment activity: 2002 2001 2002 2001 ---------- ---------- ---------- ---------- Net investment income (loss)................. (92,125) (93,474) (166,099) (165,788) Realized gain (loss) on investments.......... (3,668,042) 110,418 (2,431,393) (4,402,099) Change in unrealized gain (loss) on investments............................ (1,169,384) 1,228,548 (2,049,393) 2,206,825 Reinvested capital gains..................... 308,760 1,026,030 -- -- ---------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. (4,620,791) 2,271,522 (4,646,885) (2,361,062) ---------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 1,188,983 856,736 2,184,290 2,441,354 Transfers between funds...................... (1,353,452) 6,194,722 (120,024) (3,075,492) Surrenders (note 6).......................... (1,003,083) (349,290) (1,272,878) (849,541) Death benefits (note 4)...................... (11,891) (3,924) (71,551) (69,847) Policy loans (net of repayments) (note 5).... (51,969) (53,992) (215,642) (474,171) Deductions for surrender charges (note 2d)... (55,158) (31,259) (69,993) (76,029) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (586,977) (387,192) (1,285,393) (1,301,720) Asset charges (note 3): MSP contracts............................. (7,239) (5,500) (13,651) (17,316) LSFP contracts............................ (9,801) (8,972) (10,604) (13,625) ---------- ---------- ---------- ---------- Net equity transactions................ (1,890,587) 6,211,329 (875,446) (3,436,387) ---------- ---------- ---------- ---------- Net change in contract owners' equity........... (6,511,378) 8,482,851 (5,522,331) (5,797,449) Contract owners' equity beginning of period.................................... 15,781,967 7,299,116 25,607,027 31,404,476 ---------- ---------- ---------- ---------- Contract owners' equity end of period........... 9,270,589 15,781,967 20,084,696 25,607,027 ========== ========== ========== ========== CHANGES IN UNITS: Beginning units.............................. 1,034,902 610,738 1,141,976 1,306,261 ---------- ---------- ---------- ---------- Units purchased.............................. 107,054 520,517 129,251 116,845 Units redeemed .............................. (303,657) (96,353) (180,522) (281,130) ---------- ---------- ---------- ---------- Ending units................................. 838,299 1,034,902 1,090,705 1,141,976 ========== ========== ========== ==========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
GVITTotRt GVITUSGro -------------------------- ------------- Investment activity: 2002 2001 2002 2001 ------------ ----------- ------ ---- Net investment income (loss)................. $ 63,059 10,101 (119) -- Realized gain (loss) on investments.......... (2,673,181) (1,755,795) (263) -- Change in unrealized gain (loss) on investments............................ (11,054,460) (11,829,407) (5,779) -- Reinvested capital gains..................... -- 2,194,987 -- -- ------------ ----------- ------ ---- Net increase (decrease) in contract owners' equity resulting from operations............................. (13,664,582) (11,380,114) (6,161) -- ------------ ----------- ------ ---- Equity transactions: Purchase payments received from contract owners (note 6).................. 9,291,200 10,570,297 1,061 -- Transfers between funds...................... (2,033,396) (1,415,297) 88,214 -- Surrenders (note 6).......................... (3,864,076) (4,543,745) -- -- Death benefits (note 4)...................... (443,207) (691,160) -- -- Policy loans (net of repayments) (note 5).... (296,328) (338,342) (1,144) -- Deductions for surrender charges (note 2d)... (212,478) (406,639) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (5,626,226) (5,593,239) (1,044) -- Asset charges (note 3): MSP contracts............................. (28,021) (34,275) -- -- LSFP contracts............................ (17,931) (19,473) (11) -- ------------ ----------- ------ ---- Net equity transactions................ (3,230,463) (2,471,873) 87,076 -- ------------ ----------- ------ ---- Net change in contract owners' equity........... (16,895,045) (13,851,987) 80,915 -- Contract owners' equity beginning of period ................................... 77,220,609 91,072,596 -- -- ------------ ----------- ------ ---- Contract owners' equity end of period........... $ 60,325,564 77,220,609 80,915 -- ============ =========== ====== ==== CHANGES IN UNITS: Beginning units.............................. 2,758,504 2,847,611 -- -- ------------ ----------- ------ ---- Units purchased.............................. 391,170 387,748 10,159 -- Units redeemed............................... (526,906) (476,855) (265) -- ------------ ----------- ------ ---- Ending units................................. 2,622,768 2,758,504 9,894 -- ============ =========== ====== ==== JanCapAp JanGITech ---------------------- ----------------------- Investment activity: 2002 2001 2002 2001 --------- ---------- ---------- ---------- Net investment income (loss)................. (10,295) 4,262 (8,887) (3,153) Realized gain (loss) on investments.......... (417,474) (1,133,638) (269,555) (2,122,695) Change in unrealized gain (loss) on investments............................ (28,278) 244,422 (427,636) 1,125,331 Reinvested capital gains..................... -- -- -- -- --------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. (456,047) (884,954) (706,078) (1,000,517) --------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 302,801 395,668 201,079 364,127 Transfers between funds...................... 136,764 497,060 (298,876) 478,283 Surrenders (note 6).......................... (193,278) (98,492) (139,634) (146,539) Death benefits (note 4)...................... -- -- -- (98,999) Policy loans (net of repayments) (note 5).... 11,769 (63,185) 26,135 (41,135) Deductions for surrender charges (note 2d)... (10,628) (8,814) (7,678) (13,114) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (163,145) (158,392) (78,471) (106,881) Asset charges (note 3): MSP contracts............................. (1,385) (2,325) (916) (1,712) LSFP contracts............................ (1,213) (1,195) (608) (802) --------- ---------- ---------- ---------- Net equity transactions................ 81,685 560,325 (298,969) 433,228 --------- ---------- ---------- ---------- Net change in contract owners' equity........... (374,362) (324,629) (1,005,047) (567,289) Contract owners' equity beginning of period ................................... 2,628,238 2,952,867 1,884,814 2,452,103 --------- ---------- ---------- ---------- Contract owners' equity end of period........... 2,253,876 2,628,238 879,767 1,884,814 ========= ========== ========== ========== CHANGES IN UNITS: Beginning units.............................. 428,785 373,970 449,115 363,557 --------- ---------- ---------- ---------- Units purchased.............................. 95,428 118,903 83,201 180,547 Units redeemed............................... (83,823) (64,088) (175,140) (94,989) --------- ---------- ---------- ---------- Ending units................................. 440,390 428,785 357,176 449,115 ========= ========== ========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
JanIntGro MGVITMultiSec ----------------------- ------------------- Investment activity: 2002 2001 2002 2001 ---------- ---------- --------- ------- Net investment income (loss)................. $ (4,636) (2,522) 38,896 26,704 Realized gain (loss) on investments ......... (407,715) (1,006,099) (7,201) (16,549) Change in unrealized gain (loss) on investments............................ (16,485) 441,311 27,886 (1,097) Reinvested capital gains..................... -- -- -- -- ---------- ---------- --------- ------- Net increase (decrease) in contract owners' equity resulting from operations............................. (428,836) (567,310) 59,581 9,058 ---------- ---------- --------- ------- Equity transactions: Purchase payments received from contract owners (note 6).................. 498,623 286,461 68,550 22,300 Transfers between funds...................... (37,022) 263,144 654,994 526,721 Surrenders (note 6).......................... (398,206) (60,603) (23,316) (4,013) Death benefits (note 4)...................... (2,290) -- -- (954) Policy loans (net of repayments) (note 5).... 28,088 (50,849) (4,610) (829) Deductions for surrender charges (note 2d)... (21,897) (5,424) (1,282) (359) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (105,940) (95,431) (29,377) (13,528) Asset charges (note 3): MSP contracts............................. (824) (1,219) (472) (733) LSFP contracts............................ (988) (668) (100) (60) ---------- ---------- --------- ------- Net equity transactions................ (40,456) 335,411 664,387 528,545 ---------- ---------- --------- ------- Net change in contract owners' equity........... (469,292) (231,899) 723,968 537,603 Contract owners' equity beginning of period.................................... 1,951,169 2,183,068 624,691 87,088 ---------- ---------- --------- ------- Contract owners' equity end of period........... $1,481,877 1,951,169 1,348,659 624,691 ========== ========== ========= ======= CHANGES IN UNITS: Beginning units ............................. 324,749 276,083 57,879 8,333 ---------- ---------- --------- ------- Units purchased ............................. 70,908 104,433 68,517 54,885 Units redeemed .............................. (61,009) (55,767) (8,966) (5,339) ---------- ---------- --------- ------- Ending units ................................ 334,648 324,749 117,430 57,879 ========== ========== ========= ======= NBAMTBal NBAMTGro --------------- ------------------------- Investment activity: 2002 2001 2002 2001 ------ ------ ----------- ----------- Net investment income (loss)................. 863 (43) (127,464) (193,586) Realized gain (loss) on investments ......... (343) (16) (4,914,991) (28,997,129) Change in unrealized gain (loss) on investments............................ (8,064) 125 (1,658,364) 6,433,848 Reinvested capital gains..................... -- -- -- 12,536,350 ------ ------ ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations............................. (7,544) 66 (6,700,819) (10,220,517) ------ ------ ----------- ----------- Equity transactions: Purchase payments received from contract owners (note 6).................. 1,871 469 2,192,969 2,731,498 Transfers between funds...................... 39,141 14,107 (4,042,985) 444,727 Surrenders (note 6).......................... -- -- (939,226) (974,018) Death benefits (note 4)...................... -- -- (56,429) (42,216) Policy loans (net of repayments) (note 5).... 22 -- (16,008) (212,223) Deductions for surrender charges (note 2d)... -- -- (51,646) (87,169) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (1,718) (374) (1,089,804) (1,244,333) Asset charges (note 3): MSP contracts............................. -- -- (7,158) (12,841) LSFP contracts............................ -- -- (6,125) (9,710) ------ ------ ----------- ----------- Net equity transactions................ 39,316 14,202 (4,016,412) 593,715 ------ ------ ----------- ----------- Net change in contract owners' equity........... 31,772 14,268 (10,717,231) (9,626,802) Contract owners' equity beginning of period.................................... 14,268 -- 23,714,762 33,341,564 ------ ------ ----------- ----------- Contract owners' equity end of period........... 46,040 14,268 12,997,531 23,714,762 ====== ====== =========== =========== CHANGES IN UNITS: Beginning units ............................. 636 -- 1,114,641 1,073,053 ------ ------ ----------- ----------- Units purchased ............................. 1,949 654 141,889 180,511 Units redeemed .............................. (88) (18) (389,975) (138,923) ------ ------ ----------- ----------- Ending units ................................ 2,497 636 866,555 1,114,641 ====== ====== =========== ===========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
NBAMTGuard NBAMTLMat ---------------------- --------------------- Investment activity: 2002 2001 2002 2001 ---------- --------- --------- --------- Net investment income (loss)................. $ 2,019 (6,035) 238,386 220,379 Realized gain (loss) on investments.......... (564,694) 6,732 29,349 89,230 Change in unrealized gain (loss) on investments............................ (142,270) (216,517) (464) 11,853 Reinvested capital gains..................... -- 152,227 -- -- ---------- --------- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations............................. (704,945) (63,593) 267,271 321,462 ---------- --------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6).................. 252,039 222,976 485,372 299,644 Transfers between funds...................... (326,889) 726,698 2,049,470 1,321,934 Surrenders (note 6).......................... (70,728) (143,079) (756,920) (773,410) Death benefits (note 4)...................... -- -- (42,010) (14,103) Policy loans (net of repayments) (note 5).... (14,101) (25,903) 80,900 159,958 Deductions for surrender charges (note 2d)... (3,889) (12,805) (41,621) (69,216) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (106,763) (90,460) (245,535) (172,678) Asset charges (note 3): MSP contracts............................. (1,592) (1,858) (6,969) (5,349) LSFP contracts............................ (1,817) (1,559) (1,413) (1,030) ---------- --------- --------- --------- Net equity transactions................ (273,740) 674,010 1,521,274 745,750 ---------- --------- --------- --------- Net change in contract owners' equity........... (978,685) 610,417 1,788,545 1,067,212 Contract owners' equity beginning of period.................................... 2,584,522 1,974,105 4,952,976 3,885,764 ---------- --------- --------- --------- Contract owners' equity end of period........... $1,605,837 2,584,522 6,741,521 4,952,976 ========== ========= ========= ========= CHANGES IN UNITS: Beginning units.............................. 247,137 184,667 298,490 252,610 ---------- --------- --------- --------- Units purchased.............................. 32,929 88,493 143,330 105,369 Units redeemed............................... (70,061) (26,023) (51,497) (59,489) ---------- --------- --------- --------- Ending units................................. 210,005 247,137 390,323 298,490 ========== ========= ========= ========= NBAMTPart OppAggGro ----------------------- ---------------------- Investment activity: 2002 2001 2002 2001 ---------- ---------- --------- ---------- Net investment income (loss)................. (32,601) (75,310) (1,144) 4,198 Realized gain (loss) on investments.......... (1,617,582) (803,266) (590,299) (1,542,830) Change in unrealized gain (loss) on investments............................ (3,978,892) (872,728) 91,747 307,499 Reinvested capital gains..................... -- 860,887 -- 315,653 ---------- ---------- --------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. (5,629,075) (890,417) (499,696) (915,480) ---------- ---------- --------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 2,518,759 2,895,052 277,067 414,251 Transfers between funds...................... (1,347,916) (551,168) (127,039) (327,543) Surrenders (note 6).......................... (979,335) (900,324) (140,615) (70,469) Death benefits (note 4)...................... (57,113) (80,967) (3,005) -- Policy loans (net of repayments) (note 5).... (98,447) (121,221) (16,276) (30,433) Deductions for surrender charges (note 2d)... (53,852) (80,574) (7,732) (6,307) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (1,224,187) (1,226,475) (117,334) (140,549) Asset charges (note 3): MSP contracts............................. (12,334) (16,055) (637) (1,861) LSFP contracts............................ (13,806) (13,840) (143) (353) ---------- ---------- --------- ---------- Net equity transactions................ (1,268,231) (95,572) (135,714) (163,264) ---------- ---------- --------- ---------- Net change in contract owners' equity........... (6,897,306) (985,989) (635,410) (1,078,744) Contract owners' equity beginning of period.................................... 23,648,159 24,634,148 1,793,749 2,872,493 ---------- ---------- --------- ---------- Contract owners' equity end of period........... 16,750,853 23,648,159 1,158,339 1,793,749 ========== ========== ========= ========== CHANGES IN UNITS: Beginning units.............................. 1,050,337 1,056,621 337,769 369,008 ---------- ---------- --------- ---------- Units purchased.............................. 149,729 143,261 72,910 71,698 Units redeemed............................... (209,732) (149,545) (106,054) (102,937) ---------- ---------- --------- ---------- Ending units................................. 990,334 1,050,337 304,625 337,769 ========== ========== ========= ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
OppBdFd OppCapAp ------------------------ ----------------------- Investment activity: 2002 2001 2002 2001 ----------- ---------- ---------- ---------- Net investment income (loss) ................ $ 882,439 771,452 (15,505) (19,077) Realized gain (loss) on investments ......... (350,686) (494,081) (6,751,858) (1,029,806) Change in unrealized gain (loss) on investments ........................... 535,188 471,071 2,058,407 (3,248,518) Reinvested capital gains .................... -- -- -- 1,656,912 ----------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ............................ 1,066,941 748,442 (4,708,956) (2,640,489) ----------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 1,018,900 1,078,932 2,131,465 1,908,054 Transfers between funds ..................... 816,498 1,213,664 (446,711) 1,333,450 Surrenders (note 6) ......................... (999,559) (744,342) (1,052,801) (730,423) Death benefits (note 4) ..................... (86,356) (21,063) (45,480) (20,947) Policy loans (net of repayments) (note 5) ... (175,417) (35,391) (56,354) (312,079) Deductions for surrender charges (note 2d)... (54,964) (66,614) (57,891) (65,369) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (658,218) (528,090) (828,314) (860,437) Asset charges (note 3): MSP contracts ............................ (10,665) (10,865) (5,855) (9,111) LSFP contracts ........................... (4,779) (3,915) (6,108) (7,689) ----------- ---------- ---------- ---------- Net equity transactions ............... (154,560) 882,316 (368,049) 1,235,449 ----------- ---------- ---------- ---------- Net change in contract owners' equity .......... 912,381 1,630,758 (5,077,005) (1,405,040) Contract owners' equity beginning of period ................................... 13,096,929 11,466,171 16,694,310 18,099,350 ----------- ---------- ---------- ---------- Contract owners' equity end of period .......... $14,009,310 13,096,929 11,617,305 16,694,310 =========== ========== ========== ========== CHANGES IN UNITS: Beginning units ............................. 691,900 647,048 1,073,994 1,010,305 ----------- ---------- ---------- ---------- Units purchased ............................. 85,064 120,657 162,077 199,382 Units redeemed .............................. (91,088) (75,805) (205,638) (135,693) ----------- ---------- ---------- ---------- Ending units ................................ 685,876 691,900 1,030,433 1,073,994 =========== ========== ========== ========== OppGlSec OppMSGrInc ------------------------ ------------------- Investment activity: 2002 2001 2002 2001 ---------- ----------- --------- ------- Net investment income (loss) ................ (61,818) (17,114) (227) (1,569) Realized gain (loss) on investments ......... (779,589) 711,276 (144,832) (68,580) Change in unrealized gain (loss) on investments ........................... (6,436,152) (10,336,593) (63,259) 3,903 Reinvested capital gains .................... -- 4,652,673 -- -- ---------- ----------- --------- ------- Net increase (decrease) in contract owners' equity resulting from operations ............................ (7,277,559) (4,989,758) (208,318) (66,246) ---------- ----------- --------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 2,395,521 3,040,269 86,118 73,457 Transfers between funds ..................... (974,214) (700,733) 352,251 478,473 Surrenders (note 6) ......................... (1,670,589) (1,165,344) (39,278) (13,868) Death benefits (note 4) ..................... (139,234) (59,812) -- (5,572) Policy loans (net of repayments) (note 5) ... (107,233) (641,888) 85 (6,462) Deductions for surrender charges (note 2d)... (91,862) (104,292) (2,160) (1,241) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (1,468,689) (1,470,276) (42,091) (28,125) Asset charges (note 3): MSP contracts ............................ (11,572) (14,321) (841) (846) LSFP contracts ........................... (7,148) (7,414) (787) (396) ---------- ----------- --------- ------- Net equity transactions ............... (2,075,020) (1,123,811) 353,297 495,420 ---------- ----------- --------- ------- Net change in contract owners' equity .......... (9,352,579) (6,113,569) 144,979 429,174 Contract owners' equity beginning of period ................................... 33,331,326 39,444,895 855,113 425,939 ---------- ----------- --------- ------- Contract owners' equity end of period .......... 23,978,747 33,331,326 1,000,092 855,113 ========== =========== ========= ======= CHANGES IN UNITS: Beginning units ............................. 1,278,705 1,321,836 106,340 47,244 ---------- ----------- --------- ------- Units purchased ............................. 122,958 124,911 59,843 67,246 Units redeemed .............................. (210,884) (168,042) (12,087) (8,150) ---------- ----------- --------- ------- Ending units ................................ 1,190,779 1,278,705 154,096 106,340 ========== =========== ========= =======
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
OppMultStr SGVITMdCpGr ------------------------ -------------------- Investment activity: 2002 2001 2002 2001 ----------- ---------- --------- -------- Net investment income (loss)................. $ 377,956 463,119 (8,153) (6,440) Realized gain (loss) on investments.......... (465,799) (253,215) (397,870) (447,934) Change in unrealized gain (loss) on investments............................ (1,738,579) (788,871) (56,058) 118,872 Reinvested capital gains..................... 200,398 782,407 -- -- ----------- ---------- --------- -------- Net increase (decrease) in contract owners' equity resulting from operations............................. (1,626,024) 203,440 (462,081) (335,502) ----------- ---------- --------- -------- Equity transactions: Purchase payments received from contract owners (note 6).................. 1,233,000 1,340,866 358,592 128,618 Transfers between funds...................... 6,851 73,937 485,532 407,630 Surrenders (note 6).......................... (881,744) (1,108,678) (47,786) (17,647) Death benefits (note 4)...................... (208,239) (15,941) (10,227) -- Policy loans (net of repayments) (note 5).... (71,305) (124,435) (5,425) (28,387) Deductions for surrender charges (note 2d)... (48,485) (99,220) (2,628) (1,579) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (720,498) (685,803) (61,931) (47,737) Asset charges (note 3): MSP contracts............................. (8,198) (8,884) (561) (769) LSFP contracts............................ (3,122) (3,101) (432) (240) ----------- ---------- --------- -------- Net equity transactions................ (701,740) (631,259) 715,134 439,889 ----------- ---------- --------- -------- Net change in contract owners' equity........... (2,327,764) (427,819) 253,053 104,387 Contract owners' equity beginning of period.................................... 14,587,018 15,014,837 925,125 820,738 ----------- ---------- --------- -------- Contract owners' equity end of period........... $12,259,254 14,587,018 1,178,178 925,125 =========== ========== ========= ======== CHANGES IN UNITS: Beginning units.............................. 574,816 597,489 164,872 101,174 ----------- ---------- --------- -------- Units purchased.............................. 73,564 62,920 206,561 87,445 Units redeemed............................... (104,973) (85,593) (35,612) (23,747) ----------- ---------- --------- -------- Ending units................................. 543,407 574,816 335,821 164,872 =========== ========== ========= ======== StOpp2 StDisc2 ------------------------ ----------------------- Investment activity: 2002 2001 2002 2001 ----------- ---------- ---------- ---------- Net investment income (loss)................. (147,021) (90,855) (52,203) (7,858) Realized gain (loss) on investments.......... (2,167,910) 810,668 (262,474) (1,394,760) Change in unrealized gain (loss) on investments............................ (9,845,255) (9,214,867) (594,143) 323,479 Reinvested capital gains..................... 644,398 6,568,447 -- 1,246,478 ----------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations............................. (11,515,788) (1,926,607) (908,820) 167,339 ----------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6).................. 3,147,871 3,747,736 608,903 677,166 Transfers between funds...................... (1,938,061) 1,868,557 (80,174) 331,868 Surrenders (note 6).......................... (1,780,772) (1,628,712) (417,882) (500,137) Death benefits (note 4)...................... (79,482) (138,099) (18,966) (9,601) Policy loans (net of repayments) (note 5).... (352,730) (509,235) 81,865 1,236 Deductions for surrender charges (note 2d)... (97,921) (145,760) (22,978) (44,759) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (1,897,429) (1,891,585) (346,561) (360,160) Asset charges (note 3): MSP contracts............................. (8,916) (10,652) (1,630) (1,879) LSFP contracts............................ (6,859) (7,189) (621) (1,043) ----------- ---------- ---------- ---------- Net equity transactions................ (3,014,299) 1,285,061 (198,044) 92,691 ----------- ---------- ---------- ---------- Net change in contract owners' equity........... (14,530,087) (641,546) (1,106,864) 260,030 Contract owners' equity beginning of period.................................... 43,130,976 43,772,522 6,864,441 6,604,411 ----------- ---------- ---------- ---------- Contract owners' equity end of period........... 28,600,889 43,130,976 5,757,577 6,864,441 =========== ========== ========== ========== CHANGES IN UNITS: Beginning units.............................. 1,109,407 1,075,957 327,117 325,876 ----------- ---------- ---------- ---------- Units purchased.............................. 116,005 153,470 38,978 54,515 Units redeemed............................... (211,096) (120,020) (52,513) (53,274) ----------- ---------- ---------- ---------- Ending units................................. 1,014,316 1,109,407 313,582 327,117 =========== ========== ========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
StIntStk2 TurnGVITGro ----------------------- ------------------- Investment activity: 2002 2001 2002 2001 ---------- ---------- -------- -------- Net investment income (loss)................. $ 63,769 (19,820) (1,483) (1,295) Realized gain (loss) on investments.......... (794,539) (668,197) (118,319) (142,465) Change in unrealized gain (loss) on investments............................ 177,975 (12,561) (25,065) 26,613 Reinvested capital gains..................... -- 94,952 -- -- ---------- ---------- -------- -------- Net increase (decrease) in contract owners' equity resulting from operations............................. (552,795) (605,626) (144,867) (117,147) ---------- ---------- -------- -------- Equity transactions: Purchase payments received from contract owners (note 6).................. 300,490 379,003 26,059 17,433 Transfers between funds...................... (144,364) (626,846) 112,664 263,212 Surrenders (note 6).......................... (170,083) (73,457) (1,211) (397) Death benefits (note 4)...................... (7,537) (8,282) -- -- Policy loans (net of repayments) (note 5).... 10,245 (5,357) 104 (5) Deductions for surrender charges (note 2d)... (9,352) (6,574) (67) (35) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (115,209) (138,425) 12,255 (8,497) Asset charges (note 3): MSP contracts............................. (766) (1,205) (133) (166) LSFP contracts............................ (2,122) (2,203) (12) -- ---------- ---------- -------- -------- Net equity transactions................ (138,698) (483,346) 149,659 271,545 ---------- ---------- -------- -------- Net change in contract owners' equity........... (691,493) (1,088,972) 4,792 154,398 Contract owners' equity beginning of period.................................... 2,291,785 3,380,757 203,826 49,428 ---------- ---------- -------- -------- Contract owners' equity end of period........... $1,600,292 2,291,785 208,618 203,826 ========== ========== ======== ======== CHANGES IN UNITS: Beginning units.............................. 297,754 339,841 53,240 7,806 ---------- ---------- -------- -------- Units purchased.............................. 50,067 48,269 50,752 47,788 Units redeemed............................... (62,517) (90,356) (7,882) (2,354) ---------- ---------- -------- -------- Ending units................................. 285,304 297,754 96,110 53,240 ========== ========== ======== ======== VEWrldBd VEWrldEMkt --------------------- --------------------- Investment activity: 2002 2001 2002 2001 --------- --------- --------- --------- Net investment income (loss)................. (26,814) 82,397 (23,485) (26,750) Realized gain (loss) on investments.......... 493,528 (98,475) (383,086) (647,627) Change in unrealized gain (loss) on investments............................ 184,996 (128,804) 111,183 690,151 Reinvested capital gains..................... -- -- -- -- --------- --------- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations............................. 651,710 (144,882) (295,388) 15,774 --------- --------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6).................. 260,531 148,351 704,499 490,507 Transfers between funds...................... 1,799,806 (16,738) 622,118 (331,274) Surrenders (note 6).......................... (190,817) (89,552) (564,961) (180,526) Death benefits (note 4)...................... (3,389) (911) (5,788) (8,562) Policy loans (net of repayments) (note 5).... (6,834) 58,063 490 28,266 Deductions for surrender charges (note 2d)... (10,493) (8,014) (31,066) (16,156) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (142,406) (94,179) (229,103) (186,521) Asset charges (note 3): MSP contracts............................. (1,498) (1,268) (2,796) (2,672) LSFP contracts............................ (1,111) (221) (3,167) (2,560) --------- --------- --------- --------- Net equity transactions................ 1,703,789 (4,469) 490,226 (209,498) --------- --------- --------- --------- Net change in contract owners' equity........... 2,355,499 (149,351) 194,838 (193,724) Contract owners' equity beginning of period.................................... 2,245,571 2,394,922 3,614,378 3,808,102 --------- --------- --------- --------- Contract owners' equity end of period........... 4,601,070 2,245,571 3,809,216 3,614,378 ========= ========= ========= ========= CHANGES IN UNITS: Beginning units.............................. 170,193 170,727 558,293 573,188 --------- --------- --------- --------- Units purchased.............................. 147,907 17,591 130,293 86,484 Units redeemed............................... (26,757) (18,125) (79,461) (101,379) --------- --------- --------- --------- Ending units................................. 291,343 170,193 609,125 558,293 ========= ========= ========= =========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2002 and 2001
VEWrldHAs VKEmMkt VKUSRealEst ---------------------- --------------------- --------------------- Investment activity: 2002 2001 2002 2001 2002 2001 ---------- --------- --------- --------- --------- --------- Net investment income (loss) ................ $ (3,098) 13,329 85,212 103,553 228,325 260,668 Realized gain (loss) on investments ......... (399,785) (465,577) (10,342) 2,970 66,434 499,135 Change in unrealized gain (loss) on investments ........................... 176,398 (17,134) 14,386 (10,775) (813,789) (151,471) Reinvested capital gains .................... -- -- -- -- 229,276 71,668 ---------- --------- --------- --------- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations ............................ (226,485) (469,382) 89,256 95,748 (289,754) 680,000 ---------- --------- --------- --------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 513,130 327,399 107,703 115,651 862,806 771,202 Transfers between funds ..................... 1,395,942 (274,541) 186,450 58,296 1,889,578 801,119 Surrenders (note 6) ......................... (230,792) (221,290) (77,281) (10,839) (978,184) (221,091) Death benefits (note 4) ..................... (7,889) (9,201) (1,815) (558) (13,953) (6,563) Policy loans (net of repayments) (note 5) ... (51,043) (6,073) (44,874) (2,643) (57,356) (125,377) Deductions for surrender charges (note 2d) .. (12,691) (19,804) (4,250) (970) (53,788) (19,786) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (210,529) (191,766) (59,348) (40,159) (550,761) (419,054) Asset charges (note 3): MSP contracts ............................ (1,932) (1,931) (924) (898) (5,293) (5,645) LSFP contracts ........................... (892) (644) (2,406) (2,146) (4,505) (3,546) ---------- --------- --------- --------- --------- --------- Net equity transactions ............... 1,393,304 (397,851) 103,255 115,734 1,088,544 771,259 ---------- --------- --------- --------- --------- --------- Net change in contract owners' equity .......... 1,166,819 (867,233) 192,511 211,482 798,790 1,451,259 Contract owners' equity beginning of period ................................... 3,298,337 4,165,570 1,275,908 1,064,426 8,867,642 7,416,383 ---------- --------- --------- --------- --------- --------- Contract owners' equity end of period .......... $4,465,156 3,298,337 1,468,419 1,275,908 9,666,432 8,867,642 ========== ========= ========= ========= ========= ========= CHANGES IN UNITS: Beginning units ............................. 247,470 278,673 116,821 106,632 425,269 388,011 ---------- --------- --------- --------- --------- --------- Units purchased ............................. 136,375 26,308 27,043 22,094 123,559 83,489 Units redeemed .............................. (38,355) (57,511) (20,175) (11,905) (78,988) (46,231) ---------- --------- --------- --------- --------- --------- Ending units ................................ 345,490 247,470 123,689 116,821 469,840 425,269 ========== ========= ========= ========= ========= =========
See accompanying notes to financial statements. ================================================================================ ================================================================================ NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS December 31, 2002 and 2001 (1) Summary of Significant Accounting Policies (a) Organization and Nature of Operations The Nationwide VLI Separate Account-2 (the Account) was established pursuant to a resolution of the Board of Directors of Nationwide Life Insurance Company (the Company) on May 7, 1987. The Account is registered as a unit investment trust under the Investment Company Act of 1940. The Company offers Single Premium, Modified Single Premium, Flexible Premium and Last Survivor Flexible Premium Variable Life Insurance Policies through the Account. The primary distribution for the contracts is through the brokerage community; however, other distributors may be utilized. (b) The Contracts Prior to December 31, 1990, only contracts without a front-end sales charge, but with a contingent deferred sales charge and certain other fees, were offered for purchase. Beginning December 31, 1990, contracts with a front-end sales charge, a contingent deferred sales charge and certain other fees, are offered for purchase. See note 2 for a discussion of policy charges and note 3 for asset charges. Contract owners may invest in the following: Portfolios of the American Century Variable Portfolios, Inc. (American Century VP); American Century VP Balanced Fund - Class I (ACVPBal) American Century VP Capital Appreciation Fund - Class I (ACVPCapAp) American Century VP Income & Growth Fund - Class I (ACVPIncGr) American Century VP International Fund - Class I (ACVPInt) American Century Ultra Fund - Class I (ACVPUltra) American Century VP Value Fund - Class I (ACVPVal) Portfolios of the Credit Suisse Trust; Credit Suisse Trust - Global Post-Venture Capital Portfolio (CSGPVen) Credit Suisse Trust - International Focus Portfolio (CSIntEq) Credit Suisse Trust - Small Cap Growth Portfolio (CSSmCapGr) Portfolios of the Dreyfus GVIT (formerly Nationwide(R) SAT); Dreyfus GVIT Mid Cap Index Fund - Class I (DryMidCapIx) Portfolios of the Dreyfus Investment Portfolios (Dreyfus IP); * Dreyfus IP - European Equity Portfolio (DryEuroEq) Dreyfus IP - Small Cap Stock Index Portfolio - Service Class (DrySmCapIxS) Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares (DrySRGro) Dreyfus Stock Index Fund (DryStkIx) Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF); Dreyfus VIF - Appreciation Portfolio - Initial Shares (DryVIFApp) Dreyfus VIF - Growth and Income Portfolio - Initial Shares (DryVIFGrInc) Portfolios of Federated Insurance Series; Federated Quality Bond Fund II - Primary Shares (FedQualBd) Portfolios of the Fidelity(R) Variable Insurance Products (Fidelity(R) VIP); Fidelity(R) VIP - Equity-Income Portfolio: Initial Class (FidVIPEI) Fidelity(R) VIP - Growth Portfolio: Initial Class (FidVIPGr) Fidelity(R) VIP - High Income Portfolio: Initial Class (FidVIPHI) Fidelity(R) VIP - Overseas Portfolio: Initial Class (FidVIPOv) Portfolios of the Fidelity(R) Variable Insurance Products (Fidelity(R) VIP II); Fidelity(R) VIP II - Asset Manager: Growth Portfolio: Service Class (FidVIPAM) Fidelity(R) VIP II - Contrafund Portfolio: Initial Class (FidVIPCon) Portfolios of the Fidelity(R) Variable Insurance Products (Fidelity(R) VIP III); Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class (FidVIPGrOP) Fidelity(R) VIP III - Value Strategies Portfolio: Service Class (FidVIPValStS) Funds of the Gartmore Variable Insurance Trust (Gartmore GVIT) (formerly Nationwide(R) SAT); Gartmore GVIT Emerging Markets Fund - Class I (GVITEmMrkts) Gartmore GVIT Global Financial Services Fund - Class I (GVITGlFin) Gartmore GVIT Global Health Sciences Fund - Class I (GVITGlHlth) Gartmore GVIT Global Technology and Communications Fund - Class I (GVITGlTech) Gartmore GVIT Global Utilities Fund - Class I (GVITGlUtl) Gartmore GVIT Government Bond Fund - Class I (GVITGvtBd) Gartmore GVIT Growth Fund - Class I (formerly Nationwide(R) SAT Capital Appreciation Fund) (GVITGrowth) Gartmore GVIT ID (Investor Destinations) Aggressive Fund (GVITIDAgg) Gartmore GVIT ID (Investor Destinations) Conservative Fund (GVITIDCon) Gartmore GVIT ID (Investor Destinations) Moderate Fund (GVITIDMod) Gartmore GVIT ID (Investor Destinations) Moderately Aggressive Fund (GVITIDModAgg) Gartmore GVIT ID (Investor Destinations) Moderately Conservative Fund (GVITIDModCon) Gartmore GVIT International Growth Fund - Class I (GVITIntGro) Gartmore GVIT Money Market Fund - Class I (GVITMyMkt) Gartmore GVIT Nationwide(R) Leaders Fund - Class I (GVITLead) Gartmore GVIT Small Cap Growth Fund - Class I (GVITSmCapGr) Gartmore GVIT Small Cap Value Fund - Class I (GVITSmCapVal) Gartmore GVIT Small Company Fund - Class I (GVITSmComp) Gartmore GVIT Total Return Fund - Class I (GVITTotRt) Gartmore GVIT U.S. Growth Leaders Fund - Class I (GVITUSGro) Portfolios of the Janus Aspen Series (Janus AS); Janus AS - Capital Appreciation Portfolio - Service Shares (JanCapAp) Janus AS - Global Technology Portfolio - Service Shares (JanGITech) Janus AS - International Growth Portfolio - Service Shares (JanIntGro) MAS GVIT (formerly Nationwide(R) SAT) Multi Sector Bond Fund - Class I (MGVITMultiSec) Portfolios of the Neuberger Berman Advisers Management Trust (Neuberger Berman AMT); Neuberger Berman AMT - Balanced Portfolio (NBAMTBal) Neuberger Berman AMT - Growth Portfolio (NBAMTGro) Neuberger Berman AMT - Guardian Portfolio (NBAMTGuard) Neuberger Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat) Neuberger Berman AMT - Partners Portfolio (NBAMTPart) Funds of the Oppenheimer Variable Account Funds; Oppenheimer Aggressive Growth Fund/VA - Initial Class (OppAggGro) Oppenheimer Bond Fund/VA - Initial Class (OppBdFd) Oppenheimer Capital Appreciation Fund/VA - Initial Class (OppCapAp) Oppenheimer Global Securities Fund/VA - Initial Class (OppGlSec) Oppenheimer Main Street Growth & Income Fund/VA - Initial Class (OppMSGrInc) Oppenheimer Multiple Strategies Fund/VA - Initial Class (OppMultStr) Strong GVIT (formerly Nationwide(R) SAT) Mid Cap Growth Fund - Class I (SGVITMdCpGr) Strong Opportunity Fund II, Inc. (StOpp2) Funds of the Strong Variable Insurance Funds, Inc (Strong VIF); Strong VIF - Strong Discovery Fund II (StDisc2) Strong VIF - Strong International Stock Fund II (StIntStk2) Turner GVIT (formerly Nationwide(R) SAT) Growth Focus Fund - Class I (TurnGVITGro) Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT); Van Eck WIT - Worldwide Bond Fund (VEWrldBd) Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt) Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs) (Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued Funds of the Van Kampen Universal Institutional Funds (Van Kampen UIF); Van Kampen UIF - Emerging Markets Debt Portfolio (VKEmMkt) Van Kampen UIF - U.S. Real Estate Portfolio (VKUSRealEst) At December 31, 2002, contract owners have invested in all of the above funds except those noted with an asterisk (*). 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, 2002. Fund purchases and sales are accounted for on the trade date (date the order to buy or sell is executed). The cost of investments sold is determined on a specific identification basis, and dividends (which include capital gain distributions) are accrued as of the ex-dividend date. (d) Federal Income Taxes Operations of the Account form a part of, and are taxed with, operations of the Company, which is taxed as a life insurance company under the provisions of the Internal Revenue Code. The Company does not provide for income taxes within the Account. Taxes are the responsibility of the contract owner upon termination or withdrawal. (e) Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America may require management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, if any, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (2) Policy Charges (a) Deductions from Premiums For single premium and modified single premium contracts, no deduction is made from any premium at the time of payment. On multiple payment contracts and flexible premium contracts, the Company deducts a charge for state premium taxes equal to 2.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 3.5% of each premium payment. On last survivor flexible premium contracts, the Company deducts a charge for state premium taxes equal to 3.5% of all premiums received to cover the payment of these premium taxes. The Company also deducts a sales load from each premium payment received not to exceed 5% of each premium payment during the first ten years and 1.5% of each premium payment thereafter. The Company may at its sole discretion reduce this sales loading. (b) Cost of Insurance A cost of insurance charge is assessed monthly against each contract by liquidating units. The amount of the charge is based upon age, sex, rate class and net amount at risk (death benefit less total contract value). For last survivor flexible premium contracts, the monthly cost of insurance is determined in a manner that reflects the anticipated mortality of the two insureds and the fact that the death benefit is not payable until the death of the second insured policyholder. (c) Administrative Charges An administrative charge is assessed against each contract to recover policy maintenance, accounting, record keeping and other administrative expenses and is assessed against each contract by liquidating units. For single premium contracts, the Company deducts an annual administrative charge which is determined as follows: Contracts issued prior to April 16, 1990: Purchase payments totalling less than $25,000 - $10/month Purchase payments totalling $25,000 or more - none Contracts issued on or after April 16, 1990: Purchase payments totalling less than $25,000 - $90/year ($65/year in New York) Purchase payments totalling $25,000 or more - $50/year For multiple payment contracts, the Company currently deducts a monthly administrative charge of $5 (not to exceed $7.50 per month). For flexible premium contracts, the Company currently deducts a monthly administrative charge of $12.50 during the first policy year. For all subsequent years, a monthly administrative charge is deducted (currently $5 per month not to exceed $7.50). Additionally, the Company deducts an increase charge of $0.17 per year per $1,000 applied to any increase in the specified amount during the first 12 months after the increase becomes effective. For modified single premium contracts, the monthly charge is equal to an annual rate of 0.80% multiplied by the policy's cash value to cover administrative, premium tax and deferred acquisition costs. For policy years 11 and later, this monthly charge is reduced to an annual rate of 0.65% of the policy's cash value. The monthly charge is subject to a $10 minimum. For last survivor flexible premium contracts, the Company deducts a monthly administrative charge equal to the sum of the policy charge and the basic coverage charge. For policy years one through ten the policy charge is $10. Additionally, there is a $0.04 per $1,000 basic coverage charge (not less than $20 or more than $80 per policy per year). For policy years eleven and after, the policy charge is $5. Additionally, there is a $0.02 (not to exceed $0.04) per $1,000 basic coverage charge (not less than $10 or more than $40 per policy per year). (d) Surrender Charges Policy surrenders result in a redemption of the contract value from the Account and payment of the surrender proceeds to the contract owner or designee. The surrender proceeds consist of the contract value, less any outstanding policy loans, and less a surrender charge, if applicable. The charge is determined according to contract type. For single premium contracts, the charge is determined based upon a specified percentage of the original purchase payment. For single premium contracts issued prior to April 16, 1990, the charge is 8% in the first year and declines to 0% after the ninth year. For single premium contracts issued on or after April 16, 1990, the charge is 8.5% in the first year, and declines to 0% after the ninth year. However, if a policy increases, the amount of the increase will have a nine-year surrender charge period. (Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued For multiple payment contracts and flexible premium contracts, the amount charged is based upon a specified percentage of the initial surrender charge, which varies by issue age, sex and rate class. The charge is 100% of the initial surrender charge in the first year, declining to 0% after the ninth year. However, if a policy increases, the amount of the increase will have a nine-year surrender charge period. For modified single premium contracts, the amount charged is based on the original purchase payment. The charge is 10% in the first year, declining to 0% in the ninth year. For last survivor flexible premium contracts, the charge is 100% of the initial surrender charge, declining to 0% in the ninth year. However, if a policy increases, the amount of the increase will have a nine-year surrender charge period. For last survivor flexible payment contracts, the initial surrender charge is comprised of two components, an underwriting surrender charge and a sales surrender charge. The Company may waive the surrender charge for certain contracts in which the sales expenses normally associated with the distribution of a contract are not incurred. (3) Asset Charges For single premium contracts, the Company deducts a charge from the contract to cover mortality and expense risk charges related to operations, and to recover policy maintenance and premium tax charges. For contracts issued prior to April 16, 1990, the charge is equal to an annual rate of 0.95% during the first ten policy years, and 0.50% thereafter. A reduction of charges on these contracts is possible in policy years six through ten for those contracts achieving certain investment performance criteria. For single premium contracts issued on or after April 16, 1990, the charge is equal to an annual rate of 1.30% during the first ten policy years, and 1.00% thereafter. The above charges are assessed through the daily unit value calculation and are reflected in the table below. For multiple payment contracts and flexible premium contracts, the Company deducts a charge equal to an annual rate of 0.80%, with certain exceptions, to cover mortality and expense risk charges related to operations. The above charges are assessed through the daily unit value calculation and are reflected in the table below. For modified single premium contracts (MSP), the Company deducts an annual rate of 0.70% charged against the cash value of the contracts in the variable account. This charge is assessed monthly against each contract by liquidating units. For last survivor flexible premium contracts (LSFP), the Company deducts an annual rate of 0.80% in policy years one through ten. This charge is assessed monthly by liquidating units. In policy years eleven and greater, the Company deducts an annual rate of 0.50% if the cash value of the contract is greater than $25,000 and is less than $100,000. If the cash value is greater than or equal to $100,000, the Company reduces the annual asset fee rate to 0.30%. The following table provides mortality, expense and administration charges by contract type for the period ended December 31, 2002:
Total ACVPBal ACVPCapAp ACVPIncGr ACVPInt ---------- ------- --------- --------- ------- Single Premium contracts issued prior to April 16, 1990 ...... $ 6,498 -- 365 -- -- Single Premium contracts issued on or after April 16, 1990 ... 1,066,165 6,788 18,641 3,886 13,963 Multiple Payment and Flexible Premium contracts ............ 5,201,482 29,202 87,672 22,079 78,311 ---------- ------ ------- ------ ------ Total ..................... $6,274,145 35,990 106,678 25,965 92,274 ========== ====== ======= ====== ======
ACVPUltra ACVPVal CSGPVen CSIntEq CSSmCapGr --------- ------- ------- ------- -------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ... 6 20,765 702 6,468 10,937 Multiple Payment and Flexible Premium contracts ............ 187 67,751 7,064 37,630 86,058 ---- ------ ----- ------ ------ Total ...................... $193 88,516 7,766 44,098 96,995 ==== ====== ===== ====== ======
DryMidCapIx DryEuroEq DrySmCapIxS DrySRGro DryStkIx ----------- --------- ----------- -------- -------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- -- -- 127 Single Premium contracts issued on or after April 16, 1990 ... 6,691 94 -- 5,217 54,819 Multiple Payment and Flexible Premium contracts ............ 23,848 326 143 74,900 485,159 ------- --- --- ------ ------- Total ..................... $30,539 420 143 80,117 540,105 ======= === === ====== =======
DryVIFApp DryVIFGrInc FedQualBd FidVIPEI FidVIPGr --------- ----------- --------- -------- -------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- -- 653 786 Single Premium contracts issued on or after April 16, 1990 ... 11,997 1,759 251 112,834 108,647 Multiple Payment and Flexible Premium contracts ............ 35,870 14,448 3,726 424,404 634,626 ------- ------ ----- ------- ------- Total ..................... $47,867 16,207 3,977 537,891 744,059 ======= ====== ===== ======= =======
FidVIPHI FidVIPOv FidVIPAM FidVIPCon FidVIPGrOP -------- -------- -------- --------- ---------- Single Premium contracts issued prior to April 16, 1990 ...... $ 201 241 154 -- 51 Single Premium contracts issued on or after April 16, 1990 ... 25,297 25,028 56,105 53,714 1,780 Multiple Payment and Flexible Premium contracts ............ 98,245 96,072 145,867 312,804 22,912 -------- ------- ------- ------- ------ Total ..................... $123,743 121,341 202,126 366,518 24,743 ======== ======= ======= ======= ======
FidVIPValStS GVITEmMrkts GVITGIFin GVITGIHlth GVITGITech ------------ ----------- --------- ---------- ---------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ... 84 816 90 291 240 Multiple Payment and Flexible Premium contracts ............ 232 3,022 55 106 1,998 ---- ----- -- --- ----- Total ..................... $316 3,838 145 397 2,238 ==== ===== === === =====
GVITGlUtl GVITGvtBd GVITGrowth GVITIDAgg GVITIDCon --------- --------- ---------- --------- --------- Single Premium contracts issued prior to April 16, 1990 ...... $-- 177 -- -- -- Single Premium contracts issued on or after April 16, 1990 ... 50 73,009 5,894 -- -- Multiple Payment and Flexible Premium contracts ............ 13 94,534 109,759 965 731 --- ------- ------- --- --- Total ..................... $63 167,720 115,653 965 731 === ======= ======= === ===
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
GVITIDMod GVITIDModAgg GVITIDModCon GVITIntGro GVITMyMkt --------- ------------ ------------ ---------- --------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- -- -- 673 Single Premium contracts issued on or after April 16, 1990 ... 13 -- 4 114 144,133 Multiple Payment and Flexible Premium contracts ............ 1,240 3,289 777 219 239,044 ------ ----- --- --- ------- Total ..................... $1,253 3,289 781 333 383,850 ====== ===== === === =======
GVITLead GVITSmCapGr GVITSmCapVal GVITSmComp GVITTotRt -------- ----------- ------------ ---------- --------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- 502 79 179 Single Premium contracts issued on or after April 16, 1990 ... 97 795 22,799 11,024 29,699 Multiple Payment and Flexible Premium contracts ............ 358 8,210 69,886 154,996 493,332 ---- ----- ------ ------- ------- Total ..................... $455 9,005 93,187 166,099 523,210 ==== ===== ====== ======= =======
GVITUSGro JanCapAp JanGITech JanIntGro MGVITMultiSec --------- -------- --------- --------- ------------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ... 71 946 1,129 4,538 517 Multiple Payment and Flexible Premium contracts ............. 48 16,748 7,758 11,569 5,232 ---- ------ ----- ------ ----- Total ..................... $119 17,694 8,887 16,107 5,749 ==== ====== ===== ====== =====
NBAMTBal NBAMTGro NBAMTGuard NBAMTLMat NBAMTPart -------- -------- ---------- --------- --------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- 417 -- 203 -- Single Premium contracts issued on or after April 16, 1990 ... -- 18,507 750 19,246 12,644 Multiple Payment and Flexible Premium contracts ............ 346 108,540 13,946 29,182 127,150 ---- ------- ------ ------ ------- Total ..................... $346 127,464 14,696 48,631 139,794 ==== ======= ====== ====== =======
OppAggGro OppBdFd OppCapAp OppGlSec OppMSGrInc --------- ------- -------- -------- ---------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- 246 -- -- Single Premium contracts issued on or after April 16, 1990 ... 690 18,669 14,056 25,041 979 Multiple Payment and Flexible Premium contracts ............ 10,021 81,951 91,920 197,144 5,316 ------- ------- ------- ------- ----- Total ..................... $10,711 100,620 106,222 222,185 6,295 ======= ======= ======= ======= =====
OppMultStr SGVITMdCpGr StOpp2 StDisc2 StIntStk2 ---------- ----------- ------- ------- --------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- -- 308 -- -- Single Premium contracts issued on or after April 16, 1990 ... 23,766 763 38,303 7,782 3,129 Multiple Payment and Flexible Premium contracts ............ 81,102 7,390 243,071 44,421 11,672 -------- ----- ------- ------ ------ Total ..................... $104,868 8,153 281,682 52,203 14,801 ======== ===== ======= ====== ======
TurnGVITGro VEWrldBd VEWrldEMkt VEWrldHAs VKEmMkt ----------- -------- ---------- --------- ------- Single Premium contracts issued prior to April 16, 1990 ...... $ -- 85 479 240 69 Single Premium contracts issued on or after April 16, 1990 ... 87 8,017 4,616 7,523 2,252 Multiple Payment and Flexible Premium contracts ............ 1,396 18,712 25,790 21,651 7,305 ------ ------ ------ ------ ----- Total ..................... $1,483 26,814 30,885 29,414 9,626 ====== ====== ====== ====== =====
VKUSRealEst ----------- Single Premium contracts issued prior to April 16, 1990 ...... $ 263 Single Premium contracts issued on or after April 16, 1990 ... 16,603 Multiple Payment and Flexible Premium contracts ............ 60,031 ------- Total ..................... $76,897 ======= (4) Death Benefits Death benefit proceeds result in a redemption of the contract value from the Account and payment of those proceeds, less any outstanding policy loans (and policy charges), to the legal beneficiary. For last survivor flexible premium contracts, the proceeds are payable on the death of the last surviving insured. In the event that the guaranteed death benefit exceeds the contract value on the date of death, the excess is paid by the Company's general account. (5) Policy Loans (Net of Repayments) Contract provisions allow contract owners to borrow up to 90% (50% during first year of single and modified single premium contracts) of a policy's cash surrender value. For single premium contracts issued prior to April 16, 1990, 6.5% interest is due and payable annually in advance. For single premium contracts issued on or after April 16, 1990, multiple payment, flexible premium, modified single and last survivor flexible premium contracts, 6% interest is due and payable in advance on the policy anniversary when there is a loan outstanding on the policy. At the time the loan is granted, the amount of the loan is transferred from the Account to the Company's general account as collateral for the outstanding loan. Collateral amounts in the general account are credited with the stated rate of interest in effect at the time the loan is made, subject to a guaranteed minimum rate. Loan repayments result in a transfer of collateral, including interest, back to the Account. (6) Related Party Transactions The Company performs various services on behalf of the Mutual Fund Companies in which the Account invests and may receive fees for the services performed. These services include, among other things, share- holder 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. Contract owners may, with certain restrictions, transfer their assets between the Account and a fixed dollar contract (fixed account) maintained in the accounts of the Company. The fixed account assets are not reflected in the accompanying financial statements. In addition, the Account portion of contract owner loans is transferred to the accounts of the Company for administration and collection. Loan repayments are transferred to the Account at the direction of the contract owner. For the years ended December 31, 2002 and 2001, total transfers to the Account from the fixed account were $23,397,486 and $21,729,153, respectively, and total transfers from the Account to the fixed account were $42,106,553 and $31,605,235, respectively. Transfers from the Account to the fixed account are included in surrenders, and transfers to the Account from the fixed account are included in purchase payments received from contract owners, as applicable, on the accompanying Statements of Changes in Contract Owners' Equity. (Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 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 contract expense rate, investment income ratio and total return for each period in the five year period ended December 31, 2002.
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Modified Single Premium contracts and Last Survivor Flexible Premium contracts: American Century VP Balanced Fund - Class I 2002 ............................. 0.00% 41,666 $13.698528 $ 570,763 2.63% -9.56% 2001 ............................. 0.00% 46,974 15.146118 711,474 2.81% -3.54% 2000 ............................. 0.00% 46,479 15.701900 729,809 2.45% -2.65% 1999 ............................. 0.00% 47,439 16.129489 765,167 1.78% 10.06% 1998 ............................. 0.00% 40,224 14.655512 589,503 1.59% 15.77% American Century VP Capital Appreciation Fund - Class I 2002 ............................. 0.00% 84,319 8.776539 740,029 0.00% -21.20% 2001 ............................. 0.00% 113,954 11.137742 1,269,190 0.00% -28.07% 2000 ............................. 0.00% 136,380 15.483078 2,111,582 0.00% 9.03% 1999 ............................. 0.00% 67,671 14.200282 960,947 0.00% 64.52% 1998 ............................. 0.00% 56,709 8.631172 489,465 0.00% -2.16% American Century VP Income & Growth Fund - Class I 2002 ............................. 0.00% 52,727 8.513147 448,873 1.10% -19.37% 2001 ............................. 0.00% 53,217 10.558315 561,882 0.81% -8.35% 2000 ............................. 0.00% 51,494 11.520561 593,240 0.55% -10.62% 1999 ............................. 0.00% 90,023 12.888778 1,160,286 0.02% 18.02% 1998 ............................. 0.00% 49,568 10.920877 541,326 0.94% 9.21% 5/1/98 American Century VP International Fund - Class I 2002 ............................. 0.00% 108,743 11.680067 1,270,126 0.79% -20.37% 2001 ............................. 0.00% 111,542 14.668200 1,636,120 0.09% -29.17% 2000 ............................. 0.00% 143,626 20.710054 2,974,502 0.14% -16.83% 1999 ............................. 0.00% 120,278 24.899615 2,994,876 0.00% 64.04% 1998 ............................. 0.00% 109,633 15.178805 1,664,098 0.48% 18.76% American Century VP Ultra Fund - Class I 2002 ............................. 0.00% 2,062 8.038471 16,575 0.46% -19.62% 5/1/02 American Century VP Value Fund - Class I 2002 ............................. 0.00% 105,282 15.482416 1,630,020 0.90% -12.62% 2001 ............................. 0.00% 98,909 17.718442 1,752,513 0.95% 12.82% 2000 ............................. 0.00% 53,790 15.704757 844,759 0.73% 18.14% 1999 ............................. 0.00% 42,323 13.293167 562,607 0.93% -0.85% 1998 ............................. 0.00% 39,670 13.407134 531,861 0.64% 4.81% Credit Suisse Trust - Global Post-Venture Capital Portfolio 2002 ............................. 0.00% 11,260 7.643060 86,061 0.00% -34.16% 2001 ............................. 0.00% 12,080 11.607891 140,223 0.00% -28.63% 2000 ............................. 0.00% 19,402 16.265390 315,581 0.00% -18.94% 1999 ............................. 0.00% 14,680 20.065541 294,562 0.00% 63.50% 1998 ............................. 0.00% 4,122 12.272697 50,588 0.00% 6.51%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Credit Suisse Trust - International Focus Portfolio 2002 ............................. 0.00% 115,124 $ 7.241185 $ 833,634 0.00% -19.90% 2001 ............................. 0.00% 120,573 9.040640 1,090,057 0.00% -22.27% 2000 ............................. 0.00% 119,996 11.631433 1,395,725 0.45% -25.90% 1999 ............................. 0.00% 142,042 15.696053 2,229,499 0.93% 53.43% 1998 ............................. 0.00% 132,142 10.230064 1,351,821 0.52% 5.35% Credit Suisse Trust - Small Cap Growth Portfolio 2002 ............................. 0.00% 132,124 8.514305 1,124,944 0.00% -33.69% 2001 ............................. 0.00% 185,522 12.840185 2,382,137 0.00% -16.01% 2000 ............................. 0.00% 212,377 15.287247 3,246,660 0.00% -18.11% 1999 ............................. 0.00% 154,684 18.668523 2,887,722 0.00% 69.08% 1998 ............................. 0.00% 131,376 11.041376 1,450,572 0.00% -2.85% Dreyfus GVIT Mid Cap Index Fund - Class I 2002 ............................. 0.00% 57,522 8.791459 505,702 0.42% -15.30% 2001 ............................. 0.00% 37,983 10.379883 394,259 0.54% -1.30% 2000 ............................. 0.00% 15,903 10.517026 167,252 0.56% 5.17% 5/1/00 Dreyfus IP - European Equity Portfolio 2001 ............................. 0.00% 133 6.722485 894 0.84% -28.13% 2000 ............................. 0.00% 2,553 9.353456 23,879 0.42% -9.65% Dreyfus IP - Small Cap Stock Index Portfolio - Service Class 2002 ............................. 0.00% 4,411 7.67524 33,855 0.27% -23.25% 5/1/02 Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares 2002 ............................. 0.00% 57,964 11.828136 685,606 0.21% -28.94% 2001 ............................. 0.00% 72,096 16.646416 1,200,140 0.06% -22.57% 2000 ............................. 0.00% 87,987 21.499776 1,891,701 0.81% -11.03% 1999 ............................. 0.00% 72,077 24.166067 1,741,818 0.02% 30.08% 1998 ............................. 0.00% 59,391 18.577940 1,103,362 0.19% 29.38% Dreyfus Stock Index Fund 2002 ............................. 0.00% 584,757 14.572787 8,521,539 1.31% -22.36% 2001 ............................. 0.00% 599,693 18.770165 11,256,337 1.06% -12.18% 2000 ............................. 0.00% 591,538 21.373424 12,643,192 0.96% -9.28% 1999 ............................. 0.00% 619,532 23.560156 14,596,271 1.11% 20.60% 1998 ............................. 0.00% 451,985 19.535151 8,829,595 1.37% 28.21% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2002 ............................. 0.00% 76,442 11.167894 853,696 1.14% -16.71% 2001 ............................. 0.00% 81,387 13.409044 1,091,322 0.84% -9.31% 2000 ............................. 0.00% 68,662 14.785375 1,015,193 0.63% -0.65% 1999 ............................. 0.00% 54,118 14.882433 805,408 0.70% 11.46% 1998 ............................. 0.00% 32,649 13.352746 435,954 0.97% 30.22% Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2002 ............................. 0.00% 42,290 10.263905 434,061 0.60% -25.33% 2001 ............................. 0.00% 42,969 13.745232 590,619 0.50% -5.85% 2000 ............................. 0.00% 50,580 14.598583 738,396 0.61% -3.78% 1999 ............................. 0.00% 42,510 15.172345 644,976 0.65% 16.88% 1998 ............................. 0.00% 33,423 12.980656 433,852 1.05% 11.81% Federated Quality Bond Fund II - Primary Shares 2002 ............................. 0.00% 11,620 10.782678 125,295 0.00% 7.83% 5/1/02
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2002 ............................. 0.00% 407,426 $14.041601 $ 5,720,913 1.77% -16.95% 2001 ............................. 0.00% 431,008 16.906669 7,286,910 1.70% -4.96% 2000 ............................. 0.00% 410,082 17.788146 7,294,598 1.65% 8.42% 1999 ............................. 0.00% 442,948 16.406894 7,267,401 1.45% 6.33% 1998 ............................. 0.00% 424,796 15.430209 6,554,691 1.30% 11.63% Fidelity(R) VIP - Growth Portfolio: Initial Class 2002 ............................. 0.00% 408,322 12.670716 5,173,732 0.25% -30.10% 2001 ............................. 0.00% 464,650 18.128151 8,423,245 0.08% -17.65% 2000 ............................. 0.00% 494,090 22.013206 10,876,505 0.12% -10.98% 1999 ............................. 0.00% 462,592 24.728511 11,439,211 0.15% 37.44% 1998 ............................. 0.00% 312,967 17.992701 5,631,122 0.41% 39.49% Fidelity(R) VIP - High Income Portfolio: Initial Class 2002 ............................. 0.00% 277,242 9.334381 2,587,882 9.29% 3.44% 2001 ............................. 0.00% 268,872 9.023656 2,426,208 13.67% -11.73% 2000 ............................. 0.00% 251,453 10.222956 2,570,593 7.66% -22.47% 1999 ............................. 0.00% 301,341 13.186454 3,973,619 9.63% 8.15% 1998 ............................. 0.00% 328,441 12.192188 4,004,414 7.35% -4.33% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2002 ............................. 0.00% 100,989 9.729244 982,547 0.83% -20.28% 2001 ............................. 0.00% 100,976 12.204145 1,232,326 5.37% -21.17% 2000 ............................. 0.00% 109,074 15.480896 1,688,563 1.56% -19.11% 1999 ............................. 0.00% 121,065 19.137888 2,316,928 1.25% 42.63% 1998 ............................. 0.00% 94,348 13.418281 1,265,988 1.80% 12.75% Fidelity(R) VIP II - Asset Manager: Growth Portfolio: Service Class 2002 ............................. 0.00% 87,642 14.294216 1,252,774 3.98% -8.73% 2001 ............................. 0.00% 97,209 15.661062 1,522,396 4.21% -4.09% 2000 ............................. 0.00% 97,054 16.328861 1,584,781 3.30% -3.93% 1999 ............................. 0.00% 98,987 16.996678 1,682,450 3.18% 11.09% 1998 ............................. 0.00% 96,546 15.299714 1,477,126 2.96% 15.05% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2002 ............................. 0.00% 278,231 16.754926 4,661,740 0.85% -9.35% 2001 ............................. 0.00% 310,919 18.482808 5,746,656 0.78% -12.24% 2000 ............................. 0.00% 339,730 21.061590 7,155,254 0.36% -6.62% 1999 ............................. 0.00% 334,798 22.555449 7,551,519 0.43% 24.25% 1998 ............................. 0.00% 294,323 18.152724 5,342,764 0.53% 29.98% Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2002 ............................. 0.00% 51,868 7.927585 411,188 1.07% -21.84% 2001 ............................. 0.00% 59,212 10.143319 600,606 0.38% -14.42% 2000 ............................. 0.00% 67,837 11.852480 804,037 1.30% -17.07% 1999 ............................. 0.00% 67,209 14.291602 960,524 0.94% 4.27% 1998 ............................. 0.00% 54,891 13.706120 752,343 0.58% 24.61% Fidelity(R) VIP III - Value Strategies Portfolio: Service Class 2002 ............................. 0.00% 843 7.509507 6,331 0.00% -24.90% 5/1/02
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Gartmore GVIT Emerging Markets Fund - Class I 2002 ............................. 0.00% 7,501 $ 7.002885 $ 52,529 0.17% -15.23% 2001 ............................. 0.00% 27,272 8.260926 225,292 0.52% -5.18% Gartmore GVIT Global Financial Services Fund - Class I 2002 ............................. 0.00% 289 8.663891 2,504 0.08% -13.36% 5/1/02 Gartmore GVIT Global Health Sciences Fund - Class I 2002 ............................. 0.00% 1,753 8.340128 14,620 0.00% -16.60% 5/1/02 Gartmore GVIT Global Technology and Communications Fund - Class I 2002 ............................. 0.00% 11,606 1.972253 22,890 0.59% -42.78% 2001 ............................. 0.00% 2,536 3.446837 8,741 0.00% -42.72% 2000 ............................. 0.00% 2,596 6.017639 15,622 0.00% -39.82% 10/2/00 Gartmore GVIT Global Utilities Fund - Class I 2002 ............................. 0.00% 250 8.683837 2,171 0.54% -13.16% 5/1/02 Gartmore GVIT Government Bond Fund - Class I 2002 ............................. 0.00% 215,754 16.685161 3,599,890 4.42% 10.98% 2001 ............................. 0.00% 192,314 15.033937 2,891,237 5.12% 7.25% 2000 ............................. 0.00% 147,694 14.017108 2,070,243 5.25% 12.54% 1999 ............................. 0.00% 146,891 12.455412 1,829,588 5.74% -2.35% 1998 ............................. 0.00% 100,956 12.754801 1,287,674 5.51% 8.91% Gartmore GVIT Growth Fund - Class I 2002 ............................. 0.00% 160,573 7.964177 1,278,832 0.00% -28.72% 2001 ............................. 0.00% 169,484 11.173143 1,893,669 0.00% -28.13% 2000 ............................. 0.00% 202,780 15.547089 3,152,639 0.18% -26.53% 1999 ............................. 0.00% 234,699 21.161942 4,966,687 0.66% 4.28% 1998 ............................. 0.00% 207,778 20.293858 4,216,617 0.78% 29.96% Gartmore GVIT ID Conservative Fund 2002 ............................. 0.00% 10,505 10.050418 105,580 2.80% 0.50% 1/25/02 Gartmore GVIT ID Moderate Fund 2002 ............................. 0.00% 14,854 9.140249 135,769 1.72% -8.60% 1/25/02 Gartmore GVIT ID Moderately Aggressive Fund 2002 ............................. 0.00% 14,728 8.687687 127,952 1.55% -13.12% 1/25/02 Gartmore GVIT ID Moderately Conservative Fund 2002 ............................. 0.00% 9,155 9.642427 88,276 2.35% -3.58% 1/25/02 Gartmore GVIT Money Market Fund - Class I 2002 ............................. 0.00% 611,041 13.354620 8,160,220 1.26% 1.21% 2001 ............................. 0.00% 752,971 13.194770 9,935,279 3.57% 3.60% 2000 ............................. 0.00% 690,357 12.735851 8,792,284 5.53% 6.03% 1999 ............................. 0.00% 710,620 12.011954 8,535,935 5.04% 4.85% 1998 ............................. 0.00% 904,630 11.456534 10,363,924 5.48% 5.27% Gartmore GVIT Nationwide(R) Leaders Fund - Class I 2002 ............................. 0.00% 837 8.452459 7,075 1.18% -15.48% 5/1/02 Gartmore GVIT Small Cap Growth Fund - Class I 2002 ............................. 0.00% 39,937 4.829491 192,875 0.00% -33.29% 2001 ............................. 0.00% 28,981 7.239237 209,800 0.00% -10.84% 2000 ............................. 0.00% 5,428 8.119138 44,071 0.00% -18.81% 5/1/00
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Gartmore GVIT Small Cap Value Fund - Class I 2002 ............................. 0.00% 156,777 $11.427654 $1,791,593 0.01% -27.16% 2001 ............................. 0.00% 145,093 15.689204 2,276,394 0.03% 28.28% 2000 ............................. 0.00% 92,343 12.230652 1,129,415 0.00% 11.20% 1999 ............................. 0.00% 86,677 10.998838 953,346 0.00% 27.84% 1998 ............................. 0.00% 18,425 8.603810 158,525 0.00% -13.96% 5/1/98 Gartmore GVIT Small Company Fund - Class I 2002 ............................. 0.00% 161,607 15.090443 2,438,721 0.00% -17.33% 2001 ............................. 0.00% 171,105 18.253468 3,123,260 0.10% -6.70% 2000 ............................. 0.00% 232,635 19.565011 4,551,506 0.03% 8.90% 1999 ............................. 0.00% 210,131 17.966399 3,775,297 0.00% 44.02% 1998 ............................. 0.00% 170,740 12.475012 2,129,984 0.00% 1.01% Gartmore GVIT Total Return Fund - Class I 2002 ............................. 0.00% 343,472 13.342709 4,582,847 0.85% -17.35% 2001 ............................. 0.00% 370,050 16.144226 5,974,171 0.74% -11.82% 2000 ............................. 0.00% 383,717 18.308017 7,025,097 0.63% -2.12% 1999 ............................. 0.00% 408,867 18.704720 7,647,743 0.65% 6.94% 1998 ............................. 0.00% 377,762 17.490359 6,607,193 1.06% 18.07% Gartmore GVIT U.S. Growth Leaders Fund - Class I 2002 ............................. 0.00% 1,992 8.226323 16,387 0.00% -17.74% 5/1/02 Janus AS - Capital Appreciation Portfolio - Service Shares 2002 ............................. 0.00% 58,881 5.213836 306,996 0.30% -15.93% 2001 ............................. 0.00% 62,604 6.201616 388,246 0.91% -21.83% 2000 ............................. 0.00% 54,056 7.933369 428,846 1.33% -30.82% 5/1/00 Janus AS - Global Technology Portfolio - Service Shares 2002 ............................. 0.00% 54,722 2.510001 137,352 0.00% -40.93% 2001 ............................. 0.00% 58,616 4.249300 249,077 0.56% -37.31% 2000 ............................. 0.00% 51,067 6.778794 346,173 1.21% -20.67% 5/1/00 Janus AS - International Growth Portfolio - Service Shares 2002 ............................. 0.00% 43,393 4.520472 196,157 0.67% -25.76% 2001 ............................. 0.00% 37,721 6.088787 229,675 0.70% -23.43% 2000 ............................. 0.00% 28,662 7.951801 227,915 6.25% -20.48% 5/1/00 MAS GVIT (formerly Nationwide(R) SAT) Multi Sector Bond Fund - Class I 2002 ............................. 0.00% 12,174 11.720231 142,682 4.53% 7.21% 2001 ............................. 0.00% 2,363 10.932334 25,833 8.29% 4.19% 2000 ............................. 0.00% 3,146 10.492823 33,010 8.52% 4.93% 5/1/00 Neuberger Berman AMT - Growth Portfolio 2002 ............................. 0.00% 91,607 9.369018 858,268 0.00% -31.16% 2001 ............................. 0.00% 194,831 13.610476 2,651,743 0.00% -30.36% 2000 ............................. 0.00% 165,377 19.543829 3,232,100 0.00% -11.66% 1999 ............................. 0.00% 101,415 22.122463 2,243,550 0.00% 50.40% 1998 ............................. 0.00% 95,390 14.709510 1,403,140 0.00% 15.53%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Neuberger Berman AMT - Guardian Portfolio 2002 ............................. 0.00% 40,952 $ 7.884759 $ 322,897 0.80% -26.45% 2001 ............................. 0.00% 42,795 10.719948 458,760 0.47% -1.51% 2000 ............................. 0.00% 31,192 10.883981 339,493 0.59% 1.13% 1999 ............................. 0.00% 28,718 10.762335 309,073 0.29% 14.93% 1998 ............................. 0.00% 15,552 9.364011 145,629 0.00% -6.36% 5/1/98 Neuberger Berman AMT - Limited Maturity Bond Portfolio 2002 ............................. 0.00% 78,261 14.496454 1,134,507 4.91% 5.34% 2001 ............................. 0.00% 53,267 13.761786 733,049 5.78% 8.78% 2000 ............................. 0.00% 48,744 12.650873 616,654 6.96% 6.78% 1999 ............................. 0.00% 73,941 11.847132 875,989 5.57% 1.48% 1998 ............................. 0.00% 72,201 11.674617 842,919 6.70% 4.39% Neuberger Berman AMT - Partners Portfolio 2002 ............................. 0.00% 211,641 12.510433 2,647,721 0.53% -24.14% 2001 ............................. 0.00% 214,234 16.491924 3,533,131 0.38% -2.83% 2000 ............................. 0.00% 218,683 16.971642 3,711,410 0.79% 0.07% 1999 ............................. 0.00% 229,651 16.853460 3,870,414 1.20% 7.37% 1998 ............................. 0.00% 241,826 15.696640 3,795,856 0.39% 4.21% Oppenheimer Aggressive Growth Fund/VA - Initial Class 2002 ............................. 0.00% 11,406 3.883303 44,293 0.65% -27.79% 2001 ............................. 0.00% 27,049 5.377832 145,465 0.87% -31.27% 2000 ............................. 0.00% 29,380 7.824211 229,875 0.00% -21.76% 5/1/00 Oppenheimer Bond Fund/VA - Initial Class 2002 ............................. 0.00% 126,813 15.258399 1,934,963 7.25% 9.08% 2001 ............................. 0.00% 120,742 13.988352 1,688,982 7.04% 7.79% 2000 ............................. 0.00% 108,962 12.977817 1,414,089 7.66% 6.10% 1999 ............................. 0.00% 101,438 12.232154 1,240,805 4.68% -1.52% 1998 ............................. 0.00% 90,724 12.420731 1,126,858 1.67% 6.80% Oppenheimer Capital Appreciation Fund/VA - Initial Class 2002 ............................. 0.00% 90,095 11.756809 1,059,230 0.64% -26.86% 2001 ............................. 0.00% 116,791 16.074008 1,877,299 0.64% -12.58% 2000 ............................. 0.00% 115,080 18.386180 2,115,882 0.12% -0.23% 1999 ............................. 0.00% 83,414 18.428739 1,537,215 0.17% 41.66% 1998 ............................. 0.00% 98,891 13.009524 1,286,525 0.28% 24.00% Oppenheimer Global Securities Fund/VA - Initial Class 2002 ............................. 0.00% 106,692 17.263833 1,841,913 0.56% -22.13% 2001 ............................. 0.00% 111,537 22.171331 2,472,924 0.69% -12.04% 2000 ............................. 0.00% 119,169 25.205074 3,003,663 0.27% 5.09% 1999 ............................. 0.00% 94,622 23.984739 2,269,484 0.92% 58.48% 1998 ............................. 0.00% 89,467 15.133929 1,353,987 2.07% 14.10% Oppenheimer Main Street Growth & Income Fund/VA - Initial Class 2002 ............................. 0.00% 30,456 6.605587 201,180 0.65% -18.80% 2001 ............................. 0.00% 21,240 8.134641 172,780 0.41% -10.16% 2000 ............................. 0.00% 10,745 9.054521 97,291 0.00% -9.45% 5/1/00
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Oppenheimer Multiple Strategies Fund/VA - Initial Class 2002 ............................. 0.00% 82,462 $14.902681 $1,228,905 3.60% -10.40% 2001 ............................. 0.00% 84,920 16.632670 1,412,446 3.96% 2.22% 2000 ............................. 0.00% 82,390 16.271709 1,340,626 4.57% 6.44% 1999 ............................. 0.00% 80,822 15.287602 1,235,575 3.30% 11.80% 1998 ............................. 0.00% 90,548 13.674340 1,238,184 0.88% 6.65% Strong GVIT Mid Cap Growth Fund - Class I 2002 ............................. 0.00% 49,103 3.578034 175,692 0.00% -37.01% 2001 ............................. 0.00% 15,083 5.680754 85,683 0.00% -30.31% 2000 ............................. 0.00% 15,341 8.151094 125,046 0.00% -18.49% 5/1/00 Strong Opportunity Fund II, Inc. 2002 ............................. 0.00% 98,264 15.542573 1,527,275 0.38% -26.82% 2001 ............................. 0.00% 103,859 21.238327 2,205,791 0.59% -3.70% 2000 ............................. 0.00% 96,471 22.004768 2,122,822 0.00% 6.60% 1999 ............................. 0.00% 85,543 20.690172 1,769,899 0.00% 34.91% 1998 ............................. 0.00% 85,559 15.336685 1,312,191 0.25% 13.54% Strong VIF - Strong Discovery Fund II 2002 ............................. 0.00% 20,094 11.864827 238,412 0.00% -12.02% 2001 ............................. 0.00% 22,035 13.485135 297,145 0.72% 4.08% 2000 ............................. 0.00% 25,155 12.955970 325,907 0.00% 4.39% 1999 ............................. 0.00% 19,763 12.410693 245,273 0.00% 5.09% 1998 ............................. 0.00% 20,724 11.809640 244,743 0.00% 7.26% Strong VIF - Strong International Stock Fund II 2002 ............................. 0.00% 57,275 5.361165 307,061 4.04% -26.54% 2001 ............................. 0.00% 55,640 7.298468 406,087 0.00% -22.14% 2000 ............................. 0.00% 51,648 9.373600 484,128 0.00% -39.52% 1999 ............................. 0.00% 91,170 15.499580 1,413,097 0.17% 87.20% 1998 ............................. 0.00% 36,980 8.279751 306,185 1.14% -4.78% Turner GVIT Growth Focus Fund - Class I 2002 ............................. 0.00% 5,450 2.210411 12,047 0.00% -42.86% Van Eck WIT - Worldwide Bond Fund 2002 ............................. 0.00% 39,706 13.162611 522,635 0.00% 21.66% 2001 ............................. 0.00% 15,977 10.819530 172,864 4.39% -5.10% 2000 ............................. 0.00% 15,146 11.400381 172,670 4.90% 1.87% 1999 ............................. 0.00% 16,613 11.191476 185,924 4.31% -7.82% 1998 ............................. 0.00% 21,531 12.141253 261,413 0.79% 12.75% Van Eck WIT - Worldwide Emerging Markets Fund 2002 ............................. 0.00% 99,351 6.515847 647,356 0.20% -2.90% 2001 ............................. 0.00% 79,757 6.710492 535,209 0.00% -1.81% 2000 ............................. 0.00% 91,301 6.834145 623,964 0.00% -41.87% 1999 ............................. 0.00% 175,122 11.755719 2,058,685 0.00% 100.28% 1998 ............................. 0.00% 41,962 5.869611 246,301 0.95% -34.13%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Van Eck WIT - Worldwide Hard Assets Fund 2002 ............................. 0.00% 40,828 $ 8.006062 $ 326,871 0.68% -2.83% 2001 ............................. 0.00% 32,526 8.239575 268,000 1.21% -10.44% 2000 ............................. 0.00% 35,253 9.200485 324,345 1.12% 11.40% 1999 ............................. 0.00% 38,783 8.258894 320,305 1.47% 21.00% 1998 ............................. 0.00% 21,804 6.825397 148,821 0.69% -30.97% Van Kampen UIF - Emerging Markets Debt Portfolio 2002 ............................. 0.00% 36,681 12.250737 449,369 6.91% 9.22% 2001 ............................. 0.00% 33,534 11.216363 376,130 9.40% 10.10% 2000 ............................. 0.00% 33,493 10.187412 341,207 12.32% 11.39% 1999 ............................. 0.00% 25,999 9.146001 237,787 16.19% 29.37% 1998 ............................. 0.00% 6,444 7.069376 45,555 12.80% -28.38% Van Kampen UIF - U.S. Real Estate Portfolio 2002 ............................. 0.00% 52,407 19.795314 1,037,413 3.29% -0.79% 2001 ............................. 0.00% 58,299 19.952330 1,163,201 3.98% 9.84% 2000 ............................. 0.00% 57,529 18.164582 1,044,990 8.22% 28.06% 1999 ............................. 0.00% 53,125 14.184757 753,565 6.87% -3.37% 1998 ............................. 0.00% 58,853 14.679798 863,950 0.17% -11.62% Single Premium contracts issued prior to April 16, 1990 (policy years 11 and thereafter): American Century VP Balanced Fund - Class I 2002 ............................. 0.50% 2,665 17.589248 46,875 2.63% -10.01% American Century VP Capital Appreciation Fund - Class I 2002 ............................. 0.50% 13,972 22.346236 312,222 0.00% -21.59% 2001 ............................. 0.50% 2,922 28.500613 83,279 0.00% -28.43% 2000 ............................. 0.50% 7,428 39.820221 295,785 0.00% 8.49% 1999 ............................. 0.50% 6,108 36.406768 222,373 0.00% 63.70% 1998 ............................. 0.50% 6,437 22.339504 143,799 0.00% -2.73% American Century VP Income & Growth Fund - Class I 2002 ............................. 0.50% 7,837 8.316655 65,178 1.10% -19.77% American Century VP International Fund - Class I 2002 ............................. 0.50% 5,091 12.398163 63,119 0.79% -20.77% 2000 ............................. 0.50% 2,453 22.205291 54,470 0.14% -17.24% 1999 ............................. 0.50% 2,459 26.614141 65,444 0.00% 63.23% American Century VP Value Fund - Class I 2002 ............................. 0.50% 13,026 14.941112 194,623 0.90% -13.06% 2000 ............................. 0.50% 118 15.308543 1,806 0.73% 17.56% Credit Suisse Trust - Global Post-Venture Capital Portfolio 2002 ............................. 0.50% 1,728 7.375606 12,745 0.00% -34.49% 2000 ............................. 0.50% 4,740 15.854894 75,152 0.00% -19.34% Credit Suisse Trust - International Focus Portfolio 2002 ............................. 0.50% 2,769 8.184926 22,664 0.00% -20.30% 1998 ............................. 0.50% 1,777 11.754581 20,888 0.52% 4.73% Credit Suisse Trust - Small Cap Growth Portfolio 2002 ............................. 0.50% 6,039 11.748025 70,946 0.00% -34.02%
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------ ---------- -------------- ---------- --------- Dreyfus GVIT Mid Cap Index Fund - Class I 2002 ............................. 0.50% 7,249 $ 8.674888 $ 62,884 0.42% -15.73% Dreyfus IP - Small Cap Stock Index Portfolio - Service Class 2002 ............................. 0.50% 4,866 7.649570 37,223 0.27% -23.50% 5/1/02 Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares 2002 ............................. 0.50% 876 17.600806 15,418 0.21% -29.30% 1999 ............................. 0.50% 1,699 36.209915 61,521 0.02% 29.43% Dreyfus Stock Index Fund 2002 ............................. 0.50% 26,741 20.453144 546,938 1.31% -22.75% 2001 ............................. 0.50% 1,122 26.476528 29,707 1.06% -12.62% 2000 ............................. 0.50% 6,384 30.300792 193,440 0.96% -9.73% 1999 ............................. 0.50% 16,208 33.296352 539,667 1.11% 20.00% 1998 ............................. 0.50% 14,798 27.871347 412,440 1.37% 27.46% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2002 ............................. 0.50% 7,627 10.834553 82,635 1.14% -17.13% 1999 ............................. 0.50% 868 14.538186 12,619 0.70% 10.90% 1998 ............................. 0.50% 876 13.168334 11,535 0.97% 28.99% Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2002 ............................. 0.50% 25,078 37.500399 940,435 1.77% -17.36% 2001 ............................. 0.50% 3,200 45.378727 145,212 1.70% -5.43% 2000 ............................. 0.50% 5,076 47.985530 243,575 1.65% 7.88% 1999 ............................. 0.50% 5,082 44.120448 224,220 1.45% 5.80% 1998 ............................. 0.50% 6,566 41.890019 275,050 1.30% 10.97% Fidelity(R) VIP - Growth Portfolio: Initial Class 2002 ............................. 0.50% 39,628 40.250246 1,595,037 0.25% -30.45% 2001 ............................. 0.50% 3,370 57.875878 195,042 0.08% -18.06% 2000 ............................. 0.50% 4,686 70.634432 330,993 0.12% -11.42% 1999 ............................. 0.50% 3,009 79.099308 238,010 0.15% 36.75% 1998 ............................. 0.50% 4,551 58.102055 264,422 0.41% 38.67% Fidelity(R) VIP - High Income Portfolio: Initial Class 2002 ............................. 0.50% 2,722 20.375870 55,463 9.29% 2.93% 2001 ............................. 0.50% 1,784 19.796324 35,317 13.67% -12.17% 2000 ............................. 0.50% 1,862 22.540543 41,970 7.66% -22.86% 1999 ............................. 0.50% 2,115 28.983767 61,301 9.63% 7.62% 1998 ............................. 0.50% 3,510 27.054068 94,960 7.35% -4.89% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2002 ............................. 0.50% 16,114 17.300971 278,788 0.83% -20.68% 2001 ............................. 0.50% 2,274 21.810922 49,598 5.37% -21.56% 2000 ............................. 0.50% 2,500 27.806776 69,517 1.56% -19.51% 1999 ............................. 0.50% 4,084 34.268141 139,951 1.25% 41.92% 1998 ............................. 0.50% 4,966 24.255551 120,453 1.80% 12.09%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------ ---------- -------------- ---------- --------- Fidelity(R) VIP II - Asset Manager: Growth Portfolio: Service Class 2002 ............................. 0.50% 7,255 $25.693764 $186,408 3.98% -9.18% 2001 ............................. 0.50% 1,169 28.291882 33,073 4.21% -4.57% 2000 ............................. 0.50% 1,178 29.647039 34,924 3.30% -4.41% 1999 ............................. 0.50% 1,185 30.762893 36,454 3.18% 10.54% 1998 ............................. 0.50% 1,193 27.955691 33,351 2.96% 14.38% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2002 ............................. 0.50% 11,284 19.157346 216,171 0.85% -9.80% 1999 ............................. 0.50% 677 25.968332 17,581 0.43% 23.63% 1998 ............................. 0.50% 684 21.098746 14,432 0.53% 29.22% Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2002 ............................. 0.50% 3,061 7.690844 23,542 1.07% -22.23% 2001 ............................. 0.50% 1,210 9.889817 11,967 0.38% -14.85% 2000 ............................. 0.50% 1,231 11.614608 14,298 1.30% -17.48% 1999 ............................. 0.50% 1,477 13.960952 20,620 0.94% 3.75% Gartmore GVIT Global Technology and Communications Fund - Class I 2002 ............................. 0.50% 2,129 1.950112 4,152 0.59% -43.07% Gartmore GVIT Government Bond Fund - Class I 2002 ............................. 0.50% 10,251 29.923916 306,750 4.42% 10.43% 2001 ............................. 0.50% 1,291 27.097613 34,983 5.12% 6.72% 2000 ............................. 0.50% 1,707 25.392104 43,344 5.25% 11.98% 1999 ............................. 0.50% 1,747 22.492327 39,294 5.74% -2.83% 1998 ............................. 0.50% 1,481 23.252862 34,437 5.51% 8.27% Gartmore GVIT Growth Fund - Class I 2002 ............................. 0.50% 10,305 12.105122 124,743 0.00% -29.08% 1999 ............................. 0.50% 1,979 32.388538 64,097 0.66% 3.76% 1998 ............................. 0.50% 2,354 31.356408 73,813 0.78% 29.20% Gartmore GVIT Money Market Fund - Class I 2002 ............................. 0.50% 12,207 18.546928 226,402 1.26% 0.71% 2001 ............................. 0.50% 7,295 18.417013 134,352 3.57% 3.08% 2000 ............................. 0.50% 12,856 17.866283 229,689 5.53% 5.50% 1999 ............................. 0.50% 16,350 16.794246 274,586 5.04% 4.32% 1998 ............................. 0.50% 9,477 16.171326 153,256 5.48% 4.67% Gartmore GVIT Small Cap Value Fund - Class I 2002 ............................. 0.50% 4,939 11.163801 55,138 0.01% -27.53% 2001 ............................. 0.50% 16,203 15.403979 249,591 0.03% 27.63% 2000 ............................. 0.50% 5,781 12.068870 69,770 0.00% 10.65% 1999 ............................. 0.50% 2,201 10.825871 23,828 0.00% 27.20% Gartmore GVIT Small Company Fund - Class I 2002 ............................. 0.50% 13,072 19.224829 251,307 0.00% -17.74% 2001 ............................. 0.50% 749 23.371178 17,505 0.10% -7.17% 2000 ............................. 0.50% 762 25.176901 19,185 0.03% 8.36% 1999 ............................. 0.50% 913 23.047417 21,042 0.00% 43.30%
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------ ---------- -------------- ---------- --------- Gartmore GVIT Total Return Fund - Class I 2002 ............................. 0.50% 3,981 $30.065207 $119,690 0.85% -17.77% 2001 ............................. 0.50% 1,162 36.560512 42,483 0.74% -12.26% 2000 ............................. 0.50% 1,319 41.669957 54,963 0.63% -2.61% 1999 ............................. 0.50% 4,738 42.439374 201,078 0.65% 6.41% 1998 ............................. 0.50% 4,462 40.062865 178,761 1.06% 17.38% Janus AS - Capital Appreciation Portfolio - Service Shares 2002 ............................. 0.50% 12,685 5.144661 65,260 0.30% -16.35% Janus AS - Global Technology Portfolio - Service Shares 2002 ............................. 0.50% 3,149 2.476639 7,799 0.00% -41.23% Janus AS - International Growth Portfolio - Service Shares 2002 ............................. 0.50% 12,584 4.460490 56,131 0.67% -26.13% MAS GVIT (formerly Nationwide(R) SAT) Multi Sector Bond Fund - Class I 2002 ............................. 0.50% 360 11.565028 4,163 4.53% 6.67% 2000 ............................. 0.50% 259 10.458203 2,709 8.52% 4.58% 5/1/00 Neuberger Berman AMT - Growth Portfolio 2002 ............................. 0.50% 5,671 22.757505 129,058 0.00% -31.51% 2001 ............................. 0.50% 3,126 33.226236 103,865 0.00% -30.71% 2000 ............................. 0.50% 3,192 47.952407 153,064 0.00% -12.09% 1999 ............................. 0.50% 3,041 54.109841 164,548 0.00% 49.65% 1998 ............................. 0.50% 4,910 36.321304 178,338 0.00% 14.85% Neuberger Berman AMT - Guardian Portfolio 2002 ............................. 0.50% 870 7.702769 6,701 0.80% -26.82% 1999 ............................. 0.50% 561 10.593122 5,943 0.29% 14.36% Neuberger Berman AMT - Limited Maturity Bond Portfolio 2002 ............................. 0.50% 4,156 21.947749 91,215 4.91% 4.81% 2001 ............................. 0.50% 2,817 20.939856 58,988 5.78% 8.24% 2000 ............................. 0.50% 6,082 19.346478 117,665 7.15% 6.25% 1999 ............................. 0.50% 5,986 18.060558 108,111 5.69% 0.97% 1998 ............................. 0.50% 5,842 17.967444 104,966 6.83% 3.78% Neuberger Berman AMT - Partners Portfolio 2002 ............................. 0.50% 7,065 18.314930 129,395 0.53% -24.52% 2000 ............................. 0.50% 72 25.096849 1,807 0.69% 0.20% Oppenheimer Aggressive Growth Fund/VA - Initial Class 2002 ............................. 0.50% 2,385 3.831748 9,139 0.65% -28.15% Oppenheimer Bond Fund/VA - Initial Class 2002 ............................. 0.50% 379 23.529109 8,918 7.25% 8.54% 2001 ............................. 0.50% 47 21.678723 1,019 7.04% 7.25% 2000 ............................. 0.50% 51 20.213946 1,031 7.66% 5.57% Oppenheimer Capital Appreciation Fund/VA - Initial Class 2002 ............................. 0.50% 9,164 11.405697 104,522 0.64% -27.22% 2001 ............................. 0.50% 8,487 15.672302 133,011 0.64% -13.02% 2000 ............................. 0.50% 6,917 18.017261 124,625 0.12% -0.73%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------ ---------- -------------- ---------- --------- Oppenheimer Global Securities Fund/VA - Initial Class 2002 ............................. 0.50% 4,420 $20.644823 $ 91,250 0.56% -22.52% 2000 ............................. 0.50% 2,118 30.445645 64,484 0.27% 4.57% Oppenheimer Main Street Growth & Income Fund/VA - Initial Class 2002 ............................. 0.50% 3,493 6.518000 22,767 0.65% -19.20% Oppenheimer Multiple Strategies Fund/VA - Initial Class 2002 ............................. 0.50% 9,549 25.070852 239,402 3.60% -10.85% Strong Opportunity Fund II, Inc. 2002 ............................. 0.50% 10,474 29.855056 312,702 0.38% -27.18% 2001 ............................. 0.50% 3,831 41.000669 157,074 0.59% -4.19% 2000 ............................. 0.50% 447 42.694690 19,085 0.00% 6.07% 1999 ............................. 0.50% 450 40.018322 18,008 0.00% 34.23% 1998 ............................. 0.50% 452 29.946506 13,536 0.25% 12.88% Strong VIF - Strong Discovery Fund II 2002 ............................. 0.50% 2,071 19.001713 39,353 0.00% -12.45% Strong VIF - Strong International Stock Fund II 2002 ............................. 0.50% 392 5.758212 2,257 4.04% -26.91% Van Eck WIT - Worldwide Bond Fund 2002 ............................. 0.50% 4,159 17.737696 73,771 0.00% 21.05% 2001 ............................. 0.50% 1,086 14.653212 15,913 4.39% -5.57% 2000 ............................. 0.50% 1,105 15.517699 17,147 4.90% 1.36% 1999 ............................. 0.50% 1,325 15.185599 20,121 4.31% -8.28% 1998 ............................. 0.50% 264 16.631673 4,391 0.79% 12.09% Van Eck WIT - Worldwide Emerging Markets Fund 2002 ............................. 0.50% 32,774 6.287778 206,076 0.20% -3.39% 2000 ............................. 0.50% 407 6.661531 2,711 0.00% -42.15% 1999 ............................. 0.50% 6,267 11.423096 71,589 0.00% 99.29% Van Eck WIT - Worldwide Hard Assets Fund 2002 ............................. 0.50% 7,750 11.537923 89,419 0.68% -3.32% 2001 ............................. 0.50% 4 11.933986 48 1.21% -10.89% 2000 ............................. 0.50% 5 13.393001 67 1.12% 10.85% 1999 ............................. 0.50% 10 11.984540 120 1.47% 20.40% 1998 ............................. 0.50% 5,479 9.998900 54,784 0.69% -31.37% Van Kampen UIF - Emerging Markets Debt Portfolio 2002 ............................. 0.50% 2,372 11.884934 28,191 6.91% 8.68% 2001 ............................. 0.50% 1,244 10.935992 13,604 9.40% 9.55% 2000 ............................. 0.50% 1,265 9.982829 12,628 12.32% 10.83% 1999 ............................. 0.50% 1,518 8.934183 13,562 16.19% 28.73% Van Kampen UIF - U.S. Real Estate Portfolio 2002 ............................. 0.50% 10,521 20.976263 220,691 3.29% -1.28% 2000 ............................. 0.50% 3,074 19.442286 59,766 8.22% 27.42% 1998 ............................. 0.50% 4,103 15.812545 64,879 0.17% -12.14%
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Multiple Payment contracts and Flexible Premium contracts: American Century VP Balanced Fund - Class I 2002 ............................. 0.80% 196,895 $17.490037 $ 3,443,701 2.63% -10.28% 2001 ............................. 0.80% 201,384 19.493759 3,925,731 2.81% -4.31% 2000 ............................. 0.80% 204,099 20.372425 4,157,992 2.45% -3.42% 1999 ............................. 0.80% 222,611 21.094348 4,695,834 1.78% 9.18% 1998 ............................. 0.80% 215,629 19.320541 4,166,069 1.59% 14.85% American Century VP Capital Appreciation Fund - Class I 2002 ............................. 0.80% 657,612 14.060797 9,246,549 0.00% -21.83% 2001 ............................. 0.80% 735,263 17.987270 13,225,374 0.00% -28.64% 2000 ............................. 0.80% 819,897 25.207415 20,667,484 0.00% 8.17% 1999 ............................. 0.80% 643,372 23.303640 14,992,909 0.00% 63.21% 1998 ............................. 0.80% 649,478 14.277913 9,273,190 0.00% -2.94% American Century VP Income & Growth Fund - Class I 2002 ............................. 0.80% 289,017 8.200926 2,370,207 1.10% -20.01% 2001 ............................. 0.80% 322,604 10.252927 3,307,635 0.81% -9.09% 2000 ............................. 0.80% 303,622 11.277817 3,424,193 0.55% -11.32% 1999 ............................. 0.80% 235,223 12.717991 2,991,564 0.02% 17.08% 1998 ............................. 0.80% 73,815 10.862660 801,827 0.94% 8.63% 5/1/98 American Century VP International Fund - Class I 2002 ............................. 0.80% 679,193 12.287143 8,345,342 0.79% -21.01% 2001 ............................. 0.80% 733,730 15.554724 11,412,968 0.09% -29.74% 2000 ............................. 0.80% 754,646 22.139513 16,707,495 0.14% -17.49% 1999 ............................. 0.80% 649,836 26.831062 17,435,790 0.00% 62.74% 1998 ............................. 0.80% 568,779 16.487231 9,377,591 0.48% 17.81% American Century VP Ultra Fund - Class I 2002 ............................. 0.80% 7,959 7.995504 63,636 0.46% -20.04% 5/1/02 American Century VP Value Fund - Class I 2002 ............................. 0.80% 522,332 14.754246 7,706,615 0.90% -13.32% 2001 ............................. 0.80% 499,070 17.020923 8,494,632 0.95% 11.92% 2000 ............................. 0.80% 323,587 15.208380 4,921,234 0.73% 17.21% 1999 ............................. 0.80% 156,791 12.975752 2,034,481 0.93% -1.64% 1998 ............................. 0.80% 140,522 13.192098 1,853,780 0.64% 3.98% Credit Suisse Trust - Global Post-Venture Capital Portfolio 2002 ............................. 0.80% 156,158 7.283277 1,137,342 0.00% -34.68% 2001 ............................. 0.80% 135,156 11.150533 1,507,061 0.00% -29.21% 2000 ............................. 0.80% 139,959 15.751152 2,204,515 0.00% -19.58% 1999 ............................. 0.80% 123,907 19.586645 2,426,922 0.00% 62.20% 1998 ............................. 0.80% 64,081 12.075838 773,832 0.00% 5.66% Credit Suisse Trust - International Focus Portfolio 2002 ............................. 0.80% 469,749 8.100409 3,805,159 0.00% -20.54% 2001 ............................. 0.80% 503,048 10.194751 5,128,449 0.00% -22.90% 2000 ............................. 0.80% 525,361 13.222451 6,946,560 0.45% -26.48% 1999 ............................. 0.80% 555,966 17.985801 9,999,494 0.93% 52.21% 1998 ............................. 0.80% 579,078 11.816371 6,842,600 0.52% 4.51%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Credit Suisse Trust - Small Cap Growth Portfolio 2002 ............................. 0.80% 739,837 $11.626571 $ 8,601,767 0.00% -34.22% 2001 ............................. 0.80% 816,970 17.675000 14,439,945 0.00% -16.68% 2000 ............................. 0.80% 942,509 21.214019 19,994,404 0.00% -18.76% 1999 ............................. 0.80% 754,487 26.113570 19,702,349 0.00% 67.73% 1998 ............................. 0.80% 731,702 15.568525 11,391,521 0.00% -3.63% Dreyfus GVIT Mid Cap Index Fund - Class I 2002 ............................. 0.80% 332,165 8.605706 2,858,514 0.42% -15.98% 2001 ............................. 0.80% 246,977 10.242303 2,529,613 0.54% -2.10% 2000 ............................. 0.80% 145,426 10.461575 1,521,385 0.56% 4.62% 5/1/00 Dreyfus IP - European Equity Portfolio 2001 ............................. 0.80% 9,248 6.633319 61,345 0.84% -28.71% 2000 ............................. 0.80% 3,721 9.304097 34,621 0.42% -6.96% 5/1/00 Dreyfus IP - Small Cap Stock Index Portfolio - Service Class 2002 ............................. 0.80% 5,194 7.634206 39,652 0.27% -23.66% 5/1/02 Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares 2002 ............................. 0.80% 432,657 17.464486 7,556,132 0.21% -29.51% 2001 ............................. 0.80% 479,262 24.776659 11,874,511 0.06% -23.20% 2000 ............................. 0.80% 508,803 32.259560 16,413,761 0.81% -11.74% 1999 ............................. 0.80% 450,901 36.549891 16,480,382 0.02% 29.04% 1998 ............................. 0.80% 359,871 28.323603 10,192,843 0.19% 28.35% Dreyfus Stock Index Fund 2002 ............................. 0.80% 2,526,349 20.295193 51,272,741 1.31% -22.98% 2001 ............................. 0.80% 2,735,378 26.351146 72,080,345 1.06% -12.88% 2000 ............................. 0.80% 2,613,545 30.248565 79,055,986 0.96% -10.00% 1999 ............................. 0.80% 2,592,791 33.609618 87,142,715 1.11% 19.64% 1998 ............................. 0.80% 2,166,290 28.091438 60,854,201 1.37% 27.19% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2002 ............................. 0.80% 376,103 10.690124 4,020,588 1.14% -17.38% 2001 ............................. 0.80% 358,763 12.938645 4,641,907 0.84% -10.04% 2000 ............................. 0.80% 365,003 14.382034 5,249,486 0.63% -1.44% 1999 ............................. 0.80% 404,377 14.591996 5,900,668 0.70% 10.57% 1998 ............................. 0.80% 257,361 13.197284 3,396,466 0.97% 29.18% Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2002 ............................. 0.80% 152,335 9.781078 1,490,001 0.60% -25.92% 2001 ............................. 0.80% 162,195 13.204070 2,141,634 0.50% -6.60% 2000 ............................. 0.80% 152,925 14.137245 2,161,938 0.61% -4.54% 1999 ............................. 0.80% 138,815 14.810164 2,055,873 0.65% 15.95% 1998 ............................. 0.80% 125,274 12.772496 1,600,062 1.05% 10.92% Federated Quality Bond Fund II - Primary Shares 2002 ............................. 0.80% 101,228 10.725195 1,085,690 0.00% 7.25% 5/1/02 Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2002 ............................. 0.80% 1,471,599 31.238892 45,971,122 1.77% -17.61% 2001 ............................. 0.80% 1,558,719 37.915521 59,099,643 1.70% -5.72% 2000 ............................. 0.80% 1,556,185 40.214814 62,581,690 1.65% 7.56% 1999 ............................. 0.80% 1,750,754 37.388084 65,457,338 1.45% 5.48% 1998 ............................. 0.80% 1,726,955 35.444796 61,211,568 1.30% 10.74%
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Fidelity(R) VIP - Growth Portfolio: Initial Class 2002.............................. 0.80% 2,235,794 $27.961807 $ 62,516,840 0.25% -30.66% 2001.............................. 0.80% 2,474,278 40.327380 99,781,149 0.08% -18.31% 2000.............................. 0.80% 2,621,312 49.366480 129,404,946 0.12% -11.69% 1999.............................. 0.80% 2,613,902 55.899014 146,114,544 0.15% 36.34% 1998.............................. 0.80% 2,346,630 40.998916 96,209,286 0.41% 38.38% Fidelity(R) VIP - High Income Portfolio: Initial Class 2002.............................. 0.80% 765,595 19.377316 14,835,176 9.29% 2.62% 2001.............................. 0.80% 653,854 18.882734 12,346,551 13.67% -12.44% 2000.............................. 0.80% 619,065 21.565326 13,350,339 7.66% -23.09% 1999.............................. 0.80% 672,537 28.039263 18,857,442 9.63% 7.29% 1998.............................. 0.80% 737,225 26.133234 19,266,073 7.35% -5.09% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2002.............................. 0.80% 722,432 13.320811 9,623,380 0.83% -20.92% 2001.............................. 0.80% 814,381 16.843777 13,717,252 5.37% -21.80% 2000.............................. 0.80% 866,875 21.539183 18,671,779 1.56% -19.75% 1999.............................. 0.80% 863,446 26.840170 23,175,037 1.25% 41.49% 1998.............................. 0.80% 871,214 18.969496 16,526,490 1.80% 11.85% Fidelity(R) VIP II - Asset Manager: Growth Portfolio: Service Class 2002.............................. 0.80% 753,208 22.459775 16,916,882 3.98% -9.46% 2001.............................. 0.80% 808,651 24.805237 20,058,780 4.21% -4.86% 2000.............................. 0.80% 851,071 26.071970 22,189,098 3.30% -4.69% 1999.............................. 0.80% 917,098 27.355020 25,087,234 3.18% 10.21% 1998.............................. 0.80% 961,754 24.821550 23,872,225 2.96% 14.13% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2002.............................. 0.80% 1,875,068 18.959642 35,550,618 0.85% -10.07% 2001.............................. 0.80% 2,013,717 21.083066 42,455,328 0.78% -12.95% 2000.............................. 0.80% 2,107,468 24.218904 51,040,565 0.36% -7.36% 1999.............................. 0.80% 2,151,780 26.143948 56,256,024 0.43% 23.26% 1998.............................. 0.80% 1,826,890 21.209617 38,747,637 0.53% 28.94% Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2002.............................. 0.80% 328,074 7.588268 2,489,513 1.07% -22.47% 2001.............................. 0.80% 341,765 9.787292 3,344,954 0.38% -15.11% 2000.............................. 0.80% 358,453 11.528985 4,132,599 1.30% -17.72% 1999.............................. 0.80% 385,372 14.012663 5,400,088 0.94% 3.44% 1998.............................. 0.80% 315,036 13.546531 4,267,645 0.58% 23.62% Fidelity(R) VIP III - Value Strategies Portfolio: Service Class 2002.............................. 0.80% 10,466 7.469351 78,174 0.00% -25.31% 5/1/02 Gartmore GVIT Emerging Markets Fund - Class I 2002.............................. 0.80% 29,904 6.877883 205,676 0.17% -15.91% 2001.............................. 0.80% 23,612 8.178748 193,117 0.52% -5.94% 2000.............................. 0.80% 1,063 8.695491 9,243 0.00% -13.05% 10/2/00 Gartmore GVIT Global Financial Services Fund - Class I 2002.............................. 0.80% 3,345 8.617613 28,826 0.08% -13.82% 5/1/02 Gartmore GVIT Global Health Sciences Fund - Class I 2002.............................. 0.80% 3,831 8.295539 31,780 0.00% -17.04% 5/1/02
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Gartmore GVIT Global Technology and Communications Fund - Class I 2002.............................. 0.80% 113,725 $ 1.936951 $ 220,280 0.59% -43.24% 2001.............................. 0.80% 86,686 3.412440 295,811 0.00% -43.18% 2000.............................. 0.80% 46,652 6.005978 280,191 0.00% -39.94% 10/2/00 Gartmore GVIT Global Utilities Fund - Class I 2002.............................. 0.80% 1,341 8.637451 11,583 0.54% -13.63% 5/1/02 Gartmore GVIT Government Bond Fund - Class I 2002.............................. 0.80% 575,815 22.908666 13,191,154 4.42% 10.10% 2001.............................. 0.80% 492,674 20.807253 10,251,193 5.12% 6.40% 2000.............................. 0.80% 359,189 19.556523 7,024,488 5.25% 11.65% 1999.............................. 0.80% 402,906 17.516435 7,057,477 5.74% -3.13% 1998.............................. 0.80% 414,068 18.081576 7,487,002 5.51% 8.04% Gartmore GVIT Growth Fund - Class I 2002.............................. 0.80% 969,929 12.036520 11,674,570 0.00% -29.29% 2001.............................. 0.80% 950,129 17.022307 16,173,388 0.00% -28.71% 2000.............................. 0.80% 952,662 23.877962 22,747,627 0.18% -27.12% 1999.............................. 0.80% 1,104,444 32.761545 36,183,292 0.66% 3.45% 1998.............................. 0.80% 1,058,148 31.669989 33,511,536 0.78% 28.93% Gartmore GVIT ID Aggressive Fund 2002.............................. 0.80% 17,710 8.269753 146,457 1.83% -17.30% 1/25/02 Gartmore GVIT ID Conservative Fund 2002.............................. 0.80% 21,249 9.975795 211,976 2.80% -0.24% 1/25/02 Gartmore GVIT ID Moderate Fund 2002.............................. 0.80% 44,700 9.072331 405,533 1.72% -9.28% 1/25/02 Gartmore GVIT ID Moderately Aggressive Fund 2002.............................. 0.80% 94,483 8.623105 814,737 1.55% -13.77% 1/25/02 Gartmore GVIT ID Moderately Conservative Fund 2002.............................. 0.80% 18,773 9.570814 179,673 2.35% -4.29% 1/25/02 Gartmore GVIT International Growth Fund - Class I 2002.............................. 0.80% 7,532 4.919535 37,054 0.00% -24.71% 2001.............................. 0.80% 8,456 6.534130 55,253 0.09% -29.22% 2000.............................. 0.80% 453 9.231934 4,182 0.00% -7.68% 10/2/00 Gartmore GVIT Money Market Fund - Class I 2002.............................. 0.80% 1,963,625 15.035122 29,523,341 1.26% 0.40% 2001.............................. 0.80% 1,991,692 14.974957 29,825,502 3.57% 2.77% 2000.............................. 0.80% 2,268,467 14.571330 33,054,581 5.53% 5.18% 1999.............................. 0.80% 2,312,418 13.853330 32,034,690 5.04% 4.01% 1998.............................. 0.80% 1,953,963 13.319323 26,025,464 5.48% 4.43% Gartmore GVIT Nationwide(R) Leaders Fund - Class I 2002.............................. 0.80% 12,664 8.407288 106,470 1.18% -15.93% 5/1/02 Gartmore GVIT Small Cap Growth Fund - Class I 2002.............................. 0.80% 202,182 4.727311 955,777 0.00% -33.82% 2001.............................. 0.80% 146,635 7.143137 1,047,434 0.00% -11.55% 2000.............................. 0.80% 85,563 8.076240 691,027 0.00% -19.24% 5/1/00
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Gartmore GVIT Small Cap Value Fund - Class I 2002 ............................. 0.80% 581,061 $11.008455 $ 6,396,584 0.01% -27.74% 2001 ............................. 0.80% 679,631 15.235359 10,354,422 0.03% 27.25% 2000 ............................. 0.80% 275,697 11.972833 3,300,874 0.00% 10.32% 1999 ............................. 0.80% 165,130 10.852975 1,792,152 0.00% 26.82% 1998 ............................. 0.80% 50,840 8.557853 435,081 0.00% -14.42% 5/1/98 Gartmore GVIT Small Company Fund - Class I 2002 ............................. 0.80% 877,427 19.017572 16,686,531 0.00% -17.99% 2001 ............................. 0.80% 928,089 23.188796 21,521,266 0.10% -7.45% 2000 ............................. 0.80% 998,068 25.056031 25,007,623 0.03% 8.03% 1999 ............................. 0.80% 907,754 23.192622 21,053,195 0.00% 42.87% 1998 ............................. 0.80% 879,309 16.233001 14,273,824 0.00% 0.02% Gartmore GVIT Total Return Fund - Class I 2002 ............................. 0.80% 2,203,258 24.433418 53,833,124 0.85% -18.01% 2001 ............................. 0.80% 2,295,929 29.801440 68,421,990 0.74% -12.53% 2000 ............................. 0.80% 2,359,054 34.069071 80,370,778 0.63% -2.90% 1999 ............................. 0.80% 2,622,351 35.085217 92,005,754 0.65% 6.09% 1998 ............................. 0.80% 2,650,483 33.070880 87,653,805 1.06% 17.13% Gartmore GVIT U.S. Growth Leaders Fund - Class I 2002 ............................. 0.80% 3,205 8.182356 26,224 0.00% -18.18% 5/1/02 Janus AS - Capital Appreciation Portfolio - Service Shares 2002 ............................. 0.80% 358,288 5.103609 1,828,562 0.30% -16.60% 2001 ............................. 0.80% 350,620 6.119334 2,145,561 0.91% -22.46% 2000 ............................. 0.80% 297,781 7.891490 2,349,936 1.33% -21.09% 5/1/00 Janus AS - Global Technology Portfolio - Service Shares 2002 ............................. 0.80% 276,903 2.456849 680,309 0.00% -41.40% 2001 ............................. 0.80% 346,031 4.192814 1,450,844 0.56% -37.82% 2000 ............................. 0.80% 259,751 6.742955 1,751,489 1.21% -32.57% 5/1/00 Janus AS - International Growth Portfolio - Service Shares 2002 ............................. 0.80% 219,129 4.424879 969,619 0.67% -26.35% 2001 ............................. 0.80% 227,552 6.008001 1,367,133 0.70% -24.04% 2000 ............................. 0.80% 174,672 7.909816 1,381,623 6.25% -20.90% 5/1/00 MAS GVIT (formerly Nationwide(R) SAT) Multi Sector Bond Fund - Class I 2002 ............................. 0.80% 94,053 11.472904 1,079,061 4.53% 6.35% 2001 ............................. 0.80% 55,247 10.787560 595,980 8.29% 3.35% 2000 ............................. 0.80% 3,000 10.437484 31,312 8.52% 4.37% 5/1/00 Neuberger Berman AMT - Balanced Portfolio 2002 ............................. 0.80% 2,497 18.438130 46,040 4.01% -17.81% 2001 ............................. 0.80% 636 22.433930 14,268 0.00% -3.34% 6/15/01 Neuberger Berman AMT - Growth Portfolio 2002 ............................. 0.80% 698,803 15.635481 10,926,121 0.00% -31.71% 2001 ............................. 0.80% 800,152 22.896752 18,320,882 0.00% -30.92% 2000 ............................. 0.80% 793,907 33.145055 26,314,091 0.00% -12.36% 1999 ............................. 0.80% 660,524 37.818375 24,979,944 0.00% 49.20% 1998 ............................. 0.80% 767,489 25.347646 19,454,039 0.00% 14.61%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Neuberger Berman AMT - Guardian Portfolio 2002 ............................. 0.80% 161,292 $ 7.595581 $ 1,225,106 0.80% -27.04% 2001 ............................. 0.80% 196,852 10.409898 2,049,209 0.47% -2.30% 2000 ............................. 0.80% 149,159 10.654639 1,589,235 0.59% 0.33% 1999 ............................. 0.80% 181,217 10.619652 1,924,461 0.29% 14.02% 1998 ............................. 0.80% 71,761 9.314041 668,385 0.00% -6.86% 5/1/98 Neuberger Berman AMT - Limited Maturity Bond Portfolio 2002 ............................. 0.80% 225,668 17.871272 4,032,974 4.91% 4.50% 2001 ............................. 0.80% 178,198 17.101800 3,047,507 5.78% 7.91% 2000 ............................. 0.80% 141,846 15.848178 2,248,001 7.15% 5.94% 1999 ............................. 0.80% 203,409 14.959827 3,042,963 5.69% 0.67% 1998 ............................. 0.80% 195,748 14.860392 2,908,892 6.83% 3.56% Neuberger Berman AMT - Partners Portfolio 2002 ............................. 0.80% 728,943 18.150798 13,230,897 0.53% -24.75% 2001 ............................. 0.80% 777,174 24.119941 18,745,391 0.38% -3.61% 2000 ............................. 0.80% 781,588 25.022294 19,557,125 0.69% -0.01% 1999 ............................. 0.80% 1,008,241 25.046437 25,252,845 1.08% 6.51% 1998 ............................. 0.80% 1,151,452 23.514569 27,075,898 0.35% 3.38% Oppenheimer Aggressive Growth Fund/VA - Initial Class 2002 ............................. 0.80% 279,004 3.801151 1,060,536 0.65% -28.37% 2001 ............................. 0.80% 298,688 5.306432 1,584,968 0.87% -31.82% 2000 ............................. 0.80% 313,898 7.782869 2,443,027 0.00% -22.17% 5/1/00 Oppenheimer Bond Fund/VA - Initial Class 2002 ............................. 0.80% 492,395 21.538984 10,605,688 7.25% 8.21% 2001 ............................. 0.80% 499,632 19.904727 9,945,039 7.04% 6.92% 2000 ............................. 0.80% 480,377 18.615856 8,942,629 7.66% 5.26% 1999 ............................. 0.80% 520,266 17.686402 9,201,634 4.68% -2.30% 1998 ............................. 0.80% 532,098 18.103341 9,632,752 1.67% 5.95% Oppenheimer Capital Appreciation Fund/VA - Initial Class 2002 ............................. 0.80% 847,094 11.253616 9,532,871 0.64% -27.44% 2001 ............................. 0.80% 859,711 15.509895 13,334,027 0.64% -13.28% 2000 ............................. 0.80% 796,536 17.884539 14,245,679 0.12% -1.02% 1999 ............................. 0.80% 535,283 18.069110 9,672,087 0.17% 40.53% 1998 ............................. 0.80% 342,717 12.857977 4,406,647 0.28% 23.01% Oppenheimer Global Securities Fund/VA - Initial Class 2002 ............................. 0.80% 1,001,953 20.485514 20,525,522 0.56% -22.76% 2001 ............................. 0.80% 1,078,042 26.520512 28,590,226 0.69% -12.74% 2000 ............................. 0.80% 1,096,887 30.393395 33,338,120 0.27% 4.26% 1999 ............................. 0.80% 1,018,848 29.152831 29,702,304 0.92% 57.22% 1998 ............................. 0.80% 980,014 18.542353 18,171,766 2.07% 13.20% Oppenheimer Main Street Growth & Income Fund/VA - Initial Class 2002 ............................. 0.80% 111,681 6.466008 722,130 0.65% -19.44% 2001 ............................. 0.80% 73,856 8.026816 592,829 0.41% -10.88% 2000 ............................. 0.80% 33,482 9.006749 301,564 0.00% -9.93% 5/1/00
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Oppenheimer Multiple Strategies Fund/VA - Initial Class 2002 ............................. 0.80% 393,230 $23.955594 $ 9,420,058 3.60% -11.12% 2001 ............................. 0.80% 394,571 26.951432 10,634,253 3.96% 1.40% 2000 ............................. 0.80% 412,843 26.579650 10,973,222 4.57% 5.59% 1999 ............................. 0.80% 437,927 25.171538 11,023,296 3.30% 10.91% 1998 ............................. 0.80% 460,679 22.696024 10,455,582 0.88% 5.80% Strong GVIT Mid Cap Growth Fund - Class I 2002 ............................. 0.80% 250,537 3.502288 877,453 0.00% -37.52% 2001 ............................. 0.80% 146,210 5.605279 819,548 0.00% -30.87% 2000 ............................. 0.80% 76,685 8.108035 621,765 0.00% -18.92% 5/1/00 Strong Opportunity Fund II, Inc. 2002 ............................. 0.80% 826,619 29.685674 24,538,742 0.38% -27.40% 2001 ............................. 0.80% 901,762 40.890795 36,873,765 0.59% -4.48% 2000 ............................. 0.80% 877,807 42.709091 37,490,339 0.00% 5.75% 1999 ............................. 0.80% 898,106 40.478200 36,353,714 0.00% 33.83% 1998 ............................. 0.80% 874,006 30.245312 26,434,584 0.25% 12.64% Strong VIF - Strong Discovery Fund II 2002 ............................. 0.80% 264,753 18.893884 5,002,212 0.00% -12.72% 2001 ............................. 0.80% 269,121 21.646818 5,825,613 0.72% 3.25% 2000 ............................. 0.80% 271,144 20.965624 5,684,703 0.00% 3.57% 1999 ............................. 0.80% 296,260 20.243703 5,997,399 0.00% 4.25% 1998 ............................. 0.80% 360,468 19.418031 6,999,579 0.00% 6.41% Strong VIF - Strong International Stock Fund II 2002 ............................. 0.80% 199,430 5.696130 1,135,979 4.04% -27.13% 2001 ............................. 0.80% 213,256 7.816872 1,666,995 0.00% -22.76% 2000 ............................. 0.80% 210,636 10.120684 2,131,780 0.00% -40.00% 1999 ............................. 0.80% 219,407 16.868902 3,701,155 0.17% 85.71% 1998 ............................. 0.80% 149,776 9.083353 1,360,468 1.14% -5.54% Turner GVIT Growth Focus Fund - Class I 2002 ............................. 0.80% 80,828 2.170866 175,467 0.00% -43.31% 2001 ............................. 0.80% 50,607 3.829622 193,806 0.00% -39.52% 2000 ............................. 0.80% 7,806 6.332010 49,428 0.00% -36.68% Van Eck WIT - Worldwide Bond Fund 2002 ............................. 0.80% 198,934 16.079714 3,198,802 0.00% 20.69% 2001 ............................. 0.80% 120,008 13.323421 1,598,917 4.39% -5.86% 2000 ............................. 0.80% 123,195 14.152095 1,743,467 4.90% 1.06% 1999 ............................. 0.80% 143,676 14.003753 2,012,003 4.31% -8.56% 1998 ............................. 0.80% 154,980 15.314274 2,373,406 0.79% 11.86% Van Eck WIT - Worldwide Emerging Markets Fund 2002 ............................. 0.80% 444,801 6.209058 2,761,795 0.20% -3.68% 2001 ............................. 0.80% 444,368 6.445985 2,864,389 0.00% -2.60% 2000 ............................. 0.80% 443,771 6.617911 2,936,837 0.00% -42.33% 1999 ............................. 0.80% 576,742 11.474995 6,618,112 0.00% 98.69% 1998 ............................. 0.80% 253,188 5.775322 1,462,242 0.95% -34.66%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Van Eck WIT - Worldwide Hard Assets Fund 2002 ............................. 0.80% 254,426 $13.874598 $3,530,058 0.68% -3.61% 2001 ............................. 0.80% 176,699 14.394010 2,543,407 1.21% -11.16% 2000 ............................. 0.80% 186,255 16.202639 3,017,823 1.12% 10.52% 1999 ............................. 0.80% 206,979 14.660562 3,034,428 1.47% 20.04% 1998 ............................. 0.80% 206,325 12.213208 2,519,890 0.69% -31.52% Van Kampen UIF - Emerging Markets Debt Portfolio 2002 ............................. 0.80% 79,485 11.726545 932,084 6.91% 8.35% 2001 ............................. 0.80% 74,719 10.822665 808,659 9.40% 9.22% 2000 ............................. 0.80% 62,323 9.909218 617,572 12.32% 10.50% 1999 ............................. 0.80% 43,728 8.967304 392,122 16.19% 28.35% 1998 ............................. 0.80% 34,905 6.986851 243,876 12.80% -28.95% Van Kampen UIF - U.S. Real Estate Portfolio 2002 ............................. 0.80% 355,742 20.759770 7,385,122 3.29% -1.58% 2001 ............................. 0.80% 313,717 21.092541 6,617,089 3.98% 8.96% 2000 ............................. 0.80% 277,285 19.357784 5,367,623 8.22% 27.04% 1999 ............................. 0.80% 246,788 15.237208 3,760,360 6.87% -4.14% 1998 ............................. 0.80% 287,075 15.895654 4,563,245 0.17% -12.33% Single Premium contracts issued on or after April 16, 1990: American Century VP Balanced Fund - Class I 2002 ............................. 1.30% 36,064 16.579698 597,930 2.63% -10.73% 2001 ............................. 1.30% 27,610 18.571841 512,769 2.81% -4.79% 2000 ............................. 1.30% 29,587 19.506844 577,149 2.45% -3.90% 1999 ............................. 1.30% 36,043 20.298769 731,629 1.78% 8.64% 1998 ............................. 1.30% 43,205 18.685028 807,287 1.59% 14.28% American Century VP Capital Appreciation Fund - Class I 2002 ............................. 1.30% 83,334 14.389339 1,199,121 0.00% -22.22% 2001 ............................. 1.30% 93,041 18.500029 1,721,261 0.00% -29.00% 2000 ............................. 1.30% 156,838 26.057031 4,086,733 0.00% 7.63% 1999 ............................. 1.30% 134,822 24.209204 3,263,933 0.00% 62.40% 1998 ............................. 1.30% 113,249 14.906965 1,688,199 0.00% -3.42% American Century VP Income & Growth Fund - Class I 2002 ............................. 1.30% 18,481 8.011655 148,063 1.10% -20.41% 2001 ............................. 1.30% 40,468 10.066594 407,375 0.81% -9.54% 2000 ............................. 1.30% 48,794 11.128733 543,015 0.55% -11.76% 1999 ............................. 1.30% 53,220 12.612413 671,233 0.02% 16.50% 1998 ............................. 1.30% 18,703 10.826437 202,487 0.94% 8.26% 5/1/98 American Century VP International Fund - Class I 2002 ............................. 1.30% 67,411 11.780758 794,153 0.79% -21.40% 2001 ............................. 1.30% 105,515 14.988556 1,581,517 0.09% -30.10% 2000 ............................. 1.30% 126,911 21.441430 2,721,153 0.14% -17.90% 1999 ............................. 1.30% 162,982 26.114709 4,256,228 0.00% 61.93% 1998 ............................. 1.30% 168,629 16.127264 2,719,524 0.48% 17.23% American Century VP Ultra Fund - Class I 2002 ............................. 1.30% 739 7.968770 5,889 0.46% -20.31% 5/1/02
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- American Century VP Value Fund - Class I 2002 ............................. 1.30% 94,957 $14.316630 $ 1,359,464 0.90% -13.75% 2001 ............................. 1.30% 123,905 16.598988 2,056,698 0.95% 11.36% 2000 ............................. 1.30% 57,614 14.906133 858,802 0.73% 16.63% 1999 ............................. 1.30% 26,781 12.781220 342,294 0.93% -2.13% 1998 ............................. 1.30% 25,086 13.059452 327,609 0.64% 3.46% Credit Suisse Trust - Global Post-Venture Capital Portfolio 2002 ............................. 1.30% 5,188 7.067052 36,664 0.00% -35.01% 2001 ............................. 1.30% 7,002 10.873870 76,139 0.00% -29.56% 2000 ............................. 1.30% 11,974 15.438040 184,855 0.00% -19.98% 1999 ............................. 1.30% 88,739 19.293144 1,712,054 0.00% 61.39% 1998 ............................. 1.30% 23,108 11.954408 276,242 0.00% 5.13% Credit Suisse Trust - International Focus Portfolio 2002 ............................. 1.30% 49,680 7.802280 387,617 0.00% -20.94% 2001 ............................. 1.30% 55,979 9.868857 552,449 0.00% -23.29% 2000 ............................. 1.30% 66,083 12.864457 850,122 0.45% -26.85% 1999 ............................. 1.30% 81,838 17.586224 1,439,221 0.93% 51.45% 1998 ............................. 1.30% 92,476 11.611647 1,073,799 0.52% 3.99% Credit Suisse Trust - Small Cap Growth Portfolio 2002 ............................. 1.30% 54,671 11.198504 612,233 0.00% -34.55% 2001 ............................. 1.30% 82,230 17.109846 1,406,943 0.00% -17.10% 2000 ............................. 1.30% 118,070 20.639565 2,436,913 0.00% -19.17% 1999 ............................. 1.30% 114,996 25.533360 2,936,234 0.00% 66.90% 1998 ............................. 1.30% 152,727 15.298780 2,336,537 0.00% -4.11% Dreyfus GVIT Mid Cap Index Fund - Class I 2002 ............................. 1.30% 48,885 8.491590 415,111 0.42% -16.40% 2001 ............................. 1.30% 41,031 10.157238 416,762 0.54% -2.59% 2000 ............................. 1.30% 10,564 10.427067 110,152 0.56% 4.27% 5/1/00 Dreyfus IP - European Equity Portfolio 2001 ............................. 1.30% 2,993 6.578172 19,688 0.84% -29.06% 2000 ............................. 1.30% 5,683 9.273374 52,701 0.42% -7.27% 5/1/00 Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares 2002 ............................. 1.30% 13,724 16.676328 228,866 0.21% -29.86% 2001 ............................. 1.30% 22,613 23.777410 537,679 0.06% -23.58% 2000 ............................. 1.30% 33,067 31.114958 1,028,878 0.81% -12.18% 1999 ............................. 1.30% 31,488 35.428815 1,115,583 0.02% 28.40% 1998 ............................. 1.30% 27,695 27.592332 764,170 0.19% 27.71% Dreyfus Stock Index Fund 2002 ............................. 1.30% 179,477 19.378177 3,477,937 1.31% -23.37% 2001 ............................. 1.30% 215,776 25.286872 5,456,300 1.06% -13.32% 2000 ............................. 1.30% 248,888 29.173405 7,260,910 0.96% -10.45% 1999 ............................. 1.30% 315,343 32.576553 10,272,788 1.11% 19.05% 1998 ............................. 1.30% 326,895 27.364353 8,945,270 1.37% 26.56%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Dreyfus VIF - Appreciation Portfolio - Initial Shares 2002 ............................. 1.30% 74,627 $10.401947 $ 776,266 1.14% -17.79% 2001 ............................. 1.30% 80,268 12.653068 1,015,636 0.84% -10.49% 2000 ............................. 1.30% 69,804 14.135555 986,718 0.63% -1.93% 1999 ............................. 1.30% 81,279 14.413356 1,171,503 0.70% 10.02% 1998 ............................. 1.30% 62,982 13.101026 825,129 0.97% 28.54% Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2002 ............................. 1.30% 13,957 9.490878 132,464 0.60% -26.29% 2001 ............................. 1.30% 12,109 12.876695 155,924 0.50% -7.07% 2000 ............................. 1.30% 16,818 13.856323 233,036 0.61% -5.02% 1999 ............................. 1.30% 9,941 14.588194 145,021 0.65% 15.38% 1998 ............................. 1.30% 14,240 12.644103 180,052 1.05% 10.37% Federated Quality Bond Fund II - Primary Shares 2002 ............................. 1.30% 4,830 10.689420 51,630 0.00% 6.89% 5/1/02 Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2002 ............................. 1.30% 242,191 29.394119 7,118,991 1.77% -18.02% 2001 ............................. 1.30% 292,636 35.855591 10,492,637 1.70% -6.19% 2000 ............................. 1.30% 304,863 38.221825 11,652,420 1.65% 7.03% 1999 ............................. 1.30% 395,355 35.712129 14,118,969 1.45% 4.96% 1998 ............................. 1.30% 456,214 34.025630 15,522,969 1.30% 10.19% Fidelity(R) VIP - Growth Portfolio: Initial Class 2002 ............................. 1.30% 239,109 26.673304 6,377,827 0.25% -31.01% 2001 ............................. 1.30% 283,815 38.662344 10,972,953 0.08% -18.72% 2000 ............................. 1.30% 342,658 47.567395 16,299,348 0.12% -12.12% 1999 ............................. 1.30% 355,884 54.130524 19,264,187 0.15% 35.66% 1998 ............................. 1.30% 376,885 39.900577 15,037,929 0.41% 37.69% Fidelity(R) VIP - High Income Portfolio: Initial Class 2002 ............................. 1.30% 160,671 20.087809 3,227,528 9.29% 2.11% 2001 ............................. 1.30% 93,229 19.673202 1,834,113 13.67% -12.88% 2000 ............................. 1.30% 100,049 22.581448 2,259,251 7.66% -23.47% 1999 ............................. 1.30% 105,520 29.506936 3,113,572 9.63% 6.76% 1998 ............................. 1.30% 144,326 27.638937 3,989,017 7.35% -5.56% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2002 ............................. 1.30% 129,046 11.940760 1,540,907 0.83% -21.31% 2001 ............................. 1.30% 150,144 15.174561 2,278,369 5.37% -22.19% 2000 ............................. 1.30% 168,125 19.502680 3,278,888 1.56% -20.15% 1999 ............................. 1.30% 213,601 24.423718 5,216,931 1.25% 40.79% 1998 ............................. 1.30% 248,471 17.348011 4,310,478 1.80% 11.29% Fidelity(R) VIP II - Asset Manager: Growth Portfolio: Service Class 2002 ............................. 1.30% 165,830 24.046655 3,987,657 3.98% -9.91% 2001 ............................. 1.30% 187,390 26.691052 5,001,636 4.21% -5.34% 2000 ............................. 1.30% 201,334 28.195602 5,676,733 3.30% -5.16% 1999 ............................. 1.30% 211,956 29.730624 6,301,584 3.18% 9.66% 1998 ............................. 1.30% 253,412 27.112311 6,870,585 2.96% 13.57%
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2002 ............................. 1.30% 199,804 $18.262213 $3,648,863 0.85% -10.52% 2001 ............................. 1.30% 215,185 20.409441 4,391,806 0.78% -13.39% 2000 ............................. 1.30% 250,535 23.563410 5,903,459 0.36% -7.82% 1999 ............................. 1.30% 290,335 25.563198 7,421,891 0.43% 22.65% 1998 ............................. 1.30% 275,660 20.842351 5,745,402 0.53% 28.30% Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2002 ............................. 1.30% 15,005 7.383595 110,791 1.07% -22.86% 2001 ............................. 1.30% 17,924 9.571123 171,553 0.38% -15.53% 2000 ............................. 1.30% 19,392 11.331281 219,736 1.30% -18.13% 1999 ............................. 1.30% 21,868 13.841079 302,677 0.94% 2.93% 1998 ............................. 1.30% 64,568 13.447707 868,292 0.58% 23.01% Fidelity(R) VIP III - Value Strategies Portfolio: Service Class 2002 ............................. 1.30% 1,517 7.444367 11,293 0.00% -25.56% 5/1/02 Gartmore GVIT Emerging Markets Fund - Class I 2002 ............................. 1.30% 2,303 6.800904 15,662 0.17% -16.33% 2001 ............................. 1.30% 1,128 8.127810 9,168 0.52% -6.42% Gartmore GVIT Global Financial Services Fund - Class I 2002 ............................. 1.30% 3,861 8.588804 33,161 0.08% -14.11% 5/1/02 Gartmore GVIT Global Health Sciences Fund - Class I 2002 ............................. 1.30% 13,221 8.267793 109,308 0.00% -17.32% 5/1/02 Gartmore GVIT Global Technology and Communications Fund - Class I 2002 ............................. 1.30% 7,189 1.915215 13,768 0.59% -43.52% 2001 ............................. 1.30% 13,394 3.391119 45,421 0.00% -43.47% 2000 ............................. 1.30% 18,398 5.998698 110,364 0.00% -40.01% 10/2/00 Gartmore GVIT Global Utilities Fund - Class I 2002 ............................. 1.30% 2,573 8.608580 22,150 0.54% -13.91% 5/1/02 Gartmore GVIT Government Bond Fund - Class I 2002 ............................. 1.30% 222,251 23.773114 5,283,598 4.42% 9.55% 2001 ............................. 1.30% 253,883 21.700608 5,509,415 5.12% 5.86% 2000 ............................. 1.30% 188,357 20.498919 3,861,115 5.25% 11.09% 1999 ............................. 1.30% 240,383 18.452016 4,435,551 5.74% -3.61% 1998 ............................. 1.30% 274,184 19.142839 5,248,660 5.51% 7.50% Gartmore GVIT Growth Fund - Class I 2002 ............................. 1.30% 29,222 11.409842 333,418 0.00% -29.64% 2001 ............................. 1.30% 37,694 16.217110 611,288 0.00% -29.07% 2000 ............................. 1.30% 45,948 22.863519 1,050,533 0.18% -27.48% 1999 ............................. 1.30% 62,075 31.526314 1,956,996 0.66% 2.93% 1998 ............................. 1.30% 113,664 30.628674 3,481,378 0.78% 28.29% Gartmore GVIT ID Moderate Fund 2002 ............................. 1.30% 265 9.030143 2,393 1.72% -9.70% 1/25/02 Gartmore GVIT ID Moderately Conservative Fund 2002 ............................. 1.30% 99 9.526311 943 2.35% -4.74% 1/25/02
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Gartmore GVIT International Growth Fund - Class I 2002 ............................. 1.30% 3,701 $ 4.864470 $ 18,003 0.00% -25.09% Gartmore GVIT Money Market Fund - Class I 2002 ............................. 1.30% 594,197 14.901808 8,854,610 1.26% -0.10% 2001 ............................. 1.30% 788,057 14.917365 11,755,734 3.57% 2.25% 2000 ............................. 1.30% 857,846 14.589227 12,515,310 5.53% 4.66% 1999 ............................. 1.30% 1,082,615 13.940225 15,091,897 5.04% 3.49% 1998 ............................. 1.30% 814,530 13.470763 10,972,341 5.48% 3.90% Gartmore GVIT Nationwide(R) Leaders Fund - Class I 2002 ............................. 1.30% 178 8.379188 1,491 1.18% -16.21% 5/1/02 Gartmore GVIT Small Cap Growth Fund - Class I 2002 ............................. 1.30% 23,644 4.664552 110,289 0.00% -34.15% 2001 ............................. 1.30% 10,664 7.083730 75,541 0.00% -12.00% 2000 ............................. 1.30% 3,122 8.049546 25,131 0.00% -29.07% 5/1/00 Gartmore GVIT Small Cap Value Fund - Class I 2002 ............................. 1.30% 95,522 10.754320 1,027,274 0.01% -28.11% 2001 ............................. 1.30% 193,975 14.958425 2,901,560 0.03% 26.61% 2000 ............................. 1.30% 236,917 11.814503 2,799,057 0.00% 9.77% 1999 ............................. 1.30% 23,585 10.762831 253,841 0.00% 26.19% 1998 ............................. 1.30% 28,961 8.529271 247,016 0.00% -14.71% 5/1/98 Gartmore GVIT Small Company Fund - Class I 2002 ............................. 1.30% 38,599 18.345997 708,137 0.00% -18.40% 2001 ............................. 1.30% 42,033 22.482240 944,996 0.10% -7.92% 2000 ............................. 1.30% 74,796 24.415235 1,826,162 0.03% 7.50% 1999 ............................. 1.30% 66,890 22.712185 1,519,218 0.00% 42.16% 1998 ............................. 1.30% 68,318 15.976308 1,091,469 0.00% -0.30% Gartmore GVIT Total Return Fund - Class I 2002 ............................. 1.30% 72,057 24.840096 1,789,903 0.85% -18.42% 2001 ............................. 1.30% 91,363 30.449581 2,781,965 0.74% -12.97% 2000 ............................. 1.30% 103,521 34.985736 3,621,758 0.63% -3.38% 1999 ............................. 1.30% 115,322 36.208762 4,175,667 0.65% 5.56% 1998 ............................. 1.30% 136,311 34.300994 4,675,603 1.06% 16.55% Gartmore GVIT U.S. Growth Leaders Fund - Class I 2002 ............................. 1.30% 4,697 8.154993 38,304 0.00% -18.45% 5/1/02 Janus AS - Capital Appreciation Portfolio - Service Shares 2002 ............................. 1.30% 10,536 5.035896 53,058 0.30% -17.02% 2001 ............................. 1.30% 15,561 6.068452 94,431 0.91% -22.85% 2000 ............................. 1.30% 22,133 7.865419 174,085 1.33% -21.35% 5/1/00 Janus AS - Global Technology Portfolio - Service Shares 2002 ............................. 1.30% 22,402 2.424192 54,307 0.00% -41.70% 2001 ............................. 1.30% 44,468 4.157888 184,893 0.56% -38.13% 2000 ............................. 1.30% 52,739 6.720656 354,441 1.21% -32.79% 5/1/00 Janus AS - International Growth Portfolio - Service Shares 2002 ............................. 1.30% 59,542 4.366167 259,970 0.67% -26.72% 2001 ............................. 1.30% 59,476 5.958051 354,361 0.70% -24.43% 2000 ............................. 1.30% 72,749 7.883682 573,530 6.25% -21.16% 5/1/00
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- MAS GVIT (formerly Nationwide(R) SAT) Multi Sector Bond Fund - Class I 2002 ............................. 1.30% 10,843 $11.320967 $ 122,753 4.53% 5.82% 2001 ............................. 1.30% 269 10.698042 2,878 8.29% 2.84% 2000 ............................. 1.30% 1,928 10.403041 20,057 8.52% 4.03% 5/1/00 Neuberger Berman AMT - Growth Portfolio 2002 ............................. 1.30% 70,474 15.382754 1,084,084 0.00% -32.05% 2001 ............................. 1.30% 116,532 22.639891 2,638,272 0.00% -31.27% 2000 ............................. 1.30% 110,577 32.939123 3,642,309 0.00% -12.79% 1999 ............................. 1.30% 97,552 37.771042 3,684,641 0.00% 48.46% 1998 ............................. 1.30% 136,629 25.442656 3,476,205 0.00% 14.03% Neuberger Berman AMT - Guardian Portfolio 2002 ............................. 1.30% 6,891 7.420249 51,133 0.80% -27.40% 2001 ............................. 1.30% 7,490 10.220670 76,553 0.47% -2.79% 2000 ............................. 1.30% 4,316 10.513749 45,377 0.59% -0.17% 1999 ............................. 1.30% 2,945 10.531438 31,015 0.29% 13.45% 1998 ............................. 1.30% 4,760 9.282948 44,187 0.00% -7.17% 5/1/98 Neuberger Berman AMT - Limited Maturity Bond Portfolio 2002 ............................. 1.30% 82,238 18.030897 1,482,825 4.91% 3.98% 2001 ............................. 1.30% 64,208 17.341018 1,113,432 5.78% 7.37% 2000 ............................. 1.30% 55,938 16.150810 903,444 7.15% 5.41% 1999 ............................. 1.30% 58,827 15.321478 901,317 5.69% 0.17% 1998 ............................. 1.30% 76,004 15.295923 1,162,551 6.83% 3.04% Neuberger Berman AMT - Partners Portfolio 2002 ............................. 1.30% 42,685 17.402827 742,840 0.53% -25.12% 2001 ............................. 1.30% 58,929 23.242157 1,369,637 0.38% -4.09% 2000 ............................. 1.30% 56,278 24.233377 1,363,806 0.69% -0.59% 1999 ............................. 1.30% 69,118 24.377639 1,684,934 1.08% 5.98% 1998 ............................. 1.30% 176,971 23.001381 4,070,577 0.35% 2.86% Oppenheimer Aggressive Growth Fund/VA - Initial Class 2002 ............................. 1.30% 11,830 3.750690 44,371 0.65% -28.72% 2001 ............................. 1.30% 12,032 5.262277 63,316 0.87% -32.16% 2000 ............................. 1.30% 25,730 7.757136 199,591 0.00% -22.43% 5/1/00 Oppenheimer Bond Fund/VA - Initial Class 2002 ............................. 1.30% 66,289 22.020858 1,459,741 7.25% 7.67% 2001 ............................. 1.30% 71,479 20.452013 1,461,889 7.04% 6.39% 2000 ............................. 1.30% 57,658 19.224081 1,108,422 7.66% 4.73% 1999 ............................. 1.30% 70,351 18.355321 1,291,315 4.68% -2.79% 1998 ............................. 1.30% 84,868 18.882225 1,602,497 1.67% 5.42% Oppenheimer Capital Appreciation Fund/VA - Initial Class 2002 ............................. 1.30% 84,080 10.950071 920,682 0.64% -27.81% 2001 ............................. 1.30% 89,005 15.167382 1,349,973 0.64% -13.71% 2000 ............................. 1.30% 91,772 17.577949 1,613,164 0.12% -1.51% 1999 ............................. 1.30% 60,384 17.847892 1,077,727 0.17% 39.83% 1998 ............................. 1.30% 26,155 12.764150 333,846 0.28% 22.40%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Oppenheimer Global Securities Fund/VA - Initial Class 2002 ............................. 1.30% 77,714 $19.559687 $1,520,062 0.56% -23.14% 2001 ............................. 1.30% 89,126 25.449092 2,268,176 0.69% -13.18% 2000 ............................. 1.30% 103,662 29.312842 3,038,628 0.27% 3.74% 1999 ............................. 1.30% 99,036 28.256521 2,798,413 0.92% 56.44% 1998 ............................. 1.30% 88,848 18.062180 1,604,789 2.07% 12.63% Oppenheimer Main Street Growth & Income Fund/VA - Initial Class 2002 ............................. 1.30% 8,466 6.380282 54,015 0.65% -19.85% 2001 ............................. 1.30% 11,244 7.960162 89,504 0.41% -11.33% 2000 ............................. 1.30% 3,017 8.977032 27,084 0.00% -10.23% 5/1/00 Oppenheimer Multiple Strategies Fund/VA - Initial Class 2002 ............................. 1.30% 58,166 23.568558 1,370,889 3.60% -11.56% 2001 ............................. 1.30% 95,325 26.649037 2,540,319 3.96% 0.89% 2000 ............................. 1.30% 102,256 26.413991 2,700,989 4.57% 5.07% 1999 ............................. 1.30% 106,259 25.139330 2,671,280 3.30% 10.35% 1998 ............................. 1.30% 110,357 22.780548 2,513,993 0.88% 5.28% Strong GVIT Mid Cap Growth Fund - Class I 2002 ............................. 1.30% 36,181 3.455755 125,033 0.00% -37.83% 2001 ............................. 1.30% 3,579 5.558609 19,894 0.00% -31.22% 2000 ............................. 1.30% 9,148 8.081237 73,927 0.00% -19.19% 5/1/00 Strong Opportunity Fund II, Inc. 2002 ............................. 1.30% 78,959 28.143339 2,222,170 0.38% -27.77% 2001 ............................. 1.30% 99,955 38.960989 3,894,346 0.59% -4.95% 2000 ............................. 1.30% 101,232 40.898881 4,140,276 0.00% 5.23% 1999 ............................. 1.30% 102,073 38.955700 3,976,325 0.00% 33.17% 1998 ............................. 1.30% 111,969 29.253391 3,275,473 0.25% 12.08% Strong VIF - Strong Discovery Fund II 2002 ............................. 1.30% 26,664 17.911803 477,600 0.00% -13.15% 2001 ............................. 1.30% 35,961 20.624646 741,683 0.72% 2.73% 2000 ............................. 1.30% 29,577 20.076460 593,801 0.00% 3.05% 1999 ............................. 1.30% 32,996 19.481837 642,823 0.00% 3.73% 1998 ............................. 1.30% 58,970 18.780910 1,107,510 0.00% 5.87% Strong VIF - Strong International Stock Fund II 2002 ............................. 1.30% 28,207 5.494908 154,995 4.04% -27.49% 2001 ............................. 1.30% 28,858 7.578594 218,703 0.00% -23.15% 2000 ............................. 1.30% 77,557 9.861771 764,849 0.00% -40.30% 1999 ............................. 1.30% 142,490 16.519505 2,353,864 0.17% 84.79% 1998 ............................. 1.30% 35,834 8.939643 320,343 1.14% -6.01% Turner GVIT Growth Focus Fund - Class I 2002 ............................. 1.30% 9,832 2.146502 21,104 0.00% -43.60% 2001 ............................. 1.30% 2,633 3.805692 10,020 0.00% -39.82% Van Eck WIT - Worldwide Bond Fund 2002 ............................. 1.30% 48,544 16.600653 805,862 0.00% 20.09% 2001 ............................. 1.30% 33,122 13.823940 457,877 4.39% -6.33% 2000 ............................. 1.30% 31,281 14.757769 461,638 4.90% 0.56% 1999 ............................. 1.30% 34,273 14.675886 502,987 4.31% -9.01% 1998 ............................. 1.30% 56,294 16.129801 908,011 0.79% 11.30%
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Van Eck WIT - Worldwide Emerging Markets Fund 2002 ............................. 1.30% 32,199 $ 6.024691 $ 193,989 0.20% -4.16% 2001 ............................. 1.30% 34,168 6.285993 214,780 0.00% -3.09% 2000 ............................. 1.30% 37,709 6.486254 244,590 0.00% -42.61% 1999 ............................. 1.30% 123,914 11.302972 1,400,596 0.00% 97.70% 1998 ............................. 1.30% 25,018 5.717162 143,032 0.95% -34.98% Van Eck WIT - Worldwide Hard Assets Fund 2002 ............................. 1.30% 42,486 12.211274 518,808 0.68% -4.09% 2001 ............................. 1.30% 38,241 12.731937 486,882 1.21% -11.61% 2000 ............................. 1.30% 57,160 14.404038 823,335 1.12% 9.97% 1999 ............................. 1.30% 71,735 13.098076 939,590 1.47% 19.44% 1998 ............................. 1.30% 128,220 10.966233 1,406,090 0.69% -31.86% Van Kampen UIF - Emerging Markets Debt Portfolio 2002 ............................. 1.30% 5,151 11.410385 58,775 6.91% 7.81% 2001 ............................. 1.30% 7,324 10.583651 77,515 9.40% 8.67% 2000 ............................. 1.30% 9,551 9.739230 93,019 12.32% 9.96% 1999 ............................. 1.30% 6,540 8.857388 57,927 16.19% 27.71% 1998 ............................. 1.30% 7,315 6.935753 50,735 12.80% -29.31% Van Kampen UIF - U.S. Real Estate Portfolio 2002 ............................. 1.30% 51,170 19.996209 1,023,206 3.29% -2.07% 2001 ............................. 1.30% 53,253 20.418602 1,087,352 3.98% 8.41% 2000 ............................. 1.30% 50,123 18.833757 944,004 8.22% 26.41% 1999 ............................. 1.30% 39,678 14.898574 591,146 6.87% -4.62% 1998 ............................. 1.30% 67,042 15.620311 1,047,217 0.17% -12.76% -------------- Contract Owners' Equity Total By Year 2002 ................................................................. $ 727,023,336 ============== 2001 ................................................................. $ 933,404,977 ============== 2000 ................................................................. $1,071,884,297 ============== 1999 ................................................................. $1,144,615,392 ============== 1998 ................................................................. $ 894,156,479 ==============
* This represents the annualized contract expense rate 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 dividends for the period indicated, excluding distributions of capital gains, received by the subaccount from the underlying mutual fund, net of management fees assessed by the fund manager, divided by average net assets. The ratios exclude those expenses, such as mortality and expense charges, that result in direct reductions in the unit values. The recognition of investment income by the subaccount is affected by the timing of the declaration of dividends by the underlying fund in which the subaccounts invest. *** This represents the 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 in the total return presented. Investment options with a date notation indicate the effective date of that investment option in the Account. The total return is calculated for the period indicated or from the effective date through the end of the period. ================================================================================ INDEPENDENT AUDITORS' REPORT The Board of Directors Nationwide Life Insurance Company: We have audited the consolidated financial statements of Nationwide Life Insurance Company and subsidiaries (collectively the "Company") as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedules as listed in the accompanying index. These consolidated financial statements and financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedules 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, 2002 and 2001, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the related financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. As discussed in note 2 to the consolidated financial statements, the Company changed its methods of accounting for derivative instruments and hedging activities, and for purchased or retained interests in securitized financial assets in 2001. KPMG LLP Columbus, Ohio January 30, 2003 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, ------------------------------------ 2002 2001 ============================================================================================================================ ASSETS: Investments: Securities available-for-sale, at fair value: Fixed maturity securities (cost $23,134.3 in 2002; $17,961.6 in 2001) $ 24,169.0 $ 18,370.8 Equity securities (cost $85.1 in 2002; $83.0 in 2001) 84.3 94.0 Mortgage loans on real estate, net 7,923.2 7,113.1 Real estate, net 116.6 172.0 Policy loans 629.2 591.1 Other long-term investments 137.5 125.0 Short-term investments, including amounts managed by a related party 1,210.3 1,011.3 - ---------------------------------------------------------------------------------------------------------------------------- 34,270.1 27,477.3 - ---------------------------------------------------------------------------------------------------------------------------- Cash 0.9 22.6 Accrued investment income 328.7 306.7 Deferred policy acquisition costs 2,971.1 3,189.0 Other assets 1,243.6 646.0 Assets held in separate accounts 47,208.2 59,513.0 - ---------------------------------------------------------------------------------------------------------------------------- $ 86,022.6 $ 91,154.6 ============================================================================================================================ LIABILITIES AND SHAREHOLDER'S EQUITY: Future policy benefits and claims $ 31,679.8 $ 25,216.0 Short-term debt - 100.0 Long-term debt, payable to Nationwide Financial Services, Inc. 600.0 300.0 Other liabilities 2,985.8 2,307.9 Liabilities related to separate accounts 47,208.2 59,513.0 - ---------------------------------------------------------------------------------------------------------------------------- 82,473.8 87,436.9 - ---------------------------------------------------------------------------------------------------------------------------- Commitments and contingencies (notes 11, 16 and 17) Shareholder's equity: Common stock, $1 par value. Authorized 5.0 shares; 3.8 shares issued and outstanding 3.8 3.8 Additional paid-in capital 171.1 646.1 Retained earnings 2,979.6 2,863.1 Accumulated other comprehensive income 394.3 204.7 - ---------------------------------------------------------------------------------------------------------------------------- 3,548.8 3,717.7 - ---------------------------------------------------------------------------------------------------------------------------- $ 86,022.6 $ 91,154.6 ============================================================================================================================
See accompanying notes to consolidated financial statements, including note 14 which describes related party transactions. 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, --------------------------------------------- 2002 2001 2000 =========================================================================================================================== REVENUES: Policy charges $ 973.8 $ 1,017.3 $ 1,091.4 Life insurance premiums 259.9 251.1 240.0 Net investment income 1,838.5 1,724.7 1,653.9 Net realized (losses) gains on investments, hedging instruments and hedged items: Unrelated parties (107.6) (62.7) (19.4) Related parties 23.2 44.4 - Other 8.8 8.2 11.1 - --------------------------------------------------------------------------------------------------------------------------- 2,996.6 2,983.0 2,977.0 - --------------------------------------------------------------------------------------------------------------------------- BENEFITS AND EXPENSES: Interest credited to policyholder account values 1,241.2 1,238.7 1,182.4 Other benefits and claims 326.0 280.3 241.6 Policyholder dividends on participating policies 45.2 41.7 44.5 Amortization of deferred policy acquisition costs 670.1 347.9 352.1 Interest expense on debt, primarily with a related party 36.0 6.2 1.3 Other operating expenses 508.6 439.3 472.0 - --------------------------------------------------------------------------------------------------------------------------- 2,827.1 2,354.1 2,293.9 - --------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before federal income taxes and cumulative effect of adoption of accounting principles 169.5 628.9 683.1 Federal income tax expense 8.7 161.2 207.3 - --------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before cumulative effect of adoption of accounting principles 160.8 467.7 475.8 Income (loss) from discontinued operations, net of tax 0.7 1.2 (0.5) Cumulative effect of adoption of accounting principles, net of tax - (7.1) - - --------------------------------------------------------------------------------------------------------------------------- Net income $ 161.5 $ 461.8 $ 475.3 ===========================================================================================================================
See accompanying notes to consolidated financial statements, including note 14 which describes related party transactions. 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, 2002, 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 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, net of tax - - - 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) --------------- - ----------------------------------------------------------------------------------------------------------- Balance as of December 31, 2000 $ 3.8 $ 646.1 $ 2,436.3 $ 116.7 $ 3,202.9 ========================================================================================================================= Comprehensive income: Net income - - 461.8 - 461.8 Net unrealized gains on securities available-for-sale arising during the year, net of tax - - - 98.2 98.2 Cumulative effect of adoption of accounting principles, net of tax - - - (1.4) (1.4) Accumulated net losses on cash flow hedges, net of tax - - - (8.8) (8.8) --------------- Total comprehensive income 549.8 --------------- Dividends to shareholder - - (35.0) - (35.0) - ------------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2001 $ 3.8 $ 646.1 $ 2,863.1 $ 204.7 $ 3,717.7 ========================================================================================================================= Comprehensive income: Net income - - 161.5 - 161.5 Net unrealized gains on securities available-for-sale arising during the year, net of tax - - - 178.6 178.6 Accumulated net gains on cash flow hedges, net of tax - - - 11.0 11.0 --------------- Total comprehensive income 351.1 --------------- Returns of capital to shareholder - (475.0) - - (475.0) Dividends to shareholder - - (45.0) - (45.0) - ------------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2002 $ 3.8 $ 171.1 $ 2,979.6 $ 394.3 $ 3,548.8 =========================================================================================================================
See accompanying notes to consolidated financial statements, including note 14 which describes related party transactions. 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, ---------------------------------------------- 2002 2001 2000 =================================================================================================================================== Cash flows from operating activities: Net income $ 161.5 $ 461.8 $ 475.3 Adjustments to reconcile net income to net cash provided by operating activities: (Income) loss from discontinued operations (0.7) (1.2) 0.5 Interest credited to policyholder account values 1,241.2 1,238.7 1,182.4 Capitalization of deferred policy acquisition costs (648.2) (743.0) (778.9) Amortization of deferred policy acquisition costs 670.1 347.9 352.1 Amortization and depreciation (0.7) (31.5) (12.7) Realized losses (gains) on investments, hedging instruments and hedged items: Unrelated parties 107.6 62.7 19.4 Related parties (23.2) (44.4) - Cumulative effect of adoption of accounting principles - 10.9 - Increase in accrued investment income (22.0) (55.3) (12.8) (Increase) decrease in other assets (606.1) (271.8) (95.7) Increase (decrease) in policy liabilities 36.2 33.0 (0.3) Increase in other liabilities 426.9 302.8 234.2 Other, net 33.0 8.3 22.3 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by continuing operations 1,375.6 1,318.9 1,385.8 Net cash provided by (used in) discontinued operations 0.7 1.7 (1.7) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,376.3 1,320.6 1,384.1 - ----------------------------------------------------------------------------------------------------------------------------------- Cash flows from investing activities: Proceeds from maturity of securities available-for-sale 3,887.7 3,933.9 2,988.7 Proceeds from sale of securities available-for-sale 1,534.9 497.2 582.1 Proceeds from repayments of mortgage loans on real estate 1,009.0 1,204.4 911.7 Proceeds from sale of real estate 56.8 29.1 18.7 Proceeds from sale of limited partnership to related party 54.5 158.9 - Proceeds from repayments of policy loans and sale of other invested assets 58.3 68.9 79.3 Cost of securities available-for-sale acquired (9,874.5) (7,123.6) (3,475.5) Cost of mortgage loans on real estate acquired (1,810.2) (2,123.1) (1,318.0) Cost of real estate acquired (2.0) (0.4) (7.1) Short-term investments, net (193.1) (568.7) (26.5) Disposal of subsidiary, net of cash (20.0) - - Collateral received - securities lending, net 158.9 791.6 - Other, net (303.8) (192.2) (182.3) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash used in continuing operations (5,443.5) (3,324.0) (428.9) Net cash provided by discontinued operations - 0.6 19.8 - ----------------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (5,443.5) (3,323.4) (409.1) - ----------------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Net change in short-term debt (100.0) (18.7) 118.7 Net proceeds from issuance of long-term debt to Nationwide Financial Services, Inc. 300.0 300.0 - Capital returned to shareholder (475.0) - (120.0) Cash dividends paid to shareholder (35.0) (35.0) (100.0) Increase in investment and universal life insurance product account values 6,278.9 5,976.7 4,517.0 Decrease in investment and universal life insurance product account values (1,923.4) (4,216.0) (5,377.1) - ----------------------------------------------------------------------------------------------------------------------------------- Net cash provided by (used in) financing activities 4,045.5 2,007.0 (961.4) - ----------------------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash (21.7) 4.2 13.6 Cash, beginning of year 22.6 18.4 4.8 - ----------------------------------------------------------------------------------------------------------------------------------- Cash, end of year $ 0.9 $ 22.6 $ 18.4 ===================================================================================================================================
See accompanying notes to consolidated financial statements, including note 14 which describes related party transactions. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements December 31, 2002, 2001 and 2000 (1) Organization and Description of Business Nationwide Life Insurance Company (NLIC, or collectively with its subsidiaries, the Company) is a leading provider of life insurance and retirement savings products in the United States of America (U.S.) 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 sells its products through a diverse network of distribution channels, including independent broker/dealers, wirehouse and regional firms, financial institutions, pension plan administrators, life insurance specialists, Nationwide Retirement Solutions, Nationwide Provident agents and Nationwide agents. Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity Insurance Company (NLAIC) 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 U.S. (GAAP), which differ from statutory accounting practices. The statutory financial statements of NLIC and NLAIC are presented on the basis of accounting practices prescribed or permitted by the Ohio Department of Insurance (the Department). The State of Ohio has adopted the National Association of Insurance Commissioners (NAIC) statutory accounting practices (NAIC SAP) as the basis of its statutory accounting practices. NLIC and NLAIC have no statutory accounting practices that differ from NAIC SAP. See also note 13. 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 (DAC) for investment products and universal life insurance products, valuation allowances for mortgage loans on real estate, impairment losses on other investments and federal income taxes. Although some variability is inherent in these estimates, management believes the amounts provided are appropriate. (a) Consolidation Policy The consolidated financial statements include the accounts of NLIC and companies in which NLIC directly or indirectly has a controlling interest. All significant intercompany balances and transactions have been eliminated. 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, Investment Income 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 DAC, future policy benefits and claims, and deferred federal income tax, reported as a separate component of accumulated other comprehensive income (AOCI) in shareholders' equity. The adjustment to DAC represents the change in amortization of DAC that would have been required as a charge or credit to operations had such unrealized amounts been realized and allocated to the product lines. The adjustment to future policy benefits and claims represents the increase in policy reserves from using a lower discount rate that would have been required if such unrealized gains been realized and the proceeds reinvested at lower market interest rates. Management regularly reviews its fixed maturity and equity securities portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. A number of criteria are considered during this process including, but not limited to, the current fair value as compared to amortized cost or cost, as appropriate, of the security, the length of time the security's fair value has been below amortized cost/cost, and by how much, and specific credit issues related to the issuer, and current economic conditions. Also, the Company estimates the cash flows over the life of certain purchased beneficial interests in securitized financial assets. 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 is recognized and the purchased beneficial interest is written down to fair value. Other-than-temporary impairment losses result in a permanent reduction of the cost basis of the underlying investment For mortgage-backed securities, the Company recognizes income using a constant effective yield method based on prepayment assumptions and the estimated economic life of the securities. When estimated prepayments differ significantly from anticipated prepayments, the effective yield is recalculated to reflect actual payments to date and anticipated future payments; any resulting adjustment is included in net investment income. All other investment income is recorded on the accrual basis. 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. Mortgage loans on real estate are considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. When the Company determines that a loan is impaired, a provision for loss is established equal to the difference between the carrying value and the estimated value of the mortgage loan. Estimated value is based on the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral, if the loan is collateral dependent. Loans in foreclosure and loans considered impaired are placed on non-accrual status. Interest received on non-accrual status mortgage loans on real estate is included in net investment income in the period received. The valuation allowance account for mortgage loans on real estate is maintained at a level believed adequate by the Company to absorb estimated probable credit losses. The Company's periodic evaluation of the adequacy of the allowance for losses is based on past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower's ability to repay, the estimated value of the underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. Real estate is carried at cost less accumulated depreciation. Real estate designated as held for disposal is carried at the lower of the carrying value at the time of such designation or fair value less cost to sell. Other long-term investments are carried on the equity method of accounting. 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Realized gains and losses on the sale of investments are determined on the basis of specific security identification. Changes in valuation allowances and impairment losses for other-than-temporary declines in fair values are included in realized gains and losses on investments, hedging instruments and hedged items. (c) Derivative Instruments Derivatives are carried at fair value. On the date the derivative contract is entered into, the Company designates the derivative as either a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge), a foreign currency fair value or cash flow hedge (foreign currency hedge) or a non-hedge transaction. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for entering into various hedge transactions. This process includes linking all derivatives that are designated as fair value, cash flow or foreign currency hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivatives that are used for hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items. When it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly effective hedge, the Company discontinues hedge accounting prospectively. The Company enters into interest rate swaps, cross-currency swaps or Eurodollar Futures to hedge the fair value of existing fixed rate assets and liabilities. In addition, the Company uses short treasury future positions to hedge the fair value of bond and mortgage loan commitments. Typically, the Company is hedging the risk of changes in fair value attributable to changes in benchmark interest rates. Derivative instruments classified as fair value hedges are carried at fair value, with changes in fair value recorded in realized gains and losses on investments, hedging instruments and hedged items. Changes in the fair value of the hedged item, attributable to the risk being hedged, are also recorded in realized gains and losses on investments, hedging instruments and hedged items. The adjustment of the carrying amount of hedged assets using Eurodollar Futures and firm commitments using Treasury Futures are accounted for in the same manner as other components of the carrying amount of that asset. The adjustment of the carrying amount is amortized to investment income over the life of the asset. The Company may enter into "receive fixed/pay variable" interest rate swaps to hedge existing floating rate assets or to hedge cash flows from the anticipated purchase of investments. These derivative instruments are classified as cash flow hedges and are carried at fair value, with the offset recorded in AOCI to the extent the hedging relationship is effective. The ineffective portion of the hedging relationship is recorded in realized gains and losses on investments, hedging instruments and hedged items. Gains and losses on cash flow derivative instruments are reclassified out of AOCI and recognized in earnings over the same period(s) that the hedged item affects earnings. Amounts receivable or payable under interest rate and foreign currency swaps are recognized as an adjustment to net investment income or interest credited to policyholder account values consistent with the nature of the hedged item, except for interest rate swaps hedging the anticipated sale of investments where amounts receivable or payable under the swaps are recorded as realized gains and losses on investments, hedging instruments and hedged items, and except for interest rate swaps hedging the anticipated purchase of investments where amounts receivable or payable under the swaps are recorded in AOCI to the extent the hedging relationship is effective. From time to time, the Company may enter into a derivative transaction that will not qualify for hedge accounting. These include basis swaps (receive one variable rate, pay another variable rate) to hedge variable rate assets or foreign-denominated liabilities. These instruments are carried at fair value, with changes in fair value recorded in 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 Consolidated Financial Statements, Continued The Company discontinues hedge accounting prospectively when it is determined that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative expires, or is sold, terminated or exercised, the derivative is dedesignated as a hedging instrument, because it is unlikely that a forecasted transaction will occur, a hedged firm commitment no longer meets the definition of a firm commitment, or management determines that designation of the derivative as a hedging instrument is no longer appropriate. When hedge accounting is discontinued because it is determined that the derivative no longer qualifies as an effective fair value hedge, the Company continues to carry the derivative on the consolidated balance sheet at its fair value and no longer adjusts the hedged item for changes in fair value. The adjustment of the carrying amount of the hedged item is accounted for in the same manner as other components of the carrying amount of that item. When hedge accounting is discontinued because the hedged item no longer meets the definition of a firm commitment, the Company continues to carry the derivative on the consolidated balance sheet at its fair value, removes any asset or liability that was recorded pursuant to recognition of the firm commitment from the consolidated balance sheet and recognizes any gain or loss in net realized gains and losses on investments, hedging instruments and hedged items. When hedge accounting is discontinued because it is probable that a forecasted transaction will not occur, the Company continues to carry the derivative on the consolidated balance sheet at fair value and gains and losses that were accumulated in AOCI are recognized immediately in realized gains and losses on investments, hedging instruments and hedged items. In all other situations in which hedge accounting is discontinued, the Company continues to carry the derivative at its fair value on the consolidated balance sheet, and recognizes any changes in fair value in net realized gains and losses on investments, hedging instruments and hedged items. Prior to the January 1, 2001 adoption of SFAS 133, defined in note 2(k), provided they met specific criteria, interest rate and foreign currency swaps and futures were considered hedges and accounted for under the accrual and deferral method, respectively. Amounts receivable or payable under interest rate and foreign currency swaps were recognized as an adjustment to net investment income or interest credited to policyholder account values consistent with the nature of the hedged item. Changes in the fair value of interest rate swaps were not recognized on the consolidated balance sheets, except for interest rate swaps designated as hedges of fixed maturity securities available-for-sale, for which changes in fair values were reported in AOCI. Gains and losses on foreign currency swaps were 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. (d) 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. The timing of revenue recognition as it relates to fees assessed on investment contracts and universal life contracts is determined based on the nature of such fees. Asset fees, cost of insurance and policy administration charges are assessed on a daily or monthly basis and recognized as revenue when assessed and earned. Certain amounts assessed that represent compensation for services to be provided in future periods are reported as unearned revenue and recognized in income over the periods benefited. Surrender charges are recognized upon surrender of a contract in accordance with contractual terms. Policy benefits and claims that are charged to expense include interest credited to policy account values and benefits and claims incurred in the period in excess of related policy account values. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued 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. (e) Deferred Policy Acquisition Costs The costs of acquiring business, principally commissions, certain expenses of the policy issue and underwriting department and certain variable sales expenses that relate to and vary with the production of new and renewal business have been deferred. DAC is subject to recoverability testing at the time of policy issuance and loss recognition testing at the end of each reporting period. For investment products (principally individual and group annuities) and universal life insurance products, DAC is 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, less policy benefits and policy maintenance expenses. The DAC asset related to investment products and universal life insurance products is adjusted to reflect the impact of unrealized gains and losses on fixed maturity securities available-for-sale as described in note 2(b). The most significant assumptions that are involved in the estimation of future gross profits include future net separate account performance, surrender/lapse rates, interest margins and mortality. The Company's long-term assumption for net separate account performance is 8 percent. If actual net separate account performance varies from the 8 percent assumption, the Company assumes different performance levels over the next three years, such that the mean return equals the long-term assumption. This process is referred to as a reversion to the mean. The assumed net separate account return assumptions used in the DAC models are intended to reflect what is anticipated. However, based on historical returns of the S&P 500 Index, the Company's policy regarding the reversion to the mean process does not permit such returns to be below zero percent or in excess of 15 percent during the three-year reversion period. Changes in assumptions can have a significant impact on the calculation of DAC on investment products and universal life insurance products and their related amortization patterns. In the event actual experience differs from assumptions or assumptions are revised, the Company is required to record an increase or decrease in DAC amortization expense (DAC unlocking), which could be significant. In general, increases in the estimated general and separate account returns result in increased expected future profitability and may lower the rate of DAC amortization, while increases in lapse/surrender and mortality assumptions reduce the expected future profitability of the underlying business and may increase the rate of DAC amortization. Due to the magnitude of the DAC asset related to the individual variable annuity business, the sensitivity of the calculation to minor changes in the underlying assumptions and the related volatility that could result in the reported DAC balance without meaningful improvement in its reasonableness, the Company evaluates the appropriateness of the individual variable annuity DAC balance within pre-set parameters. Should the recorded balance of individual variable annuity DAC fall outside of these parameters for a prescribed period of time, or should the recorded balance fall outside of these parameters and the Company determines it is not reasonably possible to get back within this period of time, assumptions are required to be unlocked and the DAC is recalculated using revised best estimate assumptions. Otherwise, DAC on individual variable annuity business is not unlocked to reflect updated assumptions. In the event DAC assumptions are unlocked and revised, the Company will continue to use the reversion to the mean process. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued For other investment products and universal life insurance products, DAC is unlocked each quarter to reflect revised best estimate assumptions, including the use of a reversion to the mean methodology over the next three years as it relates to net separate account performance. Any resulting DAC unlocking adjustments are reflected currently as a charge or credit to DAC amortization expense. For traditional life insurance products, DAC is 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 is estimated using the same assumptions as those used for computing liabilities for future policy benefits at issuance. Under existing accounting guidance, the concept of DAC unlocking does not apply to traditional life insurance products, although evaluations of DAC for recoverability at the time of policy issuance and loss recognition testing at each reporting period are required. (f) Separate Accounts Separate account assets and liabilities represent contractholders' funds which have been segregated into accounts with specific investment objectives. Separate account assets are recorded at fair value. The investment income and gains or losses of these accounts accrue directly to the contractholders. For certain contracts offered through separate accounts, the Company guarantees the contractholder a minimum return. 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. Such fees are assessed on a daily or monthly basis and recognized as revenue when assessed and earned. (g) Future Policy Benefits The liability for future policy benefits for investment products in the accumulation phase, universal life insurance and variable universal life insurance policies is the policy account balance, which represents participants' net premiums and deposits plus investment performance and interest credited less applicable contract charges. The liability for future policy benefits for traditional life insurance policies has 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. The liability for future policy benefits for payout annuities has been calculated using the present value of future benefits and maintenance costs discounted using interest rates varying from 3.0% to 13.0%. Also, as of December 31, 2002, the calculated reserve was adjusted to reflect the incremental reserve that would be required if unrealized gains and losses had been realized and therefore resulted in the use of a lower discount rate, as discussed in note 2(b). (h) Participating Business Participating business represented approximately 15% in 2002 (17% in 2001 and 21% in 2000) of the Company's life insurance in-force, 59% of the number of life insurance policies in-force in 2002 (63% in 2001 and 66% in 2000), and 9% of life insurance statutory premiums in 2002 (9% in 2001 and 8% in 2000). The provision for policyholder dividends was based on then current dividend scales and has been included in Future policy benefits and claims in the accompanying consolidated balance sheets. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (i) Federal Income Tax Through September 30, 2002, the Company filed a consolidated federal income tax return with Nationwide Mutual Insurance Company (NMIC), the ultimate majority shareholder of NFS. The members of the NMIC consolidated federal income tax return group participated in a tax sharing arrangement, which provided, in effect, for each member to bear essentially the same federal income tax liability as if separate tax returns were filed. As a result of NFS' acquisition of Nationwide Life Insurance Company of America (NLICA) and subsidiaries on October 1, 2002, under Internal Revenue Code regulations, NFS and its subsidiaries cannot file a life/non-life consolidated federal income tax return until five full years following NFS' departure from the NMIC consolidated federal income tax return group. Therefore, NFS and its direct non-life insurance company subsidiaries will file a consolidated federal income tax return; NLIC and NLAIC will file a consolidated federal income tax return; the direct non-life insurance companies under NLIC will file separate federal income tax returns; NLICA and its direct life insurance company subsidiaries will file a consolidated federal income tax return; and the direct non-life insurance companies under NLICA will file a consolidated federal income tax return, until 2008, when NFS expects to be able to file a single consolidated federal income tax return with all of its subsidiaries. The Company provides for federal income taxes based on amounts the Company believes it will ultimately owe. Inherent in the provision for federal income taxes are estimates regarding the deductibility of certain expenses and the realization of certain tax credits. In the event the ultimate deductibility of certain expenses or the realization of certain tax credits differ from estimates, the Company may be required to significantly change the provision for federal income taxes recorded in the consolidated financial statements. 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. (j) 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (k) Recently Issued Accounting Pronouncements In January 2003, the Financial Accounting Standards Board (FASB) issued Interpretation No. 46, Consolidation of Variable Interest Entities - an interpretation of ARB No. 51 (FIN 46). Accounting Research Bulletin No. 51, Consolidated Financial Statements (ARB 51) states that consolidation is usually necessary when a company has a "controlling financial interest" in another company, a condition most commonly achieved via ownership of a majority voting interest. FIN 46 clarifies the application of ARB 51, to certain "variable interest entities" (VIE) where (i) the equity investors are not empowered to make sufficient decisions about the entity's operations, or do not receive expected returns or absorb expected losses commensurate with their equity ownership; or (ii) do not have sufficient equity at risk for the entity to finance its activities without additional subordinated financial support from other parties. VIEs are consolidated by their primary beneficiary, which is a party having a majority of the entity's expected losses, expected residual returns, or both. A company holding a significant variable interest in a VIE, but not deemed the primary beneficiary is subject to certain disclosure requirements specified by FIN 46. FIN 46 applies immediately to entities formed after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. It applies in the interim period beginning after June 15, 2003 to VIEs for which an enterprise holds a variable interest that it acquired prior to February 1, 2003 with earlier adoption permitted. FIN 46 may be applied on a prospective basis with a cumulative-effect adjustment made as of the date of initial application or by restating previously issued financial statements for one or more years with a cumulative-effect adjustment as of the beginning of the first year restated. The Company is evaluating the potential impact of adopting FIN 46 on the results of operations and financial position and currently expects to adopt FIN 46 on July 1, 2003. See note 19 for transitional disclosures pertaining to VIE relationships in which the Company has a significant variable interest. In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees - an interpretation of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34 (FIN 45). FIN 45 requires a guarantor to provide more detailed interim and annual financial statement disclosures about obligations under certain guarantees it has issued. It also requires a guarantor to recognize, at the inception of new guarantees issued or modified after December 31, 2002, a liability for the fair value of the obligation undertaken in issuing the guarantee. Although superceded by FIN 45, the guidance provided in FASB Interpretation No. 34, Disclosure of Indirect Guarantees of Indebtedness of Others has been incorporated into FIN 45 without change. The adoption of the transitional components of FIN 45 by the Company on December 15, 2002 resulted in the inclusion of transition disclosures in note 17. The adoption of the remaining components of FIN 45 on January 1, 2003 is not expected to have a material impact on the financial position or results of operations of the Company. In June 2002, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 146, Accounting for Costs Associated with Exit or Disposal Activities (SFAS 146), which the Company adopted January 1, 2003. Adoption of SFAS 146 is not expected to have any impact on the financial position or results of operations of the Company. In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections (SFAS 145), which the Company adopted on October 1, 2002. The adoption of SFAS 145 did not have any impact on the financial position or results of operations of the Company. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued In October 2001, the FASB issued SFAS 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 (APB 30). SFAS 144 was adopted by the Company on January 1, 2002 and carries forward many of the provisions of SFAS 121 and APB 30 for recognition and measurement of the impairment of long-lived assets to be held and used, and measurement of long-lived assets to be disposed of by sale. 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. The adoption of SFAS 144 did not have a material impact on the results of operations or financial position of the Company. In July 2001, the FASB issued SFAS No. 142, Goodwill and Other Intangible Assets (SFAS 142). 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 (APB 17) and carries forward provisions in APB 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 Company adopted SFAS 142 on January 1, 2002, at which time, the Company had no unamortized goodwill and therefore, the adoption of SFAS 142 did not have any impact on the results of operations or financial position of the Company. In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133, as amended by SFAS No. 137, Accounting for Derivative Instruments and Hedging Activities - Deferral of the Effective Date of FASB Statement No. 133 (SFAS 137), and SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities (SFAS 138), was adopted by the Company effective January 1, 2001. All references hereafter to SFAS 133 include the amendments outlined in SFAS 137 and SFAS 138. Upon adoption, the provisions of SFAS 133 were applied prospectively. 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. 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 AOCI as of 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. The adoption of SFAS 133 may 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 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 AOCI. (l) Discontinued Operations As described more fully in note 14, NLIC paid a dividend to NFS in the form of all of the shares of common stock of Nationwide Securities, Inc. (NSI), a wholly owned broker/dealer subsidiary engaged in the asset management business. The accompanying consolidated financial statements and related notes reflect this business as discontinued operations. (m) Reclassification Certain items in the 2001 and 2000 consolidated financial statements and related footnotes have been reclassified to conform to the 2002 presentation. 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, 2002 and 2001 were:
Gross Gross Amortized unrealized unrealized Estimated (in millions) cost gains losses fair value ================================================================================================================== December 31, 2002: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ $ 64.4 $ 0.3 $ 774.3 838.4 Obligations of states and political subdivisions 20.8 1.1 - 21.9 Debt securities issued by foreign governments 39.3 2.7 - 42.0 Corporate securities 14,143.5 934.5 116.6 14,961.4 Mortgage-backed securities - U.S. Government 3,808.9 157.3 154.8 3,811.4 backed Asset-backed securities 4,347.5 146.5 0.1 4,493.9 ------------------------------------------------------------------------------------------------------------------ Total fixed maturity securities 23,134.3 1,306.5 271.8 24,169.0 Equity securities 85.1 7.1 7.9 84.3 ------------------------------------------------------------------------------------------------------------------ Total $ 23,219.4 $ 1,313.6 $ 279.7 $ 24,253.3 ================================================================================================================== December 31, 2001: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ $ 23.1 $ 0.5 $ 263.2 285.8 Obligations of states and political subdivisions 7.6 0.3 - 7.9 Debt securities issued by foreign governments 41.8 2.6 - 44.4 Corporate securities 11,769.8 470.6 176.5 12,063.9 Mortgage-backed securities - U.S. Government backed 2,012.3 67.8 3.7 2,076.4 Asset-backed securities 3,866.9 76.7 51.2 3,892.4 ------------------------------------------------------------------------------------------------------------------ Total fixed maturity securities 17,961.6 641.1 231.9 18,370.8 Equity securities 83.0 11.0 - 94.0 ------------------------------------------------------------------------------------------------------------------ Total $ 18,044.6 $ 652.1 $ 231.9 $ 18,464.8 ==================================================================================================================
As of December 31, 2002, the Company had unrealized losses on fixed maturity securities available-for-sale of $271.8 million, including $7.3 million related to securities that had a fair value that was less than 80% of amortized cost as of December 31, 2002 and 2001. As part of the Company's normal assessment of other-than-temporary impairments of investments, as described in note 2(b), each of these securities were evaluated and no further impairments were deemed necessary as of December 31, 2002. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The amortized cost and estimated fair value of fixed maturity securities available-for-sale as of December 31, 2002, 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.
Amortized Estimated (in millions) cost fair value ================================================================================================================== Fixed maturity securities available for sale: Due in one year or less $ 1,100.2 $ 965.0 Due after one year through five years 6,769.6 7,155.4 Due after five years through ten years 5,107.7 5,553.1 Due after ten years 2,000.4 2,190.2 ------------------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------------ Subtotal 14,977.9 15,863.7 Mortgage-backed securities - U.S. Government backed 3,808.9 3,811.4 Asset-backed securities 4,347.5 4,493.9 ------------------------------------------------------------------------------------------------------------------ Total $ 23,134.3 $ 24,169.0 ==================================================================================================================
The components of unrealized gains on securities available-for-sale, net, were as follows as of December 31:
(in millions) 2002 2001 ================================================================================================================== Unrealized gains, before adjustments and taxes $ 1,033.9 $ 420.2 Adjustment to deferred policy acquisition costs (300.6) (94.9) Adjustment to future policy benefits and claims (133.2) - Deferred federal income tax (210.0) (113.9) ------------------------------------------------------------------------------------------------------------------ Net unrealized gains $ 390.1 $ 211.4 ==================================================================================================================
An analysis of the change in gross unrealized gains on securities available-for-sale for the years ended December 31:
(in millions) 2002 2001 2000 ================================================================================================================== Securities available-for-sale: Fixed maturity securities $ 625.5 $ 212.0 $ 280.5 Equity securities (11.8) 5.5 (2.5) ------------------------------------------------------------------------------------------------------------------ Net change $ 613.7 $ 217.5 $ 278.0 ==================================================================================================================
Proceeds from the sale of securities available-for-sale during 2002, 2001 and 2000 were $1.53 billion, $497.8 million and $602.0 million, respectively. During 2002, gross gains of $42.0 million ($31.3 million and $12.4 million in 2001 and 2000, respectively) and gross losses of $16.6 million ($10.1 million and $15.4 million in 2001 and 2000, respectively) were realized on those sales. The Company had $28.0 million and $25.2 million of real estate investments as of December 31, 2002 and 2001, respectively, that were non-income producing the preceding twelve months. Real estate is presented at cost less accumulated depreciation of $18.6 million as of December 31, 2002 ($22.0 million as of December 31, 2001). The carrying value of real estate held for disposal totaled $46.0 million and $33.4 million as of December 31, 2002 and 2001, respectively. 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 $27.4 million as of December 31, 2002 ($29.9 million as of December 31, 2001), which includes $10.9 million ($5.3 million as of December 31, 2001) of impaired mortgage loans on real estate for which the related valuation allowance was $2.5 million ($1.0 million as of December 31, 2001) and $16.5 million ($24.6 million as of December 31, 2001) of impaired mortgage loans on real estate for which there was no valuation allowance. Impaired mortgage loans with no valuation allowance are a result of collateral dependent loans where the fair value of the collateral is greater than the recorded investment of the loan. During 2002, the average recorded investment in impaired mortgage loans on real estate was $5.5 million ($7.9 million in 2001) and interest income recognized on those loans totaled $0.1 million in 2002 ($0.4 million in 2001) 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 for the years ended December 31 was as follows:
(in millions) 2002 2001 2000 =================================================================================================================== Allowance, beginning of year $ 42.9 $ 45.3 $ 44.4 Additions (reductions) charged (credited) to operations 1.5 (1.2) 4.1 Direct write-downs charged against the allowance (1.0) (1.2) (3.2) Allowance on acquired mortgage loans - - - ------------------------------------------------------------------------------------------------------------------- Allowance, end of year $ 43.4 $ 42.9 $ 45.3 ===================================================================================================================
An analysis of investment income (loss) from continuing operations by investment type follows for the years ended December 31:
(in millions) 2002 2001 2000 =================================================================================================================== Securities available-for-sale: Fixed maturity securities $ 1,332.5 $ 1,181.1 $ 1,095.5 Equity securities 1.9 1.8 2.6 Mortgage loans on real estate 563.8 527.9 494.5 Real estate 26.8 33.1 32.2 Short-term investments 12.6 28.0 26.0 Derivatives (79.6) (19.7) 3.9 Other 31.0 20.9 49.3 ------------------------------------------------------------------------------------------------------------------- Gross investment income 1,889.0 1,773.1 1,704.0 Less investment expenses 50.5 48.4 50.1 ------------------------------------------------------------------------------------------------------------------- Net investment income $ 1,838.5 $ 1,724.7 $ 1,653.9 ===================================================================================================================
An analysis of net realized losses on investments, hedging instruments and hedged items from continuing operations, by source follows for the years ended December 31:
(in millions) 2002 2001 2000 =================================================================================================================== UNRELATED PARTIES: Realized gains on sales, net of hedging losses: Fixed maturity securities, available-for-sale $ 42.0 $ 30.1 $ 7.4 Hedging losses on fixed maturity sales (41.1) (1.5) - Equity securities, available-for-sale - 1.2 5.0 Real estate 14.0 3.3 3.5 Mortgage loans on real estate 3.2 11.2 0.2 Mortgage loan hedging losses (1.2) (8.1) - Other 0.1 1.2 1.8 ------------------------------------------------------------------------------------------------------------------- Total realized gains on sales - unrelated parties 17.0 37.4 17.9 ------------------------------------------------------------------------------------------------------------------- Realized losses on sales, net of hedging gains: Fixed maturity securities, available-for-sale (15.7) (9.3) (15.1) Hedging gains on fixed maturity sales 10.7 0.1 - Equity securities, available-for-sale (0.9) (0.8) (0.3) Real estate (3.0) (1.4) (0.9) Mortgage loans on real estate (3.3) (0.6) (2.6) Mortgage loans hedging gains 0.9 - - Other (1.0) (7.7) (0.3) ------------------------------------------------------------------------------------------------------------------- Total realized losses on sales - unrelated parties (12.3) (19.7) (19.2) ------------------------------------------------------------------------------------------------------------------- Derivatives, excluding hedging gains and losses on sales 8.0 0.2 (2.7) Other-than-temporary impairments: Fixed maturity securities, available-for-sale (111.6) (66.1) (10.5) Equity securities, available-for-sale - (13.8) - Real estate (2.4) - (3.3) Mortgage loans on real estate (6.3) (0.7) (1.6) ------------------------------------------------------------------------------------------------------------------- Total other-than-temporary impairments (120.3) (80.6) (15.4) ------------------------------------------------------------------------------------------------------------------- Total - unrelated parties (107.6) (62.7) (19.4) Related parties - gain on sale of limited partnership 23.2 44.4 - ------------------------------------------------------------------------------------------------------------------- Net realized losses on investments, hedging instruments and hedged items $ (84.4) $ (18.3) $ (19.4) ===================================================================================================================
Fixed maturity securities with an amortized cost of $7.3 million as of December 31, 2002 and $6.6 million as of December 31, 2001 were on deposit with various regulatory agencies as required by law. As of December 31, 2002 and 2001 the Company had pledged fixed maturity securities with a fair value of $152.4 million and $112.3 million, respectively, as collateral to various derivative counterparties. As of December 31, 2002 and 2001 the Company held collateral of $413.1 million and $18.0 million, respectively, on derivative transactions. This amount is included in short-term investments with a corresponding liability recorded in other liabilities. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued As of December 31, 2002 and 2001, the Company had loaned securities with a fair value of $950.5 million and $775.5 million, respectively. As of December 31, 2002 and 2001 the Company held collateral of $974.5 million and $791.6 million, respectively. This amount is included in short-term investments with a corresponding liability recorded in other liabilities. (4) Deferred Policy Acquisition Costs As part of the regular quarterly analysis of DAC, at the end of the third quarter of 2002, the Company determined that using actual experience to date and assumptions consistent with those used in the second quarter of 2002, its individual variable annuity DAC balance would be outside a pre-set parameter of acceptable results. The Company also determined that it was not reasonably possible that the DAC would return to an amount within the acceptable parameter within a prescribed period of time. Accordingly, the Company unlocked its DAC assumptions for individual variable annuities and reduced the DAC asset to the amount calculated using the revised assumptions. Because the Company unlocked the net separate account growth rate assumption for individual variable annuities for the three-year reversion period, the Company unlocked that assumption for all investment products and variable universal life insurance products to be consistent across product lines. Therefore, the Company recorded an acceleration of DAC amortization totaling $347.1 million, before tax, or $225.6 million, net of $121.5 million of federal income tax benefit, which has been reported in the following segments in the amounts indicated, net of tax: Individual Annuity - $213.4 million, Institutional Products - $7.8 million and Life Insurance - $4.4 million. The acceleration of DAC amortization was the result of unlocking certain assumptions underlying the calculation of DAC for investment products and variable universal life insurance products. The most significant assumption changes were the resetting of the Company's anchor date for reversion to the mean calculations to September 30, 2002, and resetting the assumption for net separate account growth to 8 percent during the three-year reversion period for all investment products and variable life insurance products, as well as increasing the future lapses and costs related to guaranteed minimum death benefits on individual variable annuity contracts. These adjustments were primarily driven by the sustained downturn in the equity markets. (5) Short-term Debt NLIC has established a $500 million commercial paper program under which borrowings are unsecured and are issued for terms of 364 days or less. NLIC had no commercial paper outstanding as of December 31, 2002 and $100.0 million outstanding, at an average effective rate of 1.90%, as of December 31, 2001. See also note 15. The Company paid interest on short-term debt totaling $0.7 million, $5.3 million and $1.3 million in 2002, 2001 and 2000, respectively, including 0.5 million to NFS in 2002. (6) Long-term Debt, payable to Nationwide Financial Services, Inc. In December 2001, NLIC sold NFS a 7.50%, $300.0 million surplus note maturing on December 17, 2031. In June 2002, NLIC sold NFS an 8.15%, $300.0 million surplus note maturing June 27, 2032. Principal and interest payments are subject to prior approval by the superintendent of insurance of the State of Ohio. The Company made interest payments on surplus notes to NFS totaling $30.1 million in 2002, none in 2001. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (7) Derivative Financial Instruments 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 fluctuations in variable rate income on the investments, thereby creating fixed rate investments. Foreign Currency Risk Management In conjunction with the Company's medium-term note program, 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 U.S. 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 U.S. 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 U.S. 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 U.S. dollar rate instruments. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Cross-currency interest rate swaps on assets are structured to pay a fixed rate, in the foreign currency, and receive a variable U.S. dollar rate, generally 3-month libor. Non-Hedging Derivatives From time-to-time, the Company enters 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 is not able to match the receive-side terms of the derivative to a specific liability; therefore, basis swaps do not receive hedge accounting treatment. The Company sells credit default protection on selected debt instruments and combines the credit default swap with selected assets the Company owns, to replicate a higher yielding bond. The credit default swaps do not receive hedge accounting treatment. QUANTITATIVE DISCLOSURE Fair Value Hedges During the years ended December 31, 2002 and 2001, gains of $7.1 million and $2.1 million, respectively, were recognized in net realized 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 instruments' change in fair 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 For the year ended December 31, 2002, the ineffective portion of cash flow hedges was a gain of $1.8 million, and was immaterial in 2001. There were no gains or losses attributable to the portion of the derivative instruments' change in fair value excluded from the assessment of hedge effectiveness. The Company anticipates reclassifying less than $0.1 million in losses out of AOCI over the next 12-month period. As of December 31, 2002, the maximum length of time over which the Company is hedging its exposure to the variability in future cash flows associated with forecasted transactions is twelve months. During 2002 and 2001, the Company did not discontinue any cash flow hedges because the original forecasted transaction was no longer probable. Other Derivative Instruments, Including Embedded Derivatives Net realized gains and losses on investments, hedging instruments and hedged items for the years ended December 31, 2002 and 2001 include a loss of $2.2 million and $1.6 million, respectively, related to other derivative instruments, including embedded derivatives. For the years ended December 31, 2002 and 2001, a gain of $120.4 million and a loss of $27.7 million, respectively, were recorded in net realized losses on investments, hedging instruments and hedged items reflecting the change in fair value of cross-currency interest rate swaps hedging variable rate medium-term notes denominated in foreign currencies. An offsetting loss of $119.6 million and a gain of $26.3 million were recorded in net realized losses on investments, hedging instruments and hedged items to reflect the change in spot rates of these foreign currency denominated obligations during the years ended December 31, 2002 and 2001, respectively. 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, 2002 and 2001 were as follows:
(in millions) 2002 2001 =================================================================================================================== Interest rate swaps: Pay fixed/receive variable rate swaps hedging investments $ 2,206.5 $ 1,952.3 Pay variable/receive fixed rate swaps hedging investments 229.7 698.4 Pay variable/receive variable rate swaps hedging investments 221.0 197.8 Other contracts hedging investments 690.8 523.0 Cross currency interest rate swaps: Hedging foreign currency denominated investments 111.0 56.1 Hedging foreign currency denominated liabilities 3,963.6 2,500.4 Interest rate futures contracts 4,250.9 6,019.4 ------------------------------------------------------------------------------------------------------------------- Total $ 11,673.5 $ 11,947.4 ===================================================================================================================
(8) Federal Income Tax Effective October 1, 2002, Nationwide Corporation's ownership in NFS decreased from 80% to 63%, and as a result, NFS and its subsidiaries, inlcuding the Company, no longer qualify to be included in the NMIC consolidated federal income tax return. Also, see note 2(i) for a discussion of changes related to the Company's federal income tax consolidation group. The tax effects of temporary differences that give rise to significant components of the net deferred tax liability as of December 31, 2002 and 2001 were as follows:
(in millions) 2002 2001 =================================================================================================================== Deferred tax assets: Equity securities $ - $ 6.5 Mortgage loans on real estate and real estate - 7.5 Future policy benefits 102.0 8.2 Liabilities in separate accounts 447.6 482.5 Derivatives 118.6 93.0 Other 40.1 81.8 ------------------------------------------------------------------------------------------------------------------- Gross deferred tax assets 708.3 679.5 Less valuation allowance (7.0) (7.0) ------------------------------------------------------------------------------------------------------------------- Net deferred tax assets 701.3 672.5 ------------------------------------------------------------------------------------------------------------------- Deferred tax liabilities: Fixed maturity securities 402.2 173.0 Equity securities and other investments 37.4 31.7 Deferred policy acquisition costs 762.0 861.3 Derivatives 78.4 91.5 Deferred tax on realized investment gains - 26.1 Other 50.5 68.8 ------------------------------------------------------------------------------------------------------------------- Gross deferred tax liabilities 1,330.5 1,252.4 ------------------------------------------------------------------------------------------------------------------- Net deferred tax liability $ 629.2 $ 579.9 ===================================================================================================================
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 each of the years in the three-year period ended December 31, 2002. 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 $176.4 million and $186.2 million as of December 31, 2002 and 2001, respectively. Federal income tax expense attributable to income from continuing operations before cumulative effect of adoption of accounting principles for the years ended December 31 was as follows:
(in millions) 2002 2001 2000 =================================================================================================================== Current $ 63.7 $ 32.2 $ 77.6 Deferred (55.0) 129.0 129.7 ------------------------------------------------------------------------------------------------------------------- Federal income tax expense $ 8.7 $ 161.2 $ 207.3 ===================================================================================================================
The customary relationship between federal income tax (benefit) expense and pre-tax (loss) income from continuing operations before cumulative effect of adoption of accounting principles does not exist in 2002. This is a result of the impact of the $347.1 million of accelerated DAC amortization reported in 2002 (see note 4) compared to the level of pre-tax earnings. Total federal income tax expense for the years ended December 31, 2002, 2001 and 2000 differs from the amount computed by applying the U.S. federal income tax rate to income from continuing operations before federal income tax expense and cumulative effect of adoption of accounting principles as follows:
2002 2001 2000 ---------------------- ---------------------- ---------------------- (in millions) Amount % Amount % Amount % =================================================================================================================== Computed (expected) tax expense $59.3 35.0 $220.1 35.0 $239.1 35.0 Tax exempt interest and dividends received deduction (38.9) (22.9) (48.8) (7.7) (24.7) (3.6) Income tax credits (12.7) (7.5) (11.5) (1.8) (8.0) (1.2) Other, net 1.0 0.5 1.4 0.1 0.9 0.1 ------------------------------------------------------------------------------------------------------------------- Total (effective rate of each year) $ 8.7 5.1 $161.2 25.6 $207.3 30.3 ===================================================================================================================
Total federal income tax paid (refunded) was $71.0 million, $(45.4) million and $74.6 million during the years ended December 31, 2002, 2001 and 2000, respectively. The 2002 amount includes $56.0 million for previously deferred intercompany gains for tax purposes that became due when NFS no longer qualified to be included in the NMIC consolidated federal income tax return, as described in note 2(i). NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (9) Comprehensive Income Comprehensive income 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 is comprised of net unrealized gains on securities available-for-sale and accumulated net gains (losses) on cash flow hedges. The related before and after federal income tax amounts for the years ended December 31, 2002, 2001 and 2000 were as follows:
(in millions) 2002 2001 2000 =================================================================================================================== Unrealized gains on securities available-for-sale arising during the period: Gross $ 527.5 $ 164.0 $ 264.5 Adjustment to deferred policy acquisition costs (205.7) (71.7) (74.0) Adjustment to future policy benefits and claims (133.2) - - Related federal income tax expense (66.0) (32.3) (66.7) ------------------------------------------------------------------------------------------------------------------- Net unrealized gains 122.6 60.0 123.8 ------------------------------------------------------------------------------------------------------------------- Reclassification adjustment for net losses on securities available-for-sale realized during the period: Gross 86.2 58.7 13.5 Related federal income tax benefit (30.2) (20.5) (4.7) ------------------------------------------------------------------------------------------------------------------- Net reclassification adjustment 56.0 38.2 8.8 ------------------------------------------------------------------------------------------------------------------- Other comprehensive income on securities available-for-sale 178.6 98.2 132.6 ------------------------------------------------------------------------------------------------------------------- Accumulated net gain (loss) on cash flow hedges: Gross 16.9 (13.5) - Related federal income tax (expense) benefit (5.9) 4.7 - ------------------------------------------------------------------------------------------------------------------- Other comprehensive income (loss) on cash flow hedges 11.0 (8.8) - ------------------------------------------------------------------------------------------------------------------- Accumulated net loss on transition adjustments: Transition adjustment - SFAS 133 - (5.6) - Transition adjustment - EITF 99-20 - 3.5 - Related federal income tax benefit - 0.7 - ------------------------------------------------------------------------------------------------------------------- Other comprehensive loss on transition adjustments - (1.4) - ------------------------------------------------------------------------------------------------------------------- Total other comprehensive income $ 189.6 $ 88.0 $ 132.6 ===================================================================================================================
Reclassification adjustments for net realized gains and losses on the ineffective portion of cash flow hedges were immaterial during 2002 and 2001 and, therefore, are not reflected in the table above. (10) 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The fair value of a financial instrument is defined as the amount at which the financial instrument could be exchanged in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is to be based on estimates using present value or other valuation techniques. Many of the Company's assets and liabilities subject to the disclosure requirements are not actively traded, requiring fair values to be estimated by management using present value or other valuation techniques. These techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Although fair value estimates are calculated using assumptions that management believes are appropriate, changes in assumptions could cause these estimates to vary materially. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in the immediate settlement of the instruments. Although insurance contracts, other than policies such as annuities that are classified as investment contracts, are specifically exempted from the disclosure requirements, estimated fair value of policy reserves on life insurance contracts is provided to make the fair value disclosures more meaningful. The tax ramifications of the related unrealized gains and losses can have a significant effect on fair value estimates and have not been considered in the estimates. In estimating its fair value disclosures, the Company 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. Estimated value is based on the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral, if the loan is collateral dependent. Policy loans, short-term investments and cash: The carrying amounts reported in the consolidated balance sheets for these instruments approximate 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 in this analysis are similar to currently offered contracts with maturities consistent with those remaining for the contracts being valued. Policy reserves on life insurance contracts: Included are disclosures for individual and corporate-owned 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, for which the Company has used discounted cash flow analyses similar to those used for investment contracts with known maturities to estimate fair value. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Short-term debt and collateral received - securities lending and derivatives: The carrying amounts reported in the consolidated balance sheets for these instruments approximates their fair value. Long-term debt, payable to NFS: The fair value for long-term debt is based on estimated market prices. Commitments to extend credit: Commitments to extend credit have nominal fair value because of the short-term nature of such commitments. See note 11. Interest rate and cross currency interest rate swaps: The fair value for interest rate and cross currency interest rate swaps are calculated with pricing models using current rate assumptions. Futures contracts: The fair value for futures contracts is based on quoted market prices. 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:
2002 2001 ------------------------------- ------------------------------- Carrying Estimated Carrying Estimated (in millions) amount fair value amount fair value =================================================================================================================== Assets: Investments: Securities available-for-sale: Fixed maturity securities $ 24,169.0 $ 24,169.0 $ 18,370.8 $ 18,370.8 Equity securities 84.3 84.3 94.0 94.0 Mortgage loans on real estate, net 7,923.2 8,536.4 7,113.1 7,293.3 Policy loans 629.2 629.2 591.1 591.1 Short-term investments 1,210.3 1,210.3 1,011.3 1,011.3 Cash 0.9 0.9 22.6 22.6 Assets held in separate accounts 47,208.2 47,208.2 59,513.0 59,513.0 Liabilities: Investment contracts (25,276.3) (23,634.1) (19,549.5) (18,421.0) Policy reserves on life insurance contracts (6,403.5) (6,479.6) (5,666.5) (5,524.4) Collateral received - securities lending and derivatives (1,363.6) (1,363.6) (809.6) (809.6) Short-term debt - - (100.0) (100.0) Long-term debt, payable to NFS (600.0) (600.0) (300.0) (300.0) Liabilities related to separate accounts (47,208.2) (45,524.6) (59,513.0) (58,387.3) Derivative financial instruments: Interest rate swaps hedging assets (141.2) (141.2) (5.6) (5.6) Cross currency interest rate swaps 325.1 325.1 (66.0) (66.0) Futures contracts (45.7) (45.7) (33.0) (33.0) -------------------------------------------------------------------------------------------------------------------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (11) Risk Disclosures The following is a description of the most significant risks facing the Company and how it mitigates those risks: Credit Risk: The risk that issuers of securities owned by the Company or mortgagors on mortgage loans on real estate owned by the Company will default or that other parties, including reinsurers, which owe the Company money, will not pay. The Company minimizes this risk by adhering to a conservative investment strategy, by maintaining sound 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 U. S., 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 mortgaged property represents the collateral if the commitment is funded. The Company's policy for new mortgage loans on real estate is to generally lend no more than 80% 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 $252.5 million extending into 2003 were outstanding as of December 31, 2002. The Company also had $77.3 million of commitments to purchase fixed maturity securities outstanding as of December 31, 2002. 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 the Company, 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, 2002, the Company's credit risk from these derivative financial instruments was $73.3 million, net of $387.1 million of cash collateral and $25.9 million in securities pledged as collateral. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Equity Market Risk: Asset fees calculated as a percentage of the separate account assets are a significant source of revenue to the Company. As of December 31, 2002, 76% of separate account assets were invested in equity mutual funds. Gains and losses in the equity markets will result in corresponding increases and decreases in the Company's separate account assets and the reported asset fee revenue. In addition, a decrease in separate account assets may decrease the Company's expectations of future profit margins due to a decrease in asset fee revenue and/or an increase in guaranteed minimum death benefit (GMDB) claims, which may require the Company to accelerate the amortization of DAC. The Company's individual variable annuity contracts offer GMDB features. The GMDB generally provides a benefit if the annuitant dies and the policyholder contract value is less than a specified amount, which may be based on the premiums paid less amounts withdrawn or policyholder contract value on a specified anniversary date. A decline in the stock market causing the policyholder contract value to fall below this specified amount, which varies from contract to contract based on the date the contract was entered into as well as the GMDB feature elected, will increase the net amount at risk, which is the GMDB in excess of the policyholder contract value, which could result in additional GMDB claims. As of December 31, 2002, the net amount at risk, defined as the excess of the death benefit over the account value, was $6.55 billion before reinsurance and $2.96 billion net of reinsurance. As of December 31, 2002, the Company's reserve for GMDB claims was $13.7 million Significant Concentrations of Credit Risk: The Company grants mainly commercial mortgage loans on real estate to customers throughout the U. S. As of December 31, 2002, the Company has a diversified portfolio with no more than 22% in any geographic area and no more than 1% with any one borrower. As of December 31, 2002, 33% of the carrying value of the Company's commercial mortgage loan portfolio financed retail properties. Significant Business Concentrations: As of December 31, 2002, the Company did not have a material concentration of financial instruments in a single investee, industry or geographic location. Also, the Company did not have a concentration of business transactions with a particular customer, lender or distribution source, a market or geographic area in which business is conducted that makes it vulnerable to an event which could cause a severe impact to the Company's financial position. Guarantee Risk: In connection with the selling of securitized interests in Low Income Housing Tax Credit Funds (Tax Credit Funds), see note 17, the Company guarantees a specified minimum return to the investor. The guaranteed return varies by transaction and follows general market trends. The Company's risk related to securitized interests in Tax Credit Funds is that the tax benefits provided to the investor are not sufficient to provide the guaranteed cumulative after-tax yields. The Company mitigates these risks by having qualified individuals with extensive industry experience perform due diligence on each of the underlying properties to ensure they will be capable of delivering the amount of credits anticipated and by requiring cash reserves to be held at various levels within these structures to provide for possible shortfalls in the amount of credits generated. Reinsurance: The Company has entered into reinsurance contracts to cede a portion of its general account individual annuity business. Total recoveries due from these contracts were $362.3 million as of December 31, 2002. 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 contracts, trusts have been established as collateral for the recoveries. The trust assets are invested in investment grade securities, the fair value of which must at all times be greater than or equal to 100% or 102% of the reinsured reserves, as outlined in the underlying contract. Collateral - Derivatives: The Company enters into agreements with various counterparties to execute over-the-counter derivative transactions. The Company's policy is to include a Credit Support Annex with each agreement to protect the Company for any exposure above the approved credit threshold. This also protects the counterparty against exposure to the Company. The Company generally posts securities as collateral and receives cash as collateral from counterparties. The Company maintains ownership of the securities at all times and is entitled to receive from the borrower any payments for interest or dividends received during the loan term. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Collateral - Securities Lending: The Company, through its agent, lends certain portfolio holdings and in turn receives cash collateral. The cash collateral is invested in high-quality short-term investments. The Company's policy requires a minimum of 102% of the fair value of the securities loaned be maintained as collateral. Net returns on the investments, after payment of a rebate to the borrower, are shared between the Company and its agent. Both the borrower and the Company can request or return the loaned securities at any time. The Company maintains ownership of the securities at all times and is entitled to receive from the borrower any payments for interest or dividends received during the loan term. (12) Pension Plan, Postretirement Benefits Other than Pensions and Retirement Savings Plan The Company is a participant, together with other affiliated companies except for Nationwide Provident, in pension plans 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 costs charged to operations by the Company during the years ended December 31, 2002, 2001 and 2000 were $10.0 million, $5.0 million and $1.9 million, respectively. The Company has recorded a pension liability of $0.5 million as of December 31, 2002 compared to a prepaid pension asset of $9.4 million as of December 31, 2001. In addition to the defined benefit pension plan, the Company, together with certain 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, 2002 and 2001 was $51.9 million and $53.8 million, respectively, and the net periodic postretirement benefit cost (NPPBC) for 2002, 2001 and 2000 was $3.5 million, $2.9 million and $3.8 million, respectively. 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, 2002 and 2001 follows:
Pension Benefits Postretirement Benefits --------------------------- ---------------------------- (in millions) 2002 2001 2002 2001 =================================================================================================================== Change in benefit obligation: Benefit obligation at beginning of year $ 2,132.2 $ 1,981.7 $ 314.0 $ 276.4 Service cost 103.3 89.3 13.2 12.6 Interest cost 135.6 129.1 22.5 21.4 Participant contributions - - 4.0 3.3 Plan amendment (11.5) 27.7 (117.7) 0.2 Actuarial (gain) loss (13.1) (5.8) 54.0 20.2 Benefits paid (97.6) (89.8) (20.3) (20.1) Impact of settlement/curtailment (12.7) - - - ------------------------------------------------------------------------------------------------------------------- Benefit obligation at end of year 2,236.2 2,132.2 269.7 314.0 =================================================================================================================== Change in plan assets: Fair value of plan assets at beginning of year 2,200.7 2,337.1 119.7 119.4 Actual return on plan assets (142.4) (46.6) (12.7) (0.2) Employer contribution 4.3 - 16.2 17.3 Participant contributions - - 4.0 3.3 Benefits paid (97.6) (89.8) (20.3) (20.1) ------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year 1,965.0 2,200.7 106.9 119.7 ------------------------------------------------------------------------------------------------------------------- Funded status (271.2) 68.5 (162.8) (194.3) Unrecognized prior service cost 33.6 49.5 (116.9) 0.2 Unrecognized net losses (gains) 225.9 (79.3) 71.9 (4.0) Unrecognized net (asset) obligation at transition (3.8) (5.1) 0.1 0.8 ------------------------------------------------------------------------------------------------------------------- Prepaid (accrued) benefit cost, net $ (15.5) $ 33.6 $ (207.7) $ (197.3) ===================================================================================================================
Two significant plan changes were enacted to the postretirement benefit plans as of December 31, 2002. The postretirement medical plan was revised to reflect the current expectation that there will be no further increases in the benefit cap after 2006. Prior to 2007, it is assumed that benefit caps will increase 3% per year. The postretirement death benefit plan was revised to reflect that all employer subsidies will be phased out beginning in 2007. The 2007 subsidy is assumed to be 2/3 of the current subsidy and the 2008 subsidy is assumed to be 1/3 of the current amount. There is no employer subsidized benefit assumed after 2008. Effective January 1, 2002, the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) raised IRS limits for benefits and salaries considered in qualified pension plans. The projected benefit obligation decreased by $11.5 million from December 31, 2001 due to the anticipation of the EGTRRA sunset provisions not recognized in the December 31, 2001 calculations. Pension costs in 2002 and December 31, 2002 pension liabilities include curtailment charges and gains calculated for the disposal of a segment of participants. Settlement credits of $10.0 million were directly assigned to NMIC and no costs were assigned to the Company. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued 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 --------------------------- --------------------------- 2002 2001 2002 2001 =================================================================================================================== Weighted average discount rate 6.00% 6.50% 6.60% 7.25% Rate of increase in future compensation levels 4.50% 4.75% - - Assumed health care cost trend rate: Initial rate - - 11.30%1 11.00% Ultimate rate - - 5.70%1 5.50% Declining period - - 11 Years 4 Years ------------------------------------------------------------------------------------------------------------------- ---------- 1 The 2002 initial rate is 12.3% for participants over age 65, with an ultimate rate of 6.39%.
The components of net periodic pension cost for the pension plan as a whole for the years ended December 31, 2002, 2001 and 2000 were as follows:
(in millions) 2002 2001 2000 =================================================================================================================== Service cost (benefits earned during the period) $ 103.3 $ 89.3 $ 81.4 Interest cost on projected benefit obligation 135.6 129.1 125.3 Expected return on plan assets (178.6) (183.8) (184.5) Recognized gains - (7.8) (11.8) Amortization of prior service cost 3.2 3.2 4.4 Amortization of unrecognized transition asset (1.3) (1.3) (1.3) ------------------------------------------------------------------------------------------------------------------- Net periodic pension cost $ 63.4 $ 28.7 $ 12.3 ===================================================================================================================
A curtailment gain of $19.8 million was recognized in 2000 as the result of a former affiliate of NMIC ending its participation in the pension plan. Assumptions used in calculating the net periodic pension cost for the pension plan were as follows:
2002 2001 2000 =================================================================================================================== Weighted average discount rate 6.50% 6.75% 7.00% Rate of increase in future compensation levels 4.75% 5.00% 5.25% Expected long-term rate of return on plan assets 8.25% 8.00% 8.25% -------------------------------------------------------------------------------------------------------------------
The plan's investment strategy was modified based on the recommendations of a pension optimization study. This change in investment strategy is expected to increase long-term real rates of return 0.50% while maintaining the same aggregate risk level. For this reason, the expected long-term rate of return was increased to 8.25% in 2002 from 8.00% in 2001. The components of NPPBC for the postretirement benefit plan as a whole for the years ended December 31, 2002, 2001 and 2000 were as follows:
(in millions) 2002 2001 2000 ==================================================================================================================== Service cost (benefits attributed to employee service during the year) $ 13.2 $ 12.6 $ 12.2 Interest cost on accumulated postretirement benefit obligation 22.4 21.4 18.7 Expected return on plan assets (9.2) (9.6) (7.9) Amortization of unrecognized transition obligation of affiliates 0.6 0.6 0.6 Net amortization and deferral (0.4) (0.4) (1.3) -------------------------------------------------------------------------------------------------------------------- NPPBC $ 26.6 $ 24.6 $ 22.3 ====================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued Actuarial assumptions used for the measurement of the NPPBC for the postretirement benefit plan for 2002, 2001 and 2000 were as follows:
2002 2001 2000 ==================================================================================================================== Discount rate 7.25% 7.50% 7.80% Long-term rate of return on plan assets 7.75% 8.00% 8.30% Assumed health care cost trend rate: Initial rate 11.30% 11.00% 13.00% Ultimate rate 5.70% 5.50% 5.50% Declining period 11 Years 4 Years 5 Years --------------------------------------------------------------------------------------------------------------------
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, 2002 and on the NPPBC for the year ended December 31, 2002 was not calculated. The Company, together with other affiliated companies, sponsors a defined contribution retirement savings plan covering substantially all employees of the Company. Employees may make salary deferral contributions of up to 22%. Salary deferrals of up to 6% are subject to a 50% Company match. The Company's expense for contributions to this plan totaled $5.7 million, $5.6 million and $4.4 million for 2002, 2001 and 2000, respectively, including amounts related to discontinued operations that are immaterial. (13) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings and Dividend Restrictions The State of Ohio, where NLIC and NLAIC are domiciled, 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 total adjusted capital, as defined by the NAIC, to 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 for all periods presented herein. The statutory capital and surplus of NLIC as of December 31, 2002 and 2001 was $1.61 billion and $1.76 billion, respectively. The statutory net income of NLIC for the years ended December 31, 2002, 2001 and 2000 was $92.5 million, $83.1 million and $158.7 million, respectively. The NAIC completed a project to codify statutory accounting principles (Codification), which became effective January 1, 2001 for NLIC and NLAIC. 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, 2002 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 the State 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, interest and shareholder dividends in the future. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (14) Related Party Transactions During 2001, the Company entered into a transaction with NMIC, whereby it sold 78% of its interest in a limited partnership (representing 49% of the limited partnership) to NMIC for $158.9 million. As a result of this sale, the Company recorded a realized gain of $44.4 million, and related tax expense of $15.5 million. During 2002, the Company entered into transactions with NMIC and Nationwide Indemnity Company (NIC), whereby it sold 100% of its remaining interest in the limited partnership (representing 15.11% of the limited partnership) to NMIC and NIC for a total of $54.5 million. As a result of this sale, the Company recorded a realized gain of $23.2 million and related tax expense of $8.1 million. The sales prices for each transaction, which were paid in cash, represented the fair value of the portions of limited partnership interests that were sold and were based on valuations of the limited partnership and its underlying investments as of the effective dates of the transactions. The valuations were completed by qualified management of the limited partnership and utilized a combination of internal and independent valuations of the underlying investments of the limited partnership. Additionally, senior financial officers and the Boards of Directors of the Company and NMIC separately reviewed, through their respective Finance Committees, and approved the process and methodology of the valuations prior to the execution of these transactions. The Company no longer holds an economic or voting interest in the limited partnership. NLIC has issued group annuity and life insurance contracts and performs administrative services for various employee benefit plans sponsored by NMIC or its affiliates. Total account values of these contracts were $4.50 billion and $4.68 billion as of December 31, 2002 and 2001, respectively. Total revenues from these contracts were $143.3 million, $150.7 million and $156.8 million for the years ended December 31, 2002, 2001 and 2000, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances were $114.8 million, $122.5 million and $135.8 million for the years ended December 31, 2002, 2001 and 2000, respectively. The terms of these contracts are consistent in all material respects with what the Company offers to unaffiliated parties who are similarly situated. As discussed in more detail in note 2(i), through September 30, 2002, the Company filed a consolidated federal income tax return with NMIC and beginning October 1, 2002, will file a consolidated federal income tax return with NLICA. Total payments to (from) NMIC were $71.0 million, $(45.4) million and $74.6 million for the years ended December 31, 2002, 2001 and 2000, respectively. NLIC has a reinsurance agreement with NMIC whereby all of NLIC's accident and health business not ceded to unaffiliated reinsurers is ceded to NMIC on a modified coinsurance basis. Either party may terminate the agreement on January 1 of any year with prior notice. Under a modified coinsurance agreement, the ceding company retains invested assets and investment earnings are paid to the reinsurer. Under the terms of NLIC's agreements, the investment risk associated with changes in interest rates is borne by the reinsurer. Risk of asset default is retained by NLIC, although a fee is paid to NLIC 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 for the years ended December 31, 2002, 2001 and 2000 were $325.0 million, $200.7 million and $170.1 million, respectively, while benefits, claims and expenses ceded were $328.4 million, $210.1 million and $171.0 million, respectively. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued 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 investment management, 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, Nationwide Services Company, LLC, 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, 2002, 2001 and 2000, the Company made payments to NMIC and Nationwide Services Company, LLC, totaling $135.6 million, $139.8 million and $150.3 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. Under a marketing agreement with NMIC, NLIC makes payments to cover a portion of the agent marketing allowance that is paid to Nationwide agents. These costs cover product development and promotion, sales literature, rent and similar items. Payments under this agreement totaled $24.9 million, $26.4 million and $31.4 million for the years ended December 31, 2002, 2001 and 2000, respectively. The Company leases office space from NMIC and certain of its subsidiaries. For the years ended December 31, 2002, 2001 and 2000, the Company made lease payments to NMIC and its subsidiaries of $20.2 million, $18.7 million and $14.1 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 interest. As of December 31, 2002 and 2001, the Company had no borrowings from affiliated entities under such agreements. During 2002 and 2001, the most the Company had outstanding at any given time was $224.9 million and $368.5 million, respectively, and the Company incurred interest expense on intercompany repurchase agreements of $0.3 million and $0.2 million for 2002 and 2001, respectively. Transactions under the agreements during 2000 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 for the benefit of the Company were $87.0 million and $54.8 million as of December 31, 2002 and 2001, respectively, and are included in short-term investments on the accompanying consolidated balance sheets. For the years ending December 31, 2002, 2001 and 2000, the Company paid NCMC fees and expenses totaling $0.3 million, $0.4 million and $0.3 million, respectively. 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, 2002 were $50.3 million, $52.9 million and $65.0 million, respectively. Funds of Gartmore Global Investments, Inc. (GGI), an affiliate, are offered as investment options in certain of the Company's products. As of December 31, 2002, total GGI funds in the Company's products were $12.21 billion. For the year ended December 31, 2002, GGI paid the Company $38.8 million for the distribution and servicing of these funds. During 2002, NLIC paid a dividend of $35.0 million and dividends in the form of return of capital of $475.0 million to NFS. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued In addition, in June 2002, NLIC paid a dividend to NFS in the form of all of the shares of common stock of NSI, a wholly owned broker/dealer subsidiary. Therefore, the results of the operations of NSI have been reflected as discontinued operations for all periods presented. This was a transaction between related parties and therefore was recorded at carrying value, $10.0 million, of the underlying components of the transaction rather than fair value. Such amount represents a non-cash transaction that is not reflected in the Consolidated Statement of Cash Flows. In December 2001, NLIC sold NFS a 7.50%, $300.0 million surplus note maturing on December 17, 2031. In June 2002, NLIC sold NFS an 8.15%, $300.0 million surplus note maturing June 27, 2032. The Company made interest payments on surplus notes to NFS totaling $30.1 million in 2002 and none in 2001. In addition, the Company made interest payments on unsecured notes to NFS totaling $0.5 million in 2002. (15) Bank Lines of Credit The Company has available as a source of funds 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 financial institutions. The facility provides for several and not joint liability with respect to any amount drawn by any party. The facility contains covenants, including, but not limited to, requirements that the Company maintain consolidated tangible net worth, as defined, in excess of $1.69 billion and NLIC maintain statutory surplus in excess of $935 million. The Company had no amounts outstanding under this agreement as of December 31, 2002. NLIC is currently required to maintain an available credit facility equal to 50% of any amounts outstanding under its $500 million commercial paper program. Therefore, availability under the aggregate $1 billion credit facility is reduced by an amount equal to 50% of any commercial paper outstanding. NLIC did not have any commercial paper outstanding as of December 31, 2002. (16) 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 seeks to bring 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 plaintiff contends were used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. 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 the other named defendants. On January 25, 2002, the plaintiffs filed a motion for leave to amend their complaint to add three new named plaintiffs. On February 9, 2002, the plaintiffs filed a motion for class certification. On April 16, 2002, the Company and the other named defendants filed a motion for summary judgment on the individual claims of plaintiff Mercedes Castillo. On May 28, 2002, the Court denied plaintiffs' motion to add new persons as named plaintiffs, but granted Marcus Shore's request to withdraw as named plaintiff, so the action is now proceeding with Mercedes Castillo as the only named plaintiff. On November 4, 2002, the Court issued a decision granting the Company's and the other defendants' motion for summary judgment on all of plaintiff Mercedes Castillo's individual claims, and ruling that plaintiff's motion for class certification is moot. Judgment for the Company was entered on November 15, 2002. On December 16, 2002, plaintiff Mercedes Castillo filed a notice of appeal from the court's orders (a) granting the defendants' motion for summary judgment; and (b) denying plaintiff's motion for leave to amend the complaint to add three new named plaintiffs. The Company's responsive brief is due by April 23, 2003 and plaintiff's reply brief is due by May 12, 2003. The Company intends to defend this lawsuit vigorously. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued On August 15, 2001, the Company was named in a lawsuit filed in Connecticut federal court titled Lou Haddock, as trustee of the Flyte Tool & Die, Incorporated Deferred Compensation Plan, et al v. Nationwide Financial Services, Inc. and Nationwide Life Insurance Company. On September 6, 2001, the plaintiffs amended their complaint to include class action allegations. Plaintiffs seek to represent a class of retirement plans that purchased variable annuities from NLIC to fund qualified ERISA retirement plans. The amended complaint alleges that the retirement plans purchased variable annuity contracts from the Company that allowed plan participants to invest in funds that were offered by separate mutual fund companies; that the Company was a fiduciary under ERISA; that the Company breached its fiduciary duty when it accepted certain fees from the mutual fund companies that purportedly were never disclosed by the Company; and that the Company violated ERISA by replacing many of the funds originally included in the plaintiff's annuities with "inferior" funds because the new funds purportedly paid higher fees to the Company. The amended complaint seeks disgorgement of the fees allegedly received by the Company and other unspecified compensatory damages, declaratory and injunctive relief and attorney's fees. On December 3, 2001, the plaintiffs filed a motion for class certification. The Company is opposing that motion. The Company's Motion to Dismiss was denied on September 11, 2002. On January 14, 2003, plaintiffs filed a motion to file a second amended complaint and the motion was granted on February 21, 2003. The second amended complaint removes the claims asserted against the Company concerning a violation of ERISA through the replacement of many of the funds originally included in the plaintiffs' annuities with "inferior" funds that purportedly paid higher fees to the Company. The Company intends to defend this lawsuit vigorously. There can be no assurance that any such litigation will not have a material adverse effect on the Company in the future. (17) Securitization Transactions During 2002, the Company sold credit enhanced equity interests in Tax Credit Funds to unrelated third parties for $125.3 million and recognized $6.8 million of income. The Company guaranteed cumulative after-tax yield to unrelated third party investors ranging from 5.15% to 5.25%. These guarantees are in effect for approximately 15 years. The Tax Credit Funds will provide a stream of tax benefits to the investors that will generate a yield and return of capital. To the extent that the tax benefits are not sufficient to provide these cumulative after-tax yields, then the Company must fund any shortfall, which is mitigated by cash reserves established by the Company at the inception of the transactions. The maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees is $368.7 million. The Company does not anticipate making any payments related to the guarantees. At the time of the sales, $4.9 million of net sale proceeds were set aside as reserves for certain properties owned by the Tax Credit Funds that had not met all of the criteria necessary to generate tax credits. Such criteria include completion of construction and the leasing of each unit to a qualified tenant among other criteria. Properties meeting the necessary criteria are considered to have "stabilized." The properties are evaluated regularly and upon stabilizing, the reserve is released, and during 2002, $0.5 million of stabilization reserves were released into income. To the extent there are cash deficits in any specific property owned by the Tax Credit Funds, property reserves, property operating guarantees and reserves held by the Tax Credit Funds are exhausted before the Company is required to perform under its guarantees. To the extent the Company is ever required to perform under its guarantees, it can recover any such funding out of the cash flow distributed from the sale of any and/or all of the underlying properties of the Tax Credit Funds. This cash flow distribution would be paid to the Company prior to any cash flow distributions to unrelated third party investors. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued (18) Segment Information 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. During the second quarter of 2002, the Company paid a dividend to NFS that resulted in the disposal of a portion of the business that had been reported in the Corporate segment (see note 14). As a result, this business has been reported as discontinued operations. Also, structured products transactions previously reported in the Corporate segment are now reported in the Institutional Products segment. Amounts reported for all periods have been revised to reflect these changes and to conform to the 2002 presentation. The Individual Annuity segment consists of individual The BEST of AMERICA(R) and private label deferred variable annuity products, deferred fixed annuity products and income products. Individual deferred 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 prescribed periods. The Institutional Products segment is comprised of the Company's Private and Public Sector pension plans, medium-term note program and structured products transactions. The Private Sector includes the 401(k) business generated through fixed and variable annuities. The Public Sector includes the Internal Revenue Code Section 457 business in the form of fixed and variable annuities. The Life Insurance segment consists of investment life products, including individual variable life and COLI products, traditional life insurance products and universal life insurance. Life insurance products provide a death benefit and generally 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, unallocated expenses and interest expense on debt. In addition to these operating revenues and expenses, the Company also reports net realized gains and losses on investments not related to securitizations, hedging instruments and hedged items in the Corporate segment, but does not consider them as part of operating income. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The following tables summarize the financial results of the Company's business segments for the years ended December 31, 2002, 2001 and 2000.
Individual Institutional Life (in millions) Annuity Products Insurance Corporate Total =================================================================================================================== 2002: Net investment income $ 668.5 $ 800.2 $ 328.6 $ 41.2 $ 1,838.5 Other operating revenue 526.2 177.9 537.7 0.7 1,242.5 ------------------------------------------------------------------------------------------------------------------- Total operating revenue 1 1,194.7 978.1 866.3 41.9 3,081.0 ------------------------------------------------------------------------------------------------------------------- Interest credited to policyholder account values 505.9 548.9 186.4 - 1,241.2 Amortization of deferred policy acquisition costs 528.2 53.7 88.2 - 670.1 Interest expense on debt - - - 36.0 36.0 Other benefits and expenses 283.4 172.1 420.2 4.1 879.8 ------------------------------------------------------------------------------------------------------------------- Total benefits and expenses 1,317.5 774.7 694.8 40.1 2,827.1 ------------------------------------------------------------------------------------------------------------------- Operating (loss) income before federal income taxes 1 (122.8) 203.4 171.5 1.8 253.9 Net realized losses on investments, hedging instruments and hedged items - - - (84.4) (84.4) ------------------------------------------------------------------------------------------------------------------- (Loss) income from continuing operations before federal income taxes and cumulative effect of adoption of accounting $ (122.8) $ 203.4 $ 171.5 $ $ 169.5 principles (82.6) =================================================================================================================== Assets as of year end $ 40,830.0 $ 30,440.7 $ 9,676.3 $ 5,075.6 $ 86,022.6 =================================================================================================================== --------- 1 Excludes net realized gains and losses on investments not related to securitizations, hedging instruments and hedged items, discontinued operations and cumulative effect of adoption of accounting principles.
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 =================================================================================================================== 2001: Net investment income $ 534.7 $ 847.5 $ 323.3 $ 19.2 $ 1,724.7 Other operating revenue 556.0 209.4 511.5 1.6 1,278.5 ------------------------------------------------------------------------------------------------------------------- Total operating revenue 1 1,090.7 1,056.9 834.8 20.8 3,003.2 ------------------------------------------------------------------------------------------------------------------- Interest credited to policyholder account values 433.2 627.8 177.7 - 1,238.7 Amortization of deferred policy acquisition costs 220.0 47.6 80.3 - 347.9 Interest expense on debt - - - 6.2 6.2 Other benefits and expenses 206.1 170.2 387.1 (2.1) 761.3 ------------------------------------------------------------------------------------------------------------------- Total benefits and expenses 859.3 845.6 645.1 4.1 2,354.1 ------------------------------------------------------------------------------------------------------------------- Operating income before federal income taxes 1 231.4 211.3 189.7 16.7 649.1 Net realized losses on investments, hedging instruments and hedged items - - - (20.2) (20.2) ------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before federal income taxes and cumulative effect of adoption of accounting $ 231.4 $ 211.3 $ 189.7 $ (3.5) $ principles 628.9 =================================================================================================================== 2 Assets as of year end $ 43,885.4 $ 34,130.1 $ 9,129.0 $ 4,010.1 $ 91,154.6 =================================================================================================================== 2000: Net investment income $ 482.0 $ 827.4 $ 289.2 $ 55.3 $ 1,653.9 Other operating revenue 625.9 251.6 462.1 2.9 1,342.5 ------------------------------------------------------------------------------------------------------------------- Total operating revenue 1 1,107.9 1,079.0 751.3 58.2 2,996.4 ------------------------------------------------------------------------------------------------------------------- Interest credited to policyholder account values 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 debt - - - 1.3 1.3 Other benefits and expenses 192.1 181.0 368.8 16.2 758.1 ------------------------------------------------------------------------------------------------------------------- Total benefits and expenses 827.2 859.0 590.2 17.5 2,293.9 ------------------------------------------------------------------------------------------------------------------- Operating income before federal income taxes 1 280.7 220.0 161.1 40.7 702.5 Net realized losses on investments, hedging instruments and hedged items - - - (19.4) (19.4) ------------------------------------------------------------------------------------------------------------------- Income from continuing operations before federal income taxes and cumulative effect of adoption of accounting principles $ 280.7 $ 220.0 $ 161.1 $ 21.3 $ 683.1 =================================================================================================================== 3 Assets as of year end $ 45,422.5 $ 37,217.3 $ 8,103.3 $ 1,824.2 $ 92,567.3 ===================================================================================================================
---------- 1 Excludes net realized gains and losses on investments not related to securitizations, hedging instruments and hedged items, discontinued operations and cumulative effect of adoption of accounting principles. 2 Includes $24.8 million of assets related to discontinued operations. 3 Includes $22.5 million of assets related to discontinued operations. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements, Continued The Company has no significant revenue from customers located outside of the U.S. nor does the Company have any significant long-lived assets located outside the U.S. (19) Variable Interest Entities As of December 31, 2002, the Company had investments of $71.0 million in Tax Credit Funds for the purpose of generating favorable after-tax investment returns for the Company. These Tax Credit Funds and those that the Company has sold to others with a guarantee of the cumulative after-tax return, which are described in more detail in note 17, may be considered a VIE in accordance with FIN 46. See note 2(k). The Company's maximum exposure to loss as a result of its involvement in these VIEs is $439.6 million, which is comprised of the carrying value of the Tax Credit Funds held by the Company for its own use and the maximum amount of undiscounted future payments that the Company could be required to pay the investors under the terms of the guarantees. (20) Subsequent Event On February 13, 2003, NFS contributed as additional paid-in capital $200.0 million cash to NLIC for general corporate purposes. ILLUSTRATIONS Before you purchase the policy and upon request thereafter, we will provide illustrations of future benefits under the policy based upon the proposed Insured's age and premium class, the Death Benefits option, face amount, planned periodic Premiums, and Riders requested. We reserve the right to charge a reasonable fee for this service to persons who request more than one policy illustration during a policy year. ADVERTISING Independent financial rating services, including Moody's, Standard & Poor's and A.M. Best Company rank and rate us. The purpose of these ratings is to reflect the financial strength or claims-paying ability of Nationwide. The ratings are not intended to reflect the Investment Experience or financial strength of the variable account. 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. PERFORMANCE DATA The following performance tables display historical investments results of the mutual fund Sub-Accounts. This information may be useful in helping potential investors in deciding which mutual fund Sub-Accounts to choose and in assessing the competence of the mutual funds' investment advisers. The performance figures shown should be considered in light of the investment objectives and policies, characteristics and quality of the underlying portfolios of the 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 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.
PERFORMANCE TABLE - TOTAL RETURN ------------------------------------------------------------------------------------------------------- Annual Percentage Non Annualized Annualized Change Percentage Change Percentage Change ------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Inception 3 Yrs. 5 yrs. Inception UNDERLYING INVESTMENT Inception Values 2000 2001 2002 To to to to to to to to To OPTIONS Date** 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- American Century VP 05/01/91 13.70 -2.65 -3.54 -9.56 -2.52 -9.56 -12.76 -15.07 8.21 117.66 -5.30 1.59 6.90 Balanced Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ American Century VP 11/20/87 8.78 9.03 -28.07 -21.20 -4.52 -21.20 -43.32 -38.19 -0.51 145.35 -14.82 -0.10 6.12 Capital Appreciation Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ American Century VP Income 10/30/97 8.51 -10.62 -8.35 -19.37 -5.32 -19.37 -26.10 -33.95 -1.10 6.61 -12.91 -0.22 1.25 & Growth Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ American Century VP 05/02/9411.68 -16.83 -29.17 -20.37 -3.70 -20.37 -43.60 -53.09 -8.62 32.22 -22.30 -1.79 3.28 International Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ American Century VP Ultra 05/01/01 8.01 NA NA -22.97 -6.00 -22.97 NA NA NA -26.59 NA NA -16.95 Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ American Century VP Value 05/01/96 15.48 18.14 12.82 -12.62 -3.32 -12.62 -1.42 16.47 21.04 71.35 5.21 3.89 8.42 Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Credit Suisse Trust- 09/30/96 7.64 -18.94 -28.63 -34.16 -8.44 -34.16 -53.01 -61.91 -33.67 -26.63 -27.51 -7.88 -4.83 Global Post-Venture Capital Portfolio - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Credit Suisse Trust- 06/30/95 7.24 -25.90 -22.27 -19.90 -3.33 -19.90 -37.74 -53.87 -25.43 -13.99 -22.73 -5.70 -1.99 International Focus Portfolio - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Credit Suisse Trust- Small 06/30/95 8.51 -18.11 -16.01 -33.69 -6.63 -33.69 -44.30 -54.39 -25.09 23.46 -23.03 -5.61 2.85 Cap Growth Portfolio - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Dreyfus GVIT Mid Cap Index 10/31/97 8.79 15.21 -1.30 -15.30 -4.16 -15.30 -16.41 -3.70 29.04 28.26 -1.25 5.23 4.94 Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------- Annual Percentage Non Annualized Annualized Change Percentage Change Percentage Change -------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------ Fund Unit 1 mo Yr 2 Yrs 3 Yrs. 5 yrs. Inception 3 Yrs. UNDERLYING INVESTMENT Inception Values 2000 2001 2002 To to to to to to to OPTIONS Date** 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 5 yrs. Inception to To 12/31/02 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Dreyfus Small Cap Stock 05/01/02 7.65 NA NA NA -3.33 NA NA NA NA -23.50 NA NA NA Index Portfolio: Service Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Dreyfus Socially 10/06/93 11.83 -11.03 -22.57 -28.94 -6.61 -28.94 -44.98 -51.05 -17.63 88.04 -21.19 -3.80 7.08 Responsible Growth Fund, Inc.: Initial Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Dreyfus Stock Index Fund, 09/29/89 14.57 -9.28 -12.18 -22.36 -5.93 -22.36 -31.82 -38.15 -4.36 222.36 -14.80 -0.89 9.23 Inc.: Initial Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Dreyfus VIF Appreciation 04/05/93 11.17 -0.65 -9.31 -16.71 -4.05 -16.71 -24.47 -24.96 8.91 157.13 -9.13 1.72 10.19 Portfolio: Initial Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Dreyfus VIF Growth & 05/02/94 10.26 -3.78 -5.85 -25.33 -6.68 -25.33 -29.69 -32.35 -11.59 98.41 -12.22 -2.43 8.23 Income Portfolios: Initial Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Federated Insurance 04/22/99 10.75 10.45 8.01 8.94 2.58 8.94 17.67 29.97 NA 27.37 9.13 NA 6.78 Series-Federated Quality Bond Fund II: Primary Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP Equity Income 10/09/86 14.04 8.42 -4.96 -16.95 -4.72 -16.95 -21.06 -14.42 1.58 372.45 -5.06 0.31 10.04 Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP Growth 10/09/86 12.67 -10.98 -17.65 -30.10 -7.93 -30.10 -42.44 -48.76 -1.77 398.81 -19.98 -0.36 10.41 Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP High Income 09/19/85 9.33 -22.47 -11.73 3.44 1.19 3.44 -8.69 -29.21 -26.75 211.37 -10.88 -6.04 6.79 Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP Overseas 01/28/87 9.73 -19.11 -21.17 -20.28 -6.95 -20.28 -37.15 -49.16 -18.25 93.83 -20.19 -3.95 4.24 Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP II Asset 09/01/89 14.29 -3.93 -4.09 -8.73 -2.89 -8.73 -12.46 -15.90 7.49 191.50 -5.61 1.45 8.36 Manager Portfolio: Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP II 01/03/95 16.75 -6.62 -12.24 -9.35 -0.60 -9.35 -20.45 -25.72 19.97 152.24 -9.43 3.71 12.27 Contrafund(R)Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fidelity VIP III Growth 01/03/95 7.93 -17.07 -14.42 -21.84 -6.54 -21.84 -33.11 -44.53 -27.92 46.80 -17.84 -6.34 4.92 Opportunities Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Fedility VIP III Value 02/20/02 7.48 NA NA NA -11.18 NA NA NA NA -21.26 NA NA NA Strategies Portfolio: Service Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Emerging 08/30/00 7.00 NA -5.18 -15.23 -5.38 -15.23 -19.62 NA NA -39.58 NA NA -19.40 Markets Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Global 12/28/01 8.63 NA NA -11.69 -5.73 -11.69 NA NA NA -11.69 NA NA -11.60 Financial Services Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Global 12/29/00 8.31 NA 1.60 -19.50 -3.58 -19.50 -18.21 NA NA -18.21 NA NA -9.54 Health Sciences Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Global 06/30/00 1.97 NA -42.72 -42.78 -15.55 -42.78 -67.23 NA NA -75.41 NA NA -42.94 Technology & Communications Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Global 12/28/01 8.65 NA NA -25.14 -2.64 -25.14 NA NA NA -25.14 NA NA -24.97 Utilities Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Government 11/08/82 16.69 12.54 7.25 10.98 2.33 10.98 19.03 33.96 42.47 453.87 10.24 7.34 8.87 Bond Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Growth Fund: 04/15/92 7.96 -26.53 -28.13 -28.72 -7.39 -28.72 -48.77 -62.37 -49.00 28.61 -27.80 -12.60 2.38 Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT 08/30/00 5.01 NA -28.65 -24.10 -4.51 -24.10 -45.85 NA NA -53.27 NA NA -27.79 International Growth Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Nationwide 12/31/01 8.42 NA NA -6.03 -2.26 -6.03 NA NA NA -6.03 NA NA -6.03 Leaders Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Nationwide 11/08/8213.34 -2.12 -11.82 -17.35 -5.74 -17.35 -27.12 -28.67 -9.93 779.23 -10.65 -2.07 11.40 Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Growth 12/31/01 8.20 NA NA -24.05 -10.25 -24.05 NA NA NA -24.05 NA NA -24.05 Leaders Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ GVIT Small Cap Growth 05/03/99 4.83 -16.17 -10.84 -33.29 -6.21 -33.29 -40.52 -50.14 NA 2.23 -20.70 NA 0.60 Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ GVIT Small Cap Value Fund: 10/31/9711.43 11.20 28.28 -27.16 -6.70 -27.16 -6.57 3.90 28.75 26.68 1.28 5.18 4.68 Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ GVIT Small Company Fund: 10/23/9515.09 8.90 -6.70 -17.33 -3.57 -17.33 -22.87 -16.01 22.19 101.44 -5.65 4.09 10.23 Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Turner GVIT Growth Focus 06/30/00 2.21 NA -39.03 -42.86 -15.10 -42.86 -65.16 NA NA -79.20 NA NA -46.64 Fund - Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Investor 12/12/01 8.33 NA NA -18.50 -4.47 -18.50 NA NA NA -17.43 NA NA -16.65 Destinations Aggressive Fund - ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------- Annual Percentage Non Annualized Annualized Change Percentage Change Percentage Change -------------------------------------------------------------------------------------------------- - ------------------------------------------------------------------------------------------------------------------------------ Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Incepti3nYrs. 5 yrs. Inception UNDERLYING INVESTMENT Inception Values 2000 2001 2002 To to to to to to to to To OPTIONS Date** 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 12/31/02 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Investor 12/12/01 8.69 NA NA -14.59 -3.50 -14.59 NA NA NA -13.63 NA NA -13.01 Destinations Moderately Aggressive Fund - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Investor 12/12/01 9.14 NA NA -9.60 -2.50 -9.60 NA NA NA -8.84 NA NA -8.43 Destinations Moderate Fund - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Investor 12/12/01 9.64 NA NA -4.15 -1.16 -4.15 NA NA NA -3.53 NA NA -3.36 Destinations Moderately Conservative Fund - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Investor 12/12/0110.05 NA NA 0.40 -0.11 0.40 NA NA NA 0.75 NA NA 0.71 Destinations Conservative Fund - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Money Market 11/10/81 13.35 6.03 3.60 1.21 0.08 1.21 4.86 11.18 22.71 268.66 3.60 4.18 6.37 Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Series-Capital 05/01/97 5.21 -19.33 -21.83 -15.93 -5.44 -15.93 -34.28 -46.98 39.95 77.18 -19.06 6.95 10.63 Appreciation Portfolio: Service Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Janus Aspen Series-Global 01/18/00 2.51 NA -37.31 -40.93 -12.36 -40.93 -62.97 NA NA -75.60 NA NA -37.99 Technology Portfolio: Service Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Janus Aspen 05/02/94 4.52 -16.94 -23.43 -25.76 -4.04 -25.76 -43.15 -52.78 0.92 92.76 -22.13 0.18 7.87 Series-International Growth Portfolio: Service Shares - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT 09/10/84 9.37 -11.66 -30.36 -31.16 -6.92 -31.16 -52.06 -57.65 -26.42 319.29 -24.90 -5.95 8.15 Growth Portfolio - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT 11/03/97 7.88 1.13 -1.51 -26.45 -4.72 -26.45 -27.56 -26.74 10.87 16.63 -9.85 2.08 3.03 Guardian Portfolio - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT 09/10/84 14.50 6.78 8.78 5.34 1.05 5.34 14.59 22.36 29.62 269.42 6.96 5.33 7.40 Limited Maturity Bond Portfolio: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Neuberger Berman AMT 02/22/94 12.51 0.70 -2.83 -24.14 -7.17 -24.14 -26.29 -25.77 -16.94 88.32 -9.46 -3.65 7.48 Partners Portfolio - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Aggressive 05/08/92 3.88 -11.24 -31.27 -27.79 -3.75 -27.79 -50.37 -55.95 -9.12 359.77 -23.91 -1.89 9.76 Growth Fund/VA: Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Bond Fund/VA: 04/30/85 15.26 6.10 7.79 9.08 1.80 9.08 17.57 24.74 31.20 336.74 7.65 5.58 8.70 Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Capital 04/30/85 11.76 -0.23 -12.58 -26.86 -7.57 -26.86 -36.06 -36.20 12.06 598.66 -13.91 2.30 11.58 Appreciation Fund/VA: Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Global 11/12/90 17.26 5.09 -12.04 -22.13 -6.15 -22.13 -31.51 -28.02 30.16 197.15 -10.38 5.41 9.39 Securities Fund/VA: Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Main Street(R) 07/05/95 6.61 -8.78 -10.16 -18.80 -5.08 -18.80 -27.05 -33.45 -15.19 86.47 -12.69 -3.24 8.68 Fund/VA: Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Oppenheimer Multiple 02/09/87 14.90 6.44 2.22 -10.40 -2.23 -10.40 -8.41 -2.52 16.23 300.91 -0.85 3.05 9.13 Strategies Fund/VA: Initial Class - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Strong Discovery Fund II, 05/08/92 11.86 4.39 4.08 -12.02 -5.22 -12.02 -8.42 -4.40 7.76 105.75 -1.49 1.51 7.01 Inc. - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Gartmore GVIT Mid Cap 06/30/95 3.58 -15.38 -30.31 -37.01 -7.60 -37.01 -56.10 -62.85 -21.36 -19.63 -28.12 -4.69 -4.14 Growth Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Strong Opportunity Fund 05/08/92 15.54 6.35 -3.48 -26.82 -6.85 -26.82 -29.37 -24.88 15.07 223.26 -9.10 2.85 11.65 II, Inc. - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Van Eck Worldwide Bond Fund 09/01/89 13.16 1.87 -5.10 21.66 6.01 21.66 15.46 17.61 22.24 101.18 5.56 4.10 5.38 - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Van Eck Worldwide Emerging 12/27/95 6.52 -41.87 -1.81 -2.90 -3.66 -2.90 -4.66 -44.57 -26.88 -18.84 -17.86 -6.07 -2.93 Markets Fund - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Van Eck Worldwide Hard 09/01/89 8.01 11.40 -10.44 -2.83 6.40 -2.83 -12.98 -3.06 -19.03 42.38 -1.03 -4.13 2.69 Assets Fund - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Van Kampen GVIT Multi 10/31/97 11.72 5.65 4.19 7.21 2.24 7.21 11.70 18.01 22.97 24.25 5.68 4.22 4.29 Sector Bond Fund: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Van Kampen UIF Emerging 06/16/97 12.25 11.39 10.10 9.22 2.57 9.22 20.25 33.95 24.12 25.08 10.23 4.42 4.12 Markets Debt Portfolio: Class I - ------------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------------ Van Kampen UIF US Real 07/03/94 19.80 28.06 9.84 -0.79 1.00 -0.79 8.98 39.55 19.18 120.43 11.75 3.57 11.13 Estate Portfolio: Class I - ------------------------------------------------------------------------------------------------------------------------------
The AIM Variable Insurance Funds, Inc.-AIM V.I. Basic Value Fund-Series I Shares, The AIM Variable Insurance Funds, Inc.-AIM V.I. Capital Appreciation Fund-Series I Shares, The AIM Variable Insurance Funds, Inc.-AIM V.I. Capital Development Fund-Series I Shares, AllianceBernstein Variable Products Series Fund, Inc.-AllianceBernstein Growth & Income Portfolio-Class A, AllianceBernstein Variable Products Series Fund, Inc.-AllianceBernstein Small Cap Value Portfolio-Class A, American Century Variable Portfolios II, Inc.-American Century VP Inflation Protection Fund-Class II, Dreyfus Variable Investment Fund-Developing Leaders Portfolio: Initial Shares, Federated Insurance Series-Federated American Leaders Fund II: Primary Shares, Federated Insurance Series-Federated Capital Appreciation Fund II: Primary Shares, Fidelity Variable Insurance Products Fund II-VIP II Investment Grade Bond Portfolio-Service Class, Fidelity Variable Insurance Products Fund III-VIP III Mid Cap Portfolio-Service Class, Franklin Templeton Variable Insurance Products Trust-Franklin Small Cap Value Securities Fund-Class 1, Franklin Templeton Variable Insurance Products Trust-Franklin Rising Dividends Securities Fund-Class 1, Franklin Templeton Variable Insurance Products Trust-Templeton Foreign Securities Fund-Class 1, Gartmore Variable Insurance Trust-Comstock GVIT Value Fund: Class I, Gartmore Variable Insurance Trust-Dreyfus GVIT International Value Fund-Class I, Gartmore Variable Insurance Trust-Federated GVIT High Income Bond Fund: Class I, Janus Aspen Series, Balanced Portfolio-Service Shares, Janus Aspen Series-Risk-Managed Large Cap Core Portfolio-Service Shares, MFS(R) Variable Insurance Trust-MFS Investors Growth Stock Series-Initial Class, MFS(R) Variable Insurance Trust-MFS Value Series-Initial Class, Neuberger Berman Advisors Management Trust-AMT Limited Maturity Bond Portfolio-Class I, Neuberger Berman Advisors Management Trust-AMT Fasciano Portfolio-Class S, Neuberger Berman Advisors Management Trust-AMT Mid Cap Growth Portfolio: Class S, Neuberger Berman Advisors Management Trust-AMT Socially Responsive Portfolio, Oppenheimer Variable Accounts Funds-Oppenheimer Main Street(R) Small Cap Fund/VA-Initial Class, Oppenheimer Variable Accounts Funds-Oppenheimer High Income Fund/VA-Initial Class, Putnam Variable Trust-Putnam VT Growth & Income Fund-Class IB, Putnam Variable Trust-Putnam VT International Equity Fund-Class IB, Putnam Variable Trust-Putnam VT Voyager Fund-Class IB and Van Kampen-The Universal Institutional Funds, Inc.-Core Plus Fixed Income Portfolio-Class I were added to the variable account on May 1, 2003. Therefore, no performance information is available. *Fund Inception Date is the date the mutual fund first became effective, which is not necessarily the same date the mutual fund was first made available through the variable account. For those 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 mutual funds would have achieved (reduced by any applicable variable account and policy charges, and mutual fund investment advisory fees and expenses) had they been offered as Sub-Accounts through the variable account for the period quoted. Certain 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 0.60% 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 "CHARGES" SECTION. THESE OTHER CHARGES INCLUDE DEDUCTIONS FROM PREMIUMS, COST OF INSURANCE CHARGES, SURRENDER CHARGES AND A MONTHLY ADMINISTRATIVE CHARGE. FUND PERFORMANCE WOULD BE LOWER THAN THAT REFLECTED IN THE PERFORMANCE TABLE IF THESE CHARGES WERE INCLUDED. Any current yield quotations of the GVIT Gartmore GVIT Money Market Fund: Class I, subject to Rule 482 of the Securities Act of 1933, will consist of a seven calendar day historical yield, carried at least to the nearest hundredth of a percent. The yield will be calculated by determining the net change, exclusive of capital changes, in the value of a hypothetical pre-existing account having a balance of one accumulation Unit at the beginning of the base period, subtracting a hypothetical charge reflecting deductions from contract owner accounts, and dividing the net change in account value by the value of the account at the beginning of the period to obtain a base period return, and multiplying the base period return by (365/7) or (366/7) in a leap year. GVIT Gartmore GVIT Money Market Fund: Class I's effective yield is computed similarly, but includes the effect of assumed compounding on an annualized basis of the current Unit value yield quotations of the GVIT Gartmore GVIT Money Market Fund: Class I. GVIT Gartmore GVIT Money Market Fund: Class I's yield and effective yield will fluctuate daily. Actual yields will depend on factors such as the type of instruments in the fund's portfolio, portfolio quality and average maturity, changes in interest rates, and the fund's expenses. Although the GVIT Gartmore GVIT Money Market Fund: Class I determines its yield on the basis of a seven day period, it may use a different time period on occasion. The yield quotes may reflect the expense limitation described in the GVIT Gartmore GVIT Money Market Fund: Class I's Prospectus and/or Statement of Additional Information. There is no assurance that the yields quoted on any given occasion will remain in effect for any period of time and there is no guarantee that the NAVs will remain constant. It should be noted that a policy owner's investment in the GVIT Gartmore GVIT Money Market Fund: Class I is not guaranteed or insured. Yields of other money market funds may not be comparable if a different base period or another method of calculation is used. Quotations of average annual total return and total return are based upon historical earnings and will fluctuate. Any quotation of performance is not a guarantee of future performance. Factors affecting a Sub-Account's performance include general market conditions, operating expenses and investment management. A contract owner's account when redeemed may be more or less than the original cost. TAX DEFINITION OF LIFE INSURANCE Section 7702(b)(1) of the Internal Revenue Code provides that if one of two alternate tests is met, a policy will be treated as life insurance for federal tax purposes. The two tests are referred to as the Cash Value Accumulation Test and the Guideline Premium/Cash Value Corridor Test. The tables below show the numeric requirements for Guideline Premium/Cash Value Corridor Test.. GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST TABLE OF APPLICABLE PERCENTAGES OF CASH VALUE - ----------------------------------------- ATTAINED AGE OF PERCENTAGE OF CASH INSURED VALUE - ----------------------------------------- - ----------------------------------------- 0-40 250% - ----------------------------------------- - ----------------------------------------- 41 243% - ----------------------------------------- - ----------------------------------------- 42 236% - ----------------------------------------- - ----------------------------------------- 43 229% - ----------------------------------------- - ----------------------------------------- 44 222% - ----------------------------------------- - ----------------------------------------- 45 215% - ----------------------------------------- - ----------------------------------------- 46 209% - ----------------------------------------- - ----------------------------------------- 47 203% - ----------------------------------------- - ----------------------------------------- 48 197% - ----------------------------------------- - ----------------------------------------- 49 191% - ----------------------------------------- - ----------------------------------------- 50 185% - ----------------------------------------- - ----------------------------------------- 51 178% - ----------------------------------------- - ----------------------------------------- 52 171% - ----------------------------------------- - ----------------------------------------- 53 164% - ----------------------------------------- - ----------------------------------------- 54 157% - ----------------------------------------- - ----------------------------------------- 55 150% - ----------------------------------------- - ----------------------------------------- 56 146% - ----------------------------------------- - ----------------------------------------- 57 142% - ----------------------------------------- - ----------------------------------------- 58 138% - ----------------------------------------- - ----------------------------------------- 59 134% - ----------------------------------------- - ----------------------------------------- 60 130% - ----------------------------------------- - ----------------------------------------- 61 128% - ----------------------------------------- - ----------------------------------------- 62 126% - ----------------------------------------- - ----------------------------------------- 63 124% - ----------------------------------------- - ----------------------------------------- 64 122% - ----------------------------------------- - ----------------------------------------- 65 120% - ----------------------------------------- - ----------------------------------------- 66 119% - ----------------------------------------- - ----------------------------------------- 67 118% - ----------------------------------------- - ----------------------------------------- 68 117% - ----------------------------------------- - ----------------------------------------- 69 116% - ----------------------------------------- - ----------------------------------------- 70 115% - ----------------------------------------- - ----------------------------------------- 71 113% - ----------------------------------------- - ----------------------------------------- 72 111% - ----------------------------------------- - ----------------------------------------- 73 109% - ----------------------------------------- - ----------------------------------------- 74 107% - ----------------------------------------- - ----------------------------------------- 75 105% - ----------------------------------------- - ----------------------------------------- 76 105% - ----------------------------------------- - ----------------------------------------- 77 105% - ----------------------------------------- - ----------------------------------------- 78 105% - ----------------------------------------- - ----------------------------------------- 79 105% - ----------------------------------------- - ----------------------------------------- 80 105% - ----------------------------------------- - ----------------------------------------- 81 105% - ----------------------------------------- - ----------------------------------------- 82 105% - ----------------------------------------- - ----------------------------------------- 83 105% - ----------------------------------------- - ----------------------------------------- 84 105% - ----------------------------------------- - ----------------------------------------- 85 105% - ----------------------------------------- - ----------------------------------------- 86 105% - ----------------------------------------- - ----------------------------------------- 87 105% - ----------------------------------------- - ----------------------------------------- 88 105% - ----------------------------------------- - ----------------------------------------- 89 105% - ----------------------------------------- - ----------------------------------------- 90 105% - ----------------------------------------- - ----------------------------------------- 91 104% - ----------------------------------------- - ----------------------------------------- 92 103% - ----------------------------------------- - ----------------------------------------- 93 102% - ----------------------------------------- - ----------------------------------------- 94 101% - ----------------------------------------- - ----------------------------------------- 95 101% - ----------------------------------------- - ----------------------------------------- 96 101% - ----------------------------------------- - ----------------------------------------- 97 101% - ----------------------------------------- - ----------------------------------------- 98 101% - ----------------------------------------- - ----------------------------------------- 99 101% - ----------------------------------------- - ----------------------------------------- 100 100% - ----------------------------------------- PART C. OTHER INFORMATION Item 27. Exhibits (a) Resolution of the Depositor's Board of Directors authorizing the establishment of the Registrant - Filed previously with initial registration statement (33-62795) and hereby incorporated by reference. (b) Not Applicable (c) Underwriting or Distribution of contracts between the Depositor and Principal Underwriter - Filed previously with the registration statement (333-27133) and hereby incorporated by reference. (d) The form of the contract - Filed previously with initial registration statement (33-62795) and hereby incorporated by reference. (e) The form of the contract application - Filed previously with initial registration statement (333-62795) and hereby incorporated by reference. (f) Articles of Incorporation of Depositor - Filed previously with initial registration statement (33-62795) and hereby incorporated by reference. (g) Reinsurance Contracts -Filed previously with registration statement (333-46338) and hereby incorporated by reference. (h) Participation Agreements - Filed previously with registration statement (333-46338) and hereby incorporated by reference. (i) Not Applicable (j) Not Applicable (k) Opinion of Counsel - Filed previously with Pre-Effective Amendment No. 1 to the registration statement (33-62795) and hereby incorporated by reference. (l) Not Applicable (m) Not Applicable (n) Independent Auditors' Consent - To be file via subsequent 485(b) filing. (o) Not Applicable (p) Not Applicable (q) Redeemability Exemption Procedures - Filed previously with registration statement (333-46338) and hereby incorporated by reference. Item 28. DIRECTORS AND OFFICERS OF THE DEPOSITOR W.G. Jurgensen, Director, Chairman of the Board and Chief Executive Officer Joseph J. Gasper, Director, President and Chief Operating Officer Patricia R. Hatler, Executive Vice President, General Counsel and Secretary Richard D. Headley, Executive Vice President Donna A. James, Executive Vice President-Chief Administrative Officer Michael C. Keller, Executive Vice President-Chief Information Officer Douglas C. Robinette, Executive Vice President-Corporate Strategy Robert A. Rosholt, Executive Vice President-Finance and Investments John R. Cook, Jr., Senior Vice President-Chief Communications Officer David A. Diamond, Senior Vice President-Corporate Strategy Philip C. Gath, Senior Vice President-Chief Actuary-Nationwide Financial David K. Hollingsworth, Senior Vice President-President-Nationwide Insurance Sales David R. Jahn, Senior Vice President-Product Management Richard A. Karas, Senior Vice President-Sales-Financial Services Gregory S. Lashutka, Senior Vice President-Corporate Relations Gary D. McMahan, Senior Vice President Michael D. Miller, Senior Vice President-NI Finance Brian W. Nocco, Senior Vice President and Treasurer Mark D. Phelan, Senior Vice President-Technology and Operations Kathleen D. Ricord, Senior Vice President-Marketing and Strategy John S. Skubik, Senior Vice President-Consumer Finance Mark R. Thresher, Senior Vice President-Chief Financial Officer Richard M. Waggoner, Senior Vice President-Operations Susan A. Wolken, Senior Vice President-Product Management and Nationwide Financial Marketing James G. Brocksmith, Jr., Director Henry S. Holloway, Director James F. Patterson, Director Gerald D. Prothro, Director Joseph A. Alutto, Director Donald L. McWhorter, Director Arden L. Shisler, Director Alex Shumate, Director Lydia M. Marshall, Director David O. Miller, Director The business address of the Directors and Officers of the Depositor is: One Nationwide Plaza Columbus, Ohio 43215
Item 29. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR REGISTRANT. *Subsidiaries for which separate financial statements are filed **Subsidiaries included in the respective consolidated financial statements ***Subsidiaries included in the respective group financial statements filed for unconsolidated subsidiaries ****Other subsidiaries - ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ 1717 Advisory Services, Inc. Pennsylvania Registered investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ 1717 Brokerage Services, Inc. Pennsylvania This company is registered as a broker-dealer. - ------------------------------------------------------------------------------------------------------------------------------------ 1717 Capital Management Company Pennsylvania The company is registered as a broker-dealer and investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ 1717 Insurance Agency of Massachusetts Established to grant proper licensing to Massachusetts Provident Mutual Companies in Massachusetts. - ------------------------------------------------------------------------------------------------------------------------------------ 1717 Insurance Agency of Texas Texas Established to grant proper licensing to Provident Mutual Companies in Texas. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Companies, Inc. (The) Texas This corporation acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Company (The) Texas The corporation is a third-party administrator providing record keeping services for 401(k) plans. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Investment Advisors, Inc. Texas The corporation is an investment advisor registered with the Securities and Exchange Commission - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Investment Services, Inc. Texas The corporation is a broker-dealer registered with the National Association of Securities Dealers, a self-regulatory body of the Securities and Exchange Commission - ------------------------------------------------------------------------------------------------------------------------------------ Affiliate Agency of Ohio, Inc. Ohio The corporation is an insurance agency marketing life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Affiliate Agency, Inc. Delaware The corporation is an insurance agency marketing life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ AGMC Reinsurance Ltd. Turks & Caicos The corporation is a captive reinsurer. Islands - ------------------------------------------------------------------------------------------------------------------------------------ AID Finance Services, Inc. Iowa The corporation is a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Document Solutions, Inc. Iowa The corporation provides general printing services to its affiliated companies as well as to unaffiliated companies. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED General Agency Company Iowa The corporation acts as a managing general agent and surplus lines broker for property and casualty insurance products. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Group Insurance Marketing Iowa The corporation engages in the direct Company marketing of property and casualty insurance products. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Group, Inc. Iowa The corporation is a property and casualty insurance holding company. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Property and Casualty Iowa The corporation underwrites general property and Insurance Company casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Allied Texas Agency, Inc. Texas The corporation acts as a managing general agent to place personal and commercial automobile insurance with CCMIC for the independent agency companies. - ------------------------------------------------------------------------------------------------------------------------------------ Allnations, Inc. Ohio The corporation engages in promoting, extending, and strengthening cooperative insurance organizations throughout the world. - ------------------------------------------------------------------------------------------------------------------------------------ AMCO Insurance Company Iowa The corporation underwrites general property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ American Marine Underwriters, Inc. Florida The corporation is an underwriting manager for ocean cargo and hull insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Asset Management Holdings, plc England and Wales The corporation is a holding company of a group engaged in the management of pension fund assets, unit trusts and other collective investment schemes, investment trusts and portfolios for corporate clients. - ------------------------------------------------------------------------------------------------------------------------------------ Audenstar Limited England To market insurance products and to carry on business in the fields of life, pension, house, motor, marine, fire, employers' liability, accident and other insurance; to act as insurance brokers and consultants and as agents for effecting insurance and obtaining policies in respect of all and every kind of risk and against death, injury or loss arising out of, or through, or in connection with any accidents and against loss or damage to real or personal property. - ------------------------------------------------------------------------------------------------------------------------------------ Cal-Ag Insurance Services, Inc. California The corporation is a small captive insurance brokerage firm serving principally, but not exclusively, the "traditional" agent producers of CalFarm Insurance Company. - ------------------------------------------------------------------------------------------------------------------------------------ CalFarm Insurance Agency California The corporation assists agents and affiliated companies in account completion for marketing CalFarm Products. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Calfarm Insurance Company California The corporation is a California-based multi-line insurance corporation that writes agricultural, commercial, personal and individual health coverages and benefits from the sponsorship of the California Farm Bureau. - ------------------------------------------------------------------------------------------------------------------------------------ Cap Pro Holding, Inc. Delaware This company operates as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Coda Capital Management, LLC Pennsylvania The company is a convertible bond manager. - ------------------------------------------------------------------------------------------------------------------------------------ Colonial County Mutual Texas The corporation underwrites non-standard automobile Insurance Company and motorcycle insurance and various other commercial liability coverage in Texas. - ------------------------------------------------------------------------------------------------------------------------------------ Cooperative Service Company Nebraska The corporation is an insurance agency that sells and services commercial insurance. The corporation also provides loss control and compliance consulting services and audit, compilation, and tax preparation services. - ------------------------------------------------------------------------------------------------------------------------------------ Corviant Corporation Delaware The purpose of the corporation is to create a captive distribution network through which affiliates can sell multi-manager investment products, insurance products and sophisticated estate planning services. - ------------------------------------------------------------------------------------------------------------------------------------ Damian Securities Limited England & Wales The corporation is engaged in investment holding. - ------------------------------------------------------------------------------------------------------------------------------------ Dancia Life S.A. Luxembourg The purpose of this company is to carry out, on its own behalf or on behalf of third parties, any insurance business including coinsurance, reinsurance relating to human life, whether undertaken in Luxembourg or abroad, all real estate business and all business relating to movable assets, all financial business, and other business related directly to the company's objectives which would promote or facilitate the realization of the company's objective. - ------------------------------------------------------------------------------------------------------------------------------------ Delfi Realty Corporation Delaware This is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ Depositors Insurance Company Iowa The corporation underwrites general property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Dinamica Participacoes SA Brazil The company participates in other companies related to the registrant's international operations. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Discover Insurance Agency, LLC California The purpose of the company is to sell property and casualty insurance products including, but not limited to, automobile or other vehicle insurance and homeowner's insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Discover Insurance Agency of Texas, Texas To sell property and casualty insurance products LLC including, but not limited to, automobile or other vehicle insurance and homeowner's insurance. - ------------------------------------------------------------------------------------------------------------------------------------ DVM Insurance Agency California The Company places pet insurance business written by Vetrinary Pet Insurance Company outside of California with National Casualty Company - ------------------------------------------------------------------------------------------------------------------------------------ F&B, Inc. Iowa The corporation is an insurance agency that places business not written by the Farmland Insurance Companies with other carriers. - ------------------------------------------------------------------------------------------------------------------------------------ Farmland Mutual Insurance Iowa The corporation provides property and casualty Company insurance primarily to agricultural businesses. - ------------------------------------------------------------------------------------------------------------------------------------ Fenplace Limited England & Wales Currently inactive - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Alabama The corporation is an insurance agency marketing Agency of Alabama, Inc. life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Ohio The corporation is an insurance agency marketing Agency of Ohio, Inc. life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Oklahoma The corporation is an insurance agency marketing Agency of Oklahoma, Inc. life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Texas The corporation is an insurance agency marketing Agency of Texas, Inc. life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Securities Oklahoma The corporation is a limited broker-dealer doing Corporation business solely in the financial institutions market. - ------------------------------------------------------------------------------------------------------------------------------------ Florida Records Administrator, Inc. Florida The corporation administers the deferred compensation plan for the public employees of the State of Florida. - ------------------------------------------------------------------------------------------------------------------------------------ Four P Finance Company Pennsylvania This is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ G.I.L. Nominees Limited England & Wales The company is dormant within the meaning of Section 249AA of the Companies Act of 1985 (English Law). - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore 1990 Limited England & Wales The company is engaged as a general partner in a limited partnership formed to invest in unlisted securities. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore 1990 Trustee Limited England & Wales The company is dormant within the meaning of Section 249AA of the Companies Act of 1985 (English Law). - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Asset Management, Inc. Delaware The company serves as a registered investment advisor/performing equity investment functions. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Capital Management Limited England & Wales The company is engaged in investment management and advisory services to business, institutional and private investors. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Distribution Services, Inc. Delaware The corporation is a limited broker-dealer. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Emerging Managers, LLC Delaware This is a limited liability company. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Fund Managers Jersey, The company is engaged in investment administration International Limited Channel Islands and support. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Fund Managers Limited England & Wales The company is engaged in authorized unit trust management. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Global Asset Management, Delaware This company operates as a holding company. Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Global Asset Delaware The company acts as a holding company for the Management Trust Gartmore Group and as a registered investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Global Investments, Inc. Delaware The company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Global Partners Delaware The partnership is engaged in investment management. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Indosuez UK Recovery Fund England & Wales The company is a general partner in two limited (G.P.) Limited partnerships formed to invest in unlisted securities. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment Limited England & Wales The company is engaged in investment management and advisory services to pension funds, unit trusts and other collective investment schemes, investment trusts and portfolios for corporate or other institutional clients. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment England & Wales The company is an investment holding company and Management plc provides services to other companies within the Gartmore Group. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment Services Germany The company is engaged in marketing support. GmbH - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment Services England The company isengaged in investment holding. Limited - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investor Services, Inc. Ohio The corporation provides transfer and dividend disbursing agent services to various mutual fund entities. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Japan Limited Japan The company is engaged in the business of investment management. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Morley and Associates, Oregon The corporation brokers or places book value Inc. maintenance agreements (wrap contracts) and guaranteed I contracts (GICs) for collective investment trusts and accounts. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Morley Capital Oregon The corporation is an investment advisor and stable Management, Inc. value money manager. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Morley Financial Oregon The corporation is a holding company. Services, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Mutual Fund Capital Delaware The trust acts as a registered investment advisor. Trust - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Nominees Limited England & Wales The company is dormant within the meaning of Section 249AA of the Companies Act 1985 (English Law). - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Pension Trustees England & Wales The company is the trustee of the Gartmore Limited Pension Scheme. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Riverview LLC Delaware The company provides customized solutions, in the form of expert advise and investment management services, to a limited number of institutional investors, through construction of hedge fund and alternative asset portfolios and their integration into the entire asset allocation framework. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore S.A. Capital Trust Delaware The trust acts as a registered investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Secretaries (Jersey) Ltd. Jersey, Channel The company acts as a nominee. The company is Islands dormant. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Securities Limited England & Wales The company is engaged in investment holding and is a partner in Gartmore Global Partners. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Trust Company Oregon The corporation is an Oregon state bank with trust power. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore U.S. Limited England & Wales The company is a joint partner in Gartmore Global Partners. - ------------------------------------------------------------------------------------------------------------------------------------ Gates, McDonald & Company Ohio The company provides services to employers for managing worker's and unemployment compensation matters and employee benefits costs. - ------------------------------------------------------------------------------------------------------------------------------------ Gates, McDonald & Company of Nevada The corporation provides self-insurance Nevada administration, claims examining and data processing services. - ------------------------------------------------------------------------------------------------------------------------------------ Gates, McDonald & Company of New New York The corporation provides worker's York, Inc. compensation/self-insured claims administration services to employers with exposure in New York. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ GatesMcDonald Health Plus, Inc. Ohio The corporation provides medical management and cost containment services to employers. - ------------------------------------------------------------------------------------------------------------------------------------ GGI MGT LLC Delaware The company is a passive investment holder in Newhouse Special Situations Fund I, LLC for the purpose of allocation of earnings to Gartmore management team as it relates to the ownership and management of Newhouse Special Situations Fund I, LLC. - ------------------------------------------------------------------------------------------------------------------------------------ Institutional Concepts, Inc. New York This company holds insurance licenses in numerous states. - ------------------------------------------------------------------------------------------------------------------------------------ Insurance Intermediaries, Inc. Ohio The corporation is an insurance agency and provides commercial property and casualty brokerage services. - ------------------------------------------------------------------------------------------------------------------------------------ Landmark Financial Services of New New York The corporation is an insurance agency marketing York, Inc. life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Lone Star General Agency, Inc. Texas The corporation acts as general agent to market non-standard automobile and motorcycle insurance for Colonial County Mutual Insurance Company. - ------------------------------------------------------------------------------------------------------------------------------------ Market Street Fund Delaware This is an open-end diversified management company that serves as an investment medium for the variable life policies and variable annuity of NLICA and NLAICA. - ------------------------------------------------------------------------------------------------------------------------------------ Market Street Investment Management Pennsylvania This is an inactive company. Company - ------------------------------------------------------------------------------------------------------------------------------------ MedProSolutions, Inc. Massachusetts The corporation provides third-party administration services for workers compensation, automobile injury and disability claims. - ------------------------------------------------------------------------------------------------------------------------------------ **National Casualty Company Wisconsin The corporation underwrites various property and casualty coverage, as well as individual and group accident and health insurance. - ------------------------------------------------------------------------------------------------------------------------------------ National Casualty Company of England This company is currently inactive. America, Ltd. - ------------------------------------------------------------------------------------------------------------------------------------ National Deferred Compensation, Ohio The corporation administers deferred compensation Inc. plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Advantage Mortgage Iowa The company is engaged in making Company (name change) residential (1-4 family) mortgage loans. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Affinity Insurance Kansas It is a shell insurer with no active policies or Company of America liabilities. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Affordable Housing, Ohio The company invests in affordable multi- family LLC housing projects throughout the U.S. - ------------------------------------------------------------------------------------------------------------------------------------ **Nationwide Agency, Inc. Ohio The corporation is an insurance agency. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Agribusiness Insurance Iowa The corporation provides property and casualty Company insurance primarily to agricultural businesses. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Arena, LLC Ohio The purpose of this company is to develop Nationwide Arena and to engage in related Arena district development activity. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Asset Management England & Wales This company acts as a holding company. Holdings, Ltd. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Assurance Company Wisconsin The corporation underwrites non-standard auto and motorcycle insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Capital Mortgage, LLC Ohio This is a holding company that funds/owns commercial mortgage loans for an interim basis, hedges the loans during the ownership period, and then sells the loans as part of a securitization to generate a profit. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Cash Management Ohio The corporation buys and sells investment securities Company of a short-term nature as agent for other corporations, foundations, and insurance company separate accounts. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Community Development Ohio The company hold investments in low-income housing Corporation, LLC funds. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Corporation Ohio The corporation acts primarily as a holding company for entities affiliated with NMIC and NMFIC. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Assignment Ohio The corporation acts as an administrator of Company structured settlements. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Institution Delaware The corporation engages in the business of an Distributors Agency, Inc. insurance agency. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Institution New Mexico The corporation engages in the business of an Distributors Agency, Inc. of New insurance agency. Mexico - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Institution Massachusetts The corporation engages in the business of an Distributors Insurance Agency, Inc. insurance agency. of Massachusetts - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Services Bermuda The corporation is a long-term insurer that issues (Bermuda) Ltd. variable annuity and variable life products to persons outside the United States and Bermuda. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Services Delaware The Trust's sole purpose is to issue and sell Capital Trust certain securities representing individual beneficial interests in the assets of the Trust. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Services Delaware The Trust's sole purpose is to issue and sell Capital Trust II certain securities representing individual beneficial interests in the assets of the Trust. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Services, Inc. Delaware The corporation acts primarily as a holding company for companies within the Nationwide organization that offer or distribute long-term savings and retirement products. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Sp. Z o.o Poland The corporation provides services to Nationwide Global Holdings, Inc. in Poland. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Foundation Ohio The corporation contributes to non-profit activities and projects. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide General Ohio The corporation transacts a general insurance Insurance Company business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Finance, LLC Ohio The company acts as a support company for Nationwide Global Holdings, Inc., in its international capitalization efforts. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Funds Luxembourg This company is formed to issue shares of mutual funds. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Holdings, Inc. Ohio The corporation is a holding company for international operations. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Holdings, Inc. Luxembourg It serves as an extension of Nationwide Global Luxembourg Branch Holdings, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Holdings-NGH Brazil The company acts as a holding company. Brazil Participacoes LTDA - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Japan, Inc. Delaware The company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Global Limited Hong Kong The corporation is a holding company for Asian operations. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Health Plans, Inc. Ohio The corporation operates as a Health Insurance Corporation (HIC). - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Holdings, SA Brazil The purpose of the company is to participate in other companies related to the registrant's international operations. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Home Mortgage Ohio This corporation performs the marketing function for Distributors, Inc. Nationwide Advantage Mortgage Company. - ------------------------------------------------------------------------------------------------------------------------------------ *Nationwide Indemnity Company Ohio Acts as a reinsurer by assuming business from NMIC and other insurers within the Nationwide Insurance organization. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Insurance Company Wisconsin The corporation is an independent agency personal of America lines underwriter of property/casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Insurance Company of Ohio The corporation transacts general insurance business Florida except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Insurance Sales Company, Ohio The company provides administrative services for the LLC product sales and distribution channels of Nationwide Mutual Insurance Company and its affiliated and subsidiary insurance companies. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide International California The corporation is a special risk, excess and Underwriters, Inc. surplus lines underwriting manager. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Investment Oklahoma It is a limited broker-dealer company doing business Services Corporation in the deferred compensation market and acts as an investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ **Nationwide Life and Annuity Ohio The corporation engages in underwriting Insurance Company life insurance and granting, purchasing, and disposing of annuities. - ------------------------------------------------------------------------------------------------------------------------------------ *Nationwide Life and Annuity Delaware The company insures against personal injury, Company of America disablement or death resulting from traveling or general accidents and against disablement resulting from sickness and every insurance appertaining thereto. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Life Assurance Thailand The company acts as a holding company. Company, Ltd. - ------------------------------------------------------------------------------------------------------------------------------------ *Nationwide Life Insurance Company Pennsylvania The company insures against personal injury, of America disablement or death resulting from traveling or general accidents and against disablement resulting from sickness and every insurance appertaining thereto. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Life Insurance Company Delaware The company insures against personal injury, of Delaware disablement or death resulting from traveling or general accidents and against disablement resulting from sickness and every insurance appertaining thereto. - ------------------------------------------------------------------------------------------------------------------------------------ **Nationwide Life Insurance Ohio This corporation provides individual life, group Company life and health insurance, fixed and variable annuity products, and other life insurance products. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Lloyds Texas The corporation markets commercial property insurance in Texas. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Management System, Ohio The corporation offers a preferred provider Inc. organization and other related products and services. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Martima Vida Brazil To operate as a licensed insurance company in the Previdencia S.A. categories of Life and Unrestricted Private Pension Plans in Brazil. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Mortgage Holdings, Ohio The corporation acts as a holding company. Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Mutual Fire Ohio The company engages in a general insurance and Insurance Company reinsurance business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Mutual Insurance Ohio The company engages in general insurance and Company reinsurance business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Properties, Ltd. Ohio The company is engaged in the business of developing, owning and operating real estate and real estate investments. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Property and Casualty Ohio The corporation engages in a general insurance Insurance Company business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Provident Distributors, Delaware This is an inactive company. Inc - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Provident Holding Pennsylvania This is a holding company for non-insurance Company subsidiaries. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Plan Ohio The corporation is an insurance agency providing Services, Inc. individual and group life, disability and health insurance and marketing retirement plan administration and investments. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Delaware The corporation markets and administers deferred Inc. compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Alabama The corporation provides retirement Inc. of Alabama products, marketing/education and administration to public employees and educators. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Arizona The corporation markets and administers deferred Inc. of Arizona. compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Arkansas The corporation markets and administers deferred Inc. of Arkansas compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Montana The corporation markets and administers deferred Inc. of Montana compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Nevada The corporation markets and administers deferred Inc. of Nevada compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, New Mexico The corporation markets and administers Inc. of New Mexico deferred compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Ohio The corporation provides retirement products, Inc. of Ohio marketing/education and administration to public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Oklahoma The corporation markets and administers Inc. of Oklahoma deferred compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, South Dakota The corporation markets and administers deferred Inc. of South Dakota compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Texas The corporation markets and administers deferred Inc. of Texas compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Wyoming The corporation markets and administers deferred Inc. of Wyoming compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Massachusetts The corporation markets and administers deferred Insurance Agency, Inc. compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Securities, Inc. Ohio The corporation is a registered broker-dealer and provides investment management and administrative services. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Services Company, Ohio The company performs shared services functions for LLC the Nationwide organization. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Services Sp. Zo.o Poland The corporation provides services to Nationwide Global Holdings, Inc. in Poland. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Strategic Investment Ohio The company acts as a private equity fund investing Fund, LLC in companies for investment purposes and to create strategic opportunities for Nationwide. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Towarzystwo Ubezpieczen Poland The corporation is authorized to engage in the na Zycie S.A. business of life insurance and pension products in Poland. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Trust Company, FSB This is a federal savings bank chartered by the Office of Thrift Supervision in the United States Department of the Treasury to exercise custody and fiduciary powers. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide UK Asset Management England & Wales The company acts as a holding company. Holdings, Ltd. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide UK Holding Company, England & Wales The company acts as a holding company. Ltd. - ------------------------------------------------------------------------------------------------------------------------------------ Newhouse Capital Partners, LLC Delaware The company invests in financial services companies that specialize in e-commerce and promote distribution of financial services. - ------------------------------------------------------------------------------------------------------------------------------------ Newhouse Special Situations Fund, Delaware The company plans to own and manage Contributed LLC Securities and to achieve long - term capital appreciation from the Contributed Securities and through investments in a portfolio of other equity investments in financial service by the Company to be undervalued. - ------------------------------------------------------------------------------------------------------------------------------------ NFS Distributors, Inc. Delaware The corporation acts primarily as a holding company for Nationwide Financial Services, Inc. distribution companies. - ------------------------------------------------------------------------------------------------------------------------------------ NFSB Investments, Inc. Bermuda The corporation buys and sells investment securities (new company Jul 02) for its own account in order to enhance the investment returns of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ NGH Luxembourg, S, A. Luxembourg The company acts primarily as a holding company for Nationwide Global Holdings, Inc. European operations. - ------------------------------------------------------------------------------------------------------------------------------------ NGH Netherlands, B.V. Netherlands The company acts as a holding company for other Nationwide overseas companies. - ------------------------------------------------------------------------------------------------------------------------------------ NGH UK, Ltd. United Kingdom The company functions as a support company for other Nationwide overseas companies. - ------------------------------------------------------------------------------------------------------------------------------------ NorthPointe Capital, LLC Delaware The company acts as a registered investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ PanEuroLife Luxembourg This Luxembourg-based life insurance company provides individual life insurance primarily in the United Kingdom, Belgium and France. - ------------------------------------------------------------------------------------------------------------------------------------ Pension Associates, Inc. Wisconsin The corporation provides pension plan administration and record keeping services and pension plan compensation consulting. - ------------------------------------------------------------------------------------------------------------------------------------ PNAM, Inc. Delaware This is a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Premier Agency, Inc. Iowa This corporation is an insurance agency. - ------------------------------------------------------------------------------------------------------------------------------------ Provestco, Inc. Delaware The company serves as a general partner in certain real estate limited partnerships invested in by NLICA. - ------------------------------------------------------------------------------------------------------------------------------------ RCMD Financial Services, Inc. Delaware This is a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Retention Alternatives, Ltd. Bermuda The company will write first dollar insurance policies in the following lines of insurance: workers compensation, general liability and automobile liability for its affiliates in the United States. - ------------------------------------------------------------------------------------------------------------------------------------ RF Advisors, Inc. Pennsylvania This is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ Riverview Agency Texas The corporation is an insurance agency licensed with the Texas Department of Insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Riverview International Group, Inc. Delaware This company is an investment advisor and a broker/dealer. - ------------------------------------------------------------------------------------------------------------------------------------ SBSC Ltd. (Thailand) Thailand This company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Scottsdale Indemnity Company Ohio The corporation engages in a general insurance business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Scottsdale Insurance Company Ohio The corporation primarily provides excess and surplus lines of property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Scottsdale Surplus Lines Arizona The corporation provides excess and surplus lines Insurance Company coverage on a non-admitted basis. - ------------------------------------------------------------------------------------------------------------------------------------ Siam Ar-Na-Khet Company Limited Thailand The company is a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Software Development Corp. Delaware The company once used to customize and sell IMACS, NLICA (fka Provident Mutual Life Insurance) direct response administration system. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ TBG Insurance Services California The corporation markets and administers executive Corporation benefit plans. - ------------------------------------------------------------------------------------------------------------------------------------ Vertboise, SA Luxembourg The company acts as a real property holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Veterinary Pet Insurance Company California This company provides pet insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Veterinary Pet Services, Inc. California This corporation acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Villanova Securities, LLC Delaware The purpose of the company is to provide brokerage services for block mutual fund trading for both affiliated and non-affiliated investment advisors and perform block mutual fund trading directly with fund companies. - ------------------------------------------------------------------------------------------------------------------------------------ VPI Services, Inc. California The company operates as a nationwide pet registry service for holders of Veterinary Pet Insurance policies, including pet idemnification and last pet recovery program. - ------------------------------------------------------------------------------------------------------------------------------------ Washington Square Administrative Pennsylvania This company provided administrative services to Services, Inc. NLACA. - ------------------------------------------------------------------------------------------------------------------------------------ Western Heritage Insurance Arizona The corporation underwrites excess and surplus lines Company of property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS ORGANIZATION (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - --------------------------------------------------------------------------------------------------------------------------------- * MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-A Ohio Nationwide Life and Issuer of Annuity Contracts Annuity Separate Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-B Ohio Nationwide Life and Issuer of Annuity Contracts Annuity Separate Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-C Ohio Nationwide Life and Issuer of Annuity Contracts Annuity Separate Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-D Ohio Nationwide Life and Issuer of Annuity Contracts Annuity Separate Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-7 Ohio Nationwide Life Separate Issuer of Annuity Contracts (formerly, Nationwide Fidelity Account Advisor Variable Account) - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-11 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-12 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-13 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-14 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-15 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - ---------------------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------------------- COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS ORGANIZATION (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - --------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-16 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-17 Ohio Nationwide Life Separate Issuer of Annuity Contracts Account - --------------------------------------------------------------------------------------------------------------------------------- Nationwide VL Separate Account-A Ohio Nationwide Life and Issuer of Life Insurance Annuity Separate Account Policies - --------------------------------------------------------------------------------------------------------------------------------- Nationwide VL Separate Account-B Ohio Nationwide Life and Issuer of Life Insurance Annuity Separate Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VL Separate Account-C Ohio Nationwide Life and Issuer of Life Insurance Annuity Separate Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VL Separate Account-D Ohio Nationwide Life and Issuer of Life Insurance Annuity Separate Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance Account Policies - --------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance Account Policies - --------------------------------------------------------------------------------------------------------------------------------- Nationwide VLI Separate Account-6 Ohio Nationwide Life Separate Issuer of Life Insurance Account Policies - ---------------------------------------------------------------------------------------------------------------------------------
(left side) ----------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | | | | Guaranty Fund |__________________________________________ | ------------- |__________________________________________ | Certificate | | ----------- | | | | Casualty | ----------------------- | | | | | | | ---------------------------- | - ---------------------------- | | NATIONWIDE GENERAL | | | F & B, INC. | | | INSURANCE COMPANY | | | | | | | | | Common Stock: 1 Share | | | Common Stock: 20,000 |___| | ------------- | | | ------------- Shares | | | |___| | | | | Farmland | | | Casualty-100% | | | Mutual-100% | | ---------------------------- | | | | | - ---------------------------- | ---------------------------- | | | NATIONWIDE PROPERTY | | - ---------------------------- | | AND CASUALTY | | | COOPERATIVE SERVICE | | | INSURANCE COMPANY | | | COMPANY | | | | | | | | | Common Stock: 60,000 |___| | Common Stock: 600 Shares | | | ------------- Shares | | | ------------- |___| | | | | | | Casualty-100% | | | Farmland | ---------------------------- | | Mutual-100% | | - ---------------------------- ---------------------------- | | NATIONWIDE ASSURANCE | | | COMPANY | | | (ASSURANCE) | | | | | | Common Stock: 1,750 |___| | ------------- Shares | | | | | | Casualty-100% | | ---------------------------- | | ---------------------------- | | NATIONWIDE AGRIBUSINESS | | | INSURANCE COMPANY | | | | | | Common Stock: 1,000,000 | | | ------------- Shares | | | |___| | Casualty-99.9% | | | Other Capital: | | | -------------- | | | Casualty-Pfd. | | ---------------------------- | | ---------------------------- | | NATIONAL CASUALTY | | | COMPANY | | | (NC) | | | | | | Common Stock: 100 Shares |___| | ------------- | | | | Casualty-100% | ---------------------------- | | ---------------------------- | NCC OF AMERICA, LTD. | | (INACTIVE) | | | | | | NC-100% | | | ----------------------------
NATIONWIDE(R) (middle) ------------------------------------------ | | | | | | __| NATIONWIDE MUTUAL |__________________________________________ __| INSURANCE COMPANY |__________________________________________ | (CASUALTY) | | | | | | | ------------------------------------------ | | | ______________________________________________________________________________________________________________________ | | | | | -------------------------------- | ------------------------------- | | | SCOTTSDALE | | | SCOTTSDALE | ---------------------------- | | INSURANCE COMPANY | | | INDEMNITY COMPANY | | NATIONWIDE | | | (SIC) | | | | | HEALTH PLANS, INC. (NHP) | | | | | | Common Stock: 50,000 | | | |___| Common Stock: 30,136 | |___| ------------- Shares | |___| Common Stock: 100 Shares | | | ------------- Shares | | | | | | ------------- | | | | | | | | | | | | Casualty-100% | | | Casualty-100% | | | Casualty-100% | | | (See Page 2) | | ------------------------------- | ---------------------------- | -------------------------------- | | | | ------------------------------- | ---------------------------- | -------------------------------- | | NATIONWIDE | | | NATIONWIDE MANAGEMENT | | | ALLIED | | | INDEMNITY COMPANY | | | SYSTEMS, INC. | | | GROUP, INC. | | | (NW INDEMNITY) | | | | | | (AGI) | | | Common Stock: 28,000 | |___| Common Stock: 100 Shares | | | | |___| ------------- Shares | | | ------------- | |___| Common Stock: 850 Shares | | | | | | | | | ------------- | | | | | | NHP-100% | | | | | | Casualty-100% | | ---------------------------- | | Casualty-100% | | ------------------------------- | | | (See Page 2) | | | ---------------------------- | -------------------------------- | ------------------------------- | | NATIONWIDE | | | | LONE STAR | | | AGENCY, INC. | | -------------------------------- | | GENERAL AGENCY, INC. | | | | | | RP&C | | | | |___| Common Stock: 100 Shares | | | INTERNATIONAL | | | Common Stock: 1,000 | | ------------- | | | | |___| ------------- Shares | | | |___| Common Stock: 963 | | | | | NHP-99% | | | ------------- Shares | | | | ---------------------------- | | | | | Casualty-100% | | | Casualty-23.88% | | ------------------------------- ---------------------------- | -------------------------------- | || | NATIONWIDE AFFINITY | | | || | INSURANCE COMPANY | | -------------------------------- | ------------------------------- | OF AMERICA | | | NATIONWIDE CAPITAL | | | COLONIAL COUNTY | | |___| | MORTGAGE, LLC | | | MUTUAL INSURANCE | | Common Stock: 500,000 | | | | | | COMPANY | | ------------- Shares | |___| Mutual-5% | | | | | | | | | | | Surplus Debentures: | | Casualty-100% | | | NW Indemnity-95% | | | ------------------- | ---------------------------- | | | | | | | -------------------------------- | | Assurance | ---------------------------- | | | Lone Star | | NEWHOUSE CAPITAL | | -------------------------------- | | | | PARTNERS, LLC | | | NATIONWIDE INSURANCE | | ------------------------------- | | | | COMPANY OF FLORIDA | | | Casualty-70% |___| | | | ------------------------------- | | |___| Common Stock: 10,000 | | | NATIONWIDE SERVICES | | GGAMI-19% | | | ------------ Shares | | | COMPANY, LLC | | | | | | | | | | Fire-10% | | | Casualty-100% | | | Single Member Limited | ---------------------------- | | | |---| Liability Company | | -------------------------------- | | | ---------------------------- | | | Casualty-100% | | | | | | | | | | | ------------------------------- | NATIONWIDE LLOYDS | | | | |===| | ------------------------------- | A TEXAS LLOYDS | | | AMERICAN MARINE | | | | | UNDERWRITERS, INC. | | | | | | ---------------------------- | | Common Stock: 20 Shares | |___| ------------- | | | | Casualty-100% | | | -------------------------------
(right side) ------------------------------------------ ------------------------ | | | NATIONWIDE | | | | FOUNDATION | | | | | | NATIONWIDE MUTUAL | | MEMBERSHIP | ==| FIRE INSURANCE COMPANY | | NONPROFIT | | (FIRE) | | CORPORATION | | | ------------------------ | | | | ------------------------------------------ | |_______________________________________________________________________________________________ | | | _______________________________________________________________________________ | | | | | | | | | | -------------------------------- | -------------------------------- | ------------------------ | | NATIONWIDE CASH | | | NATIONWIDE | | | | | | MANAGEMANT COMPANY | | | CORPORATION | | | RETENTION | | | | | | Common Stock: Control | | | ALTERNATIVES, LTD. | | | | | | ------------- ------- | | | | |___| Common Stock: 100 Shares | | | 13,642,432 100% | | | | | | ------------- | | | | | | | | | | | | Shares | | | Fire-100% | | | | | | ------ | | | | | | Casualty-100% | | | Casualty 12,992,922 | | ------------------------ | -------------------------------- | | Fire 649,510 | | | | | | | | -------------------------------- | | (See Page 3) | | | | | | -------------------------------- | | | | | | | | NATIONWIDE | | -------------------------------- | | | ARENA LLC | | | ALLNATIONS, INC. | | |---| | | | Common Stock: 12,248 Shares | | | | | | | ------------- | | | | | | | | | | | Casualty-90% | | | Casualty-16.2% | | | | | |___| Fire-16.2% |--- | -------------------------------- | | Preferred Stock: 1,466 Shares| | | | ---------------- | | -------------------------------- | | | | | NATIONWIDE INSURANCE | | | Casualty-6.8% | | | SALES COMPANY, LLC | | | Fire-6.8% | | | (NISC) | | -------------------------------- | | | | |---| Single Member Limited |__ | -------------------------------- | | Liability Company | | | | NATIONWIDE INTERNATIONAL | | | | | | | UNDERWRITERS | | | Casualty-100% | | | | | | -------------------------------- | | | Common Stock: 1,000 | | | | |___| ------------- Shares | | | | | | | | -------------------------------- | | | | | | INSURANCE | | | | Casualty-100% | | | INTERMEDIARIES, INC. | | | -------------------------------- | | | | | | | Common Stock: 1,615 | | | -------------------------------- | | ------------- Shares | | | | CALFARM INSURANCE | | | | | | | COMPANY | | | | | | | | | | NISC-100% | | | | Common Stock: 52,000 | | -------------------------------- | |___| ------------- Shares | | | | | | | -------------------------------- | | | | | | DISCOVER INSURANCE | | | | Casualty-100% | | | AGENCY LLC | | | -------------------------------- | | | | | | | Single Member Limited | | | -------------------------------- | | Liability Company |-- | | NATIONWIDE REALTY | | | | | | INVESTORS, LTD | | | NISC-100% | | | | | | | | | Casualty-95% | | -------------------------------- |---| | | | | NW Indemnity-5% | | -------------------------------- | | | | | DISCOVER INSURANCE | | -------------------------------- | | AGENCY OF | | | | TEXAS, LLC | | -------------------------------- | | | | | NATIONWIDE STRATEGIC | |---| Single Member Limited | | | INVESTMENT FUND, LLC | |---| Liability Company | | | | | | |---| Single Member Limited | | | | | Liability Company | -------------------------------- | | | Casualty-100% | | | -------------------------------- Subsidiary Companies -- Solid Line Contractual Association -- Double Line Limited Liability Company -- Dotted Line March 31, 2003
Page 1
(left side) ----------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | | | | Guaranty Fund |__________________________________________ | ------------- |__________________________________________ | Certificate | | ----------- | | | | Casualty | | (See Page 1)| | | ----------------------- _________________________________________________ | | | | | | - ---------------------------- | ---------------------------- | NATIONWIDE INSURANCE | | | AID FINANCE | | COMPANY OF AMERICA | | | SERVICES, INC. | | | | | (AID FINANCE) | | Common Stock: 12,000 | | | | | ------------- Shares |___| | Common Stock: 10,000 | | | | | ------------- Shares | | | | | | | AGI-100% | | | AGI-100% | - ---------------------------- | ---------------------------- | | - ---------------------------- | | | ALLIED DOCUMENT | | ---------------------------- | SOLUTIONS, INC. | | | ALLIED | | | | | GROUP INSURANCE | | Common Stock: 10,000 | | | MARKETING COMPANY | | ------------- Shares |___| | | | | | | Common Stock: 20,000 | | | | | ------------- Shares | | AGI-100% | | | | - ---------------------------- | | Aid Finance-100% | | ---------------------------- - ---------------------------- | | DEPOSITORS | | ---------------------------- | INSURANCE COMPANY | | | PREMIER | | (DEPOSITORS) | | | AGENCY | | | | | INC. | | Common Stock: 300,000 |___|______| | | ------------- Shares | | | Common Stock: 100,000 | | | | | ------------- Shares | | AGI-100% | | | | - ---------------------------- | | AGI-100% | | ---------------------------- - ---------------------------- | | ALLIED PROPERTY | | | AND CASUALTY | | | INSURANCE COMPANY | | | |___| | Common Stock: 300,000 | | ------------- Shares | | | | AGI-100% | - ----------------------------
NATIONWIDE(R) (middle) ------------------------------------------ | | | | | | _______________| NATIONWIDE MUTUAL |______________________________________________________ _______________| INSURANCE COMPANY |______________________________________________________ | (CASUALTY) | | (See Page 1) | | | | | ------------------------------------------ |__________________________________________________________________________ | | ---------------------------- | ALLIED | | GROUP, INC. | | (AGI) | | | | Common Stock: 850 Shares | | ------------- | | | | Casualty-100% | ---------------------------- | | | | _______________________________________________________________________________________________________________ | | | | | | ---------------------------- | ---------------------------- | NATIONWIDE MORTGAGE | | | AMCO | | HOLDINGS INC. | | | INSURANCE COMPANY | | (NMH) | | | (AMCO) | ___| |___| ___| | | | AGI-100% | | | Common Stock: 300,000 | | | | | | ------------- Shares | | | | | | | | ---------------------------- | | AGI-100% | | | ---------------------------- | ---------------------------- | | | NATIONWIDE HOME | | ---------------------------- | | MORTGAGE DISTRIBUTORS | | | ALLIED | | | INC. | | | GENERAL AGENCY | |___| | | | COMPANY | | | NMHI-100% | |___| | | | | | | Common Stock: 5,000 | | | | | | ------------- Shares | | ---------------------------- | | | | | | AMCO-100% | | ---------------------------- | ---------------------------- | | NATIONWIDE | | | | ADVANTAGE MORTGAGE | | ---------------------------- | | COMPANY (NAMC) | | | | |___| | | | ALLIED TEXAS | | Common Stock: 54,348 | | | AGENCY, INC. | | ------------- Shares | |___| | | | | | | | NMHI-89.75% | | | AMCO-100% | ---------------------------- | | | | | | | | | ---------------------------- ---------------------------- | | AGMC | | ---------------------------- ---------------------------- | REINSURANCE, LTD. | | | CALFARM INSURANCE | | CAL-AG INSURANCE | | | | | AGENCY | | SERVICES, INC. | | Common Stock: 11,000 | | | | | | | ------------- Shares | |___| Common Stock: 1,000 |___| Common Stock: 100 | | | | ------------- Shares | | ------------- Shares | | NAMC-100% | | | | | ---------------------------- | AMCO-100% | | CalFarm Insurance | | | | Agency-100% | ---------------------------- ----------------------------
(right) ------------------------------------------ | | | | | | _______________| NATIONWIDE MUTUAL | _______________| FIRE INSURANCE COMPANY | | (FIRE) | | (See Page 1) | | | | | ------------------------------------------ _____________________________________ | | ---------------------------- | SCOTTSDALE | | INSURANCE COMPANY | | (SIC) | | | | Common Stock: 30,136 | | ------------- Shares | | | | Casualty-100% | ---------------------------- | | | |____________________________________________________________ | | | | | | | | | ---------------------------- ---------------------------- | | SCOTTSDALE | | VETERINARY PET | | | SURPLUS LINES | | SERVICES, INC. | | | INSURANCE COMPANY | | (VPSI) | |___| | | | | | Common Stock: 10,000 | | Common Stock: 1,695,985 | | | ------------- Shares | | ------------- Shares | | | | | | | | SIC-100% | | SIC-5.1% | | ---------------------------- |___| | | | | Preferred-A 403,226 | | ---------------------------- | | ----------- Shares | | | WESTERN | | | | | | HERITAGE INSURANCE | | | SIC-100% | | | COMPANY | | | | |___| | | | Preferred-B 250,596 | | Common Stock: 4,776,076 | | | ----------- Shares | | ------------- Shares | | | | | | | | SIC-96.5% | | SIC-100% | | ---------------------------- ---------------------------- | | ---------------------------- | | VETERINARY PET | | | INSURANCE CO. | | | | |___| | | | VPSI-100% | | | | | | | | ---------------------------- | | ---------------------------- | | DVM INSURANCE | | | AGENCY, INC. | |___| | | | VPSI-100% | | | | | ---------------------------- | | ---------------------------- | | VPI SERVICES, INC. | |___| | | VPSI-100% | | | ---------------------------- Subsidiary Companies -- Solid Line Contractual Association -- Double Line Limited Liability Company -- Dotted Line March 31, 2003
Page 2 ________________________________________________________________________________ | | | | | | | --------------------------------- --------------------------------- | | NATIONWIDE TOWARZYSTWO | | NATIONWIDE GLOBAL HOLDINGS, | | | UBEZPIECZEN NA ZYCIE SA | | INC.-LUXEMBOURG BRANCH | | | | | (BRANCH) | | |Common Stock: 1,952,000 Shares | | |___ | |------------ | | | | | | | | | |NGH-100% | | Endowment Capital- | | --------------------------------- --------------------------------- | | | --------------------------------- --------------------------------- | | | | | | | NATIONWIDE | | NGH LUXEMBOURG S.A. | | | FINANCIAL SP. Z O.O. | | (LUX SA) | |___| | |Common Stock: 5,894 Shares| | |Common Stock: 40,950 Shares | ___|------------ |___ | |------------ | | | | | | | | | | | | | | | | | |NGH-100% | | |BRANCH-99.98% | | --------------------------------- | --------------------------------- | | | --------------------------------- | --------------------------------- | | SIAM AR-NA-KHET | | | NGH UK, LTD. | | | COMPANY LTD. (SIAM) | | | | |---| | | | | | | | |___| | | | | | | | | | | | | | | |NGH-48.99% | | | | | --------------------------------- | |LUX SA-100% | | | | --------------------------------- | | | | | | | --------------------------------- | | | NATIONWIDE LIFE ASSURANCE | | --------------------------------- | | COMPANY, LTD. | | | NATIONWIDE GLOBAL HOLDINGS | | | | | | -NGH BRASIL PARTICIPACOES, | | | | | | LTDA (NGH BRASIL) | | |NGH-24.3% | |___| | | |SIAM-37.7% | | | Shares | | --------------------------------- | | ------ | | | |LUX SA 6,164,899 | | | |NGH 1 | | | --------------------------------- | --------------------------------| | | | | SBSC LTD (THAILAND) | | | | |Common Stock: 24,500 | | --------------------------------- | |------------ | | | NATIONWIDE MARTIMA VIDA e | | |Shares | | | PREVIDENCIA SA | |---| | | | | |NGH-.01% | | |Common Stock: 134,822,225 | | | | |------------ Shares | |SIAM-48.98% | | | | --------------------------------- | | | | |DPSA-86.4% | | --------------------------------- --------------------------------- | | | PANEUROLIFE (PEL) | | --------------------------------- | | | | CLARIENT LIFE INSURANCE | |Common Stock: 1,300,000 Shares| |___| | |------------ |___| |Common Stock: 65,000 Shares | | | | |------------ | | | | | Shares | |LUX SA-100% | | | ------ | |LUF | | |LUX SA-100% 64,999 | --------------------------------- | |NGH 1 | | | --------------------------------- | | | --------------------------------- | --------------------------------- | VERTBOIS, SA | |___| | | | | | | | | DANICA LIFE S. A | | | | | | | | | | | | | | | | | | | | | | PEL-99.99% | | | | LUX SA-.01% | |LUX SA-100% | --------------------------------- --------------------------------- (middle) NATIONWIDE(R) ------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | -------------------- | |___________|NATIONWIDE MUTUAL |________________________ |Guaranty Fund |___________|INSURANCE COMPANY |________________________ |Certificate | | (CASUALTY) | | | | (See Page 1) | |Casualty | -------------------- | (See Page 1) | | ------------------- | ----------------------------------- | NATIONWIDE CORPORATION (NW CORP) | | Common Stock: Control | | ------------- ------- | | 13,642,432 100% | | | | Shares | | ------ | |Casualty 12,992,922 | |Fire 649,510 | --------------------------------- | | ___________________________________________________________________________________________________________ _______ | | | | --------------------------------- --------------------------------- --------------------------------- | | NATIONWIDE GLOBAL | | NATIONWIDE | | NATIONWIDE FINANCIAL | | | HOLDINGS, INC. (NGH) | | SECURITIES, INC. | | SERVICES, INC. (NFS) | | | | | | | | _______|___|Common Stock: 1 Share | |Common Stock: 7,676 Share | |Common Stock: Control | | |------------ | |------------ | |------------ ------- | | | | | | |Class A Public-100% | | | | | | |Class B NW Corp-100% | | |NW Corp.-100% | |NW Corp.-100% | | (See Page 4) | | --------------------------------- --------------------------------- --------------------------------- | | --------------------------------- | | NATIONWIDE GLOBAL LIMITED | | | | | |Common Stock: 20,343,752 Shares| |___|------------ | | | Shares | | | ------ | | |NGH 20,343,751 | | |LUX SA 1 | | --------------------------------- | | --------------------------------- | | NGH | | | NETHERLANDS B.V. | | | | |___|Common Stock: 40 Shares| | |------------ | | | | | | | | |NGH-100% | | --------------------------------- | | | --------------------------------- | | NATIONWIDE GLOBAL | | | JAPAN, INC. | |___| | | |Common Stock: 100 Shares| | |------------ | | | | | |NGH - 100% | | --------------------------------- | | --------------------------------- | | NATIONWIDE | | | SERVICES SP. Z O.O. | | | | | |Common Stock: 80 Shares| |___|------------ | | | | | | | | |NGH-100% | | --------------------------------- | --------------------------------- | | NATIONWIDE GLOBAL | | | FINANCE, LLC | | | | |---| Single Member Limited | | Liability Company | | | | | |NGH-100% | ---------------------------------
(right side) ------------------------- |NATIONWIDE MUTUAL | _________________________________|FIRE INSURANCE COMPANY | _________________________________| (FIRE) | | (See Page 1) | ------------------------- ________________________________________________________________ | | | | --------------------------------- --------------------------------- | GARTMORE GLOBAL ASSET | | GATES, MCDONALD | | MANAGEMENT TRUST | | & COMPANY (GATES) | | (GGAMT) | | | | | _____|Common Stock: 254 Shares| | | | |------------ | | | | | | |NW Corp-100% | | | | | (See Page 6) | | |NW Corp.-100% | --------------------------------- | --------------------------------- | | | --------------------------------- | | MEDPROSOLUTIONS, INC. | | | | | | | |____| | | | | | | | | |Gates-100% | | --------------------------------- | | | --------------------------------- | | GATES, MCDONALD & | | | COMPANY OF NEW YORK, INC. | | | | |____|Common Stock: 3 Shares | | |------------ | | | | | | | | |Gates-100% | | --------------------------------- | | --------------------------------- | | GATES, MCDONALD & | | | COMPANY OF NEVADA | | | | | |Common Stock: 40 Shares| |____|------------ | | | | | | | | |Gates-100% | | --------------------------------- | | --------------------------------- | | GATESMCDONALD | | | HEALTH PLUS, INC. | | | | |____|Common Stock: 200 Shares| |------------ | | | |Gates-100% | --------------------------------- Subsidiary Companies -- Solid Line Contractual Association -- Double Line Limited Liability Company -- Dotted Line March 31, 2003 Page 3 (left side) ------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | | |________________________ |Guaranty Fund |________________________ |Certificate | | | |Casualty | | (See Page 1) | -------------------- __________________________________________________________________________________________________ | | | - --------------------------- ---------------------------------- | ----------------------------- | NATIONWIDE FINANCIAL | | NATIONWIDE LIFE INSURANCE | | | TBG INSURANCE | | SERVICES CAPITAL TRUST | | COMPANY (NW LIFE) | | | SERVICES CORPORATION | | | | | | | | | Preferred Stock: | ___| Common Stock: 3,814,779 Shares | |___| | | --------------- | | | ------------ | | | | | | | | | | | | | | | | | | | | | NFS-100% | | | NFS-100% | | | NFS-63% | - --------------------------- | ---------------------------------- | ----------------------------- | | | | ----------------------------- | ---------------------------------- | | CAP PRO HOLDING, INC. | | | NATIONWIDE LIFE AND | | | | | | ANNUITY INSURANCE COMPANY | | | | | | | | | | |__| Common Stock: 66,000 Shares | |___| | | | ------------ | | | | | | | | | | NW Life-100% | | NFS-63% | | ---------------------------------- ----------------------------- | | ---------------------------------- | | NATIONWIDE INVESTMENT | | | SERVICES CORPORATION | | | | |__| Common Stock: 5,000 Shares | | | ------------ | | | | | | | | | | NW Life-100% | | ---------------------------------- | | ---------------------------------- | | NATIONWIDE FINANCIAL | |__| ASSIGNMENT COMPANY | | | | | | NW LIFE-100% | | ---------------------------------- | | ---------------------------------- | | NATIONWIDE PROPERTIES LTD. | | | | | | Units: | |__| ----- | | | NW LIFE-97.6% | | | Casualty-2.4% | | ---------------------------------- | | ---------------------------------- | | NATIONWIDE COMMUNITY | | | DEVELOPMENT CORP., LLC | | | | |--| Units: | | | ----- | | | NW LIFE-67% | | | NW Indemnity-33% | | ---------------------------------- | | ---------------------------------- | | NATIONWIDE AFFORDABLE | | | HOUSING, LLC | |--| | | NW Life-45% | | NW Indemnity-45% | ----------------------------------
(middle) NATIONWIDE(R) --------------------- ______________________| NATIONWIDE MUTUAL |_________________________________ ______________________| INSURANCE COMPANY |_________________________________ | (CASUALTY) | | | (See Page 1) | | --------------------- | | --------------------------------------------- | NATIONWIDE CORPORATION (NW CORP) | | Common Stock: Control: | | ------------ ------- | | 13,642,432 100% | | Shares | | ------ | | Casualty 12,992,922 | | Fire 649,510 | --------------------------------------------- | | ------------------------------------ | NATIONWIDE FINANCIAL | | SERVICES, INC. (NFS) | | Common Stock: Control | | ------------ ------- | | Class A Public-100% | | Class B NW Corp-100% | ------------------------------------ | | _________________________________________________________________________________________________________________________ | | | ----------------------------- ---------------------------- ----------------------------------- | NATIONWIDE TRUST | | NFS DISTRIBUTORS, INC. | | NATIONWIDE FINANCIAL | | COMPANY, FSB | | (NFSDI) | | SERVICES CAPITAL TRUST II | | | | | | | | Common Stock: 2,800,000 | | | | | | ------------ Shares | | | | | | | | | | | | | | | | | | NFS-100% | | NFS-100% | | NFS-100% | ----------------------------- ---------------------------- ----------------------------------- | | _____________________________________________________________________________________________ | | | | | | | | ----------------------------- ---------------------------- | ----------------------------------- | NATIONWIDE FINANCIAL | | NATIONAL DEFERRED | | | | | INSTITUTION DISTRIBUTORS | | COMPENSATION, INC. | | | THE 401(K) COMPANIES, INC. | | AGENCY, INC. (NFIDAI) | | | | | (401(K)) | | | | | | | | | Common Stock: 1,000 Shares| | | | | | | ------------ | | | | | | | | | | | | | | NFSDI-100% | | NFSDI-100% | | | NFSDI-100% | ----------------------------- --------------------------- | ----------------------------------- ||| || | | --------------------------------- ||| ----------------------------- || -------------------------------- | | FINANCIAL HORIZONS | ||| | | || | NATIONWIDE RETIREMENT | | | DISTRIBUTORS AGENCY | ||| | | || | PLAN SERVICES, INC. | | | OF ALABAMA, INC. | ||| | FLORIDA | || | | | | Common Stock: 10,000 Shares |_||| | RECORDS |_|| | Common Stock: Control | | | ------------ | ||| | ADMINISTRATOR, INC |__| | ------------- ------- | | | | ||| | | | Class A NFS-100% | | | | ||| | | | Class B NFSDI-100% | | | | ||| | | | | | | NFIDAI-100% | ||| | | | | | --------------------------------- ||| ----------------------------- -------------------------------- | ||| | --------------------------------- ||| ----------------------------- -------------------------------- | | LANDMARK FINANCIAL | ||| | | | 401(k) INVESTMENT | | | SERVICES OF | ||| | | | SERVICES, INC. | | | NEW YORK, INC. | ||| | FINANCIAL HORIZONS | | | | | Common Stock: 10,000 Shares | |||_| DISTRIBUTORS | |Common Stock: 1,000,000 Shares|___| | ------------ |_|||_| AGENCY OF OHIO, INC | |------------- | | | | ||| | | | | | | | ||| | | | | | | NFIDAI-100% | ||| | | |401(k)-100% | | --------------------------------- ||| ----------------------------- -------------------------------- | ||| | --------------------------------- ||| ----------------------------- -------------------------------- | | FINANCIAL HORIZONS | ||| | | | 401(k) INVESTMENT | | | SECURITIES CORP. | ||| | | | ADVISORS, INC. | | | | ||| | FINANCIAL HORIZONS | | | | | Common Stock: 10,000 Shares | |||_| DISTRIBUTORS | |Common Stock: 1,000 Shares |___| | ------------ |_|||_| AGENCY OF | |------------- | | | | ||| | OKLAHOMA, INC | | | | | | ||| | | | | | | NFIDAI-100% | ||| | | |401(k)-100% | | --------------------------------- ||| ----------------------------- -------------------------------- | ||| | --------------------------------- ||| ----------------------------- -------------------------------- | | AFFILIATE AGENCY, INC. | ||| | | | THE 401(k) COMPANY | | | | ||| | | | | | | Common Stock: 100 Shares | ||| | FINANCIAL HORIZONS |Common Stock: 855,000 Shares | | | ------------ |_|||_| DISTRIBUTORS | |------------- |___| | | |||_| AGENCY OF TEXAS, INC | | | | | | ||| | | | | | | NFIDAI-100% | ||| | | |401(k)-100% | | --------------------------------- ||| ----------------------------- -------------------------------- | ||| | --------------------------------- ||| ------------------------------ -------------------------------- | | NATIONWIDE FINANCIAL | ||| | AFFILIATE AGENCY | | | | | INSTITUTION DISTRIBUTORS | ||| | OF OHIO, INC. | | | | |INSURANCE AGENCY, INC. OF MASS.| |||_| | | RIVERVIEW AGENCY, INC. |___| | Common Stock: 100 Shares |_||__| Common Stock: 750 Shares | | |___| | ------------ | | | ------------ | | | | | | | | | | | NFIDAI-100% | | | NFIDAI-100% | | | --------------------------------- | ------------------------------ -------------------------------- | --------------------------------- | | NATIONWIDE FINANCIAL | | | INSTITUTION DISTRIBUTORS | | | AGENCY, INC. OF NEW MEXICO | | | Common Stock: 100 Shares |_| | ------------ | | | | NFIDAI-100% | ---------------------------------
(right side) ------------------------- | NATIONWIDE MUTUAL | ____________| FIRE INSURANCE COMPANY | ____________| (FIRE) | | (See Page 1) | -------------------------- _______________________________________________________________________________________________________________ | | | -------------------------------- ----------------------------- ------------------------------- | PENSION ASSOCIATES, INC. | | NATIONWIDE LIFE INSURANCE | | NATIONWIDE FINANCIAL | | | | COMPANY OF AMERICA | | SERVICES, (BERMUDA) LTD. | | Common Stock: 1,000 Shares | | (NLICA) | | (NFSB) | | ------------ | | | | Common Stock: 250,000 Shares | | | | | | | | | | | | | | NFS-100% | | NFS-100% (See Page 5)| | NFS-100% | -------------------------------- ----------------------------- ------------------------------- | _______________________________________ | | | -------------------------------- -------------------------------- | NATIONWIDE RETIREMENT | | NFSB INVESTMENTS LTD. | | SOLUTIONS, INC. (NRS) | | | | | | Common Stock: 12,000 Shares | | Common Stock: 236,494 Shares |__ | ------------ | | ------------- | | | | | | | | | | NFSDI-100% | | | NFSB-100% | -------------------------------- | -------------------------------- | | -------------------------------- | ----------------------------- | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF | | ALABAMA | | | NEW MEXICO | | Common Stock: 10,000 Shares |_|_| Common Stock: 1,000 Shares| | ------------ | | | ------------ | | | | | | | NRS-100% | | | NRS-100% | -------------------------------- | ----------------------------- | -------------------------------- | ----------------------------- | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF | | ARIZONA | | | SO. DAKOTA | | Common Stock: 1,000 Shares |_|_| Common Stock: 1,000 Shares| | ------------ | | | ------------ | | | | | | | NRS-100% | | | NRS-100% | -------------------------------- | ----------------------------- | -------------------------------- | ----------------------------- | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF | | ARKANSAS | | | WYOMING | | Common Stock: 50,000 Shares |_|_| Common Stock: 500 Shares | | ------------ | | | ------------ | | | | | | | NRS-100% | | | NRS-100% | -------------------------------- | ----------------------------- | -------------------------------- | ----------------------------- | NATIONWIDE RETIREMENT | | | | | SOLUTIONS, INS. | | | | | AGENCY, INC. | |_| NATIONWIDE RETIREMENT | | Common Stock: 1,000 Shares |_|_| SOLUTIONS, INC. OF | | ------------ | | | OHIO | | | | | | | NRS-100% | | | | -------------------------------- | ----------------------------- | -------------------------------- | ----------------------------- | NATIONWIDE RETIREMENT | | | | | SOLUTIONS, INC. OF | | | | | MONTANA | | | NATIONWIDE RETIREMENT | | | |_| SOLUTIONS, INC. OF | | Common Stock: 500 Shares |_|_| OKLAHOMA | | ------------ | | | | | | | | | | NRS-100% | | | | ------------------------------- | ----------------------------- | -------------------------------- | ----------------------------- | NATIONWIDE RETIREMENT | | | | | SOLUTIONS, INC. OF | | | | | NEVADA | | | NATIONWIDE RETIREMENT | | Common Stock: 1,000 Shares | |_| SOLUTIONS, INC. OF | | ------------ |_|_| TEXAS | | | | | | NRS-100% | | | -------------------------------- -----------------------------
Subsidiary Companies -- Solid Line Contractual Association -- Double Line Limited Liability Company -- Dotted Line March 31, 2003 Page 4 (left side) NATIONWIDE(R) --------------------- -------------------------- | FARMLAND MUTUAL |___________| NATIONWIDE MUTUAL |____________________________ | INSURANCE COMPANY |___________| INSURANCE COMPANY |____________________________ | | | (CASUALTY) | | | Guaranty Fund | | (See Page 1) | | | ------------- | -------------------------- | | Certificate | | | ----------- | | | | | | Casualty | | | (See Page 1) | | --------------------- | | | | ------------------------------------------ | NATIONWIDE CORPORATION (NW CORP) | | | | Common Stock: Control: | | ------------- -------- | | 13,642,432 100% | | | | Shares | | ------ | Casualty 12,992,922 | | Fire 649,510 | ------------------------------------------ | | | --------------------------------- | NATIONWIDE FINANCIAL | | SERVICES, INC. (NFS) | | | | Common Stock: Control | | ------------- ------- | | Class A Public - 100% | | Class B NW Corp - 100%| --------------------------------- | | | ---------------------------------- | NATIONWIDE LIFE INSURANCE | | COMPANY OF AMERICA | _______________________________________| (NLICA) | | | | | | | | NFS - 100% | | | ---------------------------------- | | | | | | | | | ----------------------------- ----------------------------- ----------------------- | NATIONWIDE LIFE AND | | NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | ANNUITY COMPANY OF | | COMPANY OF DELAWARE | | PROVIDENT HOLDING | | AMERICA | | | ___| COMPANY |___ | | | | | | (NPHC) | | | | | | | | | NLICA - 100% | | NLICA - 100% | | | NLICA - 100% | ----------------------------- ----------------------------- | ----------------------- | | ----------------------------- | ----------------------- | WASHINGTON SQUARE | | | FOUR P FINANCE | | ADMINISTRATIVE | | | COMPANY | | SERVICES, INC. |__|__| | | | | | | | NPHC - 100% | | | NPHC - 100% | ----------------------------- | ----------------------- | | ----------------------------- | ----------------------- | | | | | | SOFTWARE | | | NATIONWIDE | | DEVELOPMENT | | | PROVIDENT | | CORP. |__|__| DISTRIBUTORS, INC. | | | | | | | | | | | | NPHC - 100% | | | NPHC - 100% | ----------------------------- | ----------------------- | | ----------------------------- | ----------------------- | RF ADVISERS, INC. | | | DELFI REALTY | | | | | CORPORATION | | | | | | | |__|__| | | NPHC - 100% | | | NPHC - 100% | ----------------------------- | ----------------------- | | ----------------------------- | ----------------------- | PNAM, INC. | | | INSTITUTIONAL | | | | | CONCEPTS, INC. | | |__|__| | | | | | | | NPHC - 100% | | | NPHC - 100% | ----------------------------- | ----------------------- | | ----------------------------- | ----------------------- | PROVESTCO, INC. | | | 1717 CAPITAL | | | | | MANAGEMENT COMPANY |___ | |__|__| |___ | | | | | NPHC - 100% | | NPHC - 100% | ----------------------------- -----------------------
(right side) ------------------------------------- | NATIONWIDE MUTUAL | __________| FIRE INSURANCE COMPANY | __________| (FIRE) | | (See Page 1) | ------------------------------------- ----------------------------- ----------------------------- | RCMD FINANCIAL | | 1717 BROKERAGE | | SERVICES, INC. | | SERVICES, INC. | | (RCMD) | | (BSI) | _____| |___| | | | | | | | | NPHC - 100% | | RCMD - 100% | | ----------------------------- ----------------------------- | | | | | | | ----------------------------- ----------------------------- | | 1717 ADVISORY | | 1717 INSURANCE | | | SERVICES, INC. | | AGENCY OF | | | | | MASSACHUSETTS, INC. | | | | | | | | RCMD - 100% | | BSI - 100% | | ----------------------------- ----------------------------- | | | ----------------------------- | | MARKET STREET | | | INVESTMENT | |__| MANAGEMENT COMPANY | | | | NPHC - 100% | ----------------------------- ----------------------------- | | ___| 1717 INSURANCE | ___| AGENCY OF TEXAS, INC. | | | ----------------------------- Subsidiary Companies - Solid Line Contractual Association - Double Line Limited Liability Company - Dotted Line March 31, 2003 Page 5 (left side) --------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | | | |Guaranty Fund | |------------- |_______________________ |Certificate |_______________________ |----------- | | | |Casualty | | (See Page 1) | --------------------- _________________________________________________________________ | | | _____________ --------------------------- | | | | AUDENSTAR LIMITED | | --------------------------- | | (AL) | | | NATIONWIDE ASSET | | | | | | MANAGEMENT HOLDINGS, LTD. | | | | | | (NAMHL) | | | | | | | | | GGAMT - 100% | | | | | --------------------------- | | GGAMT - 100% | | | | --------------------------- | --------------------------- | | | | RIVERVIEW INTERNATIONAL | | --------------------------- | | GROUP, INC. | | | NATIONWIDE UK ASSET | | | (RIG) | | | MANAGEMENT HOLDINGS, LTD. | | | |__| | (NUKAMHL) | | | | | | | | GGAMT - 79% | | | | | AL - 21% | | | | --------------------------- | NAMHL - 100% | | | --------------------------- | | | | --------------------------- --------------------------- | | GARTMORE RIVERVIEW, LLC | | NATIONWIDE UK HOLDING | | | | | COMPANY, LTD. | | | | | (NUKHCL) | | | | | | | | | | | | | RIG - 70% | | NUKAMHL - 96.37% | | --------------------------- --------------------------- | | | --------------------------- | | ASSET MANAGEMENT | | | HOLDINGS PLC | | | (AMH) | | | | | | | | | NUKHCL - 100% | | --------------------------- | | | --------------------------- | | GARTMORE INVESTMENT | | | MANAGEMENT PLC | | | (GIM) |__| | | | AMH - 99.99% | | GNL - .01% | --------------------------- (middle) NATIONWIDE(R) ------------------- | NATIONWIDE MUTUAL |____________________________________________________________________________ | INSURANCE COMPANY |____________________________________________________________________________ | (CASUALTY) | | | (See Page 1) | | ------------------- | ---------------------------------------- | NATIONWIDE CORPORATION (NW CORP) | | Common Stock: Control: | | ------------ ------- | | 13,642,432 100% | | Shares | | Casualty 12,992,922 | | Fire 649,510 | ---------------------------------------- | | ------------------------------------- | GARTMORE GLOBAL | | ASSET MANAGEMENT | | TRUST (GGAMT) | | | | NW Corp.-100% | ------------------------------------- | | ________________________________________________________________________________________________ ________________________________________________________________________________________________ | | -------------------------- -------------------------- | -------------------------- | GARTMORE INVESTMENT LTD. | | GARTMORE INVESTMENT | | | GARTMORE FUND | | (GIL) | | SERVICES LTD. | | | MANAGERS LTD. | |__ | | ___| (GISL) | |__| (GFM) | | | | | | | | | | | | GIM - 99.9% | | | GIM - 80% | | | GIM - 99.99% | | | GNL - 0.1% | | | GNL - 20% | | | GNL - .01% | | -------------------------- | -------------------------- | -------------------------- | | | | | | -------------------------- | -------------------------- | -------------------------- | | GARTMORE JAPAN | | | | | | | | | LIMITED | | | GARTMORE INVESTMENT | | | FENPLACE LIMITED | | | | | | SERVICES GMBH | | | | | | | |__| | | | | | | | | | | | | | | | GIL - 100% | | | | | | GFM - 100% | | | | | | GISL - 100% | | | | | -------------------------- | -------------------------- | -------------------------- | | | | -------------------------- | -------------------------- | -------------------------- | | GARTMORE 1990 LTD. | | | GARTMORE FUND MANAGERS | | | GARTMORE SECURITIES LTD. | | | | | | INTERNATIONAL LIMITED | | | (GSL) | |___| | |__| (GFMI) | |__| | | | | | | | | | | GIM - 50% | | GISL - 99.99% | | GIM - 99.99% | | | GSL - 50% | | GSL - .01% | | GNL - .01% | | -------------------------- -------------------------- -------------------------- | | | -------------------------- -------------------------- | | GARTMORE INDOSUEZ UK | | GARTMORE SECRETARIES | | | RECOVERY FUND (G.P.) LTD.| | (JERSEY) LTD. | |___| | | | | | | | GFMI - 94% | | | GIM - 50% | | GSL - 3% | | | GNL - 50% | | GIM - 3% | | -------------------------- -------------------------- | | -------------------------- | |GARTMORE 1990 TRUSTEE LTD.| | | (GENERAL PARTNER) | |___| | | | | GIM - 50% | | GSL - 50% | --------------------------
------------------------------------- | NATIONWIDE MUTUAL | | FIRE INSURANCE COMPANY | __________| (FIRE) | | (See Page 1) | ------------------------------------- ___________________________________________________________________ | _________________________________________________ | | | | | -------------------------- -------------------------- | -------------------------- | | DAMIAN SECURITIES LTD. | | GARTMORE CAPITAL | | | GARTMORE GLOBAL | | | | | MANAGEMENT LTD. | | | INVESTMENT, INC. (GGI) | |__| | | (GCM) | |__| | | | | | | | | See Page 7 | | | GIM - 50% | | GIM - 99.99% | | | | | | GSL - 50% | | GSL - 0.1% | | | | | -------------------------- -------------------------- | -------------------------- | | | -------------------------- | -------------------------- -------------------------- | | GARTMORE GLOBAL | | | GARTMORE NOMINEES LTD. | | GARTMORE U.S. LTD. | | | VENTURES, INC. | | | (GNL) | | (GUS) | |__| | |__| | | | | | | | | | | | | | | | | | | | | | GIM - 99.99% | | | | GGAMT - 100% | | | GSL - .01% | | GCM - 100% | -------------------------- | -------------------------- -------------------------- | | | -------------------------- -------------------------- | | GARTMORE PENSION | | GARTMORE GLOBAL PARTNERS | | | TRUSTEES, LTD. | | (GENERAL PARTNER) | |__| | | | | | | | | | | GIM - 99% | | GUS - 50% | | | GSL - 1% | | GSL - 50% | | -------------------------- -------------------------- | | -------------------------- | | GIL NOMINEES LTD. | | | | |__| | | | | GIM - 50% | | GSL - 50% | --------------------------
Subsidiary Companies -- Solid Line Contractual Association -- Double Line Limited Liability Company -- Dotted Line March 31, 2003 Page 6 (left side) NATIONWIDE(R) ------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | -------------------- | | | NATIONWIDE MUTUAL |_____________________________ |Guaranty Fund |_______| INSURANCE COMPANY |_____________________________ |Certificate |_______| | | | | | (CASUALTY) | | | Casualty | | (See Page 1) | | | (See Page 1) | --------------------- | - --------------------- | | ------------------------------------------ | NATIONWIDE CORPORATION (NW CORP) | | Common Stock: Control: | | 13,642,432 100% | | Shares | |Casualty 12,992,922 | |Fire 649,510 | ------------------------------------------ | | ------------------------------------ | GARTMORE GLOBAL | | ASSET MANAGEMENT | | TRUST (GGAMT) | | | |NW Corp.- 100% | ------------------------------------ | | ------------------------------------- | GARTMORE GLOBAL | | INVESTMENTS, INC. (GGI) | | | ____| Common Stock: 958,750 Shares | | | GGAMT-94% | | | Preferred Stock: 500,000 Shares | | | GGAMT-100% | | ------------------------------------- | | | | | ------------------------------------- | | GARTMORE S.A. CAPITAL | | | TRUST (GSA) | | | |____ | | | | | DELAWARE BUSINESS TRUST | | ------------------------------------- | | | | | -------------------------------------- | | GARTMORE EMERGING | | | MANAGERS, LLC | | | (GEM) |___ | | | | | | | | | | GSA-100% | | | -------------------------------------- | | | | | | | | --------------------------------------- | | | NORTHPOINTE | | | | CAPITAL LLC |--| | | | | | | GEM-65% | | | --------------------------------------- | | | | | | | | --------------------------------------- | | | CODA CAPITAL | | | | MANAGEMENT LLC | | | | |--- | | GEM-79% | | --------------------------------------- | | | | | --------------------------------------- | | GARTMORE MUTUAL FUND | | | CAPITAL TRUST | |__ | | | DELAWARE BUSINESS TRUST | --------------------------------------- | | | | --------------------------------------- | MARKET STREET FUND | | | | | | DELAWARE BUSINESS TRUST | --------------------------------------- (right side) ------------------------------------- | NATIONWIDE MUTUAL | __________| FIRE INSURANCE COMPANY | __________| (FIRE) | | (See Page 1) | ------------------------------------- ------------------------------------- | GARTMORE GLOBAL ASSET | | MANAGEMENT, INC. | __________| (GGAMI) |______ | | | | GSA-100% | | ------------------------------------- | | ------------------------------------- | | GARTMORE | | | INVESTORS SERVICES, INC. | | | | | | Common Stock: 5 Shares | | | ------------ |______| | | | | | | | GGAMI-100% | | ------------------------------------- | | ------------------------------------- | ------------------------------------- | NATIONWIDE GLOBAL FUNDS | | | GARTMORE MORLEY | | | | | FINANCIAL SERVICES, INC. | | |______| | (MORLEY) | | |_____________| |___ | LUXEMBOURG SICAV | | | Common Stock: 82,343 Shares | | | | | | ------------ | | | | | | GGAMI-100% | | ------------------------------------- | ------------------------------------- | | | ------------------------------------- | ------------------------------------- | | GARTMORE DISTRIBUTION | | | GARTMORE MORLEY CAPITAL | | | SERVICES, INC. | | | MANAGEMENT, INC | | | | | | | | | | | | | | | Common Stock: 10,000 Shares |______| | Common Stock: 500 Shares |___| | ------------ | | | ------------ | | | | | | | | | GGAMI-100% | | | Morley-100% | | ------------------------------------- | ------------------------------------- | | | ------------------------------------- | ------------------------------------- | | CORVIANT CORPORATION | | | GARTMORE | | | (CC) | | | TRUST COMPANY | | | | | | | | | Common Stock: 450,000 Shares| | | Common Stock: 2,000 Shares | | | ------------ | | | ------------ | | | Series A Preferred: 250,000 Shares|______| | |___| | | | | | | | | | | | | | GGAMI-100% | | | Morley-100% | | ------------------------------------- | ------------------------------------- | | | | | | | ------------------------------------- | ------------------------------------- | | VILLANOVA SECURITIES, LLC | | | GARTMORE MORLEY & | | | | | | ASSOCIATES, INC. | | | | | | | | | | | | Common Stock: 3,500 Shares | | | | | | ------------ |___| | | | | | | CC-100% | | | Morley-100% | ------------------------------------- | ------------------------------------- | ------------------------------------- | ------------------------------------- | | | | | | GGI MGT LLC | | | NEWHOUSE SPECIAL | | (GGIMGT) | | | SITUATIONS FUND I, LLC | | | | | | | |------------ | Common Stock: 10,000 Shares | | | | ------------ | | | | GGIMGT-10% | | | | Class A Preferred: 10,000 Shares | | GGAMI-100% | | GGAMI-75% | ------------------------------------- ------------------------------------- Subsidiary Companies - Solid Line Contractual Association - Double Line Limited Liability Company - Dotted Line March 31, 2003
Page 7 Item 30. INDEMNIFICATION Ohio's General Corporation Law expressly authorizes and Nationwide's Amended and Restated Code of Regulations provides for indemnification by Nationwide of any person who, because such person is or was a director, officer or employee of Nationwide was or is a party; or is threatened to be made a party to: o any threatened, pending or completed civil action, suit or proceeding; o any threatened, pending or completed criminal action, suit or proceeding; o any threatened, pending or completed administrative action, suit or proceeding; o any threatened, pending or completed investigative action, suit or proceeding; The indemnification will be for actual and reasonable expenses, including attorney's fees, judgments, fines and amounts paid in settlement by such person in connection with such action, suit or proceeding, to the extent and under the circumstances permitted by the Ohio's General Corporation Law. Nationwide has been informed that in the opinion of the Securities and Exchange Commission the indemnification of directors, officers or persons controlling Nationwide for liabilities arising under the Securities Act of 1933 ("Act") is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities is asserted by a director, officer or controlling person in connection with the securities being registered, the registrant will submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act. Nationwide and the directors, officers and/or controlling persons will be governed by the final adjudication of such issue. Nationwide will not be required to seek the court's determination if, in the opinion of Nationwide's cousel, the mater has been settled by controlling precedent. However, the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding is permitted. Item 31. PRINCIPAL UNDERWRITER (a) Nationwide Investment Services Corporation ("NISC") serves as principal underwriter and general distributor for 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-7, Nationwide Variable Account-8, Nationwide Variable Account-9, Nationwide Variable Account-10, Nationwide Variable Account-11, Nationwide Variable Account-13, Nationwide VA Separate Account-A, Nationwide VA Separate Account-B, Nationwide VA Separate Account-C, Nationwide VL Separate Account-C, Nationwide VL Separate Account-D, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3, Nationwide VLI Separate Account-4, and Nationwide VLI Separate Account-5, all of which are separate investment accounts of Nationwide or its affiliates. (b) NATIONWIDE INVESTMENT SERVICES CORPORATION DIRECTORS AND OFFICERS Joseph J. Gasper, Director and Chairman of the Board Richard A. Karas, Director and Vice Chairman Duane C. Meek, President William G. Goslee, Senior Vice President Mark R. Thresher, Director, Senior Vice President and Treasurer Kevin S. Crossett, Vice President Trey Rouse, Vice President Peter R. Salvator, Vice President Barbara J. Shane, Vice President-Compliance Officer Karen R. Tackett, Vice President Alan A. Todryk, Vice President-Taxation Carol L. Dove, Associate Vice President-Treasury Services and Assistant Treasurer Glenn W. Soden, Associate Vice President and Secretary Thomas E. Barnes, Associate Vice President and Assistant Secretary John F. Delaloye, Assistant Secretary Dina A. Tantra, Assistant Secretary Mark D. Maxwell, Assistant Secretary E. Gary Berndt, Assistant Treasurer Terry C. Smetzer, Assistant Treasurer The business address of the Directors and Officers of Nationwide Investment Services Corporation is: One Nationwide Plaza Columbus, Ohio 43215
(c) ------------------------------ ------------------------ ----------------------- ------------------ ------------------- NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION DISCOUNTS AND REDEMPTION OR COMMISSIONS COMMISSIONS ANNUITIZATION ------------------------------ ------------------------ ----------------------- ------------------ ------------------- ------------------------------ ------------------------ ----------------------- ------------------ ------------------- N/A N/A N/A N/A Nationwide Investment Services Corporation ------------------------------ ------------------------ ----------------------- ------------------ -------------------
Item 32. LOCATION OF ACCOUNTS AND RECORDS John Davis Nationwide Life Insurance Company One Nationwide Plaza Columbus, OH 43215 Item 33. MANAGEMENT SERVICES Not Applicable Item 34. FEE REPRESENTATION Nationwide represents that the fees and charges deducted under the contract in the aggregate are reasonable in relation to the services rendered, the expenses expected to be incurred and risks assumed by Nationwide. SIGNATURES As required by the Securities Act of 1933, and the Investment Company Act of 1940, the Registrant, NATIONWIDE VLI SEPARATE ACCOUNT-2, certifies that it meets the requirements of the Securities Act Rule 485(a) for effectiveness of this Post-Effective Amendment and has caused this Post-Effective Amendment to be signed on its behalf in the City of Columbus, and State of Ohio, on this 30th day of April, 2003. NATIONWIDE VLI SEPARATE ACCOUNT-2 -------------------------------------------- -------------------------------------------- (Registrant) NATIONWIDE LIFE INSURANCE COMPANY -------------------------------------------- -------------------------------------------- (Depositor) By: /s/ STEVEN SAVINI, ESQ. -------------------------------------------- -------------------------------------------- Steven Savini, Esq. As required by the Securities Act of 1933, the Registration Statement has been signed by the following persons in the capacities indicated on this 30th day of April, 2003. Signature TITLE /s/ W. G. JURGENSEN DIRECTOR AND CHIEF EXECUTIVE OFFICER W. G. Jurgensen /s/ JOSEPH J. GASPER DIRECTOR AND PRESIDENT AND Joseph J. Gasper CHIEF OPERATING OFFICER /s/ Joseph A. Alutto DIRECTOR Joseph A. Alutto /s/ James G. Brocksmith, Jr. DIRECTOR James G. Brocksmith, Jr. /s/ Henry S. Holloway DIRECTOR Henry S. Holloway /s/ Lydia M. Marshall DIRECTOR Lydia M. Marshall /s/ Donald L. McWhorter DIRECTOR Donald L. McWhorter /s/ David O. Miller DIRECTOR /s/ STEVEN SAVINI -------------------- -------------------- David O. Miller Steven Savini, Esq /s/ James F. Patterson DIRECTOR Attorney-in-Fact James F. Patterson /s/ Gerald D. Prothro DIRECTOR Gerald D. Prothro /s/ Arden L. Shisler DIRECTOR Arden L. Shisler /s/ Alex Shumate DIRECTOR Alex Shumate EX-99.N 4 ex99n.txt EXHIBIT N-INDEPENDENT AUDITORS CONSENT INDEPENDENT AUDITORS' CONSENT The Board of Directors of Nationwide Life Insurance Company and Contract Owners of Nationwide VLI Separate Account - 2: We consent to the use of our reports for Nationwide VLI Separate Account-2 dated February 20, 2003 and for Nationwide Life Insurance Company and subsidiaries dated January 30, 2003, included herein, and to the reference to our firm under the heading "Services" in the Statement of Additional Information (File No. 33-62795). Our report for Nationwide Life Insurance Company and subsidiaries refers to a change to the method of accounting for derivative instruments and hedging activities, and for purchased or retained interests in securitized financial assets. KPMG LLP Columbus, Ohio April 28, 2003 -----END PRIVACY-ENHANCED MESSAGE-----