-----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, RLWrFvkCVLj7cx8LbPeGxCoFMwVcW+GyRsCKRCRZDTPafZwArk86sl50WmEGlhfS 7TKpKzvUGywaBWvIxwQSUA== 0001190903-04-000291.txt : 20040420 0001190903-04-000291.hdr.sgml : 20040420 20040420161227 ACCESSION NUMBER: 0001190903-04-000291 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20040420 EFFECTIVENESS DATE: 20040420 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: 04743026 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 ================================================================================ 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. 15 |X| and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |_| AMENDMENT NO. 15 |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 43215-2220 (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 MICHAEL R. MOSER, ESQ. ONE NATIONWIDE PLAZA ONE NATIONWIDE PLAZA, 1-09-V3 COLUMBUS, OHIO 43215-2220 COLUMBUS, OHIO 43215-2220 (Name and Address of Agent for Service) Approximate Date of Proposed Public Offering: MAY 1, 2004 It is proposed that this filing will become effective (check appropriate box) |_| Immediately upon filing pursuant to paragraph (b) |X| On May 1, 2004 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: |_| This post-effective amendment designates a new effective date for a previously filed post-effective amendment. ================================================================================ 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, 2004 - -------------------------------------------------------------------------------- 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. Consult your financial adviser. Not all terms, conditions, benefits, programs, features and investment options are available or approved for use in every state. ii - -------------------------------------------------------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- TABLE OF CONTENTS...................................I - ----------------- IN SUMMARY: POLICY BENEFITS.........................1 - --------------------------- IN SUMMARY: POLICY RISKS............................3 - ------------------------ IN SUMMARY: VARIABLE UNIVERSAL LIFE INSURANCE AND THE POLICY 4 IN SUMMARY: FEE TABLES..............................6 - ---------------------- AVAILABLE SUB-ACCOUNTS..............................9 - ---------------------- THE POLICY.........................................19 - ---------- Policy Owner....................................19 ------------ The Beneficiaries...............................19 ----------------- To Purchase.....................................19 ----------- Coverage........................................20 -------- Coverage Effective Date.........................20 ----------------------- Temporary Insurance Coverage....................20 ---------------------------- To Cancel (Examination Right)...................20 ----------------------------- To Change Coverage..............................21 ------------------ Sub-Account Portfolio Transfers.................21 ------------------------------- Fixed Account Transfers.........................22 ----------------------- Modes To Make A Transfer........................22 ------------------------ To Exchange.....................................23 ----------- To Terminate Or Surrender.......................23 ------------------------- To Assign.......................................24 --------- Proceeds Upon Maturity..........................24 ---------------------- Reminders, Reports And Illustrations............24 ------------------------------------ Errors Or Misstatements.........................25 ----------------------- Incontestability................................25 ---------------- If We Modify The Policy.........................25 ----------------------- RIDER..............................................25 - ----- Long-term Care Rider............................25 -------------------- PREMIUM............................................26 - ------- Initial Premium.................................26 --------------- Subsequent Premiums.............................26 ------------------- CHARGES............................................27 - ------- Surrender Charges...............................27 ----------------- Cost Of Insurance...............................28 ----------------- Mortality And Expense Risk......................28 -------------------------- Tax Expense.....................................29 ----------- Administrative Expense..........................29 ---------------------- Policy Loan Interest............................29 -------------------- Long-term Care Rider............................29 -------------------- A Note On Charges...............................30 ----------------- TO ALLOCATE PREMIUM AND SUB-ACCOUNT VALUATION......31 - --------------------------------------------- Variable Investment Options.....................31 --------------------------- The Fixed Investment Option.....................32 --------------------------- Allocation Of Premium And Cash Value............32 ------------------------------------ When Sub-Account Units Are Valued...............32 --------------------------------- How Investment Experience Is Determined.........33 Cash Value......................................33 ---------- Dollar Cost Averaging...........................34 --------------------- Asset Rebalancing...............................35 ----------------- THE DEATH BENEFIT..................................35 - ----------------- Calculation Of The Death Benefit Proceeds.......35 Death Benefit...................................35 ------------- Suicide.........................................36 ------- SURRENDERS.........................................36 - ---------- Full Surrender..................................36 -------------- Partial Surrender...............................36 ----------------- THE PAYOUT OPTIONS.................................37 - ------------------ Interest Income.................................37 --------------- Income For A Fixed Period.......................37 ------------------------- Life Income With Payments Guaranteed............37 ------------------------------------ Fixed Income For Varying Periods................38 -------------------------------- Joint And Survivor Life.........................38 ----------------------- Alternate Life Income...........................38 --------------------- POLICY LOANS.......................................38 - ------------ Loan Amount And Interest........................38 ------------------------ Collateral And Interest.........................38 ----------------------- Repayment.......................................39 --------- Net Effect Of Policy Loans......................39 -------------------------- LAPSE..............................................40 - ----- Grace Period....................................40 ------------ Reinstatement...................................40 ------------- TAXES..............................................41 - ----- Types Of Taxes Of Which To Be Aware.............41 ----------------------------------- Buying The Policy...............................42 ----------------- Investment Gain In The Policy...................42 ----------------------------- Periodic Withdrawals, Non-Periodic Withdrawals And Loans 43 ----------------------------------- Terminal Illness................................44 ---------------- Surrender Of The Policy.........................44 ----------------------- Withholding.....................................44 ----------- Exchanging The Policy For Another Life Insurance Policy 45 ---------------------------------- Taxation Of Death Benefits......................45 -------------------------- Taxes And The Value Of Your Policy..............45 ---------------------------------- Tax Changes.....................................46 ----------- NATIONWIDE LIFE INSURANCE COMPANY..................47 - --------------------------------- NATIONWIDE VLI SEPARATE ACCOUNT-2..................47 - --------------------------------- Organization, Registration And Operation........47 Addition, Deletion, Or Substitution Of Mutual Funds 48 -------------------------------------------- Voting Rights...................................48 ------------- LEGAL PROCEEDINGS..................................49 - ----------------- Nationwide Life Insurance Company...............49 --------------------------------- Nationwide Investment Services ------------------------------- Corporation.....................................51 ----------- FINANCIAL STATEMENTS...............................51 - -------------------- APPENDIX A: DEFINITIONS...........................A-1 - ----------------------- 51 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 35. YOUR OR YOUR BENEFICIARY'S CHOICE You or your beneficiary may choose to receive the Policy Proceeds in a lump sum, or there OF POLICY PROCEEDS are a variety of options that will pay out over time. For more information, see "The Payout Options" beginning on page 37. 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 19; and "To Assign" beginning on page 24. 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 38. |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 36. |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 36 and "The Payout Options" beginning on page 37. 1 ADDITIONAL PREMIUM Though the policy is designed to be a single Premium policy, you may 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 26. INVESTMENT OPTIONS You may choose to allocate your Premiums after charges to a fixed or variable investment options in any proportion: |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 the "Available Sub-Accounts" section, to account for your allocations. Your investment return will depend on Investment Experience of the Sub-Account portfolios you have chosen. For more information, see "Available Sub-Accounts," beginning on page 9 and "To Allocate Premium And Sub-Account Valuation" beginning on page 31. 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 Transfers" beginning on page 21. We have implemented procedures intended to reduce the potentially detrimental impact that disruptive trading has on Sub-Account Investment Experience. For more information, see "Sub-Account Portfolio Transfers," beginning on page 21 and "Modes To Make A Transfer," beginning on page 22. 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 34. 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 have to include the Proceeds as taxable income. For more information, see "Taxes" beginning on page 41. Unlike other variable insurance products offered by Nationwide, this policy does not require distributions to be made before the death of the Insured. 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 24. 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 20. RIDER You may purchase a Long-term Care Rider. Availability will vary by state. For more information, see "Rider" beginning on page 25. 2 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) could cause the Cash Value of your policy to decrease, resulting in a Lapse of insurance coverage sooner than might have been foreseen, and, potentially, even terminate without value. 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 36 and "Effect of Policy Loans" beginning on page 39. 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 43. 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. 3 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 32. SUB-ACCOUNT PORTFOLIO LIMITATIONS Frequent trading among the Sub-Accounts may dilute the value of your Sub-Account units, cause the Sub-Account to incur higher transaction costs, and interfere with the Sub-Accounts' ability to pursue its stated investment objective. This disruption to the Sub-Account may result in lower Investment Experience and Cash Value. We have instituted procedures to minimize disruptive transfers. For more information, see " Sub-Account Portfolio Transfers," beginning on page 21 and "Modes To Make A Transfer," beginning on page 22. While we expect these procedures to reduce the adverse effect of disruptive transfers, we cannot assure you that we have eliminated these risks. 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 a Premium 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. 4 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. 5 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 27.
=================================================================================================================================== 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(2) 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 third year from the Policy Date the charge is 9% of initial Premium, for the fourth year it is 8%, for the fifth year it is 7%, for the sixth year it is 6%, for the seventh year it is 5%, for the eighth year it is 4%, for the ninth 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). (2) If we begin to charge for illustrations, you will be expected to pay the charge directly to us at the time of the request. 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 Monthly Minimum Maximum Representative(6) INSURANCE(3), (4), (5) Representative - For An Age 35 Male With A Long-term Care Specified Amount Of $500,000 - ------------------------------ ----------------------- --------------------------- ---------------------- -------------------------- $0.06 $83.33 $0.18 - ------------------------------ ----------------------- --------------------------- ---------------------- -------------------------- 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 - ------------------------------ ----------------------- -----------------------------------------------------------------------------
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- ------------------------------ ----------------------- ----------------------------------------------------------------------------- TAX EXPENSE(7) Monthly Maximum And Current Charges - ------------------------------ ----------------------- $0.42 Per $1,000 Of Cash Value - ------------------------------ ----------------------- ----------------------------------------------------------------------------- Proportionately From Your Chosen Variable And Fixed Investment Options - ------------------------------ ----------------------- ----------------------------------------------------------------------------- ADMINISTRATIVE EXPENSE(8) Monthly Maximum - ------------------------------ ----------------------- ----------------------------------------------------------------------------- The Greater Of: $10 Or $0.25 Per $1,000 Of Cash Value - ------------------------------ ----------------------- ----------------------------------------------------------------------------- Proportionately From Your Chosen Variable And Fixed Investment Options - ------------------------------ ----------------------- ----------------------------------------------------------------------------- POLICY LOAN Annually Maximum Guaranteed Currently INTEREST (9), (10), (11) (Accrues Daily) - ------------------------------ ----------------------- ----------------------------------- ----------------------------------------- $60 $60 - ------------------------------ ----------------------- ----------------------------------- ----------------------------------------- Per $1,000 Of An Outstanding Policy Loan - ------------------------------ ----------------------- ----------------------------------------------------------------------------- LONG-TERM CARE RIDER(12) 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 - ------------------------------ ----------------------- -----------------------------------------------------------------------------
(3) This charge varies by: the Insured's sex; age; underwriting class; any substandard ratings; the year from the Policy Date and the Specified Amount. (4) Ask for a policy illustration, or see your Policy Data Page for information on your cost. (5) 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. (6) The representative charge may not be representative of the charge that a particular policy owner pays. (7) This charge applies for the first ten years from the Policy Date. (8) The current monthly administrative charge is $0.25 per $1,000 of Cash Value for the first ten years from the Policy Date on all policies with Cash Value less than $100,000. For policies with $100,000 or more 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. 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 38. (9) On the amount of an outstanding loan, we not only charge, but also credit, interest, so there is a net cost to you. Also, there are ordinary and preferred loans on which interest rates vary. For more information, see "Policy Loans" beginning on page 38. 7 (10) We charge 6% interest per annum on the outstanding balance, which accrues daily and becomes due and payable at the end of the year from the Policy Date, or we add it to your loan. Meanwhile, we credit interest daily, too, on the portion of your policy's Cash Value corresponding to, and serving as collateral or security to ensure repayment of, the loan. It is 4% and 6% per annum currently for ordinary and preferred loans, respectively (guaranteed 4% minimally). (11) Your net cost for an ordinary loan is 2% per annum currently. There is no cost (a net cost of zero) for a preferred loan currently. For more information, see "Collateral And Interest" beginning on page 38. (12) 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 EACH SUB-ACCOUNT PORTFOLIO'S FEES AND EXPENSES IS CONTAINED IN THE PROSPECTUS FOR 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. THE NEXT SECTION LISTS THE AVAILABLE SUB-ACCOUNTS. ALSO, APPENDIX B IDENTIFIES THE AVAILABLE MUTUAL FUNDS, BY NAME, INVESTMENT TYPE AND ADVISER.
TOTAL ANNUAL SUB-ACCOUNT PORTFOLIO OPERATING EXPENSES Minimum Maximum ------- ------- (expenses that are deducted from the Sub-Account portfolio assets, including 0.27% 4.56% management fees, distribution (12b-1) fees, and other expenses)
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- -------------------------------------------------------------------------------------------------------------------------------- AVAILABLE SUB-ACCOUNTS - -------------------------------------------------------------------------------------------------------------------------------- We identify Sub-Accounts by the name of the underlying mutual funds. The Sub-Accounts available through this policy are: AIM VARIABLE INSURANCE FUNDS - AIM V.I. BASIC VALUE FUND: SERIES I SHARES - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: AIM Advisors, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ----------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS - AIM V.I. CAPITAL APPRECIATION FUND: SERIES I SHARES - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: AIM Advisors, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Growth of capital. - ------------------------------------------------ ----------------------------------------------------------------------------------- AIM VARIABLE INSURANCE FUNDS - AIM V.I. CAPITAL DEVELOPMENT FUND: SERIES I SHARES - ----------------------------------------------- ------------------------------------------------------------------------------------ Investment Adviser: AIM Advisors, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. - ALLIANCEBERNSTEIN GROWTH AND INCOME PORTFOLIO: CLASS A (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Alliance Capital Management, L.P. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Reasonable current income and reasonable opportunity for appreciation through investments primarily in dividend-paying common stocks of good quality. - ------------------------------------------------ ----------------------------------------------------------------------------------- ALLIANCEBERNSTEIN VARIABLE PRODUCTS SERIES FUND, INC. - ALLIANCEBERNSTEIN SMALL CAP VALUE PORTFOLIO: CLASS A (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Alliance Capital Management, L.P. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ----------------------------------------------- ------------------------------------------------------------------------------------ AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP INCOME & GROWTH FUND: CLASS I (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ -----------------------------------------------------------------------------------
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AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. - AMERICAN CENTURY VP INTERNATIONAL FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: American Century Investment Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND - APPRECIATION PORTFOLIO: INITIAL SHARES - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- DREYFUS VARIABLE INVESTMENT FUND - DEVELOPING LEADERS PORTFOLIO: INITIAL SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: The Dreyfus Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Maximum capital appreciation. - ------------------------------------------------ -----------------------------------------------------------------------------------
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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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- FEDERATED INSURANCE SERIES - FEDERATED AMERICAN LEADERS FUND II: PRIMARY SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Federated Investment Management Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- FEDERATED INSURANCE SERIES - FEDERATED CAPITAL APPRECIATION FUND II: PRIMARY SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Federated Investment Management Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- FEDERATED INSURANCE SERIES - FEDERATED QUALITY BOND FUND II: PRIMARY SHARES - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Federated Investment Management Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP EQUITY-INCOME PORTFOLIO: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Reasonable income. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP GROWTH PORTFOLIO: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP HIGH INCOME PORTFOLIO: INITIAL 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND - VIP OVERSEAS PORTFOLIO: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management and Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - VIP II CONTRAFUND(R) PORTFOLIO: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ -----------------------------------------------------------------------------------
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FIDELITY VARIABLE INSURANCE PRODUCTS FUND II - VIP II INVESTMENT GRADE BOND PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND III - VIP III MID CAP PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ----------------------------------------------------------------------------------- FIDELITY VARIABLE INSURANCE PRODUCTS FUND III - VIP III VALUE STRATEGIES PORTFOLIO: SERVICE CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Fidelity Management & Research Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST - TEMPLETON FOREIGN SECURITIES FUND: CLASS 1 - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Templeton Investment Counsel, Inc - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - COMSTOCK GVIT VALUE FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: Van Kampen Asset Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital growth and income. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - DREYFUS GVIT INTERNATIONAL VALUE FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: The Dreyfus Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - DREYFUS GVIT MID CAP INDEX FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: The Dreyfus Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ -----------------------------------------------------------------------------------
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GARTMORE VARIABLE INSURANCE TRUST - FEDERATED GVIT HIGH INCOME BOND FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: Federated Investment Counseling - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL FINANCIAL SERVICES FUND: CLASS I (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL HEALTH SCIENCES FUND: CLASS I - ----------------------------------------------- ------------------------------------------------------------------------------------ Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GLOBAL UTILITIES FUND: CLASS I (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT GOVERNMENT BOND FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High level of income. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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 affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ -----------------------------------------------------------------------------------
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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. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT INVESTOR DESTINATIONS FUNDS: - --------------------------- -------------------------------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate 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: CLASS II 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. - --------------------------- ----------------------------------- -------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return by seeking growth of capital DESTINATIONS MODERATELY and income. The Fund invests in a target allocation mix of 30% CONSERVATIVE FUND: CLASS large cap U.S. stocks, 10% mid cap U.S. stocks, 5% small cap U.S. II stocks, 15% international stocks, 25% bonds, and 15% short-term investments. - --------------------------- ----------------------------------- -------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return primarily by seeking growth of DESTINATIONS MODERATE capital. The Fund invests in a target allocation mix of 40% large FUND: CLASS II cap U.S. stocks, 15% mid cap U.S. stocks, 10% small cap U.S. stocks, 30% international funds, and 5% bonds. - --------------------------- ----------------------------------- -------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return by seeking income and, DESTINATIONS MODERATELY secondarily, long term growth of capital. The Fund invests in a AGGRESSIVE FUND: CLASS II 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. - --------------------------- ----------------------------------- -------------------------------------------------------------------- GARTMORE GVIT INVESTOR Investment Objective: To maximize total investment return by seeking growth of capital DESTINATIONS AGGRESSIVE and income. The Fund invests in a target allocation mix of 30% FUND: CLASS II 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. - --------------------------- ----------------------------------- -------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT MID CAP GROWTH FUND - CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT MONEY MARKET FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High level of current income. - ------------------------------------------------ -----------------------------------------------------------------------------------
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GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT NATIONWIDE(R) FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT NATIONWIDE(R) LEADERS FUND: CLASS I (not available for policies issued on or after May 1, 2003) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GARTMORE GVIT U.S. GROWTH LEADERS FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GVIT SMALL CAP GROWTH FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-advisers: Neuberger Berman, LLC; Waddell & Reed Investment Management Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GVIT SMALL CAP VALUE FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: The Dreyfus Corporation; J.P. Morgan Investment Management Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - GVIT SMALL COMPANY FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- GARTMORE VARIABLE INSURANCE TRUST - VAN KAMPEN GVIT MULTI SECTOR BOND FUND: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Gartmore Mutual Fund Capital Trust, an affiliate of Nationwide Financial Services, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: Morgan Stanley Investment Management Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Above average total return. - ------------------------------------------------ ----------------------------------------------------------------------------------- JANUS ASPEN SERIES - BALANCED PORTFOLIO: SERVICE SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ----------------------------------------------------------------------------------- JANUS ASPEN SERIES - CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ -----------------------------------------------------------------------------------
15
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. - ------------------------------------------------ ----------------------------------------------------------------------------------- JANUS ASPEN SERIES - INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management, LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- JANUS ASPEN SERIES - RISK-MANAGED CORE PORTFOLIO: SERVICE SHARES (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Janus Capital Management, LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Sub-adviser: Enhanced Investment Technologies, LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term growth of capital. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- MFS(R) VARIABLE INSURANCE TRUST - MFS VALUE SERIES: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Massachusetts Financial Services Company - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation and reasonable income. - ------------------------------------------------ ----------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT FASCIANO PORTFOLIO: CLASS S - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT LIMITED MATURITY BOND PORTFOLIO: CLASS I - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Highest available current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT MID-CAP GROWTH PORTFOLIO: CLASS S (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ -----------------------------------------------------------------------------------
16
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST - AMT SOCIALLY RESPONSIVE PORTFOLIO - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Neuberger Berman Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital growth. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER BALANCED FUND/VA: INITIAL CLASS (FORMERLY OPPENHEIMER MULTIPLE STRATEGIES FUND/VA) (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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER CAPITAL APPRECIATION FUND/VA: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation and current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER GLOBAL SECURITIES FUND/VA: SERVICE CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER HIGH INCOME FUND/VA: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High level of current income. - ----------------------------------------------- ------------------------------------------------------------------------------------ OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MAIN STREET(R) FUND/VA: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ----------------------------------------------------------------------------------- OPPENHEIMER VARIABLE ACCOUNT FUNDS - OPPENHEIMER MAIN STREET(R) SMALL CAP FUND/VA: INITIAL CLASS - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: OppenheimerFunds, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ----------------------------------------------------------------------------------- PUTNAM VARIABLE TRUST - PUTNAM VT GROWTH & INCOME FUND: CLASS IB - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Putnam Investment Management, LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital growth and current income. - ------------------------------------------------ ----------------------------------------------------------------------------------- PUTNAM VARIABLE TRUST - PUTNAM VT INTERNATIONAL EQUITY FUND: CLASS IB (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Putnam Investment Management, LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ -----------------------------------------------------------------------------------
17
PUTNAM VARIABLE TRUST - PUTNAM VT VOYAGER FUND: CLASS IB - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Putnam Investment Management, LLC - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Capital appreciation. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- THE UNIVERSAL INSTITUTIONAL FUNDS, INC. - EMERGING MARKETS DEBT PORTFOLIO: CLASS I (not available for policies issued on or after May 1, 2004) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Morgan Stanley Investment Management, Inc. - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High total return. - ------------------------------------------------ ----------------------------------------------------------------------------------- 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. - ------------------------------------------------ ----------------------------------------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST - WORLDWIDE BOND FUND: INITIAL CLASS (not available for policies issued on or after May 1, 2002) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Van Eck Associates Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: High total return - income plus capital appreciation - by investing globally, primarily in a variety of debt securities. - ------------------------------------------------ ----------------------------------------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST - WORLDWIDE EMERGING MARKETS FUND: INITIAL CLASS (not available for policies issued on or after May 1, 2002) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Van Eck Associates Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation by investing primarily in equity securities in emerging markets around the world. - ------------------------------------------------ ----------------------------------------------------------------------------------- VAN ECK WORLDWIDE INSURANCE TRUST - WORLDWIDE HARD ASSETS FUND: INITIAL CLASS (not available for policies issued on or after May 1, 2002) - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Adviser: Van Eck Associates Corporation - ------------------------------------------------ ----------------------------------------------------------------------------------- Investment Objective: Long-term capital appreciation by investing primarily in "hard asset securities." Income is a secondary consideration. - ------------------------------------------------ ----------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------
The Sub-Account portfolios listed above 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. We have entered into agency agreements with certain broker-dealer firms to distribute the policy. Some of those firms have an affiliate that acts as an investment adviser or a subadviser to one or more of the underlying funds that are offered under the policy. PLEASE REFER TO THE PROSPECTUS FOR EACH SUB-ACCOUNT PORTFOLIO FOR MORE DETAILED INFORMATION. 18 - -------------------------------------------------------------------------------- THE POLICY - -------------------------------------------------------------------------------- The policy is a legal contract between you and us. Any change we make must be in writing, signed by our president and secretary, and attached to or endorsed on the policy. You may exercise all policy rights and options while the Insured is alive. You may also change the policy, but only in accordance with its terms. Generally, the policy is available for an insured age 80 or younger (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: Policy Data Pages; 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. - -------------------------------- ----------------------------------------------- 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 41. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- TO PURCHASE To purchase the policy, you must submit to us a completed application and an initial Premium payment. 19 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. For a change in the Specified Amount, the effective date will be on the next monthly anniversary from the Policy Date after we have approved your request. 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 deposit your initial Premium payment into an interest bearing checking account. 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 a refund equal to the Premium payment you submitted). 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. Depending on the right to examine law in the state in which you live, this amount will be your initial premium or the policy's Cash Value. For more information, see "To Allocate Premium And Sub-Account Valuation" beginning on page 31. 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. 20 - -------------------------------------------------------------------------------- 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 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 6, and "How Investment Experience Is Determined" beginning on page 33. Disruptive trading practices, which hamper the orderly pursuit of stated investment objectives by underlying mutual fund managers, may adversely affect the performance of the Sub-Accounts. Prior to the policy's Maturity Date, you may transfer among the available Sub-Account portfolios. However, in instances of disruptive trading that we may, or have determined to be harmful to policy owners, we will attempt to curtail or limit the disruptive trading through the use of appropriate means available to us. If your trading activities, or those of a third party acting on your behalf, constitute disruptive trading, we will not limit your ability to initiate the trades as provided in your policy; however, we may limit your means for making a transfer or take other action we deem necessary to protect the interests of those investing in the affected Sub-Accounts. If you intend to use an active trading strategy, you should consult your registered representative and request information on our other policy that offers Sub-Accounts designed specifically to support active trading. We may add new underlying mutual funds, or new share classes of currently available underlying mutual funds, that assess short-term trading fees. In the case of new share class additions, your subsequent allocations may be limited to that new share class. Short-term trading fees are a charge assessed by an underlying mutual fund when you transfer out of a Sub-Account before the end of a stated period. These fees will only apply to Sub-Accounts corresponding to underlying mutual funds that impose such a charge. The underlying mutual fund intends short-term trading fees to compensate the fund and its shareholders for the negative impact on fund performance that may result from disruptive trading practices, including frequent trading and short-term trading (market timing) strategies. The fees generally are not intended to adversely impact policy owners not engaged in such strategies. The separate account will collect the short-term trading fees at the time of the transfer by reducing the policy owner's Sub-Account value. We will remit all such fees to the underlying mutual fund. - -------------------------------------------------------------------------------- 21 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 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 MAKE A TRANSFER To make a transfer, send your written request to us at our Home Office via first class U.S. mail. Upon receipt, we will process a transfer request at the end of the current Valuation Period. We may also permit you to use other modes of communication, subject to limitations. OUR CONTACT INFORMATION IS ON THE COVER PAGE OF THIS PROSPECTUS. With respect to any telephonic or electronic mode of communication, including the Internet, we monitor transfer activity for potentially disruptive trading practices. Generally, you are limited to 20 "transfer events" per calendar year. If you initiate transfer events within a lesser time interval at a pace that is equivalent to 20 within a year, you may be required to submit all subsequent transfers via U.S. Mail. To calculate transfer events, at the end of each Valuation Period, we will group together all of your transfer requests for the day. We will count this grouping as a "transfer event," regardless of the number of Sub-Accounts involved. Once 20 transfer events in a year or the equivalent number in a shorter period occur, you may continue to make transfers, but only by sending your written request to us at our Home Office via first class U.S. mail until the end of the year. Then, we begin to count transfer events over again. We have the right to restrict transfer requests, or take any other action we deem necessary, in order to protect policy owners and beneficiaries from the negative investment results that may result from harmful investment practices employed by some policy owners (or third parties acting on their behalf). In particular, we may restrict trading strategies designed to avoid or take advantage of our monitoring procedures and other measures aimed at curbing harmful trading practices. Some investment advisers/representatives manage the assets of multiple Nationwide policies pursuant to trading authority granted or conveyed by multiple policy owners. We generally will require multi-policy advisers to submit all transfer requests via U.S. mail. 22 We will employ reasonable procedures to confirm that instructions are genuine, especially with respect to the Internet and telephone, including: o requiring forms of personal identification before acting upon instructions; o providing you with written confirmation of completed transactions; and/or o recording 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 EXCHANGE You have an exchange right under the policy. At any time within the first 24 months of coverage from the Policy Date, you may surrender this policy and use the Cash Surrender Value to purchase a new policy on the Insured's life without evidence of insurability. Afterwards, you may also surrender the policy 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 may transfer any Indebtedness to the new policy. 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 a surrender charge. For more information, see "In Summary: Fee Tables" beginning on page 6. The new policy will take effect on the exchange date only if the Insured is alive. This policy will terminate when the new policy takes effect. - -------------------------------------------------------------------------------- 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 36. 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 44. 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 38. 23 - -------------------------------------------------------------------------------- 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 38. - -------------------------------------------------------------------------------- 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). The Maturity Date extension will either be 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). It is your choice, and, in any event, the policy will be endorsed so that: o no additional Premium payments will be allowed; o no changes to the amount of the Specified Amount will be allowed; o no additional periodic charges will be deducted; o the Death Benefit will equal the Cash Value; and o 100% of the Cash Value will be transferred to the policy's fixed account. Notwithstanding your choice, the Proceeds will be the greater of the policy's Specified Amount or Cash Value. The Maturity Date will not be extended; however, where the policy will fail the definition of life insurance. For more information, see "The Payout Options" beginning on page 37, and "The Death Benefit" beginning on page 35. - -------------------------------------------------------------------------------- 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. 24 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. - -------------------------------------------------------------------------------- INCONTESTABILITY We will not contest payment of the Death Benefit based on the initial Specified Amount after the policy has been In Force during the Insured's lifetime 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 it has been In Force for 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 6, and "Charges" beginning on page 27. - -------------------------------------------------------------------------------- LONG-TERM CARE RIDER This Rider is available to purchase at any time only within six months from the Policy Date. The Insured is paid a monthly benefit 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 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. 25 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 when the Death Benefit depends on Cash Value. Also, the benefits paid under this Rider will reduce the Cash Surrender Value if you were to surrender the policy while the Insured is alive. More importantly, though, the benefits paid under this Rider will impact your policy's Death Benefit. The Proceeds payable upon the Insured's death will be adjusted to account for the benefits paid under this Rider. There is a free look period for this Rider. Within 30 days of receipt, you may return this Rider to the sales representative who sold it to you, or to us at our Home Office, and we will void this Rider and refund the related charges. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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: o 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 21. The Insured must be in the same underwriting rate class and in the same underwriting rate class multiple as when the policy was purchased; 26 o 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 o 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 40. 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. - -------------------------------------------------------------------------------- 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 6. 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. If we begin to charge for illustrations, you will be expected to pay the charge directly to us at the time of your request. We will not deduct this charge from your policy's Cash Value. However, 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. We will transfer the loan interest charge from your investment options to 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 27 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% ----------------------------- ---------------------------- ----------------------------- ---------------------------- 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. - -------------------------------------------------------------------------------- 28 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. - -------------------------------------------------------------------------------- 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 is subject to a minimum of $10.00 per month in states other than New York. - -------------------------------------------------------------------------------- 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 POLICY LOAN INTEREST the policy loan account is a net cost of no more than 2% per annum. - -------------------------------------------------------------------------------- LONG-TERM CARE RIDER The charge for this Rider compensates us for providing long-term care coverage once the Insured meets the eligibility requirements. 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. - -------------------------------------------------------------------------------- 29 A NOTE ON CHARGES We make many assumptions and account for many economic and financial factors in establishing fees and charges. As we noted at the beginning of this "Charges" section, the deductions we make under the policy are designed to compensate us for the services and benefits we provide, the distribution and operational expenses we incur, and the risks we assume. Our initial expenses in distributing and establishing the contract exceed the deductions we make during the early stages of policy ownership. Nevertheless, we expect to make a profit over time because variable life insurance is intended to be a long term financial product. Accordingly, we have designed the policy with features and underlying investment options that we believe support and encourage long-term ownership. The "In Summary: Fee Tables," beginning on page 6 sets out the costs you incur when you purchase this policy. The following two sections describe how we use some of those charges to distribute the policy and how some of the underlying investment options pay us for services we provide to them. Neither of these transactions alters the charges you pay for the policy. Rather, these two sections provide you with information about how we set those charges. You should consider how these transactions may affect any advice you may receive with respect to the policy. Distribution, Promotional and Sales Expenses Commissions to broker/dealer firms are among the promotional and sales expenses we incur when distributing the policy. We may pay a maximum gross commissions of up to 99% of first year premiums and 3% for renewal premiums after the first year. In lieu of these premium based commissions, we may pay an equivalent amount that we calculate as a percentage of assets. Asset-based commissions may be up to 0.25% of the non-loaned Cash Value per year. Combinations of payment forms that generally equate to this maximum commission amount may also be utilized. The actual level of commissions we pay depends on factors such as the level of premium we receive from the respective broker/dealer firms and the scope of the services they provide. Individual registered representatives typically receive a portion of the commissions we pay, depending on their arrangement with their broker/dealer firm. In addition to commissions, we may also furnish marketing and expense allowances to certain firms based on our assessment of that firm's capabilities and demonstrated willingness to promote and market our products. The firms determine how these allowances are spent. If you would like to know the exact compensation arrangement associated with this product, you should consult your registered representative. Revenue from Underlying Mutual Funds The underlying mutual funds incur expense each time they sell, administer, or redeem their shares. Since the Variable Account purchases fund shares on behalf of all policy holders, it serves as a single shareholder of the fund. By processing aggregated policy owner transactions, we relieve the fund of the expenses of processing individual policy owner transactions. We also pay the costs of selling the policy as outlined in the preceding section. Sales of the policy benefits the funds by allowing policy owners to purchase interests in the Sub-Accounts, which then results in the Variable Account's purchase of fund shares. We perform all of the accounting and recordkeeping for the Sub-Accounts, and pay any processing cost associated with the redemption of 30 interests in the Sub-Accounts. The funds understand and acknowledge that, in performing these functions and incurring these costs, we provide substantial value to the funds. Accordingly, the underlying mutual funds pay us (or our affiliates) a fee for some of the distribution and operational services we provide and the related costs we incur. The underlying mutual funds understand and acknowledge the value of these services we provide. Accordingly, the underlying mutual funds pay us (or our affiliates) a fee for some of the distribution and operational services that we provide (and related costs incurred). These payments may be made pursuant to an underlying mutual fund's 12b-1 plan, in which case they are deducted from underlying mutual fund assets. Alternatively, such payments may be made pursuant to service/administration agreements between the underlying mutual fund's adviser (or its affiliates) and us (or our affiliates), in which case payments are typically made from assets outside of the underlying mutual fund assets. In some cases, however, payments received may derive from sub-transfer agent fees or fees taken pursuant to administrative service plans adopted by the underlying mutual fund. In setting the charges for this policy, we considered the amount of these payments expected to be received from the underlying mutual funds. Without these payments, our charges would be expected to be higher. We include only funds in the Variable Account that make these payments for the services we provide. - -------------------------------------------------------------------------------- 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. The "Available Sub-Accounts" section identifies the available mutual funds, by name, investment type and adviser. Your choices and any changes will appear on the Policy Data Page. 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. 31 - -------------------------------------------------------------------------------- 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. o New Year's Day o Independence Day o Martin Luther King, Jr. Day o Labor Day o Presidents' Day o Thanksgiving o Good Friday o Christmas o Memorial Day In addition, we will not price Sub-Account Units if: o trading on the New York Stock Exchange is restricted; o an emergency exists making disposal or valuation of securities held in the separate account impracticable; or o the SEC, by order, permits a suspension or postponement for the protection of security holders. 32 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. We will process transactions we receive after the close of the NYSE on the next Valuation Period that we are open. - -------------------------------------------------------------------------------- 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: o the NAV per share of the mutual fund held in the Sub-Account as of the end of the current Valuation Period; and o 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). o 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 Sub-Account Unit value for the Sub-Account (using the next Valuation Period following when we receive the Premium). 33 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 32 and "Loan Amount And Interest" on page 38. 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. For more information, see "Sub-Account Portfolio Transfers" beginning on page 21. 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 Income Portfolio: Service Class (available only for policy issued prior to May 1, 2003), 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. 34 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 21. 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 32. 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. - -------------------------------------------------------------------------------- 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. 35 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. - -------------------------------------------------------------------------------- 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. Similarly, if the Insured dies by suicide, while sane or insane, within two 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 33. 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 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: o the minimum partial surrender is $500; o 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). o after the partial surrender, the policy's Cash Surrender Value is at least $10,000; and o 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. 36 Certain partial surrenders may result in currently taxable income and tax penalties. For more information see, "Surrender Of The Policy" beginning on page 44. - -------------------------------------------------------------------------------- THE PAYOUT OPTIONS - -------------------------------------------------------------------------------- You have a number of options of receiving Proceeds, besides in a lump sum, which you may elect upon application. You may elect one or a combination of payout options. 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 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 32. 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 interest can be paid at the end of 12-, six-, three- or one-month intervals or left to accumulate. 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 stated 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, compounded annually. 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 outlive 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, compounded annually. 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. 37 - -------------------------------------------------------------------------------- FIXED INCOME FOR VARYING PERIODS You keep the Proceeds with us, but are paid a fixed amount at specified intervals until principal and interest have been exhausted. 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, compounded annually. 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 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 of the Insured's death, the Maturity Date, or the date the policy is surrendered, as applicable. 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 year from the Policy Date, 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. 38 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 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 that stated on the Policy Data Page. - -------------------------------------------------------------------------------- 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 by transferring a corresponding amount of Cash Value from each Sub-Account to the loan account in the same proportion as your Sub-Account allocation. While your policy loan is outstanding, we will continue to treat any payments that you make as a Premium payment, unless you instruct otherwise. Similarly, we will apply a loan repayment in the same proportion as your current Sub-Account allocations, unless you instruct otherwise. Outstanding ordinary policy loan balances will be satisfied by your loan repayments before outstanding preferred policy loans. - -------------------------------------------------------------------------------- NET 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 6. 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. If your total Indebtedness ever exceeds the policy's Cash Value, your policy may Lapse. Repaying a policy loan will cause the Death Benefit less outstanding policy loans and net Cash Surrender Value to increase by the repayment amount. 39 - -------------------------------------------------------------------------------- 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: o submitting a written request at any time within three years after the end of the Grace Period and prior to the Maturity Date; o providing further evidence of insurability we may require that is satisfactory to us; o paying sufficient Premium to cover all policy charges that were due and unpaid during the Grace Period; o 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 6. o paying or reinstating 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. 40 - -------------------------------------------------------------------------------- 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 schedule. In general, in 2004, an estate of less than $1,500,000 (inclusive of certain pre-death gifts) will not incur a federal estate tax liability. The $1.5 million amount increases to $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 2004, 48%, 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. 41 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 2004, 48%, 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. - -------------------------------------------------------------------------------- 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 informally suggested, from time to time, that the number of underlying mutual funds available or the number of transfer opportunities available under a variable product may be relevant in determining whether the product qualifies for the desired tax treatment. In 2003, the IRS issued formal guidance, in Revenue Ruling 2003-91, that indicates that if the number of underlying mutual funds available in a variable insurance product does not exceed twenty, the number of funds alone would not cause the policy to not qualify for the desired tax treatment. The IRS has also indicated that exceeding 20 investment options may be considered a factor, along with other factors including the number of transfer opportunities available under the policy, when determining whether the policy qualifies for the desired tax treatment. The revenue ruling did not indicate the number of 42 fund options, if any, that would cause the policy to not provide the desired tax treatment. Should the U.S. Secretary of the Treasury issue additional rules or regulations limiting the number of underlying mutual funds, transfers between underlying mutual funds, exchanges of underlying mutual funds or changes in investment objectives of underlying mutual funds such that the policy would no longer qualify as life insurance under Section 7702 of the 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 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 43 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," beginning on page 45. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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: o the value each year of the life insurance protection provided; o an amount equal to any employer-paid Premiums; or o some or all of the amount by which the current value exceeds the employer's interest in the policy. 44 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 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. 45 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 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. 46 - -------------------------------------------------------------------------------- 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 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. 47 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: o remove, combine, or add Sub-Accounts and make new Sub-Accounts available to you; o substitute shares of another mutual fund, which may have different fees and expenses, for shares of an existing mutual fund; o substitute or close Sub-Accounts to allocations; o transfer assets supporting the policies from one Sub-Account to another or from the separate account to another separate account; o combine the separate account with other separate accounts, and/or create new separate accounts; o 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 o 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 an agreement also terminate the agreement and discontinue offering their shares, or certain classes of those shares, to the Sub-Accounts. We will notify you of any such change. If you direct, either explicitly or through your participation in a dollar cost averaging or asset rebalancing program, an amount to a Sub-Account that we have advised you is no longer available, that amount will be allocated to the GVIT Gartmore GVIT Money Market Fund: Class I. You may transfer from the GVIT Gartmore GVIT Money Market Fund: Class I at any time and such a transfer will count as a transfer event. For more information see, "Modes To Make A Transfer," beginning on page 22. We will not make any such changes without receiving required approval of the SEC and applicable state insurance departments. - -------------------------------------------------------------------------------- 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. 48 - -------------------------------------------------------------------------------- LEGAL PROCEEDINGS - -------------------------------------------------------------------------------- NATIONWIDE LIFE INSURANCE COMPANY Nationwide is a party to litigation and arbitration proceedings and inquiries from regulatory bodies 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 by plaintiff Mercedes Castillo that challenged 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 was 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 defendants, which were allegedly used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. 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. 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 was moot. Following appeal by the plaintiff, both of those decisions were affirmed by the Ohio Court of Appeals on September 9, 2003. The plaintiff filed a notice of appeal of the decision by the Ohio Court of Appeals on October 24, 2003. The Ohio Supreme Court announced on January 21, 2004 that the appeal was not accepted and the time for reconsideration has expired. On October 31, 2003, a lawsuit seeking class action status containing allegations similar to those made in the Castillo case was filed against Nationwide in Arizona federal court by plaintiff Robert Helman (Robert Helman et al v. Nationwide Life Insurance Company et al). This lawsuit is in a very preliminary stage and Nationwide is evaluating its merits. Nationwide intends to defend this lawsuit vigorously. On August 15, 2001, Nationwide was named in a lawsuit filed in Connecticut federal court (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). The plaintiffs first amended their complaint on September 6, 2001 to include class action allegations, and have subsequently amended their complaint twice. As amended, in the current complaint, the plaintiffs seek to represent a class of ERISA qualified retirement plans that purchased variable annuities from Nationwide. Plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts, and that Nationwide acquired and breached ERISA fiduciary duties by accepting service payments from certain mutual funds that allegedly consisted of or diminished those ERISA plan assets. The complaint seeks 49 disgorgement of some or all of the fees allegedly received by Nationwide and other unspecified relief for restitution, along with declaratory and injunctive relief and attorneys' fees. On December 3, 2001, the plaintiffs filed a motion for class certification. Plaintiffs filed a supplement to that motion on September 19, 2003. Nationwide opposed that motion on December 24, 2003. On January 30, 2004, Nationwide filed its Revised Memorandum in Support of Summary Judgment and a Motion Requesting that the Court Decide Summary Judgment before Class Certification. Plaintiffs are opposing that motion. Nationwide intends to defend this lawsuit vigorously. On May 1, 2003, a class action was filed against Nationwide in the United States District Court for the Eastern District of Louisiana (Edward Miller, Individually, and on behalf of all others similarly situated, v. Nationwide Life Insurance Company). The complaint alleges that in 2001, plaintiff Edward Miller purchased three group modified single premium variable annuities issued by Nationwide. Plaintiff alleges that Nationwide represented in its prospectus and promised in its annuity contracts that contract holders could transfer assets without charge among the various funds available through the contracts, that the transfer rights of contract holders could not be modified and that NLIC's expense charges under the contracts were fixed. Plaintiff claims that Nationwide has breached the contracts and violated federal securities laws by imposing trading fees on transfers that were supposed to have been without charge. Plaintiff seeks compensatory damages and rescission on behalf of himself and a class of persons who purchased this type of annuity or similar contracts issued by Nationwide between May 1, 2001 and April 30, 2002 inclusive and were allegedly damaged by paying transfer fees. Nationwide's motion to dismiss the complaint was granted by the Court on October 28, 2003. Plaintiff has appealed that dismissal. On January 21, 2004, Nationwide was named in a lawsuit filed in the U.S. District Court for the Northern District of Mississippi (United Investors Life Insurance Company v. Nationwide Life Insurance Company and/or Nationwide Life Insurance Company of America and/or Nationwide Life and Annuity Insurance Company and/or Nationwide Life and Annuity Company of America and/or Nationwide Financial Services, Inc. and/or Nationwide Financial Corporation, and John Does A-Z). In its complaint, the plaintiff alleges that Nationwide and/or its affiliated life insurance companies (1) tortiously interfered with the plaintiff's contractual and fiduciary relationship with Waddell & Reed, Inc. and/or its affiliates, Waddell & Reed Financial, Inc., Waddell & Reed Financial Services, Inc. and W & R Insurance Agency, Inc. (collectively, "Waddell & Reed"), (2) conspired with and otherwise caused Waddell & Reed to breach its contractual and fiduciary obligations to the plaintiff, and (3) tortiously interfered with the plaintiff's contractual relationship with policyholders of insurance policies issued by the plaintiff. The complaint seeks compensatory damages, punitive damages, pre- and post-judgment interest, a full accounting, and costs and disbursements, including attorneys' fees. The plaintiff seeks to have each defendant judged jointly and severally liable for all damages. This lawsuit is in a very preliminary stage, and Nationwide intends to defend it vigorously. The financial services industry, including mutual fund, variable annuity and distribution companies have been the subject of increasing scrutiny by regulators, legislators, and the media over the past year. Numerous regulatory agencies, including the SEC and the New York Attorney General, have commenced industry-wide investigations regarding late trading and 50 market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund companies on those issues. Investigations and enforcement actions have also been commenced, on a smaller scale, regarding the sales practices of mutual fund and variable annuity distributors. These legal proceedings are expected to continue in the future. These investigations and proceedings could result in legal precedents, as well as new industry-wide legislation, rules, or regulations, that could significantly affect the financial services industry, including variable annuity companies. Nationwide has been contacted by regulatory agencies for information relating to market timing, late trading, and sales practices. Nationwide is cooperating with these regulatory agencies and is responding to those information requests. There can be no assurance that any such litigation or regulatory actions 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. 51 - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- 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. - -------------------------------------------------------------------------------- YOU, YOUR or the POLICY OWNER OR OWNER - The person named as the owner in the application, or the person assigned ownership rights. - -------------------------------------------------------------------------------- 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 MODIFIED SINGLE PREMIUM VARIABLE UNIVERSAL LIFE INSURANCE POLICIES This Statement of Additional Information ("SAI") contains additional information regarding the individual modified single 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, 2004 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, 2004. TABLE OF CONTENTS NATIONWIDE LIFE INSURANCE COMPANY NATIONWIDE VLI SEPARATE ACCOUNT-2 NATIONWIDE INVESTMENT SERVICES CORPORATION (NISC) SERVICES UNDERWRITING PROCEDURE ILLUSTRATIONS ADVERTISING TAX DEFINITION OF LIFE INSURANCE FINANCIAL STATEMENTS 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 $147 billion as of December 31, 2003. 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 3% 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. The report of KPMG LLP covering the December 31, 2001 financial statements of 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 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. 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 Rating Agencies 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. MONEY MARKET YIELDS We may advertise the "yield" and "effective yield" for the money market sub-account. Yield and effective yield are annualized, which means that it is assumed that the underlying mutual fund generates the same level of net income throughout a year. Yield is a measure of the net dividend and interest income earned over a specific seven-day period (which period will be stated in the advertisement) expressed as a percentage of the offering price of the underlying mutual fund's units. The effective yield is calculated similarly, but reflects assumed compounding, calculated under rules prescribed by the SEC. Thus, effective yield will be slightly higher than yield, due to the compounding. HISTORICAL PERFORMANCE OF THE SUB-ACCOUNTS We will advertise historical performance of the sub-accounts in accordance with SEC prescribed calculations. Please note that performance information is annualized. However, if a sub-account has been available in the variable account for less than one year, the performance information for that sub-account is not annualized. Performance information is based on historical earnings and is not intended to predict or project future results. 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% - ----------------------------------------- - -------------------------------------------------------------------------------- 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, 2003, 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, 2003, 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, 2003, 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, 2004 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY December 31,2003 Assets: Investments at fair value: AIM VIF - AIM V.I. Capital Appreciation Fund - Series I (AIMCapAp) 3,135 shares (cost $58,438)........................................................ $ 66,715 AIM VIF Basic Value Fund - Series I (AIMBVF) 19,085 shares (cost $189,925)...................................................... 203,442 AIM VIF Capital Development Fund - Series I (AIMCDF) 4,906 shares (cost $57,733)........................................................ 62,360 Alliance Bernstein VPS Small Cap Value Portfolio - Class A (AllSmCpVal) 14,574 shares (cost $190,639)...................................................... 211,184 Alliance VPS Growth & Income Portfolio - Class A (AllGroInc) 19,100 shares (cost $383,619)...................................................... 416,380 American Century VP Balanced Fund - Class I (ACVPBal) 835,237 shares (cost $5,508,059)................................................... 5,629,497 American Century VP Capital Appreciation Fund - Class I (ACVPCapAp) 1,839,607 shares (cost $14,981,363)................................................ 13,098,000 American Century VP Income & Growth Fund - Class I (ACVPIncGr) 569,557 shares (cost $3,015,436)................................................... 3,741,988 American Century VP Inflation Protection Fund - Class II (ACVPInfPr) 7,289 shares (cost $74,144)........................................................ 75,145 American Century VP International Fund - Class I (ACVPInt) 1,784,083 shares (cost $10,662,183)................................................ 11,471,653 American Century VP Ultra Fund - Class I (ACVPUltra) 50,764 shares (cost $437,737)...................................................... 466,014 American Century VP Value Fund - Class I (ACVPVal) 1,636,827 shares (cost $10,888,421)................................................ 12,750,880 Comstock GVIT Value Fund - Class I (ComGVITVal) 13,042 shares (cost $117,074)...................................................... 129,640 Credit Suisse Trust - Global Post-Venture Capital Portfolio (CSGPVen) 92,598 shares (cost $735,232)...................................................... 875,048 Credit Suisse Trust - International Focus Portfolio (CSIntEq) 700,069 shares (cost $5,818,907)................................................... 6,195,611 Credit Suisse Trust - Small Cap Growth Portfolio (CSSmCapGr) 1,078,591 shares (cost $11,096,706)................................................ 14,884,555 Dreyfus GVIT International Value Fund - Class I (DryIntVal) 15,989 shares (cost $192,405)...................................................... 210,418 Dreyfus GVIT Mid Cap Index Fund - Class I (DryMidCapIx) 457,119 shares (cost $5,510,723)................................................... 6,751,652 Dreyfus IP - Small Cap Stock Index Portfolio - Service Class (DrySmCapIxS) 85,174 shares (cost $1,015,313).................................................... 1,116,636
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, Continued Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares (DrySRGro) 419,875 shares (cost $14,485,910).................................................. $ 9,988,838 Dreyfus Stock Index Fund (DryStkIx) 2,755,240 shares (cost $88,020,002)................................................ 78,303,907 Dreyfus VIF - Appreciation Portfolio - Initial Shares (DryVIFApp) 188,705 shares (cost $5,657,867)................................................... 6,495,241 Dreyfus VIF - Developing Leaders Portfolio - Initial Shares (DryDevLeadI) 4,714 shares (cost $163,132)....................................................... 176,257 Dreyfus VIF - Growth and Income Portfolio - Initial Shares (DryVIFGrInc) 124,754 shares (cost $2,622,231)................................................... 2,515,032 Federated American Leaders Fund II - Primary Shares (FedAmLdII) 724 shares (cost $13,015).......................................................... 13,829 Federated Capital Appreciation Fund II - Primary Shares (FedCpApII) 1,215 shares (cost $6,135)......................................................... 6,635 Federated GVIT High Income Bond Fund - Class I (FGVITHiInc) 26,047 shares (cost $204,840)...................................................... 208,896 Federated Quality Bond Fund II - Primary Shares (FedQualBd) 137,143 shares (cost $1,615,913)................................................... 1,623,774 Fidelity(R)VIP - Equity-Income Portfolio: Initial Class (FidVIPEI) 3,204,677 shares (cost $75,195,230)................................................ 74,284,422 Fidelity(R)VIP - Growth Portfolio: Initial Class (FidVIPGr) 3,062,762 shares (cost $134,660,773)............................................... 95,068,140 Fidelity(R)VIP - High Income Portfolio: Initial Class (FidVIPHI) 3,710,348 shares (cost $22,225,627)................................................ 25,786,916 Fidelity(R)VIP - Overseas Portfolio: Initial Class (FidVIPOv) 1,102,398 shares (cost $13,435,709)................................................ 17,186,381 Fidelity(R)VIP II - Asset Manager Portfolio: Initial Class (FidVIPAM) 1,677,352 shares (cost $26,542,631)................................................ 24,254,513 Fidelity(R)VIP II - Contrafund Portfolio: Initial Class (FidVIPCon) 2,363,817 shares (cost $56,328,677)................................................ 54,675,085 Fidelity(R)VIP II - Investment Grade Bond Portfolio: Service Class (FidVIPInvGrB) 17,653 shares (cost $235,768)...................................................... 240,252 Fidelity(R)VIP III - Growth Opportunities Portfolio: Initial Class (FidVIPGrOp) 276,847 shares (cost $4,544,028)................................................... 4,172,090 Fidelity(R)VIP III - Mid Cap Portfolio: Service Class (FidVIPMCap) 30,734 shares (cost $682,559)...................................................... 740,696 Fidelity(R)VIP III - Value Strategies Portfolio: Service Class (FidVIPValStS) 172,457 shares (cost $1,955,062)................................................... 2,136,744 Franklin Templeton VIP - Franklin Rising Dividends Securities Fund - Class I (FTVIPFRDiv) 56,109 shares (cost $848,387)......................................... 913,449 Franklin Templeton VIP - Franklin Small Cap Value Securities Fund - Class I (FTVIPSmCpVal) 13,199 shares (cost $154,595)................................................... 169,076 Franklin Templeton VIPT - Templeton Foreign Securities Fund - Class I (FTVIPFS) 30,353 shares (cost $343,892)...................................................... 375,467
Gartmore GVIT Emerging Markets Fund - Class I (GVITEmMrkts) 163,841 shares (cost $1,383,854)................................................... $ 1,612,192 Gartmore GVIT Global Financial Services Fund - Class I (GVITGlFin) 31,265 shares (cost $352,113)...................................................... 356,105 Gartmore GVIT Global Health Sciences Fund - Class I (GVITGlHlth) 63,183 shares (cost $661,958)...................................................... 629,303 Gartmore GVIT Global Technology and Communications Fund - Class I (GVITGlTech) 343,387 shares (cost $1,215,482)................................................... 1,273,967 Gartmore GVIT Global Utilities Fund - Class I (GVITGlUtl) 18,114 shares (cost $147,890)...................................................... 165,926 Gartmore GVIT Government Bond Fund - Class I (GVITGvtBd) 1,353,967 shares (cost $16,631,333)................................................ 16,423,617 Gartmore GVIT Growth Fund - Class I (GVITGrowth) 1,719,348 shares (cost $30,956,682)................................................ 17,159,090 Gartmore GVIT ID Aggressive Fund (GVITIDAgg) 47,364 shares (cost $459,362)...................................................... 496,850 Gartmore GVIT ID Conservative Fund (GVITIDCon) 36,945 shares (cost $366,158)...................................................... 381,268 Gartmore GVIT ID Moderate Fund (GVITIDMod) 234,346 shares (cost $2,195,459)................................................... 2,470,006 Gartmore GVIT ID Moderately Aggressive Fund (GVITIDModAgg) 195,717 shares (cost $1,797,292)................................................... 2,074,599 Gartmore GVIT ID Moderately Conservative Fund (GVITIDModCon) 67,146 shares (cost $654,610)...................................................... 703,695 Gartmore GVIT International Growth Fund - Class I (GVITIntGro) 12,856 shares (cost $76,135)....................................................... 81,247 Gartmore GVIT Money Market Fund - Class I (GVITMyMkt) 31,758,648 shares (cost $31,758,648)............................................... 31,758,648 Gartmore GVIT Nationwide(R)Leaders Fund - Class I (GVITLead) 10,091 shares (cost $101,668)...................................................... 119,179 Gartmore GVIT Small Cap Growth Fund - Class I (GVITSmCapGr) 126,523 shares (cost $1,539,759)................................................... 1,641,007 Gartmore GVIT Small Cap Value Fund - Class I (GVITSmCapVal) 1,298,293 shares (cost $11,485,484)................................................ 15,008,264 Gartmore GVIT Small Company Fund - Class I (GVITSmComp) 1,259,065 shares (cost $23,801,358)................................................ 27,359,492 Gartmore GVIT Total Return Fund - Class I (GVITTotRt) 7,170,192 shares (cost $103,995,562)............................................... 73,637,874 Gartmore GVIT U.S. Growth Leaders Fund - Class I (GVITUSGro) 97,261 shares (cost $1,059,045).................................................... 1,044,584 Janus AS - Balanced Portfolio - Service Shares (JanBal) 1,174 shares (cost $27,080)........................................................ 27,954 Janus AS - Capital Appreciation Portfolio - Service Shares (JanCapAp) 120,909 shares (cost $2,273,247)................................................... 2,500,390 Janus AS - Global Technology Portfolio - Service Shares (JanGlTech) 376,692 shares (cost $1,025,067)................................................... 1,329,723 Janus AS - International Growth Portfolio - Service Shares (JanIntGro) 75,224 shares (cost $1,268,929).................................................... 1,721,888
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, Continued Janus AS - Risk-Managed Large Cap Core Portfolio - Service Shares (JanRsLgCpCr) 636 shares (cost $7,439)........................................................... $ 7,941 MAS GVIT Multi Sector Bond Fund - Class I (MGVITMultiSec) 128,658 shares (cost $1,247,045)................................................... 1,268,567 MFS VIT - MFS Investors Growth Stock Series - Initial Class (MFSVITInvGrwI) 6,382 shares (cost $54,035)........................................................ 55,584 MFS VIT - MFS Value Series - Initial Class (MFSVITValIn) 4,061 shares (cost $39,851)........................................................ 43,700 Neuberger Berman AMT - Balanced Portfolio (NBAMTBal) 7,633 shares (cost $68,003)........................................................ 68,160 Neuberger Berman AMT - Fasciano Portfolio (NBAMTFas) 864 shares (cost $9,966)........................................................... 10,713 Neuberger Berman AMT - Growth Portfolio (NBAMTGro) 1,554,592 shares (cost $14,602,384)................................................ 16,198,848 Neuberger Berman AMT - Guardian Portfolio (NBAMTGuard) 140,139 shares (cost $1,607,978)................................................... 1,959,147 Neuberger Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat) 474,037 shares (cost $6,303,912)................................................... 6,257,290 Neuberger Berman AMT - Mid Cap Growth Portfolio - Class S (NBAMTMCGr) 17,806 shares (cost $262,407)...................................................... 272,069 Neuberger Berman AMT - Partners Portfolio (NBAMTPart) 1,321,998 shares (cost $18,969,309)................................................ 20,358,765 Neuberger Berman AMT - Socially Responsive Portfolio (NBAMTSocRe) 3,282 shares (cost $36,246)........................................................ 40,528 Oppenheimer Aggressive Growth Fund/VA - Initial Class (OppAggGro) 49,858 shares (cost $1,793,509).................................................... 1,830,283 Oppenheimer Bond Fund/VA - Initial Class (OppBdFd) 1,156,060 shares (cost $12,746,798)................................................ 13,202,210 Oppenheimer Capital Appreciation Fund/VA - Initial Class (OppCapAp) 433,347 shares (cost $12,466,337).................................................. 15,037,136 Oppenheimer Global Securities Fund/VA - Initial Class (OppGlSec) 1,310,984 shares (cost $29,326,647)................................................ 32,879,487 Oppenheimer High Income Fund/VA - Initial Class (OppHiIncInt) 36,258 shares (cost $296,894)...................................................... 312,181 Oppenheimer Main Street(R)Growth & Income Fund/VA - Initial Class (OppMSGrInc) 74,492 shares (cost $1,316,200).................................................... 1,430,243 Oppenheimer Main Street(R)Small Cap Fund/VA - Initial Class (OppMaStSmCpI) 30,042 shares (cost $374,449)...................................................... 403,769 Oppenheimer Multiple Strategies Fund/VA - Initial Class (OppMultStr) 967,615 shares (cost $15,174,020).................................................. 15,404,426 Putnam VT Growth & Income Fund - IB Shares (PUTVTGrIncIB) 643 shares (cost $13,400).......................................................... 14,960 Putnam VT International Equity Fund - IB Shares (PUTVTIntlEqIB) 4,885 shares (cost $57,360)........................................................ 62,777 Putnam VT Voyager Fund - IB Shares (PUTVTVoyIB) 582 shares (cost $14,072).......................................................... 15,097
Strong GVIT Mid Cap Growth Fund - Class I (SGVITMdCpGr) 105,978 shares (cost $2,123,252)................................................... $ 2,273,224 Strong Opportunity Fund II, Inc. (StOpp2) 1,792,807 shares (cost $37,105,314)................................................ 34,045,406 Strong VIF - Strong Discovery Fund II (StDisc2) 602,676 shares (cost $6,267,763)................................................... 7,629,880 Strong VIF - Strong International Stock Fund II (StIntStk2) 22 shares (cost $112).............................................................. 22 Turner GVIT Growth Focus Fund - Class I (TurnGVITGro) 206,458 shares (cost $571,601)..................................................... 648,279 Van Eck WIT - Worldwide Bond Fund (VEWrldBd) 350,612 shares (cost $4,394,471)................................................... 4,666,639 Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt) 458,745 shares (cost $4,202,668)................................................... 5,573,752 Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs) 350,433 shares (cost $4,190,631)................................................... 5,210,940 Van Kampen UIF - Core Plus Fixed Income Portfolio - Class A (VKoreFI) 2,653 shares (cost $30,203)........................................................ 30,617 Van Kampen UIF - Emerging Markets Debt Portfolio (VKEmMkt) 316,520 shares (cost $2,679,847)................................................... 2,861,344 Van Kampen UIF - U.S. Real Estate Portfolio (VKUSRealEst) 836,577 shares (cost $10,577,966).................................................. 13,033,865 ------------ Total Investments............................................................... 880,777,175 Accounts Receivable...................................................................... 785,011 ------------ Total Assets.................................................................... 881,562,186 Accounts Payable............................................................................ -- ------------ Contract Owners Equity (note 7)............................................................. $881,562,186 ============
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS Year Ended December 31,2003
Total AIMCapAp AIMBVF AIMCDF ------------- -------- ------- ------- Investment activity: Reinvested dividends ........................... $ 8,949,773 -- 56 -- Mortality and expense risk charges (note 3) .... (5,897,663) (235) (350) (105) ------------- ------ ------- ------- Net investment income (loss) ................ 3,052,110 (235) (294) (105) ------------- ------ ------- ------- Proceeds from mutual fund shares sold .......... 321,981,360 4,295 43,721 19,663 Cost of mutual fund shares sold ................ (358,212,120) (3,770) (39,232) (18,923) ------------- ------ ------- ------- Realized gain (loss) on investments ......... (36,230,760) 525 4,489 740 Change in unrealized gain (loss) on investments .............................. 223,498,022 8,278 13,517 4,627 ------------- ------ ------- ------- Net gain (loss) on investments .............. 187,267,262 8,803 18,006 5,367 ------------- ------ ------- ------- Reinvested capital gains ....................... 231,065 -- -- -- ------------- ------ ------- ------- Net increase (decrease) in contract owners' equity resulting from operations ......... $ 190,550,437 8,568 17,712 5,262 ============= ====== ======= ======= AllSmCpVal AllVGroInc ACVPBal ACVPCapAp ---------- ---------- ---------- ---------- Investment activity: Reinvested dividends ........................... 13 6 129,712 -- Mortality and expense risk charges (note 3) .... (305) (424) (39,223) (92,344) ------- ------ ---------- ---------- Net investment income (loss) ................ (292) (418) 90,489 (92,344) ------- ------ ---------- ---------- Proceeds from mutual fund shares sold .......... 29,229 3,012 1,055,800 1,378,246 Cost of mutual fund shares sold ................ (28,287) (2,937) (1,381,905) (3,280,808) ------- ------ ---------- ---------- Realized gain (loss) on investments ......... 942 75 (326,105) (1,902,562) Change in unrealized gain (loss) on investments .............................. 20,545 32,761 1,118,651 4,110,801 ------- ------ ---------- ---------- Net gain (loss) on investments .............. 21,487 32,836 792,546 2,208,239 ------- ------ ---------- ---------- Reinvested capital gains ....................... 31 -- -- -- ------- ------ ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ......... 21,226 32,418 883,035 2,115,895 ======= ====== ========== ==========
ACVPIncGr ACVPInfPr ACVPInt ACVPUltra ----------- --------- ---------- ---------- Investment activity: Reinvested dividends ........................... $ 42,157 725 76,687 -- Mortality and expense risk charges (note 3) .... (22,571) (282) (75,393) (2,083) ----------- -------- ---------- ---------- Net investment income (loss) ................ 19,586 443 1,294 (2,083) ----------- -------- ---------- ---------- Proceeds from mutual fund shares sold .......... 1,399,508 136,350 3,828,602 1,424,153 Cost of mutual fund shares sold ................ (1,656,349) (136,575) (5,649,230) (1,401,682) ----------- -------- ---------- ---------- Realized gain (loss) on investments ......... (256,841) (225) (1,820,628) 22,471 Change in unrealized gain (loss) on investments .............................. 1,047,403 1,001 4,044,090 31,622 ----------- -------- ---------- ---------- Net gain (loss) on investments .............. 790,562 776 2,223,462 54,093 ----------- -------- ---------- ---------- Reinvested capital gains ....................... -- 18 -- -- ----------- -------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ......... $ 810,148 1,237 2,224,756 52,010 =========== ======== ========== ========== ACVPVal ComGVITVal CSGPVen CSIntEq ---------- ---------- ---------- --------- Investment activity: Reinvested dividends ........................... 122,033 677 -- 26,142 Mortality and expense risk charges (note 3) .... (83,906) (344) (5,477) (37,440) ---------- ------- ---------- --------- Net investment income (loss) ................ 38,127 333 (5,477) (11,298) ---------- ------- ---------- --------- Proceeds from mutual fund shares sold .......... 4,016,279 20,991 6,329,783 937,646 Cost of mutual fund shares sold ................ (4,484,903) (19,338) (6,187,737) (995,370) ---------- ------- ---------- --------- Realized gain (loss) on investments ......... (468,624) 1,653 142,046 (57,724) Change in unrealized gain (loss) on investments .............................. 3,272,161 12,566 162,735 1,638,617 ---------- ------- ---------- --------- Net gain (loss) on investments .............. 2,803,537 14,219 304,781 1,580,893 ---------- ------- ---------- --------- Reinvested capital gains ....................... -- -- -- -- ---------- ------- ---------- --------- Net increase (decrease) in contract owners' equity resulting from operations ......... 2,841,664 14,552 299,304 1,569,595 ========== ======= ========== =========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31,2003
CSSmCapGr DryIntVal DryMidCapIx DrySmCapIxS ----------- --------- ----------- ----------- Investment activity: Reinvested dividends ......................... $ -- -- 24,317 1,671 Mortality and expense risk charges (note 3) .. (89,532) (311) (37,047) (3,223) ----------- -------- ---------- -------- Net investment income (loss) .............. (89,532) (311) (12,730) (1,552) ----------- -------- ---------- -------- Proceeds from mutual fund shares sold ........ 5,621,661 117,634 1,578,531 372,139 Cost of mutual fund shares sold .............. (7,180,721) (108,623) (1,736,046) (306,784) ----------- -------- ---------- -------- Realized gain (loss) on investments ....... (1,559,060) 9,011 (157,515) 65,355 Change in unrealized gain (loss) on investments ............................ 6,398,613 18,013 1,649,966 101,495 ----------- -------- ---------- -------- Net gain (loss) on investments ............ 4,839,553 27,024 1,492,451 166,850 ----------- -------- ---------- -------- Reinvested capital gains ...................... -- -- 40 5,323 ----------- -------- ---------- -------- Net increase (decrease) in contract owners' equity resulting from operations ....... $ 4,750,021 26,713 1,479,761 170,621 =========== ======== ========== ======== DrySRGro DryStkIx DryVIFApp DryDevLeadI ---------- ----------- ---------- ----------- Investment activity: Reinvested dividends ......................... 10,175 1,036,389 82,867 45 Mortality and expense risk charges (note 3) .. (67,265) (491,154) (43,638) (221) ---------- ----------- ---------- ------- Net investment income (loss) .............. (57,090) 545,235 39,229 (176) ---------- ----------- ---------- ------- Proceeds from mutual fund shares sold ........ 1,095,766 8,989,786 3,788,412 12,737 Cost of mutual fund shares sold .............. (1,840,973) (11,036,767) (4,796,120) (11,687) ---------- ----------- ---------- ------- Realized gain (loss) on investments ....... (745,207) (2,046,981) (1,007,708) 1,050 Change in unrealized gain (loss) on investments ............................ 2,849,243 18,594,894 2,073,274 13,125 ---------- ----------- ---------- ------- Net gain (loss) on investments ............ 2,104,036 16,547,913 1,065,566 14,175 ---------- ----------- ---------- ------- Reinvested capital gains ...................... -- -- -- -- ---------- ----------- ---------- ------- Net increase (decrease) in contract owners' equity resulting from operations ....... 2,046,946 17,093,148 1,104,795 13,999 ========== =========== ========== =======
DryVIFGrInc FedAmLdII FedCpApII FGVITHiInc ----------- --------- --------- ---------- Investment activity: Reinvested dividends ......................... $ 18,048 -- -- 6,724 Mortality and expense risk charges (note 3) .. (14,646) (11) (12) (394) ----------- ------ ------ -------- Net investment income (loss) .............. 3,402 (11) (12) 6,330 ----------- ------ ------ -------- Proceeds from mutual fund shares sold ........ 772,922 1,351 1,345 112,748 Cost of mutual fund shares sold .............. (1,089,733) (1,388) (1,384) (112,106) ----------- ------ ------ -------- Realized gain (loss) on investments ....... (316,811) (37) (39) 642 Change in unrealized gain (loss) on investments ............................ 800,579 814 500 4,057 ----------- ------ ------ -------- Net gain (loss) on investments ............ 483,768 777 461 4,699 ----------- ------ ------ -------- Reinvested capital gains ..................... -- -- -- -- ----------- ------ ------ -------- Net increase (decrease) in contract owners' equity resulting from operations........ $ 487,170 766 449 11,029 =========== ====== ====== ======== FedQualBd FidVIPEI FidVIPGr FidVIPHI ---------- ---------- ----------- ----------- Investment activity: Reinvested dividends ......................... 70,239 1,139,885 223,150 1,390,428 Mortality and expense risk charges (note 3) .. (13,559) (489,575) (646,292) (177,611) ---------- ---------- ----------- ----------- Net investment income (loss) .............. 56,680 650,310 (423,142) 1,212,817 ---------- ---------- ----------- ----------- Proceeds from mutual fund shares sold ........ 2,686,186 5,863,575 8,754,074 20,227,853 Cost of mutual fund shares sold .............. (2,641,021) (7,515,510) (14,271,617) (19,969,857) ---------- ---------- ----------- ----------- 45,165 (1,651,935) (5,517,543) 257,996 Realized gain (loss) on investments ....... Change in unrealized gain (loss) on investments ............................ (31,320) 17,928,029 29,260,774 4,109,732 ---------- ---------- ----------- ----------- Net gain (loss) on investments ............ 13,845 16,276,094 23,743,231 4,367,728 ---------- ---------- ----------- ----------- Reinvested capital gains ..................... -- -- -- -- ---------- ---------- ----------- ----------- Net increase (decrease) in contract owners' equity resulting from operations........ 70,525 16,926,404 23,320,089 5,580,545 ========== ========== =========== ===========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2003
FidVIPOv FidVIPAM FidVIPCon FidVIPInvGrB ----------- ---------- ---------- ------------ Investment activity: Reinvested dividends ............................... $ 112,753 838,376 219,092 -- Mortality and expense risk charges (note 3) ........ (106,828) (193,956) (356,329) (467) ----------- ---------- ---------- ------- Net investment income (loss) .................... 5,925 644,420 (137,237) (467) ----------- ---------- ---------- ------- Proceeds from mutual fund shares sold .............. 1,790,935 3,116,268 4,585,765 19,272 Cost of mutual fund shares sold .................... (2,053,763) (3,694,374) (5,829,074) (19,195) ----------- ---------- ---------- ------- Realized gain (loss) on investments ............. (262,828) (578,106) (1,243,309) 77 Change in unrealized gain (loss) on investments .... 5,358,106 3,592,165 13,191,640 4,485 ----------- ---------- ---------- ------- Net gain (loss) on investments .................. 5,095,278 3,014,059 11,948,331 4,562 ----------- ---------- ---------- ------- Reinvested capital gains ........................... -- -- -- -- ----------- ---------- ---------- ------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 5,101,203 3,658,479 11,811,094 4,095 =========== ========== ========== ======= FidVIPGrOp FidVIPMCap FidVIPValStS FTVIPFRDiv ---------- ---------- ------------ ---------- Investment activity: Reinvested dividends ............................... 26,525 -- -- 499 Mortality and expense risk charges (note 3) ........ (25,065) (1,105) (7,699) (1,402) --------- -------- ---------- ------- Net investment income (loss) .................... 1,460 (1,105) (7,699) (903) --------- -------- ---------- ------- Proceeds from mutual fund shares sold .............. 639,910 126,122 2,379,414 37,113 Cost of mutual fund shares sold .................... (981,732) (109,423) (2,189,704) (36,298) --------- -------- ---------- ------- Realized gain (loss) on investments ............. (341,822) 16,699 189,710 815 Change in unrealized gain (loss) on investments .... 1,280,096 58,136 186,255 65,062 --------- -------- ---------- ------- Net gain (loss) on investments .................. 938,274 74,835 375,965 65,877 --------- -------- ---------- ------- Reinvested capital gains ........................... -- -- 12,819 1,517 --------- -------- ---------- ------- Net increase (decrease) in contract owners' equity resulting from operations .......... 939,734 73,730 381,085 66,491 ========= ======== ========== =======
FTVIPSmCpVal FTVIPFS GVITEmMrkts GVITGLFin ------------ -------- ----------- --------- Investment activity: Reinvested dividends ............................... $ 62 948 4,333 1,558 Mortality and expense risk charges (note 3) ........ (357) (726) (4,814) (1,427) -------- -------- ---------- --------- Net investment income (loss) .................... (295) 222 (481) 131 -------- -------- ---------- --------- Proceeds from mutual fund shares sold .............. 101,671 149,170 1,152,746 1,001,701 Cost of mutual fund shares sold .................... (93,605) (137,531) (1,003,069) (976,991) -------- -------- ---------- --------- Realized gain (loss) on investments ............. 8,066 11,639 149,677 24,710 Change in unrealized gain (loss) on investments .... 14,481 31,576 219,942 4,592 -------- -------- ---------- --------- Net gain (loss) on investments .................. 22,547 43,215 369,619 29,302 -------- -------- ---------- --------- Reinvested capital gains ........................... -- -- -- 36,957 -------- -------- ---------- --------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 22,252 43,437 369,138 66,390 ======== ======== ========== ========= GVITGLHlth GVITGLTech GVITGLUtl GVITGvtBd ---------- ---------- --------- ----------- Investment activity: Reinvested dividends ............................... -- -- 750 646,418 Mortality and expense risk charges (note 3) ........ (5,970) (5,695) (920) (159,721) ---------- ---------- -------- ----------- Net investment income (loss) .................... (5,970) (5,695) (170) 486,697 ---------- ---------- -------- ----------- Proceeds from mutual fund shares sold .............. 1,432,702 1,438,857 158,773 16,220,023 Cost of mutual fund shares sold .................... (1,294,435) (1,285,197) (153,536) (16,239,231) ---------- ---------- -------- ----------- Realized gain (loss) on investments ............. 138,267 153,660 5,237 (19,208) Change in unrealized gain (loss) on investments .... (27,859) 95,094 18,068 (207,136) ---------- ---------- -------- ----------- Net gain (loss) on investments .................. 110,408 248,754 23,305 (226,344) ---------- ---------- -------- ----------- Reinvested capital gains ........................... 70,723 -- -- 29,787 ---------- ---------- -------- ----------- Net increase (decrease) in contract owners' equity resulting from operations .......... 175,161 243,059 23,135 290,140 ========== ========== ======== ===========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2003
GVITGrowth GVITIDAgg GVITIDCon GVITIDMod ----------- --------- --------- --------- Investment activity: Reinvested dividends ............................... $ 3,130 4,130 9,827 30,037 Mortality and expense risk charges (note 3) ........ (110,693) (2,234) (2,784) (10,396) ----------- -------- -------- -------- Net investment income (loss) .................... (107,563) 1,896 7,043 19,641 ----------- -------- -------- -------- Proceeds from mutual fund shares sold .............. 1,880,508 898,198 336,122 220,719 Cost of mutual fund shares sold .................... (5,749,162) (854,015) (330,193) (214,889) ----------- -------- -------- -------- Realized gain (loss) on investments ............. (3,868,654) 44,183 5,929 5,830 Change in unrealized gain (loss) on investments .... 8,180,131 42,877 16,454 285,948 ----------- -------- -------- -------- Net gain (loss) on investments .................. 4,311,477 87,060 22,383 291,778 ----------- -------- -------- -------- Reinvested capital gains ........................... -- 5,518 1,440 946 ----------- -------- -------- -------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 4,203,914 94,474 30,866 312,365 =========== ======== ======== ======== GVITIDModAgg GVITIDModCon GVITIntGro GVITMyMkt ------------ ------------ ---------- ----------- Investment activity: Reinvested dividends ............................... 19,854 12,539 -- 267,135 Mortality and expense risk charges (note 3) ........ (9,434) (3,374) (438) (315,221) -------- -------- -------- ----------- Net investment income (loss) .................... 10,420 9,165 (438) (48,086) -------- -------- -------- ----------- Proceeds from mutual fund shares sold .............. 421,703 329,080 287,641 52,914,332 Cost of mutual fund shares sold .................... (429,277) (314,125) (278,157) (52,914,332) -------- -------- -------- ----------- Realized gain (loss) on investments ............. (7,574) 14,955 9,484 -- Change in unrealized gain (loss) on investments .... 318,164 48,943 5,034 -- -------- -------- -------- ----------- Net gain (loss) on investments .................. 310,590 63,898 14,518 -- -------- -------- -------- ----------- Reinvested capital gains ........................... -- 1,142 -- -- -------- -------- -------- ----------- Net increase (decrease) in contract owners' equity resulting from operations .......... 321,010 74,205 14,080 (48,086) ======== ======== ======== ===========
GVITLead GVITSmCapGr GVITSmCapVal GVITSmComp -------- ----------- ------------ ---------- Investment activity: Reinvested dividends ............................... $ 167 -- 54 -- Mortality and expense risk charges (note 3) ........ (670) (9,992) (78,572) (162,554) -------- ---------- ----------- ---------- Net investment income (loss) .................... (503) (9,992) (78,518) (162,554) -------- ---------- ----------- ---------- Proceeds from mutual fund shares sold .............. 66,021 2,552,073 11,825,967 4,473,625 Cost of mutual fund shares sold .................... (69,415) (2,306,781) (11,420,906) (5,414,955) -------- ---------- ----------- ---------- Realized gain (loss) on investments ............. (3,394) 245,292 405,061 (941,330) Change in unrealized gain (loss) on investments .... 22,125 101,046 4,692,960 8,912,411 -------- ---------- ----------- ---------- Net gain (loss) on investments .................. 18,731 346,338 5,098,021 7,971,081 -------- ---------- ----------- ---------- Reinvested capital gains ........................... -- -- -- -- -------- ---------- ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 18,228 336,346 5,019,503 7,808,527 ======== ========== =========== ========== GVITTotRt GVITUSGro JanBal JanCapAp ---------- ---------- ------ ---------- Investment activity: Reinvested dividends ............................... 364,416 -- 243 5,918 Mortality and expense risk charges (note 3) ........ (492,794) (4,094) (41) (17,053) ---------- ---------- ----- ---------- Net investment income (loss) .................... (128,378) (4,094) 202 (11,135) ---------- ---------- ----- ---------- Proceeds from mutual fund shares sold .............. 3,670,080 1,505,809 169 1,458,506 Cost of mutual fund shares sold .................... (5,989,912) (1,391,370) (162) (1,540,703) ---------- ---------- ----- ---------- Realized gain (loss) on investments ............. (2,319,832) 114,439 7 (82,197) Change in unrealized gain (loss) on investments .... 18,094,378 (8,682) 875 520,550 ---------- ---------- ----- ---------- Net gain (loss) on investments .................. 15,774,546 105,757 882 438,353 ---------- ---------- ----- ---------- Reinvested capital gains ........................... -- 64,799 -- -- ---------- ---------- ----- ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... 15,646,168 166,462 1,084 427,218 ========== ========== ===== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2003
JanGlTech JanIntGro JanRsLgCpCr MGVITMultiSec ---------- --------- ----------- ------------- Investment activity: Reinvested dividends ............................... $ -- 15,339 6 81,970 Mortality and expense risk charges (note 3) ........ (8,186) (11,890) (14) (10,896) --------- -------- ------ ---------- Net investment income (loss) .................... (8,186) 3,449 (8) 71,074 --------- -------- ------ ---------- Proceeds from mutual fund shares sold .............. 678,165 655,560 1,364 2,704,889 Cost of mutual fund shares sold .................... (978,757) (567,721) (1,401) (2,609,762) --------- -------- ------ ---------- Realized gain (loss) on investments ............. (300,592) 87,839 (37) 95,127 Change in unrealized gain (loss) on investments .................................. 755,405 377,425 503 (5,724) --------- -------- ------ ---------- Net gain (loss) on investments .................. 454,813 465,264 466 89,403 --------- -------- ------ ---------- Reinvested capital gains ........................... -- -- -- -- --------- -------- ------ ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 446,627 468,713 458 160,477 ========= ======== ====== ========== MFSVITInvGrwI MFSVITValIn NBAMTBal NBAMTFas ------------- ----------- -------- -------- Investment activity: Reinvested dividends ............................... -- -- 1,029 -- Mortality and expense risk charges (note 3) ........ (68) (74) (425) (42) ------ ----- ------ ------- Net investment income (loss) .................... (68) (74) 604 (42) ------ ----- ------ ------- Proceeds from mutual fund shares sold .............. 3,254 720 6,704 27,115 Cost of mutual fund shares sold .................... (3,141) (682) (7,581) (26,365) ------ ----- ------ ------- Realized gain (loss) on investments ............. 113 38 (877) 750 Change in unrealized gain (loss) on investments .................................. 1,549 3,849 8,095 747 ------ ----- ------ ------- Net gain (loss) on investments .................. 1,662 3,887 7,218 1,497 ------ ----- ------ ------- Reinvested capital gains ........................... -- -- -- 5 ------ ----- ------ ------- Net increase (decrease) in contract owners' equity resulting from operations .......... 1,594 3,813 7,822 1,460 ====== ===== ====== =======
NBAMTGro NBAMTGuard NBAMTLMat NBAMTMCGr ------------ ---------- ---------- --------- Investment activity: Reinvested dividends $ -- 15,295 289,709 -- Mortality and expense risk charges (note 3) ........ (113,247) (12,078) (50,160) (601) Net investment income (loss) .................... ------------ ---------- ---------- -------- (113,247) 3,217 239,549 (601) ------------ ---------- ---------- -------- Proceeds from mutual fund shares sold .............. 7,253,127 1,863,642 2,412,027 265,458 Cost of mutual fund shares sold .................... (10,102,232) (2,083,044) (2,392,121) (258,376) ------------ ---------- ---------- -------- Realized gain (loss) on investments ............. (2,849,105) (219,402) 19,906 7,082 Change in unrealized gain (loss) on investments .................................. 6,753,242 710,906 (150,522) 9,663 ------------ ---------- ---------- -------- Net gain (loss) on investments .................. 3,904,137 491,504 (130,616) 16,745 ------------ ---------- ---------- -------- Reinvested capital gains ........................... -- -- -- -- ------------ ---------- ---------- -------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 3,790,890 494,721 108,933 16,144 ============ ========== ========== ======== NBAMTPart NBAMTSocRe OppAggGro OppBdFd ---------- ---------- ---------- ---------- Investment activity: Reinvested dividends -- -- -- 780,527 Mortality and expense risk charges (note 3) ........ (125,663) (106) (11,886) (100,738) Net investment income (loss) .................... ---------- ----- ---------- ---------- (125,663) (106) (11,886) 679,789 ---------- ----- ---------- ---------- Proceeds from mutual fund shares sold .............. 5,454,853 342 6,981,943 3,855,356 Cost of mutual fund shares sold .................... (7,937,157) (317) (6,752,739) (3,860,203) ---------- ----- ---------- ---------- Realized gain (loss) on investments ............. (2,482,304) 25 229,204 (4,847) Change in unrealized gain (loss) on investments .................................. 8,076,460 4,282 73,026 124,933 ---------- ----- ---------- ---------- Net gain (loss) on investments .................. 5,594,156 4,307 302,230 120,086 ---------- ----- ---------- ---------- Reinvested capital gains ........................... -- -- -- -- ---------- ----- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... 5,468,493 4,201 290,344 799,875 ========== ===== ========== ==========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Year Ended December 31, 2003
OppCapAp OppGlSec OppHiIncInt OppMSGrInc ----------- ----------- ----------- ----------- Investment activity: Reinvested dividends ............................... $ 48,384 199,865 -- 11,048 Mortality and expense risk charges (note 3) ........ (97,538) (201,145) (475) (8,470) ----------- ----------- -------- ---------- Net investment income (loss) .................... (49,154) (1,280) (475) 2,578 ----------- ----------- -------- ---------- Proceeds from mutual fund shares sold .............. 6,358,285 6,570,373 134,541 1,480,124 Cost of mutual fund shares sold .................... (8,518,257) (10,925,797) (131,733) (1,398,434) ----------- ----------- -------- ---------- Realized gain (loss) on investments ............. (2,159,972) (4,355,424) 2,808 81,690 Change in unrealized gain (loss) on investments .................................. 5,578,110 14,079,632 15,287 214,017 ----------- ----------- -------- ---------- Net gain (loss) on investments .................. 3,418,138 9,724,208 18,095 295,707 ----------- ----------- -------- ---------- Reinvested capital gains ........................... -- -- -- -- ----------- ----------- -------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 3,368,984 9,722,928 17,620 298,285 =========== =========== ======== ========== OppMaStSmCpI OppMultStr PUTVTGrIncIB PUTVTIntlEqIB ------------ ---------- ------------ ------------- Investment activity: Reinvested dividends ............................... -- 378,934 -- -- Mortality and expense risk charges (note 3) ........ (584) (103,390) (40) (131) ------- ---------- ------ ------- Net investment income (loss) ....................... (584) 275,544 (40) (131) ------- ---------- ------ ------- Proceeds from mutual fund shares sold .............. 51,290 1,009,890 1,374 28,223 Cost of mutual fund shares sold .................... (49,709) (1,176,710) (1,416) (26,197) ------- ---------- ------ ------- Realized gain (loss) on investments ............. 1,581 (166,820) (42) 2,026 Change in unrealized gain (loss) on investments .................................. 29,320 2,834,011 1,560 5,418 ------- ---------- ------ ------- Net gain (loss) on investments .................. 30,901 2,667,191 1,518 7,444 ------- ---------- ------ ------- Reinvested capital gains ........................... -- -- -- -- ------- ---------- ------ ------- Net increase (decrease) in contract owners' equity resulting from operations .......... 30,317 2,942,735 1,478 7,313 ======= ========== ====== =======
PUTVTVoyIB SGVITMdCpGr StOpp2 StDisc2 ---------- ----------- ---------- ---------- Investment activity: Reinvested dividends ............................... $ -- -- 22,768 -- Mortality and expense risk charges (note 3) ........ (36) (16,320) (243,625) (51,688) ------- ----------- ---------- ---------- Net investment income (loss) .................... (36) (16,320) (220,857) (51,688) ------- ----------- ---------- ---------- Proceeds from mutual fund shares sold .............. 1,486 11,315,982 6,367,476 2,728,028 Cost of mutual fund shares sold .................... (1,372) (11,001,248) (8,381,704) (2,338,631) ------- ----------- ---------- ---------- Realized gain (loss) on investments ............. 114 314,734 (2,014,228) 389,397 Change in unrealized gain (loss) on investments .................................. 1,025 196,161 11,846,663 1,778,903 ------- ----------- ---------- ---------- Net gain (loss) on investments .................. 1,139 510,895 9,832,435 2,168,300 ------- ----------- ---------- ---------- Reinvested capital gains ........................... -- -- -- -- ------- ----------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... $ 1,103 494,575 9,611,578 2,116,612 ======= =========== ========== ========== StIntStk2 TurnGVITGro VEWrldBd VEWrldEMkt ---------- ----------- ----------- ---------- Investment activity: Reinvested dividends ............................... 22,646 -- 86,807 4,618 Mortality and expense risk charges (note 3) ........ (1,550) (3,394) (38,975) (28,328) ---------- -------- ----------- ---------- Net investment income (loss) .................... 21,096 (3,394) 47,832 (23,710) ---------- -------- ----------- ---------- Proceeds from mutual fund shares sold .............. 5,562,084 837,367 14,023,643 8,530,488 Cost of mutual fund shares sold .................... (5,619,704) (731,272) (13,494,169) (7,765,873) ---------- -------- ----------- ---------- Realized gain (loss) on investments ............. (57,620) 106,095 529,474 764,615 Change in unrealized gain (loss) on investments .................................. (7,327) 99,325 135,636 1,136,659 ---------- -------- ----------- ---------- Net gain (loss) on investments .................. (64,947) 205,420 665,110 1,901,274 ---------- -------- ----------- ---------- Reinvested capital gains ........................... -- -- -- -- ---------- -------- ----------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .......... (43,851) 202,026 712,942 1,877,564 ========== ======== =========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF OPERATIONS, Continued Years Ended December 31, 2003
VEWrldHAs VKoreFI VKEmMkt VKUSRealEst ------------ ------- ---------- ----------- Investment activity: Reinvested dividends................................ $ 19,918 -- -- -- Mortality and expense risk charges (note 3)......... (31,922) (54) (14,792) (81,334) ------------ ------ ---------- ---------- Net investment income (loss)..................... (12,004) (54) (14,792) (81,334) ------------ ------ ---------- ---------- Proceeds from mutual fund shares sold............... 14,058,576 7,706 7,573,633 5,361,279 Cost of mutual fund shares sold..................... (13,369,955) (7,626) (7,257,163) (5,210,656) ------------ ------ ---------- ---------- Realized gain (loss) on investments.............. 688,621 80 316,470 150,623 Change in unrealized gain (loss) on investments..... 856,699 414 218,451 3,325,139 ------------ ------ ---------- ---------- Net gain (loss) on investments................... 1,545,320 494 534,921 3,475,762 ------------ ------ ---------- ---------- Reinvested capital gains............................ -- -- -- -- ------------ ------ ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations... $ 1,533,316 440 520,129 3,394,428 ============ ====== ========== ==========
See accompanying notes to financial statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY Years Ended December 31, 2003 and 2002
Total AIMCapAp AIMBVF AIMCDF --------------------------- ------------- -------------- ------------- 2003 2002 2003 2002 2003 2002 2003 2002 ------------ ------------ ------ ---- ------- ---- ------ ---- Investment activity: Net investment income (loss) ................ $ 3,052,110 4,950,226 (235) -- (294) -- (105) -- Realized gain (loss) on investments ......... (36,230,760) (79,683,065) 525 -- 4,489 -- 740 -- Change in unrealized gain (loss) on investments ........................... 223,498,022 (101,227,231) 8,278 -- 13,517 -- 4,627 -- Reinvested capital gains .................... 231,065 3,918,828 -- -- -- -- -- -- ------------ ------------ ------ --- ------- --- ------ --- Net increase (decrease) in contract owners' equity resulting from operations ............................ 190,550,437 (172,041,242) 8,568 -- 17,712 -- 5,262 -- ------------ ------------ ------ --- ------- --- ------ --- Equity transactions: Purchase payments received from contract owners (note 6) ................. 79,106,617 89,852,157 4,077 -- 13,196 -- 17,738 -- Transfers between funds ..................... -- -- 54,624 -- 174,047 -- 39,891 -- Surrenders (note 6) ......................... (65,928,134) (68,413,303) -- -- -- -- -- -- Death benefits (note 4) ..................... (2,595,113) (2,878,265) -- -- -- -- -- -- Net policy repayments (loans) (note 5) ...... 2,893,261 (1,274,925) -- -- -- -- -- -- Deductions for surrender charges (note 2d)... (3,047,308) (3,761,910) -- -- -- -- -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (45,732,350) (47,105,562) (558) -- (1,485) -- (506) -- Asset charges (note 3): MSP contracts ............................ (360,513) (404,175) -- -- (11) -- -- -- LSFP contracts ........................... (348,047) (354,416) -- -- (21) -- (11) -- ------------ ------------ ------ --- ------- --- ------ --- Net equity transactions ............... (36,011,587) (34,340,399) 58,143 -- 185,726 -- 57,112 -- ------------ ------------ ------ --- ------- --- ------ --- Net change in contract owners' equity .......... 154,538,850 (206,381,641) 66,711 -- 203,438 -- 62,374 -- Contract owners' equity beginning of period ................................... 727,023,336 933,404,977 -- -- -- -- -- -- ------------ ------------ ------ --- ------- --- ------ --- Contract owners' equity end of period .......... $881,562,186 727,023,336 66,711 -- 203,438 -- 62,374 -- ============ ============ ====== === ======= === ====== === CHANGES IN UNITS: Beginning units ............................. 43,194,768 44,510,163 -- -- -- -- -- -- ------------ ------------ ------ --- ------- --- ------ --- Units purchased ............................. 9,067,289 7,977,095 5,459 -- 15,769 -- 4,859 -- Units redeemed .............................. (10,139,138) (9,292,490) (48) -- (124) -- (43) -- ------------ ------------ ------ --- ------- --- ------ --- Ending units ................................ 42,122,919 43,194,768 5,411 -- 15,645 -- 4,816 -- ============ ============ ====== === ======= === ====== ===
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
AllSmCpVal AllVGroInc --------------- -------------- 2003 2002 2003 2002 -------- ---- ------- ---- Investment activity: Net investment income (loss) ................. $ (292) -- (418) -- Realized gain (loss) on investments .......... 942 -- 75 -- Change in unrealized gain (loss) on investments ............................ 20,545 -- 32,761 -- Reinvested capital gains ..................... 31 -- -- -- -------- --- ------- --- Net increase (decrease) in contract owners' equity resulting from operations ............................. 21,226 -- 32,418 -- -------- --- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) .................. 10,110 -- 33,861 -- Transfers between funds ...................... 188,663 -- 352,236 -- Surrenders (note 6) .......................... (7,886) -- (29) -- Death benefits (note 4) ...................... -- -- -- -- Net policy repayments (loans) (note 5) ....... 1,348 -- 1,309 -- Deductions for surrender charges (note 2d) ... (364) -- (1) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (1,659) -- (3,099) -- Asset charges (note 3): MSP contracts ............................. (97) -- (130) -- LSFP contracts ............................ -- -- (188) -- -------- --- ------- --- Net equity transactions ................ 190,115 -- 383,959 -- -------- --- ------- --- Net change in contract owners' equity ........... 211,341 -- 416,377 -- Contract owners' equity beginning of period ..... -- -- -- -- -------- --- ------- --- Contract owners' equity end of period ........... $211,341 -- 416,377 -- ======== === ======= === CHANGES IN UNITS: Beginning units .............................. -- -- -- -- -------- --- ------- --- Units purchased .............................. 15,534 -- 33,907 -- Units redeemed ............................... (153) -- (320) -- -------- --- ------- --- Ending units ................................. 15,381 -- 33,587 -- ======== === ======= === ACVPBal ACVPCapAp --------------------- ----------------------- 2003 2002 2003 2002 --------- --------- ---------- ---------- Investment activity: Net investment income (loss) ................. 90,489 93,052 (92,344) (106,678) Realized gain (loss) on investments .......... (326,105) (292,649) (1,902,562) (4,991,738) Change in unrealized gain (loss) on investments ............................ 1,118,651 (326,154) 4,110,801 1,749,350 Reinvested capital gains ..................... -- -- -- -- --------- --------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ............................. 883,035 (525,751) 2,115,895 (3,349,066) --------- --------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) .................. 538,281 655,414 1,235,265 1,491,221 Transfers between funds ...................... 193,768 (19,192) (407,015) (1,137,628) Surrenders (note 6) .......................... (281,959) (261,495) (646,593) (823,146) Death benefits (note 4) ...................... (12,858) (12,043) (3,714) (65,672) Net policy repayments (loans) (note 5) ....... (42,073) (29,194) 102,148 (9,534) Deductions for surrender charges (note 2d) ... (13,033) (14,379) (29,887) (45,263) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ......................... (289,395) (278,409) (758,543) (853,298) Asset charges (note 3): MSP contracts ............................. (3,799) (4,131) (4,502) (5,655) LSFP contracts ............................ (1,595) (1,525) (2,026) (3,142) --------- --------- ---------- ---------- Net equity transactions ................ 87,337 35,046 (514,867) (1,452,117) --------- --------- ---------- ---------- Net change in contract owners' equity ........... 970,372 (490,705) 1,601,028 (4,801,183) Contract owners' equity beginning of period ..... 4,659,269 5,149,974 11,497,921 16,299,104 --------- --------- ---------- ---------- Contract owners' equity end of period ........... 5,629,641 4,659,269 13,098,949 11,497,921 ========= ========= ========== ========== CHANGES IN UNITS: Beginning units .............................. 277,290 275,968 839,237 945,180 --------- --------- ---------- ---------- Units purchased .............................. 47,943 42,350 118,180 116,117 Units redeemed ............................... (43,280) (41,028) (169,443) (222,060) --------- --------- ---------- ---------- Ending units ................................. 281,953 277,290 787,974 839,237 ========= ========= ========== ==========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
ACVPIncGr ACVPInfPr ----------------------- -------------- 2003 2002 2003 2002 ---------- ---------- ------- ---- Investment activity: Net investment income (loss) .................. $ 19,586 14,281 443 -- Realized gain (loss) on investments ........... (256,841) (990,548) (225) -- Change in unrealized gain (loss) on investments ............................. 1,047,403 154,381 1,001 -- Reinvested capital gains ...................... -- -- 18 -- ---------- ---------- ------- --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 810,148 (821,886) 1,237 -- ---------- ---------- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 359,246 405,497 19,342 -- Transfers between funds ....................... 82,945 (269,573) 66,741 -- Surrenders (note 6) ........................... (322,295) (341,450) -- -- Death benefits (note 4) ....................... (10,466) -- -- -- Net policy repayments (loans) (note 5) ........ (17,312) (16,672) (10,850) -- Deductions for surrender charges (note 2d) .... (14,897) (18,776) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (173,369) (177,476) (1,304) -- Asset charges (note 3): MSP contracts .............................. (2,173) (2,339) -- -- LSFP contracts ............................. (2,145) (1,896) (30) -- ---------- ---------- ------- --- Net equity transactions ................. (100,466) (422,685) 73,899 -- ---------- ---------- ------- --- Net change in contract owners' equity ............ 709,682 (1,244,571) 75,136 -- Contract owners' equity beginning of period ..................................... 3,032,321 4,276,892 -- -- ---------- ---------- ------- --- Contract owners' equity end of period ............ $3,742,003 3,032,321 75,136 -- ========== ========== ======= === CHANGES IN UNITS: Beginning units ............................... 368,062 416,289 -- -- ---------- ---------- ------- --- Units purchased ............................... 51,709 56,087 8,499 -- Units redeemed ................................ (66,478) (104,314) (1,186) -- ---------- ---------- ------- --- Ending units .................................. 353,293 368,062 7,313 -- ========== ========== ======= === ACVPInt ACVPUltra ----------------------- ------------------ 2003 2002 2003 2002 ---------- ---------- -------- ------- Investment activity: Net investment income (loss) .................. 1,294 6,760 (2,083) 4 Realized gain (loss) on investments ........... (1,820,628) (3,987,767) 22,471 (8,753) Change in unrealized gain (loss) on investments ............................. 4,044,090 1,109,135 31,622 (3,345) Reinvested capital gains ...................... -- -- -- -- ---------- ---------- -------- ------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 2,224,756 (2,871,872) 52,010 (12,094) ---------- ---------- -------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 1,270,341 1,372,078 51,821 5,058 Transfers between funds ....................... (927,232) (973,520) 637,951 124,302 Surrenders (note 6) ........................... (1,014,639) (877,609) (38,610) (26,672) Death benefits (note 4) ....................... (23,621) (3,330) -- -- Net policy repayments (loans) (note 5) ........ 63,696 (127,897) (205,636) -- Deductions for surrender charges (note 2d) .... (46,898) (48,258) (1,785) (1,467) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (534,885) (616,258) (115,287) (2,866) Asset charges (note 3): MSP contracts .............................. (3,290) (4,054) (419) (25) LSFP contracts ............................. (6,570) (7,145) (145) (136) ---------- ---------- -------- ------- Net equity transactions ................. (1,223,098) (1,285,993) 327,890 98,194 ---------- ---------- -------- ------- Net change in contract owners' equity ............ 1,001,658 (4,157,865) 379,900 86,100 Contract owners' equity beginning of period ..................................... 10,472,740 14,630,605 86,100 -- ---------- ---------- -------- ------- Contract owners' equity end of period ............ 11,474,398 10,472,740 466,000 86,100 ========== ========== ======== ======= CHANGES IN UNITS: Beginning units ............................... 860,438 950,787 10,760 -- ---------- ---------- -------- ------- Units purchased ............................... 107,107 102,635 66,318 11,128 Units redeemed ................................ (205,500) (192,984) (30,151) (368) ---------- ---------- -------- ------- Ending units .................................. 762,045 860,438 46,927 10,760 ========== ========== ======== =======
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
ACVPVal ComGVITVal ------------------------ -------------- 2003 2002 2003 2002 ----------- ---------- ------- ---- Investment activity: Net investment income (loss) .................. $ 38,127 16,260 333 -- Realized gain (loss) on investments ........... (468,624) (393,781) 1,653 -- Change in unrealized gain (loss) on investments ............................. 3,272,161 (2,130,437) 12,566 -- Reinvested capital gains ...................... -- 677,932 -- -- ----------- ---------- ------- --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 2,841,664 (1,830,026) 14,552 -- ----------- ---------- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 890,906 1,048,504 6,770 -- Transfers between funds ....................... (303,398) 1,006,877 110,212 -- Surrenders (note 6) ........................... (1,332,433) (962,466) -- -- Death benefits (note 4) ....................... (32,386) (6,357) -- -- Net policy repayments (loans) (note 5) ........ 388,906 (99,706) -- -- Deductions for surrender charges (note 2d) .... (61,587) (52,924) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (517,471) (502,028) (1,897) -- Asset charges (note 3): MSP contracts .............................. (5,716) (7,417) (3) -- LSFP contracts ............................. (8,230) (7,578) -- -- ----------- ---------- ------- --- Net equity transactions ................. (981,409) 416,905 115,082 -- ----------- ---------- ------- --- Net change in contract owners' equity ............ 1,860,255 (1,413,121) 129,634 -- Contract owners' equity beginning of period ..................................... 10,890,722 12,303,843 -- -- ----------- ---------- ------- --- Contract owners'equity end of period ............. $12,750,977 10,890,722 129,634 -- =========== ========== ======= === CHANGES IN UNITS: Beginning units ............................... 735,597 721,884 -- -- ----------- ---------- ------- --- Units purchased ............................... 105,740 134,241 10,445 -- Units redeemed ................................ (168,819) (120,528) (162) -- ----------- ---------- ------- --- Ending units .................................. 672,518 735,597 10,283 -- =========== ========== ======= === CSGPVen CSIntEq --------------------- ---------------------- 2003 2002 2003 2002 --------- --------- --------- ---------- Investment activity: Net investment income (loss) .................. (5,477) (7,766) (11,298) (44,098) Realized gain (loss) on investments ........... 142,046 (833,287) (57,724) 168,979 Change in unrealized gain (loss) on investments ............................. 162,735 398,641 1,638,617 (1,412,977) Reinvested capital gains ...................... -- -- -- -- --------- --------- --------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 299,304 (442,412) 1,569,595 (1,288,096) --------- --------- --------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 72,537 123,418 589,111 716,930 Transfers between funds ....................... (646,030) 70,901 (322,319) (401,475) Surrenders (note 6) ........................... (81,611) (231,349) (404,585) (411,253) Death benefits (note 4) ....................... -- -- (10,839) (17,485) Net policy repayments (loans) (note 5) ........ 7,169 98,610 55,209 39,755 Deductions for surrender charges (note 2d) .... (3,772) (12,721) (18,701) (22,614) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (44,509) (56,152) (304,171) (329,478) Asset charges (note 3): MSP contracts .............................. (353) (394) (2,338) (3,900) LSFP contracts ............................. (481) (512) (4,458) (4,265) --------- --------- --------- ---------- Net equity transactions ................. (697,050) (8,199) (423,091) (433,785) --------- --------- --------- ---------- Net change in contract owners' equity ............ (397,746) (450,611) 1,146,504 (1,721,881) Contract owners' equity beginning of period ..................................... 1,272,812 1,723,423 5,049,074 6,770,955 --------- --------- --------- ---------- Contract owners' equity end of period ............ 875,066 1,272,812 6,195,578 5,049,074 ========= ========= ========= ========== CHANGES IN UNITS: Beginning units ............................... 174,334 154,238 637,322 679,600 --------- --------- --------- ---------- Units purchased ............................... 19,057 51,890 90,205 89,777 Units redeemed ................................ (111,742) (31,794) (135,976) (132,055) --------- --------- --------- ---------- Ending units .................................. 81,649 174,334 591,551 637,322 ========= ========= ========= ==========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
CSSmCapGr DryIntVal ------------------------ -------------- 2003 2002 2003 2002 ----------- ---------- ------- ---- Investment activity: Net investment income (loss) .................. $ (89,532) (96,995) (311) -- Realized gain (loss) on investments ........... (1,559,060) (6,156,236) 9,011 -- Change in unrealized gain (loss) on investments ............................. 6,398,613 434,119 18,013 -- Reinvested capital gains ...................... -- -- -- -- ----------- ---------- ------- --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 4,750,021 (5,819,112) 26,713 -- ----------- ---------- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 1,395,647 1,742,231 10,916 -- Transfers between funds ....................... 22,985 (1,876,740) 174,077 -- Surrenders (note 6) ........................... (782,163) (1,026,223) -- -- Death benefits (note 4) ....................... (36,374) (16,016) -- -- Net policy repayments (loans) (note 5) ........ (59,178) 41,216 -- -- Deductions for surrender charges (note 2d) .... (36,153) (56,430) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (769,346) (794,609) (1,135) -- Asset charges (note 3): MSP contracts .............................. (3,361) (6,478) (99) -- LSFP contracts ............................. (7,181) (6,974) (52) -- ----------- ---------- ------- --- Net equity transactions ................. (275,124) (2,000,023) 183,707 -- ----------- ---------- ------- --- Net change in contract owners' equity ............ 4,474,897 (7,819,135) 210,420 -- Contract owners' equity beginning of period ..................................... 10,409,890 18,229,025 -- -- ----------- ---------- ------- --- Contract owners' equity end of period ............ $14,884,787 10,409,890 210,420 -- =========== ========== ======= === CHANGES IN UNITS: Beginning units ............................... 932,671 1,084,722 -- -- ----------- ---------- ------- --- Units purchased ............................... 132,389 144,963 15,359 -- Units redeemed ................................ (158,775) (297,014) (101) -- ----------- ---------- ------- --- Ending units .................................. 906,285 932,671 15,258 -- =========== ========== ======= === DryMidCapIx DryEuroEq --------------------- -------------- 2003 2002 2003 2002 --------- --------- ---- ------- Investment activity: Net investment income (loss) .................. (12,730) (15,561) -- (420) Realized gain (loss) on investments ........... (157,515) (372,288) -- (18,187) Change in unrealized gain (loss) on investments ............................. 1,649,966 (455,988) -- (639) Reinvested capital gains ...................... 40 33,555 -- -- --------- --------- --- ------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 1,479,761 (810,282) -- (19,246) --------- --------- --- ------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 547,174 351,967 -- 9,123 Transfers between funds ....................... 1,761,755 1,472,727 -- (69,351) Surrenders (note 6) ........................... (427,117) (278,698) -- (161) Death benefits (note 4) ....................... (19,754) (1,826) -- -- Net policy repayments (loans) (note 5) ........ (22,331) (9,157) -- 117 Deductions for surrender charges (note 2d) .... (19,742) (15,325) -- (9) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (384,428) (202,705) -- (2,401) Asset charges (note 3): MSP contracts .............................. (3,408) (3,190) -- -- LSFP contracts ............................. (2,402) (1,934) -- 1 --------- --------- --- ------- Net equity transactions ................. 1,429,747 1,311,859 -- (62,681) --------- --------- --- ------- Net change in contract owners' equity ............ 2,909,508 501,577 -- (81,927) Contract owners' equity beginning of period ..................................... 3,842,211 3,340,634 -- 81,927 --------- --------- --- ------- Contract owners' equity end of period ............ 6,751,719 3,842,211 -- -- ========= ========= === ======= CHANGES IN UNITS: Beginning units ............................... 445,821 325,991 -- 12,374 --------- --------- --- ------- Units purchased ............................... 215,981 165,799 -- 1,810 Units redeemed ................................ (75,898) (45,969) -- (14,184) --------- --------- --- ------- Ending units .................................. 585,904 445,821 -- -- ========= ========= === =======
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
DrySmCapIxS DrySRGro -------------------- ---------------------- 2003 2002 2003 2002 ---------- ------- --------- ---------- Investment activity: Net investment income (loss) .................. $ (1,552) 8 (57,090) (57,330) Realized gain (loss) on investments ........... 65,355 (6,758) (745,207) (1,069,508) Change in unrealized gain (loss) on investments ............................. 101,495 (172) 2,849,243 (2,683,067) Reinvested capital gains ...................... 5,323 -- -- -- ---------- ------- --------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 170,621 (6,922) 2,046,946 (3,809,905) ---------- ------- --------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 34,884 35,798 1,300,735 1,704,096 Transfers between funds ....................... 554,704 96,048 (354,728) (1,126,297) Surrenders (note 6) ........................... (53,225) (12,292) (728,259) (924,256) Death benefits (note 4) ....................... -- -- (47,698) (43,454) Net policy repayments (loans) (note 5) ........ (11,377) 314 95,761 (20,791) Deductions for surrender charges (note 2d) .... (2,460) (676) (33,661) (50,823) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... 313,580 (1,475) (769,716) (847,059) Asset charges (note 3): MSP contracts .............................. (681) (62) (2,600) (4,062) LSFP contracts ............................. (142) (3) (3,343) (3,757) ---------- ------- --------- ---------- Net equity transactions ................. 835,283 117,652 (543,509) (1,316,403) ---------- ------- --------- ---------- Net change in contract owners' equity ............ 1,005,904 110,730 1,503,437 (5,126,308) Contract owners' equity beginning of period ..................................... 110,730 -- 8,486,022 13,612,330 ---------- ------- --------- ---------- Contract owners' equity end of period ............ $1,116,634 110,730 9,989,459 8,486,022 ========== ======= ========= ========== CHANGES IN UNITS: Beginning units ............................... 14,471 -- 505,221 573,971 ---------- ------- --------- ---------- Units purchased ............................... 101,010 14,878 81,656 87,917 Units redeemed ................................ (8,896) (407) (112,686) (156,667) ---------- ------- --------- ---------- Ending units .................................. 106,585 14,471 474,191 505,221 ========== ======= ========= ========== DryStkIx DryVIFApp ------------------------ ----------------------- 2003 2002 2003 2002 ---------- ----------- ---------- ---------- Investment activity: Net investment income (loss) .................. 545,235 459,532 39,229 23,140 Realized gain (loss) on investments ........... (2,046,981) (940,878) (1,007,708) (571,297) Change in unrealized gain (loss) on investments ............................. 18,594,894 (19,311,189) 2,073,274 (691,267) Reinvested capital gains ...................... -- -- -- -- ---------- ----------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 17,093,148 (19,792,535) 1,104,795 (1,239,424) ---------- ----------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 6,831,591 8,299,700 532,770 608,427 Transfers between funds ....................... (215,290) (4,186,916) 14,944 308,413 Surrenders (note 6) ........................... (4,911,709) (4,818,700) (525,761) (292,680) Death benefits (note 4) ....................... (106,620) (104,303) (2,993) (12,604) Net policy repayments (loans) (note 5) ........ 43,990 60,616 (21,948) (52,352) Deductions for surrender charges (note 2d) .... (227,027) (264,971) (24,302) (16,094) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (3,943,274) (4,116,114) (307,883) (311,263) Asset charges (note 3): MSP contracts .............................. (28,833) (28,802) (1,612) (2,257) LSFP contracts ............................. (52,162) (51,509) (5,859) (5,846) ---------- ----------- ---------- ---------- Net equity transactions ................. (2,609,334) (5,210,999) (342,644) 223,744 ---------- ----------- ---------- ---------- Net change in contract owners' equity ............ 14,483,814 (25,003,534) 762,151 (1,015,680) Contract owners' equity beginning of period ..................................... 63,819,155 88,822,689 5,733,185 6,748,865 ---------- ----------- ---------- ---------- Contract owners' equity end of period ............ 78,302,969 63,819,155 6,495,336 5,733,185 ========== =========== ========== ========== CHANGES IN UNITS: Beginning units ............................... 3,317,324 3,551,969 534,799 520,418 ---------- ----------- ---------- ---------- Units purchased ............................... 472,303 427,978 59,732 82,728 Units redeemed ................................ (577,267) (662,623) (91,159) (68,347) ---------- ----------- ---------- ---------- Ending units .................................. 3,212,360 3,317,324 503,372 534,799 ========== =========== ========== ==========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
DryDevLeadI DryVIFGrInc --------------- --------------------- 2003 2002 2003 2002 -------- ---- --------- --------- Investment activity: Net investment income (loss) .................. $ (176) -- 3,402 (1,347) Realized gain (loss) on investments ........... 1,050 -- (316,811) (131,464) Change in unrealized gain (loss) on investments ............................. 13,125 -- 800,579 (602,115) Reinvested capital gains ...................... -- -- -- -- -------- --- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 13,999 -- 487,170 (734,926) -------- --- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 2,943 -- 198,654 229,396 Transfers between funds ....................... 161,527 -- 78,440 (67,132) Surrenders (note 6) ........................... -- -- (148,469) (99,306) Death benefits (note 4) ....................... -- -- (10,153) (7,828) Net policy repayments (loans) (note 5) ........ -- -- (11,543) (3,538) Deductions for surrender charges (note 2d) .... -- -- (6,862) (5,461) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (2,006) -- (125,107) (138,671) Asset charges (note 3): MSP contracts .............................. (57) -- (1,904) (2,335) LSFP contracts ............................. (140) -- (1,694) (1,850) -------- --- --------- --------- Net equity transactions ................. 162,267 -- (28,638) (96,725) -------- --- --------- --------- Net change in contract owners' equity ............ 176,266 -- 458,532 (831,651) Contract owners' equity beginning of period ..................................... -- -- 2,056,526 2,888,177 -------- --- --------- --------- Contract owners' equity end of period ............ $176,266 -- 2,515,058 2,056,526 ======== === ========= ========= CHANGES IN UNITS: Beginning units ............................... -- -- 208,582 217,273 -------- --- --------- --------- Units purchased ............................... 13,890 -- 34,554 26,066 Units redeemed ................................ (181) -- (39,873) (34,757) -------- --- --------- --------- Ending units .................................. 13,709 -- 203,263 208,582 ======== === ========= ========= FedAmLdII FedCpApII ------------- ------------ 2003 2002 2003 2002 ------ ---- ----- ---- Investment activity: Net investment income (loss) .................. (11) -- (12) -- Realized gain (loss) on investments ........... (37) -- (39) -- Change in unrealized gain (loss) on investments ............................. 814 -- 500 -- Reinvested capital gains ...................... -- -- -- -- ------ --- ----- --- Net increase (decrease) in contract owners'equity resulting from operations .............................. 766 -- 449 -- ------ --- ----- --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 40 -- 2,649 -- Transfers between funds ....................... 13,081 -- 3,624 -- Surrenders (note 6) ........................... -- -- -- -- Death benefits (note 4) ....................... -- -- -- -- Net policy repayments (loans) (note 5) ........ -- -- -- -- Deductions for surrender charges (note 2d) .... -- -- -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (52) -- (92) -- Asset charges (note 3): MSP contracts .............................. -- -- -- -- LSFP contracts ............................. -- -- -- -- ------ --- ----- --- Net equity transactions ................. 13,069 -- 6,181 -- ------ --- ----- --- Net change in contract owners' equity ............ 13,835 -- 6,630 -- Contract owners' equity beginning of period ..................................... -- -- -- -- ------ --- ----- --- Contract owners' equity end of period ............ 13,835 -- 6,630 -- ====== === ===== === CHANGES IN UNITS: Beginning units ............................... -- -- -- -- ------ --- ----- --- Units purchased ............................... 1,109 -- 561 -- Units redeemed ................................ (5) -- (8) -- ------ --- ----- --- Ending units .................................. 1,104 -- 553 -- ====== === ===== ===
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
FGVITHiInc FedQualBd --------------- ----------------------- 2003 2002 2003 2002 -------- ---- --------- ----------- Investment activity: Net investment income (loss) .................. $ 6,330 -- 56,680 (3,977) Realized gain (loss) on investments ........... 642 -- 45,165 17,661 Change in unrealized gain (loss) on investments ............................. 4,057 -- (31,320) 39,181 Reinvested capital gains ...................... -- -- -- -- -------- --- --------- --------- Net increase (decrease) in contract owners'equity resulting from operations .............................. 11,029 -- 70,525 52,865 -------- --- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 11,770 -- 166,447 34,259 Transfers between funds ....................... 222,001 -- 468,108 1,229,802 Surrenders (note 6) ........................... (27,497) -- (210,375) (24,623) Death benefits (note 4) ....................... -- -- -- -- Net policy repayments (loans) (note 5) ........ (3,241) -- (17,519) 2,487 Deductions for surrender charges (note 2d) .... (1,271) -- (9,724) (1,354) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (3,706) -- (104,806) (30,500) Asset charges (note 3): MSP contracts .............................. (185) -- (885) (175) LSFP contracts ............................. -- -- (634) (146) -------- --- --------- --------- Net equity transactions ................. 197,871 -- 290,612 1,209,750 -------- --- --------- --------- Net change in contract owners' equity ............ 208,900 -- 361,137 1,262,615 Contract owners' equity beginning of period ..................................... -- -- 1,262,615 -- -------- --- --------- --------- Contract owners' equity end of period ............ $208,900 -- 1,623,752 1,262,615 ======== === ========= ========= CHANGES IN UNITS: Beginning units ............................... -- -- 117,678 -- -------- --- --------- --------- Units purchased ............................... 20,105 -- 64,282 122,888 Units redeemed ................................ (1,248) -- (36,210) (5,210) -------- --- --------- --------- Ending units .................................. 18,857 -- 145,750 117,678 ======== === ========= ========= FidVIPEI FidVIPGr ------------------------ ------------------------ 2003 2002 2003 2002 ---------- ----------- ---------- ----------- Investment activity: Net investment income (loss) .................. 650,310 670,788 (423,142) (497,509) Realized gain (loss) on investments ........... (1,651,935) (1,832,619) (5,517,543) (6,475,478) Change in unrealized gain (loss) on investments ............................. 17,928,029 (13,879,079) 29,260,774 (28,601,357) Reinvested capital gains ...................... -- 1,645,146 -- -- ---------- ----------- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 16,926,404 (13,395,764) 23,320,089 (35,574,344) ---------- ----------- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 5,470,555 6,296,828 9,045,995 10,702,893 Transfers between funds ....................... 195,335 (1,326,155) (2,370,299) (5,909,456) Surrenders (note 6) ........................... (4,143,940) (4,013,742) (5,367,306) (6,576,671) Death benefits (note 4) ....................... (191,683) (512,295) (187,564) (303,488) Net policy repayments (loans) (note 5) ........ 144,919 (325,234) 547,985 53,735 Deductions for surrender charges (note 2d) .... (191,540) (220,708) (248,086) (361,638) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (3,626,293) (3,720,031) (5,279,385) (5,684,040) Asset charges (note 3): MSP contracts .............................. (28,378) (33,789) (22,563) (29,451) LSFP contracts ............................. (22,049) (22,051) (26,103) (26,493) ---------- ----------- ---------- ----------- Net equity transactions ................. (2,393,074) (3,877,177) (3,907,326) (8,134,609) ---------- ----------- ---------- ----------- Net change in contract owners' equity ............ 14,533,330 (17,272,941) 19,412,763 (43,708,953) Contract owners' equity beginning of period ..................................... 59,751,461 77,024,402 75,663,436 119,372,389 ---------- ----------- ---------- ----------- Contract owners' equity end of period ............ 74,284,791 59,751,461 95,076,199 75,663,436 ========== =========== ========== =========== CHANGES IN UNITS: Beginning units ............................... 2,146,294 2,285,562 2,922,853 3,226,113 ---------- ----------- ---------- ----------- Units purchased ............................... 270,295 239,009 414,867 408,396 Units redeemed ................................ (356,735) (378,277) (579,595) (711,656) ---------- ----------- ---------- ----------- Ending units .................................. 2,059,854 2,146,294 2,758,125 2,922,853 ========== =========== ========== ===========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
FidVIPHI FidVIPOv ------------------------ ------------------------ 2003 2002 2003 2002 ----------- ---------- ---------- ----------- Investment activity: Net investment income (loss) ....................... $ 1,212,817 1,610,797 5,925 1,649 Realized gain (loss) on investments ................ 257,996 (6,235,204) (262,828) (10,007,301) Change in unrealized gain (loss) on investments .................................. 4,109,732 5,128,915 5,358,106 6,676,168 Reinvested capital gains ........................... -- -- -- -- ----------- ---------- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ................................... 5,580,545 504,508 5,101,203 (3,329,484) ----------- ---------- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 1,736,677 1,686,100 1,605,394 1,803,973 Transfers between funds ............................ 943,588 3,942,862 234,691 (1,055,151) Surrenders (note 6) ................................ (1,521,127) (973,008) (1,417,940) (1,283,924) Death benefits (note 4) ............................ (280,214) (26,392) (49,771) (62,516) Net policy repayments (loans) (note 5) ............. (48,477) (25,575) 87,313 (63,624) Deductions for surrender charges (note 2d) ......... (70,309) (53,504) (65,539) (70,600) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (1,233,202) (970,512) (719,142) (781,093) Asset charges (note 3): MSP contracts ................................... (15,750) (12,568) (3,909) (4,418) LSFP contracts .................................. (10,973) (8,051) (5,162) (5,086) ----------- ---------- ---------- ----------- Net equity transactions ...................... (499,787) 3,559,352 (334,065) (1,522,439) ----------- ---------- ---------- ----------- Net change in contract owners' equity ................. 5,080,758 4,063,860 4,767,138 (4,851,923) Contract owners' equity beginning of period .......................................... 20,706,049 16,642,189 12,425,622 17,277,545 ----------- ---------- ---------- ----------- Contract owners' equity end of period ................. $25,786,807 20,706,049 17,192,760 12,425,622 =========== ========== ========== =========== CHANGES IN UNITS: Beginning units .................................... 1,206,230 1,017,739 968,581 1,067,775 ----------- ---------- ---------- ----------- Units purchased .................................... 156,030 325,331 154,575 127,166 Units redeemed ..................................... (172,701) (136,840) (193,925) (226,360) ----------- ---------- ---------- ----------- Ending units ....................................... 1,189,559 1,206,230 929,231 968,581 =========== ========== ========== =========== FidVIPAM FidVIPCon ----------------------- ----------------------- 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Investment activity: Net investment income (loss) ....................... 644,420 770,857 (137,237) 43,995 Realized gain (loss) on investments ................ (578,106) (608,998) (1,243,309) (1,171,475) Change in unrealized gain (loss) on investments .................................. 3,592,165 (2,677,633) 13,191,640 (3,976,205) Reinvested capital gains ........................... -- -- -- -- ---------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ................................... 3,658,479 (2,515,774) 11,811,094 (5,103,685) ---------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 1,656,663 1,668,475 4,167,255 5,127,914 Transfers between funds ............................ (262,954) (727,846) 252,182 (2,166,207) Surrenders (note 6) ................................ (1,951,807) (1,466,623) (2,630,439) (3,296,014) Death benefits (note 4) ............................ (146,560) (24,631) (139,232) (105,306) Net policy repayments (loans) (note 5) ............. 196,742 38,282 (145,214) (145,249) Deductions for surrender charges (note 2d) ......... (90,216) (80,647) (121,583) (181,241) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (1,137,560) (1,151,383) (2,560,438) (2,602,068) Asset charges (note 3): MSP contracts ................................... (6,820) (8,709) (15,681) (22,569) LSFP contracts .................................. (3,784) (3,308) (22,686) (21,973) ---------- ---------- ---------- ---------- Net equity transactions ...................... (1,746,296) (1,756,390) (1,215,836) (3,412,713) ---------- ---------- ---------- ---------- Net change in contract owners' equity ................. 1,912,183 (4,272,164) 10,595,258 (8,516,398) Contract owners' equity beginning of period .......................................... 22,343,721 26,615,885 44,077,392 52,593,790 ---------- ---------- ---------- ---------- Contract owners' equity end of period ................. 24,255,904 22,343,721 54,672,650 44,077,392 ========== ========== ========== ========== CHANGES IN UNITS: Beginning units .................................... 1,013,935 1,094,419 2,364,387 2,539,821 ---------- ---------- ---------- ---------- Units purchased .................................... 152,269 94,132 311,477 270,926 Units redeemed ..................................... (236,936) (174,616) (377,155) (446,360) ---------- ---------- ---------- ---------- Ending units ....................................... 929,268 1,013,935 2,298,709 2,364,387 ========== ========== ========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
FidVIPInvGrB FidVIPGrOp --------------- ---------------------- 2003 2002 2003 2002 -------- ---- --------- ---------- Investment activity: Net investment income (loss) ....................... $ (467) -- 1,460 13,434 Realized gain (loss) on investments ................ 77 -- (341,822) (387,954) Change in unrealized gain (loss) on investments .................................. 4,485 -- 1,280,096 (537,034) Reinvested capital gains ........................... -- -- -- -- -------- --- --------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ................................... 4,095 -- 939,734 (911,554) -------- --- --------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 4,528 -- 452,147 560,969 Transfers between funds ............................ 237,978 -- 249,767 (326,009) Surrenders (note 6) ................................ (857) -- (246,768) (159,570) Death benefits (note 4) ............................ -- -- (13,232) (4,698) Net policy repayments (loans) (note 5) ............. (2,527) -- (11,656) (22,423) Deductions for surrender charges (note 2d) ......... (40) -- (11,406) (8,774) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (2,885) -- (217,220) (218,076) Asset charges (note 3): MSP contracts ................................... -- -- (1,664) (1,654) LSFP contracts .................................. (35) -- (2,618) (2,257) -------- --- --------- ---------- Net equity transactions ...................... 236,162 -- 197,350 (182,492) -------- --- --------- ---------- Net change in contract owners' equity ................. 240,257 -- 1,137,084 (1,094,046) Contract owners' equity beginning of period .......................................... -- -- 3,035,034 4,129,080 -------- --- --------- ---------- Contract owners' equity end of period ................. $240,257 -- 4,172,118 3,035,034 ======== === ========= ========== CHANGES IN UNITS: Beginning units .................................... -- -- 398,008 420,111 -------- --- --------- ---------- Units purchased .................................... 24,251 -- 86,273 72,484 Units redeemed ..................................... (636) -- (60,512) (94,587) -------- --- --------- ---------- Ending units ....................................... 23,615 -- 423,769 398,008 ======== === ========= ========== FidVIPMCap FidVIPValStS -------------- ------------------- 2003 2002 2003 2002 ------- ---- --------- ------- Investment activity: Net investment income (loss) ....................... (1,105) -- (7,699) (316) Realized gain (loss) on investments ................ 16,699 -- 189,710 (9,547) Change in unrealized gain (loss) on investments .................................. 58,136 -- 186,255 (4,574) Reinvested capital gains ........................... -- -- 12,819 -- ------- --- --------- ------- Net increase (decrease) in contract owners' equity resulting from operations ................................... 73,730 -- 381,085 (14,437) ------- --- --------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 48,341 -- 102,826 6,353 Transfers between funds ............................ 634,806 -- 1,755,855 107,296 Surrenders (note 6) ................................ (77) -- (32,768) -- Death benefits (note 4) ............................ -- -- -- -- Net policy repayments (loans) (note 5) ............. (8,758) -- (131,607) (930) Deductions for surrender charges (note 2d) ......... (4) -- (1,515) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (7,108) -- (31,415) (2,342) Asset charges (note 3): MSP contracts ................................... (185) -- (1,287) (137) LSFP contracts .................................. (53) -- (195) (5) ------- --- --------- ------- Net equity transactions ...................... 666,962 -- 1,659,894 110,235 ------- --- --------- ------- Net change in contract owners' equity ................. 740,692 -- 2,040,979 95,798 Contract owners' equity beginning of period .......................................... -- -- 95,798 -- ------- --- --------- ------- Contract owners' equity end of period ................. 740,692 -- 2,136,777 95,798 ======= === ========= ======= CHANGES IN UNITS: Beginning units .................................... -- -- 12,826 -- ------- --- --------- ------- Units purchased .................................... 54,049 -- 192,628 13,276 Units redeemed ..................................... (1,239) -- (22,798) (450) ------- --- --------- ------- Ending units ....................................... 52,810 -- 182,656 12,826 ======= === ========= =======
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
FTVIPFRDiv FTVIPSmCpVal FTVIPFS GVITEmMrkts --------------- -------------- -------------- -------------------- 2003 2002 2003 2002 2003 2002 2003 2002 -------- ---- ------- ---- ------- ---- --------- -------- Investment activity: Net investment income (loss) ................ $ (903) -- (295) -- 222 -- (481) (3,241) Realized gain (loss) on investments ......... 815 -- 8,066 -- 11,639 -- 149,677 9,490 Change in unrealized gain (loss) on investments ........................... 65,062 -- 14,481 -- 31,576 -- 219,942 (24,239) Reinvested capital gains .................... 1,517 -- -- -- -- -- -- -- -------- --- ------- --- ------- --- --------- -------- Net increase (decrease) in contract owners' equity resulting from operations ............................ 66,491 -- 22,252 -- 43,437 -- 369,138 (17,990) -------- --- ------- --- ------- --- --------- -------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 80,062 -- 22,558 -- 40,705 -- 118,749 30,715 Transfers between funds ..................... 777,906 -- 126,262 -- 359,375 -- 1,059,724 (75,118) Surrenders (note 6) ......................... -- -- (815) -- (57,155) -- (160,155) (25,350) Death benefits (note 4) ..................... -- -- -- -- -- -- -- (1,829) Net policy repayments (loans) (note 5) ...... (1,592) -- (149) -- (5,716) -- (11,495) (40,241) Deductions for surrender charges (note 2d) .. -- -- (38) -- (2,642) -- (7,403) (1,394) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (8,946) -- (944) -- (2,423) -- (29,334) (21,884) Asset charges (note 3): MSP contracts ............................ (405) -- -- -- (15) -- (552) (498) LSFP contracts ........................... (75) -- (39) -- (88) -- (332) (121) -------- --- ------- --- ------- --- --------- -------- Net equity transactions ............... 846,950 -- 146,835 -- 332,041 -- 969,202 (135,720) -------- --- ------- --- ------- --- --------- -------- Net change in contract owners' equity .......... 913,441 -- 169,087 -- 375,478 -- 1,338,340 (153,710) Contract owners' equity beginning of period ................................... -- -- -- -- -- -- 273,867 427,577 -------- --- ------- --- ------- --- --------- -------- Contract owners' equity end of period .......... $913,441 -- 169,087 -- 375,478 -- 1,612,207 273,867 ======== === ======= === ======= === ========= ======== CHANGES IN UNITS: Beginning units ............................. -- -- -- -- -- -- 39,708 52,012 -------- --- ------- --- ------- --- --------- -------- Units purchased ............................. 75,462 -- 12,866 -- 33,927 -- 115,260 17,002 Units redeemed .............................. (948) -- (157) -- (5,504) -- (12,157) (29,306) -------- --- ------- --- ------- --- --------- -------- Ending units ................................ 74,514 -- 12,709 -- 28,423 -- 142,811 39,708 ======== === ======= === ======= === ========= ========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
GVITGlFin GVITGlHlth ----------------- ------------------ 2003 2002 2003 2002 -------- ------ -------- ------- Investment activity: Net investment income (loss)................. $ 131 (119) (5,970) (397) Realized gain (loss) on investments.......... 24,710 113 138,267 (611) Change in unrealized gain (loss) on investments............................ 4,592 (599) (27,859) (4,795) Reinvested capital gains..................... 36,957 -- 70,723 -- -------- ------ -------- ------- Net increase (decrease) in contract owners' equity resulting from operations............................. 66,390 (605) 175,161 (5,803) -------- ------ -------- ------- Equity transactions: Purchase payments received from contract owners (note 6).................. 88,543 368 32,402 17,502 Transfers between funds...................... 159,904 66,328 700,808 155,423 Surrenders (note 6).......................... (18,112) -- (350,559) -- Death benefits (note 4)...................... -- -- -- -- Net policy repayments (loans) (note 5)....... 2,194 (972) (42,579) (8,938) Deductions for surrender charges (note 2d)... (837) -- (16,203) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (6,384) (625) (25,004) (2,414) Asset charges (note 3): MSP contracts............................. (30) (3) (238) (12) LSFP contracts............................ (43) -- (184) (50) -------- ------ -------- ------- Net equity transactions................ 225,235 65,096 298,443 161,511 -------- ------ -------- ------- Net change in contract owners' equity........... 291,625 64,491 473,604 155,708 Contract owners' equity beginning of period.................................... 64,491 -- 155,708 -- -------- ------ -------- ------- Contract owners' equity end of period........... $356,116 64,491 629,312 155,708 ======== ====== ======== ======= CHANGES IN UNITS: Beginning units.............................. 7,495 -- 18,805 -- -------- ------ -------- ------- Units purchased.............................. 24,908 7,678 78,585 20,531 Units redeemed............................... (2,911) (183) (41,380) (1,726) -------- ------ -------- ------- Ending units................................. 29,492 7,495 56,010 18,805 ======== ====== ======== ======= GVITGlTech GVITGlUtl -------------------- ----------------- 2003 2002 2003 2002 --------- -------- -------- ------ Investment activity: Net investment income (loss)................. (5,695) (450) (170) 33 Realized gain (loss) on investments.......... 153,660 (188,420) 5,237 (296) Change in unrealized gain (loss) on investments............................ 95,094 (19,032) 18,068 (33) Reinvested capital gains..................... -- -- -- -- --------- -------- -------- ------ Net increase (decrease) in contract owners' equity resulting from operations............................. 243,059 (207,902) 23,135 (296) --------- -------- -------- ------ Equity transactions: Purchase payments received from contract owners (note 6).................. 56,062 45,556 1,323 75 Transfers between funds...................... 863,669 130,870 109,537 36,282 Surrenders (note 6).......................... (68,772) (56,652) (244,561) -- Death benefits (note 4)...................... (5,717) -- -- -- Net policy repayments (loans) (note 5)....... (25,530) 26,213 254,660 -- Deductions for surrender charges (note 2d)... (3,179) (3,115) (11,304) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c)......................... (46,194) (23,648) (2,587) (152) Asset charges (note 3): MSP contracts............................. (468) (196) (45) (5) LSFP contracts............................ (39) (9) (133) -- --------- -------- -------- ------ Net equity transactions................ 769,832 119,019 106,890 36,200 --------- -------- -------- ------ Net change in contract owners' equity........... 1,012,891 (88,883) 130,025 35,904 Contract owners' equity beginning of period.................................... 261,090 349,973 35,904 -- --------- -------- -------- ------ Contract owners' equity end of period........... 1,273,981 261,090 165,929 35,904 ========= -======= ======== ====== CHANGES IN UNITS: Beginning units.............................. 134,649 102,616 4,164 -- --------- -------- -------- ------ Units purchased.............................. 342,452 61,493 13,650 4,184 Units redeemed............................... (50,363) (29,460) (2,195) (20) --------- -------- -------- ------ Ending units................................. 426,738 134,649 15,619 4,164 ========= ======== ======== ======
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS'EQUITY,Continued Years Ended December 31,2003 and 2002
GVITGvtBd GVITGrowth ------------------------ ----------------------- 2003 2002 2003 2002 ----------- ---------- ---------- ---------- Investment activity: Net investment income (loss) .................. $ 486,697 740,616 (107,563) (115,653) Realized gain (loss) on investments ........... (19,208) 766,407 (3,868,654) (2,366,653) Change in unrealized gain (loss) on investments ............................. (207,136) 254,202 8,180,131 (3,021,176) Reinvested capital gains ...................... 29,787 177,046 -- -- ----------- ---------- ---------- ---------- Net increase (decrease) in contract owners'equity resulting from operations .............................. 290,140 1,938,271 4,203,914 (5,503,482) ----------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 1,454,811 1,267,894 2,819,241 3,550,411 Transfers between funds ....................... (3,784,652) 5,104,395 (527,911) (1,039,416) Surrenders (note 6) ........................... (2,627,215) (3,160,509) (1,252,791) (919,629) Death benefits (note 4) ....................... (61,806) (56,328) (72,160) (51,849) Net policy repayments (loans) (note 5) ........ 56,813 (301,152) 89,662 194,094 Deductions for surrender charges (note 2d) .... (121,434) (173,790) (57,906) (50,568) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (1,137,678) (897,183) (1,442,242) (1,432,973) Asset charges (note 3): MSP contracts .............................. (17,553) (18,203) (4,472) (5,160) LSFP contracts ............................. (8,560) (8,831) (7,643) (8,210) ----------- ---------- ---------- ---------- Net equity transactions ................. (6,247,274) 1,756,293 (456,222) 236,700 ----------- ---------- ---------- ---------- Net change in contract owners'equity ............. (5,957,134) 3,694,564 3,747,692 (5,266,782) Contract owners'equity beginning of period ..................................... 22,381,392 18,686,828 13,411,563 18,678,345 ----------- ---------- ---------- ---------- Contract owners'equity end of period ............. $16,424,258 22,381,392 17,159,255 13,411,563 =========== ========== ========== ========== CHANGES IN UNITS: Beginning units ............................... 1,024,071 940,162 1,170,029 1,157,307 ----------- ---------- ---------- ---------- Units purchased ............................... 91,225 256,619 236,749 296,325 Units redeemed ................................ (379,597) (172,710) (268,888) (283,603) ----------- ---------- ---------- ---------- Ending units .................................. 735,699 1,024,071 1,137,890 1,170,029 =========== ========== ========== ========== GVITIDAgg GVITIDCon ----------------- ----------------- 2003 2002 2003 2002 ------- ------- ------- ------- Investment activity: Net investment income (loss) .................. 1,896 375 7,043 3,709 Realized gain (loss) on investments ........... 44,183 (3,763) 5,929 (84) Change in unrealized gain (loss) on investments ............................. 42,877 (5,389) 16,454 (1,344) Reinvested capital gains ...................... 5,518 22 1,440 154 ------- ------- ------- ------- Net increase (decrease) in contract owners'equity resulting from operations .............................. 94,474 (8,755) 30,866 2,435 ------- ------- ------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 47,188 30,018 32,945 7,502 Transfers between funds ....................... 235,905 147,481 58,691 332,814 Surrenders (note 6) ........................... (5,780) (6,575) (13,603) (29,580) Death benefits (note 4) ....................... -- -- (11,368) -- Net policy repayments (loans) (note 5) ........ 1,380 (4,029) (13,680) 12,073 Deductions for surrender charges (note 2d) .... (267) (362) (629) (1,627) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (22,500) (11,321) (18,886) (5,634) Asset charges (note 3): MSP contracts .............................. (2) -- (431) (260) LSFP contracts ............................. -- -- (188) (167) ------- ------- ------- ------- Net equity transactions ................. 255,924 155,212 32,851 315,121 ------- ------- ------- ------- Net change in contract owners'equity ............. 350,398 146,457 63,717 317,556 Contract owners'equity beginning of period ..................................... 146,457 -- 317,556 -- ------- ------- ------- ------- Contract owners'equity end of period ............. 496,855 146,457 381,273 317,556 ======= ======= ======= ======= CHANGES IN UNITS: Beginning units ............................... 17,710 -- 31,754 -- ------- ------- ------- ------- Units purchased ............................... 31,669 20,524 16,723 34,708 Units redeemed ................................ (3,453) (2,814) (12,823) (2,954) ------- ------- ------- ------- Ending units .................................. 45,926 17,710 35,654 31,754 ======= ======= ======= =======
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS'EQUITY,Continued Years Ended December 31,2003 and 2002
GVITIDMod GVITIDModAgg -------------------- --------------------- 2003 2002 2003 2002 ---------- ------- --------- --------- Investment activity: Net investment income (loss) .................. $ 19,641 3,431 10,420 4,020 Realized gain (loss) on investments ........... 5,830 (3,356) (7,574) (30,041) Change in unrealized gain (loss) on investments ............................. 285,948 (11,401) 318,164 (40,857) Reinvested capital gains ...................... 946 436 -- 1,303 ---------- ------- --------- --------- Net increase (decrease) in contract owners'equity resulting from operations .............................. 312,365 (10,890) 321,010 (65,575) ---------- ------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 276,128 40,643 203,520 51,389 Transfers between funds ....................... 1,514,517 528,483 721,450 981,852 Surrenders (note 6) ........................... (32,051) (2,844) (22,041) (3,304) Death benefits (note 4) ....................... -- -- -- -- Net policy repayments (loans) (note 5) ........ (47,251) 1,352 24,606 12,741 Deductions for surrender charges (note 2d) .... (1,481) (156) (1,019) (182) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (93,995) (12,601) (114,749) (34,114) Asset charges (note 3): MSP contracts .............................. (1,685) (292) (396) (29) LSFP contracts ............................. (228) -- (454) (89) ---------- ------- --------- --------- Net equity transactions ................. 1,613,954 554,585 810,917 1,008,264 ---------- ------- --------- --------- Net change in contract owners'equity ............. 1,926,319 543,695 1,131,927 942,689 Contract owners'equity beginning of period ..................................... 543,695 -- 942,689 -- ---------- ------- --------- --------- Contract owners'equity end of period ............. $2,470,014 543,695 2,074,616 942,689 ========== ======= ========= ========= CHANGES IN UNITS: Beginning units ............................... 59,819 -- 109,211 -- ---------- ------- --------- --------- Units purchased ............................... 187,414 61,992 101,890 113,991 Units redeemed ................................ (18,823) (2,173) (19,774) (4,780) ---------- ------- --------- --------- Ending units .................................. 228,410 59,819 191,327 109,211 ========== ======= ========= ========= GVITIDModCon GVITIntGro ----------------- ------------------ 2003 2002 2003 2002 ------- ------- -------- ------- Investment activity: Net investment income (loss) .................. 9,165 2,374 (438) (333) Realized gain (loss) on investments ........... 14,955 (4,333) 9,484 (4,929) Change in unrealized gain (loss) on investments ............................. 48,943 142 5,034 (759) Reinvested capital gains ...................... 1,142 402 -- -- ------- ------- -------- ------- Net increase (decrease) in contract owners'equity resulting from operations .............................. 74,205 (1,415) 14,080 (6,021) ------- ------- -------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 64,735 10,547 129,786 37,116 Transfers between funds ....................... 353,657 353,136 14,697 46,984 Surrenders (note 6) ........................... (4,714) (83,408) (123,145) (70,278) Death benefits (note 4) ....................... (11,855) (4,459) -- -- Net policy repayments (loans) (note 5) ........ (6,687) 3,617 (636) (1,483) Deductions for surrender charges (note 2d) .... (218) (4,586) (5,692) (3,864) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (33,121) (4,367) (2,865) (2,650) Asset charges (note 3): MSP contracts .............................. (1,050) (169) (19) -- LSFP contracts ............................. (154) (4) (14) -- ------- ------- -------- ------- Net equity transactions ................. 360,593 270,307 12,112 5,825 ------- ------- -------- ------- Net change in contract owners'equity ............. 434,798 268,892 26,192 (196) Contract owners'equity beginning of period ..................................... 268,892 -- 55,057 55,253 ------- ------- -------- ------- Contract owners'equity end of period ............. 703,690 268,892 81,249 55,057 ======= ======= ======== ======= CHANGES IN UNITS: Beginning units ............................... 28,027 -- 11,233 8,456 ------- ------- -------- ------- Units purchased ............................... 42,950 28,835 5,032 9,592 Units redeemed ................................ (6,085) (808) (3,983) (6,815) ------- ------- -------- ------- Ending units .................................. 64,892 28,027 12,282 11,233 ======= ======= ======== =======
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
GVITMyMkt GVITLead -------------------------- ----------------- 2003 2002 2003 2002 ------------ ----------- ------- ------- Investment activity: Net investment income (loss) ................ $ (48,086) 234,335 (503) 224 Realized gain (loss) on investments ......... -- -- (3,394) (9,895) Change in unrealized gain (loss) on investments ........................... -- -- 22,125 (4,614) Reinvested capital gains .................... -- -- -- -- ------------ ----------- ------- ------- Net increase (decrease) in contract owners' equity resulting from operations ............................ (48,086) 234,335 18,228 (14,285) ------------ ----------- ------- ------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 4,279,006 4,228,147 10,592 7,788 Transfers between funds ..................... (6,838,365) 8,868,792 4,640 141,311 Surrenders (note 6) ......................... (10,294,119) (15,813,066) -- (12,363) Death benefits (note 4) ..................... (68,054) (100,051) -- -- Net policy repayments (loans) (note 5) ...... 666,422 856,428 (24,739) (2,325) Deductions for surrender charges (note 2d) .. (475,811) (869,528) -- (680) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (2,140,515) (2,203,711) (4,507) (4,331) Asset charges (note 3): MSP contracts ............................ (41,707) (47,444) (61) (79) LSFP contracts ........................... (23,441) (40,196) -- -- ------------ ----------- ------- ------- Net equity transactions ............... (14,936,584) (5,120,629) (14,075) 129,321 ------------ ----------- ------- ------- Net change in contract owners' equity .......... (14,984,670) (4,886,294) 4,153 115,036 Contract owners' equity beginning of period ................................... 46,764,573 51,650,867 115,036 -- ------------ ----------- ------- ------- Contract owners' equity end of period .......... $ 31,779,903 46,764,573 119,189 115,036 ============ =========== ======= ======= CHANGES IN UNITS: Beginning units ............................. 3,181,070 3,540,015 13,679 -- ------------ ----------- ------- ------- Units purchased ............................. 496,788 649,115 4,986 14,429 Units redeemed .............................. (1,534,869) (1,008,060) (7,251) (750) ------------ ----------- ------- ------- Ending units ................................ 2,142,989 3,181,070 11,414 13,679 ============ =========== ======= ======= GVITSmCapGr GVITSmCapVal --------------------- ----------------------- 2003 2002 2003 2002 --------- --------- ---------- ---------- Investment activity: Net investment income (loss) ................ (9,992) (9,005) (78,518) (92,125) Realized gain (loss) on investments ......... 245,292 (539,108) 405,061 (3,668,042) Change in unrealized gain (loss) on investments ........................... 101,046 (10,392) 4,692,960 (1,169,384) Reinvested capital gains .................... -- -- -- 308,760 --------- --------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ............................ 336,346 (558,505) 5,019,503 (4,620,791) --------- --------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 251,062 619,612 962,419 1,188,983 Transfers between funds ..................... (19,343) 134,653 1,983,387 (1,353,452) Surrenders (note 6) ......................... (51,376) (162,779) (962,055) (1,003,083) Death benefits (note 4) ..................... -- (17,654) (95,096) (11,891) Net policy repayments (loans) (note 5) ...... (47,144) (2,166) (601,100) (51,969) Deductions for surrender charges (note 2d) .. (2,375) (8,951) (44,468) (55,158) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (83,917) (76,901) (507,726) (586,977) Asset charges (note 3): MSP contracts ............................ (406) (476) (6,907) (7,239) LSFP contracts ........................... (769) (667) (10,106) (9,801) --------- --------- ---------- ---------- Net equity transactions ............... 45,732 484,671 718,348 (1,890,587) --------- --------- ---------- ---------- Net change in contract owners' equity .......... 382,078 (73,834) 5,737,851 (6,511,378) Contract owners' equity beginning of period ................................... 1,258,941 1,332,775 9,270,589 15,781,967 --------- --------- ---------- ---------- Contract owners' equity end of period .......... 1,641,019 1,258,941 15,008,440 9,270,589 ========= ========= ========== ========== CHANGES IN UNITS: Beginning units ............................. 265,763 186,280 838,299 1,034,902 --------- --------- ---------- ---------- Units purchased ............................. 48,697 120,635 202,734 107,054 Units redeemed .............................. (54,328) (41,152) (168,468) (303,657) --------- --------- ---------- ---------- Ending units ................................ 260,132 265,763 872,565 838,299 ========= ========= ========== ==========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
GVITSmComp GVITTotRt ------------------------ ------------------------ 2003 2002 2003 2002 ----------- ---------- ---------- ----------- Investment activity: Net investment income (loss) ................ $ (162,554) (166,099) (128,378) 63,059 Realized gain (loss) on investments ......... (941,330) (2,431,393) (2,319,832) (2,673,181) Change in unrealized gain (loss) on investments ........................... 8,912,411 (2,049,393) 18,094,378 (11,054,460) Reinvested capital gains .................... -- -- -- -- ----------- ---------- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations ............................ 7,808,527 (4,646,885) 15,646,168 (13,664,582) ----------- ---------- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) ................. 1,785,411 2,184,290 8,223,681 9,291,200 Transfers between funds ..................... 282,080 (120,024) (1,394,191) (2,033,396) Surrenders (note 6) ......................... (1,042,745) (1,272,878) (3,227,744) (3,864,076) Death benefits (note 4) ..................... (73,828) (71,551) (241,692) (443,207) Net policy repayments (loans) (note 5) ...... (147,834) (215,642) 9,325 (296,328) Deductions for surrender charges (note 2d) .. (48,197) (69,993) (149,192) (212,478) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (1,261,119) (1,285,393) (5,505,925) (5,626,226) Asset charges (note 3): MSP contracts ............................ (12,510) (13,651) (24,994) (28,021) LSFP contracts ........................... (11,018) (10,604) (16,647) (17,931) ----------- ---------- ---------- ----------- Net equity transactions ............... (529,760) (875,446) (2,327,379) (3,230,463) ----------- ---------- ---------- ----------- Net change in contract owners' equity .......... 7,278,767 (5,522,331) 13,318,789 (16,895,045) Contract owners' equity beginning of period ................................... 20,084,696 25,607,027 60,325,564 77,220,609 ----------- ---------- ---------- ----------- Contract owners' equity end of period .......... $27,363,463 20,084,696 73,644,353 60,325,564 =========== ========== ========== =========== CHANGES IN UNITS: Beginning units ............................. 1,090,705 1,141,976 2,622,768 2,758,504 ----------- ---------- ---------- ----------- Units purchased ............................. 133,747 129,251 360,701 391,170 Units redeemed .............................. (162,109) (180,522) (462,007) (526,906) ----------- ---------- ---------- ----------- Ending units ................................ 1,062,343 1,090,705 2,521,462 2,622,768 =========== ========== ========== =========== GVITUSGro JanBal ------------------ ------------- 2003 2002 2003 2002 --------- ------ ------ ---- Investment activity: Net investment income (loss) ................ (4,094) (119) 202 -- Realized gain (loss) on investments ......... 114,439 (263) 7 -- Change in unrealized gain (loss) on investments ........................... (8,682) (5,779) 875 -- Reinvested capital gains .................... 64,799 -- -- -- --------- ------ ------ --- Net increase (decrease) in contract owners' equity resulting from operations ............................ 166,462 (6,161) 1,084 -- --------- ------ ------ --- Equity transactions: Purchase payments received from contract owners (note 6) ................. 38,894 1,061 1,951 -- Transfers between funds ..................... 938,704 88,214 25,096 -- Surrenders (note 6) ......................... (17,480) -- -- -- Death benefits (note 4) ..................... -- -- -- -- Net policy repayments (loans) (note 5) ...... (146,138) (1,144) -- -- Deductions for surrender charges (note 2d) .. (808) -- -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ........................ (15,281) (1,044) (175) -- Asset charges (note 3): MSP contracts ............................ (31) -- -- -- LSFP contracts ........................... (140) (11) -- -- --------- ------ ------ --- Net equity transactions ............... 797,720 87,076 26,872 -- --------- ------ ------ --- Net change in contract owners' equity .......... 964,182 80,915 27,956 -- Contract owners' equity beginning of period ................................... 80,915 -- -- -- --------- ------ ------ --- Contract owners' equity end of period .......... 1,045,097 80,915 27,956 -- ========= ====== ====== === CHANGES IN UNITS: Beginning units ............................. 9,894 -- -- -- --------- ------ ------ --- Units purchased ............................. 93,269 10,159 2,565 -- Units redeemed .............................. (18,501) (265) (17) -- --------- ------ ------ --- Ending units ................................ 84,662 9,894 2,548 -- ========= ====== ====== ===
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
JanCapAp JanGITech ---------------------- ---------------------- 2003 2002 2003 2002 ---------- --------- --------- ---------- Investment activity: Net investment income (loss) ....................... $ (11,135) (10,295) (8,186) (8,887) Realized gain (loss) on investments ................ (82,197) (417,474) (300,592) (269,555) Change in unrealized gain (loss) on investments .................................. 520,550 (28,278) 755,405 (427,636) Reinvested capital gains ........................... -- -- -- -- ---------- --------- --------- ---------- Net increase (decrease) in contract owners' equity resulting from operations ................................... 427,218 (456,047) 446,627 (706,078) ---------- --------- --------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 282,142 302,801 165,602 201,079 Transfers between funds ............................ (140,161) 136,764 32,152 (298,876) Surrenders (note 6) ................................ (148,985) (193,278) (78,038) (139,634) Death benefits (note 4) ............................ (719) -- (1,735) -- Net policy repayments (loans) (note 5) ............. (8,914) 11,769 1,274 26,135 Deductions for surrender charges (note 2d) ......... (6,886) (10,628) (3,607) (7,678) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (154,470) (163,145) (110,637) (78,471) Asset charges (note 3): MSP contracts ................................... (1,377) (1,385) (844) (916) LSFP contracts .................................. (1,316) (1,213) (817) (608) ---------- --------- --------- ---------- Net equity transactions ...................... (180,686) 81,685 3,350 (298,969) ---------- --------- --------- ---------- Net change in contract owners' equity ................. 246,532 (374,362) 449,977 (1,005,047) Contract owners' equity beginning of period .......................................... 2,253,876 2,628,238 879,767 1,884,814 ---------- --------- --------- ---------- Contract owners' equity end of period ................. $2,500,408 2,253,876 1,329,744 879,767 ========== ========= ========= ========== CHANGES IN UNITS: Beginning units .................................... 440,390 428,785 357,176 449,115 ---------- --------- --------- ---------- Units purchased .................................... 64,043 95,428 91,294 83,201 Units redeemed ..................................... (95,220) (83,823) (77,325) (175,140) ---------- --------- --------- ---------- Ending units ....................................... 409,213 440,390 371,145 357,176 ========== ========= ========= ========== JanIntGro JanRsLgCpCr --------------------- ------------ 2003 2002 2003 2002 --------- --------- ----- ---- Investment activity: Net investment income (loss) ....................... 3,449 (4,636) (8) -- Realized gain (loss) on investments ................ 87,839 (407,715) (37) -- Change in unrealized gain (loss) on investments .................................. 377,425 (16,485) 503 -- Reinvested capital gains ........................... -- -- -- -- --------- --------- ----- --- Net increase (decrease) in contract owners' equity resulting from operations ................................... 468,713 (428,836) 458 -- --------- --------- ----- --- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 390,875 498,623 197 -- Transfers between funds ............................ (198,596) (37,022) 7,352 -- Surrenders (note 6) ................................ (304,722) (398,206) -- -- Death benefits (note 4) ............................ (1,441) (2,290) -- -- Net policy repayments (loans) (note 5) ............. (9,893) 28,088 8 -- Deductions for surrender charges (note 2d) ......... (14,085) (21,897) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (89,111) (105,940) (73) -- Asset charges (note 3): MSP contracts ................................... (670) (824) -- -- LSFP contracts .................................. (1,074) (988) -- -- --------- --------- ----- --- Net equity transactions ...................... (228,717) (40,456) 7,484 -- --------- --------- ----- --- Net change in contract owners' equity ................. 239,996 (469,292) 7,942 -- Contract owners' equity beginning of period .......................................... 1,481,877 1,951,169 -- -- --------- --------- ----- --- Contract owners' equity end of period ................. 1,721,873 1,481,877 7,942 -- ========= ========= ===== === CHANGES IN UNITS: Beginning units .................................... 334,648 324,749 -- -- --------- --------- ----- --- Units purchased .................................... 43,772 70,908 656 -- Units redeemed ..................................... (87,251) (61,009) (7) -- --------- --------- ----- --- Ending units ....................................... 291,169 334,648 649 -- ========= ========= ===== ===
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
MGVITMultiSec MFSVITInvGrwI ---------------------- ------------- 2003 2002 2003 2002 ---------- --------- ------ ---- Investment activity: Net investment income (loss) ....................... $ 71,074 38,896 (68) -- Realized gain (loss) on investments ................ 95,127 (7,201) 113 -- Change in unrealized gain (loss) on investments .................................. (5,724) 27,886 1,549 -- Reinvested capital gains ........................... -- -- -- -- ---------- --------- ------ --- Net increase (decrease) in contract owners' equity resulting from operations ................................... 160,477 59,581 1,594 -- ---------- --------- ------ --- Equity transactions: Purchase payments received from contract owners (note 6) ........................ 157,344 68,550 933 -- Transfers between funds ............................ (146,693) 654,994 55,220 -- Surrenders (note 6) ................................ (213,444) (23,316) (1,557) -- Death benefits (note 4) ............................ -- -- -- -- Net policy repayments (loans) (note 5) ............. 7,695 (4,610) -- -- Deductions for surrender charges (note 2d) ......... (9,866) (1,282) (72) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (33,842) (29,377) (535) -- Asset charges (note 3): MSP contracts ................................... (881) (472) -- -- LSFP contracts .................................. (880) (100) -- -- ---------- --------- ------ --- Net equity transactions ...................... (240,567) 664,387 53,989 -- ---------- --------- ------ --- Net change in contract owners' equity ................. (80,090) 723,968 55,583 -- Contract owners' equity beginning of period .......................................... 1,348,659 624,691 -- -- ---------- --------- ------ --- Contract owners' equity end of period ................. $1,268,569 1,348,659 55,583 -- ========== ========= ====== === CHANGES IN UNITS: Beginning units .................................... 117,430 57,879 -- -- ---------- --------- ------ --- Units purchased .................................... 24,936 68,517 5,007 -- Units redeemed ..................................... (43,333) (8,966) (191) -- ---------- --------- ------ --- Ending units ....................................... 99,033 117,430 4,816 -- ========== ========= ====== === MFSVITValIn NBAMTBal ------------- --------------- 2003 2002 2003 2002 ------ ---- ------ ------ Investment activity: Net investment income (loss) ....................... (74) -- 604 863 Realized gain (loss) on investments ................ 38 -- (877) (343) Change in unrealized gain (loss) on investments .................................. 3,849 -- 8,095 (8,064) Reinvested capital gains ........................... -- -- -- -- ------ --- ------ ------ Net increase (decrease) in contract owners' equity resulting from operations ................................... 3,813 -- 7,822 (7,544) ------ --- ------ ------ Equity transactions: Purchase payments received from contract owners (note 6) ........................ 2,515 -- 6,261 1,871 Transfers between funds ............................ 38,323 -- 10,323 39,141 Surrenders (note 6) ................................ -- -- -- -- Death benefits (note 4) ............................ -- -- -- -- Net policy repayments (loans) (note 5) ............. (326) -- 22 22 Deductions for surrender charges (note 2d) ......... -- -- -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................... (617) -- (2,301) (1,718) Asset charges (note 3): MSP contracts ................................... (7) -- -- -- LSFP contracts .................................. -- -- -- -- ------ --- ------ ------ Net equity transactions ...................... 39,888 -- 14,305 39,316 ------ --- ------ ------ Net change in contract owners' equity ................. 43,701 -- 22,127 31,772 Contract owners' equity beginning of period .......................................... -- -- 46,040 14,268 ------ --- ------ ------ Contract owners' equity end of period ................. 43,701 -- 68,167 46,040 ====== === ====== ====== CHANGES IN UNITS: Beginning units .................................... -- -- 2,497 636 ------ --- ------ ------ Units purchased .................................... 3,635 -- 1,044 1,949 Units redeemed ..................................... (84) -- (126) (88) ------ --- ------ ------ Ending units ....................................... 3,551 -- 3,415 2,497 ====== === ====== ======
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
NBAMTFas NBAMTGro -------------- ------------------------ 2003 2002 2003 2002 ------- ---- ---------- ----------- Investment activity: Net investment income (loss) .................. $ (42) -- (113,247) (127,464) Realized gain (loss) on investments ........... 750 -- (2,849,105) (4,914,991) Change in unrealized gain (loss) on investments ............................. 747 -- 6,753,242 (1,658,364) Reinvested capital gains ...................... 5 -- -- -- ------- --- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 1,460 -- 3,790,890 (6,700,819) ------- --- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 552 -- 1,709,589 2,192,969 Transfers between funds ....................... 10,214 -- 119,597 (4,042,985) Surrenders (note 6) ........................... (648) -- (2,092,717) (939,226) Death benefits (note 4) ....................... -- -- (25,820) (56,429) Net policy repayments (loans) (note 5) ........ (328) -- 792,718 (16,008) Deductions for surrender charges (note 2d) .... (30) -- (96,729) (51,646) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (510) -- (985,451) (1,089,804) Asset charges (note 3): MSP contracts .............................. -- -- (2,540) (7,158) LSFP contracts ............................. -- -- (5,756) (6,125) ------- --- ---------- ----------- Net equity transactions ................. 9,250 -- (587,109) (4,016,412) ------- --- ---------- ----------- Net change in contract owners' equity ............ 10,710 -- 3,203,781 (10,717,231) Contract owners' equity beginning of period ..................................... -- -- 12,997,531 23,714,762 ------- --- ---------- ----------- Contract owners' equity end of period ............ $10,710 -- 16,201,312 12,997,531 ======= === ========== =========== CHANGES IN UNITS: Beginning units ............................... -- -- 866,555 1,114,641 ------- --- ---------- ----------- Units purchased ............................... 926 -- 140,684 141,889 Units redeemed ................................ (72) -- (185,624) (389,975) ------- --- ---------- ----------- Ending units .................................. 854 -- 821,615 866,555 ======= === ========== =========== NBAMTGuard NBAMTLMat --------------------- ---------------------- 2003 2002 2003 2002 --------- --------- ---------- --------- Investment activity: Net investment income (loss) .................. 3,217 2,019 239,549 238,386 Realized gain (loss) on investments ........... (219,402) (564,694) 19,906 29,349 Change in unrealized gain (loss) on investments ............................. 710,906 (142,270) (150,522) (464) Reinvested capital gains ...................... -- -- -- -- --------- --------- ---------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 494,721 (704,945) 108,933 267,271 --------- --------- ---------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 147,198 252,039 419,152 485,372 Transfers between funds ....................... (5,208) (326,889) 90,649 2,049,470 Surrenders (note 6) ........................... (168,265) (70,728) (1,419,276) (756,920) Death benefits (note 4) ....................... -- -- (398) (42,010) Net policy repayments (loans) (note 5) ........ (6,356) (14,101) 681,836 80,900 Deductions for surrender charges (note 2d) .... (7,778) (3,889) (65,601) (41,621) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (98,043) (106,763) (290,411) (245,535) Asset charges (note 3): MSP contracts .............................. (1,250) (1,592) (7,524) (6,969) LSFP contracts ............................. (1,689) (1,817) (1,699) (1,413) --------- --------- ---------- --------- Net equity transactions ................. (141,391) (273,740) (593,272) 1,521,274 --------- --------- ---------- --------- Net change in contract owners' equity ............ 353,330 (978,685) (484,339) 1,788,545 Contract owners' equity beginning of period ..................................... 1,605,837 2,584,522 6,741,521 4,952,976 --------- --------- ---------- --------- Contract owners' equity end of period ............ 1,959,167 1,605,837 6,257,182 6,741,521 ========= ========= ========== ========= CHANGES IN UNITS: Beginning units ............................... 210,005 247,137 390,323 298,490 --------- --------- ---------- --------- Units purchased ............................... 31,713 32,929 48,590 143,330 Units redeemed ................................ (45,956) (70,061) (86,847) (51,497) --------- --------- ---------- --------- Ending units .................................. 195,762 210,005 352,066 390,323 ========= ========= ========== =========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
NBAMTMCGr NBAMTPart --------------- ----------------------- 2003 2002 2003 2002 -------- ---- ---------- ---------- Investment activity: Net investment income (loss) .................. $ (601) -- (125,663) (32,601) Realized gain (loss) on investments ........... 7,082 -- (2,482,304) (1,617,582) Change in unrealized gain (loss) on investments ............................. 9,663 -- 8,076,460 (3,978,892) Reinvested capital gains ...................... -- -- -- -- -------- --- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 16,144 -- 5,468,493 (5,629,075) -------- --- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 11,530 -- 1,956,281 2,518,759 Transfers between funds ....................... 247,205 -- (669,643) (1,347,916) Surrenders (note 6) ........................... -- -- (2,336,671) (979,335) Death benefits (note 4) ....................... -- -- (73,321) (57,113) Net policy repayments (loans) (note 5) ........ 84 -- 567,185 (98,447) Deductions for surrender charges (note 2d) .... -- -- (108,005) (53,852) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (2,759) -- (1,168,275) (1,224,187) Asset charges (note 3): MSP contracts .............................. -- -- (10,782) (12,334) LSFP contracts ............................. (148) -- (15,068) (13,806) -------- --- ---------- ---------- Net equity transactions ................. 255,912 -- (1,858,299) (1,268,231) -------- --- ---------- ---------- Net change in contract owners' equity ............ 272,056 -- 3,610,194 (6,897,306) Contract owners' equity beginning of period ..................................... -- -- 16,750,853 23,648,159 -------- --- ---------- ---------- Contract owners' equity end of period ............ $272,056 -- 20,361,047 16,750,853 ======== === ========== ========== CHANGES IN UNITS: Beginning units ............................... -- -- 990,334 1,050,337 -------- --- ---------- ---------- Units purchased ............................... 22,437 -- 124,453 149,729 Units redeemed ................................ (260) -- (211,244) (209,732) -------- --- ---------- ---------- Ending units .................................. 22,177 -- 903,543 990,334 ======== === ========== ========== NBAMTSocRe OppAggGro ------------- --------------------- 2003 2002 2003 2002 ------ ---- --------- --------- Investment activity: Net investment income (loss) .................. (106) -- (11,886) (1,144) Realized gain (loss) on investments ........... 25 -- 229,204 (590,299) Change in unrealized gain (loss) on investments ............................. 4,282 -- 73,026 91,747 Reinvested capital gains ...................... -- -- -- -- ------ --- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 4,201 -- 290,344 (499,696) ------ --- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 1,275 -- 318,237 277,067 Transfers between funds ....................... 35,670 -- 301,461 (127,039) Surrenders (note 6) ........................... -- -- (68,982) (140,615) Death benefits (note 4) ....................... -- -- (2,559) (3,005) Net policy repayments (loans) (note 5) ........ 143 -- (29,327) (16,276) Deductions for surrender charges (note 2d) .... -- -- (3,188) (7,732) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (753) -- (133,803) (117,334) Asset charges (note 3): MSP contracts .............................. -- -- (660) (637) LSFP contracts ............................. -- -- (166) (143) ------ --- --------- --------- Net equity transactions ................. 36,335 -- 381,013 (135,714) ------ --- --------- --------- Net change in contract owners' equity ............ 40,536 -- 671,357 (635,410) Contract owners' equity beginning of period ..................................... -- -- 1,158,339 1,793,749 ------ --- --------- --------- Contract owners' equity end of period ............ 40,536 -- 1,829,696 1,158,339 ====== === ========= ========= CHANGES IN UNITS: Beginning units ............................... -- -- 304,625 337,769 ------ --- --------- --------- Units purchased ............................... 3,372 -- 141,228 72,910 Units redeemed ................................ (79) -- (59,990) (106,054) ------ --- --------- --------- Ending units .................................. 3,293 -- 385,863 304,625 ====== === ========= =========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
OppBdFd OppCapAp ------------------------ ----------------------- 2003 2002 2003 2002 ----------- ---------- ---------- ---------- Investment activity: Net investment income (loss) .................. $ 679,789 882,439 (49,154) (15,505) Realized gain (loss) on investments ........... (4,847) (350,686) (2,159,972) (6,751,858) Change in unrealized gain (loss) on investments ............................. 124,933 535,188 5,578,110 2,058,407 Reinvested capital gains ...................... -- -- -- -- ----------- ---------- ---------- ---------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 799,875 1,066,941 3,368,984 (4,708,956) ----------- ---------- ---------- ---------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 986,173 1,018,900 1,377,491 2,131,465 Transfers between funds ....................... (729,951) 816,498 369,298 (446,711) Surrenders (note 6) ........................... (1,054,622) (999,559) (676,382) (1,052,801) Death benefits (note 4) ....................... (14,916) (86,356) (134,063) (45,480) Net policy repayments (loans) (note 5) ........ (9,225) (175,417) (101,777) (56,354) Deductions for surrender charges (note 2d) .... (48,746) (54,964) (31,263) (57,891) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (720,578) (658,218) (741,142) (828,314) Asset charges (note 3): MSP contracts .............................. (9,531) (10,665) (5,271) (5,855) LSFP contracts ............................. (6,190) (4,779) (5,208) (6,108) ----------- ---------- ---------- ---------- Net equity transactions ................. (1,607,586) (154,560) 51,683 (368,049) ----------- ---------- ---------- ---------- Net change in contract owners' equity ............ (807,711) 912,381 3,420,667 (5,077,005) Contract owners' equity beginning of period ..................................... 14,009,310 13,096,929 11,617,305 16,694,310 ----------- ---------- ---------- ---------- Contract owners' equity end of period ............ $13,201,599 14,009,310 15,037,972 11,617,305 =========== ========== ========== ========== CHANGES IN UNITS: Beginning units ............................... 685,876 691,900 1,030,433 1,073,994 ----------- ---------- ---------- ---------- Units purchased ............................... 95,828 85,064 167,469 162,077 Units redeemed ................................ (174,487) (91,088) (172,352) (205,638) ----------- ---------- ---------- ---------- Ending units .................................. 607,217 685,876 1,025,550 1,030,433 =========== ========== ========== ========== OppGlSec OppHiIncInt ----------------------- -------------- 2003 2002 2003 2002 ---------- ---------- ------- ---- Investment activity: Net investment income (loss) .................. (1,280) (61,818) (475) -- Realized gain (loss) on investments ........... (4,355,424) (779,589) 2,808 -- Change in unrealized gain (loss) on investments ............................. 14,079,632 (6,436,152) 15,287 -- Reinvested capital gains ...................... -- -- -- -- ---------- ---------- ------- --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 9,722,928 (7,277,559) 17,620 -- ---------- ---------- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 2,087,217 2,395,521 17,306 -- Transfers between funds ....................... 207,428 (974,214) 301,861 -- Surrenders (note 6) ........................... (1,759,910) (1,670,589) (13,447) -- Death benefits (note 4) ....................... (49,058) (139,234) -- -- Net policy repayments (loans) (note 5) ........ 153,062 (107,233) (5,673) -- Deductions for surrender charges (note 2d) .... (81,346) (91,862) (622) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (1,361,309) (1,468,689) (4,579) -- Asset charges (note 3): MSP contracts .............................. (9,838) (11,572) (256) -- LSFP contracts ............................. (7,297) (7,148) (40) -- ---------- ---------- ------- --- Net equity transactions ................. (821,051) (2,075,020) 294,550 -- ---------- ---------- ------- --- Net change in contract owners' equity ............ 8,901,877 (9,352,579) 312,170 -- Contract owners' equity beginning of period ..................................... 23,978,747 33,331,326 -- -- ---------- ---------- ------- --- Contract owners' equity end of period ............ 32,880,624 23,978,747 312,170 -- ========== ========== ======= === CHANGES IN UNITS: Beginning units ............................... 1,190,779 1,278,705 -- -- ---------- ---------- ------- --- Units purchased ............................... 148,719 122,958 30,411 -- Units redeemed ................................ (189,490) (210,884) (2,398) -- ---------- ---------- ------- --- Ending units .................................. 1,150,008 1,190,779 28,013 -- ========== ========== ======= ===
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
OppMSGrInc OppMaStSmCpI ---------------------- -------------- 2003 2002 2003 2002 ---------- --------- ------- ---- Investment activity: Net investment income (loss) .................. $ 2,578 (227) (584) -- Realized gain (loss) on investments ........... 81,690 (144,832) 1,581 -- Change in unrealized gain (loss) on investments ............................. 214,017 (63,259) 29,320 -- Reinvested capital gains ...................... -- -- -- -- ---------- --------- ------- --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 298,285 (208,318) 30,317 -- ---------- --------- ------- --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 100,521 86,118 20,279 -- Transfers between funds ....................... 195,608 352,251 365,548 -- Surrenders (note 6) ........................... (62,594) (39,278) (7,875) -- Death benefits (note 4) ....................... -- -- -- -- Net policy repayments (loans) (note 5) ........ (42,180) 85 80 -- Deductions for surrender charges (note 2d) .... (2,893) (2,160) (364) -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (54,542) (42,091) (4,132) -- Asset charges (note 3): MSP contracts .............................. (1,227) (841) (37) -- LSFP contracts ............................. (811) (787) (53) -- ---------- --------- ------- --- Net equity transactions ................. 131,882 353,297 373,446 -- ---------- --------- ------- --- Net change in contract owners' equity ............ 430,167 144,979 403,763 -- Contract owners' equity beginning of period ..................................... 1,000,092 855,113 -- -- ---------- --------- ------- --- Contract owners' equity end of period ............ $1,430,259 1,000,092 403,763 -- ========== ========= ======= === CHANGES IN UNITS: Beginning units ............................... 154,096 106,340 -- - ---------- --------- ------- --- Units purchased ............................... 46,202 59,843 29,584 - Units redeemed ................................ (25,179) (12,087) (333) - ---------- --------- ------- --- Ending units .................................. 175,119 154,096 29,251 - ========== ========= ======= === OppMultStr PUTVTGrIncIB ----------------------- ------------- 2003 2002 2003 2002 ---------- ---------- ------ ---- Investment activity: Net investment income (loss) .................. 275,544 377,956 (40) -- Realized gain (loss) on investments ........... (166,820) (465,799) (42) -- Change in unrealized gain (loss) on investments ............................. 2,834,011 (1,738,579) 1,560 -- Reinvested capital gains ...................... -- 200,398 -- -- ---------- ---------- ------ --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 2,942,735 (1,626,024) 1,478 -- ---------- ---------- ------ --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 1,155,345 1,233,000 543 -- Transfers between funds ....................... 434,484 6,851 13,190 -- Surrenders (note 6) ........................... (532,500) (881,744) -- -- Death benefits (note 4) ....................... (18,039) (208,239) -- -- Net policy repayments (loans) (note 5) ........ (62,595) (71,305) -- -- Deductions for surrender charges (note 2d) .... (24,613) (48,485) -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (737,262) (720,498) (257) -- Asset charges (note 3): MSP contracts .............................. (8,381) (8,198) -- -- LSFP contracts ............................. (3,405) (3,122) -- -- ---------- ---------- ------ --- Net equity transactions ................. 203,034 (701,740) 13,476 -- ---------- ---------- ------ --- Net change in contract owners' equity ............ 3,145,769 (2,327,764) 14,954 -- Contract owners' equity beginning of period ..................................... 12,259,254 14,587,018 -- -- ---------- ---------- ------ --- Contract owners' equity end of period ............ 15,405,023 12,259,254 14,954 -- ========== ========== ====== === CHANGES IN UNITS: Beginning units ............................... 543,407 574,816 -- -- ---------- ---------- ------ --- Units purchased ............................... 76,748 73,564 1,233 -- Units redeemed ................................ (70,952) (104,973) (23) -- ---------- ---------- ------ --- Ending units .................................. 549,203 543,407 1,210 -- ========== ========== ====== ===
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
PUTVTIntlEqIB PUTVTVoyIB -------------- ------------- 2003 2002 2003 2002 ------- ---- ------ ---- Investment activity: Net investment income (loss) .................. $ (131) -- (36) -- Realized gain (loss) on investments ........... 2,026 -- 114 -- Change in unrealized gain (loss) on investments ............................. 5,418 -- 1,025 -- Reinvested capital gains ...................... -- -- -- -- ------- --- ------ --- Net increase (decrease) in contract owners' equity resulting from operations .............................. 7,313 -- 1,103 -- ------- --- ------ --- Equity transactions: Purchase payments received from contract owners (note 6) ................... 1,697 -- 727 -- Transfers between funds ....................... 55,373 -- 13,491 -- Surrenders (note 6) ........................... (845) -- -- -- Death benefits (note 4) ....................... -- -- -- -- Net policy repayments (loans) (note 5) ........ 33 -- -- -- Deductions for surrender charges (note 2d) .... (39) -- -- -- Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (757) -- (226) -- Asset charges (note 3): MSP contracts .............................. -- -- -- -- LSFP contracts ............................. -- -- -- -- ------- --- ------ --- Net equity transactions ................. 55,462 -- 13,992 -- ------- --- ------ --- Net change in contract owners' equity ............ 62,775 -- 15,095 -- Contract owners' equity beginning of period ..................................... -- -- -- -- ------- --- ------ --- Contract owners' equity end of period ............ $62,775 -- 15,095 -- ======= === ====== === CHANGES IN UNITS: Beginning units ............................... -- -- -- -- ------- --- ------ --- Units purchased ............................... 5,067 -- 1,300 -- Units redeemed ................................ (136) -- (20) -- ------- --- ------ --- Ending units .................................. 4,931 -- 1,280 -- ======= === ====== === SGVITMdCpGr StOpp2 --------------------- ------------------------ 2003 2002 2003 2002 --------- --------- ---------- ----------- Investment activity: Net investment income (loss) .................. (16,320) (8,153) (220,857) (147,021) Realized gain (loss) on investments ........... 314,734 (397,870) (2,014,228) (2,167,910) Change in unrealized gain (loss) on investments ............................. 196,161 (56,058) 11,846,663 (9,845,255) Reinvested capital gains ...................... -- -- -- 644,398 --------- --------- ---------- ----------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 494,575 (462,081) 9,611,578 (11,515,788) --------- --------- ---------- ----------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 269,326 358,592 2,539,077 3,147,871 Transfers between funds ....................... 905,513 485,532 (2,376,920) (1,938,061) Surrenders (note 6) ........................... (96,786) (47,786) (2,584,861) (1,780,772) Death benefits (note 4) ....................... (126,970) (10,227) (71,968) (79,482) Net policy repayments (loans) (note 5) ........ (261,405) (5,425) 165,371 (352,730) Deductions for surrender charges (note 2d) .... (4,474) (2,628) (119,477) (97,921) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... 639,976 (61,931) (1,701,430) (1,897,429) Asset charges (note 3): MSP contracts .............................. (829) (561) (6,701) (8,916) LSFP contracts ............................. (803) (432) (6,270) (6,859) --------- --------- ---------- ----------- Net equity transactions ................. 1,323,548 715,134 (4,163,179) (3,014,299) --------- --------- ---------- ----------- Net change in contract owners' equity ............ 1,818,123 253,053 5,448,399 (14,530,087) Contract owners' equity beginning of period ..................................... 1,178,178 925,125 28,600,889 43,130,976 --------- --------- ---------- ----------- Contract owners' equity end of period ............ 2,996,301 1,178,178 34,049,288 28,600,889 ========= ========= ========== =========== CHANGES IN UNITS: Beginning units ............................... 335,821 164,872 1,014,316 1,109,407 --------- --------- ---------- ----------- Units purchased ............................... 418,292 206,561 118,496 116,005 Units redeemed ................................ (141,096) (35,612) (241,119) (211,096) --------- --------- ---------- ----------- Ending units .................................. 613,017 335,821 891,693 1,014,316 ========= ========= ========== ===========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
StDisc2 StIntStk2 ----------------------- ---------------------- 2003 2002 2003 2002 ---------- ---------- ---------- --------- Investment activity: Net investment income (loss) .................. $ (51,688) (52,203) 21,096 63,769 Realized gain (loss) on investments ........... 389,397 (262,474) (57,620) (794,539) Change in unrealized gain (loss) on investments ............................. 1,778,903 (594,143) (7,327) 177,975 Reinvested capital gains ...................... -- -- -- -- ---------- ---------- ---------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 2,116,612 (908,820) (43,851) (552,795) ---------- ---------- ---------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 611,081 608,903 32,865 300,490 Transfers between funds ....................... (120,100) (80,174) (1,542,823) (144,364) Surrenders (note 6) ........................... (344,691) (417,882) (28,101) (170,083) Death benefits (note 4) ....................... (49,278) (18,966) (570) (7,537) Net policy repayments (loans) (note 5) ........ 21,455 81,865 445 10,245 Deductions for surrender charges (note 2d) .... (15,932) (22,978) (1,299) (9,352) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (343,313) (346,561) (16,588) (115,209) Asset charges (note 3): MSP contracts .............................. (1,643) (1,630) (75) (766) LSFP contracts ............................. (701) (621) (295) (2,122) ---------- ---------- ---------- --------- Net equity transactions ................. (243,122) (198,044) (1,556,441) (138,698) ---------- ---------- ---------- --------- Net change in contract owners' equity ............ 1,873,490 (1,106,864) (1,600,292) (691,493) Contract owners' equity beginning of period ..................................... 5,757,577 6,864,441 1,600,292 2,291,785 ---------- ---------- ---------- --------- Contract owners' equity end of period ............ $7,631,067 5,757,577 -- 1,600,292 ========== ========== ========== ========= CHANGES IN UNITS: Beginning units ............................... 313,582 327,117 285,304 297,754 ---------- ---------- ---------- --------- Units purchased ............................... 44,706 38,978 102,641 50,067 Units redeemed ................................ (58,229) (52,513) (387,945) (62,517) ---------- ---------- ---------- --------- Ending units .................................. 300,059 313,582 -- 285,304 ========== ========== ========== ========= TurnGVITGro VEWrldBd ------------------- --------------------- 2003 2002 2003 2002 -------- -------- --------- --------- Investment activity: Net investment income (loss) .................. (3,394) (1,483) 47,832 (26,814) Realized gain (loss) on investments ........... 106,095 (118,319) 529,474 493,528 Change in unrealized gain (loss) on investments ............................. 99,325 (25,065) 135,636 184,996 Reinvested capital gains ...................... -- -- -- -- -------- -------- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 202,026 (144,867) 712,942 651,710 -------- -------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 32,050 26,059 441,801 260,531 Transfers between funds ....................... 437,266 112,664 (331,784) 1,799,806 Surrenders (note 6) ........................... (179,355) (1,211) (457,882) (190,817) Death benefits (note 4) ....................... -- -- (8,634) (3,389) Net policy repayments (loans) (note 5) ........ (16,437) 104 (8,665) (6,834) Deductions for surrender charges (note 2d) .... (8,290) (67) (21,164) (10,493) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (26,827) 12,255 (256,955) (142,406) Asset charges (note 3): MSP contracts .............................. (220) (133) (2,331) (1,498) LSFP contracts ............................. (548) (12) (1,849) (1,111) -------- -------- --------- --------- Net equity transactions ................. 237,639 149,659 (647,463) 1,703,789 -------- -------- --------- --------- Net change in contract owners' equity ............ 439,665 4,792 65,479 2,355,499 Contract owners' equity beginning of period ..................................... 208,618 203,826 4,601,070 2,245,571 -------- -------- --------- --------- Contract owners' equity end of period ............ 648,283 208,618 4,666,549 4,601,070 ======== ======== ========= ========= CHANGES IN UNITS: Beginning units ............................... 96,110 53,240 291,343 170,193 -------- -------- --------- --------- Units purchased ............................... 127,213 50,752 44,705 147,907 Units redeemed ................................ (24,354) (7,882) (87,714) (26,757) -------- -------- --------- --------- Ending units .................................. 198,969 96,110 248,334 291,343 ======== ======== ========= =========
NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002
VEWrldEMkt VEWrldHAs ---------------------- --------------------- 2003 2002 2003 2002 ---------- --------- --------- --------- Investment activity: Net investment income (loss) .................. $ (23,710) (23,485) (12,004) (3,098) Realized gain (loss) on investments ........... 764,615 (383,086) 688,621 (399,785) Change in unrealized gain (loss) on investments ............................. 1,136,659 111,183 856,699 176,398 Reinvested capital gains ...................... -- -- -- -- ---------- --------- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 1,877,564 (295,388) 1,533,316 (226,485) ---------- --------- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 609,752 704,499 484,564 513,130 Transfers between funds ....................... (129,198) 622,118 (743,244) 1,395,942 Surrenders (note 6) ........................... (426,215) (564,961) (263,804) (230,792) Death benefits (note 4) ....................... (17,744) (5,788) (2,937) (7,889) Net policy repayments (loans) (note 5) ........ 103,055 490 (22,204) (51,043) Deductions for surrender charges (note 2d) .... (19,700) (31,066) (12,193) (12,691) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (227,107) (229,103) (225,207) (210,529) Asset charges (note 3): MSP contracts .............................. (2,156) (2,796) (2,233) (1,932) LSFP contracts ............................. (3,500) (3,167) (886) (892) ---------- --------- --------- --------- Net equity transactions ................. (112,813) 490,226 (788,144) 1,393,304 ---------- --------- --------- --------- Net change in contract owners' equity ............ 1,764,751 194,838 745,172 1,166,819 Contract owners' equity beginning of period ..................................... 3,809,216 3,614,378 4,465,156 3,298,337 ---------- --------- --------- --------- Contract owners' equity end of period ............ $5,573,967 3,809,216 5,210,328 4,465,156 ========== ========= ========= ========= CHANGES IN UNITS: Beginning units ............................... 609,125 558,293 345,490 247,470 ---------- --------- --------- --------- Units purchased ............................... 151,286 130,293 60,677 136,375 Units redeemed ................................ (177,633) (79,461) (117,467) (38,355) ---------- --------- --------- --------- Ending units .................................. 582,778 609,125 288,700 345,490 ========== ========= ========= ========= VKoreFI VKEmMkt ------------- --------------------- 2003 2002 2003 2002 ------ ---- --------- --------- Investment activity: Net investment income (loss) .................. (54) -- (14,792) 85,212 Realized gain (loss) on investments ........... 80 -- 316,470 (10,342) Change in unrealized gain (loss) on investments ............................. 414 -- 218,451 14,386 Reinvested capital gains ...................... -- -- -- -- ------ --- --------- --------- Net increase (decrease) in contract owners' equity resulting from operations .............................. 440 -- 520,129 89,256 ------ --- --------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ................... 529 -- 344,106 107,703 Transfers between funds ....................... 29,850 -- 747,030 186,450 Surrenders (note 6) ........................... -- -- (100,572) (77,281) Death benefits (note 4) ....................... -- -- -- (1,815) Net policy repayments (loans) (note 5) ........ -- -- 10,322 (44,874) Deductions for surrender charges (note 2d) .... -- -- (4,649) (4,250) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) .......................... (208) -- (118,726) (59,348) Asset charges (note 3): MSP contracts .............................. -- -- (1,481) (924) LSFP contracts ............................. -- -- (3,217) (2,406) ------ --- --------- --------- Net equity transactions ................. 30,171 -- 872,813 103,255 ------ --- --------- --------- Net change in contract owners' equity ............ 30,611 -- 1,392,942 192,511 Contract owners' equity beginning of period ..................................... -- -- 1,468,419 1,275,908 ------ --- --------- --------- Contract owners' equity end of period ............ 30,611 -- 2,861,361 1,468,419 ====== === ========= ========= CHANGES IN UNITS: Beginning units ............................... -- -- 123,689 116,821 ------ --- --------- --------- Units purchased ............................... 3,028 -- 83,477 27,043 Units redeemed ................................ (21) -- (16,255) (20,175) ------ --- --------- --------- Ending units .................................. 3,007 -- 190,911 123,689 ====== === ========= =========
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, Continued Years Ended December 31, 2003 and 2002 VKUSRealEst ----------------------- 2003 2002 ----------- --------- Investment activity: Net investment income (loss) ..................... $ (81,334) 228,325 Realized gain (loss) on investments .............. 150,623 66,434 Change in unrealized gain (loss) on investments ................................ 3,325,139 (813,789) Reinvested capital gains ......................... -- 229,276 ----------- --------- Net increase (decrease) in contract owners' equity resulting from operations ................................. 3,394,428 (289,754) ----------- --------- Equity transactions: Purchase payments received from contract owners (note 6) ...................... 963,507 862,806 Transfers between funds .......................... 313,407 1,889,578 Surrenders (note 6) .............................. (669,155) (978,184) Death benefits (note 4) .......................... (27,635) (13,953) Net policy repayments (loans) (note 5) ........... 25,738 (57,356) Deductions for surrender charges (note 2d) ....... (30,929) (53,788) Redemptions to pay cost of insurance charges and administration charges (notes 2b and 2c) ............................. (591,816) (550,761) Asset charges (note 3): MSP contracts ................................. (5,098) (5,293) LSFP contracts ................................ (4,899) (4,505) ----------- --------- Net equity transactions .................... (26,880) 1,088,544 ----------- --------- Net change in contract owners' equity ............... 3,367,548 798,790 Contract owners' equity beginning of period ........................................ 9,666,432 8,867,642 ----------- --------- Contract owners' equity end of period ............... $13,033,980 9,666,432 =========== ========= CHANGES IN UNITS: Beginning units .................................. 469,840 425,269 ----------- --------- Units purchased .................................. 77,792 123,559 Units redeemed ................................... (83,771) (78,988) ----------- --------- Ending units ..................................... 463,861 469,840 =========== ========= See accompanying notes to financial statements. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS December 31, 2003 and 2002 (1) Background and 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: Funds of the AIM Variable Insurance Fund (AIMVIF); AIM VIF - AIM V.I. Capital Appreciation Fund - Series I (AIMCapAp) AIM VIF Basic Value Fund - Series I (AIMBVF) AIM VIF Capital Development Fund - Series I (AIMCDF) Alliance Bernstein VPS Small Cap Value Portfolio - Class A (AllSmCpVal) Alliance VPS Growth & Income Portfolio - Class A (AllGroInc) 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 Inflation Protection Fund - Class II (ACVPInfPr) American Century VP International Fund - Class I (ACVPInt) American Century VP Ultra Fund -Class I (ACVPUltra) American Century VP Value Fund - Class I (ACVPVal) Comstock GVIT Value Fund - Class I (ComGVITVal) 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; Dreyfus GVIT International Value Fund - Class I (DryIntVal) 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 - Developing Leaders Portfolio - Initial Shares (DryDevLeadI) Dreyfus VIF - Growth and Income Portfolio - Initial Shares (DryVIFGrInc) Portfolios of Federated Insurance Series; Federated American Leaders Fund II - Primary Shares (FedAmLdII) Federated Capital Appreciation Fund II - Primary Shares (FedCpApII) Federated GVIT High Income Bond Fund -Class I (FGVITHiInc) Federated Quality Bond Fund II - Primary Shares (FedQualBd) (Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued 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 Portfolio: Initial Class (FidVIPAM) Fidelity(R) VIP II - Contrafund Portfolio: Initial Class (FidVIPCon) Fidelity(R) VIP II - Investment Grade Bond Portfolio: Service Class (FidVIPInvGrB) 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 - Mid Cap Portfolio: Service Class (FidVIPMCap) Fidelity(R) VIP III -Value Strategies Portfolio: Service Class (FidVIPValStS) Funds of the Franklin Templeton Variable Insurance Products (Franklin Templeton VIP); Franklin Templeton VIP - Franklin Rising Dividends Securities Fund - Class I (FTVIPFRDiv) Franklin Templeton VIP - Franklin Small Cap Value Securities Fund - Class I (FTVIPSmCpVal) Franklin Templeton VIPT -Templeton Foreign Securities Fund - Class I (FTVIPFS) Funds of the Gartmore Variable Insurance Trust (Gartmore GVIT); 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 (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 - Balanced Portfolio - Service Shares (JanBal) Janus AS - Capital Appreciation Portfolio - Service Shares (JanCapAp) Janus AS - Global Technology Portfolio - Service Shares (JanGITech) Janus AS - International Growth Portfolio - Service Shares (JanIntGro) Janus AS - Risk-Managed Large Cap Core Portfolio - Service Shares (JanRsLgCpCr) MAS GVIT Multi Sector Bond Fund - Class I (MGVITMultiSec) MFS VIT - MFS Investors Growth Stock Series - Initial Class (MFSVITInvGrwI) MFS VIT - MFS Value Series - Initial Class (MFSVITValIn) Portfolios of the Neuberger Berman Advisers Management Trust (Neuberger Berman AMT); Neuberger Berman AMT - Balanced Portfolio (NBAMTBal) Neuberger Berman AMT - Fasciano Portfolio (NBAMTFas) Neuberger Berman AMT - Growth Portfolio (NBAMTGro) Neuberger Berman AMT - Guardian Portfolio (NBAMTGuard) Neuberger Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat) Neuberger Berman AMT - Mid Cap Growth Portfolio - Class S (NBAMTMCGr) Neuberger Berman AMT - Partners Portfolio (NBAMTPart) Neuberger Berman AMT - Socially Responsive Portfolio (NBAMTSocRe) 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 High Income Fund/VA- Initial Class (OppHiIncInt) Oppenheimer Main Street(R) Growth & Income Fund/VA - Initial Class (OppMSGrInc) Oppenheimer Main Street(R) Small Cap Fund/VA - Initial Class (OppMaStSmCpI) Oppenheimer Multiple Strategies Fund/VA- Initial Class (OppMultStr) Funds of the Putnam Variable Trust (Putnam VT); Putnam VT Growth & Income Fund - IB Shares (PUTVTGrIncIB) Putnam VT International Equity Fund - IB Shares (PUTVTIntlEqIB) Putnam VT Voyager Fund - IB Shares (PUTVTVoyIB) Strong GVIT 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 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) Funds of the Van Kampen Universal Institutional Funds (Van Kampen UIF); Van Kampen UIF - Core Plus Fixed Income Portfolio - Class A (VKoreFI) Van Kampen UIF - Emerging Markets Debt Portfolio (VKEmMkt) Van Kampen UIF - U.S. Real Estate Portfolio (VKUSRealEst) At December 31, 2003, 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. A purchase payment could be presented as a negative equity transaction in the Statements of Changes in Contract Owners' Equity if a prior period purchase payment is refunded to a contract owner due to a contract cancellation during the free look period, and/or if a gain is realized by the contract owner during the free look period. 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, 2003. 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. (Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued (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. For flexible premium contracts, the sales load is reduced to 1.5% on any portion of the annual premium paid in excess of the annual break point premium. 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 sales load is reduced to 1.5% on any portion of the annual premium paid in excess of the annual break point premium. 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 varies widely and 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 $1.50 per year per $1,000 for the underwriting component of the increase charge and $0.54 per year per $1,000 for the sales component of the increase charge 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 0.03% 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. 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% in the ninth year for flexible premium contracts and after the ninth year for multiple payment contracts. 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% after 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 0.90% charged against the cash value of the contracts in the variable account. This charge is assessed monthly against each contract by liquidating units. (Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued 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 and expense risk charges taken daily from the unit value calculation by contract type for the period ended December 31, 2003.
Total AIMCapAp AIMBVF AIMCDF AllSmCpVal ---------- -------- ------ ------ ---------- Single Premium contracts issued prior to April 16, 1990 ........... $ 5,805 -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 940,273 -- -- -- -- Multiple Payment and Flexible Premium contracts ................. 4,951,585 235 350 105 305 ---------- --- --- --- --- Total .......................... $5,897,663 235 350 105 305 ========== === === === === AllGroInc ACVPBal ACVPCapAp ACVPIncGr ACVPInfPr --------- ------- --------- --------- --------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- 337 -- -- Single Premium contracts issued on or after April 16, 1990 ........ -- 8,622 16,345 2,474 -- Multiple Payment and Flexible Premium contracts ................. 424 30,601 75,662 20,097 282 ---- ------ ------ ------ --- Total .......................... $424 39,223 92,344 22,571 282 ==== ====== ====== ====== === ACVPInt ACVPUltra ACVPVal ComGVITVal CSGPVen ------- --------- ------- ---------- ------- Single Premium contracts issued prior to April 16, 1990 ........... $ 1 -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 9,440 161 20,762 -- 857 Multiple Payment and Flexible Premium contracts ................. 65,952 1,922 63,144 344 4,620 ------- ----- ------ --- ----- Total .......................... $75,393 2,083 83,906 344 5,477 ======= ===== ====== === ===== CSIntEq CSSmCapGr DryIntVal DryMidCapIx DrySmCapIxS ------- --------- --------- ----------- ----------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- 88 -- 1 -- Single Premium contracts issued on or after April 16, 1990 ........ 5,051 8,740 -- 7,914 1,301 Multiple Payment and Flexible Premium contracts ................. 32,389 80,704 311 29,132 1,922 ------- ------ --- ------ ----- Total .......................... $37,440 89,532 311 37,047 3,223 ======= ====== === ====== ===== DrySRGro DryStkIx DryVIFApp DryDevLeadI DryVIFGrInc -------- -------- --------- ----------- ----------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- 124 -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 2,880 49,314 10,464 -- 2,233 Multiple Payment and Flexible Premium contracts ................. 64,385 441,716 33,174 221 12,413 ------- ------- ------ --- ------ Total .......................... $67,265 491,154 43,638 221 14,646 ======= ======= ====== === ======
FedAmLdII FedCpApII FGVITHiInc FedQualBd FidVIPEI --------- --------- ---------- --------- -------- Single Premium contracts issued prior to April 16, 1990 ........... $-- -- -- -- 558 Single Premium contracts issued on or after April 16, 1990 ........ -- -- -- 1,979 96,177 Multiple Payment and Flexible Premium contracts ................. 11 12 394 11,580 392,840 --- --- --- ------ ------- Total .......................... $11 12 394 13,559 489,575 === === === ====== ======= FidVIPGr FidVIPHI FidVIPOv FidVIPAM FidVIPCon -------- -------- -------- -------- --------- Single Premium contracts issued prior to April 16, 1990 ........... $ 631 411 221 158 -- Single Premium contracts issued on or after April 16, 1990 ........ 90,837 41,517 20,969 53,351 50,271 Multiple Payment and Flexible Premium contracts ................. 554,824 135,683 85,638 140,447 306,058 -------- ------- ------- ------- ------- Total .......................... $646,292 177,611 106,828 193,956 356,329 ======== ======= ======= ======= ======= FidVIPInvGrB FidVIPGrOp FidVIPMCap FidVIPValStS FTVIPFRDiv ------------ ---------- ---------- ------------ ---------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- 50 -- 145 -- Single Premium contracts issued on or after April 16, 1990 ........ -- 1,777 -- 2,935 -- Multiple Payment and Flexible Premium contracts ................. 467 23,238 1,105 4,619 1,402 ---- ------ ----- ----- ----- Total .......................... $467 25,065 1,105 7,699 1,402 ==== ====== ===== ===== ===== FTVIPSmCpVal FTVIPFS GVITEmMrkts GVITGlFin GVITGlHlth ------------ ------- ----------- --------- ---------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- 89 -- -- Single Premium contracts issued on or after April 16, 1990 ........ -- -- 1,348 486 4,276 Multiple Payment and Flexible Premium contracts ................. 357 726 3,377 941 1,694 ---- --- ----- ----- ----- Total .......................... $357 726 4,814 1,427 5,970 ==== === ===== ===== ===== GVITGlTech GVITGlUtl GVITGvtBd GVITGrowth GVITIDAgg ---------- --------- --------- ---------- --------- Single Premium contracts issued prior to April 16, 1990 ........... $ 229 -- 180 -- -- Single Premium contracts issued on or after April 16, 1990 ........ 1,079 590 53,444 4,854 -- Multiple Payment and Flexible Premium contracts ................. 4,387 330 106,097 105,839 2,234 ------ --- ------- ------- ----- Total .......................... $5,695 920 159,721 110,693 2,234 ====== === ======= ======= ===== GVITIDCon GVITIDMod GVITIDModAgg GVITIDModCon GVITIntGro --------- --------- ------------ ------------ ---------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 71 1,124 -- 133 157 Multiple Payment and Flexible Premium contracts ................. 2,713 9,272 9,434 3,241 281 ------ ------ ----- ----- --- Total .......................... $2,784 10,396 9,434 3,374 438 ====== ====== ===== ===== === GVITMyMkt GVITLead GVITSmCapGr GVITSmCapVal GVITSmComp --------- -------- ----------- ------------ ---------- Single Premium contracts issued prior to April 16, 1990 ........... $ 597 -- 1 118 81 Single Premium contracts issued on or after April 16, 1990 ........ 103,598 105 1,477 18,519 10,549 Multiple Payment and Flexible Premium contracts ................. 211,026 565 8,514 59,935 151,924 -------- --- ----- ------ ------- Total .......................... $315,221 670 9,992 78,572 162,554 ======== === ===== ====== =======
(Continued) NATIONWIDE VLI SEPARATE ACCOUNT-2 NOTES TO FINANCIAL STATEMENTS, Continued
GVITTotRt GVITUSGro JanBal JanCapAp JanGITech --------- --------- ------ -------- --------- Single Premium contracts issued prior to April 16, 1990 ........... $ 93 -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 25,102 1,158 -- 907 1,300 Multiple Payment and Flexible Premium contracts ................. 467,599 2,936 41 16,146 6,886 -------- ----- --- ------ ----- Total .......................... $492,794 4,094 41 17,053 8,186 ======== ===== === ====== ===== JanIntGro JanRsLgCpCr MGVITMultiSec MFSVITInvGrwI MFSVITValIn --------- ----------- ------------- ------------- ----------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 3,561 -- 1,957 -- -- Multiple Payment and Flexible Premium contracts ................. 8,329 14 8,939 68 74 ------- --- ------ --- --- Total .......................... $11,890 14 10,896 68 74 ======= === ====== === === NBAMTBal NBAMTFas NBAMTGro NBAMTGuard NBAMTLMat -------- -------- -------- ---------- --------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- 319 -- 171 Single Premium contracts issued on or after April 16, 1990 ........ -- -- 15,912 856 17,619 Multiple Payment and Flexible Premium contracts ................. 425 42 97,016 11,222 32,370 ---- --- ------- ------ ------ Total .......................... $425 42 113,247 12,078 50,160 ==== === ======= ====== ====== NBAMTMCGr NBAMTPart NBAMTSocRe OppAggGro OppBdFd --------- --------- ---------- --------- ------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ -- 10,519 -- 1,226 16,597 Multiple Payment and Flexible Premium contracts ................. 601 115,144 106 10,660 84,141 ---- ------- --- ------ ------- Total .......................... $601 125,663 106 11,886 100,738 ==== ======= === ====== ======= OppCapAp OppGlSec OppHiIncInt OppMSGrInc OppMaStSmCpI -------- -------- ----------- ---------- ------------ Single Premium contracts issued prior to April 16, 1990 ........... $ 94 -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 13,835 20,632 -- 1,470 -- Multiple Payment and Flexible Premium contracts ................. 83,609 180,513 475 7,000 584 ------- ------- --- ----- --- Total .......................... $97,538 201,145 475 8,470 584 ======= ======= === ===== === OppMultStr PUTVTGrIncIB PUTVTIntlEqIB PUTVTVoyIB SGVITMdCpGr ---------- ------------ ------------- ---------- ----------- Single Premium contracts issued prior to April 16, 1990 ........... $ -- -- -- -- -- Single Premium contracts issued on or after April 16, 1990 ........ 20,608 -- -- -- 1,618 Multiple Payment and Flexible Premium contracts ................. 82,782 40 131 36 14,702 -------- --- --- --- ------ Total .......................... $103,390 40 131 36 16,320 ======== === === === ======
StOpp2 StDisc2 StIntStk2 TurnGVITGro VEWrldBd -------- ------- --------- ----------- -------- Single Premium contracts issued prior to April 16, 1990 ........... $ 75 -- -- 138 482 Single Premium contracts issued on or after April 16, 1990 ........ 30,569 6,480 279 775 10,116 Multiple Payment and Flexible Premium contracts ................. 212,981 45,208 1,271 2,481 28,377 -------- ------ ----- ----- ------ Total .......................... $243,625 51,688 1,550 3,394 38,975 ======== ====== ===== ===== ====== VEWrldEMkt VEWrldHAs VKoreFI VKEmMkt VKUSRealEst ---------- --------- ------- ------- ----------- Single Premium contracts issued prior to April 16, 1990 ........... $ 127 39 -- 205 42 Single Premium contracts issued on or after April 16, 1990 ........ 2,736 9,144 -- 2,990 14,126 Multiple Payment and Flexible Premium contracts ................. 25,465 22,739 54 11,597 67,166 ------- ------ --- ------ ------ Total .......................... $28,328 31,922 54 14,792 81,334 ======= ====== === ====== ======
(4) Death Benefits Death benefit proceeds result in a redemption of the contract value from the Account and payment of those proceeds, less any outstanding policy loans (and policy charges), to the legal beneficiary. For last survivor flexible premium contracts, the proceeds are payable on the death of the last surviving insured. In the event that the guaranteed death benefit exceeds the contract value on the date of death, the excess is paid by the Company's general account. (5) Policy Loans (Net of Repayments) Contract provisions allow contract owners to borrow up to 90% (50% during first year of single and modified single premium contracts) of a policy's cash surrender value. For single premium contracts issued prior to April 16, 1990, 6.5% interest is due and payable annually in advance. For single premium contracts issued on or after April 16, 1990, multiple payment, flexible premium, modified single and last survivor flexible premium contracts, 6% interest is due and payable in advance on the policy anniversary when there is a loan outstanding on the policy. At the time the loan is granted, the amount of the loan is transferred from the Account to the Company's general account as collateral for the outstanding loan. Collateral amounts in the general account are credited with the stated rate of interest in effect at the time the loan is made, subject to a guaranteed minimum rate. Loan repayments result in a transfer of collateral, including interest, back to the Account. (6) Related Party Transactions The Company performs various services on behalf of the Mutual Fund Companies in which the Account invests and may receive fees for the services performed. These services include, among other things, shareholder communications, preparation, postage, fund transfer agency and various other record keeping and customer service functions. These fees are paid to an affiliate of the Company. 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 through fixed to variable or variable to fixed transactions (exchanges) or through loan transactions. The fixed account assets are not reflected in the accompanying financial statements. The Account portion of contract owner loans is transferred to the fixed account for administration and collection. Loan repayments are transferred from the fixed account to the Account and are allocated to the sub accounts at the discretion of the contract owner. Loans and loan repayments are included in net policy repayments (loans) on the accompanying Statements of Changes in Contract Owners' Equity. Exchanges are initiated, under certain restrictions, at the discretion of the contract owner. The contract owner may transfer assets between a fixed dollar contract of the Company and the sub accounts of the Account. Exchanges from the Account to the fixed account are included in surrenders, and exchanges 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. For the periods ended December 31, 2003 and 2002, total loan repayments and exchanges to the Account from the fixed account were $28,008,881 and $23,397,486, respectively, and total loans and exchanges from the Account to the fixed account were $28,642,868 and $42,106,553, respectively. (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, 2003.
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 AIM VIF - AIM V.I. Capital Appreciation Fund - Series I 2003 .......................... 0.00% 78 $12.393708 $ 967 0.00% 23.94% 5/1/03 AIM VIF Basic Value Fund - Series I 2003 .......................... 0.00% 1,146 13.067831 14,976 0.11% 30.68% 5/1/03 AIM VIF Capital Development Fund - Series I 2003 .......................... 0.00% 286 13.009212 3,721 0.00% 30.09% 5/1/03 Alliance Bernstein VPS Small Cap Value Portfolio - Class A 2003 .......................... 0.00% 3,645 13.796395 50,288 0.02% 37.96% 5/1/03 Alliance VPS Growth & Income Portfolio - Class A 2003 .......................... 0.00% 10,465 12.441750 130,203 0.00% 24.42% 5/1/03 American Century VP Balanced Fund - Class I 2003 .......................... 0.00% 39,618 16.364159 648,315 2.53% 19.46% 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% American Century VP Capital Appreciation Fund - Class I 2003 .......................... 0.00% 78,088 10.573426 825,658 0.00% 20.47% 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% American Century VP Income & Growth Fund - Class I 2003 .......................... 0.00% 57,191 11.011963 629,785 1.30% 29.35% 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% American Century VP Inflation Protection Fund - Class II 2003 .......................... 0.00% 739 10.324182 7,630 1.88% 3.24% 4/30/03 American Century VP International Fund - Class I 2003 .......................... 0.00% 93,653 14.542846 1,361,981 0.75% 24.51% 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% American Century VP Ultra Fund - Class I 2003 .......................... 0.00% 8,464 10.039885 84,978 0.00% 24.90% 2002 .......................... 0.00% 2,062 8.038471 16,575 0.46% -19.62% 5/1/02 American Century VP Value Fund - Class I 2003 .......................... 0.00% 94,777 19.965823 1,892,301 1.09% 28.96% 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% Comstock GVIT Value Fund - Class I 2003 .......................... 0.00% 75 12.672281 950 1.52% 26.72% 5/1/03
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Credit Suisse Trust - Global Post-Venture Capital Portfolio 2003 .......................... 0.00% 11,132 $11.285456 $ 125,630 0.00% 47.66% 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% Credit Suisse Trust - International Focus Portfolio 2003 .......................... 0.00% 111,879 9.637324 1,078,214 0.49% 33.09% 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% Credit Suisse Trust - Small Cap Growth Portfolio 2003 .......................... 0.00% 136,928 12.647723 1,731,827 0.00% 48.55% 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% Dreyfus GVIT International Value Fund - Class I 2003 .......................... 0.00% 3,602 13.838062 49,845 0.00% 38.38% 5/1/03 Dreyfus GVIT Mid Cap Index Fund - Class I 2003 .......................... 0.00% 87,632 11.837744 1,037,365 0.49% 34.65% 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 2003 .......................... 0.00% 38,496 10.574853 407,090 0.33% 37.78% 2002 .......................... 0.00% 4,411 7.675242 33,855 0.27% -23.25% 5/1/02 Dreyfus Socially Responsible Growth Fund, Inc.- Initial Shares 2003 .......................... 0.00% 50,706 14.903772 755,711 0.11% 26.00% 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% Dreyfus Stock Index Fund 2003 .......................... 0.00% 632,333 18.706070 11,828,465 1.51% 28.36% 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% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2003 .......................... 0.00% 77,680 13.532029 1,051,168 1.40% 21.17% 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% Dreyfus VIF - Developing Leaders Portfolio - Initial Shares 2003 .......................... 0.00% 4,756 12.900917 61,357 0.08% 29.01% 5/1/03 Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2003 .......................... 0.00% 36,562 12.991038 474,978 0.84% 26.57% 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% Federated GVIT High Income Bond Fund - Class I 2003 .......................... 0.00% 5,828 11.119017 64,802 9.25% 11.19% 5/1/03
(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*** -------- ------- ---------- -------------- ---------- --------- Federated Quality Bond Fund II - Primary Shares 2003 .......................... 0.00% 11,878 $11.283621 $ 134,027 3.93% 4.65% 2002 .......................... 0.00% 11,620 10.782678 125,295 0.00% 7.83% 5/1/02 Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2003 .......................... 0.00% 409,083 18.300351 7,486,362 1.80% 30.33% 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% Fidelity(R) VIP - Growth Portfolio: Initial Class 2003 .......................... 0.00% 393,063 16.832769 6,616,339 0.27% 32.85% 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% Fidelity(R) VIP - High Income Portfolio: Initial Class 2003 .......................... 0.00% 277,638 11.879372 3,298,165 5.94% 27.26% 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% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2003 .......................... 0.00% 104,335 13.948630 1,455,330 0.83% 43.37% 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% Fidelity(R) VIP II - Asset Manager Portfolio: Initial Class 2003 .......................... 0.00% 78,858 16.863587 1,329,829 3.62% 17.97% 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% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2003 .......................... 0.00% 271,532 21.523942 5,844,439 0.46% 28.46% 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% Fidelity(R) VIP II - Investment Grade Bond Portfolio: Service Class 2003 .......................... 0.00% 998 10.217718 10,197 0.00% 2.18% 5/1/03 Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2003 .......................... 0.00% 60,543 10.295709 623,333 0.74% 29.87% 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% Fidelity(R) VIP III - Mid Cap Portfolio: Service Class 2003 .......................... 0.00% 9,873 14.085331 139,064 0.00% 40.85% 5/1/03 Fidelity(R) VIP III - Value Strategies Portfolio: Service Class 2003 .......................... 0.00% 26,162 11.849148 309,997 0.00% 57.79% 2002 .......................... 0.00% 843 7.509507 6,331 0.00% -24.90% 5/1/02 Franklin Templeton VIP - Franklin Rising Dividends Securities Fund - Class I 2003 .......................... 0.00% 15,727 12.306508 193,544 0.20% 23.07% 5/1/03 Franklin Templeton VIP - Franklin Small Cap Value Securities Fund - Class I 2003 .......................... 0.00% 2,401 13.357313 32,071 0.12% 33.57% 5/1/03
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Franklin Templeton VIPT - Templeton Foreign Securities Fund - Class I 2003 .......................... 0.00% 4,015 $13.269107 $ 53,275 0.79% 32.69% 5/1/03 Gartmore GVIT Emerging Markets Fund - Class I 2003 .......................... 0.00% 19,194 11.573140 222,135 0.66% 65.26% 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 2003 .......................... 0.00% 1,548 12.255125 18,971 0.88% 41.45% 2002 .......................... 0.00% 289 8.663891 2,504 0.08% -13.36% 5/1/02 Gartmore GVIT Global Health Sciences Fund - Class I 2003 .......................... 0.00% 7,254 11.400451 82,699 0.00% 36.69% 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 2003 .......................... 0.00% 27,880 3.061527 85,355 0.00% 55.23% 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 2003 .......................... 0.00% 3,190 10.772327 34,364 0.70% 24.05% 2002 .......................... 0.00% 250 8.683837 2,171 0.54% -13.16% 5/1/02 Gartmore GVIT Government Bond Fund - Class I 2003 .......................... 0.00% 141,781 17.018937 2,412,962 3.14% 2.00% 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% Gartmore GVIT Growth Fund - Class I 2003 .......................... 0.00% 161,969 10.571536 1,712,261 0.02% 32.74% 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% Gartmore GVIT ID Aggressive Fund 2003 .......................... 0.00% 86 10.986753 945 1.41% 31.87% Gartmore GVIT ID Conservative Fund 2003 .......................... 0.00% 4,630 10.845040 50,213 2.37% 7.91% 2002 .......................... 0.00% 10,505 10.050418 105,580 2.80% 0.50% 1/25/02 Gartmore GVIT ID Moderate Fund 2003 .......................... 0.00% 26,164 10.972970 287,097 2.06% 20.05% 2002 .......................... 0.00% 14,854 9.140249 135,769 1.72% -8.60% 1/25/02 Gartmore GVIT ID Moderately Aggressive Fund 2003 .......................... 0.00% 10,934 11.002361 120,300 1.54% 26.64% 2002 .......................... 0.00% 14,728 8.687687 127,952 1.55% -13.12% 1/25/02 Gartmore GVIT ID Moderately Conservative Fund 2003 .......................... 0.00% 21,041 10.963279 230,678 2.34% 13.70% 2002 .......................... 0.00% 9,155 9.642427 88,276 2.35% -3.58% 1/25/02 Gartmore GVIT International Growth Fund - Class I 2003 .......................... 0.00% 2,327 6.793220 15,808 0.00% 35.62% Gartmore GVIT Money Market Fund - Class I 2003 .......................... 0.00% 426,388 13.438171 5,729,875 0.63% 0.63% 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% Gartmore GVIT Nationwide(R)Leaders Fund - Class I 2003 .......................... 0.00% 680 10.598061 7,207 0.19% 25.38% 2002 .......................... 0.00% 837 8.452459 7,075 1.18% -15.48% 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*** -------- ------- ---------- -------------- ---------- --------- Gartmore GVIT Small Cap Growth Fund - Class I 2003 .......................... 0.00% 29,802 $ 6.484322 $ 193,246 0.00% 34.27% 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 Gartmore GVIT Small Cap Value Fund - Class I 2003 .......................... 0.00% 144,123 17.924637 2,583,352 0.00% 56.85% 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% Gartmore GVIT Small Company Fund - Class I 2003 .......................... 0.00% 163,826 21.279390 3,486,117 0.00% 41.01% 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% Gartmore GVIT Total Return Fund - Class I 2003 .......................... 0.00% 320,276 17.013568 5,449,038 0.56% 27.51% 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% Gartmore GVIT U.S.Growth Leaders Fund - Class I 2003 .......................... 0.00% 4,436 12.515174 55,517 0.00% 52.14% 2002 .......................... 0.00% 1,992 8.226323 16,387 0.00% -17.74% 5/1/02 Janus AS - Capital Appreciation Portfolio - Service Shares 2003 .......................... 0.00% 57,199 6.268750 358,566 0.25% 20.23% 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 2003 .......................... 0.00% 63,964 3.676479 235,162 0.00% 46.47% 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 2003 .......................... 0.00% 43,445 6.081514 264,211 0.99% 34.53% 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 Multi Sector Bond Fund - Class I 2003 .......................... 0.00% 18,184 13.140266 238,943 5.47% 12.12% 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 MFS VIT - MFS Value Series - Initial Class 2003 .......................... 0.00% 255 12.367820 3,154 0.00% 23.68% 5/1/03 Neuberger Berman AMT - Growth Portfolio 2003 .......................... 0.00% 92,061 12.310867 1,133,351 0.00% 31.40% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Neuberger Berman AMT - Guardian Portfolio 2003 .......................... 0.00% 33,326 $10.389042 $ 346,225 0.84% 31.76% 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% Neuberger Berman AMT - Limited Maturity Bond Portfolio 2003 .......................... 0.00% 68,260 14.847857 1,013,515 4.41% 2.42% 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% Neuberger Berman AMT - Mid Cap Growth Portfolio - Class S 2003 .......................... 0.00% 2,927 12.322580 36,068 0.00% 23.23% 5/1/03 Neuberger Berman AMT - Partners Portfolio 2003 .......................... 0.00% 212,651 16.900050 3,593,813 0.00% 35.09% 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% Neuberger Berman AMT - Socially Responsive Portfolio 2003 .......................... 0.00% 42 12.374746 520 0.00% 23.75% 5/1/03 Oppenheimer Aggressive Growth Fund/VA - Initial Class 2003 .......................... 0.00% 27,076 4.877042 132,051 0.00% 25.59% 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 2003 .......................... 0.00% 113,252 16.292834 1,845,196 5.67% 6.78% 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% Oppenheimer Capital Appreciation Fund/VA - Initial Class 2003 .......................... 0.00% 98,014 15.394717 1,508,898 0.38% 30.94% 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% Oppenheimer Global Securities Fund/VA - Initial Class 2003 .......................... 0.00% 103,002 24.690704 2,543,192 0.76% 43.02% 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% Oppenheimer High Income Fund/VA - Initial Class 2003 .......................... 0.00% 6,913 11.181817 77,300 0.00% 11.82% 5/1/03 Oppenheimer Main Street(R) Growth & Income Fund/VA - Initial Class 2003 .......................... 0.00% 34,417 8.370485 288,087 0.90% 26.72% 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 Oppenheimer Main Street(R) Small Cap Fund/VA - Initial Class 2003 .......................... 0.00% 2,855 13.869971 39,599 0.00% 38.70% 5/1/03 Oppenheimer Multiple Strategies Fund/VA - Initial Class 2003 .......................... 0.00% 80,959 18.621945 1,507,614 2.82% 24.96% 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%
(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*** -------- ------- ---------- -------------- ---------- --------- Putnam VT Voyager Fund - IB Shares 2003 .......................... 0.00% 42 $11.853879 $ 498 0.00% 18.54% 5/1/03 Strong GVIT Mid Cap Growth Fund - Class I 2003 .......................... 0.00% 85,532 5.014057 428,862 0.00% 40.13% 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. 2003 .......................... 0.00% 93,627 21.294252 1,993,717 0.07% 37.01% 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% Strong VIF - Strong Discovery Fund II 2003 .......................... 0.00% 18,929 16.542813 313,139 0.00% 39.43% 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% 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% Turner GVIT Growth Focus Fund - Class I 2003 .......................... 0.00% 35,452 3.336873 118,299 0.00% 50.96% 2002 .......................... 0.00% 5,450 2.210411 12,047 0.00% -42.86% Van Eck WIT - Worldwide Bond Fund 2003 .......................... 0.00% 23,556 15.553340 366,374 1.75% 18.16% 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% Van Eck WIT - Worldwide Emerging Markets Fund 2003 .......................... 0.00% 79,411 10.046593 797,810 0.11% 54.19% 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% Van Eck WIT - Worldwide Hard Assets Fund 2003 .......................... 0.00% 43,115 11.615034 500,782 0.48% 45.08% 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% Van Kampen UIF - Core Plus Fixed Income Portfolio - Class A 2003 .......................... 0.00% 49 10.233765 501 0.00% 2.34% 5/1/03 Van Kampen UIF - Emerging Markets Debt Portfolio 2003 .......................... 0.00% 41,844 15.664315 655,458 0.00% 27.86% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------ ---------- -------------- ---------- --------- Van Kampen UIF - U.S. Real Estate Portfolio 2003 .......................... 0.00% 54,506 $27.220749 $1,483,694 0.00% 37.51% 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% Single Premium contracts issued prior to April 16, 1990 (policy years 11 and thereafter) AIM VIF Capital Development Fund - Series I 2003 .......................... 0.50% 1,364 12.965885 17,685 0.00% 29.66% 5/1/03 Alliance VPS Growth & Income Portfolio - Class A 2003 .......................... 0.50% 1,081 12.400313 13,405 0.00% 24.00% 5/1/03 American Century VP Balanced Fund - Class I 2003 .......................... 0.50% 10,265 20.907285 214,613 2.53% 18.86% 2002 .......................... 0.50% 2,665 17.589248 46,875 2.63% -10.01% American Century VP Capital Appreciation Fund - Class I 2003 .......................... 0.50% 31,820 26.787231 852,370 0.00% 19.87% 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% American Century VP Income & Growth Fund - Class I 2003 .......................... 0.50% 14,230 10.704192 152,321 1.30% 28.71% 2002 .......................... 0.50% 7,837 8.316655 65,178 1.10% -19.77% American Century VP International Fund - Class I 2003 .......................... 0.50% 27,774 15.360020 426,609 0.75% 23.89% 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 Ultra Fund - Class I 2003 .......................... 0.50% 2,408 9.956460 23,975 0.00% 24.28% American Century VP Value Fund - Class I 2003 .......................... 0.50% 31,176 19.171791 597,700 1.09% 28.32% 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% Comstock GVIT Value Fund - Class I 2003 .......................... 0.50% 570 12.630064 7,199 1.52% 26.30% 5/1/03 Credit Suisse Trust - Global Post-Venture Capital Portfolio 2003 .......................... 0.50% 6,096 10.836336 66,058 0.00% 46.92% 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 2003 .......................... 0.50% 14,533 10.839093 157,525 0.49% 32.43% 2002 .......................... 0.50% 2,769 8.184926 22,664 0.00% -20.30% Credit Suisse Trust - Small Cap Growth Portfolio 2003 .......................... 0.50% 27,210 17.364452 472,487 0.00% 47.81% 2002 .......................... 0.50% 6,039 11.748025 70,946 0.00% -34.02% Dreyfus GVIT International Value Fund - Class I 2003 .......................... 0.50% 4,952 13.791985 68,298 0.00% 37.92% 5/1/03 Dreyfus GVIT Mid Cap Index Fund - Class I 2003 .......................... 0.50% 19,389 11.622612 225,351 0.49% 33.98% 2002 .......................... 0.50% 7,249 8.674888 62,884 0.42% -15.73% Dreyfus IP - Small Cap Stock Index Portfolio - Service Class 2003 .......................... 0.50% 6,160 10.487006 64,600 0.33% 37.09% 2002 .......................... 0.50% 4,866 7.649570 37,223 0.27% -23.50% 5/1/02 Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares 2003 .......................... 0.50% 7,832 22.067029 172,829 0.11% 25.38% 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%
(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 Stock Index Fund 2003 ............................. 0.50% 108,026 $26.123506 $2,822,018 1.51% 27.72% 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% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2003 ............................. 0.50% 15,431 13.062720 201,571 1.40% 20.57% 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% Dreyfus VIF - Developing Leaders Portfolio - Initial Shares 2003 ............................. 0.50% 840 12.857964 10,801 0.08% 28.58% 5/1/03 Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2003 ............................. 0.50% 6,368 12.474297 79,436 0.84% 25.94% Federated Quality Bond Fund II - Primary Shares 2003 ............................. 0.50% 4,444 11.189906 49,728 3.93% 4.12% Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2003 ............................. 0.50% 86,371 48.630667 4,200,279 1.80% 29.68% 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% Fidelity(R) VIP - Growth Portfolio: Initial Class 2003 ............................. 0.50% 105,480 53.205281 5,612,093 0.27% 32.19% 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% Fidelity(R) VIP - High Income Portfolio: Initial Class 2003 ............................. 0.50% 55,652 25.802029 1,435,935 5.94% 26.63% 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% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2003 ............................. 0.50% 58,985 24.680530 1,455,781 0.83% 42.65% 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% Fidelity(R) VIP II - Asset Manager Portfolio: Initial Class 2003 ............................. 0.50% 84,282 30.161112 2,542,039 3.62% 17.39% 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% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2003 ............................. 0.50% 101,752 24.487594 2,491,662 0.46% 27.82% 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% Fidelity(R) VIP II - Investment Grade Bond Portfolio: Service Class 2003 ............................. 0.50% 9,748 10.183621 99,270 0.00% 1.84% 5/1/03 Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2003 ............................. 0.50% 20,500 9.938499 203,739 0.74% 29.23% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Fidelity(R) VIP III - Mid Cap Portfolio: Service Class 2003 ............................. 0.50% 2,295 $14.038431 $ 32,218 0.00% 40.38% 5/1/03 Fidelity(R) VIP III -Value Strategies Portfolio: Service Class 2003 ............................. 0.50% 15,781 11.750739 185,438 0.00% 57.00% Franklin Templeton VIP - Franklin Rising Dividends Securities Fund - Class I 2003 ............................. 0.50% 11,618 12.265513 142,501 0.20% 22.66% 5/1/03 Franklin Templeton VIP - Franklin Small Cap Value Securities Fund - Class I 2003 ............................. 0.50% 2,305 13.312843 30,686 0.12% 33.13% 5/1/03 Franklin Templeton VIPT - Templeton Foreign Securities Fund - Class I 2003 ............................. 0.50% 2,090 13.224912 27,640 0.79% 32.25% 5/1/03 Gartmore GVIT Emerging Markets Fund - Class I 2003 ............................. 0.50% 17,288 11.386650 196,852 0.66% 64.44% Gartmore GVIT Global Financial Services Fund - Class I 2003 ............................. 0.50% 629 12.153349 7,644 0.88% 40.75% Gartmore GVIT Global Health Sciences Fund - Class I 2003 ............................. 0.50% 3,699 11.305727 41,820 0.00% 36.01% Gartmore GVIT Global Technology and Communications Fund - Class I 2003 ............................. 0.50% 44,144 3.012098 132,966 0.00% 54.46% 2002 ............................. 0.50% 2,129 1.950112 4,152 0.59% -43.07% Gartmore GVIT Government Bond Fund - Class I 2003 ............................. 0.50% 20,794 30.370279 631,520 3.14% 1.49% 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% Gartmore GVIT Growth Fund - Class I 2003 ............................. 0.50% 13,689 15.988156 218,862 0.02% 32.08% 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% Gartmore GVIT ID Conservative Fund 2003 ............................. 0.50% 1,037 10.740821 11,138 2.37% 7.37% Gartmore GVIT ID Moderate Fund 2003 ............................. 0.50% 16,518 10.867503 179,509 2.06% 19.45% Gartmore GVIT Money Market Fund - Class I 2003 ............................. 0.50% 103,301 18.569650 1,918,271 0.63% 0.12% 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% Gartmore GVIT Nationwide (R) Leaders Fund - Class I 2003 ............................. 0.50% 588 10.510022 6,180 0.19% 24.76% Gartmore GVIT Small Cap Growth Fund - Class I 2003 ............................. 0.50% 10,334 6.366359 65,790 0.00% 33.60% Gartmore GVIT Small Cap Value Fund - Class I 2003 ............................. 0.50% 31,504 17.423619 548,914 0.00% 56.07% 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 2003 ............................. 0.50% 45,264 26.974404 1,220,969 0.00% 40.31% 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 2003 ............................. 0.50% 19,074 $38.145818 $727,593 0.56% 26.88% 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% Gartmore GVIT U.S. Growth Leaders Fund - Class I 2003 ............................. 0.50% 8,655 12.411260 107,419 0.00% 51.38% Janus AS - Capital Appreciation Portfolio - Service Shares 2003 ............................. 0.50% 7,149 6.154757 44,000 0.25% 19.63% 2002 ............................. 0.50% 12,685 5.144661 65,260 0.30% -16.35% Janus AS - Global Technology Portfolio - Service Shares 2003 ............................. 0.50% 8,256 3.609555 29,800 0.00% 45.74% 2002 ............................. 0.50% 3,149 2.476639 7,799 0.00% -41.23% Janus AS - International Growth Portfolio - Service Shares 2003 ............................. 0.50% 7,242 5.970919 43,241 0.99% 33.86% 2002 ............................. 0.50% 12,584 4.460490 56,131 0.67% -26.13% MAS GVIT Multi Sector Bond Fund - Class I 2003 ............................. 0.50% 2,912 12.901625 37,570 5.47% 11.56% 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 MFS VIT - MFS Investors Growth Stock Series - Initial Class 2003 ............................. 0.50% 1,131 11.559230 13,073 0.00% 15.59% 5/1/03 Neuberger Berman AMT - Balanced Portfolio 2003 ............................ 0.50% 387 9.728263 3,765 1.91% 15.70% Neuberger Berman AMT - Growth Portfolio 2003 ............................. 0.50% 24,292 29.754395 722,794 0.00% 30.75% 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% Neuberger Berman AMT - Guardian Portfolio 2003 ............................. 0.50% 12,247 10.098680 123,679 0.84% 31.10% 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 2003 ............................. 0.50% 20,267 22.367675 453,326 4.41% 1.91% 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 6.96% 6.25% 1999 ............................. 0.50% 5,986 18.060558 108,111 5.57% 0.97% Neuberger Berman AMT - Mid Cap Growth Portfolio - Class S 2003 ............................. 0.50% 1,669 12.281545 20,498 0.00% 22.82% 5/1/03 Neuberger Berman AMT - Partners Portfolio 2003 ............................. 0.50% 15,209 24.617984 374,415 0.00% 34.41% 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 2003 ............................. 0.50% 15,822 4.788336 75,761 0.00% 24.96% 2002 ............................. 0.50% 2,385 3.831748 9,139 0.65% -28.15% Oppenheimer Bond Fund/VA- Initial Class 2003 ............................. 0.50% 32,391 24.998938 809,741 5.67% 6.25% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------ ---------- -------------- ---------- --------- Oppenheimer Capital Appreciation Fund/VA - Initial Class 2003 ............................. 0.50% 43,463 $14.860580 $ 645,885 0.38% 30.29% 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% Oppenheimer Global Securities Fund/VA - Initial Class 984,291 0.76% 42.31% 2003 ............................. 0.50% 33,503 29.379176 91,250 0.56% -22.52% 2002 ............................. 0.50% 4,420 20.644823 64,484 0.27% 4.57% 2000 ............................. 0.50% 2,118 30.445645 Oppenheimer High Income Fund/VA- Initial Class 95,208 0.00% 11.45% 5/1/03 2003 ............................. 0.50% 8,543 11.144531 Oppenheimer Main Street(R) Growth & Income Fund/VA - Initial Class 2003 ............................. 0.50% 10,060 8.218350 82,677 0.90% 26.09% 2002 ............................. 0.50% 3,493 6.518000 22,767 0.65% -19.20% Oppenheimer Multiple Strategies Fund/VA - Initial Class 24.33% 2003 ............................. 0.50% 23,053 31.171669 718,600 2.82% -10.85% 2002 ............................. 0.50% 9,549 25.070852 239,402 3.60% Strong GVIT Mid Cap Growth Fund - Class I 2003 ............................. 0.50% 74,157 4.922829 365,062 0.00% 39.44% Strong Opportunity Fund II, Inc. 2003 ............................. 0.50% 38,309 40.699472 1,559,156 0.07% 36.32% 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% Strong VIF - Strong Discovery Fund II 2003 ............................. 0.50% 18,256 26.361651 481,258 0.00% 38.73% 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% Turner GVIT Growth Focus Fund - Class I 2003 ............................. 0.50% 17,823 3.283013 58,513 0.00% 50.21% Van Eck WIT - Worldwide Bond Fund 2003 ............................. 0.50% 19,995 20.854897 416,994 1.75% 17.57% 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% Van Eck WIT - Worldwide Emerging Markets Fund 2003 ............................. 0.50% 60,208 9.646671 580,807 0.11% 53.42% 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 2003 ............................. 0.50% 19,105 16.655601 318,205 0.48% 44.36% 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% Van Kampen UIF - Emerging Markets Debt Portfolio 2003 ............................. 0.50% 7,714 15.120856 116,642 0.00% 27.23% 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 2003 ............................. 0.50% 28,086 28.701013 806,097 0.00% 36.83% 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%
(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 AIM VIF - AIM V.I. Capital Appreciation Fund - Series I 2003 .......................... 0.80% 5,333 $12.327742 $ 65,744 0.00% 23.28% 5/1/03 AIM VIF Basic Value Fund - Series I 2003 .......................... 0.80% 14,499 12.998258 188,462 0.11% 29.98% 5/1/03 AIM VIF Capital Development Fund - Series I 2003 .......................... 0.80% 3,166 12.939952 40,968 0.00% 29.40% 5/1/03 Alliance Bernstein VPS Small Cap Value Portfolio - Class A 2003 .......................... 0.80% 11,736 13.722986 161,053 0.02% 37.23% 5/1/03 Alliance VPS Growth & Income Portfolio - Class A 2003 .......................... 0.80% 22,041 12.375515 272,769 0.00% 23.76% 5/1/03 American Century VP Balanced Fund - Class I 2003 .......................... 0.80% 195,164 20.727117 4,045,187 2.53% 18.51% 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% American Century VP Capital Appreciation Fund - Class I 2003 .......................... 0.80% 592,724 16.804738 9,960,572 0.00% 19.51% 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% American Century VP Income & Growth Fund - Class I 2003 .......................... 0.80% 259,996 10.523680 2,736,115 1.30% 28.32% 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% American Century VP Inflation Protection Fund - Class II 2003 .......................... 0.80% 6,574 10.268669 67,506 1.88% 2.69% 4/30/03 American Century VP International Fund - Class I 2003 .......................... 0.80% 587,899 15.176915 8,922,493 0.75% 23.52% 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% American Century VP Ultra Fund - Class I 2003 .......................... 0.80% 34,345 9.906750 340,247 0.00% 23.90% 2002 .......................... 0.80% 7,959 7.995504 63,636 0.46% -20.04% 5/1/02 American Century VP Value Fund - Class I 2003 .......................... 0.80% 461,113 18.875362 8,703,675 1.09% 27.93% 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% Comstock GVIT Value Fund - Class I 2003 .......................... 0.80% 9,638 12.604789 121,485 1.52% 26.05% 5/1/03 Credit Suisse Trust - Global Post-Venture Capital Portfolio 2003 .......................... 0.80% 53,805 10.668685 574,029 0.00% 46.48% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Credit Suisse Trust - International Focus Portfolio 2003 ............................. 0.80% 431,745 $10.695076 $ 4,617,546 0.49% 32.03% 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% Credit Suisse Trust - Small Cap Growth Portfolio 2003 ............................. 0.80% 692,838 17.133573 11,870,790 0.00% 47.37% 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% Dreyfus GVIT International Value Fund - Class I 2003 ............................. 0.80% 6,704 13.764414 92,277 0.00% 37.64% 5/1/03 Dreyfus GVIT Mid Cap Index Fund - Class I 2003 ............................. 0.80% 402,465 11.495433 4,626,509 0.49% 33.58% 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 2003 ............................. 0.80% 47,348 10.434661 494,060 0.33% 36.68% 2002 ............................. 0.80% 5,194 7.634206 39,652 0.27% -23.66% 5/1/02 Dreyfus Socially Responsible Growth Fund, Inc.- Initial Shares 2003 ............................. 0.80% 403,682 21.830604 8,812,622 0.11% 25.00% 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% Dreyfus Stock Index Fund 2003 ............................. 0.80% 2,290,356 25.844217 59,192,457 1.51% 27.34% 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% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2003 ............................. 0.80% 338,655 12.850022 4,351,724 1.40% 20.20% 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% Dreyfus VIF - Developing Leaders Portfolio - Initial Shares 2003 ............................. 0.80% 8,113 12.832258 104,108 0.08% 28.32% 5/1/03 Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2003 ............................. 0.80% 140,345 12.281397 1,723,633 0.84% 25.56% 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% Federated American Leaders Fund II - Primary Shares 2003 ............................. 0.80% 1,104 12.531875 13,835 0.00% 25.32% 5/1/03 Federated Capital Appreciation Fund II - Primary Shares 2003 ............................. 0.80% 553 11.988805 6,630 0.00% 19.89% 5/1/03 Federated GVIT High Income Bond Fund - Class I 2003 ............................. 0.80% 13,029 11.059766 144,098 9.25% 10.60% 5/1/03
(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*** -------- --------- ---------- -------------- ---------- --------- Federated Quality Bond Fund II - Primary Shares 2003 ............................. 0.80% 117,985 $11.134037 $ 1,313,649 3.93% 3.81% 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 2003 ............................. 0.80% 1,336,308 40.389521 53,972,840 1.80% 29.29% 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% Fidelity(R) VIP - Growth Portfolio: Initial Class 2003 ............................. 0.80% 2,035,206 36.851094 74,999,568 0.27% 31.79% 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% Fidelity(R) VIP - High Income Portfolio: Initial Class 2003 ............................. 0.80% 720,241 24.464133 17,620,072 5.94% 26.25% 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% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2003 ............................. 0.80% 653,974 18.945840 12,390,087 0.83% 42.23% 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% Fidelity(R) VIP II - Asset Manager Portfolio: Initial Class 2003 ............................. 0.80% 623,055 26.285930 16,377,580 3.62% 17.04% 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% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2003 ............................. 0.80% 1,740,028 24.162368 42,043,197 0.46% 27.44% 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% Fidelity(R) VIP II - Investment Grade Bond Portfolio: Service Class 2003 ............................. 0.80% 12,869 10.163210 130,790 0.00% 1.63% 5/1/03 Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2003 ............................. 0.80% 324,568 9.776597 3,173,171 0.74% 28.84% 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% Fidelity(R) VIP III - Mid Cap Portfolio: Service Class 2003 ............................. 0.80% 40,642 14.010381 569,410 0.00% 40.10% 5/1/03 Fidelity(R) VIP III - Value Strategies Portfolio: Service Class 2003 ............................. 0.80% 100,700 11.692079 1,177,392 0.00% 56.53% 2002 ............................. 0.80% 10,466 7.469351 78,174 0.00% -25.31% 5/1/02 Franklin Templeton VIP - Franklin Rising Dividends Securities Fund - Class I 2003 ............................. 0.80% 47,169 12.240997 577,396 0.20% 22.41% 5/1/03 Franklin Templeton VIP - Franklin Small Cap Value Securities Fund - Class I 2003 ............................. 0.80% 8,003 13.286230 106,330 0.12% 32.86% 5/1/03
Contract Investment Expense Units Unit Contract Income Total Rate* Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Franklin Templeton VIPT - Templeton Foreign Securities Fund - Class I 2003 ............................. 0.80% 22,318 $13.198462 $294,563 0.79% 31.98% 5/1/03 Gartmore GVIT Emerging Markets Fund - Class I 2003 ............................. 0.80% 74,580 11.276219 840,980 0.66% 63.95% 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 2003 ............................. 0.80% 19,256 12.092670 232,856 0.88% 40.33% 2002 ............................. 0.80% 3,345 8.617613 28,826 0.08% -13.82% 5/1/02 Gartmore GVIT Global Health Sciences Fund - Class I 2003 ............................. 0.80% 22,955 11.249287 258,227 0.00% 35.61% 2002 ............................. 0.80% 3,831 8.295539 31,780 0.00% -17.04% 5/1/02 Gartmore GVIT Global Technology and Communications Fund - Class I 2003 ............................. 0.80% 304,934 2.982846 909,571 0.00% 54.00% 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 2003 ............................. 0.80% 6,211 10.629478 66,020 0.70% 23.06% 2002 ............................. 0.80% 1,341 8.637451 11,583 0.54% -13.63% 5/1/02 Gartmore GVIT Government Bond Fund - Class I 2003 ............................. 0.80% 448,119 23.180734 10,387,727 3.14% 1.19% 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% Gartmore GVIT Growth Fund - Class I 2003 ............................. 0.80% 936,407 15.849998 14,842,049 0.02% 31.68% 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% Gartmore GVIT ID Aggressive Fund 2003 ............................. 0.80% 45,840 10.818285 495,910 1.41% 30.82% 2002 ............................. 0.80% 17,710 8.269753 146,457 1.83% -17.30% 1/25/02 Gartmore GVIT ID Conservative Fund 2003 ............................. 0.80% 27,042 10.678769 288,775 2.37% 7.05% 2002 ............................. 0.80% 21,249 9.975795 211,976 2.80% -0.24% 1/25/02 Gartmore GVIT ID Moderate Fund 2003 ............................. 0.80% 153,659 10.804715 1,660,242 2.06% 19.10% 2002 ............................. 0.80% 44,700 9.072331 405,533 1.72% -9.28% 1/25/02 Gartmore GVIT ID Moderately Aggressive Fund 2003 ............................. 0.80% 180,393 10.833658 1,954,316 1.54% 25.64% 2002 ............................. 0.80% 94,483 8.623105 814,737 1.55% -13.77% 1/25/02 Gartmore GVIT ID Moderately Conservative Fund 2003 ............................. 0.80% 40,296 10.795210 435,004 2.34% 12.79% 2002 ............................. 0.80% 18,773 9.570814 179,673 2.35% -4.29% 1/25/02 Gartmore GVIT International Growth Fund - Class I 2003 ............................. 0.80% 5,733 6.618892 37,946 0.00% 34.54% 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 2003 ............................. 0.80% 1,224,466 15.008153 18,376,973 0.63% -0.18% 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%
(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 Nationwide(R) Leaders Fund - Class I 2003 .............................. 0.80% 6,691 $10.457551 $ 69,971 0.19% 24.39% 2002 .............................. 0.80% 12,664 8.407288 106,470 1.18% -15.93% 5/1/02 Gartmore GVIT Small Cap Growth Fund - Class I 2003 .............................. 0.80% 191,617 6.296628 1,206,541 0.00% 33.20% 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 Gartmore GVIT Small Cap Value Fund - Class I 2003 .............................. 0.80% 566,915 17.129814 9,711,149 0.00% 55.61% 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% Gartmore GVIT Small Company Fund - Class I 2003 .............................. 0.80% 812,594 26.603797 21,618,086 0.00% 39.89% 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% Gartmore GVIT Total Return Fund - Class I 2003 .............................. 0.80% 2,115,628 30.907637 65,389,062 0.56% 26.50% 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% Gartmore GVIT U.S. Growth Leaders Fund - Class I 2003 .............................. 0.80% 55,080 12.349314 680,200 0.00% 50.93% 2002 .............................. 0.80% 3,205 8.182356 26,224 0.00% -18.18% 5/1/02 Janus AS - Balanced Portfolio - Service Shares 2003 .............................. 0.80% 2,548 10.971897 27,956 4.49% 9.72% 5/1/03 Janus AS - Capital Appreciation Portfolio - Service Shares 2003 .............................. 0.80% 331,505 6.087370 2,017,994 0.25% 19.28% 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 2003 .............................. 0.80% 262,295 3.569999 936,393 0.00% 45.31% 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 2003 .............................. 0.80% 186,894 5.905539 1,103,710 0.99% 33.46% 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 Janus AS - Risk-Managed Large Cap Core Portfolio - Service Shares 2003 .............................. 0.80% 649 12.236775 7,942 0.30% 22.37% 5/1/03 MAS GVIT Multi Sector Bond Fund - Class I 2003 .............................. 0.80% 67,316 12.760526 858,988 5.47% 11.22% 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 MFS VIT - MFS Investors Growth Stock Series - Initial Class 2003 .............................. 0.80% 3,685 11.536092 42,510 0.00% 15.36% 5/1/03 MFS VIT - MFS Value Series - Initial Class 2003 .............................. 0.80% 3,296 12.301954 40,547 0.00% 23.02% 5/1/03
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Neuberger Berman AMT - Balanced Portfolio 2003 ............................. 0.80% 3,028 $21.268673 $ 64,402 1.91% 15.35% 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 - Fasciano Portfolio 2003 ............................. 0.80% 854 12.540843 10,710 0.00% 25.41% 5/1/03 Neuberger Berman AMT - Growth Portfolio 2003 ............................. 0.80% 637,363 20.381526 12,990,431 0.00% 30.35% 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% Neuberger Berman AMT - Guardian Portfolio 2003 ............................. 0.80% 143,460 9.928356 1,424,322 0.84% 30.71% 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% Neuberger Berman AMT - Limited Maturity Bond Portfolio 2003 ............................. 0.80% 195,325 18.158640 3,546,836 4.41% 1.61% 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 6.96% 5.94% 1999 ............................. 0.80% 203,409 14.959827 3,042,963 5.57% 0.67% Neuberger Berman AMT - Mid Cap Growth Portfolio - Class S 2003 ............................. 0.80% 17,581 12.256991 215,490 0.00% 22.57% 5/1/03 Neuberger Berman AMT - Partners Portfolio 2003 ............................. 0.80% 637,464 24.324378 15,505,915 0.00% 34.01% 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 0.79% -0.01% 1999 ............................. 0.80% 1,008,241 25.046437 25,252,845 1.20% 6.51% Neuberger Berman AMT - Socially Responsive Portfolio 2003 ............................. 0.80% 3,251 12.308850 40,016 0.00% 23.09% 5/1/03 Oppenheimer Aggressive Growth Fund/VA - Initial Class 2003 ............................. 0.80% 315,600 4.735882 1,494,644 0.00% 24.59% 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 2003 ............................. 0.80% 422,466 22.815950 9,638,963 5.67% 5.93% 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% Oppenheimer Capital Appreciation Fund/VA- Initial Class 2003 ............................. 0.80% 796,583 14.618573 11,644,907 0.38% 29.90% 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% Oppenheimer Global Securities Fund/VA - Initial Class 2003 ............................. 0.80% 941,453 29.065271 27,363,587 0.76% 41.88% 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% Oppenheimer High Income Fund/VA- Initial Class 2003 ............................. 0.80% 12,557 11.122220 139,662 0.00% 11.22% 5/1/03
(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 Main Street(R) Growth & Income Fund/VA - Initial Class 2003 ............................. 0.80% 114,284 $ 8.128407 $ 928,947 0.90% 25.71% 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 Oppenheimer Main Street(R) Small Cap Fund/VA - Initial Class 2003 ............................. 0.80% 26,396 13.796198 364,164 0.00% 37.96% 5/1/03 Oppenheimer Multiple Strategies Fund/VA - Initial Class 2003 ............................. 0.80% 378,776 29.695890 11,248,090 2.82% 23.96% 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% Putnam VT Growth & Income Fund - IB Shares 2003 ............................. 0.80% 1,210 12.359054 14,954 0.00% 23.59% 5/1/03 Putnam VT International Equity Fund - IB Shares 2003 ............................. 0.80% 4,931 12.730633 62,775 0.00% 27.31% 5/1/03 Putnam VT Voyager Fund - IB Shares 2003 ............................. 0.80% 1,238 11.790763 14,597 0.00% 7.91% 5/1/03 Strong GVIT Mid Cap Growth Fund - Class I 2003 ............................. 0.80% 398,980 4.868865 1,942,580 0.00% 39.02% 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. 2003 ............................. 0.80% 690,716 40.347502 27,868,665 0.07% 35.92% 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% Strong VIF - Strong Discovery Fund II 2003 ............................. 0.80% 240,474 26.133664 6,284,467 0.00% 38.32% 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% 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% Turner GVIT Growth Focus Fund - Class I 2003 ............................. 0.80% 103,819 3.251119 337,528 0.00% 49.76% 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 2003 ............................. 0.80% 159,535 18.848928 3,007,064 1.75% 17.22% 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% Van Eck WIT - Worldwide Emerging Markets Fund 2003 ............................. 0.80% 401,918 9.497431 3,817,188 0.11% 52.96% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- --------- ---------- -------------- ---------- --------- Van Eck WIT - Worldwide Hard Assets Fund 2003 ............................. 0.80% 173,612 $19.968789 $3,466,821 0.48% 43.92% 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% Van Kampen UIF - Core Plus Fixed Income Portfolio - Class A 2003 ............................. 0.80% 2,958 10.179170 30,110 0.00% 1.79% 5/1/03 Van Kampen UIF - Emerging Markets Debt Portfolio 2003 ............................. 0.80% 113,201 14.874690 1,683,830 0.00% 26.85% 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% Van Kampen UIF - U.S. Real Estate Portfolio 2003 ............................. 0.80% 336,013 28.319843 9,515,835 0.00% 36.42% 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% Single Premium contracts issued on or after April 16, 1990 American Century VP Balanced Fund - Class I 2003 ............................. 1.30% 36,906 19.550372 721,526 2.53% 17.92% 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% American Century VP Capital Appreciation Fund - Class I 2003 ............................. 1.30% 85,342 17.111726 1,460,349 0.00% 18.92% 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% American Century VP Income & Growth Fund - Class I 2003 ............................. 1.30% 21,876 10.229575 223,782 1.30% 27.68% 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% American Century VP International Fund - Class I 2003 ............................. 1.30% 52,719 14.478934 763,315 0.75% 22.90% 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% American Century VP Ultra Fund - Class I 2003 ............................. 1.30% 1,710 9.824442 16,800 0.00% 23.29% 2002 ............................. 1.30% 739 7.968770 5,889 0.46% -20.31% 5/1/02 American Century VP Value Fund - Class I 2003 ............................. 1.30% 85,452 18.224277 1,557,301 1.09% 27.29% 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% Credit Suisse Trust - Global Post-Venture Capital Portfolio 2003 ............................. 1.30% 10,616 10.300420 109,349 0.00% 45.75% 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%
(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*** -------- --------- ---------- -------------- ---------- --------- Credit Suisse Trust - International Focus Portfolio 2003 ............................. 1.30% 33,394 $10.250133 $ 342,293 0.49% 31.37% 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% Credit Suisse Trust - Small Cap Growth Portfolio 2003 ............................. 1.30% 49,309 16.420586 809,683 0.00% 46.63% 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% Dreyfus GVIT Mid Cap Index Fund - Class I 2003 ............................. 1.30% 76,418 11.286523 862,494 0.49% 32.91% 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 IP - Small Cap Stock Index Portfolio - Service Class 2003 ............................. 1.30% 14,581 10.347973 150,884 0.33% 36.00% Dreyfus Socially Responsible Growth Fund, Inc. - Initial Shares 2003 ............................. 1.30% 11,971 20.741572 248,297 0.11% 24.38% 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% Dreyfus Stock Index Fund 2003 ............................. 1.30% 181,645 24.553549 4,460,029 1.51% 26.71% 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% Dreyfus VIF - Appreciation Portfolio - Initial Shares 2003 ............................. 1.30% 71,606 12.441321 890,873 1.40% 19.61% 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% Dreyfus VIF - Growth and Income Portfolio - Initial Shares 2003 ............................. 1.30% 19,988 11.857652 237,011 0.84% 24.94% 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% Federated Quality Bond Fund II - Primary Shares 2003 ............................. 1.30% 11,443 11.041537 126,348 3.93% 3.29% 2002 ............................. 1.30% 4,830 10.689420 51,630 0.00% 6.89% 5/1/02 Fidelity(R) VIP - Equity-Income Portfolio: Initial Class 2003 ............................. 1.30% 228,092 37.815050 8,625,310 1.80% 28.65% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ----------- -------------- ---------- --------- Fidelity(R) VIP - Growth Portfolio: Initial Class 2003 ............................. 1.30% 224,376 $34.977889 $ 7,848,199 0.27% 31.13% 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% Fidelity(R) VIP - High Income Portfolio: Initial Class 2003 ............................. 1.30% 136,028 25.234771 3,432,635 5.94% 25.62% 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% Fidelity(R) VIP - Overseas Portfolio: Initial Class 2003 ............................. 1.30% 111,937 16.898456 1,891,562 0.83% 41.52% 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% Fidelity(R) VIP II - Asset Manager Portfolio: Initial Class 2003 ............................. 1.30% 143,073 28.002882 4,006,456 3.62% 16.45% 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% Fidelity(R) VIP II - Contrafund Portfolio: Initial Class 2003 ............................. 1.30% 185,397 23.157613 4,293,352 0.46% 26.81% 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% Fidelity(R) VIP III - Growth Opportunities Portfolio: Initial Class 2003 ............................. 1.30% 18,158 9.465516 171,875 0.74% 28.20% 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% Fidelity(R) VIP III - Value Strategies Portfolio: Service Class 2003 ............................. 1.30% 40,013 11.594984 463,950 0.00% 55.76% 2002 ............................. 1.30% 1,517 7.444367 11,293 0.00% -25.56% 5/1/02 Gartmore GVIT Emerging Markets Fund - Class I 2003 ............................. 1.30% 31,749 11.094534 352,240 0.66% 63.13% 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 2003 ............................. 1.30% 8,059 11.992233 96,645 0.88% 39.63% 2002 ............................. 1.30% 3,861 8.588804 33,161 0.08% -14.11% 5/1/02 Gartmore GVIT Global Health Sciences Fund - Class I 2003 ............................. 1.30% 22,102 11.155813 246,566 0.00% 34.93% 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 2003 ............................. 1.30% 49,780 2.934687 146,089 0.00% 53.23% 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 2003 ............................. 1.30% 6,218 10.541163 65,545 0.70% 22.45% 2002 ............................. 1.30% 2,573 8.608580 22.150 0.54% -13.91% 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*** -------- --------- ---------- -------------- ---------- --------- Gartmore GVIT Government Bond Fund - Class I 2003 ............................. 1.30% 125,005 $23.935432 $ 2,992,049 3.14% 0.68% 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% Gartmore GVIT Growth Fund - Class I 2003 ............................. 1.30% 25,825 14.949958 386,083 0.02% 31.03% 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% Gartmore GVIT ID Conservative Fund 2003 ............................. 1.30% 2,945 10.576130 31,147 2.37% 6.51% Gartmore GVIT ID Moderate Fund 2003 ............................. 1.30% 32,069 10.700865 343,166 2.06% 18.50% 2002 ............................. 1.30% 265 9.030143 2,393 1.72% -9.70% 1/25/02 Gartmore GVIT ID Moderately Conservative Fund 2003 ............................. 1.30% 3,555 10.691448 38,008 2.34% 12.23% 2002 ............................. 1.30% 99 9.526311 943 2.35% -4.74% 1/25/02 Gartmore GVIT International Growth Fund - Class I 2003 ............................. 1.30% 4,222 6.512199 27,495 0.00% 33.87% 2002 ............................. 1.30% 3,701 4.864470 18,003 0.00% -25.09% Gartmore GVIT Money Market Fund - Class I 2003 ............................. 1.30% 388,834 14.800105 5,754,784 0.63% -0.68% 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% Gartmore GVIT Nationwide(R) Leaders Fund - Class I 2003 ............................. 1.30% 3,455 10.370684 35,831 0.19% 23.77% 2002 ............................. 1.30% 178 8.379188 1,491 1.18% -16.21% 5/1/02 Gartmore GVIT Small Cap Growth Fund - Class I 2003 ............................. 1.30% 28,379 6.182099 175,442 0.00% 32.53% 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 2003 ............................. 1.30% 130,023 16.651092 2,165,025 0.00% 54.83% 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% Gartmore GVIT Small Company Fund - Class I 2003 ............................. 1.30% 40,659 25.536562 1,038,291 0.00% 39.19% 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% Gartmore GVIT Total Return Fund - Class I 2003 ............................. 1.30% 66,484 31.265566 2,078,660 0.56% 25.87% 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% Gartmore GVIT U.S. Growth Leaders Fund - Class I 2003 ............................. 1.30% 16,491 12.246750 201,961 0.00% 50.17% 2002 ............................. 1.30% 4,697 8.154993 38,304 0.00% -18.45% 5/1/02
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Janus AS - Capital Appreciation Portfolio - Service Shares 2003 ............................. 1.30% 13,360 $ 5.976684 $ 79,848 0.25% 18.68% 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 2003 ............................. 1.30% 36,630 3.505015 128,389 0.00% 44.58% 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 2003 ............................. 1.30% 53,588 5.798153 310,711 0.99% 32.80% 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 MAS GVIT Multi Sector Bond Fund - Class I 2003 ............................. 1.30% 10,621 12.528743 133,068 5.47% 10.67% 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 2003 ............................. 1.30% 67,899 19.952228 1,354,736 0.00% 29.71% 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% Neuberger Berman AMT - Guardian Portfolio 2003 ............................. 1.30% 6,729 9.650858 64,941 0.84% 30.06% 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% Neuberger Berman AMT - Limited Maturity Bond Portfolio 2003 ............................. 1.30% 68,214 18.229469 1,243,505 4.41% 1.10% 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 6.96% 5.41% 1999 ............................. 1.30% 58,827 15.321478 901,317 5.57% 0.17% Neuberger Berman AMT - Partners Portfolio 2003 ............................. 1.30% 38,219 23.205843 886,904 0.00% 33.35% 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 0.79% -0.59% 1999 ............................. 1.30% 69,118 24.377639 1,684,934 1.20% 5.98% Oppenheimer Aggressive Growth Fund/VA - Initial Class 2003 ............................. 1.30% 27,365 4.649735 127,240 0.00% 23.97% 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 2003 ............................. 1.30% 39,108 23.210049 907,699 5.67% 5.40% 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%
(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 Capital Appreciation Fund/VA- Initial Class 2003 ............................. 1.30% 87,490 $14.153408 $1,238,282 0.38% 29.25% 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% Oppenheimer Global Securities Fund/VA - Initial Class 2003 ............................. 1.30% 72,050 27.613518 1,989,554 0.76% 41.18% 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% Oppenheimer Main Street(R) Growth & Income Fund/VA - Initial Class 2003 ............................. 1.30% 16,358 7.980692 130,548 0.90% 25.08% 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 2003 ............................. 1.30% 66,415 29.070523 1,930,719 2.82% 23.34% 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% Strong GVIT Mid Cap Growth Fund - Class I 2003 ............................. 1.30% 54,348 4.780255 259,797 0.00% 38.33% 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. 2003 ............................. 1.30% 69,041 38.060714 2,627,750 0.07% 35.24% 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% Strong VIF - Strong Discovery Fund II 2003 ............................. 1.30% 22,400 24.651908 552,203 0.00% 37.63% 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% 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% Turner GVIT Growth Focus Fund - Class I 2003 ............................. 1.30% 41,875 3.198637 133,943 0.00% 49.02% 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 2003 ............................. 1.30% 45,248 19.362563 876,117 1.75% 16.64% 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%
Contract Investment Expense Unit Contract Income Total Rate* Units Fair Value Owners' Equity Ratio** Return*** -------- ------- ---------- -------------- ---------- --------- Van Eck WIT - Worldwide Emerging Markets Fund 2003 ............................. 1.30% 41,241 $9.169570 $ 378,162 0.11% 52.20% 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% Van Eck WIT - Worldwide Hard Assets Fund 2003 ............................. 1.30% 52,868 17.487326 924,520 0.48% 43.21% 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% Van Kampen UIF - Emerging Markets Debt Portfolio 2003 ............................. 1.30% 28,152 14.401515 405,431 0.00% 26.21% 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% Van Kampen UIF - U.S. Real Estate Portfolio 2003 ............................. 1.30% 45,256 27.142344 1,228,354 0.00% 35.74% 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%
Contract Owners' Equity Total By Year 2003..................................... $ 881,562,186 ============== 2002..................................... $ 727,023,336 ============== 2001..................................... $ 933,404,977 ============== 2000..................................... $1,071,884,297 ============== 1999..................................... $1,144,615,392 ============== * This represents the 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 to the contractholder accounts either through reductions in unit values or redemption of units. 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 accompanying consolidated balance sheets of Nationwide Life Insurance Company and subsidiaries (the Company) as of December 31, 2003 and 2002, and the related consolidated statements of earnings, shareholder's equity, and cash flows for each of the years in the three-year period ended December 31, 2003. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Nationwide Life Insurance Company and subsidiaries as of December 31, 2003 and 2002, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States of America. 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. /s/ KPMG LLP Columbus, Ohio March 11, 2004 NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Statements of Earnings (in millions)
YEARS ENDED DECEMBER 31, --------------------------------------- 2003 2002 2001 ==================================================================================================================================== REVENUES: Policy charges $ 924.1 $ 973.8 $1,017.3 Life insurance premiums 279.8 259.9 251.1 Net investment income 1,980.0 1,838.5 1,724.7 Net realized gains (losses) on investments, hedging instruments and hedged items: Unrelated parties (100.8) (107.6) (62.7) Related parties - 23.2 44.4 Other income 12.7 8.8 8.2 - ------------------------------------------------------------------------------------------------------------------------------------ Total revenues 3,095.8 2,996.6 2,983.0 - ------------------------------------------------------------------------------------------------------------------------------------ BENEFITS AND EXPENSES: Interest credited to policyholder account values 1,300.4 1,241.2 1,238.7 Other benefits and claims 361.8 326.0 280.3 Policyholder dividends on participating policies 41.2 45.2 41.7 Amortization of deferred policy acquisition costs 375.9 670.1 347.9 Interest expense on debt, primarily with Nationwide Financial Services, Inc. (NFS) 48.4 36.0 6.2 Other operating expenses 533.7 508.6 439.3 - ------------------------------------------------------------------------------------------------------------------------------------ Total benefits and expenses 2,661.4 2,827.1 2,354.1 - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations before federal income tax expense 434.4 169.5 628.9 Federal income tax expense 96.2 8.7 161.2 - ------------------------------------------------------------------------------------------------------------------------------------ Income from continuing operations 338.2 160.8 467.7 Income from discontinued operations, net of tax - 0.7 1.2 Cumulative effect of adoption of accounting principle, net of tax (0.6) - (7.1) - ------------------------------------------------------------------------------------------------------------------------------------ Net income $ 337.6 $ 161.5 $ 461.8 ====================================================================================================================================
See accompanying notes to consolidated financial statements, including note 15 which describes related party transactions. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Consolidated Balance Sheets (in millions, except share amounts)
DECEMBER 31, December 31, 2003 2002 ============================================================================================================================= ASSETS: Investments: Securities available-for-sale, at fair value: Fixed maturity securities (cost $25,850.2 in 2003; $23,134.3 in 2002) $ 26,946.8 $ 24,169.0 Equity securities (cost $74.0 in 2003; $85.1 in 2002) 85.6 84.3 Mortgage loans on real estate, net 8,345.8 7,923.2 Real estate, net 96.5 116.6 Policy loans 618.3 629.2 Other long-term investments 130.6 137.5 Short-term investments, including amounts managed by a related party 1,860.8 1,210.3 - ----------------------------------------------------------------------------------------------------------------------------- Total invested assets 38,084.4 34,270.1 - ----------------------------------------------------------------------------------------------------------------------------- Cash 0.1 0.9 Accrued investment income 367.1 328.7 Deferred policy acquisition costs 3,219.3 2,971.1 Other assets 1,815.5 1,243.6 Assets held in separate accounts 57,084.5 47,208.2 - ----------------------------------------------------------------------------------------------------------------------------- Total assets $ 100,570.9 $ 86,022.6 ============================================================================================================================= LIABILITIES AND SHAREHOLDER'S EQUITY: Future policy benefits and claims $ 35,322.3 $ 31,679.8 Short-term debt 199.8 - Long-term debt, payable to NFS 700.0 600.0 Other liabilities 3,264.7 2,985.8 Liabilities related to separate accounts 57,084.5 47,208.2 - ----------------------------------------------------------------------------------------------------------------------------- Total liabilities 96,571.3 82,473.8 - ----------------------------------------------------------------------------------------------------------------------------- Shareholder's equity: Capital shares, $1 par value. Authorized 5.0 million shares; 3.8 million shares issued 3.8 3.8 and outstanding Additional paid-in capital 271.3 171.1 Retained earnings 3,257.2 2,979.6 Accumulated other comprehensive income 467.3 394.3 - ----------------------------------------------------------------------------------------------------------------------------- Total shareholder's equity 3,999.6 3,548.8 - ----------------------------------------------------------------------------------------------------------------------------- Total liabilities and shareholder's equity $ 100,570.9 $ 86,022.6 =============================================================================================================================
See accompanying notes to consolidated financial statements, including note 15 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, 2003, 2002 and 2001 (in millions)
ACCUMULATED ADDITIONAL OTHER TOTAL CAPITAL PAID-ON RETAINED COMPREHENSIVE SHAREHOLDER'S SHARES CAPITAL EARNINGS INCOME EQUTY ================================================================================================================================= ================================================================================================================================= Balance as of January 1, 2001 $ 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 period, 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 --------------- Dividend to NFS - - (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 period, 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 NFS - (475.0) - - (475.0) Dividend to NFS - - (45.0) - (45.0) - --------------------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2002 $ 3.8 $ 171.1 $2,979.6 $ 394.3 $ 3,548.8 ================================================================================================================================= Comprehensive income: Net income - - 337.6 - 337.6 Net unrealized gains on securities available-for-sale arising during the period, net of tax - - - 99.6 99.6 Accumulated net losses on cash flow hedges, net of tax - - - (26.6) (26.6) --------------- Total comprehensive income 410.6 --------------- Capital contributed by NFS - 200.2 - - 200.2 Return of capital to NFS - (100.0) - - (100.0) Dividend to NFS - - (60.0) - (60.0) - --------------------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2003 $ 3.8 $ 271.3 $3,257.2 $ 467.3 $ 3,999.6 =================================================================================================================================
See accompanying notes to unaudited consolidated financial statements, including note 15 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, ---------------------------------------- 2003 2002 2001 =========================================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 337.6 $ 161.5 $ 461.8 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations - (0.7) (1.2) Interest credited to policyholder account values 1,300.4 1,241.2 1,238.7 Capitalization of deferred policy acquisition costs (567.2) (648.2) (743.0) Amortization of deferred policy acquisition costs 375.9 670.1 347.9 Amortization and depreciation 69.3 (0.7) (31.5) Realized losses (gains) on investments, hedging instruments and hedged items: Unrelated parties 100.8 107.6 62.7 Related parties - (23.2) (44.4) Cumulative effect of adoption of accounting principles (0.9) - 10.9 Increase in other assets (640.7) (606.1) (271.8) Increase in policy and other liabilities 299.1 463.1 335.8 Other, net 1.1 11.0 (47.0) - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by continuing operations 1,275.4 1,375.6 1,318.9 Net cash provided by discontinued operations - 0.7 1.7 - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by operating activities 1,275.4 1,376.3 1,320.6 - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturity of available-for-sale securities 4,101.6 3,887.7 3,933.9 Proceeds from sale of available-for-sale securities 2,220.5 1,534.9 497.2 Proceeds from repayments of mortgage loans on real estate 1,478.3 1,009.0 1,204.4 Proceeds from sale of limited partnership to related parties - 54.5 158.9 Cost of available-for-sale securities acquired (9,366.7) (9,874.5) (7,123.6) Cost of mortgage loans on real estate acquired (1,914.4) (1,810.2) (2,123.1) Short-term investments, net (639.9) (193.1) (568.7) Disposal of subsidiary, net of cash - (20.0) - Other, net 254.2 (31.8) 697.0 - --------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,866.4) (5,443.5) (3,324.0) Net cash provided by discontinued operations - - 0.6 - --------------------------------------------------------------------------------------------------------------------------- Net cash used in investing activities (3,866.4) (5,443.5) (3,323.4) - --------------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net change in short-term debt 199.8 (100.0) (18.7) Net proceeds from issuance of long-term debt to NFS 100.0 300.0 300.0 Capital contributed by NFS 200.2 - - Capital returned to NFS (100.0) (475.0) - Cash dividends paid to NFS (60.0) (35.0) (35.0) Increase in investment and universal life insurance product account values 5,116.1 6,278.9 5,976.7 Decrease in investment and universal life insurance product account values (2,865.9) (1,923.4) (4,216.0) - --------------------------------------------------------------------------------------------------------------------------- Net cash provided by financing activities 2,590.2 4,045.5 2,007.0 - --------------------------------------------------------------------------------------------------------------------------- Net (decrease) increase in cash (0.8) (21.7) 4.2 Cash, beginning of period 0.9 22.6 18.4 - --------------------------------------------------------------------------------------------------------------------------- Cash, end of period $ 0.1 $ 0.9 $ 22.6 ===========================================================================================================================
See accompanying notes to consolidated financial statements, including note 15 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, 2003, 2002 and 2001 (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, other investment products sold to institutions, life insurance and an advisory services program. The Company markets its products through a diverse distribution network, including independent broker/dealers, wirehouse and regional firms, financial institutions, pension plan administrators, life insurance specialists, certified public accounting firms and the following affiliated producers: Nationwide Retirement Solutions, TBG Financial, 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 Ohio Department of Insurance 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 14 for discussion of statutory capital requirements and dividend limitations. 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 the balance and amortization of deferred policy acquisition costs (DAC) for investment products, universal life insurance products, valuation allowances for mortgage loans on real estate, impairment losses on other investments and accruals related to federal income taxes and pension and other postretirement benefits. Although some variability is inherent in these estimates, the recorded amounts reflect management's best estimates and 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 financial interest and, as discussed in note 2(n), effective December 31, 2003, the Company applied the provisions of FIN 46R to those special purpose entities (SPIEs) with which it is associated. 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 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 marketable equity securities as held-to-maturity, available-for-sale or trading. All fixed maturity and marketable equity securities are classified as available-for-sale. Available-for-sale securities are stated at fair value, with the unrealized gains and losses, net of adjustments to deferred policy acquisition costs (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 changes 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 discount rate that would have been required if such unrealized gains been realized and the proceeds reinvested at then current market interest rates, which were lower than the then current effective portfolio rate. The fair value of fixed maturity and marketable equity securities is generally obtained from independent pricing services based on market quotations. For fixed maturity securities not priced by independent services (generally private placement securities and securities that do not trade regularly), an internally developed pricing model or "corporate pricing matrix" is most often used. The corporate pricing matrix is developed by obtaining spreads versus the US Treasury yield for corporate securities with varying weighted average lives and bond ratings. The weighted average life and bond rating of a particular fixed maturity security to be priced using the corporate matrix are important inputs into the model and are used to determine a corresponding spread that is added to the US Treasury yield to create an estimated market yield for the that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular fixed maturity security. Additionally, the Company's internal corporate pricing matrix is not suitable for valuing certain fixed maturity securities, particularly those with complex cash flows such as certain mortgage-backed and asset-backed securities. In these cases, a separate "structured product pricing matrix" has been developed to value, as appropriate, using the same methodology described above. For securities for which quoted market prices are not available and for which the Company's structured product pricing matrix is not suitable for estimating fair values, qualified company representatives determine the fair value using other modeling techniques, primarily using a commercial software application utilized in valuing complex securitized investments with variable cash flows. As of December 31, 2003, 68% of the fair values of fixed maturity securities were obtained from independent pricing services, 21% from the Company's pricing matricies and 11% from other sources. 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, specific credit issues related to the issuer, and current economic conditions. Other-than-temporary impairment losses result in a permanent reduction of the cost basis of the underlying investment. 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 an adverse change 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. Impairment losses are recorded on investments in 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. 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 using the interest-method without anticipating the impact of prepayments. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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 its best estimate of probable credit losses inherent in the portfolio at the balance sheet date. The valuation allowance for mortgage loans is comprised of a specific component, based on known impairments by specific loan and an unallocated component that is derived based on the Company's estimate of impairments inherent in the portfolio at the balance sheet date, but not specifically identified by loan. The unallocated component is derived for principal amounts related to loans without a specific reserve. 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. Realized gains and losses on the sale of investments are determined on the basis of specific security identification. Changes in the Company's mortgage loan valuation allowances and recognition of impairment losses for other-than-temporary declines in the fair values of applicable investments 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The Company enters into interest rate swaps, cross-currency swaps or Euro 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 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 identified 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 derivative instruments that are initially recognized into AOCI are reclassified out of AOCI and recognized in earnings over the same period(s) that the hedged item affects earnings. Accrued interest 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 initially 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. The Company does not enter into speculative positions. Although these transactions do not qualify for hedge accounting, or have not been designated in hedging relationships by the Company, they provide the Company with an economic hedge, which is used as part of its overall risk management strategies. For example, the Company may sell credit default protection through a credit default swap. Although the credit default swap may not be effective in hedging specific investments, the income stream allows the Company to manage overall investment yields. The Company may enter into a cross-currency basis swap (pay a variable US rate and receive a variable foreign-denominated rate) to eliminate the foreign currency exposure of a variable rate foreign-denominated liability. Although basis swaps may qualify for hedge accounting, the Company has chosen not to designate these derivatives as hedging instruments due to the difficulty in assessing and monitoring effectiveness for both sides of the basis swap. Derivative instruments that do not qualify for hedge accounting, or are not designated as hedging instruments are carried at fair value, with changes in fair value recorded in realized gains and losses on investments, hedging instruments and hedged items. (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 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 or 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 growth per year. 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 negative or in excess of 15 percent during the three-year reversion period. Changes in assumptions can have a significant impact on the amount of DAC reported for 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 balance related to the individual variable annuity business, the sensitivity of the calculation to minor changes in the underlying assumptions, the complexity and judgments involved in related estimate, 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 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. For other investment products and universal life insurance products, DAC is set 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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 performed as 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 based primarily on market quotations of the underlying securities. The investment income and gains or losses of these accounts accrue directly to the contractholders. The activity of the separate accounts is not reflected in the consolidated statements of income and cash flows except for the fees the Company receives. 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 3.0% 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, 2003 and 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 13% in 2003 (15% in 2002 and 17% in 2001) of the Company's life insurance in-force, 56% of the number of life insurance policies in-force in 2003 (59% in 2002 and 63% in 2001), and 11% of life insurance statutory premiums in 2003 (9% in 2002 and 9% in 2001). 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. (i) Federal Income Tax 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 items 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. Management has used best estimates to establish reserves based on current facts and circumstances regarding tax exposure items where the ultimate deductibility is open to interpretation. Quarterly, management evaluates the appropriateness of such reserves based on any new developments specific to their fact patterns. Information considered includes results of completed tax examinations, Technical Advice Memorandums and other rulings issued by the Internal Revenue Service or the tax courts. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to 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 in the consolidated balance sheets on a gross basis, separately from the related balances of the Company. (k) Recently Issued Accounting Pronouncements In December 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 132 (revised 2003) Employers' Disclosures about Pensions and Other Postretirement Benefits an amendment of FASB Statements No. 87, 88 and 106 (SFAS 132R). SFAS 132R provides revised disclosure guidance for pension and other postretirement benefit plans but does not change the measurement or recognition of those plans under existing guidance. Disclosures previously required under SFAS No. 132 Employers' Disclosures about Pensions and Other Postretirement Benefits, which was replaced by SFAS 132R, were retained. In addition, SFAS 132R requires additional disclosures about the assets, obligations, cash flows, and net periodic benefit cost of defined benefit pension plans and other defined benefit pension plans. The Company adopted SFAS 132R effective December 31, 2003, except for disclosures about estimated benefit payments, which is expected to be adopted in the second quarter of 2004, as permitted by SFAS 132R. In January 2003, the 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" (VIEs) 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) the entity does not have sufficient equity 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 to entities formed after January 31, 2003, and to VIEs in which an enterprise obtains an interest after that date. In October 2003, the FASB delayed the implementation date of FIN 46 for VIEs acquired prior to January 31, 2003 to interim periods ending after December 15, 2003, with early adoption permitted. In December 2003, the FASB issued Interpretation No. 46 (revised December 2003) Consolidation of Variable Interest Entities - an interpretation of ARB No. 51 (FIN 46R) that required all public companies to apply the provisions of FIN 46 or FIN 46R to special purpose entities created prior to February 1, 2003. Once adopted by an entity, FIN 46R replaces FIN 46. Public companies, including the Company, at a minimum, must apply the unmodified provisions of FIN 46 to entities that were considered "special purpose entities" in practice and under applicable FASB pronouncements or guidance by the end of the first reporting period ending after December 15, 2003. The Company had no special purpose entity VIE's as of December 31, 2003. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The Company is required to apply the provisions of FIN 46R to all entities created after December 31, 2003 and to all other entities no later than the beginning of the first reporting period beginning after March 15, 2004. 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 plans to adopt the remaining provisions of FIN 46R during the first quarter of 2004. The adoption of the remaining provisions of FIN 46R is not expected to have a material impact on the results of operations or financial position of the Company. In July 2003, the American Institute of Certified Public Accountants issued Statement of Position 03-1, Accounting and Reporting by Insurance Enterprises for Certain Nontraditional Long-Duration Contracts and for Separate Accounts (SOP 03-1). SOP 03-1 addresses a number of topics; the most significant of which to the Company is the accounting for contracts with guaranteed minimum death benefits (GMDB). SOP 03-1 requires companies to evaluate the significance of the GMDB benefit to determine whether the contract should be accounted for as an investment or insurance contract. For contracts determined to be insurance contracts, companies are required to establish a reserve to recognize a portion of the assessment (revenue) that compensates the insurance company for benefits to be provided in future periods. SOP 03-1 also provides guidance on separate account presentation, interest in separate accounts, gains and losses on the transfer of assets from the general account to a separate account, liability valuation, return based on a contractually referenced pool of assets or index, annuitization options and sales inducements to contract holders. The Company adopted SOP 03-1 on January 1, 2004. As a result, the Company expects to record a cumulative effect adjustment resulting from the adoption of accounting principles of approximately $3.3 million, net of tax, during the first quarter of 2004. See note 21 for further discussion. In May 2003, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity (SFAS 150). SFAS 150 establishes standards for the classification and measurement of certain freestanding financial instruments that embody obligations of the issuer and have characteristics of both liabilities and equity. Further, SFAS 150 requires disclosure regarding the terms of those instruments and settlement alternatives. As originally issued the guidance in SFAS 150 was generally effective for financial instruments entered into or modified after May 31, 2003, and otherwise effective at the beginning of the first interim period beginning after June 15, 2003. Adjustments required as a result of the application of SFAS 150 to existing instruments should be reported as a cumulative effect of a change in accounting principle. The adoption of SFAS 150 on July 1, 2003 did not have any impact on the results of operations or financial position of the Company. In April 2003, the FASB released SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities (SFAS 149). SFAS 149 amends and clarifies financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133). SFAS 149 is generally effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS 149 on July 1, 2003 did not have a material impact on the results of operations or financial position of the Company. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements In April 2003, the FASB released Statement 133 Implementation Issue B36, Embedded Derivatives: Modified Coinsurance Arrangements and Debt Instruments That Incorporate Credit Risk Exposures That Are Unrelated or Only Partially Related to the Creditworthiness of the Obligor under Those Instruments (DIG B36). DIG B36 addresses the need to separately account for an embedded derivative within a reinsurer's receivable and ceding company's payable arising from modified coinsurance or similar arrangements. Paragraph 12.a. of SFAS 133 indicates that an embedded derivative must be separated from the host contract (bifurcated) if the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract. DIG B36 concludes that bifurcation is necessary in a modified coinsurance and similar arrangement because the yield on the receivable and payable is based on or referenced to a specified proportion of the ceding company's return on either its general account assets or a specified block of those assets, rather than the overall creditworthiness of the ceding company. The effective date of implementation was the first day of the first fiscal quarter beginning after September 15, 2003, October 1, 2003 for the Company. Upon adoption of DIG B36 on October 1, 2003, the Company recorded a derivative liability of $0.9 million, deferred taxes of $0.3 million and a charge of $0.6 million as a cumulative effect of adoption of this accounting principal. In November 2002, the FASB issued Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for Guarantees - an Iinterpretation 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 FIN 45 on January 1, 2003 did not 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 did not 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. 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 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, while providing additional criteria to determine when a long-lived asset is actually held-for-sale. SFAS 144 also broadens the definition of "discontinued operations," but does not allow for the accrual of future operating losses before they occur as previously required by APB 30. Under SFAS 144, if a long-lived asset is part of a group that includes other assets and liabilities, then the provisions of SFAS 144 apply to the entire group. In addition, SFAS 144 does not apply to goodwill and other intangible assets that are not amortized. The adoption of SFAS 144 did not have a material impact on the results of operations or financial position of the Company. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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 2001. 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 increases the Company's exposure to the volatility of reported earnings and other comprehensive income. The amount of volatility will, in part, vary with the level of derivative and hedging activities, fluctuations in market interest rates, foreign currency exchange rates and other hedged risks, during any period; and the effectiveness of hedging derivatives in offsetting changes in fiar value and cash flows attributable to those hedged risks. 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 certain asset-backed investment securities that are not of high credit quality. 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 less than its carrying value and that there has been an adverse change 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 15, 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements (m) Reclassification Certain items in the 2002 and 2001 consolidated financial statements and related footnotes have been reclassified to conform to the 2003 presentation. (3) INVESTMENTS The amortized cost, gross unrealized gains and losses and estimated fair value of securities available-for-sale as of December 31, 2003 and 2002 were:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED (in millions) COST GAINS LOSSES FAIR VALUE ======================================================================================================================= December 31, 2003: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $1,042.5 $ 61.0 $ 1.9 $1,101.6 Obligations of states and political subdivisions 167.6 1.0 5.2 163.4 Debt securities issued by foreign governments 51.8 2.0 0.8 53.0 Public securities 10,000.0 503.7 26.2 10,477.5 Private securities 6,454.2 469.1 25.3 6,898.0 Mortgage-backed securities - U.S. Government backed 3,990.1 73.9 21.8 4,042.2 Asset-backed securities 4,144.0 129.0 61.9 4,211.1 - ----------------------------------------------------------------------------------------------------------------------- Total fixed maturity securities 25,850.2 1,239.7 143.1 26,946.8 Equity securities 74.0 11.8 0.2 85.6 - ----------------------------------------------------------------------------------------------------------------------- Total $25,924.2 $1,251.5 $ 143.3 $27,032.4 ======================================================================================================================= DECEMBER 31, 2002: Fixed maturity securities: U.S. Treasury securities and obligations of U.S. Government corporations and agencies $ 774.3 $ 64.4 $ 0.3 $ 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 Public securities 8,744.3 445.4 75.2 9,114.5 Private securities 5,399.2 489.1 41.4 5,846.9 Mortgage-backed securities - U.S. Government backed 4,347.5 146.5 0.1 4,493.9 Asset-backed securities 3,808.9 157.3 154.8 3,811.4 - ----------------------------------------------------------------------------------------------------------------------- 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 =======================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The amortized cost and estimated fair value of fixed maturity securities available-for-sale as of December 31, 2003, 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 $1,056.7 $1,079.1 Due after one year through five years 7,442.2 7,784.5 Due after five years through ten years 6,704.7 7,123.5 Due after ten years 2,512.5 2,706.4 - ------------------------------------------------------------------------------------------------------------------------- Subtotal 17,716.1 18,693.5 Mortgage-backed securities - U.S. Government backed 3,990.1 4,042.2 Asset-backed securities 4,144.0 4,211.1 - ------------------------------------------------------------------------------------------------------------------------- Total $25,850.2 $26,946.8 ========================================================================================================================= The components of unrealized gains on securities available-for-sale, net, were as follows as of December 31: (in millions) 2003 2002 ========================================================================================================================= Unrealized gains, before adjustments and taxes $ 1,108.2 $ 1,033.9 Adjustment to deferred policy acquisition costs (243.7) (300.6) Adjustment to future policy benefits and claims (110.6) (133.2) Deferred federal income tax (264.2) (210.0) - ------------------------------------------------------------------------------------------------------------------------- Net unrealized gains $ 489.7 $ 390.1 ========================================================================================================================= An analysis of the change in gross unrealized gains on securities available-for-sale for the years ended December 31: (in millions) 2003 2002 2001 ========================================================================================================================= Fixed maturity securities $ 61.9 $ 625.5 $ 212.0 Equity securities 12.4 (11.8) 5.5 - ------------------------------------------------------------------------------------------------------------------------- Net change $ 74.3 $ 613.7 $ 217.5 =========================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements An analysis of selected data about gross unrealized losses on available-for-sale securities by time on an unrealized loss position as of December 31, 2003 and 2002 follows:
LESS THAN OR EQUAL TO MORE TOTAL ONE YEAR THAN ONE YEAR ------------------------------------------------------------------------------------- GROSS GROSS GROSS ESTIMATED UNREALIZED ESTIMATED UNREALIZED ESTIMATED UNREALIZED (in millions) FAIR VALUE LOSSES FAIR VALUE LOSSES FAIR VALUE LOSSES ========================================================================================================================== December 31, 2003: Fixed maturity securities: U.S. Treasury securities and $ 154.4 $ 1.9 $ - $ - $ 154.4 $ 1.9 obligations of U.S. Government corporations and agencies Obligations of states and 123.4 5.2 - - 123.4 5.2 political subdivisions Debt securities issued by 19.9 0.8 - - 19.9 0.8 foreign governments Public securities 1,236.7 24.5 31.7 1.7 1,268.4 26.2 Private securities 832.3 21.4 49.1 3.9 881.4 25.3 Mortgage-backed securities - 984.9 21.7 5.3 0.1 990.2 21.8 U.S. Government backed Asset-backed securities 787.0 36.2 260.4 25.7 1,047.4 61.9 - -------------------------------------------------------------------------------------------------------------------------- Total fixed maturity securities 4,138.6 111.7 346.5 31.4 4,485.1 143.1 Equity securities 6.2 0.1 2.0 0.1 8.2 0.2 - -------------------------------------------------------------------------------------------------------------------------- Total $ 4,144.8 $ 111.8 $ 348.5 $ 31.5 $ 4,493.3 $ 143.3 ========================================================================================================================== % of gross unrealized loss 78.0% 22.0% DECEMBER 31, 2002: Fixed maturity securities: U.S. Treasury securities and $ 55.3 $ 0.3 $ - $ - $ 55.3 $ 0.3 obligations of U.S. Government corporations and agencies Obligations of states and - - - - - - political subdivisions Debt securities issued by - - - - - - foreign governments Public securities 590.5 46.5 266.7 28.7 857.2 75.2 Private securities 245.6 32.8 70.4 8.6 316.0 41.4 Mortgage-backed securities - 51.4 0.1 19.6 - 71.0 0.1 U.S. Government backed Asset-backed securities 576.3 62.6 260.8 92.2 837.1 154.8 - -------------------------------------------------------------------------------------------------------------------------- Total fixed maturity securities 1,519.1 142.3 617.5 129.5 2,136.6 271.8 Equity securities 24.6 3.9 16.1 4.0 40.7 7.9 - -------------------------------------------------------------------------------------------------------------------------- Total $ 1,543.7 $ 146.2 $ 633.6 $ 133.5 $ 2,177.3 $ 279.7 ========================================================================================================================== % of gross unrealized loss 52.3% 47.7%
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements Proceeds from the sale of securities available-for-sale during 2003, 2002 and 2001 were $2.22 billion, $1.53 billion and $497.2 million, respectively. During 2003, gross gains of $104.0 million ($42.0 million and $31.3 million in 2002 and 2001, respectively) and gross losses of $27.6 million ($16.6 million and $10.1 million in 2002 and 2001, respectively) were realized on those sales. The Company had $27.2 million and $28.0 million of real estate investments as of December 31, 2003 and 2002, respectively, that were non-income producing during the preceding twelve months. Real estate is presented at cost less accumulated depreciation of $22.4 million as of December 31, 2003 ($18.6 million as of December 31, 2002). The carrying value of real estate held for disposal totaled $10.5 million and $46.0 million as of December 31, 2003 and 2002, respectively. The recorded investment of mortgage loans on real estate considered to be impaired was $46.3 million as of December 31, 2003 ($27.4 million as of December 31, 2002), which includes $46.3 million ($10.9 million as of December 31, 2002) of impaired mortgage loans on real estate for which the related valuation allowance was $3.9 million ($2.5 million as of December 31, 2002). Impaired mortgage loans with no valuation allowance are a result of collateral dependent loans where the fair value of the collateral is estimated to be greater than the recorded investment of the loan. During 2003, the average recorded investment in impaired mortgage loans on real estate was $15.4 million ($5.5 million in 2002) and interest income recognized on those loans using the cash-basis method of income recognition, totaled $3.3 million in 2003 ($0.1 million in 2002). Activity in the valuation allowance account for mortgage loans on real estate for the years ended December 31 was:
(in millions) 2003 2002 2001 ================================================================================================================= Allowance, beginning of period $ 43.4 $ 42.9 $ 45.3 Net (reductions) additions (credited) charged to allowance (14.3) 0.5 (2.4) - -------------------------------------------------------------------------------------------------------------- Allowance, end of period $ 29.1 $ 43.4 $ 42.9 =================================================================================================================
During the third quarter of 2003, the Company refined its analysis of the overall performance of the mortgage loan portfolio and related allowance for mortgage loan losses. This analysis included an evaluation of the current composition of the portfolio, historical losses by property type, current economic conditions and expected losses incurred as of the balance sheet date, but not yet identified by specific loan. As a result of the analysis, the total valuation allowance was reduced by $12.1 million. An analysis of investment income (loss) from continuing operations by investment type follows for the years ended December 31:
(in millions) 2003 2002 2001 ===================================================================================================================== Securities available-for-sale: Fixed maturity securities $1,453.1 1,332.5 1,181.1 Equity securities 1.4 1.9 1.8 Mortgage loans on real estate 579.7 563.8 527.9 Real estate 21.7 26.8 33.1 Short-term investments 9.3 12.6 28.0 Derivatives (100.3) (79.6) (19.7) Other 64.8 31.0 20.9 - --------------------------------------------------------------------------------------------------------------------- Gross investment income 2,029.7 1,889.0 1,773.1 Less investment expenses 49.7 50.5 48.4 - --------------------------------------------------------------------------------------------------------------------- Net investment income $1,980.0 1,838.5 1,724.7 =====================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements An analysis of net realized losses on investments, hedging instruments and hedged items, by source follows for the years ended December 31:
(in millions) 2003 2002 2001 ============================================================================================================= UNRELATED PARTIES: Realized gains on sales, net of hedging losses: Fixed maturity securities, available-for-sale $ 98.5 $ 42.0 $ 30.1 Hedging losses on fixed maturity sales (42.4) (36.2) (1.5) Equity securities, available-for-sale 5.5 - 1.2 Real estate 4.2 14.0 3.3 Mortgage loans on real estate 3.0 3.2 11.2 Mortgage loan hedging losses (2.4) (1.2) (8.1) Other - 0.1 1.2 - ------------------------------------------------------------------------------------------------------------- Total realized gains on sales - unrelated parties 66.4 21.9 37.4 - ------------------------------------------------------------------------------------------------------------- Realized losses on sales, net of hedging gains: Fixed maturity securities, available-for-sale (27.2) (15.7) (9.3) Hedging gains on fixed maturity sales 9.2 10.7 0.1 Equity securities, available-for-sale (0.4) (0.9) (0.8) Real estate (0.3) (3.0) (1.4) Mortgage loans on real estate (5.0) (3.3) (0.6) Mortgage loan hedging gains 0.5 0.9 - Other (2.0) (1.0) (7.7) - ------------------------------------------------------------------------------------------------------------- Total realized losses on sales - unrelated parties (25.2) (12.3) (19.7) - ------------------------------------------------------------------------------------------------------------- Other-than-temporary impairments: Fixed maturity securities, available-for-sale (159.4) (111.6) (66.1) Equity securities, available-for-sale (8.0) - (13.8) Real estate (0.8) (2.4) - Mortgage loans on real estate 11.7 (6.3) (0.7) - ------------------------------------------------------------------------------------------------------------- Total other-than-temporary impairments (156.5) (120.3) (80.6) - ------------------------------------------------------------------------------------------------------------- Credit default swaps 13.3 (6.4) (0.5) Derivatives, excluding hedging gains and losses on 1.2 9.5 0.7 sales, and credit default swaps - ------------------------------------------------------------------------------------------------------------- Total unrelated parties (100.8) (107.6) (62.7) Gain on sale of limited partnership - related party - 23.2 44.4 - ------------------------------------------------------------------------------------------------------------- Net realized losses on investments, $ (100.8) $ (84.4) $ (18.3) hedging instruments and hedged items =============================================================================================================
Fixed maturity securities with an amortized cost of $7.8 million as of December 31, 2003 and $7.3 million as of December 31, 2002 were on deposit with various regulatory agencies as required by law. As of December 31, 2003 and 2002 the Company had pledged fixed maturity securities with a fair value of $101.2 million and $152.4 million, respectively, as collateral to various derivative counterparties. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements As of December 31, 2003 and 2002 the Company held collateral of $544.5 million and $413.1 million, respectively, on derivative transactions. This amount is invested in short-term investments with a corresponding liability recorded in other liabilities. The Company also held $163.0 million and $25.9 million of securities as off-balance sheet collateral on derivative transactions as of December 31, 2003 and 2002, respectively. As of December 31, 2003 and 2002, the Company had loaned securities with a fair value of $958.1 million and $950.5 million, respectively. As of December 31, 2003 and 2002 the Company held collateral of $976.6 million and $974.5 million, respectively. This amount is invested 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 (GMDB) on individual variable annuity contracts. These adjustments were primarily driven by the sustained downturn in the equity markets. (5) VARIABLE ANNUITY CONTRACTS The Company issues traditional variable annuity contracts through its separate accounts, for which investment income and gains and losses on investments accrue directly to, and investment risk is borne by, the contract holder. The Company also issues non-traditional variable annuity contracts in which the Company provides various forms of guarantees to benefit the related contract holders. There are three primary guarantee types that are provided under non-traditional variable annuity contracts: (1) Guaranteed Minimum Death Benefits (GMDB); (2) Guaranteed Minimum Accumulation Benefits (GMAB); and (3) Guaranteed Minimum Income Benefits (GMIB). The GMDB provides a specified minimum return upon death. Many, but not all of these death benefits are spousal, whereby a death benefit will be paid upon death of the first spouse and the survivor has the option to terminate the contract or continue it and have the death benefit paid into the contract and a second death benefit paid upon the survivor's death. There are six primary GMDB types that the company offers. o RETURN OF PREMIUM - provides the greater of account value or total deposits made to the contract less any partial withdrawals and assessments, which is referred to as "net premiums". There are two variations of this benefit. In general, there is no lock in age for this benefit, however for some contracts, the GMDB reverts to the account value at a specified age, typically age 75. o RESET - provides the greater of a return of premium death benefit or the most recent five-year anniversary (prior to lock in age) account value adjusted for withdrawals. For most contracts, this GMDB locks in at age 86 or 90 and for others the GMDB reverts to the account value at age 75, 85, 86 or 90. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements o RATCHET - provides the greater of a return of premium death benefit or the highest specified "anniversary" account value (prior to age 86) adjusted for withdrawals. Currently, there are three versions of ratchet, with the difference being based on the definition of anniversary: monthaversary - evaluated monthly, annual - evaluated annually, and five-year - evaluated every fifth year. o ROLLUP - provides the greater of a return of premium death benefit or premiums adjusted for withdrawals accumulated at generally 5% simple interest up to the earlier of age 86 or 200% of adjusted premiums. There are two variations of this benefit. For certain contracts, this GMDB locks in at age 86 and for others the GMDB reverts to the account value at age 75. o COMBO - provides the greater of annual ratchet death benefit or rollup death benefit. This benefit locks in at either age 81 or 86. o EARNINGS ENHANCEMENT - provides an enhancement to the death benefit that is a specified percentage of the adjusted earnings accumulated on the contract at the date of death. There are two versions of this benefit, one where the benefit expires at age 86 and a credit of 4% of account value is deposited into the contract and the second where the benefit doesn't have an end age, but has a cap on the payout and is paid upon the first death in a spousal situation. Both benefits have age limitations. This benefit is paid in addition to any other death benefits paid under the contract. The GMAB is a living benefit that provides the contract holder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified period of time, 5, 7 or 10 years, selected by the contract holder at the issuance of the variable annuity contract. In some cases, the contract holder also has the option, after a specified period of time, to drop the rider and continue the variable annuity contract without the GMAB. In general, the GMAB requires a minimum allocation to guaranteed term options (GTOs) or adherence to limitations required by an approved asset allocation strategy. The GMIB is a living benefit that provides the contract holder with a guaranteed annuitization value. The GMIB types are: o RATCHET - provides an annuitization value equal to the greater of account value, net premiums or the highest one-year anniversary account value (prior to age 86) adjusted for withdrawals. o ROLLUP - provides an annuitization value equal to the greater of account value and premiums adjusted for withdrawals accumulated at 5% compound interest up to the earlier of age 86 or 200% of adjusted premiums. o COMBO - provides an annuitization value equal to the greater of account value, ratchet GMIB benefit or rollup GMIB benefit. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements Following is a summary of the account values and net amount at risk, net of reinsurance, for variable annuity contracts with guarantees as of December 31, 2003 and 2002:
2003 2002 ----------------------------------------------- ---------------------------------------------- ACCOUNT NET AMOUNT WTD. AVG. Account Net amount Wtd. Avg. (in millions) VALUE AT RISK 1 ATTAINED AGE value at risk 1 attained age ============================================================================================================================== GMDB: Return of premium $ 9,760.0 $ 199.8 56.0 $ 8,737.4 $ 736.7 54.0 Reset 17,534.2 569.4 61.0 14,710.3 1,776.9 60.0 Ratchet 8,147.7 141.0 63.0 6,058.3 411.2 63.0 Roll-up 669.7 22.2 68.0 616.7 32.8 67.0 Combo 2,128.7 39.6 67.0 1,104.0 111.6 65.0 - ------------------------------------------------------------------------------------------------------------------------------ Subtotal $ 38,240.3 972.0 61.0 $ 31,226.7 3,069.2 59.0 ============== ============= Earnings enhancement $ 314.1 10.9 59.0 $ 213.1 1.7 61.0 ----------------------------------- -------------------------------- Total - GMDB $ 982.9 61.0 $ 3,070.9 59.0 =================================== ================================ GMAB: 5 Year $ 79.9 $ 0.1 N/A n/a n/a n/a 7 Year 125.5 0.5 N/A n/a n/a n/a 10 Year 43.4 0.1 N/A n/a n/a n/a - ------------------------------------------------------------------------------------------------------------------------------ Total - GMAB $ 248.8 $ 0.7 N/A n/a n/a n/a ============================================================================================================================== GMIB: 2 Ratchet $ 416.6 $ - N/A $ 307.8 $ - n/a Roll-up 1,131.9 - N/A 664.4 - n/a Combo 1.1 - N/A 0.1 - n/a - ------------------------------------------------------------------------------------------------------------------------------ Total - GMIB $ 1,549.6 $ - N/A $ 972.3 $ - n/a ==============================================================================================================================
1 Net amount at risk is calculated on a seriatum basis and represents the greater of the respective guaranteed benefit less the account value and zero. As it relates to GMIB, net amount at risk is calculated as if all policies were eligible to annuitize immediately, although all GMIB options have a waiting period of at least 7 years from issuance, with the earliest annuitizations beginning in 2005. 2 The weighted average period remaining until expected annuitization is not meaningful and has not been presented because there is currently no net GMIB exposure. Please refer to note 8 for discussion about the use of derivatives in managing the guarantee risks discussed above. Also, refer to the equity market risk section of note 12 for discussion about the risks associated with these guarantees. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements Following is a rollforward of the liabilities for guarantees on variable annuity contracts reflected in the general account for the years ended December 31, 2003 and 2002:
(in millions) GMDB GMAB GMIB TOTAL ========================================================================================================================== Balance as of December 31, 2001 $ 10.8 $ - $ - $ 10.8 Change in fair value 23.6 - - 23.6 Paid guarantee benefits (20.7) - - (20.7) - -------------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2002 13.7 - - 13.7 NEW BUSINESS ACQUIRED - 4.7 - 4.7 Change in fair value 30.0 (0.4) - 29.6 Paid guarantee benefits, net of reinsurance (21.9) - - (21.9) - -------------------------------------------------------------------------------------------------------------------------- Balance as of December 31, 2003 $ 21.8 $ 4.3 $ - $ 26.1 ==========================================================================================================================
Account balances of contracts with guarantees were invested in separate accounts as follows as of each December 31:
(in millions) 2003 2002 =============================================================================================================== Bond mutual funds $ 4,620.3 $ 4,476.3 Domestic equity mutual funds 26,399.4 20,040.6 International equity mutual funds 1,622.0 1,158.7 Money market funds 1,792.9 2,550.2 - --------------------------------------------------------------------------------------------------------------- Total $ 34,434.6 $ 28,225.8 ===============================================================================================================
(6) SHORT-TERM DEBT NLIC has established a $500.0 million commercial paper program under which borrowings are unsecured and are issued for terms of 364 days or less. NLIC had $199.8 million of commercial paper outstanding as of December 31, 2003 at a weighted average effective rate of 1.07%, none as of December 31, 2002. See also note 16. The Company paid interest on short-term debt totaling $1.3 million, $0.7 million and $5.3 million in 2003, 2002 and 2001, respectively, including $0.1 million and $0.5 million to NFS in 2003 and 2002, respectively. (7) LONG-TERM DEBT, PAYABLE TO NATIONWIDE FINANCIAL SERVICES, INC. Following is a summary of surplus notes payable to NFS as of each December 31:
(in millions) 2003 2002 ==================================================================================================================== 7.50% surplus note, due December 17, 2031 $ 300.0 $ 300.0 8.15% surplus note, due June 27, 2032 300.0 300.0 6.75% surplus note, due December 23, 2033 100.0 - - -------------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------------- Total long-term debt $ 700.0 $ 600.0 ====================================================================================================================
The Company made interest payments to NFS on surplus notes totaling $47.1 million in 2003, $30.1 million in 2002 and none in 2001. Payments of interest and principal under the notes require the prior approval of the Ohio Department of Insurance. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements (8) DERIVATIVE FINANCIAL INSTRUMENTS QUALITATIVE DISCLOSURE Interest Rate Risk Management From time to time the Company purchases fixed rate investments to back variable rate liabilities. As a result, the Company can be exposed to interest rate risk due to the mismatch between variable rate liabilities and fixed rate assets. To mitigate 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 pay fixed/receive variable interest rate swaps and short Euro futures to manage this risk. Under interest rate swaps, the Company receives variable interest rate payments and makes fixed rate payments. The fixed interest paid on the swap offsets the fixed interest received on the investment, resulting in the Company receiving the variable interest payments on the swap, generally 3-month libor. The net receipt of a variable rate will then match the variable rate paid on the liability. Short Euro futures, when considered in combination with the fixed-rate instruments, effectively change the fixed rate cash flow exposure to variable rate cash flows. With short Euro futures, if interest rates rise (fall), the gains (losses) on the futures are recognized in investment income. When combined with the fixed income received on the investment, the gains and losses on the Euro futures contracts results in a variable stream of cash inflows, which matches the variable interest paid on the liability. As a result of entering into commercial mortgage loan and private placement commitments, the Company is exposed to changes in the fair value of such commitments due to changes in interest rates during the commitment period prior to the loans being funded. To manage this risk, the Company enters into short Treasury futures during the commitment period. 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 variability in cash flows and investment income due to changes in interest rates. Such variability poses risks to the Company when the assets are funded with fixed rate liabilities. To manage this risk, the Company enters into receive fixed, pay variable interest rate swaps. In using interest rate swaps, the Company receives fixed interest rate payments and makes variable rate payments. The variable interest paid on the swap offsets the variable interest received on the investment, resulting in the Company receiving the fixed interest payments on the swap. The net receipt of a fixed rate will then match the fixed rate paid on the liability. 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 resulting, when combined with the hedged obligations, in net U.S. dollar cash outflows. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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. In both cases, the terms of the foreign currency received on the swap will exactly match the terms of the foreign currency paid on the liability, thus eliminating currency risk. Because the resulting cash flows in both cases remain variable, the Company has designated such cross-currency interest rate swaps as fair value hedging relationships. 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. To manage this risk, the Company uses cross-currency interest rate swaps , resulting, when combined with hedged investments, in net U.S. dollar cash inflows. Cross-currency interest rate swaps on investments are structured to pay a fixed rate, in the foreign currency and receive a variable U.S. dollar rate, generally 3-month libor. The terms of the foreign currency paid on the swap will exactly match the terms of the foreign currency received on the asset, thus eliminating currency risk. Because the resulting cash inflows remain variable, the Company has designated such cross-currency interest rate swaps in fair value hedging relationships. Equity Market Risk Management Many of the Company's individual variable annuity contracts offer GMDB features. The GMDB generally provides a benefit if the annuitant dies and the contract value is less than a specified amount, which may be based on the premiums paid less amounts withdrawn or contract value on a specified anniversary date. A decline in the stock market causing the 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 contract value, which could result in additional GMDB claims. To manage this risk, the Company has implemented a GMDB economic hedging program for primarily for certain new business generated after December 2002. The program does not qualify for hedge accounting under FAS 133, but is designed to offset changes in the value of the GMDB obligation up to a return of the contractholder's premiums paid less amounts withdrawn. Currently the program shorts S&P 500 index futures, which provides an offset to changes in the value of the designated obligation. Prior to implementation of the GMDB hedging program in 2003, the Company managed the risk of these benefits primarily by entering into reinsurance arrangements. See note 12 for additional discussion. The Company also offers certain variable annuity products with a guaranteed minimum accumulation benefit (GMAB) rider. The GMAB provides the contract holder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified period of time, 5, 7 or 10 years, selected by the contract holder at the issuance of the variable annuity contract. In some cases, the contract holder also has the option, after a specified period of time, to drop the rider and continue the variable annuity contract without the GMAB. The GMAB is an embedded derivative, as such, the equity exposure in this product is recognized at fair value, separately from the annuity contract, with changes in fair value recognized in the income statement. The Company is exposed to equity market risk to the extent that the underlying investment options, which can include fixed and variable components, selected by the contract holder do not generate enough earnings over the life of the contract to at least equal the adjusted premiums. The Company is economically hedging the GMAB exposure for those risks that exceed a level considered acceptable by purchasing interest rate futures and shorting S&P 500 futures. The GMAB economic hedge does not qualify for hedge accounting under FAS 133. Other Non-Hedging Derivatives From time-to-time, the Company enters into 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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. These assets may have sufficient duration for the related liability, but do not earn a sufficient credit spread. The combined credit default swap and cash instrument provides the duration and credit spread targeted by the Company. The credit default swaps do not qualify for hedge accounting treatment. The Company also has purchased credit default protection on selected debt instruments exposed to short-term credit concerns, or because the combination of the corporate bond and purchased default protection provides sufficient spread and duration targeted by the Company. The purchased credit default protection does not qualify for hedge accounting treatment. QUANTITATIVE DISCLOSURE Fair Value Hedges During the years ended December 31, 2003, 2002 and 2001 gains of $4.2 million, $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, 2003 and 2002, the ineffective portion of cash flow hedges was a loss of $5.4 and a gain of $1.8 million in 2002. There were no net 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 $0.2 million in losses out of AOCI over the next 12-month period. In general, 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 or less. However, in 2003, the Company did enter into a hedge of a forecasted purchase of shares of a specified mutual fund, where delivery of the shares will occur 30 years in the future. During 2003, 2002 and 2001 the Company did not discontinue any cash flow hedges because the original forecasted transaction was no longer probable. Additionally, no amounts were reclassified from AOCI into earnings because it became probable that a forecasted transaction would not occur. Other Derivative Instruments, Including Embedded Derivatives Net realized gains and losses on investments, hedging instruments and hedged items for the years ended December 31, 2003, 2002 and 2001 include a net gain of $11.8 million, a net loss of $2.2 million and a net loss of $1.6 million, respectively, related to other derivative instruments, including embedded derivatives, not designated in hedging relationships. For the years ended December 31, 2003, 2002 and 2001, net gains of $4.2 million, $120.4 million and a net 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 additional net gain of $0.9, loss of $119.6 million and a net 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, 2003, 2002 and 2001, respectively. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The notional amount of derivative financial instruments outstanding as of December 31, 2003 and 2002 were as follows:
(in millions) 2003 2002 =================================================================================================================== INTEREST RATE SWAPS: Pay fixed/receive variable rate swaps hedging investments $1,954.7 $ 2,206.5 Pay variable/receive fixed rate swaps hedging investments 188.2 229.7 Pay variable/receive variable rate swaps 154.0 221.0 Pay variable/receive fixed rate swaps hedging liabilities 500.0 500.0 Pay variable/receive variable rate swaps 430.0 430.0 Other contracts hedging investments 842.5 690.8 CROSS CURRENCY INTEREST RATE SWAPS: Hedging foreign currency denominated investments 580.1 111.0 Hedging foreign currency denominated liabilities 2,643.9 3,033.6 Futures contracts 2,615.8 4,250.9 - ------------------------------------------------------------------------------------------------------------------- Total $9,909.2 $11,673.5 ===================================================================================================================
(9) 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. Effective October 1, 2002, Nationwide Corporation's ownership in NFS decreased from 80% to 63%, and as a result, NFS and its subsidiaries, including the Company, no longer qualify to be included in the NMIC consolidated federal income tax return. 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. 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 until 2008, when NFS expects to be able to file a single consolidated federal income tax return with all of its subsidiaries, including NLIC. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The tax effects of temporary differences that give rise to significant components of the net deferred tax liability as of December 31, 2003 and 2002 were as follows:
(in millions) 2003 2002 ======================================================================================================================== DEFERRED TAX ASSETS: Future policy benefits $ 594.8 $ 549.6 Derivatives 11.7 40.2 Other 104.4 40.1 - ------------------------------------------------------------------------------------------------------------------------ Gross deferred tax assets 710.9 629.9 Less valuation allowance (7.0) (7.0) - ------------------------------------------------------------------------------------------------------------------------ Net deferred tax assets 703.9 622.9 - ------------------------------------------------------------------------------------------------------------------------ DEFERRED TAX LIABILITIES: Fixed maturity securities 390.0 402.2 Equity securities and other investments 42.7 37.4 Deferred policy acquisition costs 840.8 762.0 Other 88.1 50.5 - ------------------------------------------------------------------------------------------------------------------------ Gross deferred tax liabilities 1,361.6 1,252.1 - ------------------------------------------------------------------------------------------------------------------------ Net deferred tax liability $ 657.7 $ 629.2 ========================================================================================================================
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, 2003. The Company's current federal income tax liability was $106.3 million and $176.4 million as of December 31, 2003 and 2002, 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) 2003 2002 2001 ====================================================================================================================== Current $ 106.7 $ 63.7 $ 32.2 Deferred (10.5) (55.0) 129.0 - ---------------------------------------------------------------------------------------------------------------------- Federal income tax expense $ 96.2 $ 8.7 $161.2 ======================================================================================================================
The customary relationship between federal income tax expense and pre-tax income from continuing operations before cumulative effect of adoption of accounting principles did not exist in 2002. This is a result of the impact of the $121.5 million tax benefit associated with the $347.1 million of accelerated DAC amortization reported in 2002 (see note 4) being calculated at the U.S. federal corporate income tax rate of 35%. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements Total federal income tax expense for the years ended December 31, 2003, 2002 and 2001 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:
2003 2002 2001 ---------------------- ----------------------- ----------------------- (in millions) AMOUNT % Amount % Amount % ===================================================================================================================== Computed (expected) tax expense $ 152.0 35.0 $ 59.3 35.0 $ 220.1 35.0 Tax exempt interest and dividends received deduction (45.7) (10.5) (38.9) (22.9) (48.8) (7.7) Income tax credits (10.8) (2.5) (12.7) (7.5) (11.5) (1.8) Other, net 0.7 0.1 1.0 0.5 1.4 0.1 - --------------------------------------------------------------------------------------------------------------------- Total (effective rate for each year) $ 96.2 22.1 $ 8.7 5.1 $ 161.2 25.6 =====================================================================================================================
Total federal income tax paid (refunded) was $176.0 million, $71.0 million and $(45.4) million during the years ended December 31, 2003, 2002 and 2001, 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements (10) 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, 2003, 2002 and 2001 were as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------- (in millions) 2003 2002 2001 ===================================================================================================================== Unrealized (losses) gains on securities available-for-sale arising during the period: Gross $ (16.7) $ 527.5 $ 164.0 Adjustment to deferred policy acquisition costs 56.9 (205.7) (71.7) Adjustment to future policy benefits and claims 22.6 (133.2) - Related federal income tax expense (22.4) (66.0) (32.3) - --------------------------------------------------------------------------------------------------------------------- Net unrealized gains 40.4 122.6 60.0 - --------------------------------------------------------------------------------------------------------------------- Reclassification adjustment for net losses on securities available-for-sale realized during the period: Gross 91.0 86.2 58.7 Related federal income tax benefit (31.8) (30.2) (20.5) - --------------------------------------------------------------------------------------------------------------------- Net reclassification adjustment 59.2 56.0 38.2 - --------------------------------------------------------------------------------------------------------------------- Other comprehensive income on securities 99.6 178.6 98.2 available-for-sale - --------------------------------------------------------------------------------------------------------------------- Accumulated net (losses) gains on cash flow hedges: Gross (40.9) 16.9 (13.5) Related federal income tax benefit (expense) 14.3 (5.9) 4.7 - --------------------------------------------------------------------------------------------------------------------- Other comprehensive (loss) income on cash flow hedges (26.6) 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 $ 73.0 $ 189.6 $ 88.0 =====================================================================================================================
Reclassification adjustments for net realized gains and losses on the ineffective portion of cash flow hedges were immaterial during 2003, 2002 and 2001 and, therefore, are not reflected in the table above. (11) 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 The fair value of a financial instrument is defined as the amount at which the financial instrument could be bought, or in case of liabilities incurred, or sold, or in the case of liabilities settled, in a current transaction between willing parties. In cases where quoted market prices are not available, fair value is to be based on the best information available in the circumstances. Such estimates of fair value should consider prices for similar assets or similar liabilities and the results of valuation techniques to the extent available in the circumstances. Examples of valuation techniques include the present value of estimated expected future cash flows using discount rates commensurate with the risks involved, option-pricing models, matrix pricing, option-adjusted spread models, and fundamental analysis. Valuation techniques for measuring assets and liabilities must be consistent with the objective of measuring fair value and should incorporate assumptions that market participants would use in their estimates of values, future revenues, and future expenses, including assumptions about interest rates, default, prepayment, and volatility. 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 matrix pricing, present value or other suitable 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, the Company's estimate of the fair values 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 the estimates of fair value and have not been considered in arriving at such estimates. In estimating its fair value disclosures, the Company used the following methods and assumptions: Fixed maturity and equity securities: The fair value of fixed maturity and marketable equity securities is generally obtained from independent pricing services based on market quotations. For fixed maturity securities not priced by independent services (generally private placement securities and securities that do not trade regularly), an internally developed pricing model or "corporate pricing matrix" is most often used. The corporate pricing matrix is developed by obtaining spreads versus the US Treasury yield for corporate securities with varying weighted average lives and bond ratings. The weighted average life and bond rating of a particular fixed maturity security to be priced using the corporate matrix are important inputs into the model and are used to determine a corresponding spread that is added to the US Treasury yield to create an estimated market yield for the that bond. The estimated market yield and other relevant factors are then used to estimate the fair value of the particular fixed maturity security. Additionally, the Company's internal corporate pricing matrix is not suitable for valuing certain fixed maturity securities, particularly those with complex cash flows such as certain mortgage-backed and asset-backed securities. In these cases, a separate "structured product pricing matrix" has been developed to value, as appropriate, using the same methodology described above. For securities for which quoted market prices are not available and for which the Company's structured product pricing matrix is not suitable for estimating fair values, qualified company representatives determine the fair value using other modeling techniques, primarily using a commercial software application utilized in valuing complex securitized investments with variable cash flows. As of December 31, 2003, 68% of the fair values of fixed maturity securities were obtained from independent pricing services, 21% from the Company's pricing matricies and 11% from other sources. 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 fair value is based on the present value of expected future cash flows discounted at the loan's effective interest rate. Policy loans, short-term investments and cash: The carrying amounts reported in the consolidated balance sheets for these instruments approximate their fair value. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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. 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 12. 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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:
2003 2002 --------------------------- -------------------------- CARRYING ESTIMATED Carrying Estimated (in millions) AMOUNT FAIR VALUE amount fair value ==================================================================================================================== ASSETS Investments: Securities available-for-sale: Fixed maturity securities $26,946.8 $26,946.8 $ 24,169.0 $ 24,169.0 Equity securities 85.6 85.6 84.3 84.3 Mortgage loans on real estate, net 8,345.8 8,830.0 7,923.2 8,536.4 Policy loans 618.3 618.3 629.2 629.2 Short-term investments 1,860.8 1,860.8 1,210.3 1,210.3 Cash 0.1 0.1 0.9 0.9 Assets held in separate accounts 57,084.5 57,084.5 47,208.2 47,208.2 LIABILITIES Investment contracts (28,663.4) (27,239.8) (25,276.3) (23,634.1) Policy reserves on life insurance contracts (6,658.9) (6,706.7) (6,403.5) (6,479.6) Short-term debt (199.8) (199.8) - - Long-term debt, payable to NFS (700.0) (803.7) (600.0) (728.5) Collateral received - securities lending and derivatives (1,521.1) (1,521.1) (1,363.6) (1,363.6) Liabilities related to separate accounts (57,084.5) (56,118.6) (47,208.2) (45,524.6) DERIVATIVE FINANCIAL INSTRUMENTS Interest rate swaps hedging assets (99.4) (99.4) (141.2) (141.2) Cross currency interest rate swaps 599.1 599.1 325.1 325.1 Futures contracts (25.2) (25.2) (45.7) (45.7) Other derivatives 4.6 4.6 - - - --------------------------------------------------------------------------------------------------------------------
(12) 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, mortgagees on real estate mortgage loans or other parties, including reinsurers and derivatives counterparties, default on their contractual obligations. The Company mitigates this risk by adhering to investment policies that provide portfolio diversification on an asset class, creditor, and industry basis, and by complying with investment limitations governed by State insurance laws and regulations, as applicable. The Company actively monitors and manages exposures, including restructuring, reducing, or liquidating investments, and determines whether any securities are impaired or loans are deemed uncollectible and takes charges in the period such assessments are made. The ratings of reinsurers who owe the Company money are regularly monitored along with outstanding balances as part of the Company's reinsurance collection process, with timely follow-up on delayed payments. The aggregate credit risk taken in the investment portfolio is influenced by management's risk/return preferences, the economic and credit environment, the relationship of credit risk in the asset portfolio to other business risks that the Company is exposed to and the Company's current and expected future capital position. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements Interest Rate Risk: The risk that interest rates will change and cause a decrease in the value of an insurer's investments relative to the value of its liabilities, and/or an unfavorable change in prepayment activity, resulting in compressed interest margins. For example, if 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. In some investments that contain borrower options, this risk may be realized through unfavorable cash flow patterns, e.g. increased principal repayment when interest rates have declined. When unfavorable interest rate movements occur, interest margins may compress, reducing profitability. The Company mitigates this risk by offering products that transfer this risk to the purchaser and/or by attempting to approximately match the maturity schedule of its assets with the expected payouts of its liabilities, both at inception and on an ongoing basis. In some investments that permit prepayment at the borrower option, make-whole provisions are required such that if the borrower prepays in a lower-rate environment, the Company be compensated for the loss of future income. In other situations, the Company accepts some interest rate risk in exchange for a higher yield on the investment. 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 practices that identify and minimize the adverse impact of this risk. Ratings Risk: The risk that rating agencies change their outlook or rating of the Company or a subsidiary of the company. The rating agencies generally utilize proprietary capital adequacy models in the process of establishing ratings for the Company and certain subsidiaries. The Company is at risk to changes in these models and the impact that changes in the underlying business that it is engaged in can have on such models. To mitigate this risk, the Company maintains regular communications with the rating agencies and evaluates the impact of significant transactions on such capital adequacy models and considers the same in the design of transactions to 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. 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 uinderlying 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 $391.8 million extending into 2004 were outstanding as of December 31, 2003. The Company also had $110.3 million of commitments to purchase fixed maturity securities outstanding as of December 31, 2003. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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. Any exposures related to derivative activity are aggregated with other credit exposures between the Company and the derivative counterparty to assess adherence to established credit limits. As of December 31, 2003, the Company's credit risk from these derivative financial instruments was $75.8 million, net of $544.5 million of cash collateral and $163.0 million in securities pledged as collateral. 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, 2003, approximately 80% 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 GMDB or GMAB claims, which may require the Company to accelerate the amortization of DAC. Many of the Company's individual variable annuity contracts offer GMDB features. The GMDB generally provides a benefit if the annuitant dies and the contract value is less than a specified amount, which may be based on the premiums paid less amounts withdrawn or contract value on a specified anniversary date. A decline in the stock market causing the 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 contract value, which could result in additional GMDB claims. The Company utilizes a combination of risk management techniques to mitigate this risk. In general, for most contracts issued prior to July 2002, the Company obtained reinsurance from independent third parties, whereas for certain contracts issued after December 2002, the Company has been executing an economic hedging program. The GMDB economic hedging program is designed to offset changes in the economic value of the GMDB obligation up to a return of the contract holder's premium payments, however the first 10% of GMDB claims are not hedged. Currently the program shorts S&P 500 index futures, which provides an offset to changes in the value of the designated obligation. The Company's economic evaluation of the GMDB obligation is not consistent with current accounting treatment of the GMDB obligation. Therefore the hedging activity will lead to volatility of earnings. This volatility was negligible in 2003. As of December 31, 2003, the net amount at risk, defined as the excess of the death benefit over the account value, was $2.8 billion before reinsurance and $982.9 million net of reinsurance. As of December 31, 2003 and 2002, the Company's reserve for GMDB claims was $21.8 million and $13.7 million, respectively. See note 21 for discussion of the impact of adopting a new accounting principle regarding GMDB reserves in 2004. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The Company also offers certain variable annuity products with a GMAB rider. The GMAB provides the contract holder with a guaranteed return of premium, adjusted proportionately for withdrawals, after a specified period of time, 5, 7 or 10 years, selected by the contract holder at the time of issuance of the variable annuity contract. In some cases, the contract holder also has the option, after a specified period of time, to drop the rider and continue the variable annuity contract without the GMAB. The design of the GMAB rider limits the risk to the Company in a variety of ways including the requirement that a significant portion of the premium be allocated to a guaranteed term option (GTO) that is a fixed rate investment, thereby reducing the equity exposure. The GMAB represents an embedded derivative in the variable annuity contract that is required to be separated from and valued apart from the host variable annuity contract. The embedded derivative is carried at fair value and reported in other future policy benefits and claims. The Company initially records an offset to the fair value of the embedded derivative on the balance sheet, which is amortized through the income statement over the term of the GMAB period of the contract. The fair value of the GMAB embedded derivative is calculated based on actuarial assumptions related to the projected benefit cash flows incorporating numerous assumptions including, but not limited to, expectations of contract holder persistency, market returns, correlation's of market returns and market return volatility. The Company began selling contracts with the GMAB feature on May 1, 2003. Beginning October 1, 2003, the Company launched an enhanced version of the rider that offered increased equity exposure to the contract holder in return for a higher charge. The Company simultaneously began economically hedging the GMAB exposure for those risks that exceed a level it considered acceptable. The GMAB economic hedge consists of shorting interest rate futures and S&P 500 futures contracts and does not qualify for hedge accounting under FAS 133. See note 2(c) for discussion of economic hedges. The objective of the GMAB economic hedge strategy is to manage the exposures with risk beyond a level considered acceptable to the Company. The Company is exposed to equity market risk related to the GMAB feature should the growth in the underlying investments, including any GTO investment, fail to reach the guaranteed return level. The GMAB embedded derivative will create volatility in earnings, however the hedging program provides substantial mitigation of this exposure. This volatility was negligible in 2003. The fair value of the GMAB embedded derivative as of December 31, 2003 was $4.3 million. Changes in the fair value of the GMAB embedded derivative and the hedging instruments totaled $(0.4) million and $(0.1) million, respectively, during the year ended December 31, 2003. 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, 2003, the Company has a diversified portfolio with no more than 23% in any geographic area and no more than 2% with any one borrower. As of December 31, 2003, 31% of the carrying value of the Company's commercial mortgage loan portfolio financed retail properties. Significant Business Concentrations: As of December 31, 2003, 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 overly vulnerable to a single 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 18, 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 $635.9 million as of December 31, 2003. 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 contractholder. 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 each of the underlying contract. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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 pledged securities at all times and is entitled to receive from the borrower any payments for interest or dividends received on such securities during the period it is pledged as collateral. 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 on such securities during the loan term. (13) PENSION PLAN, POSTRETIREMENT BENEFITS OTHER THAN PENSIONS AND RETIREMENT SAVINGS PLAN The Company, together with certain affiliated companies, sponsors pension plans covering all employees of participating companies 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, 2003, 2002 and 2001 were $13.2 million, $10.0 million and $5.0 million, respectively. The Company has recorded a prepaid pension asset of $7.7 million as of December 31, 2003 compared to pension liability of $0.5 million as of December 31, 2002. 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, hired prior to June 1, 2000, 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, by no more than three percent through 2006, at which time the cap will be frozen. 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 Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law on December 8, 2003. FASB Staff Position FAS 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003 permits employers that sponsor postretirement benefit plans to defer accounting for the effects of the Act until the FASB issues guidance on how to account for the provisions of the Act. Specific authoritative guidance on accounting for the Act is pending. The issued guidance could require the plan sponsor to change previously reported information. The Company will defer recognition of the Act until the guidance is issued. Any measures of the accumulated postretirement benefit obligation (APBO) and net periodic postretirement benefit cost (NPPBC) do not reflect the effects of the Act. The Company's accrued postretirement benefit expense as of December 31, 2003 and 2002 was $50.5 million and $51.9 million, respectively, and the NPPBC for 2003, 2002 and 2001 was $1.1 million, $3.5 million and $2.9 million, respectively. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements Information regarding the funded status of the pension plans as a whole and the postretirement life and health care benefit plan as a whole, both of which are U.S. plans, as of December 31, 2003 and 2002 follows:
PENSION BENEFITS POSTRETIREMENT BENEFITS --------------------------- ------------------------------ (in millions) 2003 2002 2003 2002 ======================================================================================================================== CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year $ 2,236.2 $ 2,132.2 $ 269.7 $ 314.0 Service cost 104.0 103.3 9.9 13.2 Interest cost 131.7 135.6 19.5 22.5 Participant contributions - - 4.2 4.0 Plan amendment 1.6 (11.5) - (117.7) Actuarial loss (gain) 85.1 (13.1) (2.8) 54.0 Benefits paid (101.6) (97.6) (20.4) (20.3) Impact of settlement/curtailment - (12.7) - - Impact of plan merger - - 26.7 - - ------------------------------------------------------------------------------------------------------------------------ Benefit obligation at end of year 2,457.0 2,236.2 306.8 269.7 - ------------------------------------------------------------------------------------------------------------------------ CHANGE IN PLAN ASSETS: Fair value of plan assets at beginning of year 1,965.0 2,200.7 106.9 119.7 Actual return on plan assets 265.4 (142.4) 16.5 (12.7) Employer contributions1 113.6 4.3 20.3 16.2 Participant contributions - - 4.2 4.0 Benefits paid1 (101.6) (97.6) (20.4) (20.3) - ------------------------------------------------------------------------------------------------------------------------ Fair value of plan assets at end of year 2,242.4 1,965.0 127.5 106.9 - ------------------------------------------------------------------------------------------------------------------------ Funded status (214.6) (271.2) (179.3) (162.8) Unrecognized prior service cost 30.3 33.6 (103.3) (116.9) Unrecognized net losses 192.1 225.9 56.9 71.9 Unrecognized net (asset) obligation at transition (2.5) (3.8) - 0.1 - ------------------------------------------------------------------------------------------------------------------------ Prepaid (accrued) benefit cost, net $ 5.3 $ (15.5) $ (225.7) $ (207.7) ======================================================================================================================== - ------------------------------------------------------------------------------------------------------------------------ Accumulated benefit obligation $ 2,020.2 $ 1,821.0 N/A N/A ========================================================================================================================
________ 1 Employer contributions and benefits paid include only those amounts contributed directly to or paid directly from plan assets. Effective January 1, 2003, the pension plan was amended to improve benefits for certain participants, resulting in an increase in the projected benefit of $1.6 million. 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 by 3 percent per year, at which time the cap will be frozen. 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. The plan sponsor and participating employers, including the Company, expect to contribute $130.0 million to the pension plan and $20.0 million to the postretirement benefit plan in 2004. 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. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements On June 30, 2002, NMIC Medicare operations ceased, and all Medicare employees were terminated as Nationwide employees. Curtailment charges of $10.5 million and curtailment credits of $10.0 million were directly assigned to NMIC for the years ended December 31, 2003 and 2002 respectively. Weighted average assumptions used in calculating benefit obligations and the funded status of the pension plan and postretirement life and health care benefit plan as of the end of each period presented were as follows:
PENSION BENEFITS POSTRETIREMENT BENEFITS ---------------------------- ----------------------------- 2003 2002 2003 2002 =================================================================================================================== Discount rate 5.50% 6.00% 6.10% 6.60% Rate of increase in future compensation levels 4.00% 4.50% - - Assumed health care cost trend rate: Initial rate - - 11.00%1 11.30%1 Ultimate rate - - 5.20%1 5.70%1 Declining period - - 11 YEARS 11 Years - -------------------------------------------------------------------------------------------------------------------
________ 1 The 2003 initial rate is 12.0% for participants over age 65, with an ultimate rate of 5.6% and the 2002 initial rate is 12.3% for participants over age 65, with an ultimate rate of 6.3%. The Company uses a December 31 measurement date for all plans. The asset allocation for the pension plan as a whole at the end of 2003 and 2002, and the target allocation for 2004, by asset category, are as follows:
TARGET ALLOCATION PERCENTAGE PERCENTAGE OF PLAN ASSETS - ----------------------------------------------------------------------------------------------------------------------------------- Asset Category 2004 2003 2002 =================================================================================================================================== Equity Securities 40 - 65 45% 43% Debt Securities 25 - 50 55% 57% Real Estate 0 - 10 0% 0% Total - 100% 100% ===================================================================================================================================
The plan employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. Plan language requires investment in a group annuity contract backed by fixed investments with an interest rate guarantee to match liabilit ies for specific classes of retirees. On a periodic basis, the portfolio is analyzed to establish the optimal mix of assets given current market conditions given the risk tolerance. In the most recent study, asset sub-classes were considered in debt securities (diversified US investment grade bonds, diversified high-yield US securities, and international fixed income, emerging markets, and commercial mortgage loans) and equity investments (domestic equities, private equities, international equities, emerging market equities and real estate investments). Each asset sub-class chosen contains a diversified blend of securities from that sub-class. Investment mix is measured and monitored on an on-going basis through regular investment reviews, annual liability measurements, and periodic asset/liability studies. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The asset allocation for the other postretirement life and healthcare benefit plan as a whole at the end of 2003 and 2002, and the target allocation for 2004, by asset category, are as follows:
TARGET ALLOCATION PERCENTAGE PERCENTAGE OF PLAN ASSETS - --------------------------------------------------------------------------------------------------------------------------------- Asset Category 2004 2003 2002 ================================================================================================================================= - Equity Securities 50 - 80 59% 53% Debt Securities 20 - 50 35% 39% Other 0 - 10 6% 8% Total - 100% 100% =================================================================================================================================
The other postretirement life and health care benefit plan employs a total return investment approach whereby a mix of equities and fixed income investments are used to maximize the long-term return of plan assets for a prudent level of risk. Risk tolerance is established through careful consideration of plan liabilities, plan funded status, and corporate financial condition. Plan investments for retiree life insurance benefits include a retiree life insurance contract issued by NLIC and for retiree medical liabilities both a group annuity contract issued by NLIC backed by fixed investments with an interest rate guarantee and a separate account invested in diversified US equities. The investment mix is measured and monitored on an on-going basis through regular investment reviews, annual liability measurements, and periodic asset/liability studies. The components of net periodic pension cost for the pension plan as a whole for the years ended December 31, 2003, 2002 and 2001 were as follows:
(in millions) 2003 2002 2001 ======================================================================================================================== Service cost (benefits earned during the period) $ 104.0 $ 103.3 $ 89.3 Interest cost on projected benefit obligation 131.7 135.6 129.1 Expected return on plan assets (156.7) (178.6) (183.8) Recognized gains 0.1 - (7.8) Amortization of prior service cost 4.5 4.4 3.2 Amortization of unrecognized transition asset (1.3) (1.3) (1.3) - ------------------------------------------------------------------------------------------------------------------------ Net periodic pension cost $ 82.3 $ 63.4 $ 28.7 ========================================================================================================================
Weighted average assumptions used in calculating the net periodic pension cost, set at the beginning of each year, for the pension plan were as follows:
2003 2002 2001 ==================================================================================================================== Weighted average discount rate 6.00% 6.50% 6.75% Rate of increase in future compensation levels 4.50% 4.75% 5.00% Expected long-term rate of return on plan assets 7.75% 8.25% 8.00% - --------------------------------------------------------------------------------------------------------------------
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The Company employs a prospective building block approach in determining the long-term expected rate of return for plan assets. This process is integrated with the determination of other economic assumptions such as discount rate and salary scale. Historical markets are studied and long-term historical relationships between equities and fixed-income are preserved consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run called a risk premium. Historic risk premiums are used to develop expected real rates of return of each asset sub-class. The expected real rates of return, reduced for investment expenses, are applied to the target allocation of each asset sub-class to produce an expected real rate of return for the target portfolio. This expected real rate of return will vary by plan and will change when the plan's target investment portfolio changes. Current market factors such as inflation and interest rates are incorporated in the process as follows. For a given measurement date, the discount rate is set by reference to the yield on high-quality corporate bonds to approximate the rate at which plan benefits could effectively be settled. The historic real rate of return is subtracted from these bonds to generate an assumed inflation rate. The expected long-term rate of return for plan assets is the assumed inflation rate plus the expected real rate of return. This process effectively sets the expected return for the plan's portfolio at the yield for the reference bond portfolio, adjusted for expected risk premiums of the target asset portfolio. Given the prospective nature of this calculation, short-term fluctuations in the market do not impact the expected risk premiums. However, as the yield for the reference bond fluctuates, the assumed inflation rate and the expected long-term rate are adjusted in tandem. In 2002, the pension plan's target investment portfolio 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, 2003, 2002 and 2001 were as follows:
(in millions) 2003 2002 2001 ===================================================================================================================== Service cost (benefits attributed to employee service during the year) $ 9.9 $ 13.2 $ 12.6 Interest cost on accumulated postretirement benefit obligation 19.5 22.5 21.4 Expected return on plan assets (8.0) (9.2) (9.6) Amortization of unrecognized transition obligation of affiliates - 0.6 0.6 Net amortization and deferral (9.9) (0.5) (0.4) - --------------------------------------------------------------------------------------------------------------------- NPPBC $11.5 $ 26.6 $ 24.6 =====================================================================================================================
Weighted average actuarial assumptions used for the measurement of the NPPBC, set at the beginning of each year, for the postretirement benefit plan for 2003, 2002 and 2001 were as follows:
2003 2002 2001 ========================================================================================================================== Discount rate 6.60% 7.25% 7.50% Long-term rate of return on plan assets 7.50% 7.75% 8.00% Assumed health care cost trend rate: Initial rate 11.30% 1 11.00% 1 11.00% Ultimate rate 5.70% 1 5.50% 1 5.50% Declining period 11 YEARS 4 Years 4 Years - --------------------------------------------------------------------------------------------------------------------------
1 The 2003 initial rate is 12.0% for participants over age 65, with an ultimate rate of 5.6% and the 2002 initial rate is 12.3% for participants over age 65, with an ultimate rate of 6.3%. Because current plan costs are very close to the employer dollar caps, the health care cost trend has an immaterial effect on plan obligations and expense 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, 2003 and on the NPPBC for the year ended December 31, 2003 was not calculated. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The Company, together with other affiliated companies, sponsors defined contribution retirement savings plans 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 these plans totaled $5.5 million, $5.7 million and $5.6 million for 2003, 2002 and 2001, respectively, including $0.5 million and $0.4 million related to discontinued operations for 2002 and 2001, respectively. (14) 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, 2003 and 2002 was $2.23 billion and $1.61 billion, respectively. The statutory net income of NLIC for the years ended December 31, 2003, 2002 and 2001 was $444.4 million, $92.5 million and $83.1 million, respectively. The Company is limited in the amount of shareholder dividends it may pay without prior approval by the Department. As of January 1, 2004, based on statutory financial results as of and for the year ended December 31, 2003, NLIC could pay dividends totaling $284.4 million without obtaining prior approval. In February 2004, NLIC obtained prior approval from the Ohio Department of Insurance to pay a dividend to NFS in the amount of $75.0 million because the December 31, 2003 statutory financial statements had not been filed at the time of the dividend. 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 (15) RELATED PARTY TRANSACTIONS 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 and 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, 2003, 2002 and 2001, the Company made payments to NMIC and Nationwide Services Company, LLC, totaling $170.4 million, $135.6 million and $139.8 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. 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 $5.22 billion and $4.50 billion as of December 31, 2003 and 2002, respectively. Total revenues from these contracts were $138.9 million, $143.3 million and $150.7 million for the years ended December 31, 2003, 2002 and 2001, respectively, and include policy charges, net investment income from investments backing the contracts and administrative fees. Total interest credited to the account balances were $111.8 million, $114.8 million and $122.5 million for the years ended December 31, 2003, 2002 and 2001, respectively. The terms of these contracts are consistent in all material respects with what the Company offers to unaffiliated parties who are similarly situated. 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, 2003 and 2002, customer allocations to GGI funds were $12.80 billion and $12.21 billion, respectively. For the years ended December 31, 2003 and 2002, GGI paid the Company $38.6 million and $35.3 million, respectively, for the distribution and servicing of these funds. 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, 2003, 2002 and 2001 were $286.7 million, $325.0 million and $200.7 million, respectively, while benefits, claims and expenses ceded were $247.5 million, $328.4 million and $210.1 million, respectively. 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 $24.8 million, $24.9 million and $26.4 million for the years ended December 31, 2003, 2002 and 2001, respectively. The Company leases office space from NMIC and certain of its subsidiaries. For the years ended December 31, 2003, 2002 and 2001, the Company made lease payments to NMIC and its subsidiaries of $17.5 million, $20.2 million and $18.7 million, respectively. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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, 2003 and 2002, the Company had no borrowings from affiliated entities under such agreements. During 2003, 2002 and 2001, the most the Company had outstanding at any given time was $126.0 million, $224.9 million and $368.5 million, respectively, and the Company incurred interest expense on intercompany repurchase agreements of $0.1 million, $0.3 million and $0.2 million for 2003, 2002 and 2001, respectively. 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 $205.9 million and $87.0 million as of December 31, 2003 and 2002, respectively, and are included in short-term investments on the accompanying consolidated balance sheets. For the years ending December 31, 2003, 2002 and 2001, the Company paid NCMC fees and expenses totaling $0.3 million, $0.3 million and $0.4 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 each of the years in the three year period ended December 31, 2003 were $62.0 million, $50.3 million and $52.9 million, respectively. Through September 30, 2002, the Company filed a consolidated federal income tax return with NMIC, as discussed in more detail in note 9, beginning October 1, 2002, NLIC files a consolidated federal income tax return with NLAIC. Total payments to (from) NMIC were $71.0 million and $(45.4) million for the years ended December 31, 2002 and 2001, respectively. Total payments to (from) NLAIC were $(2.7) million and $0 for the years ended December 31, 2003 and 2002, respectively. In the third quarter of 2003, NLIC received a capital contribution of 100% of the common stock of Nationwide Retirement Plan Solutions (NRPS) from NFS. The capital contribution was valued at $0.2 million. Immediately after receipt of this capital contribution, NRPS was dissolved into NLIC. In first quarter 2003 NLIC received a $200.0 million capital contribution from NFS for general corporate purposes. In 2003 and 2002, NLIC paid dividends of $60.0 million and $35.0 million, respectively, to NFS. During 2003 and 2002 NLIC paid dividends in the form of return of capital of $100.0 million and $475.0 million to NFS, respectively. Furthermore, in February 2004, NLIC paid a $75.0 million dividend to NFS. 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 issued NFS a 7.50%, $300.0 million surplus note maturing on December 17, 2031. In June 2002, NLIC issued NFS an 8.15%, $300.0 million surplus note maturing June 27, 2032. In December 2003, NLIC issued NFS a 6.75%, $100.0 million surplus note maturing December 23, 2033. The Company made interest payments on surplus notes to NFS totaling $47.1 million and $30.1 million in 2003 and 2002, respectively. In addition, the Company made interest payments on unsecured notes to NFS totaling less than $0.1 million and $0.5 million in 2003 and 2002, respectively. As of December 31, 2003 there were no outstanding balances on unsecured notes to NFS. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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. (16) BANK LINES OF CREDIT The Company has available as a source of funds a $1.00 billion revolving credit facility entered into by NFS, NLIC and NMIC. The facility is comprised of a five-year $700.0 million agreement maturing in May of 2005 and a 364 day $300.0 million agreement maturing in May of 2004 with a group of financial institutions. The Company and NMIC intend to renew both parts of the credit facility in 2004. 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 $935.0 million. The Company had no amounts outstanding under this agreement as of December 31, 2003. NLIC is currently required to maintain an available credit facility equal to 50% of any amounts outstanding under its $500.0 million commercial paper program. Therefore, availability under the aggregate $1.00 billion credit facility is reduced by an amount equal to 50% of any commercial paper outstanding. NLIC had $199.8 million of commercial paper outstanding as of December 31, 2003. Also, the Company has entered into an agreement with its custodial bank to borrow against the cash collateral that is posted in connection with its securities lending program. This is an uncommitted facility, which is contingent on the liquidity of the securities lending program. The maximum amount available under the agreement is $100.0 million. The borrowing rate on this program rate is equal to fed funds plus 3 basis points. There were no amounts outstanding under this agreement as of December 31, 2003. (17) CONTINGENCIES On October 29, 1998, the Company was named in a lawsuit filed in Ohio state court by plaintiff Mercedes Castillo that challenged 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 was brought as a class action on behalf of all persons who purchased individual deferred annuity contracts or participated in group annuity contracts sold by the Company and the other named Company affiliates, which were allegedly used to fund certain tax-deferred retirement plans. The amended complaint seeks unspecified compensatory and punitive damages. 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. On November 4, 2002, the Court issued a decision granting the Company's motion for summary judgment on all of plaintiff Mercedes Castillo's individual claims, and ruling that plaintiff's motion for class certification was moot. Following appeal by the plaintiff, both of those decisions were affirmed by the Ohio Court of Appeals on September 9, 2003. The plaintiff filed a notice of appeal of the decision by the Ohio Court of Appeals on October 24, 2003. The Ohio Supreme Court announced on January 21, 2004 that the appeal was not accepted and the time for reconsideration has expired. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements On October 31, 2003, a lawsuit seeking class action status containing allegations similar to those made in the Castillo case was filed against NLIC in Arizona federal court by plaintiff Robert Helman (Robert Helman et al v. Nationwide Life Insurance Company et al). This lawsuit is in a very preliminary stage and the Company is of evaluating its merits. The Company intends to defend this lawsuit vigorously. On August 15, 2001, the Company was named in a lawsuit filed in Connecticut federal court (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). The plaintiffs first amended their complaint on September 6, 2001 to include class action allegations, and have subsequently amended their complaint twice. As amended, in the current complaint, the plaintiffs seek to represent a class of ERISA qualified retirement plans that purchased variable annuities from NLIC. Plaintiffs allege that they invested ERISA plan assets in their variable annuity contracts, and that the Company acquired and breached ERISA fiduciary duties by accepting service payments from certain mutual funds that allegedly consisted of or diminished those ERISA plan assets. The complaint seeks disgorgement of some or all of the fees allegedly received by the Company and other unspecified relief for restitution, along with declaratory and injunctive relief and attorneys' fees. On December 3, 2001, the plaintiffs filed a motion for class certification. Plaintiffs filed a supplement to that motion on September 19, 2003. The Company opposed that motion on December 24, 2003. On January 30, 2004, the Company filed its Revised Memorandum in Support of Summary Judgment, and a Motion Requesting that the Court Decide Summary Judgment before Class Certification. Plaintiffs are opposing that motion. The Company intends to defend this lawsuit vigorously. On May 1, 2003, a class action was filed against NLIC in the United States District Court for the Eastern District of Louisiana, (Edward Miller, Individually, and on behalf of all others similarly situated, v. Nationwide Life Insurance Company). The complaint alleges that in 2001, plaintiff Edward Miller purchased three group modified single premium variable annuities issued by NLIC. Plaintiff alleges that NLIC represented in its prospectus and promised in its annuity contracts that contract holders could transfer assets without charge among the various funds available through the contracts, that the transfer rights of contract holders could not be modified and that NLIC's expense charges under the contracts were fixed. Plaintiff claims that NLIC has breached the contracts and violated federal securities laws by imposing trading fees on transfers that were supposed to have been without charge. Plaintiff seeks compensatory damages and rescission on behalf of himself and a class of persons who purchased this type of annuity or similar contracts issued by NLIC between May 1, 2001 and April 30, 2002 inclusive and were allegedly damaged by paying transfer fees. The Company's motion to dismiss the complaint was granted by the Court on October 28, 2003. Plaintiff has appealed that dismissal. On January 21, 2004, the Company was named in a lawsuit filed in the U.S. District Court for the Northern District of Mississippi (United Investors Life Insurance Company v. Nationwide Life Insurance Company and/or Nationwide Life Insurance Company of America and/or Nationwide Life and Annuity Insurance Company and/or Nationwide Life and Annuity Company of America and/or Nationwide Financial Services, Inc. and/or Nationwide Financial Corporation, and John Does A-Z). In its complaint, the plaintiff alleges that the Company and/or its affiliated life insurance companies (1) tortiously interfered with the plaintiff's contractual and fiduciary relationship with Waddell & Reed, Inc. and/or its affiliates, Waddell & Reed Financial, Inc., Waddell & Reed Financial Services, Inc. and W & R Insurance Agency, Inc. (collectively, "Waddell & Reed"), (2) conspired with and otherwise caused Waddell & Reed to breach its contractual and fiduciary obligations to the plaintiff, and (3) tortiously interfered with the plaintiff's contractual relationship with policyholders of insurance policies issued by the plaintiff. The complaint seeks compensatory damages, punitive damages, pre- and post-judgment interest, a full accounting, and costs and disbursements, including attorneys' fees. The plaintiff seeks to have each defendant judged jointly and severally liable for all damages. This lawsuit is in a very preliminary stage, and the Company intends to defend it vigorously. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The financial services industry, including mutual fund, variable annuity and distribution companies have been the subject of increasing scrutiny by regulators, legislators, and the media over the past year. Numerous regulatory agencies, including the United States Securities and Exchange Commission and the New York Attorney General, have commenced industry-wide investigations regarding late trading and market timing in connection with mutual funds and variable insurance contracts, and have commenced enforcement actions against some mutual fund companies on those issues. Investigations and enforcement actions have also been commenced, on a smaller scale, regarding the sales practices of mutual fund and variable annuity distributors. These legal proceedings are expected to continue in the future. These investigations and proceedings could result in legal precedents, as well as new industry-wide legislation, rules, or regulations, that could significantly affect the financial services industry, including variable annuity companies. The Company has been contacted by regulatory agencies for information relating to market timing, late trading, and sales practices. The Company is cooperating with these regulatory agencies and is responding to those information requests. There can be no assurance that any such litigation or regulatory actions will not have a material adverse effect on the Company in the future. (18) SECURITIZATION TRANSACTIONS To date, the Company has sold $290.1 million of credit enhanced equity interests in Tax Credit Funds to unrelated third parties. The Company has guaranteed cumulative after-tax yields to third party investors ranging from 5.10% to 5.25% and as of December 31, 2003 held guarantee reserves totaling $2.9 million on these transactions. These guarantees are in effect for periods of approximately 15 years each. The Tax Credit Funds 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 stabilization collateral set aside 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 $824.2 million. The Company does not anticipate making any payments related to the guarantees. At the time of the sales, $4.3 million of net sale proceeds were set aside as collateral 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 collateral is released. During 2003 and 2002, $3.1 million and $0.5 million of stabilization collateral had been released into income, respectively. 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 may 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. (19) 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. In addition, the Company reports certain other revenues and expenses in a Corporate segment. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements 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 group retirement plans, medium-term note program and structured products initiatives. 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 and expenses of the Company's non-insurance subsidiaries not reported within the three product segments. 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 pre-tax operating earnings. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The following tables summarize the financial results of the Company's business segments for the years ended December 31, 2003, 2002 and 2001.
INDIVIDUAL INSTITUTIONAL LIFE (in millions) ANNUITY PRODUCTS INSURANCE CORPORATE TOTAL =========================================================================================================================== 2003 Net investment income $ 807.9 $ 787.7 $ 324.3 $ 60.1 $ 1,980.0 Other operating revenue 517.7 162.3 536.2 0.4 1,216.6 Net realized losses on investments, hedging - - - (100.8) (100.8) instruments and hedged items - --------------------------------------------------------------------------------------------------------------------------- Total operating revenues 1,325.6 950.0 860.5 (40.3) 3,095.8 - --------------------------------------------------------------------------------------------------------------------------- Interest credited to policyholder account values 602.5 512.3 185.6 - 1,300.4 Amortization of deferred policy acquisition costs 228.4 45.6 101.9 - 375.9 Interest expense on debt, primarily with NFS - - - 48.4 48.4 Other benefits and expenses 324.0 183.1 423.0 6.6 936.7 - --------------------------------------------------------------------------------------------------------------------------- Total benefits and expenses 1,154.9 741.0 710.5 55.0 2,661.4 - --------------------------------------------------------------------------------------------------------------------------- Income from continuing operations before federal income tax expense 170.7 209.0 150.0 (95.3) $ 434.4 =============== Net realized losses on investments, hedging instruments and hedged items - - - 100.8 - ------------------------------------------------------------------------------------------------------------ Pre-tax operating earnings 1 $ 170.7 $ 209.0 $ 150.0 $ 5.5 ============================================================================================================ - ------------------------------------------------------------------------------------------------------------ Assets as of period end $ 49,392.5 $ 33,837.4 $ 11,243.5 $ 6,097.5 $ 100,570.9 =========================================================================================================================== 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 Net realized losses on investments, hedging instruments and hedged items - - - (84.4) (84.4) - --------------------------------------------------------------------------------------------------------------------------- Total operating revenues 1,194.7 978.1 866.3 (42.5) 2,996.6 - --------------------------------------------------------------------------------------------------------------------------- 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, primarily with NFS - - - 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 - --------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before federal income tax expense (122.8) 203.4 171.5 (82.6) 169.5 =============== Net realized losses on investments, hedging instruments and hedged items - - - 84.4 - --------------------------------------------------------------------------------------------------------------------------- Pre-tax operating (loss) earnings 1 $ (122.8) $ 203.4 $ 171.5 $ 1.8 =========================================================================================================================== - --------------------------------------------------------------------------------------------------------------------------- Assets as of period end $ 40,830.0 $ 30,440.7 $ 9,676.3 $ 5,075.6 $ 86,022.6 ===========================================================================================================================
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements
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 (0.3) 1,276.6 Net realized losses on investments, hedging instruments and hedged items - - - (18.3) (18.3) - --------------------------------------------------------------------------------------------------------------------------- Total operating revenues 1,090.7 1,056.9 834.8 0.6 2,983.0 - --------------------------------------------------------------------------------------------------------------------------- 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 primarily with NFS - - - 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 - --------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before 231.4 211.3 189.7 (3.5) $ 628.9 federal income tax expense ============ Net realized losses on investments, hedging instruments and hedged items not related to securitizations - - - 20.2 - --------------------------------------------------------------------------------------------------------------------------- Pre-tax operating earnings 1 $ 231.4 $ 211.3 $ 189.7 $ 16.7 =========================================================================================================================== - --------------------------------------------------------------------------------------------------------------------------- 2 Assets as of period end $ 43,885.4 $ 34,130.1 $ 9,129.0 $ 4,010.1 $ 91,154.6 ===========================================================================================================================
____________ 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. 2 Inclues $24.8 million of assets related to discontinued operations. 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. (20) VARIABLE INTEREST ENTITIES As of December 31, 2003, the Company has relationships with eight VIEs where the Company is the primary beneficiary. Each of these VIEs is a conduit that assists the Company in structured products transactions. One of the VIEs is used in the securitization of mortgage loans, while the others are involved in the sale of Low-Income-Housing Tax Credit Funds (Tax Credit Funds) to third-party investors where the Company provides guaranteed returns (See note 18). The Company has not yet adopted FIN 46 or FIN 46R as it relates to these VIEs. As such, these VIEs and their results of operations are not included in the consolidated financial statements. The net assets of these VIEs totaled $176.1 million as of December 31, 2003. The most significant components of net assets are $58.7 million of mortgage loans on real estate, $241.9 million of other long-term investments, $37.9 million in other assets, $59.2 million of short-term debt and $103.3 million of other liabilities. The total exposure to loss on these VIEs where the Company may be the primary beneficiary is less than $0.1 million as of December 31, 2003. For the mortgage loan VIE, which is the VIE to which the short-term debt relates to, the creditors have no recourse against the Company in the event of default by the VIE. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements In addition to the VIEs described above, the Company also holds variable interests, in the form of limited partnership (LP) or similar investments, in a number of tax credit funds. These investments have been held by the Company for periods of 1 to 7 years and allow the Company to experience certain tax credits and other tax benefits from affordable housing projects. The Company also has certain investments in securitization transactions that qualify as VIEs, but for which the Company is not the primary beneficiary. The total exposure to loss on these VIEs where the Company is not the primary beneficiary is $44.2 million as of December 31, 2003. (21) SUBSEQUENT EVENT As discussed in note 2(n), the Company adopted SOP 03-1 effective January 1, 2004. In connection with this adoption, the following cumulative effect adjustments are expected to be recorded in the 2004 consolidated financial statements.
(in millions) JANUARY 1, 2004 ================================================================================================================================== Increase in future policy benefits - ratchet interest crediting $ (12.3) Increase in future policy benefits - secondary guarantees - life insurance (2.4) Increase in future policy benefits - GMDB claim reserves (1.8) Increase in future policy benefits - GMIB claim reserves (1.0) Deferred acquisition costs related to above 12.4 Deferred federal income taxes 1.8 Cumulative effect of adoption of accounting principle, net of tax $ (3.3) ==================================================================================================================================
Under SOP 03-1, the Company's GMDB claim reserves are determined by estimating the expected value of death benefits on contracts that trigger a policy benefit and recognizing the excess ratably over the accumulation period based on total expected assessments. The Company will regularly evaluate estimates used and will adjust the additional liability balance as appropriate, with a related charge or credit to other benefits and claims, if actual experience or other evidence suggests that earlier assumptions should be revised. The following assumptions and methodology were used to determine the GMDB claim reserves upon adoption of SOP 03-1: o Data used was based on a combination of historical numbers and future projections involving 250 stochastically generated investment performance scenarios o Mean gross equity performance of 8.1% o Equity volatility of 18.7% o Mortality - 100% of Annuity 2000 table o Discount rate of 8.0% Lapse rate assumptions vary by duration as shown below:
DURATION 1 2 3 4 5 6 7 8 9 10+ - --------------------------------------------------------------------------------------------------------------------- Minimum 4.50% 5.50% 6.50% 8.50% 10.50% 10.50% 10.50% 17.50% 17.50% 17.50% MAXIMUM 4.50% 8.50% 11.50% 17.50% 22.50% 22.50% 22.50% 22.50% 22.50% 19.50%
GMABs are considered derivatives under SFAS 133 resulting in the related liabilities being recognized at fair value with changes in fair value reported in earnings, and therefore, excluded from the SOP 03-1 claim reserve. NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES (a wholly owned subsidiary of Nationwide Financial Services, Inc.) Notes to Consolidated Financial Statements The GMIB claim reserves will be determined each period by estimating the expected value of the annuitization benefits in excess of the projected account balance at the date of annuitization and recognizing the excess ratably over the accumulation period based on total assessments. The Company will regularly evaluate estimates used and will adjust the additional liability balance as appropriate, with a related charge or credit to other benefits and claims, if actual experience or other evidence suggests that earlier assumptions should be revised. The assumptions used in calculating the GMIB claim reserves are consistent with those used for calculating the GMDB claim reserves. In addition, the calculation of the GMIB claim reserves assumes utilization ranges from a low of 3% when the contract holder's annuitization value is 10% in the money to 100% utilization when the contract holder is 90% in the money. PART C. OTHER INFORMATION Item 26. 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 (33-62795) 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 - Attached hereto. (o) Not Applicable (p) Not Applicable (q) Redeemability Exemption Procedures - Filed previously with registration statement (333-46338) and hereby incorporated by reference. Item 27. DIRECTORS AND OFFICERS OF THE DEPOSITOR Arden L. Shisler, Director and Chairman of the Board W.G. Jurgensen, Director and Chief Executive Officer Joseph J. Gasper, Director, President and Chief Operating Officer Mark R. Thresher, President and Chief Operating Officer-Elect and Chief Financial Officer Patricia R. Hatler, Executive Vice President, General Counsel and Secretary Terri L. Hill, Executive Vice President-Chief Administrative Officer Michael C. Keller, Executive Vice President-Chief Information Officer Kathleen D. Ricord, Executive Vice President-Chief Marketing Officer Robert A. Rosholt, Executive Vice President-Chief Finance and Investment Officer W. Kim Austen, Senior Vice President-Property and Casualty Commercial/Farm Product Pricing David A. Diamond, Senior Vice President Dennis P. Drent, Senior Vice President-Internal Audits Philip C. Gath, Senior Vice President-Chief Actuary-Nationwide Financial J. Lynn Greenstein, Senior Vice President-Property and Casualty Personal Lines Product Pricing Kelly A. Hamilton, Senior Vice President-NI Finance David K. Hollingsworth, Senior Vice President-President-Nationwide Insurance Sales David R. Jahn, Senior Vice President-Property and Casualty Claims Richard A. Karas, Senior Vice President-Sales-Financial Services M. Eileen Kennedy, Senior Vice President-NF Finance Gale V. King, Senior Vice President-Property and Casualty Human Resources Srinivas Koushik, Senior Vice President-Chief Technology Officer Gregory S. Lashutka, Senior Vice President-Corporate Relations Gary D. McMahan, Senior Vice President Brian W. Nocco, Senior Vice President and Treasurer Mark D. Phelan, Senior Vice President-Technology and Operations John S. Skubik, Senior Vice President-Consumer Finance Katherine A. Stumph, Senior Vice President-Marketing, Strategy and Urban Market Operations Mark D. Torkos, Senior Vice President-Property and Casualty Systems Richard M. Waggoner, Senior Vice President-Operations Robert O. Wilson, Senior Vice President-Corporate Strategy 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 Martha J. Miller de Lombera, Director The business address of the Directors and Officers of the Depositor is: One Nationwide Plaza, Columbus, Ohio 43215 Item 28. 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 The company is inactive and formerly registered as an 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 former Massachusetts, Inc. Provident Mutual Companies in Massachusetts. - ------------------------------------------------------------------------------------------------------------------------------------ 1717 Insurance Agency of Texas, Inc. Texas Established to grant proper licensing to former Provident Mutual Companies in Texas. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Companies, Inc. (The) Texas This company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Company (The) Texas The company is a third-party administrator providing record keeping services for 401(k) plans. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Investment Advisors, Inc. Texas The company is an investment advisor registered with the Securities and Exchange Commission. - ------------------------------------------------------------------------------------------------------------------------------------ 401(k) Investment Services, Inc. Texas The company is a broker-dealer registered with the National Association of Securities Dealers, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Affiliate Agency, Inc. Delaware The company is an insurance agency marketing life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Affiliate Agency of Ohio, Inc. Ohio The company is an insurance agency marketing life insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ AGMC Reinsurance Ltd. Turks & Caicos The company is in the business of reinsurance of Islands mortgage guaranty risks. - ------------------------------------------------------------------------------------------------------------------------------------ AID Finance Services, Inc. Iowa The company operates as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Document Solutions, Inc. Iowa The company provides general printing services to its affiliated companies as well as to unaffiliated companies. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED General Agency Company Iowa The company acts as a general agent and surplus lines broker for property and casualty insurance products. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Group Insurance Marketing Iowa The company engages in the direct marketing of Company property and casualty insurance products. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Group, Inc. Iowa The company is a property and casualty insurance holding company. - ------------------------------------------------------------------------------------------------------------------------------------ ALLIED Property and Casualty Iowa The company underwrites general property and Insurance Company casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Allied Texas Agency, Inc. Texas The company acts as a managing general agent to place personal and commercial automobile insurance with Colonial County Mutual Insurance Company for the independent agency companies. - ------------------------------------------------------------------------------------------------------------------------------------ Allnations, Inc. Ohio The company engages in promoting, extending, and strengthening cooperative insurance organizations throughout the world. - ------------------------------------------------------------------------------------------------------------------------------------ AMCO Insurance Company Iowa The company underwrites general property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ AMH Investments England and Wales The company provides benefits to a number of associates. - ------------------------------------------------------------------------------------------------------------------------------------ American Marine Underwriters, Inc. Florida The company is an underwriting manager for ocean cargo and hull insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Asset Management Holdings, plc England and Wales The company 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 United Kingdom The company is an investment holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Cal-Ag Insurance Services, Inc. California The company is a small captive insurance brokerage firm serving principally, but not exclusively, the "traditional" agent producers of Crestbrook Insurance Company. - ------------------------------------------------------------------------------------------------------------------------------------ CalFarm Insurance Agency California The company was originally incorporated to assist agents and affiliated companies in account completion for marketing products of Crestbrook Insurance Company. The agency also assisted other in-house agencies in a brokerage capacity to accommodate policyholders. - ------------------------------------------------------------------------------------------------------------------------------------ Cap Pro Holding, Inc. Delaware The company operates as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Coda Capital Management, LLC Pennsylvania The company is a convertible bond manager. - ------------------------------------------------------------------------------------------------------------------------------------ Colonial County Mutual Insurance Texas The company underwrites non-standard automobile and Company motorcycle insurance and various other commercial liability coverages in Texas. - ------------------------------------------------------------------------------------------------------------------------------------ Cooperative Service Company Nebraska The company is an insurance agency that sells and services commercial insurance. The company also provides loss control and compliance consulting services and audit, compilation, and tax preparation services. - ------------------------------------------------------------------------------------------------------------------------------------ Corviant Corporation Delaware The purpose of the company is to create a captive distribution network through which affiliates can sell multi-manager investment products, insurance products and sophisticated estate planning services. - ------------------------------------------------------------------------------------------------------------------------------------ Crestbrook Insurance Company Ohio The company is an Ohio-based multi-line insurance corporation that is authorized to write personal, automobile, homeowners and commercial insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Damian Securities Limited England and Wales The company 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 objectives. - ------------------------------------------------------------------------------------------------------------------------------------ Delfi Realty Corporation Delaware The company is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ Depositors Insurance Company Iowa The company underwrites general property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ 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 The purpose of the company is to sell property and LLC casualty insurance products including, but not limited to, automobile or other vehicle insurance and homeowner's insurance. - ------------------------------------------------------------------------------------------------------------------------------------ DVM Insurance Agency, Inc. California The company places pet insurance business not written by Veterinary Pet Insurance Company outside of California with National Casualty Company. - ------------------------------------------------------------------------------------------------------------------------------------ Europewide Life, SA Luxembourg The company writes life insurance including coinsurance and reinsurance, with the ability to write policies and contracts. - ------------------------------------------------------------------------------------------------------------------------------------ F&B, Inc. Iowa The company is an insurance agency that places business not written by the Farmland Insurance Companies with other carriers. - ------------------------------------------------------------------------------------------------------------------------------------ Farmland Mutual Insurance Iowa The company provides property and casualty insurance Company primarily to agricultural businesses. - ------------------------------------------------------------------------------------------------------------------------------------ Fenplace Limited England and Wales The company is currently inactive. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Alabama The company is an insurance agency marketing life Agency of Alabama, Inc. insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Ohio The company is an insurance agency marketing life Agency of Ohio, Inc. insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Oklahoma The company is an insurance agency marketing life Agency of Oklahoma, Inc. insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Distributors Texas The company is an insurance agency marketing life Agency of Texas, Inc. insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Financial Horizons Securities Oklahoma The company is a limited broker-dealer doing Corporation business solely in the financial institutions market. - ------------------------------------------------------------------------------------------------------------------------------------ Florida Records Administrator, Inc. Florida The company administers the deferred compensation plan for the public employees of the State of Florida. - ------------------------------------------------------------------------------------------------------------------------------------ Four P Finance Company Pennsylvania The company is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ G.I.L. Nominees Limited England and Wales The company acts as a nominee. The company is dormant within the meaning of Section 249AA of the Companies Act of 1985 (English Law). - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore 1990 Limited England and Wales The company is engaged as a general partner in a limited partnership formed to invest in unlisted securities. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore 1990 Trustee Limited England and Wales The company is dormant within the meaning of Section 249AA of the Companies Act of 1985 (English Law). - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Capital Management Limited England and Wales The company is engaged in investment management and advisory services to business, institutional and private investors. The company has completed the transfer of its investment management activity to Gartmore Investment Limited. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Distribution Services, Delaware The company is a limited broker-dealer. Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Emerging Managers, Delaware The company acquires and holds interest in a LLC registered investment advisor and provides investment management services. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Fund Managers Jersey, Channel The company is engaged in investment administration International Limited Islands and support. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Fund Managers Limited England and Wales The company is engaged in authorized unit trust management and OEIC management. It is also the authorized Corporate Director of the Gartmore OEIC Funds. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Global Asset Management, Delaware The company operates as a holding company. Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Global Asset Management Delaware The company acts as a holding company for the 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 Global Ventures, Inc. Delaware The company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Group Limited England and Wales The company 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. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Indosuez UK Recovery Fund England and Wales The company is a general partner in two limited (G.P.) Limited partnerships formed to invest in unlisted securities. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment Limited England and 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 Management plc England and Wales The company is an investment holding company and provides services to other companies within the Gartmore Group in the UK. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment Services GmbH Germany The company is engaged in marketing support. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investment Services Limited England The company is engaged in investment holding. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Investor Services, Inc. Ohio The company provides transfer and dividend disbursing agent services to various mutual fund entities. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Japan Limited Japan The company is the renamed survivor entity of the merger of Gartmore Investment Management Japan Limited and Gartmore NC Investment Trust Management Company Ltd. The company is engaged in the business of investment management. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Managers (Jersey) Ltd Jersey, Channel The company serves as the manager of four AIB Govett Islands Jersey funds - AIB Grofunds Currency Funds Limited, Govett Securities & Investments Limited, Govett Singapore Growth Fund Limited and Govett Safeguard Funds Limited. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Morley & Associates, Inc. Oregon The company brokers or places book value maintenance agreements (wrap contracts) and guaranteed I contracts (GICs) for collective investment trusts and accounts. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Morley Capital Management, Oregon The company is an investment advisor and stable Inc. value money manager. - -------------------------------------x---------------------------------------------------------------------------------------------- Gartmore Morley Financial Services, Oregon The company is a holding company. Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Mutual Fund Capital Trust Delaware The trust acts as a registered investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore No. 1 General Partner Ltd. Scotland The company is a Gartmore No. 1 General Partner to Scottish Limited Partnership, itself a general partner of Gartmore Direct Fund I Limited Partnership, a private equity investment vehicle. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore No. 2 General Partner Ltd. Scotland The company is a Gartmore No. 2 General Partner to Scottish Limited Partnership, itself a general partner of Gartmore Direct Fund I Limited Partnership, a private equity investment vehicle. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Nominees Limited England and Wales The company acts as a nominee. The company is dormant within the meaning of Section 249AA of the Companies Act 1985 (English Law). - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Pension Trustees Limited England and Wales Until April 1999, the company acted as a trustee of the Gartmore Pension Fund established by Gartmore Investment Management plc, which was merged with the National Westminster Bank Pension Fund on April 1, 1999. As a result all assets and liabilities of the Gartmore Pension Fund were transferred to the National Westminster Bank Fund. On November 22, 2000, the company changed its name from Gartmore Pension Fund Trustees Limited to Gartmore Pension Trust Limited. On November 30, 2000, the company became the trustee of the Gartmore Pension Scheme. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Riverview, LLC Delaware The company provides customized solutions, in the form of expert advice 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 Securities Limited England and Wales The company is engaged in investment holding and is a partner in Gartmore Global Partners. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Separate Accounts LLC Delaware The company acts as an investment advisor registered with the Securities and Exchange Commission. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore Trust Company Oregon The company is an Oregon state bank with trust power. - ------------------------------------------------------------------------------------------------------------------------------------ Gartmore U.S. Limited England and Wales The company is a joint partner in Gartmore Global Partners. - ------------------------------------------------------------------------------------------------------------------------------------ Gates, McDonald & Company Ohio The company provides services to employers for managing workers' and unemployment compensation matters and employee benefits costs. - ------------------------------------------------------------------------------------------------------------------------------------ Gates, McDonald & Company of Nevada The company provides self-insurance administration, Nevada claims examining and data processing services. - ------------------------------------------------------------------------------------------------------------------------------------ Gates, McDonald & Company of New New York The company provides workers' 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 company 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 company is an insurance agency and provides commercial property and casualty brokerage services. - ------------------------------------------------------------------------------------------------------------------------------------ Landmark Financial Services of New New York The company is an insurance agency marketing life York, Inc. insurance and annuity products through financial institutions. - ------------------------------------------------------------------------------------------------------------------------------------ Lone Star General Agency, Inc. Texas The company acts as general agent to market non-standard automobile and motorcycle insurance for Colonial County Mutual Insurance Company. - ------------------------------------------------------------------------------------------------------------------------------------ MedProSolutions, Inc. Massachusetts The company provides third-party administration services for workers compensation, automobile injury and disability claims. - ------------------------------------------------------------------------------------------------------------------------------------ National Casualty Company Wisconsin The company underwrites various property and casualty coverage, as well as individual and group accident and health insurance. - ------------------------------------------------------------------------------------------------------------------------------------ National Casualty Company of England It is organized for profit under the Companies Act America, Ltd. of 1948 of England for the purpose of carrying on the business of insurance, reinsurance, indemnity, and guarantee of any and every kind, except life insurance; to act as underwriting agents and insurance manager in all of the respective branches, and to act as agent or manager for any insurance company, club, or association or for any underwriter or syndicate of underwriters and to purchase, take on, lease or in exchange, hire or otherwise acquire and hold for any estate or interest in any lands, buildings, easements, rights, privileges, concessions, patents, and any real or personal property of any kind necessary or convenient for the purposes in connection with the company's business or any branch or department thereof. This company is currently inactive. - ------------------------------------------------------------------------------------------------------------------------------------ National Deferred Compensation, Ohio The company administers deferred compensation plans Inc. for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Advantage Mortgage Iowa The company is engaged in making residential (1-4 Company family) mortgage loans. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Affinity Insurance Kansas The company is a shell insurer with no active Company of America policies or liabilities. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Affordable Housing, Ohio The company invests in affordable multi-family LLC housing projects throughout the U.S. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Agribusiness Insurance Iowa The company provides property and casualty insurance Company primarily to agricultural businesses. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Arena, LLC Ohio The purpose of the company is to develop Nationwide Arena and to engage in related Arena district development activity. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Asset Management England and Wales The company is a holding company of a group engaged Holdings, Ltd. in the management of pension fund assets, unit trusts and other collective investment schemes, investment trusts and portfolios for corporate clients. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Assurance Company Wisconsin The company underwrites non-standard automobile and motorcycle insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Capital Mortgage, LLC Ohio This company 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 profit. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Cash Management Ohio The company buys and sells investment securities of Company a short-term nature as agent for other corporations, foundations, and insurance company separate accounts. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Community Development Ohio The company holds investments in low-income housing Corporation, LLC funds. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Corporation Ohio The company acts primarily as a holding company for entities affiliated with Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Credit Enhancement Ohio The company is currently a shell company. Insurance Company - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Assignment Ohio The company acts as an administrator of structured Company settlements. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Institution Delaware The company engages in the business of an insurance Distributors Agency, Inc. agency. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Institution New Mexico The company engages in the business of an insurance Distributors Agency, Inc. of New agency. Mexico - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Institution Massachusetts The company engages in the business of an insurance Distributors Insurance Agency, Inc. agency. of Massachusetts - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Services Bermuda The company is a long-term insurer that issues (Bermuda) Ltd. variable annuity and variable life products to persons outside the United States and Bermuda. - ------------------------------------------------------------------------------------------------------------------------------------ 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 company 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 company provides distribution services for its affiliate Nationwide Towarzystwo Ubezpieczen na Zycie S.A. in Poland. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Financial Structured Ohio The company serves to capture and report the results Products, LLC of the structured products business unit. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Foundation Ohio The not-for-profit company contributes to non-profit activities and projects. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide General Insurance Company Ohio The company transacts a general insurance business, except life insurance. The corporation primarily provides automobile and fire insurance to select customers. - ------------------------------------------------------------------------------------------------------------------------------------ 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 company 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 Home Mortgage Ohio This company performs the marketing function for Distributors, Inc. Nationwide Advantage Mortgage Company. - ------------------------------------------------------------------------------------------------------------------------------------ *Nationwide Indemnity Company Ohio The company is involved in the reinsurance business by assuming business from Nationwide Mutual Insurance Company and other insurers within the Nationwide Insurance organization. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Insurance Company of Wisconsin The company is an independent agency personal lines America underwriter of property/casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Insurance Company of Ohio The company 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 company is a special risk, excess and surplus Underwriters lines underwriting manager. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Investment Services Oklahoma This is a limited broker-dealer company doing Corporation business in the deferred compensation market and acts as an investment advisor. - ------------------------------------------------------------------------------------------------------------------------------------ **Nationwide Life and Annuity Ohio The company engages in underwriting life insurance Insurance Company and granting, purchasing, and disposing of annuities. - ------------------------------------------------------------------------------------------------------------------------------------ *Nationwide Life and Annuity Delaware The company provides individual life insurance Company of America products. - ------------------------------------------------------------------------------------------------------------------------------------ *Nationwide Life Insurance Company Pennsylvania The company provides individual life insurance and of America group annuity products. - ------------------------------------------------------------------------------------------------------------------------------------ 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 type of insurance appertaining thereto. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ **Nationwide Life Insurance Ohio This company provides individual life insurance, Company group life and health insurance, fixed and variable annuity products, and other life insurance products. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Lloyds Texas The company markets commercial property insurance in Texas. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Management Systems, Inc. Ohio The company offers a preferred provider organization and other related products and services. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Martima Vida Previdencia Brazil The company operates as a licensed insurance company S.A. in the categories of life and unrestricted private pension plans in Brazil. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Mortgage Holdings, Inc. Ohio The company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Mutual Fire Insurance Ohio The company engages in a general insurance and Company reinsurance business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Mutual Insurance Ohio The company engages in a 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 company engages in a general insurance business, Insurance Company except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Provident Distributors, Delaware The company is an inactive company. Inc. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Provident Holding Pennsylvania The company is a holding company for non-insurance Company subsidiaries. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Realty Investors, Ltd. Ohio The company is engaged in the business of developing, owning and operating real estate investments. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Delaware The company markets and administers deferred Inc. compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Alabama The company provides retirement products, Inc. of Alabama marketing/education and administration to public employees and educators. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Arizona The company markets and administers deferred Inc. of Arizona compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Arkansas The company markets and administers deferred Inc. of Arkansas compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Montana The company markets and administers deferred Inc. of Montana compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Nevada The company markets and administers deferred Inc. of Nevada compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, New Mexico The company markets and administers deferred Inc. of New Mexico compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Ohio The company provides retirement products, Inc. of Ohio marketing/education and administration to public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Oklahoma The company markets and administers deferred Inc. of Oklahoma compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, South Dakota The company markets and administers deferred Inc. of South Dakota compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Texas The company markets and administers deferred Inc. of Texas compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Wyoming The company markets and administers deferred Inc. of Wyoming compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Retirement Solutions, Massachusetts The company markets and administers deferred Insurance Agency, Inc. compensation plans for public employees. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Securities, Inc. Ohio The company is a registered broker-dealer and provides investment management and administrative services. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Services Company, LLC Ohio The company performs shared services functions for the Nationwide organization. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Services Sp. z o.o. Poland The company provides services to Nationwide Global Holdings, Inc. in Poland. - ------------------------------------------------------------------------------------------------------------------------------------ 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 company is authorized to engage in the business na Zycie S.A. of life insurance and pension products in Poland. - ------------------------------------------------------------------------------------------------------------------------------------ Nationwide Trust Company, FSB United States 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 Holding Company, Ltd. England and Wales The company 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. - ------------------------------------------------------------------------------------------------------------------------------------ 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 I, Delaware The company owns and manages contributed securities LLC to achieve long - term capital appreciation from the contributed securities and through investments in a portfolio of other equity investments in financial service and other related companies as determined by the company to be undervalued or in need of changes in capital structure or to present other special situations that have the potential for significant earnings growth from among other things, major financial service industry trends, unfilled niches and synergies with other firms in the portfolio. - ------------------------------------------------------------------------------------------------------------------------------------ NFS Distributors, Inc. Delaware The company acts primarily as a holding company for Nationwide Financial Services, Inc. distribution companies. - ------------------------------------------------------------------------------------------------------------------------------------ NFSB Investments, Ltd. Bermuda The company buys and sells investment securities for its own account in order to enhance the investment returns of its affiliates. - ------------------------------------------------------------------------------------------------------------------------------------ NGH Luxembourg S. a. r. L. Luxembourg The company acts primarily as a holding company for the European operations for Nationwide Global Holdings, Inc. - ------------------------------------------------------------------------------------------------------------------------------------ NGH Netherlands, B.V. Netherlands The company acts as a holding company for other Nationwide overseas companies. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ 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. - ------------------------------------------------------------------------------------------------------------------------------------ PanEuroLife Luxembourg The company provides individual life insurance primarily in the United Kingdom, Belgium and France. - ------------------------------------------------------------------------------------------------------------------------------------ Pension Associates, Inc. Wisconsin The company provides pension plan administration and record keeping services, and pension plan and compensation consulting. - ------------------------------------------------------------------------------------------------------------------------------------ PNAM, Inc. Delaware The company is a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Premier Agency, Inc. Iowa This company is an insurance agency. - ------------------------------------------------------------------------------------------------------------------------------------ Provestco, Inc. Delaware The company serves as a general partner in certain real estate limited partnerships invested in by Nationwide Life Insurance Company of America. - ------------------------------------------------------------------------------------------------------------------------------------ Quick Sure Auto Agency, Inc. Texas The company is an insurance agency and operates as an employee agent "storefront" for Titan Insurance Services. - ------------------------------------------------------------------------------------------------------------------------------------ RCMD Financial Services, Inc. Delaware The company is a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Retention Alternatives, Ltd. Bermuda The company is a captive insurer and writes first dollar insurance policies in workers' compensation, general liability and automobile liability for its affiliates in the United States. - ------------------------------------------------------------------------------------------------------------------------------------ RF Advisors, Inc. Pennsylvania The company is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ Riverview International Group, Inc. Delaware The company is an investment advisor and a broker dealer. - ------------------------------------------------------------------------------------------------------------------------------------ RP&C International, Inc. Ohio The company is an investment-banking firm, which provides specialist advisory services and innovative financial solutions to public and private companies internationally. - ------------------------------------------------------------------------------------------------------------------------------------ Scottsdale Indemnity Company Ohio The company engages in a general insurance business, except life insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Scottsdale Insurance Company Ohio The company primarily provides excess and surplus lines of property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Scottsdale Surplus Lines Insurance Arizona The company provides excess and surplus lines 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 is an inactive company. - ------------------------------------------------------------------------------------------------------------------------------------ TBG Aviation, LLC California The company holds an investment in a leased airplane and maintains an operating agreement with Flight Options. - ------------------------------------------------------------------------------------------------------------------------------------ TBG Danco Insurance Company California The corporation provides for life insurance and individual executive estate planning to maximize benefit value. - ------------------------------------------------------------------------------------------------------------------------------------ TBG Financial and Insurance California The corporation consults with corporate clients and Services Corporation financial institutions on the development and implementation of proprietary and/or private placement insurance products for the financing of executive benefit programs and individual executive's estate planning requirements. As a broker dealer, TBG Financial Services provides complete and flexible access to institutional insurance investment products. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ TBG Financial and Insurance Hawaii The corporation consults with corporate clients and Services Corporation of Hawaii financial institutions on the development and implementation of proprietary, private placement and institutional insurance products. - ------------------------------------------------------------------------------------------------------------------------------------ TBG Insurance Services California The company markets and administers executive Corporation benefit plans. - ------------------------------------------------------------------------------------------------------------------------------------ THI Holdings (Delaware), Inc. Delaware The company acts as a holding company for the Titan, Victoria and Whitehall groups. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Auto Agency, Inc. Michigan The company is an insurance agency that primarily sells non-standard automobile insurance for Titan Insurance Company in Michigan. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Auto Insurance Nevada The company is an insurance agency that operates as an employee agent "storefront" for Titan Indemnity Company in Nevada. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Auto Insurance of Pennsylvania The company is an insurance agency that operates as Pennsylvania, Inc. an employee agent "storefront" for Titan Indemnity Company in Pennsylvania (currently inactive). - ------------------------------------------------------------------------------------------------------------------------------------ Titan Auto Insurance of Arizona, Arizona The company is an insurance agency that operates as Inc. an employee agent "storefront" for Titan Indemnity Company in Arizona. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Auto Insurance of New Mexico, New Mexico The company is an insurance agency that operates as Inc. an employee agent "storefront" for Titan Indemnity Company in New Mexico. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Auto Insurance, Inc. Colorado The company is an insurance agency and operates as an employee agent "storefront" for Titan Indemnity Company in Colorado. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Holdings Service Corporation Texas The company acts as a holding company specifically for Titan corporate employees. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Indemnity Company Texas The company is a multi-line licensed insurance company and is operating primarily as a property and casualty insurance company. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Insurance Company Michigan This is a property and casualty insurance company. - ------------------------------------------------------------------------------------------------------------------------------------ Titan Insurance Services, Inc. Texas The company is a Texas grand fathered managing general agency. - ------------------------------------------------------------------------------------------------------------------------------------ Titan National Auto Call Center, Texas The company is licensed as an insurance agency that Inc. operates as an employee agent "call center" for Titan Indemnity Company. - ------------------------------------------------------------------------------------------------------------------------------------ Vertboise, SA Luxembourg The company acts as a real property holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Veterinary Pet Insurance Company California The company provides pet insurance. - ------------------------------------------------------------------------------------------------------------------------------------ Veterinary Pet Services, Inc. California The company acts as a holding company. - ------------------------------------------------------------------------------------------------------------------------------------ Victoria Automobile Insurance Ohio The company is a property and casualty insurance Company company. - ------------------------------------------------------------------------------------------------------------------------------------ Victoria Financial Corporation Delaware The company acts as a holding company specifically for all Victoria corporate employees. - ------------------------------------------------------------------------------------------------------------------------------------ Victoria Fire & Casualty Company Ohio The company is a property and casualty insurance company. - ------------------------------------------------------------------------------------------------------------------------------------ Victoria Insurance Agency, Inc. Ohio The company is an insurance agency that acts as a broker for independent agents appointed with the Victoria companies in the state of Ohio. - ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------ STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS COMPANY ORGANIZATION SECURITIES (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ------------------------------------------------------------------------------------------------------------------------------------ Victoria National Insurance Company Ohio The company is a property and casualty insurance company. - ------------------------------------------------------------------------------------------------------------------------------------ Victoria Select Insurance Company Ohio The company is a property and casualty insurance company. - ------------------------------------------------------------------------------------------------------------------------------------ Victoria Specialty Insurance Company Ohio The company is a property and casualty insurance company. - ------------------------------------------------------------------------------------------------------------------------------------ VPI Services, Inc. California The company operates as a nationwide pet registry service for holders of Veterinary Pet Insurance policies, including pet indemnification and lost pet recovery program. - ------------------------------------------------------------------------------------------------------------------------------------ Washington Square Administrative Pennsylvania The company provides administrative services to Services, Inc. Nationwide Life and Annuity Company of America. - ------------------------------------------------------------------------------------------------------------------------------------ Western Heritage Insurance Company Arizona The company underwrites excess and surplus lines of property and casualty insurance. - ------------------------------------------------------------------------------------------------------------------------------------ William J. Lynch and Associates, California The company specializes in the analysis and funding Inc. of corporate benefit liabilities. - ------------------------------------------------------------------------------------------------------------------------------------ W.I. of Florida Florida The company is an insurance agency and operates as an employee agent "storefront" for Titan Indemnity Company in Florida. - ------------------------------------------------------------------------------------------------------------------------------------ W.I. of New York New York The company is an insurance agency and operates as an employee agent "storefront" for Titan Indemnity Company in New York (currently inactive). - ------------------------------------------------------------------------------------------------------------------------------------ Whitehall Holdings, Inc. Texas The company acts as a holding company especially for the Titan agencies. - ------------------------------------------------------------------------------------------------------------------------------------ Whitehall Insurance agency of Texas The company is a Texas licensed insurance agency Texas, Inc. (currently inactive). - ------------------------------------------------------------------------------------------------------------------------------------ Whitehall of Indiana, Inc. Indiana The company is an insurance agency and operates as an employee agent "storefront" for Titan Indemnity Company in Indiana. - ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------- COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS ORGANIZATION (SEE ATTACHED CHART UNLESS OTHERWISE INDICATED) - ----------------------------------------------------------------------------------------------------------------------------------- * MFS Variable Account Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Multi-Flex Variable Account Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-A Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-B Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-C Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VA Separate Account-D Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-II Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-3 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-4 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-5 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-6 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-7 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-8 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-9 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-10 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-11 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-12 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-13 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Variable Account-14 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-15 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-16 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- Nationwide Variable Account-17 Ohio Issuer of Annuity Contracts - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Provident VA Separate Pennsylvania Issuer of Annuity Contracts Account 1 - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Provident VA Separate Delaware Issuer of Annuity Contracts Account A - ----------------------------------------------------------------------------------------------------------------------------------- Nationwide VL Separate Account-A Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- Nationwide VL Separate Account-B Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VL Separate Account-C Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VL Separate Account-D Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-2 Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-3 Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-4 Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-5 Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide VLI Separate Account-6 Ohio Issuer of Life Insurance Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Provident VLI Separate Pennsylvania Issuer of Life Insurance Account 1 Policies - ----------------------------------------------------------------------------------------------------------------------------------- * Nationwide Provident VLI Separate Delaware Issuer of Life Insurance Account A 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 MANAGEMENT | | | (SIC) | | | | | | SYSTEMS, INC. | | | | | | 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 AFFINITY | | | ALLIED | | | INDEMNITY COMPANY | | | INSURANCE COMPANY | | | GROUP, INC. | | | (NW INDEMNITY) | | | OF AMERICA | | | (AGI) | | | Common Stock: 28,000 | | | |___| | | |___| ------------- Shares | | | Common Stock: 500,000 | |___| Common Stock: 850 Shares | | | | | | ------------- Shares | | | ------------- | | | | | | | | | | | | Casualty-100% | | | Casualty-100% | | | Casualty-100% | | ------------------------------- | ---------------------------- | | (See Page 2) | | | | | | | | ---------------------------- | -------------------------------- | ------------------------------- | | NEWHOUSE CAPITAL | | | | LONE STAR | | | PARTNERS, LLC | | -------------------------------- | | GENERAL AGENCY, INC. | | | | | | RP&C | | | | | | Casualty-70% | | | INTERNATIONAL | | | Common Stock: 1,000 | | | |___| | | |___| ------------- Shares | | | GGV-19% | |___| Common Stock: 963 | | | | | | | | | ------------- Shares | | | | | | Fire-10% | | | | | | Casualty-100% | | ---------------------------- | | Casualty-23.88% | | ------------------------------- | | -------------------------------- | || | ---------------------------- | | || | | | | -------------------------------- | ------------------------------- | | NATIONWIDE LLOYDS | | | NATIONWIDE CAPITAL | | | COLONIAL COUNTY | | | |___| | MORTGAGE, LLC | | | MUTUAL INSURANCE | | | A TEXAS LLOYDS |___| | | | | COMPANY | | | | |___| Mutual-5% | | | | | | | | | | | | Surplus Debentures: | | | | | | NW Indemnity-95% | | | ------------------- | | ---------------------------- | | | | | | | | -------------------------------- | | Assurance | | ---------------------------- | | | Lone Star | | | THI HOLDINGS | | -------------------------------- | | | | | DELAWARE, INC. | | | NATIONWIDE INSURANCE | | ------------------------------- | | (THI) | | | COMPANY OF FLORIDA | | | | | | | | | ------------------------------- | | Common Stock: 100 Shares |___|___| Common Stock: 10,000 | | | NATIONWIDE SERVICES | | | | | | ------------ Shares | | | COMPANY, LLC | | Casualty-100% | | | | | | | | | | | Casualty-100% | | | Single Member Limited | | (See page 3) | | | | |---| Liability Company | ---------------------------- | -------------------------------- | | | | | | Casualty-100% | | -------------------------------- | ------------------------------- | | NATIONWIDE CREDIT | | | | ENHANCEMENT INSURANCE | | ------------------------------- |___| COMPANY | | | AMERICAN MARINE | | | | | UNDERWRITERS, INC. | | Casualty-100% | | | | | | | | 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: 13,642,432 | | | ALTERNATIVES, LTD. | | | | | | ------------- | | | Common Stock: 120,000 SHARES | |___| Common Stock: 100 Shares | | | 13,642,432 | | | ------------- | | | ------------- | | | | | | | | | | | | | | | Fire-100% | | | | | | | | | | | | Casualty-100% | | | Casualty 95.2% | | -------------------------------- | -------------------------------- | | Fire 4.8% | | | | | | | | -------------------------------- | | (See Page 4) | | | | | | -------------------------------- | | | | | | | | 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 | | | | CRESTBROOK 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 December 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 | | | (Allied P & C) |___| | 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: 75,843 | | | AGENCY, INC. | | ------------- Shares | |___| | | | | | | | NMHI-100% | | | AMCO-100% | | | | | | | 8% Preferred: 39,500 | | | | | ------------- Shares | | ---------------------------- | | | | AGI-24% | | ---------------------------- ---------------------------- | AMCO-76% | | | CALFARM INSURANCE | | CAL-AG INSURANCE | | | | | AGENCY | | SERVICES, INC. | | 7% Preferred: 40,000 | | | | | | | ------------- Shares | |___| Common Stock: 1,000 |___| Common Stock: 100 | | | | ------------- Shares | | ------------- Shares | | AMCO- 25% | | | | | | Allied P&C-50% | | AMCO-100% | | CalFarm Insurance | | Depositors-25% | | | | Agency-100% | ---------------------------- ---------------------------- ---------------------------- | | ---------------------------- | AGMC | | REINSURANCE, LTD. | | | | Common Stock: 11,000 | | ------------- Shares | | | | NAMC-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: 5,645,527 | | | ------------- Shares | | ------------- Shares | | | | | | | | SIC-100% | ___| SIC-80.5% | | ---------------------------- | ---------------------------- | | | ---------------------------- | ---------------------------- | | WESTERN | | | VETERINARY PET | | | HERITAGE INSURANCE | | | INSURANCE CO. | | | COMPANY | | | | |___| | |___| | | Common Stock: 4,776,076 | | | VPSI-100% | | ------------- Shares | | | | | | | | | | SIC-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 December 31, 2003
Page 2 ------------------------- | FARMLAND MUTUAL | | INSURANCE COMPANY | | |______ |Guaranty Fund |______ |Certificate | | | |Casualty | | (See Page 1) | ------------------------- __________________________________________________________________________ | | | | - --------------------------------- | | TITAN INDEMNITY COMPANY | ---------------------------------- | (TITAN) | | VICTORIA FINANCIAL CORP. | | | | (VICTORIA) | |Common Stock: 4,319,951 Shares | | | |------------ | ___|Common Stock: 1,000 Shares| | | | |------------ | | | | | | |THI-100% | | | | - --------------------------------- | |THI-100% | | | ---------------------------------- | | - --------------------------------- | | TITAN INSURANCE COMPANY | | ---------------------------------- | (TITAN INSURANCE) | | | VICTORIA FIRE & | | | | | CASUALTY COMPANY | |Common Stock: 1,000,000 Shares | | | (VICTORIA FIRE) | |------------ | |___| | | | | |Common Stock: 1,500 Shares|___ | | | |------------ | | |Titan-100% | | | | | - --------------------------------- | | | | | | |Victoria-100% | | | | ---------------------------------- | - --------------------------------- | | | TITAN AUTO AGENCY, INC. | | | | (MI) | | ---------------------------------- | | | | | VICTORIA INSURANCE | | |Common Stock: 1,000 Shares | | | AGENCY INC. | | |------------ | | | | | | | |___|Common Stock: 497 Shares Class B|___| | | |------------ 3 Shares Class A| | |Titan Insurance-100% | | | | - --------------------------------- |Victoria-100% of | | |Class A & Class B | | ---------------------------------- | | | ---------------------------------- | | VICTORIA AUTOMOBILE | | | INSURANCE COMPANY | | | | | |Common Stock: 1,500 Shares|___| |------------ | | | | | | | | |Victoria Fire-100% | | ---------------------------------- | | | ---------------------------------- | | VICTORIA NATIONAL | | | INSURANCE COMPANY | | | | | |Common Stock: 1,000 Shares|___| |------------ | | | | | | | | |Victoria Fire-100% | | ---------------------------------- | | | ---------------------------------- | | VICTORIA SELECT | | | INSURANCE COMPANY | | | | | |Common Stock: 1,000 Shares|___| |------------- | | | | | | | | |Victoria Fire-100% | | ---------------------------------- | | | ---------------------------------- | | VICTORIA SPECIALITY | | | INSURANCE COMPANY | | | | | |Common Stock: 1,000 Shares|___| |------------ | | | | | |Victoria Fire-100% | ----------------------------------
NATIONWIDE(R) -------------------------------------- ___________________| NATIONWIDE MUTUAL |_____________________________________________ ___________________| INSURANCE COMPANY |_____________________________________________ | (CASUALTY) | | (See Page 1) | -------------------------------------- | | ------------------------------------ | THI HOLDINGS DELAWARE, INC. | | (THI) | | | |Common Stock: 1,000 Shares| |------------ | | | | | |THI-100% | ------------------------------------ | | | _____________________________________|______________________________________________________________________________ | ---------------------------------- | WHITEHALL HOLDINGS, INC. | | (WHITEHALL) | | | |Common Stock: 1,000 Shares| |------------ | | | | | |THI-100% | ---------------------------------- | | | | | - ---------------------------------- | ---------------------------------- | TITAN AUTO INSURANCE | | | WHITEHALL INSURANCE | | OF ARIZONA, INC. | | | AGENCY OF TEXAS, INC. | | | | | | |Common Stock: 100,000 Shares|___|___|Common Stock: 1,000 Shares|________________________ |------------ | | |------------ | | | | | | | | | | | | | | |Whitehall-100% | | |Whitehall-100% | | - ---------------------------------- | ---------------------------------- | | | | | - ---------------------------------- | ---------------------------------- ---------------------------------- | TITAN AUTO INSURANCE | | | WHITEHALL OF | | TITAN INSURANCE | | OF NEW MEXICO, INC. | | | INDIANA, INC. | | SERVICES INC. | | | | | | | (TITAN SERVICES) | |Common Stock: 1,000 Shares|___|___|Common Stock: 10,000 Shares| ___| | |------------ | | |------------ | | |Common Stock: 1 Share | | | | | | | |------------ | | | | | | | | | |Whitehall-100% | | |Whitehall-100% | | |Whitehall Ins.-100% | - ---------------------------------- | ---------------------------------- | ---------------------------------- | | | | - ---------------------------------- | ---------------------------------- | ---------------------------------- | TITAN AUTO INSURANCE | | | WI OF | | | TITAN NATIONAL AUTO | | (NV) | | | FLORIDA, INC. | | | CALL CENTER, INC. | | | | | | | | | |Common Stock: 1,000 Shares|___|___|Common Stock: 100 Shares| |___|Common Stock: 100 Shares| |------------ | | |------------ | | |------------ | | | | | | | | | | | | | | | | | |Whitehall-100% | | |Whitehall-100% | | |Titan Services-100% | - ---------------------------------- | ---------------------------------- | ---------------------------------- | | | | - ---------------------------------- | ---------------------------------- | ---------------------------------- | TITAN AUTO INSURANCE | | | TITAN AUTO | | | QUICK SURE AUTO | | OF PENNSYLVANIA, INC. | | | INSURANCE, INC | | | AGENCY, INC. | | | | | | | | | |Common Stock: 1,000 Shares|___|___|Common Stock: 1,000 Shares| |___|Common Stock: 1,050 Shares| |------------ | | |------------ | |------------ | | | | | | | | | | | | | | | |Whitehall-100% | | |Whitehall-100% | |Titan Services-100% | - ---------------------------------- | ---------------------------------- ---------------------------------- | | | ---------------------------------- | | WHI OF | | | NEW YORK, INC. | | | | |___|Common Stock: 100 Shares| |------------ | | | | | |Whitehall-100% | ----------------------------------
-------------------------------------- ________________| NATIONWIDE MUTUAL | ________________| FIRE INSURANCE COMPANY | | (CASUALTY) | | (See Page 1) | -------------------------------------- ______________________________________________________________ | | | ---------------------------------- | TITAN HOLDINGS | | SERVICE CORPORATION | | (TITAN HOLDINGS) | | | |Common Stock: 100,00 Share | |------------ | | | |THI-100% | ---------------------------------- Subsidiary Companies __ Solid Line Contractual Association __ Double Line Limited Liability Company __ Dotted Line December 31, 2003 Page 3 ________________________________________________________________________________ | | | | | | | | | --------------------------------- --------------------------------- | | 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.AA,R.L. | | | 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 MARITIMA VIDA e | | |Shares | | | PREVIDENCIA SA | |---| | | | | |NGH-.01% | | |Common Stock: 134,822,225 | | | | |------------ Shares | | | | | | | | | | | |SIAM-48.98% | | | | --------------------------------- | | | | |DPSA-86.4% | | --------------------------------- --------------------------------- | | PANEUROLIFE (PEL) | | --------------------------------- | | | | EUROPE WIDE LIFE SA | |Common Stock: 1,300,000 Shares| | | | |------------ |___|___| | | | | |Common Stock: 65,000 | | | | |------------- |___ |LUX SA-100% | | | Shares | |LUF | | | ------ | --------------------------------- | Item 29. 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 30. PRINCIPAL UNDERWRITER (a) Nationwide Investment Services Corporation ("NISC") serves as principal underwriter and general distributor for the following separate investment accounts of Nationwide or its affiliates: Multi-Flex Variable Account Nationwide VL Separate Account-C Nationwide Variable Account Nationwide VL Separate Account-D Nationwide Variable Account-II Nationwide VLI Separate Account-2 Nationwide Variable Account-4 Nationwide VLI Separate Account-3 Nationwide Variable Account-5 Nationwide VLI Separate Account-4 Nationwide Variable Account-6 Nationwide VLI Separate 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 Variable Account-14 Nationwide VA Separate Account-A Nationwide VA Separate Account-B Nationwide VA Separate Account-C (b) Directors and Officers of NISC: Joseph J. Gasper, Director and Chairman of the Board Richard A. Karas, Director and Vice Chairman John M. Davis, President William G. Goslee, Senior Vice President Mark R. Thresher, Director, Senior Vice President and Treasurer Thomas E. Barnes, Vice President and Secretary 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 Assistant Secretary Dina A. Tantra, Assistant Secretary Mark D. Maxwell, Assistant Secretary E. Gary Berndt, 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 NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION UNDERWRITER DISCOUNTS AND REDEMPTION OR COMMISSIONS COMMISSIONS ANNUITIZATION ----------------------------- ------------------------- ----------------------- ----------------- ------------------- N/A N/A N/A N/A Nationwide Investment Services Corporation ----------------------------- ------------------------- ----------------------- ----------------- -------------------
Item 31. LOCATION OF ACCOUNTS AND RECORDS John Davis Nationwide Life Insurance Company One Nationwide Plaza Columbus, OH 43215 Item 32. MANAGEMENT SERVICES Not Applicable Item 33. 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 Registration Statement and has caused this Registration Statement to be signed on its behalf in the City of Columbus, and State of Ohio, on this 20 day of April, 2004. NATIONWIDE VLI SEPARATE ACCOUNT-2 ----------------------------------------------------------------------------- (Registrant) NATIONWIDE LIFE INSURANCE COMPANY ----------------------------------------------------------------------------- (Depositor) By: /s/ MICHAEL R. MOSER ----------------------------------------------------------------------------- Michael R. Moser, 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 20 day of April, 2004. W. G. JURGENSEN - ------------------------------------------------------------------------- W. G. Jurgensen, Director and Chief Executive Officer JOSEPH J. GASPER - ------------------------------------------------------------------------- Joseph J. Gasper, Director and President and Chief Operating Officer JOSEPH A. ALUTTO - ------------------------------------------------------------------------- Joseph A. Alutto, Director JAMES G. BROCKSMITH, JR. - ------------------------------------------------------------------------- James G. Brocksmith, Jr., Director HENRY S. HOLLOWAY - ------------------------------------------------------------------------- Henry S. Holloway, Director LYDIA M. MARSHALL - ------------------------------------------------------------------------- Lydia M. Marshall, Director DONALD L. MCWHORTER - ------------------------------------------------------------------------- Donald L. McWhorter, Director DAVID O. MILLER - ------------------------------------------------------------------------- David O. Miller, Director JAMES F. PATTERSON - ------------------------------------------------------------------------- James F. Patterson, Director MARTHA J. MILLER DE LOMBERA - ------------------------------------------------------------------------- Martha J. Miller de Lombera, Director GERALD D. PROTHRO - ------------------------------------------------------------------------- Gerald D. Prothro, Director ARDEN L. SHISLER - ------------------------------------------------------------------------- Arden L. Shisler, Director ALEX SHUMATE - ------------------------------------------------------------------------- Alex Shumate, Director By /s/ MICHAEL R. MOSER ------------------------------------------------ Michael R. Moser, Esq. Attorney-in-Fact EX-99.N 4 exhibitn.txt 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, 2004 and for Nationwide Life Insurance Company and subsidiaries dated March 11, 2004, 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 covering the December 31, 2001 financial statements 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 20, 2004 -----END PRIVACY-ENHANCED MESSAGE-----