<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 333-53023
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 1 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE VARIABLE ACCOUNT-9
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, Statement of Additional Information, and the Financial
Statements.
[ ] immediately upon filing to paragraph (b) of Rule 485
[ ] on (date) pursuant to paragraph (b) of Rule 485
[ x ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-9
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover page.......................................................................... 3
Item 2. Definitions......................................................................... 5
Item 3. Synopsis or Highlights.............................................................. 16
Item 4. Condensed Financial Information..................................................... N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies............... 17
Item 6. Deductions and Expenses............................................................. 19
Item 7. General Description of Variable Annuity Contracts................................... 23
Item 8. Annuity Period...................................................................... 31
Item 9. Death Benefit and Distributions..................................................... 36
Item 10. Purchases and Contract Value....................................................... 24
Item 11. Redemptions........................................................................ 26
Item 12. Taxes.............................................................................. 40
Item 13. Legal Proceedings.................................................................. 47
Item 14. Table of Contents of the Statement of Additional Information....................... 52
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page......................................................................... 63
Item 16. Table of Contents.................................................................. 63
Item 17. General Information and History.................................................... 63
Item 18. Services........................................................................... 63
Item 19. Purchase of Securities Being Offered............................................... 64
Item 20. Underwriters....................................................................... 64
Item 21. Calculation of Performance Information............................................. 64
Item 22. Annuity Payments................................................................... 65
Item 23. Financial Statements............................................................... 66
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.................................................. 110
Item 25. Directors and Officers of the Depositor............................................ 112
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant..... 114
Item 27. Number of Contract Owners.......................................................... 125
Item 28. Indemnification.................................................................... 125
Item 29. Principal Underwriter.............................................................. 125
Item 30. Location of Accounts and Records................................................... 127
Item 31. Management Services................................................................ 127
Item 32. Undertakings....................................................................... 127
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Modified Single Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its
Nationwide Variable Account-9
The date of this prospectus is May 1, 1999.
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
The following underlying mutual funds are available under the contracts:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
- American Century: VP Income & Growth
- American Century: VP International
- American Century: VP Value
DREYFUS
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus Stock Index Fund, Inc.
- Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio: Service Class
- VIP Growth Portfolio: Service Class
- VIP High Income Portfolio: Service Class*
- VIP Overseas Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Contrafund Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Growth Opportunities Portfolio:
Service Class
MORGAN STANLEY
- Morgan Stanley Universal Funds, Inc. - Emerging Markets Debt Portfolio
- Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities
Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- Capital Appreciation Fund
- Government Bond Fund
- Money Market Fund
- Total Return Fund
- Nationwide Balanced Fund
- Nationwide Equity Income Fund
- Nationwide Global Equity Fund
- Nationwide High Income Bond Fund*
- Nationwide Multi Sector Bond Fund
- Nationwide Select Advisers Mid Cap Fund
- Nationwide Small Cap Value Fund
- Nationwide Small Company Fund
- Nationwide Strategic Growth Fund
- Nationwide Strategic Value Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
- AMT Guardian Portfolio
- AMT Mid-Cap Growth Portfolio
- AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- Oppenheimer Aggressive Growth Fund
- Oppenheimer Growth Fund
- Oppenheimer Growth & Income Fund
VAN ECK WORLDWIDE INSURANCE TRUST
- Worldwide Emerging Markets Fund
- Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
- Growth & Income Portfolio
- International Equity Portfolio
- Post-Venture Capital Portfolio
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
Purchase payments not invested in the underlying mutual funds of the Nationwide
Variable Account-9 ("variable account") can be allocated to the fixed account or
the Guaranteed
1
<PAGE> 4
Term Options (Guaranteed Term Options may not be available in every jurisdiction
- - refer to your contract for specific benefit information).
The Statement of Additional Information (May 1, 1999) which contains additional
information about the contracts and the variable account, is filed with the
Securities and Exchange Commission ("SEC") and is incorporated herein by
reference. The table of contents for the Statement of Additional Information is
on page __.
For general information or to obtain FREE copies of the:
- Statement of Additional Information
- prospectus for any underlying mutual fund
- prospectus for the Guaranteed Term Options
- required Nationwide forms,
call: 1-800-848-6331
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 16609
COLUMBUS, OHIO 43216-6609
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
www.sec.gov
Information about this and other Best of America products can be found at:
www.bestofamerica.com
THIS ANNUITY IS NOT:
- A BANK DEPOSIT
- ENDORSED BY A BANK OR GOVERNMENT AGENCY
- FEDERALLY INSURED
- AVAILABLE IN EVERY STATE
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
In the future, additional underlying mutual funds managed by certain financial
institutions or brokerage firms may be added to the variable account. These
additional underlying mutual funds may be offered exclusively to purchasing
customers of the particular financial institution or brokerage firm.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit used to calculate the variable account
contract value before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit of measure used to calculate the variable
payment annuity payments.
CONTRACT VALUE- The total of all accumulation units, any amount held in the
fixed account, and any amount held under Guaranteed Term Options.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option which is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
INVESTMENT-ONLY CONTRACT- A contract purchased by a Qualified Pension,
Profit-Sharing or Stock Bonus Plan as defined by Section 401(a) of the Internal
Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, IRA, Roth IRA or Tax Sheltered Annuity.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION DATE- Each day the New York Stock Exchange is open for business.
VALUATION PERIOD- The period of time beginning at the close of business on a
valuation date and ending at the close of business on the next valuation date.
VARIABLE ACCOUNT- Nationwide Variable Account-9, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
3
<PAGE> 6
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS..................................................
SUMMARY OF STANDARD CONTRACT EXPENSES......................................
ADDITIONAL CONTRACT OPTIONS................................................
UNDERLYING MUTUAL FUND ANNUAL EXPENSES.....................................
EXAMPLE....................................................................
SYNOPSIS OF THE CONTRACTS..................................................
FINANCIAL STATEMENTS.......................................................
NATIONWIDE LIFE INSURANCE COMPANY..........................................
NATIONWIDE ADVISORY SERVICES, INC..........................................
INVESTING IN THE CONTRACT..................................................
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS............................................
Mortality and Expense Risk Charges
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS.........................
Death Benefit Option
Guaranteed Minimum Income Benefit Options
CONTRACT OWNERSHIP.........................................................
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT..................................................
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Value of an Accumulation Unit
Determining the Contract Value
Transfers
RIGHT TO REVOKE............................................................
SURRENDER (REDEMPTION).....................................................
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE.............................................................
Minimum & Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Loan Interest
Loan Repayment
Distributions & Annuity Payments
Transferring the Contract
Grace Period & Loan Default
ASSIGNMENT.................................................................
CONTRACT OWNER SERVICES....................................................
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE..................................................
ANNUITIZING THE CONTRACT...................................................
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Options ("GMIB")
Annuity Payment Options
DEATH BENEFITS.............................................................
Death of Contract Owner - Non-Qualified Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS.....................................................
Required Distributions for Non-Qualified Contracts
Required Distributions for Tax Sheltered Annuities
Required Distributions for Individual Retirement Annuities
Required Distributions for Roth IRAs
4
<PAGE> 7
FEDERAL TAX CONSIDERATIONS.................................................
Federal Income Taxes
Individual Retirement Annuities and Tax Sheltered Annuities
Roth IRAs
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Puerto Rico
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.....................................................
YEAR 2000 COMPLIANCE ISSUES................................................
LEGAL PROCEEDINGS..........................................................
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY............................
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS.........................
5
<PAGE> 8
SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
- the contract owner meets an available exception, or
- a contract owner has replaced a standard benefit with an available option
for an additional charge.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage
of the lesser of purchase payments
or amounts surrendered.......................... 7%(1)
Range of CDSC over time:
<TABLE>
<CAPTION>
- ----------------------------- ---------------------------
Number of Years from Date CDSC
of Purchase Payment Percentage
- ----------------------------- ---------------------------
<S> <C>
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
</TABLE>
(1) Each contract year, the contract owner may withdraw without a CDSC the
greater of:
(a) 10% of all purchase payments made to the contract; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This free withdrawal privilege is non-cumulative. Free amounts not taken during
any given contract year cannot be taken as free amounts in a subsequent contract
year (see "Contingent Deferred Sales Charge").
Withdrawals may be restricted for contracts issued to fund a Tax Sheltered
Annuity plan or other Qualified Plan.
VARIABLE ACCOUNT CHARGES(2)
<TABLE>
<S> <C>
Mortality and Expense Risk Charges............... 1.20%
Total Variable Account Charges................ 1.20%(3)
LOAN PROCESSING FEE
(per loan transaction)........................... $ 25
</TABLE>
(2) These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options. They
are charged on an annual basis.
(3) Charges shown include the One-Year Step Up Death Benefit which is standard
to every contract (see "Death Benefit Payment").
6
<PAGE> 9
ADDITIONAL CONTRACT OPTIONS
For an additional charge, the following options are available to contract
owners. These options must be elected at the time of application and will
replace the corresponding standard contract benefit.
If the contract owner chooses an optional benefit, a corresponding charge will
be deducted. The charge for an optional benefit is IN ADDITION TO the standard
variable account charges. The optional benefit charges will only apply to
allocations made to the underlying mutual funds.
DEATH BENEFIT OPTION
An applicant may choose the optional death benefit instead of the One-Year Step
Up Death Benefit that is standard to every contract.
<TABLE>
<S> <C>
Optional 5% Enhanced Death
Benefit....................................... 0.05%
Total Variable Account Charges
(including 5% Enhanced Death
Benefit).................................. 1.25%
</TABLE>
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional 0.50% of the daily net assets of the variable account, an
applicant may elect one of two Guaranteed Minimum Income Benefit options (see
"Guaranteed Minimum Income Benefit Options").
<TABLE>
<S> <C>
Guaranteed Minimum Income Benefit Option .... 0.50%
Total Variable Account Charges
(including a Guaranteed Minimum
Income Benefit option)..................... 1.70%
</TABLE>
7
<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND AVERAGE NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - 0.70% 0.00% 0.00% 0.70%
American Century VP Income & Growth
- ---------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 1.50% 0.00% 0.00% 1.50%
American Century VP International
- ---------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 1.00% 0.00% 0.00% 1.00%
American Century VP Value
- ---------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.01% 0.00% 0.76%
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.03% 0.00% 0.28%
- ---------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 0.75% 0.05% 0.00% 0.80%
Appreciation Portfolio
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class 0.50% 0.05% 0.10% 0.65%
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.60% 0.07% 0.10% 0.77%
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 0.59% 0.11% 0.10% 0.80%
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.75% 0.16% 0.10% 1.01%
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 0.60% 0.08% 0.10% 0.78%
- ---------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 0.60% 0.13% 0.10% 0.83%
Service Class
- ---------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc. - Emerging 0.04% 1.26% 0.00% 1.30%
Markets Debt Portfolio
- ---------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.60% 0.09% 0.00% 0.69%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.50% 0.08% 0.00% 0.58%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.40% 0.08% 0.00% 0.48%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.60% 0.07% 0.00% 0.67%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.75% 0.15% 0.00% 0.90%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 0.15% 0.00% 0.95%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 1.00% 0.20% 0.00% 1.20%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.15% 0.00% 0.95%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.15% 0.00% 1.20%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 1.00% 0.11% 0.00% 1.11%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.10% 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Guardian Portfolio 0.60% 0.40% 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Mid-Cap Growth Portfolio 0.60% 0.40% 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio 0.80% 0.06% 0.00% 0.86%
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.71% 0.02% 0.00% 0.73%
Aggressive Growth Fund
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 11
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds - Oppenheimer 0.73% 0.02% 0.00% 0.75%
Growth Fund
- ---------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.75% 0.08% 0.00% 0.83%
Growth & Income Fund
- ---------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide 0.80% 0.00% 0.00% 0.80%
Emerging Markets Fund
- ---------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.17% 0.00% 1.17%
Assets Fund
- ---------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley 1.00% 0.07% 0.00% 1.07%
Real Estate Securities Portfolio
- ---------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 0.65% 0.35% 0.00% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio 1.00% 0.35% 0.00% 1.35%
- ---------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio 1.07% 0.33% 0.00% 1.40%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP Equity-Income Portfolio: Service Class 0.50% 0.08% 0.10% 0.68%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.60% 0.09% 0.10% 0.79%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.75% 0.17% 0.10% 1.02%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 0.60% 0.11% 0.10% 0.81%
- --------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 0.60% 0.14% 0.10% 0.84%
Service Class
- --------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc. - Emerging 0.80% 1.26% 0.00% 2.06%
Markets Debt Portfolio
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.75% 4.15% 0.00% 4.90%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 4.83% 0.00% 5.63%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 1.00% 1.84% 0.00% 2.84%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 1.38% 0.00% 2.18%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 3.66% 0.00% 4.41%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 2.26% 0.00% 3.31%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 5.41% 0.00% 6.31%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 5.43% 0.00% 6.33%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 4.64% 0.00% 5.54%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Van Eck Worldwide Insurance Trust - Worldwide Emerging 1.00% 0.34% 0.00% 1.34%
Markets Fund
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.18% 0.00% 1.18%
Assets Fund
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 0.75% 0.45% 0.00% 1.20%
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio 1.00% 0.36% 0.00% 1.36%
- --------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio 1.25% 0.33% 0.00% 1.58%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 13
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under this contract assuming a $1,000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The chart reflects expenses of both the variable account and the underlying
mutual funds. The chart reflects the maximum amount of variable account charges
(which includes all applicable rider options) that could be assessed to a
contract.
For those contracts that do not elect the maximum number of rider options, the
expenses would be reduced. Deductions for premium taxes are not reflected but
may apply.
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the contract.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- ------------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable 84 127 164 277 25 76 130 277 * 76 130 277
Portfolios, Inc. - American
Century VP Income & Growth
- ------------------------------------------------------------------------------------------------------------------------------
American Century Variable 93 152 205 357 33 101 171 357 * 101 171 357
Portfolios, Inc. - American
Century VP International
- ------------------------------------------------------------------------------------------------------------------------------
American Century Variable 87 136 179 308 28 85 145 308 * 85 145 308
Portfolios, Inc. - American
Century VP Value
- ------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 85 129 167 283 25 78 133 283 * 78 133 283
Responsible Growth Fund, Inc.
- ------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 80 114 142 232 20 63 108 232 * 63 108 232
- ------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 85 130 169 287 26 79 135 287 * 79 135 287
Fund - Capital Appreciation
Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 84 125 161 272 24 74 127 272 * 74 127 272
Portfolio: Service Class
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 85 129 167 284 25 78 133 284 * 78 133 284
Portfolio: Service Class
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 85 130 169 287 26 79 135 287 * 79 135 287
Portfolio: Service Class
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 87 137 180 309 28 86 146 309 * 86 146 309
Portfolio: Service Class
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 85 129 168 285 26 78 134 285 * 78 134 285
Portfolio: Service Class
- ------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 86 131 171 290 26 80 137 290 * 80 137 290
Opportunities Portfolio:
Service Class
- ------------------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal 90 146 195 338 31 95 161 338 * 95 161 338
Funds, Inc. - Emerging
Markets Debt Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 14
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- ------------------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NSAT Capital Appreciation Fund 84 127 163 276 25 76 129 276 * 76 129 276
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 83 123 157 264 23 72 123 264 * 72 123 264
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 82 120 152 254 22 69 118 254 * 69 118 254
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 84 126 162 274 24 75 128 274 * 75 128 274
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 86 133 174 298 27 82 140 298 * 82 140 298
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income 87 135 177 303 27 84 143 303 * 84 143 303
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity 89 143 190 328 30 92 156 328 * 92 156 328
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income 87 135 177 303 27 84 143 303 * 84 143 303
Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector 86 133 174 298 27 82 140 298 * 82 140 298
Bond Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select 89 143 190 328 30 92 156 328 * 92 156 328
Advisers Mid Cap Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap 88 138 182 313 28 87 148 313 * 87 148 313
Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company 88 140 185 319 29 89 151 319 * 89 151 319
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 87 136 179 308 28 85 145 308 * 85 145 308
Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 87 136 179 308 28 85 145 308 * 85 145 308
Value Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 87 136 179 308 28 85 145 308 * 85 145 308
Guardian Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 87 136 179 308 28 85 145 308 * 85 145 308
Mid-Cap Growth Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 86 132 172 293 26 81 138 293 * 81 138 293
Partners Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 84 128 165 280 25 77 131 280 * 77 131 280
Funds - Oppenheimer
Aggressive Growth Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 85 128 166 282 25 77 132 282 * 77 132 282
Funds - Oppenheimer Growth
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 86 131 171 290 26 80 137 290 * 80 137 290
Funds - Oppenheimer Growth &
Income Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 85 130 169 287 26 79 135 287 * 79 135 287
Trust - Worldwide Emerging
Markets Fund
- ------------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 89 142 188 325 30 91 154 325 * 91 154 325
Trust - Worldwide Hard Assets
Fund
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE> 15
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- ------------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Van Kampen Life Investment 88 139 183 315 29 88 149 315 * 88 149 315
Trust - Morgan Stanley Real
Estate Securities Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth 87 136 179 308 28 85 145 308 * 85 145 308
& Income Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 91 147 197 343 32 96 163 343 * 96 163 343
International Equity Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 92 149 200 347 32 98 166 347 * 98 166 347
Post-Venture Capital Portfolio
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Annuitization is not permitted during the first two contract years.
13
<PAGE> 16
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)."
The contracts can be categorized as follows:
- Non-Qualified;
- Investment-only;
- IRAs, with contributions rolled-over or transferred from certain
tax-qualified plans;
- Roth IRAs; and
- Tax Sheltered Annuities, with contributions rolled-over or transferred
from other Tax Sheltered Annuities.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------
MINIMUM MINIMUM
CONTRACT INITIAL SUBSEQUENT
TYPE PURCHASE PAYMENTS
PAYMENT
- -------------------------------------------------------
<S> <C> <C>
Non-Qualified $10,000 $1,000
- -------------------------------------------------------
Investment-only $100,000 $15,000
- -------------------------------------------------------
IRA $10,000 $1,000
- -------------------------------------------------------
Roth IRA $10,000 $1,000
- -------------------------------------------------------
Tax Sheltered Annuity $10,000 $1,000
- -------------------------------------------------------
</TABLE>
Subsequent purchase payments are not permitted in Oregon, and may not be
permitted in other states under certain circumstances.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide will deduct a Contingent Deferred Sales
Charge if any amount is withdrawn from the contract. This CDSC reimburses
Nationwide for sales expenses. The amount of the CDSC will not exceed the lesser
of:
(1) 7% of the amount surrendered; or
(2) 7% of the total of all purchase payments made within 7 years of the
surrender date.
Nationwide deducts a mortality and expense risk charge equal to an annual rate
of 1.20% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and expense risks, and for
administrative expenses.
An optional death benefit is available under the contract. If the contract owner
elects the 5% Enhanced Death Benefit, Nationwide will deduct an additional
charge equal to an annual rate of 0.05% of the daily net assets of the variable
account (see "Death Benefit Payment").
Two Guaranteed Minimum Income Benefit options are available under the contract.
If the contract owner elects one of the Guaranteed Minimum Income Benefit
options, Nationwide will deduct an additional charge of 0.50% of the daily net
assets of the variable account (see "Guaranteed Minimum Income Benefits").
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by a state or other
governmental entity (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or an amount required by
law (see "Right to Revoke").
14
<PAGE> 17
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained, without charge, by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929. Nationwide is a member of the "Nationwide Insurance Enterprise" with its
home office at One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a
provider of life insurance, annuities and retirement products. It is admitted to
do business in all states, the District of Columbia and Puerto Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-9 is a variable account that contains the underlying
mutual funds listed in Appendix A. The variable account was established on May
22, 1997, pursuant to Ohio law. Although the separate account is registered with
the SEC as a unit investment trust pursuant to the Investment Company Act of
1940 ("1940 Act"), the SEC does not supervise the management of Nationwide or
the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions. There are two sub-accounts for each underlying mutual fund.
One sub-account contains shares attributable to accumulation units under
Non-Qualified Contracts. The other contains shares attributable to accumulation
units under Investment-only Contracts, IRAs, Roth IRAs, and Tax Sheltered
Annuities.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded funds.
They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder
15
<PAGE> 18
meetings based on contract owner instructions. However, if the law changes
allowing Nationwide to vote in its own right, it may elect to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract 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 the underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus must be read in conjunction with this
prospectus. The minimum amount that may be allocated to a Guaranteed Term Option
is $1,000. Allocations to the Guaranteed Term Options are not subject to
variable account charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7) or ten (10) years.
Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10
year period since every guaranteed term will end on the final day of a calendar
quarter.
For the duration selected, Nationwide will declare a guaranteed interest rate.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken for any reason before the maturity date. If a
distribution occurs before the maturity date, the amount distributed will be
subject to a market value adjustment. A market value adjustment can increase or
decrease the amount distributed depending on current interest rate fluctuations.
No market value adjustment will be applied if Guaranteed Term Option allocations
are held to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment
16
<PAGE> 19
would reduce the value of the amount distributed. When actual interest rates are
lower than the guaranteed rate, the value of the amount distributed would
increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, dollar
cost averaging, or systematic withdrawals.
Guaranteed Term Options may not be available in every state.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to accuracy
and completeness of prospectus disclosure.
Purchase payments will be allocated to the fixed account by election of the
contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying rate(s) set by Nationwide. The guaranteed rate for any
purchase payment will be effective for not less than twelve months. Nationwide
guarantees that the rate will not be less than 3.0% per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
New purchase payments deposited to the contract which are allocated to the fixed
account may receive a different rate of interest than amounts transferred from
the sub-accounts to the fixed account and amounts maturing in the fixed account.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGES
Nationwide deducts mortality and expense risk charges from the variable account.
This amount is computed on a daily basis, and is equal to an annual rate of
1.20% of the daily net assets of the variable account.
The mortality risk charges compensate Nationwide for guaranteeing the annuity
rate of the contracts. This guarantee ensures that the annuity rates will not
change regardless of the death rates of annuity payees or the general
population.
The expense risk charges compensate Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If these charges are insufficient to cover actual expenses, the loss is borne by
Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will, with certain exceptions, deduct a CDSC, as
described below.
The CDSC will not exceed the lesser of:
(1) 7% of the amount surrendered; or
(2) 7% of the total of all purchase payments made within 7 years of the
surrender date.
17
<PAGE> 20
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the lesser of the amount surrendered or the total of all purchase
payments made within 7 years of the surrender request.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. For tax purposes, a surrender is usually treated
as a withdrawal of earnings first.
The CDSC applies as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------
Number of Years from Date CDSC
of Purchase Payment Percentage
- --------------------------------------------------------
<S> <C>
0 7%
- --------------------------------------------------------
1 7%
- --------------------------------------------------------
2 6%
- --------------------------------------------------------
3 5%
- --------------------------------------------------------
4 4%
- --------------------------------------------------------
5 3%
- --------------------------------------------------------
6 2%
- --------------------------------------------------------
7 0%
- --------------------------------------------------------
</TABLE>
The CDSC is used to cover sales expenses, including commissions (maximum of
6.25% of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general account, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
Contract owners taking withdrawals before age 59-1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Non-Qualified Contracts - Natural Persons as Contract
Owners").
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater
of:
(a) 10% of all purchase payments; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at
least two years;
(2) upon payment of a death benefit; or
(3) from any values which have been held under a contract for at least 7
years.
No CDSC applies to transfers among sub-accounts or between or among the
Guaranteed Term Options, the fixed account, or the variable account. Nationwide
may waive the CDSC if a contract described in this prospectus is exchanged for
another Nationwide contract (or a contract of any of its affiliated insurance
companies). A CDSC may apply to the contract received in the exchange.
A contract held by a Charitable Remainder Trust may withdraw CDSC-free the
greater of (a) or (b), where:
(a) is the amount which would otherwise be available for withdrawal
without a CDSC; and
(b) is the difference between the total purchase payments made to the
contract as of the date of the withdrawal (reduced by previous
withdrawals) and the contract value at the close of the day prior to
the date of the withdrawal.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
Long Term Care Facility Provisions
No CDSC will be charged if:
- - The third contract anniversary has passed; and
- - The contract owner has been confined to a long-term care facility or
hospital for a continuous 90-day period that began after the contract issue
date.
18
<PAGE> 21
Additionally, no CDSC will be charged if:
- - The contract owner has been diagnosed by a physician to have a terminal
illness; and
- - Nationwide receives and records a letter from that physician indicating
such diagnosis.
For those contracts that have a non-natural person as contract owner for the
benefit of a natural person, the annuitant may exercise the rights of the
contract owner for the purposes described in this provision. If the non-natural
contract owner has NOT been established for the benefit of a natural person
(e.g., the contract owner is a corporation or a trust for the benefit of an
entity), the annuitant may NOT exercise the rights described in this provision.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
Nationwide currently deducts premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes.
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS
DEATH BENEFIT OPTION
If the contract owner chooses the 5% Enhanced Death Benefit, Nationwide will
deduct a charge equal to an annual rate of 0.05% of the daily net assets of the
variable account.
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(1) the contract value; or
(2) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase payment or
surrender to the most recent contract anniversary prior to the annuitant's
86th birthday, less an adjustment for amounts subsequently surrendered,
plus purchase payments received since that contract anniversary.
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge of 0.50% of the daily net assets of the variable
account, the contract owner can purchase one of two Guaranteed Minimum Income
Benefit options at the time of application. Guaranteed Minimum Income Benefit
options provide for a minimum guaranteed value that may replace the contract
value as the amount to be annuitized under certain circumstances. A Guaranteed
Minimum Income Benefit may afford protection against unfavorable investment
performance.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract. Purchasers who name
someone other than themselves as the contract owner will have no rights under
the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
The contract owner may also request a change in the annuitant, contingent
annuitant, contingent
19
<PAGE> 22
owner, beneficiary, or contingent beneficiary before the annuitization date.
These changes must be:
- on a Nationwide form;
- signed by the contract owner; and
- received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. If the contract owner is
not a natural person and there is a change of the annuitant, distributions will
be made as if the contract owner died at the time of the change.
On the annuitization date, the annuitant will become the contract owner, unless
the contract owner is a Charitable Remainder Trust.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract. A joint owner will
receive a death benefit if a contract owner who is also the annuitant dies
before the annuitization date. If a contract owner who is NOT the annuitant dies
before the annuitization date, the joint owner becomes the contract owner.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
- Joint owners can only be named for Non-Qualified Contracts;
- Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners;
- The exercise of any ownership right in the contract will require a
written request signed by both joint owners;
- Nationwide will not be liable for any loss, liability, cost, or
expense for acting in accordance with the instructions of either joint
owner.
CONTINGENT OWNERSHIP
The contingent owner is entitled to certain benefits under the contract if a
contract owner who is NOT the annuitant dies before the annuitization date and
there is no surviving joint owner. However, if the contingent owner dies before
the contract owner, and there is no surviving joint owner, all of the contract
benefits that would have gone to the contingent owner will go to the contract
owner's estate.
If the contract owner and annuitant are the same, and the contract
owner/annuitant dies before the annuitization date, the contingent owner will
not have any rights in the contract unless the contingent owner is also the
beneficiary.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not effect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance (age 83
or younger if electing a Guaranteed Minimum Income Benefit), unless Nationwide
approves a request for an annuitant of greater age. The annuitant may be changed
before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person(s) who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. The beneficiaries will share
equally, unless otherwise specified.
If no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share equally, unless
otherwise specified.
20
<PAGE> 23
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the contract owner is a Charitable Remainder Trust and the annuitant dies
before the annuitization date, the death benefit will accrue to the Charitable
Remainder Trust. Any designation in conflict with the Charitable Remainder
Trust's right to the death benefit will be void.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
effect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
<TABLE>
<CAPTION>
- ----------------------------------------------------------
MINIMUM MINIMUM
CONTRACT INITIAL SUBSEQUENT
TYPE PURCHASE PAYMENTS
PAYMENT
- ----------------------------------------------------------
<S> <C> <C>
Non-Qualified $10,000 $1,000
- ----------------------------------------------------------
Investment-only $100,000 $15,000
- ----------------------------------------------------------
IRA $10,000 $1,000
- ----------------------------------------------------------
Roth IRA $10,000 $1,000
- ----------------------------------------------------------
Tax Sheltered Annuity $10,000 $1,000
- ----------------------------------------------------------
</TABLE>
Subsequent purchase payments are not permitted in Oregon, and may not be
permitted in other states under certain circumstances.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced no later than
2 business days after receipt of an order to purchase. The application and all
necessary information must be complete. If the application is not complete,
Nationwide may retain a purchase payment for up to 5 business days while
attempting to complete it. If the application is not completed within 5 business
days, the prospective purchaser will be informed of the reason for the delay.
The purchase payment will be returned unless the prospective purchaser
specifically consents to allow Nationwide to hold the purchase payment until the
application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- New Year's Day
- Martin Luther King, Jr. Day
- Presidents Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving
- Christmas
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist.
If Nationwide is unable to price purchase payments or transfers on any day that
the New York Stock Exchange is open, Nationwide will make its best effort to
process purchase
21
<PAGE> 24
payments and transfers as of the date pricing should have occurred.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts, the fixed account,
and/or Guaranteed Term Options as instructed by the contract owner. Shares of
the sub-accounts are purchased at net asset value, then converted into
accumulation units. Contract owners can change allocations or make exchanges
among the sub-accounts, fixed account or Guaranteed Term Options. Certain
transactions may be subject to conditions imposed by the underlying mutual
funds, as well as those set forth in the contract.
VALUE OF AN ACCUMULATION UNIT
The accumulation unit value for any valuation period is determined by
multiplying the accumulation unit value for each sub-account for the immediately
preceding valuation period by the net investment factor for the sub-account for
the subsequent valuation period. Though the number of accumulation units will
not change as a result of investment experience, the value of an accumulation
unit may increase or decrease from valuation period to valuation period.
DETERMINING THE CONTRACT VALUE
Contract value is the sum of the value of amounts allocated to the sub-accounts
in the variable account and amounts allocated to the fixed account and a
Guaranteed Term Option. If part or all of the contract value is surrendered, or
charges are assessed against the contract value, Nationwide will deduct a
proportionate amount from each of the sub-accounts, and amounts from the fixed
account and Guaranteed Term Options based on current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to the underlying mutual funds are held
in sub-accounts in the form of accumulation units. Accumulation unit value is
determined by calculating the net investment factor of each underlying mutual
fund for the current valuation period and multiplying that result with the
accumulation unit value determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor mathematically shows the investment
performance of the underlying mutual fund option in which a particular
sub-account invests, including the charges assessed against that sub-account for
a valuation period.
The net investment factor is determined by dividing (a) by (b), and then
subtracting (c) from the result, where:
(a) is the net of:
(1) the net asset value of the underlying mutual fund as of the end
of the current valuation period; and
(2) the per share amount of any dividend or income distributions made
by the underlying mutual fund (if the ex-dividend date occurs
during the current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period.
(c) Is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. The
factor is equal to an annual rate ranging from 1.20% to 1.75% of the
daily net assets of the variable account, depending on which contract
features the contract owner chose.
Based on the net investment factor, the value of an accumulation unit may
increase or decrease. Changes in the net investment factor may not be directly
proportional to changes in the net asset value of the underlying mutual fund
shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase
22
<PAGE> 25
or decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
1) adding all amounts allocated to the fixed account;
2) adding any interest earned on the amounts allocated; and
3) subtracting any withdrawals, transfers and charges deducted in
accordance with the contract.
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
1) adding all amounts allocated to any Guaranteed Term Option;
2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option;
3) adding or subtracting any amounts resulting from a market value
adjustment; and
4) subtracting charges deducted in accordance with the contract.
TRANSFERS
Contract owners can transfer allocations without penalty or adjustment, subject
to the following conditions:
- For any 12 month period, Nationwide may restrict transfers from the
variable account to the fixed account to 10% of the combined value of
Guaranteed Term Option allocations and the variable account contract
value.
- Transfers from a Guaranteed Term Option prior to maturity are subject
to a market value adjustment.
- Nationwide reserves the right to refuse transfers or purchase payments
into the fixed account if the fixed account value is greater than or
equal to 30% of the total contract value.
- After annuitization, transfers may only be made on the anniversary of
the annuitization date.
- Contract owners who use Dollar Cost Averaging (see "Dollar Cost
Averaging") may transfer from the fixed account to the variable
account (but not to Guaranteed Term Options) under the terms of that
program.
Amounts transferred to the variable account will receive the accumulation unit
value determined on the previous valuation period.
Transfer Requests
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine. Nationwide's failure to follow
these procedures will result in its liability for fraudulent or unauthorized
transfers. However, Nationwide will not be liable for following telephone
instructions that it reasonably believed to be genuine. Nationwide may withdraw
the telephone exchange privilege upon 30 days written notice to contract owners.
For transfers involving the variable account, Nationwide determines contract
values as of the date the completed transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same.
Within 45 days of the end of an interest rate guarantee period, transfers may be
made from the fixed account to the variable account or to the Guaranteed Term
Options. Nationwide will determine the amount that may be transferred and will
declare this amount at the end of the guarantee period. This amount will not be
less than 10% of the amount in the fixed account that is maturing.
23
<PAGE> 26
For new purchase payments allocated to the fixed account, or transfers to the
fixed account from the variable account or a Guaranteed Term Option, this period
begins on the date of deposit or transfer and ends on the one year anniversary
of the deposit or transfer. The guaranteed interest rate period may last for up
to 3 months beyond the 1 year anniversary because guaranteed terms end on the
last day of a calendar quarter.
The interest rate guarantee period does not in any way refer to interest rate
crediting practices connected with Guaranteed Term Options.
During an interest rate guarantee period, transfers cannot be made from the
fixed account and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer and exchange rights
of contract owners who use market timing firms (or other third parties) to
transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners, when
instructions are submitted directly by the contract owner, or by the contract
owner's representative (as authorized by the execution of a valid Nationwide
Limited Power of Attorney Form), will not be modified in any way.
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
- submitted by any agent acting under a power of attorney on behalf of
more than one contract owner; or
- submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing
firms (or other third parties) on behalf of more than one contract
owner at the same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. All IRA and Roth IRA refunds will be a return of purchase payments.
State and/or federal law may provide additional free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
24
<PAGE> 27
Partial Surrenders (Partial Redemptions)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account and Guaranteed Term Options. The amount withdrawn from
each investment option will be in proportion to the value in each option at the
time of the surrender request.
A Contingent Deferred Sales Charge may apply. The contract owner may take the
Contingent Deferred Sales Charge from either:
a) the amount requested; or
b) the remaining contract value.
If the contract owner does not make a specific election, any applicable
Contingent Deferred Sales Charge will be taken from the remaining contract
value.
Full Surrenders (Full Redemptions)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds. A Contingent Deferred Sales Charge may apply.
SURRENDERS UNDER A TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
1. when the contract owner reaches age 59-1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may NOT
include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
1. salary reduction contributions to Tax Sheltered Annuities made for
plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year beginning
before January 1, 1989, on amounts attributable to salary reduction
contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts (except that
earnings and employer contributions as of December 31, 1988 in such
Custodial Accounts may be withdrawn in the case of hardship).
C. Any distribution other than the above, including a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions stated above.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Tax Sheltered Annuities. These
contract owners can take loans from the contract value beginning 30 days after
the contract is issued up to the
25
<PAGE> 28
annuitization date. Loans are subject to the terms of the contract, the plan,
and the Internal Revenue Code. Nationwide may modify the terms of a loan to
comply with changes in applicable law.
MINIMUM & MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
<TABLE>
<CAPTION>
- ---------------- ------------ ---------------------------
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
- ---------------- ------------ ---------------------------
<S> <C> <C>
NON-ERISA PLANS up to up to 80% of contract
$20,000 value (not more than
$10,000)
- ---------------- ------------ ---------------------------
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
- ---------------- ------------ ---------------------------
- ---------------- ------------ ---------------------------
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
- ---------------- ------------ ---------------------------
</TABLE>
* The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide charges a $25 loan processing fee at the time each loan is processed.
This fee compensates Nationwide for expenses related to administering and
processing loans.
The fee is taken from the sub-accounts, fixed account, and Guaranteed Term
Options in proportion to the contract value at the time the loan is processed.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. Any
remaining required collateral will be transferred from the Guaranteed Term
Options. Transfers from the Guaranteed Term Options may be subject to a market
value adjustment. No CDSC will be deducted on transfers related to loan
processing.
LOAN INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. It is guaranteed never to fall
below 3.0%.
Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the
proportional share of the repayment to the Guaranteed Term Option is less than
$1,000, that portion of the repayment will be allocated to the NSAT-Money Market
Fund unless the contract owner directs otherwise.
26
<PAGE> 29
DISTRIBUTIONS & ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will be reduced
by the amount of the outstanding loan plus accrued interest if:
- the contract is surrendered;
- the contract owner/annuitant dies;
- the contract owner who is not the annuitant dies prior to
annuitization; or
- annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD & LOAN DEFAULT
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available (please refer to the terms of the loan agreement).
If a loan payment is not made by the end of the applicable grace period, the
entire loan will be treated as a deemed distribution and will be taxable to the
borrower. This deemed distribution may also be subject to an early withdrawal
tax penalty by the Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts,
plus interest, are deducted from the contract value when the participant is
eligible for a distribution of at least that amount. Additional loans are not
available while a previous loan is in default.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Investment-only Contracts, IRAs, Roth IRAs, and Tax Sheltered Annuities may not
be assigned, pledged or otherwise transferred except where allowed by law.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions and will be
included in gross income to the extent that the cash value exceeds the
investment in the contract for the taxable year in which it was pledged or
assigned. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account or the Guaranteed Term Options.
Requests for asset rebalancing must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York
27
<PAGE> 30
Stock Exchange is closed, asset rebalancing will occur on the next business day.
Asset rebalancing may be subject to employer limitations or restrictions for
contracts issued to a Tax Sheltered Annuity plan. Contract owners should consult
a financial adviser to discuss the use of asset rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar cost averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from the fixed account and/or certain sub-accounts into other
sub-accounts. Contract owners may participate in this program if their contract
value is $15,000 or more. Nationwide does not guarantee that this program will
result in profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account and the following underlying mutual funds: Fidelity VIP
High Income Portfolio, NSAT Government Bond Fund, NSAT Nationwide High Income
Bond Fund, and NSAT Money Market Fund to any other underlying mutual fund.
Dollar cost averaging transfers may not be directed to Guaranteed Term Options.
The minimum monthly transfer is $100. Transfers from the fixed account must be
equal to 1/30th of the fixed account value at the time the program is requested.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new dollar cost averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59-1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date;
2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
<TABLE>
<CAPTION>
- ----------------------------- -----------------------
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
- ----------------------------- -----------------------
<S> <C>
Under age 59-1/2 5%
- ----------------------------- -----------------------
Age 59-1/2 through age 61 7%
- ----------------------------- -----------------------
Age 62 through age 64 8%
- ----------------------------- -----------------------
Age 65 through age 74 10%
- ----------------------------- -----------------------
Age 75 and over 13%
- ----------------------------- -----------------------
</TABLE>
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
28
<PAGE> 31
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section. The total amount of CDSC for that contract year will be
determined in accordance with that provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten day
free look period (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a Tax
Sheltered Annuity plan, annuitization may occur during the first 2 years subject
to Nationwide's approval.
The contract owner may change the annuity commencement date. This change must be
in writing and approved by Nationwide.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose: (1) an annuity payment option; and (2) either a fixed
payment annuity, variable payment annuity, or an available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payments
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an age last birthday basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
A VARIABLE PAYMENT ANNUITY MAY NOT BE
ELECTED WHEN EXERCISING THE GUARANTEED
MINIMUM INCOME BENEFIT OPTION.
The first payment under a variable payment annuity is determined on the
annuitization date on an age last birthday basis by:
1) deducting applicable premium taxes from the total contract value; then
29
<PAGE> 32
2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. An
assumed investment rate is the percentage rate of return required to maintain
level variable annuity payments. Subsequent variable annuity payments may be
more or less than the first payment based on whether actual investment
performance of the underlying mutual funds is higher or lower than the assumed
investment rate of 3.5%.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts (see "Net Investment Factor").
Exchanges among Underlying Mutual Funds
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- - the amount to be distributed is less than $5,000, in which case Nationwide
may make one lump sum payment of the contract value; or
- - an annuity payment would be less than $50, in which case Nationwide can
change the frequency of payments to intervals that will result in payments
of at least $50. Payments will be made at least annually.
GUARANTEED MINIMUM INCOME BENEFIT OPTIONS ("GMIB")
What is a GMIB?
A GMIB is a benefit which ensures the availability of a minimum amount when the
contract owner wishes to annuitize the contract. This minimum amount, referred
to as the Guaranteed Annuitization Value, may be used at specified times to
provide a guaranteed level of determinable lifetime annuity payments. The GMIB
may provide protection in the event of lower contract values that may result
from the investment performance of the contract.
How is the Guaranteed Annuitization Value Determined?
There are two options available at the time of application. The Guaranteed
Annuitization Value is determined differently based on which option the contract
owner elects.
30
<PAGE> 33
Calculation Under Option 1
The Guaranteed Annuitization Value is equal to (a) - (b), but will never be
greater than 200% of all purchase payments, where:
(a) is the sum of all purchase payments, plus interest accumulated at a
compounded annual rate of 5% starting at the date of issue and ending
on the contract anniversary occurring prior to the annuitant's 86th
birthday;
(b) is the reductions to (a) due to surrenders made from the contract. All
such reductions will be proportionately the same as reductions to the
contract value caused by surrenders. For example, a surrender which
reduces the contract value by 25% will also reduce the Guaranteed
Annuitization Value by 25%.
Calculation Under Option 2
The Guaranteed Annuitization Value will be equal to the highest contract value
on any contract anniversary occurring prior to the annuitant's 86th birthday.
The GAV may not exceed 200% of all purchase payments made to the contract.
31
<PAGE> 34
GMIB Illustrations
The following charts illustrate the amount of income that will be provided to an
annuitant if the contract owner annuitizes the contract at the 7th, 10th or 15th
contract anniversary date, using the GMIB.
The illustrations assume the following:
- An initial purchase payment of $100,000.00 is made to the contract and
allocated to the variable account
- There are no surrenders from the contract or transfers to the fixed
account (making the fixed account greater than 30% of the contract
value)
- The contract is issued to a MALE at age 55, 65 or 70
- A Life Annuity with 120 Months Guaranteed Fixed Payment Annuity Option
is elected at annuitization
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
55 62 $4.72 $664.15
- -------------------------------------------------------------------------------------------------------
65 72 $5.96 $838.63
- -------------------------------------------------------------------------------------------------------
70 77 $5.79 $955.42
- -------------------------------------------------------------------------------------------------------
</TABLE>
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
55 65 $5.03 $819.33
- ---------------------------------------------------------------------------------------------------------
65 75 $6.44 $1,049.01
- ---------------------------------------------------------------------------------------------------------
70 80 $7.32 $1,192.35
- ---------------------------------------------------------------------------------------------------------
</TABLE>
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
55 70 $5.66 $1,132.00
- -----------------------------------------------------------------------------------------------------------
65 80 $7.32 $1,464.00
- -----------------------------------------------------------------------------------------------------------
70 85 $8.18 $1,636.00
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* Monthly Benefit per $1,000 applied
The illustrations should be used as a tool to assist an investor in determining
whether purchasing and exercising a GMIB option is right for them. The
guaranteed purchase rates assumed in the illustrations may not apply in some
states, or for contracts issued under an employer sponsored plan. Different
guaranteed purchase rates would also apply for females, and for males who
annuitize at ages other than the ones shown above, or annuitize under other
annuity payment options. In instances where different guaranteed purchase rates
apply, the GMIB amounts shown above would be different. In all instances, the
guaranteed purchase rates used to calculate the GMIB are the same as the
purchase rates guaranteed in the contract for fixed annuitizations without the
GMIB.
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Special Restrictions for GMIB Option 1
After the first contract year, if the value of the contract owner's fixed
account allocation becomes greater than 30% of the contract value in any
contract year due to:
(1) the application of additional purchase payments;
(2) surrenders; or
(3) transfers from the variable account,
then 0% interest will accrue in that contract year for purposes of calculating
the Guaranteed Annuitization Value.
If the contract owner's fixed account allocation becomes greater than 30% of the
contract value solely as a result of fluctuations in the value of the variable
account, then interest will continue to accrue, for the purposes of the
Guaranteed Annuitization Value, at 5% annually, subject to the other terms and
conditions outlined herein.
When May the Guaranteed Annuitization Value be Used?
The contract owner may use the Guaranteed Annuitization Value by electing to
enter the annuity payment phase of the contract (annuitizing the contract)
during the thirty day period following any contract anniversary:
(1) after the contract has been in effect for seven years; AND
(2) the annuitant has attained age 60.
What Annuity Payment Options May Be Used With the Guaranteed Annuitization
Value?
The contract owner may elect any life contingent FIXED ANNUITY PAYMENT OPTION
calculated using the guaranteed annuity purchase rates set forth in the
contract. Such Fixed Annuity Payment Options include:
- Life Annuity
- Joint and Last Survivor Annuity
- Life Annuity with 120 or 240 Monthly Payments Guaranteed
Other Terms and Conditions of a GMIB
**PLEASE READ CAREFULLY**
- The GMIB must be elected at the time of application.
- The annuitant must be age 83 or younger at the time the contract is
issued.
- The GMIB is irrevocable and will remain for as long as the contract
remains in force.
IMPORTANT CONSIDERATIONS TO KEEP IN MIND REGARDING THE
GMIB OPTION
While a GMIB does provide a Guaranteed Annuitization Value, A GMIB MAY NOT BE
APPROPRIATE FOR ALL INVESTORS and should be understood completely and analyzed
thoroughly before being elected.
- GMIB DOES NOT in any way guarantee the performance of any underlying
mutual fund, or any other investment option available under this contract.
- Once elected, the GMIB is irrevocable, meaning that even if the investment
performance of underlying mutual funds or other available investment
options surpasses the minimum guarantees associated with the GMIB, the
GMIB charges will still be assessed.
- The GMIB in no way restricts or limits the rights of contract owners to
annuitize the contract at other times permitted under the contract, nor
will it in any way restrict the right to annuitize the contract using
contract values that may be higher than the Guaranteed Annuitization
Value.
- The purchase rates available in connection with annuitization options
under a GMIB are minimum guaranteed purchase rates. Alternative purchase
rates, which may be more favorable, may apply to annuitizations which
occur without a GMIB option.
- Please take advantage of the guidance of a qualified financial adviser in
evaluating the GMIB options, and all other aspects of this contract.
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ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. IRAs and Tax Sheltered Annuities are subject to
the "minimum distribution" requirements set forth in the plan, contract, and the
Internal Revenue Code.
DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the contingent owner becomes the contract owner. If no contingent owner is
named, the benefits belong to the last surviving contract owner's estate.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of Annuitant -
Non-Qualified Contracts" provision.
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If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
DEATH BENEFIT PAYMENT
Contract owners may select one of two death benefits available under the
contract at the time of application (not all death benefit options may be
available in all states). If no selection is made at the time of application,
the death benefit will be the One-Year Step Up Death Benefit.
The death benefit value is determined as of the date Nationwide receives:
(1) proper proof of the annuitant's death;
(2) an election specifying the distribution method; and
(3) any state required form(s).
One-Year Step Up Death Benefit (Standard Death Benefit)
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
(1) the contract value;
(2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the highest contract value on any contract anniversary prior to the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
5% Enhanced Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
(3) the contract value; or
(4) the total of all purchase payments, less any amounts surrendered,
accumulated at 5% simple interest from the date of each purchase payment
or surrender to the most recent contract anniversary prior to the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received since that contract
anniversary.
The total accumulated amount will not exceed 200% of the net of purchase
payments and amounts surrendered. The adjustment for amounts subsequently
surrendered after the most recent contract anniversary will reduce the 5%
interest anniversary value in the same proportion that the contract value was
reduced on the date(s) of the partial surrender(s).
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and before
the entire interest in the contract has been distributed, then the
remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the entire
interest in the contract (consisting of either the death benefit or the
contract value reduced by charges set forth elsewhere in the contract)
will be distributed within 5 years of the contract owner's death,
provided however:
a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary.
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Payments must begin within one year of the contract owner's death
unless otherwise permitted by federal income tax regulations;
b) if the designated beneficiary is the surviving spouse of the deceased
contract owner, the spouse can choose to become the contract owner
instead of receiving a death benefit. Any distributions required
under these distribution rules will be made upon that spouse's death.
In the event that the contract owner is NOT a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a contract
owner;
b) any change of annuitant will be treated as the death of a contract owner;
and
c) in either case, the appropriate distribution will be made upon the death
or change, as the case may be. The annuitant is the primary annuitant as
defined in Section 72(s)(6)(B) of the Internal Revenue Code.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR TAX SHELTERED ANNUITIES
Distributions from Tax Sheltered Annuities will be made according to the Minimum
Distribution and Incidental Benefit provisions of Section 401(a)(9) of the
Internal Revenue Code. Distributions will be made to the annuitant according to
the annuity payment option selected over a period not longer than
a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's designated
beneficiary.
Required distributions will not be withdrawn from this contract if they are
being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Tax Sheltered Annuity will be
distributed in equal or substantially equal payments over a period described in
a) or b), the payments will begin on the required beginning date. The required
beginning date is the later of:
a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70-1/2; or
b) the annuitant's retirement date.
Provision b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70-1/2.
If the annuitant dies before distributions begin, the interest in the Tax
Sheltered Annuity must be distributed by December 31 of the calendar year in
which the fifth anniversary of the annuitant's death occurs unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not longer
than his or her life expectancy) and beginning no later than December 31
of the year in which the annuitant would have attained age 70-1/2; or
b) the annuitant names a beneficiary other than his or her surviving spouse
and the beneficiary elects to receive distribution of the contract in
substantially equal payments over his or her life (or a period not longer
than his or her life expectancy) beginning no later than December 31 of
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<PAGE> 39
the year following the year in which the annuitant dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distributions from an Individual Retirement Annuity must begin no later than
April 1 of the calendar year following the calendar year in which the contract
owner reaches age 70-1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
a) the contract owner's life or the lives of the contract owner and his or
her spouse or designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or the
joint life expectancy of the contract owner and the contract owner's
designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity must be distributed by December 31 of the calendar
year in which the fifth anniversary of the contract owner's death occurs,
unless:
a) the contract owner names his or her surviving spouse as the beneficiary
and such spouse chooses to:
1) treat the contract as an Individual Retirement Annuity established for
his or her benefit; or
2) receive distribution of the contract in substantially equal payments over
his or her life (or a period not longer than his or her life expectancy)
and beginning no later than December 31 of the year in which the contract
owner would have reached age 70-1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract owner's
death.
Required distributions will not be withdrawn from this contract if they are
being withdrawn from another Individual Retirement Annuity or Individual
Retirement Account of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a surviving spouse who is the beneficiary under
the annuity payment option may treat the contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity must annually report the amount of non-deductible purchase payments, the
amount of any distribution, the amount by which non-deductible purchase payments
for all years exceed non-taxable distributions for all years, and the total
balance of all Individual Retirement Annuities.
Individual Retirement Annuity distributions will not receive the favorable tax
treatment of a
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<PAGE> 40
lump sum distribution from a Qualified Plan. If the contract owner dies before
the entire interest in the contract has been distributed, the balance will also
be included in his or her gross estate.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the contract owner names his or her surviving spouse as the beneficiary
and the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her benefit; or
2) receive distribution of the contract in substantially equal payments over
his or her life (or a period not longer than his or her life expectancy)
and beginning no later than December 31 of the year following the year in
which the contract owner would have reached age 70-1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the contract
owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Income Taxes").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Contract owners should consult a financial consultant, legal counsel or tax
advisor to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1)
Individual Retirement Annuities; (2) Roth IRAs; (3) Tax Sheltered Annuities; and
(4) Non-Qualified Contracts. Each type of annuity is discussed below.
Individual Retirement Annuities and Individual Retirement Accounts
Distributions from Individual Retirement Annuities and contracts owned by
Individual Retirement Accounts are generally taxed when received. The excludable
portion of each payment is based on the ratio between the amount by which
non-deductible purchase payments to all the contracts exceeds prior non-taxable
distributions from the contracts, and the total account balances in the
contracts at the time of the distribution. The owner of these Individual
Retirement Annuities or the annuitant under contracts held by Individual
Retirement Accounts must annually report to the Internal Revenue Service:
- the amount of nondeductible purchase payments;
- the amount of any distributions;
- the amount by which nondeductible purchase payments for all years exceed
non-taxable distributions for all years; and
- the total balance in all Individual Retirement Annuities and Individual
Retirement Accounts.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five year
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rule and meets
one of the following requirements:
(i) it is made on or after the date on which the contract owner attains age
59-1/2;
(ii) it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
(iii) it is attributable to the contract owner's disability; or
(iv) it is a qualified first-time home buyer distribution (as defined in
Section 72(t)(2)(F) of the Internal Revenue Code).
If the Roth IRA does not have any qualified rollover contributions from a
retirement plan other than a Roth IRA (or income allocable thereto), the five
year rule is satisfied if the distribution is not made within the five year
period beginning with the first contribution to the Roth IRA. If the Roth IRA
contains qualified rollover contributions from a retirement plan other than a
Roth IRA (or income allocable thereto), the five year rule is satisfied if the
distribution is not made within the five taxable year period commencing with the
taxable year in which the qualified rollover contribution was made.
A nonqualified distribution is any distribution that is not a qualified
distribution.
A qualified distribution is not included in gross income for federal income tax
purposes. A nonqualified distribution is not includible in gross income to the
extent that the distribution, when added to all previous distributions, does not
exceed that total amount of contributions made to the Roth IRA. Any nonqualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Taxable distributions will not receive the same favorable tax treatment of a
lump sum distribution from a Qualified Plan. If the contract owner dies before
the contract is completely distributed, the balance will also be included in the
contract owner's gross estate for tax purposes.
A change of the annuitant or contingent annuitant may be treated by the Internal
Revenue Service as a taxable transaction.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
required by the Internal Revenue Code. The formula excludes from income the
amount invested in the contract divided by the number of anticipated payments
(as determined pursuant to Section 72(d) of the Internal Revenue Code) until the
full investment in the contract is recovered. Thereafter all distributions are
fully taxable.
Non-Qualified Contracts - Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment is excludable from taxable income based on the ratio between the
contract owner's investment in the contract and the expected return on the
contract until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income, it may be included on his or her
final tax return.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that is assigned or pledged; or for contracts issued after April 22, 1987, any
portion of the contract transferred by gift. For these purposes, a transfer by
gift may occur upon annuitization if the contract owner and the annuitant are
not the same individual.
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In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during any 12 month period will be treated as one annuity contract. Additional
limitations on the use of multiple contracts may be imposed by Treasury
Regulations.
Distributions before the annuitization date allocable to a portion of the
contract invested prior to August 14, 1982, are treated first as a recovery of
the investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on earnings from contributions made to the contract after
February 28, 1986. There are exceptions for immediate annuities and certain
contracts owned for the benefit of an individual. An immediate annuity, for
purposes of this discussion, is a single premium contract on which payments
begin within one year of purchase. If this contract is issued as the result of
an exchange described in Section 1035 of the Internal Revenue Code, for purposes
of determining whether the contract is an immediate annuity, it will generally
be considered to have been purchased on the purchase date of the contract given
up in the exchange.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59-1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution:
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over the
life or life expectancy of the contract owner (or the joint lives or
joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner),
4) is for the purchase of an immediate annuity;
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death.
If a contract owner dies before the annuitization date, then the joint owner,
the contingent owner or other named recipient must receive the distribution
within 5 years of the contract owner's death. However, the recipient may elect
to receive payments over his or her life or life expectancy as long as the
payments begin within one year of the contract owner's death. If the joint
owner, contingent owner or other named recipient is the surviving spouse, the
spouse may choose to take over the contract as contract owner and the contract
will be continued throughout the life of the surviving spouse.
If the contract owner dies on or after the annuitization date and before the
entire interest has been distributed, the remainder must be distributed at least
as rapidly as under the method being used on the date of the contract owner's
death (see "Required Distributions for Tax Sheltered Annuities").
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If the contract owner is not a natural person, the death of the annuitant (or a
change in the annuitant) will result in a distribution pursuant to these rules,
regardless of whether a contingent annuitant is named.
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code, deemed to be owned)
by individuals. Different rules apply if the contract owner is not a natural
person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity contracts under the
Internal Revenue Code. Specifically, they are not treated as annuity contracts
for purposes of Section 72. Therefore, income earned under a Non-Qualified
Contract that is owned by a non-natural person is taxed as ordinary income
during the taxable year that it is earned. Taxation is not deferred, even if the
income is not distributed out of the contract to the contract owner.
This non-natural person rule does not apply to all entity-owned contracts. A
contract that is owned by a non-natural person for the benefit of an individual
is treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
a) acquired by the estate of a decedent by reason of the death of the
decedent;
b) issued in connection with certain qualified retirement plans and
individual retirement plans;
c) used in connection with certain structured settlements;
d) purchased by an employer upon the termination of certain qualified
retirement plans; or
e) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES AND TAX SHELTERED ANNUITIES
Contract owners looking for information on eligibility, limitations on
permissible amounts of purchase payments, and the tax consequences of
distributions from Individual Retirement Annuities and Tax Sheltered Annuities
should contact a qualified adviser. The terms of each plan may limit the rights
available under the contracts.
Section 403(b)(1)(E) of the Internal Revenue Code requires a contract issued as
a Tax Sheltered Annuity to limit purchase payments for any year to an amount
that does not exceed the limit set forth in Section 402(g) of the Internal
Revenue Code. This limit is increased from time to time to reflect increases in
the cost of living. This limit may be reduced by deposits, contributions or
payments made to another Tax Sheltered Annuity or other plan, contract or
arrangement by or on behalf of the contract owner.
The Internal Revenue Code allows most distributions from Qualified Plans to be
rolled into Individual Retirement Annuities. Most distributions from Tax
Sheltered Annuities may be rolled into another Tax Sheltered Annuity, Individual
Retirement Annuity, or an Individual
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<PAGE> 44
Retirement Account. Distributions that may NOT be rolled over are those that
are:
a) one of a series of substantially equal annual (or more frequent) payments
made:
1) over the life (or life expectancy) of the contract owner;
2) over the joint lives (or joint life expectancies) of the contract
owner and the contract owner's designated beneficiary;
3) for a specified period of ten years or more; or
b) a required minimum distribution.
Any distribution that is eligible for rollover will be subject to federal tax
withholding of 20% if the distribution is not rolled into an appropriate plan as
described above.
Individual Retirement Accounts and Individual Retirement Annuities may not
provide life insurance benefits. If the death benefit exceeds the greater of the
contract's cash value or the sum of all purchase payments (less any surrenders),
the contract could be considered life insurance. Consequently, the Internal
Revenue Service could determine that the Individual Retirement Account or
Individual Retirement Annuity does not qualify for the desired tax treatment.
ROTH IRAS
The contract may be purchased as a Roth IRA. For detailed information on
purchasing and holding this contract as a Roth IRA, the contract owner should
contact a financial adviser.
The Internal Revenue Code allows distributions from Individual Retirement
Accounts and Individual Retirement Annuities to be rolled into Roth IRAs. The
rollovers are subject to federal income tax as distributions from the Individual
Retirement Account or Individual Retirement Annuity.
All of the income from rollovers will be required to be included in income in
the year of the rollover distribution from the Individual Retirement Account or
Individual Retirement Annuity.
A distribution from a Roth IRA that contains the proceeds of a rollover from an
Individual Retirement Account or Individual Retirement Annuity within the
preceding five years could be subject to a 10% penalty, even if the distribution
is not taxable. In addition, if the rollover from the Individual Retirement
Account or Individual Retirement Annuity was made in 1998, and the income from
that rollover was included in income ratably over a four year period, a
distribution from the Roth IRA within four years of the rollover may result in
the loss of the four year spread, subject to the amount deferred under the four
year election to be taxed immediately.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required). Mandatory
back-up withholding rates are 31% of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in accordance
with Internal Revenue Service requirements); and
42
<PAGE> 45
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includable in the non-resident alien's gross income
for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue Code
(generally, trusts that have no beneficiaries who are not 2 or more
generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at his
or her death; or
- who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before annuitization are treated as nontaxable return of principal until the
principal is fully recovered. Thereafter all distributions are fully taxable.
Distributions after annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
annuitization is equal to the amount of the distribution in excess of 3% of the
total purchase payments paid, until an amount equal to the total purchase
payments paid has been excluded. Thereafter, the entire distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
distributions of income. A personal adviser should be consulted in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
43
<PAGE> 46
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners all statements and reports required by law.
Therefore, contract owners should promptly notify Nationwide of any address
change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the contract's
value. Confirmation statements will not be sent for recurring
transactions (i.e., dollar cost averaging or salary reduction programs).
Instead, confirmation of recurring transactions will appear in the
contract's quarterly statements;
- semi-annual reports as of June 30 containing financial statements for the
variable account; and
- annual reports as of December 31 containing financial statements for the
variable account.
Contract owners should review these statements and confirmations carefully. All
errors or corrections must be reported to Nationwide immediately to assure
proper crediting to the contract. Unless Nationwide is notified within 30 days
of receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999.
Like many organizations, Nationwide is required to renovate or replace computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has developed a plan to renovate or replace all applications that were
identified as not Year 2000 compliant.
As of the end of July 1998, Nationwide has renovated 97% of all applications
that required renovation. Testing of the renovated programs is in process,
including running each application with the date moved forward to Year 2000.
Nationwide expects to complete the testing of all renovated applications by the
end of 1998. For applications being replaced, Nationwide
44
<PAGE> 47
anticipates all replacement systems to be in place and functioning by the end of
1998. Contingency plans are substantially completed which identify actions to be
taken if Nationwide's renovation and replacement strategies fall behind
schedule.
Nationwide is also completing an inventory and assessment of all vendor
products. As of the end of July 1998, 83% of products had been assessed and 69%
were Year 2000 compliant. Nationwide is certifying that each vendor product is
Year 2000 compliant. At the end of July 1998, 24% of vendor products that were
identified as Year 2000 compliant had been certified. Nationwide anticipates
having all vendor products assessed and certified by the end of 1998. Any vendor
products that cannot be certified as Year 2000 compliant will be replaced or
eliminated.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
working with all business partners to assess Year 2000 issues associated with
the exchange of electronic data. Nationwide has completed an inventory and
assessment of all interfaces with business partners and is in the process of
testing those interfaces. Nationwide has also initiated plans to survey producer
business partners to ascertain their Year 2000 readiness.
Operating expenses in 1997 and in the first six months of 1998 include
approximately $45 million and $22.6 million, respectively, for technology
projects, including costs related to Year 2000. In the second half of 1998,
Nationwide anticipates spending an amount comparable to expense for the first
half of 1998. At this time, no significant Year 2000 costs are anticipated in
1999. Management does not anticipate that the completion of Year 2000 renovation
and replacement activities will result in a reduction in operating expenses.
Rather, personnel and resources currently allocated to Year 2000 issues will be
assigned to other technology-related projects. These expenses do not have an
effect on the assets of the variable account and are not charged through to the
contract owner.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In February 1997, Nationwide Life Insurance Company was named as a defendant in
a lawsuit filed in New York Supreme Court related to the sale of whole life
policies on a "vanishing premium" basis (John H. Snyder v. Nationwide Life
Insurance Co.). The plaintiff in this lawsuit seeks to represent a national
class of Nationwide policyholders and claims unspecified compensatory and
punitive damages. On August 20, 1998, the Court in the Snyder case signed an
order preliminarily approving a class for settlement purposes and scheduled a
fairness hearing for December 17, 1998. The proposed settlement, if ultimately
approved, is not expected to have a material adverse effect on the financial
condition of Nationwide Life Insurance Company.
In April 1998, Nationwide Life Insurance Company was named as a defendant in a
lawsuit filed in Ohio State Court similar to the Snyder lawsuit (David Mishler
v. Nationwide Life Insurance Co.). These plaintiffs seek to represent a similar
class, make similar allegations and seek unspecified compensatory and punitive
damages.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, brought an action in a Texas federal court against Nationwide Life
Insurance Company and the American Century Group as defendants (Robert Young and
David D. Distad v. Nationwide Life Insurance Company et al.). In this action,
plaintiffs seek to represent a class of variable life insurance policy owners
and
45
<PAGE> 48
variable annuity contract owners who they claim were misled when purchasing
these variable contracts. Plaintiffs alleged the purchasers were led to believe
that the performance of an underlying mutual fund managed by American Century,
whose shares may only be purchased by insurance companies, would track the
performance of a public mutual fund, also managed by American Century. The
amended complaint seeks unspecified compensatory and punitive damages. On April
27, 1998, the Court denied, in part, and granted, in part, motions to dismiss
the complaint filed by Nationwide Life Insurance Company and American Century.
The parties are presently engaged in discovery on the issue of whether the
lawsuit should be certified as a class action. Plaintiffs filed their motion in
support of class certification and Nationwide Life Insurance Company intends to
file a response opposing class certification. Nationwide Life Insurance Company
intends to defend this case vigorously. There can be no assurance that any
litigation relating to pricing or sales practices will not have a material
adverse effect on Nationwide in the future.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT Money Market
Fund. "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 NSAT Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- precious metals;
- real estate;
- stocks and bonds;
- closed-end funds;
- bank money market deposit accounts and passbook savings;
- CDs; and
- the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- S&P 500;
- Shearson/Lehman Intermediate Government/Corporate Bond Index;
- Shearson/Lehman Long-Term Government/Corporate Bond Index;
- Donoghue Money Fund Average;
- U.S. Treasury Note Index;
- Bank Rate Monitor National Index of 2-1/2 Year CD Rates; and
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.,
- CDA/Wiesenberger,
- Morningstar,
- Donoghue's,
- magazines such as:
- Money;
- Forbes;
- Kiplinger's Personal Finance Magazine;
- Financial World
- Consumer Reports
- Business Week;
- Time;
- Newsweek;
46
<PAGE> 49
- National Underwriter;
- News and World Report;
- LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
- Variable Annuity Research & Data Service (The VARDS Report)
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the standard 7-year CDSC
schedule and the deduction of all charges that could be made to the contracts if
all available options were chosen, except for the loan processing fee and
premium taxes, which may be imposed by certain states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $10,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges except the CDSC) had they been available
in the variable account for one of the periods. The CDSC is not reflected
because the contracts are designed for long term investment. The CDSC, if
reflected, would decrease the level of performance shown. An initial investment
of $10,000 is assumed because that amount is closer to the size of a typical
contract than $1,000, which was used in calculating the standardized average
annual total return.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1997.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
47
<PAGE> 50
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/97 to 12/31/97 to 12/31/97 Account
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American N/A N/A 21.39% 11/03/97
Century VP Income & Growth
- -----------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American N/A N/A -1.54% 11/03/97
Century VP International
- -----------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American N/A N/A 12.87% 11/03/97
Century VP Value
- -----------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. N/A N/A 3.94% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. N/A N/A 16.34% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital Appreciation N/A N/A 9.47% 11/03/97
Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class N/A N/A 15.95% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class N/A N/A -5.35% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class N/A N/A 0.92% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class N/A N/A -12.84% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class N/A N/A -9.88% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service N/A N/A 20.67% 11/03/97
Class
- -----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc. - Emerging Markets N/A N/A 22.61% 11/03/97
Debt Portfolio
- -----------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund N/A N/A 19.52% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund N/A N/A 2.03% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund N/A N/A -2.77% 10/31/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund N/A N/A 8.97% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund N/A N/A 1.19% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund N/A N/A 3.29% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund N/A N/A -0.71% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund N/A N/A 8.81% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund N/A N/A -1.60% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund N/A N/A -10.21% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund N/A N/A -17.10% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund N/A N/A -27.68% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund N/A N/A 6.23% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund N/A N/A 2.32% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Guardian Portfolio N/A N/A 28.89% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Mid-Cap Growth Portfolio N/A N/A 161.31% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio N/A N/A 1.31% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer N/A N/A -31.38% 11/03/97
Aggressive Growth Fund
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer N/A N/A -16.91% 11/03/97
Growth Fund
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE> 51
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
10 Years
or Date Fund
Available in Date Fund
the Variable Available in
1 Year 5 Years Account the Variable
Sub-Account Option to 12/31/97 to 12/31/97 to 12/31/97 Account
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer N/A N/A 10.15% 11/03/97
Growth & Income Fund
- -----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide N/A N/A -58.11% 11/03/97
Emerging Markets Fund
- -----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard N/A N/A -52.93% 11/03/97
Assets Fund
- -----------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley N/A N/A 15.96% 11/03/97
Real Estate Securities Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio N/A N/A 18.60% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio N/A N/A -34.85% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio N/A N/A -15.55% 11/03/97
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/97
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/97 to 12/31/97 Fund Effective
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American N/A N/A 7.57% 10/30/97
Century VP Income & Growth
- -------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 17.15% N/A 9.22% 05/02/94
Century VP International
- -------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 24.51% N/A 21.65% 05/01/96
Century VP Value
- -------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 26.83% N/A 20.00% 10/06/93
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 31.30% 16.21% 14.41% 09/29/89
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 26.48% N/A 18.40% 04/05/93
Appreciation Portfolio
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class 26.46% 18.63% 15.29% 10/09/86
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 21.91% 16.52% 15.73% 10/09/86
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 16.11% 12.50% 11.47% 09/19/85
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 10.16% 12.67% 8.25% 01/28/87
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 22.53% N/A 26.58% 01/03/95
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 28.33% N/A 25.25% 01/03/95
Service Class
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc. - Emerging N/A N/A 0.09% 01/16/97
Markets Debt Portfolio
- -------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 32.81% 17.49% 16.11% 04/15/92
- -------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 8.30% 6.05% 7.89% 11/08/82
- -------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 3.96% 3.24% 4.32% 11/30/81
- -------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 27.81% 16.47% 14.19% 11/08/82
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund N/A N/A 1.25% 10/31/97
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund N/A N/A 1.56% 10/31/97
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund N/A N/A 0.96% 10/31/97
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
49
<PAGE> 52
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
10 Years
to 12/31/97
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/97 to 12/31/97 Fund Effective
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund N/A N/A 2.07% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund N/A N/A 0.83% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund N/A N/A -0.57% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund N/A N/A -1.82% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 15.88% N/A 24.07% 10/23/95
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund N/A N/A 1.98% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund N/A N/A 1.42% 10/31/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Guardian Portfolio N/A N/A 4.99% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Mid-Cap Growth Portfolio N/A N/A 16.97% 11/03/97
- ------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT Partners Portfolio 29.61% N/A 22.64% 03/22/94
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 10.30% 14.49% 14.79% 08/15/86
Aggressive Growth Fund
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 25.13% 17.14% 15.23% 04/03/85
Growth Fund
- ------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 30.85% N/A 35.52% 07/05/95
Growth & Income Fund
- ------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide -12.71% N/A 3.97% 12/21/95
Emerging Markets Fund
- ------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard -2.91% 13.58% 5.67% 09/01/89
Assets Fund
- ------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley 19.96% N/A 26.33% 07/03/95
Real Estate Securities Portfolio
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio N/A N/A 3.68% 10/31/87
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio -3.48% N/A 4.54% 06/30/95
- ------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio 11.92% N/A 7.04% 09/30/96
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
TABLE OF CONTENTS OF THE STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................2
Underwriters..................................................................2
Calculations of Performance...................................................2
Annuity Payments..............................................................3
Financial Statements..........................................................4
50
<PAGE> 53
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S&P 500. Such a management technique known as "portfolio optimization"
may cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities. There can be no assurance that
the Fund will achieve its objectives.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are
believed by management to be undervalued at the time of purchase. Under
normal market conditions, the Fund expects to invest at least 80% of the
value of its total asset in equity securities, including common and
preferred stock, convertible preferred stock and convertible debt
obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies.
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The Dreyfus Corporation ("Dreyfus") serves as the Fund's manager, while Mellon
Equity Associates, an affiliate of Dreyfus, serves as the Fund's index manager.
Dreyfus is a wholly-owned subsidiary of Mellon Bank, N.A., which is a
wholly-owned subsidiary of Mellon Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
sub-adviser and provides day-to-day management of the Portfolio.
CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This Portfolio
invests primarily in the common stocks of domestic and foreign issuers.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Dreyfus serves as the Fund's investment adviser. NCM
Capital Management Group, Inc. serves as the Fund's sub-investment adviser and
provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America. Current income is secondary to the primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role
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in the selection of securities and, therefore, the performance of the
Portfolio. Many securities which FMR believes would have the greatest
potential may be regarded as speculative, and investment in the Portfolio
may involve greater risk than is inherent in other underlying mutual funds.
It is also important to point out that this Portfolio makes sense for you
if you can afford to ride out changes in the stock market because it
invests primarily in common stocks. FMR can also make temporary investments
in securities such as investment-grade bonds, high-quality preferred stocks
and short-term notes, for defensive purposes when it believes market
conditions warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as part
of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Service, Inc. ("Moody's"); BB or lower by Standard &
Poor's and may be deemed to be of a speculative nature. The Portfolio may
also purchase lower-quality bonds such as those rated Ca3 by Moody's or C-
by Standard & Poor's which provide poor protection for payment of principal
and interest (commonly referred to as "junk bonds"). For a further
discussion of lower-rated securities, please see the "Risks of Lower-Rated
Debt Securities" section of the Portfolio's prospectus.
VIP OVERSEAS PORTFOLIO: SERVICE CLASS
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
VIP II CONTRAFUND PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to investments
in domestic or foreign companies, small and large, many of which may not be
well known. The Portfolio primarily invests in common stock and securities
convertible into common stock, but it has the flexibility to invest in any
type of security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and it's portfolios.
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VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio, under
normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth potential.
Although the Portfolio invests primarily in common stock and securities
convertible into common stock, it has the ability to purchase other
securities, such as preferred stock and bonds, that may produce capital
growth. The Portfolio may invest in foreign securities without limitation.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
Morgan Stanley Universal Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley Asset Management, Inc.
EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Nationwide Advisory
Services, Inc. ("NAS"), a wholly-owned subsidiary of Nationwide Life Insurance
Company.
CAPITAL APPRECIATION FUND
Investment Objective: Long-term growth by primarily investing in a
diversified portfolio of the common stock of companies which NAS determines
have a better-than-average potential for sustained capital growth over the
long term.
GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
MONEY MARKET FUND
Investment Objective: As high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing
primarily in money market instruments.
TOTAL RETURN FUND
Investment Objective: Capital growth by investing in common stocks of
companies that NAS believes will have above-average earnings or otherwise
provide investors with above-average potential for capital appreciation. To
maximize this potential, NAS may also utilize from time to time, securities
convertible into common stock, warrants and options to purchase such
stocks.
SUBADVISED NATIONWIDE FUNDS
NATIONWIDE BALANCED FUND
Subadviser: Salomon Brothers Asset Management, Inc.
Investment Objective: Primarily seeks above-average income compared to a
portfolio entirely invested in equity securities. The Fund's secondary
objective is to take advantage of opportunities for growth of capital and
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income. The Fund seeks its objective primarily through investments in a
broad variety of securities, including equity securities, fixed-income
securities and short term obligations. Under normal market conditions, it
is anticipated that the Fund will invest at least 40% of the Fund's total
assets in equity securities and at least 25% in fixed-income senior
securities. The Fund's subadviser, Salomon Brothers Asset Management,
Inc., will have discretion to invest in the full range of maturities of
fixed-income securities. Generally, most of the Fund's long-term debt
investments will consist of "investment grade" securities, but the Fund
may invest up to 20% of its net assets in non-convertible fixed-income
securities rated below investment grade or determined by the subadviser
to be of comparable quality. These securities are commonly known as junk
bonds. In addition, the Fund may invest an unlimited amount in
convertible securities rated below investment grade.
NATIONWIDE EQUITY INCOME FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks above average income and capital appreciation
by investing at least 65% of its assets in income-producing equity
securities. Such equity securities include common stocks, preferred
stocks, and securities (including debt securities) that are convertible
into common stocks. The portion of the Fund's total assets invested in
each type of equity security will vary according to the Fund's
subadviser's assessment of market, economic conditions and outlook.
NATIONWIDE GLOBAL EQUITY FUND
Subadviser: J. P. Morgan Investment Management Inc.
Investment Objective: To provide high total return from a globally
diversified portfolio of equity securities. Total return will consist of
income plus realized and unrealized capital gains and losses. The Fund
seeks its investment objective through country allocation, stock
selection and management of currency exposure. Under normal market
conditions, J.P. Morgan Investment Management Inc., intends to keep the
Fund essentially fully invested with at least 65% of the value of its
total assets in equity securities consisting of common stocks and other
securities with equity characteristics such as preferred stocks,
warrants, rights, convertible securities, trust certificates, limited
partnership interests and equity participations. The Fund's primary
equity instruments are the common stock of companies based in the
developed countries around the world. The assets of the Fund will
ordinarily be invested in the securities of at least five different
countries.
NATIONWIDE HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks to provide high current income by investing
primarily in a professionally managed, diversified portfolio of fixed
income securities. To meet its objective, the Fund intends to invest at
least 65% of its assets in lower-rated fixed income securities such as
preferred stocks, bonds, debentures, notes, equipment lease certificates
and equipment trust certificates which are rated BBB or lower by Standard
& Poor's or Fitch Investors Service or Baa or lower by Moody's (or if not
rated, are determined by the Fund's subadviser to be of a comparable
quality). Such investments are commonly referred to as "junk bonds." For
a further discussion of lower-rated securities, please see the "High
Yield Securities" section of the Fund's prospectus.
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NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Salomon Brothers Asset Management, Inc. with Salomon Brothers
Asset Management Limited
Investment Objective: Primarily seeks a high level of current income.
Capital appreciation is a secondary objective. The Fund seeks to achieve
its objectives by investing in a globally diverse portfolio of
fixed-income investments and by giving the subadviser, Salomon Brothers
Asset Management, Inc. broad discretion to deploy the Fund's assets among
certain segments of the fixed-income market that the subadviser believes
will best contribute to achievement of the Fund's investment objectives.
The Fund reserves the right to invest predominantly in securities rated
in medium or lower categories, or as determined by the subadviser to be
of comparable quality, commonly referred to as "junk bonds." Although the
subadviser has the ability to invest up to 100% of the Fund's assets in
lower-rated securities, the subadviser does not anticipate investing in
excess of 75% of the Fund's assets in such securities. The Subadviser has
entered into a subadvisory agreement with its London based affiliate,
Salomon Brothers Asset Management Limited, pursuant to which the
subadviser has delegated to Salomon Brothers Asset Management Limited
responsibility for management of the Fund's investments in non-dollar
denominated debt securities and currency transactions.
NATIONWIDE SELECT ADVISERS MID CAP FUND
Subadvisers: First Pacific Advisors, Inc., Pilgrim Baxter & Associates,
Ltd., and Rice, Hall, James & Associates
Investment Objective: Capital appreciation by investing primarily in
equity securities of medium-sized companies (market capitalization
between $500 million and $7 billion). Under normal market conditions, the
Fund will invest in equity securities consisting of common stock,
preferred stock and securities convertible into common stocks, including
convertible preferred stock and convertible bonds. NAS has chosen the
Fund's subadvisers because they utilize a number of different investment
styles. In utilizing these different styles, NAS hopes to increase
prospects for investment return and to reduce market risk and volatility.
NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. Under normal market
conditions, at least 75% of the Fund's total assets will be invested in
equity securities of companies with market capitalizations at the time of
purchase of between $200 million and $2.5 billion. The Fund will invest
in equity securities of domestic and foreign issuers characterized as
"value" companies according to criteria established by The Dreyfus
Corporation, the Fund's subadviser.
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger & Berman, L.P., Lazard
Asset Management, Strong Capital Management, Inc. and Warburg Pincus
Asset Management, Inc.
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
different investment styles, NAS hopes to increase prospects for
investment return and to reduce market risk and volatility.
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NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser
extent, in companies in which significant further growth is not
anticipated but whose market value is thought to be undervalued. Under
normal market conditions, the Fund will invest at least 65% of its total
assets in equity securities, including common stocks, preferred stocks,
and securities convertible into common or preferred stocks, such as
warrants and convertible bonds. The Fund may invest up to 35% of its
total assets in debt obligations, including intermediate- to long-term
corporate or U.S. Government debt securities.
NATIONWIDE STRATEGIC VALUE FUND
Subadviser: Strong Capital Management Inc./Schafer Capital Management
Inc.
Investment Objective: Primarily long-term capital appreciation; current
income is a secondary objective. The Fund seeks to meet its objectives by
investing in securities which are believed to offer the possibility of
increase in value, primarily common stocks of established companies
having a strong financial position and a low stock market valuation at
the time of purchase in relation to investment value. Other than
considered appropriate for cash reserves, the Fund will generally
maintain a fully invested position in common stocks of publicly held
companies, primarily in stocks of companies listed on a national
securities exchange or other equity securities (common stock or
securities convertible into common stock). Investments may also be made
in debt securities which are convertible into common stocks and in
warrants or other rights to purchase common stock, which in such case are
considered equity securities by the Fund. Strong Capital Management, Inc.
has subcontracted with Schafer Capital Management, Inc. to subadvise the
Fund.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger & Berman Advisers Management Trust ("N&B AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of N&B AMT are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through life insurance
company separate accounts and are also offered directly to qualified pension and
retirement plans outside of the separate account context.
The Guardian, Partners and Mid-Cap Growth Portfolios of N&B AMT invest all of
their investable assets in a corresponding series of Advisers Managers Trust
managed by Neuberger & Berman Management Incorporated ("N&B Management"). Each
series then invests in securities in accordance with an investment objective,
policies and limitations identical to those of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
(For more information regarding "master/feeder fund" structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" in the
underlying mutual fund prospectus.) The investment advisor is N&B Management.
AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current income.
The Portfolio and its corresponding series seek to achieve these objectives
by investing in common stocks of long-established, high-quality companies.
N&B Management uses a value-oriented investment approach in selecting
securities, looking for low
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price-to-earnings ratios, strong balance sheets, solid management, and
consistent earnings.
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital appreciation by investing in equity
securities of medium-sized companies that N&B Management believes have the
potential for long-term, above-average capital appreciation. Medium-sized
companies have market capitalizations form $300 million to $10 billion at
the time of investment. The Portfolio and its corresponding series may
invest up to 10% of its net assets, measured at the time of investment, in
corporate debt securities that are below investment grade or, if unrated,
deemed by N&B Management to be of comparable quality. Securities that are
below investment grade, as well as unrated securities, are often considered
to be speculative and usually entail greater risk. As a part of the
Portfolio's investment strategy, the Portfolio may invest up to 20% of its
net assets in securities of issuers organized and doing business
principally outside the United States. This limitation does not apply with
respect to foreign securities that are denominated in U.S. dollars.
AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth by investing primarily in the common
stock of established companies. Its investment program seeks securities
believed to be undervalued based on fundamentals such as low
price-to-earnings ratios, consistent cash flows, and the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer variable account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold to provide benefits under variable life insurance policies
and variable annuity contracts. OppenheimerFunds, Inc. is the investment
adviser.
OPPENHEIMER AGGRESSIVE GROWTH FUND
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable
long-term prospects for increasing demand for their goods or services, or
to be developing new products, services or markets and normally retain a
relatively larger portion of their earnings for research, development and
investment in capital assets. The Fund may also invest in cyclical
industries in "special situations" that OppenheimerFunds, Inc. believes
present opportunities for capital growth.
OPPENHEIMER GROWTH FUND
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (companies
which have an operating history of at least five years including
predecessors). Current income is a secondary consideration in the selection
of the Fund's portfolio securities.
OPPENHEIMER GROWTH & INCOME FUND
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
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VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck Trust") is an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts on January 7, 1987. Shares of Van Eck Trust are
offered only to separate accounts of insurance companies to fund the benefits of
variable life insurance policies and variable annuity contracts. The investment
advisor and manager is Van Eck Associates Corporation.
WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund emphasizes investment in countries that, compared to the world's major
economies, exhibit relatively low gross national product per capita, as
well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing primarily
in "Hard Asset Securities." For the Fund's purpose, "Hard Assets" are real
estate, energy, timber, and industrial and precious metals. Income is a
secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen Asset Management Inc. serves as the Fund's investment adviser.
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified portfolio of securities of companies operating in the real
estate industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of
its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in Real Estate Securities, primarily
equity securities of real estate investment trusts. The Portfolio may
invest up to 25% of its total assets in securities issued by foreign
issuers, some or all of which may also be Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. Portfolios are managed by Warburg Pincus Asset Management, Inc.
("Warburg").
GROWTH & INCOME PORTFOLIO
Investment Objective: Long-term growth of capital and income by investing
primarily in dividend-paying equity securities. Under normal market
conditions, the Portfolio will invest substantially all of its asset in
equity securities that Warburg considers to be relatively undervalued based
upon research and analysis, taking into account factors such as price/book
ratio, price/cash flow ratio, earnings growth, debt/capital ratio and
multiples of earnings of comparable securities. Although the Portfolio may
hold securities of any size, it currently expects to focus on companies
with market capitalizations of $1 billion or greater at the time of initial
purchase.
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INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing primarily
in a broadly diversified portfolio of equity securities of companies,
wherever organized, that in the judgment of Warburg have their principal
business activities and interests outside the United States. The Portfolio
will ordinarily invest substantially all of its assets, but no less than
65% of its total assets, in common stocks, warrants and securities
convertible into or exchangeable for common stocks. The Portfolio intends
to invest principally in the securities of financially strong companies
with opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily in
equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence or
the early stages of the development of a new product or service; or (b) as
part of a restructuring or recapitalization of the company. The Portfolio
may invest up to 10% of its assets in venture capital and other investment
funds.
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999
DEFERRED VARIABLE ANNUITY CONTRACTS ISSUED
BY NATIONWIDE LIFE INSURANCE COMPANY THROUGH ITS
NATIONWIDE VARIABLE ACCOUNT- 9
This Statement of Additional Information is not a prospectus. It contains
additional information than set forth in the prospectus and should be read in
conjunction with the prospectus dated May 1, 1999. The prospectus may be
obtained from Nationwide Life Insurance Company by writing P.O. Box 16609,
Columbus, Ohio 43216-6609, or calling 1-800-848-6331, TDD 1-800-238-3035.
TABLE OF CONTENTS
PAGE
General Information and History................................1
Services.......................................................1
Purchase of Securities Being Offered...........................2
Underwriters...................................................2
Calculations of Performance....................................2
Annuity Payments...............................................3
Financial Statements...........................................4
GENERAL INFORMATION AND HISTORY
Nationwide Variable Account-9 is a separate investment account of Nationwide
Life Insurance Company ("Nationwide"). Nationwide is a member of the Nationwide
Insurance Enterprise. All of Nationwide 's 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 Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $83.2 billion as of December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each contract owner and records
with respect to the contract value of each contract.
The custodian of the assets of the variable account is Nationwide. Nationwide
will maintain a record of all purchases and redemption of shares of the
underlying mutual funds. Nationwide, or affiliates of Nationwide may have
entered into agreements with either the investment adviser or distributor for
the underlying mutual funds. The agreements relate to administrative services
furnished by Nationwide or an affiliate of Nationwide and provide for an annual
fee based on the average aggregate net assets of the variable account (and other
separate accounts of Nationwide or life insurance company subsidiaries of
Nationwide) invested in particular underlying mutual funds. These fees in no way
affect the net asset value of the underlying mutual funds or fees paid by the
contract owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
1
<PAGE> 64
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215,
an affiliate of Nationwide. No underwriting commissions have been paid by
Nationwide to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of hypothetical pre-existing account having a balance of one accumulation
unit at the beginning of the base period, subtracting a hypothetical charge
reflecting deductions from contract owner accounts, and dividing the net change
in account value by the value of the account at the beginning of the period to
obtain a base period return, and multiplying the base period return by (365/7)
or (366/7) in a leap year. The NSAT Money Market Fund's effective yield is
computed similarly, but includes the effect of assumed compounding on an
annualized basis of the current unit value yield quotations of the NSAT Money
Market Fund.
The NSAT Money Market Fund's yield and effective yield will fluctuate daily.
Actual yields will depend on factors such as the type of instruments in the
fund's portfolio, portfolio quality and average maturity, changes in interest
rates, and the fund's expenses. Although the NSAT Money Market Fund determines
its yield on the basis of a seven day period, it may use a different time period
on occasion. The yield quotes may reflect the expense limitation described
"Investment Manager and Other Services" in the NSAT Money Market Fund's
Statement of Additional Information. There is no assurance that the yields
quoted on any given occasion will remain in effect for any period of time and
there is no guarantee that the net asset values will remain constant. It should
be noted that a contract owner's investment in the NSAT Money Market Fund is not
guaranteed or insured. Yield of other money market funds may not be comparable
if a different base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual total return is found by taking
a hypothetical $1,000 investment in each of the sub-accounts' units on the first
day of the period at the offering price, which is the accumulation unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of variable account charges of 1.75% which
includes the optional 5% Enhanced Death Benefit and the Guaranteed Minimum
Income Benefit option. No deduction is made for premium taxes which may be
assessed by certain states. Nonstandardized total return may also be advertised,
and is calculated in a manner similar to standardized average annual total
return except the nonstandardized total return is based on a hypothetical
initial investment of $25,000. An assumed initial investment of $25,000 will be
used because that figure more closely approximates the size of a typical
contract than does the $1,000 figure used in calculating the standardized
average annual total return quotations.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the underlying mutual fund has been available
2
<PAGE> 65
in the variable account if the underlying mutual fund has not been available for
one of the prescribed periods. Nonstandardized average annual total return will
based on rolling calendar quarters and will cover periods of one, five and ten
years, or a period covering the time the underlying mutual fund has been in
existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance is not a
guarantee of future performance. Factors affecting a sub-account's performance
include general market conditions, operating expenses and investment management.
A contract owner's account when redeemed may be more or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
<PAGE> 66
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-9:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-9 as of December 31,
1997, and the related statement of operations and changes in contract owners'
equity for the period November 3, 1997 (commencement of operations) through
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable
Account-9 as of December 31, 1997, and the results of its operations and its
changes in contract owners' equity for the period November 3, 1997 (commencement
of operations) through December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
February 6, 1998
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-9
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Income & Growth (ACVPIncGr)
84,893 shares (cost $450,578) ................................................ $ 457,574
American Century VP - American Century VP International (ACVPInt)
80,394 shares (cost $542,059) ................................................ 549,894
American Century VP - American Century VP Value (ACVPValue)
196,160 shares (cost $1,338,005) ............................................. 1,359,390
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
34,310 shares (cost $860,435) ................................................ 856,728
Dreyfus Stock Index Fund (DryStkIx)
237,689 shares (cost $6,131,037) ............................................. 6,120,488
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
33,406 shares (cost $933,581) ................................................ 932,024
Fidelity VIP - Equity-Income Portfolio - Service Class (FidVIPEI)
219,066 shares (cost $5,236,886) ............................................. 5,316,739
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
54,069 shares (cost $1,982,184) .............................................. 2,005,421
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
214,286 shares (cost $2,891,778) ............................................. 2,907,867
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
47,969 shares (cost $915,194) ................................................ 921,008
Fidelity VIP-II - Contrafund Portfolio - Service Class (FidVIPCon)
186,227 shares (cost $3,654,849) ............................................. 3,711,501
Fidelity VIP-III - Growth Opportunities Portfolio - Service Class (FidVIPGrOp)
133,797 shares (cost $2,533,275) ............................................. 2,578,274
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
20,291 shares (cost $198,057) ................................................ 196,210
Nationwide SAT - Balanced Fund (NSATBal)
88,368 shares (cost $887,470) ................................................ 892,518
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
125,479 shares (cost $2,670,893) ............................................. 2,661,401
Nationwide SAT - Equity Income Fund (NSATEqInc)
58,341 shares (cost $583,644) ................................................ 592,744
Nationwide SAT - Global Equities Fund (NSATGlobEq)
50,842 shares (cost $510,241) ................................................ 513,508
Nationwide SAT - Government Bond Fund (NSATGvtBd)
278,560 shares (cost $3,197,266) ............................................. 3,170,007
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
90,314 shares (cost $915,644) ................................................ 913,981
Nationwide SAT - Money Market Fund (NSATMyMkt)
13,547,449 shares (cost $13,547,449) ......................................... 13,547,449
</TABLE>
(Continued)
<PAGE> 3
<TABLE>
<S> <C>
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
103,611 shares (cost $1,041,445) ............................................. 1,041,294
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
23,045 shares (cost $223,629) ................................................ 229,068
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
118,195 shares (cost $1,152,448) ............................................. 1,157,126
Nationwide SAT - Small Company Fund (NSATSmCo)
98,316 shares (cost $1,579,198) .............................................. 1,558,309
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
31,934 shares (cost $317,603) ................................................ 326,042
Nationwide SAT - Strategic Value Fund (NSATStrVal)
47,632 shares (cost $479,420) ................................................ 483,462
Nationwide SAT - Total Return Fund (NSATTotRe)
369,863 shares (cost $6,138,365) ............................................. 6,058,352
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
43,903 shares (cost $450,063) ................................................ 461,856
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
134,925 shares (cost $1,507,668) ............................................. 1,581,319
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
648,620 shares (cost $13,284,917) ............................................ 13,361,565
Oppenheimer VAF - Capital Appreciation Fund (OppCapAp)
17,589 shares (cost $715,409) ................................................ 720,432
Oppenheimer VAF - Growth Fund (OppGro)
29,292 shares (cost $940,476) ................................................ 950,219
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
52,688 shares (cost $1,059,047) .............................................. 1,084,321
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
59,776 shares (cost $653,391) ................................................ 657,534
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
14,006 shares (cost $216,855) ................................................ 220,174
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
66,892 shares (cost $1,120,342) .............................................. 1,060,238
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
42,112 shares (cost $428,967) ................................................ 435,022
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
77,526 shares (cost $857,239) ................................................ 813,248
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
12,882 shares (cost $140,450) ................................................ 142,473
---------
Total investments ......................................................... 82,546,780
Accounts receivable ................................................................ 3,013
---------
Total assets .............................................................. 82,549,793
ACCOUNTS PAYABLE ...................................................................... 364,121
---------
CONTRACT OWNERS' EQUITY (NOTE 4) $ 82,185,672
=========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
TOTAL ACVPINCGR ACVPINT ACVPVALUE
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends........................... $ 184,101 -- -- --
Mortality and expense risk charges (note 2).... (44,505) (231) (247) (638)
----------- ----------- ----------- -----------
Net investment activity........................ 139,596 (231) (247) (638)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold............ 1,928,035 3,255 -- --
Cost of mutual fund shares sold.................. (1,932,025) (3,092) -- --
----------- ----------- ----------- -----------
Realized gain (loss) on investments............ (3,990) 163 -- --
Change in unrealized gain (loss) on investments.. 259,323 6,996 7,835 21,385
----------- ----------- ----------- -----------
Net gain (loss) on investments................. 255,333 7,159 7,835 21,385
----------- ----------- ----------- -----------
Reinvested capital gains......................... 478,503 -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations........... 873,432 6,928 7,588 20,747
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 81,649,336 389,541 451,373 929,382
Transfers between funds....................... -- 61,740 90,951 410,117
Redemptions................................... (339,129) (635) (18) (856)
Contingent deferred sales charges (note 2).... (409) -- -- --
Adjustments to maintain reserves.............. 2,442 5 4 8
----------- ----------- ----------- -----------
Net equity transactions..................... 81,312,240 450,651 542,310 1,338,651
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY........... 82,185,672 457,579 549,898 1,359,398
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD..... -- -- -- --
----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD........... $82,185,672 457,579 549,898 1,359,398
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DRYSRGRO DRYSTKIX DRYCAPAP FIDVIPEI
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends........................... 2,537 19,230 4,948 --
Mortality and expense risk charges (note 2).... (432) (2,973) (430) (2,576)
----------- ----------- ----------- -----------
Net investment activity........................ 2,105 16,257 4,518 (2,576)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold............ -- 53,202 -- 72,868
Cost of mutual fund shares sold.................. -- (55,328) -- (74,460)
----------- ----------- ----------- -----------
Realized gain (loss) on investments............ -- (2,126) -- (1,592)
Change in unrealized gain (loss) on investments.. (3,707) (10,549) (1,557) 79,853
----------- ----------- ----------- -----------
Net gain (loss) on investments................. (3,707) (12,675) (1,557) 78,261
----------- ----------- ----------- -----------
Reinvested capital gains......................... 20,741 83,330 414 --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'..
equity resulting from operations........... 19,139 86,912 3,375 75,685
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 806,446 5,885,293 894,637 4,978,409
Transfers between funds....................... 32,713 151,175 34,011 268,956
Redemptions................................... (1,570) (3,783) -- (7,395)
Contingent deferred sales charges (note 2).... -- -- -- --
Adjustments to maintain reserves.............. (4) 1,038 (1) 1,150
----------- ----------- ----------- -----------
Net equity transactions..................... 837,585 6,033,723 928,647 5,241,120
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY........... 856,724 6,120,635 932,022 5,316,805
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD..... -- -- -- --
----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD........... 856,724 6,120,635 932,022 5,316,805
=========== =========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
FIDVIPGR FIDVIPHI FIDVIPOV FIDVIPCON
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends........................... $ - - - -
Mortality and expense risk charges (note 2).... (956) (1,568) (438) (2,331)
-------------- ----------- -------- ----------
Net investment activity........................ (956) (1,568) (438) (2,331)
-------------- ----------- -------- ----------
Proceeds from mutual fund shares sold............ 24,231 - 5,931 -
Cost of mutual fund shares sold.................. (24,000) - (5,843) -
-------------- ----------- -------- ----------
Realized gain (loss) on investments............ 231 - 88 -
Change in unrealized gain (loss) on investments.. 23,237 16,089 5,814 56,652
-------------- ----------- -------- ----------
Net gain (loss) on investments................. 23,468 16,089 5,902 56,652
-------------- ----------- -------- ----------
Reinvested capital gains......................... - - - -
-------------- ----------- -------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations........... 22,512 14,521 5,464 54,321
-------------- ----------- -------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 1,981,907 2,761,595 757,896 3,573,555
Transfers between funds....................... 1,697 132,705 157,648 83,693
Redemptions................................... (577) (954) - (70)
Contingent deferred sales charges (note 2).... - - - -
Adjustments to maintain reserves.............. (111) (1) (2) 7
-------------- ----------- -------- ----------
Net equity transactions..................... 1,982,916 2,893,345 915,542 3,657,185
-------------- ----------- -------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY........... 2,005,428 2,907,866 921,006 3,711,506
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD..... $ - - - -
-------------- ----------- -------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD........... 2,005,428 2,907,866 921,006 3,711,506
============== =========== ======== ==========
</TABLE>
<TABLE>
<CAPTION>
FIDVIPGROP MSEMMKT NSATBAL NSATCAPAP
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends........................... - 3,740 3,951 5,462
Mortality and expense risk charges (note 2).... (1,137) (110) (459) (1,430)
---------- ------ --------- ---------
Net investment activity........................ (1,137) 3,630 3,492 4,032
---------- ------ --------- ---------
Proceeds from mutual fund shares sold............ 3 810 - -
Cost of mutual fund shares sold.................. (3) (823) - -
---------- ------ --------- ---------
Realized gain (loss) on investments............ - - - -
Change in unrealized gain (loss) on investments.. 44,999 (1,847) 5,048 (9,492)
---------- ------ --------- ---------
Net gain (loss) on investments................. 44,999 (1,860) 5,048 (9,492)
---------- ------ --------- ---------
Reinvested capital gains......................... - 1,623 - 52,894
---------- ------ --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations........... 43,862 3,393 8,540 47,434
---------- ------ --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners.............................. 2,201,875 185,958 818,465 2,528,751
Transfers between funds....................... 332,841 6,858 65,644 88,972
Redemptions................................... (304) - (90) (3,756)
Contingent deferred sales charges (note 2).... - - - -
Adjustments to maintain reserves.............. (4) (1) (26) 4
---------- ------ --------- ---------
Net equity transactions..................... 2,534,408 192,815 883,993 2,613,971
---------- ------ --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY........... 2,578,270 196,208 892,533 2,661,405
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD..... - - - -
---------- ------- ------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD........... 2,578,270 196,208 892,533 2,661,405
========== ======= ======== =========
</TABLE>
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
NSATEqInc NSATGlobEq NSATGvtBd NSATHIncBd
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends $ 989 871 46,514 9,587
Mortality and expense risk charges note 2) (411) (326) (1,730) (637)
--------- --------- ---------- ---------
Net investment activity 578 545 44,784 8,950
--------- --------- ---------- ---------
Proceeds from mutual fund shares sold 2 - 24,775 663
Cost of mutual fund shares sold (3) - (24,775) (653)
--------- --------- ---------- ---------
Realized gain (loss) on investments (1) - - 10
Change in unrealized gain (loss) on investments 9,100 3,267 (27,259) (1,663)
--------- --------- ---------- ---------
Net gain (loss) on investments 9,099 3,267 (27,259) (1,653)
--------- --------- ---------- ---------
Reinvested capital gains - - - -
--------- --------- ---------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations 9,677 3,812 17,525 7,297
--------- --------- ---------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners 524,315 505,387 3,147,571 762,946
Transfers between funds 58,870 4,389 4,912 144,381
Redemptions (135) - - (643)
Contingent deferred sales charges (note 2) - - - -
Adjustments to maintain reserves 14 (105) 1 -
--------- --------- ---------- ---------
Net equity transactions 583,064 509,671 3,152,484 906,684
--------- --------- ---------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY 592,741 513,483 3,170,009 913,981
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD - - - -
CONTRACT OWNERS' EQUITY END OF PERIOD --------- --------- ---------- ---------
$ 592,741 513,483 3,170,009 913,981
========= ========= ========== =========
</TABLE>
<TABLE>
<CAPTION>
NSATMyMkt NSATMSecBd NSATMidCap NSATSmCapV
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends 35,527 5,220 535 590
Mortality and expense risk charges note 2) (7,038) (610) (121) (603)
------------ ---------- ---------- -----------
Net investment activity 28,489 4,610 414 (13)
------------ ---------- ---------- -----------
Proceeds from mutual fund shares sold 772,983 3 - -
Cost of mutual fund shares sold (772,983) (3) - -
------------ ---------- ---------- -----------
Realized gain (loss) on investments - - - -
Change in unrealized gain (loss) on investments - (151) 5,439 4,678
------------ ---------- ---------- -----------
Net gain (loss) on investments - (151) 5,439 4,678
------------ ---------- ---------- -----------
Reinvested capital gains - - - 4,611
------------ ---------- ---------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations 28,489 4,459 5,853 9,276
------------ ---------- ---------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners 16,698,066 862,594 205,427 1,082,589
Transfers between funds (3,252,991) 174,229 20,348 65,401
Redemptions (289,851) - - -
Contingent deferred sales charges (note 2) (409) - - -
Adjustments to maintain reserves 2,636 14 (7) (112)
------------ ---------- ---------- -----------
Net equity transactions 13,157,451 1,036,837 223,209 1,147,878
------------ ---------- ---------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY 13,185,940 1,041,296 229,062 1,157,154
Contract owners' equity beginning of period - - - -
Contract owners' equity end of period ------------ ---------- ---------- -----------
13,185,940 1,041,296 229,062 1,157,154
============ ========== ========== ===========
</TABLE>
(Continued)
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
NSATSmCo NSATStrGro NSATStrVal NSATTotRe
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends $ -- 301 542 15,396
Mortality and expense risk charges (note 2) (936) (150) (222) (3,422)
----------- ----------- ----------- -----------
Net investment activity (936) 151 320 11,974
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold -- 1 -- --
Cost of mutual fund shares sold -- (1) -- --
----------- ----------- ----------- -----------
Realized gain (loss) on investments -- -- -- --
Change in unrealized gain (loss) on investments (20,889) 8,439 4,042 (80,013)
----------- ----------- ----------- -----------
Net gain (loss) on investments (20,889) 8,439 4,042 (80,013)
----------- ----------- ----------- -----------
Reinvested capital gains 39,296 -- -- 175,028
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations 17,471 8,590 4,362 106,989
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners 1,396,707 310,341 364,129 5,708,934
Transfers between funds 144,223 7,111 114,972 247,938
Redemptions (19) -- -- (5,049)
Contingent deferred sales charges (note 2) -- -- -- --
Adjustments to maintain reserves (67) -- -- (666)
----------- ----------- ----------- -----------
Net equity transactions 1,540,844 317,452 479,101 5,951,157
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY 1,558,315 326,042 483,463 6,058,146
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD -- -- -- --
CONTRACT OWNERS' EQUITY END OF PERIOD $1,558,315 326,042 483,463 6,058,146
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NBAMTGuard NBAMTMCGr NBAMTPart OppCapAp
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends -- -- -- --
Mortality and expense risk charges (note 2) (322) (702) (7,474) (478)
----------- ----------- ----------- -----------
Net investment activity (322) (702) (7,474) (478)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold 34 2 9,558 1,574
Cost of mutual fund shares sold (32) (2) (8,600) (1,616)
----------- ----------- ----------- -----------
Realized gain (loss) on investments 2 -- (43) (52)
Change in unrealized gain (loss) on investments 11,793 73,651 76,648 5,023
----------- ----------- ----------- -----------
Net gain (loss) on investments 11,795 73,651 76,605 4,971
----------- ----------- ----------- -----------
Reinvested capital gains -- -- -- --
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations 11,473 72,949 69,131 4,493
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners 399,649 1,023,027 12,820,732 690,779
Transfers between funds 51,821 488,359 483,875 25,316
Redemptions -- (3,016) (12,173) (192)
Contingent deferred sales charges (note 2) -- -- -- --
Adjustments to maintain reserves (876) 3 21 45
----------- ----------- ----------- -----------
Net equity transactions 450,594 1,508,373 13,292,455 715,948
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY 462,067 1,581,322 13,361,586 720,441
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD -- -- -- --
CONTRACT OWNERS' EQUITY END OF PERIOD 462,067 1,581,322 13,361,586 720,441
=========== =========== =========== ===========
</TABLE>
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
FOR THE PERIOD NOVEMBER 3, 1997 (COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1997
<TABLE>
<CAPTION>
OPPGRO OPPGRINC VEWRLDMKT VEWRLDHAS
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends $ -- 1,975 -- --
Mortality and expense risk charges (note 2) (469) (674) (590) (111)
---------- ---------- ---------- ----------
Net investment activity (469) 1,301 (590) (111)
---------- ---------- ---------- ----------
Proceeds from mutual fund shares sold -- 8 505,309 --
Cost of mutual fund shares sold -- (8) (492,562) --
---------- ---------- ---------- ----------
Realized gain (loss) on investments -- -- 12,747 --
Change in unrealized gain (loss) on investments 9,743 25,274 4,143 3,319
---------- ---------- ---------- ----------
Net gain (loss) on investments 9,743 25,274 16,890 3,319
---------- ---------- ---------- ----------
Reinvested capital gains -- -- -- --
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations 9,274 26,575 16,300 3,208
---------- ---------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners 933,456 953,722 1,193,031 178,412
Transfers between funds 7,668 104,635 (549,841) 38,553
Redemptions (27) (199) (1,956) --
Contingent deferred sales charges (note 2) -- -- -- --
---------- ---------- ---------- ----------
Adjustments to maintain reserves (138) (358) 2 6
---------- ---------- ---------- ----------
Net equity transactions 940,959 1,057,800 641,236 216,971
---------- ---------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY 950,233 1,084,375 657,536 220,179
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD -- -- -- --
$ ---------- ---------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD 950,233 1,084,375 657,536 220,179
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
MSRESEC WPGRINC WPINTEQ WPPVENCAP
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends 19,701 1,508 4,961 16
Mortality and expense risk charges note 2) (545) (219) (469) (290)
---------- ---------- ---------- ----------
Net investment activity 19,156 1,289 4,492 (274)
---------- ---------- ---------- ----------
Proceeds from mutual fund shares sold -- -- 5,961 447,873
Cost of mutual fund shares sold -- -- (6,534) (460,704)
---------- ---------- ---------- ----------
Realized gain (loss) on investments -- -- (573) (12,831)
Change in unrealized gain (loss) on investments (60,104) 6,055 (43,991) 2,023
---------- ---------- ---------- ----------
Net gain (loss) on investments (60,104) 6,055 (44,564) (10,808)
---------- ---------- ---------- ----------
Reinvested capital gains 66,235 -- 34,331 --
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations 25,287 7,344 (5,741) (11,082)
---------- ---------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners 917,137 402,032 838,600 584,670
Transfers between funds 117,890 25,646 (19,613) (427,813)
Redemptions -- -- -- (3,302)
Contingent deferred sales charges (note 2) -- -- -- --
---------- ---------- ---------- ----------
Adjustments to maintain reserves (46) (2) 11 --
---------- ---------- ---------- ----------
Net equity transactions 1,034,981 427,676 818,998 153,555
---------- ---------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY 1,060,268 435,020 813,257 142,473
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD -- -- -- --
---------- ---------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD 1,060,268 435,020 813,257 142,473
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT-9
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-9 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on May 22, 1997. The Account has been
registered as a unit investment trust under the Investment Company Act
of 1940.
The Company offers tax qualified and non-tax qualified Modified Single
Premium Deferred Variable Annuity Contracts through the Account. The
primary distribution for the contracts is through the brokerage
community; however, other distributors are utilized.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees are offered for purchase.
See note 2 for a discussion of contract expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio - Service Class
(FidVIPEI)
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
Portfolio of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio - Service Class
(FidVIPCon)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio - Service
Class (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc.
(Morgan Stanley); Morgan Stanley - Emerging Markets
Debt Portfolio (MSEmMkt)
<PAGE> 10
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Balanced Fund (NSATBal)
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Equity Income Fund (NSATEqInc)
Nationwide SAT - Global Equity Fund (NSATGlobEq)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Capital Appreciation Fund (OppCapAp)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (MSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio
(WPPVenCap)
At December 31, 1997, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment results
of each fund, equity transactions by contract owners and certain contract
expenses (see note 2).
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.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1997. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy or
sell is executed) and dividend income is recorded on the ex-dividend date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with, operations
of the Company which is taxed as a life insurance company under the
Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
<PAGE> 11
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities,
if any, at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge not to exceed 7% of the lesser of purchase payments or the amount
surrendered, such charge declining 1% per year, to 0%, after the purchase
payment has been held in the contract for 84 months. No sales charges are
deducted on redemptions used to purchase units in the fixed investment
options of the Company.
The Company deducts a mortality and expense risk charge assessed through
the daily unit value calculation equal to an annual rate of 0.95% (Base).
Optional long term care facility with a one-year stepped up death benefit
rider is offered at an additional annual rate of 0.05% (Rider Option 1).
Optional long term care facility with a 5% enhanced death benefit rider is
offered at an additional annual rate of 0.10% (Rider Option 2).
The following table provides mortality, expense and administration charges
by contract type for the period ended December 31, 1997:
<TABLE>
<CAPTION>
TOTAL ACVPINCGR ACVPINT ACVPVALUE DRYSRGRO
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BOA Future (Base)............... $ 26,321 119 169 235 245
BOA Future (Rider Option 1)..... 13,431 83 58 348 157
BOA Future (Rider Option 2)..... 4,753 29 20 55 30
------------ ------------ ------------ ------------ ------------
Total....................... $ 44,505 231 247 638 432
============ ============ ============ ============ ============
DRYSTKIX DRYCAPAP FIDVIPEI FIDVIPGR FIDVIPHI
------------ ------------ ------------ ------------ ------------
BOA Future (Base)............... $ 1,875 267 1,422 572 1,047
BOA Future (Rider Option 1)..... 946 133 815 312 382
BOA Future (Rider Option 2)..... 152 30 339 72 139
------------ ------------ ------------ ------------ ------------
Total....................... $ 2,973 430 2,576 956 1,568
============ ============ ============ ============ ============
FIDVIPOV FIDVIPCON FIDVIPGROP MSEMMKT NSATBAL
------------ ------------ ------------ ------------ ------------
BOA Future (Base)............... $ 303 1,607 596 54 195
BOA Future (Rider Option 1)..... 95 564 418 40 154
BOA Future (Rider Option 2)..... 40 160 123 16 110
------------ ------------ ------------ ------------ ------------
Total....................... $ 438 2,331 1,137 110 459
============ ============ ============ ============ ============
NSATCAPAP NSATEQINC NSATGLOBEQ NSATGVTBD NSATHINCBD
------------ ------------ ------------ ------------ ------------
BOA Future (Base)............... $ 739 265 165 1,060 359
BOA Future (Rider Option 1)..... 447 116 116 369 153
BOA Future (Rider Option 2)..... 244 30 45 301 125
------------ ------------ ------------ ------------ ------------
Total....................... $ 1,430 411 326 1,730 637
============ ============ ============ ============ ============
NSATMYMKT NSATMSECBD NSATMIDCAP NSATSMCAPV NSATSMCO
------------ ------------ ------------ ------------ ------------
BOA Future (Base)............... $ 4,055 353 37 376 473
BOA Future (Rider Option 1)..... 1,841 186 62 190 380
BOA Future (Rider Option 2)..... 1,142 71 22 37 83
------------ ------------ ------------ ------------ ------------
Total....................... $ 7,038 610 121 603 936
============ ============ ============ ============ ============
</TABLE>
<PAGE> 12
<TABLE>
<CAPTION>
NSATStrGro NSATStrVal NSATTotRe NBAMTGuard NBAMTMCGr
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BOA Future (Base)............... $ 83 125 2,108 110 183
BOA Future (Rider Option 1)..... 44 66 945 158 427
BOA Future (Rider Option 2)..... 23 31 369 54 92
------------ ------------ ------------ ------------ ------------
Total....................... $ 150 222 3,422 322 702
============ ============ ============ ============ ============
NBAMTPart OppCapAp OppGro OppGrInc VEWrldEMkt
------------ ------------ ------------ ------------ ------------
BOA Future (Base)............... $ 5,247 275 182 341 204
BOA Future (Rider Option 1)..... 1,929 120 193 204 380
BOA Future (Rider Option 2)..... 298 83 94 129 6
------------ ------------ ------------ ------------ ------------
Total....................... $ 7,474 478 469 674 590
============ ============ ============ ============ ============
VEWrldHAs MSRESec WPGrInc WPIntEq WPPVenCap
------------ ------------ ------------ ------------ ------------
BOA Future (Base)............... $ 79 302 61 325 108
BOA Future (Rider Option 1)..... 15 166 130 112 177
BOA Future (Rider Option 2)..... 17 77 28 32 5
------------ ------------ ------------ ------------ ------------
Total....................... $ 111 545 219 469 290
============ ============ ============ ============ ============
</TABLE>
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things,
shareholder communications, preparation, postage, fund transfer agency and
various other record keeping and customer service functions. These fees
are paid to an affiliate of the Company.
<PAGE> 13
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31,
1997, for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN
--------- ----------- -------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
The BEST of AMERICA(R)
America's FUTURE Annuity(SM) (Base):
American Century VP -
American Century VP Income & Growth:
Tax qualified 5,919 $ 10.409767 $ 61,615 4%
Non-tax qualified 14,727 10.409767 153,305 4%
American Century VP -
American Century VP International:
Tax qualified 11,451 10.088106 115,519 1%
Non-tax qualified 27,628 10.088106 278,714 1%
American Century VP -
American Century VP Value:
Tax qualified 32,890 10.296896 338,665 3%
Non-tax qualified 24,450 10.296896 251,759 3%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified 13,265 10.171132 134,920 2%
Non-tax qualified 28,338 10.171132 288,230 2%
Dreyfus Stock Index Fund:
Tax qualified 167,229 10.343734 1,729,772 3%
Non-tax qualified 220,208 10.343734 2,277,773 3%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified 23,139 10.249990 237,175 2%
Non-tax qualified 36,467 10.249990 373,786 2%
Fidelity VIP -
Equity-Income Portfolio - Service Class:
Tax qualified 124,825 10.338433 1,290,495 3%
Non-tax qualified 152,449 10.338433 1,576,084 3%
Fidelity VIP -
Growth Portfolio - Service Class:
Tax qualified 51,944 10.030842 521,042 0%
Non-tax qualified 64,880 10.030842 650,801 0%
Fidelity VIP -
High Income Portfolio - Service Class:
Tax qualified 90,815 10.126638 919,651 1%
Non-tax qualified 114,247 10.126638 1,156,938 1%
Fidelity VIP -
Overseas Portfolio - Service Class:
Tax qualified 29,834 9.902344 295,427 (1)%
Non-tax qualified 32,688 9.902344 323,688 (1)%
Fidelity VIP-II -
Contrafund Portfolio - Service Class:
Tax qualified 94,143 9.954885 937,183 0%
Non-tax qualified 137,715 9.954885 1,370,937 0%
</TABLE>
<PAGE> 14
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified 65,917 10.400464 685,567 4%
Non-tax qualified 74,836 10.400464 778,329 4%
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified 3,325 10.425451 34,665 4%
Non-tax qualified 5,093 10.425451 53,097 4%
Nationwide SAT - Balanced Fund:
Tax qualified 20,941 10.130674 212,146 1%
Non-tax qualified 23,584 10.130674 238,922 1%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified 76,048 10.385596 789,804 4%
Non-tax qualified 74,609 10.385596 774,859 4%
Nationwide SAT - Equity Income Fund:
Tax qualified 10,838 10.161693 110,132 2%
Non-tax qualified 27,331 10.161693 277,729 2%
Nationwide SAT - Global Equity Fund:
Tax qualified 15,788 10.102208 159,494 1%
Non-tax qualified 12,998 10.102208 131,308 1%
Nationwide SAT - Government Bond Fund:
Tax qualified 67,127 10.143182 680,881 1%
Non-tax qualified 138,589 10.143182 1,405,733 1%
Nationwide SAT - High Income Bond Fund:
Tax qualified 15,004 10.212505 153,228 2%
Non-tax qualified 33,703 10.212505 344,192 2%
Nationwide SAT - Money Market Fund:
Tax qualified 155,902 10.074129 1,570,577 1%
Non-tax qualified 581,682 10.074129 5,859,940 1%
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified 13,658 10.088793 137,793 1%
Non-tax qualified 41,385 10.088793 417,525 1%
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified 3,322 9.949100 33,051 (1)%
Non-tax qualified 5,540 9.949100 55,118 (1)%
Nationwide SAT - Small Cap Value Fund:
Tax qualified 29,661 9.823904 291,387 (2)%
Non-tax qualified 42,125 9.823904 413,832 (2)%
Nationwide SAT - Small Company Fund:
Tax qualified 26,226 9.613184 252,115 (4)%
Non-tax qualified 60,510 9.613184 581,694 (4)%
Nationwide SAT - Strategic Growth Fund:
Tax qualified 7,333 10.204129 74,827 2%
Non-tax qualified 14,559 10.204129 148,562 2%
Nationwide SAT - Strategic Value Fund:
Tax qualified 12,123 10.147459 123,018 1%
Non-tax qualified 13,612 10.147459 138,127 1%
</TABLE>
(Continued)
<PAGE> 15
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT - Total Return Fund:
Tax qualified 182,146 10.242940 1,865,711 2%
Non-tax qualified 197,787 10.242940 2,025,920 2%
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified 5,387 10.504106 56,586 5%
Non-tax qualified 9,331 10.504106 98,014 5%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified 24,058 11.702355 281,535 17%
Non-tax qualified 27,997 11.702355 327,631 17%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified 123,308 10.132434 1,249,410 1%
Non-tax qualified 816,409 10.132434 8,272,210 1%
Oppenheimer VAF -
Capital Appreciation Fund:
Tax qualified 17,204 9.533314 164,011 (5)%
Non-tax qualified 22,088 9.533314 210,572 (5)%
Oppenheimer VAF - Growth Fund:
Tax qualified 32,359 9.827325 318,002 (2)%
Non-tax qualified 11,808 9.827325 116,041 (2)%
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified 18,417 10.259486 188,949 3%
Non-tax qualified 39,986 10.259486 410,236 3%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified 9,145 8.814851 80,612 (12)%
Non-tax qualified 18,343 8.814851 161,691 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified 10,008 8.979477 89,867 (10)%
Non-tax qualified 7,257 8.979477 65,164 (10)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified 32,778 10.338661 338,881 3%
Non-tax qualified 27,341 10.338661 282,669 3%
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified 11,884 10.373620 123,280 4%
Non-tax qualified 1,514 10.373620 15,706 4%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified 23,146 9.454794 218,841 (5)%
Non-tax qualified 35,372 9.454794 334,435 (5)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified 1,213 9.852750 11,951 (1)%
Non-tax qualified 7,662 9.852750 75,492 (1)%
</TABLE>
<PAGE> 16
<TABLE>
<S> <C> <C> <C> <C>
The BEST of AMERICA(R)
America's FUTURE Annuity(SM) (Rider Option 1):
American Century VP -
American Century VP Income & Growth:
Tax qualified 11,674 10.408936 121,514 4%
Non-tax qualified 5,571 10.408936 57,988 4%
American Century VP -
American Century VP International:
Tax qualified 3,170 10.087297 31,977 1%
Non-tax qualified 9,299 10.087297 93,802 1%
American Century VP -
American Century VP Value:
Tax qualified 42,338 10.296077 435,915 3%
Non-tax qualified 22,796 10.296077 234,709 3%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified 21,267 10.170317 216,292 2%
Non-tax qualified 13,946 10.170317 141,835 2%
Dreyfus Stock Index Fund:
Tax qualified 79,005 10.342909 817,142 3%
Non-tax qualified 103,007 10.342909 1,065,392 3%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified 16,809 10.249171 172,278 2%
Non-tax qualified 10,034 10.249171 102,840 2%
Fidelity VIP -
Equity-Income Portfolio - Service Class:
Tax qualified 80,230 10.337608 829,386 3%
Non-tax qualified 101,670 10.337608 1,051,025 3%
Fidelity VIP -
Growth Portfolio - Service Class:
Tax qualified 26,495 10.030041 265,746 0%
Non-tax qualified 42,184 10.030041 423,107 0%
Fidelity VIP -
High Income Portfolio - Service Class:
Tax qualified 28,809 10.125825 291,715 1%
Non-tax qualified 38,172 10.125825 386,523 1%
Fidelity VIP -
Overseas Portfolio - Service Class:
Tax qualified 6,886 9.901549 68,182 (1)%
Non-tax qualified 13,646 9.901549 135,117 (1)%
Fidelity VIP-II -
Contrafund Portfolio - Service Class:
Tax qualified 52,859 9.954090 526,163 0%
Non-tax qualified 61,145 9.954090 608,643 0%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified 50,299 10.399630 523,091 4%
Non-tax qualified 34,840 10.399630 362,323 4%
</TABLE>
(Continued)
<PAGE> 17
<TABLE>
<S> <C> <C> <C> <C>
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified 4,517 10.424614 47,088 4%
Non-tax qualified 4,151 10.424614 43,273 4%
Nationwide SAT - Balanced Fund:
Tax qualified 18,660 10.129864 189,023 1%
Non-tax qualified 7,268 10.129864 73,624 1%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified 42,993 10.384765 446,472 4%
Non-tax qualified 34,299 10.384765 356,187 4%
Nationwide SAT - Equity Income Fund:
Tax qualified 10,109 10.160882 102,716 2%
Non-tax qualified 4,986 10.160882 50,662 2%
Nationwide SAT - Global Equity Fund:
Tax qualified 10,785 10.101401 108,944 1%
Non-tax qualified 5,708 10.101401 57,659 1%
Nationwide SAT - Government Bond Fund:
Tax qualified 35,843 10.142367 363,533 1%
Non-tax qualified 31,348 10.142367 317,943 1%
Nationwide SAT - High Income Bond Fund:
Tax qualified 15,211 10.211688 155,330 2%
Non-tax qualified 7,868 10.211688 80,346 2%
Nationwide SAT - Money Market Fund:
Tax qualified 172,291 10.073279 1,735,535 1%
Non-tax qualified 228,200 10.073279 2,298,722 1%
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified 22,440 10.087985 226,374 1%
Non-tax qualified 12,227 10.087985 123,346 1%
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified 5,466 9.948304 54,377 (1)%
Non-tax qualified 4,072 9.948304 40,509 (1)%
Nationwide SAT - Small Cap Value Fund:
Tax qualified 16,510 9.823118 162,180 (2)%
Non-tax qualified 20,577 9.823118 202,130 (2)%
Nationwide SAT - Small Company Fund:
Tax qualified 30,320 9.612411 291,448 (4)%
Non-tax qualified 32,541 9.612411 312,797 (4)%
Nationwide SAT - Strategic Growth Fund:
Tax qualified 3,708 10.203313 37,834 2%
Non-tax qualified 2,921 10.203313 29,804 2%
Nationwide SAT - Strategic Value Fund:
Tax qualified 3,022 10.146650 30,663 1%
Non-tax qualified 13,153 10.146650 133,459 1%
Nationwide SAT - Total Return Fund:
Tax qualified 84,236 10.242118 862,755 2%
Non-tax qualified 76,652 10.242118 785,079 2%
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified 8,001 10.503269 84,037 5%
Non-tax qualified 14,929 10.503269 156,803 5%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified 56,145 11.701424 656,976 17%
Non-tax qualified 16,768 11.701424 196,209 17%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified 195,515 10.131623 1,980,884 1%
Non-tax qualified 133,165 10.131623 1,349,178 1%
Oppenheimer VAF -
Capital Appreciation Fund:
Tax qualified 11,021 9.532548 105,058 (5)%
Non-tax qualified 10,675 9.532548 101,760 (5)%
Oppenheimer VAF - Growth Fund:
Tax qualified 26,012 9.826536 255,608 (2)%
Non-tax qualified 16,143 9.826536 158,630 (2)%
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified 15,547 10.258664 159,491 3%
Non-tax qualified 15,661 10.258664 160,661 3%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified 30,479 8.814146 268,646 (12)%
Non-tax qualified 15,119 8.814146 133,261 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified 765 8.978753 6,869 (10)%
Non-tax qualified 4,496 8.978753 40,368 (10)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified 8,443 10.337835 87,282 3%
Non-tax qualified 23,459 10.337835 242,515 3%
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified 10,462 10.372788 108,520 4%
Non-tax qualified 11,043 10.372788 114,547 4%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified 9,501 9.454036 89,823 (5)%
Non-tax qualified 11,346 9.454036 107,265 (5)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified 1,263 9.851960 12,443 (1)%
Non-tax qualified 1,127 9.851960 11,103 (1)%
</TABLE>
(Continued)
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
The BEST of AMERICA(R)
America's FUTURE Annuity(SM) (Rider Option 2):
American Century VP -
American Century VP Income & Growth:
Tax qualified 832 10.408098 8,660 4%
Non-tax qualified 5,236 10.408098 54,497 4%
American Century VP -
American Century VP International:
Tax qualified 698 10.086493 7,040 1%
Non-tax qualified 2,265 10.086493 22,846 1%
American Century VP -
American Century VP Value:
Tax qualified 1,336 10.295249 13,754 3%
Non-tax qualified 8,217 10.295249 84,596 3%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified 4,821 10.169503 49,027 2%
Non-tax qualified 2,598 10.169503 26,420 2%
Dreyfus Stock Index Fund:
Tax qualified 9,203 10.342079 95,178 3%
Non-tax qualified 13,090 10.342079 135,378 3%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified 3,777 10.248351 38,708 2%
Non-tax qualified 706 10.248351 7,235 2%
Fidelity VIP -
Equity-Income Portfolio - Service Class:
Tax qualified 18,611 10.336779 192,378 3%
Non-tax qualified 36,514 10.336779 377,437 3%
Fidelity VIP -
Growth Portfolio - Service Class:
Tax qualified 4,718 10.029235 47,318 0%
Non-tax qualified 9,713 10.029235 97,414 0%
Fidelity VIP -
High Income Portfolio - Service Class:
Tax qualified 2,418 10.125013 24,482 1%
Non-tax qualified 12,697 10.125013 128,557 1%
Fidelity VIP -
Overseas Portfolio - Service Class:
Tax qualified 887 9.900760 8,782 (1)%
Non-tax qualified 9,071 9.900760 89,810 (1)%
Fidelity VIP-II -
Contrafund Portfolio - Service Class:
Tax qualified 12,678 9.953285 126,188 0%
Non-tax qualified 14,306 9.953285 142,392 0%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified 8,419 10.398800 87,547 4%
Non-tax qualified 13,599 10.398800 141,413 4%
</TABLE>
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified 204 10.423780 2,126 4%
Non-tax qualified 1,531 10.423780 15,959 4%
Nationwide SAT - Balanced Fund:
Tax qualified 4,261 10.129053 43,160 1%
Non-tax qualified 13,393 10.129053 135,658 1%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified 4,967 10.383931 51,577 4%
Non-tax qualified 23,354 10.383931 242,506 4%
Nationwide SAT - Equity Income Fund:
Tax qualified 2,466 10.160070 25,055 2%
Non-tax qualified 2,603 10.160070 26,447 2%
Nationwide SAT - Global Equity Fund:
Tax qualified 1,682 10.100588 16,989 1%
Non-tax qualified 3,870 10.100588 39,089 1%
Nationwide SAT - Government Bond Fund:
Tax qualified 17,678 10.141552 179,282 1%
Non-tax qualified 21,953 10.141552 222,637 1%
Nationwide SAT - High Income Bond Fund:
Tax qualified 2,543 10.210867 25,966 2%
Non-tax qualified 15,172 10.210867 154,919 2%
Nationwide SAT - Money Market Fund:
Tax qualified 109,198 10.072429 1,099,889 1%
Non-tax qualified 61,681 10.072429 621,277 1%
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified 2,097 10.087176 21,153 1%
Non-tax qualified 11,411 10.087176 115,105 1%
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified 2,671 9.947507 26,570 (1)%
Non-tax qualified 1,954 9.947507 19,437 (1)%
Nationwide SAT - Small Cap Value Fund:
Tax qualified 3,373 9.822329 33,131 (2)%
Non-tax qualified 5,548 9.822329 54,494 (2)%
Nationwide SAT - Small Company Fund:
Tax qualified 453 9.611642 4,354 (4)%
Non-tax qualified 12,059 9.611642 115,907 (4)%
Nationwide SAT - Strategic Growth Fund:
Tax qualified 201 10.202497 2,051 2%
Non-tax qualified 3,231 10.202497 32,964 2%
Nationwide SAT - Strategic Value Fund:
Tax qualified 227 10.145838 2,303 1%
Non-tax qualified 5,509 10.145838 55,893 1%
Nationwide SAT - Total Return Fund:
Tax qualified 13,269 10.241300 135,892 2%
Non-tax qualified 37,377 10.241300 382,789 2%
</TABLE>
(Continued)
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified 590 10.502434 6,196 5%
Non-tax qualified 5,754 10.502434 60,431 5%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified 3,696 11.700489 43,245 17%
Non-tax qualified 6,472 11.700489 75,726 17%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified 9,975 10.130813 101,055 1%
Non-tax qualified 40,357 10.130813 408,849 1%
Oppenheimer VAF -
Capital Appreciation Fund:
Tax qualified 3,437 9.531780 32,761 (5)%
Non-tax qualified 11,150 9.531780 106,279 (5)%
Oppenheimer VAF - Growth Fund:
Tax qualified 2,404 9.825746 23,621 (2)%
Non-tax qualified 7,972 9.825746 78,331 (2)%
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified 1,064 10.257840 10,914 3%
Non-tax qualified 15,025 10.257840 154,124 3%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified 733 8.813437 6,460 (12)%
Non-tax qualified 779 8.813437 6,866 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified 206 8.978030 1,849 (10)%
Non-tax qualified 1,789 8.978030 16,062 (10)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified 416 10.337004 4,300 3%
Non-tax qualified 10,121 10.337004 104,621 3%
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified 2,908 10.371958 30,162 4%
Non-tax qualified 4,127 10.371958 42,805 4%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified 866 9.453278 8,187 (5)%
Non-tax qualified 5,787 9.453278 54,706 (5)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified 830 9.851173 8,176 (1)%
Non-tax qualified 2,366 9.851173 23,308 (1)%
======== ========= -----------
$82,185,672
===========
</TABLE>
<PAGE> 67
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1997 and
1996, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1997. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
subsidiaries classified as discontinued operations" in the
accompanying consolidated balance sheets and "Income from
discontinued operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) SEPARATE ACCOUNTS
Separate Account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $365.5 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the Separate Accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) FUTURE POLICY BENEFITS
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
estimates of mortality, morbidity, investment yields and
withdrawals which were used or which were being experienced at the
time the policies were issued, rather than the assumptions
prescribed by state regulatory authorities. See note 4.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) PARTICIPATING BUSINESS
Participating business represents approximately 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) INVESTMENTS
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $3.5
million.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995, the Company transferred nearly all of its fixed maturity
securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the
fixed maturity securities had amortized cost of $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), which is equal to interest
income recognized using a cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
The Company has entered into a reinsurance contract to cede a portion
of its general account individual annuity business to The Franklin Life
Insurance Company (Franklin). Total recoveries due from Franklin were
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
respectively. The contract is immaterial to the Company's results of
operations. The ceding of risk does not discharge the original insurer
from its primary obligation to the policyholder. Under the terms of the
contract, Franklin has established a trust as collateral for the
recoveries. The trust assets are invested in investment grade
securities, the market value of which must at all times be greater than
or equal to 102% of the reinsured reserves.
The Company has reinsurance agreements with certain affiliates as
described in note 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
FIXED MATURITY AND EQUITY SECURITIES: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
MORTGAGE LOANS ON REAL ESTATE, NET: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
POLICY LOANS, SHORT-TERM INVESTMENTS AND CASH: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
SEPARATE ACCOUNT ASSETS AND LIABILITIES: The fair value of assets
held in Separate Accounts is based on quoted market prices. The
fair value of liabilities related to Separate Accounts is the
amount payable on demand, which includes certain surrender
charges.
INVESTMENT CONTRACTS: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
POLICY RESERVES ON LIFE INSURANCE CONTRACTS: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
COMMITMENTS TO EXTEND CREDIT: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 13.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
CREDIT RISK: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
INTEREST RATE RISK: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
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 contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
SIGNIFICANT CONCENTRATIONS OF CREDIT RISK: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) PENSION PLAN
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. 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.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(10) SHAREHOLDER'S EQUITY, REGULATORY RISK-BASED CAPITAL, RETAINED EARNINGS
AND DIVIDEND RESTRICTIONS
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required approval.
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) TRANSACTIONS WITH AFFILIATES
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $20.5 million and $15.1 million as of
December 31, 1997 and 1996, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1997 and
1996 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. 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. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(14) SEGMENT INFORMATION
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses and
investment management fees and other revenue earned from mutual funds,
other than the portion allocated to the variable annuities and life
insurance segments, are reported in the Corporate and Other segment.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 68
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements: PAGE
(1) Financial statements included in Prospectus. N/A
(Part A):
Condensed Financial Information.
in Part B:
Those financial statements required by
Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-9:
Independent Auditors' Report.
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1997.
Statements of Operations and Changes in
Contract Owners' Equity for the period
November 3, 1997 (commencement of operations)
through December 31, 1997.
Notes to Financial Statements.
Nationwide Life Insurance Company:
Independent Auditors' Report.
Consolidated Balance Sheets as of December
31, 1997 and 1996.
Consolidated Statements of Income for the years
ended December 31, 1997, 1996 and 1995.
Consolidated Statements of Shareholder's Equity
for the years ended December 31, 1997, 1996 and
1995.
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996
and 1995.
Notes to Consolidated Financial Statements.
<PAGE> 69
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of
Directors authorizing the establishment of
the Registrant - Filed previously with this
Registration Statement and incorporated by
reference (333-53023).
(2) Not Applicable
(3) Underwriting or Distribution of contracts
between the Registrant and Principal
Underwriter - Filed previously with this
Registration Statement and incorporated by
reference (333-53023).
(4) The form of the variable annuity contract - Filed
previously with this Registration Statement and
incorporated by reference (333-53023).
(5) Variable Annuity Application - Filed previously
with this Registration Statement and incorporated
by reference (333-53023).
(6) Articles of Incorporation of Depositor - Filed
previously with this Registration Statement and
incorporated by reference (333-53023).
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with this
Registration Statement and incorporated by
reference (333-53023).
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with this
Registration Statement and incorporated by
reference (333-53023).
<PAGE> 70
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer-
One Nationwide Plaza Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President - Office of Product and
Columbus, OH 43215 Market Compliance
</TABLE>
Item 26. 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
<PAGE> 73
<TABLE>
<CAPTION>
NO. VOTING
STATE SECURITIES
OF (SEE ATTACHED
ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> , <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative
insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract
Inc. Agent
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability,
Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
<PAGE> 74
<TABLE>
<CAPTION>
NO. VOTING
STATE SECURITIES
OF (SEE ATTACHED
ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration
Claims Examinations and Data
Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims
York, Inc. Administration
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare
Supplement Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance
Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** MRM Investments, Inc. Ohio Owns and Operates a Recreational
Ski Facility
** National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, Great Britain Insurance Company
Ltd.
** National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer,
Investment Manager and Administrator
</TABLE>
<PAGE> 75
<TABLE>
<CAPTION>
NO. VOTING
STATE SECURITIES
OF (SEE ATTACHED
ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
Nationwide Asset Allocation Trust Massachusetts Investment Company
Nationwide Cash Management Company Ohio Investment Securities Agent
Nationwide Community Urban Ohio Redevelopment of blighted
Redevelopment Corporation areas within the City of
Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of
acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts of
other persons, associations,
corporations, domestic or
foreign and to form or
acquire the control of other
corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena
development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of
acquiring, holding,
encumbering, transferring,
or otherwise disposing of
shares, bonds, and other
evidences of indebtedness,
securities, and contracts of
other persons, associations,
corporations, domestic or
foreign and to form or
acquire the control of other
corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for
Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance
Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
</TABLE>
<PAGE> 76
<TABLE>
<CAPTION>
NO. VOTING
STATE SECURITIES
OF (SEE ATTACHED
ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Nationwide Insurance Enterprise Ohio Membership Non-Profit
Foundation Corporation
Nationwide Insurance Enterprise Ohio Performs shares services
Services, Ltd. functions for the Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit
Inc. Corporation
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
Nationwide Investment Services Oklahoma Registered Broker-Dealer in
Corporation Deferred Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider
Organization and Other
Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates
real estate and real estate
investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates
real estate and real estate
investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
NO. VOTING
STATE SECURITIES
OF (SEE ATTACHED
ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for
Neckura Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers
Agency, Inc. Deferred Compensation Plans
for Public Employees
PEBSCO of Texas, Inc Texas Markets and Administers
Deferred Compensation Plans
for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration,
record keeping and
consulting and compensation
consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance
Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance
Organization
Public Employees Benefit Services Delaware Markets and Administers
Corporation Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Alabama Markets and Administers
Corporation of Alabama Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers
Corporation of Arkansas Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services Montana Markets and Administers
Corporation of Montana Deferred Compensation Plans
for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers
Corporation of New Mexico Deferred Compensation Plans
for Public Employees
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NO. VOTING
STATE SECURITIES
OF (SEE ATTACHED
ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines
Company Insurance Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura
Group Insurance Group
TIG Countrywide Insurance Group California Independent Agency Personal
Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance
Limited Company
Wausau International Underwriters California Special Risks, Excess and
Surplus Lines Insurance
Underwriting Manager
* Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance
Company Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS PRINCIPAL
COMPANY OF ORGANIZATION OTHERWISE INDICATED BUSINESS
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* NACo Variable Account Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of
Separate Account Annuity Contracts
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of
Separate Account Annuity Contracts
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of
Separate Account Annuity Contracts
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of
Separate Account Annuity Contracts
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
</TABLE>
<PAGE> 80
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS PRINCIPAL
COMPANY OF ORGANIZATION OTHERWISE INDICATED BUSINESS
<S> <C> <C> <C>
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of
Account Account Annuity Contracts
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of
Account Annuity Contracts
* Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life
Account-A Separate Account Insurance
Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life
Account-B Separate Account Insurance
Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life
Account-C Separate Account Insurance
Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life
Account-D Separate Account Insurance
Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life
Account Insurance
Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life
Account Insurance
Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life
Account Insurance
Policies
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life
Account Insurance
Policies
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life
Account Insurance
Policies
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate |-------- | |------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | | |
- -------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WINCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ | ------| |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
| |------------ Shares | | | Cost |
| | Cost | | | ---- |
| | ---- | | |Casualty-90% $9,000 |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
| -------------------------------- | --------------------------------
| || |
| -------------------------------- | --------------------------------
| | COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| | INSURANCE COMPANY | | | MANAGEMENT |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|-----------------------------------------------------------------
--------------------------- |
| NATIONWIDE FINANCIAL | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC. | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $500 | || | NEA -100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $1,000 | || | NEA -100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP. -100% $25,683,532 | | | NW CORP. -100% $126,509,480 | | | NW CORP. -100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 87
Item 27. NUMBER OF CONTRACT OWNERS
Not applicable.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation Law
of the State of Ohio, for indemnification by the Company of any
person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of
the fact that such person is or was a director, officer or employee
of the Company, against expenses, including attorneys fees,
judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than 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 asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide DC Variable Account,
Nationwide DCVA II, Nationwide Variable Account-II, Nationwide
Variable Account-5, Nationwide Variable Account-8, Nationwide
Variable Account-9, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C, Nationwide VL Separate Account-A, Nationwide VL
Separate Account-B, Nationwide VL Separate Account-C,
Nationwide VL Separate Account-D, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide VLI
Separate Account-4, Nationwide VLI Separate Account-5, NACo
Variable Account and the Nationwide Variable Account, all of
which are separate investment accounts of the Company or its
affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Asset
Allocation Trust and Nationwide Investing Foundation II, and
Nationwide Investing Foundation III which are open-end
management investment companies.
<PAGE> 88
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and Chief Executive
Columbus, OH 43215 Officer--Nationwide Insurance Enterprise
and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and General Counsel
One Nationwide Plaza and Assistant Secretary
Columbus, OH 43215
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
James F. Laird, Jr. Vice President and General Manager
One Nationwide Plaza
Columbus, OH 43215
Edwin P. Mc Causland Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee Vice President
One Nationwide Plaza
Columbus, OH 43215
Charles Bath Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
(c)NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
The Registrant represents that any of the contracts which are
issued pursuant to Section 403(b) of the Code, are issued by
Nationwide through the Registrant in reliance upon, and in
compliance with, a no-action letter issued by the Staff of the
Securities and Exchange Commission to the American Council of Life
Insurance (publicly available November 28, 1988) permitting
withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11) of the Code.
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.
<PAGE> 90
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
NATIONWIDE VARIABLE ACCOUNT - 9
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
PROSPECTUS
May 1, 1999
<PAGE> 91
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-9:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 30, 1998 included the related financial statement
schedules as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth therein.
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG Peat Marwick LLP
Columbus, Ohio
August 21, 1998
<PAGE> 92
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-9, has caused this
Post-Effective Amendment No.1 to the Registration Statement to be signed on its
behalf in the City of Columbus, and State of Ohio, on this 26th day of February,
1999.
NATIONWIDE VARIABLE ACCOUNT-9
---------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
---------------------------------------------------
Joseph P. Rath
Vice President - Product and Market Compliance
As required by the Securities Act of 1933, Post-Effective Amendment No.1 to the
Registration Statement has been signed by the following persons in the
capacities indicated on the 26th day of February, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C> <C>
LEWIS J. ALPHIN Director
- -----------------------------
Lewis J. Alphin
A. I. BELL Director
- -----------------------------
A. I. Bell
KEITH W. ECKEL Director
- -----------------------------
Keith W. Eckel
Willard J. Engel Director
- -----------------------------
Willard J. Engel
Fred C. Finney Director
- -----------------------------
Fred C. Finney
Charles L. Fuellgraf, Jr. Director
- -----------------------------
Charles L. Fuellgraf, Jr.
Joseph J. Gasper President and Chief Operating
- ----------------------------- Officer and Director
Joseph J. Gasper
Dimon R. MCFerson Chairman and Chief Executive
- ----------------------------- Officer Nationwide Insurance
Dimon R. McFerson Enterprise and Director
David O. Miller Chairman of the Board and
- ----------------------------- Director
David O. Miller
Yvonne L. Montgomery Director
- -----------------------------
Yvonne L. Montgomery
Robert A. Oakley Executive Vice President - Chief
- ----------------------------- Financial Officer
Robert A. Oakley
James F. Patterson Director
- -----------------------------
James F. Patterson
Arden L. Shisler Director By /s/ JOSEPH P. RATH
- ----------------------------- -------------------------
Arden L. Shisler Joseph P. Rath
Attorney-in-Fact
Robert L. Stewart Director
- -----------------------------
Robert L. Stewart
Nancy C. Thomas Director
- -----------------------------
Nancy C. Thomas
Harold W. Weihl Director
- -----------------------------
Harold W. Weihl
</TABLE>
