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NATIONWIDE LIFE INSURANCE COMPANY
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 (as amended December 30, 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
o American Century VP Income & Growth
o American Century VP International
o American Century VP Value
DREYFUS
o Dreyfus Investment Portfolios - European Equity Portfolio
o The Dreyfus Socially Responsible Growth Fund, Inc.
o Dreyfus Stock Index Fund, Inc.
o Dreyfus Variable Investment Fund - Capital Appreciation
Portfolio
FEDERATED INSURANCE SERIES
o Federated Quality Bond Fund II
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
o VIP Equity-Income Portfolio: Service Class
o VIP Growth Portfolio: Service Class
o VIP High Income Portfolio: Service Class*
o VIP Overseas Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
o VIP II Contrafund Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCT FUND III
o VIP III Growth Opportunities Portfolio: Service Class
JANUS ASPEN SERIES (NOT AVAILABLE UNTIL JANUARY 27, 2000)
o Capital Appreciation Portfolio: Service Shares
o Global Technology Portfolio: Service Shares(1)
o International Growth Portfolio: Service Shares
(1) UNITS IN THE JANUS ASPEN SERIES GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
CANNOT BE MADE AVAILABLE FOR INVESTMENT UNTIL THE LATER OF JANUARY 27, 2000
OR UNTIL THE REGISTRATION STATEMENT FOR THE JANUS ASPEN SERIES GLOBAL
TECHNOLOGY PORTFOLIO: SERVICE SHARES IS DECLARED EFFECTIVE BY THE SECURITIES
AND EXCHANGE COMMISSION.
MORGAN STANLEY
o Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio
o Van Kampen Life Investment Trust - Morgan Stanley Real Estate
Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
o Capital Appreciation Fund
o Government Bond Fund
o Money Market Fund
o Total Return Fund
o Nationwide Balanced Fund* (subadviser: Salomon Brothers Asset
Management, Inc.)
o Nationwide Equity Income Fund (subadviser: Federated
Investment Counseling)
o Nationwide Global Equity Fund (subadviser: J.P. Morgan
Investment Management Inc.)
o Nationwide High Income Bond Fund* (subadviser: Federated
Investment Counseling)
o Nationwide Mid Cap Index Fund (formerly Nationwide Select
Advisers Mid Cap Fund) (The Dreyfus Corporation)
o Nationwide Multi Sector Bond Fund* (subadviser: Salomon
Brothers Asset Management, Inc. with Salomon Brothers Asset
Management Limited)
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o Nationwide Select Advisers Small Cap Growth Fund (subadvisers:
Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC.)
o Nationwide Small Cap Value Fund (subadviser: The Dreyfus
Corporation)
o Nationwide Small Company Fund (subadvisers: The Dreyfus
Corporation, Neuberger Berman, LLC., Lazard Asset Management,
Strong Capital Management, Inc. and Credit Suisse Asset
Management, LLC)
o Nationwide Strategic Growth Fund (subadviser: Strong Capital
Management, Inc.)
o Nationwide Strategic Value Fund (subadviser: Strong Capital
Management, Inc./Schafer Capital Management, Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
o AMT Guardian Portfolio
o AMT Mid-Cap Growth Portfolio*
o AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
o Oppenheimer Aggressive Growth Fund/VA (formerly "Oppenheimer
Capital Appreciation Fund")
o Oppenheimer Capital Appreciation Fund/VA (formerly
"Oppenheimer Growth Fund")
o Oppenheimer Main Street Growth & Income Fund/VA (formerly
"Oppenheimer Growth & Income Fund")
VAN ECK WORLDWIDE INSURANCE TRUST
o Worldwide Emerging Markets Fund
o Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
o Growth & Income Portfolio
o International Equity Portfolio**
o Post-Venture Capital Portfolio**
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
**NOT AVAILABLE FOR NEW ANNUITY APPLICATIONS RECEIVED ON OR AFTER SEPTEMBER 27,
1999 OR APPLICATIONS RECEIVED BY NATIONWIDE'S HOME OFFICE PRIOR TO SEPTEMBER
27, 1999 THAT WERE NOT IN GOOD ORDER.
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Variable Account-9 ("variable account") may be allocated to the fixed
account or the Guaranteed Term Options (Guaranteed Term Options may not be
available in every jurisdiction - refer to your contract for specific
information).
The Statement of Additional Information (dated May 1, 1999, as amended December
30, 1999) which contains additional information about the contracts and the
variable account has been 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 54.
For general information or to obtain FREE copies of the:
o Statement of Additional Information,
o prospectus for any underlying mutual fund,
o prospectus for the Guaranteed Term Options,
o required Nationwide forms,
call: 1-800-848-6331
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 01-05-P1
COLUMBUS, OHIO 43215
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:
o A BANK DEPOSIT o FEDERALLY INSURED
o ENDORSED BY A BANK OR GOVERNMENT AGENCY o AVAILABLE IN EVERY STATE
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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.
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.
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GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account 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 used to calculate the variable payment annuity
payments.
CONTRACT VALUE- The total of all accumulation units in a contract, 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 that 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, Individual Retirement Annuity, Roth IRA, SEP IRA,
Simple 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.
SEP IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408(k) of the Internal Revenue Code.
SIMPLE IRA- An annuity contract which qualifies for favorable tax treatment
under Section 408(p) 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 PERIOD- Each day the New York Stock Exchange is open for business.
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.
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TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.......................... 4
SUMMARY OF STANDARD CONTRACT EXPENSES.............. 7
ADDITIONAL CONTRACT OPTIONS........................ 8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES............. 10
EXAMPLE............................................ 13
SYNOPSIS OF THE CONTRACTS.......................... 16
FINANCIAL STATEMENTS............................... 17
CONDENSED FINANCIAL INFORMATION.................... 17
NATIONWIDE LIFE INSURANCE COMPANY.................. 17
NATIONWIDE ADVISORY SERVICES, INC.................. 17
INVESTING IN THE CONTRACT.......................... 18
The Variable Account and Underlying
Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS.................... 20
Mortality and Expense Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND
DEDUCTIONS.................................... 22
Reduced Purchase Payment Option
CDSC Options and Charges
Death Benefit Options
Guaranteed Minimum Income Benefit Option
CONTRACT OWNERSHIP................................. 26
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT.......................... 27
Minimum Initial and Subsequent Purchase
Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE.................................... 31
SURRENDER (REDEMPTION)............................. 31
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Texas Optional Retirement
Program or a Louisiana Optional
Retirement Plan
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE..................................... 33
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......................................... 34
CONTRACT OWNER SERVICES............................ 35
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE.......................... 36
ANNUITIZING THE CONTRACT........................... 37
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Option
("GMIB")
Annuity Payment Options
DEATH BENEFITS..................................... 41
Death of Contract Owner - Non-Qualified
Contracts
Death of Annuitant - Non-Qualified Contracts
Death of Contract Owner/Annuitant
Death Benefit Payment
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REQUIRED DISTRIBUTIONS............................. 43
Required Distributions for Non-Qualified
Contracts
Required Distributions for Tax Sheltered
Annuities
Required Distributions for Individual
Retirement Annuities, SEP IRAs and
Simple IRAs
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS......................... 46
Federal Income Taxes
Individual Retirement Annuities, SEP IRAs,
Simple IRAs 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............................. 51
YEAR 2000 COMPLIANCE ISSUES........................ 52
LEGAL PROCEEDINGS.................................. 53
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY.... 54
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL
INFORMATION................................... 59
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS......................................... 60
APPENDIX B: CONDENSED FINANCIAL INFORMATION........ 71
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SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
o the contract owner meets an available exception, or
o 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 purchase
payments surrendered)......................................................7%(1)
Range of CDSC over time:
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
(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.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of average account value)
Mortality and Expense Risk Charges............0.95%
Total Variable Account Charges...........0.95%(3)
(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 a daily basis at the annual rate noted above.
(3)Charges shown include the Five-Year Reset Death Benefit that is standard to
every contract (see "Death Benefit Payment").
Nationwide may assess a loan processing fee at the time each new loan is
processed. Loans are only available for contracts issued as Tax Sheltered
Annuities. Loans are not available in all states. In addition, some states may
not allow Nationwide to assess a loan processing fee (see "Loan Privilege").
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ADDITIONAL CONTRACT OPTIONS
For an additional charge, the following options are available to contract owners
(upon approval by state insurance authorities). These options must be elected at
the time of application and will replace the corresponding standard contract
benefits.
If the contract owner chooses one or more of the following optional benefits, a
corresponding charge will be deducted. Charges for the optional benefits are IN
ADDITION TO the standard variable account charges. Optional benefit charges will
only apply to allocations made to the variable account and are charged as a
percentage of the average variable account value.
REDUCED PURCHASE PAYMENT OPTION
For an additional charge at an annualized rate of 0.25% of the daily net assets
of the variable account, Nationwide will lower an applicant's minimum initial
purchase payment to $1,000 and subsequent purchase payments to $25. This option
in not available to contracts issued as Investment-only Contracts.
Reduced Purchase Payment Option...........0.25%
Total Variable Account Charges
(including Reduced Purchase Payment
Option)................................1.20%
FIVE YEAR CDSC OPTION
For an additional charge at an annualized rate of 0.15% of the daily net assets
of the variable account, an applicant can receive a five year CDSC schedule,
instead of the standard seven year CDSC schedule.
Five Year CDSC Option .......................0.15%
Total Variable Account Charges
(including Five Year CDSC Option)..........1.10%
Range of Five-Year CDSC over time:
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 4%
4 2%
5 0%
CDSC WAIVER OPTIONS
ADDITIONAL WITHDRAWAL WITHOUT CHARGE AND DISABILITY WAIVER
For an additional charge at an annualized rate of 0.10% of the daily net
assets of the variable account, an applicant can receive an additional 5%
CDSC-free withdrawal privilege, which also includes a disability waiver. This
5% is in addition to the standard 10% CDSC-free withdrawal privilege that
applies to every contract (see "CDSC Options and Charges").
Additional Withdrawal Without
Charge and Disability Waiver ..............0.10%
Total Variable Account Charges
(including Additional Withdrawal
Without Charge and Disability Waiver)..1.05%
ADDITIONAL CDSC WAIVER OPTIONS FOR TAX SHELTERED ANNUITIES
Applicants of a Tax Sheltered Annuity may also elect two additional CDSC
waiver options (see "CDSC Options and Charges").
10 Year and Disability Waiver..............0.05%
Total Variable Account Charges
(including 10 Year and Disability
Waiver) .................................1.00%
Hardship Waiver............................0.15%
Total Variable Account Charges
(including Hardship Waiver) .............1.10%
DEATH BENEFIT OPTIONS
An applicant may choose one of two optional death benefits instead of the
Five-Year Reset Death Benefit that is standard to every contract. The optional
death benefits are:
Optional One-Year Step Up
Death Benefit................................0.05%
Total Variable Account Charges
(including One Year Step Up Death Benefit).1.00%
Optional 5% Enhanced Death
Benefit......................................0.10%
Total Variable Account Charges
(including 5% Enhanced Death Benefit)......1.05%
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GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge at an annualized rate of 0.45% of the daily net assets
of the variable account, an applicant may elect the Guaranteed Minimum Income
Benefit option (see "Guaranteed Minimum Income Benefit Option").
Guaranteed Minimum Income Benefit Option.....0.45%
Total Variable Account Charges (including
a Guaranteed Minimum Income Benefit
option)....................................1.40%
EXTRA VALUE OPTION
For an additional charge at an annualized rate of 0.45% of the daily net
assets of the variable account, Nationwide will credit 3% of the purchase
payment(s) made to the contract during the first 12 months the contract is in
force. Nationwide will discontinue deducting this charge seven years from the
date the contract was issued (see "Extra Value Option").
Extra Value Option...........................0.45%
Total Variable Account Charges (including
Extra Value Option)........................1.40%
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND 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. - American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 1.47% 0.00% 0.00% 1.47%
Century VP International
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 0.00% 1.00%
Century VP Value
Dreyfus Investment Portfolios - European Equity 1.00% 0.50% 0.00% 1.50%
Portfolio
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.05% 0.00% 0.80%
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
Dreyfus Variable Investment Fund - Capital 0.75% 0.05% 0.00% 0.80%
Appreciation Portfolio
Federated Insurance Series - Federated Quality Bond 0.23% 0.47% 0.00% 0.70%
Fund II
Fidelity VIP Equity-Income Portfolio: Service Class 0.49% 0.08% 0.10% 0.67%
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.14% 0.10% 0.82%
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.13% 0.10% 0.97%
Fidelity VIP II Contrafund Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.10% 0.10% 0.79%
Service Class
Janus Aspen Series - Capital Appreciation Portfolio: 0.66% 0.04% 0.25% 0.95%
Service Shares
Janus Aspen Series - Global Technology Portfolio: 0.73% 0.30% 0.25% 1.28%
Service Shares
Janus Aspen Series - International Growth Portfolio: 0.66% 0.09% 0.25% 1.00%
Service Shares
Morgan Stanley Dean Witter Universal Funds, Inc. - 0.27% 1.03% 0.00% 1.30%
Emerging Markets Debt Portfolio
NSAT Capital Appreciation Fund 0.58% 0.22% 0.00% 0.80%
NSAT Government Bond Fund 0.44% 0.22% 0.00% 0.66%
NSAT Money Market Fund 0.34% 0.21% 0.00% 0.55%
NSAT Total Return Fund 0.57% 0.21% 0.00% 0.78%
NSAT Nationwide Balanced Fund 0.54% 0.36% 0.00% 0.90%
NSAT Nationwide Equity Income Fund 0.45% 0.50% 0.00% 0.95%
NSAT Nationwide Global Equity Fund 0.59% 0.61% 0.00% 1.20%
NSAT Nationwide High Income Bond Fund 0.48% 0.47% 0.00% 0.95%
NSAT Nationwide Mid Cap Index Fund 0.15% 0.50% 0.00% 0.65%
NSAT Nationwide Multi-Sector Bond Fund 0.54% 0.36% 0.00% 0.90%
NSAT Nationwide Select Advisers Small Cap Growth Fund 0.72% 0.58% 0.00% 1.30%
NSAT Nationwide Small Cap Value Fund 0.47% 0.58% 0.00% 1.05%
NSAT Nationwide Small Company Fund 1.00% 0.25% 0.00% 1.25%
NSAT Nationwide Strategic Growth Fund 0.20% 0.80% 0.00% 1.00%
NSAT Nationwide Strategic Value Fund 0.52% 0.48% 0.00% 1.00%
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.85% 0.15% 0.00% 1.00%
</TABLE>
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<TABLE>
<CAPTION>
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
<S> <C> <C> <C> <C>
Neuberger Berman AMT Partners Portfolio 0.78% 0.06% 0.00% 0.84%
Oppenheimer Variable Account Funds - Oppenheimer 0.69% 0.02% 0.00% 0.71%
Aggressive Growth Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer 0.72% 0.03% 0.00% 0.75%
Capital Appreciation Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer Main 0.74% 0.05% 0.00% 0.79%
Street Growth & Income Fund/VA
Van Eck Worldwide Insurance Trust - Worldwide Emerging 0.69% 0.61% 0.00% 1.30%
Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.16% 0.00% 1.16%
Assets Fund
Van Kampen Life Investment Trust - Morgan Stanley Real 1.00% 0.08% 0.00% 1.08%
Estate Securities Portfolio
Warburg Pincus Trust - Growth & Income Portfolio 0.51% 0.49% 0.00% 1.00%
Warburg Pincus Trust - International Equity Portfolio 1.00% 0.33% 0.00% 1.33%
Warburg Pincus Trust - Post-Venture Capital Portfolio 1.08% 0.32% 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.
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Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
<S> <C> <C> <C> <C>
Dreyfus Investment Portfolios - European Equity 1.00% 2.67% 0.00% 3.67%
Portfolio
Fidelity VIP Equity-Income Portfolio: Service 0.49% 0.09% 0.10% 0.68%
Class
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.11% 0.10% 0.80%
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.17% 0.10% 1.01%
Fidelity VIP II Contrafund Portfolio: Service 0.59% 0.11% 0.10% 0.80%
Class
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.11% 0.10% 0.80%
Service Class
Janus Aspen Series - Capital Appreciation 0.73% 0.04% 0.25% 1.02%
Portfolio: Service Shares
Janus Aspen Series - Global Technology 0.75% 0.30% 0.25% 1.30%
Portfolio: Service Shares
Janus Aspen Series - International Growth 0.72% 0.09% 0.25% 1.06%
Portfolio: Service Shares
Morgan Stanley Dean Witter Universal Funds, Inc. 0.80% 1.25% 0.00% 2.05%
- - Emerging Markets Debt Portfolio
NSAT Capital Appreciation Fund 0.60% 0.22% 0.00% 0.82%
NSAT Government Bond Fund 0.50% 0.22% 0.00% 0.72%
NSAT Money Market Fund 0.40% 0.21% 0.00% 0.61%
NSAT Total Return Fund 0.59% 0.21% 0.00% 0.80%
NSAT Nationwide Balanced Fund 0.75% 0.36% 0.00% 1.11%
NSAT Nationwide Equity Income Fund 0.80% 0.50% 0.00% 1.30%
NSAT Nationwide Global Equity Fund 1.00% 0.61% 0.00% 1.61%
NSAT Nationwide High Income Bond Fund 0.80% 0.47% 0.00% 1.27%
NSAT Nationwide Mid Cap Index Fund 0.50% 0.50% 0.00% 1.00%
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.36% 0.00% 1.11%
NSAT Nationwide Select Advisers Small Cap Growth 1.10% 0.73% 0.00% 1.83%
Fund
NSAT Nationwide Small Cap Value Fund 0.90% 0.58% 0.00% 1.48%
NSAT Nationwide Strategic Growth Fund 0.90% 0.80% 0.00% 1.70%
NSAT Nationwide Strategic Value Fund 0.90% 0.48% 0.00% 1.38%
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.61% 0.00% 1.61%
Emerging Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.20% 0.00% 1.20%
Hard Assets Fund
</TABLE>
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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 underlying mutual fund 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 assumed variable account charge is 2.65% which is the maximum
charge for the maximum number of rider options.
For those contracts that do not elect the maximum number of rider options, the
expenses are reduced. Deductions for premium taxes are not reflected but may
apply.
<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 98 161 217 376 35 107 181 376 * 107 181 376
Portfolios, Inc. - American
Century VP Income & Growth
American Century Variable 106 185 255 446 43 131 219 446 * 131 219 446
Portfolios, Inc. - American
Century VP International
American Century Variable 101 170 232 404 38 116 196 404 * 116 196 404
Portfolios, Inc. - American
Century VP Value
Dreyfus Investment Portfolio 107 186 257 449 44 132 221 449 * 132 221 449
- - European Equity Portfolio
The Dreyfus Socially 99 164 222 386 36 110 186 386 * 110 186 386
Responsible Growth Fund, Inc.
Dreyfus Stock Index Fund, Inc. 94 147 195 334 31 93 159 334 * 93 159 334
Dreyfus Variable Investment 99 164 222 386 36 110 186 386 * 110 186 386
Fund - Capital Appreciation
Portfolio
Federated Insurance Series - 98 161 217 376 35 107 181 376 * 107 181 376
Federated Quality Bond Fund II
Fidelity VIP Equity-Income 98 160 216 373 35 106 180 373 * 106 180 373
Portfolio: Service Class
Fidelity VIP Growth 99 163 220 381 36 109 184 381 * 109 184 381
Portfolio: Service Class
Fidelity VIP High Income 99 165 223 387 36 111 187 387 * 111 187 387
Portfolio: Service Class
Fidelity VIP Overseas 101 169 231 401 38 115 195 401 * 115 195 401
Portfolio: Service Class
Fidelity VIP II Contrafund 99 163 220 381 36 109 184 381 * 109 184 381
Portfolio: Service Class
Fidelity VIP III Growth 99 164 222 385 36 110 186 385 * 110 186 385
Opportunities Portfolio:
Service Class
</TABLE>
13
<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>
Janus Aspen Series - Capital 101 169 230 399 38 115 194 399 * 115 14 399
Appreciation Portfolio:
Service Shares
Janus Aspen Series - Global 107 179 246 429 41 125 210 429 * 125 210 429
Technology Portfolio:
Service Shares
Janus Aspen Series - 101 170 232 404 38 116 196 404 * 116 196 404
International Growth
Portfolio: Service Shares
Morgan Stanley Dean Witter 104 179 247 431 41 125 211 431 * 125 211 431
Universal Funds, Inc. -
Emerging Markets Debt
Portfolio
NSAT Capital Appreciation Fund 99 164 222 386 36 110 186 386 * 110 186 386
NSAT Government Bond Fund 98 160 215 372 35 106 179 372 * 106 179 372
NSAT Money Market Fund 97 156 210 362 34 102 174 362 * 102 174 362
NSAT Total Return Fund 99 164 221 384 36 110 185 384 * 110 185 384
NSAT Nationwide Balanced Fund 100 167 227 395 37 113 191 395 * 113 191 395
NSAT Nationwide Equity Income 101 169 230 399 38 115 194 399 * 115 194 399
Fund
NSAT Nationwide Global Equity 103 176 242 422 40 122 206 422 * 122 206 422
Fund
NSAT Nationwide High Income 101 169 230 399 38 115 194 399 * 115 194 399
Bond Fund
NSAT Nationwide Mid Cap Index 98 160 215 371 35 106 179 371 * 106 179 371
Fund
NSAT Nationwide Multi-Sector 100 167 227 395 37 113 191 395 * 113 191 395
Bond Fund
NSAT Nationwide Select 104 179 247 431 41 125 211 431 * 125 211 431
Advisers Small Cap Growth Fund
NSAT Nationwide Small Cap 102 172 235 409 39 118 199 409 * 118 199 409
Value Fund
NSAT Nationwide Small Company 104 178 244 427 41 124 208 427 * 124 208 427
Fund
NSAT Nationwide Strategic 101 170 232 404 38 116 196 404 * 116 196 404
Growth Fund
NSAT Nationwide Strategic 101 170 232 404 38 116 196 404 * 116 196 404
Value Fund
Neuberger Berman AMT- 101 170 232 404 38 116 196 404 * 116 196 404
Guardian Portfolio
Neuberger Berman AMT-Mid-Cap 101 170 232 404 38 116 196 404 * 116 196 404
Growth Portfolio
Neuberger Berman AMT- 100 165 224 389 37 111 188 389 * 111 188 389
Partners Portfolio
</TABLE>
14
<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>
Oppenheimer Variable Account 98 161 218 377 35 107 182 377 * 107 182 377
Funds - Oppenheimer
Aggressive Growth Fund/VA
Oppenheimer Variable Account 99 163 220 381 36 109 184 381 * 109 184 381
Funds - Oppenheimer Capital
Appreciation Fund/VA
Oppenheimer Variable Account 99 164 222 385 36 110 186 385 * 110 186 385
Funds - Oppenheimer Main
Street Growth & Income Fund/VA
Van Eck Worldwide Insurance 104 179 247 431 41 125 211 431 * 125 211 431
Trust - Worldwide Emerging
Markets Fund
Van Eck Worldwide Insurance 103 175 240 419 40 121 204 419 * 121 204 419
Trust - Worldwide Hard Assets
Fund
Van Kampen Life Investment 102 173 236 411 39 119 200 411 * 119 200 411
Trust - Morgan Stanley Real
Estate Securities Portfolio
Warburg Pincus Trust - Growth 101 170 232 404 38 116 196 404 * 116 196 404
& Income Portfolio
Warburg Pincus Trust - 105 180 248 434 42 126 212 434 * 126 212 434
International Equity Portfolio
Warburg Pincus Trust - 106 183 252 440 43 129 216 440 * 129 216 440
Post-Venture Capital Portfolio
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
15
<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:
o Investment-Only Contracts;
o Non-Qualified;
o Individual Retirement Annuities with contributions rolled over
or transferred from certain tax-qualified plans*;
o Roth IRAs;
o Tax Sheltered Annuities with contributions rolled over or
transferred from other Tax Sheltered Annuity plans*;
o Charitable Remainder Trusts;
o SEP IRAs;
o Simple IRAs.
*Contributions are not required to be rolled over or transferred if the contract
owner elects the Reduced Purchase Payment Option.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE SUBSEQUENT
TYPE PAYMENT PAYMENTS
Investment-only $100,000 $15,000
Contracts
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
Charitable $15,000 $1,000
Remainder Trust
SEP IRA $15,000 $1,000
Simple IRA $15,000 $1,000
If the contract owner elects the Reduced Purchase Payment Option, minimum
initial and subsequent purchase payments will be reduced accordingly.
If the contract owner elects the Extra Value Option, amounts credited to the
contract may not be used to meet the minimum initial and subsequent purchase
payment requirements.
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 deducts a Mortality and Expense Risk Charge equal to an annual rate
of 0.95% of the daily net assets of the variable account. Nationwide assesses
this charge in return for bearing certain mortality and expense risks, and for
administrative expenses.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
There are several CDSC options that are available to contract owners, each with
different characteristics and costs. The charge associated with each option is
charged as a percentage of the daily net assets of the variable account. They
are as follows:
OPTION CONTRACT CHARGE
TYPE
Five Year CDSC Option all 0.15%
Additional Withdrawal all 0.10%
Without Charge and
Disability Waiver
10 Year and Disability Tax 0.05%
Waiver Sheltered
Annuities
Hardship Waiver Tax 0.15%
Sheltered
Annuities
If the contract owner elects the Reduced Purchase Payment Option, Nationwide
will reduce the minimum initial purchase payment to $1,000 and subsequent
purchase payments to $25. In return for the reduction, Nationwide will deduct an
additional charge of 0.25% of the daily net assets of the variable account.
16
<PAGE> 17
This option is not available for contracts issued as Investment-only Contracts.
Two optional death benefits are available under the contract. If the contract
owner elects one of these options, Nationwide will deduct either 0.05% for the
One-Year Step Up Death Benefit, or 0.10% for the 5% Enhanced Death Benefit.
A Guaranteed Minimum Income Benefit option is available under the contract. If
the contract owner elects the Guaranteed Minimum Income Benefit option,
Nationwide will deduct an additional charge of an annualized rate of 0.45% of
the daily net assets of the variable account (see "Guaranteed Minimum Income
Benefit").
An Extra Value Option is available under the contract. The Extra Value Option is
only available at the time of application. If the contract owner elects the
Extra Value Option on the application, Nationwide will apply a credit of 3% of
the purchase payment(s) made during the first 12 months the contract is in
force. In exchange, Nationwide will deduct an additional charge at an annualized
rate of 0.45% of the daily net assets of the variable account. Nationwide will
discontinue deducting this charge seven years from the date the contract was
issued. Once the Extra Value Option is elected, it may not be revoked (see
"Extra Value Option").
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 any governmental
authority (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 the amount required by
law (see "Right to Revoke").
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.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of a variable
account charge which may vary from contract to contract (for more information on
the calculation of accumulation unit values, see "Determining Variable Account
Value - Valuing an Accumulation Unit"). Please refer to Appendix B for
information regarding each class of accumulation units.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929 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.
17
<PAGE> 18
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-9 is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
separate account 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, Individual Retirement Annuities, Simple
IRAs, SEP 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 mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. 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 meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed 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 that 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
18
<PAGE> 19
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 along 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 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 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
19
<PAGE> 20
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 guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
o New Money Rate - The rate credited on the fixed account allocation when the
contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than the
rate when the contract was issued, since the New Money Rate is subject to
change based on market conditions.
o Variable Account to Fixed Rate - Allocations transferred from any of the
underlying investment options in the variable account to the fixed account
may receive a different rate. The rate may be lower than the New Money
Rate. There may be limits on the amount and frequency of movements from the
variable account to the fixed account.
o Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. The contract owner will be
notified of this rate in a letter issued with the quarterly statements when
any of the money in the contract owner's fixed account matures. At that
time, the contract owner will have an opportunity to leave the money in the
fixed account and receive the Renewal Rate or the contract owner can move
the money to any of the other underlying mutual fund options.
o Dollar Cost Averaging Rate - From time to time, Nationwide may offer a more
favorable rate for an initial purchase payment into a new contract when
used in conjunction with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during the12 month anniversary in which the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any 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.
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 CHARGE
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis, and is equal to an annual
rate of 0.95% 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
20
<PAGE> 21
charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is 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 deduct a CDSC. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered.
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:
Number of Years from Date CDSC
of Purchase Payment Percentage
0 7%
1 7%
2 6%
3 5%
4 4%
5 3%
6 2%
7 0%
The CDSC is used to cover sales expenses, including commissions (maximum of 6%
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 assets, 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.
21
<PAGE> 22
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
5.0%. 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.
If applicable, Nationwide will deduct 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.
Premium taxes may be deducted from death benefit proceeds.
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS
REDUCED PURCHASE PAYMENT OPTION
If the contract owner chooses the Reduced Purchase Payment Option, Nationwide
will deduct a charge equal to an annual rate of 0.25% of the daily net assets of
the variable account. In return, the minimum initial purchase payment for that
contract will be $1,000 and minimum subsequent purchase payment will be $25.
This option is not available for Investment-only Contracts.
The contract owner may elect to terminate this rider if, throughout a period of
at least two years and continuing until such election, the total of all purchase
payments, less surrenders and withdrawals, is maintained at $25,000 or more.
This election must be submitted in writing on a form provided by Nationwide.
Termination of the rider will occur as of the date on the election form, and the
charge for this rider will no longer be assessed. Subsequent purchase payments,
if any, will be subject to the terms of the contract and must be at least
$1,000.
CDSC OPTIONS AND CHARGES
Five Year CDSC Option
For an additional charge at an annualized rate of 0.15% of the daily net assets
of the variable account, the contract owner may choose the Five-Year CDSC
Option.
Under this option, CDSC will not exceed 7% of purchase payments surrendered.
The Five Year CDSC Option applies as follows:
Number of Years from Date of CDSC
Purchase Payment Percentage
0 7%
1 7%
2 6%
3 4%
4 2%
5 0%
Additional Withdrawal without Charge and Disability Waiver
Each contract has a standard 10% CDSC-free withdrawal privilege each year. For
an additional charge at an annualized rate of 0.10% of the daily net assets of
the variable account, the contract owner can withdraw an additional 5% of total
purchase payments each year without incurring a CDSC. This would allow the
contract owner to withdraw a total of 15% of the total of all purchase payments
each year free of CDSC. Like the standard 10% CDSC-free privilege, this
additional withdrawal benefit is non-cumulative.
This option also contains a disability waiver. Nationwide will waive CDSC if a
contract owner (or annuitant if the contract is owned by a non-natural owner) is
disabled after the contract is issued but before reaching age 65. If this waiver
becomes effective due to disability, no additional purchase payments may be made
to the contract.
Additional CDSC Waiver Options for Tax Sheltered Annuities
10 Year and Disability Waiver
For an additional charge at an annualized rate of 0.05% of the daily
net assets of the
22
<PAGE> 23
variable account, the contract owner of a Tax Sheltered Annuity can
purchase the 10 Year and Disability Waiver. Under this option,
Nationwide will waive CDSC if two conditions are met:
1) the contract owner has been the owner of the contract for 10
years; and
2) the contract owner has made regular payroll deferrals during the
entire contract year for at least 5 of those 10 years.
This option also contains a disability waiver. Nationwide will waive
CDSC if the contract owner is disabled after the contract is issued but
before reaching age 65. If this waiver becomes effective due to
disability, no additional purchase payments may be made to the
contract.
Hardship Waiver
For an additional charge at an annualized rate of 0.15% of the daily
net assets of the variable account, the contract owner of a Tax
Sheltered Annuity can purchase the Hardship Waiver. Under this option,
Nationwide will waive CDSC if the contract owner experiences a hardship
(as defined for purposes of Internal Revenue Code Section (401(k)). The
contract owner may be required to provide proof of hardship.
If this waiver becomes effective, no additional purchase payments may
be made to the contract.
DEATH BENEFIT OPTIONS
If the contract owner chooses an optional death benefit, Nationwide will deduct
a charge equal to an annual rate of either 0.05% (for the One-Year Step Up Death
Benefit) or 0.10% (for the 5% Enhanced Death Benefit) of the daily net assets of
the variable account, depending upon which option was chosen. Nationwide may
lower either of these charges at any time without notifying contract owners.
Further information about these benefits can be found in the "Death Benefit
Payment" provision.
One-Year Step Up 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 before 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:
(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.
Long Term Care Facility Provisions
If the contract owner chooses an optional death benefit, no CDSC will be charged
if:
o The third contract anniversary has passed; and
o 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.
Additionally, if the contract owner chooses an optional death benefit, no CDSC
will be charged if:
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o The contract owner has been diagnosed by a physician to have a terminal
illness; and
o Nationwide receives and records a letter from that physician indicating
such diagnosis.
Written notice and proof of terminal illness or confinement for 90 days in a
hospital or long term care facility must be received in a form satisfactory to
Nationwide and recorded at Nationwide's home offer prior to waiver of the CDSC.
For those contracts that have a non-natural person as contract owner as an agent
for 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 does NOT own the contract as an agent for 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.
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge at an annualized rate of 0.45% of the daily net assets
of the variable account, the contract owner can purchase a Guaranteed Minimum
Income Benefit option at the time of application. The Guaranteed Minimum Income
Benefit option provides 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.
EXTRA VALUE OPTION
THE EXTRA VALUE OPTION MAY NOT BE AVAILABLE IN ALL STATES. APPLICANTS SHOULD BE
AWARE OF THE FOLLOWING PRIOR TO ELECTING THE EXTRA VALUE OPTION:
1. ELECTING THE EXTRA VALUE OPTION WILL BE BENEFICIAL FOR CONTRACT OWNERS
ONLY IF THE INVESTMENT PERFORMANCE OF THE UNDERLYING MUTUAL FUNDS IS
GREAT ENOUGH TO COMPENSATE FOR THE REDUCTION IN CONTRACT VALUE DUE TO
THE 0.45% CHARGE;
2. NATIONWIDE MAY MAKE A PROFIT FROM THE CHARGE ASSESSED BY THE EXTRA
VALUE OPTION;
3. BECAUSE THE 0.45% CHARGE ASSOCIATED WITH THE EXTRA VALUE OPTION WILL BE
ASSESSED AGAINST THE ENTIRE VARIABLE ACCOUNT VALUE FOR THE FIRST SEVEN
(7) CONTRACT YEARS, CONTRACT OWNERS WHO ANTICIPATE MAKING ADDITIONAL
PURCHASE PAYMENTS AFTER THE FIRST CONTACT YEAR SHOULD CAREFULLY EXAMINE
THE EXTRA VALUE OPTION AND CONSULT THEIR FINANCIAL ADVISER REGARDING
ITS DESIRABILITY;
4. ONCE THE EXTRA VALUE OPTION IS ELECTED, IT MAY NOT BE REVOKED;
5. NATIONWIDE MAY RECAPTURE ALL OR PART OF THE AMOUNT CREDITED IN THE
EVENT OF EARLY SURRENDERS, INCLUDING REVOCATION OF THE CONTRACT DURING
THE CONTRACTUAL FREE-LOOK PERIOD.
For an additional charge at an annualized rate of 0.45% of the daily net assets
of the variable account, the contract owner can purchase an Extra Value Option
at the time of application. Nationwide may reduce this charge.
In exchange, Nationwide will apply a credit of 3% of the purchase payment(s)
made during the first 12 months the contract is in force. This credit is funded
from Nationwide's general account. The amount credited will be allocated among
the sub-accounts, the fixed account, and/or the Guaranteed Term Options in the
same proportion that the purchase payment is allocated to the contract.
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The option of electing the Extra Value Option allows prospective contract owners
to choose between two different variable account charge structures for the first
seven years of the contract.
If the credit is elected and no additional contract options are elected, the
total variable account charges under the contract will be an annualized rate of
1.40% of the daily net assets of the variable account for the first seven years
of the contract. If the Extra Value Option is not elected, total variable
account charges will be an annualized rate of 0.95% (assuming no other contract
options are elected) of the daily net assets of the variable account for the
first seven years of the contract and thereafter.
Under these circumstances, the decision to elect or decline the Extra Value
Option will depend primarily on whether the prospective contract owner believes
it is more advantageous to have:
(a) a 1.40% variable account charge for the first seven years of the contract,
plus the Extra Value Option credit, or
(b) (b) a 0.95% variable account charge for the first seven years of the
contract, without the Extra Value Option credit.
The following table demonstrates hypothetical rates of return for contracts with
the Extra Value Option and no other optional benefits (total variable account
asset charges of 1.40%) and contracts with no additional contract options
whatsoever (total variable account asset charges of 0.95%). The figures are
based upon:
(a) a $100,000 initial purchase payment with no additional purchase payments;
(b) the deduction of variable account charges of an annualized rate of 0.95%
(base contract) and 1.40% (contract with only the Extra Value Option) of
the daily net asset value; and
(c) an assumed annual rate of return before charges of 7.75% for all years for
a period of 10 years.
7.75% RATE OF RETURN
Contract Year Base Contract Contract With Extra
(0.95% total asset Value Option (1.40%
charges) total asset charges)
1 $106,800 $109,541
2 $114,062 $116,496
3 $121,819 $123,894
4 $130,102 $131,761
5 $138,949 $140,128
6 $148,398 $149,026
7 $158,489 $158,489
8 $169,266 $169,266
9 $180,776 $180,776
10 $193,069 $193,069
Generally, the higher the rate of return, the more advantageous the Extra Value
Option becomes and vice versa.
Amounts credited to the contract in connection with the Extra Value Option may
be recaptured if:
(a) the contract owner elects to surrender the contract pursuant to the
contractual free-look provisions; or
(b) withdrawals that are subject to a CDSC are taken before the end of the
seventh contract year.
If the contract is surrendered pursuant to the contractual free-look, Nationwide
may recapture the full credited amount if the contract value, at the time of the
request to surrender, is equal to or greater than the purchase payments made to
the contract. In such a situation, the contract owner is entitled to keep any
earnings. If, however, the contract value is less than the purchase payments
made to the contract, Nationwide will bear the loss.
After the free look period and before the seventh contract anniversary, any
amounts withdrawn from the contract that are subject to a CDSC subjects a part
of the amount credited to recapture. For example, if a contract owner
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withdraws 13% of purchase payments made within the first contract year, 3% of
the amount credited will be recaptured by Nationwide, since the contract owner
may withdraw only 10% of purchase payments without a CDSC. This means that the
percentage of the amount credited to be recaptured will be the determined by the
percentage of total purchase payments reflected in the amount surrendered that
is subject to CDSC. The amount recaptured will be taken from the sub-accounts,
the fixed account and/or the Guaranteed Term Options in the same proportion as
allocated by the contract owner at the time of the withdrawal.
NO AMOUNT CREDITED WILL BE SUBJECT TO RECAPTURE IF THE WITHDRAWAL IS NOT SUBJECT
TO A CDSC OR IF A DISTRIBUTION IS TAKEN AS A RESULT OF DEATH, ANNUITIZATION, OR
TO MEET MINIMUM DISTRIBUTION REQUIREMENTS UNDER THE INTERNAL REVENUE CODE. IN
ADDITION, NO RECAPTURE WILL TAKE PLACE AFTER THE SEVENTH CONTRACT YEAR.
After the end of the first seven contract years, the 0.45% charge for the Extra
Value Option will no longer be assessed and the amount credited will be fully
vested. Nationwide intends to administer the removal of the 0.45% rider option
charge by decreasing the number of units and increasing the unit value of the
sub-accounts in which the contract owner was invested at the end of the seventh
contract year. The elimination of the 0.45% charge and the adjustment in the
number of units and unit values will not affect contract owners' contract
values.
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 owner, beneficiary, or contingent beneficiary before the
annuitization date. These changes must be:
o on a Nationwide form;
o signed by the contract owner; and
o 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.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
o Joint owners can only be named for Non-Qualified Contracts.
o Joint owners must be spouses at the time joint ownership is
requested, unless state law requires Nationwide to allow non-spousal
joint owners.
o The exercise of any ownership right in the contract will generally
require a written request signed by both joint owners.
o An election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of
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ownership rights independently by either joint owner.
o 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.
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 affect 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 option), 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. Multiple beneficiaries will
share the death benefit equally, unless otherwise specified.
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
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE PAYMENT SUBSEQUENT
TYPE PAYMENTS
Investment-only $100,000 $15,000
Contracts
Non-Qualified $ 15,000 $ 1,000
IRA $ 15,000 $ 1,000
Roth IRA $ 15,000 $ 1,000
Tax Sheltered $ 15,000 $ 1,000
Annuity
Charitable $ 15,000 $ 1,000
Remainder Trust
SEP IRA $ 15,000 $ 1,000
Simple IRA $ 15,000 $ 1,000
Subsequent purchase payments are not permitted for contracts issued in the State
of Oregon and may not be permitted in other states under certain circumstances.
If the contract owner elects the Reduced Purchase Payment Option, minimum
initial and subsequent purchase payments will be reduced accordingly.
If the contract owner elects the Extra Value Option, amounts credited to the
contract may not be used to meet the minimum initial and subsequent purchase
payment requirements.
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 at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
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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 allows 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:
o New Year's Day o Independence Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents Day o Thanksgiving
o Good Friday o Christmas
o Memorial Day
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 closed on days when the New York Stock
Exchange is open, contract value may be affected since the contract owner would
not have access to their account.
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 underlying mutual funds allocated to 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. However, no change may be made that would result in an
amount less than 1% of the purchase payments being allocated to any sub-account.
Certain transactions may be subject to conditions imposed by the underlying
mutual funds, as well as those set forth in the contract.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
1) the value of amounts allocated to the sub-accounts of the variable
account; and
2) amounts allocated to the fixed account; and
3) amounts allocated to a Guaranteed Term Option.
If part or all of the contract value is surrendered, or charges are assessed
against the whole contract value, Nationwide will deduct a proportionate amount
from each sub-account, the fixed account and any Guaranteed Term Option based on
current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
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 shows the investment performance of the
underlying mutual fund in which a particular sub-account invests,
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including the charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(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 0.95% to 2.50% of the daily
net assets of the variable account, depending on which contract features the
contract owner chooses.
Based on the change in 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 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, minus amounts
previously transferred or withdrawn; and
2) adding any interest earned on the amounts allocated.
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, minus
amounts previously transferred or withdrawn (which may be subject to
a market value adjustment); and
2) adding any interest earned on the amounts allocated to any
Guaranteed Term Option; and
3) subtracting charges deducted in accordance with the contract.
TRANSFERS
Transfers from the Fixed Account to the Variable Account or a Guaranteed Term
Option
Fixed account allocations may be transferred to the variable account or to a
Guaranteed Term Option only upon reaching the end of an interest rate guarantee
period. Normally, Nationwide will permit 100% of such fixed account allocations
to be transferred to the variable account or a Guaranteed Term Option; however
Nationwide may, under certain economic conditions and at its discretion, limit
the maximum transferable amount. Under no circumstances will the maximum
transferable amount be less than 10% of the fixed account allocation reaching
the end of an interest rate guarantee period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an interest
rate guarantee period.
Contract owners who use 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 (see "Dollar Cost Averaging").
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Transfers to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account. Except as noted below, under no
circumstances will the transfer limit be less than 10% of the current value of
the variable account, less any transfers made in the 12 months preceding the
date the transfer is requested, but not including transfers made prior to the
imposition of the transfer limit. However, where permitted by state law,
Nationwide reserves the right to refuse transfers or purchase payments to the
fixed account (whether from the variable account or a Guaranteed Term Option)
when the fixed account value is greater than or equal to 30% of the contract
value at the time the purchase payment is made or the transfer is requested.
Transfers from a Guaranteed Term Option
Transfers from a Guaranteed Term Option prior to maturity are subject to a
market value adjustment.
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 and will not be liable for
following telephone instructions that it reasonably determined to be genuine.
Nationwide may withdraw the telephone exchange privilege upon 30 days written
notice to contract owners.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the 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.
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 will not be
modified in any way
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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).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
o submitted by any agent acting under a power of attorney on behalf of more than
one contract owner; or
o 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. The refunded contract value will reflect the deduction of any contract
charges, unless otherwise required by law. All Individual Retirement Annuity,
SEP IRA, Simple IRA and Roth IRA refunds will be a return of purchase payments.
State and/or federal law may provide additional free look privileges.
Contract owners, who have elected the Extra Value Option and subsequently
terminate the contract under the free look provision, will forfeit any amounts
credited to the contract. For those jurisdictions that allow a return of
contract value, the contract owner will retain any earnings attributable to the
amount credited; all losses attributable to the amount credited will be incurred
by Nationwide.
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.
During the first seven contract years only, if an amount withdrawn is subject to
a CDSC, then a portion of the amount credited may be recaptured. No recapture
will take place after the seventh contract year. The amount credited will not,
however, be subject to recapture if a free withdrawal (not subject to the CDSC)
is being made (see "Extra Value Option").
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.
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 CDSC may apply. The contract owner may take the CDSC from either:
a) the amount requested; or
b) the contract value remaining after the contract owner has received
the amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
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The CDSC deducted is a percentage of the amount requested by the contract owner.
Amounts deducted for CDSC are not subject to subsequent CDSC.
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 CDSC may apply.
SURRENDERS UNDER A TEXAS OPTIONAL RETIREMENT PROGRAM OR A LOUISIANA OPTIONAL
RETIREMENT PLAN
Redemption restrictions apply to contracts issued under the Texas Optional
Retirement Program or the Louisiana Optional Retirement Plan.
The Texas Attorney General has ruled that participants in contracts issued under
the Texas Optional Retirement Program may only take withdrawals if:
o the participant dies;
o the participant retires;
o the participant terminates employment due to total disability;
o or the participant that works in a Texas public institution of higher
education terminates employment.
A participant under a contract issued under the Louisiana Optional Retirement
Plan may only take distributions from the contract upon retirement or
termination of employment. All retirement benefits under this type of plan must
be paid as lifetime income; lump sum cash payments are not permitted, except for
death benefits.
Due to the restrictions described above, a participant under either of these
plans will not be able to withdraw cash values from the contract unless one of
the applicable conditions is met. However, contract value may be transferred to
other carriers, subject to any CDSC.
Nationwide issues this contract to participants in the Texas Optional Retirement
Program in reliance upon and in compliance with Rule 6c-7 of the Investment
Company Act of 1940. Nationwide issues this contract to participants in the
Louisiana Optional Retirement Plan in reliance upon and in compliance with an
exemptive order that Nationwide received from the SEC on August 22, 1990.
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
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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 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 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:
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
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*)
*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 may charge a loan processing fee at the time each new loan is
processed. If assessed, 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
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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.
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:
o the contract is surrendered;
o the contract owner/annuitant dies;
o the contract owner who is not the annuitant dies prior to
annuitization; or
o 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, Individual Retirement Annuities, Roth IRAs, SEP IRAs,
Simple 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
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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 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: Federated
Insurance Series - Federated Quality Bond Fund II, 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 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.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal or less than to 1/30th of the
fixed account value at the time the program is requested. A Dollar Cost
Averaging program which transfers amounts from the fixed account to the variable
account is not the same as an Enhanced Rate Dollar Cost Averaging program.
Contract owners that wish to utilize Dollar Cost Averaging from the fixed
account should first inquire whether any Enhanced Rate Dollar Cost Averaging
programs are available.
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Enhanced Rate Dollar Cost Averaging
Nationwide may, from time to time, offer Enhanced Rate Dollar Cost Averaging
programs. Dollar Cost Averaging transfers for this program may only be made from
the fixed account. Such Enhanced Rate Dollar Cost Averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
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:
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
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%
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.
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.
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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.
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
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
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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.
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:
o 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
o 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 OPTION ("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?
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 immediately 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%.
Special Restrictions for a GMIB
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,
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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.
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:
o An initial purchase payment of $100,000.00 is made to the contract and
allocated to the variable account;
o There are no surrenders from the contract or transfers to the fixed account
(raising the fixed account value to greater than 30% of the contract value);
o The contract is issued to a MALE at age 55, 65 or 70;
o A Life Annuity with 120 Months Guaranteed Fixed Payment Annuity Option is
elected.
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
55 62 $4.72 $664.15
65 72 $5.96 $838.63
70 77 $6.79 $955.42
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
55 65 $5.03 $ 819.33
65 75 $6.44 $1,049.01
70 80 $7.32 $1,192.35
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
Male Age at Issue Male Age at Annuitization GMIB Purchase Rate* Monthly GMIB
55 70 $5.66 $1,132.00
65 80 $7.32 $1,464.00
70 85 $8.18 $1,636.00
*Guaranteed 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 will apply for females, for males who annuitize at
ages other than the ages shown above, or for annuitizations under other annuity
payment options. Where different guaranteed purchase rates apply, GMIB amounts
shown above will be different. In all cases, the guaranteed purchase rates used
to calculate the GMIB will be the same as the purchase rates guaranteed in the
contract for fixed annuitizations without the GMIB.
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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.
When May the Guaranteed Annuitization Value be Used?
The contract owner may use the Guaranteed Annuitization Value by 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:
o Life Annuity;
o Joint and Last Survivor Annuity;
o Life Annuity with 120 or 240 Monthly Payments Guaranteed.
Other GMIB Terms and Conditions
**PLEASE READ CAREFULLY**
o The GMIB must be elected at the time of application.
o The annuitant must be age 83 or younger at the time the contract is
issued.
o 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.
o A GMIB DOES NOT in any way guarantee the performance of any underlying mutual
fund, or any other investment option available under the contract.
o 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.
o 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.
o Please take advantage of the guidance of a qualified financial adviser in
evaluating the GMIB options, and all other aspects of the contract.
o GMIB may not be approved in all state jurisdictions.
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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. Individual Retirement Annuities 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 last surviving contract owner's estate becomes the contract owner.
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.
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 no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death
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benefit. Contingent beneficiaries will share the death benefit equally, unless
otherwise specified.
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.
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 the Annuitant -
Non-Qualified Contracts" provision.
A joint owner will receive a death benefit if a contract owner/annuitant dies
before the annuitization date.
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 three 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 Five-Year Reset 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).
Five-Year Reset Death Benefit (Standard Contractual 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 contract value as of the most recent five year contract
anniversary before the annuitant's 86th birthday, less an adjustment
for amounts surrendered, plus purchase payments received after that
five year 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).
One-Year Step Up 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 before 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:
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
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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. 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.
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 ("MDIB") provisions of Section 401(a)(9) of
the Internal Revenue Code. Distributions will be made to the annuitant according
to the selected annuity payment option 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 do not have to be withdrawn from this contract if they
are being
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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.
Distribution commencing on the required distribution date must satisfy minimum
distribution and incidental benefit provisions set forth in the Internal Revenue
Code. Those provisions require that distributions cannot be less than the amount
determined by dividing the annuitant's interest in the Tax Sheltered Annuity
determined by the end of the previous calendar year by (a) the annuitant's life
expectancy; or if applicable, (b) the joint and survivor life expectancy of the
annuitant and the annuitant's beneficiary. The life expectancies and joint life
expectancies are determined by reference to Treasury Regulation 1.72-9.
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 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, SEP IRAS AND SIMPLE
IRAS
Distributions from an Individual Retirement Annuity, SEP IRA or Simple IRA 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, SEP IRA or Simple IRA 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:
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1) treat the contract as an Individual Retirement Annuity, SEP IRA
or Simple 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 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 do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity, SEP IRA or
Simple IRA 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, SEP IRA or Simple IRA 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, SEP
IRA or Simple IRA.
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
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they are "qualified distributions" or "nonqualified distributions" (see "Federal
Tax Considerations").
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, including SEP IRAs and Simple IRAs; (2) Roth
IRAs; (3) Tax Sheltered Annuities; and (4) Non-Qualified Contracts. Each type of
annuity is discussed below.
Individual Retirement Annuities, SEP IRAs and Simple IRAs
Distributions from Individual Retirement Annuities, SEP IRAs, Simple IRAs 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
the Individual Retirement Annuity, SEP IRA, Simple IRA or the annuitant under
contracts held by Individual Retirement Accounts must annually report to the
Internal Revenue Service:
o the amount of nondeductible purchase payments;
o the amount of any distributions;
o the amount by which nondeductible purchase payments for all years
exceed non-taxable distributions for all years; and
o the total balance in all Individual Retirement Annuities, SEP IRAs,
Simple IRAs 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 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 homebuyer 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
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of contributions will be included in the contract owner's gross income in the
year that is distributed to the contract owner.
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 and no additional payments are due
after his or her death, then he or she may be entitled to a deduction for the
balance of the unrecovered investment in the contract on his or her final income
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.
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.
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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. These rules are described in "Required
Distributions for Non-Qualified Contracts."
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 as an agent for 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
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e) an immediate annuity.
INDIVIDUAL RETIREMENT ANNUITIES, SEP IRAS, SIMPLE IRAS 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, SEP IRAs, Simple IRAs, 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, SEP IRAs or Simple IRAs. Most
distributions from Tax Sheltered Annuities may be rolled into another Tax
Sheltered Annuity, Individual Retirement Annuity, SEP IRA or Simple IRA.
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 Annuities, SEP IRAs and Simple IRAs 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 Annuity, SEP IRA or
Simple IRA 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.
For rollovers from Individual Retirement Accounts and Individual Retirement
Annuities, all of the income from the rollover 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
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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), or if it is
an eligible rollover distribution. 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
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 includible 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:
o a transfer of the contract from one contract owner to another; or
o a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may be 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:
o 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
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o 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.
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
o the failure to diversify was accidental;
o the failure is corrected; and
o 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 statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
o statements showing the contract's quarterly activity;
o 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;
o annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must be sent to the
underlying mutual fund beneficial shareholders as required by the rules
under the Investment Company Act of 1940 for the variable account.
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Contract owners should review 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 many 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 implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. The shareholder services
system that supports mutual fund products was fully deployed during the first
quarter 1999. Conversion of existing traditional life policies to the new
compliant system was completed by July 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide's facilities in Columbus, Ohio have been inventoried, assessed and
tested as being Year 2000 compliant. Mission-critical systems supporting
Nationwide's infrastructure such as telecommunications, voice and networks were
renovated and brought into compliance as planned during the second quarter.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners utilizing electronic interfaces with
Nationwide and processes have been put in place to allow Nationwide to accept
data regardless of the format. Contingency plans were completed in the third
quarter that will allow Nationwide to continue to send or receive data in the
event of failures related to other exchanges of data.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
conducting a due diligence effort with significant external organizations,
including mutual fund organizations, financial institutions and wholesale
producers, to assess if they will be Year 2000 compliant. This involves
communication and follow-up with critical business partners to determine if they
will be in a position to continue doing business in the Year 2000 and beyond.
To-date, 87% of our critical business partners have reported that they are
compliant. Our communication efforts with the remaining business partners will
continue until compliance is assured or until regulatory rulings indicate
actions to be taken related to non-compliant firms. Contingency plans have been
developed for mutual fund orangizations, financial institution and wholesale
producers who may not become compliant prior to the end of 1999.
As part of its risk management strategy, Nationwide has identified risk
scenarios including the identification of external risk factors that could cause
business interruptions from Year 2000 related events. These risk scenarios
include increased customer service volume, increased producer service volume,
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utility failures, technology failures and disruptions in business operations,
finance and cash flow. Nationwide has completed its mitigation and contingency
plans to address these risks that would, except for complete utility failure,
permit uninterrupted service to customers and producers.
During 1998 and the first nine months of 1999 communications regarding
Nationwide's Year 2000 readiness have been sent to all of our customers and
producers, on several different occasions in the form of brochures and
literature included with statements and billings. This process will continue for
the remainder of 1999.
Operating expenses in 1998 and 1997 include approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Expenditures for Year 2000 projects for the first nine months of 1999
totaled $5.3 million. These expenses do not have an effect on the assets of the
variable account and are not charged through to the annuitant.
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.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide
Life Insurance Company and the American Century group of defendants (Robert
Young and David D. Distad v. Nationwide Life Insurance Company et al.). In this
lawsuit, plaintiffs sought to represent a class of variable life insurance
contract owners and variable annuity contract owners whom they claim were
allegedly misled when purchasing these variable contracts into believing that
the performance of their underlying mutual fund option managed by American
Century, whose shares may only be purchased by insurance companies, would track
the performance of a mutual fund, also managed by American Century, whose shares
are publicly traded. The amended complaint seeks unspecified compensatory and
punitive damages. On April 27, 1998, the district court denied, in part, and
granted, in part, Nationwide and American Century's motions to dismiss the
complaint. The remaining claims against Nationwide allege securities fraud,
common law fraud, civil conspiracy, and breach of contract. The District Court,
on December 2, 1998, issued an order denying plaintiffs' motion for class
certification and the appeals court declined to review the order denying class
certification upon interlocutory appeal. On June 11, 1999, the District Court
denied the plaintiffs' motion to amend their complaint and reconsider class
certification. Nationwide intends to defend this lawsuit (now limited to the
claims of the two named plaintiffs) vigorously.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide
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<PAGE> 54
affiliates which were used to fund certain tax-deferred retirement plans. The
amended complaint seeks unspecified compensatory and punitive damages. On June
11, 1999, Nationwide and the other named defendants filed a motion to dismiss
the amended complaint. Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NAS, is not engaged in any litigation of any material
nature.
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:
o precious metals;
o real estate;
o stocks and bonds;
o closed-end funds;
o bank money market deposit accounts and passbook savings;
o CDs; and
o the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
o S&P 500;
o Shearson/Lehman Intermediate Government/Corporate Bond Index;
o Shearson/Lehman Long-Term Government/Corporate Bond Index;
o Donoghue Money Fund Average;
o U.S. Treasury Note Index;
o Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
o Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
o Lipper Analytical Services, Inc.;
o CDA/Wiesenberger;
o Morningstar;
o Donoghue's;
o magazines such as:
- Money;
- Forbes;
- Kiplinger's Personal Finance Magazine;
- Financial World;
- Consumer Reports;
- Business Week;
- Time;
- Newsweek;
- National Underwriter;
- News and World Report;
o LIMRA;
o Value;
o Best's Agent Guide;
o Western Annuity Guide;
o Comparative Annuity Reports;
o Wall Street Journal;
o Barron's;
o Investor's Daily;
o Standard & Poor's Outlook; and
o Variable Annuity Research & Data Service (The VARDS Report).
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<PAGE> 55
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
("standardized return") calculated in a manner prescribed by the SEC, and
non-standardized average annual total return ("non-standardized return").
Standardized 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
charges that could be assessed to a contract if the maximum rider options for a
contract issued as a Tax Sheltered Annuity are chosen (2.65%). Standardized
return does not reflect the deduction of state premium taxes, which may be
imposed by certain states.
Non-standardized return is calculated similarly to standardized return except
non-standardized return assumes an initial investment of $25,000, with variable
account charges of 1.40% (base contract charges of 0.95% in addition to the
Extra Value Option of 0.45% for a total of 1.40%). A CDSC is reflected. An
assumed initial investment of $25,000 is used because that amount more
accurately reflects the average contract size.
Both methods of calculation reflect total return 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 had they been available in the variable account for
one of the periods.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1998.
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.
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<PAGE> 56
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 12/31/98 to 12/31/98 to 12/31/98 Account
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 17.24 N/A N/A 11/03/97
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 9.33 N/A N/A 11/03/97
Century VP International
American Century Variable Portfolios, Inc. - American -4.23 N/A N/A 11/03/97
Century VP Value
The Dreyfus Socially Responsible Growth Fund, Inc. 19.70 N/A N/A 11/03/97
Dreyfus Stock Index Fund, Inc. 18.58 N/A N/A 11/03/97
Dreyfus Variable Investment Fund - Capital 20.52 N/A N/A 11/03/97
Appreciation Portfolio
Fidelity VIP Equity-Income Portfolio: Service Class 2.33 N/A N/A 11/03/97
Fidelity VIP Growth Portfolio: Service Class 29.47 N/A N/A 11/03/97
Fidelity VIP High Income Portfolio: Service Class -12.78 N/A N/A 11/03/97
Fidelity VIP Overseas Portfolio: Service Class 3.39 N/A N/A 11/03/97
Fidelity VIP II Contrafund Portfolio: Service Class 20.27 N/A N/A 11/03/97
Fidelity VIP III Growth Opportunities Portfolio: 14.97 N/A N/A 11/03/97
Service Class
Morgan Stanley Dean Witter Universal Funds, Inc. - -34.53 N/A N/A 11/03/97
Emerging Markets Debt Portfolio
NSAT Capital Appreciation Fund 20.29 N/A N/A 11/03/97
NSAT Government Bond Fund -0.23 N/A N/A 11/03/97
NSAT Money Market Fund -3.82 N/A N/A 10/31/97
NSAT Total Return Fund 8.68 N/A N/A 11/03/97
NSAT Nationwide Balanced Fund -1.08 N/A N/A 11/03/97
NSAT Nationwide Equity Income Fund 5.81 N/A N/A 11/03/97
NSAT Nationwide Global Equity Fund 9.72 N/A N/A 11/03/97
NSAT Nationwide High Income Bond Fund -3.30 N/A N/A 11/03/97
NSAT Nationwide Mid Cap Index Fund 1.58 N/A N/A 11/03/97
NSAT Nationwide Multi-Sector Bond Fund -6.41 N/A N/A 11/03/97
NSAT Nationwide Small Cap Value Fund -11.56 N/A N/A 11/03/97
NSAT Nationwide Small Company Fund -7.81 N/A N/A 11/03/97
NSAT Nationwide Strategic Growth Fund 5.28 N/A N/A 11/03/97
NSAT Nationwide Strategic Value Fund -8.43 N/A N/A 11/03/97
Neuberger Berman AMT Guardian Portfolio 21.94 N/A N/A 11/03/97
Neuberger Berman AMT Mid-Cap Growth Portfolio 29.39 N/A N/A 11/03/97
Neuberger Berman AMT Partners Portfolio -4.81 N/A N/A 11/03/97
Oppenheimer Variable Account Funds - Oppenheimer 3.15 N/A N/A 11/03/97
Aggressive Growth Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer 14.48 N/A N/A 11/03/97
Capital Appreciation Fund/VA
</TABLE>
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<PAGE> 57
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 12/31/98 to 12/31/98 to 12/31/98 Account
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds - Oppenheimer Main -4.33 N/A N/A 11/03/97
Street Growth & Income Fund/VA
Van Eck Worldwide Insurance Trust - Worldwide -39.65 N/A N/A 11/03/97
Emerging Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard -36.80 N/A N/A 11/03/97
Assets Fund
Van Kampen Life Investment Trust - Morgan Stanley -19.28 N/A N/A 11/03/97
Real Estate Securities Portfolio
Warburg Pincus Trust - Growth & Income Portfolio 2.90 N/A N/A 11/03/97
Warburg Pincus Trust - International Equity Portfolio -3.73 N/A N/A 11/03/97
Warburg Pincus Trust - Post-Venture Capital Portfolio -2.56 N/A N/A 11/03/97
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
$25,000 INITIAL INVESTMENT
PLEASE NOTE: THE PERFORMANCE NUMBERS BELOW REFLECT THE DEDUCTION OF THE AMOUNT
ASSESSED FOR THE BASE CONTRACT WITH ONLY THE EXTRA VALUE OPTION FOR TOTAL
VARIABLE ACCOUNT EXPENSES EQUAL TO AN ANNUALIZED RATE OF 1.40% OF THE DAILY NET
ASSETS OF THE VARIABLE ACCOUNT. FOR CONTRACT OWNERS WHICH HAVE CHOSEN RIDER
OPTIONS HAVING TOTAL VARIABLE ACCOUNT EXPENSES MORE THAN 1.40%, THE FUND
PERFORMANCE AS SHOWN BELOW WOULD BE REDUCED IN ACCORDANCE TO THE COSTS OF THE
RIDER OPTIONS SELECTED. FOR CONTRACT OWNERS WHO HAVE CHOSEN RIDER OPTIONS HAVING
TOTAL VARIABLE ACCOUNT EXPENSES OF LESS THAN 1.40%, THE FUND PERFORMANCE AS
SHOWN BELOW WOULD BE INCREASED ACCORDINGLY.
<TABLE>
<CAPTION>
10 Years
to 12/31/98
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/98 to 12/31/98 Fund Effective
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 18.81% N/A N/A 10/30/97
Century VP Income & Growth
American Century Variable Portfolios, Inc. - American 10.81% N/A N/A 05/02/94
Century VP International
American Century Variable Portfolios, Inc. - American -2.94% N/A N/A 05/01/96
Century VP Value
The Dreyfus Socially Responsible Growth Fund, Inc. 21.30% 20.49% N/A 10/06/93
Dreyfus Stock Index Fund, Inc. 20.15% 21.41% N/A 09/29/89
Dreyfus Variable Investment Fund - Capital 22.12% 21.36% N/A 04/05/93
Appreciation Portfolio
Fidelity VIP Equity-Income Portfolio: Service Class, 3.70% 16.82% 14.01% 10/09/86
Fidelity VIP Growth Portfolio: Service Class 31.17% 19.77% 17.74% 10/09/86
Fidelity VIP High Income Portfolio: Service Class -11.67% 6.83% 9.51% 09/19/85
Fidelity VIP Overseas Portfolio: Service Class 4.78% 7.76% 8.54% 01/28/87
Fidelity VIP II Contrafund Portfolio: Service Class 21.86% N/A N/A 01/03/95
Fidelity VIP III Growth Opportunities Portfolio: 16.50% N/A N/A 01/03/95
Service Class
</TABLE>
57
<PAGE> 58
<TABLE>
<CAPTION>
10 Years
to 12/31/98
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/98 to 12/31/98 Fund Effective
<S> <C> <C> <C> <C>
Morgan Stanley Dean Witter Universal Funds, Inc. - -33.66% N/A N/A 06/19/97
Emerging Markets Debt Portfolio
NSAT Capital Appreciation Fund 21.88% 21.15% N/A 04/15/92
NSAT Government Bond Fund 1.10% 5.35% 7.83% 11/08/82
NSAT Money Market Fund -2.50% 3.09% 3.94% 11/10/81
NSAT Total Return Fund 10.14% 17.41% 13.80% 11/08/82
NSAT Nationwide Balanced Fund 0.26% N/A N/A 10/31/97
NSAT Nationwide Equity Income Fund 7.24% N/A N/A 10/31/97
NSAT Nationwide Global Equity Fund 11.19% N/A N/A 10/31/97
NSAT Nationwide High Income Bond Fund -1.98% N/A N/A 10/31/97
NSAT Nationwide Mid Cap Index Fund 2.96% N/A N/A 10/31/97
NSAT Nationwide Multi-Sector Bond Fund -5.13% N/A N/A 10/31/97
NSAT Nationwide Small Cap Value Fund -10.39% N/A N/A 10/31/97
NSAT Nationwide Small Company Fund -6.66% N/A N/A 10/23/95
NSAT Nationwide Strategic Growth Fund 6.70% N/A N/A 10/31/97
NSAT Nationwide Strategic Value Fund -7.25% N/A N/A 10/31/97
Neuberger Berman AMT Guardian Portfolio 23.56% N/A N/A 11/03/97
Neuberger Berman AMT Mid-Cap Growth Portfolio 31.09% N/A N/A 11/03/97
Neuberger Berman AMT Partners Portfolio -3.53% N/A N/A 03/22/94
Oppenheimer Variable Account Funds - Oppenheimer 4.52% 11.15% 14.51% 08/15/86
Aggressive Growth Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer 16.00% 20.16% 15.24% 04/03/85
Capital Appreciation Fund/VA
Oppenheimer Variable Account Funds - Oppenheimer Main -3.04% N/A N/A 07/05/95
Street Growth & Income Fund/VA
Van Eck Worldwide Insurance Trust - Worldwide -38.89% N/A N/A 12/21/95
Emerging Markets Fund
Van Eck Worldwide Insurance Trust - Worldwide Hard -36.03% -5.14% N/A 09/01/89
Assets Fund
Van Kampen Life Investment Trust - Morgan Stanley -18.25% N/A N/A 07/03/95
Real Estate Securities Portfolio
Warburg Pincus Trust - Growth & Income Portfolio 4.27% N/A N/A 10/31/97
Warburg Pincus Trust - International Equity Portfolio -2.42% N/A N/A 06/30/95
Warburg Pincus Trust - Post-Venture Capital Portfolio -1.24% N/A N/A 09/30/96
</TABLE>
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no sub-account performance is available.
The Dreyfus Investment Portfolio - European Equity Portfolio was added to the
variable account September 27, 1999. Therefore, no sub-account performance is
available.
The Janus Aspen Series-Capital Appreciation Portfolio: Service Shares, and the
Janus Aspen Series-International Growth Portfolio: Service Shares were added to
the variable account effective January 27, 2000. Therefore, no sub-account
performance is available.
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<PAGE> 59
TABLE OF CONTENTS OF 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
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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
that 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 INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management investment
company known as a mutual fund. Shares are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies to
fund variable annuity contracts and variable life insurance policies and to
qualified pension and retirement plans.
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<PAGE> 61
Individuals may not purchase shares directly from the Fund. The Dreyfus
Corporation serves as the Fund's investment adviser.
EUROPEAN EQUITY PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth. To
pursue this goal, the Portfolio generally invests at least 80% of its total
assets in stocks included within the universe of the 300 largest European
companies. The Portfolio may invest up to 10% of its total assets in the
stocks of non-European companies. The Portfolio's stock investments may
include common stocks, preferred stocks and convertible securities.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management
investment company incorporated under Maryland law on January 24, 1989 and
commenced operations on September 29, 1989. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation ("Dreyfus") serves as the Fund's
manager, while Mellon Equity Associates, an affiliate of Dreyfus, serves as the
Fund's index manager. Dreyfus is a wholly owned subsidiary of Mellon Bank, N.A.,
which is a wholly owned subsidiary of Mellon Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund 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.
FEDERATED INSURANCE SERIES
Federated Insurance Series (the "Trust"), an Open-End Management Investment
Company, was established as a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Trust offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Federated Advisers serves as the investment adviser.
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<PAGE> 62
FEDERATED QUALITY BOND FUND II
Investment Objective: Current income by investing in investment grade
fixed income securities.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is also
important to point out that this Portfolio makes sense for you if you can
afford to ride out changes in the stock market because it invests primarily
in common stocks. FMR can also make temporary investments in securities
such as investment-grade bonds, high-quality preferred stocks and
short-term notes, for defensive purposes when it believes market conditions
warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
o at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
o 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.
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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.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio, under
normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth potential.
Although the Portfolio invests primarily in common stock and securities
convertible into common stock, it has the ability to purchase other
securities, such as preferred stock and bonds, that may produce capital
growth. The Portfolio may invest in foreign securities without limitation.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in common stocks selected for their growth potential. The
Portfolio may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.
GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies selected for
their growth potential. Under normal circumstances, the portfolio invests
at least 65% of its total assets in securities of companies that the
portfolio manager believes will benefit significantly from advances or
improvements in technology.
INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing at
least 65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the Portfolio
intends to invest substantially all of its assets in issuers located
outside the United States, it may invest in U.S. issuers and it may at
times invest all of its assets in
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<PAGE> 64
fewer than five countries, or even a single country.
MORGAN STANLEY DEAN WITTER UNIVERSAL FUNDS, INC.
Morgan Stanley Dean Witter 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 Dean Witter Investment 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. Effective September 1, 1999, the investment advisory
services previously performed by Nationwide Advisory Services ("NAS") were
transferred to Villanova Mutual Fund Capital Trust ("VMF"), an affiliate of NAS
and an indirect subsidiary of Nationwide Financial Services, Inc. The portfolio
managers and subadvisers for each of the Funds continue to manage the Funds
after the transfer to VMF.
CAPITAL APPRECIATION FUND
Investment Objective: Long-term capital appreciation.
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 consistent
with the preservation of capital and maintenance of liquidity.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
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
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
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<PAGE> 65
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.
NATIONWIDE MID CAP INDEX FUND (FORMERLY NATIONWIDE SELECT ADVISERS MID
CAP FUND)
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. The Fund seeks to match the
performance of the Standard & Poor's MidCap 400 Index. To pursue this
goal, the Fund generally is fully invested in all 400 stocks included in
this index in proportion to their weighting in the index, and in futures
whose performance is tied to the index. The Fund is neither sponsored by
nor affiliated with Standard & Poor's Corporation.
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
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<PAGE> 66
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 SMALL CAP GROWTH FUND
Subadvisers: Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC. Investment Objective: Seeks capital growth by
investing in a broadly diversified portfolio of equity securities issued
by U.S. and foreign companies with market capitalizations in the range of
companies represented by the Russell 2000, known has small cap companies.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in the equity securities of small cap companies. The balance
of the Fund's assets may be invested in equity securities of larger cap
companies.
NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: The Fund intends to pursue its investment objective
by investing, under normal market conditions, at least 75% of the Fund's
total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index.
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC., Lazard
Asset Management, Strong Capital Management, Inc. and Credit Suisse Asset
Management, LLC
Investment Objective: Under normal market conditions, the Fund will
invest at least 65% of its total assets in equity securities of companies
whose equity market capitalizations at the time of investment are similar
to the market capitalizations of companies in the Russell 2000 Small
Stock Index.
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
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<PAGE> 67
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 ("NB AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of NB AMT are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through life insurance
company separate accounts and are also offered directly to qualified pension and
retirement plans outside of the separate account context.
The Guardian, Partners and Mid-Cap Growth Portfolios of NB AMT invest all of
their investable assets in a corresponding series of Advisers Managers Trust
managed by Neuberger & Berman Management Incorporated ("NB Management"). Each
series then invests in securities in accordance with an investment objective,
policies and limitations identical to those of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
(For more information regarding "master/feeder fund" structure, see "Special
Information Regarding Organization, Capitalization, and Other Matters" in the
underlying mutual fund prospectus.) The investment advisor is NB Management.
AMT 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.
NB Management uses a value-oriented investment approach in selecting
securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital appreciation by investing in equity
securities of medium-sized companies that NB 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 NB Management to be of comparable quality. Securities that are
below investment grade, as well as
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<PAGE> 68
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/VA (FORMERLY "OPPENHEIMER CAPITAL
APPRECIATION 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 CAPITAL APPRECIATION FUND/VA (FORMERLY "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 MAIN STREET GROWTH & INCOME FUND/VA (FORMERLY "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.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance 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.
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<PAGE> 69
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 Credit Suisse Asset Management, LLC
("Credit Suisse").
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 Credit Suisse 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.
INTERNATIONAL EQUITY PORTFOLIO (NOT AVAILABLE FOR ANNUITY APPLICATIONS
RECEIVED ON OR AFTER SEPTEMBER 27, 1999, OR APPLICATIONS RECEIVED BY
NATIONWIDE'S HOME OFFICE PRIOR TO SEPTEMBER 27, 1999 THAT WERE NOT IN GOOD
ORDER)
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 Credit Suisse have their
principal business
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<PAGE> 70
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 (NOT AVAILABLE FOR ANNUITY APPLICATIONS
RECEIVED ON OR AFTER SEPTEMBER 27, 1999, OR APPLICATIONS RECEIVED BY
NATIONWIDE'S HOME OFFICE PRIOR TO SEPTEMBER 27, 1999 THAT WERE NOT IN GOOD
ORDER)
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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<PAGE> 71
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
NO OPTIONAL DEATH BENEFITS
(VARIABLE ACCOUNT CHARGES OF 0.95% OF THE DAILY NET ASSETS OF THE VARIABLE ACCOUNT)
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE IN NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT END ACCUMULATION ACCUMULATION
BEGINNING OF OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
American Century 10.409767 13.081019 25.66% 954,865 1998
Variable Portfolios, 10.000000 10.409767 4.10% 5,919 1997
Inc. - American Century
VP Income & Growth - Q
American Century 10.409767 13.081019 25.66% 1,156,159 1998
Variable Portfolios, 10.000000 10.409767 4.10% 14,727 1997
Inc. - American Century
VP Income & Growth - NQ
American Century 10.088106 11.866841 17.63% 1,231,761 1998
Variable Portfolios, 10.000000 10.088106 0.88% 11,451 1997
Inc. - American Century
VP International - Q
American Century 10.088106 11.866841 17.63% 1,439,143 1998
Variable Portfolios, 10.000000 10.088106 0.88% 27,628 1997
Inc. - American Century
VP International - NQ
American Century 10.296896 10.689857 3.82% 628,798 1998
Variable Portfolios, 10.000000 10.296896 2.97% 32,890 1997
Inc. - American Century
VP Value - Q
American Century 10.296896 10.689857 3.82% 591,188 1998
Variable Portfolios, 10.000000 10.296896 2.97% 24,450 1997
Inc. - American Century
VP Value - NQ
The Dreyfus Socially 10.171132 13.034607 28.15% 897,734 1998
Responsible Growth 10.000000 10.171132 1.71% 13,265 1997
Fund, Inc. - Q
The Dreyfus Socially 10.171132 13.034607 28.15% 729,174 1998
Responsible Growth 10.000000 10.171132 1.71% 28,338 1997
Fund, Inc. - NQ
</TABLE>
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<PAGE> 72
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE IN NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT END ACCUMULATION ACCUMULATION
BEGINNING OF OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.343734 13.135997 26.99% 6,530,360 1998
Fund, Inc. - Q 10.000000 10.343734 3.44% 167,229 1997
Dreyfus Stock Index 10.343734 13.135997 26.99% 6,930,101 1998
Fund, Inc. - NQ 10.000000 10.343734 3.44% 220,208 1997
Dreyfus Variable 10.249990 13.220513 28.98% 994,159 1998
Investment Fund - 10.000000 10.249990 2.50% 23,139 1997
Capital Appreciation
Portfolio - Q
Dreyfus Variable 10.249990 13.220513 28.98% 1,635,130 1998
Investment Fund - 10.000000 10.249990 2.50% 36,467 1997
Capital Appreciation
Portfolio - NQ
Fidelity VIP 10.338433 11.422130 10.48% 4,652,014 1998
Equity-Income 10.000000 10.338433 3.88% 124,825 1997
Portfolio: Service
Class - Q
Fidelity VIP 10.338433 11.422130 10.48% 4,431,491 1998
Equity-Income 10.000000 10.338433 3.88% 152,449 1997
Portfolio: Service
Class - NQ
Fidelity VIP Growth 10.030842 13.848033 38.05% 2,225,770 1998
Portfolio: Service 10.000000 10.030842 0.31% 51,944 1997
Class - Q
Fidelity VIP Growth 10.030842 13.848033 38.05% 1,962,518 1998
Portfolio: Service 10.000000 10.030842 0.31% 64,880 1997
Class - NQ
Fidelity VIP High 10.126638 9.586675 -5.33% 3,021,525 1998
Income Portfolio: 10.000000 10.126638 1.27% 90,815 1997
Service Class - Q
Fidelity VIP High 10.126638 9.586675 -5.33% 3,109,107 1998
Income Portfolio: 10.000000 10.126638 1.27% 114,247 1997
Service Class - NQ
</TABLE>
72
<PAGE> 73
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE IN NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT END ACCUMULATION ACCUMULATION
BEGINNING OF OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 9.902344 11.047878 11.57% 630,058 1998
Portfolio: Service 10.000000 9.902344 -0.98% 29,834 1997
Class - Q
Fidelity VIP Overseas 9.902344 11.047878 11.57% 759,889 1998
Portfolio: Service 10.000000 9.902344 -0.98% 32,688 1997
Class - NQ
Fidelity VIP II 9.954885 12.812355 28.74% 2,868,661 1998
Contrafund Portfolio: 10.000000 9.954885 -0.45% 94,143 1997
Service Class - Q
Fidelity VIP II 9.954885 12.812355 28.74% 2,993,987 1998
Contrafund Portfolio: 10.000000 9.954885 -0.45% 137,715 1997
Service Class - NQ
Fidelity VIP III Growth 10.400464 12.826216 23.32% 2,015,088 1998
Opportunities 10.000000 10.400464 4.00% 65,917 1997
Portfolio: Service
Class - Q
Fidelity VIP III Growth 10.400464 12.826216 23.32% 2,029,092 1998
Opportunities 10.000000 10.400464 4.00% 74,836 1997
Portfolio: Service
Class - NQ
Morgan Stanley Dean 10.425451 7.395794 -29.06% 148,936 1998
Witter Universal Funds, 10.000000 10.425451 4.25% 3,325 1997
Inc. - Emerging Markets
Debt Portfolio - Q
Morgan Stanley Dean 10.425451 7.395794 -29.06% 152,995 1998
Witter Universal Funds, 10.000000 10.425451 4.25% 5,093 1997
Inc. - Emerging Markets
Debt Portfolio - NQ
NSAT Capital 10.385596 13.369463 28.73% 4,235,753 1998
Appreciation Fund - Q 10.000000 10.385596 3.86% 76,048 1997
</TABLE>
73
<PAGE> 74
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE IN NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT END ACCUMULATION ACCUMULATION
BEGINNING OF OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Capital 10.385596 13.369463 28.73% 4,697,136 1998
Appreciation Fund - NQ 10.000000 10.385596 3.86% 74,609 1997
NSAT Government Bond 10.143182 10.941842 7.87% 3,607,650 1998
Fund - Q 10.000000 10.143182 1.43% 67,127 1997
NSAT Government Bond 10.143182 10.941842 7.87% 3,232,045 1998
Fund - NQ 10.000000 10.143182 1.43% 138,589 1997
NSAT Money Market Fund 10.074129 10.504509 4.27% 4,931,150 1998
- - Q* 10.000000 10.074129 0.74% 155,902 1997
NSAT Money Market Fund 10.074129 10.504509 4.27% 5,513,782 1998
- - NQ* 10.000000 10.074129 0.74% 581,682 1997
NSAT Total Return Fund 10.242940 11.979444 16.95% 8,225,066 1998
- - Q 10.000000 10.242940 2.43% 182,146 1997
NSAT Total Return Fund 10.242940 11.979444 16.95% 5,639,031 1998
- - NQ 10.000000 10.242940 2.43% 197,787 1997
NSAT Nationwide 10.130674 10.844036 7.04% 1,042,085 1998
Balanced Fund - Q 10.000000 10.130674 1.31% 20,941 1997
NSAT Nationwide 10.130674 10.844036 7.04% 927,751 1998
Balanced Fund - NQ 10.000000 10.130674 1.31% 23,584 1997
NSAT Nationwide Equity 10.161693 11.588459 14.04% 237,366 1998
Income Fund - Q 10.000000 10.161693 1.62% 10,838 1997
NSAT Nationwide Equity 10.161693 11.588459 14.04% 340,149 1998
Income Fund - NQ 10.000000 10.161693 1.62% 27,331 1997
NSAT Nationwide Global 10.102208 11.921445 18.01% 296,907 1998
Equity Fund - Q 10.000000 10.102208 1.02% 15,788 1997
</TABLE>
74
<PAGE> 75
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE IN NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT END ACCUMULATION ACCUMULATION
BEGINNING OF OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Global 10.102208 11.921445 18.01% 382,578 1998
Equity Fund - NQ 10.000000 10.102208 1.02% 12,998 1997
NSAT Nationwide High 10.212505 10.701912 4.79% 656,370 1998
Income Bond Fund - Q 10.000000 10.212505 2.13% 15,004 1997
NSAT Nationwide High 10.212505 10.701912 4.79% 709,535 1998
Income Bond Fund - NQ 10.000000 10.212505 2.13% 33,703 1997
NSAT Nationwide Mid Cap 9.949100 10.919701 9.76% 171,632 1998
Index Fund- Q 10.000000 9.949100 -0.51% 3,322 1997
NSAT Nationwide Mid Cap 9.949100 10.919701 9.76% 185,246 1998
Index Fund- NQ 10.000000 9.949100 -0.51% 5,540 1997
NSAT Nationwide 10.088793 10.252876 1.63% 915,760 1988
Multi-Sector Bond Fund 10.000000 10.88793 0.89% 13,658 1997
- - Q
NSAT Nationwide 10.088793 10.252879 1.63% 934,096 1998
Multi-Sector Bond Fund 10.000000 10.088793 0.89% 41,385 1997
- - NQ
NSAT Nationwide Small 9.823904 9.432351 -3.99% 930,565 1998
Cap Value Fund - Q 10.000000 9.823904 -1.76% 29,661 1997
NSAT Nationwide Small 9.823904 9.432351 -3.99% 1,021,664 1998
Cap Value Fund - NQ 10.000000 9.823904 -1.76% 42,125 1997
NSAT Nationwide Small 9.613184 9.617964 0.05% 1,269,546 1998
Company Fund - Q 10.000000 9.613184 -3.87% 26,226 1997
</TABLE>
75
<PAGE> 76
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small 9.613184 9.617964 0.05% 1,253,383 1998
Company Fund - NQ 10.000000 9.613184 -3.87% 60,510 1997
NSAT Nationwide 10.204129 11.582258 13.51% 265,377 1998
Strategic Growth Fund - 10.000000 10.204129 2.04% 7,333 1997
Q
NSAT Nationwide 10.204129 11.582258 13.51% 223,704 1998
Strategic Growth Fund - 10.000000 10.204129 2.04% 14,559 1997
NQ
NSAT Nationwide 10.147459 10.090240 -0.56% 345,847 1998
Strategic Value Fund - Q 10.000000 10.147459 1.47% 12,123 1997
NSAT Nationwide 10.147459 10.090240 -0.56% 505,486 1998
Strategic Value Fund - 10.000000 10.147459 1.47% 13,612 1997
NQ
Neuberger Berman AMT 10.504106 13.699229 30.42% 578,032 1998
Guardian Portfolio - Q 10.000000 10.504106 5.04% 5,387 1997
Neuberger Berman AMT 10.504106 13.699229 30.42% 609,746 1998
Guardian Portfolio - NQ 10.000000 10.504106 5.04% 9,331 1997
Neuberger Berman AMT 11.702355 16.144809 37.96% 436,579 1998
Mid-Cap Growth 10.000000 11.702355 17.02% 24,058 1997
Portfolio - Q
Neuberger Berman AMT 11.702355 16.144809 37.96% 449,661 1998
Mid-Cap Growth 10.000000 11.702355 17.02% 27,997 1997
Portfolio - NQ
Neuberger Berman AMT 10.132434 10.458607 3.22% 3,020,772 1998
Partners Portfolio - Q 10.000000 10.132434 1.32% 123,308 1997
</TABLE>
76
<PAGE> 77
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.132434 10.458607 3.22% 2,842,880 1998
Partners Portfolio - NQ 10.000000 10.132434 1.32% 816,409 1997
Oppenheimer Variable 9.533314 10.609896 11.29% 787,398 1998
Account Funds - 10.000000 9.533314 -4.67% 17,204 1997
Oppenheimer Aggressive
Growth Fund/VA - Q
Oppenheimer Variable 9.533314 10.609896 11.29% 753,325 1998
Account Funds - 10.000000 9.533314 -4.67% 22,088 1997
Oppenheimer Aggressive
Growth Fund/VA - NQ
Oppenheimer Variable 9.827325 12.070167 22.82% 916,203 1998
Account Funds - 10.000000 9.827325 -1.73% 32,359 1997
Oppenheimer Capital
Appreciation Fund/VA - Q
Oppenheimer Variable 9.827325 12.070167 22.82% 1,094,091 1998
Account Funds - 10.000000 9.827325 -1.73% 11,808 1997
Oppenheimer Capital
Appreciation Fund/VA -
NQ
Oppenheimer Variable 10.259486 10.639805 3.71% 1,242,544 1998
Account Funds - 10.000000 10.259486 2.59% 18,417 1997
Oppenheimer Main Street
Growth & Income Fund/VA
- - Q
Oppenheimer Variable 10.259486 10.639805 3.71% 1,352,028 1998
Account Funds - 10.000000 10.259486 2.59% 39,986 1997
Oppenheimer Main Street
Growth & Income Fund/VA
- - NQ
</TABLE>
77
<PAGE> 78
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 8.814851 5.751082 -34.76% 217,873 1998
Insurance Trust - 10.000000 8.814851 -11.85% 9,145 1997
Worldwide Emerging
Markets Fund - Q
Van Eck Worldwide 8.814851 5.751082 -34.76% 279,325 1998
Insurance Trust - 10.000000 8.814851 -11.85% 18,343 1997
Worldwide Emerging
Markets Fund - NQ
Van Eck Worldwide 8.979477 6.139717 -31.63% 82,690 1998
Insurance Trust - 10.000000 8.979477 -10.21% 10,008 1997
Worldwide Hard Assets
Fund - Q
Van Eck Worldwide 8.979477 6.139717 -31.63% 115,681 1998
Insurance Trust - 10.000000 8.979477 -10.21% 7,257 1997
Worldwide Hard Assets
Fund - NQ
Van Kampen Life 10.338661 9.050353 -12.46% 646,017 1998
Investment Trust - 10.000000 10.338661 3.39% 32,778 1997
Morgan Stanley Real
Estate Securities
Portfolio - Q
Van Kampen Life 10.338661 9.050353 -12.46% 606,338 1998
Investment Trust - 10.000000 10.338661 3.39% 27,341 1997
Morgan Stanley Real
Estate Securities
Portfolio - NQ
Warburg Pincus Trust - 10.373620 11.521372 11.06% 373,962 1998
Growth & Income 10.000000 10.373620 3.74% 11,884 1997
Portfolio - Q
Warburg Pincus Trust - 10.373620 11.521372 11.06% 328,455 1998
Growth & Income 10.000000 10.373620 3.74% 1,514 1997
Portfolio - NQ
</TABLE>
78
<PAGE> 79
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust - 9.454794 9.865775 4.35% 479,917 1998
International Equity 10.000000 9.454794 -5.45% 23,146 1997
Portfolio - Q
Warburg Pincus Trust - 9.454794 9.865775 4.35% 496,472 1998
International Equity 10.000000 9.454794 -5.45% 35,372 1997
Portfolio - NQ
Warburg Pincus Trust - 9.852750 10.394476 5.50% 192,595 1998
Post-Venture Capital 10.000000 9.852750 -1.47% 1,213 1997
Portfolio - Q
Warburg Pincus Trust - 9.852750 10.394476 5.50% 209,056 1998
Post-Venture Capital 10.000000 9.852750 -1.47% 7,662 1997
Portfolio - NQ
</TABLE>
*The 7-day yield for the NSAT Money Market Fund as of December 31, 1998 was
3.77%.
Contracts were first available October 27, 1997. Condensed Financial Information
for 1997 reflects the period from October 27, 1997 to December 31, 1997.
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no Condensed Financial Information is available.
The Dreyfus Investment Portfolios - European Equity Portfolio was added to the
variable account September 27, 1999. Therefore, no Condensed Financial
Information is available.
The Janus Aspen Series - Capital Appreciation Portfolio: Service Shares, Janus
Aspen Series - Global Technology Portfolio: Service Shares, and Janus Aspen
Series - International Growth Portfolio: Service Shares were added to the
variable account effective January 27, 2000. Therefore, no Condensed Financial
Information is available.
79
<PAGE> 80
OPTIONAL ONE-YEAR STEP UP DEATH BENEFIT
(VARIABLE ACCOUNT CHARGES OF 1.00% OF THE DAILY
NET ASSETS OF THE VARIABLE ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
American Century 10.408936 13.073386 25.60% 583,554 1998
Variable Portfolios, 10.000000 10.408936 4.09% 11,674 1997
Inc. - American Century
VP Income & Growth - Q
American Century 10.408936 13.073386 25.60% 612,111 1998
Variable Portfolios, 10.000000 10.408936 4.09% 5,571 1997
Inc. - American Century
VP Income & Growth - NQ
American Century 10.087297 11.859906 17.57% 667,671 1998
Variable Portfolios, 10.000000 10.087297 0.87% 3,170 1997
Inc. - American Century
VP International - Q
American Century 10.087297 11.859906 17.57% 795,739 1998
Variable Portfolios, 10.000000 10.087297 0.87% 9,299 1997
Inc. - American Century
VP International - NQ
American Century 10.296077 10.683601 3.76% 355,592 1998
Variable Portfolios, 10.000000 10.296077 2.96% 42,338 1997
Inc. - American Century
VP Value - Q
American Century 10.296077 10.683601 3.76% 298,758 1998
Variable Portfolios, 10.000000 10.296077 2.96% 22,796 1997
Inc. - American Century
VP Value - NQ
The Dreyfus Socially 10.170317 13.026995 28.09% 570,245 1998
Responsible Growth 10.000000 10.170317 1.70% 21,267 1997
Fund, Inc. - Q
The Dreyfus Socially 10.170317 13.026995 28.09% 538,134 1998
Responsible Growth 10.000000 10.170317 1.70% 13,946 1997
Fund, Inc. - NQ
</TABLE>
80
<PAGE> 81
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.342909 13.128325 26.93% 4,403,681 1998
Fund, Inc. - Q 10.000000 10.342909 3.43% 79,005 1997
Dreyfus Stock Index 10.342909 13.128325 26.93% 4,086,832 1998
Fund, Inc. - NQ 10.000000 10.342909 3.43% 103,007 1997
Dreyfus Variable 10.249171 13.212796 28.92% 620,733 1998
Investment Fund - 10.000000 10.249171 2.49% 16,809 1997
Capital Appreciation
Portfolio - Q
Dreyfus Variable 10.249171 13.212796 28.92% 689,993 1998
Investment Fund - 10.000000 10.249171 2.49% 10,034 1997
Capital Appreciation
Portfolio - NQ
Fidelity VIP 10.337608 11.415454 10.43% 3,163,281 1998
Equity-Income 10.000000 10.337608 3.38% 80,230 1997
Portfolio: Service
Class - Q
Fidelity VIP 10.337608 11.415454 10.43% 3,558,258 1998
Equity-Income 10.000000 10.337608 3.38% 101,670 1997
Portfolio: Service
Class - NQ
Fidelity VIP Growth 10.030041 13.839948 37.98% 1,633,140 1998
Portfolio: Service 10.000000 10.030041 0.30% 26,495 1997
Class - Q
Fidelity VIP Growth 10.030041 13.839948 37.98% 1,450,527 1998
Portfolio: Service 10.000000 10.030041 0.30% 42,184 1997
Class - NQ
Fidelity VIP High 10.125825 9.581067 -5.38% 1,716,342 1998
Income Portfolio: 10.000000 10.125825 1.26% 28,809 1997
Service Class - Q
Fidelity VIP High 10.125825 9.581067 -5.38% 1,953,504 1998
Income Portfolio: 10.000000 10.125825 1.26% 38,172 1997
Service Class - NQ
</TABLE>
81
<PAGE> 82
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 9.901549 11.041416 11.51% 390,759 1998
Portfolio: Service 10.000000 9.901549 -0.98% 6,886 1997
Class - Q
Fidelity VIP Overseas 9.901549 11.041416 11.51% 364,389 1998
Portfolio: Service 10.000000 9.901549 -0.98% 13,646 1997
Class - NQ
Fidelity VIP II 9.954090 12.804877 28.64% 1,744,153 1998
Contrafund Portfolio: 10.000000 9.954090 -0.46% 52,859 1997
Service Class - Q
Fidelity VIP II 9.954090 12.804877 28.64% 1,750,402 1998
Contrafund Portfolio: 10.000000 9.954090 -0.46% 61,145 1997
Service Class - NQ
Fidelity VIP III Growth 10.399630 12.818700 23.26% 1,566,691 1998
Opportunities 10.000000 10.399630 4.00% 50,299 1997
Portfolio: Service
Class - Q
Fidelity VIP III Growth 10.399630 12.818700 23.26% 1,701,741 1998
Opportunities 10.000000 10.399630 4.00% 34,840 1997
Portfolio: Service
Class - NQ
Morgan Stanley Dean 10.424614 7.391460 -29.10% 50,958 1998
Witter Universal Funds, 10.000000 10.424614 4.25% 4,517 1997
Inc. - Emerging Markets
Debt Portfolio - Q
Morgan Stanley Dean 10.424614 7.391460 -29.10% 56,822 1998
Witter Universal Funds, 10.000000 10.424614 4.25% 4,151 1997
Inc. - Emerging Markets
Debt Portfolio - NQ
NSAT Capital 10.384765 13.361662 28.67% 2,719,427 1998
Appreciation Fund - Q 10.000000 10.384765 3.85% 42,993 1997
</TABLE>
82
<PAGE> 83
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Capital 10.384765 13.361662 28.67% 2,067,286 1998
Appreciation Fund - NQ 10.000000 10.384765 3.85% 34,299 1997
NSAT Government Bond 10.142367 10.935440 7.82% 2,389,465 1998
Fund - Q 10.000000 10.142367 1.42% 35,843 1997
NSAT Government Bond 10.142367 10.935440 7.82% 2,162,208 1998
Fund - NQ 10.000000 10.142367 1.42% 31,348 1997
NSAT Money Market Fund 10.073279 10.498325 4.22% 3,146,947 1998
- - Q* 10.000000 10.073279 0.73% 172,291 1997
NSAT Money Market Fund 10.073279 10.498325 4.22% 2,859,923 1998
- - NQ* 10.000000 10.073279 0.73% 228,200 1997
NSAT Total Return Fund 10.242118 11.972436 16.89% 4,784,644 1998
- - Q 10.000000 10.242118 2.42% 84,236 1997
NSAT Total Return Fund 10.242118 11.972436 16.89% 3,784,283 1998
- - NQ 10.000000 10.242118 2.42% 76,652 1997
NSAT Nationwide 10.129864 10.837697 6.99% 724,101 1998
Balanced Fund - Q 10.000000 10.129864 1.30% 18,660 1997
NSAT Nationwide 10.129864 10.837697 6.99% 641,839 1998
Balanced Fund - NQ 10.000000 10.129864 1.30% 7,268 1997
NSAT Nationwide Equity 10.160882 11.581699 13.98% 182,603 1998
Income Fund - Q 10.000000 10.160882 1.61% 10,109 1997
NSAT Nationwide Equity 10.160882 11.581699 13.98% 263,284 1998
Income Fund - NQ 10.000000 10.160882 1.61% 4,986 1997
NSAT Nationwide Global 10.101401 11.914478 17.95% 209,682 1998
Equity Fund - Q 10.000000 10.101401 1.01% 10,785 1997
</TABLE>
83
<PAGE> 84
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Global 10.101401 11.914478 17.95% 265,967 1998
Equity Fund - NQ 10.000000 10.101401 1.01% 5,708 1997
NSAT Nationwide High 10.211688 10.695657 4.74% 563,880 1998
Income Bond Fund - Q 10.000000 10.211688 2.12% 15,211 1997
NSAT Nationwide High 10.211688 10.695657 4.74% 507,316 1998
Income Bond Fund - NQ 10.000000 10.211688 2.12% 7,868 1997
NSAT Nationwide Mid Cap 9.948304 10.913315 9.70% 124,451 1998
Index Fund- Q 10.000000 9.948304 -0.52% 5,466 1997
NSAT Nationwide Mid Cap 9.948304 10.913315 9.70% 125,175 1998
Index Fund- NQ 10.000000 9.948304 -0.52% 4,072 1997
NSAT Nationwide 10.087985 10.246882 1.58% 628,805 1998
Multi-Sector Bond Fund 10.000000 10.087985 0.88% 22,440 1997
- - Q
NSAT Nationwide 10.087985 10.246882 1.58% 548,001 1998
Multi-Sector Bond Fund 10.000000 10.087985 0.88% 12,227 1997
- - NQ
NSAT Nationwide Small 9.823118 9.426837 -4.03% 502,680 1998
Cap Value Fund - Q 10.000000 9.823118 -1.77% 16,510 1997
NSAT Nationwide Small 9.823118 9.426837 -4.03% 467,220 1998
Cap Value Fund - NQ 10.000000 9.823118 -1.77% 20,577 1997
NSAT Nationwide Small 9.612411 9.612340 0.00% 832,015 1998
Company Fund - Q 10.000000 9.612411 -3.88% 30,320 1997
</TABLE>
84
<PAGE> 85
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small 9.612411 9.612340 0.00% 830,194 1998
Company Fund - NQ 10.000000 9.612411 -3.88% 32,541 1997
NSAT Nationwide 10.203313 11.575478 13.45% 105,819 1998
Strategic Growth Fund - 10.000000 10.203313 2.03% 3,708 1997
Q
NSAT Nationwide 10.203313 11.575478 13.45% 115,940 1998
Strategic Growth Fund - 10.000000 10.203313 2.03% 2,921 1997
NQ
NSAT Nationwide 10.146650 10.084334 -0.61% 134,335 1998
Strategic Value Fund - Q 10.000000 10.146650 1.47% 3,022 1997
NSAT Nationwide 10.146650 10.084334 -0.61% 239,315 1998
Strategic Value Fund - 10.000000 10.146650 1.47% 13,153 1997
NQ
Neuberger Berman AMT 10.503269 13.691238 30.35% 519,550 1998
Guardian Portfolio - Q 10.000000 10.503269 5.03% 8,001 1997
Neuberger Berman AMT 10.503269 13.691238 30.35% 425,826 1998
Guardian Portfolio - NQ 10.000000 10.503269 5.03% 14,929 1997
Neuberger Berman AMT 11.701424 16.135377 37.89% 347,143 1998
Mid-Cap Growth 10.000000 11.701424 17.01% 56,145 1997
Portfolio - Q
Neuberger Berman AMT 11.701424 16.135377 37.89% 372,662 1998
Mid-Cap Growth 10.000000 11.701424 17.01% 16,768 1997
Portfolio - NQ
Neuberger Berman AMT 10.131623 10.452498 3.17% 1,949,091 1998
Partners Portfolio - Q 10.000000 10.131623 1.32% 195,515 1997
</TABLE>
85
<PAGE> 86
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.131623 10.452498 3.17% 1,997,553 1998
Partners Portfolio - NQ 10.000000 10.131623 1.32% 133,165 1997
Oppenheimer Variable 9.532548 10.603692 11.24% 395,607 1998
Account Funds - 10.000000 9.532548 -4.67% 11,021 1997
Oppenheimer Aggressive
Growth Fund/VA - Q
Oppenheimer Variable 9.532548 10.603692 11.24% 446,338 1998
Account Funds - 10.000000 9.532548 -4.67% 10,675 1997
Oppenheimer Aggressive
Growth Fund/VA - NQ
Oppenheimer Variable 9.826536 12.063121 22.76% 587,304 1998
Account Funds - 10.000000 9.826536 -1.73% 26,012 1997
Oppenheimer Capital
Appreciation Fund/VA - Q
Oppenheimer Variable 9.826536 12.063121 22.76% 591,561 1998
Account Funds - 10.000000 9.826536 -1.73% 16,143 1997
Oppenheimer Capital
Appreciation Fund/VA -
NQ
Oppenheimer Variable 10.258664 10.633592 3.65% 825,742 1998
Account Funds - 10.000000 10.258664 2.59% 15,547 1997
Oppenheimer Main Street
Growth & Income Fund/VA
- - Q
Oppenheimer Variable 10.258664 10.633592 3.65% 1,013,404 1998
Account Funds - 10.000000 10.258664 2.59% 15,661 1997
Oppenheimer Main Street
Growth & Income Fund/VA
- - NQ
Van Eck Worldwide 8.814146 5.747723 -34.79% 141,469 1998
Insurance Trust - 10.000000 8.814146 -11.86% 30,479 1997
Worldwide Emerging
Markets Fund - Q
</TABLE>
86
<PAGE> 87
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 8.814146 5.747723 -34.79% 104,323 1998
Insurance Trust - 10.000000 8.814146 -11.86% 15,119 1997
Worldwide Emerging
Markets Fund - NQ
Van Eck Worldwide 8.978753 6.136113 -31.66% 69,784 1998
Insurance Trust - 10.000000 8.978753 -10.21% 765 1997
Worldwide Hard Assets
Fund - Q
Van Eck Worldwide 8.978753 6.136113 -31.66% 36,296 1998
Insurance Trust - 10.000000 8.978753 -10.21% 4,496 1997
Worldwide Hard Assets
Fund - NQ
Van Kampen Life 10.337835 9.045055 -12.89% 372,172 1998
Investment Trust - 10.000000 10.337835 3.38% 8,443 1997
Morgan Stanley Real
Estate Securities
Portfolio - Q
Van Kampen Life 10.337835 9.045055 -12.89% 250,104 1998
Investment Trust - 10.000000 10.337835 3.38% 23,459 1997
Morgan Stanley Real
Estate Securities
Portfolio - NQ
Warburg Pincus Trust - 10.372788 11.514627 11.01% 150,366 1998
Growth & Income 10.000000 10.372788 3.73% 10,462 1997
Portfolio - Q
Warburg Pincus Trust - 10.372788 11.514627 11.01% 193,659 1998
Growth & Income 10.000000 10.372788 3.73% 11,043 1997
Portfolio - NQ
Warburg Pincus Trust - 9.454036 9.860001 4.29% 2,136,445 1998
International Equity 10.000000 9.454036 -5.46% 9,501 1997
Portfolio - Q
Warburg Pincus Trust - 9.454036 9.860001 4.29% 2,809,469 1998
International Equity 10.000000 9.454036 -5.46% 11,346 1997
Portfolio - NQ
</TABLE>
87
<PAGE> 88
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust - 9.851960 10.388404 5.45% 92,766 1998
Post-Venture Capital 10.000000 9.851960 -1.48% 1,263 1997
Portfolio - Q
Warburg Pincus Trust - 9.851960 10.388404 5.45% 59,430 1998
Post-Venture Capital 10.000000 9.851960 -1.48% 1,127 1997
Portfolio - NQ
</TABLE>
*The 7-day yield for the NSAT Money Market Fund as of December 31, 1998 was
3.77%.
Contracts were first available October 27, 1997. Condensed Financial Information
for 1997 reflects the period from October 27, 1997 to December 31, 1997.
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no Condensed Financial Information is available.
The Dreyfus Investment Portfolios - European Equity Portfolio was added to the
variable account on September 27, 1999. Therefore, no Condensed Financial
Information is available.
The Janus Aspen Series - Capital Appreciation Portfolio: Service Shares, Janus
Aspen Series - Global Technology Portfolio: Service Shares, and Janus Aspen
Series - International Growth Portfolio: Service Shares were added to the
variable account effective January 27, 2000. Therefore, no Condensed Financial
Information is available.
88
<PAGE> 89
OPTIONAL 5% ENHANCED DEATH BENEFIT
(VARIABLE ACCOUNT CHARGES OF 1.05% OF THE DAILY
NET ASSETS OF THE VARIABLE ACCOUNT)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
American Century 10.408098 13.065728 25.53% 81,928 1998
Variable Portfolios, 10.000000 10.408098 4.08% 832 1997
Inc. - American Century
VP Income & Growth - Q
American Century 10.408098 13.065728 25.53% 128,629 1998
Variable Portfolios, 10.000000 10.408098 4.08% 5,236 1997
Inc. - American Century
VP Income & Growth - NQ
American Century 10.086493 11.852979 17.51% 99,298 1998
Variable Portfolios, 10.000000 10.086493 0.86% 698 1997
Inc. - American Century
VP International - Q
American Century 10.086493 11.852979 17.51% 165,809 1998
Variable Portfolios, 10.000000 10.086493 0.86% 2,265 1997
Inc. - American Century
VP International - NQ
American Century 10.295249 10.677353 3.71% 77,126 1998
Variable Portfolios, 10.000000 10.295249 2.95% 1,336 1997
Inc. - American Century
VP Value - Q
American Century 10.295249 10.677353 3.71% 72,329 1998
Variable Portfolios, 10.000000 10.295249 2.95% 8,217 1997
Inc. - American Century
VP Value - NQ
The Dreyfus Socially 10.169503 13.019372 28.02% 89,640 1998
Responsible Growth 10.000000 10.169503 1.70% 4,821 1997
Fund, Inc. - Q
The Dreyfus Socially 10.169503 13.019372 28.02% 135,100 1998
Responsible Growth 10.000000 10.169503 1.70% 2,598 1997
Fund, Inc. - NQ
</TABLE>
89
<PAGE> 90
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Dreyfus Stock Index 10.342079 13.120640 26.87% 783,466 1998
Fund, Inc. - Q 10.000000 10.342079 3.42% 9,203 1997
Dreyfus Stock Index 10.342079 13.120640 26.87% 913,818 1998
Fund, Inc. - NQ 10.000000 10.342079 3.42% 13,090 1997
Dreyfus Variable 10.248351 13.205079 28.85% 131,684 1998
Investment Fund - 10.000000 10.248351 2.48% 3,777 1997
Capital Appreciation
Portfolio - Q
Dreyfus Variable 10.248351 13.205079 28.85% 246,123 1998
Investment Fund - 10.000000 10.248351 2.48% 706 1997
Capital Appreciation
Portfolio - NQ
Fidelity VIP 10.336779 11.408770 10.37% 524,588 1998
Equity-Income 10.000000 10.336779 3.37% 18,611 1997
Portfolio: Service
Class - Q
Fidelity VIP 10.336779 11.408770 10.37% 864,765 1998
Equity-Income 10.000000 10.336779 3.37% 36,514 1997
Portfolio: Service
Class - NQ
Fidelity VIP Growth 10.029235 13.831860 37.92% 253,263 1998
Portfolio: Service 10.000000 10.029235 0.29% 4,718 1997
Class - Q
Fidelity VIP Growth 10.029235 13.831860 37.92% 343,224 1998
Portfolio: Service 10.000000 10.029235 0.29% 9,713 1997
Class - NQ
Fidelity VIP High 10.125013 9.575458 -5.43% 376,294 1998
Income Portfolio: 10.000000 10.125013 1.25% 2,418 1997
Service Class - Q
Fidelity VIP High 10.125013 9.575458 -5.43% 598,620 1998
Income Portfolio: 10.000000 10.125013 1.25% 12,697 1997
Service Class - NQ
</TABLE>
90
<PAGE> 91
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 9.900760 11.034969 11.46% 91,010 1998
Portfolio: Service 10.000000 9.900760 -0.99% 887 1997
Class - Q
Fidelity VIP Overseas 9.900760 11.034969 11.46% 137,943 1998
Portfolio: Service 10.000000 9.900760 -0.99% 9,071 1997
Class - NQ
Fidelity VIP II 9.953285 12.797393 28.57% 214,618 1998
Contrafund Portfolio: 10.000000 9.953285 -0.47% 12,678 1997
Service Class - Q
Fidelity VIP II 9.953285 12.797393 28.57% 446,178 1998
Contrafund Portfolio: 10.000000 9.953285 -0.47% 14,306 1997
Service Class - NQ
Fidelity VIP III Growth 10.398800 12.811215 23.20% 231,845 1998
Opportunities 10.000000 10.398800 3.99% 8,419 1997
Portfolio: Service
Class - Q
Fidelity VIP III Growth 10.398800 12.811215 23.20% 295,189 1998
Opportunities 10.000000 10.398800 3.99% 13,599 1997
Portfolio: Service
Class - NQ
Morgan Stanley Dean 10.423780 7.387124 -29.13% 9,703 1998
Witter Universal Funds, 10.000000 10.423780 4.24% 204 1997
Inc. - Emerging Markets
Debt Portfolio - Q
Morgan Stanley Dean 10.423780 7.387124 -29.13% 19,124 1998
Witter Universal Funds, 10.000000 10.423780 4.24% 1,531 1997
Inc. - Emerging Markets
Debt Portfolio - NQ
NSAT Capital 10.383931 13.353842 28.55% 391,203 1998
Appreciation Fund - Q 10.000000 10.383931 3.84% 4,967 1997
</TABLE>
91
<PAGE> 92
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Capital 10.383931 13.353842 28.55% 499,622 1998
Appreciation Fund - NQ 10.000000 10.383931 3.84% 23,354 1997
NSAT Government Bond 10.141552 10.929045 7.77% 425,444 1998
Fund - Q 10.000000 10.141552 1.42% 17,678 1997
NSAT Government Bond 10.141552 10.929045 7.77% 578,467 1998
Fund - NQ 10.000000 10.141552 1.42% 21,953 1997
NSAT Money Market Fund 10.072429 10.492136 4.17% 773,874 1998
- - Q* 10.000000 10.072429 0.72% 109,198 1997
NSAT Money Market Fund 10.072429 10.492136 4.17% 932,153 1998
- - NQ* 10.000000 10.072429 0.72% 61,681 1997
NSAT Total Return Fund 10.241300 11.965436 16.84% 705,982 1998
- - Q 10.000000 10.241300 2.41% 13,269 1997
NSAT Total Return Fund 10.241300 11.965436 16.84% 695,165 1998
- - NQ 10.000000 10.241300 2.41% 37,377 1997
NSAT Nationwide 10.129053 10.831355 6.93% 123,286 1998
Balanced Fund - Q 10.000000 10.129053 1.29% 4,261 1997
NSAT Nationwide 10.129053 10.831355 6.93% 149,449 1998
Balanced Fund - NQ 10.000000 10.129053 1.29% 13,393 1997
NSAT Nationwide Equity 10.160070 11.574924 13.93% 32,573 1998
Income Fund - Q 10.000000 10.160070 1.60% 2,466 1997
NSAT Nationwide Equity 10.160070 11.574924 13.93% 46,558 1998
Income Fund - NQ 10.000000 10.160070 1.60% 2,603 1997
NSAT Nationwide Global 10.100588 11.907510 17.89% 52,138 1998
Equity Fund - Q 10.000000 10.100588 1.01% 1,682 1997
</TABLE>
92
<PAGE> 93
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Global 10.100588 11.907510 17.89% 52,521 1998
Equity Fund - NQ 10.000000 10.100588 1.01% 3,870 1997
NSAT Nationwide High 10.210867 10.689393 4.69% 168,923 1998
Income Bond Fund - Q 10.000000 10.210867 2.11% 2,873 1997
NSAT Nationwide High 10.210867 10.689393 4.69% 196,834 1998
Income Bond Fund - NQ 10.000000 10.210867 2.11% 15,172 1997
NSAT Nationwide Mid Cap 9.947507 10.906928 9.64% 20,280 1998
Index Fund- Q 10.000000 9.947507 -0.52% 2,671 1997
NSAT Nationwide Mid Cap 9.947507 10.906928 9.64% 35,289 1998
Index Fund- NQ 10.000000 9.947507 -0.52% 1,954 1997
NSAT Nationwide 10.087176 10.240891 1.52% 180,699 1998
Multi-Sector Bond Fund 10.000000 10.087176 0.87% 2,097 1997
- - Q
NSAT Nationwide 10.087176 10.240891 1.52% 200,225 1998
Multi-Sector Bond Fund 10.000000 10.087176 0.87% 11,411 1997
- - NQ
NSAT Nationwide Small 9.822329 9.421309 -4.08% 73,139 1998
Cap Value Fund - Q 10.000000 9.822329 -1.78% 3,373 1997
NSAT Nationwide Small 9.822329 9.421309 -4.08% 149,068 1998
Cap Value Fund - NQ 10.000000 9.822329 -1.78% 5,548 1997
NSAT Nationwide Small 9.611642 9.606706 -0.05% 103,212 1998
Company Fund - Q 10.000000 9.611642 -3.88% 453 1997
</TABLE>
93
<PAGE> 94
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Small 9.611642 9.606706 -0.05% 182,983 1998
Company Fund - NQ 10.000000 9.611642 -3.88% 12,059 1997
NSAT Nationwide 10.202497 11.568711 13.39% 28,004 1998
Strategic Growth Fund - 10.000000 10.202497 2.02% 201 1997
Q
NSAT Nationwide 10.202497 11.568711 13.39% 14,539 1998
Strategic Growth Fund - 10.000000 10.202497 2.02% 3,231 1997
NQ
NSAT Nationwide 10.145838 10.078441 -0.66% 36,418 1998
Strategic Value Fund - Q 10.000000 10.145838 1.46% 227 1997
NSAT Nationwide 10.145838 10.078441 -0.66% 85,804 1998
Strategic Value Fund - 10.000000 10.145838 1.46% 5,509 1997
NQ
Neuberger Berman AMT 10.502434 13.683246 30.29% 66,839 1998
Guardian Portfolio - Q 10.000000 10.502434 5.02% 590 1997
Neuberger Berman AMT 10.502434 13.683246 30.29% 161,709 1998
Guardian Portfolio - NQ 10.000000 10.502434 5.02% 5,754 1997
Neuberger Berman AMT 11.700489 16.125954 37.82% 41,741 1998
Mid-Cap Growth 10.000000 11.700489 17.00% 3,696 1997
Portfolio - Q
Neuberger Berman AMT 11.700489 16.125954 37.82% 107,495 1998
Mid-Cap Growth 10.000000 11.700489 17.00% 6,472 1997
Portfolio - NQ
Neuberger Berman AMT 10.130813 10.446379 3.11% 269,744 1998
Partners Portfolio - Q 10.000000 10.130813 1.31% 9,975 1997
</TABLE>
94
<PAGE> 95
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.130813 10.446379 3.11% 330,876 1998
Partners Portfolio - NQ
10.000000 10.130813 1.31% 40,357 1997
Oppenheimer Variable 9.531780 10.597477 11.18% 75,188 1998
Account Funds -
Oppenheimer Aggressive
Growth Fund/VA - Q
10.000000 9.531780 -4.68% 3,437 1997
Oppenheimer Variable 9.531780 10.597477 11.18% 118,302 1998
Account Funds -
Oppenheimer Aggressive
Growth Fund/VA - NQ
10.000000 9.531780 -4.68% 11,150 1997
Oppenheimer Variable 9.825746 12.056049 22.70% 110,392 1998
Account Funds -
Oppenheimer Capital
Appreciation Fund/VA - Q
10.000000 9.825746 -1.74% 2,404 1997
Oppenheimer Variable 9.825746 12.056049 22.70% 122,036 1998
Account Funds -
Oppenheimer Capital
Appreciation Fund/VA -
NQ
10.000000 9.825746 -1.74% 7,972 1997
Oppenheimer Variable 10.257840 10.627355 3.60% 155,966 1998
Account Funds -
Oppenheimer Main Street
Growth & Income Fund/VA
- - Q
10.000000 10.257840 2.58% 1,064 1997
Oppenheimer Variable 10.257840 10.627355 3.60% 254,947 1998
Account Funds -
Oppenheimer Main Street
Growth & Income Fund/VA
- - NQ
10.000000 10.257840 2.58% 15,025 1997
Van Eck Worldwide 8.813437 5.744349 -34.82% 31,317 1998
Insurance Trust -
Worldwide Emerging
Markets Fund - Q
10.000000 8.813437 -11.87% 733 1997
</TABLE>
<PAGE> 96
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 8.813437 5.744349 -34.82% 46,981 1998
Insurance Trust - 10.000000 8.813437 -11.87% 779 1997
Worldwide Emerging
Markets Fund - NQ
Van Eck Worldwide 8.978030 6.132522 -31.69% 10,468 1998
Insurance Trust - 10.000000 8.978030 -10.22% 206 1997
Worldwide Hard Assets
Fund - Q
Van Eck Worldwide 8.978030 6.132522 -31.69% 17,880 1998
Insurance Trust - 10.000000 8.978030 -10.22% 1,789 1997
Worldwide Hard Assets
Fund - NQ
Van Kampen Life 10.337004 9.039759 -12.55% 40,468 1998
Investment Trust - 10.000000 10.337004 3.37% 416 1997
Morgan Stanley Real
Estate Securities
Portfolio - Q
Van Kampen Life 10.337004 9.039759 -12.55% 71,613 1998
Investment Trust - 10.000000 10.337004 3.37% 10,121 1997
Morgan Stanley Real
Estate Securities
Portfolio - NQ
Warburg Pincus Trust - 10.371958 11.507907 10.95% 18,436 1998
Growth & Income 10.000000 10.371958 3.72% 2,908 1997
Portfolio - Q
Warburg Pincus Trust - 10.371958 11.507907 10.95% 71,280 1998
Growth & Income 10.000000 10.371958 3.72% 4,127 1997
Portfolio - NQ
Warburg Pincus Trust - 9.453278 9.854235 4.24% 43,919 1998
International Equity 10.000000 9.453278 -5.47% 866 1997
Portfolio - Q
Warburg Pincus Trust - 9.453278 9.854235 4.24% 82,462 1998
International Equity 10.000000 9.453278 -5.47% 5,787 1997
Portfolio - NQ
</TABLE>
96
<PAGE> 97
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust - 9.851173 10.382320 5.39% 32,373 1998
Post-Venture Capital 10.000000 9.851173 -1.49% 830 1997
Portfolio - Q
Warburg Pincus Trust - 9.851173 10.382320 5.39% 39,431 1998
Post-Venture Capital 10.000000 9.851173 -1.49% 2,366 1997
Portfolio - NQ
</TABLE>
*The 7-day yield for the NSAT Money Market Fund as of December 31, 1998 was
3.77%.
Contracts were first available October 27, 1997. Condensed Financial Information
for 1997 reflects the period from October 27, 1997 to December 31, 1997.
The Federated Insurance Series - Federated Quality Bond Fund II and NSAT
Nationwide Select Advisers Small Cap Growth Fund were added to the variable
account May 1, 1999. Therefore, no Condensed Financial Information is available.
The Dreyfus Investment Portfolios -European Equity Portfolio was added to the
variable account September 27, 1999. Therefore, no Condensed Financial
Information is available.
The Janus Aspen Series - Capital Appreciation Portfolio: Service Shares, Janus
Aspen Series - Global Technology Portfolio: Service Shares, and Janus Aspen
Series - International Growth Portfolio: Service Shares were added to the
variable account effective January 27, 2000. Therefore, no Condensed Financial
Information is available.
97
<PAGE> 98
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1999 (AS AMENDED DECEMBER 30, 1999)
MODIFIED SINGLE PREMIUM 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
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 1999 (as
amended December 30, 1999). The prospectus may be obtained from Nationwide Life
Insurance Company by writing One Nationwide Plaza, 01-05-P1, Columbus, Ohio
43215, 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
The Nationwide Variable Account-9 is a separate investment account of Nationwide
Life Insurance Company ("Nationwide"). 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 its 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 $98.28 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.
The custodian of the assets of the variable account is Nationwide. Nationwide
will maintain a record of all purchases and redemptions 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.
1
<PAGE> 99
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
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"), One Nationwide Plaza, Columbus, Ohio 43215, a
wholly owned subsidiary of Nationwide. During the fiscal years ended December
31, 1998, 1997 and 1996, no underwriting commissions were 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 a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1998, the
NSAT Money Market Fund's seven-day current unit value yield was 3.77%. 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. At December 31, 1998 the NSAT
Money Market Fund's seven-day effective yield was 3.84%.
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. Yields 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 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 a the standard 7 year CDSC schedule
2
<PAGE> 100
and the deduction of all charges that could be made to a contract if all
available options were chosen as of December 31, 1998 (2.65%), except for
premium taxes, which may be imposed 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 and the deduction of
charges for the base contract with only the Extra Value Option (1.40%). 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 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 the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
<PAGE> 101
<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,
1998, and the related statements of operations and changes in contract owners'
equity for the year then ended and 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1998, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable
Account-9 as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for the year then ended and the period
November 3, 1997 (commencement of operations) through December 31, 1997, in
conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-9
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Income & Growth (ACVPIncGr)
6,808,423 shares (cost $41,583,538) ........................................ $ 46,161,106
American Century VP - American Century VP International (ACVPInt)
6,855,908 shares (cost $51,855,024) ........................................ 52,242,021
American Century VP - American Century VP Value (ACVPValue)
3,217,095 shares (cost $21,777,436) ........................................ 21,651,051
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
1,248,565 shares (cost $35,462,984) ........................................ 38,805,415
Dreyfus Stock Index Fund (DryStkIx)
9,577,288 shares (cost $279,024,199) ....................................... 311,453,398
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
1,589,914 shares (cost $52,116,562) ........................................ 57,411,798
Fidelity VIP - Equity-Income Portfolio - Service Class (FidVIPEIS)
7,742,140 shares (cost $188,934,420) ....................................... 196,572,937
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGrS)
2,439,295 shares (cost $92,723,883) ........................................ 109,329,206
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHIS)
8,982,394 shares (cost $109,103,276) ....................................... 103,387,351
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOvS)
1,311,658 shares (cost $25,776,988) ........................................ 26,272,515
Fidelity VIP-II - Contrafund Portfolio - Service Class (FidVIPConS)
5,268,891 shares (cost $110,700,033) ....................................... 128,666,318
Fidelity VIP-III - Growth Opportunities Portfolio - Service Class (FidVIPGrOpS)
4,400,750 shares (cost $88,712,986) ........................................ 100,601,146
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
533,017 shares (cost $4,220,740) ........................................... 3,251,406
Nationwide SAT - Balanced Fund (NSATBal)
3,702,529 shares (cost $38,838,888) ........................................ 39,172,762
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
7,353,398 shares (cost $180,569,944) ....................................... 195,526,840
Nationwide SAT - Equity Income Fund (NSATEqInc)
1,115,255 shares (cost $11,913,630) ........................................ 12,791,978
Nationwide SAT - Global Equity Fund (NSATGlobEq)
1,278,862 shares (cost $14,086,471) ........................................ 15,026,629
Nationwide SAT - Government Bond Fund (NSATGvtBd)
11,611,591 shares (cost $135,670,425) ...................................... 135,739,496
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
2,988,003 shares (cost $30,639,154) ........................................ 29,999,551
Nationwide SAT - Money Market Fund (NSATMyMkt)
190,044,189 shares (cost $190,044,189) ..................................... 190,044,189
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
3,559,456 shares (cost $35,711,253) .................................. 34,953,863
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
663,376 shares (cost $6,840,714) ..................................... 7,244,064
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
3,132,624 shares (cost $29,764,563) .................................. 29,728,605
Nationwide SAT - Small Company Fund (NSATSmCo)
2,686,535 shares (cost $42,607,479) .................................. 43,011,428
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
746,793 shares (cost $7,919,572) ..................................... 8,737,474
Nationwide SAT - Strategic Value Fund (NSATStrVal)
1,344,546 shares (cost $13,728,595) .................................. 13,606,806
Nationwide SAT - Total Return Fund (NSATTotRe)
15,536,927 shares (cost $281,022,843) ................................ 285,879,460
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
2,338,020 shares (cost $31,751,426) .................................. 32,358,203
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
1,748,395 shares (cost $23,894,825) .................................. 28,358,964
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
5,754,650 shares (cost $111,859,485) ................................. 108,935,530
Oppenheimer VAF - Aggressive Growth Fund (OppAggGro)
610,901 shares (cost $25,670,049) .................................... 27,386,693
Oppenheimer VAF - Growth Fund (OppGro)
1,127,365 shares (cost $37,003,995) .................................. 41,340,470
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
2,521,659 shares (cost $51,774,563) .................................. 51,643,569
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
664,975 shares (cost $5,629,404) ..................................... 4,734,621
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
222,585 shares (cost $2,130,378) ..................................... 2,047,778
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (VKMSRESec)
1,308,962 shares (cost $19,243,692) .................................. 18,011,317
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
1,140,740 shares (cost $12,673,239) .................................. 13,095,697
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
1,439,870 shares (cost $16,523,314) .................................. 15,824,169
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
552,506 shares (cost $6,237,564) ..................................... 6,508,526
--------------
Total investments ................................................. 2,587,514,350
Accounts receivable ........................................................ 1,282,585
--------------
Total assets ...................................................... 2,588,796,935
ACCOUNTS PAYABLE .............................................................. --
--------------
CONTRACT OWNERS' EQUITY (NOTE 4) .............................................. $2,588,796,935
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
TOTAL ACVPIncGr
---------------------------------- ----------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 20,037,926 184,101 220,567 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (6,687,096) (26,321) (104,919) (119)
Asset fee @ 1.00% rate ..................... (4,480,001) (13,431) (64,746) (83)
Asset fee @ 1.05% rate ..................... (1,009,646) (4,753) (13,006) (29)
Asset fee @ 1.10% rate ..................... (909) -- (46) --
Asset fee @ 1.15% rate ..................... (244) -- (14) --
Asset fee @ 1.20% rate ..................... (1,510) -- (19) --
Asset fee @ 1.25% rate ..................... (131) -- -- --
Asset fee @ 1.30% rate ..................... (50) -- -- --
Asset fee @ 1.35% rate ..................... (37) -- -- --
--------------- --------------- --------------- ---------------
Net investment activity ...................... 7,858,302 139,596 37,817 (231)
--------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold ......... 147,138,081 1,928,035 299,469 3,255
Cost of mutual fund shares sold ............... (151,277,931) (1,932,025) (260,801) (3,092)
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... (4,139,850) (3,990) 38,668 163
Change in unrealized gain (loss) on investments 121,513,304 259,323 4,570,573 6,996
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 117,373,454 255,333 4,609,241 7,159
--------------- --------------- --------------- ---------------
Reinvested capital gains ...................... 27,066,537 478,503 9,256 --
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 152,298,293 873,432 4,656,314 6,928
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 2,421,579,829 81,649,336 34,231,141 389,541
Transfers between funds ....................... -- -- 7,880,597 61,740
Redemptions ................................... (66,628,531) (339,129) (1,021,174) (635)
Contingent deferred sales charges (note 2) .... (676,512) (409) (7,094) --
Adjustments to maintain reserves .............. 38,184 2,442 (27,089) 5
--------------- --------------- --------------- ---------------
Net equity transactions .................... 2,354,312,970 81,312,240 41,056,381 450,651
--------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 2,506,611,263 82,185,672 45,712,695 457,579
Contract owners' equity beginning of period .... 82,185,672 -- 457,579 --
--------------- --------------- --------------- ---------------
Contract owners' equity end of period .......... $ 2,588,796,935 82,185,672 46,170,274 457,579
=============== =============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
ACVPInt ACVPValue
---------------------------------- ----------------------------------
1998 1997 1998 1997
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 26,394 -- 28,096 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (135,323) (169) (68,970) (235)
Asset fee @ 1.00% rate ..................... (74,971) (58) (44,443) (348)
Asset fee @ 1.05% rate ..................... (14,635) (20) (8,106) (55)
Asset fee @ 1.10% rate ..................... (9) -- (4) --
Asset fee @ 1.15% rate ..................... (9) -- -- --
Asset fee @ 1.20% rate ..................... (2) -- (24) --
Asset fee @ 1.25% rate ..................... -- -- (2) --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... (4) -- -- --
--------------- --------------- --------------- ---------------
Net investment activity ...................... (198,559) (247) (93,453) (638)
--------------- --------------- --------------- ---------------
Proceeds from mutual fund shares sold ......... 2,580,905 -- 1,595,103 --
Cost of mutual fund shares sold ............... (2,610,970) -- (1,678,560) --
--------------- --------------- --------------- ---------------
Realized gain (loss) on investments .......... (30,065) -- (83,457) --
Change in unrealized gain (loss) on investments 379,163 7,835 (147,770) 21,385
--------------- --------------- --------------- ---------------
Net gain (loss) on investments ............... 349,098 7,835 (231,227) 21,385
--------------- --------------- --------------- ---------------
Reinvested capital gains ...................... 270,951 -- 335,441 --
--------------- --------------- --------------- ---------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 421,490 7,588 10,761 20,747
--------------- --------------- --------------- ---------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 39,680,086 451,373 19,091,612 929,382
Transfers between funds ....................... 12,597,519 90,951 1,715,026 410,117
Redemptions ................................... (1,031,134) (18) (518,275) (856)
Contingent deferred sales charges (note 2) .... (7,206) -- (7,315) --
Adjustments to maintain reserves .............. 31,510 4 (218) 8
--------------- --------------- --------------- ---------------
Net equity transactions .................... 51,270,775 542,310 20,280,830 1,338,651
--------------- --------------- --------------- ---------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 51,692,265 549,898 20,291,591 1,359,398
Contract owners' equity beginning of period .... 549,898 -- 1,359,398 --
--------------- --------------- --------------- ---------------
Contract owners' equity end of period .......... 52,242,163 549,898 21,650,989 1,359,398
=============== =============== =============== ===============
</TABLE>
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
DrySRGro DryStkix
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 60,373 2,537 2,203,648 19,230
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (87,632) (245) (736,785) (1,875)
Asset fee @ 1.00% rate ..................... (63,281) (157) (495,327) (946)
Asset fee @ 1.05% rate ..................... (13,367) (30) (102,440) (152)
Asset fee @ 1.10% rate ..................... (51) -- (137) --
Asset fee @ 1.15% rate ..................... (15) -- (51) --
Asset fee @ 1.20% rate ..................... (13) -- (305) --
Asset fee @ 1.25% rate ..................... (15) -- (30) --
Asset fee @ 1.30% rate ..................... (6) -- (2) --
Asset fee @ 1.35% rate ..................... -- -- (5) --
------------ ------------ ------------ ------------
Net investment activity ...................... (104,007) 2,105 868,566 16,257
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 777,497 -- 3,532,880 53,202
Cost of mutual fund shares sold ............... (725,553) -- (3,554,666) (55,328)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... 51,944 -- (21,786) (2,126)
Change in unrealized gain (loss) on investments 3,346,139 (3,707) 32,439,748 (10,549)
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 3,398,083 (3,707) 32,417,962 (12,675)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 1,392,227 20,741 435,046 83,330
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 4,686,303 19,139 33,721,574 86,912
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 29,765,433 806,446 242,868,858 5,885,293
Transfers between funds ....................... 4,305,104 32,713 34,854,129 151,175
Redemptions ................................... (803,449) (1,570) (6,057,535) (3,783)
Contingent deferred sales charges (note 2) .... (4,582) -- (83,383) --
Adjustments to maintain reserves .............. 66 (4) 30,385 1,038
------------ ------------ ------------ ------------
Net equity transactions .................... 33,262,572 837,585 271,612,454 6,033,723
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 37,948,875 856,724 305,334,028 6,120,635
Contract owners' equity beginning of period .... 856,724 -- 6,120,635 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... $ 38,805,599 856,724 311,454,663 6,120,635
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
DryCapAp FidVIPEIS
--------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 296,317 4,948 217,564 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (111,207) (267) (505,712) (1,422)
Asset fee @ 1.00% rate ..................... (62,252) (133) (395,500) (815)
Asset fee @ 1.05% rate ..................... (17,737) (30) (90,638) (339)
Asset fee @ 1.10% rate ..................... (62) -- (58) --
Asset fee @ 1.15% rate ..................... (27) -- (7) --
Asset fee @ 1.20% rate ..................... (19) -- (41) --
Asset fee @ 1.25% rate ..................... -- -- (22) --
Asset fee @ 1.30% rate ..................... (4) -- (14) --
Asset fee @ 1.35% rate ..................... (4) -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... 105,005 4,518 (774,428) (2,576)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 692,754 -- 628,613 72,868
Cost of mutual fund shares sold ............... (632,372) -- (599,673) (74,460)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... 60,382 -- 28,940 (1,592)
Change in unrealized gain (loss) on investments 5,296,793 (1,557) 7,558,663 79,853
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 5,357,175 (1,557) 7,587,603 78,261
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 1,464 414 774,271 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 5,463,644 3,375 7,587,446 75,685
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 37,281,447 894,637 175,676,909 4,978,409
Transfers between funds ....................... 14,756,161 34,011 13,491,409 268,956
Redemptions ................................... (999,653) -- (5,441,684) (7,395)
Contingent deferred sales charges (note 2) .... (11,014) -- (54,879) --
Adjustments to maintain reserves .............. (10,617) (1) (2,947) 1,150
------------ ------------ ------------ ------------
Net equity transactions .................... 51,016,324 928,647 183,668,808 5,241,120
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 56,479,968 932,022 191,256,254 5,316,805
Contract owners' equity beginning of period .... 932,022 -- 5,316,805 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... 57,411,990 932,022 196,573,059 5,316,805
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
FidVIPGrS FidVIPHIS
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 27,645 -- 609,157 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (212,170) (572) (294,475) (1,047)
Asset fee @ 1.00% rate ..................... (166,839) (312) (193,581) (382)
Asset fee @ 1.05% rate ..................... (35,112) (72) (58,296) (139)
Asset fee @ 1.10% rate ..................... (51) -- (22) --
Asset fee @ 1.15% rate ..................... (10) -- (5) --
Asset fee @ 1.20% rate ..................... (99) -- (16) --
Asset fee @ 1.25% rate ..................... (6) -- -- --
Asset fee @ 1.30% rate ..................... (1) -- -- --
Asset fee @ 1.35% rate ..................... -- -- (4) --
------------- ------------- ------------- -------------
Net investment activity ...................... (386,643) (956) 62,758 (1,568)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 1,691,790 24,231 5,911,230 --
Cost of mutual fund shares sold ............... (1,783,855) (24,000) (7,053,926) --
------------- ------------- ------------- -------------
Realized gain (loss) on investments .......... (92,065) 231 (1,142,696) --
Change in unrealized gain (loss) on investments 16,582,085 23,237 (5,732,014) 16,089
------------- ------------- ------------- -------------
Net gain (loss) on investments ............... 16,490,020 23,468 (6,874,710) 16,089
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 723,135 -- 387,069 --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 16,826,512 22,512 (6,424,883) 14,521
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 71,107,684 1,981,907 106,687,268 2,761,595
Transfers between funds ....................... 21,283,689 1,697 3,713,555 132,705
Redemptions ................................... (1,868,105) (577) (3,477,421) (954)
Contingent deferred sales charges (note 2) .... (25,533) -- (19,045) --
Adjustments to maintain reserves .............. 198 (111) (220) (1)
------------- ------------- ------------- -------------
Net equity transactions .................... 90,497,933 1,982,916 106,904,137 2,893,345
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 107,324,445 2,005,428 100,479,254 2,907,866
Contract owners' equity beginning of period .... 2,005,428 -- 2,907,866 --
------------- ------------- ------------- -------------
Contract owners' equity end of period .......... $ 109,329,873 2,005,428 103,387,120 2,907,866
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPOvS FidVIPConS
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 39,473 -- 56,795 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (70,614) (303) (299,506) (1,607)
Asset fee @ 1.00% rate ..................... (42,096) (95) (193,026) (564)
Asset fee @ 1.05% rate ..................... (13,142) (40) (37,910) (160)
Asset fee @ 1.10% rate ..................... -- -- (67) --
Asset fee @ 1.15% rate ..................... (2) -- (15) --
Asset fee @ 1.20% rate ..................... (32) -- (115) --
Asset fee @ 1.25% rate ..................... -- -- -- --
Asset fee @ 1.30% rate ..................... -- -- (2) --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------- ------------- ------------- -------------
Net investment activity ...................... (86,413) (438) (473,846) (2,331)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 4,459,537 5,931 389,637 --
Cost of mutual fund shares sold ............... (4,576,878) (5,843) (408,471) --
------------- ------------- ------------- -------------
Realized gain (loss) on investments .......... (117,341) 88 (18,834) --
Change in unrealized gain (loss) on investments 489,713 5,814 17,909,633 56,652
------------- ------------- ------------- -------------
Net gain (loss) on investments ............... 372,372 5,902 17,890,799 56,652
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 116,340 -- 417,852 --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 402,299 5,464 17,834,805 54,321
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 21,535,431 757,896 95,817,883 3,573,555
Transfers between funds ....................... 3,800,935 157,648 13,757,369 83,693
Redemptions ................................... (383,762) -- (2,362,374) (70)
Contingent deferred sales charges (note 2) .... (3,534) -- (32,976) --
Adjustments to maintain reserves .............. 163 (2) (59,196) 7
------------- ------------- ------------- -------------
Net equity transactions .................... 24,949,233 915,542 107,120,706 3,657,185
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 25,351,532 921,006 124,955,511 3,711,506
Contract owners' equity beginning of period .... 921,006 -- 3,711,506 --
------------- ------------- ------------- -------------
Contract owners' equity end of period .......... 26,272,538 921,006 128,667,017 3,711,506
============= ============= ============= =============
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
FidVIPGrOpS MSEmMkt
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 67,013 -- 387,439 3,740
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (225,407) (596) (13,756) (54)
Asset fee @ 1.00% rate ..................... (198,453) (418) (5,701) (40)
Asset fee @ 1.05% rate ..................... (34,785) (123) (1,939) (16)
Asset fee @ 1.10% rate ..................... (23) -- -- --
Asset fee @ 1.15% rate ..................... -- -- -- --
Asset fee @ 1.20% rate ..................... (7) -- (8) --
Asset fee @ 1.25% rate ..................... -- -- (1) --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------- ------------- ------------- -------------
Net investment activity ...................... (391,662) (1,137) 366,034 3,630
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 312,351 3 1,077,168 810
Cost of mutual fund shares sold ............... (318,329) (3) (1,547,782) (823)
------------- ------------- ------------- -------------
Realized gain (loss) on investments .......... (5,978) -- (470,614) (13)
Change in unrealized gain (loss) on investments 11,843,161 44,999 (967,487) (1,847)
------------- ------------- ------------- -------------
Net gain (loss) on investments ............... 11,837,183 44,999 (1,438,101) (1,860)
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 232,948 -- -- 1,623
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 11,678,469 43,862 (1,072,067) 3,393
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 79,527,836 2,201,875 3,872,593 185,958
Transfers between funds ....................... 8,581,600 332,841 313,112 6,858
Redemptions ................................... (1,722,323) (304) (58,191) --
Contingent deferred sales charges (note 2) .... (20,999) -- (253) --
Adjustments to maintain reserves .............. (21,308) (4) (62) (1)
------------- ------------- ------------- -------------
Net equity transactions .................... 86,344,806 2,534,408 4,127,199 192,815
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 98,023,275 2,578,270 3,055,132 196,208
Contract owners' equity beginning of period .... 2,578,270 -- 196,208 --
------------- ------------- ------------- -------------
Contract owners' equity end of period .......... $ 100,601,545 2,578,270 3,251,340 196,208
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NSATBal NSATCapAp
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 683,468 3,951 750,851 5,462
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (90,403) (195) (465,341) (739)
Asset fee @ 1.00% rate ..................... (70,281) (154) (270,821) (447)
Asset fee @ 1.05% rate ..................... (15,676) (110) (52,969) (244)
Asset fee @ 1.10% rate ..................... (11) -- (81) --
Asset fee @ 1.15% rate ..................... (7) -- (20) --
Asset fee @ 1.20% rate ..................... (9) -- (17) --
Asset fee @ 1.25% rate ..................... -- -- -- --
Asset fee @ 1.30% rate ..................... (1) -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------- ------------- ------------- -------------
Net investment activity ...................... 507,080 3,492 (38,398) 4,032
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 181,876 -- 2,717,344 --
Cost of mutual fund shares sold ............... (178,647) -- (2,728,836) --
------------- ------------- ------------- -------------
Realized gain (loss) on investments .......... 3,229 -- (11,492) --
Change in unrealized gain (loss) on investments 328,826 5,048 14,966,388 (9,492)
------------- ------------- ------------- -------------
Net gain (loss) on investments ............... 332,055 5,048 14,954,896 (9,492)
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 115,971 -- 5,341,096 52,894
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 955,106 8,540 20,257,594 47,434
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 33,253,731 818,465 150,374,491 2,528,751
Transfers between funds ....................... 4,913,679 65,644 25,963,419 88,972
Redemptions ................................... (833,930) (90) (3,752,392) (3,756)
Contingent deferred sales charges (note 2) .... (8,225) -- (30,248) --
Adjustments to maintain reserves .............. 177 (26) 53,212 4
------------- ------------- ------------- -------------
Net equity transactions .................... 37,325,432 883,993 172,608,482 2,613,971
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 38,280,538 892,533 192,866,076 2,661,405
Contract owners' equity beginning of period .... 892,533 -- 2,661,405 --
------------- ------------- ------------- -------------
Contract owners' equity end of period .......... 39,173,071 892,533 195,527,481 2,661,405
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
NSATEqinc NSATGlobEq
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 75,504 989 141,975 871
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (34,439) (265) (39,570) (165)
Asset fee @ 1.00% rate ..................... (27,139) (116) (28,746) (116)
Asset fee @ 1.05% rate ..................... (5,129) (30) (8,199) (45)
Asset fee @ 1.10% rate ..................... -- -- (5) --
Asset fee @ 1.15% rate ..................... (1) -- -- --
Asset fee @ 1.20% rate ..................... (18) -- -- --
Asset fee @ 1.25% rate ..................... -- -- (2) --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... 8,778 578 65,453 545
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 376,534 2 685,356 --
Cost of mutual fund shares sold ............... (366,898) (3) (668,251) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... 9,636 (1) 17,105 --
Change in unrealized gain (loss) on investments 869,248 9,100 936,891 3,267
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 878,884 9,099 953,996 3,267
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 137,183 -- 98,132 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 1,024,845 9,677 1,117,581 3,812
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 10,836,292 524,315 12,466,313 505,387
Transfers between funds ....................... 736,897 58,870 1,290,714 4,389
Redemptions ................................... (392,814) (135) (359,325) --
Contingent deferred sales charges (note 2) .... (5,629) -- (2,129) --
Adjustments to maintain reserves .............. (359) 14 35 (105)
------------ ------------ ------------ ------------
Net equity transactions .................... 11,174,387 583,064 13,395,608 509,671
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 12,199,232 592,741 14,513,189 513,483
Contract owners' equity beginning of period .... 592,741 -- 513,483 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... $ 12,791,973 592,741 15,026,672 513,483
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NSATGvtBd NSATHIncBd
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 4,068,221 46,514 1,175,418 9,587
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (325,601) (1,060) (70,627) (359)
Asset fee @ 1.00% rate ..................... (228,102) (369) (51,930) (153)
Asset fee @ 1.05% rate ..................... (64,068) (301) (17,784) (125)
Asset fee @ 1.10% rate ..................... (51) -- -- --
Asset fee @ 1.15% rate ..................... (13) -- -- --
Asset fee @ 1.20% rate ..................... (11) -- (14) --
Asset fee @ 1.25% rate ..................... (14) -- (1) --
Asset fee @ 1.30% rate ..................... (1) -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... 3,450,360 44,784 1,035,062 8,950
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 6,875,359 24,775 1,434,798 663
Cost of mutual fund shares sold ............... (6,712,656) (24,775) (1,454,954) (653)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... 162,703 -- (20,156) 10
Change in unrealized gain (loss) on investments 96,330 (27,259) (637,940) (1,663)
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 259,033 (27,259) (658,096) (1,653)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 644,842 -- -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 4,354,235 17,525 376,966 7,297
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 135,535,861 3,147,571 26,481,762 762,946
Transfers between funds ....................... (2,966,402) 4,912 2,932,999 144,381
Redemptions ................................... (4,331,237) -- (701,614) (643)
Contingent deferred sales charges (note 2) .... (23,933) -- (4,542) --
Adjustments to maintain reserves .............. 1,128 1 (12) --
------------ ------------ ------------ ------------
Net equity transactions .................... 128,215,417 3,152,484 28,708,593 906,684
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 132,569,652 3,170,009 29,085,559 913,981
Contract owners' equity beginning of period .... 3,170,009 -- 913,981 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... 135,739,661 3,170,009 29,999,540 913,981
============ ============ ============ ============
</TABLE>
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
NSATMyMkt NSATSecBd
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 5,541,671 35,527 1,155,410 5,220
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (597,802) (4,055) (95,878) (353)
Asset fee @ 1.00% rate ..................... (367,633) (1,841) (61,058) (186)
Asset fee @ 1.05% rate ..................... (112,880) (1,142) (20,762) (71)
Asset fee @ 1.10% rate ..................... (56) -- (2) --
Asset fee @ 1.15% rate ..................... (1) -- -- --
Asset fee @ 1.20% rate ..................... (530) -- (20) --
Asset fee @ 1.25% rate ..................... -- -- (1) --
Asset fee @ 1.30% rate ..................... -- -- (1) --
Asset fee @ 1.35% rate ..................... (16) -- -- --
------------- ------------- ------------- -------------
Net investment activity ...................... 4,462,753 28,489 977,688 4,610
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 74,592,150 772,983 474,327 3
Cost of mutual fund shares sold ............... (74,592,150) (772,983) (482,830) (3)
------------- ------------- ------------- -------------
Realized gain (loss) on investments .......... -- -- (8,503) --
Change in unrealized gain (loss) on investments -- -- (757,239) (151)
------------- ------------- ------------- -------------
Net gain (loss) on investments ............... -- -- (765,742) (151)
------------- ------------- ------------- -------------
Reinvested capital gains ...................... -- -- 31,361 --
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 4,462,753 28,489 243,307 4,459
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 406,622,866 16,698,066 29,533,663 862,594
Transfers between funds ....................... (219,515,750) (3,252,991) 4,903,909 174,229
Redemptions ................................... (13,347,779) (289,851) (761,323) --
Contingent deferred sales charges (note 2) .... (133,217) (409) (7,092) --
Adjustments to maintain reserves .............. 36,549 2,636 78 14
------------- ------------- ------------- -------------
Net equity transactions .................... 173,662,669 13,157,451 33,669,235 1,036,837
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 178,125,422 13,185,940 33,912,542 1,041,296
Contract owners' equity beginning of period .... 13,185,940 -- 1,041,296 --
------------- ------------- ------------- -------------
Contract owners' equity end of period .......... $ 191,311,362 13,185,940 34,953,838 1,041,296
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NSATMidCap NSATSmCapV
------------------------------ ------------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 40,624 535 -- 590
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (20,251) (37) (83,736) (376)
Asset fee @ 1.00% rate ..................... (14,445) (62) (45,868) (190)
Asset fee @ 1.05% rate ..................... (4,536) (22) (9,629) (37)
Asset fee @ 1.10% rate ..................... (9) -- (7) --
Asset fee @ 1.15% rate ..................... -- -- (4) --
Asset fee @ 1.20% rate ..................... -- -- (35) --
Asset fee @ 1.25% rate ..................... -- -- (2) --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------- ------------- ------------- -------------
Net investment activity ...................... 1,383 414 (139,281) (13)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 1,063,903 -- 2,135,282 --
Cost of mutual fund shares sold ............... (1,093,420) -- (2,330,458) --
------------- ------------- ------------- -------------
Realized gain (loss) on investments .......... (29,517) -- (195,176) --
Change in unrealized gain (loss) on investments 397,911 5,439 (40,635) 4,678
------------- ------------- ------------- -------------
Net gain (loss) on investments ............... 368,394 5,439 (235,811) 4,678
------------- ------------- ------------- -------------
Reinvested capital gains ...................... -- -- -- 4,611
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 369,777 5,853 (375,092) 9,276
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 6,187,234 205,427 24,448,985 1,082,589
Transfers between funds ....................... 558,871 20,348 5,269,520 65,401
Redemptions ................................... (98,756) (2,559) (761,878) --
Contingent deferred sales charges (note 2) .... (2,133) -- (10,195) --
Adjustments to maintain reserves .............. 6 (7) 49 (112)
------------- ------------- ------------- -------------
Net equity transactions .................... 6,645,222 223,209 28,946,481 1,147,878
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 7,014,999 229,062 28,571,389 1,157,154
Contract owners' equity beginning of period .... 229,062 -- 1,157,154 --
------------- ------------- ------------- -------------
Contract owners' equity end of period .......... 7,244,061 229,062 29,728,543 1,157,154
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
NSATSmCo NSATStrGro
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ -- -- -- 301
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (117,084) (473) (27,226) (83)
Asset fee @ 1.00% rate ..................... (81,828) (380) (13,699) (44)
Asset fee @ 1.05% rate ..................... (15,866) (83) (3,029) (23)
Asset fee @ 1.10% rate ..................... (7) -- (12) --
Asset fee @ 1.15% rate ..................... -- -- -- --
Asset fee @ 1.20% rate ..................... -- -- -- --
Asset fee @ 1.25% rate ..................... -- -- -- --
Asset fee @ 1.30% rate ..................... -- -- (1) --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (214,785) (936) (43,967) 151
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 1,735,242 -- 487,613 1
Cost of mutual fund shares sold ............... (1,907,541) -- (466,818) (1)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... (172,299) -- 20,795 --
Change in unrealized gain (loss) on investments 424,838 (20,889) 809,463 8,439
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 252,539 (20,889) 830,258 8,439
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- 39,296 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 37,754 17,471 786,291 8,590
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 35,742,935 1,396,707 7,304,155 310,341
Transfers between funds ....................... 6,599,455 144,223 441,689 7,111
Redemptions ................................... (919,776) (19) (118,200) --
Contingent deferred sales charges (note 2) .... (7,264) -- (2,477) --
Adjustments to maintain reserves .............. 6 (67) (24) --
------------ ------------ ------------ ------------
Net equity transactions .................... 41,415,356 1,540,844 7,625,143 317,452
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 41,453,110 1,558,315 8,411,434 326,042
Contract owners' equity beginning of period .... 1,558,315 -- 326,042 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... $ 43,011,425 1,558,315 8,737,476 326,042
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NSATStrVal NSATTotRe
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 63,791 542 1,708,752 15,396
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (41,771) (125) (790,615) (2,108)
Asset fee @ 1.00% rate ..................... (23,731) (66) (504,264) (945)
Asset fee @ 1.05% rate ..................... (7,171) (31) (88,737) (369)
Asset fee @ 1.10% rate ..................... (1) -- (65) --
Asset fee @ 1.15% rate ..................... -- -- (29) --
Asset fee @ 1.20% rate ..................... (9) -- (28) --
Asset fee @ 1.25% rate ..................... -- -- (9) --
Asset fee @ 1.30% rate ..................... -- -- (8) --
Asset fee @ 1.35% rate ..................... -- -- (4) --
------------ ------------ ------------ ------------
Net investment activity ...................... (8,892) 320 324,993 11,974
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 1,450,301 -- 467,344 --
Cost of mutual fund shares sold ............... (1,513,062) -- (439,529) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... (62,761) -- 27,815 --
Change in unrealized gain (loss) on investments (125,831) 4,042 4,936,630 (80,013)
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... (188,592) 4,042 4,964,445 (80,013)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- 11,040,291 175,028
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (197,484) 4,362 16,329,729 106,989
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 12,996,713 364,129 262,212,521 5,708,934
Transfers between funds ....................... 616,493 114,972 8,063,395 247,938
Redemptions ................................... (291,210) -- (6,698,439) (5,049)
Contingent deferred sales charges (note 2) .... (1,123) -- (83,262) --
Adjustments to maintain reserves .............. (115) -- (796) (666)
------------ ------------ ------------ ------------
Net equity transactions .................... 13,320,758 479,101 263,493,419 5,951,157
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 13,123,274 483,463 279,823,148 6,058,146
Contract owners' equity beginning of period .... 483,463 -- 6,058,146 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... 13,606,737 483,463 285,881,294 6,058,146
============ ============ ============ ============
</TABLE>
<PAGE> 11
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
NBAMTGuard NBAMTMCGr
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 1,976 -- 2,804 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (72,339) (110) (60,842) (183)
Asset fee @ 1.00% rate ..................... (65,593) (158) (55,230) (427)
Asset fee @ 1.05% rate ..................... (12,071) (54) (11,986) (92)
Asset fee @ 1.10% rate ..................... (10) -- (1) --
Asset fee @ 1.15% rate ..................... -- -- -- --
Asset fee @ 1.20% rate ..................... -- -- (4) --
Asset fee @ 1.25% rate ..................... -- -- -- --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (148,037) (322) (125,259) (702)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 3,798,426 34 2,635,124 2
Cost of mutual fund shares sold ............... (3,492,087) (32) (2,223,804) (2)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... 306,339 2 411,320 --
Change in unrealized gain (loss) on investments 594,984 11,793 4,390,487 73,651
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 901,323 11,795 4,801,807 73,651
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- 19,626 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 753,286 11,473 4,696,174 72,949
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 24,467,744 399,649 18,933,486 1,023,027
Transfers between funds ....................... 7,388,132 51,821 3,753,367 488,359
Redemptions ................................... (704,350) -- (610,060) (3,016)
Contingent deferred sales charges (note 2) .... (8,663) -- (5,247) --
Adjustments to maintain reserves .............. (16) (876) 10,095 3
------------ ------------ ------------ ------------
Net equity transactions .................... 31,142,847 450,594 22,081,641 1,508,373
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 31,896,133 462,067 26,777,815 1,581,322
Contract owners' equity beginning of period .... 462,067 -- 1,581,322 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... $ 32,358,200 462,067 28,359,137 1,581,322
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NBAMTPart OppAggGro
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 110,164 -- 9,456 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (403,079) (5,247) (66,368) (275)
Asset fee @ 1.00% rate ..................... (264,681) (1,929) (43,278) (120)
Asset fee @ 1.05% rate ..................... (43,176) (298) (9,592) (83)
Asset fee @ 1.10% rate ..................... (16) -- (7) --
Asset fee @ 1.15% rate ..................... (3) -- (2) --
Asset fee @ 1.20% rate ..................... (17) -- (26) --
Asset fee @ 1.25% rate ..................... (3) -- (5) --
Asset fee @ 1.30% rate ..................... -- -- (4) --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (600,811) (7,474) (109,826) (478)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 11,129,126 8,557 1,420,396 1,564
Cost of mutual fund shares sold ............... (12,460,209) (8,600) (1,460,125) (1,616)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... (1,331,083) (43) (39,729) (52)
Change in unrealized gain (loss) on investments (3,000,603) 76,648 1,711,620 5,023
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... (4,331,686) 76,605 1,671,891 4,971
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 3,470,168 -- 97,107 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (1,462,329) 69,131 1,659,172 4,493
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 107,647,557 12,820,732 21,395,189 690,779
Transfers between funds ....................... (8,050,973) 483,875 4,014,156 25,316
Redemptions ................................... (2,536,518) (12,173) (398,429) (192)
Contingent deferred sales charges (note 2) .... (22,496) -- (3,886) --
Adjustments to maintain reserves .............. (1,292) 21 66 45
------------ ------------ ------------ ------------
Net equity transactions .................... 97,036,278 13,292,455 25,007,096 715,948
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 95,573,949 13,361,586 26,666,268 720,441
Contract owners' equity beginning of period .... 13,361,586 -- 720,441 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... 108,935,535 13,361,586 27,386,709 720,441
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
OppGro OppGrInc
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 37,971 -- 15,499 1,975
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (97,646) (182) (118,139) (341)
Asset fee @ 1.00% rate ..................... (61,251) (193) (87,278) (204)
Asset fee @ 1.05% rate ..................... (15,113) (94) (21,510) (129)
Asset fee @ 1.10% rate ..................... (5) -- (18) --
Asset fee @ 1.15% rate ..................... (2) -- (5) --
Asset fee @ 1.20% rate ..................... (6) -- (26) --
Asset fee @ 1.25% rate ..................... (6) -- -- --
Asset fee @ 1.30% rate ..................... (1) -- (4) --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (136,059) (469) (211,481) 1,301
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 597,638 -- 1,051,542 8
Cost of mutual fund shares sold ............... (673,390) -- (1,137,377) (8)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... (75,752) -- (85,835) --
Change in unrealized gain (loss) on investments 4,326,733 9,743 (156,268) 25,274
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... 4,250,981 9,743 (242,103) 25,274
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 458,139 -- 341,298 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 4,573,061 9,274 (112,286) 26,575
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 34,076,956 933,456 47,098,256 953,722
Transfers between funds ....................... 2,552,479 7,668 4,855,602 104,635
Redemptions ................................... (796,810) (27) (1,267,689) (199)
Contingent deferred sales charges (note 2) .... (15,293) -- (14,711) --
Adjustments to maintain reserves .............. (7) (138) 6 (358)
------------ ------------ ------------ ------------
Net equity transactions .................... 35,817,325 940,959 50,671,464 1,057,800
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 40,390,386 950,233 50,559,178 1,084,375
Contract owners' equity beginning of period .... 950,233 -- 1,084,375 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... $ 41,340,619 950,233 51,643,553 1,084,375
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
VEWrldEMkt VEWrldHAs
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 10,120 -- 2,513 --
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (15,766) (204) (8,058) (79)
Asset fee @ 1.00% rate ..................... (11,953) (380) (3,644) (15)
Asset fee @ 1.05% rate ..................... (2,830) (6) (1,503) (17)
Asset fee @ 1.10% rate ..................... -- -- (5) --
Asset fee @ 1.15% rate ..................... -- -- -- --
Asset fee @ 1.20% rate ..................... (14) -- -- --
Asset fee @ 1.25% rate ..................... -- -- -- --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (20,443) (590) (10,697) (111)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 1,437,687 505,309 1,320,656 --
Cost of mutual fund shares sold ............... (1,801,946) (492,562) (1,839,705) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... (364,259) 12,747 (519,049) --
Change in unrealized gain (loss) on investments (898,926) 4,143 (85,920) 3,319
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... (1,263,185) 16,890 (604,969) 3,319
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 8,995 -- 61,720 --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (1,274,633) 16,300 (553,946) 3,208
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 5,631,777 1,193,031 2,371,551 178,412
Transfers between funds ....................... (119,473) (549,841) 111,448 38,553
Redemptions ................................... (159,609) (1,956) (100,995) --
Contingent deferred sales charges (note 2) .... (976) -- (454) --
Adjustments to maintain reserves .............. 120 2 (228) 6
------------ ------------ ------------ ------------
Net equity transactions .................... 5,351,839 641,236 2,381,322 216,971
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 4,077,206 657,536 1,827,376 220,179
Contract owners' equity beginning of period .... 657,536 -- 220,179 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... 4,734,742 657,536 2,047,555 220,179
============ ============ ============ ============
</TABLE>
<PAGE> 13
NATIONWIDE VARIABLE ACCOUNT - 9
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Year Ended December 31, 1998 and For the Period November 3, 1997
(commencement of operations) Through December 31, 1997
<TABLE>
<CAPTION>
VKMSRESec WPGrinc
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 10,631 19,701 108,063 1,508
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (67,026) (302) (39,367) (61)
Asset fee @ 1.00% rate ..................... (39,789) (166) (19,708) (130)
Asset fee @ 1.05% rate ..................... (7,635) (77) (6,454) (28)
Asset fee @ 1.10% rate ..................... (8) -- (2) --
Asset fee @ 1.15% rate ..................... (2) -- -- --
Asset fee @ 1.20% rate ..................... (26) -- -- --
Asset fee @ 1.25% rate ..................... -- -- (6) --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (103,855) 19,156 42,526 1,289
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 1,342,798 -- 492,211 --
Cost of mutual fund shares sold ............... (1,619,581) -- (462,324) --
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... (276,783) -- 29,887 --
Change in unrealized gain (loss) on investments (1,172,272) (60,104) 416,403 6,055
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... (1,449,055) (60,104) 446,290 6,055
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 104,608 66,235 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (1,448,302) 25,287 488,816 7,344
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 17,955,980 917,137 11,279,862 402,032
Transfers between funds ....................... 861,422 117,890 1,072,048 25,646
Redemptions ................................... (416,792) -- (178,134) --
Contingent deferred sales charges (note 2) .... (1,112) -- (1,134) --
Adjustments to maintain reserves .............. (276) (46) (786) (2)
------------ ------------ ------------ ------------
Net equity transactions .................... 18,399,222 1,034,981 12,171,856 427,676
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 16,950,920 1,060,268 12,660,672 435,020
Contract owners' equity beginning of period .... 1,060,268 -- 435,020 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... $ 18,011,188 1,060,268 13,095,692 435,020
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
WPIntEq WPPVenCap
---------------------------- ----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 82,563 4,961 -- 16
Mortality and expense risk charges (note 2):
Asset fee @ 0.95% rate ..................... (53,651) (325) (17,995) (108)
Asset fee @ 1.00% rate ..................... (28,614) (112) (9,221) (177)
Asset fee @ 1.05% rate ..................... (7,209) (32) (3,019) (5)
Asset fee @ 1.10% rate ..................... -- -- -- --
Asset fee @ 1.15% rate ..................... -- -- -- --
Asset fee @ 1.20% rate ..................... -- -- -- --
Asset fee @ 1.25% rate ..................... -- -- (6) --
Asset fee @ 1.30% rate ..................... -- -- -- --
Asset fee @ 1.35% rate ..................... -- -- -- --
------------ ------------ ------------ ------------
Net investment activity ...................... (6,911) 4,492 (30,241) (274)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 2,101,509 5,961 1,184,605 447,873
Cost of mutual fund shares sold ............... (2,099,792) (6,534) (1,319,705) (460,704)
------------ ------------ ------------ ------------
Realized gain (loss) on investments .......... 1,717 (573) (135,100) (12,831)
Change in unrealized gain (loss) on investments (655,153) (43,991) 268,939 2,023
------------ ------------ ------------ ------------
Net gain (loss) on investments ............... (653,436) (44,564) 133,839 (10,808)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- 34,331 -- --
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (660,347) (5,741) 103,598 (11,082)
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 14,240,840 838,600 5,338,928 584,670
Transfers between funds ....................... 1,644,029 (19,613) 1,058,670 (427,813)
Redemptions ................................... (211,060) -- (134,332) (3,302)
Contingent deferred sales charges (note 2) .... (2,448) -- (810) --
Adjustments to maintain reserves .............. (112) 11 15 --
------------ ------------ ------------ ------------
Net equity transactions .................... 15,671,249 818,998 6,262,471 153,555
------------ ------------ ------------ ------------
NET CHANGE IN CONTRACT OWNERS' EQUITY .......... 15,010,902 813,257 6,366,069 142,473
Contract owners' equity beginning of period .... 813,257 -- 142,473 --
------------ ------------ ------------ ------------
Contract owners' equity end of period .......... 15,824,159 813,257 6,508,542 142,473
============ ============ ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 14
NATIONWIDE VARIABLE ACCOUNT-9
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 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 VIPS);
Fidelity VIP - Equity-Income Portfolio - Service Class
(FidVIPEIS)
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGrS)
Fidelity VIP - High Income Portfolio - Service Class
(FidVIPHIS)
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOvS)
Portfolio of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio - Service Class
(FidVIPConS)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio - Service
Class (FidVIPGrOpS)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
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)
<PAGE> 15
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 - Aggressive Growth Fund (OppAggGro)
(formerly Oppenheimer VAF - Capital Appreciation Fund)
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 (VKMSRESec)
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, 1998, 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.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1998. 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> 16
(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
(a) Sales Charges
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. On NEA Valuebuilder Select Roth IRA and BOA V Roth IRA
contracts, for an additional charge of 0.15% of the daily net assets,
such charge will decline to 0%, after the purchases payment has been
held in the contract for 60 months.
For all contracts, except BOA Exclusive II, which have elected a death
benefit option at the time of application, the following long term care
facility provisions also apply. Beginning at the third contract
anniversary, surrender charges on withdrawals will not apply if a
contract owner is diagnosed with a terminal illness or has been
confined to a long term care facility or hospital for a continuous 90
day period which has commenced any time after the date of issue.
No sales charges are deducted on BOA Exclusive II contracts and no
sales charges are deducted on redemptions used to purchase units in the
fixed investment options of the Company.
(b) Mortality and Expense Risk Charges
The Company deducts a mortality and expense risk charge assessed
through the daily unit value calculation. Refer to the following table
to determine the mortality and risk expense associated with each of the
products offered in the Account:
<TABLE>
<CAPTION>
ASSET FEE RATE
-----------------------------------------------------------------------
0.95% 1.00% 1.05% 1.10% 1.15% 1.20% 1.25% 1.30% 1.35%
----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BOA Future/NEA Valuebuilder Future ....... X
Optional long term care facility
with a stepped up death benefit ................ X
Optional long term care facility
with a 5% enhanced death benefit ........................ X
BOA V/NEA Valuebuilder Select ..................................... X
Optional long term care facility
with a stepped up death benefit ......................................... X
Optional long term care facility
with a 5% enhanced death benefit ................................................ X
BOA Choice/BOA Vision II .......................................................... X
Optional long term care facility
with a 5% enhanced death benefit ......................................................... X
BOA Exclusive II .................................................................. X
Optional long term care facility
with a stepped up death benefit .................................................................. X
Optional long term care facility
with a 5% enhanced death benefit ........................................................................ X
</TABLE>
<PAGE> 17
(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> 18
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1998.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
--------- ----------- ---------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
Asset fee @ 0.95% rate:
American Century VP -
American Century VP Income & Growth:
Tax qualified ........................................ 954,865 $13.081019 $12,490,607 26%
Non-tax qualified .................................... 1,156,159 13.081019 15,123,738 26%
American Century VP -
American Century VP International:
Tax qualified ........................................ 1,231,761 11.866841 14,617,112 18%
Non-tax qualified .................................... 1,439,143 11.866841 17,078,081 18%
American Century VP -
American Century VP Value:
Tax qualified ........................................ 628,798 10.689857 6,721,761 4%
Non-tax qualified .................................... 591,188 10.689857 6,319,715 4%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ........................................ 897,734 13.034607 11,701,610 28%
Non-tax qualified .................................... 729,174 13.034607 9,504,497 28%
Dreyfus Stock Index Fund:
Tax qualified ........................................ 6,530,360 13.135997 85,782,789 27%
Non-tax qualified .................................... 6,930,101 13.135997 91,033,786 27%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ........................................ 994,159 13.220513 13,143,292 29%
Non-tax qualified .................................... 1,635,130 13.220513 21,617,257 29%
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ........................................ 4,652,014 11.422130 53,135,909 10%
Non-tax qualified .................................... 4,431,491 11.422130 50,617,066 10%
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ........................................ 2,225,770 13.848033 30,822,536 38%
Non-tax qualified .................................... 1,962,518 13.848033 27,177,014 38%
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ........................................ 3,021,525 9.586675 28,966,378 (5)%
Non-tax qualified .................................... 3,109,107 9.586675 29,805,998 (5)%
Fidelity VIP - Overseas Portfolio -
Service Class:
Tax qualified ........................................ 630,058 11.047878 6,960,804 12%
Non-tax qualified .................................... 759,889 11.047878 8,395,161 12%
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ........................................ 2,868,661 12.812355 36,754,303 29%
Non-tax qualified .................................... 2,993,987 12.812355 38,360,024 29%
</TABLE>
<PAGE> 19
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified ....................... 2,015,088 12.826216 25,845,954 23%
Non-tax qualified ................... 2,029,092 12.826216 26,025,572 23%
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ....................... 148,936 7.395794 1,101,500 (29)%
Non-tax qualified ................... 152,995 7.395794 1,131,520 (29)%
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 1,042,085 10.844036 11,300,407 7%
Non-tax qualified ................... 927,751 10.844036 10,060,565 7%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 4,235,753 13.369463 56,629,743 29%
Non-tax qualified ................... 4,697,136 13.369463 62,798,186 29%
Nationwide SAT - Equity Income Fund:
Tax qualified ....................... 237,366 11.588459 2,750,706 14%
Non-tax qualified ................... 340,149 11.588459 3,941,803 14%
Nationwide SAT - Global Equity Fund:
Tax qualified ....................... 296,907 11.921445 3,539,560 18%
Non-tax qualified ................... 382,578 11.921445 4,560,883 18%
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 3,607,650 10.941842 39,474,336 8%
Non-tax qualified ................... 3,232,045 10.941842 35,364,526 8%
Nationwide SAT - High Income Bond Fund:
Tax qualified ....................... 656,370 10.701912 7,024,414 5%
Non-tax qualified ................... 709,535 10.701912 7,593,381 5%
Nationwide SAT - Money Market Fund:
Tax qualified ....................... 4,931,150 10.504509 51,799,310 4%
Non-tax qualified ................... 5,513,782 10.504509 57,919,573 4%
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified ....................... 915,760 10.252876 9,389,174 2%
Non-tax qualified ................... 934,096 10.252876 9,577,170 2%
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified ....................... 171,632 10.919701 1,874,170 10%
Non-tax qualified ................... 185,246 10.919701 2,022,831 10%
Nationwide SAT - Small Cap Value Fund:
Tax qualified ....................... 930,565 9.432351 8,777,416 (4)%
Non-tax qualified ................... 1,021,664 9.432351 9,636,693 (4)%
Nationwide SAT - Small Company Fund:
Tax qualified ....................... 1,269,546 9.617964 12,210,448 0%
Non-tax qualified ................... 1,253,383 9.617964 12,054,993 0%
Nationwide SAT - Strategic Growth Fund:
Tax qualified ....................... 265,377 11.582258 3,073,665 14%
Non-tax qualified ................... 223,704 11.582258 2,590,997 14%
Nationwide SAT - Strategic Value Fund:
Tax qualified ....................... 345,847 10.090240 3,489,679 (1)%
Non-tax qualified ................... 505,486 10.090240 5,100,475 (1)%
</TABLE>
(Continued)
<PAGE> 20
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT - Total Return Fund:
Tax qualified .................. 8,225,066 11.979444 98,531,718 17%
Non-tax qualified .............. 5,639,031 11.979444 67,552,456 17%
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified .................. 578,032 13.699229 7,918,593 30%
Non-tax qualified .............. 609,746 13.699229 8,353,050 30%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified .................. 436,579 16.144809 7,048,485 38%
Non-tax qualified .............. 449,661 16.144809 7,259,691 38%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified .................. 3,020,772 10.458607 31,593,067 3%
Non-tax qualified .............. 2,842,880 10.458607 29,732,565 3%
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified .................. 787,398 10.609896 8,354,211 11%
Non-tax qualified .............. 753,325 10.609896 7,992,700 11%
Oppenheimer VAF - Growth Fund:
Tax qualified .................. 916,203 12.070167 11,058,723 23%
Non-tax qualified .............. 1,094,091 12.070167 13,205,861 23%
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified .................. 1,242,544 10.639805 13,220,426 4%
Non-tax qualified .............. 1,352,028 10.639805 14,385,314 4%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified .................. 217,873 5.751082 1,253,005 (35)%
Non-tax qualified .............. 279,325 5.751082 1,606,421 (35)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified .................. 82,690 6.139717 507,693 (32)%
Non-tax qualified .............. 115,681 6.139717 710,249 (32)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified .................. 646,017 9.050353 5,846,682 (12)%
Non-tax qualified .............. 606,338 9.050353 5,487,573 (12)%
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified .................. 373,962 11.521372 4,308,555 11%
Non-tax qualified .............. 328,455 11.521372 3,784,252 11%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified .................. 479,917 9.865775 4,734,753 4%
Non-tax qualified .............. 496,472 9.865775 4,898,081 4%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified .................. 192,595 10.394476 2,001,924 5%
Non-tax qualified .............. 209,056 10.394476 2,173,028 5%
</TABLE>
<PAGE> 21
Asset fee @ 1.00% rate:
<TABLE>
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Income & Growth:
Tax qualified ....................... 583,554 13.073386 7,629,027 26%
Non-tax qualified ................... 612,111 13.073386 8,002,363 26%
American Century VP -
American Century VP International:
Tax qualified ....................... 667,671 11.859906 7,918,515 18%
Non-tax qualified ................... 795,739 11.859906 9,437,390 18%
American Century VP -
American Century VP Value:
Tax qualified ....................... 355,592 10.683601 3,799,003 4%
Non-tax qualified ................... 298,758 10.683601 3,191,811 4%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ....................... 570,245 13.026995 7,428,579 28%
Non-tax qualified ................... 538,134 13.026995 7,010,269 28%
Dreyfus Stock Index Fund:
Tax qualified ....................... 4,403,681 13.128325 57,812,955 27%
Non-tax qualified ................... 4,086,832 13.128325 53,653,259 27%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ....................... 620,733 13.212796 8,201,618 29%
Non-tax qualified ................... 689,993 13.212796 9,116,737 29%
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 3,163,281 11.415454 36,110,289 10%
Non-tax qualified ................... 3,558,258 11.415454 40,619,131 10%
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 1,633,140 13.839948 22,602,573 38%
Non-tax qualified ................... 1,450,527 13.839948 20,075,218 38%
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ....................... 1,716,342 9.581067 16,444,388 (5)%
Non-tax qualified ................... 1,953,504 9.581067 18,716,653 (5)%
Fidelity VIP - Overseas Portfolio -
Service Class:
Tax qualified ....................... 390,759 11.041416 4,314,533 12%
Non-tax qualified ................... 364,389 11.041416 4,023,371 12%
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ....................... 1,744,153 12.804877 22,333,665 29%
Non-tax qualified ................... 1,750,402 12.804877 22,413,682 29%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified ....................... 1,566,691 12.818700 20,082,942 23%
Non-tax qualified ................... 1,701,741 12.818700 21,814,107 23%
</TABLE>
(Continued)
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C>
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ....................... 50,958 7.391460 376,654 (29)%
Non-tax qualified ................... 56,822 7.391460 419,998 (29)%
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 724,101 10.837697 7,847,587 7%
Non-tax qualified ................... 641,839 10.837697 6,956,057 7%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 2,719,427 13.361662 36,336,064 29%
Non-tax qualified ................... 2,067,286 13.361662 27,622,377 29%
Nationwide SAT - Equity Income Fund:
Tax qualified ....................... 182,603 11.581699 2,114,853 14%
Non-tax qualified ................... 263,284 11.581699 3,049,276 14%
Nationwide SAT - Global Equity Fund:
Tax qualified ....................... 209,682 11.914478 2,498,252 18%
Non-tax qualified ................... 265,967 11.914478 3,168,858 18%
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 2,389,465 10.935440 26,129,851 8%
Non-tax qualified ................... 2,162,208 10.935440 23,644,696 8%
Nationwide SAT - High Income Bond Fund:
Tax qualified ....................... 563,880 10.695657 6,031,067 5%
Non-tax qualified ................... 507,316 10.695657 5,426,078 5%
Nationwide SAT - Money Market Fund:
Tax qualified ....................... 3,146,947 10.498325 33,037,672 4%
Non-tax qualified ................... 2,859,923 10.498325 30,024,401 4%
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified ....................... 628,805 10.246882 6,443,291 2%
Non-tax qualified ................... 548,001 10.246882 5,615,302 2%
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified ....................... 124,451 10.913315 1,358,173 10%
Non-tax qualified ................... 125,175 10.913315 1,366,074 10%
Nationwide SAT - Small Cap Value Fund:
Tax qualified ....................... 502,680 9.426837 4,738,682 (4)%
Non-tax qualified ................... 467,220 9.426837 4,404,407 (4)%
Nationwide SAT - Small Company Fund:
Tax qualified ....................... 832,015 9.612340 7,997,611 0%
Non-tax qualified ................... 830,194 9.612340 7,980,107 0%
Nationwide SAT - Strategic Growth Fund:
Tax qualified ....................... 105,819 11.575478 1,224,906 13%
Non-tax qualified ................... 115,940 11.575478 1,342,061 13%
Nationwide SAT - Strategic Value Fund:
Tax qualified ....................... 134,335 10.084334 1,354,679 (1)%
Non-tax qualified ................... 239,315 10.084334 2,413,332 (1)%
Nationwide SAT - Total Return Fund:
Tax qualified ....................... 4,784,644 11.972436 57,283,844 17%
Non-tax qualified ................... 3,784,283 11.972436 45,307,086 17%
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ................ 519,550 13.691238 7,113,283 30%
Non-tax qualified ............ 425,826 13.691238 5,830,085 30%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified ................ 347,143 16.135377 5,601,283 38%
Non-tax qualified ............ 372,662 16.135377 6,013,042 38%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ................ 1,949,091 10.452498 20,372,870 3%
Non-tax qualified ............ 1,997,553 10.452498 20,879,419 3%
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ................ 395,607 10.603692 4,194,895 11%
Non-tax qualified ............ 446,338 10.603692 4,732,831 11%
Oppenheimer VAF - Growth Fund:
Tax qualified ................ 587,304 12.063121 7,084,719 23%
Non-tax qualified ............ 591,561 12.063121 7,136,072 23%
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ................ 825,742 10.633592 8,780,604 4%
Non-tax qualified ............ 1,013,404 10.633592 10,776,125 4%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ................ 141,469 5.747723 813,125 (35)%
Non-tax qualified ............ 104,323 5.747723 599,620 (35)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ................ 69,784 6.136113 428,203 (32)%
Non-tax qualified ............ 36,296 6.136113 222,716 (32)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ................ 372,172 9.045055 3,366,316 (13)%
Non-tax qualified ............ 250,104 9.045055 2,262,204 (13)%
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified ................ 150,366 11.514627 1,731,408 11%
Non-tax qualified ............ 193,659 11.514627 2,229,911 11%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ................ 216,678 9.860001 2,136,445 4%
Non-tax qualified ............ 284,936 9.860001 2,809,469 4%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ................ 92,766 10.388404 963,691 5%
Non-tax qualified ............ 59,430 10.388404 617,383 5%
</TABLE>
(Continued)
<PAGE> 24
Asset fee @ 1.05% rate:
<TABLE>
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Income & Growth:
Tax qualified ....................... 81,928 13.065728 1,070,449 26%
Non-tax qualified ................... 128,629 13.065728 1,680,632 26%
American Century VP -
American Century VP International:
Tax qualified ....................... 99,298 11.852979 1,176,977 18%
Non-tax qualified ................... 165,809 11.852979 1,965,331 18%
American Century VP -
American Century VP Value:
Tax qualified ....................... 77,126 10.677353 823,502 4%
Non-tax qualified ................... 72,329 10.677353 772,282 4%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ....................... 89,640 13.019372 1,167,057 28%
Non-tax qualified ................... 135,100 13.019372 1,758,917 28%
Dreyfus Stock Index Fund:
Tax qualified ....................... 783,466 13.120640 10,279,575 27%
Non-tax qualified ................... 913,818 13.120640 11,989,877 27%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ....................... 131,684 13.205079 1,738,898 29%
Non-tax qualified ................... 246,123 13.205079 3,250,074 29%
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 524,588 11.408770 5,984,904 10%
Non-tax qualified ................... 864,765 11.408770 9,865,905 10%
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 253,263 13.831860 3,503,098 38%
Non-tax qualified ................... 343,224 13.831860 4,747,426 38%
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ....................... 376,294 9.575458 3,603,187 (5)%
Non-tax qualified ................... 598,620 9.575458 5,732,061 (5)%
Fidelity VIP - Overseas Portfolio -
Service Class:
Tax qualified ....................... 91,010 11.034969 1,004,293 11%
Non-tax qualified ................... 137,943 11.034969 1,522,197 11%
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ....................... 214,618 12.797393 2,746,551 29%
Non-tax qualified ................... 446,178 12.797393 5,709,915 29%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified ....................... 231,845 12.811215 2,970,216 23%
Non-tax qualified ................... 295,189 12.811215 3,781,730 23%
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C>
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ....................... 9,703 7.387124 71,677 (29)%
Non-tax qualified ................... 19,124 7.387124 141,271 (29)%
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 123,286 10.831355 1,335,354 7%
Non-tax qualified ................... 149,449 10.831355 1,618,735 7%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 391,203 13.353842 5,224,063 29%
Non-tax qualified ................... 499,622 13.353842 6,671,873 29%
Nationwide SAT - Equity Income Fund:
Tax qualified ....................... 32,573 11.574924 377,030 14%
Non-tax qualified ................... 46,558 11.574924 538,905 14%
Nationwide SAT - Global Equity Fund:
Tax qualified ....................... 52,138 11.907510 620,834 18%
Non-tax qualified ................... 52,521 11.907510 625,394 18%
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 425,444 10.929045 4,649,697 8%
Non-tax qualified ................... 578,467 10.929045 6,322,092 8%
Nationwide SAT - High Income Bond Fund:
Tax qualified ....................... 168,923 10.689393 1,805,684 5%
Non-tax qualified ................... 196,834 10.689393 2,104,036 5%
Nationwide SAT - Money Market Fund:
Tax qualified ....................... 773,874 10.492136 8,119,591 4%
Non-tax qualified ................... 932,153 10.492136 9,780,276 4%
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified ....................... 180,699 10.240891 1,850,519 2%
Non-tax qualified ................... 200,225 10.240891 2,050,482 2%
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified ....................... 20,280 10.906928 221,192 10%
Non-tax qualified ................... 35,289 10.906928 384,895 10%
Nationwide SAT - Small Cap Value Fund:
Tax qualified ....................... 73,139 9.421309 689,065 (4)%
Non-tax qualified ................... 149,068 9.421309 1,404,416 (4)%
Nationwide SAT - Small Company Fund:
Tax qualified ....................... 103,212 9.606706 991,527 0%
Non-tax qualified ................... 182,983 9.606706 1,757,864 0%
Nationwide SAT - Strategic Growth Fund:
Tax qualified ....................... 28,004 11.568711 323,970 13%
Non-tax qualified ................... 14,539 11.568711 168,197 13%
Nationwide SAT - Strategic Value Fund:
Tax qualified ....................... 36,418 10.078441 367,037 (1)%
Non-tax qualified ................... 85,804 10.078441 864,771 (1)%
Nationwide SAT - Total Return Fund:
Tax qualified ....................... 705,982 11.965436 8,447,382 17%
Non-tax qualified ................... 695,165 11.965436 8,317,952 17%
</TABLE>
(Continued)
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ................ 66,839 13.683246 914,574 30%
Non-tax qualified ............ 161,709 13.683246 2,212,704 30%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified ................ 41,741 16.125954 673,113 38%
Non-tax qualified ............ 107,495 16.125954 1,733,459 38%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ................ 269,744 10.446379 2,817,848 3%
Non-tax qualified ............ 330,876 10.446379 3,456,456 3%
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ................ 75,188 10.597477 796,803 11%
Non-tax qualified ............ 118,302 10.597477 1,253,703 11%
Oppenheimer VAF - Growth Fund:
Tax qualified ................ 110,392 12.056049 1,330,891 23%
Non-tax qualified ............ 122,036 12.056049 1,471,272 23%
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ................ 155,966 10.627355 1,657,506 4%
Non-tax qualified ............ 254,947 10.627355 2,709,412 4%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ................ 31,317 5.744349 179,896 (35)%
Non-tax qualified ............ 46,981 5.744349 269,875 (35)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ................ 10,468 6.132522 64,195 (32)%
Non-tax qualified ............ 17,880 6.132522 109,649 (32)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ................ 40,468 9.039759 365,821 (13)%
Non-tax qualified ............ 71,613 9.039759 647,364 (13)%
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified ................ 18,436 11.507907 212,160 11%
Non-tax qualified ............ 71,280 11.507907 820,284 11%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ................ 43,919 9.854235 432,788 4%
Non-tax qualified ............ 82,462 9.854235 812,600 4%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ................ 32,373 10.382320 336,107 5%
Non-tax qualified ............ 39,431 10.382320 409,385 5%
</TABLE>
<PAGE> 27
Asset fee @ 1.10% rate:
<TABLE>
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Income & Growth:
Tax qualified ....................... 7,515 12.515499 94,054 25%(a)
Non-tax qualified ................... 411 12.515499 5,144 25%(a)
American Century VP -
American Century VP International:
Non-tax qualified ................... 1,791 12.062037 21,603 21%(a)
American Century VP -
American Century VP Value:
Tax qualified ....................... 360 11.279817 4,061 13%(a)
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ....................... 10,035 12.784895 128,296 28%(a)
Non-tax qualified ................... 706 12.784895 9,026 28%(a)
Dreyfus Stock Index Fund:
Tax qualified ....................... 29,563 12.464249 368,481 25%(a)
Non-tax qualified ................... 1,760 12.464249 21,937 25%(a)
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ....................... 19,433 12.389971 240,774 24%(a)
Non-tax qualified ................... 366 12.389971 4,535 24%(a)
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 8,946 11.809798 105,650 18%(a)
Non-tax qualified ................... 384 11.809798 4,535 18%(a)
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 17,524 12.914475 226,313 29%(a)
Non-tax qualified ................... 382 12.914475 4,933 29%(a)
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ....................... 7,652 10.530579 80,580 5%(a)
Non-tax qualified ................... 71 10.530579 748 5%(a)
Fidelity VIP - Overseas Portfolio -
Service Class:
Tax qualified ....................... 171 12.187321 2,084 22%(a)
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ....................... 12,351 12.797152 158,058 28%(a)
Non-tax qualified ................... 54 12.797152 691 28%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified ....................... 3,636 12.309512 44,757 23%(a)
Non-tax qualified ................... 534 12.309512 6,573 23%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ....................... 18 11.395495 205 14%(a)
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 2,359 10.677473 25,188 7%(a)
</TABLE>
(Continued)
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 12,023 12.439602 149,561 24%(a)
Non-tax qualified ................... 1,118 12.439602 13,907 24%(a)
Nationwide SAT - Equity Income Fund:
Tax qualified ....................... 17 11.846282 201 18%(a)
Nationwide SAT - Global Equity Fund:
Tax qualified ....................... 586 12.212250 7,156 22%(a)
Non-tax qualified ................... 86 12.212250 1,050 22%(a)
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 9,774 9.853072 96,304 (1)%(a)
Non-tax qualified ................... 345 9.853072 3,399 (1)%(a)
Nationwide SAT - High Income Bond Fund:
Tax qualified ....................... 85 10.339812 879 3%(a)
Nationwide SAT - Money Market Fund:
Tax qualified ....................... 9,288 10.095781 93,770 1%(a)
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified ....................... 338 10.245831 3,463 2%(a)
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified ....................... 1,248 12.253848 15,293 23%(a)
Non-tax qualified ................... 36 12.253848 441 23%(a)
Nationwide SAT - Small Cap Value Fund:
Tax qualified ....................... 1,427 12.964349 18,500 30%(a)
Nationwide SAT - Small Company Fund:
Tax qualified ....................... 1,394 12.123056 16,900 21%(a)
Non-tax qualified ................... 89 12.123056 1,079 21%(a)
Nationwide SAT - Strategic Growth Fund:
Tax qualified ....................... 896 12.668723 11,351 27%(a)
Nationwide SAT - Strategic Value Fund:
Tax qualified ....................... 184 13.028676 2,397 30%(a)
Nationwide SAT - Total Return Fund:
Tax qualified ....................... 24,285 11.993303 291,257 20%(a)
Non-tax qualified ................... 1,477 11.993303 17,714 20%(a)
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ....................... 1,095 12.887023 14,111 29%(a)
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified ....................... 318 14.077949 4,477 41%(a)
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ....................... 2,949 11.858021 34,969 19%(a)
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ....................... 1,583 13.191805 20,883 32%(a)
Oppenheimer VAF - Growth Fund:
Tax qualified ....................... 591 13.244991 7,828 32%(a)
Non-tax qualified ................... 199 13.244991 2,636 32%(a)
</TABLE>
<PAGE> 29
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ....................... 4,829 12.340636 59,593 23%(a)
Non-tax qualified ................... 274 12.340636 3,381 23%(a)
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ....................... 18 12.634284 227 26%(a)
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ....................... 489 9.918535 4,850 (1)%(a)
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ....................... 883 10.411332 9,193 4%(a)
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified ....................... 252 11.896081 2,998 19%(a)
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ....................... 2 11.551939 23 16%(a)
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ....................... 61 12.839012 783 28%(a)
Asset fee @ 1.15% rate:
American Century VP -
American Century VP Income & Growth:
Tax qualified ....................... 1,887 12.513926 23,614 25%(a)
Non-tax qualified ................... 1,522 12.513926 19,046 25%(a)
American Century VP -
American Century VP International:
Tax qualified ....................... 1,080 12.060517 13,025 21%(a)
Non-tax qualified ................... 698 12.060517 8,418 21%(a)
American Century VP -
American Century VP Value:
Tax qualified ....................... 9 11.278389 102 13%(a)
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ....................... 2,027 12.783289 25,912 28%(a)
Non-tax qualified ................... 662 12.783289 8,463 28%(a)
Dreyfus Stock Index Fund:
Tax qualified ....................... 6,396 12.462691 79,711 25%(a)
Non-tax qualified ................... 964 12.462691 12,014 25%(a)
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ....................... 2,784 12.388419 34,489 24%(a)
Non-tax qualified ................... 1,343 12.388419 16,638 24%(a)
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 1,580 11.808307 18,657 18%(a)
Non-tax qualified ................... 324 11.808307 3,826 18%(a)
</TABLE>
(Continued)
<PAGE> 30
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 667 12.912859 8,613 29%(a)
Non-tax qualified ................... 670 12.912859 8,652 29%(a)
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ....................... 852 10.529250 8,971 5%(a)
Non-tax qualified ................... 168 10.529250 1,769 5%(a)
Fidelity VIP - Overseas Portfolio -
Service Class:
Tax qualified ....................... 221 12.185792 2,693 22%(a)
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ....................... 1,632 12.795546 20,882 28%(a)
Non-tax qualified ................... 887 12.795546 11,350 28%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified ....................... 52 12.307964 640 23%(a)
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 798 10.676123 8,520 7%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 2,994 12.438039 37,239 24%(a)
Non-tax qualified ................... 573 12.438039 7,127 24%(a)
Nationwide SAT - Equity Income Fund:
Tax qualified ....................... 58 11.844786 687 18%(a)
Nationwide SAT - Global Equity Fund:
Tax qualified ....................... 97 12.210713 1,184 22%(a)
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 2,196 9.851828 21,635 (1)%(a)
Non-tax qualified ................... 346 9.851828 3,409 (1)%(a)
Nationwide SAT - High Income Bond Fund:
Tax qualified ....................... 2 10.338506 21 3%(a)
Nationwide SAT - Money Market Fund:
Tax qualified ....................... 99 10.094495 999 1%(a)
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified ....................... 367 10.244538 3,760 2%(a)
Nationwide SAT -
Select Advisers Mid Cap Fund:
Tax qualified ....................... 81 12.252304 992 23%(a)
Nationwide SAT - Small Cap Value Fund:
Tax qualified ....................... 757 12.962717 9,813 30%(a)
Nationwide SAT - Small Company Fund:
Tax qualified ....................... 67 12.121529 812 21%(a)
Nationwide SAT - Strategic Growth Fund:
Tax qualified ....................... 52 12.667131 659 27%(a)
Nationwide SAT - Strategic Value Fund:
Tax qualified ....................... 283 13.027042 3,687 30%(a)
</TABLE>
<PAGE> 31
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT - Total Return Fund:
Tax qualified ................... 4,692 11.991803 56,266 20%(a)
Non-tax qualified ............... 645 11.991803 7,735 20%(a)
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ................... 110 12.885403 1,417 29%(a)
Non-tax qualified ............... 2 12.885403 26 29%(a)
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Tax qualified ................... 120 14.076184 1,689 41%(a)
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ................... 392 11.856528 4,648 19%(a)
Non-tax qualified ............... 110 11.856528 1,304 19%(a)
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ................... 461 13.190143 6,081 32%(a)
Oppenheimer VAF - Growth Fund:
Tax qualified ................... 206 13.243332 2,728 32%(a)
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ................... 1,075 12.339083 13,265 23%(a)
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ................... 20 12.632701 253 26%(a)
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ................... 227 10.410018 2,363 4%(a)
Asset fee @ 1.20% rate:
American Century VP -
American Century VP Income & Growth:
Tax qualified ................... 1,366 12.431326 16,981 24%(a)
Non-tax qualified ............... 1,176 12.431326 14,619 24%(a)
American Century VP -
American Century VP International:
Non-tax qualified ............... 223 10.904652 2,432 9%(a)
American Century VP -
American Century VP Value:
Tax qualified ................... 3 11.497731 34 15%(a)
Non-tax qualified ............... 1,306 11.497731 15,016 15%(a)
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ................... 925 12.758878 11,802 28%(a)
Non-tax qualified ............... 2,098 12.758878 26,768 28%(a)
Dreyfus Stock Index Fund:
Tax qualified ................... 3,618 12.367188 44,744 24%(a)
Non-tax qualified ............... 26,086 12.367188 322,610 24%(a)
</TABLE>
(Continued)
<PAGE> 32
<TABLE>
<S> <C> <C> <C> <C>
Dreyfus VIF --
Capital Appreciation Portfolio:
Tax qualified ....................... 390 12.207586 4,761 22%(a)
Non-tax qualified ................... 2,910 12.207586 35,524 22%(a)
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 3,974 11.850451 47,094 19%(a)
Non-tax qualified ................... 776 11.850451 9,196 19%(a)
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 10,429 13.015101 135,734 30%(a)
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ....................... 991 10.384114 10,291 4%(a)
Non-tax qualified ................... 1,251 10.384114 12,991 4%(a)
Fidelity VIP - Overseas Portfolio -
Service Class:
Tax qualified ....................... 3,385 11.296846 38,240 13%(a)
Non-tax qualified ................... 811 11.296846 9,162 13%(a)
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ....................... 1,641 12.602507 20,681 26%(a)
Non-tax qualified ................... 10,719 12.602507 135,086 26%(a)
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class:
Tax qualified ....................... 1 12.421717 12 24%(a)
Non-tax qualified ................... 2,338 12.421717 29,042 24%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Non-tax qualified ................... 593 11.400149 6,760 14%(a)
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 2 10.772545 22 8%(a)
Non-tax qualified ................... 842 10.772545 9,070 8%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 35 12.392954 434 24%(a)
Non-tax qualified ................... 2,724 12.392954 33,758 24%(a)
Nationwide SAT - Equity Income Fund:
Non-tax qualified ................... 1,552 11.927845 18,512 19%(a)
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 10 10.174058 102 2%(a)
Non-tax qualified ................... 1,172 10.174058 11,924 2%(a)
Nationwide SAT - High Income Bond Fund:
Tax qualified ....................... 19 10.558563 201 6%(a)
Non-tax qualified ................... 1,154 10.558563 12,185 6%(a)
Nationwide SAT - Money Market Fund:
Non-tax qualified ................... 48,756 10.126097 493,708 1%(a)
Nationwide SAT - Multi Sector Bond Fund:
Non-tax qualified ................... 1,706 10.475252 17,871 5%(a)
</TABLE>
<PAGE> 33
<TABLE>
<S> <C> <C> <C> <C>
Nationwide SAT - Small Cap Value Fund:
Tax qualified ..................... 1,749 12.586199 22,013 26%(a)
Non-tax qualified ................. 1,878 12.586199 23,637 26%(a)
Nationwide SAT - Small Company Fund:
Tax qualified ..................... 3 12.016781 36 20%(a)
Nationwide SAT - Strategic Value Fund:
Tax qualified ..................... 853 12.477330 10,643 25%(a)
Nationwide SAT - Total Return Fund:
Tax qualified ..................... 335 11.968910 4,010 20%(a)
Non-tax qualified ................. 2,349 11.968910 28,115 20%(a)
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ..................... 29 12.307946 357 23%(a)
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio:
Non-tax qualified ................. 1,744 13.702754 23,898 37%(a)
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ..................... 874 11.821068 10,332 18%(a)
Non-tax qualified ................. 1,913 11.821068 22,614 18%(a)
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ..................... 47 12.961315 609 30%(a)
Non-tax qualified ................. 1,383 12.961315 17,925 30%(a)
Oppenheimer VAF - Growth Fund:
Tax qualified ..................... 1 12.752843 13 28%(a)
Non-tax qualified ................. 2,543 12.752843 32,430 28%(a)
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ..................... 806 12.149185 9,792 21%(a)
Non-tax qualified ................. 1,940 12.149185 23,569 21%(a)
Van Eck WIT -
Worldwide Emerging Markets Fund:
Non-tax qualified ................. 1,018 12.101814 12,320 21%(a)
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ..................... 3 10.740684 32 7%(a)
Non-tax qualified ................. 2,201 10.740684 23,640 7%(a)
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified ..................... 25 11.688738 292 17%(a)
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ..................... 3 12.739606 38 27%(a)
</TABLE>
(Continued)
<PAGE> 34
<TABLE>
<S> <C> <C> <C> <C>
Asset fee @ 1.25% rate:
American Century VP --
American Century VP Value:
Non-tax qualified ................... 322 11.495807 3,702 15%(a)
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ....................... 1,342 12.756741 17,120 28%(a)
Dreyfus Stock Index Fund:
Tax qualified ....................... 1,241 12.365124 15,345 24%(a)
Non-tax qualified ................... 1,686 12.365124 20,848 24%(a)
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 739 11.848469 8,756 18%(a)
Non-tax qualified ................... 1,549 11.848469 18,353 18%(a)
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 41 13.012933 534 30%(a)
Non-tax qualified ................... 1,201 13.012933 15,629 30%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ....................... 154 11.398245 1,755 14%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ....................... 203 12.390885 2,515 24%(a)
Nationwide SAT - Global Equity Fund:
Tax qualified ....................... 155 11.745400 1,821 17%(a)
Non-tax qualified ................... 143 11.745400 1,680 17%(a)
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 997 10.172348 10,142 2%(a)
Non-tax qualified ................... 598 10.172348 6,083 2%(a)
Nationwide SAT - High Income Bond Fund:
Non-tax qualified ................... 151 10.556787 1,594 6%(a)
Nationwide SAT - Multi Sector Bond Fund:
Non-tax qualified ................... 153 10.473496 1,602 5%(a)
Nationwide SAT - Small Cap Value Fund:
Non-tax qualified ................... 310 12.584102 3,901 26%(a)
Nationwide SAT - Total Return Fund:
Tax qualified ....................... 1,038 11.966903 12,422 20%(a)
Non-tax qualified ................... 137 11.966903 1,639 20%(a)
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ....................... 7 11.819096 83 18%(a)
Non-tax qualified ................... 789 11.819096 9,325 18%(a)
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ....................... 147 12.959156 1,905 30%(a)
Non-tax qualified ................... 678 12.959156 8,786 30%(a)
Oppenheimer VAF - Growth Fund:
Tax qualified ....................... 482 12.750719 6,146 28%(a)
</TABLE>
<PAGE> 35
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ....................... 9 12.147153 109 21%(a)
Warburg Pincus Trust -
Growth & Income Portfolio:
Tax qualified ....................... 499 11.686779 5,832 17%(a)
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ....................... 487 12.737475 6,203 27%(a)
Asset fee @ 1.30% rate:
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ....................... 571 12.754610 7,283 28%(a)
Dreyfus Stock Index Fund:
Tax qualified ....................... 1,040 12.363055 12,858 24%(a)
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ....................... 343 12.203505 4,186 22%(a)
Fidelity VIP - Equity-Income Portfolio -
Service Class:
Tax qualified ....................... 2,008 11.846486 23,788 18%(a)
Fidelity VIP - Growth Portfolio -
Service Class:
Tax qualified ....................... 123 13.010755 1,600 30%(a)
Fidelity VIP-II - Contrafund Portfolio -
Service Class:
Tax qualified ....................... 169 12.598299 2,129 26%(a)
Nationwide SAT - Balanced Fund:
Tax qualified ....................... 1,074 10.768931 11,566 8%(a)
Nationwide SAT - Government Bond Fund:
Tax qualified ....................... 144 10.170644 1,465 2%(a)
Nationwide SAT - Multi Sector Bond Fund:
Tax qualified ....................... 115 10.471735 1,204 5%(a)
Nationwide SAT - Small Company Fund:
Tax qualified ....................... 4 12.012761 48 20%(a)
Nationwide SAT - Strategic Growth Fund:
Tax qualified ....................... 134 12.459415 1,670 25%(a)
Nationwide SAT - Strategic Value Fund:
Tax qualified ....................... 3 12.473162 37 25%(a)
Nationwide SAT - Total Return Fund:
Tax qualified ....................... 1,548 11.964909 18,522 20%(a)
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ....................... 3 11.817120 35 18%(a)
Oppenheimer VAF -
Aggressive Growth Fund:
Tax qualified ....................... 415 12.956986 5,377 30%(a)
</TABLE>
(Continued)
<PAGE> 36
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer VAF - Growth Fund:
Tax qualified ..................... 102 12.748581 1,300 27%(a)
Oppenheimer VAF -
Growth & Income Fund:
Tax qualified ..................... 367 12.145122 4,457 21%(a)
Asset fee @ 1.35% rate:
American Century VP -
American Century VP International:
Tax qualified ..................... 272 12.054452 3,279 21%(a)
Dreyfus Stock Index Fund:
Tax qualified ..................... 311 12.456413 3,874 25%(a)
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ..................... 259 12.382184 3,207 24%(a)
Fidelity VIP - High Income Portfolio -
Service Class:
Tax qualified ..................... 295 10.523939 3,105 5%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ..................... 51 12.431774 634 24%(a)
Nationwide SAT - Money Market Fund:
Tax qualified ..................... 4,169 10.089342 42,062 1%(a)
Nationwide SAT - Total Return Fund:
Tax qualified ..................... 265 11.985762 3,176 20%(a)
===== =========
$2,588,796,935
==============
</TABLE>
(a) This investment option was not being utilized for the entire period.
Accordingly, the annual return was computed for such period as the
investment option was utilized.
(b) The annual return does not include contract charges satisfied by
surrendering units.
<PAGE> 102
<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, 1998 and
1997, 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,
1998. 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, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
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 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
Years ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</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, 1998, 1997 and 1996
(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 10 and 14. 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, including variable annuities, fixed annuities and life
insurance.
(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. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "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, 1998 or 1997.
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 deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(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. 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. 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).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) 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 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
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, 1998 and
1997 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, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
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
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</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) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
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) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</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) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</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, 1998, 1997 and 1996.
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) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(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.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
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 $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. 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 $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $187.9 million and $220.2 million as of December 31,
1998 and 1997, 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.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition to the 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,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
----------------------------------------------------------------------
and Dividend Restrictions
-------------------------
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(10) 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, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 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 $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, 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 $31.9 million and $20.5 million as of
December 31, 1998 and 1997, 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 1998 and
1997 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> 23
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, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $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 $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
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, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) 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. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(13) Segment Information
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</TABLE>
-----------
(1) The Company's method of allocating net investment income results
in a charge (negative net investment income) to the Variable
Annuities segment which is recognized in the Corporate and Other
segment. The charge relates to non-invested assets which support
this segment on a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
(14) 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.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 10 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, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
