<PAGE> 1
Registration No. 333-43639
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
POST-EFFECTIVE AMENDMENT NO. 2
TO FORM S-6
FOR REGISTRATION UNDER THE SECURITIES ACT OF 1933 OF
SECURITIES OF UNIT INVESTMENT TRUSTS REGISTERED ON FORM N-8B-2
----------------------------
NATIONWIDE VL SEPARATE ACCOUNT-C
(EXACT NAME OF TRUST)
----------------------------
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(EXACT NAME AND ADDRESS OF DEPOSITOR AND REGISTRANT)
DENNIS W. CLICK
SECRETARY
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43215
(NAME AND ADDRESS OF AGENT FOR SERVICE)
----------------------------
================================================================================
This Post-Effective Amendment amends the Registration Statement in respect to
the Prospectus.
It is proposed that this filing will become effective (check appropriate box).
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on September 27, 1999 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[ ] on (date) pursuant to paragraph (a)(1) of Rule 485
If appropriate check the following box:
[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities being registered: Corporate Flexible Premium Variable
Universal Life Insurance Policies
Approximate date of proposed offering: Continuously on and after May 1, 1999
[ ] Check box if it is proposed that this filing will become effective on (date)
at (time) pursuant to Rule 487.
================================================================================
1 of 107
<PAGE> 2
CROSS REFERENCE TO ITEMS REQUIRED
BY FORM N-8B-2
N-8B-2 ITEM CAPTION IN PROSPECTUS
1.................................Nationwide Life and Annuity Insurance
Company
The Variable Account
2.................................Nationwide Life and Annuity Insurance
Company
3.................................Custodian of Assets
4.................................Distribution of The Policies
5.................................The Variable Account
6.................................Not Applicable
7.................................Not Applicable
8.................................Not Applicable
9.................................Legal Proceedings
10.................................Information About The Policies; How The
Cash Value Varies; Right to Exchange for a
Fixed Benefit Policy; Reinstatement; Other
Policy Provisions
11 Investments of The Variable Account
12.................................The Variable Account
13.................................Policy Charges
Reinstatement
14.................................Underwriting and Issuance -
Premium Payments
Minimum Requirements for
Issuance of a Policy
15.................................Investments of the Variable
Account; Premium Payments
16.................................Underwriting and Issuance -
Allocation of Cash Value
17.................................Surrendering The Policy for Cash
18.................................Reinvestment
19.................................Not Applicable
20.................................Not Applicable
21.................................Policy Loans
22.................................Not Applicable
23.................................Not Applicable
24.................................Not Applicable
25.................................Nationwide Life and Annuity
Insurance Company
26.................................Not Applicable
27.................................Nationwide Life and Annuity
Insurance Company
28.................................Company Management
29.................................Company Management
2 of 107
<PAGE> 3
N-8B-2 ITEM........................CAPTION IN PROSPECTUS
30.................................Not Applicable
31.................................Not Applicable
32.................................Not Applicable
33.................................Not Applicable
34.................................Not Applicable
35.................................Nationwide Life and Annuity
Insurance Company
36.................................Not Applicable
37.................................Not Applicable
38.................................Distribution of The Policies
39.................................Distribution of The Policies
40.................................Not Applicable
41(a)..............................Distribution of The Policies
42.................................Not Applicable
43.................................Not Applicable
44.................................How The Cash Value Varies
45.................................Not Applicable
46.................................How The Cash Value Varies
47.................................Not Applicable
48.................................Custodian of Assets
49.................................Not Applicable
50.................................Not Applicable
51.................................Summary of The Policies;
Information About The Policies
52.................................Substitution of Securities
53.................................Taxation of The Company
54.................................Not Applicable
55.................................Not Applicable
56.................................Not Applicable
57.................................Not Applicable
58.................................Not Applicable
59.................................Financial Statements
3 of 107
<PAGE> 4
SUPPLEMENT DATED SEPTEMBER 27, 1999 TO
PROSPECTUS DATED MAY 1, 1999 FOR
CORPORATE FLEXIBLE PREMIUM VARIABLE UNIVERSAL LIFE
ISSUED BY
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VL SEPARATE ACCOUNT - C
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1. EFFECTIVE JULY 6, 1999, ALL REFERENCES TO WARBURG PINCUS ASSET MANAGEMENT,
INC. IN YOUR PROSPECTUS CHANGED TO:
Credit Suisse Asset Management, LLC
2. ALL REFERENCES TO NATIONWIDE SEPARATE ACCOUNT TRUST - NATIONWIDE SELECT
ADVISERS MID CAP FUND IN YOUR PROSPECTUS ARE CHANGED TO:
Nationwide Separate Account Trust - Nationwide Mid Cap Index Fund
AND THE SUBADVISER FOR THIS UNDERLYING MUTUAL FUND IS CHANGED TO:
The Dreyfus Corporation
3. THE FOLLOWING UNDERLYING MUTUAL FUNDS WILL NOT BE AVAILABLE AS INVESTMENT
OPTIONS FOR POLICIES ISSUED ON OR AFTER SEPTEMBER 27, 1999:
Warburg Pincus Trust - International Equity Portfolio
Warburg Pincus Trust - Post-Venture Capital Portfolio
CURRENT POLICIES ARE NOT AFFECTED BY THIS CHANGE.
4. PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING UNDERLYING
MUTUAL FUND AS AN INVESTMENT OPTION FOR ALL CONTRACTS:
Dreyfus Investment Portfolios - European Equity Portfolio
5. THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES" TABLE LOCATED ON PAGES 7
THROUGH 9 OF YOUR PROSPECTUS, IS AMENDED AS FOLLOWS:
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND AVERAGE NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
- ----------------------------------------------------------------------------------------------------------------------
Total Underlying
Management Other 12b-1 Mutual Fund Expenses
Fees Expenses Fees
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Investment Portfolios - European Equity 1.00% 0.50% 0.00% 1.50%
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.15% 0.50% 0.00% 0.65%
- ----------------------------------------------------------------------------------------------------------------------
</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
<PAGE> 5
relating to the underlying mutual funds was provided by the underlying mutual
funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Total Underlying
Management Other 12b-1 Mutual Fund
Fees Expenses Fees Expenses
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dreyfus Investment Portfolios - European Equity 1.00% 2.67% 0.00% 3.67%
Portfolio
----------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.50% 0.50% 0.00% 1.00%
----------------------------------------------------------------------------------------------------------------------
</TABLE>
6. EFFECTIVE SEPTEMBER 1, 1999 "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS" LOCATED ON PAGES 43 THROUGH 52 OF YOUR PROSPECTUS IS AMENDED AS
FOLLOWS:
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.
7. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" LOCATED ON PAGES 43
THROUGH 52 OF YOUR PROSPECTUS IS AMENDED AS FOLLOWS:
DREYFUS INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management
investment company known as a mutual fund. Shares are offered only to
variable annuity and variable life insurance separate accounts established
by insurance companies to fund variable annuity contracts and variable life
insurance policies and to qualified pension and retirement plans.
Individuals may not purchase shares directly from the Fund. The Dreyfus
Corporation serves as the Fund's investment adviser.
EUROPEAN EQUITY PORTFOLIO
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.
NATIONWIDE SEPARATE ACCOUNT TRUST
SUBADVISED NATIONWIDE FUNDS
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.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Corporate Flexible Premium Variable Universal Life Insurance Policies
Issued by Nationwide Life and Annuity Insurance Company
through its Nationwide VL Separate Account-C
The date of this prospectus is May 1, 1999
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the policies
before investing. Please read it and keep it for future reference
The following underlying mutual funds are available under the policies:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC. A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
- American Century VP Income & Growth
- American Century VP International
- American Century VP Value
DREYFUS
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus Stock Index Fund
- Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
FEDERATED INSURANCE SERIES
- Federated Quality Bond Fund II
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
- VIP Equity-Income Portfolio: Service Class
- VIP Growth Portfolio: Service Class
- VIP High Income Portfolio: Service Class*
- VIP Overseas Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
- VIP II Contrafund Portfolio: Service Class
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Growth Opportunities Portfolio: Service Class
MORGAN STANLEY
- Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging Markets Debt
Portfolio
- Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities
Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- Capital Appreciation Fund
- Total Return Fund
- Government Bond Fund
- Money Market Fund
- Nationwide Balanced Fund* (subadviser: Salomon Brothers Asset
Management, Inc.)
- Nationwide Equity Income Fund (subadviser: Federated Investment
Counseling)
- Nationwide Global Equities Fund (subadviser: J.P. Morgan Investment
Management Inc.)
- Nationwide High Income Bond Fund* (subadviser: Federated Investment
Counseling)
- Nationwide Multi Sector Bond Fund* (subadviser: Salomon Brothers Asset
Management, Inc. with Salomon Brothers Asset Management Limited)
- Nationwide Select Advisers Mid Cap Fund (subadvisers: First Pacific
Advisors, Inc., Pilgrim Baxter & Associates, Ltd., and Rice, Hall, James
& Associates)
- Nationwide Select Advisers Small Cap Growth Fund (subadviser: Franklin
Advisers, Inc., Miller Anderson & Sherrerd, LLP, Neuberger Berman, LLC.)
- Nationwide Small Cap Value Fund (subadviser: The Dreyfus Corporation)
- Nationwide Small Company Fund (subadviser: The Dreyfus Corporation,
Neuberger Berman, LLC, Lazard Asset Management, Strong Capital
Management, Inc. and Warburg Pincus Asset Management, Inc.)
- Nationwide Strategic Growth Fund (subadviser: Strong Capital Management
Inc.)
1
<PAGE> 7
- Nationwide Strategic Value Fund (subadviser: Strong Capital Management
Inc./Schafer Capital Management Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- AMT Guardian Portfolio*
- AMT Mid-Cap Growth Portfolio
- AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- Oppenheimer Aggressive Growth Fund/VA (formerly "Oppenheimer Capital
Appreciation Fund")
- Oppenheimer Capital Appreciation Fund/VA (formerly "Oppenheimer Growth
Fund")
- Oppenheimer Main Street Growth & Income Fund/VA (formerly "Oppenheimer
Growth & Income Fund")
VAN ECK WORLDWIDE INSURANCE TRUST
- Worldwide Emerging Markets Fund
- Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
- Growth & Income Portfolio
- International Equity Portfolio
- Post-Venture Capital Portfolio
*Invest in lower quality debt securities commonly referred to as junk bonds.
To obtain copies of any underlying mutual fund prospectus, please call:
1-800-547-7548
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
P.O. BOX 182150
COLUMBUS, OHIO 43218-2150
Material incorporated by reference to this prospectus can be found on the SEC
website at:
www.sec.gov
Information about this and other Best of America Products can be found on the
world-wide web at:
www.bestofamerica.com
This policy is NOT:
- a bank deposit;
- endorsed by a bank or government agency;
- federally insured; or
- available in every state.
The life insurance policies offered by this prospectus are corporate flexible
premium variable universal life insurance policies. They are designed for use by
corporations and employers, to provide flexibility to vary the amount and
frequency of premium payments. A cash surrender value may be offered if the
policy is terminated during the lifetime of the insured.
The purpose of this policy is to provide life insurance protection for the
beneficiary named in the policy. No claim is made that the policy is in any way
similar or comparable to a systematic investment plan of a mutual fund.
The death benefit and cash value of this policy may vary to reflect the
experience of the Nationwide VL Separate Account -C (the "variable account") or
the fixed account, depending on how premium payments are invested.
Investors assume certain risks when investing in the policies, including the
risk of losing money.
Nationwide Life and Annuity Insurance Company ("Nationwide") guarantees the
death benefit for as long as the policy is in force. The cash surrender value is
not guaranteed. The policy will lapse if the cash surrender value is
insufficient to cover policy charges.
Nationwide guarantees to keep the policy in force so long as minimum premium
requirements have been met.
Benefits described in this prospectus may not be available in every jurisdiction
- - refer to your policy for specific benefit information.
THIS PROSPECTUS IS NOT AN OFFERING IN ANY JURISDICTION WHERE SUCH OFFERING MAY
NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY REPRESENTATIONS IN
CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS.
2
<PAGE> 8
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.
3
<PAGE> 9
GLOSSARY OF SPECIAL TERMS
ATTAINED AGE- The insured's age on the policy date, plus the number of full
years since the policy date.
ACCUMULATION UNIT- An accounting unit of measure used to calculate the cash
value of the variable account.
FIXED ACCOUNT- An investment option which is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
GUIDELINE LEVEL PREMIUM- The level annual premiums required to mature the policy
under guaranteed mortality and current expense charges with an annual effective
interest rate of 4%.
MATURITY DATE- The policy anniversary on or next following the insured's 100th
birthday.
NATIONWIDE - Nationwide Life and Annuity Insurance Company.
NET AMOUNT AT RISK- Net amount at risk is the death benefit minus the cash
value. On a monthly anniversary day, the net amount at risk is the death benefit
minus the cash value prior to subtraction of the base policy cost of insurance
charge.
NET PREMIUMS- Net premiums are equal to the actual premiums minus the percent of
premium charges. The percent of premium charges are shown on the policy data
page.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units are separately maintained.
TARGET PREMIUM- The level annual premium at which the sales load is reduced on a
current basis.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide VL Separate Account -C, 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.
4
<PAGE> 10
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS...............................4
SUMMARY OF POLICY EXPENSES..............................7
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..................7
SYNOPSIS OF THE POLICIES...............................10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY..........10
NATIONWIDE ADVISORY SERVICES, INC......................10
INVESTING IN THE POLICY................................10
The Variable Account and Underlying Mutual Funds
The Fixed Account
INFORMATION ABOUT THE POLICIES.........................13
Minimum Requirements for Policy Issuance
Premium Payments
Pricing
POLICY CHARGES.........................................13
Sales Load
Premium Expense Charge
Monthly Cost of Insurance
Monthly Administrative Charge
Mortality and Expense Risk Charge
Income Tax
Reduction of Charges
SURRENDERING THE POLICY FOR CASH.......................15
Surrender (Redemption)
Cash Surrender Value
Partial Surrenders
Income Tax Withholding
VARIATION IN CASH VALUE................................17
POLICY PROVISIONS......................................17
Policy Owner
Beneficiary
Changes in Existing Insurance Coverage
OPERATION OF THE POLICY................................18
Allocation of Net Premium and Cash Value
How the Investment Experience is Determined
Net Investment Factor
Determining the Cash Value
Transfers
RIGHT TO REVOKE........................................20
POLICY LOANS...........................................20
Taking a Policy Loan
Effect on Investment Performance
Interest
Effect on Death Benefit and Cash Value
Repayment
ASSIGNMENT.............................................22
POLICY OWNER SERVICES..................................22
Dollar Cost Averaging
DEATH BENEFIT INFORMATION..............................22
Calculation of the Death Benefit
Changes in the Death Benefit Option
Proceeds Payable on Death
Incontestability
Error in Age
Suicide
Maturity Proceeds
RIGHT OF CONVERSION....................................25
GRACE PERIOD...........................................26
Reinstatement
TAX MATTERS............................................26
Policy Proceeds
Withholding
Federal Estate and Generation-Skipping
Transfers Taxes
Non-Resident Aliens
Taxation of Nationwide
Tax Changes
LEGAL CONSIDERATIONS...................................29
YEAR 2000 COMPLIANCE ISSUES............................30
STATE REGULATION.......................................30
REPORTS TO POLICY OWNERS...............................31
ADVERTISING............................................31
LEGAL PROCEEDINGS......................................31
EXPERTS................................................32
REGISTRATION STATEMENT.................................32
LEGAL OPINIONS.........................................32
DISTRIBUTION OF THE POLICIES...........................32
5
<PAGE> 11
ADDITIONAL INFORMATION ABOUT
NATIONWIDE........................................35
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS.....43
APPENDIX B: ILLUSTRATIONS OF CASH VALUES,
CASH SURRENDER VALUES, AND DEATH BENEFITS.........53
6
<PAGE> 12
SUMMARY OF POLICY EXPENSES
Nationwide deducts certain charges from the policy. Charges are made for
administrative and sales expenses, providing life insurance protection and
assuming the mortality and expense risks.
Nationwide deducts a sales load and a premium expense charge from premium
payments. The sales load is guaranteed never to exceed 5.5% of each premium
payment during the first 7 policy years and 2% thereafter. On a current basis,
the sales load is 3.0% of premium payment plus 2.5% of premiums up to the target
premium during the first 7 policy years, and 0% on all premiums thereafter (see
"Sales Load").
The premium expense charge is approximately 3.5% of premiums for all states (see
"Premium Expense Charge").
Nationwide deducts the following charges from the cash value of the policy:
- monthly cost of insurance
- monthly cost of any additional benefits provided by riders to the policy
- administrative expense charge(1)
- mortality and expense risk charge(2).
(1)Currently, the administrative expense charge is $5 per month. It is
guaranteed not to exceed $10 per month.
(2)The mortality and expense risk charge is guaranteed not to exceed an annual
effective rate of 0.75% of the daily net assets of the variable account. On a
current basis, the annual effective rate will be 0.40% in policy years 1-4,
0.25% in policy years 5-20, and 0.10% thereafter.
Nationwide does not deduct a surrender charge from the polices.
For more information about any policy charge, see "Policy Charges" in this
prospectus.
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund net assets, after expense reimbursement)
-----------------------------------------------------------------------------------------------------------------
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - 0.70% 0.00% 0.00% 0.70%
American Century VP Income & Growth
-----------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 1.47% 0.00% 0.00% 1.47%
American Century VP International
-----------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - 1.00% 0.00% 0.00% 1.00%
American Century VP Value
-----------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, 0.75% 0.05% 0.00% 0.80%
Inc.
-----------------------------------------------------------------------------------------------------------------
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 0.23% 0.47% 0.00% 0.70%
Bond Fund II
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service 0.49% 0.08% 0.10% 0.67%
Class
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service 0.58% 0.14% 0.10% 0.82%
Class
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.13% 0.10% 0.97%
-----------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service 0.59% 0.06% 0.10% 0.75%
Class
-----------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 13
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fidelity VIP III Growth Opportunities 0.59% 0.10% 0.10% 0.79%
Portfolio: Service Class
-----------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, 0.27% 1.25% 0.00% 1.52%
Inc. - Emerging Markets Debt Portfolio
-----------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.60% 0.07% 0.00% 0.67%
-----------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.50% 0.07% 0.00% 0.57%
-----------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.40% 0.06% 0.00% 0.46%
-----------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.59% 0.06% 0.00% 0.65%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.75% 0.15% 0.00% 0.90%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 0.15% 0.00% 0.95%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 1.00% 0.20% 0.00% 1.20%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.15% 0.00% 0.95%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.15% 0.00% 1.20%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Small Cap 1.10% 0.20% 0.00% 1.30%
Growth Fund
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 1.00% 0.07% 0.00% 1.07%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.10% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT - Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT - Mid-Cap Growth Portfolio 0.85% 0.15% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT - Partners Portfolio 0.78% 0.06% 0.00% 0.84%
-----------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.69% 0.02% 0.00% 0.71%
Oppenheimer Aggressive Growth Fund/VA
-----------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.72% 0.03% 0.00% 0.75%
Oppenheimer Capital Appreciation Fund/VA
-----------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 0.74% 0.05% 0.00% 0.79%
Oppenheimer Main Street Growth & Income Fund/VA
-----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.50% 0.00% 1.50%
Emerging Markets Fund
-----------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.16% 0.00% 1.16%
Hard Assets Fund
-----------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan 1.20% 0.00% 0.00% 1.20%
Stanley Real Estate Securities Portfolio
-----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 0.51% 0.49% 0.00% 1.00%
-----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity 1.00% 0.33% 0.00% 1.33%
Portfolio
-----------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital 1.08% 0.32% 0.00% 1.40%
Portfolio
-----------------------------------------------------------------------------------------------------------------
</TABLE>
The Federated Insurance Series - Federated Quality Bond Fund II has a voluntary
expense cap of 0.70%.
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
8
<PAGE> 14
relating to the underlying mutual funds was provided by the underlying mutual
funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Management Other Total Underlying
Fees Expenses 12b-1 Fees Mutual Fund Expenses
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
<S> <C> <C> <C> <C>
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
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
Morgan Stanley Dean Witter Universal Funds, Inc. 0.80% 1.25% 0.00% 2.05%
- - Emerging Markets Debt Portfolio
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Balanced Fund 0.75% 0.21% 0.00% 0.96%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Equity Income Fund 0.80% 0.35% 0.00% 1.15%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Global Equity Fund 1.00% 0.46% 0.00% 1.46%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.32% 0.00% 1.12%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.21% 0.00% 0.96%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.49% 0.00% 1.54%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Select Advisers Small Cap Growth 1.10% 0.58% 0.00% 1.68%
Fund
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.43% 0.00% 1.33%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.65% 0.00% 1.55%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.33% 0.00% 1.23%
- -------------------------------------------------- ------------- ------------- -------------- ----------------------
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>
9
<PAGE> 15
SYNOPSIS OF THE POLICIES
The policy offered by this prospectus provides for life insurance coverage on
the insured. The death benefit and cash value of the policy may increase or
decrease to reflect the performance of the investment options chosen by the
policy owner (see "Death Benefit Information").
CASH SURRENDER VALUE
If the policy is terminated during the insured's lifetime, a cash surrender
value may be payable under the policy. However, there is no guaranteed cash
surrender value (see "Variation in Cash Value "). The policy will lapse without
value if the cash surrender value falls below what is needed to cover policy
charges.
PREMIUMS
The minimum initial premium for which a policy may be issued is equal to three
times the initial minimum monthly premium. The initial premium is shown on the
policy data page. Each premium payment must be at least $50.
Additional premium payments may be made at any time while the policy is in force
(see "Premium Payments").
TAXATION
The policies described in this prospectus meet the definition of "life
insurance" under Section 7702 of the Internal Revenue Code. Nationwide will
monitor compliance with the tests provided by Section 7702 to insure the
policies continue to receive this favored tax treatment (see "Tax Matters").
NONPARTICIPATING POLICIES
The policies are nonparticipating policies on which no dividends are payable.
The policies do not share in the profits or surplus earnings of Nationwide.
RIDERS
A rider may be added to the policy (availability varies by state).
Riders currently include:
- Additional Protection Rider; and
- Change of Insured Rider.
POLICY CANCELLATION
Policy owners may return the policy for any reason within certain time periods
and Nationwide will refund the policy value or the amount required by law (see
"Right to Revoke").
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in
February 1981. It is a member of the Nationwide group with its home office at
One Nationwide Plaza, Columbus, Ohio 43215. Nationwide is a provider of life
insurance, annuities and retirement products.
CUSTODIAN OF ASSETS
Nationwide serves as the custodian of the assets of the variable account.
OTHER CONTRACTS ISSUED BY NATIONWIDE
Nationwide does presently and will, from time to time, offer variable contracts
and policies with benefits which vary in accordance with the investment
experience of a separate account of Nationwide.
NATIONWIDE ADVISORY SERVICES, INC.
The policies are distributed by Nationwide Advisory Services, Inc. ("NAS"),
Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a wholly owned subsidiary
of Nationwide Life Insurance Company.
INVESTING IN THE POLICY
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide VL Separate Account-C is a separate account that invests in the
underlying mutual fund options listed in Appendix A. Nationwide established the
separate account on July 22,1997, pursuant to Ohio law. Although
10
<PAGE> 16
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 in general are not chargeable with
liabilities incurred in any other business of Nationwide. Nationwide is
obligated to pay all amounts promised to policy owners under the policies.
The variable account is divided into sub-accounts. Policy owners elect to have
net premiums allocated among the sub-accounts and the fixed account at the time
of application.
Nationwide uses the assets of each sub-account to buy shares of the underlying
mutual funds based on policy owner instructions. A policy's investment
performance depends upon the performance of the underlying mutual fund options
chosen by the policy owner.
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. The underlying mutual fund options 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.
However the underlying mutual funds are NOT directly related to any publicly
traded mutual fund. Policy 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.
Changes of Investment Policy
Nationwide may materially change the investment policy of the variable account.
Nationwide must inform policy owners and obtain all necessary regulatory
approvals. Any change must be submitted to the various state insurance
departments which may disapprove it if deemed detrimental to the interests of
the policy owners or if it renders Nationwide's operations hazardous to the
public. If a policy owner objects, the policy owner may elect to transfer all
sub-account cash value to the fixed account. No transfer charges will be
assessed. The policy owner has the later of 60 days (6 months in Pennsylvania)
from the date of the investment policy change or 60 days (6 months in
Pennsylvania) from being informed of the change to make the transfer.
Voting Rights
Policy owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote policy owner shares at
special shareholder meetings based on policy owner instructions. However, if the
law changes allowing Nationwide to vote in its own right, it may elect to do so.
Policy owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholder's vote as soon as possible prior to
the shareholder meeting. Notification will contain proxy materials, and a form
to return to Nationwide with 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 policy owner may vote is determined by dividing the
cash value of the amount they have allocated to an underlying mutual fund by the
net asset value of that underlying mutual fund. Nationwide will designate a date
for this determination not more than 90 days before the shareholder meeting.
11
<PAGE> 17
Substitution of Securities
Nationwide may substitute, eliminate and/or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occur:
1) shares of a current underlying mutual fund option are no longer available
for investment; or
2) further investment in an underlying mutual fund option is inappropriate.
No substitution, elimination, and/or combination of shares may take place
without the prior approval of the SEC and state insurance departments.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
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. Premium payments will be allocated
to the fixed account by election of the policy owner.
Under exemptive and exclusionary provisions, Nationwide's general account has
not been registered under the Securities Act of 1933 and has not been registered
as an investment company under the Investment Company Act of 1940. Accordingly,
neither the general account nor any interest therein is subject to the
provisions of these Acts. Nationwide has been advised that the staff of the SEC
has not reviewed the disclosures in this prospectus relating to the fixed
account. Disclosures regarding the general account may, however, be subject to
certain generally applicable provisions of the federal securities laws
concerning the accuracy and completeness of statements made in prospectuses.
The investment income earned by the fixed account will be allocated to the
policies at varying rate(s) set by Nationwide. The guaranteed rate for any
premium payment will be effective for not less than twelve months. Nationwide
guarantees that the rate will not be less than an annual effective rate of 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The policy owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of an
annual effective rate of 3.0% for any given year.
New premium payments deposited to the contract which are allocated to the fixed
account may receive a different rate of interest than amounts transferred from
the sub-accounts to the fixed account and amounts maturing in the fixed account.
The fixed account is not available for policies issued in the State of Texas.
12
<PAGE> 18
INFORMATION ABOUT THE POLICIES
MINIMUM REQUIREMENTS FOR POLICY ISSUANCE
This policy provides life insurance coverage with the flexibility to vary the
amount and frequency of premium payments. Minimum requirements for policy
issuance include:
- the insured must be 80 or younger;
- Nationwide may require satisfactory evidence of insurability
(including a medical exam);
- a minimum specified amount of $50,000 ($100,000 in Pennsylvania and
New Jersey).
PREMIUM PAYMENTS
Each premium payment must be at least $50. The initial premium is payable in
full at Nationwide's home office or to an authorized agent of Nationwide.
Upon payment of the initial premium, temporary insurance may be provided.
Issuance of the continuing insurance coverage is dependent upon completion of
all underwriting requirements, payment of initial premium, and delivery of the
policy while the insured is still living.
Additional premium payments may be made at any time while the policy is in
force, subject to the following conditions:
- Nationwide may require satisfactory evidence of insurability before
accepting any additional premium payment which results in an increase
in the net amount at risk.
- Premium payments in excess of the premium limit established by the IRS
to qualify the policy as a contract for life insurance will be
refunded.
- Nationwide may require policy indebtedness be repaid prior to
accepting any additional premium payments.
Additional premium payments or other changes to the policy may jeopardize the
policy's non-modified endowment status. Nationwide will monitor premiums paid
and other policy transactions and will notify the policy owner when non-modified
endowment contract status is in jeopardy.
PRICING
Premiums payments will not be priced, when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- New Year's Day - Independence Day
- Martin Luther King, Jr. Day - Labor Day
- Presidents' Day - Thanksgiving
- Good Friday - Christmas
- Memorial Day
Nationwide also will not price premium 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, policy value may be affected since the policy owner would not
have access to their account.
POLICY CHARGES
SALES LOAD
Nationwide deducts a sales load from each premium payment received. It is
guaranteed never to exceed 5.5% of each premium payment during the first 7
policy years and 2% thereafter. Currently, the sales load is 3% of the premium
payment plus 2.5% of premiums up to the target premium during the first 7 policy
years, and 0% of all premiums thereafter. The target premium is a premium level
based upon a percentage of the guideline level premium. It is the level annual
premium amount at which the sales load
13
<PAGE> 19
is reduced on a current basis. The target premium amount is located on the
policy data page.
PREMIUM EXPENSE CHARGE
Nationwide deducts a premium expense charge equal to 3.50% from all premium
payments. This charge reimburses Nationwide for administrative expenses on an
aggregate basis, including premium taxes imposed by various state and local
jurisdictions and for federal taxes imposed under Section 848 of the Internal
Revenue Code. Generally, these tax expenses consist of two components:
(1) a state premium tax rate of 2.25%; and
(2) a federal tax rate of 1.25%.
Nationwide expects to pay an average state premium tax rate of approximately
2.25% of premiums for all states. State tax rates can range from 0% to 4%. This
charge may be more or less than the amount actually assessed by the state in
which a particular policy owner lives.
The 1.25% federal tax component is designed to reimburse Nationwide for expenses
incurred from federal taxes imposed under Section 848 of the Internal Revenue
Code.
Nationwide does not expect to make a profit from these charges.
MONTHLY COST OF INSURANCE
The monthly cost of insurance charge for each policy month is determined by
multiplying the monthly cost of insurance rate by the net amount at risk. This
deduction is charged proportionately to the cash value in each sub-account and
the fixed account.
If death benefit Option 1 is in effect and there have been increases in the
specified amount, then the cash value will first be considered a part of the
initial specified amount. If the cash value exceeds the initial specified
amount, it will then be considered a part of the additional increases in
specified amount resulting from the increases in the order of the increases.
Monthly cost of insurance rates will be unisex and will not exceed those
guaranteed in the policy. Guaranteed cost of insurance rates are based on the
1980 Commissioners Standard Ordinary Male Mortality Table, Age Last Birthday,
aggregate as to tobacco status (1980 CSO). Guaranteed cost of insurance rates
for policies issued on a substandard basis are based on appropriate percentage
multiples of the 1980 CSO.
The rate class of an insured may affect the cost of insurance rate. Nationwide
currently places insureds into both standard rate classes and substandard rate
classes that involve a higher mortality risk. In an otherwise identical policy,
an insured in the standard rate class will have a lower cost of insurance than
an insured in a rate class with higher mortality risks. Nationwide may also
issue certain policies on a "non-medical," guaranteed issue, or simplified issue
basis to certain categories of individuals. Due to the underwriting criteria
established for policies issued on a non-medical basis, actual rates will be
higher than the current cost of insurance rates being charged under policies
that are medically underwritten.
MONTHLY ADMINISTRATIVE CHARGE
Nationwide deducts an administrative expense charge proportionately from the
cash value in each sub-account and the fixed account on a monthly basis. This
charge reimburses Nationwide for certain actual administrative expenses related
to maintenance of the policies including accounting and record keeping, and
periodic reporting to policy owners. Nationwide does not expect to recover any
amount in excess of aggregate maintenance expenses from this charge. Currently,
this charge is $5 per month in all policy years. On a guaranteed basis, this
charge is $10 per month in all policy years.
MORTALITY AND EXPENSE RISK CHARGE
Nationwide assumes certain risks for guaranteeing the mortality and expense
charges.
The mortality risk assumed under the policies is that the insured may not live
as long as expected. The expense risk assumed is that the actual expenses
incurred in issuing and
14
<PAGE> 20
administering the policies may be greater than expected. In addition, Nationwide
assumes risks associated with the non-recovery of policy issue, underwriting and
other administrative expenses due to policies that lapse or are surrendered in
the early policy years.
Nationwide deducts the mortality and expense risk charge from the variable
account on a monthly basis. Mortality and expense risk deductions may vary from
policy to policy because they are charged proportionally to the cash value in
each sub-account. The mortality and expense risk charge compensates Nationwide
for assuming risks associated with mortality and administrative costs. This
charge is guaranteed not to exceed an annual effective rate of 0.75% of the
daily net assets of the variable account. On a current basis this rate will be
0.40% during policy years 1-4, 0.25% during policy years 5-20, and 0.10%
thereafter. Policy owners receive quarterly and annual statements, advising
policy owners of the cancellation of accumulation units for mortality and
expense risk charges.
To the extent that future levels of mortality and expenses are less than or
equal to those expected, Nationwide may realize a profit from this charge.
Unrecovered expenses are borne by Nationwide's general assets which may include
profits, if any, from mortality and expense risk charges.
INCOME TAX
No charge is assessed to policy owners for income taxes incurred by Nationwide
as a result of the operations of the sub-accounts. However, Nationwide reserves
the right to assess a charge for income taxes against the variable account if
income taxes are incurred.
REDUCTION OF CHARGES
The policy is available for purchase by individuals, corporations and other
groups. Nationwide may reduce or eliminate certain charges (sales load,
surrender charge, monthly administrative charge, monthly cost of insurance
charge, or other charges), where the size or nature of the group results in
savings in sales, underwriting, administrative or other costs, to Nationwide.
These charges may be reduced in certain group, sponsored arrangements or special
exchange programs made available by Nationwide, (including employees of
Nationwide and their families). Eligibility for reduction in charges and the
amount of any reduction is determined by a number of factors, including:
- the number of insureds;
- the total premium expected to be paid;
- total assets under management for the policy owner;
- the nature of the relationship among individual insureds;
- the purpose for which the policies are being purchased;
- the expected persistency of individual policies; and
- any other circumstances which are rationally related to the expected
reduction in expenses.
The extent and nature of reductions may change from time to time. The charge
structure may vary. Variations are determined in a manner not unfairly
discriminatory to policy owners which reflects differences in costs of services.
SURRENDERING THE POLICY FOR CASH
SURRENDER (REDEMPTION)
Policies may be surrendered for the cash surrender value any time while the
insured is living. The cancellation will be effective as of the date Nationwide
receives the policy accompanied by a signed, written request for cancellation.
Nationwide may require the policy owner's signature to be guaranteed by a member
firm of the New York, American, Boston, Midwest, Philadelphia or Pacific Stock
Exchanges, or by a commercial bank or a savings and loan, which is a member of
the Federal Deposit Insurance Corporation. In some cases, Nationwide may require
additional documentation of a customary nature.
15
<PAGE> 21
CASH SURRENDER VALUE
The cash surrender value increases or decreases daily to reflect the investment
experience of the variable account and the daily crediting of interest in the
fixed account and the policy loan account.
The cash surrender value equals the policy's cash value, next computed after the
date Nationwide receives a proper written request for surrender and the policy,
minus any charges, indebtedness or other deductions due on that date, plus 3.5%,
5.5%, or 4.0% of the current premium if that date occurs during policy years
one, two or three, respectively.
PARTIAL SURRENDERS
After the policy has been in force for one year, the policy owner may request a
partial surrender.
Partial surrenders are permitted if they satisfy the following requirements:
1) the minimum partial surrender is $500;
2) partial surrenders may not reduce the specified amount to less than
$50,000;
3) after the partial surrender, the cash surrender value is greater than
$500 or an amount equal to three times the current monthly deduction, if
higher; and
4) after the partial surrender, the policy continues to qualify as life
insurance.
When a partial surrender is made, the cash value will be reduced by the amount
of the partial surrender. Further, the specified amount will be reduced by the
amount necessary to prevent any increase to the net amount at risk, unless the
partial surrender is treated as a preferred partial surrender.
Preferred Partial Surrenders
A partial surrender is considered a preferred partial surrender if the following
conditions are met:
(1) the surrender occurs before the 15th policy anniversary; and
(2) the surrender amount plus the amount of any previous preferred policy
surrenders in that same policy year does not exceed 10% of the cash
surrender value as of the beginning of the policy year.
Reduction of the Specified Amount
When a partial surrender is made, in addition to the cash value being reduced by
the amount of the partial surrender, the specified amount may also be reduced,
(except in the case of a preferred partial surrender). The reduction to the
specified amount will be made in the following order:
(1) against the most recent increase in the specified amount;
(2) against the next most recent increases in the specified amount in
succession; and
(3) against the specified amount under the original application.
INCOME TAX WITHHOLDING
Federal law requires Nationwide to withhold income tax from any portion of
surrender proceeds subject to tax. Nationwide will withhold income tax unless
the policy owner advises Nationwide, in writing, of his or her request not to
withhold. If a policy owner requests that taxes not be withheld, or if the taxes
withheld are insufficient, the policy owner may be liable for payment of an
estimated tax. Policy owners should consult a tax advisor. In certain
employer-sponsored life insurance arrangements, including equity split dollar
arrangements, participants may be required to report for income tax purposes,
one or more of the following:
(1) the value each year of the life insurance protection provided;
(2) an amount equal to any employer-paid premiums; or
(3) some or all of the amount by which the current value exceeds the
employer's interest in the policy.
Participants should consult with the sponsor or the administrator of the plan,
and/or with their
16
<PAGE> 22
personal tax or legal advisor, to determine the tax consequences, if any, of
their employer-sponsored life insurance arrangements.
VARIATION IN CASH VALUE
On any date during the policy year, the cash value equals the cash value on the
preceding valuation date, plus any net premium applied since the previous
valuation date, minus any partial surrenders, plus or minus any investment
results, and less any policy charges.
There is no guaranteed cash value. The cash value will vary with the investment
experience of the variable account and/or the daily crediting of interest in the
fixed account and policy loan account depending on the allocation of cash value
by the policy owner.
POLICY PROVISIONS
POLICY OWNER
While the insured is living, all rights in this policy are vested in the policy
owner named in the application or as subsequently changed, subject to
assignment, if any.
The policy owner may name a contingent policy owner or a new policy owner while
the insured is living. Any change must be in a written form satisfactory to
Nationwide and recorded at Nationwide's home office. Once recorded, the change
will be effective when signed. The change will not affect any payment made or
action taken by Nationwide before it was recorded. Nationwide may require that
the policy be submitted for endorsement before making a change.
If the policy owner is other than the insured, names no contingent policy owner,
and dies before the insured, the policy owner's rights in this policy belong to
the policy owner's estate.
BENEFICIARY
The beneficiary(ies) will be as named in the application or as subsequently
changed, subject to assignment, if any.
The policy owner may name a new beneficiary while the insured is living. Any
change must be in a written form satisfactory to Nationwide and recorded at
Nationwide's home office. Once recorded, the change will be effective when
signed. The change will not affect any payment made or action taken by
Nationwide before it was recorded.
If any beneficiary predeceases the insured, that beneficiary's interest passes
to any surviving beneficiary(ies), unless otherwise provided. Multiple
beneficiaries will be paid in equal shares, unless otherwise provided. If no
named beneficiary survives the insured, the death proceeds will be paid to the
policy owner or the policy owner's estate.
CHANGES IN EXISTING INSURANCE COVERAGE
The policy owner may request certain changes in the insurance coverage under the
policy. Requests must be in writing and received by Nationwide. No change will
take effect unless the cash surrender value after the change is sufficient to
keep the policy in force for at least 3 months.
Specified Amount Increases
The policy owner may request an increase to the specified amount. Any increase
will be subject to the following conditions:
1. the request must be applied for in writing;
2. satisfactory evidence of insurability must be provided;
3. the increase must be for a minimum of $10,000;
4. the cash surrender value is sufficient to continue the policy in force
for at least 3 months; and
5. age limits are the same as for a new issue.
Any approved increase will have an effective date of the monthly anniversary day
on or next following the date Nationwide approves the supplemental application.
Nationwide reserves the right to limit the number of specified amount increases
to one each policy year.
17
<PAGE> 23
Specified Amount Decreases
After the first policy year, the policy owner may also request a decrease to the
specified amount. Any approved decrease will be effective on the monthly
anniversary day on or next following the date Nationwide receives the request.
Any such decrease shall reduce insurance in the following order:
1. against insurance provided by the most recent increase;
2. against the next most recent increases successively; and
3. against insurance provided under the original application.
Nationwide reserves the right to limit the number of specified amount decreases
to one each policy year. Nationwide will refuse a request for a decrease which
would:
1. reduce the specified amount to less than $50,000 ($100,000 in New Jersey
and Pennsylvania) or;
2. disqualify the policy as a contract for life insurance.
OPERATION OF THE POLICY
ALLOCATION OF NET PREMIUM AND CASH VALUE
Nationwide allocates premium payments to sub-accounts or the fixed account, as
instructed by policy owners. All percentage allocations must be in whole
numbers, and must be at least 1%. The sum of allocations must equal 100%. Future
premium allocations may be changed by giving written notice to Nationwide.
Premiums allocated to a sub-account on the application are allocated to the NSAT
Money Market Fund during the period a policy owner can cancel the policy, unless
a specific state requires premiums to be allocated to the fixed account. At the
expiration of this period, these premiums are used to purchase shares of the
underlying mutual funds specified by the policy owner at net asset value for the
respective sub-account(s).
The policy owner may change the allocation of net premiums or may transfer cash
value from one sub-account to another. Changes are subject to the terms and
conditions imposed by each underlying mutual fund and those found in this
prospectus.
HOW THE INVESTMENT EXPERIENCE IS DETERMINED
The accumulation unit value for a valuation period is determined by multiplying
the accumulation unit value of each sub-account for the immediately preceding
valuation period by the net investment factor of the sub-account for the
subsequent valuation period. Though the number of accumulation units will not
change as a result of investment experience, the value of an accumulation unit
may increase or decrease from valuation period to valuation period. The number
of accumulation units will not change as a result of investment experience.
NET INVESTMENT FACTOR
The net investment factor for any valuation period is determined by dividing (a)
by (b) and subtracting (c) from the result where:
(a) is:
(1) the net asset value per share of the underlying mutual fund held
in the sub-account 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 per share of the underlying mutual fund determined
as of the end of the immediately preceding valuation period.
(c) is a factor representing the daily mortality and expense risk charge
deducted from the variable account. Such factor is guaranteed not to
exceed an annual effective rate of 0.75% of the daily net assets of the
variable account. On a current basis, this annual effective rate
18
<PAGE> 24
will be 0.40% during policy years 1-4, 0.25% during policy years 5-20,
and 0.10% thereafter.
The net investment factor may be greater or less than one; therefore, the value
of an accumulation unit may increase or decrease. Currently, Nationwide does not
maintain a tax reserve with respect to the policies since income with respect to
the underlying mutual funds is not taxable to Nationwide or the variable
account. Nationwide reserves the right to adjust the calculation of the net
investment factor to reflect a tax reserve should such income of other items
become taxable to Nationwide. It should be noted that changes in the net
investment factor may not be directly proportional to changes in the net asset
value of underlying mutual fund shares because of the deduction for mortality
and expense risk charge.
DETERMINING THE CASH VALUE
The cash value is the sum of the value of all variable account accumulation
units attributable to the policy plus amounts credited to the fixed account and
the policy loan account.
The number of accumulation units credited to each sub-account is determined by
dividing the net amount allocated to the sub-account by the accumulation unit
value for the sub-account for the valuation period during which the premium is
received by Nationwide. In the event part or all of the cash value is
surrendered or charges or deductions are made against the cash value, an
appropriate number of accumulation units from the variable account and an
appropriate amount from the fixed account will be deducted in the same
proportion that the policy owner's interest in the variable account and the
fixed account bears to the total cash value.
The cash value in the fixed account and the policy loan account is credited with
interest daily at an effective annual rate which Nationwide periodically
declares. The annual effective rate will never be less than 3%. (For a
description of the annual effective credited rates, see "The Fixed Account" and
"Policy Loans.") Upon request, Nationwide will inform the policy owner of the
then applicable rates for each account.
TRANSFERS
The policy owner may transfer amounts between the fixed account and the variable
account without penalty or adjustment, subject to the following requirements:
- Nationwide reserves the right to limit such transfers to one per policy
year.
- Transfers from the fixed account must be made within 45 days after the
end of an interest rate guarantee period (the period of time for which
the current interest rate is guaranteed by Nationwide).
- Nationwide reserves the right to restrict the amount transferred from
the fixed account to 20% of the portion of the cash value attributable
to the fixed account as of the end of the prior policy year. However, if
the policy owner elects in writing to Nationwide to transfer all of the
cash value attributable to the fixed account, the restriction for five
successive policy years shall be 20%, 25%, 33%, 50% and 100%,
respectively.
- Transfers to the fixed account may not be made prior to the first policy
anniversary or within 12 months subsequent to a prior transfer.
- Nationwide reserves the right to restrict the amount transferred to the
fixed account to 20% of that portion of the cash value attributable to
the variable account as of the close of business of the prior valuation
period.
- Nationwide reserves the right to refuse a transfer to the fixed account
if the cash value attributable to the fixed account is greater than or
equal to 30% of the cash value.
Transfer Requests
Nationwide will accept transfer requests in writing or over the telephone.
Nationwide will use reasonable procedures to confirm that
19
<PAGE> 25
telephone instructions are genuine and will not be liable for following
instructions it reasonably determined to be genuine. Nationwide may withdraw the
telephone exchange privilege upon 30 days written notice to policy owners.
Market-Timing Firms
Some policy owners may use market-timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market- timing firms will submit transfer requests on behalf of
multiple policy owners at the same time. Sometimes this can result in unusually
large transfers of funds. These large transfers might interfere with the ability
of Nationwide or the underlying mutual fund to process transactions. This can
potentially disadvantage policy owners not using market-timing firms. To avoid
this, Nationwide may modify the transfer rights of policy owners who use
market-timing firms (or other third parties) to initiate transfers on their
behalf.
The transfer rights of individual policy owners will not be modified in any way
when instructions are submitted directly by the policy owner, or by the policy
owner's representative (as authorized by the execution of a valid Nationwide
Limited Power of Attorney Form).
To protect policy owners, Nationwide may refuse transfer requests:
- submitted by any agent acting under a power of attorney on behalf of
more than one policy owner; or
- submitted on behalf of individual policy owners who have executed
pre-authorized exchange forms which are submitted by market-timing firms
(or other third parties) on behalf of more than one policy owner at the
same time.
Nationwide will not restrict transfer rights unless Nationwide believes it to be
necessary for the protection of all policy owners.
RIGHT TO REVOKE
A policy owner may cancel the policy by returning it by the latest of:
- 10 days after receiving the policy;
- 45 days after signing the application; or
- 10 days after Nationwide delivers a Notice of Right to Withdrawal.
The policy can be mailed to the registered representative who sold it, or
directly to Nationwide.
Returned policies are deemed void from the beginning. Nationwide will refund the
amount prescribed by the state in which the policy was issued within seven days
after it receives the policy. The refunded policy value will reflect the
deduction of any policy charges, unless otherwise required by law. This right
varies by state.
POLICY LOANS
TAKING A POLICY LOAN
The policy owner may take a policy loan at any time using the policy as
security. Maximum policy indebtedness is limited to 90% of the cash value of the
sub-accounts, plus 100% of the cash value in the fixed account, plus 100% of the
cash value in the policy loan account. Nationwide will not grant a loan for an
amount less than $500 (unless otherwise required by state law). Policy
indebtedness will be deducted from the death benefit, cash surrender value upon
surrender, or the maturity proceeds.
Any request for a policy loan must be in written form. The request must be
signed and, where permitted, the signature guaranteed by a member firm of the
New York, American, Boston, Midwest, Philadelphia or Pacific Stock Exchanges, or
by a commercial bank or a savings and loan which is a member of the Federal
Deposit Insurance Corporation. Certain policy loans may result in currently
taxable income and tax penalties.
A policy owner considering the use of policy loans in connection with his or her
retirement
20
<PAGE> 26
income plan should consult his or her personal tax adviser regarding potential
tax consequences that may arise if necessary payments are not made to keep the
policy from lapsing. The amount of the payments necessary to prevent the policy
from lapsing will increase with age.
EFFECT ON INVESTMENT PERFORMANCE
When a loan is made, an amount equal to the amount of the loan is transferred
from the variable account to the policy loan account. If the assets relating to
a policy are held in more than one sub-account, withdrawals from sub-accounts
will be made in proportion to the assets in each sub-account at the time of the
loan. Policy loans will be transferred from the fixed account only when
sufficient amounts are not available in the sub-accounts.
The amount taken out of the variable account will not be affected by the
variable account's investment experience while the loan is outstanding.
INTEREST
The annual effective loan interest rate is guaranteed not to exceed 3.75%. On a
current basis, the loan interest rate is 3.4% in policy years 1-4, 3.25% in
policy years 5-20, and 3.10% thereafter.
On a current and guaranteed basis, the cash value in the policy loan account is
credited with an annual effective rate of 3% during policy years 2 and
thereafter. Nationwide may change the current interest crediting rate on the
policy loans at any time at its sole discretion. However, the crediting rate is
guaranteed never to be lower than 3% during policy years 1 through 10 and 3.65%
during the 11th and subsequent policy years.
If it is determined that such loans will be treated, as a result of the
differential between the interest crediting rate and the loan interest rate, as
taxable distributions under any applicable ruling, regulation, or court
decision, Nationwide retains the right to increase the net cost (by decreasing
the interest crediting rate) on all subsequent policy loans to an amount that
would result in the transaction being treated as a loan under federal tax law.
If this amount is not prescribed by such ruling, regulation, or court decision,
the amount will be that which Nationwide considers to be more likely to result
in the transaction being treated as a loan under federal tax law.
Amounts transferred to the policy loan account will earn interest daily from the
date of transfer. The earned interest is transferred from the policy loan
account to a variable account or the fixed account on each policy anniversary,
at the time a new loan is requested, or at the time of loan repayment. It will
be allocated according to the fund allocation factors in effect at the time of
the transfer.
Interest is charged daily and is payable at the end of each policy year or at
the time of loan repayment. Unpaid interest will be added to the existing policy
indebtedness as of the due date and will be charged interest at the same rate as
the rest of the indebtedness.
Whenever the total policy indebtedness exceeds the cash value, Nationwide will
send a notice to the policy owner and the assignee, if any. The policy will
terminate without value 61 days after the mailing of the notice unless a
sufficient repayment is made during that period. A repayment is sufficient if it
is large enough to reduce the total policy indebtedness to an amount equal to
the total cash value plus an amount sufficient to continue the policy in force
for 3 months.
EFFECT ON DEATH BENEFIT AND CASH VALUE
A policy loan, whether or not repaid, will have a permanent effect on the death
benefit and cash value because the investment results of the variable account or
the fixed account will apply only to the non-loaned portion of the cash value.
The longer the loan is outstanding, the greater the effect is likely to be.
Depending on the investment results of the variable account or the fixed account
while the loan is outstanding, the effect could be favorable or unfavorable.
21
<PAGE> 27
REPAYMENT
All or part of the indebtedness may be repaid at any time while the policy is in
force during the insured's lifetime. Any payment intended as a premium payment,
rather than a loan repayment, must be identified as such. Loan repayments will
be credited to the sub-accounts and the fixed account in proportion to the
policy owner's underlying mutual fund allocation factors in effect at the time
of the repayment. Each repayment may not be less than $50. Nationwide reserves
the right to require that any loan repayments resulting from policy loans
transferred from the fixed account must be first allocated to the fixed account.
ASSIGNMENT
While the insured is living, the policy owner may assign his or her rights in
the policy. The assignment must be in writing, signed by the policy owner and
recorded at Nationwide's home office. Prior to being recorded, assignments will
not affect any payments made or actions taken by Nationwide. Nationwide is not
responsible for any assignment not submitted for recording, nor is Nationwide
responsible for the sufficiency or validity of any assignment. Assignments are
subject to any indebtedness owed to Nationwide before being recorded.
POLICY OWNER SERVICES
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. Policy owners may participate in this program if their policy
value is at least $15,000. Nationwide does not guarantee that this program will
result in profit or protect policy owners from loss.
Policy owners direct Nationwide to automatically transfer specified amounts from
the fixed account and the following underlying mutual fund options: Federated
Insurance Series - Federated Quality Bond Fund II, Fidelity VIP High Income
Portfolio; NSAT Government Bond Fund; NSAT Nationwide High Income Bond Fund; and
the NSAT Money Market Fund.
The minimum monthly transfer is $100. Transfers from the fixed account must be
equal to or less than 1/30th of the fixed account value at the time the program
is requested.
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 policy owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide reserves the right to assess a processing fee for this
service.
DEATH BENEFIT INFORMATION
CALCULATION OF THE DEATH BENEFIT
At issue, the policy owner selects the specified amount and the death benefit
option. At issue, the policy owner also irrevocably elects either of the
following tests qualifying the policy as life insurance under Section 7702 of
the Internal Revenue Code: (1) guideline premium/cash value corridor test; or
(2) the cash value accumulation test.
While the policy is in force, the death benefit will never be less than the
specified amount. The death benefit may vary with the cash value of the policy,
which depends on investment performance.
The policy owner may choose one of three death benefit options.
OPTION 1: the death benefit will be the greater of the specified amount or the
applicable percentage of cash value. Under Option 1, the amount of the death
benefit will ordinarily not change for several years to reflect the investment
performance and may not change at
22
<PAGE> 28
all. If investment performance is favorable, the amount of death benefit may
increase. To see how and when investment performance will begin to affect death
benefits, see the illustrations in Appendix B.
OPTION 2: the death benefit will be the greater of the specified amount plus the
cash value as of the date of death, or the applicable percentage of cash value
and will vary directly with the investment performance.
OPTION 3: the death benefit is the greater of: the applicable percentage of the
cash value as of the date of death; or the sum of the specified amount and the
lesser of: (i) the maximum increase amount shown on the policy, or (ii) the
amount of all premium payments and interest accrued at the Option 3 interest
rate as shown in the policy, accumulated up to the date of death, less any
partial surrenders and applicable interest accrued at the Option 3 interest rate
as shown in the policy. Once elected, Option 3 is irrevocable.
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE
GUIDELINE PREMIUM/CASH VALUE CORRIDOR TEST
- ----------------------------------------------------------------------------------------------------------
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
0-40 250% 60 130% 80 105%
- ----------------------------------------------------------------------------------------------------------
41 243% 61 128% 81 105%
- ----------------------------------------------------------------------------------------------------------
42 236% 62 126% 82 105%
- ----------------------------------------------------------------------------------------------------------
43 229% 63 124% 83 105%
- ----------------------------------------------------------------------------------------------------------
44 222% 64 122% 84 105%
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
45 215% 65 120% 85 105%
- ----------------------------------------------------------------------------------------------------------
46 209% 66 119% 86 105%
- ----------------------------------------------------------------------------------------------------------
47 203% 67 118% 87 105%
- ----------------------------------------------------------------------------------------------------------
48 197% 68 117% 88 105%
- ----------------------------------------------------------------------------------------------------------
49 191% 69 116% 89 105%
- ----------------------------------------------------------------------------------------------------------
==========================================================================================================
50 185% 70 115% 90 105%
- ----------------------------------------------------------------------------------------------------------
51 178% 71 113% 91 104%
- ----------------------------------------------------------------------------------------------------------
52 171% 72 111% 92 103%
- ----------------------------------------------------------------------------------------------------------
53 164% 73 109% 93 102%
- ----------------------------------------------------------------------------------------------------------
54 157% 74 107% 94 101%
- ----------------------------------------------------------------------------------------------------------
===========================================================================================================
55 150% 75 105% 95 101%
- ----------------------------------------------------------------------------------------------------------
56 146% 76 105% 96 101%
- ----------------------------------------------------------------------------------------------------------
57 142% 77 105% 97 101%
- ----------------------------------------------------------------------------------------------------------
58 138% 78 105% 98 101%
- ----------------------------------------------------------------------------------------------------------
59 134% 79 105% 99 101%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
In the event the policy owner has a substandard rating, the above percentages
will differ.
23
<PAGE> 29
<TABLE>
<CAPTION>
APPLICABLE PERCENTAGE OF CASH VALUE
CASH VALUE ACCUMULATION TEST
- ----------------------------------------------------------------------------------------------------------
Attained Percentage Attained Percentage Attained Percentage
Age of Cash Value Age of Cash Value Age of Cash Value
- ----------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
16 708.43% 44 292.29% 72 141.69%
- ----------------------------------------------------------------------------------------------------------
17 687.69% 45 283.37% 73 139.10%
- ----------------------------------------------------------------------------------------------------------
18 667.85% 46 274.79% 74 136.66%
- ----------------------------------------------------------------------------------------------------------
19 648.73% 47 266.55% 75 134.38%
===========================================================================================================
20 630.14% 48 258.61% 76 133.56%
- ----------------------------------------------------------------------------------------------------------
21 611.94% 49 250.98% 77 132.83%
- ----------------------------------------------------------------------------------------------------------
22 594.06% 50 243.65% 78 132.18%
- ----------------------------------------------------------------------------------------------------------
23 576.45% 51 236.59% 79 131.58%
- ----------------------------------------------------------------------------------------------------------
24 559.07% 52 229.82% 80 131.04%
- ----------------------------------------------------------------------------------------------------------
25 541.95% 53 223.34% 81 130.55%
===========================================================================================================
26 525.08% 54 217.13% 82 130.12%
- ----------------------------------------------------------------------------------------------------------
27 508.52% 55 211.19% 83 127.37%
- ----------------------------------------------------------------------------------------------------------
28 492.32% 56 205.51% 84 124.75%
- ----------------------------------------------------------------------------------------------------------
29 476.49% 57 200.06% 85 122.27%
- ----------------------------------------------------------------------------------------------------------
30 461.08% 58 194.84% 86 119.90%
- ----------------------------------------------------------------------------------------------------------
===========================================================================================================
31 446.10% 59 189.84% 87 117.63%
- ----------------------------------------------------------------------------------------------------------
32 431.57% 60 185.03% 88 115.44%
- ----------------------------------------------------------------------------------------------------------
33 417.50% 61 180.43% 89 113.31%
- ----------------------------------------------------------------------------------------------------------
34 403.89% 62 176.02% 90 112.35%
- ----------------------------------------------------------------------------------------------------------
35 390.73% 63 171.81% 91 111.38%
- ----------------------------------------------------------------------------------------------------------
===========================================================================================================
36 378.03% 64 167.80% 92 110.38%
- ----------------------------------------------------------------------------------------------------------
37 365.79% 65 163.98% 93 109.32%
- ----------------------------------------------------------------------------------------------------------
38 354.01% 66 160.34% 94 108.18%
- ----------------------------------------------------------------------------------------------------------
39 342.67% 67 156.86% 95 106.94%
- ----------------------------------------------------------------------------------------------------------
40 331.77% 68 153.54% 96 105.62%
- ----------------------------------------------------------------------------------------------------------
===========================================================================================================
41 321.30% 69 150.37% 97 104.27%
- ----------------------------------------------------------------------------------------------------------
42 311.24% 70 147.33% 98 102.99%
- ----------------------------------------------------------------------------------------------------------
43 301.57% 71 144.44% 99 100.00%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
In the event the policy owner has a substandard rating, the above percentages
will differ.
24
<PAGE> 30
CHANGES IN THE DEATH BENEFIT OPTION
After the first policy year, the policy owner may elect to change the death
benefit option under the policy from either Option 1 to Option 2, or from Option
2 to Option 1. Initial elections to Option 3 are irrevocable and may not be
changed.
Only one change of death benefit option is permitted per policy year. The
effective date of a change will be the monthly anniversary day following the
date the change is approved by Nationwide.
In order for any change in the death benefit option to become effective, the
cash surrender value after a change must be sufficient to keep the policy in
force for at least three months.
Nationwide will adjust the specified amount so that the net amount at risk
remains constant before and after the death benefit option change. A change in
death benefit option will not be permitted if it results in the specified amount
being reduced to an amount in which the total premiums paid exceed the premium
limit required by state law to qualify the policy as a contract for life
insurance.
PROCEEDS PAYABLE ON DEATH
The actual death proceeds payable on the insured's death will be the death
benefit as described above, less any policy indebtedness and less any unpaid
policy charges. Under certain circumstances, the death proceeds may be adjusted
(see "Incontestability," "Error in Age," and "Suicide").
INCONTESTABILITY
Nationwide will not contest payment of the death proceeds based on the initial
specified amount after the policy has been in force during the insured's
lifetime for 2 years from the policy date. For any increase in specified amount
requiring evidence of insurability, Nationwide will not contest payment of the
death proceeds based on such an increase after it has been in force during the
insured's lifetime for 2 years from its effective date.
ERROR IN AGE
If the age of the insured has been misstated, the affected benefits will be
adjusted. The amount of the death benefit will be (1) multiplied by (2) and then
the result added to (3), where:
1) is the amount of the death benefit at the time of the insured's death
reduced by the amount of the cash value at the time of the insured's
death;
2) is the ratio of the monthly cost of insurance applied in the policy
month of death and the monthly cost of insurance that should have been
applied at the true age in the policy month of death; and
3) is the cash value at the time of the insured's death.
SUICIDE
If the insured dies by suicide, while sane or insane, within two years from the
policy date, Nationwide will pay no more than the sum of the premiums paid, less
any indebtedness. If the insured dies by suicide, while sane or insane, within
two years from the date an application is accepted for an increase in the
specified amount, Nationwide will pay no more than the amount paid for the
additional benefit.
MATURITY PROCEEDS
The maturity date is the policy anniversary on or next following the insured's
100th birthday. If the policy is still in force, maturity proceeds are payable
to the policy owner on the maturity date. Maturity proceeds are equal to the
amount of the policy's cash value, less any indebtedness.
RIGHT OF CONVERSION
The policy owner may at any time, upon written request to Nationwide within 24
months of the policy date, make an irrevocable, one-time election to transfer
all sub-account cash value to the fixed account. The right of conversion is
subject to state availability.
25
<PAGE> 31
GRACE PERIOD
If the cash surrender value on a monthly anniversary day is not sufficient to
cover the current policy charges, a grace period of 61 days from the monthly
anniversary day will be allowed for the payment of a premium of at least three
times the current monthly deduction. Nationwide will send the policy owner a
notice at the start of the grace period, at the address in the application or
another address specified by the policy owner, stating the amount of premium
required. If sufficient premium is not received by Nationwide by the end of the
grace period, the policy will lapse without value. If death proceeds become
payable during the grace period, Nationwide will pay the death proceeds.
REINSTATEMENT
If the grace period ends and the policy owner has neither paid the required
premium nor surrendered the policy for its cash surrender value, the policy
owner may reinstate the policy by:
1. submitting a written request at any time within 3 years after the end of
the grace period and prior to the maturity date;
2. providing evidence of insurability satisfactory to Nationwide;
3. paying sufficient premium to cover all policy charges that were due and
unpaid during the grace period;
4. paying sufficient premium to keep the policy in force for 3 months from
the date of reinstatement; and
5. paying or reinstating any indebtedness against the policy which existed
at the end of the grace period.
The effective date of a reinstated policy will be the monthly anniversary day on
or next following the date the application for reinstatement is approved by
Nationwide. If the policy is reinstated, the cash value on the date of
reinstatement, but prior to applying any premiums or loan repayments received,
will be set equal to the cash value at the end of the grace period.
Amounts will be allocated based on the fund allocation factors in effect at the
start of the grace period, unless the policy owner provides otherwise.
TAX MATTERS
POLICY PROCEEDS
Section 7702 of the Internal Revenue Code provides that if certain tests are
met, a policy will be treated as a life insurance policy for federal tax
purposes. Nationwide will monitor compliance with these tests. The policy should
thus receive the same federal income tax treatment as fixed benefit life
insurance. As a result, the death proceeds payable under a policy are excludable
from gross income of the beneficiary under Section 101 of the Internal Revenue
Code.
Section 7702A of the Internal Revenue Code defines modified endowment contracts
as those policies issued or materially changed on or after June 21, 1988 on
which the total premiums paid during the first seven years exceed the amount
that would have been paid if the policy provided for paid up benefits after
seven level annual premiums (see "Information about the Policies"). The Internal
Revenue Code states that taxation of surrenders, partial surrenders, loans,
collateral assignments and other pre-death distributions from modified endowment
contracts (other than certain distributions to terminally ill individuals) are
subject to federal income taxes in a manner similar to the way annuities are
taxed. Modified endowment contract distributions are defined by the Internal
Revenue Code as amounts not received as an annuity and are taxable to the extent
the cash value of the policy exceeds, at the time of distribution, the premiums
paid into the policy. A 10% tax penalty generally applies to the taxable portion
of such distributions unless the policy owner is over age 59 1/2 or disabled or
the distribution is part of an annuity to the policy owner as defined in the
Internal Revenue Code. Under certain circumstances, certain
26
<PAGE> 32
distributions made under a policy on the life of a "terminally ill individual",
as that term is defined in the Internal Revenue Code, are excludable from gross
income.
The policies offered by this prospectus may or may not be issued as modified
endowment contracts. Nationwide will monitor premiums paid and will notify the
policy owner when the policy's non-modified endowment status is in jeopardy. If
a policy is not a modified endowment contract, a cash distribution during the
first 15 years after a policy is issued which causes a reduction in death
benefits may still become fully or partially taxable to the policy owner
pursuant to Section 7702(f)(7) of the Internal Revenue Code. The policy owner
should carefully consider this potential effect and seek further information
before initiating any changes in the terms of the policy. Under certain
conditions, a policy may become a modified endowment as a result of a material
change or a reduction in benefits as defined by Section 7702A(c) of the Internal
Revenue Code. In addition to meeting the tests required under Section 7702,
Section 817(h) of the Internal Revenue Code requires that the investments of
separate accounts such as the variable account be adequately diversified.
Regulations under 817(h) provide that a variable life policy that fails to
satisfy the diversification standards will not be treated as life insurance
unless such failure was inadvertent, is corrected, and the policy owner or
Nationwide pays an amount to the IRS. The amount will be based on the tax that
would have been paid by the policy owner if the income, for the period the
policy was not diversified, had been received by the policy owner.
If the failure to diversify is not corrected in this manner, the policy owner
will be deemed the owner of the underlying securities and taxed on the earnings
of his or her account.
Representatives of the IRS have suggested, from time to time, that the number of
underlying mutual funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of underlying mutual funds, transfers between
underlying mutual funds, exchanges of underlying mutual funds or changes in
investment objectives of underlying mutual funds such that the policy would no
longer qualify as life insurance under Section 7702 of the Internal Revenue
Code, Nationwide will take whatever steps are available to remain in compliance.
Nationwide will monitor compliance with these regulations and, to the extent
necessary, will change the objectives or assets of the sub-account investments
to remain in compliance.
A total surrender or cancellation of the policy by lapse or the maturity of the
policy on its maturity date may have adverse tax consequences. If the amount
received by the policy owner plus total policy Indebtedness exceeds the premiums
paid into the policy, the excess generally will be treated as taxable income,
regardless of whether or not the policy is a modified endowment contract.
WITHHOLDING
Distributions of income from a modified endowment contract are subject to
federal income tax withholding; however, the recipient may elect not to have the
withholding taken from the distribution. A distribution of income from a
modified endowment contract may be subject to mandatory back-up withholding
(which cannot be waived). The mandatory back-up withholding rate is 31% of the
income that is distributed and will arise of no taxpayer identification number
is provided to Nationwide, or if the IRS notifies Nationwide that back-up
withholding is required.
FEDERAL ESTATE AND GENERATION-SKIPPING TRANSFER TAXES
The federal estate tax is integrated with the federal gift tax under a unified
tax rate schedule. In general, in 1999, an estate of less than $625,000
(inclusive of certain pre-death gifts)
27
<PAGE> 33
will not incur a federal estate tax liability. In addition, an unlimited marital
deduction may be available for federal estate tax purposes, for certain amounts
that pass to the surviving spouse.
When the insured dies, the death benefit will generally be included in the
insured's federal gross estate if: (1) the proceeds were payable to or for the
benefit of the insured's estate; or (2) the insured held any "incident of
ownership" in the policy at death or at any time within three years of death. An
incident of ownership is, in general, any right that may be exercised by the
policy owner, such as the right to borrow on the policy, or the right to name a
new beneficiary.
If the policy owner (whether or not he or she is the insured) transfers
ownership of the policy to another person, such transfer may be subject to a
federal gift tax. In addition, if such policy owner transfers the policy to
someone two or more generations younger than the policy owner, the transfer may
be subject to the federal generation-skipping transfer tax ("GSTT"), the taxable
amount being the value of the policy.
Similarly, if the beneficiary is two or more generations younger than the
insured, the payment of the death proceeds at the death of the insured may be
subject to the GSTT. Pursuant to regulations recently promulgated by the U.S.
Secretary of the Treasury, Nationwide may be required to withhold a portion of
the death proceeds and pay them directly to the IRS as the GSTT liability.
The GSTT provisions generally apply to the same transfers that are subject to
estate or gift taxes.
The tax rate is a flat rate equal to the maximum estate tax rate (currently
55%), and there is a provision for an aggregate $1 million exemption. Due to the
complexity of these rules, the policy owner should consult with counsel and
other competent advisors regarding these taxes.
NON-RESIDENT ALIENS
Pre-death distributions from modified endowment contracts to nonresident aliens
("NRAs") are generally subject to federal income tax and tax withholding, at a
statutory rate of 30% of the amount of income that is distributed. Nationwide is
required to withhold such amount from the distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances
zero, tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to Nationwide sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. In
addition, the NRA must obtain an individual taxpayer identification number from
the IRS, and furnish that number to Nationwide prior to the distribution. If
Nationwide does not have the proper proof of citizenship or residency and a
proper individual taxpayer identification number prior to any distribution,
Nationwide will be required to withhold 30% of the income, regardless of any
treaty provision.
A pre-death distribution may not be subject to withholding where the recipient
sufficiently establishes to Nationwide that such payment is effectively
connected to the recipient's conduct of a trade or business in the United States
and that such payment is includible in the recipient's gross income for United
States federal income tax purposes, Any such distributions may be subject to
back-up withholding at the statutory rate (currently 31%) if no taxpayer
identification number, or an incorrect taxpayer identification number, is
provided.
State and local estate, inheritance, income and other tax consequences of
ownership or receipt of policy proceeds depend on the circumstances of each
policy owner or beneficiary.
TAXATION OF NATIONWIDE
Nationwide is taxed as a life insurance company under the Internal Revenue Code.
Since the variable account is not a separate entity from
28
<PAGE> 34
Nationwide and its operations form a part of Nationwide, it will not be taxed
separately as a "regulated investment company" under Sub-chapter M of the
Internal Revenue Code. Investment income and realized capital gains on the
assets of the variable account are reinvested and taken into account in
determining the value of accumulation units. As a result, such investment income
and realized capital gains are automatically applied to increase reserves under
the policies.
Nationwide does not initially expect to incur any federal income tax liability
that would be chargeable to the variable account. Based upon these expectations,
no charge is currently being made against the variable account for federal
income taxes. If, however, Nationwide determines that on a separate company
basis such taxes may be incurred, it reserves the right to assess a charge for
such taxes against the variable account.
Nationwide may also incur state and local taxes (in addition to premium taxes)
in several states. At present, these taxes are not significant. If they
increase, however, charges for such taxes may be made.
TAX CHANGES
The foregoing discussion, which is based on Nationwide's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice.
The Internal Revenue Code has been subjected to numerous amendments and changes,
and it is reasonable to believe that it will continue to be revised. The United
States Congress has, in the past, considered numerous legislative proposals
that, if enacted, could change the tax treatment of the policies. It is
reasonable to believe that such proposals, and future proposals, may be enacted
into law. In addition, the U.S. Treasury Department may amend existing
regulations, issue new regulations, or adopt new interpretations of existing law
that may be at variance with its current positions on these matters. In
addition, current state law (which is not discussed herein), and future
amendments to state law, may affect the tax consequences of the policy.
If the policy owner, insured, or beneficiary or other person receiving any
benefit or interest in or from the policy is not both a resident and citizen of
the United States, there may be a tax imposed by a foreign country, in addition
to any tax imposed by the United States. The foreign law (including regulations,
rulings, and case law) may change and impose additional taxes on the policy, the
death proceeds, or other distributions and/or ownership of the policy, or a
treaty may be amended and all or part of the favorable treatment may be
eliminated.
Any or all of the foregoing may change from time to time without any notice, and
the tax consequences arising out of a policy may be changed retroactively. There
is no way of predicting if, when, or to what extent any such change may take
place. No representation is made as to the likelihood of the continuation of
these current laws, interpretations, and policies.
The foregoing is a general explanation as to certain tax matters pertaining to
insurance policies. It is not intended to be legal or tax advice, and should
not take the place of your independent legal, tax and/or financial advisor.
LEGAL CONSIDERATIONS
On July 6, 1983, the U.S. Supreme Court held in Arizona Governing Committee v.
Norris that certain annuity benefits provided by employers' retirement and
fringe benefit programs may not vary between men and women on the basis of sex.
This decision applies only to benefits derived from premiums made on or after
August 1, 1983. The policies offered by this prospectus are based upon actuarial
tables which distinguish between men and women. Thus the policies provide
different benefits to men and women of the same age. Accordingly, employers and
employee organizations should consider, in consultation with legal counsel, the
impact of Norris on any employment related insurance or benefit program before
purchasing this policy.
29
<PAGE> 35
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to may 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. Conversions of existing
traditional life policies will continue through second quarter, 1999. In
addition, the shareholder services system that support our mutual fund products
will be fully deployed in the first quarter of 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 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 including electronic interfaces. Processes
have been put in place and programs initiated to process data irrespective of
the format by converting non-compliant data into a Year 2000 compliant format.
Systems supporting Nationwide's infrastructure such as telecommunications, voice
and networks will be compliant by March 1999. Nationwide's assessment of Year
2000 issues has also included non-information technology systems with embedded
computer chips. Nationwide's building systems such as fire, security, elevators
and escalators supporting facilities in Columbus, Ohio have been tested and are
Year 2000 compliant.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
surveying significant external organizations (business partners) to assess if
they will be Year 2000 compliant and be in a position to do business in the Year
2000 and beyond. Specifically, Nationwide has contacted mutual fund
organizations that provide funds for our variable annuity and life products. The
same action will continue during the first quarter of 1999 with wholesale
producers. Nationwide continues its efforts to identify external risk factors
and is planning to develop contingency plans as part of its ongoing risk
management strategy.
Operating expenses for Nationwide Life Insurance Company ("NLIC") in 1998 and
1997 included approximately $44.7 million and $45.4 million, respectively, for
technology projects, including costs related to Year 2000. NLIC anticipates
spending approximately $5 million on Year 2000 activities in 1999. These
expenses do not have an effect on the assets of the variable account and are not
charged through to the contract owner.
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.
STATE REGULATION
Nationwide is subject to the laws of Ohio governing insurance companies and to
regulation by the Ohio Insurance Department. An annual statement in a prescribed
form is
30
<PAGE> 36
filed with the Insurance Department each year covering the operation of
Nationwide for the preceding year and its financial condition as of the end of
such year. Regulation by the Insurance Department includes periodic examination
to determine Nationwide's contract liabilities and reserves so that the
Insurance Department may certify the items are correct. Nationwide's books and
accounts are subject to review by the Insurance Department at all times and a
full examination of its operations is conducted periodically by the National
Association of Insurance Commissioners. Such regulation does not, however,
involve any supervision of management or investment practices or policies. In
addition, Nationwide is subject to regulation under the insurance laws of other
jurisdictions in which it may operate.
REPORTS TO POLICY OWNERS
Nationwide will mail to the policy owner at the last known address of record:
- - an annual statement containing: the amount of the current death benefit,
cash value, cash surrender value, premiums paid, monthly charges deducted,
amounts invested in the fixed account and the sub-accounts, and policy
indebtedness;
- - annual and semi-annual reports containing all applicable information and
financial statements or their equivalent, which must be sent to the
underlying mutual fund beneficial shareholders as required by the rules
under the Investment Company Act of 1940 for the variable account; and
- - statements of significant transactions, such as changes in specified amount,
changes in death benefit options, changes in future premium allocations,
transfers among sub-accounts, premium payments, loans, loan repayments,
reinstatement and termination.
ADVERTISING
Nationwide is ranked and rated by independent financial rating services,
including Moody's, Standard & Poor's and A.M. Best Company. The purpose of these
ratings is to reflect the financial strength or claims-paying ability of
Nationwide. The ratings are not intended to reflect the investment experience or
financial strength of the variable account. Nationwide may advertise these
ratings from time to time. In addition, Nationwide may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend Nationwide or the policies. Furthermore,
Nationwide may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
LEGAL PROCEEDINGS
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.
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.
The general distributor, Nationwide Advisory Services, Inc. is not engaged in
any litigation of any material nature.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
On October 29, 1998, Nationwide and certain of its subsidiaries were named in a
lawsuit filed in Ohio state court related to the sale of deferred annuity
products for use as investments in tax-deferred contributory retirement plans
(Mercedes Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company). The
plaintiff in such lawsuit seeks to represent a national class of Nationwide's
customers and seeks unspecified
31
<PAGE> 37
compensatory and punitive damages. Nationwide currently is evaluating this
lawsuit, which has not been certified as a class. 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.
EXPERTS
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, and upon the
authority of said firm as experts in accounting and auditing.
REGISTRATION STATEMENT
A registration statement has been filed with the SEC under the Securities Act of
1933, as amended, with respect to the policies offered hereby. This prospectus
does not contain all the information set forth in the Registration Statement and
amendments thereto and exhibits filed as a part thereof, to all of which
reference is hereby made for further information concerning the variable
account, Nationwide, and the policies offered hereby. Statements contained in
this prospectus as to the content of policies and other legal instruments are
summaries. For a complete statement of the terms thereof, reference is made to
such instruments as filed.
LEGAL OPINIONS
Legal matters in connection with the policies described herein are being passed
upon by Dietrich, Reynolds & Koogler, One Nationwide Plaza, Columbus, Ohio
43215. All the members of such firm are employed by the Nationwide Mutual
Insurance Company.
DISTRIBUTION OF THE POLICIES
The policies will be sold by licensed insurance agents in those states where the
policies may lawfully be sold. Agents are registered representatives of broker
dealers registered under the Securities Exchange Act of 1934 who are member
firms of the National Association of Securities Dealers, Inc. ("NASD"). The
policies will be distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"). NAS was organized as an Ohio corporation on April 8,
1965. NAS is a wholly owned subsidiary of Nationwide and a member of the NASD.
NAS acts as general distributor for the following separate accounts, all of
which are separate investment accounts of Nationwide or its affiliates:
- Nationwide Multi-Flex Variable Account
- Nationwide Variable Account-II
- Nationwide VLI Separate Account-2
- Nationwide VLI Separate Account-3
- Nationwide VLI Separate Account-4
- Nationwide VLI Separate Account-5
- Nationwide Variable Account
- Nationwide Variable Account-5
- Nationwide Variable Account-6
- Nationwide Variable Account-9
- Nationwide Variable Account-10
- Nationwide VA Separate Account-A
- Nationwide VA Separate Account-B
- Nationwide VA Separate Account-C
- Nationwide VL Separate Account-A
- Nationwide VL Separate Account-B
- Nationwide VL Separate Account-C
- Nationwide VL Separate Account-D.
NAS also acts as principal underwriter for the following open-end management
investment companies:
- Nationwide Mutual Funds;
- Nationwide Separate Account Trust; and
- Nationwide Asset Allocation Trust.
Gross first year commissions plus any expense allowance payments made by
Nationwide on the sale of these policies distributed by NAS will not exceed 40%
of target premium plus 5% of any excess premium payments in year one and 25% of
target premium plus 5% on the excess premium in years two through four. Gross
renewal commissions paid at the beginning of
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<PAGE> 38
policy year five and beyond by Nationwide will not exceed greater of 5% of
target premium plus 5% on the excess premium or an annual effective rate of
0.20%, paid quarterly, of the cash value as of the end of the prior quarter. For
single premium modified endowment contracts issued on or after May 1, 1999,
gross renewal commissions paid at the beginning of policy year two and beyond
will not exceed an annual rate of 0.20%, paid quarterly, of the cash value as of
the end of the prior quarter.
No underwriting commissions have been paid by Nationwide to NAS.
33
<PAGE> 39
<TABLE>
<CAPTION>
NATIONWIDE ADVISORY SERVICES, INC. DIRECTORS AND OFFICERS
-------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman of the Board of Directors and Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President - Chief Financial Officer and Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Paul J. Hondros Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President - Chief Investment Officer and Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Edwin P. McCausland, Jr. Senior Vice President-Fixed Income Securities
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Charles S. Bath Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
William G. Goslee Vice President
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
James F. Laird, Jr. Vice President and General Manager
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
</TABLE>
34
<PAGE> 40
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
-------------------------------------------------------------------------------------------------------
<S> <C>
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------
</TABLE>
ADDITIONAL INFORMATION ABOUT NATIONWIDE
The life insurance business, including annuities, is the only business in which
Nationwide is engaged.
Nationwide markets its policies through independent insurance brokers, general
agents, and registered representatives of registered NASD broker/dealer firms.
Nationwide serves as depositor for the following separate investment accounts,
each of which is a registered investment company:
- Nationwide VA Separate Account - A
- Nationwide VA Separate Account - B
- Nationwide VA Separate Account - C
- Nationwide VL Separate Account - A
- Nationwide VL Separate Account - B
- Nationwide VL Separate Account - C
- Nationwide VL Separate Account - D
Nationwide, in common with other insurance companies, is subject to regulation
and supervision by the regulatory authorities of the states in which it is
licensed to do business. A license from the state insurance department is a
prerequisite to the transaction of insurance business in that state. In general,
all states have statutory administrative powers. Such regulation relates, among
other things, to licensing of insurers and their agents, the approval of policy
forms, the methods of computing reserves, the form and content of statutory
financial statements, the amount of policyholders' and stockholders' dividends,
and the type of distribution of investments permitted.
Nationwide operates in the highly competitive field of life insurance. There are
approximately 2,300 stock, mutual and other types of insurers in the life
insurance business in the United States, and a large number of them compete with
the registrant in the sale of insurance policies.
As is customary in insurance company groups, employees are shared with the other
insurance companies in the group. In addition to its direct salaried employees,
Nationwide shares employees with Nationwide Life Insurance Company, Nationwide
Mutual Insurance Company and Nationwide Mutual Fire Insurance Company.
Nationwide does not presently own or lease any materially important physical
properties when its property holdings are viewed in relation to its total
assets. Nationwide shares Home Office, other facilities and equipment with
Nationwide Mutual Insurance Company.
Company Management
Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance
Company, together with Nationwide Mutual Insurance Company, Nationwide Mutual
Fire Insurance Company, Nationwide Property and Casualty Insurance Company and
Nationwide General Insurance Company and their affiliated companies comprise the
Nationwide group. The companies listed above have substantially common boards of
directors and officers.
Nationwide Financial Services, Inc. ("NFS") is the sole shareholder of
Nationwide. NFS serves as a holding company for other financial institutions.
Nationwide Life Insurance
35
<PAGE> 41
Company is the sole owner of Nationwide Life and Annuity Insurance Company.
Each of the directors and officers listed below is a director or officer
respectively of at least one or more of the other major insurance affiliates of
the Nationwide group. Messrs. McFerson, Gasper, Woodward and Ms. Thomas are also
trustees of one or more of the registered investment companies distributed by
Nationwide Advisory Services, a registered broker-dealer affiliated with the
Nationwide Insurance Enterprise.
36
<PAGE> 42
<TABLE>
<CAPTION>
DIRECTORS OF NATIONWIDE
- ------------------------------------ --------------------------- ----------------------------------------------------
DIRECTORS OF THE DEPOSITOR NAME
AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES
WITH DEPOSITOR PRINCIPAL OCCUPATION
- ------------------------------------ --------------------------- ----------------------------------------------------
<S> <C> <C>
Lewis J. Alphin Director Farm Owner and Operator (1)
519 Bethel Church Road
Mount Olive, NC 28365
- ------------------------------------ --------------------------- ----------------------------------------------------
A. I. Bell Director Farm Owner and Operator (1)
4121 North River Road West
Zanesville, OH 43701
- ------------------------------------ --------------------------- ----------------------------------------------------
Kenneth D. Davis Director Farm Owner and Operator (1)
7229 Woodmansee Road
Leesburg, OH 45135
- ------------------------------------ --------------------------- ----------------------------------------------------
Keith W. Eckel Director Partner, Fred W. Eckel Sons; President, Eckel
1647 Falls Road Farms, Inc. (1)
Clarks Summit, PA 18411
- ------------------------------------ --------------------------- ----------------------------------------------------
Willard J. Engel Director Retired General Manager, Lyon County Co-operative
301 East Marshall Street Oil Company (1)
Marshall, MN 44691
- ------------------------------------ --------------------------- ----------------------------------------------------
Fred C. Finney Director Owner and Operator, Moreland Fruit Farm; Operator,
1558 West Moreland Road Melrose Orchard (1)
Wooster, OH 44691
- ------------------------------------ --------------------------- ----------------------------------------------------
Joseph J. Gasper President and Chief President and Chief Operating Officer, Nationwide
One Nationwide Plaza Operating Officer and Life Insurance Company and Nationwide Life and
Columbus, OH 43215 Director Annuity Insurance Company (2)
- ------------------------------------ --------------------------- ----------------------------------------------------
Dimon R. McFerson Chairman and Chief Chairman and Chief Executive Officer- (2)
One Nationwide Plaza Executive Officer and
Columbus, OH 43215 Director
- ------------------------------------ --------------------------- ----------------------------------------------------
David O. Miller Chairman of the Board and President, Owen Potato Farm, Inc.; Partner, M&M
115 Sprague Drive Director Enterprises (1)
Hebron, OH 43025
- ------------------------------------ --------------------------- ----------------------------------------------------
Yvonne L. Montgomery Director Senior Vice President-General Manager Southern
Suite 1600 Customer Operations for U.S. Customer Operations,
2859 Paces Ferry Road Xerox Corporation (2)
Atlanta, GA 30339
- ------------------------------------ --------------------------- ----------------------------------------------------
Ralph M. Paige Director Executive Director Federation of Southern
2769 Church Street Cooperatives/Land Assistance Fund
East Point, GA 30344
- ------------------------------------ --------------------------- ----------------------------------------------------
</TABLE>
37
<PAGE> 43
<TABLE>
<CAPTION>
- ------------------------------------ --------------------------- ----------------------------------------------------
DIRECTORS OF THE DEPOSITOR NAME
AND PRINCIPAL BUSINESS ADDRESS POSITIONS AND OFFICES
WITH DEPOSITOR PRINCIPAL OCCUPATION
- ------------------------------------ --------------------------- ----------------------------------------------------
<S> <C> <C>
James F. Patterson Director Vice President, Pattersons, Inc.; President,
8765 Mulberry Road Patterson Farms, Inc. (1)
Chesterland, OH 44026
- ------------------------------------ --------------------------- ----------------------------------------------------
Arden L. Shisler Director President and Chief Executive Officer, K&B
1356 North Wenger Road Transport, Inc. (1)
Dalton, OH 44618
- ------------------------------------ --------------------------- ----------------------------------------------------
Robert L. Stewart Director Owner and Operator Sunnydale Farms and Mining (1)
88740 Fairview Road
Jewett, OH 43986
- ------------------------------------ --------------------------- ----------------------------------------------------
Nancy C. Thomas Director Farm Owner and Operator, Da-Ma-Lor Farms (1)
1733A Westwood Avenue
Alliance, OH 44601
- ------------------------------------ --------------------------- ----------------------------------------------------
<FN>
(1) Principal occupation for last 5 years
(2) Prior to assuming this current position, held other executive management
positions with the same or affiliated companies.
</TABLE>
Each of the directors is a director of the other major insurance affiliates of
the Nationwide group, except Mr. Gasper who is a director only of Nationwide
Life Insurance Company and Nationwide Life and Annuity Insurance Company.
Messrs. McFerson and Gasper are directors of Nationwide Advisory Services, Inc.,
a registered broker-dealer.
Messrs. McFerson, Miller, Patterson, and Shisler are directors of Nationwide
Financial Services, Inc. Mr. McFerson and Ms. Thomas are trustees of Nationwide
Mutual Funds, a registered investment company. Messrs. McFerson, Gasper and
Woodward are trustees of Nationwide Separate Account Trust and Nationwide Asset
Allocation Trust, registered investment companies. Mr. McFerson is trustee of
Nationwide Mutual Funds, a registered investment company. Mr. Engel is a
director of Western Cooperative Transport.
EXECUTIVE OFFICERS OF NATIONWIDE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
OFFICERS OF THE DEPOSITOR OFFICES OF THE DEPOSITOR
NAME AND PRINCIPAL BUSINESS ADDRESS
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President-Chief Financial Officer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President-Chief Investment Officer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
James E. Brock Senior Vice President - Corporate Development
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
John R. Cook, Jr. Senior Vice President - Chief Communications Officer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
38
<PAGE> 44
<TABLE>
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
Phillip C. Gath Senior Vice President and Chief Actuary
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Richard D. Headley Senior Vice President - Chief Information Technology Officer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Donna A. James Senior Vice President - Human Resources
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Richard A. Karas Senior Vice President - Sales and Financial Services
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Douglas C. Robinette Senior Vice President - Marketing and Product Management
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Susan A. Wolken Senior Vice President - Life Company Operations
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Bruce C. Barnes Vice President - Technology Strategy and Planning
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
David A. Diamond Vice President - Enterprise Controller
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Matthew S. Easley Vice President - Investment Life Actuarial
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Joseph P. Rath Vice President -Product and Market Compliance
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
Mark R. Thresher Vice President - Finance and Treasurer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
JOSEPH J. GASPER has been President and Chief Operating Officer of Nationwide
and Director since April 1996. Previously, he was Executive Vice President -
Property/Casualty Operations of Nationwide Mutual Insurance Company from April
1995 to April 1996. He was Senior Vice President - Property/Casualty Operations
of Nationwide Mutual Insurance Company from September 1993 to April 1995. Prior
to that time, Mr. Gasper held numerous positions within Nationwide. Mr. Gasper
has been with Nationwide for 32 years.
BRUCE C. BARNES has been Vice President - Technology Strategy and Planning since
May 1998. Previously, Mr. Barnes was Vice President - Information Systems from
February 1997 to May 1998. Mr. Barnes was Vice President - Life Systems from May
1996 to May 1998. Previously, he was Vice President - Investment Product Systems
from April 1995 to May 1996. Prior to that time, Mr. Barnes was Vice President -
Individual Investment Products/Common Systems from May 1994 to April 1995 and
Associate Vice President - Individual Investment Products/Common
39
<PAGE> 45
Systems from May 1992 to May 1994. Mr. Barnes was Vice President - Information
Services of PHP Benefits Systems, Inc. from January 1987 to January 1992. Mr.
Barnes has been with Nationwide for 7 years.
A. I. BELL has been a Director of Nationwide since April, 1998. Mr. Bell has
served as a state trustee of the Ohio Farm Bureau Federation from 1991 to 1998
and as president that last four years. He oversees the Bell family farm in
Zanesville, Ohio. The farm is the hub of a multi-family swine network, in
addition to grain and beef operations. Mr. Bell has represented the Ohio Farm
Bureau at state and national level activities, and has traveled internationally
representing Ohio agriculture. In 1995, he was introduced into The Ohio State
University Department of Animal Sciences Hall of Fame.
JAMES E. BROCK has been Senior Vice President - Corporate Development since July
1997. Previously, he was Senior Vice President - Company Operations from
December 1996 to July 1997 and was also Senior Vice President - Life Company
Operations from April 1996 to July 1997. Mr. Brock was Senior Vice President -
Investment Products Operations from November 1990 to April 1996. Prior to that
time, Mr. Brock held several positions within Nationwide. Mr. Brock has been
with Nationwide for 29 years.
DENNIS W. CLICK has been Vice President - Secretary since December 1997.
Previously, he was Vice President - Assistant Secretary from December 1996 to
December 1997. Mr. Click was Vice President - Assistant Secretary from August
1994 to December 1997. Mr. Click was Associate Vice President and Assistant
Secretary from August 1989 to August 1994. Prior to that time, he held several
positions within Nationwide. Mr. Click has been with Nationwide for 38 years.
JOHN R. COOK, JR. has been Senior Vice President - Chief Communications Officer
since May 1997. Previously, Mr. Cook was Senior Vice President - Chief
Communications Officer of USAA from July 1989 to May 1997.
KENNETH D. DAVIS has been a Director of Nationwide since April 1999. Mr. Davis
has been Chairman of the Board of South Central Power Company since August 1979,
and currently oversees the Davis family farm located in Leesburg, Ohio. Mr.
Davis served as Director of the Farm Bureau Bancorp from October 1998 to March
1998. In addition, Mr. Davis has served in various officer positions with the
Ohio Farm Bureau Federation since December 1989, with his most recent position
as Trustee and President, a position he held from March 1998 to March 1999. Mr.
Davis also held officer positions with the Highland County Farm Bureau from June
1997 to September 1997, including Trustee and President from September 1984 to
September 1997.
DAVID A. DIAMOND has been Vice President - Enterprise Controller since August
1996. Previously, he was Vice President - Controller from October 1993 to August
1996. Prior to that time, Mr. Diamond held several positions within Nationwide.
Mr. Diamond has been with Nationwide for 10 years.
MATTHEW S. EASLEY has been Vice President - Investment Life Actuarial since June
1998. Mr. Easley was Vice President - Marketing and Administrative Services from
December 1996 to June 1998. Mr. Easley was Vice President - Life Marketing and
Administrative Services from May 1996 to June 1998. Mr. Easley was Vice
President - Annuity and Pension Actuarial from August 1989 to May 1996. Prior to
that time, Mr. Easley held several positions within Nationwide. Mr. Easley has
been with Nationwide for 16 years.
KEITH W. ECKEL has been a Director of Nationwide since April 1996. Mr. Eckel is
a partner of Fred W. Eckel Sons and president of Eckel Farms, Inc., in northeast
Pennsylvania. He received the Master Farmer award from Penn State University in
1982. He is a former president of the Pennsylvania Farm Bureau, a position he
held for 15 years, and the Lackawanna County Cooperative Extension Association.
Mr. Eckel has served as a board member and executive committee member of
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<PAGE> 46
the American Farm Bureau. He is a former vice president of the Pennsylvania
Council of Cooperative Extension Associations, and former board member of the
Pennsylvania Vegetable Grower's Association.
PHILIP C. GATH has been Senior Vice President - Chief Actuary since May 1998.
Previously, Mr. Gath was Vice President - Product Manager - Individual Variable
Annuity from July 1997 to May 1998. Mr. Gath was Vice President - Individual
Life Actuary from August 1989 to July 1997. Prior to that time, Mr. Gath held
several positions within Nationwide. Mr. Gath has been with Nationwide for 30
years.
RICHARD D. HEADLEY has been Senior Vice President - Chief Information Technology
Officer since October 1997. Previously, Mr. Headley was Chairman and Chief
Executive Officer of Banc One Services Corporation from 1992 to October 1997.
From January 1975 until 1992 Mr. Headley held several positions with Banc One
Corporation.
DONNA A. JAMES has been Senior Vice President - Human Resources since December
1997. Previously, she was Vice President - Human Resources from July 1996 to
December 1997. Prior to that time Ms. James was Vice President Assistant to the
CEO from March 1996 to July 1996. From May 1994 to March 1996 she was Associate
Vice President - Assistant to the CEO. Prior to that time Ms. James held several
positions within Nationwide. Ms. James has been with Nationwide for 17 years.
RICHARD A. KARAS has been Senior Vice President - Sales - Financial Services
since March 1993. Previously, he was Vice President - Sales - Financial Services
from February 1989 to March 1993. Prior to that time, Mr. Karas held several
positions within Nationwide. Mr. Karas has been with Nationwide for 34 years.
DAVID O. MILLER has been a Director of Nationwide since November 1996. Mr.
Miller has been a farm owner and land developer since 1962. He is the President
of the Owen Potato Farm Inc. and is a partner of M&M Enterprises in Licking
County, Ohio. He is Chairman of the Board of the Wausau Insurance Companies and
serves on the board of directors of several companies of the Nationwide group.
He is also a director of the National Cooperative Business Association.
YVONNE L. MONTGOMERY has been a Director since April, 1998. Ms. Montgomery is
senior vice president/general manager of southern customer operations for United
States Customer Operations for Xerox Corporation. A resident of Atlanta,
Georgia, Ms. Montgomery oversees eight customer business units across the
southern United States as well as all business and marketing functions in the
regions. Ms. Montgomery joined Xerox in 1976 as a sales representative and
progressed through management positions, including Vice President - Field
Operations, and Executive Assistant to the Chairman and CEO.
R. DENNIS NOICE has been Vice President - Systems since April 1998. Previously,
he was Vice President - Retail Operations from March 1997 to April 1998. Prior
to that time, Mr. Noice was Vice President - Individual Investment Products from
October 1989 to March 1997. Prior to that time, Mr. Noice held several positions
within Nationwide. Mr. Noice has been with Nationwide for 27 years.
ROBERT A. OAKLEY has been Executive Vice President - Chief Financial Officer
since April 1995. Previously, he was Senior Vice President - Chief Financial
Officer from October 1993 to April 1995. Prior to that time, Mr. Oakley held
several positions within Nationwide. Mr. Oakley has been with Nationwide for 23
years.
RALPH M. PAIGE has been a Director of Nationwide since April 1999. Mr. Paige has
been the Executive Director of the Federation of Southern Cooperatives/Land
Assistance Fund since 1969. Mr. Paige also served as the National Field
Director/Georgia State Director from 1981 to 1984.
JOSEPH P. RATH has been Vice President - Product and Market Compliance since
April 1997. Previously, he was Vice President -
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Associate General Counsel from October 1988 to April 1997. Prior to that time,
Mr. Rath held several positions within Nationwide. Mr. Rath has been with
Nationwide for 22 years.
DOUGLAS C. ROBINETTE has been Senior Vice President - Marketing and Product
Management since May 1998. Previously, Mr. Robinette was Executive Vice
President, Customer Services of Employers Insurance of Wausau (Wausau), a member
of the Nationwide group until December 1998, from September 1996 to May 1998.
Prior to that time he was Executive Vice President, Finance and Insurance
Services of Wausau from May 1995 to September 1996. From November 1994 to May
1995 Mr. Robinette was Senior Vice President, Finance and Insurance Services of
Wausau. From May 1993 to November 1994 he was Senior Vice President, Finance of
Wausau. Prior to that time, Mr. Robinette held several positions within the
Nationwide group. Mr. Robinette has been with the Nationwide group for 12 years.
MARK R. THRESHER has been Vice President - Controller since August 1996. He was
Vice President and Treasurer from November 1996 to February 1997. Previously, he
was Vice President and Treasurer from June 1996 to August 1996. Prior to joining
Nationwide, Mr. Thresher served as a partner with KPMG LLP.
SUSAN A. WOLKEN has been Senior Vice President - Life Company Operations since
June 1997. Previously, she was Senior Vice President - Enterprise Administration
from July 1996 to June 1997. Prior to that time, she was Senior Vice President -
Human Resources from April 1995 to July 1996. From September 1993 to April 1995,
Ms. Wolken was Vice President - Human Resources. From October 1989 to September
1993 she was Vice President - Individual Life and Health Operations. Ms. Wolken
has been with Nationwide for 24 years.
ROBERT J. WOODWARD, JR. has been Executive Vice President - Chief Investment
Officer since August 1995. Previously, he was Senior Vice President - Fixed
Income Investments from March 1991 to August 1995. Prior to that time, Mr.
Woodward held several positions within Nationwide. Mr. Woodward has been with
Nationwide for 34 years.
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investment
vehicles for variable annuity contracts and variable life insurance policies
issued by insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF THE AMERICAN CENTURYSM
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S&P 500. Such a management technique known as "portfolio optimization"
may cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities. There can be no assurance that
the Fund will achieve its objectives.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are
believed by management to be undervalued at the time of purchase. Under
normal market conditions, the Fund expects to invest at least 80% of the
value of its total asset in equity securities, including common and
preferred stock, convertible preferred stock and convertible debt
obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life
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insurance products of insurance companies. The Dreyfus Corporation ("Dreyfus")
serves as the Fund's manager, while Mellon Equity Associates, an affiliate of
Dreyfus, serves as the Fund's index manager. Dreyfus is a wholly-owned
subsidiary of Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon
Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
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.
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
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Portfolio's goal is to achieve a yield which exceeds the composite yield on
the securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is also
important to point out that this Portfolio makes sense for you if you can
afford to ride out changes in the stock market because it invests primarily
in common stocks. FMR can also make temporary investments in securities
such as investment-grade bonds, high-quality preferred stocks and
short-term notes, for defensive purposes when it believes market conditions
warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- at least 65% in income-producing debt securities and preferred
stocks, including convertible securities
- up to 20% in common stocks and other equity securities when
consistent with the Portfolio's primary objective or acquired as
part of a unit combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated or
that are unrated. Lower-rated securities are usually defined as Ba or lower
by Moody's Investor Service, Inc. ("Moody's"); BB or lower by Standard &
Poor's and may be deemed to be of a speculative nature. The Portfolio may
also purchase lower-quality bonds such as those rated Ca3 by Moody's or C-
by Standard & Poor's which provide poor protection for payment of principal
and interest (commonly referred to as "junk bonds"). For a further
discussion of lower-rated securities, please see the "Risks of Lower-Rated
Debt Securities" section of the Portfolio's prospectus.
VIP OVERSEAS PORTFOLIO: SERVICE CLASS
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
VIP II CONTRAFUND PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to investments
in domestic or foreign companies, small and large, many of which may not be
well known. The Portfolio primarily invests in common stock and securities
convertible into common stock, but it has the flexibility to invest in any
type
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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.
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. The assets of NSAT are managed by Nationwide Advisory
Services, Inc. ("NAS"), a wholly-owned subsidiary of Nationwide Life Insurance
Company.
CAPITAL APPRECIATION FUND
Investment Objective: Long-term 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 considered
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.
SUB-ADVISED NATIONWIDE FUNDS
NATIONWIDE BALANCED FUND
Subadviser: Salomon Brothers Asset Management, Inc.
Investment Objective: Primarily seeks above-average income compared to a
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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 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
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discussion of lower-rated securities, please see the "High Yield
Securities" section of the Fund's prospectus.
NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Salomon Brothers Asset Management, Inc. with Salomon Brothers
Asset Management Limited Investment Objective: Primarily seeks a high
level of current income. Capital appreciation is a secondary objective.
The Fund seeks to achieve its objectives by investing in a globally
diverse portfolio of fixed-income investments and by giving the
subadviser, Salomon Brothers Asset Management, Inc. broad discretion to
deploy the Fund's assets among certain segments of the fixed-income
market that the subadviser believes will best contribute to achievement
of the Fund's investment objectives. The Fund reserves the right to
invest predominantly in securities rated in medium or lower categories,
or as determined by the subadviser to be of comparable quality, commonly
referred to as "junk bonds." Although the subadviser has the ability to
invest up to 100% of the Fund's assets in lower-rated securities, the
subadviser does not anticipate investing in excess of 75% of the Fund's
assets in such securities. The subadviser has entered into a subadvisory
agreement with its London based affiliate, Salomon Brothers Asset
Management Limited, pursuant to which the subadviser has delegated to
Salomon Brothers Asset Management Limited responsibility for management
of the Fund's investments in non-dollar denominated debt securities and
currency transactions.
NATIONWIDE SELECT ADVISERS MID CAP FUND
Subadvisers: First Pacific Advisors, Inc., Pilgrim Baxter & Associates,
Ltd., and Rice, Hall, James & Associates Investment Objective: Capital
appreciation by investing primarily in equity securities of medium-sized
companies (market capitalization between $500 million and $7 billion).
Under normal market conditions, the Fund will invest in equity securities
consisting of common stock, preferred stock and securities convertible
into common stocks, including convertible preferred stock and convertible
bonds. NAS has chosen the Fund's subadvisers because they utilize a
number of different investment styles. In utilizing these different
styles, NAS hopes to increase prospects for investment return and to
reduce market risk and volatility.
NATIONWIDE 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 as small cap companies.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in the equity securities of small cap companies. The balance
of the Fund's assets may be invested in equity securities of larger cap
companies. The Fund may also invest in foreign securities.
NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: 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.
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NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Lazard Asset
Management, Strong Capital Management, Inc. and Warburg Pincus Asset
Management, Inc. 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 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
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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 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
50
<PAGE> 56
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 ("Van Eck Trust") is an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts on January 7, 1987. Shares of Van Eck Trust are
offered only to separate accounts of insurance companies to fund the benefits of
variable life insurance policies and variable annuity contracts. The investment
advisor and manager is Van Eck Associates Corporation.
WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund emphasizes investment in countries that, compared to the world's major
economies, exhibit relatively low gross national product per capita, as
well as the potential for rapid economic growth.
WORLDWIDE HARD ASSETS FUND
Investment Objective: Long-term capital appreciation by investing primarily
in "Hard Asset Securities." For the Fund's purpose, "Hard Assets" are real
estate, energy, timber, and industrial and precious metals.
Income is a secondary consideration.
VAN KAMPEN LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen Asset Management, Inc. serves as the Fund's investment adviser.
MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally in
a diversified portfolio of securities of companies operating in the real
estate industry ("Real Estate Securities"). Current income is a secondary
consideration. Real Estate Securities include equity securities, including
common stocks and convertible securities, as well as non-convertible
preferred stocks and debt securities of real estate industry companies. A
"real estate industry company" is a company that derives at least 50% of
its assets (marked to market), gross income or net profits from the
ownership, construction, management or sale of residential, commercial or
industrial real estate. Under normal market conditions, at least 65% of the
Fund's total assets will be invested in Real Estate Securities, primarily
equity securities of real estate investment trusts. The Portfolio may
invest up to 25% of its total assets in securities issued by foreign
issuers, some or all of which may also be Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. The Portfolios are managed by Warburg Pincus Asset Management,
Inc. ("Warburg").
51
<PAGE> 57
GROWTH & INCOME PORTFOLIO
Investment Objective: Long-term growth of capital and income by investing
primarily in dividend-paying equity securities. Under normal market
conditions, the Portfolio will invest substantially all of its asset in
equity securities that Warburg considers to be relatively undervalued based
upon research and analysis, taking into account factors such as price/book
ratio, price/cash flow ratio, earnings growth, debt/capital ratio and
multiples of earnings of comparable securities. Although the Portfolio may
hold securities of any size, it currently expects to focus on companies
with market capitalizations of $1 billion or greater at the time of initial
purchase.
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing primarily
in a broadly diversified portfolio of equity securities of companies,
wherever organized, that in the judgment of Warburg have their principal
business activities and interests outside the United States. The Portfolio
will ordinarily invest substantially all of its assets, but no less than
65% of its total assets, in common stocks, warrants and securities
convertible into or exchangeable for common stocks. The Portfolio intends
to invest principally in the securities of financially strong companies
with opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily in
equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence or
the early stages of the development of a new product or service; or (b) as
part of a restructuring or recapitalization of the company. The Portfolio
may invest up to 10% of its assets in venture capital and other investment
funds.
52
<PAGE> 58
APPENDIX B: ILLUSTRATIONS OF CASH VALUES, CASH SURRENDER VALUES,
AND DEATH BENEFITS
The illustrations in this prospectus have been prepared to help show how values
under the policies change with investment performance. The illustrations
illustrate how cash values, cash surrender values and death benefits under a
policy would vary over time if the hypothetical gross investment rates of return
were a uniform annual effective rate of either 0%, 6% or 12%. If the
hypothetical gross investment rate of return averages 0%, 6% or 12% over a
period of years, but fluctuates above or below those averages for individual
years, the cash values, cash surrender values and death benefits may be
different. For hypothetical returns of 0% and 6%, the illustrations also
illustrate when the policies would go into default, at which time additional
premium payments would be required to continue the policy in force. The
illustrations also assume there is no policy indebtedness, no additional premium
payments are made, no cash values are allocated to the fixed account, and there
are no changes in the specified amount or death benefit option.
The amounts shown for the cash value, cash surrender value and death benefit as
of each policy anniversary reflect the fact that the net investment return on
the assets held in the sub-accounts is lower than the gross return. This is due
to the daily charges made against the assets of the sub-accounts for assuming
mortality and expense risks. Beginning in the fourth policy year, cash surrender
value equals cash value less indebtedness, or other deductions. In policy years
one, two and three only, cash surrender value equals cash value less
indebtedness or other deductions increased by 3.5%, 5.5% and 4.0%, respectively,
of the current premium. The guaranteed mortality and expense risk charges for
policy years one through four are equivalent to an annual effective rate of
0.75% of the daily net assets of the variable account. The current mortality and
expense risk charges for policy years one through four are equivalent to an
annual effective rate of 0.40% of the daily net assets of the variable account.
The current mortality and expense risk charges for policy years five through
twenty are equivalent to an annual effective rate of 0.25% of the daily net
assets of the variable account. The current mortality and expense risk charges
for policy years twenty-one and beyond are equivalent to an annual effective
rate of 0.10% of the daily net assets of the variable account. In addition, the
net investment returns also reflect the deduction of underlying mutual fund
investment advisory fees and other expenses which are equivalent to an annual
effective rate of 0.94% of the daily net assets of the variable account. This
effective rate is based on the average of the fund expenses, after expense
reimbursement, for all underlying mutual fund options available under the policy
as of April 13, 1999. Some underlying mutual funds are subject to expense
reimbursements and fee waivers. Absent expense reimbursements and fee waivers,
the annual effective rate would have been 1.02%. Nationwide anticipates that the
expense reimbursement and fee waiver arrangements will continue past the current
year. Should there be an increase or decrease in the expense reimbursements and
fee waivers of these underlying mutual funds, such change will be reflected in
the net asset value of the corresponding underlying mutual fund.
Considering current charges for mortality and expense risks and underlying
mutual fund expenses, gross annual rates of return of 0%, 6% and 12% correspond
to net investment experience at constant annual rates of -1.30%, 4.70% and
10.70% for policy years one through four, and rates of -1.15%, 4.85% and 10.85%
for policy years five through twenty, and rates of -1.00%, 5.00% and 11.00% for
policy years twenty-one and beyond. Considering guaranteed charges for mortality
and expense risks and underlying mutual fund expenses, gross annual rates of
return of 0%, 6% and 12% correspond to net investment experience at constant
annual rates of -1.65%, 4.35% and 10.35% for all policy years.
53
<PAGE> 59
The illustrations also reflect the fact that Nationwide makes monthly charges
for providing insurance protection. Current values reflect current cost of
insurance charges and guaranteed values reflect the maximum cost of insurance
charges guaranteed in the policy. The values shown are for policies which are
issued as standard. Policies issued on a substandard basis would result in lower
cash values and death benefits than those illustrated.
The illustrations also reflect the fact that Nationwide deducts a sales load
from each premium payment received guaranteed not to exceed 5.5% of each premium
payment for the first seven policy years and 2% thereafter. On a current basis,
the sales load is 3.0% of premium payments plus 2.5% of premiums up to the
target premium during the first seven policy years, and 0% of all premiums
thereafter. Nationwide also deducts a tax expense charge of 3.5%, both current
and guaranteed, from all premium payments. The illustrations also reflect the
fact that Nationwide deducts a charge for state premium taxes at a rate of 2.25%
and for federal tax at a rate of 1.25% (imposed under Section 848 of the
Internal Revenue Code) of all premium payments.
In addition, the illustrations reflect the fact that Nationwide deducts a
monthly administrative charge at the beginning of each policy month. This
monthly administrative expense charge is currently $5.00 per month and
guaranteed not to exceed $10.00. The illustrations also reflect the fact that no
charges for federal or state income taxes are currently made against the
variable account. If such a charge is made in the future, it will require a
higher gross investment return than illustrated in order to produce the net
after-tax returns shown in the illustrations.
Upon request, Nationwide will furnish a comparable illustration based on the
proposed insured's age, smoking classification, rating classification and
premium payment requested.
54
<PAGE> 60
<TABLE>
<CAPTION>
$100,000 ANNUAL PREMIUM FOR 7 YEARS $1,703,050 SPECIFIED AMOUNT
CASH VALUE ACCUMULATION TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 1
CURRENT VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 87,973 91,473 1,703,050 93,358 96,858 1,703,050 98,745 102,245 1,703,050
2 215,250 174,541 180,041 1,703,050 190,783 196,283 1,703,050 207,670 213,170 1,703,050
3 331,013 260,057 264,057 1,703,050 292,828 296,828 1,703,050 328,245 332,245 1,703,050
4 452,563 344,488 344,488 1,703,050 399,678 399,678 1,703,050 461,696 461,696 1,703,050
5 580,191 428,425 428,425 1,703,050 512,284 512,284 1,703,050 610,298 610,298 1,703,050
6 714,201 511,353 511,353 1,703,050 630,358 630,358 1,703,050 774,770 774,770 1,887,649
7 854,911 593,340 593,340 1,703,050 754,109 754,109 1,784,147 955,930 955,930 2,261,636
8 897,656 582,320 582,320 1,703,050 786,308 786,308 1,807,093 1,053,187 1,053,187 2,420,434
9 942,539 571,033 571,033 1,703,050 819,770 819,770 1,830,792 1,160,182 1,160,182 2,591,035
10 989,666 559,430 559,430 1,703,050 854,523 854,523 1,855,341 1,277,853 1,277,853 2,774,475
11 1,039,150 547,500 547,500 1,703,050 890,636 890,636 1,880,844 1,407,280 1,407,280 2,971,893
12 1,091,107 535,197 535,197 1,703,050 928,148 928,148 1,907,343 1,549,606 1,549,606 3,184,440
13 1,145,662 522,503 522,503 1,703,050 967,129 967,129 1,934,838 1,706,133 1,706,133 3,413,290
14 1,202,945 509,372 509,372 1,703,050 1,007,632 1,007,632 1,963,270 1,878,257 1,878,257 3,659,597
15 1,263,093 495,616 495,616 1,703,050 1,049,602 1,049,602 1,992,459 2,067,297 2,067,297 3,924,349
16 1,326,247 481,136 481,136 1,703,050 1,093,062 1,093,062 2,022,493 2,274,827 2,274,827 4,209,112
17 1,392,560 465,814 465,814 1,703,050 1,138,032 1,138,032 2,053,237 2,502,553 2,502,553 4,515,106
18 1,462,188 449,480 449,480 1,703,050 1,184,501 1,184,501 2,084,840 2,752,261 2,752,261 4,844,255
19 1,535,297 431,953 431,953 1,703,050 1,232,460 1,232,460 2,117,489 3,025,885 3,025,885 5,198,773
20 1,612,062 413,057 413,057 1,703,050 1,281,920 1,281,920 2,150,933 3,325,569 3,325,569 5,579,972
21 1,692,665 394,774 394,774 1,703,050 1,335,923 1,335,923 2,190,513 3,661,946 3,661,946 6,004,493
22 1,777,298 376,474 376,474 1,703,050 1,392,759 1,392,759 2,233,011 4,033,961 4,033,961 6,467,649
23 1,866,163 357,031 357,031 1,703,050 1,451,872 1,451,872 2,277,406 4,443,333 4,443,333 6,969,812
24 1,959,471 335,925 335,925 1,703,050 1,513,115 1,513,115 2,323,237 4,893,023 4,893,023 7,512,748
25 2,057,445 312,946 312,946 1,703,050 1,576,553 1,576,553 2,370,504 5,386,893 5,386,893 8,099,733
26 2,160,317 287,835 287,835 1,703,050 1,642,238 1,642,238 2,419,509 5,929,122 5,929,122 8,735,375
27 2,268,333 260,345 260,345 1,703,050 1,710,256 1,710,256 2,470,123 6,524,388 6,524,388 9,423,173
28 2,381,750 230,158 230,158 1,703,050 1,780,670 1,780,670 2,523,032 7,177,712 7,177,712 10,170,100
29 2,500,837 196,875 196,875 1,703,050 1,853,532 1,853,532 2,578,078 7,894,532 7,894,532 10,980,504
30 2,625,879 160,022 160,022 1,703,050 1,928,876 1,928,876 2,636,002 8,680,686 8,680,686 11,863,025
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
55
<PAGE> 61
<TABLE>
<CAPTION>
$100,000 ANNUAL PREMIUM FOR 7 YEARS $1,703,050 SPECIFIED AMOUNT
CASH VALUE ACCUMULATION TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 1
GUARANTEED VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 81,804 85,304 1,703,050 86,939 90,439 1,703,050 92,079 95,579 1,703,050
2 215,250 162,060 167,560 1,703,050 177,411 182,911 1,703,050 193,381 198.881 1,703,050
3 331,013 240,818 244,818 1,703,050 271,628 275,628 1,703,050 304,952 308,952 1,703,050
4 452,563 318,117 318,117 1,703,050 369,810 369,810 1,703,050 427,954 427,954 1,703,050
5 580,191 393,976 393,976 1,703,050 472,176 472,176 1,703,050 563,678 563,678 1,703,050
6 714,201 468,422 468,422 1,703,050 578,979 578,979 1,703,050 713,577 713,577 1,738,559
7 854,911 541,443 541,443 1,703,050 690,462 690,462 1,703,050 877,092 877,092 2,075,111
8 897,656 522,801 522,801 1,703,050 711,259 711,259 1,703,050 955,774 955,774 2,196,559
9 942,539 503,355 503,355 1,703,050 732,313 732,313 1,703,050 1,041,054 1,041,054 2,324,986
10 989,666 482,981 482,981 1,703,050 753,591 753,591 1,703,050 1,133,421 1,133,421 2,460,884
11 1,039,150 461,562 461,562 1,703,050 775,077 775,077 1,703,050 1,233,415 1,233,415 2,604,726
12 1,091,107 438,986 438,986 1,703,050 796,765 796,765 1,703,050 1,341,636 1,341,636 2,757,063
13 1,145,662 415,134 415,134 1,703,050 818,655 818,655 1,703,050 1,458,738 1,458,738 2,918,351
14 1,202,945 389,865 389,865 1,703,050 840,742 840,742 1,703,050 1,585,421 1,585,421 3,089,034
15 1,263,093 362,988 362,988 1,703,050 863,001 863,001 1,703,050 1,722,402 1,722,402 3,269,635
16 1,326,247 334,244 334,244 1,703,050 885,376 885,376 1,703,050 1,870,394 1,870,394 3,460,790
17 1,392,560 303,295 303,295 1,703,050 907,785 907,785 1,703,050 2,030,107 2,030,107 3,662,719
18 1,462,188 269,748 269,748 1,703,050 930,136 930,136 1,703,050 2,202,267 2,202,267 3,876,209
19 1,535,297 233,157 233,157 1,703,050 952,337 952,337 1,703,050 2,387,626 2,387,626 4,102,180
20 1,612,062 193,032 193,032 1,703,050 974,303 974,303 1,703,050 2,587,009 2,587,009 4,340,743
21 1,692,665 148,890 148,890 1,703,050 995,985 995,985 1,703,050 2,801,365 2,801,365 4,593,398
22 1,777,298 100,208 100,208 1,703,050 1,017,350 1,017,350 1,703,050 3,031,751 3,031,751 4,860,806
23 1,866,163 46,413 46,413 1,703,050 1,038,375 1,038,375 1,703,050 3,279,349 3,279,349 5,143,987
24 1,959,471 0 0 0 1,059,009 1,059,009 1,703,050 3,545,373 3,545,373 5,443,566
25 2,057,445 0 0 0 1,079,135 1,079,135 1,703,050 3,830,967 3,830,967 5,760,242
26 2,160,317 0 0 0 1,098,577 1,098,577 1,703,050 4,137,162 4,137,162 6,095,281
27 2,268,333 0 0 0 1,117,090 1,117,090 1,703,050 4,464,907 4,464,907 6,448,664
28 2,381,750 0 0 0 1,134,370 1,134,370 1,703,050 4,814,977 4,814,977 6,822,341
29 2,500,837 0 0 0 1,150,082 1,150,082 1,703,050 5,188,199 5,188,199 7,216,267
30 2,625,879 0 0 0 1,163,924 1,163,924 1,703,050 5,585,598 5,585,598 7,633,278
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
56
<PAGE> 62
<TABLE>
<CAPTION>
$100,000 ANNUAL PREMIUM FOR 7 YEARS $1,703,050 SPECIFIED AMOUNT
CASH VALUE ACCUMULATION TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 2
CURRENT VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 87,773 91,273 1,790,823 93,146 96,646 1,796,196 98,521 102,021 1,801,571
2 215,250 173,897 179,397 1,876,947 190,074 195,574 1,893,124 206,892 212,392 1,909,942
3 331,013 258,730 262,730 1,961,780 291,307 295,307 1,994,357 326,512 330,512 2,029,562
4 452,563 342,210 342,210 2,045,260 396,965 396,965 2,100,015 458,486 458,486 2,161,536
5 580,191 424,873 424,873 2,127,923 507,889 507,889 2,210,939 604,896 604,896 2,307,946
6 714,201 506,162 506,162 2,209,212 623,682 623,682 2,326,732 766,547 766,547 2,469,597
7 854,911 586,114 586,114 2,289,164 744,602 744,602 2,447,652 945,099 945,099 2,648,149
8 897,656 572,959 572,959 2,276,009 773,602 773,602 2,476,652 1,039,565 1,039,565 2,742,615
9 942,539 559,424 559,424 2,262,474 803,445 803,445 2,506,495 1,143,598 1,143,598 2,846,648
10 989,666 545,447 545,447 2,248,497 834,103 834,103 2,537,153 1,258,155 1,258,155 2,961,205
11 1,039,150 531,026 531,026 2,234,076 865,608 865,608 2,568,658 1,384,356 1,384,356 3,087,406
12 1,091,107 516,108 516,108 2,219,158 897,940 897,940 2,600,990 1,523,387 1,523,387 3,226,437
13 1,145,662 500,683 500,683 2,203,733 931,123 931,123 2,634,173 1,676,609 1,676,609 3,379,659
14 1,202,945 484,702 484,702 2,187,752 965,141 965,141 2,668,191 1,845,456 1,845,456 3,595,686
15 1,263,093 467,918 467,918 2,170,968 999,772 999,772 2,702,822 2,031,131 2,031,131 3,855,697
16 1,326,247 450,219 450,219 2,153,269 1,034,922 1,034,922 2,737,972 2,235,030 2,235,030 4,135,476
17 1,392,560 431,476 431,476 2,134,526 1,070,470 1,070,470 2,773,520 2,458,771 2,458,771 4,436,115
18 1,462,188 411,495 411,495 2,114,545 1,106,224 1,106,224 2,809,274 2,704,110 2,704,110 4,759,504
19 1,535,297 390,081 390,081 2,093,131 1,141,977 1,141,977 2,845,027 2,972,945 2,972,945 5,107,817
20 1,612,062 367,059 367,059 2,070,109 1,177,534 1,177,534 2,880,584 3,267,384 3,267,384 5,482,344
21 1,692,665 344,829 344,829 2,047,879 1,216,627 1,216,627 2,919,677 3,597,875 3,597,875 5,899,436
22 1,777,298 322,819 322,819 2,025,869 1,257,656 1,257,656 2,960,706 3,963,380 3,963,380 6,354,487
23 1,866,163 299,600 299,600 2,002,650 1,299,242 1,299,242 3,002,292 4,365,588 4,365,588 6,847,862
24 1,959,471 274,578 274,578 1,977,628 1,340,789 1,340,789 3,043,839 4,807,410 4,807,410 7,381,297
25 2,057,445 247,580 247,580 1,950,630 1,382,096 1,382,096 3,085,146 5,292,637 5,292,637 7,958,010
26 2,160,317 218,396 218,396 1,921,446 1,422,916 1,422,916 3,125,966 5,825,377 5,825,377 8,582,528
27 2,268,333 186,857 186,857 1,889,907 1,463,027 1,463,027 3,166,077 6,410,226 6,410,226 9,258,290
28 2,381,750 152,736 152,736 1,855,786 1,502,135 1,502,135 3,205,185 7,052,117 7,052,117 9,992,145
29 2,500,837 115,752 115,752 1,818,802 1,539,875 1,539,875 3,242,925 7,756,394 7,756,394 10,788,368
30 2,625,879 75,586 75,586 1,778,636 1,575,820 1,575,820 3,278,870 8,528,790 8,528,790 11,655,445
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
57
<PAGE> 63
<TABLE>
<CAPTION>
$100,000 ANNUAL PREMIUM FOR 7 YEARS $1,703,050 SPECIFIED AMOUNT
CASH VALUE ACCUMULATION TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 2
GUARANTEED VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 105,000 81,397 84,897 1,784,447 86,507 90,007 1,789,557 91,622 95,122 1,794,672
2 215,250 160,805 166,305 1,863,855 176,027 181,527 1,879,077 191,863 197,363 1,894,913
3 331,013 238,224 242,224 1,941,274 268,655 272,655 1,971,705 301,563 305,563 2,004,613
4 452,563 313,634 313,634 2,016,684 364,469 364,469 2,067,519 421,632 421,632 2,124,682
5 580,191 386,984 386,984 2,090,034 463,519 463,519 2,166,569 553,033 553,033 2,256,083
6 714,201 458,221 458,221 2,161,271 565,854 565,854 2,268,904 696,829 696,829 2,399,879
7 854,911 527,226 527,226 2,230,276 671,457 671,457 2,374,507 854,117 854,117 2,557,167
8 897,656 504,400 504,400 2,207,450 685,455 685,455 2,388,505 925,885 925,885 2,628,935
9 942,539 480,584 480,584 2,183,634 698,646 698,646 2,401,696 1,003,506 1,003,506 2,706,556
10 989,666 455,657 455,657 2,158,707 710,854 710,854 2,413,904 1,087,432 1,087,432 2,790,482
11 1,039,150 429,519 429,519 2,132,569 721,913 721,913 2,424,963 1,178,176 1,178,176 2,881,226
12 1,091,107 402,083 402,083 2,105,133 731,666 731,666 2,434,716 1,276,319 1,276,319 2,979,369
13 1,145,662 373,266 373,266 2,076,316 739,949 739,949 2,442,999 1,382,506 1,382,506 3,085,556
14 1,202,945 342,971 342,971 2,046,021 746,576 746,576 2,449,626 1,497,424 1,497,424 3,200,474
15 1,263,093 311,048 311,048 2,014,098 751,295 751,295 2,454,345 1,621,779 1,621,779 3,324,829
16 1,326,247 277,281 277,281 1,980,331 753,776 753,776 2,456,826 1,756,271 1,756,271 3,459,321
17 1,392,560 241,388 241,388 1,944,438 753,600 753,600 2,456,650 1,901,602 1,901,602 3,604,652
18 1,462,188 203,055 203,055 1,906,105 750,295 750,295 2,453,345 2,058,504 2,058,504 3,761,554
19 1,535,297 161,957 161,957 1,865,007 743,349 743,349 2,446,399 2,227,763 2,227,763 3,930,813
20 1,612,062 117,768 117,768 1,820,818 732,226 732,226 2,435,276 2,410,246 2,410,246 4,113,296
21 1,692,665 70,238 70,238 1,773,288 716,436 716,436 2,419,486 2,606,976 2,606,976 4,310,026
22 1,777,298 19,135 19,135 1,722,185 695,483 695,483 2,398,533 2,819,099 2,819,099 4,522,149
23 1,866,163 0 0 0 668,867 668,867 2,371,917 3,047,821 3,047,821 4,780,812
24 1,959,471 0 0 0 635,975 635,975 2,339,025 3,294,192 3,294,192 5,057,903
25 2,057,445 0 0 0 595,982 595,982 2,299,032 3,559,154 3,559,154 5,351,545
26 2,160,317 0 0 0 547,845 547,845 2,250,895 3,843,516 3,843,516 5,662,652
27 2,268,333 0 0 0 490,283 490,283 2,193,333 4,147,989 4,147,989 5,990,941
28 2,381,750 0 0 0 421,790 421,790 2,124,840 4,473,203 4,473,203 6,338,081
29 2,500,837 0 0 0 340,739 340,739 2,043,789 4,819,925 4,819,925 6,704,034
30 2,625,879 0 0 0 245,623 245,623 1,948,673 5,189,106 5,189,106 7,091,432
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
58
<PAGE> 64
<TABLE>
<CAPTION>
$38,872.05 ANNUAL PREMIUM FOR 20 YEARS $1,703,050 SPECIFIED AMOUNT
GUIDELINE PREMIUM / CASH VALUE CORRIDOR TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 1
CURRENT VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40,816 31,428 32,789 1,703,050 33,420 34,781 1,703,050 35,415 36,776 1,703,050
2 83,672 62,020 64,158 1,703,050 67,952 70,090 1,703,050 74,126 76,264 1,703,050
3 128,671 92,124 93,679 1,703,050 104,001 105,556 1,703,050 116,852 118,407 1,703,050
4 175,921 121,675 121,675 1,703,050 141,572 141,572 1,703,050 163,963 163,963 1,703,050
5 225,532 150,810 150,810 1,703,050 180,916 180,916 1,703,050 216,162 216,162 1,703,050
6 277,625 179,312 179,312 1,703,050 221,880 221,880 1,703,050 273,744 273,744 1,703,050
7 332,321 207,223 207,223 1,703,050 264,589 264,589 1,703,050 337,356 337,356 1,703,050
8 389,753 236,376 236,376 1,703,050 311,084 311,084 1,703,050 409,744 409,744 1,703,050
9 450,056 264,860 264,860 1,703,050 359,558 359,558 1,703,050 489,789 489,789 1,703,050
10 513,375 292,643 292,643 1,703,050 410,093 410,093 1,703,050 578,354 578,354 1,703,050
11 579,859 319,743 319,743 1,703,050 462,830 462,830 1,703,050 676,454 676,454 1,703,050
12 649,668 346,137 346,137 1,703,050 517,881 517,881 1,703,050 785,201 785,201 1,703,050
13 722,967 371,839 371,839 1,703,050 575,403 575,403 1,703,050 905,883 905,883 1,703,050
14 799,931 396,832 396,832 1,703,050 635,540 635,540 1,703,050 1,039,929 1,039,929 1,703,050
15 880,743 420,949 420,949 1,703,050 698,331 698,331 1,703,050 1,188,894 1,188,894 1,703,050
16 965,596 444,136 444,136 1,703,050 763,927 763,927 1,703,050 1,354,585 1,354,585 1,760,960
17 1,054,691 466,323 466,323 1,703,050 832,495 832,495 1,703,050 1,537,876 1,537,876 1,968,481
18 1,148,242 487,403 487,403 1,703,050 904,205 904,205 1,703,050 1,740,261 1,740,261 2,192,728
19 1,246,469 507,265 507,265 1,703,050 979,269 979,269 1,703,050 1,963,719 1,963,719 2,435,012
20 1,349,608 525,822 525,822 1,703,050 1,057,955 1,057,955 1,703,050 2,210,463 2,210,463 2,696,764
21 1,417,089 507,650 507,650 1,703,050 1,103,242 1,103,242 1,703,050 2,445,769 2,445,769 2,934,923
22 1,487,943 489,460 489,460 1,703,050 1,151,293 1,151,293 1,703,050 2,706,428 2,706,428 3,220,649
23 1,562,341 470,222 470,222 1,703,050 1,201,817 1,201,817 1,703,050 2,994,746 2,994,746 3,533,801
24 1,640,458 449,459 449,459 1,703,050 1,254,878 1,254,878 1,703,050 3,313,501 3,313,501 3,876,796
25 1,722,480 426,972 426,972 1,703,050 1,310,719 1,310,719 1,703,050 3,665,895 3,665,895 4,252,438
26 1,808,604 402,522 402,522 1,703,050 1,369,620 1,369,620 1,703,050 4,055,472 4,055,472 4,663,793
27 1,899,035 375,876 375,876 1,703,050 1,431,924 1,431,924 1,703,050 4,486,959 4,486,959 5,070,264
28 1,993,986 346,738 346,738 1,703,050 1,498,024 1,498,024 1,703,050 4,965,147 4,965,147 5,511,314
29 2,093,686 314,736 314,736 1,703,050 1,568,388 1,568,388 1,709,542 5,495,459 5,495,459 5,990,050
30 2,198,370 279,427 279,427 1,703,050 1,643,187 1,643,187 1,758,211 6,084,070 6,084,070 6,509,955
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
59
<PAGE> 65
<TABLE>
<CAPTION>
$38,872.05 ANNUAL PREMIUM FOR 20 YEARS $1,703,050 SPECIFIED AMOUNT
GUIDELINE PREMIUM / CASH VALUE CORRIDOR TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 1
GUARANTEED VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40,816 26,824 28,185 1,703,050 28,661 30,022 1,703,050 30,501 31,862 1,703,050
2 83,672 52,697 54,835 1,703,050 58,028 60,166 1,703,050 63,587 65,725 1,703,050
3 128,671 77,615 79,170 1,703,050 88,127 89,682 1,703,050 99,529 101,084 1,703,050
4 175,921 101,562 101,562 1,703,050 118,968 118,968 1,703,050 138,616 138,616 1,703,050
5 225,532 124,491 124,491 1,703,050 150,537 150,537 1,703,050 181,143 181,143 1,703,050
6 277,625 146,355 146,355 1,703,050 182,822 182,822 1,703,050 227,450 227,450 1,703,050
7 332,321 167,051 167,051 1,703,050 215,756 215,756 1,703,050 277,868 277,868 1,703,050
8 389,753 187,859 187,859 1,703,050 250,741 250,741 1,703,050 334,322 334,322 1,703,050
9 450,056 207,306 207,306 1,703,050 286,353 286,353 1,703,050 395,916 395,916 1,703,050
10 513,375 225,315 225,315 1,703,050 322,570 322,570 1,703,050 463,221 463,221 1,703,050
11 579,859 241,825 241,825 1,703,050 359,391 359,391 1,703,050 536,917 536,917 1,703,050
12 649,668 256,787 256,787 1,703,050 396,839 396,839 1,703,050 617,810 617,810 1,703,050
13 722,967 270,151 270,151 1,703,050 434,947 434,947 1,703,050 706,835 706,835 1,703,050
14 799,931 281,850 281,850 1,703,050 473,746 473,746 1,703,050 805,072 805,072 1,703,050
15 880,743 291,773 291,773 1,703,050 513,242 513,242 1,703,050 913,753 913,753 1,703,050
16 965,596 299,746 299,746 1,703,050 553,407 553,407 1,703,050 1,034,301 1,034,301 1,703,050
17 1,054,691 305,536 305,536 1,703,050 594,186 594,186 1,703,050 1,168,388 1,168,388 1,703,050
18 1,148,242 308,874 308,874 1,703,050 635,524 635,524 1,703,050 1,318,023 1,318,023 1,703,050
19 1,246,469 309,463 309,463 1,703,050 677,378 677,378 1,703,050 1,484,436 1,484,436 1,840,701
20 1,349,608 306,989 306,989 1,703,050 719,734 719,734 1,703,050 1,666,799 1,666,799 2,033,495
21 1,417,089 264,049 264,049 1,703,050 723,297 723,297 1,703,050 1,826,399 1,826,399 2,191,678
22 1,487,943 216,881 216,881 1,703,050 724,500 724,500 1,703,050 2,000,852 2,000,852 2,381,014
23 1,562,341 164,942 164,942 1,703,050 723,014 723,014 1,703,050 2,191,549 2,191,549 2,586,027
24 1,640,458 107,535 107,535 1,703,050 718,405 718,405 1,703,050 2,400,002 2,400,002 2,808,003
25 1,722,480 43,694 43,694 1,703,050 710,068 710,068 1,703,050 2,627,846 2,627,846 3,048,302
26 1,808,604 0 0 0 697,192 697,192 1,703,050 2,876,845 2,876,845 3,308,372
27 1,899,035 0 0 0 678,715 678,715 1,703,050 3,150,375 3,150,375 3,559,924
28 1,993,986 0 0 0 653,272 653,272 1,703,050 3,451,282 3,451,282 3,830,923
29 2,093,686 0 0 0 619,182 619,182 1,703,050 3,782,939 3,782,939 4,123,403
30 2,198,370 0 0 0 574,510 574,510 1,703,050 4,149,425 4,149,425 4,439,884
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Natiomwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
60
<PAGE> 66
<TABLE>
<CAPTION>
$38,872.05 ANNUAL PREMIUM FOR 20 YEARS $1,703,050 SPECIFIED AMOUNT
GUIDELINE PREMIUM / CASH VALUE CORRIDOR TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 2
CURRENT VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40,816 32,715 31,663 1,734,404 33,341 34,702 1,736,391 35,331 36,692 1,738,381
2 83,672 61,784 63,922 1,764,834 67,692 69,830 1,770,742 73,840 75,978 1,776,890
3 128,671 91,641 93,196 1,794,691 103,448 105,003 1,806,498 116,222 117,777 1,819,272
4 175,921 120,853 120,853 1,823,903 140,591 140,591 1,843,641 162,801 162,801 1,865,851
5 225,532 149,534 149,534 1,852,584 179,335 179,335 1,882,385 214,216 214,216 1,917,266
6 277,625 177,455 177,455 1,880,505 219,487 219,487 1,922,537 270,684 270,684 1,973,734
7 332,321 204,648 204,648 1,907,698 261,142 261,142 1,964,192 332,772 332,772 2,035,822
8 389,753 232,923 232,923 1,935,973 306,280 306,280 2,009,330 403,104 403,104 2,106,154
9 450,056 260,346 260,346 1,963,396 353,035 353,035 2,056,085 480,414 480,414 2,183,464
10 513,375 286,860 286,860 1,989,910 401,416 401,416 2,104,466 565,382 565,382 2,268,432
11 579,859 312,469 312,469 2,015,519 451,493 451,493 2,154,543 658,821 658,821 2,361,871
12 649,668 337,125 337,125 2,040,175 503,286 503,286 2,206,336 761,576 761,576 2,464,626
13 722,967 360,823 360,823 2,063,873 556,864 556,864 2,259,914 874,632 874,632 2,577,682
14 799,931 383,520 383,520 2,086,570 612,255 612,255 2,315,305 999,034 999,034 2,702,084
15 880,743 404,972 404,972 2,108,022 669,283 669,283 2,372,333 1,135,729 1,135,729 2,838,779
16 965,596 425,075 425,075 2,128,125 727,902 727,902 2,430,952 1,285,908 1,285,908 2,988,958
17 1,054,691 443,702 443,702 2,146,752 788,045 788,045 2,491,095 1,450,868 1,450,868 3,153,918
18 1,148,242 460,666 460,666 2,163,716 849,573 849,573 2,552,623 1,631,975 1,631,975 3,335,025
19 1,246,469 475,776 475,776 2,178,826 912,335 912,335 2,615,385 1,830,738 1,830,738 3,533,788
20 1,349,608 488,863 488,863 2,191,913 976,195 976,195 2,679,245 2,048,848 2,048,848 3,751,898
21 1,417,089 465,425 465,425 2,168,475 1,005,323 1,005,323 2,708,373 2,252,198 2,252,198 3,955,248
22 1,487,943 442,220 442,220 2,145,270 1,035,892 1,035,892 2,738,942 2,477,693 2,477,693 4,180,743
23 1,562,341 417,818 417,818 2,120,868 1,066,502 1,066,502 2,769,552 2,726,227 2,726,227 4,429,277
24 1,640,458 391,624 391,624 2,094,674 1,096,528 1,096,528 2,799,578 2,999,665 2,999,665 4,702,715
25 1,722,480 363,466 363,466 2,066,516 1,125,745 1,125,745 2,828,795 3,300,516 3,300,516 5,003,566
26 1,808,604 333,134 333,134 2,036,184 1,153,877 1,153,877 2,856,927 3,631,521 3,631,521 5,334,571
27 1,899,035 300,458 300,458 2,003,508 1,180,671 1,180,671 2,883,721 3,995,761 3,995,761 5,698,811
28 1,993,986 265,211 265,211 1,968,261 1,205,804 1,205,804 2,908,854 4,396,589 4,396,589 6,099,639
29 2,093,686 227,112 227,112 1,930,162 1,228,876 1,228,876 2,931,926 4,837,662 4,837,662 6,540,712
30 2,198,370 185,842 185,842 1,888,892 1,249,427 1,249,427 2,952,477 5,322,996 5,322,996 7,026,046
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
61
<PAGE> 67
<TABLE>
<CAPTION>
$38,872.05 ANNUAL PREMIUM FOR 20 YEARS $1,703,050 SPECIFIED AMOUNT
GUIDELINE PREMIUM / CASH VALUE CORRIDOR TEST
UNISEX: REGULAR ISSUE / NON TOBACCO PREFERRED, AGE 45
DEATH BENEFIT OPTION 2
GUARANTEED VALUES
PREMIUMS 0% HYPOTHETICAL 6% HYPOTHETICAL 12% HYPOTHETICAL
PLUS
POLICY INTEREST CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH CONTRACT SURRENDER DEATH
YEAR AT 5% VALUE VALUE BENEFIT VALUE VALUE BENEFIT VALUE VALUE BENEFIT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 40,816 26,677 28,038 1,729,727 28,504 29,865 1,731,554 30,335 31,696 1,733,385
2 83,672 52,257 54,395 1,755,307 57,543 59,681 1,760,593 63,054 65,192 1,766,104
3 128,671 76,725 78,280 1,779,775 87,104 88,659 1,790,154 98,361 99,916 1,801,411
4 175,921 100,048 100,048 1,803,098 117,159 117,159 1,820,209 136,467 136,467 1,839,517
5 225,532 122,159 122,159 1,825,209 147,639 147,639 1,850,689 177,566 177,566 1,880,616
6 277,625 142,992 142,992 1,846,042 178,474 178,474 1,881,524 221,871 221,871 1,924,921
7 332,321 162,415 162,415 1,865,465 209,522 209,522 1,912,572 269,545 269,545 1,972,595
8 389,753 181,670 181,670 1,884,720 242,087 242,087 1,945,137 322,302 322,302 2,025,352
9 450,056 199,249 199,249 1,902,299 274,638 274,638 1,977,688 378,980 378,980 2,082,030
10 513,375 215,043 215,043 1,918,093 307,033 307,033 2,010,083 439,831 439,831 2,142,881
11 579,859 228,961 228,961 1,932,011 339,141 339,141 2,042,191 505,152 505,152 2,208,202
12 649,668 240,929 240,929 1,943,979 370,843 370,843 2,073,893 575,286 575,286 2,278,336
13 722,967 250,875 250,875 1,953,925 402,013 402,013 2,105,063 650,613 650,613 2,353,663
14 799,931 258,710 258,710 1,961,760 432,504 432,504 2,135,554 731,532 731,532 2,434,582
15 880,743 264,296 264,296 1,967,346 462,108 462,108 2,165,158 818,427 818,427 2,521,477
16 965,596 267,426 267,426 1,970,476 490,536 490,536 2,193,586 911,649 911,649 2,614,699
17 1,054,691 267,829 267,829 1,970,879 517,417 517,417 2,220,467 1,011,510 1,011,510 2,714,560
18 1,148,242 265,201 265,201 1,968,251 542,324 542,324 2,245,374 1,118,315 1,118,315 2,821,365
19 1,246,469 259,225 259,225 1,962,275 564,796 564,796 2,267,846 1,232,380 1,232,380 2,935,430
20 1,349,608 249,586 249,586 1,952,636 584,348 584,348 2,287,398 1,354,053 1,354,053 3,057,103
21 1,417,089 199,908 199,908 1,902,958 562,239 562,239 2,265,289 1,443,314 1,443,314 3,146,364
22 1,487,943 146,691 146,691 1,849,741 534,698 534,698 2,237,748 1,537,032 1,537,032 3,240,082
23 1,562,341 89,722 89,722 1,792,772 501,212 501,212 2,204,262 1,635,372 1,635,372 3,338,422
24 1,640,458 28,703 28,703 1,731,753 461,156 461,156 2,164,206 1,738,422 1,738,422 3,441,472
25 1,722,480 0 0 0 413,695 413,695 2,116,745 1,846,089 1,846,089 3,549,139
26 1,808,604 0 0 0 357,768 357,768 2,060,818 1,958,078 1,958,078 3,661,128
27 1,899,035 0 0 0 292,086 292,086 1,995,136 2,073,869 2,073,869 3,776,919
28 1,993,986 0 0 0 215,123 215,123 1,918,173 2,192,710 2,192,710 3,895,760
29 2,093,686 0 0 0 125,243 125,243 1,828,293 2,313,718 2,313,718 4,016,768
30 2,198,370 0 0 0 20,919 20,919 1,723,969 2,436,112 2,436,112 4,139,162
<FN>
(1) no policy loans and no partial withdrawals have been made.
(2) current values reflect current cost of insurance charges and a monthly
$5.00 administrative expense charge all the time. Current values reflect a
premium charge of 9% of target premium and 6.5% of excess-of-target premium
for the first seven years and 3.5% of all premium from eighth year and on.
(3) net investment returns are calculated as the hypothetical gross investment
return less all charges and deductions shown in the prospectus appendix.
</TABLE>
The hypothetical investment rates of return shown above and elsewhere in this
prospectus are illustrative only and should not be deemed a representation of
past or future investment rates of return. Actual rates of return may be more or
less than those shown and will depend on a number of factors, including the
investment allocations made by an owner, prevailing rates and rates of
inflation. The death benefit and cash value for a policy would be different from
those shown if the actual rates of return averaged 0%, 6%, and 12% over a period
of years but also fluctuated above or below those averages for individual policy
years. No representation can be made by Nationwide or the trust that these
hypothetical rates of return can be achieved for any one year or sustained over
any period of time.
62
<PAGE> 68
<TABLE>
<CAPTION>
Performance Table
---------------------------------------------------------------------------------------------------------------------
Annual Percentage Non annualized Percentage Change Annualized Percentage
Change Change
---------------------------------------------------------------------------------------------------------------------
Fund Unit 1 mo 1 Yr 2 Yrs 3 Yrs. 5 yrs. Inception 3 Yrs. 5 yrs. Inception
UNDERLYING Inception Values to to to to to to to to to
INVESTMENT Date 12/31/98 1995 1996 1997 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98 12/31/98
OPTIONS
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American 05/02/91 11.60 10.00 11.36 14.94 4.18 14.91 32.06 47.09 76.58 119.86 13.73 12.04 10.83
Century VP
Balanced
- ---------------------------------------------------------------------------------------------------------------------------------
American 11/20/87 8.58 30.12 -5.04 -3.98 10.60 -2.89 -6.22 -11.46 13.02 121.98 -3.97 2.48 7.44
Century VP
Capital App
- ---------------------------------------------------------------------------------------------------------------------------------
American 10/30/97 10.87 N/A N/A N/A 5.91 25.92 25.92 N/A N/A 35.57 N/A N/A 29.72
Century VP
Inc & Growth
- ---------------------------------------------------------------------------------------------------------------------------------
American 05/01/94 11.74 11.37 13.54 17.75 5.33 17.87 38.87 57.59 N/A 65.91 16.37 N/A 11.47
Century VP
International
- ---------------------------------------------------------------------------------------------------------------------------------
American 05/01/96 10.67 N/A N/A 25.14 -0.51 4.03 18.69 N/A N/A 45.45 N/A N/A 15.10
Century VP
Value
- ---------------------------------------------------------------------------------------------------------------------------------
Dreyfus Soc. 10/06/93 13.30 32.55 24.63 27.11 4.29 29.24 65.66 104.74 177.55 194.62 26.98 22.65 20.73
Resp. Growth
- ---------------------------------------------------------------------------------------------------------------------------------
Dreyfus 09/29/89 11.12 60.73 19.86 15.34 4.37 10.98 25.56 53.42 N/A 142.39 15.34 N/A 20.92
Stock Index
- ---------------------------------------------------------------------------------------------------------------------------------
Dreyfus 05/05/93 13.09 33.56 20.32 27.48 7.84 28.42 64.30 96.96 164.99 183.97 25.35 21.52 22.07
Capital
Appreciation
- ---------------------------------------------------------------------------------------------------------------------------------
Dreyfus VIF 05/02/94 13.31 35.76 21.61 31.96 5.71 27.25 64.91 104.23 177.62 303.22 26.87 22.66 16.26
Growth &
Income
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 09/06/89 11.76 16.08 13.74 19.75 4.06 14.19 33.53 55.53 68.29 190.91 15.86 10.97 12.13
Asst. Mgmt.
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 01/03/95 13.16 N/A 20.39 23.21 12.09 29.01 62.65 91.38 N/A 165.26 24.15 N/A 27.68
Contrafund
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 10/09/86 11.53 34.09 13.42 27.15 3.06 10.79 31.50 59.78 127.68 373.70 16.91 17.89 13.57
Equity Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 01/03/95 13.99 34.36 13.84 22.56 8.47 38.45 80.34 93.17 157.55 546.19 24.54 20.83 16.49
Growth
Opportunities
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 10/09/86 13.04 N/A 17.38 28.98 5.32 23.68 56.22 87.26 N/A 146.32 23.26 N/A 25.34
Growth
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 09/19/85 9.85 19.71 13.17 16.79 -0.67 -5.04 0.00 25.51 46.81 268.19 7.87 7.98 10.31
High Inc.
- ---------------------------------------------------------------------------------------------------------------------------------
Fidelity 01/28/87 10.82 8.86 12.36 10.72 2.13 11.91 24.57 39.23 53.03 144.46 11.66 8.88 7.78
Overseas
- ---------------------------------------------------------------------------------------------------------------------------------
Morgan 06/16/97 6.83 N/A N/A N/A -2.39 -28.91 -28.91 N/A N/A -28.65 N/A N/A -19.70
Stanley
Emerging Mkt
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT Capital 04/15/92 11.54 30.75 8.32 28.04 12.96 14.66 38.94 59.03 96.08 491.35 16.72 14.42 13.23
Appreciation
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT Govt. 11/08/82 9.32 N/A N/A N/A 4.70 30.68 30.68 N/A N/A 37.32 N/A N/A 31.49
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT Money 11/10/81 10.55 10.11 3.52 5.94 0.08 3.61 8.55 13.63 24.00 167.28 4.35 4.40 7.11
Mkt.
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT Small 10/31/97 10.55 35.45 28.59 30.27 2.31 3.43 20.06 73.27 N/A 127.97 20.11 N/A 18.84
Capital Value
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT Small 10/23/95
Company Fund
- ---------------------------------------------------------------------------------------------------------------------------------
NSAT Tot. 11/08/82 13.54 28.39 25.19 33.49 5.17 28.99 69.27 115.57 172.24 211.62 29.18 22.18 18.46
Return
- ---------------------------------------------------------------------------------------------------------------------------------
N/B AMT 09/10/84 10.61 4.88 4.34 4.48 0.35 4.48 9.16 13.90 23.18 178.18 4.43 4.26 6.15
Growth
- ---------------------------------------------------------------------------------------------------------------------------------
N/B AMT 11/03/97 8.56 N/A N/A N/A 4.56 -3.79 -3.79 N/A N/A -5.46 N/A N/A -4.70
Guardian
- ---------------------------------------------------------------------------------------------------------------------------------
N/B AMT Bond 09/10/84 9.90 N/A 21.90 16.47 7.96 0.25 8.34 42.35 N/A 62.59 12.49 N/A 16.47
- ---------------------------------------------------------------------------------------------------------------------------------
N/B AMT 03/22/94 12.07 28.13 20.92 28.46 3.40 17.19 43.79 82.05 134.01 921.26 22.10 18.54 15.48
Partners
- ---------------------------------------------------------------------------------------------------------------------------------
OPPEN Bond 04/30/85 11.04 16.12 4.01 8.44 0.34 6.00 13.65 19.55 35.13 220.76 6.13 6.21 8.90
- ---------------------------------------------------------------------------------------------------------------------------------
OPPEN Global 11/12/90 11.48 1.48 16.91 21.51 5.99 13.25 32.85 60.89 52.77 145.11 17.18 8.85 11.65
Securities
- ---------------------------------------------------------------------------------------------------------------------------------
OPPEN Growth 04/03/85 12.30 35.63 24.28 25.76 9.52 23.07 53.12 92.36 161.43 597.99 24.37 21.19 15.19
Fund
- ---------------------------------------------------------------------------------------------------------------------------------
OPPEN 02/09/87 10.78 20.45 14.63 16.35 1.48 5.86 17.48 41.17 65.50 236.55 12.18 10.60 10.75
Multiple
Strategies
- ---------------------------------------------------------------------------------------------------------------------------------
STRONG 05/08/92 10.18 34.25 0.05 10.56 8.37 6.46 15.49 17.75 48.45 94.83 5.60 8.22 10.56
Discovery
- ---------------------------------------------------------------------------------------------------------------------------------
STRONG 10/20/95 8.16 N/A 9.55 -14.17 4.84 -5.49 -14.88 -11.13 N/A -8.94 -3.86 N/A -2.89
International
- ---------------------------------------------------------------------------------------------------------------------------------
STRONG 05/08/92 11.41 24.88 17.26 24.52 4.57 12.69 33.50 64.54 111.29 203.46 18.06 16.14 18.18
Special
- ---------------------------------------------------------------------------------------------------------------------------------
VAN ECK 09/01/89 4.78 N/A 25.89 -12.27 0.64 -34.62 -50.49 -27.79 N/A -28.53 -10.29 N/A -10.50
Worldwide.
Bond
- ---------------------------------------------------------------------------------------------------------------------------------
VAN ECK 12/27/95 11.61 16.43 1.75 1.62 1.51 11.91 19.35 15.72 31.96 73.02 4.99 5.70 6.05
Wldwide.
Emerging Mkt
- ---------------------------------------------------------------------------------------------------------------------------------
VAN ECK 09/01/89 6.21 10.17 17.18 -2.41 -2.40 -31.48 -43.98 -21.65 -18.44 13.17 -7.81 -3.99 1.33
Wldwide.
Hard Assets
- ---------------------------------------------------------------------------------------------------------------------------------
Van Kampen 07/03/95 9.54 N/A 39.48 20.57 1.04 -12.28 -9.79 47.51 N/A 59.23 13.83 N/A 14.25
Am Cap Real
Estate
- ---------------------------------------------------------------------------------------------------------------------------------
Warburg 06/30/95 9.22 N/A 9.16 -2.99 0.86 4.56 5.31 10.72 N/A 18.36 3.45 N/A 4.93
Pincus Inter
Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Warburg Post 09/30/96 10.31 N/A N/A 12.49 9.41 5.71 15.28 N/A N/A 15.84 N/A N/A 6.75
Venture
Capital
- ---------------------------------------------------------------------------------------------------------------------------------
Warburg 06/30/95 9.82 N/A 13.05 14.79 7.53 -3.58 1.44 25.12 N/A 55.94 7.76 N/A 13.54
Pincus Small
Co.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
63
<PAGE> 69
<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VL Separate Account-C:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide VL Separate Account-C as of December 31,
1998, and the related statement of operations and changes in contract owners'
equity for the period May 1, 1998 (commencement of operations) through December
31, 1998. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide VL Separate
Account-C as of December 31, 1998, and the results of its operations and its
changes in contract owners' equity for the period May 1, 1998 (commencement of
operations) through December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
<PAGE> 2
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1998
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Income & Growth (ACVPIncGr)
67,771 shares (cost $405,064) ............................................. $ 459,489
American Century VP - American Century VP International (ACVPInt)
40,174 shares (cost $275,351) ............................................. 306,126
American Century VP - American Century VP Value (ACVPValue)
14,278 shares (cost $90,889) .............................................. 96,093
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
266 shares (cost $7,429) .................................................. 8,265
Dreyfus Stock Index Fund (DryStkIx)
185,783 shares (cost $5,140,294) .......................................... 6,041,674
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
8,328 shares (cost $276,608) .............................................. 300,718
Fidelity VIP - Equity-Income Portfolio - Service Class (FidVIPEI)
361 shares (cost $8,302) .................................................. 9,155
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
35,182 shares (cost $1,398,277) ........................................... 1,576,836
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
83,195 shares (cost $900,788) ............................................. 957,577
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
33,371 shares (cost $619,631) ............................................. 668,429
Fidelity VIP-II - Contrafund Portfolio - Service Class (FidVIPCon)
52,010 shares (cost $1,064,968) ........................................... 1,270,081
Fidelity VIP-III - Growth Opportunities Portfolio - Service Class (FidVIPGrOp)
17,198 shares (cost $351,358) ............................................. 393,139
Morgan Stanley - Emerging Markets Debt Portfolio (VKMSEmMkt)
14,873 shares (cost $96,661) .............................................. 90,728
Nationwide SAT - Balanced Fund (NSATBal)
7,637 shares (cost $79,936) ............................................... 80,804
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
17,741 shares (cost $439,254) ............................................. 471,722
Nationwide SAT - Global Equities Fund (NSATGlobEq)
210 shares (cost $2,107) .................................................. 2,471
Nationwide SAT - Government Bond Fund (NSATGvtBd)
43,182 shares (cost $513,537) ............................................. 504,792
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
14,403 shares (cost $141,675) ............................................. 144,610
Nationwide SAT - Money Market Fund (NSATMyMkt)
7,104,131 shares (cost $7,104,131) ........................................ 7,104,131
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
33,105 shares (cost $324,442) ............................................. 325,088
</TABLE>
(Continued)
<PAGE> 3
<TABLE>
<S> <C>
Nationwide SAT - Select Advisers Mid Cap Fund (NSATMidCap)
233 shares (cost $2,153) ..................................... 2,543
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
61,953 shares (cost $539,799) ................................ 587,937
Nationwide SAT - Small Company Fund (NSATSmCo)
28,600 shares (cost $412,656) ................................ 457,891
Nationwide SAT - Strategic Value Fund (NSATStrVal)
28,029 shares (cost $242,052) ................................ 283,652
Nationwide SAT - Total Return Fund (NSATTotRe)
5,619 shares (cost $97,485) .................................. 103,385
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
86,606 shares (cost $1,035,407) .............................. 1,198,625
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
66,658 shares (cost $849,195) ................................ 1,081,201
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
12,810 shares (cost $222,364) ................................ 242,488
Oppenheimer VAF - Aggressive Growth Fund (OppAggGr)
11,499 shares (cost $417,543) ................................ 515,480
Oppenheimer VAF - Growth Fund (OppGro)
3,413 shares (cost $104,659) ................................. 125,165
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
13,520 shares (cost $251,274) ................................ 276,894
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
18,698 shares (cost $117,838) ................................ 133,132
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
8,993 shares (cost $84,775) .................................. 82,736
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (VKMSRESec)
1,046 shares (cost $13,889) .................................. 14,397
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
39,914 shares (cost $423,285) ................................ 458,216
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
20,492 shares (cost $209,561) ................................ 225,209
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
18,657 shares (cost $183,538) ................................ 219,774
-----------
Total investments ......................................... 26,820,653
Accounts receivable ................................................ 78,606
-----------
Total assets .............................................. 26,899,259
ACCOUNTS RECEIVABLE ................................................... --
-----------
CONTRACT OWNERS' EQUITY (NOTE 7) ...................................... $26,899,259
===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
Total ACVPIncGr ACVPInt ACVPValue
----- --------- ------- ---------
<S> <C> <C>
Investment activity:
Reinvested dividends ............................... $ 167,299 2,209 - -
Mortality and expense charges (note 3) ............. (23,151) (336) (196) (77)
-------------- ------- ------- ------
Net investment activity .......................... 144,148 1,873 (196) (77)
-------------- ------- ------- ------
Proceeds from mutual fund shares sold .............. 3,278,422 18,460 - 960
Cost of mutual fund shares sold .................... (3,254,787) (16,283) - (886)
-------------- ------- ------- ------
Realized gain (loss) on investments .............. 23,635 2,177 - 74
Change in unrealized gain (loss) on investments .... 2,372,478 54,426 30,775 5,204
-------------- ------- ------- ------
Net gain (loss) on investments ................... 2,396,113 56,603 30,775 5,278
-------------- ------- ------- ------
Reinvested capital gains ........................... 23,462 - - -
-------------- ------- ------- ------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 2,563,723 58,476 30,579 5,201
-------------- ------- ------- ------
Equity transactions:
Purchase payments received from
contract owners
Transfers between funds ............................ 24,823,406 375,552 232,301 77,512
Surrenders ......................................... - 33,816 48,928 14,883
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance ............... - - - -
charges and administration charges
(notes 2b and 2c) ................................ (487,870) (8,540) (5,673) (1,490)
-------------- ------- ------- ------
Net equity transactions ........................ 24,335,536 400,828 275,556 90,905
-------------- ------- ------- ------
Net change in contract owners' equity .............. 26,899,259 459,304 306,135 96,106
Contract owners' equity beginning of period ........ - - - -
-------------- ------- ------- ------
Contract owners' equity end of period .............. $ 26,899,259 459,304 306,135 96,106
============== ======= ======= ======
</TABLE>
<TABLE>
<CAPTION>
DrySRGro DryStkIx DryCapAp FidVIPEI
-------- -------- -------- --------
<S> <C> <C> <C>
Investment activity:
Reinvested dividends ............................... 13 16,440 1,424 -
Mortality and expense charges (note 3) ............. (5) (4,323) (168) (7)
----- --------- ------- -----
Net investment activity .......................... 8 12,117 1,256 (7)
----- --------- ------- -----
Proceeds from mutual fund shares sold .............. 403 74,709 18,997 238
Cost of mutual fund shares sold .................... (360) (68,241) (16,543) (216)
----- --------- ------- -----
Realized gain (loss) on investments .............. 43 6,468 2,454 22
Change in unrealized gain (loss) on investments .... 836 901,380 24,110 853
----- --------- ------- -----
Net gain (loss) on investments ................... 879 907,848 26,564 875
----- --------- ------- -----
Reinvested capital gains ........................... 287 4,384 - -
----- --------- ------- -----
Net increase (decrease) in contract owners'
equity resulting from operations ............. 1,174 924,349 27,820 868
----- --------- ------- -----
Equity transactions:
Purchase payments received from
contract owners
Transfers between funds ............................ 4,085 1,344,322 254,590 3,459
Surrenders ......................................... 3,639 3,839,399 26,358 5,196
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance ............... - - - -
charges and administration charges
(notes 2b and 2c) ................................ (628) (65,383) (8,026) (369)
----- --------- ------- -----
Net equity transactions ........................ 7,096 5,118,338 272,922 8,286
----- --------- ------- -----
Net change in contract owners' equity .............. 8,270 6,042,687 300,742 9,154
Contract owners' equity beginning of period ........ - - - -
----- --------- ------- -----
Contract owners' equity end of period .............. 8,270 6,042,687 300,742 9,154
===== ========= ======= =====
</TABLE>
(Continued)
<PAGE> 5
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI FidVIPOv FidVIPCon
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ............................... $ - - - -
Mortality and expense charges (note 3) ............. (835) (736) (415) (860)
--------- ------- ------- ---------
Net investment activity .......................... (835) (736) (415) (860)
--------- ------- ------- ---------
Proceeds from mutual fund shares sold .............. 10,989 26,665 35,291 24,885
Cost of mutual fund shares sold .................... (10,235) (25,810) (31,093) (23,083)
--------- ------- ------- ---------
Realized gain (loss) on investments .............. 754 855 4,198 1,802
Change in unrealized gain (loss) on investments .... 178,559 56,789 48,798 205,114
--------- ------- ------- ---------
Net gain (loss) on investments ................... 179,313 57,644 52,996 206,916
--------- ------- ------- ---------
Reinvested capital gains ........................... - - - -
--------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 178,478 56,908 52,581 206,056
--------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners .................................. 877,191 797,529 322,715 1,010,459
Transfers between funds ............................ 536,214 126,690 302,240 83,425
Surrenders ......................................... - - - -
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ................................ (15,006) (23,488) (9,108) (29,838)
--------- ------- ------- ---------
Net equity transactions ........................ 1,398,399 900,731 615,847 1,064,046
--------- ------- ------- ---------
Net change in contract owners' equity .............. 1,576,877 957,639 668,428 1,270,102
Contract owners' equity beginning of period ........ - - - -
--------- ------- ------- ---------
Contract owners' equity end of period .............. 1,576,877 957,639 668,428 1,270,102
========= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
FidVIPGrOp VKMSEmMkt NSATBal NSATCapAp
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ............................... - 10,770 579 864
Mortality and expense charges (note 3) ............. (220) (72) (39) (308)
------- ------ ------ -------
Net investment activity .......................... (220) 10,698 540 556
------- ------ ------ -------
Proceeds from mutual fund shares sold .............. 3,540 3,311 10,977 39,188
Cost of mutual fund shares sold .................... (3,522) (3,263) (10,455) (35,989)
------- ------ ------ -------
Realized gain (loss) on investments .............. 18 48 522 3,199
Change in unrealized gain (loss) on investments .... 41,781 (5,933) 868 32,468
------- ------ ------ -------
Net gain (loss) on investments ................... 41,799 (5,885) 1,390 35,667
------- ------ ------ -------
Reinvested capital gains ........................... - - 221 11,909
------- ------ ------ -------
Net increase (decrease) in contract owners'
equity resulting from operations ............. 41,579 4,813 2,151 48,132
------- ------ ------ -------
Equity transactions:
Purchase payments received from
contract owners .................................. 39,353 76,358 64,453 469,254
Transfers between funds ............................ 315,460 10,866 16,856 (26,553)
Surrenders ......................................... - - - -
Policy loans (net of repayments) (note 5) .......... - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ................................ (3,286) (1,302) (2,533) (19,108)
------- ------ ------ -------
Net equity transactions ........................ 351,527 85,922 78,776 423,593
------- ------ ------ -------
Net change in contract owners' equity .............. 393,106 90,735 80,927 471,725
Contract owners' equity beginning of period ........ - - - -
------- ------ ------ -------
Contract owners' equity end of period .............. 393,106 90,735 80,927 471,725
======= ====== ====== =======
</TABLE>
<PAGE> 6
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
NSATGlobEq NSATGvtBd NSATHIncBd NSATMyMkt
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ....................................... $ 5 7,625 1,789 116,826
Mortality and expense charges (note 3) ..................... (3) (306) (86) (10,114)
------- ------- ------- ---------
Net investment activity .................................. 2 7,319 1,703 106,712
------- ------- ------- ---------
Proceeds from mutual fund shares sold ...................... 43 1,249 17,430 2,917,122
Cost of mutual fund shares sold ............................ (37) (1,246) (16,738) (2,917,122)
------- ------- ------- ---------
Realized gain (loss) on investments ...................... 6 3 692 -
Change in unrealized gain (loss) on investments ............ 365 (8,745) 2,935 -
------- ------- ------- ---------
Net gain (loss) on investments ........................... 371 (8,742) 3,627 -
Reinvested capital gains ................................... 17 2,401 - -
------- ------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ..................... 390 978 5,330 106,712
------- ------- ------- ---------
Equity transactions:
Purchase payments received from
contract owners .......................................... 259 314,799 138,276 14,686,986
Transfers between funds .................................... 1,883 195,168 3,992 (7,412,730)
Surrenders ................................................. - - - -
Policy loans (net of repayments) (note 5) .................. - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ........................................ (52) (6,117) (2,423) (200,727)
------- ------- ------- ---------
Net equity transactions ................................ 2,090 503,850 139,845 7,073,529
------- ------- ------- ---------
Net change in contract owners' equity ...................... 2,480 504,828 145,175 7,180,241
Contract owners' equity beginning of period ................ - - - -
------- ------- ------- ---------
Contract owners' equity end of period ...................... $ 2,480 504,828 145,175 7,180,241
======= ======= ======= =========
</TABLE>
<TABLE>
<CAPTION>
NSATMSecBd NSATMidCap NSATSmCapV NSATSmCo
---------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ................................. 3,801 4 - -
Mortality and expense charges (note 3) ............... (203) (3) (251) (266)
------- ----- ------- -------
Net investment activity ............................ 3,598 1 (251) (266)
------- ----- ------- -------
Proceeds from mutual fund shares sold ................ 2,882 44 749 4,791
Cost of mutual fund shares sold ...................... (2,846) (37) (617) (4,712)
------- ----- ------- -------
Realized gain (loss) on investments ................ 36 7 132 79
Change in unrealized gain (loss) on investments ...... 646 390 48,137 45,235
------- ----- ------- -------
Net gain (loss) on investments ..................... 682 397 48,269 45,314
Reinvested capital gains ............................. 233 - - -
------- ----- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ............... 4,513 398 48,018 45,048
------- ----- ------- -------
Equity transactions:
Purchase payments received from
contract owners .................................... 291,490 314 53,437 415,058
Transfers between funds .............................. 33,681 1,884 488,017 12,398
Surrenders ........................................... - - - -
Policy loans (net of repayments) (note 5) ............ - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) .................................. (3,898) (52) (1,592) (14,608)
------- ----- ------- -------
Net equity transactions .......................... 321,273 2,146 539,862 412,848
------- ----- ------- -------
Net change in contract owners' equity ................ 325,786 2,544 587,880 457,896
Contract owners' equity beginning of period .......... - - - -
------- ----- ------- -------
Contract owners' equity end of period ................ 325,786 2,544 587,880 457,896
======= ===== ======= =======
</TABLE>
(Continued)
<PAGE> 7
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
NSATStrVal NSATTotRe NBAMTGuard NBAMTMCGr
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ..................................... $ 697 262 - -
Mortality and expense charges (note 3) ................... (234) (78) (837) (620)
------------ ------- --------- ---------
Net investment activity ................................ 463 184 (837) (620)
------------ ------- --------- ---------
Proceeds from mutual fund shares sold .................... 5,193 975 7,799 4,507
Cost of mutual fund shares sold .......................... (5,131) (930) (7,186) (4,091)
------------ ------- --------- ---------
Realized gain (loss) on investments .................... 62 45 613 416
Change in unrealized gain (loss) on investments .......... 41,599 5,900 163,218 232,006
------------ ------- --------- ---------
Net gain (loss) on investments ......................... 41,661 5,945 163,831 232,422
------------ ------- --------- ---------
Reinvested capital gains ................................. - 4,010 - -
------------ ------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 42,124 10,139 162,994 231,802
------------ ------- --------- ---------
Equity transactions:
Purchase payments received from
contract owners ........................................ 158,330 79,186 795,893 440,392
Transfers between funds .................................. 87,690 15,559 253,300 417,252
Surrenders ............................................... - - - -
Policy loans (net of repayments) (note 5) ................ - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ...................................... (4,477) (1,494) (13,527) (8,273)
------------ ------- --------- ---------
Net equity transactions .............................. 241,543 93,251 1,035,666 849,371
------------ ------- --------- ---------
Net change in contract owners' equity .................... 283,667 103,390 1,198,660 1,081,173
Contract owners' equity beginning of period .............. - - - -
------------ ------- --------- ---------
Contract owners' equity end of period .................... $ 283,667 103,390 1,198,660 1,081,173
============ ======= ========= =========
</TABLE>
<TABLE>
<CAPTION>
NBAMTPart OppCapAp OppGro OppGrInc
--------- -------- ------ --------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends ..................................... - - - -
Mortality and expense charges (note 3) ................... (180) (320) (101) (157)
------- ------- ------- -------
Net investment activity ................................ (180) (320) (101) (157)
------- ------- ------- -------
Proceeds from mutual fund shares sold .................... 2,278 857 28,812 906
Cost of mutual fund shares sold .......................... (2,175) (910) (30,635) (797)
------- ------- ------- -------
Realized gain (loss) on investments .................... 103 (53) (1,823) 109
Change in unrealized gain (loss) on investments .......... 20,123 97,938 20,506 25,619
------- ------- ------- -------
Net gain (loss) on investments ......................... 20,226 97,885 18,683 25,728
------- ------- ------- -------
Reinvested capital gains ................................. - - - -
------- ------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ................... 20,046 97,565 18,582 25,571
------- ------- ------- -------
Equity transactions:
Purchase payments received from
contract owners ........................................ 200,749 248,676 86,295 104,537
Transfers between funds .................................. 26,446 174,349 22,139 149,203
Surrenders ............................................... - - - -
Policy loans (net of repayments) (note 5) ................ - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ...................................... (4,731) (5,124) (1,833) (2,412)
------- ------- ------- -------
Net equity transactions .............................. 222,464 417,901 106,601 251,328
------- ------- ------- -------
Net change in contract owners' equity .................... 242,510 515,466 125,183 276,899
Contract owners' equity beginning of period .............. - - - -
------- ------- ------- -------
Contract owners' equity end of period .................... 242,510 515,466 125,183 276,899
======= ======= ======= =======
</TABLE>
<PAGE> 8
NATIONWIDE VL SEPARATE ACCOUNT - C
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
For the Period May 1, 1998 (commencement of operations) Through
December 31, 1998
<TABLE>
<CAPTION>
VEWrldEMkt VEWrldHAs VKMSRESec WPGrInc
---------- --------- --------- -------
<S> <C> <C> <C> <C>
Investment activity:
Reinvested dividends .................................... $ - - - 2,979
Mortality and expense charges (note 3) .................. (102) (68) (2) (289)
------------ ------ ------ -------
Net investment activity ............................... (102) (68) (2) 2,690
------------ ------ ------ -------
Proceeds from mutual fund shares sold ................... 2,077 1,076 33 5,560
Cost of mutual fund shares sold ......................... (1,987) (1,070) (30) (5,306)
------------ ------ ------ -------
Realized gain (loss) on investments ................... 90 6 3 254
Change in unrealized gain (loss) on investments ......... 15,293 (2,039) 508 34,931
------------ ------ ------ -------
Net gain (loss) on investments ........................ 15,383 (2,033) 511 35,185
------------ ------ ------ -------
Reinvested capital gains ................................ - - - -
------------ ------ ------ -------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 15,281 (2,101) 509 37,875
------------ ------ ------ -------
Equity transactions:
Purchase payments received from
contract owners ....................................... 87,572 75,264 311 373,642
Transfers between funds ................................. 32,251 10,866 13,626 59,416
Surrenders .............................................. - - - -
Policy loans (net of repayments) (note 5) ............... - - - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (1,951) (1,280) (53) (12,701)
------------ ------ ------ -------
Net equity transactions ............................. 117,872 84,850 13,884 420,357
------------ ------ ------ -------
Net change in contract owners' equity ................... 133,153 82,749 14,393 458,232
Contract owners' equity beginning of period ............. - - - -
------------ ------ ------ -------
Contract owners' equity end of period ................... $ 133,153 82,749 14,393 458,232
============ ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
WPIntEq WPPVenCap
------- ---------
<S> <C> <C>
Investment activity:
Reinvested dividends .................................... 1,012 -
Mortality and expense charges (note 3) .................. (180) (154)
------- -------
Net investment activity ............................... 832 (154)
------- -------
Proceeds from mutual fund shares sold ................... 3,488 1,938
Cost of mutual fund shares sold ......................... (3,431) (1,774)
------- -------
Realized gain (loss) on investments ................... 57 164
Change in unrealized gain (loss) on investments ......... 15,648 36,237
------- -------
Net gain (loss) on investments ........................ 15,705 36,401
------- -------
Reinvested capital gains ................................ - -
------- -------
Net increase (decrease) in contract owners'
equity resulting from operations .................. 16,537 36,247
------- -------
Equity transactions:
Purchase payments received from
contract owners ....................................... 160,067 162,740
Transfers between funds ................................. 51,953 24,240
Surrenders .............................................. - -
Policy loans (net of repayments) (note 5) ............... - -
Redemptions to pay cost of insurance
charges and administration charges
(notes 2b and 2c) ..................................... (3,326) (3,441)
------- -------
Net equity transactions ............................. 208,694 183,539
------- -------
Net change in contract owners' equity ................... 225,231 219,786
Contract owners' equity beginning of period ............. - -
------- -------
Contract owners' equity end of period ................... 225,231 219,786
======= =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 9
NATIONWIDE VL SEPARATE ACCOUNT - C
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide VL Separate Account-C (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
and Annuity Insurance Company (the Company) on December 3, 1997. The
Account has been registered as a unit investment trust under the
Investment Company Act of 1940.
The Company offers Corporate Flexible Premium Variable Life Insurance
Policies through the Account.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees are offered for purchase.
See note 2 for a discussion of policy charges, and note 3 for asset
charges.
Contract owners may invest in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value
(ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio - Service Class
(FidVIPEI)
Fidelity VIP - Growth Portfolio - Service Class (FidVIPGr)
Fidelity VIP - High Income Portfolio - Service Class (FidVIPHI)
Fidelity VIP - Overseas Portfolio - Service Class (FidVIPOv)
Portfolio of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio - Service Class
(FidVIPCon)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio - Service
Class (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (VKMSEmMkt)
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> 10
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Capital Appreciation Fund (OppCapAp)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Growth & Income Fund (OppGrInc)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (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 except for Nationwide SAT - Equity Income Fund and Nationwide SAT
- Strategic Growth Fund. 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> 11
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
(2) POLICY CHARGES
(a) Deductions from Premium
On corporate flexible premium contracts, the Company deducts a charge
for state premium taxes of 3.5% on all premiums received to cover the
payment of premium taxes. Additionally, the Company deducts a front-end
sales load not to exceed 5.5% from each premium payment received. The
Company may at its sole discretion reduce this sales loading.
(b) Cost of Insurance
A cost of insurance charge is assessed monthly against each contract.
The amount of the charge is based upon age, sex, rate class and net
amount at risk (death benefit less total contract value).
(c) Administrative Charges
For corporate flexible premium contracts, the Company deducts a monthly
administrative expense charge to recover policy maintenance,
accounting, record keeping and other administrative expenses. On a
current basis this charge is $5.00 per month in all policy years. On a
guaranteed basis this charge is $10.00 per month in all policy years.
The above charges are assessed against each contract by liquidating
units.
(3) ASSET CHARGES
For corporate flexible premium contracts, the Company deducts a charge from
the contract to cover mortality and expense risk charges related to
operations. This charge is guaranteed not to exceed an annual rate of .75%.
On a current basis this rate will be .40% during the first through fourth
policy years, .25% during the fifth through twentieth policy years, and
.10% thereafter.
(4) DEATH BENEFITS
Death benefits result in a redemption of the contract value from the
Account and payment of the death benefit proceeds, less any outstanding
policy loans and policy charges, to the legal beneficiary. The excess of
the death benefit proceeds over the contract value on the date of death is
paid by the Company's general account. There were no death benefits paid in
the current year.
(5) POLICY LOANS (NET OF REPAYMENTS)
Contract provisions allow contract owners to borrow 90% of a policy's cash
surrender value. Interest is charged on the outstanding loan and is due and
payable in advance on the policy anniversary.
At the time the loan is granted, the amount of the loan is transferred from
the Account to the Company's general account as collateral for the
outstanding loan. Collateral amounts in the general account are credited
with the stated rate of interest in effect at the time the loan is made,
subject to a guaranteed minimum rate. Interest credited is paid by the
Company's general account to the Account. Loan repayments result in a
transfer of collateral including interest back to the Account. There were
no policy loans in the current year.
(6) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 12
(7) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1998.
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
--------- ---------- -------
<S> <C> <C> <C> <C>
The BEST of AMERICA(R) America's FUTURE Life Series(SM):
American Century VP - American
Century VP Income & Growth 42,170 $ 10.891732 $ 459,304 9%
American Century VP - American
Century VP International 31,340 9.768200 306,135 (2)%
American Century VP - American
Century VP Value 10,252 9.374321 96,106 (6)%
The Dreyfus Socially Responsible
Growth Fund, Inc. 742 11.144998 8,270 11%
Dreyfus Stock Index Fund 547,841 11.030001 6,042,687 10%
Dreyfus VIF -
Capital Appreciation Portfolio 27,277 11.025485 300,742 10%
Fidelity VIP - Equity-Income Portfolio -
Service Class 924 9.906965 9,154 (1)%
Fidelity VIP - Growth Portfolio -
Service Class 130,876 12.048634 1,576,877 20%
Fidelity VIP - High Income Portfolio -
Service Class 106,365 9.003329 957,639 (10)%
Fidelity VIP - Overseas Portfolio -
Service Class 70,301 9.508092 668,428 (5)%
Fidelity VIP-II - Contrafund Portfolio -
Service Class 112,018 11.338370 1,270,102 13%
Fidelity VIP-III - Growth Opportunities
Portfolio - Service Class 34,950 11.247664 393,106 12%
Morgan Stanley -
Emerging Markets Debt Portfolio 13,412 6.765184 90,735 (32)%
Nationwide SAT - Balanced Fund 8,085 10.009481 80,927 0%
Nationwide SAT -
Capital Appreciation Fund 42,152 11.191056 471,725 12%
Nationwide SAT - Global Equity Fund 239 10.374941 2,480 4%
Nationwide SAT - Government Bond Fund 47,339 10.664112 504,828 7%
Nationwide SAT - High Income Bond Fund 14,446 10.049520 145,175 0%
Nationwide SAT - Money Market Fund 695,771 10.319833 7,180,241 3%
Nationwide SAT - Multi Sector Bond Fund 32,607 9.991296 325,786 0%
Nationwide SAT -
Select Advisers Mid Cap Fund 259 9.821278 2,544 (2)%
Nationwide SAT - Small Cap Value Fund 68,511 8.580808 587,880 (14)%
Nationwide SAT - Small Company Fund 50,558 9.056852 457,896 (9)%
Nationwide SAT - Strategic Value Fund 31,219 9.086371 283,667 (9)%
Nationwide SAT - Total Return Fund 10,192 10.144232 103,390 1%
</TABLE>
(Continued)
<PAGE> 13
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Guardian Portfolio 128,350 9.338993 1,198,660 (7)%
Neuberger & Berman AMT -
Mid-Cap Growth Portfolio 95,708 11.296584 1,081,173 13%
Neuberger & Berman AMT -
Partners Portfolio 25,973 9.337008 242,510 (7)%
Oppenheimer VAF -
Capital Appreciation Fund 53,218 9.685930 515,466 (3)%
Oppenheimer VAF - Growth Fund 11,744 10.659314 125,183 7%
Oppenheimer VAF -
Growth & Income Fund 30,977 8.938847 276,899 (11)%
Van Eck WIT -
Worldwide Emerging Markets Fund 21,058 6.323175 133,153 (37)%
Van Eck WIT -
Worldwide Hard Assets Fund 12,094 6.842178 82,749 (32)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio 1,612 8.928571 14,393 (11)%
Warburg Pincus Trust -
Growth & Income Portfolio 46,093 9.941469 458,232 (1)%
Warburg Pincus Trust -
International Equity Portfolio 25,320 8.895388 225,231 (11)%
Warburg Pincus Trust -
Post Venture Capital Portfolio 24,245 9.065227 219,786 (9)%
-------- --------- ---------
$ 26,899,259
============
</TABLE>
* This investment option was not being utilized for the entire period.
Accordingly, the period return was computed for such period as the investment
option was utilized and does not include contract charges satisfied by
surrendering units.
<PAGE> 70
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life and Annuity Insurance Company:
We have audited the accompanying balance sheets of Nationwide Life and Annuity
Insurance Company, a wholly owned subsidiary of Nationwide Life Insurance
Company, as of December 31, 1998 and 1997, and the related statements of income,
shareholder's equity and cash flows for each of the years in the three-year
period ended December 31, 1998. 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 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 financial statements referred to above present fairly, in
all material respects, the financial position of Nationwide Life and Annuity
Insurance Company as of December 31, 1998 and 1997, and the results of its
operations and its 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
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Balance Sheets
($000's omitted, except per share amounts)
<TABLE>
<CAPTION>
December 31,
Assets 1998 1997
---- ----
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $ 904,946 $ 796,919
Equity securities 20,853 14,767
Mortgage loans on real estate, net 268,894 218,852
Real estate, net 2,250 2,824
Policy loans 332 215
Short-term investments 2,277 18,968
---------- ----------
1,199,552 1,052,545
---------- ----------
Cash 2 5,163
Accrued investment income 11,645 10,778
Deferred policy acquisition costs 53,007 30,087
Other assets 41,542 15,624
Assets held in separate accounts 1,533,690 891,101
---------- ----------
$2,839,438 $2,005,298
========== ==========
Liabilities and Shareholder's Equity
Future policy benefits and claims $1,163,829 $ 986,191
Other liabilities 25,933 29,426
Liabilities related to separate accounts 1,533,690 891,101
---------- ----------
2,723,452 1,906,718
---------- ----------
Commitments and contingencies (note 7 and 11)
Shareholder's equity:
Common stock, $40 par value. Authorized, issued and outstanding 66,000 shares 2,640 2,640
Additional paid-in capital 52,960 52,960
Retained earnings 50,331 35,812
Accumulated other comprehensive income 10,055 7,168
---------- ----------
115,986 98,580
---------- ----------
$2,839,438 $2,005,298
========== ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Income
($000's omitted)
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Revenues:
Policy charges $ 28,549 $ 11,244 $ 6,656
Life insurance premiums 63 363 246
Net investment income 11,314 11,577 51,045
Realized gains (losses) on investments 696 (246) (3)
Other income 1,165 1,057 --
-------- -------- --------
41,787 23,995 57,944
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 4,881 3,948 34,711
Other benefits and claims 1,586 433 813
Amortization of deferred policy acquisition costs 4,348 1,402 7,380
Other operating expenses 8,952 1,860 7,247
-------- -------- --------
19,767 7,643 50,151
-------- -------- --------
Income before federal income tax expense 22,020 16,352 7,793
Federal income tax expense 7,501 5,749 2,707
-------- -------- --------
Net income $ 14,519 $ 10,603 $ 5,086
======== ======== ========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
($000's omitted)
<TABLE>
<CAPTION>
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 $ 2,640 $ 52,960 $ 20,123 $ 4,454 $ 80,177
Comprehensive income:
Net income -- -- 5,086 -- 5,086
Net unrealized losses on securities
available-for-sale arising during the -- -- -- (1,226) (1,226)
year
---------
Total comprehensive income 3,860
--------- --------- --------- --------- ---------
December 31, 1996 2,640 52,960 25,209 3,228 84,037
Comprehensive income:
Net income -- -- 10,603 -- 10,603
Net unrealized gains on securities
available-for-sale arising during the -- -- -- 3,940 3,940
year
---------
Total comprehensive income 14,543
--------- --------- --------- --------- ---------
December 31, 1997 2,640 52,960 35,812 7,168 98,580
Comprehensive income:
Net income -- -- 14,519 -- 14,519
Net unrealized gains on securities
available-for-sale arising during the -- -- -- 2,887 2,887
year
---------
Total comprehensive income 17,406
--------- --------- --------- --------- ---------
December 31, 1998 $ 2,640 $ 52,960 $ 50,331 $ 10,055 $ 115,986
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Statements of Cash Flows
($000's omitted)
<TABLE>
<CAPTION>
Years ended December 31,
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 14,519 $ 10,603 $ 5,086
Adjustments to reconcile net income to net cash provided by
operating activities:
Interest credited to policyholder account balances 4,881 3,948 34,711
Capitalization of deferred policy acquisition costs (29,216) (20,099) (19,987)
Amortization of deferred policy acquisition costs 4,348 1,402 7,380
Commission and expense allowances under coinsurance
agreement with affiliate -- -- 26,473
Amortization and depreciation (479) 250 1,721
Realized (gains) losses on invested assets, net (696) 246 3
Increase in accrued investment income (867) (1,589) (725)
(Increase) decrease in other assets (25,919) 21,858 (32,539)
Increase (decrease) in policy liabilities and funds withheld
on coinsurance agreement with affiliate 139,991 228,898 (7,101)
(Decrease) increase in other liabilities (3,883) (7,488) 23,198
--------- --------- ---------
Net cash provided by operating activities 102,679 238,029 38,220
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 117,228 95,366 73,966
Proceeds from sale of securities available-for-sale 17,403 30,431 2,480
Proceeds from repayments of mortgage loans on real estate 28,180 15,199 10,975
Proceeds from sale of real estate 707 -- --
Proceeds from repayments of policy loans 99 67 23
Cost of securities available-for-sale acquired (242,516) (267,899) (179,671)
Cost of mortgage loans on real estate acquired (78,180) (84,736) (57,395)
Cost of real estate acquired (3) (13) --
Policy loans issued (216) (155) (55)
Short-term investments, net 16,691 (18,476) 4,352
--------- --------- ---------
Net cash used in investing activities (140,607) (230,216) (145,325)
--------- --------- ---------
Cash flows from financing activities:
Increase in investment product and universal life insurance
product account balances 74,828 6,952 200,575
Decrease in investment product and universal life insurance
product account balances (42,061) (13,898) (89,174)
--------- --------- ---------
Net cash provided by (used in) financing activities 32,767 (6,946) 111,401
--------- --------- ---------
Net (decrease) increase in cash (5,161) 867 4,296
Cash, beginning of year 5,163 4,296 --
--------- --------- ---------
Cash, end of year $ 2 $ 5,163 $ 4,296
========= ========= =========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 6
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements
December 31, 1998, 1997 and 1996
($000's omitted)
(1) Organization and Description of Business
Nationwide Life and Annuity Insurance Company (the Company) is a wholly
owned subsidiary of Nationwide Life Insurance Company (NLIC).
The Company provides 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 financial statements have been prepared in accordance with
generally accepted accounting principles, which differ from statutory
accounting practices prescribed or permitted by regulatory authorities.
An Annual Statement, filed with the Department of Insurance of the
State of Ohio (the Department), is prepared on the basis of accounting
practices prescribed or permitted by the Department. Prescribed
statutory accounting practices include a variety of publications of the
National Association of Insurance Commissioners (NAIC), as well as
state laws, regulations and general administrative rules. Permitted
statutory accounting practices encompass all accounting practices not
so prescribed. The Company has no material permitted statutory
accounting practices.
In preparing the 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 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) 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.
<PAGE> 7
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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. 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.
(b) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual 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 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.
(c) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(a).
(d) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. 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
statements of income and cash flows except for the fees the
Company receives.
<PAGE> 8
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(e) 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 5.1%, 5.1% and 5.6% for the years ended
December 31, 1998, 1997 and 1996, respectively.
(f) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC). The members of the
consolidated tax return group have a tax sharing agreement 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.
(g) Reinsurance Ceded
Reinsurance revenues ceded and reinsurance recoveries on benefits
and expenses incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(h) Statements of Cash Flows
The Company routinely invests its available cash balances in
highly liquid, short-term investments with affiliated companies.
See note 10. As such, the Company had no cash balance as of
December 31, 1995.
(i) 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 12.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits. 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.
<PAGE> 9
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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.
(j) Reclassification
Certain items in the 1997 and 1996 financial statements have been
reclassified to conform to the 1998 presentation.
(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
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 $ 15,577 $ 232 $ (11) $ 15,798
Obligations of states and political subdivisions 332 1 -- 333
Debt securities issued by foreign governments 4,015 23 -- 4,038
Corporate securities 602,925 15,446 (358) 618,013
Mortgage-backed securities 261,225 5,605 (66) 266,764
--------- --------- --------- ---------
Total fixed maturity securities 884,074 21,307 (435) 904,946
Equity securities 15,323 5,530 -- 20,853
--------- --------- --------- ---------
$ 899,397 $ 26,837 $ (435) $ 925,799
========= ========= ========= =========
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 5,923 $ 109 $ (27) $ 6,005
Obligations of states and political subdivisions 267 5 -- 272
Debt securities issued by foreign governments 6,077 57 (1) 6,133
Corporate securities 482,478 10,964 (509) 492,933
Mortgage-backed securities 285,224 6,458 (106) 291,576
--------- --------- --------- ---------
Total fixed maturity securities 779,969 17,593 (643) 796,919
Equity securities 11,704 3,063 -- 14,767
--------- --------- --------- ---------
$ 791,673 $ 20,656 $ (643) $ 811,686
========= ========= ========= =========
</TABLE>
<PAGE> 10
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to 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
cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available-for-sale:
Due in one year or less $121,769 $122,931
Due after one year through five years 606,626 621,349
Due after five years through ten years 126,215 130,402
Due after ten years 29,464 30,264
-------- --------
$884,074 $904,946
======== ========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 26,402 $ 20,013
Adjustment to deferred policy acquisition costs (10,933) (8,985)
Deferred federal income tax (5,414) (3,860)
-------- --------
$ 10,055 $ 7,168
======== ========
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale follows for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3,922 $ 9,177 $ (8,764)
Equity securities 2,467 1,663 249
-------- -------- --------
$ 6,389 $ 10,840 $ (8,515)
======== ======== ========
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $17,403, $30,431 and $2,480, respectively. During
1998, gross gains of $509 ($825 and $181 in 1997 and 1996,
respectively) and gross losses of $0 ($1,124 and none in 1997 and 1996,
respectively) were realized on those sales. See note 10.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $890 (none as of December 31,
1997). No valuation allowance has been recorded for these loans as of
December 31, 1998. During 1998, the average recorded investment in
impaired mortgage loans on real estate was approximately $178 ($386 in
1997) and interest income recognized on those loans was $15 (none in
1997), which is equal to interest income recognized using a cash-basis
method of income recognition.
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $ 750 $ 934
Reductions credited to operations -- (53)
Direct write-downs charged against the allowance -- (131)
----- -----
Allowance, end of year $ 750 $ 750
===== =====
</TABLE>
<PAGE> 11
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Real estate is presented at cost less accumulated depreciation of $105
as of December 31, 1998 ($153 as of December 31, 1997). There was a
valuation allowance of $229 as of December 31, 1997.
The Company has no investments which were non-income producing for the
twelve month periods preceding December 31, 1998 and 1997.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $56,398 $53,491 $40,552
Equity securities -- 375 598
Mortgage loans on real estate 21,124 14,862 9,991
Real estate 379 318 214
Short-term investments 1,361 899 507
Other 178 90 57
------- ------- -------
Total investment income 79,440 70,035 51,919
Less:
Investment expenses 1,773 1,386 874
Net investment income ceded (note 9) 66,353 57,072 --
------- ------- -------
Net investment income $11,314 $11,577 $51,045
======= ======= =======
</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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Fixed maturity securities available-for-sale $ 509 $(299) $ 181
Mortgage loans on real estate -- 53 (184)
Real estate and other 187 -- --
----- ----- -----
$ 696 $(246) $ (3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $3,562 and $3,383
as of December 31, 1998 and 1997, respectively, were on deposit with
various regulatory agencies as required by law.
<PAGE> 12
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(4) Federal Income Tax
The Company's current federal income tax liability was $1,522 and $806
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 asset (liability) as of December 31,
1998 and 1997 are as follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $ 16,670 $ 13,168
Liabilities in Separate Accounts 12,477 8,080
Mortgage loans on real estate and real estate 263 336
Other assets and other liabilities -- 48
-------- --------
Total gross deferred tax assets 29,410 21,632
-------- --------
Deferred tax liabilities:
Fixed maturity securities 8,669 7,186
Deferred policy acquisition costs 8,103 6,159
Equity securities 1,935 1,072
Other 10,422 7,892
-------- --------
Total gross deferred tax liabilities 29,129 22,309
-------- --------
$ 281 $ (677)
======== ========
</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. All future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. The
Company has determined that valuation allowances are not necessary as
of December 31, 1998, 1997 and 1996 based on its analysis of future
deductible amounts.
Federal income tax expense for the years ended December 31 was as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $ 10,014 $ 2,458 $ 9,612
Deferred tax (benefit) expense (2,513) 3,291 (6,905)
-------- -------- --------
$ 7,501 $ 5,749 $ 2,707
======== ======== ========
</TABLE>
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
Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $ 7,707 35.0 $ 5,723 35.0 $ 2,728 35.0
Tax exempt interest and dividends
received deduction (223) (1.0) -- (0.0) (175) (2.3)
Other, net 17 0.1 26 (0.2) 154 2.0
------- ------ ------- ------ ------- ------
Total (effective rate of each year) $ 7,501 34.1 $ 5,749 35.2 $ 2,707 34.7
======= ====== ======= ====== ======= ======
</TABLE>
Total federal income tax paid was $9,298, $9,566 and $2,335 during the
years ended December 31, 1998, 1997 and 1996, respectively.
<PAGE> 13
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-
for-sale arising during the period:
Gross $ 6,898 $ 10,541 $ (8,334)
Adjustment to deferred policy acquisition costs (1,947) (4,778) 6,628
Related federal income tax (expense) benefit (1,733) (2,017) 362
-------- -------- --------
Net 3,218 3,746 (1,344)
-------- -------- --------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross (509) 299 (181)
Related federal income tax expense (benefit) 178 (105) 63
-------- -------- --------
Net (331) 194 118
-------- -------- --------
Total Other Comprehensive Income $ 2,887 $ 3,940 $ (1,226)
======== ======== ========
</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.
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 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.
<PAGE> 14
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices.
Mortgage loans on real estate: 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 mortgages in default is the estimated fair value of
the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the 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.
Policy reserves on life insurance contracts: 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 value because of the short-term nature of such
commitments. See note 7.
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
amount fair value amount fair value
------ ---------- ------ ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $ 904,946 $ 904,946 $ 796,919 $ 796,919
Equity securities 20,853 20,853 14,767 14,767
Mortgage loans on real estate, net 268,894 276,387 218,852 229,881
Policy loans 332 332 215 215
Short-term investments 2,277 2,277 18,968 18,968
Cash 2 2 5,163 5,163
Assets held in separate accounts 1,533,690 1,533,690 891,101 891,101
Liabilities:
Investment contracts 1,153,930 1,113,584 980,263 950,105
Policy reserves on life insurance contracts 9,899 10,517 5,928 6,076
Liabilities related to separate accounts 1,533,690 1,501,255 891,101 868,056
</TABLE>
<PAGE> 15
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(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 which owe the Company money, will
not pay. The Company minimizes this risk by adhering to a conservative
investment strategy, by maintaining 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.
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 operating throughout the
United States, thus reducing its exposure to any single 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
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 $9,500 extending into
1999 were 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 33% (29% in 1997) in any geographic area and no more than 6% (3%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998 36% (37% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed apartment
building properties.
<PAGE> 16
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
(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 $235, $257 and $189,
respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $1,008 and $891, respectively, and the net periodic
postretirement benefit cost (NPPBC) for 1998, 1997 and 1996 was $130,
$94 and $78, respectively.
<PAGE> 17
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $ 2,033,800 $ 1,847,800 $ 237,900 $ 200,700
Service cost 87,600 77,300 9,800 7,000
Interest cost 123,400 118,600 15,400 14,000
Actuarial loss 123,200 60,000 15,600 24,400
Plan curtailment in 1998/merger in 1997 (107,200) 1,500 -- --
Benefits paid (75,800) (71,400) (8,600) (8,200)
----------- ----------- ----------- -----------
Benefit obligation at end of year 2,185,000 2,033,800 270,100 237,900
----------- ----------- ----------- -----------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212,900 1,947,900 69,200 63,000
Actual return on plan assets 300,700 328,100 5,000 3,600
Employer contribution 104,100 7,200 12,100 10,600
Plan merger -- 1,100 -- --
Benefits paid (75,800) (71,400) (8,400) (8,000)
----------- ----------- ----------- -----------
Fair value of plan assets at end of year 2,541,900 2,212,900 77,900 69,200
----------- ----------- ----------- -----------
Funded status 356,900 179,100 (192,200) (168,700)
Unrecognized prior service cost 31,500 34,700 -- --
Unrecognized net (gains) losses (345,700) (330,700) 16,000 1,600
Unrecognized net (asset) obligation at transition (11,000) 33,300 1,300 1,500
----------- ----------- ----------- -----------
Prepaid (accrued) benefit cost $ 31,700 $ (83,600) $ (174,900) $ (165,600)
=========== =========== =========== ===========
</TABLE>
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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 87,600 $ 77,300 $ 75,500
Interest cost on projected benefit obligation 123,400 118,600 105,500
Expected return on plan assets (159,000) (139,000) (116,100)
Recognized gains (3,800) -- --
Amortization of prior service cost 3,200 3,200 3,200
Amortization of unrecognized transition obligation 4,200 4,200 4,100
--------- --------- ---------
$ 55,600 $ 64,300 $ 72,200
========= ========= =========
</TABLE>
<PAGE> 18
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
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 $67,100
resulted (consisting of a $107,200 reduction in the projected benefit
obligation, net of the write-off of the $40,100 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>
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>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service
during the year) $ 9,800 $ 7,000 $ 6,500
Interest cost on accumulated postretirement benefit obligation 15,400 14,000 13,700
Actual return on plan assets (5,000) (3,600) (4,300)
Amortization of unrecognized transition obligation of affiliates 200 200 200
Net amortization and deferral 1,200 (500) 1,800
-------- -------- --------
$21,600 $ 17,100 $ 17,900
======== ======== ========
</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, the Company'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
<PAGE> 19
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
certain levels, each of which requires specified corrective action. The
Company exceeds the minimum risk-based capital requirements.
The statutory capital and surplus of the Company as reported to
regulatory authorities as of December 31, 1998, 1997 and 1996 was
$70,135, $74,820 and $71,390, respectively. The statutory net (loss)
income of the Company as reported to regulatory authorities for the
years ended December 31, 1998, 1997 and 1996 was $(3,371), $7,446 and
$670, 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 $7,013.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and stockholder dividends
in the future.
(10) Transactions With Affiliates
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 $430, $703
and $410, 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 $2,933, $2,564 and $2,682 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 $2,750 and $4,981 as of December 31, 1998 and 1997,
respectively.
Effective December 31, 1996, the Company entered into an intercompany
reinsurance agreement with NLIC whereby certain inforce and
subsequently issued fixed individual deferred annuity contracts are
ceded on a 100% coinsurance with funds withheld basis. On December 31,
1997, the agreement was amended to a modified coinsurance basis. Under
modified coinsurance agreements, invested assets and liabilities for
future policy benefits are retained by the ceding company and net
investment earnings on the invested assets are paid to the assuming
company. Under terms of the Company's agreement, the investment risk
associated with changes in interest rates is borne by NLIC. Risk of
asset default is retained by the Company, although a fee is paid by
NLIC to the Company for the Company's retention of such risk. The
agreement will remain inforce until all contract obligations are
settled. The ceding of risk does not discharge the original insurer
from its primary obligation to the contractholder. The Company believes
that the terms of the modified coinsurance agreement are consistent in
all material respects with what the Company could have obtained with
unaffiliated parties. Amounts ceded to NLIC in 1998 are included in
NLIC's results of operations for 1998 and include premiums of $241,503,
net investment income of $66,353 and benefits, claims and other
expenses of $296,659. In consideration for the initial inforce business
reinsured, NLIC paid the Company $26,473 in commission and expense
allowances which were applied to the Company's deferred policy
acquisition costs as of December 31, 1996. No significant gain or loss
was recognized as a result of the agreement.
<PAGE> 20
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
During 1997, the Company sold fixed maturity securities
available-for-sale at fair value of $27,253 to NLIC. The Company
recognized a $693 gain on the transactions.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as 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 $2,277 and $18,968 as of December 31,
1998 and 1997, respectively, and are included in short-term investments
on the accompanying balance sheets.
(11) 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.
(12) 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,
and all realized gains and losses on investments in a Corporate and
Other segment.
<PAGE> 21
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to 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
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (1,417) $ 6,792 $ 4098 $ 5,531 $ 11,314
Other operating revenue 18,209 3,182 8,386 -- 29,777
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 16,792 9,974 8,794 5,531 41,091
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 4,660 221 -- 4,881
Amortization of deferred policy
acquisition costs 3,466 508 374 -- 4,348
Other benefits and expenses 4,442 2,087 4,009 -- 10,538
----------- ----------- ----------- ----------- -----------
Total expenses 7,908 7,255 4,604 -- 19,767
----------- ----------- ----------- ----------- -----------
Operating income (loss) before
federal income tax 8,884 2,719 4,190 5,531 21,324
Realized gains on investments -- -- -- 696 696
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 8,884 $ 2,719 $ 4,190 $ 6,227 $ 22,020
=========== =========== =========== =========== ===========
Assets as of year end $ 1,502,829 $ 1,162,040 $ 92,482 $ 82,087 $ 2,839,438
=========== =========== =========== =========== ===========
1997:
Net investment income (1) $ (873) $ 5,927 $ 166 $ 6,357 $ 11,577
Other operating revenue 10,823 1,825 16 -- 12,664
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 9,950 7,752 182 6,357 24,241
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 3,856 92 -- 3,948
Amortization of deferred policy
acquisition costs 1,035 347 20 -- 1,402
Other benefits and expenses 1,648 347 298 -- 2,293
----------- ----------- ----------- ----------- -----------
Total expenses 2,683 4,550 410 -- 7,643
----------- ----------- ----------- ----------- -----------
Operating income before federal
income tax 7,267 3,202 (228) 6,357 16,598
Realized losses on investments -- -- -- (246) (246)
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 7,267 $ 3,202 $ (228) $ 6,111 $ 16,352
=========== =========== =========== =========== ===========
Assets as of year end $ 925,021 $ 989,116 $ 2,228 $ 88,933 $ 2,005,298
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 22
NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(a wholly owned subsidiary of Nationwide Life Insurance Company)
Notes to Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
Annuities Annuities Insurance and Other Total
--------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (849) $ 50,197 $ 149 $ 1,548 $ 51,045
Other operating revenue 5,440 1,445 16 1 6,902
----------- ----------- ----------- ----------- -----------
Total operating revenue (2) 4,591 51,642 165 1,549 57,947
----------- ----------- ----------- ----------- -----------
Interest credited to policyholder
account balances -- 34,711 -- -- 34,711
Amortization of deferred policy
acquisition costs 1,473 5,888 19 -- 7,380
Benefits and expenses 2,024 5,889 147 -- 8,060
----------- ----------- ----------- ----------- -----------
Total expenses 3,497 46,488 166 -- 50,151
----------- ----------- ----------- ----------- -----------
Operating income before federal
income tax 1,094 5,154 (1) 1,549 7,796
Realized losses on investments -- -- -- (3) (3)
----------- ----------- ----------- ----------- -----------
Consolidated income before
federal tax expense $ 1,094 $ 5,154 $ (1) $ 1,546 $ 7,793
=========== =========== =========== =========== ===========
Assets as of year end $ 503,111 $ 787,682 $ 2,597 $ 73,031 $ 1,366,421
=========== =========== =========== =========== ===========
</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.
<PAGE> 71
PART II - OTHER INFORMATION
CONTENTS OF REGISTRATION STATEMENT
This Form S-6 Post-Effective Amendment No. 2 comprises the following papers and
documents:
The facing sheet.
Cross-reference to items required by Form N-8B-2.
The prospectus consisting of 97 pages.
Representations and Undertakings.
The Signatures.
Independent Auditor's Consent
The following exhibits required by Forms N-8B-2 and S-6:
<TABLE>
<S> <C> <C>
1. Power of Attorney dated April 1, 1999. Attached hereto.
2. Resolution of the Depositor's Board of Directors Included with the Registration Statement on Form N-8B-2 for
authorizing the establishment of the Registrant, the Nationwide VL Separate Account-C (File No. 811-6137),
adopted and is hereby incorporated by reference.
3. Distribution Contracts Underwriting or Distribution of contracts between the
Registrant and Principal Underwriter - Filed previously in
connection with Registration Statement (SEC File No.
33-86408) on November 14, 1994 and hereby incorporated by
reference.
4. Form of Security Filed previously in connection with this Registration
Statement (SEC File No. 333-43639) on April 20, 1998 and
hereby incorporated by reference.
5. Articles of Incorporation of Depositor Included with the Registration Statement on Form N-8B-2 for the
Nationwide VL Separate Account-C (File No. 811-6137), and is
hereby incorporated by reference.
6. Application form of Security Filed previously in connection with Registration Statement (SEC
File No. 333-43639) on January 2, 1998 and hereby
incorporated by reference.
7. Opinion of Counsel
Filed previously in connection with Registration Statement (SEC
File No. 333-43639) on January 2, 1998 and hereby
incorporated by reference.
</TABLE>
99
<PAGE> 72
REPRESENTATIONS AND UNDERTAKINGS
The Registrant and Nationwide hereby make the following representations and
undertakings:
(a) This filing is made pursuant to Rules 6c-3 and 6e-3(T) under the
Investment Company Act of 1940 (the "Act"). The Registrant and Nationwide
elect to be governed by Rule 6e-3(T)(b)(13)(i)(A) under the Act with
respect to the policies described in the prospectus. The policies have
been designed in such a way as to qualify for the exemptive relief from
various provisions of the Act afforded by Rule 6e-3(T).
(b) Paragraph (b) (13) (iii) (F) of Rule 6e-3(T) is being relied on for the
deduction of the mortality and expense risk charges ("risk charges")
assumed by Nationwide under the policies. Nationwide represents that the
risk charges are within the range of industry practice for comparable
policies and reasonable in relation to all of the risks assumed by the
issuer under the policies. Actuarial memoranda demonstrating the
reasonableness of these charges are maintained by Nationwide, and will be
made available to the Securities and Exchange Commission (the
"Commission") on request.
(c) Nationwide has concluded that there is a reasonable likelihood that the
distribution financing arrangement of the separate account will benefit
the separate account and the policy owners and will keep and make
available to the Commission on request a memorandum setting forth the
basis for this representation.
(d) Nationwide represents that the separate account will invest only in
management investment companies which have undertaken to have a board of
directors, a majority of whom are not interested persons of Nationwide,
formulate and approve any plan under Rule 12b-1 to finance distribution
expenses.
(e) Subject to the terms and conditions of Section 15(d) of the Securities
Exchange Act of 1934, the Registrant hereby undertakes to file with the
Commission such supplementary and periodic information, documents, and
reports as may be prescribed by any rule or regulation of the Commission
heretofore or hereafter duly adopted pursuant to authority conferred in
that section.
(f) The fees and charges deducted under the policy in the aggregate are
reasonable in relation to the services rendered, the expenses expected to
be incurred, and the risks assumed by Nationwide.
100
<PAGE> 73
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life and Annuity Insurance Company and
Contract Owners of Nationwide VL Separate Account-C:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Experts" in the Prospectus.
KPMG LLP
Columbus, Ohio
April 29, 1999
101
<PAGE> 74
SIGNATURES
As required by the Securities Act of 1933, the Registrant, Nationwide VL
Separate Account-C, certifies that it meets the requirements of Securities Act
Rule 485(b) for effectiveness of this Post-Effective Amendment and has caused
this Post-Effective Amendment to be signed on its behalf in the City of
Columbus, and State of Ohio, on this 24TH day of SEPTEMBER, 1999.
NATIONWIDE VL SEPARATE ACCOUNT-C
--------------------------------
(Registrant)
(Seal)
Attest: NATIONWIDE LIFE AND ANNUITY INSURANCE COMPANY
(Depositor)
GLEN W. SODEN By: JOSEPH P. RATH
- -------------------------- ------------------------------------------
Glen W. Soden Joseph P. Rath
Assistant Secretary Vice President - Office of Product and
Market Compliance
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment has been signed below by the following persons in the capacities
indicated on the 24TH day of SEPTEMBER, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C> <C>
LEWIS J. ALPHIN Director
- ---------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ---------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ---------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ---------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ---------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ---------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief Operating
- --------------------------------------- Officer and Director
Joseph J. Gasper
DIMON R. MCFERSON Chairman and Chief Executive
- --------------------------------------- Officer and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and
- --------------------------------------- Director
David O. Miller
YVONNE L. MONTGOMERY Director
- ---------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
- --------------------------------------- Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
- ---------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- ---------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /s/ JOSEPH P. RATH
- --------------------------------------- --------------------------------------
Arden L. Shisler Joseph P. Rath
Attorney-in-Fact
ROBERT L. STEWART Director
- ---------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ---------------------------------------
Nancy C. Thomas
</TABLE>
102
<PAGE> 1
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each of the undersigned as directors
and/or officers of NATIONWIDE LIFE INSURANCE COMPANY, and NATIONWIDE LIFE AND
ANNUITY INSURANCE COMPANY, both Ohio corporations, which have filed or will file
with the U.S. Securities and Exchange Commission under the provisions of the
Securities Act of 1933, as amended, various Registration Statements and
amendments thereto for the registration under said Act of Individual Deferred
Variable Annuity Contracts in connection with MFS Variable Account, Nationwide
Variable Account, Nationwide Variable Account-II, Nationwide Variable Account-3,
Nationwide Variable Account-4, Nationwide Variable Account-5, Nationwide
Variable Account-6, Nationwide Fidelity Advisor Variable Account, Nationwide
Multi-Flex Variable Account, Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide Variable Account-10, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VA Separate Account-C and
Nationwide VA Separate Account-Q; and the registration of fixed interest rate
options subject to a market value adjustment offered under some or all of the
aforementioned individual Variable Annuity Contracts in connection with
Nationwide Multiple Maturity Separate Account and Nationwide Multiple Maturity
Account-A, and the registration of Group Flexible Fund Retirement Contracts in
connection with Nationwide DC Variable Account, Nationwide DCVA-II, and NACo
Variable Account; and the registration of Group Common Stock Variable Annuity
Contracts in connection with Separate Account No. 1; and the registration of
variable life insurance policies in connection with Nationwide VLI Separate
Account, Nationwide VLI Separate Account-2, Nationwide VLI Separate Account-3,
Nationwide VLI Separate Account-4, Nationwide VLI Separate Account-5, Nationwide
VL Separate Account-A and Nationwide VL Separate Account-B, Nationwide VL
Separate Account-C, Nationwide VL Separate Account-D, hereby constitutes and
appoints Dimon Richard McFerson, Joseph J. Gasper, Robert J. Woodward, Jr.,
Philip C. Gath Richard A. Karas, Edwin P. McCausland, Jr., Douglas C. Robinette,
Susan A. Wolken, Mark B. Koogler, Joseph P. Rath, and Mark R. Thresher, and each
of them with power to act without the others, his/her attorney, with full power
of substitution and resubstitution, for and in his/her name, place and stead, in
any and all capacities, to approve, and sign such Registration Statements and
any and all amendments thereto, with power to affix the corporate seal of said
corporation thereto and to attest said seal and to file the same, with all
exhibits thereto and other documents in connection therewith, with the U.S.
Securities and Exchange Commission, hereby gaining unto said attorneys, and each
of them, full power and authority to do and perform all and every act and thing
requisite to all intents and purposes as he/she might or could do in person,
hereby ratifying and confirming that which said attorneys, or any of them, may
lawfully do or cause to be done by virtue hereof. This instrument may be
executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have herewith set their names and seals
as of this 1st day of April, 1999.
/s/ Lewis J. Alphin /s/ David O. Miller
- ------------------------------------- -------------------------------------
Lewis J. Alphin, Director David O. Miller, Chairman of the
Board, Director
/s/ A. I. Bell /s/ Yvonne L. Montgomery
- ------------------------------------- -------------------------------------
A. I. Bell, Director Yvonne L. Montgomery, Director
/s/ Kenneth D. Davis /s/ Robert A. Oakley
- ------------------------------------- -------------------------------------
Kenneth D. Davis, Director Robert A. Oakley, Executive Vice
President and Chief Financial Officer
/s/ Keith W. Eckel /s/ Ralph M. Paige
- ------------------------------------- -------------------------------------
Keith W. Eckel, Director Ralph M. Paige, Director
/s/ Willard J. Engel /s/ James F. Patterson
- ------------------------------------- -------------------------------------
Willard J. Engel, Director James F. Patterson, Director
/s/ Fred C. Finney /s/ Arden L. Shisler
- ------------------------------------- -------------------------------------
Fred C. Finney, Director Arden L. Shisler, Director
/s/ Joseph J. Gasper /s/ Robert L. Stewart
- ------------------------------------- -------------------------------------
Joseph J. Gasper, President and Robert L. Stewart, Director
Chief Operating Officer and Director
/s/ Dimon Richard McFerson /s/ Nancy C. Thomas
- ------------------------------------- -------------------------------------
Dimon Richard McFerson, Chairman and Nancy C. Thomas, Director
Chief Executive Officer and Director
