<PAGE> 1
As filed with the Securities and Exchange Commission.
`33 Act File No. ______________
`40 Act File No.______________
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
NATIONWIDE VARIABLE ACCOUNT-10
(EXACT NAME OF REGISTRANT)
NATIONWIDE LIFE INSURANCE COMPANY
(NAME OF DEPOSITOR)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement. September 1, 1999 requested).
The Registrant hereby agrees to amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
===============================================================================
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<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT -10
REFERENCE TO ITEMS REQUIRED BY FORM N-4
Caption in Prospectus and Statement of Additional Information and Other
Information
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page.................................................................................3
Item 2. Definitions................................................................................6
Item 3. Synopsis or Highlights....................................................................14
Item 4. Condensed Financial Information..........................................................N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies.....................14
Item 6. Deductions and Expenses...................................................................17
Item 7. General Description of Variable Annuity Contracts.........................................20
Item 8. Annuity Period............................................................................26
Item 9. Death Benefit and Distributions...........................................................28
Item 10. Purchases and Contract Value..............................................................21
Item 11. Redemptions...............................................................................23
Item 12. Taxes.....................................................................................30
Item 13. Legal Proceedings.........................................................................35
Item 14. Table of Contents of the Statement of Additional Information..............................38
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page................................................................................49
Item 16. Table of Contents.........................................................................49
Item 17. General Information and History...........................................................49
Item 18. Services..................................................................................49
Item 19. Purchase of Securities Being Offered......................................................50
Item 20. Underwriters..............................................................................50
Item 21. Calculation of Performance Information....................................................50
Item 22. Annuity Payments..........................................................................51
Item 23. Financial Statements......................................................................52
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.........................................................80
Item 25. Directors and Officers of the Depositor...................................................81
Item 26. Persons Controlled by or Under Common Control with the Depositor or
Registrant................................................................................83
Item 27. Number of Contract Owners.................................................................95
Item 28. Indemnification...........................................................................95
Item 29. Principal Underwriter.....................................................................95
Item 30. Location of Accounts and Records..........................................................97
Item 31. Management Services.......................................................................97
Item 32. Undertakings..............................................................................98
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Modified Single Premium Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide
Variable Account -10
The date of this prospectus is _____________, 1999.
- -------------------------------------------------------------------------------
The contracts described in this prospectus offer a combination of variable
annuity and long-term care insurance benefits. The contracts are intended to:
1. serve the long-term savings needs of investors; AND
2. provide specific insurance protection against financial loss caused by
confinement in a nursing home or other long-term care facility.
BECAUSE THE CONTRACT IS SPECIFICALLY DESIGNED FOR LONG-TERM INVESTORS ALSO
SEEKING LONG-TERM CARE INSURANCE BENEFITS, THE CONTRACT MAY NOT BE APPROPRIATE
FOR INVESTORS SOLELY INTERESTED IN LONG-TERM SAVINGS. INVESTORS SHOULD CAREFULLY
CONSIDER THE COSTS AND BENEFITS OF THE CONTRACT WITH THEIR INVESTMENT OR
FINANCIAL ADVISER BEFORE PURCHASING THE CONTRACT.
This prospectus contains basic information you should know about the variable
annuity provisions of the contract before investing. Please read it and keep it
for future reference.
The contract issued with this prospectus consists of two components: variable
annuity benefits and long-term care/disability insurance benefits. The
information in this prospectus describes only the variable annuity provisions of
the contract unless stated otherwise. Investors should read this prospectus in
conjunction with the contract and other material provided which discusses the
long-term care provisions of the contract before purchasing the contract.
The following underlying mutual funds are available under the contracts:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
- American Century VP Income & Growth
- American Century VP International
- American Century VP Value
DREYFUS
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus Stock Index Fund, Inc.
- Dreyfus Variable Investment Fund - Capital Appreciation Portfolio
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
- Government Bond Fund
- Money Market Fund
- Total Return Fund
- Nationwide Balanced Fund* (subadviser: Salomon Brothers Asset
Management, Inc.)
- Nationwide Equity Income Fund (subadviser: Federated Investment
Counseling)
- Nationwide Global Equity 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 (First Pacific Advisors, Inc.,
Pilgrim Baxter & Associates, Ltd., and Rice, Hall, James & Associates)
- Nationwide Select Advisers Small Cap Growth Fund (subadvisers:
Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP, Neuberger
Berman, LLC.)
- Nationwide Small Cap Value Fund (subadviser: The Dreyfus Corporation)
1
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<PAGE> 4
- Nationwide Small Company Fund (subadvisers: 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.)
- 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
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
Purchase payments may also be allocated to the fixed account or the Guaranteed
Term Options. (Guaranteed Term Options may not be available in every
jurisdiction - refer to your contract for specific information.)
The Statement of Additional Information (dated __________, 1999) which contains
additional information about the variable annuity portion of the contracts and
the variable account has been filed with the Securities and Exchange Commission
("SEC") and is incorporated herein by reference. The table of contents for the
Statement of Additional Information is on page 36.
For general information, information relating to the long-term care/disability
insurance benefits offered by the contract, or to obtain FREE copies of the:
- Statement of Additional Information;
- prospectus for any underlying mutual fund;
- prospectus for Guaranteed Term Options; and
- required Nationwide forms,
call: 1-800-848-6331
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 01-05-P1
COLUMBUS, OHIO 43215
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
WWW.SEC.GOV
Information about this and other Best of America(R) products can be found at:
WWW.BESTOFAMERICA.COM
THIS ANNUITY IS NOT:
- - A BANK DEPOSIT - FEDERALLY INSURED
- - ENDORSED BY A BANK OR - AVAILABLE IN EVERY
GOVERNMENT AGENCY STATE.
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
2
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<PAGE> 5
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
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<PAGE> 6
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit of measure used to calculate the variable
payment annuity payments.
CONTRACT VALUE- The total of all accumulation units in a contract and any amount
held in the fixed account and any amount held under Guaranteed Term Options.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as a Qualified Plan, Individual Retirement Annuity, Roth IRA, SEP IRA,
Simple IRA, or Tax Sheltered Annuity.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide Variable Account-10, 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
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<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<S> <C>
GLOSSARY OF SPECIAL TERMS.....................................................4
SUMMARY OF STANDARD CONTRACT EXPENSES.........................................6
ADDITIONAL CONTRACT OPTION....................................................6
UNDERLYING MUTUAL FUND ANNUAL EXPENSES........................................7
EXAMPLE.......................................................................9
SYNOPSIS OF THE CONTRACTS....................................................12
FINANCIAL STATEMENTS.........................................................12
NATIONWIDE LIFE INSURANCE COMPANY............................................12
NATIONWIDE ADVISORY SERVICES, INC............................................13
INVESTING IN THE CONTRACT....................................................13
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
STANDARD CHARGES AND DEDUCTIONS..............................................15
Mortality Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP...........................................................17
Joint Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT....................................................18
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Value of the Annuity Portion of the Contract
Transfers
RIGHT TO REVOKE..............................................................21
SURRENDER (REDEMPTION).......................................................22
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
ASSIGNMENT...................................................................22
CONTRACT OWNER SERVICES......................................................23
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE....................................................24
ANNUITIZING THE CONTRACT.....................................................25
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS...............................................................26
Death of Contract Owner
Death of Annuitant
Death of Contract Owner/Annuitant
How the Death Benefit Value is Determined
Death Benefit Payment
REQUIRED DISTRIBUTIONS.......................................................28
FEDERAL TAX CONSIDERATIONS...................................................28
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Puerto Rico
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.......................................................32
YEAR 2000 COMPLIANCE ISSUES..................................................32
LEGAL PROCEEDINGS............................................................33
ADVERTISING..................................................................34
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.....................36
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS...........................37
</TABLE>
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<PAGE> 8
SUMMARY OF STANDARD CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless:
- - the contract owner meets an available exception, or
- - a contract owner has replaced the standard death benefit with the One-Year
Step Up Death Benefit option for an additional charge of 0.05%.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge ("CDSC") (as a
percentage of purchase payments surrendered)..............................8%(1)
Range of CDSC over time:
<TABLE>
<CAPTION>
- -------------------------------- ------------------------
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
- ---------------------------------------------------------
<S> <C>
1 8%
- ---------------------------------------------------------
2 8%
- ---------------------------------------------------------
3 8%
- ---------------------------------------------------------
4 8%
- ---------------------------------------------------------
5 8%
- ---------------------------------------------------------
6 7%
- ---------------------------------------------------------
7 6%
- ---------------------------------------------------------
8 5%
- ---------------------------------------------------------
9 4%
- ---------------------------------------------------------
10 3%
- ---------------------------------------------------------
11 2%
- ---------------------------------------------------------
12 1%
- ---------------------------------------------------------
13+ 0%
- -------------------------------- ------------------------
</TABLE>
(1) Each contract year, the contract owner may withdraw without a CDSC the
lesser of:
1) 10% of all purchase payments made to the annuity portion of the
contract (less any purchase payments previously withdrawn from the
annuity portion of the contract); or
2) 10% of the value of the annuity portion of the contract.
This free withdrawal privilege is non-cumulative. Free amounts not taken during
any given contract year cannot be taken as free amounts in a subsequent contract
year (see "Waiver of Contingent Deferred Sales Charge").
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of account value)
<TABLE>
<S> <C>
Mortality Risk Charge.........................1.40%
Total Variable Account Charges...........1.40%
</TABLE>
(2) These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options, or
to the amount paid as premium for the long-term care/disability insurance
benefits offered by the contract. They are charged on a daily basis at the
annual rate noted above.
ADDITIONAL CONTRACT OPTION
For an additional charge, the One-Year Step Up Death Benefit option is available
to contract owners (upon approval by state insurance authorities). The One-Year
Step Up Death Benefit option must be elected at the time of application and will
replace the standard death benefit (see "Death Benefit Payment").
If the contract owner chooses the One-Year Step Up Death Benefit option, a
charge of 0.05% will be deducted. Charges for the One-Year Step Up Death Benefit
option are IN ADDITION TO the standard variable account charges of 1.40%. The
charge will only apply to allocations made to the variable account and is
charged on a daily basis at the annual rate noted below.
<TABLE>
<S> <C>
Optional One-Year Step Up
Death Benefit................................0.05%
Total Variable Account Charges
(including One Year Step Up
Death Benefit).............................1.45%
</TABLE>
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<PAGE> 9
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE
REIMBURSEMENT)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
- -------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 1.47% 0.00% 0.00% 1.47%
Century VP International
- -------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American 1.00% 0.00% 0.00% 1.00%
Century VP Value
- -------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.05% 0.00% 0.80%
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
- -------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Capital 0.75% 0.05% 0.00% 0.80%
Appreciation Portfolio
- -------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond 0.23% 0.47% 0.00% 0.70%
Fund II
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class, 0.49% 0.08% 0.10% 0.67%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.14% 0.10% 0.82%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.74% 0.13% 0.10% 0.97%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio: Service Class 0.59% 0.06% 0.10% 0.75%
- -------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: 0.59% 0.10% 0.10% 0.79%
Service Class
- -------------------------------------------------------------------------------------------------------------------
Morgan Stanley Dean Witter Universal Funds, Inc. - 0.27% 1.03% 0.00% 1.30%
Emerging Markets Debt Portfolio
- -------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.58% 0.22% 0.00% 0.80%
- -------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.44% 0.22% 0.00% 0.66%
- -------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.34% 0.21% 0.00% 0.55%
- -------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.57% 0.21% 0.00% 0.78%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.54% 0.36% 0.00% 0.90%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.45% 0.50% 0.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 0.59% 0.61% 0.00% 1.20%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.48% 0.47% 0.00% 0.95%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 0.54% 0.36% 0.00% 0.90%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 0.56% 0.64% 0.00% 1.20%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Small Cap Growth Fund 0.57% 0.73% 0.00% 1.30%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.47% 0.58% 0.00% 1.05%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 1.00% 0.25% 0.00% 1.25%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.20% 0.80% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.52% 0.48% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.85% 0.15% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 0.78% 0.06% 0.00% 0.84%
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.69% 0.02% 0.00% 0.71%
Aggressive Growth Fund/VA
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer 0.72% 0.03% 0.00% 0.75%
Capital Appreciation Fund/VA
- -------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Main 0.74% 0.05% 0.00% 0.79%
Street Growth & Income Fund/VA
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 10
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Van Eck Worldwide Insurance Trust - Worldwide 0.69% 0.61% 0.00% 1.30%
Emerging Markets Fund
- -------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard 1.00% 0.16% 0.00% 1.16%
Assets Fund
- -------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley 1.00% 0.08% 0.00% 1.08%
Real Estate Securities Portfolio
- -------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Growth & Income Portfolio 0.51% 0.49% 0.00% 1.00%
- -------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - International Equity Portfolio 1.00% 0.33% 0.00% 1.33%
- -------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Post-Venture Capital Portfolio 1.08% 0.32% 0.00% 1.40%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
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% 0.36% 0.00% 1.11%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 0.50% 0.00% 1.30%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global Equity Fund 1.00% 0.61% 0.00% 1.61%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.47% 0.00% 1.27%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector Bond Fund 0.75% 0.36% 0.00% 1.11%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Mid Cap Fund 1.05% 0.64% 0.00% 1.69%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select Advisers Small Cap Growth 1.10% 0.73% 0.00% 1.83%
Fund
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.58% 0.00% 1.48%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.80% 0.00% 1.70%
- --------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.48% 0.00% 1.38%
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.61% 0.00% 1.61%
Emerging Markets Fund
- --------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide 1.00% 0.20% 0.00% 1.20%
Hard Assets Fund
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 11
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under the annuity provisions of this contract assuming a $1,000
investment to the annuity portion of the contract, 5% annual return, and no
change in expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below.
The chart reflects expenses of both the variable account and the underlying
mutual funds. The chart reflects variable account charges of 1.45%, which is the
maximum variable account charges that could be assessed to a contract. For those
contracts that do not elect the One-Year Step Up Death Benefit option, the
expenses would be reduced. Deductions for premium taxes are not reflected but
may apply.
The summary of contract expenses and example are to help contract owners
understand the expenses associated with the annuity provisions of the contract.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable 95 142 191 283 23 70 119 256 * 70 119 256
Portfolios, Inc. - American
Century VP Income & Growth
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 103 166 231 362 31 94 159 335 * 94 159 335
Portfolios, Inc. - American
Century VP International
- --------------------------------------------------------------------------------------------------------------------------
American Century Variable 98 151 207 314 26 79 135 287 * 79 135 287
Portfolios, Inc. - American
Century VP Value
- --------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 96 145 197 293 24 73 125 266 * 73 125 266
Responsible Growth Fund, Inc.
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, 90 128 168 235 18 56 96 208 * 56 96 208
Inc.
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 96 145 197 293 24 73 125 266 * 73 125 266
Fund - Capital Appreciation
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - 95 142 191 283 23 70 119 256 * 70 119 256
Federated Quality Bond Fund
II
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income 94 141 190 280 22 69 118 253 * 69 118 253
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 95 143 194 288 23 71 122 261 * 71 122 261
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 96 145 198 295 24 73 126 268 * 73 126 268
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 97 150 205 311 25 78 133 284 * 78 133 284
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 95 143 194 288 23 71 122 261 * 71 122 261
Portfolio: Service Class
- --------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 96 144 196 292 24 72 124 265 * 72 124 265
Opportunities Portfolio:
Service Class
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Morgan Stanley Dean Witter 101 160 223 345 29 88 151 318 * 88 151 318
Universal Funds, Inc. -
Emerging Markets Debt
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation 96 145 197 293 4 73 125 266 * 73 125 266
Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 94 140 189 278 22 68 117 251 * 68 117 251
- --------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 93 137 183 267 21 95 111 240 * 65 111 240
- --------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 95 144 195 291 23 72 123 264 * 72 123 264
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 97 148 202 304 25 76 130 277 * 76 130 277
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity 97 149 204 309 25 77 132 282 * 77 132 282
Income Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 100 157 217 335 28 85 145 308 * 85 145 308
Equity Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income 97 149 204 309 25 77 132 282 * 77 130 282
Bond Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi-Sector 97 148 202 304 25 76 130 277 * 76 130 277
Bond Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select 100 157 217 335 28 85 145 308 * 85 145 308
Advisers Mid Cap Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Select 101 160 223 345 29 88 151 318 * 88 151 318
Advisers Small Cap Growth
Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap 98 153 210 319 26 81 138 292 * 81 138 292
Value Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small 100 159 220 340 28 87 148 313 * 87 148 313
Company Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 98 151 207 314 26 79 135 287 * 79 135 287
Growth Fund
- --------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic 98 151 207 314 26 79 135 287 * 79 135 287
Value Fund
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 98 151 207 314 26 79 135 287 * 79 135 287
Guardian Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 98 151 207 314 26 79 135 287 * 79 135 287
Mid-Cap Growth Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT- 96 146 199 298 24 74 127 271 * 74 127 271
Partners Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 95 142 192 284 23 70 120 257 * 70 120 257
Funds - Oppenheimer
Aggressive Growth Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 95 143 194 288 23 71 122 261 * 71 122 261
Funds - Oppenheimer Capital
Appreciation Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 96 144 196 292 24 72 124 265 * 72 124 265
Funds - Oppenheimer Main
Street Growth & Income
Fund/VA
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 13
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
- --------------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Van Eck Worldwide Insurance 101 160 223 345 29 88 151 318 * 88 151 318
Trust - Worldwide Emerging
Markets Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance 99 156 215 331 27 84 143 304 * 84 143 304
Trust - Worldwide Hard
Assets Fund
- --------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment 99 154 211 322 27 82 139 295 * 82 139 295
Trust - Morgan Stanley Real
Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 98 151 207 314 26 79 135 287 * 79 135 287
Growth & Income Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 101 161 224 348 29 89 152 321 * 89 152 321
International Equity
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 102 164 228 355 30 92 156 328 * 92 156 328
Post-Venture Capital
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
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<PAGE> 14
SYNOPSIS OF THE CONTRACTS
The contract issued with this prospectus consists of two components: variable
annuity benefits and long-term care/disability insurance benefits. The
information in this prospectus describes only the annuity provisions of the
contract unless otherwise stated.
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts are issued as individual, Non-Qualified Contracts.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
The minimum payment for the contract is $25,000. The minimum initial purchase
payment for the annuity portion of the contract is $20,000. The remaining $5,000
is paid as premium for the long-term care/disability insurance benefits provided
by the contract. Minimum subsequent purchase payments to the annuity portion of
the contract must be at least $1,000.
Subsequent purchase payments are allocated to the sub-accounts, the fixed
account, and/or the Guaranteed Term Options as instructed by the contract owner
(see "Operation of the Contract").
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 1.40% of the daily net assets of the variable account. Nationwide assesses
this charge in return for bearing certain mortality and expense risks.
An optional death benefit is available under the contract. If the contract owner
elects the One-Year Step Up Death Benefit, Nationwide will deduct 0.05% for the
optional benefit.
Nationwide does not deduct a sales charge from purchase payments upon allocation
into the annuity portion of the contract. However, Nationwide may deduct a CDSC
if any amount is withdrawn from the annuity portion of the contract. The CDSC
reimburses Nationwide for sales expenses incurred in the sale of the contracts.
The amount of the CDSC will not exceed 8% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
Nationwide will charge against the contract any premium taxes levied by any
governmental authority (see "Federal Tax Considerations" and "Premium Taxes").
FREE LOOK PERIOD
Contract owners may return the contract for any reason within 30 days of
receipt. Where permitted by state law, Nationwide will refund the contract value
and the premium paid for long-term care/disability insurance benefits (see
"Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for Nationwide are located in the Statement of Additional
Information. A current Statement of Additional Information may be obtained,
without charge, by contacting Nationwide's home office at the telephone number
listed on page 2 of this prospectus.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929 with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
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<PAGE> 15
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account -10 is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
separate account on March 31, 1999 pursuant to Ohio law. Although the separate
account is registered with the SEC as a unit investment trust pursuant to the
Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise the
management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not
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<PAGE> 16
anticipate any disadvantages to this. However, it is possible that a conflict
may arise between the interests of the variable account and one or more of the
other separate accounts in which these underlying mutual funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC and state insurance departments.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus must be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the Guaranteed Term Options are not subject to variable account
charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7) or ten (10) years.
Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10
year period since every guaranteed term will end on the final day of a calendar
quarter.
For the duration selected, Nationwide will declare a guaranteed interest rate.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken before the maturity date. If a distribution
occurs before the maturity date, the amount distributed will be subject to a
market value adjustment. A market value adjustment can increase or decrease the
amount distributed depending on current interest rate fluctuations. No market
value adjustment will be applied if Guaranteed Term Option allocations are held
to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment would reduce the value of the amount
distributed. When actual interest rates are lower than the guaranteed rate, the
value of the amount distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, Dollar
Cost Averaging, or systematic withdrawals.
Guaranteed Term Options may not be available in every state.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality risks. The general account is not subject to the same
laws as the variable account and the SEC has not reviewed material in this
prospectus relating to the fixed account.
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<PAGE> 17
However, information relating to the fixed account is subject to federal
securities laws relating to accuracy and completeness of prospectus disclosure.
Purchase payments will be allocated to the fixed account by election of the
contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying guaranteed interest rate(s) depending on the following
categories of fixed account allocations:
- - New Money Rate - The rate credited on the fixed account allocation when the
contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than the
rate when the contract was issued, since the New Money Rate is subject to
change based on market conditions.
- - Variable Account to Fixed Rate - Allocations transferred from any of the
underlying investment options in the variable account to the fixed account
may receive a different rate. The rate may be lower than the New Money
Rate. There may be limits on the amount and frequency of movements from the
variable account to the fixed account.
- - Renewal Rate - The rate available for maturing fixed account allocations
which are entering a new guarantee period. The contract owner will be
notified of this rate in a letter issued with the quarterly statements when
any of the money in the contract owner's fixed account matures. At that
time, the contract owner will have an opportunity to leave the money in the
fixed account and receive the Renewal Rate or the contract owner can move
the money to any of the other underlying mutual fund options.
- - Dollar Cost Averaging Rate - From time to time, Nationwide may offer a more
favorable rate for an initial purchase payment into a new contract when
used in conjunction with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during the 12 month anniversary in which the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any applicable charges including
CDSC.
STANDARD CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis, and is equal to an annual
rate of 1.40% of the daily net assets of the variable account.
The mortality risk charge compensates Nationwide for guaranteeing the annuity
rate of the contracts. This guarantee ensures that the annuity rates will not
change regardless of the death rates of annuity payees or the general
population.
The expense risk charge compensates Nationwide for guaranteeing that
administration charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is insufficient to cover actual
expenses, the loss is borne by Nationwide.
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<PAGE> 18
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
allocated into the contract. However, if any part of the annuity portion of the
contract is surrendered, Nationwide will deduct a CDSC. The CDSC will not exceed
8% of purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by the amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. For tax purposes, a surrender is usually treated
as a withdrawal of earnings first.
<TABLE>
<CAPTION>
The CDSC applies as follows:
- -------------------------------------------------------
Number of Years from Date CDSC
of Purchase Payment Percentage
- -------------------------------------------------------
<S> <C>
1 8%
- -------------------------------------------------------
2 8%
- -------------------------------------------------------
3 8%
- -------------------------------------------------------
4 8%
- -------------------------------------------------------
5 8%
- -------------------------------------------------------
6 7%
- -------------------------------------------------------
7 6%
- -------------------------------------------------------
8 5%
- -------------------------------------------------------
9 4%
- -------------------------------------------------------
10 3%
- -------------------------------------------------------
11 2%
- -------------------------------------------------------
12 1%
- -------------------------------------------------------
13+ 0%
- -------------------------------------------------------
</TABLE>
The CDSC is used to cover sales expenses, including commissions paid (maximum of
6% of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general assets, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes (see "Natural Persons as Contract Owners").
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the lesser
of:
1) 10% of purchase payments made to the annuity portion of the contract
(less any purchase payment previously withdrawn from the annuity
portion of the contract); or
2) 10% of the value of the annuity portion of the contract.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon annuitization;
(2) upon payment of a death benefit; or
(3) from any values which have been held under a contract for at least 13
years.
No CDSC applies to transfers among sub-accounts or between or among the
Guaranteed Term Options, the fixed account, or the variable account. Nationwide
may waive the CDSC if a contract described in this prospectus is exchanged for
another Nationwide contract (or a contract of any of its affiliated insurance
companies). A CDSC may apply to the contract received in the exchange.
The CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
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<PAGE> 19
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes. Premium
taxes may be deducted from death benefit proceeds.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract. Purchasers who name
someone other than themselves as the contract owner will have no rights under
the contract.
Contract owners may name a new contract owner at any time before the
annuitization date. Any change of contract owner automatically revokes any prior
contract owner designation. Changes in contract ownership may result in federal
income taxation and may be subject to state and federal gift taxes.
A change in contract ownership must be submitted in writing, signed by the
contract owner and the person designated as the new contract owner, and recorded
at Nationwide's home office. Nationwide may require a signature guarantee. Once
recorded, the change will be effective as of the date signed. However, the
change will not affect any payments made or actions taken by Nationwide before
it was recorded.
The contract owner may also request a change in the annuitant, joint owner,
beneficiary, or contingent beneficiary before the annuitization date. These
changes must be:
- on a Nationwide form;
- signed by the contract owner; and
- received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests. Any change of the
annuitant is subject to underwriting and approval by Nationwide. If the contract
owner is not a natural person and there is a change of the annuitant,
distributions will be made as if the contract owner died at the time of the
change.
On the annuitization date, the annuitant will become the contract owner.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract. Contract owners can
name a joint owner at any time before annuitization subject to the following
conditions:
- Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners.
- The exercise of any ownership right in the contract will generally
require a written request signed by both joint owners.
- An election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently by either joint owner.
- Nationwide will not be liable for any loss, liability, cost, or
expense for acting in accordance with the instructions of either joint
owner.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, unless
Nationwide approves a request for an annuitant of greater age. The annuitant may
be changed before the annuitization date subject to underwriting and approval by
Nationwide.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiar(ies) is the person(s) who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. Multiple beneficiaries will
share the death benefit equally, unless otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's
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<PAGE> 20
lifetime by submitting a written request to Nationwide. Once recorded, the
change will be effective as of the date it was signed, whether or not the
annuitant was living at the time it was recorded. The change will not affect any
action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
The minimum payment for the contract is $25,000. The minimum initial purchase
payment for the annuity portion of the contract is $20,000. The remaining $5,000
is paid as premium for the long-term care/disability insurance benefits provided
by the contract. Minimum subsequent purchase payments to the annuity portion of
the contract must be at least $1,000.
Purchase payments allocated to a sub-account on the application are allocated to
the NSAT Money Market Fund during the period that the contract owner may cancel
the contract (the underwriting and free-look periods), unless a state requires
purchase payments to be allocated to the fixed account. At the expiration of
this period, the purchase payments are allocated to sub-accounts to purchase
shares of the underlying mutual funds specified by the contract owner at net
asset value for the respective sub-accounts.
Subsequent purchase payments are not permitted for contracts issued in the State
of Oregon and may not be permitted in other states under certain circumstances.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- - 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 purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist. If Nationwide is closed on days when the New York Stock
Exchange is open, contract value may be affected since the contract owner would
not have access to their account.
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<PAGE> 21
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts, the fixed account and/or
Guaranteed Term Options as instructed by the contract owner. Shares of the
underlying mutual funds allocated to the sub-accounts are purchased at net asset
value, then converted into accumulation units. Contract owners can change
allocations or make exchanges among the sub-accounts, the fixed account or
Guaranteed Term Options. However, no change may be made that would result in an
amount less than 1% of the purchase payments being allocated to any sub-account.
Certain transactions may be subject to conditions imposed by the underlying
mutual funds, as well as those set forth in the contract.
DETERMINING THE VALUE OF THE ANNUITY PORTION OF THE CONTRACT
The value of the annuity portion of the contract is the sum of:
1) the value of amounts allocated to the sub-accounts of the variable account;
2) amounts allocated to the fixed account; and
3) amounts allocated to a Guaranteed Term Option.
If part or all of the value of the annuity portion of the contract is
surrendered, or charges are assessed against the value of the annuity portion of
the contract, Nationwide will deduct a proportionate amount from each
sub-account, the fixed account and any Guaranteed Term Option based on current
cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
(1) the net asset value of the underlying mutual fund as of the end
of the current valuation period; and
(2) the per share amount of any dividend or income distributions made
by the underlying mutual fund (if the ex-dividend date occurs
during the current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period.
(c) is a factor representing the daily variable account charges, which may
include charges for the One-Year Step Up Death Benefit option if
chosen by the contract owner. The factor is equal to an annual rate of
1.40% (1.45% if the One-Year Step Up Death Benefit option is chosen)
of the daily net assets of the variable account.
Based on the change in the net investment factor, the value of an accumulation
unit may increase or decrease. Changes in the net investment factor may not be
directly proportional to changes in the net asset value of the underlying mutual
fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase
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or decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
2) adding any interest earned on the amounts allocated.
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
1) adding all amounts allocated to any Guaranteed Term Option, minus
amounts previously transferred or withdrawn (which may be subject to a
market value adjustment);
2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option; and
3) subtracting charges deducted in accordance with the annuity portion of
the contract.
TRANSFERS
Transfers from the Fixed Account to the Variable Account or a Guaranteed Term
Option
Fixed account allocations may be transferred to the variable account or to a
Guaranteed Term Option only upon reaching the end of an interest rate guarantee
period. Normally, Nationwide will permit 100% of such fixed account allocations
to be transferred to the variable account or to a Guaranteed Term Option;
however Nationwide may, under certain economic conditions and at its discretion,
limit the maximum transferable amount. Under no circumstances will the maximum
transferable amount be less than 10% of the fixed account allocation reaching
the end of an interest rate guarantee period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an interest
rate guarantee period.
Contract owners who use Dollar Cost Averaging may transfer from the fixed
account to the variable account (but not to Guaranteed Term Options) under the
terms of that program (see "Dollar Cost Averaging").
Transfers to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account. Except as noted below, under no
circumstances will the transfer limit be less than 10% of the current value of
the variable account, less any transfers made in the 12 months preceding the
date the transfer is requested, but not including transfers made prior to the
imposition of the transfer limit. However, where permitted by state law,
Nationwide reserves the right to refuse transfers or purchase payments to the
fixed account (whether from the variable account or a Guaranteed Term Option)
when the fixed account value is greater than or equal to 30% of the value of the
annuity portion of the contract, at the time the purchase payment is made or the
transfer is requested.
Transfers from a Guaranteed Term Option
Transfers from a Guaranteed Term Option prior to maturity are subject to a
market value adjustment.
Transfer Requests
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine and will not be liable for
following telephone instructions that it reasonably determined to be genuine.
Nationwide may withdraw the telephone exchange privilege upon 30 days written
notice to contract owners.
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
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Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 45 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the variable account or to the Guaranteed Term Options. Nationwide will
determine the amount that may be transferred and will declare this amount at the
end of the guarantee period. This amount will not be less than 10% of the amount
in the fixed account that is maturing.
For new purchase payments allocated to the fixed account, or transfers to the
fixed account from the variable account or to a Guaranteed Term Option, this
period begins on the date of deposit or transfer and ends on the one year
anniversary of the deposit or transfer. The guaranteed interest rate period may
last for up to 3 months beyond the 1 year anniversary because guaranteed terms
end on the last day of a calendar quarter.
The interest rate guarantee period does not in any way refer to interest rate
crediting practices connected with Guaranteed Term Options.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer and exchange rights
of contract owners who use market timing firms (or other third parties) to
transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
- - submitted by any agent acting under a power of attorney on behalf of more
than one contract owner; or
- - submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing firms
(or other third parties) on behalf of more than one contract owner at the
same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners may return the contract to Nationwide's home office for any
reason within thirty days of receipt. Where permitted by state law, Nationwide
will refund the contract value and the premium for the long term care benefits
under the contract without deduction for any sales charges or administration
fees as of the date of cancellation.
State and/or federal law may provide additional free look privileges.
SURRENDER (REDEMPTION)
Contract owners may surrender some or all of the contract value in the annuity
portion of the contract before the earlier of the annuitization date or the
annuitant's death. Surrender
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requests must be in writing and Nationwide may require additional information.
When taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
PARTIAL SURRENDERS (PARTIAL REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account and Guaranteed Term Options. The amount withdrawn from
each investment option will be in proportion to the value in each option at the
time of the surrender request.
A CDSC may apply. The contract owner may take the CDSC from either:
a) the amount requested; or
b) the value of the annuity portion of the contract remaining after the
contract owner has received the amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the value of the annuity portion of the contract remaining
after the contract owner has received the amount requested.
FULL SURRENDERS (FULL REDEMPTIONS)
The contract value in the annuity portion of the contract upon full surrender
may be more or less than the total of all purchase payments made to the
contract. The value in the annuity portion of the contract will reflect
variable account charges, underlying mutual fund charges and the investment
performance of the underlying mutual funds. A CDSC may apply.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent.
A contract owner may assign some or all rights under the contract. An assignment
must occur before annuitization while the annuitant is alive. Once proper notice
of assignment is recorded by Nationwide's home office, the assignment will
become effective as of the date the written request was signed.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned under the annuity provisions of the contract will be
treated as distributions and will be included in gross income to the extent that
the cash value exceeds the investment in the annuity portion of the contract for
the taxable year in which it was pledged or assigned. Amounts assigned may be
subject to a tax penalty equal to 10% of the amount included in gross income.
Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account or the Guaranteed Term Options.
Requests for asset rebalancing must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized
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holiday, or any other day when the New York Stock Exchange is closed, asset
rebalancing will occur on the next business day.
Contract owners should consult a financial adviser to discuss the use of asset
rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from the fixed account and/or certain sub-accounts into other
sub-accounts. Nationwide does not guarantee that this program will
result in profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account and the following underlying mutual funds: Federated
Insurance Series - Federated Quality Bond Fund II, Fidelity VIP High Income
Portfolio, NSAT Government Bond Fund, NSAT Nationwide High Income Bond Fund, and
NSAT Money Market Fund to any other underlying mutual fund. The minimum monthly
transfer is $100. Dollar Cost Averaging transfers may not be directed to
Guaranteed Term Options.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal or less than to 1/30th of the
fixed account value at the time the program is requested. A Dollar Cost
Averaging program which transfers amounts from the fixed account to the variable
account is not the same as an Enhanced Rate Dollar Cost Averaging program.
Contract owners that wish to utilize Dollar Cost Averaging from the fixed
account should first inquire whether any Enhanced Rate Dollar Cost Averaging
programs are available.
Enhanced Rate Dollar Cost Averaging
Nationwide may, from time to time, offer Enhanced Rate Dollar Cost Averaging
programs. Dollar Cost Averaging transfers for this program may only be made from
the fixed account. Such Enhanced Rate Dollar Cost Averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
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Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greater of:
1) 10% of the total of all purchase payments made to the annuity portion
of the contract as of the withdrawal date;
2) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the value of the annuity portion of the contract based
on the contract owner's age, as shown in the table below:
<TABLE>
<CAPTION>
---------------------------------------------------
PERCENTAGE OF VALUE IN
CONTRACT THE ANNUITY PORTION
OWNER'S AGE OF THE CONTRACT
---------------------------------------------------
<S> <C>
Under age 59 1/2 5%
---------------------------------------------------
Age 59 1/2 through age 61 7%
---------------------------------------------------
Age 62 through age 64 8%
---------------------------------------------------
Age 65 through age 74 10%
---------------------------------------------------
Age 75 and over 13%
---------------------------------------------------
</TABLE>
The value of the annuity portion of the contract and contract owner's age are
determined as of the date the request for the withdrawal program is recorded by
Nationwide's home office. For joint owners, the older joint owner's age will be
used.
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Waiver of Contingent
Deferred Sales Charge" section. The total amount of CDSC for that contract year
will be determined in accordance with that provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the period
that a contract owner can cancel the contract (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
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FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payments
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the annuity contract value;
then
2) applying the amount of the value of the annuity portion of the
contract specified by the contract owner to the fixed payment annuity
table for the annuity payment option elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the annuity contract value;
then
2) applying the amount of the value of the annuity portion of the
contract specified by the contract owner to the variable payment
annuity table for the annuity payment option elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment
and to calculate the investment performance of an underlying mutual fund in
order to determine subsequent payments under a variable payment annuity. An
assumed investment rate is the percentage rate of return required to maintain
level variable annuity payments. Subsequent variable annuity payments may be
more or less than the first payment based on whether actual investment
performance of the underlying mutual funds is higher or lower than the assumed
investment rate of 3.5%.
Value of an Annuity Unit
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
Exchanges among Underlying Mutual Funds
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- the amount to be distributed is less than $5,000, in which case
Nationwide may
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make one lump sum payment of the contract value; or
- an annuity payment would be less than $50, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for the contracts will be made until an annuity payment option
has been elected.
DEATH BENEFITS
DEATH OF CONTRACT OWNER
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the annuitant becomes the contract owner.
Distributions under the contracts will be made pursuant to the "Required
Distributions" provision.
DEATH OF ANNUITANT
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary.
If no beneficiaries survive the annuitant, the contingent beneficiary(ies)
receives the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant"
provision.
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A joint owner will receive a death benefit if a contract owner/annuitant dies
before the annuitization date.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
HOW THE DEATH BENEFIT IS DETERMINED
The death benefit value is determined as of the date Nationwide receives:
1) proper proof of the annuitant's death;
2) an election specifying the distribution method; and
3) any state required form(s).
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
DEATH BENEFIT PAYMENT
Contract owners may select one of two annuity death benefit options available
under the contract at the time of application (not all death benefit options are
available in all states). If no selection is made at the time of application,
the death benefit will be the standard death benefit.
Standard Death Benefit
If the annuitant dies at any time prior to the annuitization date, the dollar
amount of the death benefit will be the greater of:
(1) the contract value; or
(2) the sum of all purchase payments made to the contract, less an
adjustment for amounts surrendered.
The adjustment for amounts surrendered will reduce item (2) above in the same
proportion that the contract value was reduced on the date of the partial
surrender.
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
REQUIRED DISTRIBUTIONS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
1) If any contract owner dies on or after the annuitization date and before
the entire interest in the contract has been distributed, then the
remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
2) If any contract owner dies before the annuitization date, then the entire
interest in the contract (consisting of either the death benefit or the
contract value reduced by charges set forth elsewhere in the contract)
will be distributed within 5 years of the contract owner's death,
provided however:
a) any interest payable to or for the benefit of a natural person
(referred to
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herein as a "designated beneficiary"), may be distributed over the
life of the designated beneficiary or over a period not longer than
the life expectancy of the designated beneficiary. Payments must begin
within one year of the contract owner's death unless otherwise
permitted by federal income tax regulations;
b) if the designated beneficiary is the surviving spouse of the deceased
contract owner, the spouse can choose to become the contract owner
instead of receiving a death benefit. Any distributions required under
these distribution rules will be made upon that spouse's death.
In the event that the contract owner is NOT a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
a) the death of the annuitant will be treated as the death of a contract
owner;
b) any change of annuitant will be treated as the death of a contract owner;
and
c) in either case, the appropriate distribution will be made upon the death or
change, as the case may be.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Contract owners should consult a financial consultant, legal counsel or tax
adviser to discuss in detail the taxation and the use of the contracts.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Section 72 of the Internal Revenue Code governs federal income taxation of
annuities in general. That section sets forth different rules for: (1)
Individual Retirement Annuities, including SEP IRAs and Simple IRAs; (2) Roth
IRAs; (3) Tax Sheltered Annuities; and (4) Non-Qualified Contracts.
Non-Qualified contracts are discussed below.
Natural Persons as Contract Owners
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment is excludable from taxable income based on the ratio between the
contract owner's investment in the contract and the expected return on the
contract until the investment has been recovered. Thereafter the entire amount
is includible in income. The maximum amount excludable from income is the
investment in the contract. If the annuitant dies before the entire investment
in the contract has been excluded from income and no additional payments are due
after his or her death, then he or she may be entitled to a deduction for the
balance of the unrecovered investment in the contract on his or her final income
tax return.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, dividends, loans, or any portion of the contract
that is assigned or pledged; or for contracts issued after April 22, 1987, any
portion of the contract transferred by gift. For these purposes, a transfer by
gift may occur upon annuitization if the contract owner and the annuitant are
not the same individual.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during any 12-month period will be treated as one annuity contract.
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Additional limitations on the use of multiple contracts may be imposed by
Treasury Regulations.
Distributions before the annuitization date allocable to a portion of the
contract invested prior to August 14, 1982, are treated first as a recovery of
the investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on earnings from contributions made to the contract after
February 28, 1986. There are exceptions for immediate annuities and certain
contracts owned for the benefit of an individual. An immediate annuity, for
purposes of this discussion, is a single premium contract on which payments
begin within one year of purchase. If this contract is issued as the result of
an exchange described in Section 1035 of the Internal Revenue Code, for purposes
of determining whether the contract is an immediate annuity, it will generally
be considered to have been purchased on the purchase date of the contract given
up in the exchange.
Internal Revenue Code Section 72 also assesses a penalty tax if a distribution
is made before the contract owner reaches age 59 1/2. The amount of the penalty
is 10% of the portion of any distribution that is includible in gross income.
The penalty tax does not apply if the distribution:
1) is the result of a contract owner's death;
2) is the result of a contract owner's disability;
3) is one of a series of substantially equal periodic payments made over
the life or life expectancy of the contract owner (or the joint lives
or joint life expectancies of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner);
4) is for the purchase of an immediate annuity; or
5) is allocable to an investment in the contract before August 14, 1982.
A contract owner that wants to begin taking distributions to which the 10% tax
penalty does not apply should forward a written request to Nationwide. Upon
receipt of this written request, Nationwide will inform the contract owner of
Nationwide's policies and procedures, as well as contract limitations. An
election to begin taking these withdrawals will be irrevocable and may not be
amended or changed.
In order to qualify as an annuity contract under Section 72 of the Internal
Revenue Code, the contract must provide for distribution of the entire contract
upon a contract owner's death. These rules are described in "Required
Distributions."
The Internal Revenue Code requires that any election to receive an annuity
instead of a lump sum payment be made within 60 days after the lump sum becomes
payable (generally, within 60 days of the death of a contract owner or the
annuitant). As long as the election is made within the 60 day period, each
distribution will be taxable when it is paid. Upon the end of this 60 day
period, if no election has been made, the entire amount of the lump sum will be
subject to immediate tax, even if the payee decides at a later date to take the
distribution as an annuity.
Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
(or, pursuant to Section 72(u) of the Internal Revenue Code, deemed to be owned)
by individuals. Different rules apply if the contract owner is not a natural
person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities ("non-natural persons") are not treated as annuity
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contracts under the Internal Revenue Code. Specifically, they are not treated as
annuity contracts for purposes of Section 72. Therefore, income earned under a
Non-Qualified Contract that is owned by a non-natural person is taxed as
ordinary income during the taxable year that it is earned. Taxation is not
deferred, even if the income is not distributed out of the contract to the
contract owner.
This non-natural person rule does not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent for an individual is
treated as owned by the individual. This would put the contract back under
Section 72, allowing tax deferral. However, this exception does not apply when
the non-natural person is an employer that holds the contract under a
non-qualified deferred compensation arrangement for one or more employees.
The non-natural person rule also does not apply to contracts that are:
a) acquired by the estate of a decedent by reason of the death of the
decedent;
b) issued in connection with certain qualified retirement plans and
individual retirement plans;
c) used in connection with certain structured settlements;
d) purchased by an employer upon the termination of certain qualified
retirement plans; or
e) an immediate annuity.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. Contract owners may not waive withholding if the
distribution is subject to mandatory back-up withholding (if no mandatory
taxpayer identification number is given or if the Internal Revenue Service
notifies Nationwide that mandatory back-up withholding is required), or if it is
an eligible rollover distribution. Mandatory back-up withholding rates are 31%
of income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
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- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may be subject to
estate taxes, even if all or a portion of the value is also subject to federal
income taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at
his or her death; or
- who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
PUERTO RICO
Under the Puerto Rico tax code, distributions from a Non-Qualified Contract
before annuitization are treated as nontaxable return of principal until the
principal is fully recovered. Thereafter all distributions are fully taxable.
Distributions after annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
annuitization is equal to the amount of the distribution in excess of 3% of the
total purchase payments paid, until an amount equal to the total purchase
payments paid has been excluded. Thereafter, the entire distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
distributions of income. A personal adviser should be consulted in these
situations.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless:
- the failure to diversify was accidental;
- the failure is corrected; and
- a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
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TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
adviser.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., Dollar Cost Averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
- 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.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. The shareholder services
system that supports mutual fund products was fully deployed during the first
quarter 1999. Conversions of existing traditional life policies to the new
compliant system will continue through second quarter 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide's facilities in Columbus, Ohio have been inventoried, assessed, and
tested as being Year 2000 compliant. Systems supporting Nationwide's
infrastructure such as telecommunications, voice and networks were renovated and
will be brought into compliance before the end of the second quarter 1999.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners utilizing electronic interfaces
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with Nationwide and processes have been put in place to allow Nationwide to
accept data regardless of the format.
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 Nationwide's variable annuity and life
products and wholesale producers to determine when they will be Year 2000
compliant. The results are currently being gathered and analyzed.
In addition to the contingency plans developed for electronic interfaces between
Nationwide and its business partners, contingency plans were also developed for
wholesale producers who may not become compliant before the end of 1999.
Additional contingency plans will be developed for mutual fund organizations
during the second quarter 1999. Nationwide has identified external risk
scenarios, prioritized those risks and is now in the process of developing
contingency plans to minimize the impact to Nationwide, customers and producers.
Contingency plan efforts are expected to be completed by the end of the third
quarter 1999.
Operating expenses in 1998 and 1997 include approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Nationwide anticipates spending less than $5 million on Year 2000
activities in 1999, and spent $2.4 million during first quarter 1999. These
expenses have no affect on the assets of the variable account and are not
charged through to contract owners.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction in operating expenses. Rather,
personnel and resources currently allocated to Year 2000 issues will be assigned
to other technology-related projects.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
The general distributor, NAS 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.
In February 1997, Nationwide was named as a defendant in a lawsuit filed in New
York state court related to the sale of whole life policies on a "vanishing
premium" basis (John H. Snyder v. Nationwide Life Insurance Company). In April
1998, Nationwide was named as a defendant in a lawsuit filed in Ohio state court
similar to the Snyder case (David and Joan Mishler v. Nationwide Life Insurance
Company). In August 1998, Nationwide Mutual Insurance Company and Nationwide and
the plaintiffs executed a stipulation of settlement and submitted it to the New
York state court for approval. On August 20, 1998, the court in the Snyder case
signed an order preliminarily approving a class for settlement purposes (which
would include the Mishler case) and scheduled a fairness hearing for December
17, 1998. At the hearing, the court reviewed the fairness and reasonableness of
the proposed settlement and issued a final order and judgment. The approved
settlement provides for dismissal of both the Snyder and Mishler cases, bars
class members from pursuing litigation against Nationwide Mutual Insurance
Company and its affiliates, including Nationwide and its subsidiaries, relating
to the allegations in the Snyder case, and provides class members with a
potential value of approximately $100 million in policy adjustments, discounted
premiums and discounted products.
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In November 1997, two plaintiffs, one who was the owner of a variable life
insurance policy and the other who was the owner of a variable annuity contract,
commenced a lawsuit in a federal court in Texas against Nationwide and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs seek to
represent a class of variable life insurance policy owners and variable annuity
contract owners whom they claim were allegedly misled when purchasing these
variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the district court denied, in part, and granted, in part, Nationwide and
American Century's motions to dismiss the complaint. The remaining claims
against Nationwide allege securities fraud, common law fraud, civil conspiracy
and breach of contract. On December 2, 1998, the district court issued an order
denying plaintiffs' motion for class certification. On December 10, 1998, the
district court stayed the lawsuit pending plaintiffs'petition to the federal
appeals court for interlocutory review of the order denying class certification.
On December 14, 1998, plaintiffs filed their petition for interlocutory review.
On March 26, 1999, the appeals court denied plaintiff's petition for
interlocutory review of the order. On April 28, 1999, the court denied
plaintiff's motion for reconsideration of the denial of the interlocutory
review. Nationwide intends to vigorously defend the case.
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 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.
The general distributor, NAS, is not engaged in any litigation of any material
nature.
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- - precious metals;
- - real estate;
- - stocks and bonds;
- - closed-end funds;
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- - bank money market deposit accounts and passbook savings;
- - CDs; and
- - the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- - S&P 500;
- - Shearson/Lehman Intermediate Government/Corporate Bond Index;
- - Shearson/Lehman Long-Term Government/Corporate Bond Index;
- - Donoghue Money Fund Average;
- - U.S. Treasury Note Index;
- - Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
- - Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- - Lipper Analytical Services, Inc.;
- - CDA/Wiesenberger;
- - Morningstar;
- - Donoghue's;
- - magazines such as:
+ Money;
+ Forbes;
+ Kiplinger's Personal Finance Magazine;
+ Financial World;
+ Consumer Reports;
+ Business Week;
+ Time;
+ Newsweek;
+ National Underwriter;
+ News and World Report;
- - LIMRA;
- - Value;
- - Best's Agent Guide;
- - Western Annuity Guide;
- - Comparative Annuity Reports;
- - Wall Street Journal;
- - Barron's;
- - Investor's Daily;
- - Standard & Poor's Outlook; and
- - Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized average annual total return
("standardized return") calculated in a manner prescribed by the SEC, and
non-standardized total return ("non-standardized return").
Standardized return shows the percentage rate of return of a hypothetical
initial investment of $1,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been available
in the variable account if it has not been available for one of the prescribed
periods). This calculation reflects the deduction of CDSC and all charges that
could be assessed to a contract if the optional One-Year Step Up Death Benefit
is chosen (1.45%). Standardized return does
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not reflect the deduction of state premium taxes, which may be imposed by
certain states.
Non-standardized return is calculated similarly to standardized return except
non-standardized return assumes an initial investment of $25,000, with base
contract variable account charges of 1.40% and does NOT reflect CDSC. An assumed
initial investment of $25,000 is used because that amount more accurately
reflects the average contract size.
Both methods of calculation reflect total return for the most recent one, five
and ten year periods (or for a period covering the time the underlying mutual
fund has been in existence). For those underlying mutual funds which have not
been available for one of the prescribed periods, the nonstandardized total
return illustrations will show the investment performance the underlying mutual
funds would have achieved had they been available in the variable account for
one of the periods.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1998.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History..............................................1
Services.....................................................................1
Purchase of Securities Being Offered.........................................2
Underwriters.................................................................2
Calculations of Performance..................................................2
Annuity Payments.............................................................3
Financial Statements.........................................................4
</TABLE>
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN 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
that offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of
the S&P 500. Such a management technique known as "portfolio optimization"
may cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of
selection and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is
the primary intent of the manager to diversify investments across a broad
range of foreign issuers. Although the primary investment of the Fund will
be common stocks (defined to include depository receipts for common stock
and other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to
35% of its assets in such other securities. There can be no assurance that
the Fund will achieve its objectives.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are
believed by management to be undervalued at the time of purchase. Under
normal market conditions, the Fund expects to invest at least 80% of the
value of its total asset in equity securities, including common and
preferred stock, convertible preferred stock and convertible debt
obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management
investment company incorporated under Maryland law on January 24, 1989 and
commenced operations on September 29, 1989. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation
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("Dreyfus") serves as the Fund's manager, while Mellon Equity Associates, an
affiliate of Dreyfus, serves as the Fund's index manager. Dreyfus is a wholly
owned subsidiary of Mellon Bank, N.A., which is a wholly owned subsidiary of
Mellon Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with Standard
& Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment company.
It was organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts on October 29, 1986 and commenced operations on
August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
sub-adviser and provides day-to-day management of the Portfolio.
CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This Portfolio
invests primarily in the common stocks of domestic and foreign issuers.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. Dreyfus serves as the Fund's investment adviser. NCM
Capital Management Group, Inc. serves as the Fund's sub-investment adviser and
provides day-to-day management of the Fund's portfolio.
Investment Objective: Capital growth through equity investment in companies
that, in the opinion of the Fund's advisers, not only meet traditional
investment standards, but which also show evidence that they conduct their
business in a manner that contributes to the enhancement of the quality of
life in America.
Current income is secondary to the primary goal.
FEDERATED INSURANCE SERIES
Federated Insurance Series (the "Trust"), an Open-End Management Investment
Company, was established as a Massachusetts business trust, under a Declaration
of Trust dated September 15, 1993. The Trust offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies.
Federated Advisers serves as the investment adviser.
FEDERATED QUALITY BOND FUND II
Investment Objective: Current income by investing in investment grade fixed
income securities.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on
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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 consistent
with the preservation of capital and maintenance of liquidity.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
SUBADVISED NATIONWIDE FUNDS
NATIONWIDE BALANCED FUND
Subadviser: Salomon Brothers Asset Management, Inc.
Investment Objective: Primarily seeks above-average income compared to a
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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 has small cap companies.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in the equity securities of small cap companies. The balance
of the Fund's assets may be invested in equity securities of larger cap
companies.
NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: The Fund intends to pursue its investment objective
by investing, under normal market conditions, at least 75% of the Fund's
total assets in equity securities of companies whose equity market
capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index.
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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
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portfolios of securities. (For more information regarding "master/feeder fund"
structure, see "Special Information Regarding Organization, Capitalization, and
Other Matters" in the underlying mutual fund prospectus.) The investment
advisor is NB Management.
AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current income.
The Portfolio and its corresponding series seek to achieve these objectives
by investing in common stocks of long-established, high-quality companies.
NB Management uses a value-oriented investment approach in selecting
securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
AMT MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital appreciation by investing in equity
securities of medium-sized companies that NB Management believes have the
potential for long-term, above-average capital appreciation. Medium-sized
companies have market capitalizations form $300 million to $10 billion at
the time of investment. The Portfolio and its corresponding series may
invest up to 10% of its net assets, measured at the time of investment, in
corporate debt securities that are below investment grade or, if unrated,
deemed by NB Management to be of comparable quality. Securities that are
below investment grade, as well as 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.
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OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA (FORMERLY "OPPENHEIMER
GROWTH & INCOME FUND")
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities
and U.S. debt obligations, and cash and cash equivalents. From time to
time, the Fund may focus on small to medium capitalization issuers, the
securities of which may be subject to greater price volatility than those
of larger capitalized issuers.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust is an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on January 7, 1987. Shares of Van Eck Trust are offered only to
separate accounts of insurance companies to fund the benefits of variable life
insurance policies and variable annuity contracts. The investment advisor and
manager is Van Eck Associates Corporation.
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
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purpose of funding variable annuity and variable life contracts. Portfolios are
managed by Warburg Pincus Asset Management, Inc. ("Warburg").
GROWTH & INCOME PORTFOLIO
Investment Objective: Long-term growth of capital and income by investing
primarily in dividend-paying equity securities. Under normal market
conditions, the Portfolio will invest substantially all of its asset in
equity securities that Warburg considers to be relatively undervalued based
upon research and analysis, taking into account factors such as price/book
ratio, price/cash flow ratio, earnings growth, debt/capital ratio and
multiples of earnings of comparable securities. Although the Portfolio may
hold securities of any size, it currently expects to focus on companies
with market capitalizations of $1 billion or greater at the time of initial
purchase.
INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing primarily
in a broadly diversified portfolio of equity securities of companies,
wherever organized, that in the judgment of Warburg have their principal
business activities and interests outside the United States. The Portfolio
will ordinarily invest substantially all of its assets, but no less than
65% of its total assets, in common stocks, warrants and securities
convertible into or exchangeable for common stocks. The Portfolio intends
to invest principally in the securities of financially strong companies
with opportunities for growth within growing international economies and
markets through increased earning power and improved utilization or
recognition of assets.
POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily in
equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence or
the early stages of the development of a new product or service; or (b) as
part of a restructuring or recapitalization of the company. The Portfolio
may invest up to 10% of its assets in venture capital and other investment
funds.
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STATEMENT OF ADDITIONAL INFORMATION
_____________, 1999
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT -10
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated _________, 1999. The
prospectus may be obtained from Nationwide Life Insurance Company by writing One
Nationwide Plaza, 01-05-P1, Columbus, Ohio 43215, or calling 1-800-848-6331, TDD
1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History..............................................1
Services.....................................................................1
Purchase of Securities Being Offered.........................................2
Underwriters.................................................................2
Calculations of Performance..................................................2
Annuity Payments.............................................................3
Financial Statements.........................................................4
</TABLE>
GENERAL INFORMATION AND HISTORY
The Nationwide Variable Account -10 is a separate investment account of
Nationwide Life Insurance Company ("Nationwide"). All of Nationwide's common
stock is owned by Nationwide Financial Services, Inc. ("NFS"), a holding
company. NFS has two classes of common stock outstanding with different voting
rights enabling Nationwide Corporation (the holder of all of the outstanding
Class B Common Stock) to control NFS. Nationwide Corporation is a holding
company, as well. All of its common stock is held by Nationwide Mutual Insurance
Company (95.24%) and Nationwide Mutual Fire Insurance Company (4.76%), the
ultimate controlling persons of Nationwide Insurance Enterprise. The Nationwide
Insurance Enterprise is one of America's largest insurance and financial
services family of companies, with combined assets of over $98.28 billion as of
December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each contract owner and records
with respect to the contract value.
The custodian of the assets of the variable account is Nationwide. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide, or affiliates of Nationwide, may have
entered into agreements with either the investment adviser or distributor for
the underlying mutual funds. The agreements relate to administrative services
furnished by Nationwide or an affiliate of Nationwide and provide for an annual
fee based on the average aggregate net assets of the variable account (and other
separate accounts of Nationwide or life insurance company subsidiaries of
Nationwide) invested in particular underlying mutual funds. These fees in no way
affect the net asset value of the underlying mutual funds or fees paid by the
contract owner.
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The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215, a
wholly owned subsidiary of Nationwide. During the fiscal years ended December
31, 1998, 1997 and 1996, no underwriting commissions were paid by Nationwide to
NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1998, the
NSAT Money Market Fund's seven-day current unit value yield was 3.77%. The NSAT
Money Market Fund's effective yield is computed similarly, but includes the
effect of assumed compounding on an annualized basis of the current unit value
yield quotations of the NSAT Money Market Fund. At December 31, 1998 the NSAT
Money Market Fund's seven-day effective yield was 3.84%.
The NSAT Money Market Fund's yield and effective yield will fluctuate daily.
Actual yields will depend on factors such as the type of instruments in the
fund's portfolio, portfolio quality and average maturity, changes in interest
rates, and the fund's expenses. Although the NSAT Money Market Fund determines
its yield on the basis of a seven day period, it may use a different time period
on occasion. The yield quotes may reflect the expense limitation described
"Investment Manager and Other Services" in the NSAT Money Market Fund's
Statement of Additional Information. There is no assurance that the yields
quoted on any given occasion will remain in effect for any period of time and
there is no guarantee that the net asset values will remain constant. It should
be noted that a contract owner's investment in the NSAT Money Market Fund is not
guaranteed or insured. Yields of other money market funds may not be comparable
if a different base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual total return is found by taking
a hypothetical $1,000 investment in each of the sub-accounts' units on the first
day of the period at the offering price, which is the accumulation unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of CDSC and all charges that could be
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assessed to a contract if the optional One-Year Step Up Death Benefit is chosen
(1.45%), except for premium taxes, which may be imposed by certain states.
Nonstandardized total return may also be advertised, and is calculated in a
manner similar to standardized average annual total return except the
nonstandardized total return is based on a hypothetical initial investment of
$25,000, with based contract variable account charges of 1.40% and does NOT
reflect CDSC. An assumed initial investment of $25,000 will be used because that
figure more closely approximates the size of a typical contract than does the
$1,000 figure used in calculating the standardized average annual total return
quotations.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the underlying mutual fund has been available in the variable account if
the underlying mutual fund has not been available for one of the prescribed
periods. Nonstandardized average annual total return will based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the underlying mutual fund has been in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, is not a
guarantee of future performance. Factors affecting a sub-account's performance
include general market conditions, operating expenses and investment management.
A contract owner's account when redeemed may be more or less than the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
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<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
Years ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Description of Business
----------------------------------------
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11,
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 10 and 14. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products, including variable annuities, fixed annuities and life
insurance.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "Income from discontinued operations" in
the accompanying consolidated statements of income. All
significant intercompany balances and transactions have been
eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1998 or 1997.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life insurance
products, these deferred policy acquisition costs are
predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio
of actual annual premium revenue to the anticipated total premium
revenue. Such anticipated premium revenue was estimated using the
same assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
------------------
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
-----------
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ -- $ 313.7
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
--------- ------ ------ ---------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
--------- ------ ------ ---------
$12,800.7 $498.3 $(14.5) $13,284.5
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1998, 1997 and 1996.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(6) Fair Value of Financial Instruments
-----------------------------------
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $187.9 million and $220.2 million as of December 31,
1998 and 1997, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
----------------------------------------------------------------------
and Dividend Restrictions
-------------------------
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(10) Transactions With Affiliates
----------------------------
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $31.9 million and $20.5 million as of
December 31, 1998 and 1997, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1998 and
1997 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(13) Segment Information
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</TABLE>
-----------
(1) The Company's method of allocating net investment income results
in a charge (negative net investment income) to the Variable
Annuities segment which is recognized in the Corporate and Other
segment. The charge relates to non-invested assets which support
this segment on a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
(14) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 10 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
<PAGE> 53
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<S> <C>
(a) Financial Statements: PAGE
(1) Financial statements included in Prospectus. 52
(Part A):
Condensed Financial Information. N/A
in Part B:
Those financial statements required by 52
Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-10:
Independent Auditors' Report. N/A
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1998. N/A
Statements of Operations and Changes in
Contract Owners' Equity for the year ended
December 31, 1998 and for the period
November 3, 1997 (commencement of
operations) through December 31, 1997. N/A
Notes to Financial Statements. N/A
Nationwide Life Insurance Company and subsidiaries:
Independent Auditors' Report. 52
Consolidated Balance Sheets as of December
31, 1998 and 1997. 53
Consolidated Statements of Income for the
years ended December 31, 1998, 1997 and
1996. 54
Consolidated Statements of Shareholder's
Equity for the years ended December 31,
1998, 1997 and 1996. 55
Consolidated Statements of Cash Flows for
the years ended December 31, 1998, 1997
and 1996. 56
Notes to Consolidated Financial Statements. 57
</TABLE>
79 of 101
<PAGE> 54
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant -
Attached hereto.
(2) Not Applicable
(3) Underwriting or Distribution of contracts between
the Registrant and Principal Underwriter -
Attached hereto.
(4) The form of the variable annuity contract -
Attached hereto.
(5) Variable Annuity Application - Attached hereto.
(6) Articles of Incorporation of Depositor -
Attached hereto.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Attached hereto.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule - Filed
previously with initial registration statement
(333-28995) and is hereby incorporated by reference.
80 of 101
<PAGE> 55
<TABLE>
<CAPTION>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
81 of 101
<PAGE> 56
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1733A Westwood Avenue
Alliance, OH 44601
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
Richard D. Headley Senior Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Donna A James Senior Vice President - Human
One Nationwide Plaza Resources
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
</TABLE>
82 of 101
<PAGE> 57
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Douglas C. Robinette Senior Vice President-
One Nationwide Plaza Marketing and Product
Columbus, OH 43215 Management Nationwide
Financial Services
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Vice President - Enterprise
One Nationwide Plaza Controller
Columbus, OH 43215
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President - Product
Columbus, OH 43215 and Market Compliance
Mark Thresher Vice President - Finance and
One Nationwide Plaza Treasurer
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
83 of 101
<PAGE> 58
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The 401(k) Companies, Inc. Texas Holding Company
----------------------------------------------------------------------------------------------------------------------------
The 401(k) Company Texas Third-party administrator for 401(k)
plans
----------------------------------------------------------------------------------------------------------------------------
401(k) Investment Advisors, Inc. Texas Investment Advisor registered with the
SEC
----------------------------------------------------------------------------------------------------------------------------
401(k) Investments Services, Inc. Texas NASD registered Broker-Dealer
----------------------------------------------------------------------------------------------------------------------------
Affiliate Agency, Inc. Delaware Life Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
AID Finance Services, Inc. Iowa Holding Company
----------------------------------------------------------------------------------------------------------------------------
ALLIED General Agency Company Iowa Managing General Agent and Surplus
Lines Broker (P&C)
----------------------------------------------------------------------------------------------------------------------------
ALLIED Group, Inc. Iowa Holding Company
----------------------------------------------------------------------------------------------------------------------------
ALLIED Group Insurance Marketing Iowa Direct Marketer (P&C)
Company
----------------------------------------------------------------------------------------------------------------------------
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
----------------------------------------------------------------------------------------------------------------------------
ALLIED Group Mortgage Company Iowa Mortgage Lender
----------------------------------------------------------------------------------------------------------------------------
ALLIED Life Brokerage Agency, Inc. Iowa Insurance Broker
----------------------------------------------------------------------------------------------------------------------------
ALLIED Life Financial Corporation Iowa Holding Company
----------------------------------------------------------------------------------------------------------------------------
ALLIED Life Insurance Company Iowa Insurance Company
----------------------------------------------------------------------------------------------------------------------------
ALLIED Property and Casualty Iowa Underwrites General P&C Insurance
Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
----------------------------------------------------------------------------------------------------------------------------
AMCO Insurance Company Iowa Underwrites General P&C Insurance
----------------------------------------------------------------------------------------------------------------------------
American Marine Underwriters, Inc. Florida Underwriting Manager
----------------------------------------------------------------------------------------------------------------------------
Auto Direkt Insurance Company Germany Insurance Company
----------------------------------------------------------------------------------------------------------------------------
CalFarm Insurance Company California Stock Corporation
----------------------------------------------------------------------------------------------------------------------------
Caliber Funding Corporation Delaware Stock Corporation
----------------------------------------------------------------------------------------------------------------------------
Colonial County Mutual Insurance Texas Insurance Company
Company
----------------------------------------------------------------------------------------------------------------------------
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
----------------------------------------------------------------------------------------------------------------------------
Columbus Insurance Brokerage and Germany Insurance Broker
Service GmbH
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
84 of 101
<PAGE> 59
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Depositors Insurance Company Iowa Underwrites P&C insurance
----------------------------------------------------------------------------------------------------------------------------
*Employers Life Insurance Company Wisconsin Life Insurance Company
of Wausau
----------------------------------------------------------------------------------------------------------------------------
Excaliber Funding Corporation Delaware Limited purpose corporation
----------------------------------------------------------------------------------------------------------------------------
F&B, Inc. Iowa Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Alabama Insurance Agency
Agency of Alabama, Inc.
----------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio, Inc.
----------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Oklahoma Insurance Agency
Agency of Oklahoma, Inc.
----------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Texas Insurance Agency
Agency of Texas, Inc.
----------------------------------------------------------------------------------------------------------------------------
*Financial Horizons Investment Trust Massachusetts Investment Company
----------------------------------------------------------------------------------------------------------------------------
Financial Horizons Securities Oklahoma Broker-Dealer
Corporation
----------------------------------------------------------------------------------------------------------------------------
GatesMcDonald Health Plus, Inc. Ohio Managed Care Organization
----------------------------------------------------------------------------------------------------------------------------
Gates, McDonald & Company Ohio Cost Control
----------------------------------------------------------------------------------------------------------------------------
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
----------------------------------------------------------------------------------------------------------------------------
Gates, McDonald & Company of New New York Workers' compensation claims
York, Inc. administration
----------------------------------------------------------------------------------------------------------------------------
MedPro Solutions, Inc. Massachusetts Third-party administration services
for workers' compensation, automobile
injury and disability claims
----------------------------------------------------------------------------------------------------------------------------
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Irvin L. Schwartz and Associates, Ohio Insurance Agency
Inc.
----------------------------------------------------------------------------------------------------------------------------
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
----------------------------------------------------------------------------------------------------------------------------
Leben Direkt Insurance Company Germany Life Insurance Company
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
85 of 101
<PAGE> 60
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Midwest Printing Services, Inc. Iowa General Printing Services
----------------------------------------------------------------------------------------------------------------------------
Morley & Associates Oregon Insurance Broker
----------------------------------------------------------------------------------------------------------------------------
Morley Capital Management, Inc. Oregon Investment Adviser and stable value
money management
----------------------------------------------------------------------------------------------------------------------------
Morley Financial Services, Inc. Oregon Holding Company
----------------------------------------------------------------------------------------------------------------------------
Morley Research Associates, Ltd. Delaware Credit research consulting
----------------------------------------------------------------------------------------------------------------------------
**MRM Investments, Inc. Ohio Owns and operates a recreational ski
facility
----------------------------------------------------------------------------------------------------------------------------
**National Casualty Company Wisconsin Insurance Company
----------------------------------------------------------------------------------------------------------------------------
National Casualty Company of America, Great Britain Insurance Company
Ltd.
----------------------------------------------------------------------------------------------------------------------------
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
----------------------------------------------------------------------------------------------------------------------------
**National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Advisory Services, Inc. Ohio Investment Management and
Administrative Services
----------------------------------------------------------------------------------------------------------------------------
**Nationwide Agency, Inc. Ohio Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Asset Allocation Trust Massachusetts Investment Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Cash Management Company Ohio Investment Securities Agent
----------------------------------------------------------------------------------------------------------------------------
Nationwide Community Urban Ohio Special purpose real estate corporation
Redevelopment Corporation
----------------------------------------------------------------------------------------------------------------------------
Nationwide Corporation Ohio Holding Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
----------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services Bermuda Life Insurance Company
(Bermuda) Ltd.
----------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services Delaware Statutory Business Trust
Capital Trust
----------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services Delaware Statutory Business Trust
Capital Trust II
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
86 of 101
<PAGE> 61
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Financial Services, Inc. Delaware Holding Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide General Insurance Company Ohio Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Global Holdings, Inc. Ohio Holding Company for International
Operations
----------------------------------------------------------------------------------------------------------------------------
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
----------------------------------------------------------------------------------------------------------------------------
*Nationwide Indemnity Company Ohio Reinsurance Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Company of California Underwriter
America
----------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Company of Ohio Insurance Company
Florida
----------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
----------------------------------------------------------------------------------------------------------------------------
Nationwide Services Company, LCC Ohio Shared services functions
----------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
----------------------------------------------------------------------------------------------------------------------------
Nationwide International Underwriters California Underwriting Manager
----------------------------------------------------------------------------------------------------------------------------
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment
----------------------------------------------------------------------------------------------------------------------------
*Nationwide Investing Foundation II Massachusetts Common Law Trust
----------------------------------------------------------------------------------------------------------------------------
Nationwide Investment Services Oklahoma Registered Broker-Dealer in deferred
Corporation compensation market
----------------------------------------------------------------------------------------------------------------------------
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
----------------------------------------------------------------------------------------------------------------------------
**Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
----------------------------------------------------------------------------------------------------------------------------
**Nationwide Life Insurance Company Ohio Life Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Lloyds Texas Property Insurance
----------------------------------------------------------------------------------------------------------------------------
Nationwide Management Systems, Inc. Ohio Preferred provider organization,
products and related services
----------------------------------------------------------------------------------------------------------------------------
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Mutual Funds Ohio Investment Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
87 of 101
<PAGE> 62
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Nationwide Properties, Ltd. Ohio Develop, own and operate real estate
and real estate investments
----------------------------------------------------------------------------------------------------------------------------
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real estate
and real estate investments
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Alabama Market and administer deferred
Inc. of Alabama compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Arizona Market and administer deferred
Inc. of Arizona compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Arkansas Market and administer deferred
Inc. of Arkansas compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Montana Market and administer deferred
Inc. of Montana compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Nevada Market and administer deferred
Inc. of Nevada compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, New Mexico Market and administer deferred
Inc. of New Mexico compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Ohio Market variable annuity contracts to
Inc. of Ohio members of the National Education
Association in the state of Ohio
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Oklahoma Market variable annuity contracts to
Inc. of Oklahoma members of the National Education
Association in the state of Oklahoma
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, South Dakota Market and administer deferred
Inc. of South Dakota compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Texas Market and administer deferred
Inc. of Texas compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Wyoming Market variable annuity contracts to
Inc. of Wyoming members of the National Education
Association in the state of Wyoming
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
88 of 101
<PAGE> 63
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public employees
----------------------------------------------------------------------------------------------------------------------------
*Nationwide Separate Account Trust Massachusetts Investment Company
----------------------------------------------------------------------------------------------------------------------------
Nationwide Trust Company, FSB United States of America Federal Savings Bank
----------------------------------------------------------------------------------------------------------------------------
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
----------------------------------------------------------------------------------------------------------------------------
Neckura Insurance Company Germany Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Neckura Life Insurance Company Germany Life Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services
----------------------------------------------------------------------------------------------------------------------------
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services
----------------------------------------------------------------------------------------------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services
----------------------------------------------------------------------------------------------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing services
----------------------------------------------------------------------------------------------------------------------------
NFS Distributors, Inc. Delaware Holding Company
----------------------------------------------------------------------------------------------------------------------------
NWE, Inc. Ohio Special Investments
----------------------------------------------------------------------------------------------------------------------------
PanEuroLife Luxembourg Life Insurance
----------------------------------------------------------------------------------------------------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration
----------------------------------------------------------------------------------------------------------------------------
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
----------------------------------------------------------------------------------------------------------------------------
Premier Agency, Inc. Iowa Insurance Agency
----------------------------------------------------------------------------------------------------------------------------
Riverview Agency, Inc. Texas Stock Corporation
----------------------------------------------------------------------------------------------------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Scottsdale Insurance Company Ohio Insurance Company
----------------------------------------------------------------------------------------------------------------------------
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance
Company Company
----------------------------------------------------------------------------------------------------------------------------
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance
Group Group
----------------------------------------------------------------------------------------------------------------------------
Union Bond and Trust Company Oregon Oregon state bank with trust powers
----------------------------------------------------------------------------------------------------------------------------
Villanova Capital, Inc. Delaware Holding Company
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
89 of 101
<PAGE> 64
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Villanova Mutual Fund Capital Trust Delaware Business Trust
----------------------------------------------------------------------------------------------------------------------------
Villanova SA Capital Trust Delaware Business Trust
----------------------------------------------------------------------------------------------------------------------------
**Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
----------------------------------------------------------------------------------------------------------------------------
Western Heritage Insurance Company Arizona Excess and Surplus Lines Insurance
Company
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
90 of 101
<PAGE> 65
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
91 of 101
<PAGE> 66
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide VL Separate Account -D Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
92 of 101
<PAGE> 67
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE PROPERTY | | | NECKURA |
|| | INSURANCE COMPANY | | | AND CASUALTY | | | INSURANCE COMPANY |
|| |Guaranty Fund | | | INSURANCE COMPANY | | | |
|| |------------ | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
||==|Certificate |---| |---|------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WISCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |---- |---|------------ Shares | ---- |--|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares | | | Common Stock: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|Casualty-Ptd. $ 713,576 | | | | | | | |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |--------| |------------ Shares |----| |--|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
-------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 69
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- -----------------------------------------------------------------------|
|
- --------------- --------------------------------------------------
| |
- -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | Cost | | | Shares Cost |
| | ---- | | | ---- | | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $751,352,485|
| | | | | | | |Fire 649,510 24,007,936|
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | NATIONWIDE | | | INSURANCE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 70
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-------------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
----------------|------------ ----------------------------- ---------------||------------
| ||
- ----------------------------- | ----------------------------- ----------------------------- || ----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |--|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| INVESTORS, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ |..| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
- ----------------------------- | ----------------------------- || ----------------------------- ----------------------------
| ||
- ----------------------------- | ----------------------------- || -----------------------------
| NATIONWIDE | | | NATIONWIDE | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 71
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $751,352,485 |
|Fire 649,510 24,007,936 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 72
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 73
Item 27. NUMBER OF CONTRACT OWNERS
N/A
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by Nationwide of any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of Nationwide, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling Nationwide pursuant to the
foregoing provisions, Nationwide has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Variable Account, Nationwide Multi-Flex Variable Account,
Nationwide Variable Account-II, Nationwide Variable
Account-5, Nationwide Variable Account-6, 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, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VL Separate
Account-C, Nationwide VL Separate Account-D, Nationwide VLI
Separate Account-2, Nationwide VLI Separate Account-3,
Nationwide VLI Separate Account-4, and the Nationwide VLI
Separate Account-5, all of which are separate investment
accounts of Nationwide or its affiliates.
NAS also acts as principal underwriter for Nationwide Mutual
Funds, Nationwide Separate Account Trust, and Nationwide
Asset Allocation Trust, which are open-end management
investment companies.
95 of 101
<PAGE> 74
(b) NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman of the Board of Directors and 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 - Product and Market Compliance
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
</TABLE>
96 of 101
<PAGE> 75
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------------------
<S> <C>
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
(c)
- ----------------------------------------------------------------------------------------------------------------------
NAME OF PRINCIPAL NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION
UNDERWRITER DISCOUNTS AND REDEMPTION OR COMMISSIONS
COMMISSIONS ANNUITIZATION
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Advisory N/A N/A N/A N/A
Services, Inc.
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
97 of 101
<PAGE> 76
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration statement
as frequently as is necessary to ensure that the audited
financial statements in the registration statement are never
more than 16 months old for so long as payments under the
variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an applicant
can check to request a Statement of Additional Information, or
(2) a post card or similar written communication affixed to or
included in the prospectus that the applicant can remove to
send for a Statement of Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under this
form promptly upon written or oral request.
The Registrant represents that any of the contracts which are
issued pursuant to Section 403(b) of the Internal Revenue Code,
are issued by Nationwide through the Registrant in reliance upon,
and in compliance with, a no-action letter issued by the Staff of
the Securities and Exchange Commission to the American Council of
Life Insurance (publicly available November 28, 1988) permitting
withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11) of the Internal Revenue Code.
Nationwide represents that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by Nationwide.
98 of 101
<PAGE> 77
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
NATIONWIDE VARIABLE ACCOUNT - 10
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACT
PROSPECTUS
____________________, 1999
99 of 101
<PAGE> 78
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of the Nationwide Variable Account-10:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
Columbus, Ohio
June 28, 1999
100 of 101
<PAGE> 79
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT -10, has caused this
Registration Statement to be signed on its behalf in the City of Columbus, and
State of Ohio, on this 28th day of June, 1999.
NATIONWIDE VARIABLE ACCOUNT -10
------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
------------------------------------------
(Depositor)
By /s/ JOSEPH P. RATH
------------------------------------------
Joseph P. Rath
Vice President - Product and Market Compliance
As required by the Securities Act of 1933, this Registration Statement has been
signed by the following persons in the capacities indicated on the 28th day of
June, 1999.
SIGNATURE TITLE
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
101 of 101
<PAGE> 1
EXHIBIT NO. 1
BOARD OF DIRECTORS RESOLUTION OF THE DEPOSITOR
<PAGE> 2
Following are excerpts from the MINUTES OF A REGULAR MEETING OF THE BOARD OF
DIRECTORS OF NATIONWIDE LIFE INSURANCE COMPANY, held at the office of the
Company in Columbus, Ohio, on March 31, 1999.
The following resolution concerning the establishment of Nationwide Variable
Account-10 was presented for consideration:
RESOLVED, that the Company, pursuant to the provisions of the Ohio Revised Code
Section 3907.15, hereby establishes a separate account, designated Nationwide
Variable Account-10 ("Variable Account") for the following use and purposes, and
subject to such conditions as hereafter set forth:
RESOLVED FURTHER, that the Variable Account shall be established for the purpose
of providing for the issuance of variable annuity contracts ("Contracts"), which
provide that part or all of the annuity benefits and cash value will reflect the
investment experience of one or more designated underlying securities; and
RESOLVED FURTHER, that the fundamental investment policy of the Variable Account
shall be to invest or reinvest the assets of the Variable Account in securities
issued by investment companies registered under the Investment Company Act of
1940, as may be specified in the respective Contracts; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are, authorized and directed to take all action they deem necessary and
appropriate to: (a) to register the Variable Account as a unit investment trust
under the Investment Company Act of 1940, as amended; (b) register the Contracts
in such amounts as the officers of the Company shall from time to time deem
appropriate under the Securities Act of 1933 and to prepare and file all
amendments to such registration as they may deem necessary or desirable; and (c)
take all other action necessary to comply with: the Investment Company Act of
1940, including the filing of applications for such exemptions from the
Investment Company Act of 1940 as the officers of the Company shall deem
necessary or desirable; the Securities Exchange Act of 1934; the Securities Act
of 1933; and all
<PAGE> 3
other applicable state and federal laws in connection with offering said
Contracts for sale and the operation of the Variable Account; and
RESOLVED FURTHER, that the proper officers of the Company, as appointed by a
duly executed Power of Attorney, each of them with full power to act without the
others, hereby are severally authorized and empowered to execute and cause to be
filed with the U.S. Securities and Exchange Commission on behalf of the Variable
Account and by the Company as sponsor and depositor any required Registration
Statement and Notice thereof registering the Variable Account as an investment
company under the Investment Company Act of 1940; and one or more Registration
Statements under the Securities Act of 1933, registering the Contracts and any
and all amendments to the foregoing on behalf of and as attorneys for the
Variable Account and the Company and on behalf of and as attorneys for the
principal executive officer and/or the principal financial officer and/or the
principal accounting officer and/or any other officer of the Variable Account
and the Company; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are authorized on behalf of the Variable Account and on behalf of the Company to
take any and all action which they may deem necessary or advisable in order to
sell the Contracts and, if necessary, to register or qualify the Contracts for
offer or sale under the insurance and securities laws of any of the states of
the United States of America and in connection therewith to execute, deliver and
file all such applications, reports, covenants, resolutions and other papers and
instruments as may be required under such laws, and to take any and all further
action which said officers or counsel of the Company may deem necessary or
desirable in order to maintain such registration or qualification for as long as
said officers or counsel deem it to be in the best interests of the Variable
Account and the Company; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are, authorized in the names and on behalf of the Variable Account to execute
and file irrevocable written consents on the part of the Variable Account and of
the Company to be used in such states wherein such consents to service of
process may be requisite under
<PAGE> 4
the insurance or securities laws thereof in connection with said registration or
qualification of Contracts and appoint the appropriate state official, or such
other persons as may be allowed by said insurance or securities laws, agent of
the Variable Account and of the Company for the purpose of receiving and
accepting process; and
RESOLVED FURTHER, that the proper officers of the Company be, and they hereby
are, to establish procedures under which the Company will provide sales and
administrative functions with respect to the Contracts issued in connection
therewith, including, but not limited to procedures for providing any voting
rights required by the federal securities laws for owners of such Contracts with
respect to securities owned by the Variable Account, adding additional
underlying investment series to the Variable Account, and permitting conversion
or exchange of the Contract values or benefits among the various series.
A motion was made, seconded and carried that the resolution be adopted.
<PAGE> 1
EXHIBIT NO. 3
UNDERWRITING OR DISTRIBUTION OF CONTRACTS BETWEEN THE REGISTRANT AND
PRINCIPAL UNDERWRITER
<PAGE> 2
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this ________ day of May, 1997, between Nationwide
Life Insurance Company, Nationwide Life and Annuity Insurance Company
(collectively "Nationwide"), and Nationwide Advisory Services, Inc. ("NAS") and
restates and confirms all earlier agreements between the parties concerning
marketing coordination and administrative services.
Nationwide proposes to develop, issue and administer, and NAS proposes to
provide the exclusive national distribution services for variable annuity
contracts and variable life insurance policies (the "Products").
The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
1. APPOINTMENT OF PRODUCT ADMINISTRATION
Nationwide is hereby appointed Product Administrator for the Products.
2. DUTIES OF NATIONWIDE
Nationwide shall perform in a proper and timely manner, those functions
enumerated in the column marked "Nationwide" in the "Analysis of
Administrative Functions," attached hereto as EXHIBIT A, and
incorporated herein by reference.
3. DUTIES OF NAS
NAS shall perform in a proper and timely manner, those functions
enumerated in the column marked "NAS" in the Analysis of Administrative
Functions," attached hereto as EXHIBIT A, and incorporated herein by
reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
1. DISTRIBUTION OF PRODUCTS
The Products will be distributed through registered representatives of
NASD broker-dealer firms, appointed by Nationwide, who shall be duly
qualified and licensed as agents (the "Agents"), in accordance with
applicable state insurance authority.
2. NAS shall be the exclusive National Distributor of the Products.
<PAGE> 3
3. APPOINTMENT AND TERMINATION OF AGENTS
Appointment and termination of Agents shall be processed and executed by
Nationwide. NAS reserves the right to require Nationwide to consult with
it regarding licensing decisions.
4. ADVERTISING
NAS shall not print, publish or distribute any advertisement, circular
or document relating to the Products or relating to Nationwide unless
such advertisement, circular or document has been approved in writing by
Nationwide. Such approval shall not be unreasonably withheld, and shall
be given promptly, normally within three (3) business days. Neither
Nationwide nor any of its affiliates shall print, publish or distribute
any advertisement, circular or document relating to the Products or
relating to NAS unless such advertisement, circular or document has been
approved in writing by NAS. Such approval shall not be unreasonably
withheld, and shall be given promptly, normally within three (3)
business days. However, nothing herein shall prohibit any person from
advertising the Products on a generic basis.
5. MARKETING CONDUCT
The parties will jointly develop standards, practices and procedures
respecting the marketing of the Products. Such standards, practices and
procedures are intended to help Nationwide meet its obligations as an
issuer under the securities laws, to assure compliance with state
insurance laws, and to help NAS meet its obligations under the
securities laws of National Distributor. These standards, practices and
procedures are subject to continuing review and neither Nationwide nor
NAS shall object unreasonably to changes to such standards, practices
and procedures recommended by the other to comply with the intent of
this provision.
6. SALES MATERIAL AND OTHER DOCUMENTS
a. SALES MATERIAL
1) Nationwide shall develop and prepare all promotional material to
be used in the distribution of the Products, in consultation
with NAS.
2) Nationwide is responsible for the printing and the expense of
providing such promotional material.
3) Nationwide is responsible for approval of such promotional
material by state insurance regulators, where required.
4) NAS and Nationwide agree to abide by the Advertising and Sales
Promotion Material Guidelines, attached hereto as EXHIBIT B, and
incorporated herein by reference.
<PAGE> 4
b. PROSPECTUSES
1) Nationwide is responsible for the preparation and regulatory
clearance of any required registration statements and
prospectuses for the Products. NAS is responsible for the
preparation and regulatory clearance of any underlying mutual
fund registration statements and prospectuses.
2) Nationwide is responsible for the printing of Product
prospectuses in such quantities as the parties agree are
necessary to assure sufficient supplies.
3) Nationwide will bear the cost of providing the required supply
of mutual fund prospectuses.
4) Nationwide is responsible for supplying Agents with sufficient
quantities of Product prospectuses.
c. CONTRACTS, APPLICATIONS AND RELATED FORMS
1) Nationwide, in consultation with NAS, is responsible for the
design and printing of adequate supplies of Product
applications, contracts, related forms, and such service forms
as the parties agree are necessary.
2) Nationwide is responsible for supplying adequate quantities of
all such forms to the Agents.
7. APPOINTMENT OF AGENTS
a. NAS shall assist Nationwide in facilitating the appointment of
Agents by Nationwide.
b. Nationwide shall forward all appointment forms and applications to
the appropriate states and maintain all contacts with the states.
c. Nationwide shall maintain appointment files on Agents, and NAS shall
have access to such files as needed.
8. LICENSING AND APPOINTMENT GUIDE
Nationwide shall provide to NAS a Licensing and Appointment Guide (as
well as periodic updates thereto), setting forth the requirements for
licensing and appointment, in such quantities as NAS may reasonably
require.
<PAGE> 5
9. OTHER
a. PRODUCT TRAINING
Nationwide is responsible for any Product training for the Agents.
b. FIELD SALES MATERIAL
1) Nationwide, in consultation with NAS, is responsible for the
development, printing and distribution of non-public field sales
material to be used by Agents.
2) NAS shall have the right to review all field sales materials and
to require any modification mandated by regulatory requirements.
c. PRODUCTION REPORTS
Nationwide shall deliver to NAS the items listed in Production
Reports to be Provided, attached hereto as EXHIBIT C, and
incorporated herein by reference.
d. CUSTOMER SERVICE
Each party will notify the other of all material pertinent inquiries
and complaints it receives, from whatever source and to whomever
directed, and will consult with the other in responding to such
inquiries and complaints.
10. AUDITING
NAS shall maintain all records relating to the mutual funds or other
investment options in accordance with generally accepted accounting
procedures. Any such records shall be made available to Nationwide or
its accountants or auditors upon reasonable written request. Nationwide
shall provide NAS with any records, reports or other materials relative
to the distribution of the Products as may reasonably be required by NAS
or as may be required by any governmental agency having jurisdiction.
C. GENERAL PROVISIONS
1. WAIVER
The forbearance or neglect of either party to insist upon strict
compliance by the other with any of the provisions of this Agreement,
whether continuing or not, or to declare a forfeiture of termination
against the other, shall not be construed as a waiver of any rights or
privileges of the forbearing party in the event of a further default or
failure of performance.
<PAGE> 6
2. LIMITATIONS
Neither party shall have authority on behalf of the other to: make,
alter or discharge any contractual terms of the Products; waive any
forfeiture; extend the time of making any contributions to the products;
guarantee dividends; alter the forms which either may prescribe; nor
substitute other forms in place of those prescribed by the other.
3. BINDING EFFECT
This Agreement shall be binding on and shall inure to the benefit of the
parties to it and their respective successors and assigns, provided that
neither party shall assign or sub-contract this Agreement or any rights
or obligations hereunder without prior written consent of the other.
4. INDEMNIFICATION
Each party ("Indemnifying Party") hereby agrees to release, indemnify
and hold harmless the other party, its officers, directors, employers,
agents, servants, predecessors or successors from any claims or
liability arising out of the acts or omissions of the Indemnifying Party
not authorized by this Agreement, including the violation of any federal
or state law or regulation.
5. NOTICES
All notices, requests, demands and other communication under this
Agreement shall be in writing and shall be deemed to have been given on
the date of service if served personally on the party to whom notice is
to be given, or on the date of mailing if sent postage prepaid by First
Class Mail, Registered or Certified mail, by overnight mail, properly
addressed as follows:
TO NATIONWIDE:
Nationwide Life Insurance Company
Richard A Karas, Senior Vice President-Sales-Financial Services
One Nationwide Plaza
Columbus, Ohio 43216
TO NAS:
Nationwide Advisory Services, Inc.
Joseph P. Rath, Vice President-Compliance
One Nationwide Plaza
Columbus, Ohio 43216
<PAGE> 7
6. GOVERNING LAW
This Agreement shall be construed in accordance with and governed by the
laws of the State of Ohio.
7. ARBITRATION
The parties agree that misunderstandings or disputes arising from this
Agreement shall be decided by arbitration, conducted upon request of
either party before three arbitrators (unless the parties agree on a
single arbitrator) designated by the American Arbitration Association,
and in accordance with the rules of such Association. The expenses of
the arbitration proceedings conducted hereunder shall be borne equally
by both parties.
8. CONFIDENTIALITY
Any information, documents and materials, whether printed or oral,
furnished by either party or its agents or employees to the other shall
be held in confidence. No such information shall be given to any third
party, other than to such sub-contractors of NAS as may be permitted
herein, or under requirements of a lawful authority, without the express
written consent of the other party.
D. TERM OF AGREEMENT
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by mutual
agreement of the parties in writing. Any decision by either party to cease
issuance or distribution of any specific Product shall not effect a
termination of the Agreement unless such termination is mutually agreed
upon, or unless notice is given pursuant to Section E.2 hereof.
E. TERMINATION
1. Either party may terminate this Agreement for cause at any time, upon
written notice to the other, if the other knowingly and willfully: (a)
fails to comply with the laws or regulations of any state or
governmental agency or body having jurisdiction over the sale of
insurance or securities; (b) misappropriates any money or property
belonging to the other; (c) subjects the other to any actual or
potential liability due to misfeasance, malfeasance, or nonfeasance; (d)
commits any fraud upon the other; (e) has an assignment for the benefit
of creditors; (f) incurs bankruptcy; or (g) commits a material breach of
this Agreement.
2. Either party may terminate this Agreement, without regard to cause, upon
six months prior written notice to the other.
3. In the event of termination of this Agreement, the following conditions
shall apply:
<PAGE> 8
a) The parties irrevocably acknowledge the continuing right to use any
Product trademark that might then be associated with any Products,
but only with respect to all business in force at the time of
termination.
b) NAS shall continue to sell to Nationwide at net asset value, shares
of all mutual funds which serve as underlying investments for
Products actually issued by Nationwide pursuant to this Agreement,
until such time as mutually agreed upon by the parties. NAS may
discontinue the sale at net asset value of such shares in connection
with the issuance by Nationwide of new products after termination.
c) In the event this Agreement is terminated the parties will use their
best efforts to preserve in force the business issued pursuant to
this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date first above written.
NATIONWIDE LIFE INSURANCE
COMPANY
By: Richard A. Karas
----------------------
Title: Senior Vice President
----------------------
NATIONWIDE LIFE AND ANNUITY
INSURANCE COMPANY
By: Richard A. Karas
----------------------
Title: Senior Vice President
----------------------
NATIONWIDE ADVISORY SERVICES,
INC.
By: Joseph P. Rath
----------------------
Title: Vice President
----------------------
<PAGE> 9
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
NATIONWIDE
- - Establishes underwriting criteria for application processing and rejections.
- - Reviews the completed application. Applies underwriting/issue criteria to
application.
- - Notifies Agent and/or customer of any error or missing data necessary to
underwrite application and establish records for owner of Product ("Contract
Owner").
- - Prepares policy data page for approved business and mails with policy to
Contract Owner.
- - Establishes and maintains all records required for each Contract Owner, as
applicable.
- - Prepares and mails confirmation and other statements to Contract Owners and
Agents, as required.
- - Prints, provides all forms ancillary to issue of contract/policy forms for
Products.
- - Maintains supply of approved specimen policy forms and all ancillary forms,
distributes same to Agents.
NAS
- - Consults with regard to new business procedures and processing.
<PAGE> 10
B. BILLING AND COLLECTION
NATIONWIDE
- - Receives premium/purchase payments and reconciles amount received with
remittance media.
- - Updates Contract Owner records to reflect receipt of premium/purchase payment
and performs accounting/investment allocation of each payment received.
- - Deposits all cash received under the Products in accordance with the terms of
the Products.
C. BANKING
NATIONWIDE
- - Balances, edits, endorses and prepares daily deposit.
- - Places deposits in depository account.
- - Transfers funds from depository account to NAS within 24 hours following
underwriting approval, in accordance with investment allocation.
- - Prepares daily cash journal summary reports and maintains same for review by
NAS.
<PAGE> 11
D. PRICING/VALUATION/ACCOUNTING
NATIONWIDE
- - Determines the "Net Amount Available for Investment" in Fund Shares and
places Fund Share purchase or redemption orders with the Fund, by facsimile
each day by 10:00 a.m. E.T. If for any reason Nationwide is unable to process
such orders, it will provide NAS with estimates.
- - Maintains and makes available, as reasonably requested, records used in
determining "Net Amount Available for Investment."
- - Collects information needed in determining Variable Account unit values from
the Funds including daily net asset value, capital gains or dividend
distributions, and the number of Fund Shares acquired or sold during the
immediately preceding valuation period.
- - Performs daily unit valuation calculation.
NAS
- - Issues Fund Shares to Nationwide at net asset Value.
- - Confirms Nationwide's Fund purchases and redemptions.
- - Transmit by facsimile Fund Share prices to Nationwide by 6:00 p.m. EST each
day.
- - Maintains records of all Fund Shares owned by Nationwide, including the date
purchased and sold, cost, and other information maintained by NAS in its
ordinary course of business.
- - Cooperates in annual audit of separate account financials conducted for
purposes of financial statement certification and publication.
<PAGE> 12
E. CONTRACT OWNER SERVICE RECORD MAINTENANCE
NATIONWIDE
- - Receives and processes all Contract Owner service requests, including but not
limited to informational requests, beneficiary changes, and transfers of
Contract Value among eligible investment options.
- - Maintains daily records of all changes made to Contract Owner accounts.
- - Researches and responds to all Contract Owner/Agent inquiries.
- - Keeps all required Contract Owner records.
- - Maintains adequate number of toll free lines to service Contract Owner/Agent
inquiries.
NAS
- - Accommodates customer service function by providing any supporting
information or documentation which may be in the control of NAS.
- - Researches and responds to Nationwide's inquiries regarding fund performance.
F. DISBURSEMENTS (SURRENDERS, DEATH CLAIMS, LOANS)
NATIONWIDE
- - Receives and processes surrenders, loans, and death claims in accordance with
established guidelines.
- - Prepares checks for surrenders, loans, and death claims, and forwards to
Contract Owner or Beneficiary. Prepares and mails confirmation statement of
disbursement to Contract Owner/Beneficiary with copy to Agent.
NAS
<PAGE> 13
G. COMMISSIONS
NATIONWIDE
- - Ascertains, on receipt of applications, whether writing Agent is
appropriately licensed.
- - Pays commissions and other fees in accordance with agreements relating to
same.
NAS
H. PROXY PROCESSING
NATIONWIDE
- - Receives record date information from Funds. Receives proxy solicitation
materials from Funds.
- - Prepares Voting Instruction cards and mails solicitation, if necessary.
- - Tabulates and votes all Fund Shares in accordance with SEC requirements.
NAS
- - Provides proxy, solicitation materials, and record date information.
I. PERIODIC REPORTS TO CONTRACT OWNERS
NATIONWIDE
- - Prepares and mails quarterly and annual Statements of Account to Contract
Owners.
- - Prepares and mails all semi-annual and annual reports of Variable Account(s)
to Contract Owners.
NAS
- - Prepares and mails to Nationwide all required semi-annual and annual
financial reports to shareholder of the Funds.
<PAGE> 14
J. REGULATORY STATEMENT REPORTS
NATIONWIDE
- - Prepares and files Separate Account Annual Statements.
- - Prepares and mails the appropriate required IRS reports at the Contract Owner
level. Files same with required regulatory agencies.
- - Prepares and files form N-SAR for the Separate Account.
NAS
- - Prepares and files form N-SAR for the Funds.
K. PREMIUM TAXES
NATIONWIDE
- - Collects, pays and accounts for premium taxes as appropriate.
- - Prepares and maintains all premium tax records by state.
- - Maintains liabilities in General Account ledger for accrual of premium tax
collected.
- - Integrates all company premium taxes due and performs related accounting.
NAS
L. FINANCIAL AND MANAGEMENT REPORTS
NATIONWIDE
- - Provides periodic reports in accordance with the Schedule of Reports to be
prepared jointly by Nationwide and NAS. (See EXHIBIT C).
NAS
- - Provides periodic reports in accordance with the Schedule of Reports to be
prepared jointly by Nationwide and NAS. (See EXHIBIT C).
M. AGENT LICENSE RECORDKEEPING
NATIONWIDE
- - Receives, establishes, processes, and maintains Agent appointment records.
NAS
- - Cooperates with Nationwide in the Agent appointment process with the broker-
dealer firms.
<PAGE> 15
EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY THE OFFICE OF SALES-FINANCIAL SERVICES
In order to assure compliance with state and federal regulatory requirements and
to maintain control over the distribution of promotional materials dealing with
the Products, Nationwide and NAS require that ALL variable contract promotional
materials be REVIEWED and APPROVED by both Nationwide and NAS PRIOR to their
use. These guidelines are intended to provide appropriate regulatory and
distribution controls.
1. Sufficient lead time must be allowed in the submission of all promotional
material. The Office of Sales-Financial Services ("OS-FS") and NAS shall
approve in writing all promotional material. Such approval shall not be
unreasonably withheld, and shall be given promptly, normally within three
(3) days.
2. All promotional material will be submitted in "draft" form to permit any
changes or corrections to be made prior to the printing.
3. Nationwide and NAS will provide each other with details as to each and
every use of all promotional material submitted. Approval for one use will
not constitute approval for any other use. Different standards of review
may apply when the same advertising material is intended for different
uses. The following information will be provided for each item of
promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be used (e.g., brochure, mailing, 482 ads,
etc.).
c. How the material will be used (e.g., brochure, mailing, 482 ads, etc.).
d. The projected date of initial use and, if a special promotion, the
projected date of last use.
4. Each party will advise the other of the date it discontinues the use of any
material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to be
put to a different use, request for approval of the material for the new
use must be submitted.
6. OS-FS and NAS will assign a form number to each item of advertising and
sales promotional material. This number will appear on each piece of
advertising and sales promotional material. It will be used to aid in
necessary filings, and to maintain appropriate controls.
7. OS-FS and NAS will provide WRITTEN APPROVAL for all material to be used.
8. Nationwide and NAS will provide each other with a minimum of 50 copies of
all material in final print form to effect necessary state filings.
9. NAS will coordinate SEC/NASD filings of sales and promotional material.
10. All communication regarding promotional materials should be directed to
Marketing Director, Office of Sales-Financial Services, Nationwide Life
Insurance Company, One Nationwide Plaza, Columbus, Ohio 43216 (phone
(614) 249-6258) or to President, Nationwide Advisory Services, Inc.,
Three Nationwide Plaza, Columbus, Ohio (phone (614) 249-5947).
<PAGE> 16
EXHIBIT C
PRODUCTION REPORTS TO BE PROVIDED
Nationwide agrees to provide the following reports to NAS:
1. Daily Receipt Report Indicates which Agents are generating sales.
2. Daily Approval Report Indicates the applications have been approved.
3. Daily Activity Summary Indicates top firms' sales and liquidation by
month, year-to-date as well as total assets by
firm.
4. Dealer Activity Indicates top firms' sales and
Summary by Territory liquidation by month, year-to-date.
5. Summary of Sales by Indicates sales by territory/dealer/branch,
Territory and Dealer including non-commissionable amounts and actual
commission payments, as well as chargebacks
(Internal use only).
6. Summary of Sales by Indicates sales by territory/dealer/branch,
Territory and Dealer including chargebacks.
7. Commission Report Indicates commissions paid and chargebacks,
matched to commission checks.
In addition, Nationwide shall provide reports detailing current appointments and
other information, as reasonably requested by NAS.
<PAGE> 1
EXHIBIT NO 4
THE VARIABLE ANNUITY CONTRACT FORM
<PAGE> 2
EXHIBIT 4
[NATIONWIDE INSURANCE LOGO] NATIONWIDE LIFE INSURANCE COMPANY
GUARANTEED RENEWABLE
ANNUITY AND DISABILITY CONTRACT
Home Office: One Nationwide Plaza Individual Deferred Variable Annuity,
Columbus, OH 43215 Disability Benefits, Non-Participating
[1-800-535-8600]
NATIONWIDE LIFE INSURANCE COMPANY will make annuity payments to the Annuitant
starting on the Annuitization Date, as set forth in the Contract. This Contract
is provided in return for the Purchase Payments made, Premium paid, and the
application as required. The pre-existing condition clause and the disability
benefit exclusions are listed in the Disability Provisions of this Contract.
RENEWAL PROVISION - The Disability Provisions of this Contract will continue for
the Insured's life as long as:
1. the Maximum Lifetime Benefit has not been paid out. Once the
Maximum Lifetime Benefit has been paid the Disability Provisions
of the contract will terminate without value; or
2. the Contract Owner has not cancelled or returned this Contract.
A CLAIM UNDER THIS CONTRACT COULD BE CONTESTED! PLEASE READ! - The Disability
Provisions of this Contract are contingent upon responses to the questions on
the application. A copy of the application is attached. If the Insured's answers
are incorrect or untrue, the Company has the right to deny benefits or rescind
this Contract. The best time to clear up any questions is now, before a claim
arises! If, for any reason, any of the answers are incorrect, contact the
Company at [P.O. Box 16786, Columbus, Ohio 43216-6786].
RIGHT TO RETURN -- TO BE SURE THAT THE OWNER IS SATISFIED WITH THIS CONTRACT,
THE OWNER MAY EXAMINE THE CONTRACT AND RETURN IT TO THE HOME OFFICE FOR ANY
REASON 30 DAYS AFTER THE DATE THE COMPANY SENDS NOTIFICATION THAT UNDERWRITING
IS COMPLETE AND THE CONTRACT WILL BE ISSUED.
WHEN THE CONTRACT IS RECEIVED IN THE HOME OFFICE, THE COMPANY, WHERE PERMITTED
BY STATE LAW, WILL RETURN THE ANNUITY VALUE AND THE PREMIUM FOR THE DISABILITY
PORTION OF THIS CONTRACT TO THE OWNER, WITHOUT DEDUCTION FOR ANY SALES CHARGES
OR ADMINISTRATION FEES AS OF THE DATE OF CANCELLATION.
NOTICE TO CONTRACT OWNER AND INSURED
- --------------------------------------------------------------------------------
READ YOUR CONTRACT CAREFULLY
Annuity payments, Death Benefits, surrender values, and other annuity values
provided by this Contract, when based on the investment experience of a separate
account, are variable, may increase or decrease in accordance with the
fluctuations in the net investment factor, as applicable, and are not guaranteed
as to fixed-dollar amount, unless otherwise specified.
The Disability Provisions of this Contract may not cover all of the disability
costs associated with the Long-Term Care needs
incurred by the Insured during the period of coverage. The Contract Owner and
the Insured are advised to review carefully all limitations in the Disability
Provisions of this Contract.
- --------------------------------------------------------------------------------
NOTICE - The details of the variable provisions in the Contract
may be found on Pages 9, 10, 11 and 16.
HOSPITALIZATION NOT REQUIRED - The Insured is not required to be hospitalized
before receiving benefits under this Contract.
CONTRACT EFFECTIVE DATE - This Contract takes effect on the date shown in the
Data Page.
DATA PAGE - The Data Page shows the Annuity Provisions information, the
Elimination Period, the Maximum Daily Home Health Care Benefit, the Maximum
Daily Facility Benefit, and the Maximum Lifetime Benefit (as defined in Part A).
It also includes optional benefit information, if applicable, and Premium and
general Contract information.
PAYMENT OF DISABILITY BENEFITS - Except where otherwise stated, no Disability
Provision benefits under this Contract will be paid:
(1) for any services the Insured receives or expenses the Insured incurs before
satisfying:
a. the eligibility for benefits determination; and
b. the Elimination Period; and
(2) in excess of the Maximum Lifetime Benefit.
This Contract takes effect on the date shown in the Data Page.__________________
Countersigned by
Licensed Resident
Agent
1
<PAGE> 3
CONTENTS
--------
<TABLE>
<S> <C>
RENEWAL PROVISION.........................................................................................................1
RIGHT TO RETURN...........................................................................................................1
NOTICE TO CONTRACT OWNER AND INSURED......................................................................................1
PAYMENT OF DISABILITY BENEFITS............................................................................................1
DEFINITIONS...............................................................................................................4
ANNUITY PROVISIONS........................................................................................................8
DEDUCTIONS AND CHARGES...........................................................................................8
Variable Account Charge
Deduction for Premium Taxes
OWNERSHIP PROVISIONS.............................................................................................8
Contract Ownership
Joint Ownership
Annuitant
Beneficiary
Changes of Parties Named in the Contract
ACCUMULATION PROVISIONS..........................................................................................9
Purchase Payments
Allocation of Purchase Payments
Fixed Account Provisions
Variable Account Provisions
Accumulation Unit Value
Valuation of Underlying Mutual Fund Shares
Substitution of Underlying Mutual Fund Shares
Net Investment Factor
TRANSFERS, SURRENDERS, AND WITHDRAWALS..........................................................................11
Transfer Provisions
Surrenders
Surrender Value
Suspension or Delay of Surrender
Contingent Deferred Sales Charge (CDSC)
Withdrawals without Charge
Systematic Withdrawals
REQUIRED DISTRIBUTION PROVISIONS................................................................................13
Required Distribution-Non-Qualified Contracts
DEATH PROVISIONS................................................................................................14
Death of Contract Owner
Death of Contract Owner/Annuitant
Death of Annuitant
Death Benefit Payment
Standard Death Benefit
ANNUITIZATION PROVISIONS........................................................................................15
Annuity Commencement Date
Change of Annuity Commencement Date and Annuity Payment Option
Annuitization Fixed Payment Annuity - First and Subsequent
Payments Variable Payment Annuity - First Payment Variable
Payment Annuity - Subsequent Payments Annuity Unit Value
Frequency and Amount of Payments
ANNUITY PAYMENT OPTIONS.........................................................................................16
Selection of Annuity Payment Option
</TABLE>
2
<PAGE> 4
<TABLE>
<S> <C>
Life Annuity
Joint and Survivor Annuity
Life Annuity With 120 or 240 Monthly Payments Guaranteed
Any Other Options
DISABILITY PROVISIONS....................................................................................................19
DEFINTION OF DISABILITY.........................................................................................19
BENEFITS .......................................................................................................19
Long-Term Care Facility Benefit
Home and Adult Day Care Benefit
Assisted Living Facility Benefit
Respite Care Benefit
Medical Help Benefit
Caregiver Training Benefit
Bed Reservation Benefit
Alternate Plan of Care Benefit
Care Management Services
Death Benefit
EXCLUSIONS......................................................................................................21
PRE-EXISTING CONDITION LIMITATION...............................................................................21
GENERAL PROVISIONS.......................................................................................................22
Entire Contract Non-Participating Incontestability Contract
Settlement Evidence of Survival Alteration or Modification
Assignment Protection of Proceeds Misstatement of Age or Sex
Reports Number and Gender Time Limit On Certain Defenses
Notice of Claim Claim Forms Proof of Loss Time Payment of
Claims Payment of Benefits Physical Examinations and Autopsy
Effect of Cancellation on the Disability Premium Legal Actions
Misstatements of Age Conformity with State Statutes
IN WITNESS WHEREOF..............................................................................................24
</TABLE>
3
<PAGE> 5
DEFINITIONS
-----------
ACTIVITIES OF DAILY LIVING - The Activities of Daily Living are:
1. BATHING - Washing oneself by sponge bath; or in either a tub or shower,
including the task of getting in or out of the tub or shower.
2. CONTINENCE - The ability to maintain control of bowel and bladder function;
or, when unable to maintain control of bowel or bladder function, the
ability to perform associated personal hygiene (including caring for
catheter or colostomy bag).
3. DRESSING - Putting on and taking off all items of clothing and any
necessary braces, fasteners, or artificial limbs.
4. EATING - Feeding oneself by getting food into the body from a receptacle
(such as a plate, cup or table) or by a feeding tube or intravenously.
5. TOILETING - Getting to and from the toilet, getting on and off the toilet,
and performing associated personal hygiene.
6. TRANSFERRING - Moving into or out of a bed, chair, or wheelchair.
ACCUMULATION UNIT - An accounting unit of measure used to calculate the Variable
Account value prior to the Annuitization Date.
ADULT DAY CARE - A community-based group program that provides health, social,
and related support services in a facility which is licensed or certified by the
state as an Adult Day Care Center to impaired adults. It does not mean 24-hour
care.
ANNIVERSARY VALUE - The Annuity Value on a Contract Anniversary.
ANNUITANT - The person upon whose continuation of life any annuity payments
involving life contingencies depend.
ANNUITIZATION -The period during which annuity payments are received.
ANNUITIZATION DATE - The date the annuity payments actually commence.
ANNUITY COMMENCEMENT DATE - The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract, and is subject to change by the Contract Owner.
ANNUITY PAYMENT OPTION - The chosen form of annuity payments. Several options
are available under the Contract.
ANNUITY PROVISIONS - The portion of the Contract describing the annuity benefits
provided herein.
ANNUITY UNIT - An accounting unit of measure used to calculate the value of
Variable Annuity payments.
ANNUITY VALUE - The sum of the value of all Accumulation Units plus any amount
held in the Fixed Account.
ASSISTED LIVING FACILITY - A facility that is engaged primarily in providing
ongoing care and related services to inpatients in one location and meets all of
the following criteria:
1. provides 24 hour a day care and services sufficient to support needs
resulting from inability to perform Activities of Daily Living or Cognitive
Impairment; and
2. has a trained and ready to respond employee on duty at all times to provide
that care; and
3. provides 3 meals a day and accommodates special dietary needs; and
4. is licensed or accredited by the appropriate agency to provide such care,
if such licensing or accreditation is required by the state in which the
care is received; and
5. has formal arrangements for the services of a physician or nurse to furnish
medical care in case of emergency; and
6. has appropriate methods and procedures for handling and administering drugs
and biologics.
These requirements are typically met by hospice care facilities or assisted
living facilities that are either free standing facilities or part of a
life-care community. They may also be met by some personal care and adult
congregate care facilities. They are generally NOT met by individual residences
or independent living units.
An Assisted Living Facility does not mean a Long-Term Care Facility, hospital or
clinic, boarding home, or a place that operates primarily for the treatment of
alcoholics or drug addicts.
BENEFICIARY - The person designated to receive certain benefits under this
Contract upon the death of the Annuitant or the Contract Owner if there is no
surviving Joint Owner, or upon the death of the Insured. The Beneficiary can be
changed by the Contract Owner as set forth in the Contract.
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<PAGE> 6
CAREGIVER TRAINING - Training provided by a Home Health Care Agency, Long-Term
Care Facility, or hospital and received by the Informal Caregiver to care for
the Insured in the Insured's residence.
CODE - The Internal Revenue Code of 1986, as amended.
COGNITIVE IMPAIRMENT - A severe deficiency in the Insured's short- or long-term
memory, orientation as to person, place and time, deductive or abstract
reasoning, or judgment as it relates to safety awareness. Included are nervous
or mental disorders of organic origin, including Alzheimer's Disease or senile
dementia, which are determined by clinical diagnosis or tests.
COMPANY - Nationwide Life Insurance Company, P.O. Box 16786, Columbus, Ohio
43216-6786.
CONTINGENT BENEFICIARY - The person designated to be the Beneficiary if the
named Beneficiary is not living at the time of the death of the Annuitant.
CONTRACT - The Individual Deferred Variable Annuity issued to the Contract Owner
which includes an annuity portion and a disability portion.
CONTRACT ANNIVERSARY - Each 12 month anniversary the Contract remains in force
commencing with Date of Issue.
CONTRACT OWNER (OWNER) - A person who possesses all rights under the Contract,
including the right to designate and change any designations of a Owner,
Beneficiary, Contingent Beneficiary, Annuity Payment Option, and Annuity
Commencement Date. A Contract Owner is the person named as owner unless a
subsequent change is made.
DATE OF ISSUE - The date the first Purchase Payment is applied to the Contract.
DEATH BENEFIT(S) - Benefits available under both the Annuity and Disability
Provisions of this Contract. The Annuity Death Benefit is payable upon the death
of the Annuitant and the Disability Death Benefit is payable upon the death of
the Insured.
The Annuity Death Benefit does not apply upon the death of the Contract Owner
when the Contract Owner and Annuitant are not the same person. If the Annuitant
dies after the Annuitization Date, any benefit that may be payable shall be as
specified in the Annuity Payment Option elected.
DISABILITY PROVISIONS - The portion of the Contract describing the disability
benefits herein.
DISTRIBUTION - Any payment of part or all of the Annuity Value.
ELIMINATION PERIOD - The number of days, after the Effective Date of this
Contract, in which covered Long-Term Care services are provided to the Insured,
due to total disability, before this Contract begins to pay benefits. It is
shown on the Data Page and can be satisfied by any combination of days of a
Long-Term Care Facility stay, a Home and Adult Day Care stay or a stay in an
Assisted Living Facility. These days of care or services need not be continuous,
but must be accumulated within a continuous period of 730 days. This Elimination
Period has to be satisfied only once while this Contract is in effect.
FIXED ACCOUNT - The portion of the Contract which is held under the general
account of the Company.
FIXED PAYMENT ANNUITY - An annuity providing for payments which are guaranteed
by the Company as to dollar amount during Annuitization.
HOME CONVALESCENT UNIT - Any of the following:
1. The Insured's home;
2. A private home;
3. A home for the retired or aged;
4. A place which provides residential care; or
5. A section of a nursing facility providing only residential care.
It does not mean a hospital.
HOME HEALTH CARE AGENCY - An entity which provides home health care or hospice
services and:
1. has an agreement as a provider of home health care services or hospice care
under the Medicare program; or
2. is licensed or accredited by state law as a Home Health Care Agency or
hospice, if such licensing or accreditation is required by the state in
which the care is received.
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<PAGE> 7
For purposes of this Contract, a licensed therapist, a registered nurse (R.N.),
a licensed practical nurse (L.P.N.), or a licensed vocational nurse (L.V.N.)
operating within the scope of his or her license will be considered a Home
Health Care Agency.
HOME OFFICE - The main office of the Company located in Columbus, Ohio.
INFORMAL CAREGIVER - The person who has the primary responsibility of caring for
the Insured in the Insured's Home Convalescent Unit. A person who is paid for
caring for the Insured cannot be an Informal Caregiver.
INSURED - The person named to receive disability benefits in this Contract.
INTEREST RATE GUARANTEE PERIOD - The interval of time during which an interest
rate credited to the Fixed Account is guaranteed to remain the same.
JOINT OWNER - The Joint Owner, if any, possesses an undivided interest in the
entire Contract in conjunction with the Contract Owner. If a Joint Owner is
named, references to "Contract Owner" or "Joint Owner" will apply to both the
Contract Owner and Joint Owner or either of them
LICENSED HEALTH CARE PRACTITIONER - Any physician, registered professional
nurse, or licensed social worker. It does not include the Insured or a close
relative of the Insured or anyone who is under suspension from Medicare or
Medicaid.
LONG-TERM CARE - Necessary diagnostic, preventive, therapeutic, curing,
treating, mitigating, and rehabilitative services, and Maintenance or Personal
Services, which:
1. are required by a totally disabled individual, and
2. are provided pursuant to a Plan of Treatment prescribed by a Licensed
Health Care Practitioner.
LONG-TERM CARE FACILITY - A place which:
1. is licensed by the state where it is located; and
2. provides skilled, intermediate, or custodial nursing care on an inpatient
basis under the supervision of a physician; and
3. has 24-hour-a-day nursing services provided by or under the supervision of
a registered nurse (R.N.), licensed vocational nurse (L.V.N.), or licensed
practical nurse (L.P.N.), and
4. keeps a daily medical record of each patient; and
5. may be either a freestanding facility or a distinct part of a facility such
as a ward, wing, unit, or swing-bed of a hospital or other institution.
A Long-Term Care Facility does not mean a hospital or clinic, boarding home, a
place which operates primarily for the treatment of alcoholics or drug addicts,
or a hospice.
MAINTENANCE OR PERSONAL SERVICES - Any care the primary purpose of which is the
provision of needed assistance with any of the disabilities from which the
Insured is totally disabled (including the protection from threats to health and
safety due to severe Cognitive Impairment).
MAXIMUM DAILY FACILITY BENEFIT - The amount shown in the Data Page.
MAXIMUM DAILY HOME HEALTH CARE BENEFIT - The amount shown in the Data Page
MAXIMUM LIFETIME BENEFIT - The total number of days the Company will pay in the
Insured's lifetime for all benefits provided by this Contract. The Maximum
Lifetime Benefit is shown on the Data Page. The number of days that will count
toward the Maximum Lifetime Benefit for a particular benefit will be calculated
as follows:
Cost paid out under a benefit provision divided by the Maximum Daily
Facility Benefit will equal the number of days that will count towards
the Maximum Lifetime Benefit.
When the Maximum Lifetime Benefit is met, the Disability Provisions of this
contract will terminate.
MEDICAL HELP SYSTEM - A communication system located in the Insured's home, used
to summon medical attention in case of a medical emergency.
NON-QUALIFIED CONTRACT - A Contract which does not qualify for favorable tax
treatment under the provisions of Sections 401 or 403(a) (qualified plans), 408
(IRAs) or 403(b) (Tax-Sheltered Annuities) of the Code.
PLAN OF TREATMENT - A program of care and treatment. It must be:
1. initiated by and approved in writing by a Licensed Health Care Practitioner
before receiving benefits; and
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<PAGE> 8
2. confirmed in writing at least once every 60 days.
PREMIUM - Payment for disability portion of this Contract. Amount(s) are shown
on the Data Page.
PROOF OF GOOD HEALTH - The process of going through the Company's underwriting.
PURCHASE PAYMENT - A deposit of new value into the annuity portion of the
Contract. The term Purchase Payment does not include transfers between the
Variable Account and Fixed Account or among the Sub-Accounts.
RESPITE CARE - Long-Term Care, provided by or through a Long-Term Care Facility,
Assisted Living Facility, or Home Health Care Agency, in order to temporarily
relieve the Informal Caregiver.
SUB-ACCOUNTS - Separate and distinct divisions of the Variable Account to which
specific underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
UNDERLYING MUTUAL FUNDS - The registered management investment companies in
which the assets of the Sub-Accounts of the Variable Account will be invested.
VALUATION DATE - Each day the New York Stock Exchange and the Company's Home
Office are open for business or any other day during which there is a sufficient
degree of trading of the Variable Account's underlying Mutual Fund shares such
that the current net asset value of its Accumulation Units might be materially
affected.
VALUATION PERIOD - The period of time commencing at the close of a Valuation
Date and ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT - A separate investment account of the Company into which
Variable Account Purchase Payments are allocated.
VARIABLE PAYMENT ANNUITY - An annuity providing for payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 9
ANNUITY PROVISIONS
------------------
DEDUCTIONS AND CHARGES
VARIABLE ACCOUNT CHARGE
The Variable Account Charge applies to allocations made to the Sub-Accounts. The
Company deducts charges from the Variable Account equal to an annual rate of
[1.40%] of the daily net asset value of the Variable Account. This fee
compensates the Company for administrative expenses incurred relating to the
issuance and maintenance of the Contracts and for mortality risks assumed in
connection with the Death Benefit and annuity features of the Contracts.
DEDUCTION FOR PREMIUM TAXES
The Company will charge against the Annuity Value the amount of any premium
taxes levied by a state or any other government entity upon Purchase Payments
received by the Company. The method used to recoup premium taxes will be
determined by the Company at its sole discretion and in compliance with
applicable state law. The Company currently deducts such charges from a Annuity
Value either (1) at the time the Contract is surrendered, (2) at the
Annuitization Date, or (3) at such earlier date as the Company may be subject to
such taxes.
OWNERSHIP PROVISIONS
CONTRACT OWNERSHIP
Unless otherwise provided, the Contract Owner has all rights under the Contract.
IF THE PURCHASER NAMES SOMEONE OTHER THAN HIMSELF AS CONTRACT OWNER, THE
PURCHASER WILL HAVE NO RIGHTS UNDER THE CONTRACT.
JOINT OWNERSHIP
Joint Owners must be spouses at the time joint ownership is requested. If a
Joint Owner is named, the Joint Owner will possess an undivided interest in the
Contract. Unless otherwise provided, the exercise of any ownership right in the
Contract (including the right to surrender or partially surrender the Contract;
or to change the parties to the Contract, the Payment Option or the
Annuitization Date) shall require written request signed by both Contract
Owners.
If a Contract Owner who is not also the Annuitant dies before the Annuitization
Date and there is a surviving Joint Owner, the Joint Owner shall become the
Contract Owner.
If a Contract Owner who is also the Annuitant dies before the Annuitization Date
and there is a surviving Joint Owner, all benefits under the Annuity Provisions
of the Contract are payable to the Joint Owner.
ANNUITANT
The Annuitant is the person who will receive annuity payments upon
Annuitization. The Annuitant must be age 85 or younger at the time of Contract
issuance unless the Company has approved a request for an Annuitant of greater
age. The Annuitant may be changed prior to the Annuitization Date with the
consent of the Company.
BENEFICIARY
If there is no surviving Joint Owner, or if the Annuitant is someone other than
a Contract Owner, the Beneficiary is the person who will receive benefits under
the Contract if the Annuitant dies prior to the Annuitization Date. If a
Contract Owner who is also the Annuitant dies before the Annuitization Date and
there is a surviving Joint Owner, all benefits under the Annuity Provisions of
the contract are payable to the surviving Joint Owner. If more than one
Beneficiary survives the Annuitant, each will share equally unless otherwise
specified in the beneficiary designation. If there is no surviving Joint Owner
and no Beneficiary survives the Annuitant, all rights and interest of such
parties will vest in the Contingent Beneficiary, and if more than one Contingent
Beneficiary survives, each will share equally unless otherwise specified in the
Contingent Beneficiary designation. If no Contingent Beneficiary survives the
Annuitant, all rights and interest of the Contract will vest with the last
surviving Contract Owner's estate.
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<PAGE> 10
CHANGES OF PARTIES NAMED IN THE CONTRACT
Prior to the Annuitization Date, the Contract Owner may request a change in the
Contract Owner, Joint Owner, Beneficiary, or Contingent Beneficiary. Such
change, upon receipt and recording by the Company at its Home Office, will take
effect as of the time the written notice was signed, whether or not the Contract
Owner or Annuitant are living at the time of record, but without further
liability as to any payment or settlement made by the Company before receipt of
such change is recorded at the Home Office.
Any request for change of Contract Owner must be recorded at the Home Office,
may require a signature guarantee and must be signed by the Contract Owner and
the person designated as the new Contract Owner.
Any change to the Annuitant is subject to underwriting and approval by the
Company. If any Contract Owner is not a natural person, the change of the
annuitant will be treated as the death of the Contract Owner and will result in
a distribution.
Distributions will be made as if the Contract Owner died at the date of such
change.
ACCUMULATION PROVISIONS
PURCHASE PAYMENTS
The Contract is provided in return for the initial Purchase Payment and any
subsequent Purchase Payments. The cumulative total of all purchase payments
under this and any other annuity contract(s) issued by the Company having the
same annuitant may not exceed $1,000,000 without the prior written consent of
the Company.
Purchase Payments, if any, after the initial Purchase Payment must be at least
[$1,000] and may be made at any time.
If no Purchase Payments have been received in the Contract for a period of two
full years and the paid-up annuity benefit at maturity would be less than [$50]
a month, the Company may, at its option, pay the accumulated value and will by
such payment, be relieved of any obligation under the Annuity Provisions.
ALLOCATION OF PURCHASE PAYMENTS
The Contract Owner elects to have the Purchase Payments allocated among the
Fixed Account and the Sub-Accounts of the Variable Account. The allocation of
future Purchase Payments may be changed by the Contract Owner by a proper
submission that is received and recorded by the Company.
FIXED ACCOUNT PROVISIONS
The Fixed Account Annuity Value at any time will be: the sum of all amounts
credited to the Fixed Account under this Contract less any amounts canceled or
withdrawn for charges, deductions, or surrenders. Any paid up annuity cash
surrender or death benefit that may become payable from the Fixed Account will
not be less than the minimum benefits as required by the statute of any state in
which the Contract is issued.
The Company will credit interest to the Fixed Account Annuity Value. Such
interest will be credited at such rate or rates as the Company prospectively
declares from time to time, at the sole discretion of the Company. Such rates
will be declared to the Contract Owner in writing on quarterly statements. Any
such rate or rates so determined, for which deposits are received, will remain
in effect for a period of not less than 12 months. However, the Company
guarantees that it will credit interest at not less than [3.0%] per year or any
lesser amount as permitted by state law.
At the end of an Interest Rate Guarantee Period, a new interest rate is declared
with an Interest Rate Guarantee Period starting at the end of the prior period
and ending at the end of the calendar quarter one year later. For new Purchase
Payments allocated to the Fixed Account or transfers from the Variable Account,
this period begins upon the date of deposit or transfer and ends at the end of
the calendar quarter at least one year (but not more than 15 months) from
deposit or transfer.
VARIABLE ACCOUNT PROVISIONS
The Variable Account Annuity Value is the sum of the value of all Accumulation
Units under this Contract.
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<PAGE> 11
The Company has allocated a part of its assets for the Contract and other
contracts to the Variable Account. Such assets of the Variable Account remain
the property of the Company. However, they may not be charged with the
liabilities from any other business in which the Company may take part.
The Variable Account is divided into Sub-Accounts which invest in shares of the
Underlying Mutual Funds. Purchase Payments are allocated among one or more of
these Sub-Accounts, as designated by the Contract Owner, and are subject to the
terms and conditions of the Underlying Mutual Funds.
ACCUMULATION UNIT VALUE
The number of Accumulation Units for each Sub-Account of the Variable Account is
found by dividing: (1) the net amount allocated to the Sub-Account; by (2) the
Accumulation Unit value for the Sub-Account for the Valuation Period during
which the Company received the Purchase Payment.
When the Underlying Mutual Fund shares were first established, the value of an
Accumulation Unit for each Sub-Account of the Variable Account was arbitrarily
set at $10. The value for any later Valuation Period is found as follows:
The Accumulation Unit value for each Sub-Account for the last prior Valuation
Period is multiplied by the net investment factor for the Sub-Account for the
next following Valuation Period. The result is the Accumulation Unit value. The
value of an Accumulation Unit may increase or decrease from one Valuation Period
to the next. The number of Accumulation Units will not change as a result of
investment experience.
VALUATION OF UNDERLYING MUTUAL FUND SHARES
Underlying Mutual Fund shares in the Variable Account will be valued at their
net asset value.
SUBSTITUTION OF UNDERLYING MUTUAL FUND SHARES
If the shares of the Underlying Mutual Funds should no longer be available for
investment by the Separate Account or if in the judgment of the Company's
management further investment in such Underlying Mutual Fund's shares should be
inappropriate in view of the purposes of the Contract, the Company may
substitute shares of another Underlying Mutual Fund for Underlying Mutual Fund
shares already purchased or to be purchased in the future by purchase payments
under the Contract.
In the event of such substitution or change, the Company may, by appropriate
endorsement, make such changes to this and other contracts of this class as may
be necessary to reflect such substitution or change. Nothing contained herein
shall prevent the separate account from purchasing other securities for other
series or classes of contracts or from effecting a conversion between series or
classes of contracts on the basis of requests made individually by owners of
such contracts.
NET INVESTMENT FACTOR
The net investment factor is an index applied to measure the investment
performance of a Sub-Account from one Valuation Period to the next. The net
investment factor may be greater or less than one; therefore, the value of an
Accumulation Unit may increase or decrease.
The net investment factor for any Sub-Account for any Valuation Period is
determined by: dividing (1) by (2) and subtracting (3) from the result, where:
1. is the net of:
a. the net asset value per share of the Underlying Mutual Fund held
in the Sub-Account, determined at the end of the current
Valuation Period; plus
b. the per share amount of any dividend or capital gain
Distributions made by the Underlying Mutual Fund held in the
Sub-Account, if the "ex-dividend" date occurs during the current
Valuation Period.
2. is the net result of:
a. the net asset value per share of the Underlying Mutual Fund held
in the Sub-Account, determined at the end of the last prior
Valuation Period, plus or minus
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b. the per share credit or charge for any taxes reserved for the
last prior Valuation Period, plus or minus
c. a per share credit or charge for any taxes reserved for, which is
determined by the Company to have resulted from the investment
operations of the Sub-Account.
3. is a factor representing the Variable Account Charge plus additional
charges for any riders or options which become a part of the Contract.
For funds that credit dividends on a daily basis and pay such dividends once a
month, the net investment factor allows for the monthly reinvestment of these
daily dividends.
TRANSFERS, SURRENDERS, AND WITHDRAWALS
TRANSFER PROVISIONS
Transfers among the Fixed Account and Variable Account must be made prior to the
Annuitization Date. Transfers among the Sub-Accounts may occur once daily
without charges and penalties. The Company reserves the right to refuse any
transfer requests submitted by individuals or firms performing market timing
services on behalf of multiple Contract Owners and to suspend or delay any
transfer when the New York Stock Exchange is closed or restricted or when
disposal or the purchase of the Underlying Mutual Funds is not possible due to
actions taken, or limitations imposed, independently by the Underlying Mutual
Funds.
A Contract Owner may transfer annually, at the end of an Interest Rate Guarantee
Period, funds from the Fixed Account to the Variable Account without incurring a
penalty or adjustment. The maximum allowable transfer amount from the Fixed
Account to the Variable Account will be determined by the Company at its sole
discretion, but will not be less than [10%] of the total value of the portion of
the Fixed Account at the end of an Interest Rate Guaranteed Period. All
transfers from the Fixed Account must be made within 45 days after the
expiration date of the Interest Rate Guarantee Period.
A Contract Owner may annually transfer a portion of the Variable Account to the
Fixed Account. The Company reserves the right to limit the maximum amount
transferable to the Fixed Account. This maximum will never be less than [10%] of
the value of the Variable Account for any 12 month period. The Company also
reserves the right to refuse transfers or Purchase Payments into the Fixed
Account if the Fixed Account value is greater than or equal to [30%] of the
total Annuity Value at the time such transfer is requested.
SURRENDERS
Prior to the earlier of the Annuitization Date or the death of the Annuitant,
the Contract Owner may surrender part or all of the Annuity Value. A surrender
request must be in writing or in a form otherwise acceptable to the Company. The
Company reserves the right to require that the signature(s) be guaranteed by a
member firm of a major stock exchange or other depository institution qualified
to give such a guaranty.
When written application and proof of interest are received, the Company will
surrender the number of Variable Account Accumulation Units, any amount from the
Fixed Account and any amount from any other options under this Contract needed
to equal:
(a) the dollar amount requested; plus (b) any CDSC which applies.
If a partial surrender is requested, unless the Contract Owner has instructed
otherwise, amounts will be surrendered as follows: (a) from the Variable Account
and (b) from the Fixed Account. The amounts surrendered from each of these
accounts will be in the same proportion that the Contract Owner's interest in
each account bears to the total Annuity Value. Additionally, the amount that is
surrendered from each underlying Sub-Account will be in the same proportion that
each Sub-Account bears to the total Variable Account.
The surrender value will be paid to the Contract Owner within seven days of
receipt of proper request and proof of interest satisfactory to the Company are
received at the Home Office.
SURRENDER VALUE
The surrender value is the amount that will be paid if the Annuity portion of
the Contract is surrendered. The surrender value at any time will be:
The Annuity Value less the sum of any applicable;
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1. Contingent Deferred Sales Charge (CDSC), and
2. Premium taxes.
SUSPENSION OR DELAY OF SURRENDER
The Company has the right to suspend or delay the date of any surrender from the
Variable Account for any period:
1. When the New York Stock Exchange is closed;
2. When trading on the New York Stock Exchange is restricted;
3. When an emergency exists as a result of which: disposal of securities held
in the Variable Account is not reasonably practicable or it is not
reasonably practicable to fairly determine the value of the net assets of
the Variable Account; or
4. During any other period when the Securities and Exchange Commission, by
order, so permits for the protection of security holders.
Rules and regulations of the Securities and Exchange Commission may govern as to
whether certain conditions set forth above exist.
Payment of funds from the Variable Account will be made within seven days of
receipt of both proper written application and proof of interest satisfactory to
the Company. The Company reserves the right to delay payment of a total
surrender of Contract Owner's Fixed Account Value for up to six months in those
states where applicable law requires the Company to reserve such right.
CONTINGENT DEFERRED SALES CHARGE (CDSC)
If part or all of the Annuity Value is withdrawn, a CDSC may be made by the
Company. The CDSC is designed to cover expenses relating to the sale of the
Contract.
The CDSC is calculated by multiplying the applicable CDSC percentages noted
below by the Purchase Payments that are withdrawn. For purposes of calculating
the amount of the CDSC, withdrawals are considered to come first from the oldest
Purchase Payment made to the Contract, then from the next oldest Purchase
Payment and so forth, with any earnings attributable to such Purchase Payments
considered only after all Purchase Payments made to the Contract have been
considered. (For federal income tax purposes, a full or partial withdrawal is
treated as a withdrawal of earnings first.)
<TABLE>
<CAPTION>
Years Measured From Date of Payment: 1 2 3 4 5 6 7 8 9 10 11 12
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CDSC %: 8% 8% 8% 8% 8% 7% 6% 5% 4% 3% 2% 1%
</TABLE>
The CDSC % for years 13 and after will be 0%.
WITHDRAWALS WITHOUT CHARGE
During each Contract Year, the Contract Owner may withdraw without CDSC a total
amount equal to the lesser of (1) or (2) where (1) is 10% of the sum of all
Purchase Payments (less any Purchase Payments previously withdrawn) and (2) is
10% of the Annuity Value. This CDSC-free withdrawal privilege is non-cumulative;
that is, free amounts not taken during any given Contract Year cannot be taken
as free amounts in subsequent Contract Years.
A CDSC will not be assessed against the withdrawal of any: (1) Purchase Payments
which have been held under this Contract for at least [144] months; (2) earnings
attributable to Purchase Payments made to this Contract; (3) Death Benefit
payments made upon the death of the Annuitant prior to the Annuitization Date;
(4) amounts applied to an Annuity Payment Option after two years from the Date
of Issue; (5) amounts transferred among the Sub-Accounts or among the Fixed
Account and the Variable Account, or (6) as otherwise noted in the Contract.
In addition, when this Contract is exchanged for another contract issued by the
Company or any of its affiliate insurance companies, of the type and class which
the Company determines is eligible for such waiver, the Company will waive the
CDSC on the first contract. A CDSC may apply to the contract received in the
exchange.
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SYSTEMATIC WITHDRAWALS
The Contract Owner may elect in writing on a form provided by the Company to
take Systematic Withdrawals of a specified dollar amount (of at least $100) on a
monthly, quarterly, semi-annual or annual basis. The Company will process the
withdrawals as directed by surrendering on a pro-rata basis Accumulation Units
from all of the Sub-Accounts in which the Contract Owner has an interest and the
Fixed Account. A CDSC may apply to Systematic Withdrawals in accordance with the
considerations set forth in the "Contingent Deferred Sales Charge" and
"Withdrawals Without Charge" provisions of the Contract. Unless otherwise
directed by the Contract Owner, the Company will withhold federal income taxes
from each Systematic Withdrawal. An age-based Systematic Withdrawal program (see
following paragraph) will terminate automatically at the end of each Contract
Year and may be reinstated only on or after the next Contract Anniversary
pursuant to a new request. Unless the Contract Owner has made an irrevocable
election of distributions of substantially equal periodic payments, the
Systematic Withdrawals may be discontinued at any time by notification to the
Company in writing. The Company reserves the right to discontinue prospective
Systematic Withdrawals.
If the Contract Owner withdraws amounts pursuant to a Systematic Withdrawal
program, then the Contract Owner may withdraw each Contract Year without a CDSC
an amount up to the greater of (1) free withdrawal privilege described in
"Withdrawals Without Charge" section of the Contract, (2) the amount required to
meet Minimum Distribution requirements for this Contract, or (3) the specified
percentage of the Contract Value based on the Contract Owner's age, as shown in
the following table:
<TABLE>
<CAPTION>
CONTRACT OWNER'S AGE PERCENTAGE OF ANNUITY VALUE
-------------------- ---------------------------
<S> <C>
Under 59-1/2 5%
59-1/2 thru 61 7%
62 thru 64 8%
65 thru 74 10%
75 and over 13%
</TABLE>
If the total amounts withdrawn in any Contract Year exceed the CDSC-free amount
as calculated under the Systematic Withdrawal method described above, then such
total withdrawn amounts will be eligible only for CDSC-free withdrawal privilege
described in the "Withdrawals Without Charge" section of the Contract, and the
total amount of CDSC charged during the Contract Year will be determined in
accordance with those sections.
The Annuity Value and the Contract Owner's age for purposes of applying the
CDSC-free withdrawal percentage described above are determined as of the date
the request for a Systematic Withdrawal program is received and recorded by the
Company at its Home Office. (In the case of Joint Owners, the older Contract
Owner's age will be used.) Furthermore, this CDSC-free withdrawal privilege for
Systematic Withdrawals is non-cumulative, that is, free amounts not taken during
any given Contract Year cannot be taken as free amounts in a subsequent Contract
Year.
Systematic Withdrawals are not available prior to the expiration of the free
look provision of the Contract. The Company reserves the right to assess a
processing fee for this service.
REQUIRED DISTRIBUTION PROVISIONS
This Contract is intended to be treated as an "annuity contract" for federal
income tax purposes. Accordingly, all provisions of this Contract shall be
interpreted and administered in accordance with the requirements of Section
72(s) of the Code. In no event shall any payment be deferred beyond the time
limits permitted by Section 72(s) of the Code. The Company reserves the right to
amend this Contract to comply with requirements set out in the Code and
regulations and rulings thereunder, as they may exist from time to time.
Payments will be calculated by use of the expected return multiples specified in
Tables V and VI of Section 1.72-9 of the Income Tax Regulations and calculated
in accordance with the calculation methods made available by the Company,
prescribed by the regulations and elected by the Contract Owner.
Upon the death of any Contract Owner or Joint Owner (including an Annuitant who
becomes the Contract Owner of the Contract on the Annuitization Date) (each of
the foregoing "a deceased Contract Owner"), certain distributions for
Non-Qualified Contracts are required by Section 72(s) of the Code.
Notwithstanding any provision of the Contract to the contrary, the following
distributions shall be made in accordance with such requirements.
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<PAGE> 15
1. If any deceased Contract Owner dies on or after the Annuitization
Date and before the entire interest under the Annuity Provisions
of the Contract has been distributed, then the remaining portion
of such interest shall be distributed at least as rapidly as under
the method of distribution in effect as of the date of such
deceased Contract Owner's death.
2. If any deceased Contract Owner dies prior to the Annuitization
Date, then the entire interest in the Annuity Provisions of the
Contract (consisting of either the Death Benefit or the Annuity
Value reduced by certain charges as set forth elsewhere in the
Contract) shall be distributed within 5 years of the death of the
deceased Contract Owner, provided however:
(a) If any portion of such interest is payable to or for the
benefit of a natural person who is a surviving Contract Owner,
Joint Owner, Annuitant, Beneficiary, or Contingent Beneficiary
as the case may be (each a "designated beneficiary"), such
portion may, at the election of the designated Beneficiary, be
distributed over the life of such designated beneficiary, or
over a period not extending beyond the life expectancy of such
designated beneficiary, provided that payments begin within
one year of the date of the deceased Contract Owner's death
(or such longer period as may be permitted by federal income
tax regulations). Life expectancy and the amount of each
payment will be determined as prescribed by federal income tax
regulations.
(b) If the designated beneficiary is the surviving spouse of the
deceased Contract Owner, such spouse may elect, in lieu of the
Death Benefit, to become the Contract Owner of this Contract,
and the distributions required under these Required
Distribution Provisions will be made upon the death of such
spouse.
In the event that the Contract Owner is a person that is not a natural person
(e.g., a trust or corporation), then, for purposes of these distribution
provisions, (i) the death of the Annuitant shall be treated as the death of any
Contract Owner, (ii) any change of the Annuitant shall be treated as the death
of any Contract Owner, and (iii) in either case the appropriate distribution
required under these distribution rules shall be made upon such death or change,
as the case may be. The Annuitant is the primary annuitant as defined in Section
72(s)(6)(B) of the Code.
These distribution provisions shall not be applicable to any Contract that is
not required to be subject to the provisions of Section 72(s) of the Code by
reason of Section 72(s)(5) or any other law or rule. Such contracts include, but
are not limited to, any Contract (i) which is provided under a plan described in
Section 401(a) of the Code which includes a trust exempt from tax under Section
501 of the Code; (ii) which is provided under a plan described in Section 403(a)
of the Code; (iii) which is described in Section 403(b) of the Code; (iv) which
is an individual retirement annuity or provided under an individual retirement
account or annuity as described in Section 408 of the Code; or (v) which is
qualified funding asset (as defined in Section 130 (d) of the Code, but without
regard to whether there is a qualified assignment).
DEATH PROVISIONS
DEATH OF CONTRACT OWNER
If any Contract Owner and the Annuitant are not the same person and such
Contract Owner dies prior to the Annuitization Date, the death benefit
provisions do not apply. The surviving Joint Owner, if any, becomes the new
Contract Owner. If there is no surviving Joint Owner, the Insured becomes the
new Contract Owner. If there is no surviving Joint Owner or Insured, the last
surviving Contract Owner's estate becomes the new Contract Owner. The entire
interest in the Contract must be distributed in accordance with the "Required
Distribution Provisions".
DEATH OF CONTRACT OWNER/ANNUITANT
If any Contract Owner and the Annuitant are the same person, and such person
dies prior to the Annuitization Date, the Death Benefit shall be payable to the
surviving Joint Owner, the Beneficiary, the Contingent Beneficiary or the last
surviving Contract Owner's estate, as specified in the "Beneficiary" section and
distributed in accordance with the "Required Distribution Provisions".
DEATH OF ANNUITANT
If the Contract Owner and the Annuitant are not the same person and the
Annuitant dies prior to the Annuitization Date, a Death Benefit will be payable
to the Beneficiary, the Contingent Beneficiary, or the estate of the last
surviving Contract Owner, as specified in the "Beneficiary" section.
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<PAGE> 16
If the Annuitant dies after the Annuitization Date, any benefit that may be
payable shall be paid according to the Annuity Payment Option selected.
DEATH BENEFIT PAYMENT
The value of the Death Benefit will be determined as of the Valuation Date
coincident with, or next following the date the Company receives in writing at
the Home Office the following three items: (1) proper proof of the Annuitant's
death; (2) an election specifying distribution method; and (3) any applicable
state required form(s).
Proof of death is either:
(1) a copy of a certified death certificate;
(2) a copy of a certified decree of a court of competent jurisdiction as to the
finding of death;
(3) a written statement by a medical doctor who attended the deceased; or
(4) any other proof satisfactory to the Company.
The Beneficiary must elect a method of distribution which complies with the
"Distribution Provisions" of this Contract. The Beneficiary may elect to receive
such Death Benefits in the form of: (1) a lump sum distribution; (2) an annuity
payout; or (3) any distribution that is permitted under state and federal
regulations and is acceptable by the Company. If such election is not received
by the Company within 60 days of the Annuitant's death, the Beneficiary will be
deemed to have elected a cash payment as of the last day of the 60 day period.
Payment of the Death Benefit will be made or will commence within 30 days after
receipt of proof of death and notification of the election.
STANDARD DEATH BENEFIT
If the Annuitant dies at any time prior to the Annuitization Date, the dollar
amount of the Death Benefit will be the greatest of: (1) the Annuity Value; or
(2) the sum of all Purchase Payments, less an adjustment for amounts
surrendered.
The adjustment for amounts surrendered will reduce item (2) above in the same
proportion that the Annuity Value was reduced on the date of the partial
surrender.
ANNUITIZATION PROVISIONS
ANNUITY COMMENCEMENT DATE
The Annuity Commencement Date is a date chosen by the Contract Owner and is
generally the first day of a calendar month. The date must be at least two years
after the Date of Issue. If an Annuity Commencement Date is not chosen by the
Contract Owner, a date will be established for the Contract. The Contract Owner
may change the Annuity Commencement Date prior to the Annuitization Date at any
time via a written request as outlined in the "Change in Annuity Commencement
Date and Annuity Payment Option" section.
The Annuity Commencement Date may be changed but may not be later than the first
day of the first calendar month after the Annuitant's 90th birthday unless
otherwise agreed upon by the Contract Owner and Company.
CHANGE OF ANNUITY COMMENCEMENT DATE AND ANNUITY PAYMENT OPTION
The Contract Owner may change the Annuity Commencement Date and the Annuity
Payment Option prior to the Annuitization Date. Such changes must be in writing
and approved by the Company, and must comply with the "Annuity Commencement
Date" section above. A change will become effective as of the date requested,
but will not apply to any payment made or action taken by the Company before it
is recorded at Home Office.
ANNUITIZATION
Annuitization is irrevocable once payments have begun. To annuitize the
Contract, the Contract Owner shall notify the Company in writing of election of:
(1) an Annuity Payment Option; and
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<PAGE> 17
(2) either a Fixed Payment Annuity, Variable Payment Annuity, or any other
combination that may be available on the Annuitization Date.
Any amounts in the Fixed Account which the Contract Owner elects to annuitize as
a Variable Payment Annuity must be moved to a variable sub-Account prior to the
Annuitization Date.
FIXED PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment of a Fixed Payment Annuity will be determined by applying the
portion of the total Annuity Value specified by the Contract Owner, less
applicable premium tax, to the fixed annuity table in effect on the
Annuitization Date for the Annuity Payment Option elected. The purchase rates
for any options guaranteed to be available will be determined on a basis not
less favorable than the applicable 1983 "Table a" with ages set back six years,
with minimum interest at 3.0%. The determination of the applicable "Table a"
will be based upon the type of Contract issued: Non-Qualified.
The rates shown in the fixed annuity tables are calculated on this guaranteed
basis.
Subsequent fixed annuity payments will remain level unless the Annuity Payment
Option elected dictates otherwise.
VARIABLE PAYMENT ANNUITY - FIRST PAYMENT
A Variable Payment Annuity is a series of payments which are not predetermined
or guaranteed as to dollar amount and which vary in amount with the investment
experience of the underlying Variable Sub-Accounts selected by the Contract
Owner.
The first payment of a Variable Payment Annuity will be determined by applying
the portion of the total Annuity Value specified by the Contract Owner, less
applicable premium taxes, to the variable annuity table in effect on the
Annuitization Date for the Annuity Payment Option elected. The purchase rates
for any options guaranteed to be available will be determined on a basis not
less favorable than the applicable 1983 "Table a" with ages set back six years,
with minimum interest at [3.5%]. The determination of the applicable "Table a"
will be based upon the type of Contract issued: Non-Qualified.
VARIABLE PAYMENT ANNUITY - SUBSEQUENT PAYMENTS
Variable annuity payments after the first payment vary in amount. The payment
amount changes with the investment performance of the Sub-Accounts selected by
the Contract Owner within the Variable Account. The dollar amount of such
payments is determined as follows:
1. The dollar amount of the first annuity payment is divided by the annuity
unit value as of the Annuitization Date. This result establishes the fixed
number of Annuity Units for each monthly annuity payment after the first.
The number of Annuity Units remains fixed during the annuity payment
period.
2. The fixed number of Annuity Units is multiplied by the annuity unit value
for the Valuation Date for which the payment is due. This result
establishes the dollar amount of the payment.
The Company guarantees that the dollar amount of each payment after the first
will not be affected by variations in the Company's expenses or mortality
experience.
ANNUITY UNIT VALUE
An Annuity Unit is used to calculate the value of annuity payments. When the
Underlying Mutual Fund shares were first established, the value of an
Accumulation Unit for each Sub-Account of the Variable Account was arbitrarily
set at $10. The value for any later Valuation Period is found as follows:
1. The Annuity Unit value for each Sub-Account for the immediately preceding
Valuation Period is multiplied by the net investment factor for the
Sub-Account for the Valuation Period for which the Annuity Unit value is
being calculated.
2. The result is multiplied by an interest factor because the assumed
investment rate of [3.5%] per year is built into the purchase rate basis
for Variable Payment Annuities.
FREQUENCY AND AMOUNT OF PAYMENTS
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<PAGE> 18
All annuity payments will be mailed within 10 working days of the first of the
month in which they are scheduled. Payments will be made based on the Annuity
Payment Option selected and frequency selected. However, if the net amount to be
applied to any Annuity Payment Option at the Annuitization Date is less than
[$5,000], the Company has the right to pay such amount in one lump sum in lieu
of periodic annuity payments.
If any payment would be or becomes less than [$50], the Company has the right to
change the frequency of payments to an interval that will result in payments of
at least [$50]. In no event will the Company make payments under an annuity
option less frequently than annually.
ANNUITY PAYMENT OPTIONS
SELECTION OF ANNUITY PAYMENT OPTION
The Contract Owner may select an Annuity Payment Option prior to Annuitization.
If an Annuity Payment Option is not selected, a life annuity with a guarantee
period of 240 months will be the automatic form of payment.
The following are the annuity payment options which are guaranteed to be
available by the Company.
LIFE ANNUITY
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. Payments will cease with the last payment due prior to the death of
the Annuitant.
JOINT AND SURVIVOR ANNUITY
The amount to be paid under this option will be paid during the joint lifetimes
of the Annuitant and a designated second person. Payments will continue as long
as either is living.
LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED
The amount to be paid under this option will be paid during the lifetime of the
Annuitant. A guaranteed period of 120 or 240 months may be selected. If the
Annuitant dies prior to the end of this guaranteed period, the recipient chosen
by the Owner will receive the remaining guaranteed payments.
ANY OTHER OPTION
The amount and period under any other option will be determined by the Company.
Payment options not set forth in the Contract are available only if they are
approved by both the Company and the Annuitant.
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<PAGE> 19
MONTHLY BENEFITS PER $1000 APPLIED
ANNUITY TABLES
JOINT AND SURVIVOR MONTHLY ANNUITY PAYMENTS
ANNUITANT'S AGE LAST BIRTHDAY
<TABLE>
<CAPTION>
FEMALE AGE
----------
50 55 60 65 70
-- -- -- -- --
<S> <C> <C> <C> <C> <C> <C>
MALE AGE 50 3.36 3.46 3.56 3.64 3.71
-------- 55 3.42 3.56 3.69 3.82 3.93
60 3.47 3.64 3.82 3.99 4.16
65 3.70 3.92 4.15 4.39
70 4.00 4.30 4.61
</TABLE>
LIFE ANNUITY: MONTHLY ANNUITY PAYMENTS
<TABLE>
<CAPTION>
MALE GUARANTEED PERIOD FEMALE GUARANTEED PERIOD
ANNUITANT'S ANNUITANT'S
ATTAINED AGE 120 240 ATTAINED AGE 120 240
LAST BIRTHDAY NONE MONTHS MONTHS LAST BIRTHDAY NONE MONTHS MONTHS
------------- ---- ------ ------ ------------- ---- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
50 3.87 3.85 3.77 50 3.59 3.58 3.55
51 3.93 3.90 3.82 51 3.64 3.63 3.59
52 3.99 3.96 3.87 52 3.68 3.67 3.63
53 4.05 4.02 3.92 53 3.74 3.72 3.68
54 4.12 4.09 3.97 54 3.79 3.78 3.72
55 4.19 4.15 4.03 55 3.85 3.83 3.77
56 4.27 4.22 4.08 56 3.90 3.89 3.82
57 4.34 4.30 4.14 57 3.97 3.95 3.88
58 4.43 4.37 4.20 58 4.03 4.01 3.93
59 4.51 4.45 4.26 59 4.10 4.08 3.99
60 4.60 4.54 4.32 60 4.18 4.15 4.04
61 4.70 4.62 4.39 61 4.25 4.22 4.11
62 4.80 4.72 4.45 62 4.34 4.30 4.17
63 4.91 4.82 4.51 63 4.42 4.38 4.23
64 5.03 4.92 4.58 64 4.52 4.47 4.30
65 5.15 5.03 4.65 65 4.61 4.56 4.37
66 5.28 5.14 4.71 66 4.72 4.66 4.44
67 5.43 5.27 4.78 67 4.83 4.76 4.51
68 5.58 5.39 4.84 68 4.95 4.87 4.58
69 5.74 5.53 4.90 69 5.08 4.98 4.65
70 5.91 5.66 4.96 70 5.21 5.10 4.72
71 6.10 5.81 5.02 71 5.36 5.22 4.79
72 6.30 5.96 5.08 72 5.51 5.36 4.86
73 6.51 6.12 5.13 73 5.67 5.50 4.93
74 6.73 6.28 5.18 74 5.85 5.65 5.00
75 6.97 6.44 5.23 75 6.04 5.80 5.06
76 7.23 6.61 5.27 76 6.25 5.97 5.12
77 7.51 6.79 5.31 77 6.47 6.14 5.18
78 7.80 6.96 5.34 78 6.71 6.32 5.23
79 8.12 7.14 5.37 79 6.98 6.50 5.28
80 8.46 7.32 5.40 80 7.26 6.69 5.32
</TABLE>
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<PAGE> 20
DISABILITY PROVISIONS
DEFINITION OF DISABILITY
The Insured is totally disabled if a Licensed Health Care Practitioner certifies
either of the following:
a. The Insured is unable to perform, without regular human assistance or
supervision, 2 of the 6 Activities of Daily Living; or
b. The Insured has a severe Cognitive Impairment.
The total disability must begin while this Contract is in force. Following the
Elimination Period, for each day that the Insured is totally disabled, the
Company will pay the Insured the daily benefits for care received as described
in this provision. The sum of all days received shall not exceed the Maximum
Lifetime Benefit listed in the Data Page.
BENEFITS
LONG-TERM CARE FACILITY BENEFIT
During a period of total disability, if the Insured requires and receives
Long-Term Care in a Long-Term Care Facility, for each day of the Insured's stay,
following the Elimination Period, the Company will pay the lesser of:
1. The Maximum Daily Facility Benefit, or
2. The charges made by the Long-Term Care Facility for the Insured's Long-Term
Care, including room and board.
Any benefits payable under this provision will count toward the Maximum Lifetime
Benefit.
HOME AND ADULT DAY CARE BENEFIT
During a period of total disability, each day, following the Elimination Period,
the Insured requires and receives Long-Term Care in a Home Convalescent Unit or
Adult Day Care center, the Company will pay, the lesser of:
1. The Maximum Daily Home Health Care Benefit; or
2. The total of:
a. The expenses incurred for occupational, physical, respiratory, or
speech therapy; or nursing care services provided by a registered
nurse (R.N.) or a licensed practical or vocational nurse (L.P.N.
or L.V.N.), and
b. The expenses incurred for services provided by a medical social
worker, home health aide, homemaker and similar services; and
c. The expenses incurred for Adult Day Care.
Each day that the Insured receives benefits under this provision will count
toward the Maximum Lifetime Benefit. Benefits cannot be collected under both the
Assisted Living Facility Benefit and this benefit for the same day.
ASSISTED LIVING FACILITY BENEFIT
During a period of total disability, each day, following the Elimination Period,
the Insured requires and receives Long-Term Care, including room and board, in
an Assisted Living Facility, the Company will pay the lesser of:
1. The Maximum Daily Facility Benefit shown in the Schedule, or
2. The expenses incurred for such care.
Each day that the Insured receives benefits under this provision will count
toward the Maximum Lifetime Benefit. Benefits cannot be collected under both the
Home and Adult Day Care Benefit and this benefit for the same day.
RESPITE CARE BENEFIT
During a period of total disability, the Company will pay for up to 21 days of
Respite Care per year as follows:
1. For Respite Care provided by a Long-Term Care Facility or Assisted Living
Facility, the lesser of:
a. The Maximum Daily Facility Benefit shown in the Schedule, or
b. The expenses incurred for each day of such care.
2. For Respite Care received in a Home Convalescent Unit or Home Health Care
facility, the lesser of:
a. The Maximum Daily Home Health Care Benefit, or
b. The expenses incurred for each day of such care.
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<PAGE> 21
The Elimination Period does not apply to this benefit and days of Respite Care
will not be used to satisfy the Elimination Period. Unused days cannot be
carried over into the next calendar year. Any benefits payable under this
provision will count toward the Maximum Lifetime Benefit as shown in the Data
Page. The benefit will be paid using the following formula:
Cost paid out (divided by) the Maximum Daily Facility Benefit will
equal the number of days of Respite Care used.
Benefits cannot be collected under both 1 and 2 of this section for the same
day.
MEDICAL HELP BENEFIT
During a period of total disability, the Company will pay for either the actual
monthly rental and monitoring charges incurred or the actual purchase and
monitoring cost of a Medical Help System, up to 25% of the Maximum Daily Home
Health Care Benefit, for up to 12 months in the Insured's lifetime. The Company
will, in good faith, determine whether to rent or purchase a Medical Help
System.
The Company will only pay the Medical Help Benefit for a system installed in the
Insured's home while this Contract is in force.
The Company will not pay for any charges for normal telephone service while the
system is installed or for a home security system.
Benefits payable under this provision will not count toward the Maximum Lifetime
Benefit or toward satisfaction of the Elimination Period.
CAREGIVER TRAINING BENEFIT
During a period of total disability, if the Insured requires Long-Term Care, the
Company will pay 100% of the expenses incurred for Caregiver Training. This may
not exceed 5 times the Maximum Daily Home Health Care Benefit during a Plan of
Treatment. The Elimination Period does not apply to this benefit. If the Insured
requires a stay in a Long-Term Care Facility or is hospitalized, this benefit
will be payable only if the training will make it possible to return to or
remain in a Home Convalescent Unit where care can be provided by an Informal
Caregiver.
Benefits payable under this provision will count toward the Maximum Lifetime
Benefit.
BED RESERVATION BENEFIT
During a period of total disability, following the Elimination Period, the
Company will continue to pay the Maximum Daily Facility Benefit when the Insured
is charged for a room in a Long-Term Care Facility while temporarily absent, due
to hospitalization, during the course of a Long-Term Care Facility stay. During
the Elimination Period, the Company will credit, toward the Elimination Period,
each day the Insured is charged for a room in a Long-Term Care Facility while
temporarily absent, due to hospitalization, during the course of a Long-Term
Care Facility stay.
This Benefit will be limited to 21 days per calendar year. Unused days cannot be
carried over into the next calendar year.
Benefits payable under this provision will count toward the Maximum Lifetime
Benefit.
ALTERNATE PLAN OF CARE BENEFIT
During a period of total disability, if the Insured would otherwise require a
Long-Term Care Facility stay under a Plan of Treatment, the Company may pay for
alternate services, devices or types of care under a written Alternate Plan of
Care. Such plan must be medically acceptable. This Alternate Plan of Care:
1. must be agreed to by the Insured, the Insured's physician, and the
Company;
2. will be developed by or with Licensed Health Care Professionals; and
3. must be developed in good faith by all parties.
Any plan, including the benefit levels to be payable, may be adopted as long as
it is mutually agreed to by the parties. The Company is not obligated to provide
benefits for services received prior to such agreement.
Benefits provided in this section are in place of other benefits that would be
available to the Insured.
This plan may specify special treatments or different sites or levels of care.
Some of the services the Insured may receive may differ from those otherwise
covered by this Contract. In this case, benefits will be paid at the levels
specified and agreed to in the Alternate Plan of Care.
Any benefits payable under this provision will count toward the Maximum Lifetime
Benefit.
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<PAGE> 22
CARE MANAGEMENT SERVICES
During a claim, the Company may, with the Insured's agreement, provide access to
care management professionals who can work with the Insured, the Insured's
family, and the Insured's doctor to determine and monitor the appropriate plan
of care. This can include assessments of the Insured's circumstances and
investigation of available care resources.
DEATH BENEFIT
Should the Insured die while the Disability Provisions of this Contract are in
force, the Company will pay a death benefit, if greater than zero, based upon
the following:
1. Amounts applied to the Contract as Premium, minus Disability benefits
paid, plus
2. Purchase Payments, minus amounts withdrawn from the Annuity Portion,
minus
3. The greater of the Purchase Payments or the Annuity Value at the
Insured's death.
The Company will pay the Disability Death Benefit in the following order:
1. to the Contract Owner, if living;
2. to the Beneficiary or Contingent beneficiary, if living; or
3. to the estate of the last surviving Contract Owner.
Such payment shall completely discharge the Company from all obligations under
the Disability Provisions. This Death Benefit is unaffected by the Death Benefit
provided for in the Annuity Provision of this Contract.
EXCLUSIONS
This Contract does not cover any expense that results from:
1. suicide, intentionally self-inflicted injuries or attempts at suicide
(either while sane or insane);
2. committing or attempting to commit a felony;
3. a condition for which the Insured can receive benefits under Workers'
Compensation or similar legislation;
4. a mental, psychoneurotic, or personality disorder without evidence of
organic disease (Alzheimer's Disease and senile dementia are not excluded
from coverage);
5. alcoholism or drug addiction, unless addiction results from administration
of drugs for treatment prescribed by a physician;
6. service in the armed forces or units auxiliary thereto;
7. war or any act of war, whether declared or undeclared;
This Contract does not cover any expenses:
a. which are provided under title XVIII of the Social Security Act
(Medicare) or would be so reimbursable but for the application of a
deductible or coinsurance amount; or
b. which are provided under any other federal, or state health care plan
or law, except Medicaid.
The Company will reduce the Insured's benefits payable dollar for
dollar for amounts paid from the government health care plan or law to
the extent that the combination of the Company's coverage and
governmental coverage exceeds 100% of the actual charge for the covered
services.
If the Insured has benefits paid or payable by other medical expense or
liability coverage that this Contract would also pay for, then the Insured's
benefits will be the lesser of:
a. The benefits which would be paid by this Contract in the absence of
that coverage; or
b. Those benefits incurred which are not paid or payable by the other
coverage.
PRE-EXISTING CONDITION LIMITATION
The Company will not pay for any medical expenses which are incurred during the
six-month period which follows the date the Insured becomes covered under this
Contract if such expense results from a Pre-Existing Condition. A disease or
physical condition is a Pre-Existing Condition if, during the six-month period
just prior to the date the inured became covered under this Contract, either:
1. Medical advice or treatment was given to the Insured for the
condition; or
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<PAGE> 23
2. The Insured had symptoms of the condition that would have caused an
ordinarily prudent person to seek medical care.
This exclusion shall not apply if such condition is shown in the application for
insurance and is not specifically excluded from coverage.
If this Contract replaces a long-term care insurance policy, the 6-month time
period above is waived to the extent it was satisfied under the replaced policy.
Losses due to Pre-existing Conditions shown on the application are covered
immediately.
GENERAL PROVISIONS
------------------
ENTIRE CONTRACT
This document is the whole Contract between the Contract Owner and the Company.
This Contract, Data Page, application, Riders, and Endorsements(s), if any, make
up the entire Contract. No change in this Contract will be valid until approved
by one of the Company's officers. This approval must be noted on or attached to
this Contract. No agent may change this Contract or waive any of its provisions.
NON-PARTICIPATING
The Contract is non-participating. It will not share in the surplus of the
Company.
CONTRACT SETTLEMENT
The Company may require the Contract to be returned to the Home Office prior to
making any payments. All sums payable to or by the Company under this Contract
are payable at the Home Office.
EVIDENCE OF SURVIVAL
Where any payments under this Contract depend on the recipient being alive on a
given date, proof that such person is living may be required by the Company.
Such proof may be required prior to making the payments.
ALTERATION OR MODIFICATION
All changes in or to the terms of the Contract must be: (1) made in writing; and
(2) signed by the President or Secretary of the Company. No other person can
alter or change any of the terms or conditions of the Contract.
The Company reserves the right to discontinue the Fixed Account option as of a
specific date, and not accept future deposits in the Fixed Account.
ASSIGNMENT
Where permitted, a Contract Owner may assign some or all rights under the
Annuity Provisions of this Contract at any time during the lifetime of the
Annuitant, prior to the Annuitization Date. The Company shall not be liable as
to any payment or other settlement made by the Company before recording of the
assignment. The Company is not responsible for the validity or tax consequences
of any assignment. Such assignment will take effect upon receipt and recording
by the Company at its Home Office of written notice executed by the Contract
Owner. Where necessary for proper administration of the terms of the Contract,
an assignment will not be recorded until the Company has received sufficient
direction from the Contract Owner and assignee as to the proper allocation of
Contract rights under the assignment.
The value of any portion of the Contract which is assigned, pledged or
transferred by gift may be treated like a cash withdrawal for federal tax
purposes and may be subject to a tax penalty. All rights in this Contract are
personal to the Contract Owner and may not be assigned without written consent
of the Company.
No assignment of interest under the Disability Provisions of this Contract will
be binding upon the Company unless and until the original or duplicate of the
assignment is received by the Company at the Home Office in Columbus, Ohio. Any
assignment will be subject to any payment made by the Company before the
assignment is received in the Home Office and will be subject to any right of
offset which the Company may be entitled to assert. The Company is not
responsible for the validity or sufficiency of any assignment.
PROTECTION OF PROCEEDS
Proceeds under this Contract are not assignable by any Beneficiary prior to the
time they are due. Proceeds are not subject to the claims of creditors or to
legal process, except as mandated by applicable laws.
22
<PAGE> 24
MISSTATEMENT OF AGE OR SEX
If the age or sex of the Annuitant has been misstated, all payments and benefits
under Annuity Provisions of this Contract will be adjusted. Payments and
benefits will be made, based on the correct age or sex. Proof of age of an
Annuitant may be required at any time, in a form satisfactory to the Company.
When the age or sex of an Annuitant has been misstated, the dollar amount of any
overpayment under the Annuity Provisions will be deducted from the next payment
or payments due under the Contract. The dollar amount of any underpayment under
the Annuity Provisions made by the Company as a result of any such misstatement
will be paid in full with the next payment due under the Contract.
If the Insured's age or sex has been misstated, the benefits paid pursuant to
the Disability Provisions of the Contract will be those that the Premium paid
would have purchased at the true age or sex. However, if the Insured's true age
on the Contract date was such that the Company would not have sold the Contract,
then the Company will be liable for no more than the return of the Premiums that
have been paid. The Annuity Provisions of the Contract will continue to be in
force.
REPORTS
At least once each year, prior to the Annuitization Date, a report showing the
Annuity Value will be provided to the Contract Owner.
NUMBER AND GENDER
Unless otherwise provided, all references in this Contract which are in the
singular form will include the plural; all references in the plural form will
include the singular; and all references in the male gender will include the
female and neuter genders.
TIME LIMIT ON CERTAIN DEFENSES
1. After 2 years from the effective date of coverage of this Contract,
excluding any period during which the Insured is totally disabled, only
fraudulent misstatements made by the Insured in the application may be used
to void the Contract or deny benefits for loss incurred after such two-year
period.
2. No claim for loss incurred or total disability that starts after the 6
month period which follows the date the Insured becomes covered under this
Contract will be reduced or denied on the ground that a sickness or
physical condition existed prior to the effective date of coverage.
NOTICE OF CLAIM
Written notice of a total disability must be given within 30 days after the
total disability starts or as soon as reasonably possible. The notice can be
given to the Company in Columbus, Ohio, or to any of the Company's authorized
agents. The notice should include the Insured's name and Contract number.
CLAIM FORMS
When the Company receives notice of a total disability, it will send the
claimant forms for filing proof of loss. If these forms are not sent within 15
days after notice has been given, the claimant will meet the proof of loss
requirements by giving the Company a written statement of the nature and extent
of the loss within the time limit stated in the Proof of Loss Section.
PROOF OF LOSS
Written proof of loss must be given to the Company in Columbus, Ohio, within 90
days after the termination of the period for which the Company is liable. If it
was not reasonably possible to give written proof in the time required, the
Company will not reduce or deny the claim for this reason if the proof is given
as soon as reasonably possible. In any event, the proof required must be given
no later than 1 year from the time specified unless the claimant was legally
incapacitated.
TIME PAYMENT OF CLAIMS
Benefits for any loss covered by this Contract will be paid as soon as the
Company receives proper written proof of loss.
PAYMENT OF BENEFITS
All benefits under the Disability Provisions of this Contract will be paid to
the Insured, or the Insured's assignee if one has been named. Any benefits
unpaid at the Insured's death will be paid to the Insured's estate. If any
benefit is payable to the Insured's estate or to a person who cannot execute a
valid release, the Company may pay benefits up to $1,000 to someone related to
the Insured or such person by blood or marriage whom the Company deems to be
entitled to the benefits. The Company will be discharged to the extent of such
payment made in good faith.
23
<PAGE> 25
PHYSICAL EXAMINATIONS AND AUTOPSY
The Company, at its own expense, has the right to have the Insured examined as
often as it is reasonably needed while a claim is pending. The Company, at its
own expense, has the right to make an autopsy in case of death where it is not
forbidden by law.
EFFECT OF CANCELLATION ON THE DISABILITY PREMIUM
If the Contract Owner wishes to cancel the Disability Provision of this
Contract, the Company will return a portion of the Premium paid (minus
Disability benefits paid) to the Contract Owner, according to the table shown
below.
------------------------ --------------------------
------------------------ --------------------------
1st Contract Year 80%
2nd Contract Year 72%
3rd Contract Year 64%
4th Contract Year 56%
5th Contract Year 48%
6th Contract Year 40%
7th Contract Year 32%
8th Contract Year 24%
9th Contract Year 16%
10th Contract Year 8%
11th Contract Year 0%
------------------------ --------------------------
Once the Disability Provisions of this Contract are cancelled, no Disability
Benefits will be paid. The Contract Owner may NOT cancel the Disability
Provision if the Insured is currently receiving Disability benefits.
LEGAL ACTIONS
No legal action may be brought to recover on this Contract within 60 days after
written proof of loss has been given as required by this Contract. No such
action may be brought after 2 years from the time written proof of loss is
required to be given.
CONFORMITY WITH STATE STATUTES
Any provision of this Contract that, on its effective date, is in conflict with
the laws of the state in which the Contract Owner lives on that date is amended
to conform to the minimum requirements of such laws.
IN WITNESS WHEREOF
The Company's President and Secretary have signed this Contract, but it shall
not bind the Company unless the Contract is countersigned by one of its licensed
resident agents.
/s/ Dennis W. Celick /s/ Joseph J. Graham
SECRETARY PRESIDENT
24
<PAGE> 1
EXHIBIT NO.5
THE VARIABLE ANNUITY APPLICATION FORM
<PAGE> 2
================================================================================
WELCOME TO
NATIONWIDE LIFE
INSURANCE COMPANY
SPECIMEN COPY
APO-4453-OH (O4/1999)
================================================================================
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY
[P.O. Box 16786], Columbus, OH [43216-6786]
===========================================================================================================
A. CONTRACT OWNER
===========================================================================================================
<S> <C>
Name of Contract Owner (last, first, middle initial) Sex M / F
------------------------------
Date of Birth / / Age Last Birthday Social Security Number
------------------- --- ---------------------
Address City State Zip
----------------------------------- --------------- ---------- ------------------
County Relationship to Proposed Insured
---------------------- ------------------------------------------
=============================================================================================================
B. PROPOSED INSURED
=============================================================================================================
Name of Proposed Insured (last, first, middle initial) Sex M / F
-------------------------------
Height Ft. In. Weight lbs.
------ ----- -------------
Date of Birth / / Age Last Birthday Social Security Number
----------------- --- -----------------------
Address City State Zip
-------------------------- ------------------ ---------------- -------------
County Type of Employment Marital Status: Married Single Other
---------------------- ------------------
Daytime Telephone Number ( ) Best Time To Call: A.M. P.M.
------------------------- ---- ----
Evening Telephone Number ( ) Best Time To Call: A.M. P.M.
------------------------- ---- ----
=============================================================================================================
C. ANNUITANT (Please complete if different than proposed Insured)
=============================================================================================================
Name of Proposed Insured (last, first, middle initial) Sex M / F
----------------------------
Date of Birth / / Age Last Birthday Social Security Number
-------------------- --- -----------------
Address City State Zip
---------------------------- --------------------------- ------------------ -----------
=============================================================================================================
D. PART I - MEDICAL QUESTIONS (To be answered by the proposed Insured)
=============================================================================================================
If any question in Part 1 is answered "Yes", the proposed insured is ineligible for coverage.
YES NO
1. During the past 10 YEARS, have you been diagnosed, had symptoms of, consulted for, or been
treated by a member of the medical profession for any of the following:
a. Acquired Immune Deficiency Syndrome (AIDS), AIDS-related complex (ARC), or any other
AIDS-related condition, or received a positive result of an HIV test?...................... [ ] [ ]
b. Alzheimer's Disease, Organic Brain Syndrome, Mental Retardation, Malignant Brain
Tumor, Benign Brain Tumor (within the past 60 months), Senility, Confusion, Disorientation,
Schizophrenia, Memory Loss or Dementia?.................................................... [ ] [ ]
c. Parkinson's Disease, Multiple Sclerosis, Lou Gehrig's Disease/Amyotrophic Lateral
Sclerosis (ALS), Systemic Lupus Erythematosus or Peripheral Neuropathy?.....................[ ] [ ]
d. More than one Stroke or Trans-Ischemic Attack (TIA), Congestive Heart Failure,
Cerebral Vascular Disease, Neurogenic Bladder, Kidney Failure, Chronic Obstructive
Pulmonary Disease (COPD), Respiratory Failure, Cirrhosis of the Liver, or unoperated
Aneurysm?.................................................................................. [ ] [ ]
2. Are you confined to bed or house or require assistance or supervision or limited in any
way from performing any of the following daily activities: bathing, continence, eating,
dressing, toileting, transferring (moving into or out of a bed, chair, or wheel chair)?........ [ ] [ ]
3. Are you using any medical appliance such as but not limited to, oxygen equipment
(Continuous Positive Airways Pressure, CPAP machine not included) or dialysis equipment or
dependent on the use of the walker, a wheelchair, or other motorized ambulatory device?........ [ ] [ ]
4. Do you have an authorized Power of Attorney in place currently, due to any present or past,
mental or physical disability?..................................................................[ ] [ ]
5. Are you eligible for or receiving disability benefits? (Disability benefits received as a
result of military service are not included in the above question.)............................ [ ] [ ]
6. Are you a foreign national (not a citizen of the United States of America), or do you reside or
have any plans to reside outside of the United States or Canada?............................... [ ] [ ]
=============================================================================================================
E. JOINT CONTRACT OWNER - OPTIONAL (Spouse only, unless prohibited by law)
=============================================================================================================
Name of Joint Contract Owner of Annuity (last, first, middle initial) Sex M / F
-------------------
Date of Birth / / Age Last Birthday Social Security Number
-------------------- --- --------------
Address City State Zip
----------------------------------- ---------------- ----------------- --------
County Relationship to Proposed Insured
----------------------------------- ---------------------------
- --------------------------------------------------------------------------------------------------------------
</TABLE>
APO-4453-OH (O4/1999)
<PAGE> 4
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
F. BENEFICIARY DESIGNATION
- ----------------------------------------------------------------------------------------------------------------------
Relationship Social Birthdate
Primary Contingent Print Full Name (Last, First, MI) Allocation to Annuitant Security Number MM/DD/YYYY
<S> <C> <C> <C> <C> <C> <C>
[ ] [ ] %
--------------------------------- ---------- ------------ --------------- --------------
[ ] [ ] %
--------------------------------- ---------- ------------ --------------- --------------
[ ] [ ] %
--------------------------------- ---------- ------------ --------------- --------------
[ ] [ ] %
--------------------------------- ---------- ------------ --------------- --------------
</TABLE>
<TABLE>
<CAPTION>
========================================================================================================================
G. INSURANCE INFORMATION
========================================================================================================================
1. a. List all Long Term Care Insurance now in force OR lapsed on the proposed Insured. If None, write "NONE."
- ------------------------------------------------------------------------------------------------------------------------
CONTRACT OWNER
COMPANY POLICY NUMBER TO BE REQUESTED YEAR LAPSE OR
REPLACED? EFFECTIVE DATE? ISSUED DATE PROPOSED INSURED
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
[ ] YES [ ] NO
- ------------------------------------------------------------------------------------------------------------------------
[ ] YES [ ] NO
- ------------------------------------------------------------------------------------------------------------------------
[ ] YES [ ] NO
- ------------------------------------------------------------------------------------------------------------------------
[ ] YES [ ] NO
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C>
b. Will the contract applied for replace existing Annuities on the Contract Owner or Long Term Care YES NO
Insurance on the proposed Insured? (If "Yes", so indicate party beside A above.)......................... [ ] [ ]
(Complete and send replacement and/or 1035 forms where applicable.)
c. Is the proposed Insured now applying for Long Term Care Insurance with any other company? If "Yes",
state the company and daily benefit amount being applied for......................................... [ ] [ ]
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
d. List all health policies that are still in force, or lapsed, that the agent/broker has sold the
proposed Insured within the past five years.
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
_______________________________________________________________________________________________________
</TABLE>
================================================================================
H. PURCHASE PAYMENT ALLOCATIONS
================================================================================
Annuity Purchase Payments will be allocated to the Nationwide Separate Account
Trust Money Market Fund Sub-Account until the end of the Free Look Period. When
this period ends, your Annuity Value will be allocated to the Sub-Account(s)
indicated below. Selections must be in whole percentages and total 100%. (Rider
Premium Payments do not receive any investment earnings.)
The underlying mutual fund options listed on this application are only available
in variable annuity insurance products issued by life insurance companies or, in
some cases, through participation in certain qualified pension or retirement
plans. They are NOT offered to the general public directly.
AMERICAN CENTURY VARIABLE
PORTFOLIOS, INC.
_____ % VP Income & Growth
_____ % VP International
_____ % VP Value
DREYFUS
_____% Socially Responsible Growth Fund, Inc.
_____% Stock Index Fund, Inc.
DREYFUS VARIABLE INVESTMENT FUND
_____% Capital Appreciation Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS
FUND
_____% VIP Equity-Income Portfolio (Service Class)
_____% VIP Growth Portfolio (Service Class)
_____% VIP High Income Portfolio (Service Class)
_____% VIP Overseas Portfolio (Service Class)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
_____% VIP II Contrafund Portfolio (Service Class)
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
_____% VIP III Growth Opportunities Portfolio (Service Class)
MORGAN STANLEY UNIVERSAL FUNDS, INC.
_____% Emerging Markets Debt Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
_____% Capital Appreciation Fund
_____% Government Bond Fund
_____% Money Market Fund
_____% Total Return Fund
NATIONWIDE SUBADVISED FUNDS
Fund Name (Subadvisor) %
_____% Balanced Fund (Salomon Brothers)
_____% Equity Income Fund (Federated)
_____% Global Equity Fund (JP Morgan)
_____% High Income Bond Fund (Federated)
_____% Multi Sector Bond Fund (Salomon Brothers)
_____% Select Advisers Mid Cap Fund (United Asset Managers)
_____% Small Cap Value Fund (Dreyfus)
_____% Small Company Fund (Multi Managers)
_____% Strategic Growth Fund (Strong)
_____% Strategic Value Fund (Strong/Schafer)
NEUBERGER & BERMAN ADVISORS
MANAGEMENT TRUST
_____% AMT Guardian Portfolio
_____% AMT Mid-Cap Growth Portfolio
_____% AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
_____% Aggressive Growth Fund
_____% Growth Fund
_____% Growth & Income Fund
VAN ECK WORLDWIDE INSURANCE TRUST
_____% Worldwide Emerging Markets Fund
_____% Worldwide Hard Assets Fund
VAN KAMPEN LIFE INVESTMENT TRUST
_____% Morgan Stanley Real Estate Securities
Portfolio
WARBURG PINCUS TRUST
_____% Growth & Income Portfolio
_____% International Equity Portfolio
_____% Post-Venture Capital Portfolio
MVA/GUAR. TERM OPTION
_____% 3 Year $1,000 minimum
_____% 5 Year for each MVA/GTO
_____% 7 Year option.
_____% 10 Year
NATIONWIDE LIFE INSURANCE CO.
_____% Fixed Account
================================================================================
APO-4453-OH (04/1999)
<PAGE> 5
<TABLE>
<CAPTION>
========================================================================================
I. SUITABILITY QUESTIONS
========================================================================================
DOES OR HAS THE CONTRACT OWNER: YES NO
<S> <C> <C>
1. Understand that the death benefits and Annuity Value may increase or
decrease depending on the investment experience of the variable
account?................................................................... [ ] [ ]
2. Believe that this Contract will meet the insurance needs of the Contract
Owner(s) and the proposed Insured, and their financial
objectives?................................................................ [ ] [ ]
3. Received the following items:
a. Current copy of the prospectus?....................................... [ ] [ ]
b. Outline of Coverage for the contract applied for?..................... [ ] [ ]
c. The applicable Shopper's Guide or Buyer's Guide?.......................[ ] [ ]
d. The completed Personal Worksheet?......................................[ ] [ ]
e. Things You Should Know Before You Buy Long Term Care Insurance
Publication?...........................................................[ ] [ ]
</TABLE>
<TABLE>
<CAPTION>
=======================================================================================
J. PART II - MEDICAL QUESTIONS (To be answered by the proposed Insured)
=======================================================================================
YES NO
<S> <C> <C>
1. Has the proposed Insured experienced, or is the proposed Insured
experiencing any difficulties such as shortness of breath, dizziness,
or leg cramps when 4 blocks are walked at a normal pace?................... [ ] [ ]
2. During the past 12 MONTHS has the proposed Insured:
a. Been confined to a hospital, nursing home, or other facility?..........[ ] [ ]
b. Received home care services, physical or rehabilitative therapy?.......[ ] [ ]
c. Sought medical advice or treatment for loss of appetite, falling,
fainting, unstable gait, bladder control, dizziness, or
deterioration of vision?.............................................. [ ] [ ]
d. Been limited in any way, or used any equipment such as crutches to
aid in mobility?.......................................................[ ] [ ]
e. During the past 12 MONTHS, used any tobacco products, including
but not limited to cigarettes, pipe, cigar or chewing tobacco?.........[ ] [ ]
3. DURING THE PAST 10 YEARS HAS THE PROPOSED INSURED EVER BEEN DIAGNOSED OR HAD
SYMPTOMS OF OR CONSULTED FOR OR RECEIVED MEDICATION FOR, OR BEEN TREATED BY
A MEMBER OF THE MEDICAL PROFESSION FOR ANY OF THE FOLLOWING CONDITIONS:
a. Alcoholism, Drug or Substance Abuse?...................................[ ] [ ]
b. Amputation, Arthritis (Prescription Drugs), Fractures or Joint
Replacement, Inflammatory Arthritis of any type, Osteoporosis,
or Spine or Back Disorders?............................................[ ] [ ]
c. Anemia, Cancer, Epilepsy, Meniere's Disease, Sleep Apnea,
Ulcerative Colitis, or Other Inflammatory Bowel Disease?...............[ ] [ ]
d. Dizziness (other than Meniere's Disease), Macular Degeneration?........[ ] [ ]
e. Anxiety, Depression, Mental, Nervous, Psychotic, or Neurological
Disorders?.............................................................[ ] [ ]
f. Angina (Chest Pain), Angioplasty, Arrhythmia, Coronary Artery
Disease, Heart Attack, Heart Surgery? .................................[ ] [ ]
g. Arteriosclerosis, Carotid Artery Disease, Peripheral Vascular
Disease (Reduced circulation in extremities), Phlebitis or Skin
Ulcers?................................................................[ ] [ ]
h. Diabetes Mellitus, Kidney or Renal Failure?............................[ ] [ ]
4. TO THE BEST OF YOUR KNOWLEDGE AND BELIEF; HAVE YOU EVER BEEN TREATED
FOR OR DIAGNOSED AS HAVING ANY OF THE FOLLOWING CONDITIONS:
a. Significant Heart Defects, Disease or Disorder (other than Mitral
Valve Prolapse or Functional Heart Murmur)?............................[ ] [ ]
b. Respiratory Disorders (other than Asthma or Acute Bronchitis)?.........[ ] [ ]
c. Amputation, Joint Disorder or Replacement?.............................[ ] [ ]
d. Stroke, Transient Ischemic Attack (TIA)?...............................[ ] [ ]
e. Chronic Obstructive Pulmonary Disease (COPD)?..........................[ ] [ ]
f. Black Lung?............................................................[ ] [ ]
5. Within the last 5 YEARS, have you been treated by a health
professional for any condition(s) not named above, or contemplated
or advised to have any surgery, hospitalization treatment, test or
referral that was not completed?...........................................[ ] [ ]
=======================================================================================
APO-4453-OH (04/1999)
</TABLE>
<PAGE> 6
===============================================================================
6. Please list the details of the physician who treated the proposed Insured
for any "Yes" answers to questions 1 through 5.
===============================================================================
<TABLE>
<S> <C> <C>
Question # _____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -----------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -----------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -----------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -----------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -----------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -----------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -----------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -----------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -----------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
</TABLE>
===============================================================================
YES NO
7. Are there any prescriptions being taken other than listed above?
If "Yes", please list........................................... [ ] [ ]
----------------------------------------------------------------
8. Has the proposed Insured ever had their driver's license suspended
or revoked, or had more than one moving violation within the past
three years? If "Yes", give details.............................. [ ] [ ]
------------------------------------------------------------------
===============================================================================
K. SPECIAL INSTRUCTIONS
===============================================================================
===============================================================================
APO-4453-OH (04/1999)
<PAGE> 7
===============================================================================
L. INFLATION PROTECTION COVERAGE
===============================================================================
I (We) the Contract Owner(s) have been informed of right to purchase an
inflation protection benefit which increases the disability dollar benefit
limits annually based on the options chosen below. This benefit and the costs
have been fully explained.
[ ] I (WE) ELECT to have a compound inflation protection benefit rider of:
[ ] 5 [[ ] 7 OR [ ] 10 percent ]
[ ] I (WE) DO NOT ELECT to have an inflation protection benefit. I (We) have
reviewed the outline of coverage which compares the benefits and premiums of
this policy with and without inflation protection. Specifically, I (We) have
reviewed my (our) options, and I (We) reject inflation protection. I (We)
understand that any optional benefit increase based on simple interest is
not intended to account for reasonably anticipated increases in the costs of
disability care services covered by the policy.
===============================================================================
M. AGREEMENT, AUTHORIZATION AND SIGNATURES
===============================================================================
I (We) have read this application. I (We) understand each of the questions. All
of the answers and statements on this form are complete and true to the best of
my/our knowledge and belief.
If Partial Premiums are to be returned, Nationwide is to:
[ ] Return the Partial Premiums [ ] Transfer the Partial Premiums as a
to the Payor. Purchase Payment to the Annuity.
I (We) understand and agree that:
1. This application, any amendments to it, and any related medical examinations
will become a part of the Contract and are the basis of any insurance issued
upon this application.
2. Any person who submits an application or a claim containing a false or
deceptive statement, and does so with intent to defraud or knowing that
he/she is facilitating a fraud against an insurer, is guilty of insurance
fraud.
3. No medical examiner and no agent or other representative of Nationwide may
accept risks or make or change any contract, or waive or change any of the
Company's rights or requirements.
4. If the full Premium Payment is made in exchange for a Temporary Insurance
Receipt (with the same date and number as this form), Nationwide will only
be liable to the extent set forth in that receipt.
5. IF THE FULL PREMIUM AND PURCHASE PAYMENT IS NOT PAID WITH THIS APPLICATION,
THEN INSURANCE WILL ONLY TAKE EFFECT WHEN ALL OF THE FOLLOWING CONDITIONS
ARE MET:
A. A CONTRACT IS ISSUED BY NATIONWIDE AND IS ACCEPTED BY ME(US); AND
B. THE FULL PREMIUM AND PURCHASE PAYMENT IS PAID; AND
C. ALL THE ANSWERS AND STATEMENTS MADE ON THE APPLICATION, MEDICAL
EXAMINATION(S) AND AMENDMENTS CONTINUE TO BE TRUE TO THE BEST OF MY/OUR
KNOWLEDGE AND BELIEF.
6. Should this application fail underwriting all premiums and purchase payments
will be returned to the payor.
I (We) have received the pre-notice form of the Fair Credit Reporting Act of
1970 and the Medical Information Bureau disclosure form. I (We) certify that the
Social Security Number given is correct and complete.
I, the proposed Insured, authorize: any licensed physician or medical
practitioner; any hospital, clinic or other medical or medically related
facility; any insurance company; the Medical Information Bureau; or any other
organization, institution or person who has knowledge of me; to give information
relevant to this application to the Medical Director of the Nationwide Life
Insurance Company, or its reinsurers. This authorization includes information
about drugs, alcoholism or mental illness. This authorization, or a copy of it,
will be valid for a period of not more than two and one-half years from the date
it was signed.
[ ] THE FULL PREMIUM AND PURCHASE PAYMENT IS BEING SENT WITH THE
APPLICATION.
[ ] THE FULL PREMIUM AND PURCHASE PAYMENT IS NOT BEING SENT WITH THE
APPLICATION.
I acknowledge that I have received a copy of the current prospectus for this
variable annuity contract.
[ ] Yes [ ] No Do you have any reason to believe the Contract applied
for is to replace existing annuities or insurance
[ ] Please send me a copy of the Statement of Additional Information to the
Prospectus.
Signed at_________________________, on __________________________, ___________.
<TABLE>
<S> <C>
- -------------------------------------------
I have truly and accurately recorded all Contract Owner
and proposed Insured's answers on this application and
have witnessed his/her/their signature(s) hereon.
To the best of my knowledge, the insurance applied for [ ] ----------------------------------
will [ ] will not (CHECK ONE) replace any life insurance, Signature of Proposed Insured
annuity, or long term care policy.
- --------------------------------------------------------- ----------------------------------
Licensed Resident Agent Signature Firm Signature of Contract Owner
- --------------------------------------------------------
Agent's Name (Print) License ID Number
- ------------------------------------------ ----------------------------------
NO. Signature of Joint Owner
</TABLE>
===============================================================================
APO-4453-OH (04/1999)
<PAGE> 8
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
AGENT CERTIFICATE
- ------------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------- ------------------------------------------------------------------------------------
ANNUITY DEATH BENEFIT OPTION DISABILITY BENEFIT SELECTIONS
- ----------------------------------------------- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(If no option selected, the Death Benefit Maximum Lifetime Benefit: |_|3 |_|4 |_| 5 or |_| 10 years |_| Lifetime
will be the standard Anniversary) (1095) (1460) (1825) (3650) days
|_| Standard Anniversary Compound Inflation Protection Rider: |_|5% |_|7% |_|10%
|_| 1-Year Anniversary * Simple Interest Rider: |_|5% |_|7% |_|10%
* Additional charge, please see prospectus Elimination Period: |_| 30 |_| 90 |_|180 or |_| 365 days |_| 730 days
Available to annuitants aged less than 85
Maximum Daily Facility Benefit: $__________________ (100 to 500 dollars in $10
increments.)
Maximum Home Health Care Benefit: |_| 50% or |_|100% of Maximum Daily Facility
Benefit.
- ----------------------------------------------- ------------------------------------------------------------- ------------------
Unless indicated below Nationwide will order
requirements. I have ordered:
____________________________________________________
YES NO REQUIREMENTS Licensed Resident Agent Signature
|_| |_| Physical Measurements
|_| |_| Oral/HIV ___________________________ Initial
|_| |_| Urine/HIV Date Confirmation
|_| |_| Urine
|_| |_| APR(Medical Records) ____________________________________________________
|_| |_| Part II Medical Questions Print Agent Name
|_| |_| Personal History Interview
|_| |_| Face to Face Assessment ________________________ __________________________
|_| |_| Other________________________________ Social Security # E-Mail Address
|_| Confirmation Via
Paramedical Company ____________________________________________________ E-Mail
Name of Firm
_______________________________________________
________________________ __________________________
Telephone Number Fax Number |_| Confirmation Via
Telephone
____________________________________________________
Address for Communication and Contract Mailing |_| Confirmation Via
Fax
- ---------------------------------------------- ----------------------------------------------------------------- ------------------
</TABLE>
APO-4453-OH (04/1999)
<PAGE> 9
PERSONAL WORKSHEET
People buy disability insurance for many reasons. Some do not want to use their
own assets to pay for long-term care needs arising from disability care. Some
buy insurance to make sure they can choose the type of care they receive, while
others do not want family members to have to pay for care or do not want to go
on Medicaid. Long-term care needs arising from disability may be expensive, and
may not be right for everyone. By state law, the insurance company must ASK you
to fill out this worksheet to help you and the company decide if you should buy
this contract.
<TABLE>
MARITAL STATUS
<S> <C> <C> <C> <C>
Contract Owner |_| Married |_| Single |_| Other |_| Number of Dependents (Excluding self) ______________
Proposed Insured |_| Married |_| Single |_| Other |_| Number of Dependents (Excluding self) ______________
PREMIUM
Contract Owner
The Purchase Payment for the Annuity and the Premium for the disability coverage
you are thinking about buying will be $_____________________.
The company cannot increase premiums in the future.
How will you pay the single premium?
Contract Owner |_| From my Income |_|From my Savings\Investments
|_|My Family will pay
<CAPTION>
INCOME
What is your annual income? (check one)
<S> <C> <C> <C> <C> <C>
Contract Owner |_| Under $45,000 |_| $45-60,000 |_|$60-75,000 |_|$75-$100,000 |_|Over $100,000
Proposed Insured |_| Under $45,000 |_| $45-60,000 |_|$60-75,000 |_|$75-$100,000 |_|Over $100,000
<CAPTION>
How do you expect your income to change over the next 10 years? (check one)
<S> <C> <C> <C>
Contract Owner |_| No change |_| Increase |_|Decrease
Proposed Insured |_| No change |_| Increase |_|Decrease
Because this product is a single premium product, we would expect that the
premium would be paid from sources other than current income.
<CAPTION>
SAVINGS AND INVESTMENTS
Not counting your home, about how much are all your assets worth (your savings and investments)? (check one)
<S> <C> <C> <C> <C>
Contract Owner |_| Under $100,000 |_|$100,000-$200,000 |_|$200,000-$300,000 |_| Over $300,000
Proposed Insured |_| Under $100,000 |_|$100,000-$200,000 |_|$200,000-$300,000 |_| Over $300,000
<CAPTION>
How do you expect your assets to change over the next ten years? (check one)
<S> <C> <C> <C>
Contract Owner |_| Stay about the same |_|Increase |_|Decrease
Proposed Insured |_| Stay about the same |_|Increase |_|Decrease
If you are buying this contract to protect your assets and your assets are
less than $100,000, you may wish to consider other options for financing
your disability.
<CAPTION>
INDEBTEDNESS
<S> <C> <C> <C> <C>
Contract Owner |_| Under $50,000 |_|$50,000-$100,000 |_|$100,000-$200,000 |_| Over $200,000
Proposed Insured |_| Under $50,000 |_|$50,000-$100,000 |_|$100,000-$200,000 |_| Over $200,000
<CAPTION>
How do you expect your indebtedness to change over the next ten years? (check one)
<S> <C> <C> <C>
Contract Owner |_| Stay about the same |_|Increase |_|Decrease
Proposed Insured |_| Stay about the same |_|Increase |_|Decrease
<CAPTION>
PURPOSE OF THE ANNUITY
Contract Owner
<S> <C> <C> <C>
|_| Retirement Income |_|Gift |_|Diversified Investment |_|Accumulated Savings
|_| Long Term Care |_|Pass $ to Next Generation |_|Professional Management |_|Other _______________
</TABLE>
APO-4453-OH (04/1999)
<PAGE> 10
DISCLOSURE STATEMENT
|_| The answers to the questions above describe my financial situation.
|_| I choose not to complete this information.
Signed:___________________________________________ __________________________
(Contract Owner) (Date)
Signed:___________________________________________ __________________________
(Joint Owner) (Date)
Signed:___________________________________________ __________________________
(Proposed Insured) (Date)
I explained to the applicant the importance of completing this information.
Signed:___________________________________________ __________________________
(Agent) (Date)
Agent's Printed Name:______________________________________
My agent has advised me that this contract does not seem suitable for me.
However, I still want the company to consider my application.
Signed:___________________________________________ __________________________
(Contract Owner) (Date)
Signed:___________________________________________ __________________________
(Joint Owner) (Date)
The company may contact you to verify your answers.
Home Office Suitability Approval
Signed:___________________________________________ __________________________
(Principal) (Date)
APO-4453-OH (04/1999)
<PAGE> 11
This receipt must not be detached and in no event will there be any temporary
insurance unless the full premium required by the Company has been paid at the
time of this application.
TEMPORARY INSURANCE RECEIPT NO.
NATIONWIDE LIFE INSURANCE COMPANY, COLUMBUS, OHIO
Received from ________________________ this _____ day of ____________ , ______
the sum of ____________________________ dollars ($ ).
The temporary insurance that is provided by this receipt is for the coverage
afforded by the Premium deposit that is associated with the application having
the same date and number as this receipt; except that the total coverage with
this Company under this and all other receipts will not exceed $250 Maximum
Daily Facility Benefit on the proposed Insured, regardless of the total
amount(s) or number of receipts or applications.
If coverage afforded by this single Premium is more than $250 Maximum Daily
Facility Benefit on the proposed Insured under this and/or any other
application, the Company's liability will be no more than $250 Maximum Daily
Facility Benefit on the proposed Insured, plus a prorated return of Premium
submitted in excess of the Premium required to afford the $250 Maximum Daily
Facility Benefit of insurance coverage.
Temporary insurance for the proposed Insured will be in force on the date of
this receipt, subject to the terms of the contract applied for in this
application. Coverage will end on the earliest of:
1. The date the Contract is issued. (The Contract will replace the
temporary insurance.)
2. The date the Company returns the Premium and mails a written notice to
the Applicant(s) that said insurance has ended for each proposed
Insured.
3. The 60th day after the date of this receipt (unless the receipt has been
replaced earlier or has ended as noted in 1 or 2).
Fraud or material misrepresentation in this application voids the agreement. In
such cases, the Company's only liability is for a refund of the Premium made.
If the proposed Insured becomes disabled by suicide attempt, the Company's only
liability with respect to that person under this receipt is for a refund of
payment made for that person's portion of the insurance applied for.
<TABLE>
<S> <C>
- ---------------------------------------------------
I have read and agree to the terms of this receipt. -----------------------------------
Licensed Resident Agent Signature
- ---------------------------------------------------
Signature of Contract Owner -----------------------------------
Date
- ----------------------------------------------------
</TABLE>
IMPORTANT NOTICE
DETACH AND GIVE TO PROPOSED INSURED
PRE-NOTICE OF PROCEDURES AS REQUIRED BY THE FAIR CREDIT REPORTING ACT OF 1970
This notice is to inform you that as part of our normal underwriting procedures
in connection with an application for insurance:
1. An investigative consumer report may be made whereby information is obtained
through personal interviews with yourself, your neighbors, friends or others
with whom you are acquainted. This inquiry will include information as to
character, general reputation, personal characteristics and mode of living,
except as may be related directly or indirectly to your sexual orientation,
with respect to you, members of your family, and others having an interest
in or closely connected with the insurance transaction; and
2. Upon your written request, made within a reasonable time after you receive
this notice, additional information as to the nature and scope of the
investigation, if one is made, will be provided. Requests for additional
information should be addressed to Nationwide Life Insurance Company, [Box
16786], Columbus, Ohio [43216].
MEDICAL INFORMATION BUREAU DISCLOSURE NOTICE
Information regarding your insurability will be treated as confidential.
Nationwide Life Insurance Company, or its reinsurer(s) may, however, make a
brief report thereon to the Medical Information Bureau, a non-profit membership
organization of life insurance companies, which operates an information exchange
on behalf of its members. If you apply to another Bureau member company for life
or health insurance coverage or a claim for benefits is submitted to such a
company, the Bureau, upon request, will supply such company with the information
in its file.
Upon receipt of a request from you, the Bureau will arrange disclosure of any
information it may have in your file. If you question the accuracy of
information in the Bureau's file, you may contact the Bureau and seek a
correction in accordance with the procedures set forth in the Federal Fair
Credit Reporting Act. The address of the Bureau's information office is Post
Office Box 105, Essex Station, Boston, Massachusetts 02112, telephone number
(617) 426-3660.
Nationwide Life Insurance Company or its reinsurer(s) may also release
information in its file to other life insurance companies to whom you may apply
for life or health insurance, or to whom a claim for benefits may be submitted.
APO-4453-OH (OH/1999)
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY
[P.O. Box 16786], Columbus, OH [43216-6786]
Phone No. [1-800-xxx-xxxx] Fax No. [1-800-xxx-xxxx]
===============================================================================
PART II - MEDICAL QUESTIONS
(To be answered by the proposed Insured)
===============================================================================
YES NO
1. Has the proposed Insured experienced, or is the proposed
Insured experiencing any difficulties such as shortness
of breath, dizziness, or leg cramps when 4 blocks are
walked at a normal pace?.................................... [ ] [ ]
2. During the past 12 MONTHS has the proposed Insured:
a. Been confined to a hospital, nursing home, or other
facility?.............................................. [ ] [ ]
b. Received home care services, physical or
rehabilitative therapy?................................ [ ] [ ]
c. Sought medical advice or treatment for loss of
appetite, falling, fainting, unstable gait, bladder
control, dizziness, or deterioration of vision?........ [ ] [ ]
d. Been limited in any way, or used any equipment such
as crutches to aid in mobility?........................ [ ] [ ]
e. During the past 12 MONTHS, used any tobacco
products, including but not limited to cigarettes,
pipe, cigar or chewing tobacco?........................ [ ] [ ]
3. DURING THE PAST 10 YEARS HAS THE PROPOSED INSURED EVER
BEEN DIAGNOSED OR HAD SYMPTOMS OF OR CONSULTED FOR OR
RECEIVED MEDICATION FOR, OR BEEN TREATED BY A MEMBER OF
THE MEDICAL PROFESSION FOR ANY OF THE FOLLOWING
CONDITIONS:
a. Alcoholism, Drug or Substance Abuse?.................... [ ] [ ]
b. Amputation, Arthritis (Prescription Drugs),
Fractures or Joint Replacement, Inflammatory
Arthritis of any type, Osteoporosis, or Spine or
Back Disorders?......................................... [ ] [ ]
c. Anemia, Cancer, Epilepsy, Meniere's Disease, Sleep
Apnea, Ulcerative Colitis, or Other Inflammatory
Bowel Disease?.......................................... [ ] [ ]
d. Dizziness (other than Meniere's Disease), Macular
Degeneration?........................................... [ ] [ ]
e. Anxiety, Depression, Mental, Nervous, Psychotic, or
Neurological Disorders?................................. [ ] [ ]
f. Angina (Chest Pain), Angioplasty, Arrhythmia,
Coronary Artery Disease, Heart Attack, Heart
Surgery?................................................ [ ] [ ]
g. Arteriosclerosis, Carotid Artery Disease, Peripheral
Vascular Disease (Reduced circulation in
extremities), Phlebitis or Skin Ulcers?................. [ ] [ ]
h. Diabetes Mellitus, Kidney or Renal Failure?............. [ ] [ ]
4. TO THE BEST OF YOUR KNOWLEDGE AND BELIEF; HAVE YOU EVER
BEEN TREATED FOR OR DIAGNOSED AS HAVING ANY OF THE
FOLLOWING CONDITIONS:
a. Significant Heart Defects, Disease or Disorder
(other than Mitral Valve Prolapse or Functional
Heart Murmur)?.......................................... [ ] [ ]
b. Respiratory Disorders (other than Asthma or Acute
Bronchitis)?............................................ [ ] [ ]
c. Amputation, Joint Disorder or Replacement?.............. [ ] [ ]
d. Stroke, Transient Ischemic Attack (TIA)?................ [ ] [ ]
e. Chronic Obstructive Pulmonary Disease (COPD)?........... [ ] [ ]
f. Black Lung?............................................. [ ] [ ]
5. Within the last 5 YEARS, have you been treated by a
health professional for any condition(s) not named
above, or contemplated or advised to have any surgery,
hospitalization treatment, test or referral that was not
completed?.................................................. [ ] [ ]
===============================================================================
APO-4453-B-OH (04/1999)
<PAGE> 13
===============================================================================
6. Please list the details of the physician who treated the proposed
Insured for any "Yes" answers to questions 1 through 5.
===============================================================================
<TABLE>
<S> <C> <C>
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -------------------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -------------------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -------------------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -------------------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -------------------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -------------------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -------------------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
- -------------------------------------------------------------------------------------------------------
Question #_____ Name of Medical Condition Treatment Dates From/To Physician's Name
- -------------------------------------------------------------------------------------------------------
Prescription Medication and Dosage Treatment Other Than Address and Phone Number
Prescription Drugs
</TABLE>
===============================================================================
YES NO
7. Are there any prescriptions being taken other than listed above?
If "Yes", please list.......................................... [ ] [ ]
----------------------------------------------------------------
8. Has the proposed Insured ever had their driver's license suspended
or revoked, or had more than one moving violation within
the past three years? If "Yes", give details.................. [ ] [ ]
----------------------------------------------------------------
===============================================================================
All the statements and answers on this form are complete and true to the best of
my knowledge and belief, whether written by my own hand or not; and I agree that
they are to be the basis for any insurance issued hereon.
I authorize: any licensed physician or medical practitioner; any hospital,
clinic or other medical or medically related facility; any insurance company;
the Medical Information Bureau; or any other organization, institution, or
person who has knowledge of me (or of any other person who is proposed for
insurance); to give that information to the Medical Director of the Nationwide
Insurance Company, or its reinsurers. This authorization, or a copy of it, will
be valid for a period of not more than one year from the date it was signed.
Signed at______________________________ this __________day of ___________, ____
__________________________________________ ___________________________________
Signature of Witness Signature of Proposed Insured
===============================================================================
APO-4453-B-OH (04/1999)
<PAGE> 1
EXHIBIT NO. 6
ARTICLES OF INCORPORATION OF THE DEPOSITOR
<PAGE> 2
AMENDED ARTICLES OF INCORPORATION
NATIONWIDE LIFE INSURANCE COMPANY
FIRST: The name of said Corporation shall be "NATIONWIDE LIFE INSURANCE
COMPANY."
SECOND: Said Corporation is to be located, and its principal office
maintained in the City of Columbus, Ohio.
THIRD: Said Corporation is formed for the purpose of (a) making insurance
upon the lives of individuals and every insurance appertaining thereto or
connected therewith on both participating and non-participating plans, (b)
granting, purchasing or disposing of annuities on both participating and non-
participating plans, (c) taking risks connected with or appertaining to making
insurance on life or against accidents to persons, or sickness, temporary or
permanent disability on both participating and non-participating plans, (d)
investing funds, (e) borrowing money on either a secured or unsecured basis in
furtherance of the foregoing, and (f) engaging in all activities permitted life
insurance companies under the laws of the State of Ohio.
FOURTH: No holder of shares of this Corporation shall be entitled as such,
as a matter or right, to subscribe for or purchase shares now or hereafter
authorized.
The capital stock of this Corporation shall be Five Million Dollars
($5,000,000.00) divided into Five Million (5,000,000) Common shares of the par
value of One Dollar ($1.00) each, which may be subscribed and purchased, or
otherwise acquired for such consideration at not less than par, and under such
terms and conditions as the Board of Directors may prescribe.
FIFTH: Dividends may be declared and paid on the outstanding stock, subject
to the restrictions herein contained. Dividends on the capital stock shall be
paid only from the earned surplus of the Corporation. Unless those policyholders
owning participating insurance policies or contracts shall have received an
equitable dividend arising out of savings in mortality, savings in expense
loadings and excess interest earnings, if any, from such participating policies,
no dividend from such savings and earnings shall be declared or paid on capital
stock in an amount in excess of seven percent (7%) per annum, computed on the
par value of the stock from date of original issue to date of retirement or date
of payment of dividend.
<PAGE> 3
* SIXTH: The corporate powers and business of the Corporation shall be
exercised, conducted and controlled, and the corporate property managed by a
Board of Directors consisting of not less than three (3), nor more than
twenty-one (21), as may from time to time be fixed by the Code of Regulations
of the Corporation. At the first election of directors one-third of the
directors shall be elected to serve until the next annual meeting, one third
shall be elected to serve until the second annual meeting, and one-third shall
be elected to serve until the third annual meeting; thereafter all directors
shall be elected to serve for terms of three (3) years each, and until their
successors are elected and qualified. Vacancies in the Board of Directors,
arising from any cause, shall be filled by the remaining directors.
The directors shall be elected at the annual meetings of the stockholders
by a majority vote of the stockholders present in person or by proxy, provided
that vacancies may be filled as herein provided for.
The stockholders of the Corporation shall have the right, subject to the
statutes of the State of Ohio and these Articles of Incorporation, to adopt a
Code of Regulations governing the transaction of the business and affairs of the
Corporation which may be altered, amended or repealed in the manner provided by
law.
The Board of Directors shall elect from their own number a Chairman of the
Board of Directors, a General Chairman, and a President. The Board of Directors
shall also elect a Vice President and a Secretary and a Treasurer, or a
Secretary-Treasurer. The Board of Directors may also elect or appoint such
additional vice presidents, assistant secretaries and assistant treasurers as
may be deemed advisable or necessary, and may fix their duties. The Board of
Directors may appoint such other officers as may be provided in the Code of
Regulations. All officers, unless sooner removed by the Board of Directors,
shall hold office for one (1) year, or until their successors are elected and
qualified. Other than the Chairman of the Board of Directors, the General
Chairman and the President, the officers need not be members of the Board of
Directors. Officers shall be elected at each annual organization meeting of the
Board of Directors, but elections or appointments to fill vacancies may be had
at any meeting of the directors.
A majority of the Board of Directors and officers shall, at all times, be
citizens of the State of Ohio.
* Amended Effective March 14, 1986.
- 2 -
<PAGE> 4
SEVENTH: The annual meeting of the stockholders of the Corporation shall be
held at such time as may be fixed in the Code of Regulations of the Corporation.
Any meeting of the stockholders, annual or special, may be held in or outside of
the State of Ohio. Reasonable notice of all meetings of stockholders shall be
given, by mail or publication, or as prescribed by the Code of Regulations or by
law.
EIGHTH: These Amended Articles of Incorporation shall supersede and take
the place of the Articles of Incorporation and all amendments thereto heretofore
filed with the Secretary of State by and on behalf of this Corporation.
Amended Effective March 14, 1986
- 3 -
<PAGE> 1
EXHIBIT NO. 9
OPINION OF COUNSEL
<PAGE> 2
DIETRICH, REYNOLDS & KOOGLER, LLP
ATTORNEYS AT LAW
ONE NATIONWIDE PLAZA
COLUMBUS, OHIO 43216
(614) 249-7617
FACSIMILE: (614) 249-2418
PRACTICE LIMITED TO NATIONWIDE INSURANCE COMPANIES
AND THEIR ASSOCIATED COMPANIES
June 28, 1999
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, Ohio 43215
To the Company:
We have prepared the Registration Statement being filed with the
Securities and Exchange Commission for the purpose of registering under the
Securities Act of 1933, as amended, Modified Single Premium Variable Annuity
Contracts to be sold by Nationwide Life Insurance Company ("Nationwide") and to
be issued and administered through the Nationwide Variable Account-10.
In connection therewith, we have examined the Articles of
Incorporation, Code of Regulations and Bylaws of Nationwide, minutes of meetings
of the Board of Directors, pertinent provisions of federal and Ohio laws,
together with such other documents as we have deemed relevant for the purposes
of this opinion. Based on the foregoing, it is our opinion that:
1. Nationwide is a stock life insurance corporation duly
organized and validly existing under the laws of the State of
Ohio and duly authorized to issue and sell life insurance and
annuity contracts.
2. Nationwide Variable Account-10 has been properly created and
is a validly existing separate account pursuant to the laws of
the State of Ohio.
3. The issuance and sale of the Modified Single Premium Variable
Annuity Contracts have been duly authorized by Nationwide.
When issued and sold in the manner stated in the prospectus
which is contained in the Registration Statement, the
contracts will be legal and binding obligations of Nationwide
in accordance with their terms, except that clearance must be
obtained, or the contract form must be approved, prior to the
issuance thereof in certain jurisdictions.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name as the firm determining the
legality of the securities being registered.
Very truly yours,
DIETRICH, REYNOLDS & KOOGLER
