<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 333-81701
'40 Act File No. 811-09407
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO. 5
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
PATRICIA R. HATLER, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus and the Statement of Additional Information.
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[X] on September 20, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT -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 CAPTION
PART A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C>
Item 1. Cover Page..................................................................................................Cover Page
Item 2. Definitions..................................................................................Glossary of Special Terms
Item 3. Synopsis or Highlights.......................................................................Synopsis of the Contracts
Item 4. Condensed Financial Information........................................................Condensed Financial Information
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies ..........................................Nationwide Life Insurance Company; Investing in the Contract
Item 6. Deductions and Expenses...........................................................................Charges & Deductions
Item 7. General Description of Variable
Annuity Contracts........................................................Contract Ownership; Operation of the Contract
Item 8. Annuity Period................................................................................Annuitizing the Contract
Item 9. Death Benefit and Distributions.........................................................................Death Benefits
Item 10. Purchases and Contract Value.................................................................Operation of the Contract
Item 11. Redemptions.....................................................................................Surrender (Redemption)
Item 12. Taxes ...................................................................................Federal Tax Considerations
Item 13. Legal Proceedings....................................................................................Legal proceedings
Item 14. Table of Contents of the Statement of Additional
Information.........................................Table of Contents of the Statement of Additional Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page..................................................................................................Cover Page
Item 16. Table of Contents....................................................................................Table of Contents
Item 17. General Information and History........................................................General Information and History
Item 18. Services......................................................................................................Services
Item 19. Purchase of Securities Being Offered..............................................Purchase of Securities Being Offered
Item 20. Underwriters..............................................................................................Underwriters
Item 21. Calculation of Performance Information..........................................Calculation of Performance Information
Item 22. Annuity Payments......................................................................................Annuity Payments
Item 23. Financial Statements..............................................................................Financial Statements
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..............................................................................Item 24
Item 25. Directors and Officers of the Depositor........................................................................Item 25
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant..............................................................................Item 26
Item 27. Number of Contract Owners......................................................................................Item 27
Item 28. Indemnification................................................................................................Item 28
Item 29. Principal Underwriter..........................................................................................Item 29
Item 30. Location of Accounts and Records...............................................................................Item 30
Item 31. Management Services............................................................................................Item 31
Item 32. Undertakings...................................................................................................Item 32
</TABLE>
<PAGE> 3
SUPPLEMENT DATED SEPTEMBER 20, 2000, TO
PROSPECTUS DATED MAY 1, 2000, FOR
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY
NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS
NATIONWIDE VARIABLE ACCOUNT - 10
THIS SUPPLEMENT UPDATES CERTAIN INFORMATION CONTAINED IN YOUR PROSPECTUS. PLEASE
READ IT AND KEEP IT WITH YOUR PROSPECTUS FOR FUTURE REFERENCE.
1. AN APPLICATION HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
("SEC") FOR AN ORDER PERMITTING THE SUBSTITUTION OF SHARES OF THE
UNDERLYING MUTUAL FUNDS IN COLUMN A ("EXISTING FUNDS") OF THE FOLLOWING
TABLE WITH SHARES OF THE UNDERLYING MUTUAL FUNDS IN COLUMN B
("REPLACEMENT FUNDS"). UNTIL AN ORDER IS GRANTED BY THE SEC, BOTH
INVESTMENT OPTIONS WILL BE AVAILABLE TO ALL CONTRACT OWNERS AS UNDERLYING
MUTUAL FUND OPTIONS. IF AN ORDER IS GRANTED, INFORMATION WILL BE SENT TO
ALL CONTRACT OWNERS REGARDING THE "EXCHANGE DATE" ON WHICH THE EXISTING
FUNDS WILL BE ELIMINATED AS INVESTMENT OPTIONS AND SUBSTITUTED WITH THE
REPLACEMENT FUNDS.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Column A Column B
Existing Funds Replacement Funds
---------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Nationwide Separate Account Trust ("NSAT") - Strong Opportunity Fund II, Inc.
Nationwide Strategic Value Fund
---------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio Fidelity VIP - Equity-Income Portfolio: Service Class
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2. THE "SURRENDER (REDEMPTION)" PROVISION ON PAGE 23 OF YOUR PROSPECTUS IS
AMENDED TO INCLUDE THE FOLLOWING:
Nationwide is required by state law to reserve the right to postpone
payment of assets in the fixed account for a period of up to six months
from the date of the surrender request.
3. THE "ENHANCED RATE DOLLAR COST AVERAGING" PROVISION ON PAGE 25 OF YOUR
PROSPECTUS IS AMENDED TO INCLUDE THE FOLLOWING:
Nationwide is required by state law to reserve the right to postpone
payment of assets in the fixed account for a period of up to six months
from the date of the surrender request.
4. "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS" ON PAGE 40 OF YOUR
PROSPECTUS IS AMENDED TO READ:
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST ("AMT")
Neuberger Berman AMT is an open-end, diversified management investment
company that offers its portfolios in connection with variable annuity
contracts and variable life insurance policies, and certain qualified
plans. Prior to May 1, 2000, the portfolios invested through a two-tier
master/feeder structure, whereby each portfolio invested its assets in
another fund that served as a corresponding "master series;" the master
series invested in securities. Effective May 1, 2000, the portfolios
converted to a conventional one-tier structure, whereby each portfolio
holds its securities directly. Neuberger Berman Management Inc. is the
investment adviser.
<PAGE> 4
GUARDIAN PORTFOLIO
Investment Objective: Long-term capital growth, with current income as a
secondary objective. The portfolio pursues these goals by investing
mainly in common stocks of large-capitalization companies.
MID-CAP GROWTH PORTFOLIO
Investment Objective: Capital growth. The portfolio pursues this goal by
investing mainly in common stocks of mid-capitalization companies. The
managers look for fast-growing companies that are in new or rapidly
evolving industries and seek to reduce risk by diversifying among many
companies, industries and sectors.
PARTNERS PORTFOLIO
Investment Objective: Capital growth. The portfolio pursues its goal by
investing mainly in common stocks of mid- to large-capitalization
companies.
5. EFFECTIVE SEPTEMBER 25, 2000: MERGER OF VAN KAMPEN LIFE INVESTMENT TRUST
- MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO INTO THE UNIVERSAL
INSTITUTIONAL FUNDS, INC. - U.S. REAL ESTATE PORTFOLIO.
Effective September 25, pursuant to shareholder vote, all shares of Van
Kampen Life Investment Trust - Morgan Stanley Real Estate Securities
Portfolio were exchanged for shares of The Universal Institutional Funds,
Inc. - U.S. Real Estate Portfolio. Any assets invested in Van Kampen Life
Investment Trust - Morgan Stanley Real Estate Securities Portfolio at the
close of business on September 22, 2000 will be exchanged for shares of
The Universal Institutional Funds, Inc. - U.S. Real Estate Portfolio. The
value of the shares received in the exchange equals the value of the
shares held in the Van Kampen Life Investment Trust - Morgan Stanley Real
Estate Securities Portfolio as of the close of business on September 22,
2000. This exchange of shares will not otherwise affect any contract
rights. Contract owners are free to reallocate assets located in The
Universal Institutional Funds, Inc. - U.S. Real Estate Portfolio pursuant
to the terms of the contract.
Following the exchange, contract owners who had assets in the Van Kampen
Life Investment Trust - Morgan Stanley Real Estate Securities Portfolio
will have assets in The Universal Institutional Funds, Inc. - U.S. Real
Estate Portfolio and the Van Kampen Life Investment Trust - Morgan
Stanley Real Estate Securities Portfolio will be terminated in accordance
with Delaware state law.
6. EFFECTIVE SEPTEMBER 25, 2000, ALL REFERENCES IN YOUR PROSPECTUS TO VAN
KAMPEN LIFE INVESTMENT TRUST - MORGAN STANLEY REAL ESTATE SECURITIES
PORTFOLIO ARE DELETED AND PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO INCLUDE
THE FOLLOWING UNDERLYING MUTUAL FUND:
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
- U.S. Real Estate Portfolio
7. EFFECTIVE SEPTEMBER 25, 2000, THE "UNDERLYING MUTUAL FUND ANNUAL
EXPENSES" TABLE ON PAGE 7 OF YOUR PROSPECTUS IS AMENDED AS FOLLOWS:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets, after expense
reimbursement)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Total Underlying Mutual
Management Other 12b-1 Fund
Fees Expenses Fees Expenses
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Universal Institutional Funds, Inc. 0.75% 0.35% 0.00% 1.10%
--U.S. Real Estate Portfolio
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 5
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
in calculating 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.
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets, before
expense reimbursement)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------------
Total Underlying Mutual
Management Other 12b-1 Fund
Fees Expenses Fees Expenses
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
The Universal Institutional Funds, Inc. 0.80% 0.35% 0.00% 1.15%
--U.S. Real Estate Portfolio
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8. EFFECTIVE SEPTEMBER 25, 2000, THE "EXAMPLE" CHART ON PAGE 10 OF YOUR
PROSPECTUS IS AMENDED AS FOLLOWS:
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, 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 example reflects expenses of both the variable account and the
underlying mutual funds. The example reflects the CDSC schedule and
variable account expenses of 1.40%, which is the variable account charge
that is assessed to a contract. Deductions for premium taxes are not
reflected but may apply.
<TABLE>
<CAPTION>
If you surrender your contract at the If you do not surrender your contract If you annuitize your contract
end of the applicable time period at the end of the applicable time at the end of the applicable
period time period
-----------------------------------------------------------------------------------------------------------------------------------
1 3 5 10 1 3 5 10 1 3 5 10
Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs. Yr. Yrs. Yrs. Yrs.
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
The Universal 98 153 210 319 26 81 138 292 * 81 138 292
Institutional Funds,
Inc. -- U. S. Real
Estate Portfolio
----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
9. EFFECTIVE SEPTEMBER 25, 2000, "APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS" ON PAGE 40 OF YOUR PROSPECTUS IS AMENDED TO READ: THE
UNIVERSAL INSTITUTIONAL FUNDS, INC.
U. S. REAL ESTATE 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, includin
<PAGE> 6
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. Morgan Stanley
Asset Management, Inc. serves as the Fund's investment adviser.
10. EFFECTIVE OCTOBER 2, 2000, PAGE 1 OF YOUR PROSPECTUS IS AMENDED TO
INCLUDE THE FOLLOWING UNDERLYING MUTUAL FUNDS:
NATIONWIDE SEPARATE ACCOUNT TRUST
- Gartmore NSAT Emerging Markets Fund
- Gartmore NSAT Global Technology and Communications Fund
- Gartmore NSAT International Growth Fund
- Turner NSAT Growth Focus Fund
11. EFFECTIVE OCTOBER 2, 2000, THE FOLLOWING UNDERLYING MUTUAL FUNDS HAVE
CHANGED NAMES. ALL REFERENCES IN YOUR PROSPECTUS TO THE OLD NAME WILL BE
REPLACED WITH THE NEW NAME AS DESCRIBED BELOW:
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
ALL REFERENCES TO... ARE REPLACED WITH...
----------------------------------------------------------------------------------------------------------------------------
<S> <C>
Nationwide Separate Account Trust ("NSAT") - Nationwide Balanced Fund NSAT - J.P. Morgan NSAT Balanced Fund
----------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide High Income Bond Fund NSAT - Federated NSAT High Income Bond Fund
----------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Mid Cap Index Fund NSAT - Dreyfus NSAT Mid Cap Index Fund
----------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Multi Sector Bond Fund NSAT - MAS NSAT Multi Sector Bond Fund
----------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Strategic Growth Fund NSAT - Strong NSAT Mid Cap Growth Fund
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
12. EFFECTIVE OCTOBER 2, 2000, WADDELL & REED INVESTMENT MANAGEMENT COMPANY
WILL REPLACE FRANKLIN ADVISERS, INC. AS ONE OF THE SUBADVISERS OF THE
NATIONWIDE SEPARATE ACCOUNT TRUST - NATIONWIDE SMALL CAP GROWTH FUND.
THERE IS NO CHANGE IN THE FUND'S OBJECTIVE AS IS STATED IN THE PROSPECTUS
DATED MAY 1, 2000
<PAGE> 7
13. EFFECTIVE OCTOBER 2, 2000, THE "UNDERLYING MUTUAL FUND ANNUAL EXPENSES"
TABLE ON PAGE 9 OF YOUR PROSPECTUS IS AMENDED AS FOLLOWS:
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets, after
expense reimbursement)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying Mutual
Fees Expenses Fees Fund Expenses
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NSAT - Gartmore NSAT Emerging Markets Fund 0.87% 0.88% 0.00% 1.75%
--------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT Global Technology and Communications 0.62% 0.73% 0.00% 1.35%
Fund
--------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT International Growth Fund 0.72% 0.88% 0.00% 1.60%
--------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Cap Value Fund 0.88% 0.37% 0.00% 1.25%
--------------------------------------------------------------------------------------------------------------------------------
NSAT - Turner NSAT Growth Focus Fund 0.59% 0.76% 0.00% 1.35%
--------------------------------------------------------------------------------------------------------------------------------
</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 in calculating 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.
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(as a percentage of underlying mutual fund average net assets, before
expense reimbursement)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying Mutual
Fees Expenses Fees Fund Expenses
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NSAT - Gartmore NSAT Emerging Markets Fund 1.15% 0.88% 0.00% 2.03%
---------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT Global Technology and Communications Fund 0.98% 0.73% 0.00% 1.71%
---------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT International Growth Fund 1.00% 0.88% 0.00% 1.88%
---------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small Cap Value Fund 0.90% 0.37% 0.00% 1.27%
---------------------------------------------------------------------------------------------------------------------------------
NSAT - Turner NSAT Growth Focus Fund 0.90% 0.76% 0.00% 1.66%
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 8
14. EFFECTIVE OCTOBER 2, 2000, THE "EXAMPLE" CHART ON PAGE 10 OF YOUR
PROSPECTUS IS AMENDED AS FOLLOWS:
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, 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 example reflects expenses of both the variable account and the
underlying mutual funds. The example reflects the CDSC schedule and
variable account expenses of 1.40%, which is the variable account charge
that is assessed to a contract. Deductions for premium taxes are not
reflected but may apply.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract at the If you do not surrender your contract If you annuitize your contract
end of the applicable time period at the end of the applicable time at the end of the applicable
period time period
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
-----------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT 88 130 166 277 25 76 130 277 * 76 130 277
Emerging Markets Fund
-----------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT 83 117 145 234 20 63 109 234 * 63 109 234
Global Technology and
Communications Fund
-----------------------------------------------------------------------------------------------------------------------------------
NSAT - Gartmore NSAT 86 125 158 261 23 71 122 261 * 71 122 261
International Growth Fund
-----------------------------------------------------------------------------------------------------------------------------------
NSAT - Nationwide Small 100 157 217 335 28 85 145 308 * 85 145 308
Cap Value Fund
-----------------------------------------------------------------------------------------------------------------------------------
NSAT - Turner NSAT Growth 83 117 145 234 20 63 109 234 * 63 109 234
Focus Fund
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The contracts sold under this prospectus do not permit annuitization
during the first two contract years.
15. EFFECTIVE OCTOBER 2, 2000, "APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL
FUNDS" ON PAGE 40 OF YOUR PROSPECTUS IS AMENDED TO READ:
NATIONWIDE SEPARATE ACCOUNT TRUST ("NSAT")
GARTMORE NSAT EMERGING MARKETS FUND
(subadviser: Gartmore Global Partners)
Investment Objective: Long term capital growth by investing primarily
in equity securities of companies located in emerging market
countries.
<PAGE> 9
GARTMORE NSAT GLOBAL TECHNOLOGY AND COMMUNICATIONS FUND
(subadviser: Gartmore Global Partners)
Investment Objective: Long term capital appreciation by investing
primarily and at least 65% of its total assets in equity securities
issued by U.S. and foreign companies with business operations in
technology and communications and technology and communication related
industries.
GARTMORE NSAT INTERNATIONAL GROWTH FUND
(subadviser: Gartmore Global Partners)
Investment Objective: Long term capital growth by investing primarily in
equity securities of companies in Europe, Australia, the Far East and
other regions, including developing countries.
TURNER NSAT GROWTH FOCUS FUND
(subadviser: Turner Investment Partners, Inc.)
Investment Objective: Long term capital appreciation by investing
primarily in U.S. common stocks, ADRs and foreign companies that
demonstrate strong earnings growth potential.
<PAGE> 10
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 May 1, 2000.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life Insurance
Company and its affiliates. This process will aid in determining whether the
purchase of the contract described in this prospectus is consistent with an
individual's goals, risk tolerance, time horizon, marital status, tax situation,
and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
--------------------------------------------------------------------------------
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 INVESTORS ALSO SEEKING
LONG-TERM CARE INSURANCE BENEFITS, THE CONTRACT MAY NOT BE APPROPRIATE FOR
INVESTORS SOLELY INTERESTED IN A VARIABLE ANNUITY. INVESTORS SHOULD CAREFULLY
CONSIDER THE COSTS AND BENEFITS OF THE CONTRACT WITH THEIR INVESTMENT OR
FINANCIAL ADVISER BEFORE PURCHASING THE CONTRACT.
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 information you should know about
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/disability insurance
benefits 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
- Dreyfus Investment Portfolios - European Equity Portfolio
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus Stock Index Fund, Inc.
- Dreyfus Variable Investment Fund - Appreciation Portfolio
(formerly, 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(R) Portfolio: Service Class
1
<PAGE> 11
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Growth Opportunities Portfolio:
Service Class
JANUS ASPEN SERIES
- Capital Appreciation Portfolio: Service Shares
- Global Technology Portfolio: Service Shares
- International Growth Portfolio: Service Shares
MORGAN STANLEY
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (FORMERLY, MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC.)
- Emerging Markets Debt Portfolio
- Mid Cap Growth 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: J.P. Morgan Investment
Management Inc.)
- Nationwide Equity Income Fund (subadviser: Federated Investment
Counseling)
- Nationwide Global 50 Fund (formerly, 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: Miller, Anderson &
Sherrerd, LLP)
- Nationwide Mid Cap Index Fund (subadviser: The Dreyfus
Corporation)
- Nationwide Small Cap Growth Fund (formerly, 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)
- Nationwide Small Company Fund
(subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC.,
Lazard Asset Management and Strong Capital Management, Inc.)
- Nationwide Strategic Growth Fund (subadviser: Strong 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
- Oppenheimer Capital Appreciation Fund/VA
- Oppenheimer Global Securities Fund/VA
- Oppenheimer Main Street Growth & Income Fund/VA
STRONG OPPORTUNITY FUND II, INC.
VAN ECK WORLDWIDE INSURANCE TRUST
- Worldwide Emerging Markets Fund
- Worldwide Hard Assets Fund
THE FOLLOWING UNDERLYING MUTUAL FUNDS ARE NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
MAY 1, 2000:
NATIONWIDE SEPARATE ACCOUNT TRUST
- Nationwide Strategic Value Fund (subadvisers: Strong Capital
Management, Inc./Schafer Capital Management, Inc.
WARBURG PINCUS TRUST
- Value Portfolio (formerly, Growth & Income 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 Guaranteed Term
Options. (Guaranteed Term Options may not be available in every jurisdiction -
refer to your contract for specific information).
The Statement of Additional Information (dated May 1, 2000) which contains
additional information about the variable annuity portion of
2
<PAGE> 12
the contract 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 39.
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, annual report or semi-annual report 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 may be found on the SEC website at:
WWW.SEC.GOV
Information about this and other Best of America(R) products may be found at:
WWW.BESTOFAMERICA.COM
THIS ANNUITY IS NOT:
- A BANK DEPOSIT - FEDERALLY INSURED
- ENDORSED BY A BANK - AVAILABLE IN EVERY
OR GOVERNMENT STATE.
AGENCY
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
In the future, additional underlying mutual funds managed by certain financial
institutions or brokerage firms may be added to the variable account. These
additional underlying mutual funds may be offered exclusively to purchasing
customers of the particular financial institution or brokerage firm.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE> 13
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 annuitization
payments when the variable payment option is chosen.
CONTRACT VALUE- The total value of all accumulation units in a contract plus any
amount held in the fixed account and any amount held under Guaranteed Term
Options. The premium amount paid for the long-term care insurance portion of the
contract does not contribute to the annuity contract value.
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 - each sub-account corresponds to a single underlying
mutual fund.
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
<PAGE> 14
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS............................................
SUMMARY OF CONTRACT EXPENSES.........................................
UNDERLYING MUTUAL FUND ANNUAL
EXPENSES.......................................................
EXAMPLE..............................................................
SYNOPSIS OF THE CONTRACTS............................................
FINANCIAL STATEMENTS.................................................
CONDENSED FINANCIAL INFORMATION......................................
NATIONWIDE LIFE INSURANCE COMPANY....................................
NATIONWIDE INVESTMENT SERVICES
CORPORATION....................................................
INVESTING IN THE CONTRACT............................................
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
CHARGES AND DEDUCTIONS...............................................
Mortality and Expense Risk Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP...................................................
Joint Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT............................................
Pricing of the Minimum Initial Purchase Payment
Pricing of Subsequent Purchase Payments
When Purchase Payments Will Not Be Priced
Allocation of Purchase Payments
Determining the Value of the Annuity Portion of the Contract
Transfers Prior to Annuitization
Transfers After Annuitization
Transfer Requests
SURRENDER (REDEMPTION)...............................................
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
ASSIGNMENT...........................................................
CONTRACT OWNER SERVICES..............................................
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE............................................
ANNUITIZING THE CONTRACT.............................................
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS.......................................................
Death of Contract Owner
Death of Annuitant
Death of Contract Owner/Annuitant
How the Death Benefit is Determined
Death Benefit Payment
REQUIRED DISTRIBUTIONS...............................................
FEDERAL TAX CONSIDERATIONS...........................................
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS...............................................
LEGAL PROCEEDINGS....................................................
ADVERTISING..........................................................
SUB-ACCOUNT PERFORMANCE SUMMARY......................................
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION.............
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS...................
APPENDIX B: CONDENSED FINANCIAL INFORMATION..........................
5
<PAGE> 15
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contracts, unless the contract
owner meets an available exception under the contract.
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 Date of CDSC
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 the daily net assets of the variable account)
Mortality and Expense Risk Charge.....................................1.40%
Total Variable Account Annual Expenses.............................1.40%
(2) These charges apply only to allocations made to the sub-accounts. They do
not apply to allocations made to the fixed account, 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.
6
<PAGE> 16
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE
REIMBURSEMENT)
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Management Other
Fees Expenses
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Century Variable Portfolios, Inc. - American Century VP Income & 0.70% 0.00%
Growth
---------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP 1.34% 0.00%
International
---------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP Value 1.00% 0.00%
---------------------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European Equity Portfolio 1.00% 0.25%
---------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.04%
---------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.01%
---------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Appreciation Portfolio (formerly, 0.43% 0.35%
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio)
---------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond Fund II 0.00% 0.68%
---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class, 0.48% 0.08%
---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.58% 0.07%
---------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 0.58% 0.11%
---------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.73% 0.15%
---------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio: Service Class 0.58% 0.07%
---------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service Class 0.58% 0.10%
---------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Capital Appreciation Portfolio: Service Shares* 0.65% 0.04%
---------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Global Technology Portfolio: Service Shares* 0.65% 0.13%
---------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - International Growth Portfolio: Service Shares* 0.65% 0.11%
---------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.60% 0.14%
---------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.50% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.39% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.58% 0.14%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.75% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide Global Equity 1.00% 0.20%
Fund)
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.88% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT Nationwide Select 1.10% 0.20%
Advisers Small Cap Growth Fund)
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.15%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 0.98% 0.17%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.10%
---------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.10%
---------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 0.85% 0.15%
---------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.85% 0.15%
---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
12b-1 Total Underlying Mutual Fund
Fees Expenses
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
American Century Variable Portfolios, Inc. - American Century VP Income & 0.00% 0.70%
Growth
------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP 0.00% 1.34%
International
------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP Value 0.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European Equity Portfolio 0.00% 1.25%
------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 0.00% 0.79%
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.00% 0.26%
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Appreciation Portfolio (formerly, 0.00% 0.78%
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio)
------------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond Fund II 0.00% 0.68%
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class, 0.10% 0.66%
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.10% 0.75%
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 0.10% 0.79%
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.10% 0.98%
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio: Service Class 0.10% 0.75%
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service Class 0.10% 0.78%
------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Capital Appreciation Portfolio: Service Shares* 0.25% 0.94%
------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Global Technology Portfolio: Service Shares* 0.25% 1.03%
------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - International Growth Portfolio: Service Shares* 0.25% 1.01%
------------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 0.00% 0.74%
------------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 0.00% 0.65%
------------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 0.00% 0.54%
------------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 0.00% 0.72%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.00% 0.90%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.00% 0.95%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide Global Equity 0.00% 1.20%
Fund)
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.00% 0.95%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.00% 1.03%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.00% 0.90%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT Nationwide Select 0.00% 1.30%
Advisers Small Cap Growth Fund)
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.00% 1.05%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 0.00% 1.15%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 0.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.00% 1.00%
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 17
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
Management Other
Fees Expenses
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Neuberger Berman AMT Partners Portfolio 0.80% 0.07%
-----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Aggressive Growth Fund/VA 0.66% 0.01%
-----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation 0.68% 0.02%
Fund/VA
-----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Accounts Funds - Oppenheimer Global Securities Fund/VA 0.67% 0.02%
-----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Main Street Growth & 0.73% 0.05%
Income Fund/VA
-----------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00% 0.14%
-----------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging Markets Debt Portfolio 0.45% 0.98%
(formerly, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio)
-----------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Mid Cap Growth Portfolio 0.00% 1.05%
-----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets Fund 1.00% 0.34%
-----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund 1.00% 0.26%
-----------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities 0.97% 0.13%
Portfolio
-----------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio (formerly, Warburg Pincus Trust - 0.56% 0.44%
Growth & Income Portfolio)
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
12b-1 Total Underlying Mutual Fund
Fees Expenses
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Neuberger Berman AMT Partners Portfolio 0.00% 0.87%
-------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Aggressive Growth Fund/VA 0.00% 0.67%
-------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Capital Appreciation 0.00% 0.70%
Fund/VA
-------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Accounts Funds - Oppenheimer Global Securities Fund/VA 0.00% 0.69%
-------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Main Street Growth & 0.00% 0.78%
Income Fund/VA
-------------------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 0.00% 1.14%
-------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging Markets Debt Portfolio 0.00% 1.43%
(formerly, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio)
-------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Mid Cap Growth Portfolio 0.00% 1.05%
-------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets Fund 0.00% 1.34%
-------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund 0.00% 1.26%
-------------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities 0.00% 1.10%
Portfolio
-------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio (formerly, Warburg Pincus Trust - 0.00% 1.00%
Growth & Income Portfolio)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Expenses are based on the estimated expenses that the new Service Shares class
of each Portfolio expects to incur in its initial fiscal year.
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 in calculating 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 Fees Other Expenses
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federated Insurance Series - Federated Quality Bond Fund II 0.60% 0.89%
--------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class 0.48% 0.09%
--------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 0.58% 0.09%
--------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.73% 0.18%
--------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio: Service Class 0.58% 0.10%
--------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service Class 0.58% 0.11%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.75% 0.25%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.80% 0.29%
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
12b-1 Total Underlying Mutual Fund
Fees Expenses
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Federated Insurance Series - Federated Quality Bond Fund II 0.25% 1.74%
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class 0.10% 0.67%
-------------------------------------------------------------------------------------------------------------------------------
Portfolio: Service Class 0.10% 0.77%
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 0.10% 1.01%
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio: Service Class 0.10% 0.78%
-------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service Class 0.10% 0.79%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 0.00% 1.00%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 0.00% 1.09%
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 18
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
Management Fees Other Expenses
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide Global Equity 1.00% 0.54%
Fund)
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.80% 0.50%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.88% 0.86%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.75% 0.27%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT Nationwide Select 1.10% 1.30%
Advisers Small Cap Growth Fund)
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.90% 0.37%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.90% 0.33%
--------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.90% 0.32%
--------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.93% 0.15%
--------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging Markets Debt Portfolio 0.80% 0.98%
(formerly, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio)
--------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Mid Cap Growth Portfolio 0.75% 7.31%
--------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets Fund 1.00% 0.54%
--------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities 1.00% 0.13%
Portfolio
--------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Value Portfolio (formerly, Warburg Pincus Trust - 0.75% 0.59%
Growth & Income Portfolio)
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------------------
12b-1 Total Underlying Mutual Fund
Fees Expenses
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide Global Equity 0.00% 1.54%
Fund)
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 0.00% 0.30%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.00% 1.74%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 0.00% 1.02%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT Nationwide Select 0.00% 2.40%
Advisers Small Cap Growth Fund)
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 0.00% 1.27%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 0.00% 1.23%
-------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 0.00% 1.22%
-------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 0.00% 1.08%
-------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging Markets Debt Portfolio 0.00% 1.78%
(formerly, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio)
-------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Mid Cap Growth Portfolio 0.00% 8.06%
-------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets Fund 0.00% 1.54%
-------------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real Estate Securities 0.00% 1.13%
Portfolio
-------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Value Portfolio (formerly, Warburg Pincus Trust - 0.00% 1.34%
Growth & Income Portfolio)
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 19
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, 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 example reflects expenses of both the variable account and the underlying
mutual funds. The example reflects the CDSC schedule and variable account
expenses of 1.40%, which is the variable account charge that is assessed to a
contract. Deductions for premium taxes are not reflected but may apply.
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your contract
at the end of the applicable at the end of the applicable time
time period period
------------------------------------------------------------------------------------------------------------------------------
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>
American Century Variable Portfolios, 94 140 189 277 22 68 117 250
Inc. - American Century VP Income &
Growth
------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 101 160 222 344 29 88 150 317
Inc. - American Century VP International
------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 97 149 204 309 25 77 132 282
Inc. - American Century VP Value
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European 100 157 217 335 28 85 145 308
Equity Portfolio
------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 95 143 193 287 23 71 121 260
Fund, Inc.
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 89 126 165 229 17 54 93 202
------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - 95 143 193 286 23 71 121 259
Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund -
Capital Appreciation Portfolio)
------------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated 94 139 188 275 22 67 116 248
Quality Bond Fund II
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: 94 139 186 273 22 67 114 246
Service Class
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service 95 142 191 283 23 70 119 256
Class
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: 95 143 193 287 23 71 121 260
Service Class
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: 97 149 203 307 25 77 131 280
Service Class
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) 95 142 191 283 23 70 119 256
Portfolio: Service Class
------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities 95 143 193 286 23 71 121 259
Portfolio: Service Class
------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - Capital 97 148 201 303 25 76 129 276
Appreciation Portfolio: Service Shares
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
If you annuitize your contract
at the end of the applicable
time period
-----------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, * 68 117 250
Inc. - American Century VP Income &
Growth
-----------------------------------------------------------------------------------
American Century Variable Portfolios, * 88 150 317
Inc. - American Century VP International
-----------------------------------------------------------------------------------
American Century Variable Portfolios, * 77 132 282
Inc. - American Century VP Value
-----------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European * 85 145 308
Equity Portfolio
-----------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth * 71 121 260
Fund, Inc.
-----------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. * 54 93 202
-----------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - * 71 121 259
Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund -
Capital Appreciation Portfolio)
-----------------------------------------------------------------------------------
Federated Insurance Series - Federated * 67 116 248
Quality Bond Fund II
-----------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: * 67 114 246
Service Class
-----------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service * 70 119 256
Class
-----------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: * 71 121 260
Service Class
-----------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: * 77 131 280
Service Class
-----------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) * 70 119 256
Portfolio: Service Class
-----------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities * 71 121 259
Portfolio: Service Class
-----------------------------------------------------------------------------------
Janus Aspen Series - Capital * 76 129 276
Appreciation Portfolio: Service Shares
-----------------------------------------------------------------------------------
</TABLE>
10
<PAGE> 20
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your contract
at the end of the applicable at the end of the applicable time
time period period
------------------------------------------------------------------------------------------------------------------------------
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>
Janus Aspen Series - Global Technology 98 150 206 312 26 78 134 285
Portfolio: Service Shares
------------------------------------------------------------------------------------------------------------------------------
Janus Aspen Series - International 97 150 205 310 25 78 133 283
Growth Portfolio: Service Shares
------------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 94 141 191 282 22 69 119 255
------------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund 94 138 186 272 22 66 114 245
------------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 92 135 180 260 20 63 108 233
------------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 94 141 190 280 22 69 118 253
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund 96 146 199 299 24 74 127 272
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 97 148 202 304 25 76 130 277
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 50 Fund 99 156 215 330 27 84 143 303
(formerly, NSAT Nationwide Global Equity
Fund)
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 97 148 202 304 25 76 130 277
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 98 150 206 312 26 78 134 285
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 96 146 199 299 24 74 127 272
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund 100 159 220 340 28 87 148 313
(formerly, NSAT Nationwide Select
Advisers Small Cap Growth Fund)
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 98 151 207 314 26 79 135 287
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 99 154 212 325 27 82 140 298
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 97 149 204 309 25 77 132 282
------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund 97 149 204 309 25 77 132 282
------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 97 149 204 309 25 77 132 282
------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth 97 149 204 309 25 77 132 282
Portfolio
------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 96 145 198 295 24 73 126 268
------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 94 139 187 274 22 67 115 247
Oppenheimer Aggressive Growth Fund/VA
------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - 94 140 189 277 22 68 117 250
Oppenheimer Capital Appreciation Fund/VA
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
If you annuitize your contract
at the end of the applicable
time period
-----------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Janus Aspen Series - Global Technology * 78 134 285
Portfolio: Service Shares
-----------------------------------------------------------------------------------
Janus Aspen Series - International * 78 133 283
Growth Portfolio: Service Shares
-----------------------------------------------------------------------------------
NSAT Capital Appreciation Fund * 69 119 255
-----------------------------------------------------------------------------------
NSAT Government Bond Fund * 66 114 245
-----------------------------------------------------------------------------------
NSAT Money Market Fund * 63 108 233
-----------------------------------------------------------------------------------
NSAT Total Return Fund * 69 118 253
-----------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund * 74 127 272
-----------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund * 76 130 277
-----------------------------------------------------------------------------------
NSAT Nationwide Global 50 Fund * 84 143 303
(formerly, NSAT Nationwide Global Equity
Fund)
-----------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund * 76 130 277
-----------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund * 78 134 285
-----------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund * 74 127 272
-----------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund * 87 148 313
(formerly, NSAT Nationwide Select
Advisers Small Cap Growth Fund)
-----------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund * 79 135 287
-----------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund * 82 140 298
-----------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund * 77 132 282
-----------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund * 77 132 282
-----------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio * 77 132 282
-----------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth * 77 132 282
Portfolio
-----------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio * 73 126 268
-----------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - * 67 115 247
Oppenheimer Aggressive Growth Fund/VA
-----------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - * 68 117 250
Oppenheimer Capital Appreciation Fund/VA
-----------------------------------------------------------------------------------
</TABLE>
11
<PAGE> 21
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
If you surrender your contract If you do not surrender your contract
at the end of the applicable at the end of the applicable time
time period period
------------------------------------------------------------------------------------------------------------------------------
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>
Oppenheimer Variable Account Funds - 95 143 193 286 23 71 121 259
Oppenheimer Main Street Growth & Income
Fund/VA
------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Accounts Funds - 94 140 188 276 22 68 116 249
------------------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 99 154 212 324 27 82 140 297
------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. 102 163 227 353 30 91 155 326
- Emerging Markets Debt Portfolio
(formerly, Morgan Stanley Dean Witter
Universal Funds, Inc. - Emerging Markets
Debt Portfolio)
------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. 98 151 207 314 26 79 135 287
- Mid Cap Growth Portfolio
------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 101 160 222 344 29 88 150 317
Worldwide Emerging Markets Fund
------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - 100 158 218 336 28 86 146 309
Worldwide Hard Assets Fund
------------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - 98 153 210 319 26 81 138 292
Morgan Stanley Real Estate Securities
Portfolio
------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio 97 149 204 309 25 77 132 282
(formerly, Warburg Pincus Trust - Growth
& Income Portfolio)
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------
If you annuitize your contract
at the end of the applicable
time period
-----------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds - * 71 121 259
Oppenheimer Main Street Growth & Income
Fund/VA
-----------------------------------------------------------------------------------
Oppenheimer Variable Accounts Funds - * 68 116 249
Oppenheimer Global Securities Fund/VA
-----------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. * 82 140 297
-----------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. * 91 155 326
- Emerging Markets Debt Portfolio
(formerly, Morgan Stanley Dean Witter
Universal Funds, Inc. - Emerging Markets
Debt Portfolio)
-----------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. * 79 135 287
- Mid Cap Growth Portfolio
-----------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - * 88 150 317
Worldwide Emerging Markets Fund
-----------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - * 86 146 309
Worldwide Hard Assets Fund
-----------------------------------------------------------------------------------
Van Kampen Life Investment Trust - * 81 138 292
Morgan Stanley Real Estate Securities
Portfolio
-----------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio * 77 132 282
(formerly, Warburg Pincus Trust - Growth
& Income Portfolio)
-----------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
12
<PAGE> 22
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 contract described in this prospectus is a modified single purchase payment
contract. The contract is issued as an individual, Non-Qualified Contract.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
The minimum payment for the contract differs depending upon the gender of the
contract owner and the age of the contract owner at the time the contract is
issued. The following charts reflect the minimum purchase payment amount for the
annuity portion of the contract, the minimum premium required for the long term
care insurance, and the total minimum payment required based on the contract
owners gender and age:
MALE CONTRACT OWNERS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
AGE ANNUITY MINIMUM LONG TERM CARE TOTAL MINIMUM
MINIMUM PAYMENT FOR
CONTRACT
----------------------------------------------------------------------------
<S> <C> <C> <C>
18-62 $20,000 $5,000 $25,000
----------------------------------------------------------------------------
63 20,000 5,184 25,184
----------------------------------------------------------------------------
64 20,000 5,471 25,471
----------------------------------------------------------------------------
65 20,000 5,759 25,759
----------------------------------------------------------------------------
66 20,000 6,046 26,046
----------------------------------------------------------------------------
67 20,000 6,333 26,333
----------------------------------------------------------------------------
68 20,000 6,698 26,698
----------------------------------------------------------------------------
69 20,000 7,063 27,063
----------------------------------------------------------------------------
70 20,000 7,427 27,427
----------------------------------------------------------------------------
71 20,000 7,792 27,792
----------------------------------------------------------------------------
72 20,000 8,157 28,157
----------------------------------------------------------------------------
73 20,000 8,617 28,617
----------------------------------------------------------------------------
74 20,000 9,078 29,078
----------------------------------------------------------------------------
75 20,000 9,539 29,539
----------------------------------------------------------------------------
76 20,000 10,000 30,000
----------------------------------------------------------------------------
77 20,000 10,460 30,460
----------------------------------------------------------------------------
78 20,000 10,683 30,683
----------------------------------------------------------------------------
79 20,000 10,905 30,905
----------------------------------------------------------------------------
80 20,000 11,128 31,128
----------------------------------------------------------------------------
81 20,000 11,351 31,351
----------------------------------------------------------------------------
82 20,000 11,573 31,573
----------------------------------------------------------------------------
</TABLE>
FEMALE CONTRACT OWNERS
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
AGE ANNUITY MINIMUM LONG TERM CARE TOTAL MINIMUM
MINIMUM PAYMENT FOR
CONTRACT
----------------------------------------------------------------------------
<S> <C> <C> <C>
18-43 $20,000 $5,000 $25,000
----------------------------------------------------------------------------
44 20,000 5,064 25,064
----------------------------------------------------------------------------
45 20,000 5,204 25,204
----------------------------------------------------------------------------
46 20,000 5,344 25,344
----------------------------------------------------------------------------
47 20,000 5,484 25,484
----------------------------------------------------------------------------
48 20,000 5,685 25,685
----------------------------------------------------------------------------
49 20,000 5,887 25,887
----------------------------------------------------------------------------
50 20,000 6,089 26,089
----------------------------------------------------------------------------
51 20,000 6,290 26,290
----------------------------------------------------------------------------
52 20,000 6,492 26,492
----------------------------------------------------------------------------
53 20,000 6,686 26,686
----------------------------------------------------------------------------
54 20,000 6,879 26,879
----------------------------------------------------------------------------
55 20,000 7,073 27,073
----------------------------------------------------------------------------
56 20,000 7,266 27,266
----------------------------------------------------------------------------
57 20,000 7,460 27,460
----------------------------------------------------------------------------
58 20,000 7,950 27,950
----------------------------------------------------------------------------
59 20,000 8,441 28,441
----------------------------------------------------------------------------
60 20,000 8,931 28,931
----------------------------------------------------------------------------
61 20,000 9,422 29,422
----------------------------------------------------------------------------
62 20,000 9,912 29,912
----------------------------------------------------------------------------
63 20,000 10,550 30,550
----------------------------------------------------------------------------
64 20,000 11,187 31,187
----------------------------------------------------------------------------
65 20,000 11,824 31,824
----------------------------------------------------------------------------
66 20,000 12,462 32,462
----------------------------------------------------------------------------
67 20,000 13,099 33,099
----------------------------------------------------------------------------
68 20,000 13,850 33,850
----------------------------------------------------------------------------
69 20,000 14,600 34,600
----------------------------------------------------------------------------
</TABLE>
(continued)
13
<PAGE> 23
FEMALE CONTRACT OWNERS (CONTINUED)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------
AGE ANNUITY MINIMUM LONG TERM CARE TOTAL MINIMUM
MINIMUM PAYMENT FOR
CONTRACT
----------------------------------------------------------------------------
<S> <C> <C> <C>
70 20,000 15,350 35,350
----------------------------------------------------------------------------
71 20,000 16,100 36,100
----------------------------------------------------------------------------
72 20,000 16,850 36,850
----------------------------------------------------------------------------
73 20,000 17,802 37,802
----------------------------------------------------------------------------
74 20,000 18,754 38,754
----------------------------------------------------------------------------
75 20,000 19,706 39,706
----------------------------------------------------------------------------
76 20,000 20,658 40,658
----------------------------------------------------------------------------
77 20,000 21,610 41,610
----------------------------------------------------------------------------
78 20,000 21,923 41,923
----------------------------------------------------------------------------
79 20,000 22,236 42,236
----------------------------------------------------------------------------
80 20,000 22,549 42,549
----------------------------------------------------------------------------
81 20,000 22,861 42,861
----------------------------------------------------------------------------
82 20,000 23,174 43,174
----------------------------------------------------------------------------
</TABLE>
Minimum subsequent purchase payments to the annuity portion of the contract must
be at least $1,000 (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 any 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.
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").
RIGHT TO REVOKE/FREE LOOK PERIOD
Contract owners may return the contract for any reason during the underwriting
and free look periods (which may be as long as 120 days after receipt of a
completed application). All revocation requests must be in writing and sent to
Nationwide's home office. Upon receipt of a valid revocation request, Nationwide
will refund the contract value and the premium paid for long-term
care/disability insurance benefits without deduction for any sales charges or
administration fees as of the date of cancellation.
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 3 of this prospectus.
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of a variable
account charge which may vary from contract to contract (for more information on
the calculation of accumulation unit values, see "Determining Variable Account
Value"). Please refer to Appendix B for information regarding each class of
accumulation units.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929 with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
14
<PAGE> 24
NATIONWIDE INVESTMENT SERVICES CORPORATION
The policies are distributed by Nationwide Investment Services Corporation
("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. (For contracts issued in
the State of Michigan, all references to NISC shall mean Nationwide Investment
Svcs. Corporation.) NISC is a wholly owned subsidiary of Nationwide.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-10 is a variable account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
variable account on March 31, 1999 pursuant to Ohio law. Although the variable
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, each sub-account corresponds
to a single underlying mutual fund.
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 anticipate any disadvantages to this. However, it
15
<PAGE> 25
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 underlying mutual
funds 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.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus should 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.
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. 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.
16
<PAGE> 26
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 money
is allocated to the fixed account, the interest rate assigned is guaranteed
until the end of the calendar quarter during the12 month anniversary in which
the fixed account allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The guaranteed rate for any purchase payment will be effective for not less than
twelve months. Nationwide guarantees that the rate will not be less than 3.0%
per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less any surrenders and any applicable
charges including CDSC.
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
purchase rates of the contracts. This guarantee ensures that the annuity
purchase 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.
17
<PAGE> 27
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. Earnings are not subject to the CDSC, however,
earnings may not be distributed prior to the distribution of all purchase
payments. For tax purposes, a surrender is usually treated as a withdrawal of
earnings first.
The CDSC applies as follows:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
Number of Years from Date of CDSC
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
8.5% 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.
All or a portion of any withdrawal may be subject to federal income taxes.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10%
penalty tax.
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
5.0%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
18
<PAGE> 28
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
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 beneficiary is the person who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contingent beneficiary is the person who is entitled to the death benefit if
there is no surviving joint owner and no beneficiary survives the annuitant. If
no contingent beneficiary survives the annuitant, all rights and interests will
vest in the last surviving contract owner's estate.
19
<PAGE> 29
The contract owner can name more than one beneficiary or contingent beneficiary.
Multiple beneficiaries or contingent beneficiaries will share the death benefit
equally, unless otherwise specified.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
PRICING OF THE MINIMUM INITIAL PURCHASE PAYMENT
The minimum initial annuity purchase payment allocated to the sub-accounts as
shown on the completed application will be transferred to the NSAT Money Market
Fund within 2 business days of receipt until the end of the period in which the
contract owner may cancel the contract (the underwriting and free look periods).
Such a period may last up to 120 days after receipt of a completed application
(a maximum of 90 days for the underwriting period and a 30 day free look
period). In addition, if the underwriting period cannot be completed within 90
days for any reason, the annuity contract value, plus premium paid for the
long-term care insurance benefits will be returned to the purchaser.
While attempting to complete an incomplete application, Nationwide may retain
the initial purchase payment for up to 5 business days. If the application is
not completed within 5 business days, the prospective purchaser will be informed
of the reason for the delay. All purchase payments, including premium for the
long-term care insurance will be returned unless the prospective purchaser
specifically allows Nationwide to hold the purchase payment until the
application is completed.
Upon the expiration of the underwriting and free look periods, the initial
purchase payment allocated to the NSAT Money Market Fund will be transferred,
the same business day, to sub-accounts indicated on the application and
purchased at net asset value.
PRICING OF SUBSEQUENT PURCHASE PAYMENTS
Minimum subsequent purchase payments may only be made to the annuity portion of
the contract and must be at least $1,000. Subsequent purchase payments will be
priced based on the next available accumulation unit value calculated after the
payment is received. The cumulative total of all purchase payments under
contracts issued by Nationwide on the life of any one annuitant cannot exceed
$1,000,000 without Nationwide's prior consent.
Subsequent purchase payments may not be made during the underwriting and free
look periods. In addition, 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.
WHEN PURCHASE PAYMENTS WILL NOT BE PRICED
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- New Year's Day
- Martin Luther King, Jr. Day
- Presidents' Day
- Good Friday
- Memorial Day
- Independence Day
- Labor Day
- Thanksgiving
- Christmas
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities
held in the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
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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 will
not have access to their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts (after the expiration of
the underwriting and free look periods), 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 (as
of the date the purchase payments are applied to the sub-accounts), then
converted into accumulation units.
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. The
factor is equal to an annual rate of 1.40% 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 or
decrease from valuation period to valuation period.
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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 PRIOR TO ANNUITIZATION
NO TRANSFER REQUESTS OF ANY KIND WILL BE ALLOWED DURING THE UNDERWRITING AND
FREE LOOK PERIODS.
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.
Amounts transferred to the variable account will be priced at the accumulation
unit value next determined after the transfer request is received.
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.
Transfers Among the Sub-Accounts
Transfers may be made among the sub-accounts. However, no change may be made
that would result in an amount less than 1% of the purchase payment 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.
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TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on an anniversary of the
annuitization date.
TRANSFER REQUESTS
After the expiration of the underwriting and free look periods, 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 determines to be genuine. Nationwide
may withdraw the telephone exchange privilege upon 30 days written notice to
contract owners.
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.
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.
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).
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
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 requests must be in writing and Nationwide may
require
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additional information. 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, unless otherwise instructed by the contract
owner.
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 in 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, DOLLAR COST AVERAGING AND SYSTEMATIC WITHDRAWALS ARE NOT
AVAILABLE DURING THE UNDERWRITING AND FREE LOOK PERIODS.
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of values to the sub-accounts on
a predetermined percentage basis. Asset rebalancing is not available for assets
held in the fixed account or the Guaranteed Term Options. Requests for asset
rebalancing must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York Stock Exchange is
closed, asset rebalancing will occur on the next business day.
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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 Federated Insurance Series - Federated Quality
Bond Fund II, Fidelity VIP High Income Portfolio, NSAT Government Bond Fund,
NSAT Nationwide High Income Bond Fund, and NSAT Money Market Fund to any other
underlying mutual fund. Dollar Cost Averaging transfers may not be directed to
Guaranteed Term Options.
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 to or less than 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 in which contract owners may allocate all or a portion of their fixed
account assets. Enhanced Rate Dollar Cost Averaging programs allow the contract
owner to earn a higher rate of interest on assets allocated to the program than
would be earned on assets in the fixed account. Each enhanced interest rate is
guaranteed for as long as the corresponding program is in effect and applies
only to the assets within that program. Nationwide will process transfers until
either amounts in the Enhanced Rate Dollar Cost Averaging program are exhausted,
or the contract owner instructs Nationwide in writing to stop the transfers. For
these programs only, when a written request to discontinue transfers is
received, Nationwide will automatically transfer the remaining amount in the
program to the NSAT Money Market Fund.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greater of:
1) 10% of the total of all purchase payments made to the annuity
portion of the contract as of the withdrawal date;
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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 THE
ANNUITY PORTION OF THE
CONTRACT CONTRACT
OWNER'S AGE
--------------------------------------------------------------
<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.
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.
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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 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
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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 a 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 a contract owner dies before the annuitization date,
a death benefit is payable to the beneficiary.
If no beneficiary survives the annuitant, the contingent beneficiary receives
the death benefit. Contingent beneficiaries will share the death benefit
equally, unless otherwise specified.
If no beneficiary or contingent beneficiary survives 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.
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.
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DEATH BENEFIT PAYMENT
If the annuitant dies at any time prior to the annuitization date, the dollar
amount of the annuity death benefit will be the greater of:
1) the value of the annuity portion of the contract; or
2) the sum of all purchase payments made to the annuity portion of
the contract, less an adjustment for amounts surrendered.
The adjustment for amounts surrendered will reduce item (2) above in the same
proportion that the value of the annuity portion of the contract was reduced on
the date of the partial surrender.
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 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
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- the type of contract purchased;
- the purposes for which the contract is purchased; and
- the personal circumstances of individual investors having
interests in the contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
29
<PAGE> 39
If the contract is purchased as an investment of certain retirement plans (such
as qualified retirement plans, Individual Retirement Accounts, and custodial
accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal
Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may
relate to participation in the plan rather than ownership of the annuity
contract. Such plans are permitted to purchase investments other than annuities
and retain tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is
owned by a natural person is not taxable until it is distributed from the
contract.
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, any portion of the contract that is assigned or
pledged; or any portion of the contract that is 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.
With respect to annuity distributions on or after the annuitization date, a
portion of each annuity payment is excludable from taxable income. The amount
excludable is based on the ratio between the contract owner's investment in the
contract and the expected return on the contract. Once the entire investment in
the contract is recovered, all distributions are fully includable 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 as a result of the annuitant's death no more payments are due
under the contract, then the unrecovered investment in the contract may be
deducted on his or her final tax return.
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 the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date 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 Internal Revenue Code imposes 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 is:
- the result of a contract owner's death;
- the result of a contract owner's disability, as defined in the Internal
Revenue Code;
- 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; or
- is allocable to an investment in the contract before August 14, 1982.
Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by
30
<PAGE> 40
individuals. Different rules (the so-called "non-natural persons" rules) apply
if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
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. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, 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 persons rules also do not apply to contracts that are:
- acquired by the estate of a decedent by reason of the death of the
decedent;
- issued in connection with certain qualified retirement plans and
individual retirement plans;
- purchased by an employer upon the termination of certain qualified
retirement plans.
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
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
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
31
<PAGE> 41
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.
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.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail to contract owners all 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;
- semi-annual reports as of June 30 containing financial statements for the
variable account; and
- annual reports as of December 31 containing financial statements for the
variable account.
Contract owners should review 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.
32
<PAGE> 42
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits relating to life insurance and annuity
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide and
the American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs sought to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the District Court denied, in part, and granted, in part, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law fraud, civil
conspiracy, and breach of contract. The District Court, on December 2, 1998,
issued an order denying plaintiffs' motion for class certification and the
appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000, Nationwide and American Century settled this lawsuit now
limited to the claims of the two named plaintiffs. On February 9, 2000, the
court dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended complaint seeks
unspecified compensatory and punitive damages. No class has been certified. On
June 11, 1999, Nationwide and the other named defendants filed a motion to
dismiss the amended complaint. On March 8, 2000, the court denied the motion to
dismiss the amended complaint filed by Nationwide and other named defendants.
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, NISC, 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,
33
<PAGE> 43
which means that it is assumed that the NSAT Money Market Fund generates the
same level of net income over a 52-week period. The "effective yield" is
calculated similarly but includes the effect of assumed compounding, calculated
under rules prescribed by the SEC. The effective yield will be slightly higher
than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- precious metals;
- real estate;
- stocks and bonds;
- closed-end funds;
- bank money market deposit accounts and passbook savings;
- CDs; and
- the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- S&P 500;
- Shearson/Lehman Intermediate Government/Corporate Bond Index;
- Shearson/Lehman Long-Term Government/Corporate Bond Index;
- Donoghue Money Fund Average;
- U.S. Treasury Note Index;
- Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.;
- CDA/Wiesenberger;
- Morningstar;
- Donoghue's;
- magazines such as:
- Money;
- Forbes;
- Kiplinger's Personal Finance Magazine;
- Financial World;
- Consumer Reports;
- Business Week;
- Time;
- Newsweek;
- National Underwriter; and
- 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.
34
<PAGE> 44
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 total return
("standardized return") calculated in a manner prescribed by the SEC, and
non-standardized average annual total return ("non-standardized return").
Standardized return shows the percentage rate of return of a hypothetical
initial investment of $1,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been available
in the variable account if it has not been available for one of the prescribed
periods). This calculation reflects the deduction of CDSC and all charges that
could be assessed to a contract (1.40%). Standardized returns are not annualized
since the underlying mutual funds have been available in the variable account
for less than one year. Standardized return does not reflect the deduction of
state premium taxes, which may be imposed by certain states.
Non-standardized return is calculated similarly to standardized return except
non-standardized return assumes an initial investment of $25,000, with 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. For those underlying mutual funds which have not been
available for one of the prescribed periods, the non-standardized 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. If the underlying mutual fund has been effective for less than one
year, non-standardized return is not annualized.
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).
The standardized return and nonstandardized return quotations are calculated
using data for the period ended December 31, 1999. 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.
35
<PAGE> 45
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE TOTAL RETURN
<TABLE>
<CAPTION>
10 Years
or Date Fund
Available in Date Fund
the Variable Available in the
1 Year 5 Years Account Variable Account
Sub-Account Option to 12/31/99 to 12/31/99 to 12/31/99
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American Century VP N/A N/A 6.20% 10/01/99
Income & Growth
-----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP N/A N/A 39.17% 10/01/99
International
-----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century VP N/A N/A -8.60% 10/01/99
Value
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European Equity Portfolio N/A N/A 21.04% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. N/A N/A 12.77% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. N/A N/A 7.16% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Appreciation Portfolio N/A N/A 2.73% 10/01/99
(formerly, Dreyfus Variable Investment Fund - Capital Appreciation
Portfolio)
-----------------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond Fund II N/A N/A -7.53% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class N/A N/A -3.64% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class N/A N/A 15.38% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class N/A N/A -3.51% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class N/A N/A 16.71% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio: Service Class N/A N/A 10.49% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service Class N/A N/A -1.03% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund N/A N/A -2.69% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund N/A N/A -7.81% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund N/A N/A -6.29% 09/30/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund N/A N/A 0.88% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Balanced Fund N/A N/A -6.53% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund N/A N/A 6.76% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide Global N/A N/A 6.71% 10/01/99
Equity Fund)
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund N/A N/A -4.67% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund N/A N/A 9.73% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund N/A N/A -5.51% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT Nationwide N/A N/A 57.69% 10/01/99
Select Advisers Small Cap Growth Fund)
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund N/A N/A 3.93% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund N/A N/A 24.70% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund N/A N/A 35.08% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund N/A N/A 0.83% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio N/A N/A 8.94% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio N/A N/A 41.18% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio N/A N/A 1.83% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Aggressive Growth N/A N/A 38.00% 10/01/99
Fund/VA
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
36
<PAGE> 46
STANDARDIZED AVERAGE TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years
or Date Fund
Available in Date Fund
the Variable Available in the
1 Year 5 Years Account Variable Account
Sub-Account Option to 12/31/98 to 12/31/98 to 12/31/98
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds - Oppenheimer Capital N/A N/A 4.37% 10/01/99
Appreciation Fund/VA
-----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Main Street N/A N/A 4.11% 10/01/99
Growth & Income Fund/VA
-----------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging Markets Debt N/A N/A 6.02% 10/01/99
Portfolio (formerly, Morgan Stanley Dean Witter Universal
Funds, Inc. - Emerging Markets Debt Portfolio)
-----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets N/A N/A 48.96% 10/01/99
Fund
-----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund N/A N/A -4.07% 10/01/99
-----------------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real Estate N/A N/A -8.92% 10/01/99
Securities Portfolio
-----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio (formerly, Warburg N/A N/A -7.25% 10/01/99
Pincus Trust - Growth & Income Portfolio)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 Years
to 12/31/99
1 Year 5 Years or Life of Fund Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 Effective
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc. - American Century 16.37% N/A 22.96% 10/30/97
VP Income & Growth
-----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century 61.75% 22.56% 18.39% 05/02/94
VP International
-----------------------------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc. - American Century -2.24% N/A 9.55% 05/01/96
VP Value
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Investment Portfolios - European Equity Portfolio N/A N/A 27.36% 04/30/99
-----------------------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth Fund, Inc. 28.26% 26.86% 22.36% 10/06/93
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 18.92% 26.08% 15.96% 09/29/89
-----------------------------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund - Appreciation Portfolio 9.90% 23.78% 18.39% 04/05/93
(formerly, Dreyfus Variable Investment Fund - Capital
Appreciation Portfolio)
-----------------------------------------------------------------------------------------------------------------------------------
Federated Insurance Series - Federated Quality Bond Fund II N/A N/A -2.95% 04/22/99
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity-Income Portfolio: Service Class 4.77% 16.91% 12.87% 10/09/86
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio: Service Class 35.37% 27.87% 18.23% 10/09/86
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio: Service Class 6.56% 9.25% 10.83% 09/19/85
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio: Service Class 40.47% 15.68% 9.84% 01/28/87
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund(R) Portfolio: Service Class 22.41% N/A 25.93% 01/03/95
-----------------------------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities Portfolio: Service Class 2.72% N/A 19.79% 01/03/95
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Capital Appreciation Fund 2.82% 22.62% 15.64% 04/15/92
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Government Bond Fund -3.71% 5.98% 6.18% 11/08/82
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Money Market Fund 3.42% 3.76% 3.53% 11/10/81
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Total Return Fund 5.45% 19.09% 13.18% 11/08/82
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
37
<PAGE> 47
NON-STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years
to 12/31/99
1 Year 5 Years or Life of Date Fund
Sub-Account Option to 12/31/99 to 12/31/99 Fund Effective
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NSAT Nationwide Balanced Fund -0.55% N/A 3.29% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Equity Income Fund 16.83% N/A 14.74% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Global 50 Fund (formerly, NSAT Nationwide Global 21.20% N/A 18.23% 10/31/97
Equity Fund)
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide High Income Bond Fund 1.75% N/A 3.75% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Mid Cap Index Fund 19.23% N/A 12.68% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Multi Sector Bond Fund 0.13% N/A 0.97% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Growth Fund (formerly, NSAT Nationwide N/A N/A 103.11% 05/03/99
Select Advisers Small Cap Growth Fund)
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Cap Value Fund 26.05% N/A 8.05% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Small Company Fund 42.02% N/A 21.52% 10/23/95
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Growth Fund 82.17% N/A 40.82% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
NSAT Nationwide Strategic Value Fund -4.43% N/A -1.91% 10/31/97
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Guardian Portfolio 13.32% N/A 22.32% 11/03/97
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Mid-Cap Growth Portfolio 51.74% N/A 50.21% 11/03/97
-----------------------------------------------------------------------------------------------------------------------------------
Neuberger Berman AMT Partners Portfolio 5.87% 19.33% 15.84% 03/22/94
-----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Aggressive 81.04% 27.90% 18.75% 08/15/86
Growth Fund/VA
-----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Capital 39.67% 28.84% 16.81% 04/03/85
Appreciation Fund/VA
-----------------------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds - Oppenheimer Main Street 20.01% N/A 24.05% 07/05/95
Growth & Income Fund/VA
-----------------------------------------------------------------------------------------------------------------------------------
The Universal Institutional Funds, Inc. - Emerging Markets Debt 27.57% N/A -4.02% 06/16/97
Portfolio (formerly, Morgan Stanley Dean Witter Universal Funds,
Inc. - Emerging Markets Debt Portfolio)
-----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Emerging Markets 97.49% N/A 8.40% 12/21/95
Fund
-----------------------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust - Worldwide Hard Assets Fund 19.31% 0.06% 1.61% 09/01/89
-----------------------------------------------------------------------------------------------------------------------------------
Van Kampen Life Investment Trust - Morgan Stanley Real Estate -4.73% N/A 9.15% 07/03/95
Securities Portfolio
-----------------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - Value Portfolio (formerly, Warburg Pincus 4.76% N/A 8.80% 10/31/97
Trust - Growth & Income Portfolio)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Janus Aspen Series - Capital Appreciation Portfolio: Service Shares, Janus
Aspen Series - Global Technology Portfolio: Service Shares and Janus Aspen
Series - International Growth Portfolio: Service Shares were added to the
variable account effective January 27, 2000. Therefore, no sub-account
performance is available.
The Oppenheimer Variable Accounts Funds - Oppenheimer Global Securities Fund/VA,
Strong Opportunity Fund II, Inc., and The Universal Institutional Funds, Inc. -
Mid Cap Growth Portfolio were added to the variable account effective May 1,
2000. Therefore, no sub-account performance is available.
38
<PAGE> 48
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>
39
<PAGE> 49
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
that offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the portfolio
to match the risk characteristics of the S&P 500 Stock Index and then
optimizes each portfolio to achieve the desired balance of risk and return
potential. This includes targeting a dividend yield that exceeds that of the
S&P 500. Such a management technique known as "portfolio optimization" may
cause the Fund to be more heavily invested in some industries than in
others. However, the Fund may not invest more than 25% of its total assets
in companies whose principal business activities are in the same industry.
AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to achieve
its investment objective by investing primarily in securities of foreign
companies that meet certain fundamental and technical standards of selection
and, in the opinion of the investment manager, have potential for
appreciation. Under normal conditions, the Fund will invest at least 65% of
its assets in common stocks or other equity securities of issuers from at
least three countries outside the United States. While securities of United
States issuers may be included in the portfolio from time to time, it is the
primary intent of the manager to diversify investments across a broad range
of foreign issuers. Although the primary investment of the Fund will be
common stocks (defined to include depository receipts for common stock and
other equity equivalents), the Fund may also invest in other types of
securities consistent with the Fund's objective. When the manager believes
that the total capital growth potential of other securities equals or
exceeds the potential return of common stocks, the Fund may invest up to 35%
of its assets in such other securities. There can be no assurance that the
Fund will achieve its objectives.
AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are
believed by management to be undervalued at the time of purchase. Under
normal market conditions, the Fund expects to invest at least 80% of the
value of its total asset in equity securities, including common and
preferred stock, convertible preferred stock and convertible debt
obligations.
DREYFUS INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management investment
company known as a mutual fund. Shares are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies to
fund variable annuity contracts and variable life insurance policies and to
qualified pension and retirement plans. Individuals may not purchase shares
directly from the Fund. The Dreyfus Corporation serves as the Fund's investment
adviser.
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<PAGE> 50
EUROPEAN EQUITY PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth. To
pursue this goal, the Portfolio generally invests at least 80% of its total
assets in stocks included within the universe of the 300 largest European
companies. The Portfolio may invest up to 10% of its total assets in the
stocks of non-European companies. The Portfolio's stock investments may
include common stocks, preferred stocks and convertible securities.
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.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. is an open-end, non-diversified, management
investment company incorporated under Maryland law on January 24, 1989 and
commenced operations on September 29, 1989. The Fund offers its shares only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation ("Dreyfus") serves as the Fund's
manager, while Mellon Equity Associates, an affiliate of Dreyfus, serves as the
Fund's index manager. Dreyfus is a wholly owned subsidiary of Mellon Bank, N.A.,
which is a wholly owned subsidiary of Mellon Bank Corporation.
Investment Objective: To provide investment results that correspond to the
price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock Price
Index. The Fund is neither sponsored by nor affiliated with Standard &
Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund is an open-end, management investment company.
It was organized as an unincorporated business trust under the laws of the
Commonwealth of Massachusetts on October 29, 1986 and commenced operations on
August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
sub-adviser and provides day-to-day management of the Portfolio.
APPRECIATION PORTFOLIO (FORMERLY, 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.
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 Investment Management Company serves as the
investment adviser.
FEDERATED QUALITY BOND FUND II
Investment Objective: Current income by investing in investment grade fixed
income securities.
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<PAGE> 51
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and its
portfolios.
VIP EQUITY-INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's goal
is to achieve a yield which exceeds the composite yield on the securities
comprising the Standard & Poor's 500 Composite Stock Price Index.
VIP GROWTH PORTFOLIO: SERVICE CLASS
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is also
important to point out that this Portfolio makes sense for you if you can
afford to ride out changes in the stock market because it invests primarily
in common stocks. FMR can also make temporary investments in securities
such as investment-grade bonds, high-quality preferred stocks and
short-term notes, for defensive purposes when it believes market conditions
warrant.
VIP HIGH INCOME PORTFOLIO: SERVICE CLASS
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
- 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
42
<PAGE> 52
contracts. FMR is the manager of VIP II and its portfolios.
VIP II CONTRAFUND(R) PORTFOLIO: SERVICE CLASS
Investment Objective: To seek capital appreciation by investing primarily
in companies that FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to investments
in domestic or foreign companies, small and large, many of which may not be
well known. The Portfolio primarily invests in common stock and securities
convertible into common stock, but it has the flexibility to invest in any
type of security that may produce capital appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and it's portfolios.
VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio, under
normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth potential.
Although the Portfolio invests primarily in common stock and securities
convertible into common stock, it has the ability to purchase other
securities, such as preferred stock and bonds, that may produce capital
growth. The Portfolio may invest in foreign securities without limitation.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in common stocks selected for their growth potential. The
Portfolio may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.
GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies selected for
their growth potential. Under normal circumstances, the Portfolio invests
at least 65% of its total assets in securities of companies that the
Portfolio manager believes will benefit significantly from advances or
improvements in technology.
INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing at
least 65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the Portfolio
intends to invest substantially all of its assets in issuers located
outside the United States, it may invest in U.S. issuers and it may at
times invest all of its assets in fewer than five countries, or even a
single country.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. Effective September 1, 1999, the investment advisory
services
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<PAGE> 53
previously performed by Nationwide Advisory Services ("NAS") were
transferred to Villanova Mutual Fund Capital Trust ("VMF"), an affiliate of NAS
and an indirect subsidiary of Nationwide Financial Services, Inc. The portfolio
managers and subadvisers for each of the Funds continue to manage the Funds
after the transfer to VMF.
CAPITAL APPRECIATION FUND
Investment Objective: Long-term capital appreciation.
GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
MONEY MARKET FUND
Investment Objective: As high a level of current income as is consistent
with the preservation of capital and maintenance of liquidity.
TOTAL RETURN FUND
Investment Objective: To obtain a reasonable, long-term total return on
invested capital.
SUBADVISED NATIONWIDE FUNDS
NATIONWIDE BALANCED FUND
Subadviser: J.P. Morgan Investment Management, Inc.
Investment Objective: Primarily seeks above-average income compared to
a portfolio entirely invested in equity securities. The Fund's
secondary objective is to take advantage of opportunities for growth
of capital and income. The Fund seeks its objective primarily through
investments in a broad variety of securities, including equity
securities, fixed-income securities and short-term obligations. Under
normal market conditions, it is anticipated that the Fund will invest
at least 40% of the Fund's total assets in equity securities and at
least 25% in fixed-income senior securities. The Fund's subadviser
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 50 FUND (FORMERLY, 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
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<PAGE> 54
companies based in the developed countries around the world. The
assets of the Fund will ordinarily be invested in the securities of at
least five different countries.
NATIONWIDE HIGH INCOME BOND FUND
Subadviser: Federated Investment Counseling
Investment Objective: Seeks to provide high current income by
investing primarily in a professionally managed, diversified portfolio
of fixed income securities. To meet its objective, the Fund intends to
invest at least 65% of its assets in lower-rated fixed income
securities such as preferred stocks, bonds, debentures, notes,
equipment lease certificates and equipment trust certificates which
are rated BBB or lower by Standard & Poor's or Fitch Investors Service
or Baa or lower by Moody's (or if not rated, are determined by the
Fund's subadviser to be of a comparable quality). Such investments are
commonly referred to as "junk bonds." For a further discussion of
lower-rated securities, please see the "High Yield Securities" section
of the Fund's prospectus.
NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Miller, Anderson & Sherrerd, LLP
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 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.
NATIONWIDE MID CAP INDEX FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. The Fund seeks to match
the performance of the Standard & Poor's MidCap 400 Index. To pursue
this goal, the Fund generally is fully invested in all 400 stocks
included in this index in proportion to their weighting in the index,
and in futures whose performance is tied to the index. The Fund is
neither sponsored by nor affiliated with Standard & Poor's
Corporation.
NATIONWIDE SMALL CAP GROWTH FUND (FORMERLY, 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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<PAGE> 55
NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC., Lazard
Asset Management and Strong Capital 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 (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON
OR AFTER MAY 1, 2000)
Subadviser: Strong Capital Management Inc./Schafer Capital Management
Inc.
Investment Objective: Primarily long-term capital appreciation;
current income is a secondary objective. The Fund seeks to meet its
objectives by investing in securities which are believed to offer the
possibility of increase in value, primarily common stocks of
established companies having a strong financial position and a low
stock market valuation at the time of purchase in relation to
investment value. Other than considered appropriate for cash reserves,
the Fund will generally maintain a fully invested position in common
stocks of publicly held companies, primarily in stocks of companies
listed on a national securities exchange or other equity securities
(common stock or securities convertible into common stock).
Investments may also be made in debt securities which are convertible
into common stocks and in warrants or other rights to purchase common
stock, which in such case are considered equity securities by the
Fund. Strong Capital Management, Inc. has subcontracted with Schafer
Capital Management, Inc. to subadvise the Fund.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger Berman Advisers Management Trust ("NB AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of NB AMT are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through life insurance
company separate accounts and are also offered directly to qualified pension and
retirement plans outside of the separate account context.
The Guardian, Partners and Mid-Cap Growth Portfolios of NB AMT invest all of
their investable assets in a corresponding series of Advisers Managers Trust
managed by Neuberger Berman Management Incorporated ("NB Management"). Each
series then invests in securities in accordance with an investment objective,
policies and limitations identical to those of the Portfolio. This
"master/feeder fund" structure is different from that of many other investment
companies which directly acquire and manage their own portfolios of securities.
(For more information regarding "master/feeder fund" structure, see "Special
Information Regarding Organization,
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<PAGE> 56
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
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
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history
of earnings and dividends and are issued by seasoned companies (companies
which have an operating history of at least five years including
predecessors). Current income is a secondary consideration in the selection
of the Fund's portfolio securities.
OPPENHEIMER GLOBAL SECURITIES FUND/VA
Investment Objective: To seek long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special appreciation
possibilities. These securities may be considered speculative.
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<PAGE> 57
OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
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.
STRONG OPPORTUNITY FUND II, INC.
The Strong Opportunity Fund II, Inc. is a diversified, open-end management
company commonly called a mutual fund. The Strong Opportunity Fund II, Inc. was
incorporated in Wisconsin and may be purchased by the separate accounts of
insurance companies for the purpose of funding variable annuity contracts and
variable life insurance policies. Strong Capital Management Inc. is the
investment adviser for the Fund.
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (FORMERLY, MORGAN STANLEY DEAN WITTER
UNIVERSAL FUNDS, INC.)
The Universal Institutional 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.
MID CAP GROWTH PORTFOLIO
Investment Objective: Long-term capital growth by investing primarily in
common stocks and other equity securities of issuers with equity
capitalizations in the range of the companies represented in the Standard &
Poor's Rating Group ("S&P") MidCap 400 Index. Such range is generally $500
million to $6 billion but the range fluctuates over time with changes in
the equity market. Miller Anderson & Sherrerd, LLP is the Portfolio's
investment dealer.
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.
48
<PAGE> 58
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 (NOT AVAILABLE IN CONNECTION WITH CONTRACTS FOR WHICH GOOD
ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER MAY 1, 2000)
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. Portfolios are managed by Credit Suisse Asset Management, LLC
("Credit Suisse").
VALUE PORTFOLIO (FORMERLY, GROWTH & INCOME PORTFOLIO)
Investment Objective: Seeks total return by investing primarily in equity
securities of value companies that may or may not pay dividends.
49
<PAGE> 59
APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
American Century 10.000000 11.339911 13.40% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Variable Portfolios,
------------------- ------------------- ------------------- ------------------- ------------
Inc. - American Century
------------------- ------------------- ------------------- ------------------- ------------
VP Income & Growth - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
American Century 10.000000 14.637401 46.37% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Variable Portfolios,
------------------- ------------------- ------------------- ------------------- ------------
Inc. - American Century
------------------- ------------------- ------------------- ------------------- ------------
VP International - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
American Century 10.000000 9.849004 -1.51% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Variable Portfolios,
------------------- ------------------- ------------------- ------------------- ------------
Inc. - American Century
------------------- ------------------- ------------------- ------------------- ------------
VP Value - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Dreyfus Investment 10.000000 12.824168 28.24% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Portfolios - European
------------------- ------------------- ------------------- ------------------- ------------
Equity Portfolio - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
The Dreyfus Socially 10.000000 11.997336 19.97% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Responsible Growth
------------------- ------------------- ------------------- ------------------- ------------
Fund, Inc. - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Dreyfus Stock Index 10.000000 11.436031 14.36% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Fund, Inc. - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Dreyfus Variable 10.000000 10.993278 9.93% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Investment Fund
------------------- ------------------- ------------------- ------------------- ------------
-Appreciation Portfolio
------------------- ------------------- ------------------- ------------------- ------------
- NQ(1)
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Federated Insurance 10.000000 9.964904 -0.35% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Series - Federated
------------------- ------------------- ------------------- ------------------- ------------
Quality Bond Fund II -
------------------- ------------------- ------------------- ------------------- ------------
NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
</TABLE>
(1) Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
50
<PAGE> 60
<TABLE>
<CAPTION>
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP 10.000000 10.356381 3.56% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Equity-Income
------------------- ------------------- ------------------- ------------------- ------------
Portfolio: Service
------------------- ------------------- ------------------- ------------------- ------------
Class - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Fidelity VIP Growth 10.000000 12.257729 22.58% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Portfolio: Service
------------------- ------------------- ------------------- ------------------- ------------
Class - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Fidelity VIP High 10.000000 10.369409 3.69% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Income Portfolio:
------------------- ------------------- ------------------- ------------------- ------------
Service Class - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Fidelity VIP Overseas 10.000000 12.390673 23.91% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Portfolio: Service
------------------- ------------------- ------------------- ------------------- ------------
Class - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Fidelity VIP II 10.000000 11.768698 17.69% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Contrafund(R)
------------------- ------------------- ------------------- ------------------- ------------
Portfolio: Service
------------------- ------------------- ------------------- ------------------- ------------
Class - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Fidelity VIP III Growth 10.000000 10.616993 6.17% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Opportunities
------------------- ------------------- ------------------- ------------------- ------------
Portfolio: Service
------------------- ------------------- ------------------- ------------------- ------------
Class - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Capital 10.000000 10.450957 4.51% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Appreciation Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Government Bond 10.000000 9.933775 -0.66% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Money Market Fund 10.000000 10.090878 0.91% 6,004 1999
------------------- ------------------- ------------------- ------------------- ------------
- NQ*
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Total Return Fund 10.000000 10.808344 8.08% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
- NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide 10.000000 10.066595 0.67% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Balanced Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
</TABLE>
*The 7-day yield on the NSAT Money Market Fund as of December 31, 1999 was
3.97%.
51
<PAGE> 61
<TABLE>
<CAPTION>
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
NSAT Nationwide Equity 10.000000 11.395844 13.96% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Income Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide Global 10.000000 11.391398 13.91% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
50 Fund - NQ(1)
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide High 10.000000 10.253125 2.53% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Income Bond Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide Mid Cap 10.000000 11.693496 16.93% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Index Fund- NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide Multi 10.000000 10.204605 2.05% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Sector Bond Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide Small 10.000000 16.489018 64.89% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Cap Growth Fund - NQ(2)
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide Small 10.000000 11.112696 11.13% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Cap Value Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide Small 10.000000 13.189965 31.90% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Company Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide 10.000000 14.227539 42.28% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Strategic Growth Fund -
------------------- ------------------- ------------------- ------------------- ------------
NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
NSAT Nationwide 10.000000 10.802650 8.03% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Strategic Value Fund -
------------------- ------------------- ------------------- ------------------- ------------
NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
</TABLE>
(1) Formerly, NSAT Nationwide Global Equity Fund.
(2) Formerly, NSAT Nationwide Select Advisers Small Cap Growth Fund.
52
<PAGE> 62
<TABLE>
<CAPTION>
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT 10.000000 11.613561 16.14% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Guardian Portfolio - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Neuberger Berman AMT 10.000000 14.837719 48.38% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Mid-Cap Growth
------------------- ------------------- ------------------- ------------------- ------------
Portfolio - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Neuberger Berman AMT 10.000000 10.903103 9.03% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Partners Portfolio - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Oppenheimer Variable 10.000000 14.519858 45.20% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Account Funds -
------------------- ------------------- ------------------- ------------------- ------------
Oppenheimer Aggressive
------------------- ------------------- ------------------- ------------------- ------------
Growth Fund/VA - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Oppenheimer Variable 10.000000 12.856734 28.57% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Account Funds -
------------------- ------------------- ------------------- ------------------- ------------
Oppenheimer Capital
------------------- ------------------- ------------------- ------------------- ------------
Appreciation Fund/VA -
------------------- ------------------- ------------------- ------------------- ------------
NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Oppenheimer Variable 10.000000 11.130917 11.31% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Account Funds -
------------------- ------------------- ------------------- ------------------- ------------
Oppenheimer Main Street
------------------- ------------------- ------------------- ------------------- ------------
Growth & Income Fund/VA
------------------- ------------------- ------------------- ------------------- ------------
- NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
The Universal 10.000000 11.321990 13.22% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Institutional Funds,
------------------- ------------------- ------------------- ------------------- ------------
Inc. - Emerging Markets
------------------- ------------------- ------------------- ------------------- ------------
Debt Portfolio - NQ(1)
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Van Eck Worldwide 10.000000 15.615759 56.16% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Insurance Trust -
------------------- ------------------- ------------------- ------------------- ------------
Worldwide Emerging
------------------- ------------------- ------------------- ------------------- ------------
Markets Fund - NQ
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
</TABLE>
(1) Formerly, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio.
53
<PAGE> 63
<TABLE>
<CAPTION>
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
UNDERLYING MUTUAL FUND ACCUMULATION UNIT ACCUMULATION UNIT PERCENT CHANGE IN NUMBER OF YEAR
VALUE AT VALUE AT END OF ACCUMULATION UNIT ACCUMULATION
BEGINNING OF PERIOD VALUE UNITS AT END OF
PERIOD PERIOD
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
<S> <C> <C> <C> <C> <C>
Van Eck Worldwide 10.000000 10.313058 3.13% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Insurance Trust -
------------------- ------------------- ------------------- ------------------- ------------
Worldwide Hard Assets
------------------- ------------------- ------------------- ------------------- ------------
Fund - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Van Kampen Life 10.000000 9.814146 -1.86% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Investment Trust - 1998
------------------- ------------------- ------------------- ------------------- ------------
Morgan Stanley Real 1997
------------------- ------------------- ------------------- ------------------- ------------
Estate Securities
------------------- ------------------- ------------------- ------------------- ------------
Portfolio - NQ
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
Warburg Pincus Trust - 10.000000 9.994949 -0.05% 0 1999
------------------- ------------------- ------------------- ------------------- ------------
Value Portfolio - NQ(1)
------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
------------------------- ------------------- ------------------- ------------------- ------------------- ------------
</TABLE>
(1) Formerly, Warburg Pincus Trust - Growth & Income Portfolio.
The Janus Aspen Series - Capital Appreciation Portfolio: Service Shares, Janus
Aspen Series - Global Technology Portfolio: Service Shares, and Janus Aspen
Series - International Growth Portfolio: Service Shares were added to the
variable account effective January 27, 2000. Therefore, no Condensed Financial
Information is available.
The Oppenheimer Variable Account Funds - Oppenheimer Global Securities Fund/VA,
Strong Opportunity Fund II, Inc., and The Universal Institutional Funds, Inc. -
Mid Cap Growth Portfolio were added to the variable account effective May 1,
2000. Therefore, no Condensed Financial Information is available.
54
<PAGE> 64
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
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 May 1, 2000. 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 group of companies. The Nationwide
group of companies is one of America's largest insurance and financial services
family of companies, with combined assets of over $120 billion as of December
31, 1999.
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.
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.
1
<PAGE> 65
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
Investment Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio
43215, a wholly owned subsidiary of Nationwide. During the fiscal years ended
December 31, 1999, 1998 and 1997, no underwriting commissions were paid by
Nationwide to NISC.
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, 1999, the
NSAT Money Market Fund's seven-day current unit value yield was 3.97%. 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, 1999 the NSAT
Money Market Fund's seven-day effective yield was 4.05%.
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
total return, calculated in accordance with a standard method prescribed by
rules of the SEC. Standardized average 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 total return
reflects the deduction of CDSC and all charges that could be assessed to a
contract (1.40%), 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 total return except the
nonstandardized total return is based on a hypothetical initial investment of
$25,000, with contract variable account charges of 1.40% and does NOT reflect
CDSC. An assumed initial investment of
2
<PAGE> 66
$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 total return quotations.
The standardized average total return and nonstandardized 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 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 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 total return are based upon historical earnings and will
fluctuate. Any quotation of performance, is not a guarantee of future
performance. Factors affecting a sub-account's performance include general
market conditions, operating expenses and investment management. A contract
owner's account when redeemed may be more or less than the original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
<PAGE> 67
<PAGE> 1
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-10
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-10 (comprised of the
Nationwide Separate Account Trust-Money Market Fund) (collectively, "the
Account") as of December 31, 1999, and the related statements of operations and
changes in contract owners' equity for the period December 15, 1999
(commencement of operations) through December 31, 1999. These financial
statements are the responsibility of the Account's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1999, and the results of its operations and its changes in contract owners'
equity for the period December 15, 1999 (commencement of operations) through
December 31, 1999 in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 18, 2000
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-10
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
ASSETS:
Investments at market value:
Nationwide SAT - Money Market Fund (NSATMyMkt)
60,585 shares (cost $60,585) ............................ $60,585
-------
Total investments .................................... 60,585
Accounts receivable ........................................... 1
-------
Total assets ......................................... 60,586
ACCOUNTS PAYABLE ................................................. -
-------
CONTRACT OWNERS' EQUITY (NOTE 4) ................................. $60,586
=======
See accompanying notes to financial statements.
<PAGE> 3
NATIONWIDE VARIABLE ACCOUNT-10
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
--------------------------------
STATEMENTS OF OPERATIONS
--------------------------------
FOR THE PERIOD DECEMBER 15, 1999
(COMMENCEMENT OF OPERATIONS)
THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
NSATMYMKT
-------------
<S> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 106
Mortality and expense risk charges
(note 2) .......................................... (28)
------
Net investment activity ........................... 78
------
Proceeds from mutual fund shares sold ............... 22
Cost of mutual fund shares sold ..................... (22)
------
Realized gain (loss) on investments ............... -
------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 78
------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 60,508
------
Net equity transactions ......................... 60,508
------
NET CHANGE IN CONTRACT OWNERS' EQUITY ................. 60,586
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ........... -
------
CONTRACT OWNERS' EQUITY END OF PERIOD ................. $ 60,586
======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT-10
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-10 (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on March 31, 1999. The Account has been
registered as a unit investment trust under the Investment Company Act
of 1940.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts through the Account. The primary
distribution for the contracts is through the brokerage community;
however, other distributors are utilized.
(b) The Contracts
Only contracts without a sales charge, but with certain other fees are
offered for purchase. See note 2 for a discussion of contract expenses.
Contract owners in either the accumulation or payout phase may invest
in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP);
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolio of the Dreyfus Investment Portfolios (Dreyfus IP);
Dreyfus IP - European Equity Portfolio (DryEuroEq)
Portfolio of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Federated Insurance Series - Quality Bond Fund II (FedQualBal)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio: Service Class
(FidVIPEIS)
Fidelity VIP - Growth Portfolio: Service Class (FidVIPGrS)
Fidelity VIP - High Income Portfolio: Service Class (FidVIPHIS)
Fidelity VIP - Overseas Portfolio: Service Class (FidVIPOvS)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Contrafund Portfolio: Service Class
(FidVIPConS)
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio: Service Class
(FidVIPGrOpS)
Portfolio of the Morgan Stanley Universal Funds, Inc. (Morgan
Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
<PAGE> 5
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Balanced Fund (NSATBal)
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Equity Income Fund (NSATEqInc)
Nationwide SAT - Global Equity Fund (NSATGlobEq)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - High Income Bond Fund (NSATHIncBd)
Nationwide SAT - Mid Cap Index Fund (NSATMidCap)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Multi Sector Bond Fund (NSATMSecBd)
Nationwide SAT - Select Advisers Small Cap Fund (NSATSmCapGr)
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Strategic Growth Fund (NSATStrGro)
Nationwide SAT - Strategic Value Fund (NSATStrVal)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger &Berman AMT);
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
Neuberger & Berman AMT - Mid-Cap Growth Portfolio (NBAMTMCGr)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Aggressive Growth Fund (OppAggGro)
Oppenheimer VAF - Capital Appreciation Fund (OppCapApp)
Oppenheimer VAF - Main Street Growth & Income Fund (OppMSGrInc)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
Portfolio of the Van Kampen Life Investment Trust (Van Kampen
LIT);
Van Kampen LIT - Morgan Stanley Real Estate Securities Portfolio
(VKMSRESec)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - Growth & Income Portfolio (WPGrInc)
At December 31, 1999, contract owners have only invested in Nationwide
SAT - Money Market Fund. The contract owners' equity is affected by the
investment results of the fund, equity transactions by contract owners
and certain contract expenses (see note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their
contracts and exclude any purchase payments for fixed dollar benefits,
the latter being included in the accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-10
NOTES TO FINANCIAL STATEMENTS
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual fund is based on the closing
net asset value per share at December 31, 1999. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge not to exceed 8% of purchase payments surrendered. After 5 years,
such charge will decline 1% per year, to 0%, after the purchase payment has
been held in the contract for 13 years. No sales charges are deducted on
redemptions used to purchase units in the fixed investment options of the
Company.
The Company deducts a mortality and expense risk charge assessed through
the daily unit value calculation equal to an annual rate of 1.40%.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 7
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1999.
<TABLE>
<CAPTION>
PERIOD
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(b)
-------- --------- ---------
<S> <C> <C> <C> <C>
Nationwide SAT - Money Market Fund: ..... 6,004 10.090878 $ 60,586 1%(a)
======== =========
$ 60,586
=========
</TABLE>
(a) Non-annualized. The return was computed for the period 12/15/99
(commencement of operations) through 12/31/99.
(b) The period return does not include contract charges satisfied by
surrendering units.
<PAGE> 68
<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, 1999 and
1998, 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,
1999. 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, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 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
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</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, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(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.
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. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(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 accumulated other comprehensive income in
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, 1999 or 1998.
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.
(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.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(d) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 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 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, 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 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) 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.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 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. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
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
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, 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) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
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 Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</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) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</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, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<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, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
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) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) 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 fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
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 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
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>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) 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.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
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 and derivative financial instruments. 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 $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
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 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 $143.6 million and $187.9 million as of December 31,
1999 and 1998, 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.
(9) 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.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
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
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance 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). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
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, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 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, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 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, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
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.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, 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
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
The ceding of risk does not discharge the original insurer from its
primary obligation to the policyholder. The Company believes that the
terms of the modified coinsurance agreements are consistent in all
material respects with what the Company could have obtained with
unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 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 such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
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 1999 and
1998 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.
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 $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company 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.
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, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to 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 any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was named in a lawsuit filed in Ohio
state court related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) 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.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. 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, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. 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, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</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) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 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 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 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) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 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
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
----------
(1) The Company's method of allocating net investment income results in
a charge (negative net investment income) to the Variable Annuities
segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on
a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 69
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements:
(1) Financial statements included in Prospectus.
(Part A):
Condensed Financial Information.
in Part B:
Those financial statements required by Item 23 to
be included in Part B have been incorporated
therein by reference to the Prospectus (Part A).
Nationwide Variable Account -10:
Independent Auditors' Report.
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1999.
Statement of Operations for December 15, 1999
through December 31, 1999.
Statement of Changes in Contract Owners' Equity
for December 15, 1999 through December 31, 1999.
Notes to Financial Statements.
Nationwide Life Insurance Company and subsidiaries:
Independent Auditors' Report.
Consolidated Balance Sheets as of December
31, 1999 and 1998.
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholder's Equity
for the years ended December 31, 1999, 1998 and
1997.
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
<PAGE> 70
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant - *
(2) Not Applicable
(3) Underwriting or Distribution of contracts between the
Registrant and Principal Underwriter - Filed previously
with Post-Effective Amendment - 3 and hereby
incorporated by reference (1933 Act File No.
333-81701).
(4) The form of the variable annuity contract -*
(5) Variable Annuity Application - *
(6) Articles of Incorporation of Depositor - *
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - *
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule - Filed
previously with initial registration statement (1933
Act File No. 333-28995) and is hereby incorporated by
reference.
*Filed previously with initial registration statement
(1933 Act File No. 333-81701) and is hereby
incorporated by reference.
<PAGE> 71
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365-6107
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
301 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
Xerox Corporation
Suite 200
1401 H Street NW
Washington, DC 20005-2110
Ralph M. Paige 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>
<PAGE> 72
<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
1767D Westwood Avenue
Alliance, OH 44601
Richard D. Headley Executive Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
Charles A. Bryan Senior Vice President -
One Nationwide Plaza Chief Actuary - Property and Casualty
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
</TABLE>
<PAGE> 73
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
David K. Hollingsworth Senior Vice President -
One Nationwide Plaza Business Development and
Columbus, OH 43215 Sponsor Relations
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
Donna A James Senior Vice President - Chief Human
One Nationwide Plaza Resources Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President -
One Nationwide Plaza Corporate Relations
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Mark D. Phelan Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President -
One Nationwide Plaza Claims and Finance Services
Columbus, OH 43215
Mark R. Thresher Senior Vice President -
One Nationwide Plaza Finance - Nationwide Financial
Columbus, OH 43215
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Operations
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product
One Nationwide Plaza Management and Nationwide
Columbus, OH 43215 Financial Marketing
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial statements
filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 74
<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 Insurance agency marketing life
insurance & annuity products through
financial institutions
------------------------------------------------------------------------------------------------------------------------------
Affiliate Agency of Ohio, Inc. Ohio Insurance agency marketing life
insurance & annuity products through
financial institutions
------------------------------------------------------------------------------------------------------------------------------
AID Finance Services, Inc. Iowa Holding Company
------------------------------------------------------------------------------------------------------------------------------
ALLIED General Agency Company Iowa Managing general agent and surplus
lines broker for property & casualty
insurance products
------------------------------------------------------------------------------------------------------------------------------
ALLIED Group, Inc. Iowa Property & casualty holding company
------------------------------------------------------------------------------------------------------------------------------
ALLIED Group Insurance Marketing Iowa Direct marketer for property and
Company casualty insurance products
------------------------------------------------------------------------------------------------------------------------------
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
------------------------------------------------------------------------------------------------------------------------------
ALLIED Property and Casualty Insurance Iowa Underwrites general property &
Company casualty insurance
------------------------------------------------------------------------------------------------------------------------------
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
------------------------------------------------------------------------------------------------------------------------------
AMCO Insurance Company Iowa Underwrites general property &
casualty insurance
------------------------------------------------------------------------------------------------------------------------------
American Marine Underwriters, Inc. Florida Underwriting manager for ocean cargo
and bulk insurance
------------------------------------------------------------------------------------------------------------------------------
Auto Direkt Insurance Company Germany Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Cal-Ag Insurance services, Inc. California Captive insurance brokerage firm
------------------------------------------------------------------------------------------------------------------------------
CalFarm Insurance Agency California Former marketing company for
traditional agent producers of CalFarm
Insurance Company
------------------------------------------------------------------------------------------------------------------------------
CalFarm Insurance Company California Multi-line insurance company
------------------------------------------------------------------------------------------------------------------------------
Caliber Funding Delaware A limited purpose corporation
------------------------------------------------------------------------------------------------------------------------------
Colonial County Mutual Insurance Texas Insurance Company
Company
------------------------------------------------------------------------------------------------------------------------------
Columbus Insurance Brokerage and Germany General service insurance broker
Service GmbH
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 75
<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 that sells and
services commercial insurance
------------------------------------------------------------------------------------------------------------------------------
Depositors Insurance Company Iowa Underwrites property & casualty
insurance
------------------------------------------------------------------------------------------------------------------------------
eNationwide, LLC Ohio A limited liability company to provide
administrative services to
Nationwide's direct operations
------------------------------------------------------------------------------------------------------------------------------
Excaliber Funding Corporation Delaware Limited purpose corporation
------------------------------------------------------------------------------------------------------------------------------
F&B, Inc. Iowa Insurance Agency
------------------------------------------------------------------------------------------------------------------------------
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Agency Alabama Insurance agency marketing life
of Alabama, Inc. insurance and annuity products through
financial institutions
------------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Agency Ohio Insurance marketing life insurance and
of Ohio, Inc. annuity products through financial
institutions
------------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Agency Oklahoma Insurance marketing life insurance and
of Oklahoma, Inc. annuity products through financial
institutions
------------------------------------------------------------------------------------------------------------------------------
Financial Horizons Distributors Agency Texas Insurance marketing life insurance and
of Texas, Inc. annuity products through financial
institutions
------------------------------------------------------------------------------------------------------------------------------
*Financial Horizons Investment Trust Massachusetts Diversified, open-end investment
company
------------------------------------------------------------------------------------------------------------------------------
Financial Horizons Securities Oklahoma Limited broker-dealer doing business
Corporation solely in the financial institution
market
------------------------------------------------------------------------------------------------------------------------------
GatesMcDonald Health Plus Inc. Ohio Managed Care Organization
------------------------------------------------------------------------------------------------------------------------------
Gates, McDonald & Company Ohio Services employers for managing
workers' and unemployment compensation
matters
------------------------------------------------------------------------------------------------------------------------------
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
------------------------------------------------------------------------------------------------------------------------------
Gates, McDonald & Company of New York, New York Workers' compensation/self-insured
Inc. claims administration services to
employers with exposure in New York
------------------------------------------------------------------------------------------------------------------------------
Insurance Intermediaries, Inc. Ohio Insurance agency providing commercial
property & casualty brokerage services
------------------------------------------------------------------------------------------------------------------------------
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
------------------------------------------------------------------------------------------------------------------------------
Landmark Financial Services of New New York Insurance agency marketing life
York, Inc. insurance and annuity products through
financial institutions
------------------------------------------------------------------------------------------------------------------------------
Leben Direkt Insurance Company Germany Life insurance through direct mail
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 76
<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 General agent to market non-standard
automobile and motorcycle insurance
for Colonial Mutual Insurance Company
------------------------------------------------------------------------------------------------------------------------------
MedProSolutions, Inc. Massachusetts Provides third-party administration
services for workers compensation,
automobile injury and disability claims
------------------------------------------------------------------------------------------------------------------------------
Midwest Printing Services, Ltd. Iowa General printing services
------------------------------------------------------------------------------------------------------------------------------
Morley & Associates, Inc. Oregon Insurance brokerage
------------------------------------------------------------------------------------------------------------------------------
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, England Insurance Company
Ltd.
------------------------------------------------------------------------------------------------------------------------------
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
------------------------------------------------------------------------------------------------------------------------------
**National Premium and Benefit Delaware Provides third-party administration
Administration Company services
------------------------------------------------------------------------------------------------------------------------------
Nationwide Advisory Services, Inc. Ohio Registered broker-dealer providing
investment management and
administrative services
------------------------------------------------------------------------------------------------------------------------------
**Nationwide Agency, Inc. Ohio Insurance Agency
------------------------------------------------------------------------------------------------------------------------------
Nationwide Agribusiness Insurance Iowa Provides property & casualty insurance
Company primarily to agricultural business
------------------------------------------------------------------------------------------------------------------------------
Nationwide Arena, LLC Ohio A limited liability company related to
arena development
------------------------------------------------------------------------------------------------------------------------------
*Nationwide Asset Allocation Trust Ohio Diversified open-end investment company
------------------------------------------------------------------------------------------------------------------------------
Nationwide Assurance Company Wisconsin Underwrites non-standard automobile
and motorcycle insurance
------------------------------------------------------------------------------------------------------------------------------
Nationwide Cash Management Company Ohio Investment Securities Agent
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 77
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Corporation Ohio Holding company for entities
affiliated with Nationwide Mutual
Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Nationwide Exclusive Distribution Ohio A limited liability company providing
Company, LLC agency support services to Nationwide
exclusive agents
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Assignment Company Ohio An assignment company to administer
structured settlement business
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Institution New Mexico Insurance Agency
Distributors Agency, Inc. of New Mexico
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Institution Massachusetts Insurance Agency
Distributors Agency, Inc. of
Massachusetts
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services Bermuda Long-term insurer which issued
(Bermuda) Ltd. variable annuity and variable life
products to persons outside the U.S. &
Bermuda
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust securities & uses proceeds to acquire
debentures
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust II securities & uses proceeds to acquire
debentures
------------------------------------------------------------------------------------------------------------------------------
Nationwide Financial Services, Inc. Delaware Holding Company for entities
associated with Nationwide Mutual
Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Nationwide Foundation Ohio Not-for profit corporation
------------------------------------------------------------------------------------------------------------------------------
Nationwide General Insurance Company Ohio Primarily provides automobile and fire
insurance to select customers
------------------------------------------------------------------------------------------------------------------------------
Nationwide Global Finance, LLC Ohio Act as a support company for
Nationwide Global Holdings, Inc. & its
international capitalization efforts
------------------------------------------------------------------------------------------------------------------------------
Nationwide Global Funds Cayman Islands Exempted company with limited
liability for purpose of issuing
investment shares to segregated asset
accounts of Nationwide Financial
Services (Bermuda) Ltd. and to
non-U.S. resident investors
------------------------------------------------------------------------------------------------------------------------------
Nationwide Global Holdings, Inc. Ohio Holding Company for Nationwide
Insurance Enterprise international
operations
------------------------------------------------------------------------------------------------------------------------------
Nationwide Global Holdings, Inc.-NGH Grand Duchy of Analyze European market of life
Luxembourg Branch Luxembourg insurance
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Global Holdings-Hong Kong, Hong Kong Primarily a holding company for
Limited Nationwide Global Holdings, Inc. Asian
operations
------------------------------------------------------------------------------------------------------------------------------
Nationwide Global Holdings-NGH Brasil Brazil Holding company
Participacoes LTDA
------------------------------------------------------------------------------------------------------------------------------
Nationwide Health Plans, Inc. Ohio Health insuring organization
------------------------------------------------------------------------------------------------------------------------------
Nationwide Home Mortgage Company Iowa Mortgage lendor
------------------------------------------------------------------------------------------------------------------------------
*Nationwide Indemnity Company Ohio Reinsurance company assuming business
from Nationwide Mutual Insurance
Company and other insurers within the
Nationwide Insurance Enterprise
------------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Company of America Wisconsin Independent agency personal lines
underwriter of property & casualty
insurance
------------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Company of Florida Ohio Transacts general insurance business
except life insurance
------------------------------------------------------------------------------------------------------------------------------
Nationwide Insurance Golf Charities, Ohio Not-for-profit corporation
Inc.
------------------------------------------------------------------------------------------------------------------------------
Nationwide International Underwriters California Special risks, excess & surplus lines
underwriting manager
------------------------------------------------------------------------------------------------------------------------------
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment under management
of trustees
------------------------------------------------------------------------------------------------------------------------------
*Nationwide Investing Foundation II Massachusetts Diversified, open-end investment
company
------------------------------------------------------------------------------------------------------------------------------
Nationwide Investment Services Oklahoma Registered broker-dealer
Corporation
------------------------------------------------------------------------------------------------------------------------------
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 Commercial property insurance in Texas
------------------------------------------------------------------------------------------------------------------------------
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 Diversified, open-end investment
company
------------------------------------------------------------------------------------------------------------------------------
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 79
<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, Inc. Alabama Market and administer deferred
of Alabama compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Arizona Market and administer deferred
of Arizona compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Arkansas Market and administer deferred
of Arkansas compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity contracts to
of Ohio members of the National Education
Association in the state of Ohio
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity contracts to
of Oklahoma members of the National Education
Association in the state of Oklahoma
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public employees
------------------------------------------------------------------------------------------------------------------------------
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity contracts to
of Wyoming members of the National Education
Association in the state of Wyoming
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 80
<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 Seguradora S.A. Brazil Engage in elementary, health & life
insurance; private open pension and
wealth concession plans
------------------------------------------------------------------------------------------------------------------------------
*Nationwide Separate Account Trust Massachusetts Diversified, open-end investment
company
------------------------------------------------------------------------------------------------------------------------------
Nationwide Services Company, LLC. Ohio Single member limited liability
company performing shared services
functions for the Nationwide Insurance
Enterprise
------------------------------------------------------------------------------------------------------------------------------
Nationwide Trust Company, FSB United States Federal savings bank chartered by the
Office of Thrift Supervision in U.S.
Department of Treasury to exercise
custody & fiduciary powers
------------------------------------------------------------------------------------------------------------------------------
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
------------------------------------------------------------------------------------------------------------------------------
Neckura Insurance Company Germany Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Neckura Life Insurance Company Germany Life and health insurance company
------------------------------------------------------------------------------------------------------------------------------
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services to Nevada employers in the
construction industry
------------------------------------------------------------------------------------------------------------------------------
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services to Nevada employers in health
& nonprofit industries
------------------------------------------------------------------------------------------------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services to Nevada employers in the
hospitality & entertainment industries
------------------------------------------------------------------------------------------------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing, Transportation and services to Nevada employers in the
Distribution manufacturing, transportation and
distribution industries
------------------------------------------------------------------------------------------------------------------------------
NFS Distributors, Inc. Delaware Holding company for Nationwide
Financial Services, Inc. distribution
companies
------------------------------------------------------------------------------------------------------------------------------
NGH Luxembourg, S.A Luxembourg Acts primarily as holding company for
Nationwide Global Holdings, Inc.
European operations
------------------------------------------------------------------------------------------------------------------------------
NGH Netherlands, B.V. The Netherlands Holding company for other overseas
companies
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
COMPANY STATE/COUNTRY NO. VOTING PRINCIPAL BUSINESS
OF SECURITIES
ORGANIZATION (SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NGH UK, Ltd. United Kingdom Assist Nationwide Global Holdings,
Inc. with European operations and
marketing
------------------------------------------------------------------------------------------------------------------------------
Northpointe Capital LLC Delaware Limited liability company for
investments
------------------------------------------------------------------------------------------------------------------------------
PanEuroLife Luxembourg Life Insurance company providing
individual life insurance primarily in
the UK, Belgium and France
------------------------------------------------------------------------------------------------------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration and record
keeping services
------------------------------------------------------------------------------------------------------------------------------
Portland Investment Services, Inc. Oregon NASD registered broker-dealer
------------------------------------------------------------------------------------------------------------------------------
Premier Agency, Inc. Iowa Insurance Agency
------------------------------------------------------------------------------------------------------------------------------
Riverview Agency, Inc. Texas Has a pending application to become a
licensed insurance agency with the
Texas Department of Insurance
------------------------------------------------------------------------------------------------------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Scottsdale Insurance Company Ohio Insurance Company
------------------------------------------------------------------------------------------------------------------------------
Scottsdale Surplus Lines Insurance Arizona Provides excess and surplus lines
Company insurance coverage on a non-admitted
basis
------------------------------------------------------------------------------------------------------------------------------
SVM Sales GmbH, Neckura Insurance Group Germany Recruits and supervises external sales
partners who obtain new business for
the Neckura Group as well as to offer
financial services
------------------------------------------------------------------------------------------------------------------------------
Union Bond & Trust Company Oregon Oregon state bank with trust powers
------------------------------------------------------------------------------------------------------------------------------
Villanova Capital, Inc. Delaware Holding Company
------------------------------------------------------------------------------------------------------------------------------
Villanova Mutual Fund Capital Trust Delaware Trust designed to act as a registered
investment advisor
------------------------------------------------------------------------------------------------------------------------------
Villanova SA Capital Trust Delaware Trust designed to act as a registered
investment advisor
------------------------------------------------------------------------------------------------------------------------------
Western Heritage Insurance Company Arizona Underwrites excess and surplus lines
of property and casualty insurance
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 82
<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 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 Variable Account-11 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 83
<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-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
---------------------------------------------------------------------------------------------------------------------------------
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>
<PAGE> 84
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
--------------------------- --------------------------- ----------------------------
| CARIBBEAN ALLIANCE | | ALLIED | | |
| INSURANCE COMPANY | | GROUP, INC. | | |
| | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 1,900,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $19,000,000 | | |100% $1,243,344,521| | | |
--------------------------- | --------------------------- | ----------------------------
| |
--------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 500,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI 100% $22,251,842 |
--------------------------- | --------------------------- | ----------------------------
| | |
--------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
--------------------------- --------------------------- | ----------------------------
| |
--------------------------- --------------------------- | ----------------------------
| ALLIED | | ALLIED | | | NATIONWIDE |
| GROUP INSURANCE | | DOCUMENT SOLUTIONS, | | | HOME MORTGAGE |
| MARKETING COMPANY | | INC. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-80% |
| Finance-100% $16,059,469| --------------------------- | ----------------------------
-------------------------- | |
--------------------------- | ----------------------------
| PREMIER | | | AGMC |
| AGENCY, | | | REINSURANCE, LTD. |
| INC. | | | |
|Common Stock: 100,000 | | |Common Stock: 11,000 |
|------------ Shares | | |------------ Shares |
| |---| | |
| Cost | | Cost |
| ---- | | ---- |
|AGI-100% $100,000 | |NHMC-100% $11,000 |
--------------------------- ----------------------------
----------------------------
| WESTERN |
| HERITAGE INSURANCE |
| COMPANY |
| |
|Common Stock: 4,776,076 |--------------------------------
|------------- Shares |
| |
| Cost |
| ---- |
|SIC-100% $57,000,000 |
----------------------------
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
--| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- -----------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GmbH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | |---| ------------- | |--|------------ |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |SIC-100% $6,000,000 | | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | | |
| -------------------------------- | -------------------------------- | --------------------------------
| | | |
| -------------------------------- | -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | | |
| |Common Stock: 10,000 | | | | | |Common Stock: 1500 Shares |
---|---|------------ Shares | | | | |--|------------ |
| | | | | | | |
| Cost | | | | | | Cost |
| ---- | | | | | | ---- |
|SIC-100% $10,000 | | |NC-100% | | |Neckura-100% DM 1,643,149 |
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| RP&C | | | SUN DIRECT | | | SVM SALES |
| INTERNATIONAL | | | VERSICHERUNGS - | | | GmbH |
| | | | AKTIENGESCLISCHAFT | | | |
|Common Stock: 1,000 | | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|------------ Shares |--------- |------------ |------------|------------ |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|Casualty-20.3% $2,400,740 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
---------------------------------------------------------------------------------------------------------------------|
|
--------------------------------------------------------------------------------------------------------------- |
| | | | |
| | | | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | SCOTTSDALE | | | NATIONWIDE CASH | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | | CORPORATION |
| | | | | | | | |
| | | | | | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 100 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | | | | Cost | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $11,226 | | |Casualty 12,992,922 $1,182,959,447 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 111,835,185 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | ARENA LLC | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |....| | |-----| ---- |
| |------------ Shares | | | | | |Casualty-16% $91,600 |
| | | | | | | |Fire-16% $91,742 |
| | Cost | | | | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-90% | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE | | | NATIONWIDE INTERNATIONAL |
| | GENERAL AGENCY, INC. | | | EXCLUSIVE DISTRIBUTION | | | UNDERWRITERS |
| | | | | COMPANY, LLC (NEDCO) | | | |
------|Common Stock: 1,000 | |....| | |-----|Common Stock: 1,000 |
| |------------ Shares | | | Single Member Limited | | |------------- Shares |
| | | | | Liability Company | | | |
| | Cost | | | | | | Cost |
| | ---- | | |Casualty-100% | | | ---- |
| |Casualty-100% $5,000,000 | | | | | |Casualty-100% $10,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| || | | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | COLONIAL COUNTY | | | INSURANCE | | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | INTERMEDIARIES, INC. | | | COMPANY |
| | COMPANY | | | | | | |
| | | | |Common Stock: 1,615 Shares | | |Common Stock: 52,000 |
| | | | |------------- | |-----|-------------- Shares |
| | | | | Cost | | |
| |Surplus Debentures: | | | ---- | | Cost |
| |------------------- | | |NEDCO-100% $1,615,000 | | ---- |
| | Cost | | -------------------------------- |Casualty-100% $106,164,995 |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- -------------------------------------
| |Lone Star 150,000 | | | eNATIONWIDE, LLC | |
| -------------------------------- | | (eNat) | -------------------------------------
| | | | | CALFARM INSURANCE |
| -------------------------------- | | | | AGENCY |
| | NATIONWIDE SERVICES | |....| Single Member Limited | | |
| | COMPANY, LLC | | Liability Company | | |
| | | | | | |
| |Single Member Limited | |----| | |Common Stock: 1,000 shares |
|.....|Liability Company | | | | |------------- |
| | | | | | | |
| | | | |Casualty-100% | | |
| |Casualty-100% | | | | | |
| | | | -------------------------------- |CalFarm Insurance |
| -------------------------------- | |Company - 100% |
| | -------------------------------- -------------------------------------
| | | DISCOVER INSURANCE | |
| -------------------------------- | | COMPANY, LLC | -------------------------------------
| | AMERICAN MARINE | | | | | CAL-AG INSURANCE |
| | UNDERWRITERS, INC. | | | | | SERVICES |
| | | | | Single Member Limited | | |
| |Common Stock: 20 Shares | |....| Liability Company | |Common Stock: 100 Shares |
|-----|------------ | | | | |------------ |
| | Cost | | | | | |
| | ---- | | |eNat-100% | |CalFarm Insurance |
| |Casualty-100% $5,020 | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| --------------------------------- | | DISCOVER COMPANY |
| | NATIONWIDE INSURANCE | | | OF TEXAS, LLC |
| | COMPANY OF FLORIDA | | | |
| | | | | Single Member Limited |
| | Liability Company | |....| Liability Company |
| |Common Stock: 10,000 Shares | | |
|-----|------------- | | |
| Cost | |eNat-100% |
| ---- | | |
|Casualty-100% $300,000,000 | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
June 30, 2000
</TABLE>
Page 1
<PAGE> 87
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| |--------------------------
----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR, |
| | | | | || | | | || | INC |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | ASSET ALLOCATION TRUST | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |..| | OHIO BUSINESS TRUST |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | | || | OF OKLAHOMA, INC |
| | | | | | Cost | | || | |
| NW Life-70% | | | | | ---- | | || | |
| NW Mutual-30% | | | | | NFIDAI-100% $153,000 | | || | |
----------------------------- | ----------------------------- ----------------------------- | || -----------------------
| | ||
----------------------------- | ----------------------------- | || -----------------------
| NATIONWIDE | | | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | | | || | |
| | | | | | || | |
| Units: |..| | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | OF TEXAS, INC |
| | | Cost | | || | |
| NW Life-97.6% | | ---- | | || | |
| NW Mutual-2.4% | | NFIDAI-100% $100 | | || | |
----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INSURANCE AGENCY, | | || | |
| INC. OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INSURANCE AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(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 $1,182,959,447 |
|FIRE 649,510 111,385,185 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public-100% |
|CLASS B NW CORP-100% |
---------------|-------------
|
-----------|-------------------------|-------------------------|--------------------------|-------------------------|
| | | | |
-----------|------------ ------------|------------ ------------|------------ -------------|------------ ------------|-------------
|NFS DISTRIBUTORS, INC.| | NATIONWIDE FINANCIAL | | NATIONWIDE FINANCIAL | |PENSION ASSOCIATES, INC.| |VILLANOVA CAPITAL, INC. |
| (NFSDI) | | SERVICES CAPITAL | |SERVICES (BERMUDA) INC.| |Common Stock: 1,000 | |Common Stock: 958,750 |
| | | TRUST II | |Common Stock: 250,000 | |------------ Shares | |------------- Shares |
| | | | |------------- Shares | | | |NFS-96% |
| | | | | Cost | | Cost | |Preferred Stock: 500,000|
|NFS-100% | | | | ---- | | ---- | |--------------- Shares |
| | | NFS-100% | |NFS-100% $3,500,000 | | NFS-100% $2,839,392| |NFS-100% |
-----------|------------ ------------------------- ------------------------- -------------------------- ------------|-------------
|
-----------|---------|----------------|--------------------------| |-------------------------|---------------
-----------|-------- | ---------------|------------ -------------|------------ -----------|------------- -----------|-------------
|NATIONAL DEFERRED | | |THE 401(k) COMPANIES, INC.| | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL |
|COMPENSATION, INC.| | | (401(k)) | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)|
| | | | | |Common Stock: 236,494 | | | |Common Stock: 82,343 |
| | | |Common Stock: Control | |------------- Shares | | | |------------ Shares |
| | | |------------- ------- | | | | | | |
|NFSDI-100% | | |Class A Other-100% | | | | | |VILLANOVA CAPITAL, INC.|
| | | |Class B NFS-100% | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% |
---||--------------- | ---------------------------- -------------|------------ -----------------|------- -----------|-------------
|| | | | | |
|| | | | | |------------|
|| | | | | |
|| --------------|------------|---------------------------- | -------------------------- | ---------------------------- |
|| | IRVIN L. SCHWARTZ ||| NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | |
|| | AND ASSOCIATES, INC. |||SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | | INVESTORS SERVICES, INC. | |
|| | ||| | | | NEW MEXICO | | | | |
|| |Common Stock: Control: |||Common Stock: 10,000 | | | Common Stock: 1,000 | | |Common Stock: 5 | |
===== |------------- -------- |||------------- Shares |--|--| ------------- Shares | |--|------------- Shares | |
|Class A Other-100%||| Cost | | | Cost | | | Cost | |
|Class B NFSDI-100%||| ---- | | | ---- | | | ---- | |
| |||NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
| | | |
---------------------------|---------------------------- | -------------------------- | ---------------------------- |
| 401(k) INVESTMENT ||| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | NATIONWIDE GLOBAL FUNDS | |
| SERVICES, INC. |||SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | | |
| ||| | | | SO. DAKOTA | | | | |
|Common Stock: 1,000,000 |||Common Stock: 1,000 | | |Common Stock: 1,000 | | | | |
|------------ Shares |-|------------- Shares |--|--|------------- Shares | |==| LUXEMBOURG SICAV | |--
| ||| Cost | | | Cost | | | | |
| Cost ||| ---- | | | ---- | | | | |
| ---- |||NRS-100% $1,000 | | |NRS-100% $1,000 | | | | |
|401(k)-100% $7,800 ||---------------------------- | -------------------------- | ---------------------------- |
---------------------------| | | |
|---------------------------- | -------------------------- | ---------------------------- |
---------------------------|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | ALLIED GROUP MERCHANT | |
| 401(k) INVESTMENT ||| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | | BANKING CORPORATION | |
| ADVISORS, INC. ||| ARKANSAS | | | OF WYOMING | | | | |
| |||Common Stock: 50,000 |-----|Common Stock: 500 Shares| |--|Common Stock: 10,000 | |--
|Common Stock: 1,000 |||------------- Shares | | |------------- | |------------- Shares | |
|------------ Shares |-| Cost | | | Cost | | Cost | |
| ||| ---- | | | ---- | | ---- | |
| Cost |||NRS-100% $500 | | |NRS-100% $500 | |VSA-100% $146,653 | |
| ---- ||---------------------------- | -------------------------- ---------------------------- |
|401(k)-100% $1,000 || | |
---------------------------|---------------------------- | -------------------------- ---------------------------- |
|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | |
---------------------------|| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | |
| 401(k) COMPANY ||| AGENCY, INC. | | | OF OHIO | | | |
| |||Common Stock: 1,000 | | | | |Common Stock: 2,000 | |
|Common Stock: 855,000 |||------------- Shares |--|==| | |------------- Shares |--|--
|------------ Shares ||| | | | | | | |
| ||| Cost | | | | | Cost | |
| Cost ||| ---- | | | | | ---- | |
| ---- |-|NRS-100% $1,000 | | | | |Morley-100% $50,000 | |
|401(k)-100% $1,000 ||---------------------------- | -------------------------- ---------------------------- |
---------------------------| | |
|---------------------------- | -------------------------- ---------------------------- |
---------------------------|| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
| |||SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| ||| | | | OKLAHOMA | | | |
| RIVERVIEW AGENCY, INC. |||Common Stock: 500 | | | | |Common Stock: 1,000 | |
| |||------------- Shares |--|==| | |------------- Shares |--|--
| ||| Cost | | | | | Cost | |
| |=| ---- | | | | | ---- | |
| | |NRS-100% $500 | | | | |Morley-100% $25,000 | |
--------------------------- ---------------------------- | -------------------------- ---------------------------- |
| |
---------------------------- | -------------------------- ---------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT| | MORLEY & | |
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. | | ASSOCIATES, INC. | |
| | | | OF TEXAS | | | |
|Common Stock: 1,000 |-- ==| | |Common Stock: 3,500 |--|
|------------- Shares | | | |------------- Shares |
| Cost | | | | Cost |
| ---- | | | | ---- |
|NRS-100% $1,000 | | | |Morley-100% $1,000 |
---------------------------- -------------------------- ----------------------------
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
---------------|-------------- ------------------------------- | ----------------------------
| NATIONWIDE GLOBAL | | GATES MCDONALD | | | NATIONWIDE |
| HOLDINGS, INC. (NGH) | | & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) |
| | | | | | |
|Common Stock: 1 Share | --|Common Stock: 254 Shares | | |---|Common Stock: 100 Shares |
|------------ | | |------------ | | | |------------ |
| Cost | | | Cost | | | | Cost |
| ---- | | | ---- | | | | ---- |
|NW Corp.-100% $257,000,000 | | |NW Corp.-100% $25,683,532 | | | | |
| | | |------------------------------ | | |NW Corp.-100% $14,603,732|
------------------------------ | | | ----------------------------
| |------------------------------ | | ----------------------------
| | MEDPROSOLUTIONS, INC. | | | | NATIONWIDE MANAGEMENT |
------------------------------ --| | | | | SYSTEMS, INC. |
| VILLANOVA MUTUAL FUND | | | Cost | | | | |
| CAPITAL TRUST (VMF) | | | ---- | | |---|Common Stock: 100 Shares |
----|----| | | |Gates-100% $6,700,000 | | | |------------- |
| | | | | | | | | Cost |
| | | | | | | | | ---- |
| | | | ------------------------------- | | |NHP Inc.-100% $25,149 |
| | | | | | ----------------------------
| | | | |------------------------------ | | ----------------------------
| | DELAWARE BUSINESS TRUST | | | GATES MCDONALD & | | | | NATIONWIDE |
| ------------------------------ | | COMPANY OF NEW YORK, INC. | | | | AGENCY, INC. |
| --| | | | | |
| ------------------------------ | |Common Stock: 3 Shares | | |---|Common Stock: 100 Shares |
| | NORTHPOINTE | | |------------ | | |------------ |
| | CAPITAL LLC | | | Cost | | | Cost |
| | | | | ---- | | | ---- |
|----| | | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 |
| | | ------------------------------- | ----------------------------
| | | |
| | | ------------------------------- | ----------------------------
|VILLANOVA CAPITAL, INC.-100%| | | GATES MCDONALD & | | | MRM INVESTMENTS, INC. |
------------------------------ | | COMPANY OF NEVADA | | | |
--| | -------|Common Stock: 1 Shares |
------------------------------ | |Common Stock: 40 Shares | |------------ |
| EXCALIBER FUNDING | | |------------ | | Cost |
| CORPORATION | | | Cost | | ---- |
---------|Common Stock: 1,000 Shares | | | ---- | |NW Corp.-100% $7,000,000 |
|------------- | | |Gates-100% $93,750 | ----------------------------
| Cost | | -------------------------------
| ---- | |
|Morley-100% $1,000 | | -------------------------------
------------------------------ | | GATES MCDONALD |
| | HEALTH PLUS, INC. |
------------------------------ --| |
| CALIBER FUNDING | | |Common Stock: 200 Shares |
| CORPORATION | | |------------ |
| | | | Cost |
---------| | | | ---- |
| | | |Gates-100% $2,000,000 |
| Morley-100% | | -------------------------------
| | |
------------------------------ | -------------------------------
| |NEVADA INDEPENDENT COMPANIES-|
| |MANUFACTURING TRANSPORTATION |
| | AND DISTRIBUTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| |Gates-100% |
| -------------------------------
|
------------------------------ | -------------------------------
| MORLEY RESEARCH | | | NEVADA INDEPENDENT |
| ASSOCIATES, LTD. | | | COMPANIES-HEALTH AND |
---------| | --| NONPROFIT |
|Common Stock: 1,000 Shares | | |Common Stock: 1,000 Shares |
|------------- | | |------------ |
| Cost | | | |
| ---- | | |Gates-100% |
|Morley-100% $1,000 | | -------------------------------
------------------------------ |
| -------------------------------
------------------------------ | | NEVADA INDEPENDENT |
| MORLEY CAPITAL | | | COMPANIES-CONSTRUCTION |
| MANAGEMENT | --| |
| | | |Common Stock: 1,000 Shares |
---------|Common Stock: 500 Shares | | |------------ |
|------------- | | | |
| Cost | | |Gates-100% |
| ---- | | -------------------------------
|Morley-100% $5,000 | |
------------------------------ | -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
--| ENTERTAINMENT | Contractual Association - Double Line
| | Limited Liability Company - Dotted Line
|Common Stock: 1,000 Shares |
|------------ |
| |
|Gates-100% | June 30, 2000
-------------------------------
Page 2
</TABLE>
<PAGE> 90
Item 27. NUMBER OF CONTRACT OWNERS
The number of Non-Qualified Contract Owners as of March 28, 2000
is 7.
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 Investment Services Corporation ("NISC") acts as
principal underwriter and general distributor for the
Nationwide Multi-Flex Variable Account, Nationwide 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
Variable Account -11, 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, Nationwide DC Variable Account, Nationwide DCVA
- II and the NACo Variable Account, all of which are
separate investment accounts of Nationwide or its
affiliates.
<PAGE> 91
(b) NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
-------------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper Chairman of the Board and
One Nationwide Plaza Director
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Duane C. Meek President
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Philip C. Gath Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President and Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Barbara J. Shane Vice President - Compliance Officer
Two Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Glenn W. Soden Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 92
NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
-------------------------------------------------------------------------------------------------------------------
<S> <C>
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
-------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 93
(c)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
NAME OF PRINCIPAL NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION
UNDERWRITER DISCOUNTS AND REDEMPTION OR COMMISSIONS
COMMISSIONS ANNUITIZATION
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Nationwide Investment N/A N/A N/A N/A
Services Corporation
-------------------------------------------------------------------------------------------------------------------
</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
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.
Nationwide represents that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by Nationwide.
<PAGE> 94
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of 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
April 26, 2000
<PAGE> 95
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT -10, certifies that it meets
the requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment and has caused this Post-Effective Amendment No. 4 to
the Registration Statement to be signed on its behalf in the City of Columbus,
and State of Ohio, on this 20th day of September, 2000.
NATIONWIDE VARIABLE ACCOUNT -10
---------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------------
(Depositor)
By/s/STEVEN SAVINI, ESQ.
---------------------------------------------
Steven Savini, Esq.
As required by the Securities Act of 1933, this Post Effective Amendment No. 4
has been signed by the following persons in the capacities indicated on the 20th
day of September, 2000.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
LEWIS J. ALPHIN Director
----------------------------------------
Lewis J. Alphin
A. I. BELL Director
----------------------------------------
A. I. Bell
NANCY C. BREIT Director
----------------------------------------
Nancy C. Breit
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
W.G. JURGENSEN Chief Executive Officer Elect
---------------------------------------- and Director
W.G. Jurgensen
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/ STEVEN SAVINI
---------------------------------------- --------------------------------------
Arden L. Shisler Steven Savini
ROBERT L. STEWART Director Attorney-in-Fact
----------------------------------------
Robert L. Stewart
</TABLE>
