<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 333-80481
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 1 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
NATIONWIDE VARIABLE ACCOUNT
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43216-6609
(Name and Address of Agent for Service)
Approximate date of proposed public offering: (Upon the effective date of this
Registration Statement. December 30, 1999 requested.)
The Registrant hereby agrees to amend this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall therefore become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
================================================================================
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<TABLE>
NATIONWIDE VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<CAPTION>
N-4 ITEM PAGE
<S> <C>
Part A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page.......................................................................3
Item 2. Definitions......................................................................5
Item 3. Synopsis or Highlights..........................................................13
Item 4. Condensed Financial Information................................................N/A
Item 5. General Description of Registrant, Depositor, and Portfolio Companies...........14
Item 6. Deductions and Expenses.........................................................16
Item 7. General Description of Variable Annuity Contracts...............................19
Item 8. Annuity Period..................................................................23
Item 9. Death Benefit and Distributions.................................................27
Item 10. Purchases and Contract Value....................................................20
Item 11. Redemptions.....................................................................22
Item 12. Taxes...........................................................................29
Item 13. Legal Proceedings...............................................................32
Item 14. Table of Contents of the Statement of Additional Information....................35
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page......................................................................42
Item 16. Table of Contents...............................................................42
Item 17. General Information and History.................................................42
Item 18. Services........................................................................42
Item 19. Purchase of Securities Being Offered............................................43
Item 20. Underwriters....................................................................43
Item 21. Calculation of Performance......................................................43
Item 22. Annuity Payments................................................................44
Item 23. Financial Statements............................................................45
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits...............................................94
Item 25. Directors and Officers of the Depositor.........................................96
Item 26. Persons Controlled by or Under Common Control with the
Depositor or Registrant.........................................................98
Item 27. Number of Contract Owners......................................................110
Item 28. Indemnification................................................................110
Item 29. Principal Underwriter..........................................................110
Item 30. Location of Accounts and Records...............................................112
Item 31. Management Services............................................................112
Item 32. Undertakings...................................................................113
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company
through its Nationwide Variable Account
The date of this prospectus is December 30, 1999.
- --------------------------------------------------------------------------------
This prospectus contains basic information you should know about the contracts
before investing.
Please read it and keep it for future reference.
The following underlying mutual funds are available under the contracts:
o American Century: Short Term Government: Investor Class
o American Century: Income & Growth: Advisor Class
o American Century: Growth: Investor Class
o American Century: International Growth: Advisor Class
o American Century: Ultra: Investor Class
o Dreyfus Appreciation Fund, Inc.
o Dreyfus Balanced Fund, Inc.
o Dreyfus Emerging Leaders Fund
o Dreyfus Premier Third Century Fund, Inc.
o Federated Bond Fund - Class F
o Federated High Yield Trust*
o Fidelity Advisor Balanced Fund - Class A
o Fidelity Advisor Equity Income Fund - Class A
o Fidelity Advisor Growth Opportunities Fund - Class A
o Fidelity Advisor High Yield Fund - Class T*
o Franklin Mutual Series Fund, Inc. - Mutual Shares Fund: Class
A
o Franklin Small Cap Growth Fund - Class A
o INVESCO Dynamics Fund
o INVESCO Small Company Growth Fund
o INVESCO Total Return Fund
o Janus Fund
o Janus Twenty Fund
o Janus Worldwide Fund
o Lazard Small Cap Portfolio - Open Shares
o Nationwide(R) Bond Fund - Class D
o Nationwide(R) Fund - Class D
o Nationwide(R) Growth Fund - Class D
o Nationwide(R) Intermediate U.S. Government Bond Fund - Class D
o Nationwide(R) Money Market Fund - Class R
o Nationwide S&P 500(R) Index Fund - Class R
o Neuberger Berman Genesis Trust
o Neuberger Berman Guardian Trust
o Neuberger Berman Partners Trust
o Oppenheimer Global Fund: Class A
o Prestige Balanced Fund - Class A
o Prestige International Fund - Class A
o Prestige Large Cap Growth Fund - Class A
o Prestige Large Cap Value Fund - Class A
o Prestige Small Cap Fund - Class A
o Strong Common Stock Fund, Inc.
o Templeton Foreign Fund - Class A
*May invest in lower quality debt securities commonly referred to as junk bonds.
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Variable Account ("variable account") may be allocated to the
Guaranteed Term Options (Guaranteed Term Options may not be available in every
jurisdiction - refer to your contract for specific benefit information).
The Statement of Additional Information (dated December 30, 1999) which contains
additional information about the contracts and the variable account, is filed
with the Securities and Exchange Commission ("SEC") and is incorporated herein
by reference. The table of contents for the Statement of Additional Information
is on page 33.
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<PAGE> 4
For general information or to obtain FREE copies of the:
o Statement of Additional Information;
o prospectus for any underlying mutual fund;
o prospectus for the Guaranteed Term Options; or
o required Nationwide forms,
call: 1-800-848-6331
TDD 1-800-238-3035
or write:
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX 16609
COLUMBUS, OHIO 43216-6609
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
WWW.SEC.GOV
THIS ANNUITY IS NOT:
o A BANK DEPOSIT
o ENDORSED BY A BANK OR GOVERNMENT AGENCY
o FEDERALLY INSURED
o AVAILABLE IN EVERY STATE
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit used to calculate annuitization payments when
the variable payment option is chosen.
CONTRACT VALUE- The total of all accumulation units in a contract and any amount
held under Guaranteed Term Options.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
CUSTODIAN- An institution that holds securities on behalf of one or more persons
or entities. The Custodian, Nationwide Advisory Services, Inc., will be treated
as a trustee of the Custodial Account pursuant to Section 408(h) of the Internal
Revenue Code.
CUSTODIAL ACCOUNT- An account established for the purpose of holding securities
on behalf of one or more persons or entities. The Custodial Account for this
product will be treated as a trust pursuant to Section 408(h) of the Internal
Revenue Code.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
NATIONWIDE- Nationwide Life Insurance Company.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA- An account that qualifies for favorable tax treatment under Section
408A of the Internal Revenue Code.
SEP IRA- An account that qualifies for favorable tax treatment under Section
408(k) of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to which underlying mutual fund
shares are allocated and for which accumulation units and annuity units are
separately maintained.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide Variable Account, a separate account of Nationwide
that contains variable account allocations. The variable account is divided into
sub-accounts, each of which invests in shares of a separate underlying mutual
fund.
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<PAGE> 6
TABLE OF CONTENTS
<TABLE>
<CAPTION>
<S> <C>
GLOSSARY OF SPECIAL TERMS............................3
SUMMARY OF CONTRACT EXPENSES.........................5
UNDERLYING MUTUAL FUND ANNUAL EXPENSES...............7
EXAMPLE..............................................9
SYNOPSIS OF THE CONTRACTS...........................11
FINANCIAL STATEMENTS................................12
NATIONWIDE LIFE INSURANCE COMPANY...................12
NATIONWIDE ADVISORY SERVICES, INC...................12
The Custodial Account
INVESTING IN THE CONTRACT...........................12
The Variable Account and Underlying
Mutual Funds
Guaranteed Term Options
STANDARD CHARGES AND DEDUCTIONS.....................14
Mortality and Expense Risk Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS..14
CDSC Options
Reduced Purchase Payment Option
Death Benefit Options
Guaranteed Minimum Income Benefit Option
OWNERSHIP RIGHTS....................................16
Contract Owner
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT...........................17
Minimum Initial and Subsequent Purchase
Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE.....................................19
SURRENDER (REDEMPTION)..............................20
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
ASSIGNMENT..........................................20
SERVICES............................................20
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE...........................22
ANNUITIZING THE CONTRACT............................22
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit
Option ("GMIB")
Annuity Payment Options
DEATH BENEFITS......................................25
Death of Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS..............................26
Individual Retirement Accounts
Roth IRAs
FEDERAL TAX CONSIDERATIONS..........................27
Federal Income Taxes
Individual Retirement Accounts
Roth IRA Accounts
Withholding
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
Tax Changes
STATEMENTS AND REPORTS..............................29
YEAR 2000 COMPLIANCE ISSUES.........................30
LEGAL PROCEEDINGS...................................31
ADVERTISING.........................................32
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION.........................33
APPENDIX A: OBJECTIVES FOR UNDERLYING
MUTUAL FUNDS...................................34
</TABLE>
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<PAGE> 7
SUMMARY OF CONTRACT EXPENSES
The expenses listed below include both standard expenses and expenses associated
with optional benefits that may be elected by the annuitant.
The optional benefits listed below may be chosen by annuitants provided such
options are approved by state insurance authorities. These options must be
elected at the time of application and will replace the corresponding standard
contract benefits.
If the annuitant chooses one or more of the following options, a corresponding
reduction or charge (whichever is applicable) will apply to the standard
variable account annual expenses of 1.20%. The adjustment is made on a daily
basis at the annual rate noted below. Optional benefit charges/reductions will
only apply to allocations made to the variable account and are calculated as a
percentage of the average variable account value.
CONTRACT OWNER TRANSACTION EXPENSES
Contingent Deferred Sales Charge ("CDSC") (as a percentage of purchase payments
surrendered..................................................................0%
CDSC Options
An applicant may choose one of two optional CDSC schedules. Election of a
CDSC option will REDUCE the variable account annual expenses by the amounts
shown below.
7 Year CDSC Option..........................-0.25%
Total Variable Account Annual
Expenses (including 7 Year CDSC
Option)....................................0.95%
<TABLE>
<CAPTION>
Range of 7 Year CDSC over time:
--------------------------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
------------------- ----------
<S> <C>
0 7%
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
Thereafter 0%
</TABLE>
5 Year CDSC Option..........................-0.10%
Total Variable Account Annual
Expenses (including 5 Year CDSC
Option)....................................1.10%
<TABLE>
<CAPTION>
Range of 5 Year CDSC over time:
--------------------------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
------------------- ----------
<S> <C>
0 7%
1 7%
2 7%
3 6%
4 4%
5 2%
Thereafter 0%
</TABLE>
VARIABLE ACCOUNT ANNUAL EXPENSES(1)
(as a percentage of average account value)
Mortality and Expense Risk Charge.............1.20%
Total Variable Account Annual
Expenses.................................1.20%(2)
- -----------------
(1) These charges apply only to sub-account allocations. The actual amount of
variable account annual expenses assessed to a particular contract will
depend on the optional benefits elected, which may increase or decrease
variable account annual expenses.
Variable account annual expenses do not apply to allocations made to the
Guaranteed Term Options. They are charged on a daily basis at the annual
rate determined by the optional benefits elected.
(2) Charges shown include the Standard Contractual Death Benefit that is
standard to every contract (see "Death Benefit Payment").
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<PAGE> 8
Reduced Purchase Payment Option
For an additional 0.25% of the daily net assets of the variable account,
Nationwide will lower an applicant's minimum initial purchase payment to
$1,000 and subsequent purchase payments to $25.
Reduced Purchase Payment Option..............0.25%
Total Variable Account Annual
Expenses (including Reduced
Purchase Payment Option) ..................1.45%
Death Benefit Options
For an additional charge, an applicant may choose one of two optional death
benefits instead of the Standard Contractual Death Benefit that is standard
to every contract. The optional death benefits are:
Optional Five-Year Step Up
Death Benefit................................0.05%
Total Variable Account Annual
Expenses (including Five-Year Step
Up Death Benefit)..........................1.25%
Optional One-Year Step Up
Death Benefit................................0.10%
Total Variable Account Annual
Expenses (including One-Year Step
Up Death Benefit)..........................1.30%
Guaranteed Minimum Income Benefit Option
For an additional 0.45% of the daily net assets of the variable account, an
applicant may elect the Guaranteed Minimum Income Benefit option (see
"Guaranteed Minimum Income Benefit Option").
Guaranteed Minimum Income Benefit
Option.......................................0.45%
Total Variable Account Annual
Expenses (including Guaranteed
Minimum Income Benefit)....................1.65%
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<TABLE>
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE REIMBURSEMENT)
<CAPTION>
Management Other 12b-1 Total Underlying Mutual
Fees Expenses Fees Fund Annual Expenses
---------- -------- ----- -----------------------
<S> <C> <C> <C> <C>
American Century: Short Term Government: Investor Class 0.59% 0.00% 0.00% 0.59%
American Century: Income & Growth: Advisor Class 0.44% 0.00% 0.50% 0.94%
American Century: Growth: Investor Class 1.00% 0.00% 0.00% 1.00%
American Century: International Growth: Advisor Class 1.10% 0.00% 0.50% 1.60%
American Century: Ultra: Investor Class 1.00% 0.00% 0.00% 1.00%
Dreyfus Appreciation Fund, Inc. 0.55% 0.34% 0.00% 0.89%
Dreyfus Balanced Fund, Inc. 0.60% 0.32% 0.00% 0.92%
Dreyfus Emerging Leaders Fund 0.90% 0.49% 0.00% 1.39%
Dreyfus Premier Third Century Fund, Inc. 0.75% 0.22% 0.00% 0.97%
Federated Bond Fund - Class F 0.65% 0.43% 0.00% 1.08%
Federated High Yield Trust 0.53% 0.35% 0.00% 0.88%
Fidelity Advisor Balanced Fund - Class A 0.46% 0.31% 0.25% 1.02%
Fidelity Advisor Equity Income Fund - Class A 0.50% 0.27% 0.25% 1.02%
Fidelity Advisor Growth Opportunities Fund - Class A 0.46% 0.25% 0.25% 0.96%
Fidelity Advisor High Yield Fund - Class T 0.58% 0.24% 0.25% 1.07%
Franklin Mutual Series Fund Inc. - Mutual Shares Fund: 0.60% 0.15% 0.35% 1.10%
Class A
Franklin Small Cap Growth Fund - Class A 0.46% 0.18% 0.25% 0.89%
INVESCO Dynamics Fund 0.55% 0.28% 0.25% 1.08%
INVESCO Small Company Growth Fund 0.75% 0.48% 0.25% 1.48%
INVESCO Total Return Fund 0.58% 0.20% 0.25% 1.03%
Janus Fund 0.65% 0.19% 0.00% 0.84%
Janus Twenty Fund 0.65% 0.21% 0.00% 0.86%
Janus Worldwide Fund 0.65% 0.24% 0.00% 0.89%
Lazard Small Cap Portfolio - Open Shares 0.75% 0.14% 0.25% 1.14%
Nationwide(R)Bond Fund - Class D 0.50% 0.36% 0.00% 0.86%
Nationwide(R)Fund - Class D 0.57% 0.21% 0.00% 0.77%
Nationwide(R)Growth Fund - Class D 0.58% 0.27% 0.00% 0.85%
Nationwide(R)Intermediate U.S. Government Bond Fund - 0.43% 0.36% 0.00% 0.79%
Class D
Nationwide(R)Money Market Fund - Class R 0.40% 0.20% 0.15% 0.75%
Nationwide S&P 500(R)Index Fund - Class R 0.13% 0.23% 0.24% 0.60%
Neuberger Berman Genesis Trust 1.11% 0.06% 0.00% 1.17%
Neuberger Berman Guardian Trust 0.84% 0.03% 0.00% 0.87%
Neuberger Berman Partners Trust 0.85% 0.05% 0.00% 0.90%
Oppenheimer Global Fund: Class A 0.69% 0.23% 0.22% 1.14%
Prestige Balanced Fund - Class A 0.25% 0.60% 0.25% 1.10%
Prestige International Fund - Class A 0.43% 0.62% 0.25% 1.30%
Prestige Large Cap Growth Fund - Class A 0.35% 0.60% 0.25% 1.20%
Prestige Large Cap Value Fund - Class A 0.30% 0.60% 0.25% 1.15%
Prestige Small Cap Fund - Class A 0.50% 0.60% 0.25% 1.35%
Strong Common Stock Fund, Inc. 1.00% 0.20% 0.00% 1.20%
Templeton Foreign Fund- Class A 0.61% 0.26% 0.25% 1.12%
</TABLE>
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The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value to calculate the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
Management Other 12b-1 Total Underlying Mutual
Fees Expenses Fees Fund Annual Expenses
---------- -------- ----- -----------------------
<S> <C> <C> <C> <C>
Federated Bond Fund - Class F 0.75% 0.45% 0.00% 1.20%
Federated High Yield Trust 0.75% 0.40% 0.00% 1.15%
Fidelity Advisor Equity Income Fund - Class A 0.50% 0.28% 0.25% 1.03%
Fidelity Advisor Growth Opportunities Fund - Class A 0.46% 0.26% 0.25% 0.97%
Franklin Small Cap Growth Fund - Class A 0.48% 0.19% 0.25% 0.92%
Nationwide(R)Intermediate U.S. Government Bond Fund - 0.50% 0.36% 0.00% 0.86%
Class D
Nationwide(R)Money Market Fund - Class R 0.40% 0.40% 0.15% 0.95%
Nationwide S&P 500(R)Index Fund - Class R 0.13% 0.66% 0.24% 1.03%
Neuberger Berman Genesis Trust 1.11% 0.08% 0.00% 1.19%
Neuberger Berman Partners Trust 0.85% 0.06% 0.00% 0.91%
</TABLE>
Nationwide provides the Summary of Contract Expenses and Underlying Mutual Fund
Annual Expenses to assist the annuitant in understanding the various costs and
expenses that he or she will bear directly or indirectly. Expenses of both the
variable account and the underlying mutual funds are set forth in those tables.
Premium taxes are not included in the tables, but may apply (see "Premium
Taxes").
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<PAGE> 11
EXAMPLE
The following chart shows the amount of expenses (in dollars) that would be
incurred under this contract assuming a $1,000 investment, 5% annual return, and
no change in expenses. These dollar figures are illustrative only and should not
be considered a representation of past or future expenses. Actual expenses may
be greater or less than those shown below.
The chart reflects expenses of both the variable account and the underlying
mutual funds. The charge reflects variable account annual expenses of 2.00%,
which is the maximum that could be assessed to a contract, and no CDSC.
For those contracts that do not elect the options that correspond to the maximum
variable account annual expenses, the expenses would be reduced. Deductions for
premium taxes are not reflected but may apply.
The summary of contract expenses and example are to help contract owners
understand the maximum expenses associated with the contract.
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
------------------------------ ---------------------------- -------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
----- ------ ------ ------- ----- ----- ------ ------- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century: Short Term 27 83 142 302 27 83 142 302 * 83 142 302
Government: Investor Class
American Century: Income & 31 94 160 337 31 94 160 337 * 94 160 337
Growth: Advisor Class
American Century: Growth: 32 96 163 343 32 96 163 343 * 96 163 343
Investor Class
American Century: 38 115 194 399 38 115 194 399 * 115 194 399
International Growth:
Advisor Class
American Century: Ultra: 32 96 163 343 32 96 163 343 * 96 163 343
Investor Class
Dreyfus Appreciation Fund, 30 93 158 332 30 93 158 332 * 93 158 332
Inc.
Dreyfus Balanced Fund, Inc. 31 94 159 335 31 94 159 335 * 94 159 335
Dreyfus Emerging Leaders Fund 36 108 183 380 36 108 183 380 * 108 183 380
Dreyfus Premier Third 31 95 162 340 31 95 162 340 * 95 162 340
Century Fund, Inc.
Federated Bond Fund - Class F 32 99 168 350 32 99 168 350 * 99 168 350
Federated High Yield Trust 30 93 157 331 30 93 157 331 * 93 157 331
Fidelity Advisor Balanced 32 97 164 345 32 97 164 345 * 97 164 345
Fund - Class A
Fidelity Advisor Equity 32 97 164 345 32 97 164 345 * 97 164 345
Income Fund - Class A
Fidelity Advisor Growth 31 95 161 339 31 95 161 339 * 95 161 339
Opportunities Fund - Class A
Fidelity Advisor High Yield 32 98 167 349 32 98 167 349 * 98 167 349
Fund - Class T
Franklin Mutual Series Fund, 33 99 169 352 33 99 169 352 * 99 169 352
Inc.- Mutual Shares Fund:
Class A
</TABLE>
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<PAGE> 12
<TABLE>
<CAPTION>
If you surrender your contract If you do not surrender your If you annuitize your contract
at the end of the applicable contract at the end of the at the end of the applicable
time period applicable time period time period
------------------------------ ---------------------------- -------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
----- ------ ------ ------- ----- ----- ------ ------- ----- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Franklin Small Cap Growth 30 93 158 332 30 93 158 332 * 93 158 332
Fund - Class A
INVESCO Dynamics Fund 32 99 168 350 32 99 168 350 * 99 168 350
INVESCO Small Company Growth 37 111 188 388 37 111 188 388 * 111 188 388
Fund
INVESCO Total Return Fund 32 97 165 345 32 97 165 345 * 97 165 345
Janus Fund 30 91 155 327 30 91 155 327 * 91 155 327
Janus Twenty Fund 30 92 156 329 30 92 156 329 * 92 156 329
Janus Worldwide Fund 30 93 158 332 30 93 158 332 * 93 158 332
Lazard Small Cap Portfolio - 33 101 171 356 33 101 171 356 * 101 171 356
Open Shares
Nationwide(R)Bond Fund - 30 92 156 329 30 92 156 329 * 92 156 329
Class D
Nationwide(R)Fund - Class D 29 89 152 320 29 89 152 320 * 89 152 320
Nationwide(R)Growth Fund - 30 92 156 328 30 92 156 328 * 92 156 328
Class D
Nationwide(R)Intermediate 29 90 153 322 29 90 153 322 * 90 153 322
U.S. Government Bond Fund -
Class D
Nationwide(R)Money Market 29 88 151 318 29 88 151 318 * 88 151 318
Fund - Class R
Nationwide S&P 500(R)Index 27 84 143 303 27 84 143 303 * 84 143 303
Fund - Class R
Neuberger Berman Genesis 33 102 172 359 33 102 172 359 * 102 172 359
Trust
Neuberger Berman Guardian 30 92 157 330 30 92 157 330 * 92 157 330
Trust
Neuberger Berman Partners 30 93 158 333 30 93 158 333 * 93 158 333
Trust
Oppenheimer Global Fund: 33 101 171 356 33 101 171 356 * 101 171 356
Class A
Prestige Balanced Fund - 33 99 169 352 33 99 169 352 * 99 169 352
Class A
Prestige International Fund 35 106 179 371 35 106 179 371 * 106 179 371
- - Class A
Prestige Large Cap Growth 34 102 174 362 34 102 174 362 * 102 174 362
Fund - Class A
Prestige Large Cap Value 33 101 171 357 33 101 171 357 * 101 171 357
Fund - Class A
Prestige Small Cap Fund - 35 107 181 376 35 107 181 376 * 107 181 376
Class A
Strong Common Stock Fund, 34 102 174 362 34 102 174 362 * 102 174 362
Inc.
Templeton Foreign Fund - 33 100 170 354 33 100 170 354 * 100 170 354
Class A
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
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<PAGE> 13
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are flexible purchase payment
contracts.
The contracts do not qualify for tax-deferral under the federal tax rules. The
contracts are, however, issued to custodians of Individual Retirement Accounts,
Roth IRAs, or SEP IRAs for the benefit of the account holders. The account
holder will be the annuitant under these contracts. The annuitant shall exercise
all contract ownership rights permitted under the custodial agreement and
consistent with the Internal Revenue Code requirements for a custodial account.
No contract described in this prospectus will be issued as an Individual
Retirement Annuity.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
The minimum initial purchase payment to a contract is $15,000. Subsequent
purchase payments must be at least $1,000.
If the annuitant elects the Reduced Purchase Payment Option, minimum initial and
subsequent purchase payments will be reduced accordingly.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 1.20% of the daily net assets of the variable account. Nationwide assesses
this charge in return for bearing certain mortality and administrative risks.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into or withdrawal from the contract, unless the annuitant elects one of two
optional CDSC schedules in exchange for a reduction of variable account charges.
If the annuitant elects one of the CDSC options, Nationwide will REDUCE the
variable account annual expenses by either 0.25% for the 7 Year CDSC Option, or
0.10% for the 5 Year CDSC Option.
If the annuitant elects the Reduced Purchase Payment Option, Nationwide will
reduce the minimum initial purchase payment to $1,000 and subsequent purchase
payments to $25. In return for the reduction, Nationwide will deduct an
additional charge equal to an annual rate of 0.25% of the daily net assets of
the variable account.
Two optional death benefits are available under the contract. If the annuitant
elects one of these options, Nationwide will deduct either a charge equal to an
annual rate of 0.05% of the daily net assets of the variable account for the
Five-Year Step Up Death Benefit, or 0.10% of the daily net assets of the
variable account for the One-Year Step Up Death Benefit.
A Guaranteed Minimum Income Benefit option is available under the contract. If
the annuitant elects the Guaranteed Minimum Income Benefit option, Nationwide
will deduct an additional charge equal to an annual rate of of 0.45% of the
daily net assets of the variable account (see "Guaranteed Minimum Income
Benefit").
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued. Nationwide
will charge against the contract any premium taxes levied by any governmental
authority (see "Federal Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Annuitants may return the contract for any reason within ten days of receipt and
Nationwide will refund the contract value or the amount required by state law
(see "Right to Revoke").
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FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained, without charge, by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929 with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities, and retirement products.
It is admitted to do business in all states, the District of Columbia, and
Puerto Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The contracts are distributed by the general distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide.
THE CUSTODIAL ACCOUNT
On September 25, 1981, the Internal Revenue Service ruled that Individual
Retirement Annuities established with variable annuities that offer publicly
traded mutual funds would no longer receive tax deferral.
However, it is possible to retain tax deferral by establishing an Individual
Retirement Account and having a trust or custodial account that qualifies under
Section 408 of the Internal Revenue Code purchase the contract. By doing this,
the Individual Retirement Account is subject to similar rules as an Individual
Retirement Annuity (see "Required Distributions for Individual Retirement
Accounts").
All contracts described in this prospectus are established as Individual
Retirement Accounts and purchased by NAS as custodian. The annuitant is the
individual for whom the account is established. The annuitant may exercise
ownership rights as set forth in the custodial agreement.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
The Nationwide Variable Account is a separate account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
variable account on March 3, 1976, 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 own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts. Nationwide uses the assets of
each sub-account to buy shares of the underlying mutual funds based on contract
owner instructions.
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.
Voting Rights
Annuitants who have allocated assets to the underlying mutual funds are entitled
to certain voting rights. Nationwide will vote shares at special shareholder
meetings based on annuitant instructions. However, if the law changes and
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Nationwide is allowed to vote in its own right, it may elect to do so.
Annuitants with voting interests in an underlying mutual fund will be notified
of issues requiring 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 an annuitant 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 variable accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of 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 and state insurance departments.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus must be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the Guaranteed Term Options are not subject to variable account
charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7), or ten (10) years.
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
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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.
STANDARD CHARGES AND DEDUCTIONS
The maximum commissions payable on the sale of a contract described in this
prospectus is 6% of purchase payments.
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 1.20% of the daily net assets of the variable account.
The mortality risk charge portion (0.80%) compensates Nationwide for
guaranteeing the annuity rate of the contracts. This guarantee ensures that the
annuity rates will not change regardless of the death rates of annuity payees or
the general population.
The expense risk charge portion (0.40%) 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.
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
3.5%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS
CDSC OPTIONS
On a standard contract (when no CDSC option is elected), no sales charge is
deducted from purchase payments when amounts are deposited into, or withdrawn
from, the contract.
However, if the annuitant chooses a CDSC option, Nationwide will REDUCE variable
account annual expenses. In exchange for the reduction, Nationwide may assess a
CDSC upon surrender of purchase payments from the contract. For either option,
the CDSC will not exceed 7% of purchase payments surrendered.
The CDSC is used to cover sales expenses, including production of sales material
and other promotional expenses.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted in
the table corresponding to the option chosen) by the amount of purchase payments
surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. For tax purposes, a surrender is usually treated
as a withdrawal of earnings first.
Annuitants taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes.
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7 Year CDSC Option
In exchange for a REDUCTION equal to an annual rate of 0.25% of the daily net
assets of the variable account, an annuitant can elect to have a 7 Year CDSC
schedule applied to surrenders from his or her contract. The 7 Year CDSC
schedule is as follows:
<TABLE>
<CAPTION>
7 Year CDSC Schedule
--------------------------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
------------------- ----------
<S> <C>
0 7%
1 7%
2 7%
3 6%
4 5%
5 4%
6 3%
7 2%
Thereafter 0%
</TABLE>
5 Year CDSC Option
In exchange for a REDUCTION equal to an annual rate of 0.10% of the daily net
assets of the variable account, an annuitant can elect to have a 5 Year CDSC
schedule applied to surrenders from his or her contract. The 5 Year CDSC
schedule is as follows:
<TABLE>
<CAPTION>
5 Year CDSC Schedule
--------------------------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
------------------- ----------
<S> <C>
0 7%
1 7%
2 7%
3 6%
4 4%
5 2%
Thereafter 0%
</TABLE>
Waiver of Contingent Deferred Sales Charge Under Either CDSC Option
Each contract year, the annuitant may withdraw without a CDSC the greater of:
1) the lesser of:
a) 10% of all purchase payments made to the contract, reduced by any
withdrawals; or
b) 10% of the contract value; or
2) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at
least two years;
(2) upon payment of a death benefit; or
(3) from any values which have been held in a contract for at least 5 or 7
years, depending on the CDSC option elected.
No CDSC applies to transfers among sub-accounts or between or among the
Guaranteed Term Options and 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.
REDUCED PURCHASE PAYMENT OPTION
If the annuitant chooses the Reduced Purchase Payment Option, Nationwide will
deduct a charge equal to an annual rate of 0.25% of the daily net assets of the
variable account. In return, the minimum initial purchase payment for that
contract will be $1,000 and minimum subsequent purchase payment will be $25.
The annuitant may elect to terminate this rider if, throughout a period of at
least two years and continuing until such election:
(1) the total of all purchase payments, less surrenders and withdrawals,
is maintained at $25,000 or more; and
(2) during such period and continuance, all subsequent purchase payments
were at least $1,000.
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This election must be submitted in writing on a form provided by Nationwide.
Termination of the rider will occur as of the date on the election form, and the
charge for this rider will no longer be assessed. Subsequent purchase payments,
if any, will be subject to the terms of the contract and must be at least
$1,000.
DEATH BENEFIT OPTIONS
If the annuitant chooses an optional death benefit, Nationwide will deduct a
charge equal to an annual rate of either 0.05% for the Five-Year Step Up Death
Benefit or 0.10% for the One-Year Step Up Death Benefit of the daily net assets
of the variable account. Nationwide may lower either of these charges at any
time without notification. Further information about these benefits can be found
in the "Death Benefit Payment" provision.
Five-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the contract value as of the most recent five-year contract
anniversary occurring before the annuitant's 86th birthday, less an
adjustment for amounts subsequently surrendered, plus purchase
payments received after that five-year contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
GUARANTEED MINIMUM INCOME BENEFIT OPTION
For an additional charge equal to an annual rate of 0.45% of the daily net
assets of the variable account, the annuitant can purchase a Guaranteed Minimum
Income Benefit option at the time of application. The Guaranteed Minimum Income
Benefit option provides for a minimum guaranteed value that may replace the
contract value as the amount to be annuitized under certain circumstances. A
Guaranteed Minimum Income Benefit may afford protection against unfavorable
investment performance.
OWNERSHIP RIGHTS
CONTRACT OWNER
The contract owner is the custodian or trustee under an Individual Retirement
Account, Roth IRA account, or SEP IRA account.
ANNUITANT
The annuitant may exercise all rights under the contract subject to any
limitations imposed by the Individual Retirement Account, Roth IRA, or SEP IRA
on the annuitant or the custodian/trustee. The annuitant is the person who will
receive annuity payments and upon whose continuation of life any annuity payment
involving life contigencies 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 request a change in the beneficiary or contingent beneficiary
before the annuitization date. These changes must be:
o on a Nationwide form;
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o signed by the annuitant; and
o received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary(ies) is the person(s) who is entitled to the death benefit if
the annuitant dies before the annuitization date. The annuitant can name more
than one beneficiary. The beneficiaries will share the death benefit equally,
unless otherwise specified.
If no beneficiary(ies) survives the annuitant, the contingent beneficiary(ies)
will receive the death benefit. Contingent beneficiaries will share the death
benefit equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survive the annuitant, the
annuitant's estate will receive the death benefit.
The annuitant may change the beneficiary or contingent beneficiary during his or
her lifetime by submitting a written request to Nationwide. Once recorded, the
change will be effective as of the date the request was signed, whether or not
the annuitant was living at the time the request was recorded. The change will
not affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
The mimimum initial purchase payment to a contract is $15,000. Subsequent
purchase payments must be at least $1,000.
If the annuitant elects the Reduced Purchase Payment Option, minimum initial and
subsequent purchase payments will be reduced accordingly.
Guaranteed Term Options
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the delay. The purchase payment will be
returned unless the prospective purchaser specifically allows Nationwide to hold
the purchase payment until the application is completed.
Subsequent purchase payments will be priced based on the current net asset value
of the contract which is next computed not later than two business days after
Nationwide receives the order to purchase. The cumulative total of all purchase
payments under Nationwide contracts on the life of any one annuitant cannot
exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchanged is closed
or on the following nationally recognized holidays:
o New Year's Day o Independence Day
o Martin Luther King, Jr. Day o Labor Day
o Presidents' Day o Thanksgiving
o Good Friday o Christmas
o Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
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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 annuitant would not
have access to their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts and/or Guaranteed Term
Options as instructed by the annuitant. Shares of the underlying mutual funds
allocated to the sub-accounts are purchased at net asset value, then converted
into accumulation units. Annuitants can change allocations or make exchanges
among the sub-accounts or Guaranteed Term Options. 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.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
1) the value of amounts allocated to the sub-accounts; and
2) amounts allocated to a Guaranteed Term Option.
If part or all of the contract value is surrendered, or charges are assessed
against the contract value, Nationwide will deduct a proportionate amount from
each of the sub-accounts and amounts from the Guaranteed Term Options based on
current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to the underlying mutual funds are
accounted for in accumulation units. Accumulation unit values (for each
sub-account) are determined by calculating the net investment factor for the
underlying mutual fund 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 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; less ----
(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); and
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period; and
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the annuitant. The
factor is equal to an annual rate ranging from 0.95% to 2.00% of the
daily net assets of the variable account, depending on which contract
features the annuitant chooses.
Based on the net investment factor, the value of an accumulation unit may
increase or decrease. Changes in the net investment factor may not be directly
proportional to changes in the net asset value of the underlying mutual fund
shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
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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 contract.
TRANSFERS
Annuitants can transfer allocations without penalty or adjustment subject to the
following conditions:
o Transfers among the sub-accounts are limited to 12 times per year.
o Transfers from a Guaranteed Term Option prior to maturity are subject
to a market value adjustment.
o After annuitization, transfers may only be made on an anniversary of
the annuitization date.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Transfer Requests
Nationwide will accept transfer requests in writing or, in those states that
allow them, over the telephone. Nationwide will use reasonable procedures to
confirm that telephone instructions are genuine and will not be liable for
following telephone instructions that it reasonably determines to be genuine.
Nationwide may withdraw the telephone exchange privilege upon 30 days written
notice to annuitants.
Market Timing Firms
Some annuitants 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 annuitants 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 annuitants not using market timing firms. To
avoid this, Nationwide may modify transfer and exchange rights of annuitants who
use market timing firms (or other third parties) to transfer or exchange funds
on their behalf.
The exchange and transfer rights of individual annuitants will not be modified
in any way when instructions are submitted directly by the annuitant, or by the
annuitant's representative (as authorized by the execution of a valid Nationwide
Limited Power of Attorney Form).
To protect annuitants, Nationwide may refuse exchange and transfer requests:
o submitted by any agent acting under a power of attorney on behalf of
more than one annuitant; or
o submitted on behalf of individual annuitants who have executed
pre-authorized exchange forms which are submitted by market timing
firms (or other third parties) on behalf of more than one annuitant at
the same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all annuitants.
RIGHT TO REVOKE
Annuitants have a ten day "free look" to examine the contract. The contract may
be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by state law. The refunded contract value will reflect the deduction of any
contract charges, unless otherwise required by state law. All refunds will be a
return of purchase payments. State
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and/or federal law may provide additional free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded will be paid by Nationwide.
SURRENDER (REDEMPTION)
Annuitants may surrender some or all of the contract value before the earlier of
the annuitization date or his or her death. Surrender requests must be in
writing and Nationwide may require additional information. When taking a full
surrender, the contract must accompany the written request. Nationwide may
require a signature guarantee.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
PARTIAL SURRENDERS (PARTIAL REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the 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 annuitant.
A CDSC may apply if the annuitant elected a CDSC option. The CDSC deducted is a
percentage of the amount requested by the annuitant. Amounts deducted for CDSC
are not subject to a subsequent CDSC. The annuitant may take the CDSC from
either:
a) the amount requested; or
b) the contract value remaining after the annuitant has received the
amount requested.
If the annuitant does not make a specific election, any applicable CDSC will be
taken from the contract value remaining after the annuitant has received the
amount requested.
FULL SURRENDERS (FULL REDEMPTIONS)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account annual expenses, interest earned under Guaranteed Term Options (if
applicable), underlying mutual fund charges and the investment performance of
the underlying mutual funds. If the annuitant elected a CDSC option, a CDSC may
apply.
ASSIGNMENT
Contract rights may not be assigned.
SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the 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.
Annuitants 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 certain sub-accounts into other sub-accounts.
Annuitants direct Nationwide to automatically transfer specified amounts from
the
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Nationwide(R) Money Market Fund Class R to any other underlying mutual fund.
Dollar Cost Averaging transfers may not be directed to Guaranteed Term Options.
The minimum monthly transfer is $100.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the annuitant instructs Nationwide in writing
to stop the transfers.
Nationwide does not guarantee that this program will result in a profit or
protect annuitants from a loss.
Nationwide reserves the right to stop establishing new Dollar Cost Averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow annuitants 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 proportionately unless
Nationwide is instructed otherwise. Systematic withdrawals are not available
from the Guaranteed Term Options. If the annuitant elected a CDSC option, a CDSC
may apply.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the annuitant. The Internal Revenue Service may impose a
10% penalty tax if the annuitant is under age 59 1/2 unless the annuitant has
made an irrevocable election of distributions of substantially equal payments.
If the annuitant elected a CDSC option and takes systematic withdrawals, the
maximum amount that can be withdrawn annually without a CDSC is the greatest of:
1) the lesser of:
a) 10% of all purchase payments made to the contract, reduced by any
withdrawals; or
b) 10% of the contract value;
2) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the contract value based on the annuitant's age, as
shown in the table below:
<TABLE>
<CAPTION>
ANNUITANT'S PERCENTAGE OF
AGE CONTRACT VALUE
----------- --------------
<S> <C>
Under age 59 1/2 5%
Age 59 1/2 through age 61 7%
Age 62 through age 64 8%
Age 65 through age 74 10%
Age 75 and over 13%
</TABLE>
Contract value and annuitant's age are determined as of the date the request for
the withdrawal program is recorded by Nationwide's home office.
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the CDSC-free
withdrawal privilege described in the "CDSC Options - Waiver of Contingent
Deferred Sales Charge Under Either CDSC Option" section. The total amount of
CDSC for that contract year will be determined in accordance with that
provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten-day
free look period (see "Right to Revoke").
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ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The annuitant 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. The contract must be in
effect at least 2 years before annuitization may begin.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Before 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 depending on the performance of the underlying mutual
funds chosen by the annuitant.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payments
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the annuitant to the
fixed payment annuity table for the annuity payment option elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
-------------------------------------------------------
A VARIABLE PAYMENT ANNUITY MAY NOT BE ELECTED WHEN
EXERCISING THE GUARANTEED MINIMUM INCOME BENEFIT
OPTION.
-------------------------------------------------------
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the annuitant to the
variable payment annuity table for the annuity payment option elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed
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investment rate of 3.5% to calculate the first annuity payment and to calculate
the investment performance of an underlying mutual fund in order to determine
subsequent payments under a variable payment annuity. An assumed investment rate
is the percentage rate of return required to maintain level variable annuity
payments. Subsequent variable annuity payments may be more or less than the
first payment depending 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
Annuity payments are made based on the annuity payment option selected, unless:
o the amount to be distributed is less than $5,000, in which case
Nationwide may make one lump sum payment of the contract value; or
o an annuity payment would be less than $50, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
GUARANTEED MINIMUM INCOME BENEFIT OPTION ("GMIB")
What is a GMIB?
A GMIB is a benefit which ensures the availability of a minimum amount when the
annuitant wishes to annuitize the contract. This minimum amount, referred to as
the Guaranteed Annuitization Value, may be used at specified times to provide a
guaranteed level of determinable lifetime annuity payments. The GMIB may provide
protection in the event of lower contract values that may result from the
investment performance of the contract.
How is the Guaranteed Annuitization Value Determined?
The Guaranteed Annuitization Value is equal to (a) minus (b), but will never be
greater than 200% of all purchase payments, where:
(a) is the sum of all purchase payments, plus interest accumulated at a
compounded annual rate of 5% starting at the date of issue and ending on
the contract anniversary occurring immediately prior to the annuitant's
86th birthday; and
(b) is the reductions to (a) due to surrenders made from the contract. All such
reductions will be proportionately the same as reductions to the contract
value caused by surrenders. For example, a surrender which reduces the
contract value by 25% will also reduce the Guaranteed Annuitization Value
by 25%.
GMIB Illustrations
The following charts illustrate the amount of income that will be provided if
the annuitant annuitizes the contract at the 7th, 10th, or 15th contract
anniversary date, using the GMIB.
The illustrations assume the following:
o An initial purchase payment of $100,000 is made to the contract and
allocated to the variable account;
o The contract is issued to a MALE at age 55, 65, or 70; and
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o A Life Annuity with 120 Months Guaranteed Fixed Payment Annuity Option
is elected.
<TABLE>
<CAPTION>
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
-----------------------------------------------------
Male Age Male Age at GMIB Purchase Monthly
at Issue Annuitization Rate* GMIB
-------- ------------- ------------- -------
<S> <C> <C> <C>
55 62 $4.72 $664.15
65 72 $5.96 $838.63
70 77 $5.79 $955.42
</TABLE>
<TABLE>
<CAPTION>
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
-----------------------------------------------------
Male Age Male Age at GMIB Purchase Monthly
at Issue Annuitization Rate* GMIB
-------- ------------- ------------- -------
<S> <C> <C> <C>
55 65 $5.03 $819.33
65 75 $6.44 $1,049.01
70 80 $7.32 $1,192.35
</TABLE>
<TABLE>
<CAPTION>
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
-----------------------------------------------------
Male Age Male Age at GMIB Purchase Monthly
at Issue Annuitization Rate* GMIB
-------- ------------- ------------- -------
<S> <C> <C> <C>
55 70 $5.66 $1,132.00
65 80 $7.32 $1,464.00
70 85 $8.18 $1,636.00
</TABLE>
*Guaranteed Monthly Benefit per $1,000 applied.
The illustrations should be used as a tool to assist an investor in determining
whether purchasing and exercising a GMIB option is right for them. The
guaranteed purchase rates assumed in the illustrations may not apply in some
states. Different guaranteed purchase rates will also apply for females, for
males who annuitize at ages other than the ages shown above, or for
annuitizations under other annuity payment options. Where different guaranteed
purchase rates apply, GMIB amounts shown will be different. In all cases, the
guaranteed purchase rates used to calculate the GMIB will be the same as the
purchase rates guaranteed in the contract for fixed annuitizations without the
GMIB.
The purchase rates available in connection with annuitization options under a
GMIB are minimum guaranteed purchase rates. Alternative purchase rates, which
may be more favorable, may apply to annuitizations that occur without a GMIB
option.
When May the Guaranteed Annuitization Value be Used?
The annuitant may use the Guaranteed Annuitization Value by annuitizing the
contract during the thirty day period following any contract anniversary:
(1) after the contract has been in effect for seven years; and
(2) the annuitant has attained age 60.
What Annuity Payment Options May Be Used With the Guaranteed Annuitization
Value?
The annuitant may elect any life contingent FIXED ANNUITY PAYMENT OPTION
calculated using the guaranteed annuity purchase rates set forth in the
contract. Such Fixed Annuity Payment Options include:
o Life Annuity;
o Joint and Last Survivor Annuity; and
o Life Annuity with 120 or 240 Monthly Payments Guaranteed.
Other GMIB Terms and Conditions
**PLEASE READ CAREFULLY**
o The GMIB must be elected at the time of application;
o The annuitant must be age 83 or younger at the time the contract is
issued; and
o The GMIB is irrevocable and will remain for as long as the contract
remains in force.
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- --------------------------------------------------------------------------------
IMPORTANT CONSIDERATIONS TO KEEP IN MIND REGARDING
THE GMIB OPTION
While a GMIB does provide a Guaranteed Annuitization Value, A GMIB MAY NOT BE
APPROPRIATE FOR ALL INVESTORS and should be understood completely and analyzed
thoroughly before being elected.
o A GMIB DOES NOT in any way guarantee the performance of any underlying
mutual fund, or any other investment option available under the
contract.
o Once elected, the GMIB is irrevocable, meaning that even if the
investment performance of underlying mutual funds or other available
investment options surpasses the minimum guarantees associated with
the GMIB, the GMIB charges will still be assessed.
o The GMIB in no way restricts or limits the rights of annuitants to
annuitize the contract at other times permitted under the contract,
nor will it in any way restrict the right to annuitize the contract
using contract values that may be higher than the Guaranteed
Annuitization Value.
o Please take advantage of the guidance of a qualified financial adviser
in evaluating the GMIB options, and all other aspects of the contract.
o GMIB may not be approved in all states.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT OPTIONS
Annuitants must elect an annuity payment option before the annuitization date.
The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states.
Annuitants may request other options before the annuitization date. These
options are subject to Nationwide's approval.
DEATH BENEFITS
DEATH OF ANNUITANT
If the annuitant dies before the annuitization date, a death benefit is payable
to the beneficiary.
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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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 BENEFIT PAYMENT
Annuitants may select one of three death benefits available under the contract
at the time of application (not all death benefit options may be available in
all states). If no selection is made at the time of application, the death
benefit will be the Standard Contractual Death Benefit.
The death benefit value is determined as of the date Nationwide receives:
1) proper proof of the annuitant's death;
2) an election specifying the distribution method; and
3) any state required form(s).
Standard Contractual Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greater of:
1) the contract value; or
2) the total of all purchase payments, less an adjustment for amounts
surrendered.
The adjustment for amounts surrendered will reduce item (2) above in the same
proportion that the contract value was reduced on the date(s) of the partial
surrender(s).
Five-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the contract value as of the most recent five-year contract
anniversary occurring before the annuitant's 86th birthday, less an
adjustment for amounts subsequently surrendered, plus purchase
payments received after that five-year contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
One-Year Step Up Death Benefit
If the annuitant dies before the annuitization date, the death benefit will be
the greatest of:
1) the contract value;
2) the total of all purchase payments, less an adjustment for amounts
surrendered; or
3) the highest contract value on any contract anniversary before the
annuitant's 86th birthday, less an adjustment for amounts subsequently
surrendered, plus purchase payments received after that contract
anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above in
the same proportion that the contract value was reduced on the date(s) of the
partial surrender(s).
REQUIRED DISTRIBUTIONS
INDIVIDUAL RETIREMENT ACCOUNTS
Individual Retirement Accounts are subject to the "minimum distribution"
requirements set forth in the Internal Revenue Code and the custodial agreement.
Distributions from an Individual Retirement Account must begin no later than
April 1 of the calendar year following the calendar year in which the annuitant
reaches age 70 1/2. Distribution may be paid in a lump sum or in substantially
equal payments over:
a) the annuitant's life or the life of his or her designated beneficiary;
or
b) a period not longer than the life expectancy of the annuitant or the
life expectancy of the annuitant's designated beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Account of the annuitant.
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If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
annuitant's death. However, a surviving spouse who is the beneficiary under the
annuity payment option may treat the account as his or her own.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The annuitant of this Individual
Retirement Account must annually report the amount of non-deductible purchase
payments, the amount of any distribution, the amount by which non-deductible
purchase payments for all years exceed non-taxable distributions for all years,
and the total balance of all Individual Retirement Accounts.
ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
annuitant's lifetime.
When the annuitant dies, the interest in the Roth IRA must be distributed by
December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year following the year in which the annuitant would have
reached age 70 1/2; or
b) the annuitant names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the annuitant
dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
Annuitants should consult a financial consultant, legal counsel or tax advisor
to discuss in detail the taxation and the use of the contracts.
Annuitants taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes.
Nationwide does not guarantee the tax status of the contracts or any
transactions involving the contracts.
Nationwide will sell the contracts only to Individual Retirement Accounts, Roth
IRA accounts, and SEP IRA accounts. As a general rule, those accounts are exempt
from federal income taxation. Federal income tax law contains numerous
provisions regarding Individual Retirement Accounts, Roth IRAs, and SEP IRAs,
including:
o limitations on the amount of contributions;
o taxation of distributions;
o minimum required distributions;
o penalty taxes for early distributions; and
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o other matters.
These items should be more fully described in the account's disclosure
documents. The annuitant should review these documents fully before purchasing a
contract.
Because the purchaser of the contract will be a tax-exempt Individual Retirement
Account, Roth IRA account, or SEP IRA account, the contract itself does not
provide tax deferral. Any tax deferral that will occur will arise by reason of:
o the tax-exempt status of the Individual Retirement Account, Roth IRA
account, or SEP IRA account; and
o the general rule that income from such accounts will not be taxable to
the account owner until it is distributed (and, for certain
distributions from Roth IRAs, certain qualifying distributions will
also be tax-exempt).
The following is a brief description of Individual Retirement Accounts and Roth
IRA accounts. For detailed information on purchasing and holding this contract
as an Individual Retirement Account or a Roth IRA account, the annuitant should
contact a qualified financial advisor.
INDIVIDUAL RETIREMENT ACCOUNTS
As a general rule, income from Individual Retirement Accounts is taxed when it
is distributed. If the Individual Retirement Account contains non-deductible
contributions, then a portion of each distribution will be non-taxable until the
non-deductible amount has been recovered; thereafter, the entire distribution
from the account would be taxable.
The Internal Revenue Code requires Individual Retirement Accounts to make
certain distributions and imposes a penalty tax on accounts that fail to meet
those requirements. Those rules are discussed under "Required Distributions -
Individual Retirement Accounts."
The annuitant under contracts held by an Individual Retirement Account must
annually report to the IRS:
o the amount of non-deductible contributions;
o the amount of any distributions;
o the amount by which non-deductible contributions for all years exceed
non-taxable distributions for all years; and
o the total balance in all Individual Retirement Accounts.
Individual Retirement Accounts may not provide life insurance. If the death
benefit under this contract exceeds the greater of the contract's cash value or
the sum of all purchase payments (less any surrenders), the contract could be
considered life insurance, and the IRS could determine that an account that
purchases this contract does not qualify for the desired tax treatment.
ROTH IRA ACCOUNTS
Distributions of earnings from a Roth IRA account are taxable or non-taxable,
depending on whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that is made not prior to the
end of the fifth calendar year after the first contribution or conversion to a
Roth IRA is made AND is made for one of the following reasons:
1) the annuitant attained the age of 59 1/2;
2) the annuitant died;
3) the annuitant has been disabled; or
4) it is a qualified first-time homebuyer distribution (as described in
Section 72(t)(2)(F) of the Internal Revenue Code).
A qualified distribution is not included in gross income for federal income tax
purposes. A non-qualified distribution is not includible in gross income to the
extent that the distribution, when added to all previous distributions, does not
exceed the total amount of contributions made to the Roth IRA. Any non-qualified
distribution
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in excess of the aggregate amount of contributions will be included in the
annuitant's gross income in the year that it is distributed.
The Internal Revenue Code requires Individual Retirement Accounts to make
certain distributions and imposes a penalty tax on accounts that fail to meet
those requirements. Those rules are discussed under "Required Distributions -
Roth IRAs."
Roth IRA accounts may not provide life insurance. If the death benefit under
this contract exceeds the greater of the contract's cash value or the sum of all
purchase payments (less any surrenders), the contract could be considered life
insurance, and the IRS could determine that an account that purchases this
contract does not qualify for the desired tax treatment.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the annuitant
requests otherwise. Annuitants may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no mandatory taxpayer
identification number is given or if the Internal Revenue Service notifies
Nationwide that mandatory back-up withholding is required), or if it is an
eligible rollover distribution. Mandatory back-up withholding rates are 31% of
income that is distributed.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
Upon the annuitant's death, the value of the account may be subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the
annuitant; 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 annuitant).
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.
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 annuitants all statements and reports. Therefore,
annuitants should promptly notify Nationwide of any address change.
These mailings will contain:
o statements showing the contract's quarterly activity;
o confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., Dollar Cost Averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements; and
o annual and semi-annual reports containing all applicable information
and financial statements or their equivalent, which must be sent to
the underlying mutual fund beneficial shareholders as required by the
rules under the Investment Company Act of 1940 for the variable
account.
Annuitants should review statements and confirmations carefully. All errors or
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corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
YEAR 2000 COMPLIANCE ISSUES
Nationwide has developed and implemented a plan to address issues related to the
Year 2000. The problem relates to many existing computer systems using only two
digits to identify a year in a date field. These systems were designed and
developed without considering the impact of the upcoming change in the century.
If not corrected, many computer systems could fail or create erroneous results
when processing information dated after December 31, 1999. Like many
organizations, Nationwide is required to renovate or replace many computer
systems so that the systems will function properly after December 31, 1999.
Nationwide has completed an inventory and assessment of all computer systems and
has implemented a plan to renovate or replace all applications that were
identified as not Year 2000 compliant. Nationwide has renovated all applications
that required renovation. Testing of the renovated programs included running
each application in a Year 2000 environment and was completed as planned during
1998. For applications being replaced, Nationwide had all replacement systems in
place and functioning as planned by year-end 1998. The shareholder services
system that supports mutual fund products was fully deployed during the first
quarter 1999. Conversion of existing traditional life policies to the new
compliant system was completed by July 1999.
Nationwide has completed an inventory and assessment of all vendor products and
has tested and certified that each vendor product is Year 2000 compliant. Any
vendor products that could not be certified as Year 2000 compliant were replaced
or eliminated in 1998.
Nationwide's facilities in Columbus, Ohio have been inventoried, assessed and
tested as being Year 2000 compliant. Mission-critical systems supporting
Nationwide's infrastructure such as telecommunications, voice and networks were
renovated and brought into compliance as planned during the second quarter.
Nationwide has also addressed issues associated with the exchange of electronic
data with external organizations. Nationwide has completed an inventory and
assessment of all business partners utilizing electronic interfaces with
Nationwide and processes have been put in place to allow Nationwide to accept
data regardless of the format. Contingency plans were completed in the third
quarter that will allow Nationwide to continue to send or receive data in the
event of failures related to other exchanges of data.
In addition to resolving internal Year 2000 readiness issues, Nationwide is
conducting a due diligence effort with significant external organizations,
including mutual fund organizations, financial institutions and wholesale
producers, to assess if they will be Year 2000 compliant. This involves
communication and follow-up with critical business partners to determine if they
will be in a position to continue doing business in the Year 2000 and beyond.
To-date, 87% of our critical business partners have reported that they are
compliant. Our communication efforts with the remaining business partners will
continue until compliance is assured or until regulatory rulings indicate
actions to be taken related to non-compliant firms. Contingency plans have been
developed for mutual fund organizations, financial institutions and wholesale
producers who may not become compliant prior to the end of 1999.
As part of its risk management strategy, Nationwide has identified risk
scenarios including the identification of external risk factors that could cause
business interruptions from Year 2000 related events. These risk scenarios
include increased customer service volume, increased producer service volume,
utility failures, technology failures and disruptions in business operations,
finance and cash flow. Nationwide has completed its mitigation and contingency
plans to address
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these risks that would, except for complete utility failure, permit
uninterrupted service to customers and producers.
During 1998 and the first nine months of 1999 communications regarding
Nationwide's Year 2000 readiness have been sent to all of our customers and
producers, on several different occasions in the form of brochures and
literature included with statements and billings. This process will continue for
the remainder of 1999.
Operating expenses in 1998 and 1997 include approximately $44.7 million and
$45.4 million, respectively, for technology projects, including costs related to
Year 2000. Expenditures for Year 2000 projects for the first nine months of 1999
totaled $5.3 million. These expenses do not have an effect on the assets of the
variable account and are not charged through to the annuitant.
Management does not anticipate that the completion of Year 2000 renovation and
replacement activities will result in a reduction in operating expenses. Rather,
personnel and resources currently allocated to Year 2000 issues will be assigned
to other technology-related projects.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide
Life Insurance Company and the American Century group of defendants (Robert
Young and David D. Distad v. Nationwide Life Insurance Company et al.). In this
lawsuit, plaintiffs sought to represent a class of variable life insurance
contract owners and variable annuity contract owners whom they claim were
allegedly misled when purchasing these variable contracts into believing that
the performance of their underlying mutual fund option managed by American
Century, whose shares may only be purchased by insurance companies, would track
the performance of a mutual fund, also managed by American Century, whose shares
are publicly traded. The amended complaint seeks unspecified compensatory and
punitive damages. On April 27, 1998, the district court denied, in part, and
granted, in part, Nationwide and American Century's motions to dismiss the
complaint. The remaining claims against Nationwide allege securities fraud,
common law fraud, civil conspiracy, and breach of contract. The District Court,
on December 2, 1998, issued an order denying plaintiffs' motion for class
certification and the appeals court declined to review the order denying class
certification upon interlocutory appeal. On June 11, 1999, the District Court
denied the plaintiffs' motion to amend their complaint and reconsider class
certification. Nationwide intends to defend this lawsuit (now limited to the
claims of the two named plaintiffs) vigorously.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide
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affiliates which were used to fund certain tax-deferred retirement plans. The
amended complaint seeks unspecified compensatory and punitive damages. On June
11, 1999, Nationwide and the other named defendants filed a motion to dismiss
the amended complaint. Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NAS, is not engaged in any litigation of any material
nature.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide(R) Money
Market Fund - Class R. "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
Nationwide(R) Money Market Fund - Class R's units. Yield is an annualized
figure, which means that it is assumed that the Nationwide(R) Money Market Fund
- - Class R generates the same level of net income over a 52-week period. The
"effective yield" is calculated similarly but includes the effect of assumed
compounding, calculated under rules prescribed by the SEC. The effective yield
will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
o precious metals;
o real estate;
o stocks and bonds;
o closed-end funds;
o bank money market deposit accounts and passbook savings;
o CDs; and
o the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
o S&P 500;
o Shearson/Lehman Intermediate Government/Corporate Bond Index;
o Shearson/Lehman Long-Term Government/Corporate Bond Index;
o Donoghue Money Fund Average;
o U.S. Treasury Note Index;
o Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
o Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
o Lipper Analytical Services, Inc.;
o CDA/Wiesenberger;
o Morningstar;
o Donoghue's;
o magazines such as:
o Money;
o Forbes;
o Kiplinger's Personal Finance Magazine;
o Financial World;
o Consumer Reports;
o Business Week;
o Time;
o Newsweek;
o National Underwriter;
o News and World Report;
o LIMRA;
o Value;
o Best's Agent Guide;
o Western Annuity Guide;
o Comparative Annuity Reports;
o Wall Street Journal;
o Barron's;
o Investor's Daily;
o Standard & Poor's Outlook; and
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o 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.
Nationwide may occasionally advertise comparisons of currently taxable and tax
deferred investment programs, based on selected tax brackets, or discussions of
alternative investment vehicles and general economic conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the maximum charges that
could be assessed to a contract (2.00%). It does not take into consideration
premium taxes, which may be imposed by certain states.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," shows the percentage rate of return of a hypothetical
initial investment of $25,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges) had they been available in the variable
account for one of the periods. An initial investment of $25,000 is assumed
because that amount is closer to the size of a typical contract than $1,000,
which was used in calculating the standardized average annual total return.
<TABLE>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<CAPTION>
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<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
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APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS
The underlying mutual funds listed below are designed primarily as investments
for variable annuity contracts and variable life insurance policies issued by
insurance companies.
There is no guarantee that the investment objectives will be met.
AMERICAN CENTURY: SHORT-TERM GOVERNMENT: INVESTOR CLASS
Investment Objective: To seek current income and limited price volatility by
maintaining an average weighted portfolio maturity of four years or less. U.S.
Governments invests in securities of the United States government and its
agencies. American Century Investment Management, Inc. serves as the Fund's
investment adviser.
AMERICAN CENTURY: INCOME & GROWTH: ADVISOR CLASS
Investment Objective: Seeks dividend growth, current income and capital
appreciation by investing in common stocks. The Fund may buy securities
convertible into common stock, such as convertible bonds, convertible preferred
stocks or warrants. The Fund may also, for liquidity purposes, invest in
high-quality money market instruments with remaining maturities of one year or
less. The Fund may also enter into repurchase agreements, collateralized by U.S.
government securities, with banks or broker-dealers deemed to present minimal
credit risk. American Century Investment Management, Inc. serves as the Fund's
investment adviser.
AMERICAN CENTURY: GROWTH: INVESTOR CLASS
Investment Objective: Seeks capital growth through investment in securities
which the management considers to have better than average prospects for
appreciation of value. The Fund's investment approach identifies companies with
accelerating earnings and revenues. As part of its strategy, the Fund remains
essentially fully invested in stocks at all times. American Century Investment
Management, Inc. serves as the Fund's investment adviser.
AMERICAN CENTURY: INTERNATIONAL GROWTH: ADVISOR CLASS
Investment Objective: Seeks capital growth by investing in an international
portfolio of common stocks, primarily in developed markets; stocks considered by
the investment manager to have prospects for appreciation. The Fund will invest
primarily in common stocks (defined to include depository receipts for common
stocks) and other equity equivalents of such companies. American Century
Investment Management, Inc. serves as the Fund's investment adviser.
AMERICAN CENTURY: ULTRA: INVESTOR CLASS
Investment Objective: The investment objective of the Fund is to seek capital
growth by investing primarily in common stocks that are considered by management
to have better-than-average prospects for appreciation. American Century
Investment Management, Inc. serves as the Fund's investment adviser.
DREYFUS APPRECIATION FUND, INC.
Investment Objective: To provide long-term capital growth consistent with the
preservation of capital. Current income is a secondary investment objective. The
Fund seeks to meet its objective by investing primarily in the common stocks of
domestic and foreign issuers. The Dreyfus Corporation serves as the Fund's
investment adviser.
DREYFUS BALANCED FUND, INC.
Investment Objective: To provide long-term capital growth and current income,
consistent with reasonable investment risk. The Fund is managed as a balanced
fund and invests in equity and debt securities, the proportion of which will
vary from time to time in accordance the fund manager's assessment of economic
conditions and investment opportunities. The Dreyfus Corporation serves as the
Fund's investment adviser.
DREYFUS EMERGING LEADERS FUND
Investment Objective: Capital growth by investing in companies Dreyfus believes
to be emerging leaders: small companies
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characterized by new or innovative products, services, or processes having the
potential to enhance earnings growth. The Fund invests at least 65% of total
assets in companies with total market values of less than $1.5 billion at the
time of purchase. The Fund's investments may include common stocks, preferred
stocks and convertible securities. The Dreyfus Corporation serves as the Fund's
investment adviser.
DREYFUS PREMIER THIRD CENTURY FUND, INC.
Investment Objective: Primarily seeks to provide capital growth through equity
investment in companies that, in the opinion of the Fund's management, 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. The
Dreyfus Corporation serves as the Fund's investment adviser.
FEDERATED BOND FUND - CLASS F
Investment Objective: To provide as high a level of current income as is
consistent with the preservation of capital. The Fund invests primarily in a
professionally managed, diversified portfolio of bonds. Under normal
circumstances, at least 65% of the Fund's net assets will be invested in
investment grade securities, including repurchase agreements collateralized by
investment grade securities. The Fund may invest in corporate debt obligations,
U.S. Government obligations, municipal securities, asset-backed securities,
adjustable rate mortgage securities, collateralized mortgage obligations, and
other securities which are deemed to be consistent with the Fund's investment
objective. Federated Advisers serves as the Fund's investment adviser.
FEDERATED HIGH YIELD TRUST
Investment Objective: Seeks high current income by investing primarily in a
professionally managed, diversified portfolio of fixed income securities. Such
securities are expected to be lower-rated corporate debt obligations commonly
referred to as "junk bonds." Investments of this type are subject to a greater
risk of loss of principal and interest than investments in higher rated
securities. The Trust's investment adviser will endeavor to limit these risks
through diversifying the portfolio and through careful credit analysis of
individual issuers. Federated Advisers serves as the Fund's investment adviser.
FIDELITY ADVISOR BALANCED FUND - CLASS A
Investment Objective: Seeks income and growth potential by investing in
securities including U.S. government and corporate bonds, and a diversified
selection of common stocks. Fidelity Management & Research Company serves as the
Fund's investment adviser.
FIDELITY ADVISOR EQUITY INCOME FUND - CLASS A
Investment Objective: Seeks to obtain reasonable income from a portfolio
consisting primarily of income-producing equity securities, with a secondary
emphasis on growth potential. Fidelity Management & Research Company serves as
the Fund's investment adviser.
FIDELITY ADVISOR GROWTH OPPORTUNITIES FUND - CLASS A
Investment Objective: Pursues capital growth that exceeds market performance
through investments in growth, cyclical, and value stocks, and securities
convertible to common stocks. Fidelity Management & Research Company serves as
the Fund's investment adviser.
FIDELITY ADVISOR HIGH YIELD FUND - CLASS T
Investment Objective: A bond Fund designed to meet the needs of the long-term
investor, seeking above-average monthly income and potential capital growth by
investing in lower-rated, high-yielding, fixed income securities. Fidelity
Management & Research Company serves as the Fund's investment adviser.
FRANKLIN MUTUAL SERIES FUND, INC. - MUTUAL SHARES FUND: CLASS A
Investment Objective: Seeks capital appreciation, which may occasionally be
short-term. Income is a secondary objective. The Fund seeks to meet its
objectives by primarily investing in common stock, preferred stock and corporate
debt securities which may be convertible into common stock. Franklin Mutual
serves as the Fund's investment adviser.
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FRANKLIN SMALL CAP GROWTH FUND - CLASS A
Investment Objective: Long-term capital growth by investing primarily in equity
securities of small capitalization growth companies, which have market cap
values of less than $1.5 billion. Franklin Advisers, Inc. serves as the Fund's
investment adviser.
INVESCO DYNAMICS FUND
Investment Objective: To seek appreciation of capital through aggressive
investment policies. The Fund invests primarily in common stocks of U.S.
companies traded on national securities exchanges and over-the-counter. The Fund
also has the flexibility to invest in preferred stocks and convertible or
straight issues of debentures, as well as foreign securities. INVESCO Funds
Group, Inc. serves as the Fund's investment adviser. INVESCO Trust Company
serves as the Fund's sub-adviser.
INVESCO SMALL COMPANY GROWTH FUND
Investment Objective: To seek long-term capital growth. The Fund invests
primarily in equity securities of small-capitalization U.S. companies traded
"over-the-counter." INVESCO Funds Group, Inc. serves as the Fund's investment
adviser.
INVESCO TOTAL RETURN FUND
Investment Objective: To seek to achieve a high total return on investment
through capital appreciation and current income by investing in a combination of
equity securities (consisting of common stocks and, to a lesser degree,
securities convertible into common stock) and fixed income securities. The
equity securities purchased by the Fund generally will be issued by companies
which are listed on a national securities exchange and which usually pay regular
dividends. This Fund seeks reasonably consistent total returns over a variety of
market cycles. INVESCO Funds Group, Inc. serves as the Fund's investment
adviser. INVESCO Capital Management, Inc.
serves as the Fund's sub-adviser.
JANUS FUND
Investment Objective: Seeks long-term growth of capital by investing primarily
in common stocks of a large number of issuers of any size. Generally this Fund
emphasizes issuers with larger market capitalizations. Janus Capital Corporation
serves as the Fund's investment adviser.
JANUS TWENTY FUND
Investment Objective: Seeks growth of capital in a manner consistent with the
preservation of capital. Under normal conditions, the Fund will concentrate its
investments in a core position of 20-30 common stocks. However, the percentage
of the Fund's assets invested in common stocks will vary, depending upon its
investment adviser's opinion of prevailing market, financial and economic
conditions. Consequently, the Fund may at times hold substantial positions in
cash, or interest bearing securities. Janus Capital Corporation serves as the
Fund's investment adviser.
JANUS WORLDWIDE FUND
Investment Objective: To seek long-term growth of capital in a manner consistent
with the preservation of capital. The objective is pursued primarily through
investments in common stocks of foreign and domestic issuers. The Fund may
invest on a worldwide basis in companies and organizations of any size,
regardless of country of organization or place of principal business activity.
The Fund normally invests in issuers from at least five different countries.
Janus Capital Corporation serves as the Fund's investment adviser.
LAZARD SMALL CAP PORTFOLIO - OPEN SHARES
Investment Objective: To seek capital appreciation through investing primarily
in equity securities of companies with market capitalizations under $1 billion
that are believed by the investment adviser to be inexpensively priced relative
to the return on total capital or equity. Lazard Asset Management serves as the
Fund's investment adviser.
NATIONWIDE(R) BOND FUND - CLASS D
Investment Objective: Seeks as high a level of income as is consistent with
preservation of capital. The Fund invests primarily in fixed-income securities
and currently focuses on corporate debt investments and U.S. Government
mortgage-backed securities. Under normal market conditions, the dollar-weighted
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average portfolio maturity of the Fund will be intermediate, which is defined as
being between six and ten years. Villanova Mutual Fund Capital Trust, an
affiliate of NAS and an indirect subsidiary of Nationwide Financial Services,
Inc., serves as the Fund's investment adviser.
NATIONWIDE(R) FUND - CLASS D
Investment Objective: Seeks total return through a flexible combination of
current income and capital appreciation. The Fund invests primarily in common
stocks, but also in convertible securities, other equity securities, bonds and
money market obligations. Villanova Mutual Fund Capital Trust, an affiliate of
NAS and an indirect subsidiary of Nationwide Financial Services, Inc., serves as
the Fund's investment adviser.
NATIONWIDE(R) GROWTH FUND - CLASS D
Investment Objective: Seeks long-term capital appreciation. The Fund invests
primarily in equity securities of companies of all sizes. Major emphasis in the
selection of securities is placed on companies which have capable management,
and are in fields where social and economic trends, technological developments,
and new processes or products indicate a potential for greater-than-average
growth. Villanova Mutual Fund Capital Trust, an affiliate of NAS and an indirect
subsidiary of Nationwide Financial Services, Inc., serves as the Fund's
investment adviser.
NATIONWIDE(R) INTERMEDIATE U.S. GOVERNMENT BOND FUND - CLASS D
Investment Objective: Seeks as high a level of current income as is consistent
with the preservation of capital. The Fund invests in securities of the U.S.
Government and its agencies and instrumentalities. The average duration of the
Fund will be between three and a half and six years. Villanova Mutual Fund
Capital Trust, an affiliate of NAS and an indirect subsidiary of Nationwide
Financial Services, Inc., serves as the Fund's investment adviser.
NATIONWIDE(R) MONEY MARKET FUND - CLASS R
Investment Objective: Seeks as high a level of current income as is consistent
with the preservation of capital and maintenance of liquidity. The Fund invests
in high-quality money market instruments maturing in 397 days or less. Villanova
Mutual Fund Capital Trust, an affiliate of NAS and an indirect subsidiary of
Nationwide Financial Services, Inc., serves as the Fund's investment adviser.
NATIONWIDE S&P 500(R) INDEX FUND - CLASS R
Investment Objective: To provide investment results that correspond to the price
and yield performance of publicly traded common stocks as represented by the
Standard & Poor's 500 Composite Stock Price Index (the "Index"). The Fund
attempts to be fully invested at all times in stocks that comprise the Index and
stock index futures, and in any event, at least 80% of the Fund's net assets
will be invested in stocks comprising the Index. Villanova Mutual Fund Capital
Trust serves as the Fund's investment adviser and The Dreyfus Corporation is the
Fund's sub-adviser.
"S&P 500(R)" has been licensed for use by Nationwide Advisory Services, Inc. The
Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's and
Standard & Poor's makes no representation regarding the advisability of
investing in the Fund.
NEUBERGER BERMAN GENESIS TRUST
Investment Objective: Seeks capital appreciation by investing primarily in
stocks of companies with small market capitalizations (usually up to $1.5
billion). The portfolio manager seeks to buy the stocks of strong companies with
a history of solid performance and a proven management team, which are selling
at attractive prices. Neuberger Berman Management Incorporated serves as the
Fund's investment adviser
NEUBERGER BERMAN GUARDIAN TRUST
Investment Objective: Seeks capital appreciation through investments generally
in dividend-paying issues of established companies that its investment officers
believe are well managed. The emphasis of the Fund's investments is on common
stock. The Fund diversifies its holdings among different industries and
different companies in light of conditions prevailing at any given time. Current
income is a secondary objective. Neuberger Berman
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Management Incorporated serves as the Fund's investment adviser.
NEUBERGER BERMAN PARTNERS TRUST
Investment Objective: Seeks capital growth. The Fund invests in securities
solely on the basis of management's evaluation of their investment merit and
potential for growth using a value-oriented approach to the selection of
individual securities. The Fund's management believes that the Fund is an
attractive investment vehicle for conservative investors who are interested in
long-term appreciation from stock investments, but who have a low tolerance for
risk. Neuberger Berman Management Incorporated serves as the Fund's investment
adviser.
OPPENHEIMER GLOBAL FUND: CLASS A
Investment Objective: Seeks capital appreciation. The Fund emphasizes investment
in foreign and domestic securities considered by the Fund's investment manager
to have appreciation possibilities, primarily common stocks or securities having
investment characteristics of common stocks (such as convertible securities) of
"growth-type" companies. As a matter of fundamental policy, under normal market
conditions, the Fund will invest its total assets in securities of issuers
traded in markets in at least three different countries (which may include the
United States). The portfolio may also emphasize securities of cyclical
industries and "special situations" when the Fund's manager believes that they
present opportunities for capital growth. The remainder of the Fund's invested
assets will be invested in securities for liquidity purposes. OppenheimerFunds,
Inc. serves as the Fund's investment adviser.
PRESTIGE BALANCED FUND - CLASS A
Investment Objective: To provide a high total return from a diversified
portfolio of equity and fixed income securities. The Fund seeks to provide a
total return that approaches the total return of the universe of equity
securities of large and medium sized companies and that exceeds the return
typical of a portfolio of fixed income securities. Under normal market
conditions, the Fund will invest approximately 60% of its assets in equity
securities and 40% in fixed income securities. The equity securities will
primarily be securities of large and medium sized companies included in the
Standard & Poor's 500 Composite Stock Price Index, and the fixed income
securities will cover a range of fixed income sectors and securities, including
government, corporate, asset-backed and mortgage-backed securities. Villanova
Mutual Fund Capital Trust serves as the Fund's investment adviser and J.P.
Morgan Investment Management Inc. is the Fund's sub-adviser.
PRESTIGE INTERNATIONAL FUND - CLASS A
Investment Objective: Capital appreciation. The Fund seeks to accomplish its
investment objective by investing primarily in equity securities of non-United
States companies that, in the opinion of its subadviser, are inexpensively
priced relative to the return on total capital or equity. The Fund invests
primarily in equity securities of non-United States companies. Under normal
market conditions, the Fund will invest at least 80% of the value of its total
assets in the equity securities of companies within at least three different
countries (not including the United States). Villanova Mutual Fund Capital Trust
serves as the Fund's investment adviser and Lazard Asset Management is the
Fund's sub-adviser.
PRESTIGE LARGE CAP GROWTH FUND - CLASS A
Investment Objective: Long-term capital appreciation. The Fund seeks to achieve
its investment objective from a broadly diversified portfolio of equity
securities of large capitalization companies that are expected to have better
prospects for earnings growth than the growth rate of the general domestic
economy. Dividend income is a secondary objective. A large capitalization
company is a company with a market capitalization and industry characteristics
that are similar to companies in the Russell 1000(R) Growth Index, which
currently have market capitalizations that range from $1.4 billion to $272
billion. Villanova Mutual Fund Capital Trust serves as the Fund's investment
adviser and Goldman
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Sachs Asset Management is the Fund's sub-adviser.
PRESTIGE LARGE CAP VALUE FUND - CLASS A
Investment Objective: To maximize total return, consisting of both capital
appreciation and current income. The Fund seeks to achieve its investment
objective by investing in U.S. equity securities that are currently undervalued
as determined by its subadviser. Under normal market conditions, substantially
all, but in no event less than 65% of the Fund's total assets will be invested
in equity securities of large capitalization U.S. companies, including foreign
companies whose securities are traded in the United States and who comply with
U.S. accounting standards. A large capitalization company is a company with a
market capitalization and industry characteristics that are similar to companies
in the Russell 1000(R) Value Index, which currently have market capitalizations
that range from $1.4 billion to $272 billion. Villanova Mutual Fund Capital
Trust serves as the Fund's investment adviser and Brinson Partners, Inc. is the
Fund's sub-adviser.
PRESTIGE SMALL CAP FUND - CLASS A
Investment Objective: Long-term capital appreciation. The Fund seeks to
accomplish its investment objective from a broadly diversified portfolio of
equity securities issued by U.S. companies that have small market
capitalizations. Under normal market conditions, the Fund will invest at least
65% of its total assets in equity securities of companies whose market
capitalizations at the time of investment do not exceed 110% of the largest
company in the Russell 2000(R) Small Stock Index; these companies currently have
market capitalizations that range from $222 million to $1.4 billion. Villanova
Mutual Fund Capital Trust serves as the Fund's investment adviser and INVESCO
Management & Research, Inc. serves as the Fund's sub-adviser, providing daily
portfolio management for the Fund.
STRONG COMMON STOCK FUND, INC.
Investment Objective: To seek capital growth by investing in a diversified
portfolio of equity securities which, in the opinion of the Fund's investment
adviser, possess the potential for price appreciation. Strong Capital
Management, Inc. serves as the Fund's investment adviser.
TEMPLETON FOREIGN FUND - CLASS A
Investment Objective: Seeks long-term capital growth through a flexible policy
of investing in stocks and debt obligations of companies and governments outside
the United States. Any income realized will be incidental. Templeton Investment
Counsel, Inc. serves as the Fund's investment adviser.
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STATEMENT OF ADDITIONAL INFORMATION
DECEMBER 30, 1999
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGHT ITS NATIONWIDE VARIABLE ACCOUNT
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 December 30, 1999.
The prospectus may be obtained from Nationwide Life Insurance Company by writing
P. O. Box 16609, Columbus, Ohio 43216-6609, or calling 1-800-848-6631, TDD
1-800-238-3035.
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<CAPTION>
PAGE
<S> <C>
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................2
Underwriters..................................................................2
Advertising...................................................................2
Annuity Payments..............................................................3
Financial Statements..........................................................4
</TABLE>
GENERAL INFORMATION AND HISTORY
Nationwide Variable Account ("variable account") 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. Nationwide is one of America's
largest insurance and financial services family of companies, with combined
assets of over $98.28 billion as of December 31, 1998.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each annuitant and
the number and type of contract issued to each such annuitant and records with
respect to the contract value of each contract.
The custodian of the assets of the variable account is Nationwide Advisory
Services, Inc. ("NAS"). Nationwide will maintain a record of all purchases and
redemptions of shares of the underlying mutual funds. Nationwide, or affiliates
Nationwide, may have entered into agreements with either the investment adviser
or distributor for several of 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 annuitant.
1
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<PAGE> 43
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by NAS, Three
Nationwide Plaza, Columbus, Ohio 43215, a wholly owned subsidiary of Nationwide.
During the fiscal years ended December 31, 1998, 1997 and 1996 no underwriting
commissions were paid by Nationwide to NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Nationwide(R) Money Market Fund - Class R,
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 annuitant accounts,
and dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. The Nationwide(R) Money
Market Fund - Class R'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 Nationwide(R) Money Market Fund - Class R.
The Nationwide(R) Money Market Fund - Class R'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 Nationwide(R)
Money Market Fund - Class R 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 Nationwide(R) Money Market Fund - Class R'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 an annuitant's
investment in the Nationwide(R) Money Market Fund - Class R is not guaranteed or
insured. Yield of other money market funds may not be comparable if a different
base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual total return is found by taking
a hypothetical $1,000 investment in each of the sub-accounts' units on the first
day of the period at the offering price, which is the accumulation unit value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
reflects the deduction of variable account charges of 2.00% (which includes the
Reduced Purchase Payment Option, One-Year Step Up Death Benefit, and GMIB
Option). No deduction is made for premium taxes which may be assessed by certain
states. Nonstandardized total
2
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<PAGE> 44
return may also be advertised, and is calculated in a manner similar to
standardized average annual total return except the nonstandardized total return
is based on a hypothetical initial investment of $25,000. An assumed initial
investment of $25,000 will be used because that figure more closely approximates
the size of a typical contract than does the $1,000 figure used in calculating
the standardized average annual total return quotations.
The standardized average annual total return and nonstandardized average annual
total return quotations will be current to the last day of the calendar quarter
preceding the date on which an advertisement is submitted for publication. The
standardized average annual return will be based on rolling calendar quarters
and will cover periods of one, five, and ten years, or a period covering the
time the underlying mutual fund has been available in the variable account if
the underlying mutual fund has not been available for one of the prescribed
periods. Nonstandardized average annual total return will based on rolling
calendar quarters and will cover periods of one, five and ten years, or a period
covering the time the underlying mutual fund has been in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance, is not a
guarantee of future performance. Factors affecting a sub-account's performance
include general market conditions, operating expenses and investment management.
An annuitant's account when redeemed may be more or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
- --------------------------------------------------------------------------------
The Successor Annuity commenced sales in December, 1999. Therefore, the
following financial statements do not reflect performance for the Successor
Annuity. However, the financial statements do reflect performance for other
annuity contracts issued through the Nationwide Variable Account.
- --------------------------------------------------------------------------------
3
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<PAGE> 45
<PAGE> 1
- --------------------------------------------------------------------------------
Independent Auditors' Report
----------------------------
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account as of December 31, 1998,
and the related statements of operations and changes in contract owners' equity
for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1998, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable Account
as of December 31, 1998, and the results of its operations and its changes in
contract owners' equity for each of the years in the two year period then ended
in conformity with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 5, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
- --------------------------------------------------------------------------------
NATIONWIDE VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
December 31, 1998
<TABLE>
<CAPTION>
ASSETS:
Investments at market value:
American Century: Benham Short-Term Government Fund (ACBenSTGvt)
<S> <C>
318,360 shares (cost $3,023,746) ............................................. $ 3,037,155
American Century: Income & Growth Fund (ACIncGro)
239,477 shares (cost $6,466,421) ............................................. 7,004,694
American Century: Twentieth Century Growth Fund (ACTCGro)
496,230 shares (cost $11,178,870) ............................................ 13,477,614
American Century: Twentieth Century International Growth Fund (ACTCIntlGr)
92,684 shares (cost $888,476) ................................................ 887,911
American Century: Twentieth Century Ultra Fund (ACTCUltra)
523,376 shares (cost $15,463,890) ............................................ 17,485,992
Delaware Group Delchester High-Yield Bond Fund, Inc. -
Delchester Fund Institutional Class (DeHYBd)
185,894 shares (cost $1,183,704) ............................................. 1,093,058
Dreyfus A Bonds Plus, Inc. (DryABds)
149,493 shares (cost $2,174,658) ............................................. 2,092,907
Dreyfus Appreciation Fund, Inc. (DryApp)
17,044 shares (cost $655,061) ................................................ 717,021
Dreyfus Balanced Fund, Inc. (DryBal)
9,850 shares (cost $165,759) ................................................. 159,865
Dreyfus S&P 500 Index Fund (Dry500Ix)
342,009 shares (cost $10,241,491) ............................................ 12,445,691
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
87,714 shares (cost $974,509) ................................................ 1,077,129
Evergreen Income and Growth Fund - Class Y (EvIncGro)
62,239 shares (cost $1,302,771) .............................................. 1,281,509
Federated High Yield Trust (FedHiYld)
54,906 shares (cost $487,047) ................................................ 489,217
Federated Investment Series Funds, Inc. - Federated Bond Fund - Class F (FedBdFd)
121,397 shares (cost $1,216,998) ............................................. 1,205,468
Fidelity Advisor Balanced Fund - Class T (FABal)
24,900 shares (cost $484,215) ................................................ 465,377
Fidelity Advisor Equity Income Fund - Class T (FAEqInc)
60,237 shares (cost $1,512,578) .............................................. 1,708,317
Fidelity Advisor Growth Opportunities Fund - Class T (FAGrOpp)
145,021 shares (cost $6,129,380) ............................................. 7,285,842
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Fidelity Advisor High Yield Fund - Class T (FAHiYld)
<S> <C>
249,871 shares (cost $3,168,604) ............................................. 2,831,038
Fidelity Asset Manager(TM) (FidAsMgr)
238,304 shares (cost $4,125,986) ............................................. 4,144,111
Fidelity Capital & Income Fund (FidCapInc)
130,527 shares (cost $1,210,400) ............................................. 1,211,289
Fidelity Equity-Income Fund (FidEqInc)
307,411 shares (cost $12,698,617) ............................................ 17,076,675
Fidelity Magellan(R) Fund (FidMgln)
188,315 shares (cost $16,971,067) ............................................ 22,752,212
Fidelity Puritan(R) Fund (FidPurtn)
716,357 shares (cost $13,049,557) ............................................ 14,377,276
Fidelity VIP - High Income Portfolio (FidVIPHI)
10,523 shares (cost $119,580) ................................................ 121,328
Franklin Mutual Series Fund Inc. - Mutual Shares Fund - Class 1 (FranMutSer)
9,538 shares (cost $202,331) ................................................. 185,899
Janus Fund (JanFund)
181,212 shares (cost $4,911,487) ............................................. 6,097,787
Janus Twenty Fund (Jan20Fd)
307,989 shares (cost $11,441,360) ............................................ 16,415,836
Janus Worldwide Fund (JanWrldwde)
147,751 shares (cost $6,154,382) ............................................. 6,997,491
Lazard Small Cap Portfolio - Open Shares (LazSmCap)
26 shares (cost $454) ........................................................ 454
MFS(R) World Governments Fund - Class A (MFSWdGvt)
71,179 shares (cost $784,874) ................................................ 751,652
Nationwide(R) Bond Fund - Class D (NWBdFd)
164,377 shares (cost $1,548,837) ............................................. 1,601,029
Nationwide(R) Fund - Class D (NWFund)
230,420 shares (cost $6,212,047) ............................................. 7,467,925
Nationwide(R) Growth Fund - Class D (NWGroFd)
206,739 shares (cost $2,971,890) ............................................. 3,543,500
Nationwide(R) Money Market Fund (NWMyMkt)
11,440,557 shares (cost $11,440,557) ......................................... 11,440,557
Nationwide(R) Intermediate U.S. Government Bond Fund - Class D(NWUSGvt)
49,384 shares (cost $523,959) ................................................ 517,051
Neuberger & Berman Genesis Trust (NBGenesTr)
30,745 shares (cost $673,006) ................................................ 625,352
Neuberger & Berman Guardian Trust (NBGuardTr)
334,515 shares (cost $8,494,757) ............................................. 7,499,825
Neuberger & Berman Limited Maturity Bond Fund (NBLtdMat)
99,401 shares (cost $991,117) ................................................ 981,091
Neuberger & Berman Partners Fund (NBPartFd)
365,841 shares (cost $9,830,942) ............................................. 9,328,945
</TABLE>
(Continued)
<PAGE> 4
<TABLE>
<CAPTION>
Oppenheimer Global Fund - Class A (OppGlob)
<S> <C>
170,554 shares (cost $7,334,345) ............................................ 7,265,612
Phoenix Balanced Fund Series - Class A (PhxBalFd)
45,951 shares (cost $754,993) ............................................... 795,880
Prestige International Fund - Class A (PrInt)
172 shares (cost $1,815) .................................................... 1,815
Prestige Small Cap Fund - Class A (PrSmCap)
42 shares (cost $454) ....................................................... 454
Strong Total Return Fund, Inc. (StTotRet)
58,723 shares (cost $1,684,593) ............................................. 2,024,753
Templeton Foreign Fund - Class I (TemForFd)
485,063 shares (cost $4,900,840) ............................................ 4,069,681
Warburg Pincus Emerging Growth Fund - Common Shares (WPEmGro)
124,909 shares (cost $4,433,313) ............................................ 4,992,600
Warburg Pincus Global Fixed - Income Fund - Common Shares (WPGlFxInc)
14,142 shares (cost $148,345) ............................................... 149,910
------------
Total investments ........................................................ 227,183,795
Accounts receivable ............................................................. 42,466
------------
Total assets ............................................................. 227,226,261
Accounts payable ................................................................ 308
------------
Contract owners' equity (note 4) ................................................ $227,225,953
============
</TABLE>
See accompanying notes to financial statements.
- --------------------------------------------------------------------------------
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
TOTAL ACBENSTGVT
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ........................ $ 3,196,414 2,943,209 162,608 177,782
Mortality, expense and administration
charges (note 2) .......................... (2,533,959) (1,849,500) (40,633) (42,118)
------------- ------------- ------------- -------------
Net investment activity ................... 662,455 1,093,709 121,975 135,664
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ....... 56,416,999 47,219,466 723,023 925,121
Cost of mutual fund shares sold ............. (48,174,169) (41,630,262) (721,176) (914,401)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ....... 8,242,830 5,589,204 1,847 10,720
Change in unrealized gain (loss)
on investments ............................ 14,063,893 6,076,074 17,698 (2,838)
------------- ------------- ------------- -------------
Net gain (loss) on investments ............ 22,306,723 11,665,278 19,545 7,882
------------- ------------- ------------- -------------
Reinvested capital gains .................... 11,574,852 13,114,383 - -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 34,544,030 25,873,370 141,520 143,546
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................... 53,270,516 36,040,726 668,275 178,490
Transfers between funds ..................... - - 7,071 (53,232)
Redemptions ................................. (23,621,452) (12,768,924) (835,080) (517,635)
Annuity benefits ............................ (27,891) (17,520) (952) (938)
Annual contract maintenance charge (note 2).. (169,891) (108,625) (1,748) (1,865)
Contingent deferred sales charges (note 2) .. (324,873) (262,567) (1,752) (15,741)
Adjustments to maintain reserves ............ 788 9,849 290 301
------------- ------------- ------------- -------------
Net equity transactions ................... 29,127,197 22,892,939 (163,896) (410,620)
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... 63,671,227 48,766,309 (22,376) (267,074)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ... 163,554,726 114,788,417 3,059,798 3,326,872
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 227,225,953 163,554,726 3,037,422 3,059,798
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
ACINCGRO ACTCGRO
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ........................ $ 64,541 15,209 - -
Mortality, expense and administration
charges (note 2) .......................... (61,634) (12,374) (152,386) (134,498)
------------- ------------- ------------- -------------
Net investment activity ................... 2,907 2,835 (152,386) (134,498)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ....... 2,702,912 1,753,420 1,724,411 2,899,543
Cost of mutual fund shares sold ............. (2,527,718) (1,566,771) (1,226,965) (2,626,829)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ....... 175,194 186,649 497,446 272,714
Change in unrealized gain (loss)
on investments.......................... 627,403 (79,760) 968,585 768,718
------------- ------------- ------------- -------------
Net gain (loss) on investments ............ 802,597 106,889 1,466,031 1,041,432
------------- ------------- ------------- -------------
Reinvested capital gains .................... 275,147 150,836 2,228,156 1,546,715
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'.
equity resulting from operations ...... 1,080,651 260,560 3,541,801 2,453,649
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................... 2,774,469 589,787 646,577 482,037
Transfers between funds ..................... 1,481,828 869,824 (134,689) (543,754)
Redemptions ................................. (220,883) (14,946) (1,058,730) (1,535,818)
Annuity benefits ............................ - - (12,964) (4,775)
Annual contract maintenance charge (note 2) . (2,588) (224) (14,839) (16,461)
Contingent deferred sales charges (note 2) .. (5,005) (78) (6,993) (16,969)
Adjustments to maintain reserves ............ (981) (3) 3,397 9,189
------------- ------------- ------------- -------------
Net equity transactions ................. 4,026,840 1,444,360 (578,241) (1,626,551)
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... 5,107,491 1,704,920 2,963,560 827,098
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ... 1,896,251 191,331 10,517,144 9,690,046
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 7,003,742 1,896,251 13,480,704 10,517,144
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ACTCINTLGR ACTCULTRA
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ........................ $ 1,491 1,451 - 4,160
Mortality, expense and administration
charges (note 2) .......................... (10,515) (7,272) (183,975) (122,017)
------------- ------------- ------------- -------------
Net investment activity ................... (9,024) (5,821) (183,975) (117,857)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ....... 622,576 411,368 1,479,795 1,635,447
Cost of mutual fund shares sold ............. (562,613) (361,201) (1,263,460) (1,055,134)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ....... 59,963 50,167 216,335 580,313
Change in unrealized gain (loss) on investments 35,468 (27,035) 2,426,265 (936,614)
------------- ------------- ------------- -------------
Net gain (loss) on investments ............ 95,431 23,132 2,642,600 (356,301)
------------- ------------- ------------- -------------
Reinvested capital gains .................... 12,976 65,811 1,488,048 2,211,772
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ...... 99,383 83,122 3,946,673 1,737,614
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................... 282,424 154,962 3,883,377 3,371,633
Transfers between funds ..................... 47,185 (81,095) (311,089) (589,520)
Redemptions ................................. (38,282) (151,902) (1,084,444) (729,493)
Annuity benefits ............................ - - - -
Annual contract maintenance charge (note 2) . (677) (269) (14,129) (7,543)
Contingent deferred sales charges (note 2) .. (699) (6,228) (23,446) (23,504)
Adjustments to maintain reserves ............ 14 (16) 172 96
------------- ------------- ------------- -------------
Net equity transactions ................. 289,965 (84,548) 2,450,441 2,021,669
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... 389,348 (1,426) 6,397,114 3,759,283
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ... 498,568 499,994 11,089,110 7,329,827
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 887,916 498,568 17,486,224 11,089,110
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DEHYBD DRYABDS
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 123,276 116,418 115,918 109,727
Mortality, expense and administration
charges (note 2) ............................ (16,341) (16,476) (25,437) (23,480)
------------- ------------- ------------- -------------
Net investment activity ..................... 106,935 99,942 90,481 86,247
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 341,656 192,668 1,243,229 870,811
Cost of mutual fund shares sold ............... (327,084) (185,268) (1,219,521) (874,737)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 14,572 7,400 23,708 (3,926)
Change in unrealized gain (loss) on investments (151,204) 43,399 (120,982) 38,180
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (136,632) 50,799 (97,274) 34,254
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - - 32,247 21,033
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (29,697) 150,741 25,454 141,534
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 156,659 236,070 545,761 592,080
Transfers between funds ....................... (127,468) 143,298 (80,789) (506,273)
Redemptions ................................... (241,587) (144,393) (241,342) (228,961)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (495) (393) (1,451) (1,091)
Contingent deferred sales charges (note 2) .... (1,713) (3,311) (3,165) (3,508)
Adjustments to maintain reserves .............. (83) 20 (408) 6
------------- ------------- ------------- -------------
Net equity transactions ................... (214,687) 231,291 218,606 (147,747)
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... (244,384) 382,032 244,060 (6,213)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,340,246 958,214 1,848,441 1,854,654
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 1,095,862 1,340,246 2,092,501 1,848,441
============= ============= ============= =============
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
DRYAPP DRYBAL
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 3,740 - 3,036 -
Mortality, expense and administration
charges (note 2) ............................ (3,370) - (1,249) -
------------- ------------- ------------- -------------
Net investment activity ..................... 370 - 1,787 -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 108,365 - 38,449 -
Cost of mutual fund shares sold ............... (104,926) - (38,148) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 3,439 - 301 -
Change in unrealized gain (loss) on
investments ................................. 61,961 - (5,894) -
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 65,400 - (5,593) -
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 1,147 - 8,351 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 66,917 - 4,545 -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 301,616 - 123,154 -
Transfers between funds ....................... 367,247 - 63,401 -
Redemptions ................................... (18,608) - (31,225) -
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (113) - (9) -
Contingent deferred sales charges (note 2) .... (36) - - -
Adjustments to maintain reserves .............. 273 - (50) -
------------- ------------- ------------- -------------
Net equity transactions ................... 650,379 - 155,271 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 717,296 - 159,816 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... - - - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 717,296 - 159,816 -
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
DRY500IX DRY3DCEN
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ........................ $ 120,795 76,946 - 1,186
Mortality, expense and administration
charges (note 2) .......................... (129,044) (65,774) (11,355) (7,462)
------------- ------------- ------------- -------------
Net investment activity ................... (8,249) 11,172 (11,355) (6,276)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ....... 2,847,389 2,535,120 277,680 479,349
Cost of mutual fund shares sold ............. (2,101,605) (2,054,865) (215,841) (427,821)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ....... 745,784 480,255 61,839 51,528
Change in unrealized gain (loss) on invest .. 1,493,487 604,315 68,617 39,050
------------- ------------- ------------- -------------
Net gain (loss) on investments ............ 2,239,271 1,084,570 130,456 90,578
------------- ------------- ------------- -------------
Reinvested capital gains .................... 2,453 117,343 106,354 53,383
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ...... 2,233,475 1,213,085 225,455 137,685
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................... 3,936,518 1,991,411 195,911 338,691
Transfers between funds ..................... 1,528 1,332,333 7,991 41,154
Redemptions ................................. (1,319,672) (182,233) (70,148) (125,882)
Annuity benefits ............................ - - - -
Annual contract maintenance charge (note 2) . (8,663) (2,126) (1,341) (358)
Contingent deferred sales charges (note 2) .. (28,571) (2,808) (2,211) (3,494)
Adjustments to maintain reserves ............ 51 420 1 33
------------- ------------- ------------- -------------
Net equity transactions ................... 2,581,191 3,136,997 130,203 250,144
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... 4,814,666 4,350,082 355,658 387,829
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ... 7,631,150 3,281,068 721,473 333,644
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 12,445,816 7,631,150 1,077,131 721,473
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
EVINCGRO FEDHIYLD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 53,014 46,100 10,742 -
Mortality, expense and administration
charges (note 2) ............................ (15,523) (12,752) (1,643) -
------------- ------------- ------------- -------------
Net investment activity ..................... 37,491 33,348 9,099 -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 141,082 124,635 6,112 -
Cost of mutual fund shares sold ............... (121,276) (118,286) (6,420) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 19,806 6,349 (308) -
Change in unrealized gain (loss) on invest .... (202,823) 103,540 2,169 -
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (183,017) 109,889 1,861 -
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 119,607 68,181 - -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (25,919) 211,418 10,960 -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 529,511 60,014 52,736 -
Transfers between funds ....................... (1,596) (27,145) 427,826 -
Redemptions ................................... (329,204) (50,285) (2,247) -
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (584) (423) (13) -
Contingent deferred sales charges (note 2) .... (286) (1,158) (46) -
Adjustments to maintain reserves .............. 3 10 162 -
------------- ------------- ------------- -------------
Net equity transactions ................... 197,844 (18,987) 478,418 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 171,925 192,431 489,378 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,109,581 917,150 - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 1,281,506 1,109,581 489,378 -
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FEDBDFD FABAL
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ................................... $ 63,263 21,641 11,502 3,087
Mortality, expense and administration
charges (note 2) ..................................... (11,793) (3,878) (4,942) (1,279)
----------- ----------- ----------- -----------
Net investment activity .............................. 51,470 17,763 6,560 1,808
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold .................. 87,912 36,495 463,667 20,257
Cost of mutual fund shares sold ........................ (85,985) (36,293) (435,638) (18,774)
----------- ----------- ----------- -----------
Realized gain (loss) on investments .................. 1,927 202 28,029 1,483
Change in unrealized gain (loss) on investments......... (22,462) 11,825 (21,984) 2,888
----------- ----------- ----------- -----------
Net gain (loss) on investments ....................... (20,535) 12,027 6,045 4,371
----------- ----------- ----------- -----------
Reinvested capital gains ............................... - - 35,081 9,912
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ................. 30,935 29,790 47,686 16,091
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ...................................... 217,429 42,403 285,138 115,578
Transfers between funds ................................ 627,230 206,842 (26,713) 23,256
Redemptions ............................................ (41,428) (7,402) (15,263) (8,828)
Annuity benefits ....................................... - - - -
Annual contract maintenance charge (note 2) ............ (198) (21) (415) (76)
Contingent deferred sales charges (note 2) ............. (1) - (539) (348)
Adjustments to maintain reserves ....................... (3) (6) (12) (26)
----------- ----------- ----------- -----------
Net equity transactions .............................. 803,029 241,816 242,196 129,556
----------- ----------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY .................... 833,964 271,606 289,882 145,647
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD .............. 371,500 99,894 175,488 29,841
----------- ----------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD .................... $ 1,205,464 371,500 465,370 175,488
=========== =========== =========== ===========
</TABLE>
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FAEQINC FAGROPP
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 10,023 9,331 48,032 48,467
Mortality, expense and administration
charges (note 2) ............................ (18,599) (12,553) (78,505) (46,701)
------------- ------------- ------------- -------------
Net investment activity ..................... (8,576) (3,222) (30,473) 1,766
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 319,587 146,787 1,353,752 1,220,774
Cost of mutual fund shares sold ............... (238,766) (121,404) (1,094,861) (997,920)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 80,821 25,383 258,891 222,854
Change in unrealized gain (loss) on investments 55,249 113,836 732,635 375,374
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 136,070 139,219 991,526 598,228
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 71,848 67,192 251,548 246,460
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 199,342 203,189 1,212,601 846,454
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 451,869 197,077 1,711,707 1,354,651
Transfers between funds ....................... 35,389 169,371 (64,906) 633,126
Redemptions ................................... (185,723) (41,115) (359,563) (155,973)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (1,384) (369) (5,519) (1,594)
Contingent deferred sales charges (note 2) .... (1,588) (1,252) (6,868) (4,894)
Adjustments to maintain reserves .............. (6) 23 44 78
------------- ------------- ------------- -------------
Net equity transactions ................... 298,557 323,735 1,274,895 1,825,394
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 497,899 526,924 2,487,496 2,671,848
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,210,420 683,496 4,798,392 2,126,544
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 1,708,319 1,210,420 7,285,888 4,798,392
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FAHIYLD FIDASMGR
--------------------------- ---------------------------
1998 1997 1998 1997
-------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 255,735 148,014 117,170 110,938
Mortality, expense and administration
charges (note 2) ............................ (38,336) (20,450) (49,446) (42,804)
------------- ------------- ------------- -------------
Net investment activity ..................... 217,399 127,564 67,724 68,134
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 1,050,322 321,627 896,828 821,473
Cost of mutual fund shares sold ............... (1,032,112) (303,939) (671,236) (677,732)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 18,210 17,688 225,592 143,741
Change in unrealized gain (loss) on investments (349,860) 5,965 (393,169) 197,082
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (331,650) 23,653 (167,577) 340,823
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 31,024 51,990 626,712 205,712
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (83,227) 203,207 526,859 614,669
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 814,267 743,205 740,021 634,370
Transfers between funds ....................... (223,421) 829,565 (76,681) (301,774)
Redemptions ................................... (195,080) (78,562) (694,794) (313,159)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (1,287) (449) (2,816) (2,060)
Contingent deferred sales charges (note 2) .... (3,651) (1,423) (16,506) (8,276)
Adjustments to maintain reserves .............. 446 (337) 21 43
------------- ------------- ------------- -------------
Net equity transactions ................... 391,274 1,491,999 (50,755) 9,144
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 308,047 1,695,206 476,104 623,813
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 2,492,698 797,492 3,668,034 3,044,221
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 2,800,745 2,492,698 4,144,138 3,668,034
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FIDCAPINC FIDEQINC
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 117,272 87,131 269,798 309,641
Mortality, expense and administration
charges (note 2) ............................ (16,266) (15,505) (229,390) (206,648)
------------- ------------- ------------- -------------
Net investment activity ..................... 101,006 71,626 40,408 102,993
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 139,878 119,208 3,943,497 2,893,495
Cost of mutual fund shares sold ............... (116,142) (102,280) (2,379,246) (1,851,804)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 23,736 16,928 1,564,251 1,041,691
Change in unrealized gain (loss) on investments (112,592) 66,754 (528,172) 2,069,323
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (88,856) 83,682 1,036,079 3,111,014
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 32,589 - 735,781 658,912
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 44,739 155,308 1,812,268 3,872,919
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 1,897 - 1,203,569 1,025,601
Transfers between funds ....................... (8,199) (2,573) (1,030,099) 20,535
Redemptions ................................... (112,832) (97,708) (2,317,284) (1,703,965)
Annuity benefits .............................. (1,566) (1,097) (4,684) (3,737)
Annual contract maintenance charge (note 2) ... (1,764) (2,112) (17,633) (16,868)
Contingent deferred sales charges (note 2) .... (290) (281) (13,552) (14,857)
Adjustments to maintain reserves .............. 144 (550) (186) 293
------------- ------------- ------------- -------------
Net equity transactions ..................... (122,610) (104,321) (2,179,869) (692,998)
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... (77,871) 50,987 (367,601) 3,179,921
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,289,328 1,238,341 17,444,026 14,264,105
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 1,211,457 1,289,328 17,076,425 17,444,026
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FIDMGIN FIDPURTN
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 117,953 180,615 443,211 361,432
Mortality, expense and administration
charges (note 2) ............................ (234,858) (171,071) (173,935) (129,814)
------------- ------------- ------------- -------------
Net investment activity ..................... (116,905) 9,544 269,276 231,618
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 1,944,713 2,718,430 1,884,862 1,265,875
Cost of mutual fund shares sold ............... (1,734,936) (2,272,279) (1,482,526) (1,040,109)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 209,777 446,151 402,336 225,766
Change in unrealized gain (loss) on investment 4,084,520 1,660,947 177,749 821,043
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 4,294,297 2,107,098 580,085 1,046,809
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 884,756 753,138 1,012,923 536,381
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 5,062,148 2,869,780 1,862,284 1,814,808
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 4,957,504 2,893,931 2,895,054 3,077,343
Transfers between funds ....................... (286,839) (1,898,187) (942,420) (390,612)
Redemptions ................................... (1,512,760) (939,188) (1,263,833) (414,158)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (16,887) (12,358) (9,022) (6,296)
Contingent deferred sales charges (note 2) .... (31,705) (27,286) (23,520) (12,075)
Adjustments to maintain reserves .............. 251 349 89 105
------------- ------------- ------------- -------------
Net equity transactions ................... 3,109,564 17,261 656,348 2,254,307
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 8,171,712 2,887,041 2,518,632 4,069,115
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 14,580,812 11,693,771 11,858,759 7,789,644
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 22,752,524 14,580,812 14,377,391 11,858,759
============= ============= ============= =============
</TABLE>
<PAGE> 11
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
FIDVIPHI FRANMUTSER
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends ........................ $ 19,285 18,061 3,923 -
Mortality, expense and administration
charges (note 2) .......................... (2,858) (3,314) (1,297) -
------------- ------------- ------------- -------------
Net investment activity ................... 16,427 14,747 2,626 -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ....... 146,537 39,981 34,211 -
Cost of mutual fund shares sold ............. (137,310) (37,078) (39,523) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ....... 9,227 2,903 (5,312) -
Change in unrealized gain (loss)
on investments ......................... (46,265) 20,298 (16,432) -
------------- ------------- ------------- -------------
Net gain (loss) on investments ............ (37,038) 23,201 (21,744) -
------------- ------------- ------------- -------------
Reinvested capital gains .................... 12,254 2,232 10,640 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ...... (8,357) 40,180 (8,478) -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ........................... - - 151,888 -
Transfers between funds ..................... (132,120) (4,194) 43,975 -
Redemptions ................................. (11,242) (32,145) (1,472) -
Annuity benefits ............................ - - - -
Annual contract maintenance charge (note 2) . (110) (222) (16) -
Contingent deferred sales charges (note 2) .. - (95) - -
Adjustments to maintain reserves ............ (4) (196) 96 -
------------- ------------- ------------- -------------
Net equity transactions ................... (143,476) (36,852) 194,471 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ......... (151,833) 3,328 185,993 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ... 273,172 269,844 - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ......... $ 121,339 273,172 185,993 -
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
JANFUND JAN20FD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 13,196 26,556 42,176 16,202
Mortality, expense and administration
charges (note 2) ............................ (59,083) (36,518) (127,040) (64,389)
------------- ------------- ------------- -------------
Net investment activity ..................... (45,887) (9,962) (84,864) (48,187)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 630,648 441,921 2,274,301 2,411,435
Cost of mutual fund shares sold ............... (554,019) (403,087) (1,711,517) (2,113,928)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 76,629 38,834 562,784 297,507
Change in unrealized gain (loss) on
investments .................................. 1,321,824 (64,982) 5,023,354 127,847
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 1,398,453 (26,148) 5,586,138 425,354
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 144,449 543,614 91,123 734,575
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,497,015 507,504 5,592,397 1,111,742
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 1,312,739 1,003,807 3,053,816 1,839,757
Transfers between funds ....................... 123,452 441,173 2,754,222 185,607
Redemptions ................................... (273,851) (111,066) (867,882) (607,222)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (3,757) (1,046) (8,378) (2,887)
Contingent deferred sales charges (note 2) .... (5,439) (1,859) (17,610) (17,382)
Adjustments to maintain reserves .............. 87 5 447 80
------------- ------------- ------------- -------------
Net equity transactions ................... 1,153,231 1,331,014 4,914,615 1,397,953
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 2,650,246 1,838,518 10,507,012 2,509,695
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 3,447,634 1,609,116 5,909,299 3,399,604
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 6,097,880 3,447,634 16,416,311 5,909,299
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
JANWRLDWDE LAZSMCAP
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 27,824 19,023 - -
Mortality, expense and administration
charges (note 2) ............................ (73,506) (31,612) - -
------------- ------------- ------------- -------------
Net investment activity ..................... (45,682) (12,589) - -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 1,326,534 584,448 - -
Cost of mutual fund shares sold ............... (1,091,427) (530,660) - -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 235,107 53,788 - -
Change in unrealized gain (loss) on investments 896,338 (29,732) - -
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 1,131,445 24,056 - -
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - 252,002 - -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,085,763 263,469 - -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 2,138,597 1,462,110 - -
Transfers between funds ....................... 111,111 1,864,319 454 -
Redemptions ................................... (301,152) (78,572) - -
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (5,392) (773) - -
Contingent deferred sales charges (note 2) .... (6,090) (1,044) - -
Adjustments to maintain reserves .............. 70 (145) 16 -
------------- ------------- ------------- -------------
Net equity transactions ................... 1,937,144 3,245,895 470 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 3,022,907 3,509,364 470 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 3,974,671 465,307 - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 6,997,578 3,974,671 470 -
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
MFSWDGVT NWBDFD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 46,268 29,388 93,677 99,663
Mortality, expense and administration
charges (note 2) ............................ (9,446) (11,467) (20,893) (20,516)
------------- ------------- ------------- -------------
Net investment activity ..................... 36,822 17,921 72,784 79,147
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 254,224 436,153 536,549 485,789
Cost of mutual fund shares sold ............... (271,092) (460,939) (509,194) (527,157)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... (16,868) (24,786) 27,355 (41,368)
Change in unrealized gain (loss) on investments (1,563) (14,028) 2,462 78,384
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (18,431) (38,814) 29,817 37,016
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - 3,807 - -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 18,391 (17,086) 102,601 116,163
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 53,676 35,762 373,966 218,598
Transfers between funds ....................... 10,990 (134,039) (106,283) (104,705)
Redemptions ................................... (84,094) (161,551) (479,980) (130,239)
Annuity benefits .............................. (2,578) (2,597) (214) (203)
Annual contract maintenance charge (note 2) ... (1,081) (1,293) (1,293) (1,055)
Contingent deferred sales charges (note 2) .... (962) (1,956) (972) (2,203)
Adjustments to maintain reserves .............. 273 156 59 8
------------- ------------- ------------- -------------
Net equity transactions ................... (23,776) (265,518) (214,717) (19,799)
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... (5,385) (282,604) (112,116) 96,364
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 761,789 1,044,393 1,713,185 1,616,821
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 756,404 761,789 1,601,069 1,713,185
============= ============= ============= =============
</TABLE>
<PAGE> 13
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NWFUND NWGROFD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 58,065 42,568 5,977 31,889
Mortality, expense and administration
charges (note 2) ............................ (79,929) (43,646) (53,844) (53,875)
------------- ------------- ------------- -------------
Net investment activity ..................... (21,864) (1,078) (47,867) (21,986)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 2,006,814 422,079 2,457,885 615,042
Cost of mutual fund shares sold ............... (1,061,945) (247,136) (1,632,831) (367,660)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 944,869 174,943 825,054 247,382
Change in unrealized gain (loss) on investments 168,811 627,149 (146,456) 124,155
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 1,113,680 802,092 678,598 371,537
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 351,018 218,982 224,429 533,665
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,442,834 1,019,996 855,160 883,216
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 2,518,633 613,432 390,995 163,823
Transfers between funds ....................... 286,664 548,513 (150,263) 2,896
Redemptions ................................... (1,272,428) (165,231) (1,950,035) (318,735)
Annuity benefits .............................. (1,645) (1,292) (1,563) (1,330)
Annual contract maintenance charge (note 2) ... (5,526) (1,864) (3,472) (2,546)
Contingent deferred sales charges (note 2) .... (5,815) (600) (4,096) (4,373)
Adjustments to maintain reserves .............. (970) (1,053) 524 396
------------- ------------- ------------- -------------
Net equity transactions ................... 1,518,913 991,905 (1,717,910) (159,869)
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 2,961,747 2,011,901 (862,750) 723,347
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 4,500,730 2,488,829 4,406,739 3,683,392
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 7,462,477 4,500,730 3,543,989 4,406,739
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NWMYMKT NWUSGVT
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 461,473 427,521 14,221 2,659
Mortality, expense and administration
charges (note 2) ............................ (122,488) (111,984) (3,754) (600)
------------- ------------- ------------- -------------
Net investment activity ..................... 338,985 315,537 10,467 2,059
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 13,390,890 14,140,604 370,513 49,603
Cost of mutual fund shares sold ............... (13,390,890) (14,140,604) (365,796) (49,605)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... - - 4,717 (2)
Change in unrealized gain (loss) on investments - - (8,808) 1,852
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. - - (4,091) 1,850
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - - 3,694 -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 338,985 315,537 10,070 3,909
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 6,108,738 4,503,576 292,897 34,673
Transfers between funds ....................... 188,506 (3,008,782) 147,064 (23,833)
Redemptions ................................... (2,839,314) (1,686,416) (7,884) (5,095)
Annuity benefits .............................. (1,725) (1,551) - -
Annual contract maintenance charge (note 2) ... (8,599) (7,909) (162) (40)
Contingent deferred sales charges (note 2) .... (48,336) (24,598) (105) (238)
Adjustments to maintain reserves .............. 1,133 309 796 (6)
------------- ------------- ------------- -------------
Net equity transactions ................... 3,400,403 (225,371) 432,606 5,461
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 3,739,388 90,166 442,676 9,370
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 7,765,550 7,675,384 75,160 65,790
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 11,504,938 7,765,550 517,836 75,160
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 14
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
NBGENESTR NBGUARD TR
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 3,629 - 43,561 43,637
Mortality, expense and administration
charges (note 2) ............................ (5,221) - (102,643) (90,339)
------------- ------------- ------------- -------------
Net investment activity ..................... (1,592) - (59,082) (46,702)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 46,166 - 1,421,419 852,547
Cost of mutual fund shares sold ............... (51,966) - (1,295,137) (629,818)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... (5,800) - 126,282 222,729
Change in unrealized gain (loss) on investments (47,655) - (1,131,594) (237,797)
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (53,455) - (1,005,312) (15,068)
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 6,048 - 1,110,714 1,010,701
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (48,999) - 46,320 948,931
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 361,520 - 1,484,830 1,854,345
Transfers between funds ....................... 323,146 - (1,057,014) 13,046
Redemptions ................................... (10,080) - (595,129) (394,887)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (57) - (5,098) (3,499)
Contingent deferred sales charges (note 2) .... (76) - (8,659) (9,677)
Adjustments to maintain reserves .............. 267 - (9) 88
------------- ------------- ------------- -------------
Net equity transactions ................... 674,720 - (181,079) 1,459,416
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 625,721 - (134,759) 2,408,347
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... - - 7,634,575 5,226,228
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 625,721 - 7,499,816 7,634,575
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
NBLTDMAT NBPARTFD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 50,742 51,322 - 42,968
Mortality, expense and administration
charges (note 2) ............................ (11,240) (10,612) (112,673) (75,592)
------------- ------------- ------------- -------------
Net investment activity ..................... 39,502 40,710 (112,673) (32,624)
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 212,801 512,384 1,369,375 893,439
Cost of mutual fund shares sold ............... (213,183) (510,665) (1,169,514) (640,676)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... (382) 1,719 199,861 252,763
Change in unrealized gain (loss) on investments (12,717) 1,619 (542,191) (202,544)
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. (13,099) 3,338 (342,330) 50,219
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - - 808,960 1,320,713
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 26,403 44,048 353,957 1,338,308
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 348,091 352,479 3,047,800 1,735,386
Transfers between funds ....................... (146,743) (302,390) (551,497) 616,650
Redemptions ................................... (31,227) (126,409) (922,110) (393,918)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (396) (256) (7,349) (3,385)
Contingent deferred sales charges (note 2) .... (183) (3,195) (18,634) (12,603)
Adjustments to maintain reserves .............. 225 (2) (27) (5)
------------- ------------- ------------- -------------
Net equity transactions ................... 169,767 (79,773) 1,548,183 1,942,125
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 196,170 (35,725) 1,902,140 3,280,433
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 785,148 820,873 7,426,836 4,146,403
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 981,318 785,148 9,328,976 7,426,836
============= ============= ============= =============
</TABLE>
<PAGE> 15
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
OPPGLOB PHXBALFD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 61,774 96,072 18,333 15,090
Mortality, expense and administration
charges (note 2) ............................ (85,201) (65,639) (9,786) (7,320)
------------- ------------- ------------- -------------
Net investment activity ..................... (23,427) 30,433 8,547 7,770
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 2,675,792 1,614,192 143,908 215,973
Cost of mutual fund shares sold ............... (2,232,654) (1,233,355) (144,310) (218,348)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 443,138 380,837 (402) (2,375)
Change in unrealized gain (loss) on investments (210,371) (186,375) 80,132 (8,166)
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 232,767 194,462 79,730 (10,541)
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 475,445 665,438 29,498 93,626
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 684,785 890,333 117,775 90,855
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 1,551,016 1,205,785 143,962 213,816
Transfers between funds ....................... (79,722) (95,415) (31,417) (146,863)
Redemptions ................................... (562,042) (404,533) (95,632) (24,836)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (5,709) (3,916) (749) (292)
Contingent deferred sales charges (note 2) .... (12,575) (13,137) (1,821) (1,026)
Adjustments to maintain reserves .............. (5,842) 76 (7) -
------------- ------------- ------------- -------------
Net equity transactions ................... 885,126 688,860 14,336 40,799
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 1,569,911 1,579,193 132,111 131,654
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 5,695,782 4,116,589 663,764 532,110
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 7,265,693 5,695,782 795,875 663,764
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
PRINT PRSMCAP
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ - - - -
Mortality, expense and administration
charges (note 2) ............................ - - - -
------------- ------------- ------------- -------------
Net investment activity ..................... - - - -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... - - - -
Cost of mutual fund shares sold ............... - - - -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... - - - -
Change in unrealized gain (loss) on investments - - - -
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. - - - -
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - - - -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ - - - -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. - - - -
Transfers between funds ....................... 1,815 - 454 -
Redemptions ................................... - - - -
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... - - - -
Contingent deferred sales charges (note 2) .... - - - -
Adjustments to maintain reserves .............. 1 - 12 -
------------- ------------- ------------- -------------
Net equity transactions ................... 1,816 - 466 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 1,816 - 466 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... - - - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 1,816 - 466 -
============= ============= ============= =============
</TABLE>
(Continued)
<PAGE> 16
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
STTOTRET TEMFORFD
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 4,227 9,509 111,484 141,805
Mortality, expense and administration
charges (note 2) ............................ (22,635) (18,949) (59,378) (59,161)
------------- ------------- ------------- -------------
Net investment activity ..................... (18,408) (9,440) 52,106 82,644
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 377,041 383,941 1,293,020 662,819
Cost of mutual fund shares sold ............... (384,883) (343,668) (1,287,738) (572,838)
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... (7,842) 40,273 5,282 89,981
Change in unrealized gain (loss) on investments 473,589 (72,806) (678,199) (364,660)
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 465,747 (32,533) (672,917) (274,679)
------------- ------------- ------------- -------------
Reinvested capital gains ...................... 21,813 333,588 328,019 373,056
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 469,152 291,615 (292,792) 181,021
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 307,761 396,146 917,664 1,244,024
Transfers between funds ....................... (207,357) 39,129 (948,243) 175,787
Redemptions ................................... (154,396) (178,732) (423,401) (209,477)
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (1,357) (635) (3,898) (2,245)
Contingent deferred sales charges (note 2) .... (2,073) (4,415) (5,931) (6,278)
Adjustments to maintain reserves .............. 34 161 (65) (47)
------------- ------------- ------------- -------------
Net equity transactions ................... (57,388) 251,654 (463,874) 1,201,764
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 411,764 543,269 (756,666) 1,382,785
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 1,613,016 1,069,747 4,826,284 3,443,499
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 2,024,780 1,613,016 4,069,618 4,826,284
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
WPEMGRO WPGIFXINC
--------------------------- ---------------------------
1998 1997 1998 1997
------------- ------------- ------------- -------------
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ - - 3,459 -
Mortality, expense and administration
charges (note 2) ............................ (61,048) (49,041) (821) -
------------- ------------- ------------- -------------
Net investment activity ..................... (61,048) (49,041) 2,638 -
------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 1,097,855 1,065,213 8,819 -
Cost of mutual fund shares sold ............... (912,250) (995,193) (8,789) -
------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 185,605 70,020 30 -
Change in unrealized gain (loss) on investments 95,404 399,868 1,566 -
------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 281,009 469,888 1,596 -
------------- ------------- ------------- -------------
Reinvested capital gains ...................... - 263,613 - -
------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 219,961 684,460 4,234 -
------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 1,272,369 1,083,873 64,115 -
Transfers between funds ....................... (414,970) 57,962 81,989 -
Redemptions ................................... (547,689) (298,254) (400) -
Annuity benefits .............................. - - - -
Annual contract maintenance charge (note 2) ... (3,914) (1,806) (3) -
Contingent deferred sales charges (note 2) .... (13,328) (10,397) (25) -
Adjustments to maintain reserves .............. (10) (4) 53 -
------------- ------------- ------------- -------------
Net equity transactions ................... 292,458 831,374 145,729 -
------------- ------------- ------------- -------------
NET CHANGE IN CONTRACT OWNERS' EQUITY ........... 512,419 1,515,834 149,963 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ..... 4,480,173 2,964,339 - -
------------- ------------- ------------- -------------
CONTRACT OWNERS' EQUITY END OF PERIOD ........... $ 4,992,592 4,480,173 149,963 -
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 17
- --------------------------------------------------------------------------------
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 and 1997
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account (the Account) was established pursuant
to a resolution of the Board of Directors of Nationwide Life Insurance
Company (the Company) on March 3, 1976. The Account has been registered
as a unit investment trust under the Investment Company Act of 1940.
The Company offers Individual Deferred Variable Annuity Contracts
through the Account. As of December 25, 1982, only tax qualified
contracts are issued. The primary distribution for the contract is
through the Company for Individual Retirement Account rollovers;
however, other distributors may be utilized.
(b) The Contracts
Only contracts without a front-end sales charge, but with a contingent
deferred sales charge and certain other fees, are offered for purchase.
See note 2 for a discussion of contract charges.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in the following:
<TABLE>
<CAPTION>
<S> <C>
American Century: Benham Short-Term Government Fund (ACBenSTGvt)
American Century: Income & Growth Fund (ACIncGro)
American Century: Twentieth Century Growth Fund (ACTCGro)
American Century: Twentieth Century International Growth Fund (ACTCIntlGr)
American Century: Twentieth Century Ultra Fund (ACTCUltra)
Delaware Group Delchester High-Yield Bond Fund, Inc. - Delchester Fund Institutional Class (DeHYBd)
Dreyfus A Bonds Plus, Inc. (DryABds)
Dreyfus Appreciation Fund, Inc. (DryApp)
Dreyfus Balanced Fund, Inc. (DryBal)
Dreyfus S&P 500 Index Fund (Dry500Ix)
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
Evergreen Income and Growth Fund - Class Y (EvIncGro)
Federated High Yield Trust (FedHiYld)
Federated Investment Series Funds, Inc. - Federated Bond Fund - Class F (FedBdFd)
Fidelity Advisor Balanced Fund - Class T (FABal)
Fidelity Advisor Equity Income Fund - Class T (FAEqInc)
Fidelity Advisor Growth Opportunities Fund - Class T (FAGrOpp)
Fidelity Advisor High Yield Fund - Class T (FAHiYld)
Fidelity Asset Manager(TM) (FidAsMgr)
Fidelity Capital & Income Fund (FidCapInc)
(not available for additional purchase payments or exchanges after May 1, 1991)
Fidelity Equity-Income Fund (FidEqInc)
Fidelity Magellan(R) Fund (FidMgln)
Fidelity Puritan(R) Fund (FidPurtn)
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C>
Portfolio of the Fidelity Variable Insurance Products Fund (Fidelity VIP);
Fidelity VIP - High Income Portfolio (FidVIPHI)
(not available for additional purchase payments or exchanges after December 1, 1993)
Franklin Mutual Series Fund Inc. - Mutual Shares Fund - Class I (FranMutSer)
INVESCO Dynamics Fund (InvDynam)
Janus Fund (JanFund)
Janus Twenty Fund (Jan20Fd)
Janus Worldwide Fund (JanWrldwde)
Lazard Small Cap Portfolio - Open Shares (LazSmCap)
MFS(R) World Governments Fund - Class A (MFSWdGvt)
Nationwide(R) Bond Fund - Class D (NWBdFd) (managed for a fee by an affiliated investment advisor)
Nationwide(R) Fund - Class D (NWFund) (managed for a fee by an affiliated investment advisor)
Nationwide(R) Growth Fund - Class D (NWGroFd) (managed for a fee by an affiliated investment advisor)
Nationwide(R) Money Market Fund (NWMyMkt) (managed for a fee by an affiliated investment advisor)
Nationwide(R) Intermediate U.S. Government Bond Fund - Class D (NWUSGvt)
(formerly Nationwide U.S. Government Income Fund)
(managed for a fee by an affiliated investment advisor)
Nationwide S&P 500(R) Index Fund - Class R (NWIndxFd)
(managed for a fee by an affiliated investment advisor)
Neuberger & Berman Genesis Trust (NBGenesTr)
(available only for contracts established prior to March 6, 1998)
Neuberger & Berman Guardian Trust (NBGuardTr)
Neuberger & Berman Limited Maturity Bond Fund (NBLtdMat)
Neuberger & Berman Partners Fund (NBPartFd)
Oppenheimer Global Fund - Class A (OppGlob)
Phoenix Balanced Fund Series - Class A (PhxBalFd)
Prestige Balanced Fund - Class A (PrBal) (managed for a fee by an affiliated investment advisor)
Prestige International Fund - Class A (PrInt) (managed for a fee by an affiliated investment advisor)
Prestige Large Cap Growth Fund - Class A (PrLgCapGro)
(managed for a fee by an affiliated investment advisor)
Prestige Large Cap Value Fund - Class A (PrLgCapVal)
(managed for a fee by an affiliated investment advisor)
Prestige Small Cap Fund - Class A (PrSmCap) (managed for a fee by an affiliated investment advisor)
Strong Common Stock Fund, Inc. (StComStk)
Strong Total Return Fund, Inc. (StTotRet)
Templeton Foreign Fund - Class I (TemForFd)
Warburg Pincus Emerging Growth Fund - Common Shares (WPEmGro)
Warburg Pincus Global Fixed-Income Fund - Common Shares (WPGlFxInc)
</TABLE>
At December 31, 1998, contract owners have not invested in all of the
above funds except for INVESCO Dynamics Fund, Nationwide S&P 500(R)
Index Fund - Class R, Prestige Balanced Fund - Class A, Prestige Large
Cap Growth Fund - Class A, Prestige Large Cap Value Fund - Class A and
Strong Common Stock Fund, Inc. The contract owners' equity is affected
by the investment results of each fund, equity transactions by contract
owners and certain contract expenses (see note 2). The accompanying
financial statements include only contract owners' purchase payments
pertaining to the variable portions of their contracts and exclude any
purchase payments for fixed dollar benefits, the latter being included
in the accounts of the Company.
<PAGE> 19
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1998. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account.
Taxes are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments
received from the contract owners. However, if any part of the contract
value of such contracts is surrendered, the Company will, with certain
exceptions, deduct from a contract owner's contract value a contingent
deferred sales charge. For contracts issued prior to January 1, 1993,
the contingent deferred sales charge will be equal to 5% of the lesser
of the total of all purchase payments made within 96 months prior to
the date of the request for surrender or the amount surrendered. For
contracts issued on or after January 1, 1993, the Company will deduct a
contingent deferred sales charge not to exceed 7% of the lesser of
purchase payments or the amount surrendered, such charge declining 1%
per year, to 0%, after the purchase payment has been held in the
contract for 84 months. No sales charges are deducted on redemptions
used to purchase units in the fixed investment options of the Company.
The following contract charges are deducted by the Company: (a) an
annual contract maintenance charge of up to $30, dependent upon
contract type and issue date, which is satisfied by surrendering units;
and (b) for contracts issued prior to January 1, 1993, a charge for
mortality and expense risk assessed through the daily unit value
calculation equal to an annual rate of 0.80% and 0.50%, respectively;
for contracts issued on or after January 1, 1993, a mortality risk
charge, an expense risk charge and an administration charge assessed
through the daily unit value calculation equal to an annual rate of
0.80%, 0.45% and 0.05%, respectively.
(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> 20
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31,
1998, for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN(B)
------- ---------- ---------
Contracts in accumulation phase:
American Century: Benham
Short-Term Government Fund:
<S> <C> <C> <C> <C>
Tax qualified ........................ 131,664 23.012292 $3,029,890 5%
American Century: Income & Growth Fund:
Tax qualified ........................ 397,026 17.640513 7,003,742 26%
American Century: Twentieth Century
Growth Fund:
Tax qualified ........................ 150,519 88.518097 13,323,655 35%
American Century: Twentieth Century
International Growth Fund:
Tax qualified ........................ 48,212 18.416900 887,916 17%
American Century: Twentieth Century
Ultra Fund:
Tax qualified ........................ 784,677 22.284614 17,486,224 33%
Delaware Group Delchester High-Yield
Bond Fund, Inc. - Delchester Fund
Institutional Class:
Tax qualified ........................ 73,489 14.911925 1,095,862 (3)%
Dreyfus A Bonds Plus, Inc.:
Tax qualified ........................ 174,256 12.008201 2,092,501 1%
Dreyfus Appreciation Fund, Inc.:
Tax qualified ........................ 56,370 12.724781 717,296 27%(a)
Dreyfus Balanced Fund, Inc.:
Tax qualified ........................ 14,859 10.755504 159,816 8%(a)
Dreyfus S&P 500 Index Fund:
Tax qualified ........................ 429,513 28.976575 12,445,816 26%
The Dreyfus Third Century Fund, Inc.:
Tax qualified ........................ 41,708 25.825514 1,077,131 28%
Evergreen Income and Growth
Fund - Class Y:
Tax qualified ........................ 75,243 17.031564 1,281,506 (2)%
Federated High Yield Trust:
Tax qualified ........................ 49,055 9.976102 489,378 0%
Federated Investment Series Funds, Inc. -
Federated Bond Fund - Class F:
Tax qualified ........................ 104,392 11.547474 1,205,464 4%
Fidelity Advisor Balanced Fund - Class T:
Tax qualified ........................ 31,056 14.984876 465,370 14%
Fidelity Advisor Equity Income
Fund - Class T:
Tax qualified ........................ 103,814 16.455574 1,708,319 5%
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
Fidelity Advisor Growth Opportunities
Fund - Class T:
<S> <C> <C> <C> <C>
Tax qualified.............................. 391,088 18.629791 7,285,888 22%
Fidelity Advisor High Yield Fund - Class T:
Tax qualified.............................. 223,247 12.545500 2,800,745 (2)%
Fidelity Asset Manager(TM):
Tax qualified.............................. 240,850 17.206302 4,144,138 15%
Fidelity Capital & Income Fund:
Tax qualified.............................. 24,848 48.330455 1,200,915 3%
Fidelity Equity-Income Fund:
Tax qualified.............................. 216,592 78.774753 17,061,981 11%
Fidelity Magellan(R) Fund:
Tax qualified.............................. 775,189 29.350937 22,752,524 32%
Fidelity Puritan(R) Fund:
Tax qualified.............................. 631,678 22.760633 14,377,391 15%
Fidelity VIP - High Income Portfolio:
Tax qualified.............................. 5,077 23.899779 121,339 (6)%
Franklin Mutual Series Fund Inc. -
Mutual Shares Fund - Class I:
Tax qualified ............................. 18,848 9.868029 185,993 (1)%(a)
Janus Fund:
Tax qualified ............................. 303,830 20.070038 6,097,880 37%
Janus Twenty Fund:
Tax qualified ............................. 507,576 32.342568 16,416,311 71%
Janus Worldwide Fund:
Tax qualified ............................. 459,107 15.241714 6,997,578 24%
Lazard Small Cap Portfolio - Open Shares:
Tax qualified ............................. 45 10.448830 470 4%(a)
MFS(R) World Governments Fund - Class A:
Tax qualified ............................. 19,990 37.527462 750,174 3%
Nationwide(R) Bond Fund - Class D:
Tax qualified ............................. 36,470 43.667785 1,592,564 7%
Non-tax qualified ......................... 148 43.480582 6,435 7%
Nationwide(R) Fund - Class D:
Tax qualified ............................. 59,155 25.467347 7,422,021 29%
Non-tax qualified ......................... 176 30.686988 23,001 29%
Nationwide(R) Growth Fund - Class D:
Tax qualified ............................. 30,515 14.746202 3,501,480 22%
Non-tax qualified ......................... 218 21.157545 26,412 22%
Nationwide(R) Money Market Fund:
Tax qualified - Pre 12/25/82 .............. 32,588 26.532610 864,645 4%
Tax qualified ............................. 503,152 21.071063 10,601,947 4%
Non-tax qualified ......................... 841 26.700292 22,455 4%
Nationwide(R) Intermediate U.S.
Government Bond Fund - Class D:
Tax qualified ............................. 43,459 11.915504 517,836 7%
</TABLE>
<PAGE> 22
<TABLE>
<CAPTION>
Neuberger & Berman Genesis Trust
<S> <C> <C> <C> <C>
Tax qualified ............................. 67,525 9.266508 625,721 (7)%(a)
Neuberger & Berman Guardian Trust:
Tax qualified ............................. 436,072 17.198573 7,499,816 1%
Neuberger & Berman Limited Maturity
Bond Fund:
Tax qualified ............................. 81,393 12.056542 981,318 3%
Neuberger & Berman Partners Fund:
Tax qualified ............................. 374,224 24.928856 9,328,976 5%
Oppenheimer Global Fund - Class A:
Tax qualified ............................. 301,407 24.105920 7,265,693 11%
Phoenix Balanced Fund Series - Class A:
Tax qualified ............................. 47,793 16.652539 795,875 17%
Prestige International Fund - Class A:
Tax qualified ............................. 181 10.035113 1,816 0%(a)
Prestige Small Cap Fund - Class A:
Tax qualified ............................. 45 10.359298 466 4%(a)
Strong Total Return Fund, Inc.:
Tax qualified ............................. 75,602 26.782090 2,024,780 30%
Templeton Foreign Fund - Class I:
Tax qualified ............................. 318,666 12.770793 4,069,618 (6)%
Warburg Pincus Emerging Growth
Fund - Common Shares:
Tax qualified ............................. 338,034 14.769496 4,992,592 4%
Warburg Pincus Global Fixed-Income
Fund - Common Shares:
Tax qualified ............................. 14,079 10.651516 149,963 7%(a)
====== =========
Reserves for annuity contracts in payout phase:
Tax qualified ............................. 247,310
-------------
$ 227,225,953
=============
</TABLE>
(a) This investment option was not being utilized for the entire period.
Accordingly, the annual return was computed for such period as the
investment option was utilized.
(b) The annual return does not include contract charges satisfied by
surrendering units.
- --------------------------------------------------------------------------------
<PAGE> 46
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1998 and
1997, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1998. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1998 and 1997, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1998, in conformity with generally accepted
accounting principles.
KPMG LLP
Columbus, Ohio
January 29, 1999
<PAGE> 2
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars, except per share amounts)
December 31,
-----------------------
Assets 1998 1997
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $14,245.1 $13,204.1
Equity securities 127.2 80.4
Mortgage loans on real estate, net 5,328.4 5,181.6
Real estate, net 243.6 311.4
Policy loans 464.3 415.3
Other long-term investments 44.0 25.2
Short-term investments 289.1 358.4
--------- ---------
20,741.7 19,576.4
--------- ---------
Cash 3.4 175.6
Accrued investment income 218.7 210.5
Deferred policy acquisition costs 2,022.2 1,665.4
Other assets 420.3 438.4
Assets held in separate accounts 50,935.8 37,724.4
--------- ---------
$74,342.1 $59,790.7
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $19,767.1 $18,702.8
Other liabilities 866.1 885.6
Liabilities related to separate accounts 50,935.8 37,724.4
--------- ---------
71,569.0 57,312.8
--------- ---------
Commitments and contingencies (notes 7 and 12)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 914.7 914.7
Retained earnings 1,579.0 1,312.3
Accumulated other comprehensive income 275.6 247.1
--------- ---------
2,773.1 2,477.9
--------- ---------
$74,342.1 $59,790.7
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions of dollars)
Years ended December 31,
-----------------------------------
1998 1997 1996
-------- -------- ---------
<S> <C> <C> <C>
Revenues:
Policy charges $ 698.9 $ 545.2 $ 400.9
Life insurance premiums 200.0 205.4 198.6
Net investment income 1,481.6 1,409.2 1,357.8
Realized gains (losses) on investments 28.4 11.1 (0.3)
Other 66.8 46.5 35.9
-------- -------- --------
2,475.7 2,217.4 1,992.9
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Other benefits and claims 175.8 178.2 178.3
Policyholder dividends on participating policies 39.6 40.6 41.0
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Other operating expenses 419.7 384.9 342.4
-------- -------- --------
1,918.6 1,787.5 1,677.4
-------- -------- --------
Income from continuing operations before federal income tax expense 557.1 429.9 315.5
Federal income tax expense 190.4 150.2 110.9
-------- -------- --------
Income from continuing operations 366.7 279.7 204.6
Income from discontinued operations (less federal income tax expense
of $4.5 in 1996) -- -- 11.3
-------- -------- --------
Net income $ 366.7 $ 279.7 $ 215.9
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1998, 1997 and 1996
(in millions of dollars)
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
----- ------- -------- ------ ------
<S> <C> <C> <C> <C> <C>
December 31, 1995 $ 3.8 $ 657.2 $1,583.2 $ 384.3 $2,628.5
Comprehensive income:
Net income -- -- 215.9 -- 215.9
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (170.9) (170.9)
--------
Total comprehensive income 45.0
--------
Dividends to shareholder -- (129.3) (366.5) (39.8) (535.6)
------ ------- -------- ------- --------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ ------- -------- ------- --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ ------- -------- ------- --------
December 31, 1998 $ 3.8 $ 914.7 $1,579.0 $ 275.6 $2,773.1
====== ======= ======== ======= ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions of dollars)
Years ended December 31,
---------------------------------------
1998 1997 1996
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 366.7 $ 279.7 $ 215.9
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,069.0 1,016.6 982.3
Capitalization of deferred policy acquisition costs (584.2) (487.9) (422.6)
Amortization of deferred policy acquisition costs 214.5 167.2 133.4
Amortization and depreciation (8.5) (2.0) 7.0
Realized gains on invested assets, net (28.4) (11.1) (0.3)
(Increase) decrease in accrued investment income (8.2) (0.3) 2.8
(Increase) decrease in other assets 16.4 (12.7) (38.9)
Decrease in policy liabilities (8.3) (23.1) (151.0)
(Decrease) increase in other liabilities (34.8) 230.6 191.4
Other, net (11.3) (10.9) (61.7)
--------- --------- ---------
Net cash provided by operating activities 982.9 1,146.1 858.3
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 1,557.0 993.4 1,162.8
Proceeds from sale of securities available-for-sale 610.5 574.5 299.6
Proceeds from repayments of mortgage loans on real estate 678.2 437.3 309.0
Proceeds from sale of real estate 103.8 34.8 18.5
Proceeds from repayments of policy loans and sale of other invested assets 23.6 22.7 22.8
Cost of securities available-for-sale acquired (3,182.8) (2,828.1) (1,573.6)
Cost of mortgage loans on real estate acquired (829.1) (752.2) (972.8)
Cost of real estate acquired (0.8) (24.9) (7.9)
Policy loans issued and other invested assets acquired (88.4) (62.5) (57.7)
Short-term investments, net 69.3 (354.8) 28.0
--------- --------- ---------
Net cash used in investing activities (1,058.7) (1,959.8) (771.3)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- 836.8 --
Cash dividends paid (100.0) -- (50.0)
Increase in investment product and universal life insurance
product account balances 2,682.1 2,488.5 1,781.8
Decrease in investment product and universal life insurance
product account balances (2,678.5) (2,379.8) (1,784.5)
--------- --------- ---------
Net cash (used in) provided by financing activities (96.4) 945.5 (52.7)
--------- --------- ---------
Net (decrease) increase in cash (172.2) 131.8 34.3
Cash, beginning of year 175.6 43.8 9.5
--------- --------- ---------
Cash, end of year $ 3.4 $ 175.6 $ 43.8
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1998, 1997 and 1996
(1) Organization and Description of Business
----------------------------------------
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11,
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 10 and 14. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products, including variable annuities, fixed annuities and life
insurance.
(2) Summary of Significant Accounting Policies
------------------------------------------
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
--------------------
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Operations that are classified
and reported as discontinued operations are not consolidated but
rather are reported as "Income from discontinued operations" in
the accompanying consolidated statements of income. All
significant intercompany balances and transactions have been
eliminated.
(b) Valuation of Investments and Related Gains and Losses
-----------------------------------------------------
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1998 or 1997.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) Revenues and Benefits
---------------------
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) Deferred Policy Acquisition Costs
---------------------------------
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. For traditional life insurance
products, these deferred policy acquisition costs are
predominantly being amortized with interest over the premium
paying period of the related policies in proportion to the ratio
of actual annual premium revenue to the anticipated total premium
revenue. Such anticipated premium revenue was estimated using the
same assumptions as were used for computing liabilities for future
policy benefits. Deferred policy acquisition costs are adjusted to
reflect the impact of unrealized gains and losses on fixed
maturity securities available-for-sale as described in note 2(b).
(e) Separate Accounts
-----------------
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $743.9 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
----------------------
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 6.0%, 6.1% and 6.3% for the years ended
December 31, 1998, 1997 and 1996, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
----------------------
Participating business represents approximately 40% in 1998 (50%
in 1997 and 52% in 1996) of the Company's life insurance in force,
74% in 1998 (77% in 1997 and 78% in 1996) of the number of life
insurance policies in force, and 14% in 1998 (27% in 1997 and 40%
in 1996) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
------------------
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
-----------------
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 10 and 14.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(j) Recently Issued Accounting Pronouncements
-----------------------------------------
On January 1, 1998 the Company adopted SFAS No. 131 - Disclosures
about Segments of an Enterprise and Related Information (SFAS
131). SFAS 131 supersedes SFAS No. 14 - Financial Reporting for
Segments of a Business Enterprise. SFAS 131 establishes standards
for public business enterprises to report information about
operating segments in annual financial statements and selected
information about operating segments in interim financial reports.
SFAS 131 also establishes standards for related disclosures about
products and services, geographic areas, and major customers. The
adoption of SFAS 131 did not affect results of operations or
financial position, nor did it affect the manner in which the
Company defines its operating segments. The segment information
required for annual financial statements is included in note 13.
On January 1, 1998, the Company adopted SFAS No. 132 - Employers'
Disclosures about Pensions and Other Postretirement Benefits (SFAS
132). SFAS 132 revises employers' disclosures about pension and
other postretirement benefit plans. The Statement does not change
the measurement or recognition of benefit plans in the financial
statements. The revised disclosures required by SFAS 132 are
included in note 8.
In June 1998, the FASB issued SFAS No. 133 - Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
establishes accounting and reporting standards for derivative
instruments and for hedging activities. Contracts that contain
embedded derivatives, such as certain insurance contracts, are
also addressed by the Statement. SFAS 133 requires that an entity
recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at
fair value. The Statement is effective for fiscal years beginning
after June 15, 1999. It may be implemented earlier provided
adoption occurs as of the beginning of any fiscal quarter after
issuance. The Company plans to adopt this Statement in first
quarter 2000 and is currently evaluating the impact on results of
operations and financial condition.
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position 98-1 - Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use (SOP 98-1). SOP
98-1 provides guidance intended to standardize accounting
practices for costs incurred to develop or obtain computer
software for internal use. Specifically, SOP 98-1 provides
guidance for determining whether computer software is for internal
use and when costs incurred for internal use software are to be
capitalized. SOP 98-1 is effective for financial statements for
fiscal years beginning after December 15, 1998. The Company does
not expect the adoption of SOP 98-1, which occurred on January 1,
1999, to have a material impact on the Company's financial
statements.
(k) Reclassification
----------------
Certain items in the 1997 and 1996 consolidated financial
statements have been reclassified to conform to the 1998
presentation.
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
-----------
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1998 and
1997 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
------------------------ ---- ----- ------ ----------
<S> <C> <C> <C> <C>
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------ ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------ ---------
$13,831.7 $563.2 $(22.6) $14,372.3
========= ====== ====== =========
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ -- $ 313.7
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
--------- ------ ------ ---------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
--------- ------ ------ ---------
$12,800.7 $498.3 $(14.5) $13,284.5
========= ====== ====== =========
</TABLE>
As of December 31, 1998 the Company had entered into S&P 500 futures
contracts with a notional amount of $20.0 million to reduce the risk of
changes in the fair market value of certain investments classified as
equity securities. These contracts had an unrealized loss of $1.3
million as of December 31, 1998 which is included in the recorded
amount of the equity securities and in accumulated other comprehensive
income, net of tax, similar to other unrealized gains and losses on
securities available-for-sale.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1998, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
---- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 2,019.9 $ 2,048.0
Due after one year through five years 8,169.1 8,470.6
Due after five years through ten years 2,795.0 2,927.7
Due after ten years 737.3 798.8
--------- ---------
$13,721.3 $14,245.1
========= =========
</TABLE>
The components of unrealized gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Gross unrealized gains $ 540.6 $ 483.8
Adjustment to deferred policy acquisition costs (116.6) (103.7)
Deferred federal income tax (148.4) (133.0)
------- -------
$ 275.6 $ 247.1
======= =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $52.6 $137.5 $(289.2)
Equity securities 4.2 (2.7) 8.9
----- ------ -------
$56.8 $134.8 $(280.3)
===== ====== =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1998,
1997 and 1996 were $610.5 million, $574.5 million and $299.6 million,
respectively. During 1998, gross gains of $9.0 million ($9.9 million
and $6.6 million in 1997 and 1996, respectively) and gross losses of
$7.6 million ($18.0 million and $6.9 million in 1997 and 1996,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1998 was $3.7 million. No valuation
allowance has been recorded for these loans as of December 31, 1998.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million which includes
$3.9 million of impaired mortgage loans on real estate for which the
related valuation allowance was $0.1 million and $16.0 million of
impaired mortgage loans on real estate for which there was no valuation
allowance. During 1998, the average recorded investment in impaired
mortgage loans on real estate was approximately $9.1 million ($31.8
million in 1997) and interest income recognized on those loans was $0.3
million ($1.0 million in 1997), which is equal to interest income
recognized using a cash-basis method of income recognition.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Allowance, beginning of year $42.5 $51.0
Reductions credited to operations (0.1) (1.2)
Direct write-downs charged against the allowance -- (7.3)
----- -----
Allowance, end of year $42.4 $42.5
===== =====
</TABLE>
Real estate is presented at cost less accumulated depreciation of $21.5
million as of December 31, 1998 ($45.1 million as of December 31, 1997)
and valuation allowances of $5.4 million as of December 31, 1998 ($11.1
million as of December 31, 1997).
Investments that were non-income producing for the twelve month period
preceding December 31, 1998 amounted to $42.4 million ($19.4 million
for 1997) and consisted of $32.7 million ($3.0 million in 1997) in
securities available-for-sale and $9.7 million ($16.4 million in 1997)
in real estate.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 982.5 $ 911.6 $ 917.1
Equity securities 0.8 0.8 1.3
Mortgage loans on real estate 458.9 457.7 432.8
Real estate 40.4 42.9 44.3
Short-term investments 17.8 22.7 4.2
Other 30.7 21.0 4.0
-------- -------- --------
Total investment income 1,531.1 1,456.7 1,403.7
Less investment expenses 49.5 47.5 45.9
-------- -------- --------
Net investment income $1,481.6 $1,409.2 $1,357.8
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(0.7) $ 3.6 $(3.5)
Equity securities 2.1 2.7 3.2
Mortgage loans on real estate 3.9 1.6 (4.1)
Real estate and other 23.1 3.2 4.1
----- ----- -----
$28.4 $11.1 $(0.3)
===== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $6.5 million and
$6.2 million as of December 31, 1998 and 1997, respectively, were on
deposit with various regulatory agencies as required by law.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) Federal Income Tax
------------------
The Company's current federal income tax liability was $72.8 million
and $60.1 million as of December 31, 1998 and 1997, respectively.
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1998
and 1997 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997
---- ----
<S> <C> <C>
Deferred tax assets:
Future policy benefits $207.7 $200.1
Liabilities in Separate Accounts 319.9 242.0
Mortgage loans on real estate and real estate 17.5 19.0
Other assets and other liabilities 58.9 59.2
------ ------
Total gross deferred tax assets 604.0 520.3
Less valuation allowance (7.0) (7.0)
------ ------
Net deferred tax assets 597.0 513.3
------ ------
Deferred tax liabilities:
Deferred policy acquisition costs 568.7 480.5
Fixed maturity securities 212.2 193.3
Deferred tax on realized investment gains 34.8 40.1
Equity securities and other long-term investments 9.6 7.5
Other 21.6 22.2
------ ------
Total gross deferred tax liabilities 846.9 743.6
------ ------
Net deferred tax liability $249.9 $230.3
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1998, 1997 and 1996.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Currently payable $186.1 $121.7 $116.5
Deferred tax expense (benefit) 4.3 28.5 (5.6)
------ ------ ------
$190.4 $150.2 $110.9
====== ====== ======
</TABLE>
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1998,
1997 and 1996 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------- ---------------- -----------------
(in millions of dollars) Amount % Amount % Amount %
------ - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $195.0 35.0 $150.5 35.0 $110.4 35.0
Tax exempt interest and dividends
received deduction (4.9) (0.9) - 0.0 (0.2) (0.1)
Other, net 0.3 0.1 (0.3) (0.1) 0.7 0.3
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $190.4 34.2 $150.2 34.9 $110.9 35.2
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $173.4 million, $91.8 million and
$115.8 million during the years ended December 31, 1998, 1997 and 1996,
respectively.
(5) Comprehensive Income
--------------------
Pursuant to SFAS No. 130 - Reporting Comprehensive Income, which the
Company adopted January 1, 1998, the Consolidated Statements of
Shareholder's Equity include a new measure called "Comprehensive
Income". Comprehensive Income includes net income as well as certain
items that are reported directly within separate components of
shareholders' equity that bypass net income. Currently, the Company's
only component of Other Comprehensive Income is unrealized gains
(losses) on securities available-for-sale. The related before and after
federal tax amounts are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Unrealized gains (losses) on securities
available-for-sale arising during the period:
Gross $ 58.2 $141.1 $(272.4)
Adjustment to deferred policy acquisition costs (12.9) (21.8) 57.0
Related federal income tax (expense) benefit (15.9) (41.7) 44.0
------ ------ ------
Net 29.4 77.6 (171.4)
------ ------ ------
Reclassification adjustment for net (gains) losses
on securities available-for-sale realized
during the period:
Gross (1.4) (6.3) 0.7
Related federal income tax expense (benefit) 0.5 2.2 (0.2)
------ ------ -------
Net (0.9) (4.1) 0.5
------ ------ -------
Total Other Comprehensive Income $ 28.5 $ 73.5 $(170.9)
====== ====== =======
</TABLE>
(6) Fair Value of Financial Instruments
-----------------------------------
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for
equity securities exclude the fair value of futures contracts
designated as hedges of equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 7.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1998 1997
------------------------- --------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $14,245.1 $14,245.1 $13,204.1 $13,204.1
Equity securities 128.5 128.5 80.4 80.4
Mortgage loans on real estate, net 5,328.4 5,527.6 5,181.6 5,509.7
Policy loans 464.3 464.3 415.3 415.3
Short-term investments 289.1 289.1 358.4 358.4
Cash 3.4 3.4 175.6 175.6
Assets held in separate accounts 50,935.8 50,935.8 37,724.4 37,724.4
Liabilities:
Investment contracts 15,468.7 15,158.6 14,708.2 14,322.1
Policy reserves on life insurance contracts 3,914.0 3,768.9 3,345.4 3,182.4
Liabilities related to separate accounts 50,935.8 49,926.5 37,724.4 36,747.0
Futures contracts 1.3 1.3 -- --
</TABLE>
(7) Risk Disclosures
----------------
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $156.0 million
extending into 1999 were outstanding as of December 31, 1998. The
Company also had $40.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1998.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 22% (20% in 1997) in any geographic area and no more than 2% (2%
in 1997) with any one borrower as of December 31, 1998. As of December
31, 1998, 42% (46% in 1997) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $187.9 million and $220.2 million as of December 31,
1998 and 1997, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(8) Pension Plan and Postretirement Benefits Other Than Pensions
------------------------------------------------------------
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC and
Employers Life Insurance Company of Wausau (ELICW).
Pension costs charged to operations by the Company during the years
ended December 31, 1998, 1997 and 1996 were $2.0 million, $7.5 million
and $7.4 million, respectively. The Company has recorded a prepaid
pension asset of $5.0 million as of December 31, 1998 and no prepaid or
accrued pension asset or expense as of December 31, 1997.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1998 and 1997 was $40.1 million and $36.5 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1998, 1997 and
1996 was $4.1 million, $3.0 million and $3.3 million, respectively.
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1998 and 1997 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
--------------------- -----------------------
(in millions of dollars) 1998 1997 1998 1997
--------------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,033.8 $1,847.8 $237.9 $ 200.7
Service cost 87.6 77.3 9.8 7.0
Interest cost 123.4 118.6 15.4 14.0
Actuarial loss 123.2 60.0 15.6 24.4
Plan curtailment in 1998/merger in 1997 (107.2) 1.5 - -
Benefits paid (75.8) (71.4) (8.6) (8.2)
-------- -------- ------- -------
Benefit obligation at end of year 2,185.0 2,033.8 270.1 237.9
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,212.9 1,947.9 69.2 63.0
Actual return on plan assets 300.7 328.1 5.0 3.6
Employer contribution 104.1 7.2 12.1 10.6
Plan merger - 1.1 - -
Benefits paid (75.8) (71.4) (8.4) (8.0)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,541.9 2,212.9 77.9 69.2
-------- -------- ------- -------
Funded status 356.9 179.1 (192.2) (168.7)
Unrecognized prior service cost 31.5 34.7 - -
Unrecognized net (gains) losses (345.7) (330.7) 16.0 1.6
Unrecognized net (asset) obligation at transition (11.0) 33.3 1.3 1.5
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 31.7 $ (83.6) $(174.9) $(165.6)
======== ======== ======= =======
</TABLE>
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
-------------------- -----------------------
1998 1997 1998 1997
-------- ------ -------- --------
<S> <C> <C> <C> <C>
Weighted average discount rate 5.50% 6.00% 6.65% 6.70%
Rate of increase in future compensation levels 3.75% 4.25% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 12.13%
Ultimate rate -- -- 8.00% 6.12%
Uniform declining period -- -- 15 Years 12 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1998, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
-------------------------------------------------------------------------------- ---- ----
<S> <C> <C>
Service cost (benefits earned during the period) $ 87.6 $ 77.3 $ 75.5
Interest cost on projected benefit obligation 123.4 118.6 105.5
Expected return on plan assets (159.0) (139.0) (116.1)
Recognized gains (3.8) - -
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation 4.2 4.2 4.1
------- ------- -------
$ 55.6 $ 64.3 $ 72.2
======= ======= =======
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with the Nationwide Insurance Enterprise and employees of
WSC ended participation in the plan. A curtailment gain of $67.1
million resulted (consisting of a $107.2 million reduction in the
projected benefit obligation, net of the write-off of the $40.1 million
remaining unamortized transition obligation related to WSC). The
Company anticipates that the plan will settle the obligation related to
WSC employees with a transfer of assets during 1999.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Weighted average discount rate 6.00% 6.50% 6.00%
Rate of increase in future compensation levels 4.25% 4.75% 4.25%
Expected long-term rate of return on plan assets 7.25% 7.25% 6.75%
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1998, 1997 and 1996 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $ 9.8 $ 7.0 $ 6.5
Interest cost on accumulated postretirement benefit obligation 15.4 14.0 13.7
Actual return on plan assets (5.0) (3.6) (4.3)
Amortization of unrecognized transition obligation of affiliates 0.2 0.2 0.2
Net amortization and deferral 1.2 (0.5) 1.8
----- ----- -----
$21.6 $17.1 $17.9
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the accumulated
postretirement benefit obligation (APBO) and the NPPBC for the
postretirement benefit plan for 1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- ----
<S> <C> <C> <C>
NPPBC:
Discount rate 6.70% 7.25% 6.65%
Long term rate of return on plan
assets, net of tax 5.83% 5.89% 4.80%
Assumed health care cost trend rate:
Initial rate 12.00% 11.00% 11.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1998 and have no impact
on the NPPBC for the year ended December 31, 1998.
(9) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
----------------------------------------------------------------------
and Dividend Restrictions
-------------------------
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1998, 1997
and 1996 was $1.32 billion, $1.13 billion and $1.00 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1998, 1997 and 1996 was $171.0 million, $111.7 million and
$73.2 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1998,
the maximum amount available for dividend payment from the Company to
its shareholder without prior approval of the Department was $71.0
million.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(10) Transactions With Affiliates
----------------------------
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1998, 1997 and 1996, the
Company made lease payments to NMIC and its subsidiaries of $8.0
million, $8.4 million and $9.1 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $95.0 million, $85.8 million and $101.6
million in 1998, 1997 and 1996, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $31.9 million and $20.5 million as of
December 31, 1998 and 1997, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1998 and
1997 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1998, 1997 and 1996 were:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------------------------------------------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW NMIC ELICW
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Premiums $90.1 $106.3 $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other
revenue $11.1 $ 9.4 $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and expenses $98.8 $160.5 $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $248.4 million and $211.0 million as
of December 31, 1998 and 1997, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1998 were $60.0
million, $66.1 million and $76.9 million, respectively.
(11) Bank Lines of Credit
--------------------
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement. As of December 31, 1998 the Company had
no amounts outstanding under the agreement.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(12) Contingencies
-------------
On October 29, 1998, the Company and certain of its affiliates were
named in a lawsuit filed in the Common Pleas Court of Franklin County,
Ohio related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
The plaintiff in such lawsuit seeks to represent a national class of
the Company's customers and seeks unspecified compensatory and punitive
damages. The Company is currently evaluating this lawsuit, which is in
an early stage and has not been certified as a class. The Company
intends to defend this lawsuit vigorously.
(13) Segment Information
-------------------
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
The Variable Annuities segment consists of annuity contracts that
provide the customer with the opportunity to invest in mutual funds
managed by independent investment managers and the Company, with
investment returns accumulating on a tax-deferred basis. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate, fixed for a
prescribed period, with returns accumulating on a tax-deferred basis.
Such contracts consist of single premium deferred annuities, flexible
premium deferred annuities and single premium immediate annuities. The
Fixed Annuities segment includes the fixed option under variable
annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary (other than
the portion allocated to the Variable Annuities and Life Insurance
segments), revenues and expenses related to group annuity contracts
sold to Nationwide Insurance Enterprise employee and agent benefit
plans and all realized gains and losses on investments in a Corporate
and Other segment.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The following table summarizes the financial results of the Company's business
segments for the years ended December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
- ------------------------------------ --------- --------- --------- --------- -----
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 231.6 $ 164.7 $ 1,481.6
Other operating revenue 560.8 35.7 319.6 49.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 529.5 1,152.3 551.2 214.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 187.2 104.2 294.6 49.1 635.1
--------- --------- -------- -------- ---------
Total expenses 311.1 977.0 456.4 174.1 1,918.6
--------- --------- -------- -------- ---------
Operating income (loss) before
federal income tax 218.4 175.3 94.8 40.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 94.8 $ 68.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.9) $ 1,098.2 $ 189.1 $ 148.8 $ 1,409.2
Other operating revenue 430.9 43.2 284.0 39.0 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 404.0 1,141.4 473.1 187.8 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Other benefits and expenses 165.3 108.7 284.1 45.6 603.7
--------- --------- -------- -------- ---------
Total expenses 253.1 971.9 402.2 160.3 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 70.9 27.5 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 70.9 $ 38.6 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions of dollars) Annuities Annuities Insurance and Other Total
------------------------------------ ---------- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1996:
Net investment income (1) $ (21.5) $ 1,050.6 $ 174.0 $ 154.7 $ 1,357.8
Other operating revenue 306.1 42.0 261.6 25.7 635.4
---------- ---------- --------- --------- ---------
Total operating revenue (2) 284.6 1,092.6 435.6 180.4 1,993.2
---------- ---------- --------- --------- ---------
Interest credited to policyholder
account balances -- 805.0 70.2 107.1 982.3
Amortization of deferred policy
acquisition costs 57.4 38.6 37.4 -- 133.4
Benefits and expenses 136.9 113.6 260.8 50.4 561.7
---------- ---------- --------- --------- ---------
Total expenses 194.3 957.2 368.4 157.5 1,677.4
---------- ---------- --------- --------- ---------
Operating income before federal
income tax 90.3 135.4 67.2 22.9 315.8
Realized losses on investments -- -- -- (0.3) (0.3)
---------- ---------- --------- --------- ---------
Consolidated income from
continuing operations before
federal tax expense $ 90.3 $ 135.4 $ 67.2 $ 22.6 $ 315.5
========== ========== ======== ======== =========
Assets as of year end $ 25,069.7 $ 13,994.7 $3,353.3 $5,348.5 $47,766.2
========== ========== ======== ======== =========
</TABLE>
-----------
(1) The Company's method of allocating net investment income results
in a charge (negative net investment income) to the Variable
Annuities segment which is recognized in the Corporate and Other
segment. The charge relates to non-invested assets which support
this segment on a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
(14) Discontinued Operations
-----------------------
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
<PAGE> 27
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 10 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C>
Revenues $ -- $ -- $ 668.9
Net income $ -- $ -- $ 11.3
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1998, 1997 and 1996 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Assets, consisting primarily of investments $221.5 $247.3 $3,288.5
Liabilities, consisting primarily of policy benefits and claims $221.5 $247.3 $2,802.8
</TABLE>
<PAGE> 47
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
<S> <C>
(a) Financial Statements:
(1) Financial statements included in Prospectus
(Part A)
Condensed Financial Information. N/A
(2) Financial statements included 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:
Independent Auditors' Report. 45
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1998. 46
Statements of Operations and Changes in
Contract Owners' Equity for the years ended
December 31, 1998 and 1997. 49
Notes to Financial Statements. 61
Nationwide Life Insurance Company and subsidiaries:
Independent Auditors' Report. 67
Consolidated Balance Sheets as of December
31, 1998 and 1997. 68
Consolidated Statements of Income for the
years ended December 31, 1998, 1997 and
1996. 69
Consolidated Statements of Shareholder's
Equity for the years ended December 31,
1998, 1997 and 1996. 70
Consolidated Statements of Cash Flows for
the years ended December 31, 1998, 1997
and 1996. 71
Notes to Consolidated Financial Statements. 72
</TABLE>
94 of 116
<PAGE> 48
<TABLE>
Item 24. (b) Exhibits
<S> <C> <C>
(1) Resolution of the Depositor's Board of Filed previously with the Registration
Directors authorizing the Statement, (File No. 2-58043), and hereby
establishment of the Registrant incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of Filed previously with the Registration
Contracts between the Registrant and Statement, (File No. 2-58043), and hereby
Principal Underwriter incorporated by reference.
(4) The form of the variable annuity Filed previously with the Registration
contract Statement (File No. 2-58043), and hereby
incorporated by reference. Amendment to
variable annuity contract attached hereto.
(5) Variable Annuity Application Attached hereto.
(6) Articles of Incorporation of Depositor Filed previously with the Registration
Statement (File No. 2-58043), and hereby
incorporated by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel Filed previously with the Registration
Statement (File No. 2-58043), and hereby
incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
</TABLE>
95 of 116
<PAGE> 49
<TABLE>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<CAPTION>
- --------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
- --------------------------------------------------------------------------------
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
- --------------------------------------------------------------------------------
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
- --------------------------------------------------------------------------------
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
- --------------------------------------------------------------------------------
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
- --------------------------------------------------------------------------------
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
- --------------------------------------------------------------------------------
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
- --------------------------------------------------------------------------------
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
- --------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
- --------------------------------------------------------------------------------
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
- --------------------------------------------------------------------------------
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
- --------------------------------------------------------------------------------
Ralph M. Paige, Executive Director Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
- --------------------------------------------------------------------------------
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
- --------------------------------------------------------------------------------
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
- --------------------------------------------------------------------------------
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
- --------------------------------------------------------------------------------
</TABLE>
96 of 116
<PAGE> 50
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
- --------------------------------------------------------------------------------
<S> <C>
Nancy C. Thomas Director
1733A 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 - Chief Actuary
One Nationwide Plaza 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 - Corporate
One Nationwide Plaza Controller
Columbus, OH 43215
- --------------------------------------------------------------------------------
Phillip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary
Columbus, OH 43215
- --------------------------------------------------------------------------------
Patricia R. Hatler Senior Vice President and
One Nationwide Plaza General Counsel
Columbus, OH 43215
- --------------------------------------------------------------------------------
David K. Hollingsworth Senior Vice President - Marketing
One Nationwide Plaza
Columbus, OH 43215
- --------------------------------------------------------------------------------
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
- --------------------------------------------------------------------------------
Donna A. James Senior Vice President -
One Nationwide Plaza Chief Human Resources Officer
Columbus, OH 43215
- --------------------------------------------------------------------------------
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
- --------------------------------------------------------------------------------
</TABLE>
97 of 116
<PAGE> 51
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
- --------------------------------------------------------------------------------
<S> <C>
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
- --------------------------------------------------------------------------------
Douglas C. Robinette Senior Vice President - Finance
One Nationwide Plaza
Columbus, OH 43215
- --------------------------------------------------------------------------------
James A. Taylor Senior Vice President -
One Nationwide Plaza Property and Casualty Insurance
Columbus, OH 43215
- --------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President - Finance
One Nationwide Plaza
Columbus, OH 43215
- --------------------------------------------------------------------------------
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Shared Services
Columbus, OH 43215
- --------------------------------------------------------------------------------
Susan A. Wolken Senior Vice President -
One Nationwide Plaza Product Management and Marketing
Columbus, OH 43215
- --------------------------------------------------------------------------------
Bruce C. Barnes Vice President - Technology
One Nationwide Plaza Strategy and Planning
Columbus, OH 43215
- --------------------------------------------------------------------------------
Dennis W. Click Vice President - Secretary
One Nationwide Plaza
Columbus, OH 43215
- --------------------------------------------------------------------------------
Matthew S. Easley Vice President -
One Nationwide Plaza Investment Life Actuarial
Columbus, OH 43215
- --------------------------------------------------------------------------------
R. Dennis Noice Vice President - Systems
One Nationwide Plaza
Columbus, OH 43215
- --------------------------------------------------------------------------------
Joseph P. Rath Vice President - Product
One Nationwide Plaza and Market Compliance
Columbus, OH 43215
- --------------------------------------------------------------------------------
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
98 of 116
<PAGE> 52
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
The 401K Companies, Inc. Texas Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
The 401(K) Company Texas Third-party administrator for 401(k)
plans
- ------------------------------------ ---------------- ------------- --------------------------------------
401K Investment Advisors, Inc. Texas Investment Advisor registered with the
SEC
- ------------------------------------ ---------------- ------------- --------------------------------------
401K Investments Services, Inc. Texas NASD registered Broker-Dealer
- ------------------------------------ ---------------- ------------- --------------------------------------
Affiliate Agency, Inc. Delaware Life Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
AID Finance Services, Inc. Iowa Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED General Agency Company Iowa Managing General Agent and Surplus
Lines Broker (P&C)
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Group, Inc. Iowa Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Group Insurance Marketing Iowa Direct Marketer (P&C)
Company
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Group Mortgage Company Iowa Mortgage Lender
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Life Brokerage Agency, Inc. Iowa Insurance Broker
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Life Financial Corporation Iowa Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Life Insurance Company Iowa Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
ALLIED Property and Casualty Iowa Underwrites General P&C Insurance
Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
- ------------------------------------ ---------------- ------------- --------------------------------------
AMCO Insurance Company Iowa Underwrites General P&C Insurance
- ------------------------------------ ---------------- ------------- --------------------------------------
American Marine Underwriters, Inc. Florida Underwriting Manager
- ------------------------------------ ---------------- ------------- --------------------------------------
Auto Direkt Insurance Company Germany Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
CalFarm Insurance Company California Stock Corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
Caliber Funding Corporation Delaware Stock Corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
Colonial County Mutual Insurance Texas Insurance Company
Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
- ------------------------------------ ---------------- ------------- --------------------------------------
Columbus Insurance Brokerage and Germany Insurance Broker
Service GmbH
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
99 of 116
<PAGE> 53
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Depositors Insurance Company Iowa Underwrites P&C insurance
- ------------------------------------ ---------------- ------------- --------------------------------------
*Employers Life Insurance Company Wisconsin Life Insurance Company
of Wausau
- ------------------------------------ ---------------- ------------- --------------------------------------
Excaliber Funding Corporation Delaware Limited purpose corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
F&B, Inc. Iowa Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Financial Horizons Distributors Alabama Insurance Agency
Agency of Alabama, Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Financial Horizons Distributors Ohio Insurance Agency
Agency of Ohio, Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Financial Horizons Distributors Oklahoma Insurance Agency
Agency of Oklahoma, Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Financial Horizons Distributors Texas Insurance Agency
Agency of Texas, Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
*Financial Horizons Investment Trust Massachusetts Investment Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Financial Horizons Securities Oklahoma Broker-Dealer
Corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
GatesMcDonald Health Plus, Inc. Ohio Managed Care Organization
- ------------------------------------ ---------------- ------------- --------------------------------------
Gates, McDonald & Company Ohio Cost Control
- ------------------------------------ ---------------- ------------- --------------------------------------
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
- ------------------------------------ ---------------- ------------- --------------------------------------
Gates, McDonald & Company of New New York Workers' compensation claims
York, Inc. administration
- ------------------------------------ ---------------- ------------- --------------------------------------
MedPro Solutions, Inc. Massachusetts Third-party administration services
for workers' compensation, automobile
injury and disability claims
- ------------------------------------ ---------------- ------------- --------------------------------------
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Irvin L. Schwartz and Associates, Ohio Insurance Agency
Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Leben Direkt Insurance Company Germany Life Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
100 of 116
<PAGE> 54
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Midwest Printing Services, Inc. Iowa General Printing Services
- ------------------------------------ ---------------- ------------- --------------------------------------
Morley & Associates Oregon Insurance Broker
- ------------------------------------ ---------------- ------------- --------------------------------------
Morley Capital Management, Inc. Oregon Investment Adviser and stable value
money management
- ------------------------------------ ---------------- ------------- --------------------------------------
Morley Financial Services, Inc. Oregon Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Morley Research Associates, Ltd. Delaware Credit research consulting
- ------------------------------------ ---------------- ------------- --------------------------------------
**MRM Investments, Inc. Ohio Owns and operates a recreational ski
facility
- ------------------------------------ ---------------- ------------- --------------------------------------
**National Casualty Company Wisconsin Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
National Casualty Company of America, Great Britain Insurance Company
Ltd.
- ------------------------------------ ---------------- ------------- --------------------------------------
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
**National Premium and Benefit Delaware Insurance Administrative Services
Administration Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Advisory Services, Inc. Ohio Investment Management and
Administrative Services
- ------------------------------------ ---------------- ------------- --------------------------------------
**Nationwide Agency, Inc. Ohio Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Agribusiness Insurance Iowa Insurance Company
Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Asset Allocation Trust Massachusetts Investment Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Cash Management Company Ohio Investment Securities Agent
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Community Urban Ohio Special purpose real estate corporation
Redevelopment Corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Corporation Ohio Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Financial Services Bermuda Life Insurance Company
(Bermuda) Ltd.
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Financial Services Delaware Statutory Business Trust
Capital Trust
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Financial Services Delaware Statutory Business Trust
Capital Trust II
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
101 of 116
<PAGE> 55
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
Nationwide Financial Services, Inc. Delaware Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide General Insurance Company Ohio Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Global Holdings, Inc. Ohio Holding Company for International
Operations
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
- ------------------------------------ ---------------- ------------- --------------------------------------
*Nationwide Indemnity Company Ohio Reinsurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Insurance Company of California Underwriter
America
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Insurance Company of Ohio Insurance Company
Florida
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Services Company, LCC Ohio Shared services functions
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide International Underwriters California Underwriting Manager
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment
- ------------------------------------ ---------------- ------------- --------------------------------------
*Nationwide Investing Foundation II Massachusetts Common Law Trust
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Investment Services Oklahoma Registered Broker-Dealer in deferred
Corporation compensation market
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
- ------------------------------------ ---------------- ------------- --------------------------------------
**Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
**Nationwide Life Insurance Company Ohio Life Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Lloyds Texas Property Insurance
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Management Systems, Inc. Ohio Preferred provider organization,
products and related services
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Mutual Funds Ohio Investment Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
102 of 116
<PAGE> 56
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
Nationwide Properties, Ltd. Ohio Develop, own and operate real estate
and real estate investments
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real estate
and real estate investments
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Alabama Market and administer deferred
Inc. of Alabama compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Arizona Market and administer deferred
Inc. of Arizona compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Arkansas Market and administer deferred
Inc. of Arkansas compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Montana Market and administer deferred
Inc. of Montana compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Nevada Market and administer deferred
Inc. of Nevada compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, New Mexico Market and administer deferred
Inc. of New Mexico compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Ohio Market variable annuity contracts to
Inc. of Ohio members of the National Education
Association in the state of Ohio
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Oklahoma Market variable annuity contracts to
Inc. of Oklahoma members of the National Education
Association in the state of Oklahoma
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, South Dakota Market and administer deferred
Inc. of South Dakota compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Texas Market and administer deferred
Inc. of Texas compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Retirement Solutions, Wyoming Market variable annuity contracts to
Inc. of Wyoming members of the National Education
Association in the state of Wyoming
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
103 of 116
<PAGE> 57
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public employees
- ------------------------------------ ---------------- ------------- --------------------------------------
*Nationwide Separate Account Trust Massachusetts Investment Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nationwide Trust Company, FSB United States Federal Savings Bank
of America
- ------------------------------------ ---------------- ------------- --------------------------------------
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
- ------------------------------------ ---------------- ------------- --------------------------------------
Neckura Insurance Company Germany Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Neckura Life Insurance Company Germany Life Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services
- ------------------------------------ ---------------- ------------- --------------------------------------
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services
- ------------------------------------ ---------------- ------------- --------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services
- ------------------------------------ ---------------- ------------- --------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing services
- ------------------------------------ ---------------- ------------- --------------------------------------
NFS Distributors, Inc. Delaware Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
NWE, Inc. Ohio Special Investments
- ------------------------------------ ---------------- ------------- --------------------------------------
PanEuroLife Luxembourg Life Insurance
- ------------------------------------ ---------------- ------------- --------------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration
- ------------------------------------ ---------------- ------------- --------------------------------------
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
- ------------------------------------ ---------------- ------------- --------------------------------------
Premier Agency, Inc. Iowa Insurance Agency
- ------------------------------------ ---------------- ------------- --------------------------------------
Riverview Agency, Inc. Texas Stock Corporation
- ------------------------------------ ---------------- ------------- --------------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Scottsdale Insurance Company Ohio Insurance Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance
Company Company
- ------------------------------------ ---------------- ------------- --------------------------------------
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance
Group Group
- ------------------------------------ ---------------- ------------- --------------------------------------
Union Bond and Trust Company Oregon Oregon state bank with trust powers
- ------------------------------------ ---------------- ------------- --------------------------------------
Villanova Capital, Inc. Delaware Holding Company
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
104 of 116
<PAGE> 58
<TABLE>
<CAPTION>
- ------------------------------------ ---------------- ------------- --------------------------------------
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
- ------------------------------------ ---------------- ------------- --------------------------------------
<S> <C> <C> <C>
Villanova Mutual Fund Capital Trust Delaware Business Trust
- ------------------------------------ ---------------- ------------- --------------------------------------
Villanova SA Capital Trust Delaware Business Trust
- ------------------------------------ ---------------- ------------- --------------------------------------
**Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
- ------------------------------------ ---------------- ------------- --------------------------------------
Western Heritage Insurance Company Arizona Excess and Surplus Lines Insurance
Company
- ------------------------------------ ---------------- ------------- --------------------------------------
</TABLE>
105 of 116
<PAGE> 59
<TABLE>
<CAPTION>
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
</TABLE>
106 of 116
<PAGE> 60
<TABLE>
<CAPTION>
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
COMPANY STATE/COUNTRY OF NO. VOTING SECURITIES PRINCIPAL BUSINESS
ORGANIZATION (SEE ATTACHED CHART)
UNLESS OTHERWISE INDICATED
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
<S> <C> <C> <C>
Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VL Separate Account-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
Nationwide VL Separate Account -D Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
- ------------------------------------------ ---------------- ---------------------------- ----------------------------
</TABLE>
107 of 116
<PAGE> 61
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ----------------------------
| ALLIED LIFE | | ALLIED | | AID FINANCE |
| FINANCIAL | | GROUP, INC. | | SERVICES, INC. |
| CORPORATION | | (AGI) | | (AID FINANCE) |
| (ALFC) | | | | |
|Common Stock: 850 | |Common Stock: 850 Shares | |Common Stock: 10,000 |
|------------ Shares | |------------ | |------------ Shares |
| |---| | |---| | |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
|Casualty- | | |Casualty- | | |Casualty- |
|100% $47,286,429 | | |100% $1,049,237,226| | |100% $19,545,634 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| ALLIED GROUP | | | AMCO | | | ALLIED |
| MERCHANT BANKING | | | INSURANCE COMPANY | | | GROUP INSURANCE |
| CORPORATION | | | (AMCO) | | | MARKETING COMPANY |
|Common Stock: 10,000 | | |Common Stock: 155,991 | | |Common Stock: 20,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| |----| |---| | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
| | | | | | | |Aid Finance- |
|AFLC-100% $100,000 | | | |AGI-100% $95,925,450| | |100% $16,059,469 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | WESTERN | | | DEPOSITORS |
| BROKERAGE | | | | HERITAGE INSURANCE | | | INSURANCE COMPANY |
| AGENCY, INC. | | | | COMPANY | | | (DEPOSITORS) |
|Common Stock: 500,000 | | | |Common Stock: 4,776,076 | | |Common Stock: 199,991 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|AFLC-100% $442,695 | | | |AMCO-100% $11,686,037| | |AGI-100% $15,251,842 |
- --------------------------- | | --------------------------- | ----------------------------
| | |
- --------------------------- | | --------------------------- | ----------------------------
| ALLIED LIFE | | | | ALLIED | | | ALLIED PROPERTY |
| INSURANCE | | | | GENERAL AGENCY | | | AND CASUALTY |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 250,000 | | | |Common Stock: 5,000 | | |Common Stock: 156,822 |
|------------ Shares | | | |------------ Shares | | |------------ Shares |
| |---| |----| | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AFLC-100% $41,732,343| |AMCO-100% $135,342 | | |AGI-100% $33,018,634 |
- --------------------------- --------------------------- | ----------------------------
|
--------------------------- | ----------------------------
| PREMIER | | | ALLIED |
| AGENCY, | | | GROUP MORTGAGE |
| INC. | | | COMPANY |
|Common Stock: 100,000 | | |Common Stock: 9,500 |
|------------ Shares | | |------------ Shares |
| |---|---| |
| Cost | | | Cost |
| ---- | | | ---- |
|AGI-100% $100,000 | | |AGI-100% $213,976 |
--------------------------- | ----------------------------
|
| ----------------------------
| | MIDWEST |
| | PRINTING SERVICES |
| | LTD. |
| |Common Stock: 10,000 |
| |------------ Shares |
|---| |
| Cost |
| ---- |
|AFLC-100% $610,000 |
----------------------------
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |============================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
| || |--------------------------------------------------------------------| |--------------------------
- --| || |
|| |--------------------------------------------------------------|----------------
|| | |
|| -------------------------------- | -------------------------------- --------------------------------
|| | | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| | NATIONWIDE LLOYDS | | | | | |
|| | | | |Common Stock: 20,000 | |Common Stock: 10,000 |
||==| | |---|------------ Shares | |--|------------ Shares |
|| | A TEXAS LLOYDS | | | | | | |
|| | | | | Cost | | | Cost |
|| | | | | ---- | | | ---- |
|| | | | |Casualty-100% $5,944,422 | | |Casualty-100% $87,943,140 |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | |
|| -------------------------------- | -------------------------------- | --------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE PROPERTY | | | NECKURA |
|| | INSURANCE COMPANY | | | AND CASUALTY | | | INSURANCE COMPANY |
|| |Guaranty Fund | | | INSURANCE COMPANY | | | |
|| |------------ | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
||==|Certificate |---| |---|------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WISCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |---- |---|------------ Shares | ---- |--|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares | | | Common Stock: 10,000 | | | |Common Stock: 1 Share |
| |--------| | ------------ Shares | ---| |--|------------ |
| Cost | | | | | | | |
|Casualty-99.9% ---- | | | Cost | | | | Cost |
|Other Capital: $26,714,335 | | | ---- | | | | ---- |
|------------- | | | SIC-100% $6,000,000 | | | |Neckura-100% DM 51,639 |
|Casualty-Ptd. $ 713,576 | | | | | | | |
-------------------------------- | -------------------------------- | | --------------------------------
| | |
-------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |--------| |------------ Shares |----| |--|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
-------------------------------- -------------------------------- | --------------------------------
| |
-------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1500 Shares |
| | |------------ |------------|------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 63
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- -----------------------------------------------------------------------|
|
- --------------- --------------------------------------------------
| |
- -----------------------------------------------------------------------------------------|----------------------- |
| | | | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | | CORPORATION |
| | | | | REDEVELOPMENT | | | |
| | | | | CORPORATION | | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | Cost | | | Cost | | | Shares Cost |
| | ---- | | | ---- | | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $751,352,485|
| | | | | | | |Fire 649,510 24,007,936|
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | NATIONWIDE | | | INSURANCE | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. | | |Common Stock: 10,330 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 | |--------| ---- |
| |------------ Shares | | |------------ Shares | | |Casualty-18.6% $88,320 |
| | Cost | | | Cost | | |Fire-18.6% $88,463 |
| | ---- | | | ---- | | |Preferred Stock 1466 Shares |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 | | |--------------- Cost |
| | | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | ----------------------------------
| | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | LONE STAR | | | NATIONWIDE CASH | | | PENSION ASSOCIATES |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY | | | OF WAUSAU, INC. |
| | | | |Common Stock: 100 Shares | | |Common Stock: 1,000 Shares |
------|Common Stock: 1,000 | |----|------------ | |--------|------------- |
| |------------ Shares | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-90% $9,000 | | | |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 | | |Casualty-100% $2,839,392 |
| -------------------------------- | -------------------------------- | ----------------------------------
| || | |
| -------------------------------- | -------------------------------- | ----------------------------------
| | COLONIAL COUNTY MUTUAL | | | NATIONWIDE INSURANCE | | | AMERCIAN MARINE |
| | INSURANCE COMPANY | | | COMPANY OF FLORIDA | | | UNDERWRITERS, INC. |
| | | | |Common Stock: 10,000 | | |Common Stock: 20 Shares |
| |Surplus Debentures | | |------------- Shares | | |------------- |
| |------------------ | |----| | |--------| Cost |
| | Cost | | | Cost | | ---- |
| | ---- | | | ---- | | |
| |Colonial $500,000 | | |Casualty-100% $300,000,000 | |Casualty-100% $5,020 |
| |Lone Star 150,000 | | | | | |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | WAUSAU INTERNATIONAL |
| | INSURANCE COMPANY | | | UNDERWRITERS |
| |Common Stock 12,000 | | | |
| |------------ Shares | | |Common Stock: 1,000 Shares |
|-----| | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $10,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE |
| | ENTERPRISE SERVICES, LTD. | | | ARENA LLC |
| | | | | |
| |Single Member Limited | | | |
|.....|Liability Company | |....| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- --------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
</TABLE>
Page 1
<PAGE> 64
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-------------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
----------------|------------ ----------------------------- ---------------||------------
| ||
- ----------------------------- | ----------------------------- ----------------------------- || ----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |--|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| || ||
- ----------------------------- | ----------------------------- || ----------------------------- || ----------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| INVESTORS, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ |..| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
- ----------------------------- | ----------------------------- || ----------------------------- ----------------------------
| ||
- ----------------------------- | ----------------------------- || -----------------------------
| NATIONWIDE | | | NATIONWIDE | || | NATIONWIDE |
| PROPERTIES, LTD. | | | INVESTING | || | INVESTING |
| | | | FOUNDATION II | || | FOUNDATION III |
| Units: |..| | | || | |
| ------ | | |==||==| |
| | | | || | |
| | | | || | | ----------------------
| NW Life -97.6% | | | || | | | MORLEY RESEARCH |
| NW Mutual -2.4% | | COMMON LAW TRUST | || | OHIO BUSINESS TRUST | | ASSOCIATES, LTD. |
- ----------------------------- ----------------------------- || ----------------------------- | |
|| |Common Stock: 1,000 |
----------------------------- || ----------------------------- |------------- Shares|------
| NATIONWIDE | || | NATIONWIDE | | Cost |
| SEPARATE ACCOUNT | || | ASSET ALLOCATION TRUST | | ---- |
| TRUST | || | | |Morley-100% $1,000|
| | || | | ----------------------
| |==||==| |
| | | |
| | | |
| | | MASSACHUSETTS |
| COMMON LAW TRUST | | BUSINESS TRUST |
----------------------------- -----------------------------
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $751,352,485 |
|Fire 649,510 24,007,936 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------------|-------------------------------|-------------------|--------------------------------|-----------------------------
| | | |
-------------|--------------- --------------|-------------- | ---------------|-------------
| MORLEY FINANCIAL | | THE 401(k) COMPANIES, INC.| | | NATIONWIDE RETIREMENT |
| SERVICES, INC. (MORLEY) | | (401(k)) | | | SOLUTIONS, INC. |
|Common Stock: 82,343 | |Common Stock: Control: | | |Common Stock: 236,494 |
|---|------------- Shares | |------------- ------- |--| | |------------- Shares |
| | | |Class A Other-100% | | | | |
| |NFS-100% | |Class B NFS -100% | | | |NRS-100% |
| ----------------------------- ----------------------------- | | ---------------|-------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY & | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | ASSOCIATES, INC. | | SERVICES, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF NEW |
| | | | | | | | ALABAMA | | | MEXICO |
| |Common Stock: 3,500 | | Common Stock: 1,000,000 | | | | Common Stock: 10,000 | | | Common Stock: 1,000 |
|---|------------- Shares | | ------------- Shares |--| | | ------------- Shares |--|--| ------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $1,000 | |401(k)-100% $7,800 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | MORLEY CAPITAL | | 401(k) INVESTMENT | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | MANAGEMENT | | ADVISORS, INC. | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARIZONA | | | SO. DAKOTA |
| |Common Stock: 500 | |Common Stock: 1,000 | | | |Common Stock: 1,000 | | |Common Stock: 1,000 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | | Cost | | | Cost |
| | ---- | | ---- | | | | ---- | | | ---- |
| |Morley-100% $5,000 | |401(k)-100% $1,000 | | | |NRS-100% $1,000 | | |NRS-100% $1,000 |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | | |
| ----------------------------- ----------------------------- | | ----------------------------- | ---------------------------
| | UNION BOND | | 401(k) ICOMPANY | | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | & TRUST COMPANY | | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | | ARKANSAS | | | WYOMING |
| |Common Stock: 2,000 | |Common Stock: 855,000 | | | |Common Stock: 50,000 | | |Common Stock: 500 |
|---|------------- Shares | |------------- Shares |--| | |------------- Shares |--|--|------------- Shares |
| | Cost | | Cost | | | Cost | | | Cost |
| | ---- | | ---- | | | ---- | | | ---- |
| |Morley-100% $50,000 | |401(k)-100% $1,000 | | |NRS-100% $500 | | |NRS-100% $500 |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | PORTLAND INVESTMENT | | NATIONWIDE TRUST | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | SERVICES, INC. | | COMPANY, FSB | | | SOLUTIONS, INS. AGENCY, | | | SOLUTIONS, INC. OF |
| | | | | | | INC. | | | OHIO |
| |Common Stock: 1,000 | |Common Stock: 2,800,000 | | |Common Stock: 1,000 | | | |
|---|------------- Shares | |------------- Shares |-----| |------------- Shares |--|==| |
| | Cost | | Cost | | | Cost | | | |
| | ---- | | ---- | | | ---- | | | |
| |Morley-100% $25,000 | |NFS-100% $3,500,000 | | |NRS -100% $1,000 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ---------------------------- | ---------------------------
| | EXCALIBER FUNDING | | NATIONWIDE FINANCIAL | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | SERVICES CAPITAL TRUST II | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | MONTANA | | | OKLAHOMA |
| |Common Stock: 1,000 | | | | |Common Stock: 500 | | | |
|---|------------- Shares | | |-----| |------------- Shares |--|==| |
| | Cost | | | | | Cost | | | |
| | ---- | | | | | ---- | | | |
| |Morley-100% $1,000 | |NFS-100% | | |NRS-100% $500 | | | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | |
| ----------------------------- ----------------------------- | ----------------------------- | ---------------------------
| | CALIBER FUNDING | | NFS DISTRIBUTORS INC. | | | NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT |
| | CORPORATION | | | | | SOLUTIONS, INC. OF | | | SOLUTIONS, INC. OF |
| | | | | | | NEVADA | | | TEXAS |
| | | | | | | Common Stock: 1,000 | | | |
|---| | | |-----| | ------------- Shares |--|==| |
| | | | | Cost | | |
| | | | | ---- | | |
|Morley-100% | |NFS-100% | | NRS-100% $1,000 | | |
----------------------------- ----------------------------- ----------------------------- ---------------------------
</TABLE>
<PAGE> 66
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------|--------------------|---------------------------------------|
| | |
| ---------------|---------------- --------------|----------------
| | EMPLOYERS LIFE INSURANCE CO. | | GATES MCDONALD |
| | OF WAUSAU (ELIOW) | | & COMPANY (GATES) |
| | | | |
| |Common Stock: 250,000 | |Common Stock: 254 |
| |--|------------- Shares | |--|------------- Shares |
| | | | | | |
| | | Cost | | | Cost |
| | | ---- | | | ---- |
| | |NW CORP. -100% $126,509,480 | | |NW CORP. -100% $25,683,532 |
| | -------------------------------- | -------------------------------
- ------------ | | |
| -------------------------------- | | -------------------------------- | --------------------------------
| | NATIONWIDE TRUST | | | | WAUSAU PREFERRED | | | HEALTHCARE |
| | COMPANY | | | | HEALTH INSURANCE CO. | | | FIRST, INC. |
| | | | | | | | | |
| |Common Stock: 2,800,000 | | | |Common Stock: 200 | | | |
|--|------------- Shares | | |--|------------- Shares | |--| |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |ELIOW -100% $57,413,193 | | |Gates-100% $6,700,000 |
| -------------------------------- | -------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE FINANCIAL | | | NATIONWIDE GLOBAL | | | GATES MCDONALD & COMPANY |
| | SERVICES (BERMUDA) INC. | | | HOLDINGS, INC. (NGH) | | | OF NEW YORK, INC. |
| | | | | | | | |
| |Common Stock: 250,000 | | |Common Stock: 1 | | |Common Stock: 3 |
|--|------------- Shares | |-----|------------- Share | |--|------------- Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| |NFS-100% $3,500,000 | | |NW CORP.-100% $7,000,000 | | |Gates-100% $106,947 |
| -------------------------------- | -------------------------------- | -------------------------------
| | | |
| -------------------------------- | -------------------------------- | -------------------------------
| | NATIONWIDE DEFERRED | | | NATIONWIDE GLOBAL HOLDINGS | | | GATES MCDONALD & COMPANY |
| | COMPENSATION, INC. | | | -HONG KONG, LIMITED | | | OF NEVADA |
| | | | | | | | |
| | | | |Common Stock: 2 | | |Common Stock: 40 |
|--| | | |------------- Shares | |--|------------- Shares |
| | | | | | | | |
| | | | | | | | Cost |
| | | | | | | | ---- |
| |NFS-100% | | |NGH-100% | | |Gates-100% $93,750 |
| -------------------------------- | -------------------------------- | -------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------
| | IRVIN L. SCHWARTZ | | | NATIONWIDE | | | GATES McDONALD |
| | AND ASSOCIATES, INC. | | | HEALTH PLANS, INC. (NHP) | | | HEALTH PLUS, INC. |
| | | | | | | | |
| |Common Stock: Control | | |Common Stock: 100 | | |Common Stock: 200 |
|--|------------- ------- | |-----|------------- Shares |--| |--|------------- Shares |
| | | | | | | |
| | | | Cost | | | Cost |
|Class A Other-100% | | | ---- | | | ---- |
|Class B NFS -100% | | |NW CORP.-100% $14,603,732 | | |Gates-100% $2,000,000 |
-------------------------------- | -------------------------------- | -------------------------------
| |
-------------------------------- | -------------------------------- |
| MRM INVESTMENTS, INC. | | | NATIONWIDE MANAGEMENT | |
| | | | SYSTEMS, INC. | |
| | | | | |
|Common Stock: 1 | | |Common Stock: 100 | |
|------------- Share |--| |------------- Shares |--|
| | | | |
| Cost | | Cost | |
| ---- | | ---- | |
|NW CORP.-100% $7,000,000 | |NHP Inc.-100% $25,149 | |
-------------------------------- -------------------------------- |
|
-------------------------------- |
| NATIONWIDE | |
| AGENCY, INC. | |
| | |
|Common Stock: 100 | |
|------------ Shares |--|
| |
| Cost |
| ---- |
|NHP Inc.-99% $116,077 |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1998
Page 2
</TABLE>
<PAGE> 67
Item 27. NUMBER OF CONTRACT OWNERS
Not applicable.
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended Code of Regulations and
expressly authorized by the General Corporation Law of the State
of Ohio, for indemnification by Nationwide of any person who was
or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason
of the fact that such person is or was a director, officer or
employee of Nationwide, against expenses, including attorneys'
fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action,
suit or proceeding, to the extent and under the circumstances
permitted by the General Corporation Law of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling Nationwide pursuant to the
foregoing provisions, Nationwide has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Variable Account, Nationwide Multi-Flex Variable Account,
Nationwide Variable Account-II, Nationwide Variable
Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-8, Nationwide Variable Account-9,
Nationwide Variable Account-10, Nationwide VA Separate
Account-A, Nationwide VA Separate Account-B, Nationwide VA
Separate Account-C, Nationwide VL Separate Account-A,
Nationwide VL Separate Account-B, Nationwide VL Separate
Account-C, Nationwide VL Separate Account-D, Nationwide VLI
Separate Account-2, Nationwide VLI Separate Account-3,
Nationwide VLI Separate Account-4, and the Nationwide VLI
Separate Account-5, all of which are separate investment
accounts of Nationwide or its affiliates.
NAS also acts as principal underwriter for Nationwide Mutual
Funds, Nationwide Separate Account Trust, and Nationwide
Asset Allocation Trust, which are open-end management
investment companies.
110 of 116
<PAGE> 68
<TABLE>
(b) NATIONWIDE ADVISORY SERVICES, INC. DIRECTORS AND OFFICERS
<CAPTION>
------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman of the Board of Directors and Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President - Chief Financial Officer and Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Paul J. Hondros Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President - Chief Investment Officer and Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Edwin P. McCausland, Jr. Senior Vice President - Fixed Income Securities
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Charles S. Bath Vice President - Investments
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Dennis W. Click Vice President and Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
William G. Goslee Vice President
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
James F. Laird, Jr. Vice President and General Manager
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
</TABLE>
111 of 116
<PAGE> 69
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------
<S> <C>
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------
</TABLE>
(c)
<TABLE>
<CAPTION>
- ------------------------------ ---------------- --------------- ----------- ------------
NAME OF PRINCIPAL UNDERWRITER NET UNDERWRITING COMPENSATION ON BROKERAGE COMPENSATION
DISCOUNTS AND REDEMPTION OR COMMISSIONS
COMMISSIONS ANNUITIZATION
- ------------------------------ ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C>
Nationwide Advisory N/A N/A N/A N/A
Services, Inc.
- ------------------------------ ---------------- --------------- ----------- ------------
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
112 of 116
<PAGE> 70
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 hereby 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
the risks assumed by Nationwide.
The Registrant hereby represents that any contract offered by the
prospectus and which is issued pursuant to Section 403(b) of the
Internal Revenue Code is issued by the Registrant in reliance
upon, and in compliance with, the Securities and Exchange
Commission's no-action letter to the American Council of Life
Insurance (publicly available November 28, 1988) which permits
withdrawal restrictions to the extent necessary to comply with
IRC Section 403(b)(11).
113 of 116
<PAGE> 71
PROSPECTUS
DECEMBER 30, 1999
NATIONWIDE
VARIABLE ACCOUNT
DEFERRED
VARIABLE ANNUITY CONTRACTS
OFFERED BY
NATIONWIDE
LIFE INSURANCE COMPANY
114 of 116
<PAGE> 72
INDEPENDENT AUDITORS' CONSENT
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of the Nationwide Variable Account:
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
December 15, 1999
115 of 116
<PAGE> 73
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT, certifies that it meets the
requirements of Securities Act Rule 485 for effectiveness of this Pre-Effective
Amendment and has caused this Pre-Effective Amendment to be signed on its behalf
in the City of Columbus, and State of Ohio, on this 15th day of December, 1999.
NATIONWIDE VARIABLE ACCOUNT
------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
------------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
------------------------------------------------
Joseph P. Rath
Vice President - Product and Market Compliance
As required by the Securities Act of 1933, this Pre-Effective Amendment has been
signed by the following persons in the capacities indicated on the 15th day of
December, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C> <C>
LEWIS J. ALPHIN Director
- ---------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ---------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ---------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ---------------------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ---------------------------------------
Willard J. Engel
FRED C. FINNEY Director
- ---------------------------------------
Fred C. Finney
JOSEPH J. GASPER President and Chief Operating
- ---------------------------------------
Joseph J. Gasper Officer and Director
DIMON R. MCFERSON Chairman and Chief Executive
- ---------------------------------------
Dimon R. McFerson Officer and Director
DAVID O. MILLER Chairman of the Board and
- ---------------------------------------
David O. Miller Director
YVONNE L. MONTGOMERY Director
- ---------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
- ---------------------------------------
Robert A. Oakley Financial Officer
RALPH M. PAIGE Director
- ---------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- ---------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /s/ JOSEPH P. RATH
- --------------------------------------- -------------------------------
Arden L. Shisler Joseph P. Rath
Attorney-in-Fact
ROBERT L. STEWART Director
- ---------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ---------------------------------------
Nancy C. Thomas
</TABLE>
116 of 116
<PAGE> 1
ITEM 24(b)
EXHIBIT NO. 4
AMENDMENT TO VARIABLE ANNUITY CONTRACT
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY
P.O. BOX [16609]
COLUMBUS, OHIO [43216-6609]
REDUCED PURCHASE PAYMENT RIDER
This Rider is made a part of the Contract to which it is attached and is
effective on the Date of Issue of the Contract. To the extent any provisions
contained in this Rider are contrary to or inconsistent with those of the
Contract to which it is attached, the provisions of this Rider will control.
The benefits described in this rider will cease upon termination of the
Contract.
1. ADDITIONAL CHARGES
For the additional benefits provided by this Rider, the Company will deduct a
charge at an annual maximum rate of [0.25]% of the daily net asset value of
the Variable Account. The Company reserves the right to charge less than the
maximum rate.
2. THE FOLLOWING IS HEREBY ADDED TO THE CONTRACT:
"The Initial Purchase Payment is due on the Date of Issue and may not be less
than [$1,000]. If periodic payments are expected by the Company, the Initial
Purchase Payment amount may be satisfied on an annualized basis. Subsequent
Purchase Payments, if any, must be at least [$25] and may be made at any
time."
The Annuitant may elect to terminate this Reduced Purchase Payment Rider if,
throughout a period of at least 2 years and continuing until such
termination, the total of all Purchase Payments (less surrenders and
withdrawals) is maintained at [$25,000] or more.
The election to terminate must be submitted in writing on a form provided by
the Company. Termination of the rider will occur on the date the Company
receives a valid election form, and the charge for this Rider will no longer
be made. Any Purchase Payments made after the termination of this rider will
be subject to the terms of the Contract."
/s/ Dennis W. Click /s/ Joseph J. Gasper
SECRETARY PRESIDENT
APO-4321-A (AO)(10/1999)
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
5-YEAR CDSC SCHEDULE
TO INDIVIDUAL DEFERRED ANNUITY
THE FOLLOWING PROVISIONS APPLY ONLY TO CONTRACTS ISSUED PURSUANT TO THE
ANNUITANT ELECTION OF THE 5-YEAR CDSC SCHEDULE, WHICH IS AT [-0.10%] OF THE
DAILY NET ASSET VALUE OF THE VARIABLE ACCOUNT. TO THE EXTENT THE TERMS OF THE
CONTRACT AND THIS RIDER ARE INCONSISTENT, THE TERMS OF THIS RIDER SHALL CONTROL.
The following is added to the DEFINITION section of the Contract:
PURCHASE PAYMENT YEAR - Each 12 month period starting from the date the Purchase
Payment is made.
The SURRENDERS section is amended by replacing item 4 of the section with the
following:
4. When written application is received, the Company will surrender the number
of Variable Account Accumulation Units and any amount from any GTO under the
Multiple Maturity Account and any amount from any other options under this
Contract needed to equal: (a) the dollar amount requested; plus (b) any
Contingent Deferred Sales Charge (CDSC); minus (c) any applicable taxes.
The SURRENDER VALUE section is amended by replacing it with the following:
The surrender value at anytime will be the Contract Value less the sum of any
applicable CDSC and taxes.
The following sections are added to the Contract:
CONTINGENT DEFERRED SALES CHARGE (CDSC)
If part or all of the Contract Value is withdrawn, a CDSC may be made by the
Company. The CDSC is designed to cover expenses relating to the sale of the
Contract.
The CDSC is calculated by multiplying the applicable CDSC percentages noted
below by the Purchase Payments that are withdrawn. For purposes of calculating
the amount of the CDSC, withdrawals are considered to come first from the oldest
Purchase Payment made to the Contract, then from the next oldest Purchase
Payment and so forth, with any earnings attributable to such Purchase Payments
considered only after all Purchase Payments made to the Contract have been
considered. (For federal income tax purposes, a full or partial withdrawal is
treated as a withdrawal of earnings first.)
Years* Measured From Date of Payment: 1 2 3 4 5 Thereafter
- -------------------------------------------------------------------------------
CDSC %: 7% 7% 6% 4% 2% 0%
*The CDSC percentage will change to the next year's CDSC percentage on the last
day of the Purchase Payment Year.
CDSC, if applicable, will be assessed against full or partial surrenders from
GTOs. If any such surrender occurs prior to the Maturity Date for any particular
GTO, the amount surrendered will be subject to an MVA in addition to CDSC.
APO-4406-A 1 (AO) (10/99)
<PAGE> 4
WITHDRAWALS WITHOUT CHARGE
During each Contract Year, the Annuitant may withdraw without CDSC a total
amount equal to the greater of (1) or (2) where (1) is the lesser of 10% of the
sum of all Purchase Payments made to the Contract reduced by Purchase Payments
withdrawn or 10% of the Contract Value and (2) is the amount required to meet
Minimum Distribution requirements for this Contract. This CDSC-free withdrawal
privilege is non-cumulative; that is, free amounts not taken during any given
Contract Year cannot be taken as free amounts in subsequent Contract Years.
A CDSC will not be assessed against the withdrawal of any: (1) Purchase Payments
which have been held under this Contract for at least [60] months; (2) earnings
attributable to Purchase Payments made to this Contract; (3) Death Benefit
payments made upon the death of the Annuitant prior to the Annuitization Date;
(4) amounts applied to an Annuity Payment Option after two years from the Date
of Issue; (5) amounts transferred among the Sub-Accounts and the GTOs under the
Multiple Maturity Account, or (6) as otherwise noted in the Contract.
In addition, when this Contract is exchanged for another contract issued by the
Company or any of its affiliate insurance companies, of the type and class which
the Company determines is eligible for such waiver, the Company will waive the
CDSC on the first contract. A CDSC may apply to the contract received in the
exchange.
The SYSTEMATIC WITHDRAWALS section has been amended by replacing it with the
following:
The Annuitant may elect in writing on a form provided by the Company to take
systematic withdrawals of a specified dollar amount (of at least $100) on a
monthly, quarterly, semi-annual or annual basis. The Company will process the
withdrawals as directed by surrendering on a pro-rata basis Accumulation Units
from all of the Sub-Accounts in which the Annuitant has an interest and the
Multiple Maturity Account. A CDSC may apply to systematic withdrawals in
accordance with the considerations set forth in the "Contingent Deferred Sales
Charge" and "Withdrawals Without Charge" provisions of the rider. Unless
otherwise directed by the Annuitant, the Company will withhold federal income
taxes from each systematic withdrawal. An age-based systematic withdrawal
program (see following paragraph) will terminate automatically at the end of
each Contract Year and may be reinstated only on or after the next Contract
Anniversary pursuant to a new request. Unless the Annuitant has made an
irrevocable election of distributions of substantially equal periodic payments,
the systematic withdrawals may be discontinued at any time by notification to
the Company in writing. The Company reserves the right to discontinue
prospective systematic withdrawals.
If the Annuitant withdraws amounts pursuant to a systematic withdrawal program,
then the Annuitant may withdraw each Contract Year without a CDSC an amount up
to the greater of (1) free withdrawal privilege described in "Withdrawals
Without Charge" section of the rider, (2) the amount required to meet Minimum
Distribution requirements for this Contract, or (3) the specified percentage of
the Contract Value based on the Annuitant's age, as shown in the following
table:
<TABLE>
<CAPTION>
ANNUITANT'S AGE PERCENTAGE OF CONTRACT VALUE
--------------- ----------------------------
<S> <C>
Under 59-1/2 5%
59-1/2 thru 61 7%
62 thru 64 8%
65 thru 74 10%
75 and over 13%
</TABLE>
If the total amounts withdrawn in any Contract Year exceed the CDSC-free amount
as calculated under the systematic withdrawal method described above, then such
total withdrawn amounts will be eligible only for CDSC-free withdrawal privilege
described in the "Withdrawals Without Charge" section of the rider, and the
total amount of CDSC charged during the Contract Year will be determined in
accordance with those sections.
The Contract Value and the Annuitant's age for purposes of applying the
CDSC-free withdrawal percentage described above are determined as of the date
the request for a systematic withdrawal program is received and recorded by the
Company at its Home Office. Furthermore, this CDSC-free withdrawal privilege for
systematic withdrawals is non-cumulative, that is, free amounts not taken during
any given Contract Year cannot be taken as free amounts in a subsequent Contract
Year.
APO-4406-A 2 (AO) (10/99)
<PAGE> 5
Systematic withdrawals are not available prior to the expiration of the free
look provision of the Contract. The Company reserves the right to assess a
processing fee for this service.
IF THE ANNUITANT HAS ELECTED AN MVA/GTO OPTION, THE FOLLOWING LANGUAGE SHALL BE
ADDED TO THE CONTRACT:
An MVA will apply against all amounts which are transferred or surrendered from
allocations under a GTO prior to the Maturity Period for the particular GTO.
During the Maturity Period, allocations under a GTO may be transferred,
surrendered, or distributed for any other reason without any MVA (a CDSC may
apply on amounts surrendered). At all times other than during a Maturity Period,
an MVA will apply to amounts distributed from allocations under a GTO.
/s/ Dennis W. Click /s/ Joseph J. Gasper
SECRETARY PRESIDENT
APO-4406-A 3 (AO) (10/99)
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY
7-YEAR CDSC SCHEDULE
TO INDIVIDUAL DEFERRED ANNUITY
THE FOLLOWING PROVISIONS APPLY ONLY TO CONTRACTS ISSUED PURSUANT TO THE
ANNUITANT ELECTION OF THE 7-YEAR CDSC SCHEDULE, WHICH IS AT [-0.25%] OF THE
DAILY NET ASSET VALUE OF THE VARIABLE ACCOUNT. TO THE EXTENT THE TERMS OF THE
CONTRACT AND THIS RIDER ARE INCONSISTENT, THE TERMS OF THIS RIDER SHALL CONTROL.
The following is added to the DEFINITION section of the Contract:
PURCHASE PAYMENT YEAR - Each 12 month period starting from the date the Purchase
Payment is made.
The SURRENDERS section is amended by replacing item 4 of the section with the
following:
4. When written application is received, the Company will surrender the number
of Variable Account Accumulation Units and any amount from any GTO under the
Multiple Maturity Account and any amount from any other options under this
Contract needed to equal: (a) the dollar amount requested; plus (b) any
Contingent Deferred Sales Charge (CDSC); minus (c) any applicable taxes.
The SURRENDER VALUE section is amended by replacing it with the following:
The surrender value at anytime will be the Contract Value less the sum of any
applicable CDSC and taxes.
The following sections are added to the Contract:
CONTINGENT DEFERRED SALES CHARGE
If part or all of the Contract Value is withdrawn, a CDSC may be made by the
Company. The CDSC is designed to cover expenses relating to the sale of the
Contract.
The CDSC is calculated by multiplying the applicable CDSC percentages noted
below by the Purchase Payments that are withdrawn. For purposes of calculating
the amount of the CDSC, withdrawals are considered to come first from the oldest
Purchase Payment made to the Contract, then from the next oldest Purchase
Payment and so forth, with any earnings attributable to such Purchase Payments
considered only after all Purchase Payments made to the Contract have been
considered. (For federal income tax purposes, a full or partial withdrawal is
treated as a withdrawal of earnings first.)
Years* Measured From Date of Payment: 1 2 3 4 5 6 7 Thereafter
- -------------------------------------------------------------------------------
CDSC %: 7% 7% 6% 5% 4% 3% 2% 0%
*The CDSC percentage will change to the next year's CDSC percentage on the last
day of the Purchase Payment Year.
CDSC, if applicable, will be assessed against full or partial surrenders from
GTOs. If any such surrender occurs prior to the Maturity Date for any particular
GTO, the amount surrendered will be subject to an MVA in addition to CDSC.
APO-4405-A 1 (AO) (10/99)
<PAGE> 7
WITHDRAWALS WITHOUT CHARGE
During each Contract Year, the Annuitant may withdraw without CDSC a total
amount equal to the greater of (1) or (2) where (1) is the lesser of 10% of the
sum of all Purchase Payments made to the Contract reduced by Purchase
Payments withdrawn or 10% of the Contract Value and (2) is the amount required
to meet Minimum Distribution requirements for this Contract. This CDSC-free
withdrawal privilege is non-cumulative; that is, free amounts not taken during
any given Contract Year cannot be taken as free amounts in subsequent Contract
Years.
A CDSC will not be assessed against the withdrawal of any: (1) Purchase Payments
which have been held under this Contract for at least [84] months; (2) earnings
attributable to Purchase Payments made to this Contract; (3) Death Benefit
payments made upon the death of the Annuitant prior to the Annuitization Date;
(4) amounts applied to an Annuity Payment Option after two years from the Date
of Issue; (5) amounts transferred among the Sub-Accounts and the GTOs under the
Multiple Maturity Account, or (6) as otherwise noted in the Contract.
In addition, when this Contract is exchanged for another contract issued by the
Company or any of its affiliate insurance companies, of the type and class which
the Company determines is eligible for such waiver, the Company will waive the
CDSC on the first contract. A CDSC may apply to the contract received in the
exchange.
The SYSTEMATIC WITHDRAWALS section has been amended by replacing it with the
following:
The Annuitant may elect in writing on a form provided by the Company to take
systematic withdrawals of a specified dollar amount (of at least $100) on a
monthly, quarterly, semi-annual or annual basis. The Company will process the
withdrawals as directed by surrendering on a pro-rata basis Accumulation Units
from all of the Sub-Accounts in which the Annuitant has an interest, and the
Multiple Maturity Account. A CDSC may apply to systematic withdrawals in
accordance with the considerations set forth in the "Contingent Deferred Sales
Charge" and "Withdrawals Without Charge" provisions of the rider. Unless
otherwise directed by the Annuitant, the Company will withhold federal income
taxes from each systematic withdrawal. An age-based systematic withdrawal
program (see following paragraph) will terminate automatically at the end of
each Contract Year and may be reinstated only on or after the next Contract
Anniversary pursuant to a new request. Unless the Annuitant has made an
irrevocable election of distributions of substantially equal periodic payments,
the systematic withdrawals may be discontinued at any time by notification to
the Company in writing. The Company reserves the right to discontinue
prospective systematic withdrawals.
If the Annuitant withdraws amounts pursuant to a systematic withdrawal program,
then the Annuitant may withdraw each Contract Year without a CDSC an amount up
to the greater of (1) free withdrawal privilege described in "Withdrawals
Without Charge" section of the rider, (2) the amount required to meet Minimum
Distribution requirements for this Contract, or (3) the specified percentage of
the Contract Value based on the Annuitant's age, as shown in the following
table:
<TABLE>
<CAPTION>
ANNUITANT'S AGE PERCENTAGE OF CONTRACT VALUE
--------------- ----------------------------
<S> <C>
Under 59-1/2 5%
59-1/2 thru 61 7%
62 thru 64 8%
65 thru 74 10%
75 and over 13%
</TABLE>
If the total amounts withdrawn in any Contract Year exceed the CDSC-free amount
as calculated under the systematic withdrawal method described above, then such
total withdrawn amounts will be eligible only for CDSC-free withdrawal privilege
described in the "Withdrawals Without Charge" section of the rider, and the
total amount of CDSC charged during the Contract Year will be determined in
accordance with those sections.
The Contract Value and the Annuitant's age for purposes of applying the
CDSC-free withdrawal percentage described above are determined as of the date
the request for a systematic withdrawal program is received and recorded by the
Company at its Home Office. Furthermore, this CDSC-free withdrawal privilege for
systematic withdrawals is non-cumulative, that is, free amounts not taken during
any given Contract Year cannot be taken as free amounts in a subsequent Contract
Year.
APO-4405-A 2 (AO) (10/99)
<PAGE> 8
Systematic withdrawals are not available prior to the expiration of the free
look provision of the Contract. The Company reserves the right to assess a
processing fee for this service.
IF THE ANNUITANT HAS ELECTED AN MVA/GTO OPTION, THE FOLLOWING LANGUAGE SHALL BE
ADDED TO THE CONTRACT:
An MVA will apply against all amounts which are transferred or surrendered from
allocations under a GTO prior to the Maturity Period for the particular GTO.
During the Maturity Period, allocations under a GTO may be transferred,
surrendered, or distributed for any other reason without any MVA (a CDSC may
apply on amounts surrendered). At all times other than during a Maturity Period,
an MVA will apply to amounts distributed from allocations under a GTO.
/s/ Dennis W. Click /s/ Joseph J. Gasper
SECRETARY PRESIDENT
APO-4405-A 3 (AO) (10/99)
<PAGE> 1
ITEM 24(b)
EXHIBIT NO. 5
VARIABLE ANNUITY APPLICATION
<PAGE> 2
[LOGO] THE BEST OF AMERICA(R) SUCCESSOR(SM) ANNUITY
APPLICATION
INDIVIDUAL DEFERRED VARIABLE ANNUITY
[$15,000] MINIMUM INITIAL PAYMENT
Nationwide Life Insurance Company
[P.O. Box 16609]
Columbus, OH 43215
- --------------------------------------------------------------------------------
PLAN TYPE An option must be selected
This contract is established as a: [ ] IRA Rollover [ ] Roth IRA Rollover
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS Maximum issue age through age 85.
[ ] STANDARD DEATH BENEFIT
[ ] 1 - YEAR ANNIVERSARY *
[ ] 5 - YEAR ANNIVERSARY *
OTHER OPTIONS
[ ] 5 YEAR CONTINGENT DEFERRED SALES CHARGE *
[ ] 7 YEAR CONTINGENT DEFERRED SALES CHARGE *
[ ] REDUCED PURCHASE PAYMENT RIDER *
[ ] INCOME GUARD (Not available in NJ or CA) *
ONLY AVAILABLE FOR ANNUITANTS AGE 82 OR LESS
*ELECTION OF THIS OPTION WILL INCREASE OR DECREASE THE
VARIABLE ACCOUNT CHARGE, PLEASE SEE PROSPECTUS.
- --------------------------------------------------------------------------------
CONTRACT OWNER
Last Name
First Name (continued) MI
Address ____________________________________
____________________________________
Sex [ ] M [ ] F Birthdate / /
-----------------
MM DD YYYY
Soc. Sec. No. or Tax ID _____________________________
ANNUITANT
Last Name Complete only if different from primary Contract Owner
First Name MI
Address ____________________________________
____________________________________
Maximum issue age through age 85
Sex [ ] M [ ] F Birthdate / /
-----------------
MM DD YYYY
Soc. Sec. No. or Tax ID _____________________________
- --------------------------------------------------------------------------------
BENEFICIARY Whole percentages only, must total 100%.
<TABLE>
<CAPTION>
Relationship Birthdate
Primary Contingent Print Full Name (Last, First, MI) Allocation to Annuitant Soc. Sec. No. MM/DD/YYYY
<S> <C> <C> <C> <C> <C> <C>
[ ] _________________________________ _________% ____________ _____________ ___/___/_____
[ ] [ ] _________________________________ _________% ____________ _____________ ___/___/_____
[ ] [ ] _________________________________ _________% ____________ _____________ ___/___/_____
[ ] [ ] _________________________________ _________% ____________ _____________ ___/___/_____
</TABLE>
APO-4297-A Product of Nationwide Life Insurance Co. AO (10/99)
<PAGE> 3
- --------------------------------------------------------------------------------
NOTICE TO ALL RESIDENTS (FL, MN, ND, PA, SC, SD, TX, VT )
---------------------------------------------------------
ANNUITY PAYMENTS, DEATH BENEFITS, SURRENDER VALUES, AND OTHER CONTRACT VALUES
PROVIDED BY THIS CONTRACT, WHEN BASED ON THE INVESTMENT EXPERIENCE OF A SEPARATE
ACCOUNT, OR WHEN SUBJECT TO A MARKET VALUE ADJUSTMENT ARE VARIABLE, MAY INCREASE
OR DECREASE IN ACCORDANCE WITH THE FLUCTUATIONS IN THE NET INVESTMENT FACTOR OR
APPLICATION OF A MARKET VALUE ADJUSTMENT, AS APPLICABLE, AND ARE NOT GUARANTEED
AS TO THE FIXED-DOLLAR AMOUNT, UNLESS OTHERWISE SPECIFIED. A MARKET VALUE
ADJUSTMENT MAY BE ASSESSED ON ANY GUARANTEED TERM OPTIONS THAT HAVE NOT MATURED
JUST PRIOR TO ANNUITIZATION AND WOULD BE IN ADDITION TO THE SCHEDULED SURRENDER
PENALTY CHARGE.
ADDITIONALLY, ANY BENEFITS, VALUES OR PAYMENTS BASED ON PERFORMANCE OF THE
UNDERLYING INVESTMENT OPTIONS MAY VARY AND ARE NOT GUARANTEED BY NATIONWIDE LIFE
INSURANCE COMPANY, ANY OTHER INSURANCE COMPANY, BY THE U.S. GOVERNMENT, OR ANY
STATE GOVERNMENT. THEY ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD OR ANY AGENCY FEDERAL OR STATE.
NOTICE TO ALL RESIDENTS (AR, DC, FL, KY, LA, ME, NJ, NM, OH, PA)
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ANY PERSON WHO, KNOWINGLY AND WITH INTENT TO INJURE, DEFRAUD OR DECEIVE ANY
INSURANCE COMPANY OR OTHER PERSON, FILES AN APPLICATION FOR INSURANCE OR
STATEMENT OF CLAIM CONTAINING ANY MATERIALLY FALSE INFORMATION OR CONCEALS FOR
THE PURPOSE OF MISLEADING, INFORMATION CONCERNING ANY FACT MATERIAL THERETO
COMMITS A FRAUDULENT INSURANCE ACT, WHICH IS A CRIME AND MAY SUBJECT SUCH PERSON
TO CRIMINAL AND CIVIL PENALTIES, FINES, IMPRISONMENT, OR A DENIAL OF INSURANCE
BENEFITS.
FOR AZ RESIDENTS ONLY: TEN DAY FREE LOOK
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TO BE SURE THAT THE ANNUITANT IS SATISFIED WITH THIS CONTRACT, THE ANNUITANT HAS
TEN DAYS TO EXAMINE THE CONTRACT AND RETURN IT TO THE HOME OFFICE OR THE AGENT
THROUGH WHOM IT WAS PURCHASED, FOR ANY REASON. WHEN THE CONTRACT IS RECEIVED IN
THE HOME OFFICE, THE COMPANY WILL RETURN THE CONTRACT VALUE TO THE ANNUITANT,
WITHOUT DEDUCTION FOR ANY SALES CHARGES OR ADMINISTRATIVE FEE AS OF THE DATE OF
CANCELLATION, WHERE PERMITTED BY LAW.
FOR AZ RESIDENTS ONLY:
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UPON WRITTEN REQUEST, THE COMPANY AGREES TO PROVIDE, WITHIN A REASONABLE TIME,
REASONABLE FACTUAL INFORMATION REGARDING THE BENEFITS AND PROVISIONS OF THE
ANNUITY CONTRACT TO THE ANNUITANT.
FOR MN RESIDENTS ONLY:
----------------------
THIS POLICY OR CONTRACT IS NOT PROTECTED BY THE MINNESOTA LIFE AND HEALTH
INSURANCE GUARANTY ASSOCIATION OR THE MINNESOTA INSURANCE GUARANTY ASSOCIATION.
IN THE CASE OF INSOLVENCY, PAYMENT OF CLAIMS IS NOT GUARANTEED.
ONLY THE ASSETS OF THE INSURER WILL BE AVAILABLE TO PAY YOUR CLAIM.
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REMARKS
APO-4297-A Product of Nationwide Life Insurance Co. AO (10/99)
<PAGE> 4
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ANNUITY PURCHASE PAYMENTS [ ] Rollover [ ] Apply for tax year _______
First Purchase Payment $__________ ([$15,000] MINIMUM INITIAL PAYMENT)
submitted. A copy of this application properly signed by the producer will
constitute receipt for such amount. If this application is declined by the
Company, there will be no liability on the part of the Company, and any payments
submitted with this application will be refunded.
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PURCHASE PAYMENT ALLOCATION A contract cannot be issued unless this section
is complete. Whole percentages only, must total
100%.
AMERICAN CENTURY
____% Growth: Investor Class
____% Income & Growth: Advisor Class
____% International Growth: Advisor Class
____% Short-Term Government: Investor Class
____% Ultra: Investor Class
DREYFUS
____% Appreciation Fund, Inc.
____% Balanced Fund, Inc.
____% Emerging Leaders Fund
____% Premier Third Century Fund, Inc.
FEDERATED
____% Bond Fund - Class F
____% High Yield Trust
FIDELITY ADVISOR
____% Balanced Fund - Class A
____% Equity Income Fund - Class A
____% Growth Opportunities Fund - Class A
____% High Yield Fund - Class T
FRANKLIN MUTUAL SERIES FUND, INC.
____% Mutual Shares Fund: Class A
____% Small Cap Growth Fund - Class A
INVESCO
____% Dynamics Fund
____% Small Company Growth Fund
____% Total Return Fund
JANUS
____% Fund
____% Twenty Fund
____% Worldwide Fund
LAZARD
____% Small Cap Portfolio - Open Shares
NATIONWIDE(R) FUNDS
____% Nationwide(R) Bond Fund - Class D
____% Nationwide(R) Fund - Class D
____% Nationwide(R) Growth Fund - Class D
____% Nationwide(R) Intermediate U.S. Government Bond Fund - Class D
____% Nationwide(R) Money Market Fund - Class R
____% Nationwide S&P 500(R) Index Fund - Class R
NEUBERGER BERMAN
____% Genesis Trust
____% Guardian Trust
____% Partners Trust
OPPENHEIMER
____% Oppenheimer Global Fund: Class A
PRESTIGE
____% Balanced Fund - Class A
____% International Fund - Class A
____% Large Cap Growth Fund - Class A
____% Large Cap Value Fund - Class A
____% Small Cap Fund - Class A
STRONG
____% Common Stock Fund, Inc.
TEMPLETON
____% Templeton Foreign Fund - Class A
MVA/GUAR. TERM OPTION (GTO) NOT AVAILABLE IN PA, MD, NJ, OR WA
____% 3 Year
____% 5 Year $1,000 minimum for each MVA/GTO option
____% 7 Year
____% 10 Year
APO-4297-A Product of Nationwide Life Insurance Co. AO (10/99)
<PAGE> 5
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CONTRACT OWNER SIGNATURES
I hereby represent my answers to the above questions to be accurate and complete
and acknowledge that I have received a copy of the current prospectus for this
variable annuity contract.
[ ] Yes [ ] No Do you have any reason to believe the Contract applied for
is to replace existing annuities or insurance?
[ ] Please send me a copy of the statement of additional information to the
prospectus.
STATE IN WHICH APPLICATION WAS SIGNED ___________________ DATE ________________
State
ANNUITANT _____________________________________________________________________
Signature
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PRODUCER INFORMATION
[ ] Yes [ ] No Do you have any reason to believe the Contract applied for
is to replace existing annuities or insurance?
PRODUCER SIGNATURE _______________________________________
Signature
FLORIDA LICENSE IDENTIFICATION NO.: _______________
PRODUCER'S NAME (print) _______________________ PRODUCER SSN __________
FIRM NAME _____________________________________ PHONE (___)____________
ADDRESS _______________________________________
_______________________________________
_______________________________________
APO-4297-A Product of Nationwide Life Insurance Co. AO (10/99)
