<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 333-80481
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
PRE-EFFECTIVE AMENDMENT NO. 2 [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. May 1, 2000 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.
================================================================================
<PAGE> 2
<TABLE>
NATIONWIDE VARIABLE ACCOUNT
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<CAPTION>
N-4 ITEM CAPTION
<S> <C>
PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page.................................................................................Cover Page
Item 2. Definitions.................................................................Glossary of Special Terms
Item 3. Synopsis or Highlights......................................................Synopsis of the Contracts
Item 4. Condensed Financial Information.......................................Condensed Financial Information
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies ..........................Nationwide Life Insurance Company; Investing in the Contract
Item 6. Deductions and Expenses...............................................Standard Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts.......................................Contract Ownership; Operation of the Contract
Item 8. Annuity Period...............................................................Annuitizing the Contract
Item 9. Death Benefit and Distributions........................................................Death Benefits
Item 10. Purchases and Contract Value................................................Operation of the Contract
Item 11. Redemptions....................................................................Surrender (Redemption)
Item 12. Taxes ....................................................................Federal Tax Considerations
Item 13. Legal Proceedings...................................................................Legal Proceedings
Item 14. Table of Contents of the Statement of Additional
Information.........................Table of Contents of the Statement of Additional Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.................................................................................Cover Page
Item 16. Table of Contents...................................................................Table of Contents
Item 17. General Information and History.......................................General Information and History
Item 18. Services.....................................................................................Services
Item 19. Purchase of Securities Being Offered.............................Purchase of Securities Being Offered
Item 20. Underwriters.............................................................................Underwriters
Item 21. Calculation of Performance Information....................................Calculations of Performance
Item 22. Annuity Payments.....................................................................Annuity Payments
Item 23. Financial Statements.............................................................Financial Statements
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.............................................................Item 24
Item 25. Directors and Officers of the Depositor.......................................................Item 25
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant..............................................................Item 26
Item 27. Number of Contract Owners.....................................................................Item 27
Item 28. Indemnification...............................................................................Item 28
Item 29. Principal Underwriter.........................................................................Item 29
Item 30. Location of Accounts and Records..............................................................Item 30
Item 31. Management Services...........................................................................Item 31
Item 32. Undertakings..................................................................................Item 32
</TABLE>
<PAGE> 3
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 May 1, 2000.
- --------------------------------------------------------------------------------
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life Insurance
Company and its affiliates. This process will aid in determining whether the
purchase of the contract described in this prospectus is consistent with an
individual's goals, risk tolerance, time horizon, marital status, tax situation,
and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
The 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. - Class Z
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 - Service Class
o Nationwide S&P 500(R) Index Fund - Service Class
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
1
<PAGE> 4
*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 May 1, 2000) 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__.
For general information or to obtain FREE copies of the:
o Statement of Additional Information;
o prospectus, annual or semi-annual report 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 contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<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 of measure used to calculate annuitization
payments when the variable annuity payment option is chosen.
CONTRACT VALUE- The total of all accumulation units in a contract plus any
amount held under Guaranteed Term Options.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
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 ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
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 - each sub-account corrsponds to a single underlying
mutual fund.
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.
3
<PAGE> 6
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS.............................
SUMMARY OF CONTRACT EXPENSES..........................
UNDERLYING MUTUAL FUND ANNUAL EXPENSES................
EXAMPLE...............................................
SYNOPSIS OF THE CONTRACTS.............................
FINANCIAL STATEMENTS..................................
NATIONWIDE LIFE INSURANCE COMPANY.....................
NATIONWIDE INVESTMENT SERVICES CORPORATION............
INVESTING IN THE CONTRACT.............................
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
STANDARD CHARGES AND DEDUCTIONS.......................
Mortality and Expense Risk Charge
Premium Taxes
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS....
CDSC Options
Reduced Purchase Payment Option
Death Benefit Options
Guaranteed Minimum Income Benefit Option
OWNERSHIP RIGHTS......................................
Contract Owner
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT.............................
Minimum Initial and Subsequent Purchase Payments
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers
RIGHT TO REVOKE.......................................
SURRENDER (REDEMPTION)................................
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
ASSIGNMENT............................................
SERVICES..............................................
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE.............................
ANNUITIZING THE CONTRACT..............................
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Frequency and Amount of Annuity Payments
Guaranteed Minimum Income Benefit Option ("GMIB")
Annuity Payment Options
DEATH BENEFITS........................................
Death of Annuitant
Death Benefit Payment
REQUIRED DISTRIBUTIONS................................
Individual Retirement Accounts
Roth IRAs
FEDERAL TAX CONSIDERATIONS............................
Federal Income Taxes
Individual Retirement Accounts
Roth IRA Accounts
Withholding
Federal Estate, Gift, and Generation Skipping
Transfer Taxes
Tax Changes
STATEMENTS AND REPORTS................................
LEGAL PROCEEDINGS.....................................
ADVERTISING...........................................
TABLE OF CONTENTS OF STATEMENT OF
ADDITIONAL INFORMATION............................
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS....
4
<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 applicant.
The optional benefits listed below may be chosen by applicants 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 applicant chooses one or more 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
Standard Contract Contingent Deferred Sales Charge ("CDSC") (as a percentage of
purchase payments surrendered)..........................................0%
VARIABLE ACCOUNT ANNUAL EXPENSES(1)
(as a percentage of the daily net assets of the varible account)
Mortality and Expense Risk Charge....................................1.20%
Total Variable Account Annual
Expenses........................................................1.20%(2)
The standard contract does not include a CDSC. However, if the applicant
chooses, a CDSC schedule may be elected in return for a reduction in the
standard contract Variable Account Annual Expenses.
CDSC OPTIONS AVAILABLE AT THE TIME OF APPLICATION
7 YEAR CDSC OPTION
Maximum Contingent Deferred Sales Charge ("CDSC") (as a percentage of purchase
payments surrendered)...................................................7%
Range of 7 Year CDSC over time:
-------------------------- ----------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
-------------------------- ----------------------
0 7%
-------------------------- ----------------------
1 7%
-------------------------- ----------------------
2 7%
-------------------------- ----------------------
3 6%
-------------------------- ----------------------
4 5%
-------------------------- ----------------------
5 4%
-------------------------- ----------------------
6 3%
-------------------------- ----------------------
7 2%
-------------------------- ----------------------
Thereafter 0%
-------------------------- ----------------------
VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF THE DAILY NET ASSETS OF THE
VARIABLE ACCOUNT)
Mortality and Expense Risk Charge
(including the 7 Year CDSC Option)..............0.95%(1,3)
5 YEAR CDSC OPTION
Maximum Contingent Deferred Sales Charge ("CDSC") (as a percentage of purchase
payments surrendered)....................................................7%
Range of 5 Year CDSC over time:
-------------------------- ----------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
-------------------------- ----------------------
0 7%
-------------------------- ----------------------
1 7%
-------------------------- ----------------------
2 7%
-------------------------- ----------------------
3 6%
-------------------------- ----------------------
4 4%
-------------------------- ----------------------
5 2%
-------------------------- ----------------------
Thereafter 0%
-------------------------- ----------------------
VARIABLE ACCOUNT ANNUAL EXPENSES (AS A PERCENTAGE OF THE DAILY NET ASSETS OF THE
VARIABLE ACCOUNT)
Mortality and Expense Risk Charge
(including the 5 Year CDSC Option)..............1.10%(1,4)
- --------------------------------------------------------------------------------
(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. The variable account annual expenses are charged
on a daily basis at the annual rate determined by the optional benefits
elected.
5
<PAGE> 8
(2) Charges shown include the Standard Contractual Death Benefit that is
included in the standard contract (see "Death Benefit Payment").
(3) If the 7 Year CDSC Option is chosen at the time of application, the
standard contract variable account annual expenses will be REDUCED by
0.25%, making total variable account annual expenses equal to 0.95% of the
daily net assets of the variable account.
(4) If the 5 Year CDSC Option is chosen at the time of application, the
standard contract Variable Account Annual Expenses will be REDUCED by
0.10%, making total variable account annual expenses equal to 1.10% of the
daily net assets of the variable account.
For additional information on CDSC Options, see "Optional Contract Benefits,
Charges and Deductions" in the prospectus.
ADDITIONAL CONTRACT OPTIONS AVAILABLE AT THE TIME OF APPLICATION
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
An applicant may elect one of two Guaranteed Minimum Income Benefit options
(see "Guaranteed Minimum Income Benefit Options").
Guaranteed Minimum Income Benefit
Option 1.....................................0.45%
Total Variable Account Annual
Expenses (including Guaranteed
Minimum Income Benefit Option 1)...........1.65%
Guaranteed Minimum Income Benefit
Option 2.....................................0.30%
Total Variable Account Annual
Expenses (including Guaranteed
Minimum Income Benefit Option 2).........1.50%
6
<PAGE> 9
<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: Income & Growth - Advisor Class 0.43% 0.00% 0.50% 0.93%
- -----------------------------------------------------------------------------------------------------------------------------
American Century: Growth - Investor Class 1.00% 0.00% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
American Century: International Growth - Advisor Class 1.02% 0.00% 0.50% 1.52%
- -----------------------------------------------------------------------------------------------------------------------------
American Century: Short Term Government - Investor Class 0.59% 0.00% 0.00% 0.59%
- -----------------------------------------------------------------------------------------------------------------------------
American Century: Ultra - Investor Class 1.00% 0.00% 0.00% 1.00%
- -----------------------------------------------------------------------------------------------------------------------------
Dreyfus Appreciation Fund, Inc. 0.28% 0.25% 0.36% 0.89%
- -----------------------------------------------------------------------------------------------------------------------------
Dreyfus Balanced Fund, Inc. 0.60% 0.12% 0.22% 0.94%
- -----------------------------------------------------------------------------------------------------------------------------
Dreyfus Emerging Leaders Fund 0.90% 0.23% 0.25% 1.38%
- -----------------------------------------------------------------------------------------------------------------------------
Dreyfus Premier Third Century Fund, Inc. - Class Z 0.75% 0.10% 0.11% 0.96%
- -----------------------------------------------------------------------------------------------------------------------------
Federated Bond Fund - Class F 0.64% 0.45% 0.00% 1.09%
- -----------------------------------------------------------------------------------------------------------------------------
Federated High Yield Trust 0.54% 0.34% 0.00% 0.88%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Balanced Fund - Class A 0.43% 0.25% 0.25% 0.93%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Equity Income Fund - Class A 0.48% 0.26% 0.25% 0.99%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Growth Opportunities Fund - Class A 0.43% 0.24% 0.25% 0.92%
- -----------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor High Yield Fund - Class T 0.58% 0.21% 0.25% 1.04%
- -----------------------------------------------------------------------------------------------------------------------------
Franklin Mutual Series Fund Inc. - Mutual Shares Fund:
Class A 0.56% 0.21% 0.35% 1.12%
- -----------------------------------------------------------------------------------------------------------------------------
Franklin Small Cap Growth Fund - Class A 0.46% 0.23% 0.25% 0.94%
- -----------------------------------------------------------------------------------------------------------------------------
INVESCO Dynamics Fund 0.52% 0.27% 0.25% 1.04%
- -----------------------------------------------------------------------------------------------------------------------------
INVESCO Small Company Growth Fund 0.72% 0.65% 0.25% 1.62%
- -----------------------------------------------------------------------------------------------------------------------------
INVESCO Total Return Fund 0.56% 0.23% 0.25% 1.04%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Fund 0.65% 0.20% 0.00% 0.85%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 0.65% 0.23% 0.00% 0.88%
- -----------------------------------------------------------------------------------------------------------------------------
Janus Worldwide Fund 0.65% 0.24% 0.00% 0.89%
- -----------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Portfolio - Open Shares 0.75% 0.09% 0.25% 1.09%
- -----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Bond Fund - Class D 0.50% 0.33% 0.00% 0.83%
- -----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Fund - Class D 0.56% 0.17% 0.00% 0.73%
- -----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Growth Fund - Class D 0.58% 0.22% 0.00% 0.80%
- -----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Intermediate U.S. Government Bond Fund -
Class D 0.50% 0.29% 0.00% 0.79%
- -----------------------------------------------------------------------------------------------------------------------------
Nationwide(R)Money Market Fund - Service Class 0.40% 0.09% 0.15% 0.64%
- -----------------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R)Index Fund - Service Class 0.13% 0.35% 0.15% 0.63%
- -----------------------------------------------------------------------------------------------------------------------------
Neuberger Berman Genesis Trust 1.12% 0.11% 0.00% 1.23%
- -----------------------------------------------------------------------------------------------------------------------------
Neuberger Berman Guardian Trust 0.84% 0.04% 0.00% 0.88%
- -----------------------------------------------------------------------------------------------------------------------------
Neuberger Berman Partners Trust 0.85% 0.06% 0.00% 0.91%
- -----------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund - Class A 0.69% 0.26% 0.21% 1.16%
- -----------------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund - Class A 0.75% 0.10% 0.25% 1.10%
- -----------------------------------------------------------------------------------------------------------------------------
Prestige International Fund - Class A 0.85% 0.20% 0.25% 1.30%
- -----------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth Fund - Class A 0.80% 0.15% 0.25% 1.20%
- -----------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund - Class A 0.75% 0.15% 0.25% 1.15%
- -----------------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund - Class A 0.95% 0.15% 0.25% 1.35%
- -----------------------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 1.00% 0.17% 0.00% 1.17%
- -----------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund - Class A 0.61% 0.27% 0.25% 1.13%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 10
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value in calculating the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide.
Some underlying mutual funds are subject to fee waivers and expense
reimbursements. The following chart shows what the expenses would have been for
such funds without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Management Other 12b-1 Total Underlying
Fees Expenses Fees Mutual Fund Annual Expenses
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Federated Bond Fund - Class F 0.75% 0.47% 0.00% 1.22%
- ---------------------------------------------------------------------------------------------------------------------------
Federated High Yield Trust 0.75% 0.39% 0.00% 1.14%
- ---------------------------------------------------------------------------------------------------------------------------
Franklin Mutual Series Fund Inc. - Mutual Shares Fund:
Class A 0.60% 0.21% 0.35% 1.16%
- ---------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Intermediate U.S. Government Bond Fund -
Class D 0.50% 0.31% 0.00% 0.81%
- ---------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund - Service Class 0.40% 0.24% 0.15% 0.79%
- ---------------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index Fund - Service Class 0.13% 0.54% 0.15% 0.82%
- ---------------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund - Class A 0.75% 2.44% 0.25% 3.44%
- ---------------------------------------------------------------------------------------------------------------------------
Prestige International Fund - Class A 0.85% 1.77% 0.25% 2.87%
- ---------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth Fund - Class A 0.80% 0.64% 0.25% 1.69%
- ---------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund - Class A 0.75% 0.87% 0.25% 1.87%
- ---------------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund - Class A 0.95% 1.04% 0.25% 2.24%
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Nationwide provides the Summary of Contract Expenses and Underlying Mutual Fund
Annual Expenses to assist the contract owner 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 the
tables. Premium taxes are not included in the tables, but may apply (see
"Premium Taxes").
8
<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 example reflects expenses of both the variable account and the underlying
mutual funds. The example reflects an assumed variable account charge of 2.05%,
which is the maximum amount 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you annuitize your
If you surrender your contract If you do not surrender 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
Government - Investor Class 28 85 145 307 28 85 145 307 * 85 145 307
- --------------------------------------------------------------------------------------------------------------------------
American Century: Income &
Growth - Advisor Class 31 96 162 341 31 96 162 341 * 96 162 341
- --------------------------------------------------------------------------------------------------------------------------
American Century: Growth -
Investor Class 32 98 166 347 32 98 166 347 * 98 166 347
- --------------------------------------------------------------------------------------------------------------------------
American Century:
International Growth -
Advisor Class 37 114 192 397 37 114 192 397 * 114 192 397
- --------------------------------------------------------------------------------------------------------------------------
American Century: Ultra -
Investor Class 32 98 166 347 32 98 166 347 * 98 166 347
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Appreciation Fund,
Inc. 31 94 160 337 31 94 160 337 94 160 337
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Balanced Fund, Inc. 31 96 163 342 31 96 163 342 * 96 163 342
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Emerging Leaders Fund 36 110 185 384 36 110 185 384 * 110 185 384
- --------------------------------------------------------------------------------------------------------------------------
Dreyfus Premier Third Century
Fund, Inc. - Class Z 32 97 164 344 32 97 164 344 * 97 164 344
- --------------------------------------------------------------------------------------------------------------------------
Federated Bond Fund - Class F 33 101 171 356 33 101 171 356 101 171 356
- --------------------------------------------------------------------------------------------------------------------------
Federated High Yield Trust 31 94 160 336 31 94 160 336 * 94 160 336
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Balanced
Fund - Class A 31 96 162 341 31 96 162 341 * 96 162 341
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Equity
Income Fund - Class A 32 98 165 346 32 98 165 346 * 98 165 346
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor Growth
Opportunities Fund - Class A 31 95 162 340 31 95 162 340 * 95 162 340
- --------------------------------------------------------------------------------------------------------------------------
Fidelity Advisor High Yield
Fund - Class T 32 99 168 351 32 99 168 351 * 99 168 351
- --------------------------------------------------------------------------------------------------------------------------
Franklin Mutual Series Fund,
Inc. - Mutual Shares Fund:
Class A 33 102 172 359 33 102 172 359 * 102 172 359
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 12
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
If you annuitize your
If you surrender your contract If you do not surrender 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
Fund - Class A 31 96 163 342 31 96 163 342 * 96 163 342
- --------------------------------------------------------------------------------------------------------------------------
INVESCO Dynamics Fund 32 99 168 351 32 99 168 351 * 99 168 351
- --------------------------------------------------------------------------------------------------------------------------
INVESCO Small Company Growth
Fund 39 117 197 406 39 117 197 406 * 117 197 406
- --------------------------------------------------------------------------------------------------------------------------
INVESCO Total Return Fund 32 99 168 351 32 99 168 351 * 99 168 351
- --------------------------------------------------------------------------------------------------------------------------
Janus Fund 30 93 158 333 30 93 158 333 * 93 158 333
- --------------------------------------------------------------------------------------------------------------------------
Janus Twenty Fund 31 94 160 336 31 94 160 336 * 94 160 336
- --------------------------------------------------------------------------------------------------------------------------
Janus Worldwide Fund 31 94 160 337 31 94 160 337 * 94 160 337
- --------------------------------------------------------------------------------------------------------------------------
Lazard Small Cap Portfolio -
Open Shares 33 101 171 356 33 101 171 356 * 101 171 356
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Bond Fund -
Class D 30 93 157 331 30 93 157 331 * 93 157 331
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Fund - Class D 29 89 152 321 29 89 152 321 * 89 152 321
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Growth Fund -
Class D 30 92 156 328 30 92 156 328 * 92 156 328
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Intermediate U.S.
Government Bond Fund - Class D 30 91 155 327 30 91 155 327 * 91 155 327
- --------------------------------------------------------------------------------------------------------------------------
Nationwide(R) Money Market Fund
- - Service Class 28 87 148 312 28 87 148 312 * 87 148 312
- --------------------------------------------------------------------------------------------------------------------------
Nationwide S&P 500(R) Index
Fund - Service Class 28 86 147 311 28 86 147 311 * 86 147 311
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman Genesis Trust 34 105 178 370 34 105 178 370 * 105 178 370
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman Guardian
Trust 31 94 160 336 31 94 160 336 * 94 160 336
- --------------------------------------------------------------------------------------------------------------------------
Neuberger Berman Partners
Trust 31 95 161 339 31 95 161 339 * 95 161 339
- --------------------------------------------------------------------------------------------------------------------------
Oppenheimer Global Fund -
Class A 34 103 174 363 34 103 174 363 * 103 174 363
- --------------------------------------------------------------------------------------------------------------------------
Prestige Balanced Fund -
Class A 33 101 171 357 33 101 171 357 * 101 171 357
- --------------------------------------------------------------------------------------------------------------------------
Prestige International Fund -
Class A 35 107 181 376 35 107 181 376 * 101 181 376
- --------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Growth
Fund - Class A 34 104 176 367 34 104 176 367 * 104 176 367
- --------------------------------------------------------------------------------------------------------------------------
Prestige Large Cap Value Fund
- - Class A 34 102 174 362 34 102 174 362 * 102 174 362
- --------------------------------------------------------------------------------------------------------------------------
Prestige Small Cap Fund -
Class A 36 109 184 381 36 109 184 381 * 109 184 381
- --------------------------------------------------------------------------------------------------------------------------
Strong Common Stock Fund, Inc. 34 103 175 364 34 103 175 364 * 103 175 364
- --------------------------------------------------------------------------------------------------------------------------
Templeton Foreign Fund -
Class A 33 102 173 360 33 102 173 360 * 102 173 360
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*The contracts sold under this prospectus do not permit annuitization during the
first two contract years.
10
<PAGE> 13
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are individual deferred variable
annuity contracts, which can be categorized as:
o Individual Retirement Annuities with contributions rolled over or
transferred from certain tax-qualified plans;*
o Roth IRAs;
o SEP IRAs; and
o Simple IRAs
*Contributions are not required to be rolled-over or transferred if the contract
owner elects the Reduced Purchase Payment Option.
For more detailed information with regard to the differences in contract types,
please see "Types of Contracts" later in this prospectus.
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 contract owner has elected 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 contract owner has elected one
of two optional Contingent Deferred Sales Charge ("CDSC") schedules in exchange
for a reduction of variable account charges. If the contract owner has elected
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 contract owner has elected 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. Nationwide will
deduct either a charge equal to an annual rate of 0.05% of the daily net assets
of the variable account if the Five-Year Step Up Death Benefit is elected, or
0.10% of the daily net assets of the variable account if the One-Year Step Up
Death Benefit is elected.
Two Guaranteed Minimum Income Benefit options are available under the contract.
If the contract owner elects one of the Guaranteed Minimum Income Benefit
options, Nationwide will deduct an additional charge equal to an annual rate of
0.45% or 0.30% of the daily net assets of the variable account, depending on
which option was chosen (see "Guaranteed Minimum Income Benefit").
Upon annuitization of the contract, any amounts assessed for any rider options
elected will be waived and only those charges applicable to the base contract
will be assessed.
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 a contract is taxed depends on the type of contract issued and the purpose
for which the contract is purchased. Nationwide will charge against the contract
any premium taxes levied
11
<PAGE> 14
by any governmental authority (see "Federal Tax Considerations" and "Premium
Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or other amounts required
by state law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained, without charge, by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
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 INVESTMENT SERVICES CORPORATION
The contracts are distributed by the general distributor, Nationwide Investment
Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. NISC
is a wholly owned subsidiary of Nationwide.
TYPES OF CONTRACTS
The following is a general description of the types of annuity contracts, and is
intended to provide only general information of the various types of contracts;
it is not intended to be comprehensive. The eligibility requirements, tax
benefits, limitations, and other features of these contracts differ one from the
other.
INDIVIDUAL RETIREMENT ANNUITIES (IRAS)
Individual Retirement Annuities are contracts that are issued by insurance
companies and satisfy the following requirements:
o the contract is not transferable by the owner;
o the premiums are not fixed;
o the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from qualified plans, tax-sheltered annuities and other IRAs
can be received);
o certain minimum distribution requirements must be satisfied after the
owner attains the age of 70 1/2;
o the entire interest of the owner in the contract is nonforfeitable; and
o after the death of the owner, additional distribution requirements may
be imposed to ensure distribution of the entire balance in the contract
within the statutory period of time.
Depending on the circumstance of the owner, all or a portion of the
contributions made to the account may be deducted for federal income tax
purposes.
Failure to make the mandatory distributions can result in an additional penalty
tax of 50% of the excess of the amount required to be distributed over the
amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement
Accounts and Individual Retirement Annuities, from Tax Sheltered Annuities, and
from qualified retirement plans, including 401(k) plans.
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
SIMPLIFIED EMPLOYEE PENSION IRAS (SEP IRAS)
A SEP IRA is a written plan established by an employer for the benefit of
employees which permits the employer to make contributions to
12
<PAGE> 15
an IRA established for the benefit of each employee.
An employee may make deductible contributions to a SEP IRA in the same way, and
with the same restrictions and limitations, as for an IRA. In addition, the
employer may make contributions to the SEP IRA, subject to dollar and percentage
limitations imposed by both the Internal Revenue Code and the written plan.
A SEP IRA plan established by an employer must satisfy certain requirements:
o minimum participation rules;
o top-heavy contribution rules;
o nondiscriminatory allocation rules; and
o requirements regarding a written allocation formula.
In addition, the plan cannot restrict withdrawals of non-elective contributions,
and must restrict withdrawals of elective contributions before March 15th of the
following year.
SIMPLE IRAS
A Simple IRA is an individual retirement annuity which is funded exclusively by
a qualified salary reduction arrangement and satisfies the following:
o vesting requirements,
o participation requirements; and
o administrative requirements.
The funds contributed to a Simple IRA cannot be commingled with funds in IRAs or
SEP IRAs.
A Simple IRA cannot receive rollover distributions except from another Simple
IRA.
ROTH IRAS
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
o the contract is not transferable by the owner;
o the premiums are not fixed;
o the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
o the entire interest of the owner in the contract is nonforfeitable; and
o after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract
within the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement provided when the Roth IRA was established.
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
13
<PAGE> 16
obligated to pay all amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts each corresponding to a single
underlying mutual fund. Nationwide uses the assets of each sub-account to buy
shares of the underlying mutual funds based on contract owner instructions.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Voting Rights
Contract owners 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 contract owner instructions. However, if the law
changes and Nationwide is allowed to vote in its own right, it may elect to do
so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring shareholders' vote as soon as possible before the
shareholder meeting. Notification will contain proxy materials and a form with
which to give Nationwide voting instructions. Nationwide will vote shares for
which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other 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
14
<PAGE> 17
be credited to amounts allocated to the Guaranteed Term Option UNLESS a
distribution is taken before the maturity date. If a distribution occurs before
the maturity date, the amount distributed will be subject to a market value
adjustment. A market value adjustment can increase or decrease the amount
distributed depending on current interest rate fluctuations. No market value
adjustment will be applied if Guaranteed Term Option allocations are held to
maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment would reduce the value of the amount
distributed. When actual interest rates are lower than the guaranteed rate, the
value of the amount distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, Dollar
Cost Averaging, or systematic withdrawals.
Guaranteed Term Options may not be available in every state.
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 purchase rates of the contracts. This guarantee ensures
that the annuity purchase rates will not change regardless of the death rates of
annuity payees or the general population. The mortality risk charge also
compensates Nationwide for risks assumed in connection with the standard death
benefit, but only partially compensates Nationwide in connection with the
optional death benefits for which there are separate charges.
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
5.0%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such earlier date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
OPTIONAL CONTRACT BENEFITS, CHARGES AND DEDUCTIONS
CDSC OPTIONS
No Contingent Deferred Sales Charge is deducted from purchase payments when
amounts are deposited into, or withdrawn from, the contract, if the contract
owner has a standard contract.
HOWEVER, IF THE CONTRACT OWNER HAS CHOSEN A CDSC OPTION, NATIONWIDE WILL REDUCE
VARIABLE ACCOUNT ANNUAL EXPENSES. In exchange for the
15
<PAGE> 18
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 maximum commission payable on the sale of
this product is 6.0% of purchase payments made to the contract.
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. Earnings are not subject to the CDSC,
however, earnings may not be distributed prior to the distribution of all
purchase payments. For tax purposes, a surrender is usually treated as a
withdrawal of earnings first.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10% tax
penalty. In addition, all or a portion of the withdrawal may be subject to
federal income taxes.
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, a contract owner can elect, at the time of
application, to have a 7 Year CDSC schedule applied to surrenders from his or
her contract. The 7 Year CDSC schedule is as follows:
7 Year CDSC Schedule
-------------------------- ----------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
-------------------------- ----------------------
0 7%
-------------------------- ----------------------
1 7%
-------------------------- ----------------------
2 7%
-------------------------- ----------------------
3 6%
-------------------------- ----------------------
4 5%
-------------------------- ----------------------
5 4%
-------------------------- ----------------------
6 3%
-------------------------- ----------------------
7 2%
-------------------------- ----------------------
Thereafter 0%
-------------------------- ----------------------
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, a contract owner can elect, at the time of
application to have a 5 Year CDSC schedule applied to surrenders from his or her
contract. The 5 Year CDSC schedule is as follows:
5 Year CDSC Schedule
-------------------------- ----------------------
Number of Completed
Years from Date of CDSC
Purchase Payment Percentage
-------------------------- ----------------------
0 7%
-------------------------- ----------------------
1 7%
-------------------------- ----------------------
2 7%
-------------------------- ----------------------
3 6%
-------------------------- ----------------------
4 4%
-------------------------- ----------------------
5 2%
-------------------------- ----------------------
Thereafter 0%
-------------------------- ----------------------
Waiver of Contingent Deferred Sales Charge Under Either CDSC Option
Each contract year, the contract owner 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
16
<PAGE> 19
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 contract owner has chosen 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 contract owner 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.
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 contract owner has chosen an optional death benefit, Nationwide will
deduct an additional 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. The following
death benefits may not be available in all states.
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
The contract owner may, at the time of application, purchase one of two
Guaranteed Minimum Income Benefit options. If elected, Nationwide will deduct an
additional charge of either 0.45% or 0.30% of the daily net assets of the
variable account, depending on which option was chosen. Guaranteed Minimum
Income Benefit options provide for a minimum guaranteed value that may replace
the contract
17
<PAGE> 20
value as the amount to be annuitized under certain circumstances. A Guaranteed
Minimum Income Benefit may afford protection against unfavorable investment
performance.
Upon annuitization of the contract, any amounts assessed for any rider options
will be waived and only those charges applicable to the base contract will be
assessed.
OWNERSHIP RIGHTS
CONTRACT OWNER
The contract owner and the annuitant must be the same person for contracts
described in this prospectus. The contract owner has all rights under the
contract.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, unless
Nationwide approves a request for an annuitant of greater age.
BENEFICIARY AND CONTINGENT BENEFICIARY
The contract owner may request a change in the beneficiary or contingent
beneficiary before the annuitization date. These changes must be:
o on a Nationwide form;
o signed by the contract owner; and
o received at Nationwide's home office before the annuitization date.
Nationwide must review and approve any change requests.
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.
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 minimum initial purchase payment to a contract is $15,000. Subsequent
purchase payments must be at least $1,000.
If the contract owner has elected the Reduced Purchase Payment Option, the
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.
18
<PAGE> 21
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under 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 Martin Luther King, Jr. Day
o Presidents' Day
o Good Friday
o Memorial Day
o Independence Day
o Labor Day
o Thanksgiving
o Christmas
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
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 will 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 contract owner. Shares of the underlying mutual
funds allocated to the sub-accounts are purchased at net asset value, then
converted into accumulation units. Contract owners can change allocations or
make exchanges among the sub-accounts 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; and
(2) the per share amount of any dividend or income distributions made
by the
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underlying mutual fund (if the ex-dividend date occurs during the
current valuation period);
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period; and
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. The
factor is equal to an annual rate ranging from 0.95% to 2.05% of the
daily net assets of the variable account, depending on which contract
features the contract owner 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.
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
Contract owners 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 contract owners.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using market
timing firms. To avoid this, Nationwide may modify transfer and exchange rights
of contract owners who use market timing firms (or other third parties) to
transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
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of a valid Nationwide Limited Power of Attorney Form).
To protect contracts owner, Nationwide may refuse exchange and transfer
requests:
o submitted by any agent acting under a power of attorney on behalf of more
than one contract owner; or
o submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing firms
(or other third parties) on behalf of more than one contract owner at the
same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will return purchase payments paid. State 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)
Contract owners 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 contract owner.
A CDSC may apply if the contract owner elected a CDSC option. The CDSC deducted
is a percentage of the amount requested by the contract owner. Amounts deducted
for CDSC are not subject to a subsequent CDSC. The contract owner may take the
CDSC from either:
a) the amount requested; or
b) the contract value remaining after the contract owner has received the
amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
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 contract owner 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
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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.
Contract owners should consult a financial adviser to discuss the use of asset
rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar Cost Averaging is a long-term transfer program that allows the contract
owner to make regular, level investments over time. It involves the automatic
transfer of a specified amount from certain sub-accounts into other
sub-accounts.
Contract owners direct Nationwide to automatically transfer specified amounts
from the Nationwide(R) Money Market Fund - Service Class to any other underlying
mutual fund. Dollar Cost Averaging transfers may not be directed to Guaranteed
Term Options.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide does not guarantee that this program will result in a profit or
protect contract owners 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 contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts proportionately unless
Nationwide is instructed otherwise. Systematic withdrawals are not available
from the Guaranteed Term Options. If the contract owner elected a CDSC option, a
CDSC may apply.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner 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 contract owner's age,
as shown in the table below:
----------------------------- -----------------------
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
----------------------------- -----------------------
Under age 59 1/2 5%
----------------------------- -----------------------
Age 59 1/2 through age 61 7%
----------------------------- -----------------------
Age 62 through age 64 8%
----------------------------- -----------------------
Age 65 through age 74 10%
----------------------------- -----------------------
Age 75 and over 13%
----------------------------- -----------------------
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Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office.
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").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed. 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
contract owner 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 contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payments
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
---------------------------------------------------------
A VARIABLE PAYMENT ANNUITY MAY NOT BE
ELECTED WHEN EXERCISING THE GUARANTEED
MINIMUM INCOME BENEFIT OPTION.
---------------------------------------------------------
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday" basis by:
1) deducting applicable premium taxes from the total contract value; then
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2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
Assumed Investment Rate
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed 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
contract owner wishes to annuitize the contract. This minimum amount, referred
to as the Guaranteed Annuitization Value, may be used at specified times to
provide a guaranteed level of determinable lifetime annuity payments. The GMIB
may provide protection in the event of lower contract values that may result
from the investment performance of the contract.
How is the Guaranteed Annuitization Value Determined?
There are two options available at the time of application. The Guaranteed
Annuitization Value is determined differently based on which option the contract
owner elects.
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Calculation Under GMIB Option 1
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%.
Special Restrictions for GMIB Option 1
After the first contract year, if the value of the contract owner's fixed
account allocation becomes greater than 30% of the contract value in any
contract year due to:
(1) the application of additional purchase payments;
(2) surrender; or
(3) transfers from the variable account,
then 0% interest will accrue in that contract year for purposes of calculation
the Guaranteed Annuitization Value.
If the contract owner's fixed account allocation becomes greater than 30% of the
contract value solely as a result of fluctuations in the value of the variable
account, then interest will continue to accrue for the purposes of the
Guaranteed Annuitization Value at 5% annually, subject to the other terms and
conditions outlined herein.
Calculation Under GMIB Option 2
The Guaranteed Annuitization Value will be equal to the highest contract value
on any contract anniversary occurring prior to the annuitant's 86th birthday,
less an adjustment for amounts surrendered, plus purchase payments received
after that contract anniversary. If the contract owner elects to annuitize the
contract using this GMIB option prior to the first contract anniversary, the
Guaranteed Annuitization Value will be equal to the amount of purchase payments
made, less an adjustment for amounts surrendered.
GMIB Illustrations
The following charts illustrate the amount of income that will be provided to
the annuitant if the contract is annuitized 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
o A Life Annuity with 120 Months Guaranteed Fixed Payment Annuity Option
is elected.
7 Years in Accumulation
$140,710.04 for GMIB at Annuitization
- -------------- -------------- ---------------- ------------
Male Age at Male Age at GMIB Purchase Monthly
Issue Annuitization Rate* GMIB
- -------------- -------------- ---------------- ------------
55 62 $4.72 $664.15
- -------------- -------------- ---------------- ------------
65 72 $5.96 $838.63
- -------------- -------------- ---------------- ------------
70 77 $5.79 $955.42
- -------------- -------------- ---------------- ------------
10 Years in Accumulation
$162,889.46 for GMIB at Annuitization
- -------------- -------------- ---------------- -----------
Male Age at Male Age at GMIB Purchase Monthly
Issue Annuitization Rate* GMIB
- -------------- -------------- ---------------- -----------
55 65 $5.03 $819.33
- -------------- -------------- ---------------- -----------
65 75 $6.44 $1,049.01
- -------------- -------------- ---------------- -----------
70 80 $7.32 $1,192.35
- -------------- -------------- ---------------- -----------
15 Years in Accumulation
$200,000.00 for GMIB at Annuitization
- -------------- --------------- --------------- -----------
Male Age at Male Age at GMIB Purchase Monthly
Issue Annuitization Rate* GMIB
- -------------- --------------- --------------- -----------
55 70 $5.66 $1,132.00
- -------------- --------------- --------------- -----------
65 80 $7.32 $1,464.00
- -------------- --------------- --------------- -----------
70 85 $8.18 $1,636.00
- -------------- --------------- --------------- -----------
*Guaranteed Monthly Benefit per $1,000 applied.
The illustrations should be used as a tool to assist an investor in determining
whether purchasing and exercising a GMIB option is right for them. The
guaranteed purchase rates
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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 contract owner may use the Guaranteed Annuitization Value by annuitizing the
contract during the thirty day period following any contract anniversary:
(1) after the contract has been in effect for seven years; and
(2) the annuitant has attained age 60.
What Annuity Payment Options May Be Used With the Guaranteed Annuitization
Value?
The contract owner may elect any life contingent FIXED ANNUITY PAYMENT OPTION
calculated using the guaranteed annuity purchase rates set forth in the
contract. Such Fixed Annuity Payment Options include:
o Life Annuity;
o Joint and Last Survivor Annuity; 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 82 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.
- --------------------------------------------------------------------------------
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.
* A GMIB DOES NOT in any way guarantee the performance of any underlying
mutual fund, or any other investment option available under the
contract.
* 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.
* The GMIB in no way restricts or limits the rights of contract owners
to annuitize the contract at other times permitted under the contract,
nor will it in any way restrict the right to annuitize the contract
using contract values that may be higher than the Guaranteed
Annuitization Value.
* Please take advantage of the guidance of a qualified financial adviser
in evaluating the GMIB options, and all other aspects of the contract.
* GMIB may not be approved in all states.
- --------------------------------------------------------------------------------
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
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(1) LIFE ANNUITY - An annuity payable periodically, but at least annually, for
the lifetime of the annuitant. Payments will end upon the annuitant's
death. For example, if the annuitant dies before the second annuity payment
date, the annuitant will receive only one annuity payment. The annuitant
will only receive two annuity payments if he or she dies before the third
annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but at
least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments will
continue for the lifetime of the survivor. As is the case under option 1,
there is no guaranteed number of payments. Payments end upon the death of
the last surviving party, regardless of the number of payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant dies
before all of the guaranteed payments have been made, payments will
continue to the end of the guaranteed period and will be paid to a designee
chosen by the annuitant at the time the annuity payment option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed as of
the date Nationwide receives the notice of the annuitant's death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
DEATH BENEFITS
DEATH OF CONTRACT OWNER/ANNUITANT
Because the contract owner and the annuitant must be the same person, if the
contract owner/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.
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
Contract owners may select one of three death benefits available under the
contract at the time of application (not all death benefit options may be
available in all states). If no selection is made at the time of application,
the death benefit will be the 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:
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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 ANNUITIES OR SEP IRAS
Distributions from an Individual Retirement Annuity or SEP IRA must begin no
later than April 1 of the calendar year following the calendar year in which the
contract owner reaches age 70 1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
a) the contract owner's life or the life of his or her spouse or
designated beneficiary; or
b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity or SEP IRA must be distributed by December 31 of
the calendar year in which the fifth anniversary of the contract owner's death
occurs unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
1) treat the contracts as an Individual Retirement Annuity or SEP
IRA established for his or her benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year in which the contract owner would have reached age 70
1/2; or
b) The contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract
owner's death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity, SEP IRA or
Individual Retirement Account of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a
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surviving spouse who is the beneficiary under the annuity payment option may
treat the account as his or her own, in the same manner as is described in
section (a)(1) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior non-taxable distributions and total account
balances at the time of the distribution. The contract owner of an Individual
Retirement Annuity or SEP IRA must annually report the amount of non-deductible
purchase payments, the amount of any distribution, the amount by which
non-deductible purchase payments for all years exceed non-taxable distributions
for all years, and the total balance of all Individual Retirement Annuities.
Individual Retirement Annuity and SEP IRA distributions will not receive the
favorable treatment of a lump sum distribution from a Qualified Plan. If the
contract owner dies before the entire interest in the contract has been
distributed, the balance will also be included in his or her gross estate.
Simplified Employee Pensions (SEPs) as described in Internal Revenue Code
section 408(k) are taxed similarly to Individual Retirement Annuities, and are
subject to similar distribution requirements.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
a) the contract owner names his or her surviving spouse as the
beneficiary and the spouse chooses to:
1) treat the contract as a Roth IRA established for his or her
benefit; or
2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year following the year in which the contract owner would
have reached age 70 1/2; or
b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the contract
owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "non-qualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
o the type of contract purchased;
o the purposes for which the contract is purchased; and
o the personal circumstances of individual investors having interests in
the contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
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Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
Annuity contracts are often purchased with the expectation that investment
earnings will be taxable only upon withdrawal from the contract (tax-deferral).
In some cases, tax-deferral may apply as a result of the type of contract
purchased. In other cases, tax-deferral may apply, but only as a result of the
contract being purchased by certain tax qualified or tax advantaged plans - such
plans are typically permitted to purchase other investments besides annuities
and retain tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
o Individual Retirement Annuities;
o SEP IRAs;
o SIMPLE IRAs; and
o Roth IRAs.
This discussion is not intended to serve as tax advice. Contract owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the contracts.
Individual Retirement Annuities, SEP IRAs and SIMPLE IRAs
Distributions from Individual Retirement Annuities, are generally taxed when
received. If any of the amount contributed to the IRA was nondeductible for
federal income tax purposes, then a portion of each distribution is excludable
from income.
If distributions of income from an IRA are made prior to the date that the owner
attains the age of 59 1/2 years, the income is subject to both the regular
income tax and an additional penalty tax of 10%. (For SIMPLE IRAs the 10%
penalty is increased to 25% if the distribution is made during the 2 year period
beginning on the date that the individual first participated in the SIMPLE IRA.)
The penalty tax can be avoided if the distribution is:
o made to a beneficiary on or after the death of the owner;
o attributable to the owner becoming disabled (as defined in the
Internal Revenue Code);
o part of a series of substantially equal periodic payments made not
less frequently than annually made for the life (or life expectancy)
of the owner, or the joint lives (or joint life expectancies) of the
owner and his or her designated beneficiary;
o used for qualified higher education expenses; or
o used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
o it is made on or after the date on which the contract owner attains
age 59 1/2;
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o it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
o it is attributable to the contract owner's disability; or
o it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
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
that total amount of contributions made to the Roth IRA. Any non-qualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Special rules apply for Roth IRAs that have proceeds received from a traditional
IRA prior to January 1, 1999 if the owner elected the special 4-year income
averaging provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
o made to a beneficiary on or after the death of the owner;
o attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
o part of a series of substantially equal periodic payments made not
less frequently than annually made for the life (or life expectancy)
of the owner, or the joint lives (or joint life expectancies) of the
owner and his or her designated beneficiary;
o for qualified higher education expenses; or
o used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
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2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
o a transfer of the contract from one contract owner to another; or
o a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
a) an individual who is two or more generations younger than the contract
owner; or
b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
o who would be required to include the contract, death benefit, distribution,
or other payment in his or her federal gross estate at his or her death; or
o who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless:
o the failure to diversify was accidental;
o the failure is corrected; and
o a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
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These mailings will contain:
o statements showing the contract's quarterly activity;
o confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., dollar cost averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
o semi-annual reports as of June 30 containing financial statements for
the variable account; and
o annual reports as of December 31 containing financial statements for
the variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance and
annuity pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide and
the American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs sought to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the District Court denied, in part, and granted, in part, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law fraud, civil
conspiracy, and breach of contract. The District Court, on December 2, 1998,
issued an order denying plaintiffs' motion for class certification and the
appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000 Nationwide and American Century settled this lawsuit now limited
to the claims of the two named plaintiffs. On February 9, 2000 the court
dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide affiliates which were used to
fund certain tax-deferred retirement plans. The amended
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complaint seeks unspecified compensatory and punitive damages. No class has been
certified. On June 11, 1999, Nationwide and the other named defendants filed a
motion to dismiss the amended complaint. On March 8, 2000, the court denied the
motion to dismiss the amended complaint filed by Nationwide and other named
defendants. Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NISC, is not engaged in any litigation of any material
nature.
ADVERTISING
A "yield" and "effective yield" may be advertised for the Nationwide(R) Money
Market Fund - Service Class. "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 - Service Class' units. Yield is an
annualized figure, which means that it is assumed that the Nationwide(R) Money
Market Fund - Service Class generates the same level of net income over a
52-week period. The "effective yield" is calculated similarly but includes the
effect of assumed compounding, calculated under rules prescribed by the SEC. The
effective yield will be slightly higher than yield due to this compounding
effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
o precious metals;
o real estate;
o stocks and bonds;
o closed-end funds;
o bank money market deposit accounts and passbook savings;
o CDs; and
o the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
o S&P 500;
o Shearson/Lehman Intermediate Government/Corporate Bond Index;
o Shearson/Lehman Long-Term Government/Corporate Bond Index;
o Donoghue Money Fund Average;
o U.S. Treasury Note Index;
o Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
o Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
o Lipper Analytical Services, Inc.;
o CDA/Wiesenberger;
o Morningstar;
o Donoghue's;
o magazines such as:
-- Money;
-- Forbes;
-- Kiplinger's Personal Finance Magazine;
-- Financial World;
-- Consumer Reports;
-- Business Week;
-- Time;
-- Newsweek;
-- National Underwriter; and
-- 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 (2.05%). 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 OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
General Information and History.................................................
Services........................................................................
Purchase of Securities Being Offered............................................
Underwriters....................................................................
Calculations of Performance.....................................................
Annuity Payments................................................................
Financial Statements............................................................
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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. - CLASS Z
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 Investment Management Company 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 Investment Management Company 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
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convertible into common stock. Franklin Mutual serves as the Fund's investment
adviser.
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
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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 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 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 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 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 indirect subsidiary of Nationwide Financial Services, Inc.,
serves as the Fund's investment adviser.
NATIONWIDE(R) MONEY MARKET FUND - SERVICE CLASS
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 indirect subsidiary of Nationwide Financial
Services, Inc., serves as the Fund's investment adviser.
NATIONWIDE S&P 500(R) INDEX FUND - SERVICE CLASS
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-
39
<PAGE> 42
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 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
40
<PAGE> 43
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 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.
41
<PAGE> 44
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH 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 May 1, 2000. 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.
TABLE OF CONTENTS
PAGE
General Information and History...............................................1
Services......................................................................1
Purchase of Securities Being Offered..........................................2
Underwriters..................................................................2
Advertising...................................................................2
Annuity Payments..............................................................3
Financial Statements..........................................................4
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. The Nationwide group of companies is
one of America's largest insurance and financial services family of companies,
with combined assets of over $120 billion as of December 31, 1999.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each 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. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide, or affiliates of Nationwide, may have
entered into agreements with either the investment adviser or distributor for
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 contract owner.
1
<PAGE> 45
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Such agents will be registered representatives
of broker-dealers registered under the Securities Exchange Act of 1934 who are
members of the National Association of Securities Dealers, Inc. ("NASD").
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Investment Services Corporation, Two Nationwide Plaza, Columbus, Ohio 43215, a
wholly owned subsidiary of Nationwide. During the fiscal years ended December
31, 1999, 1998 and 1997 no underwriting commissions were paid by Nationwide to
NISC.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the Nationwide(R) Money Market Fund - Service
Class, 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 - Service Class' 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 - Service Class.
The Nationwide(R) Money Market Fund - Service Class' 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 - Service Class 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 - Service Class' 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 - Service Class 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 2.05% (which includes the
Reduced Purchase Payment Option, One-Year Step Up Death Benefit, and GMIB
Option).
2
<PAGE> 46
No deduction is made for premium taxes which may be assessed by certain states.
Nonstandardized total return may also be advertised, and is calculated in a
manner similar to standardized average annual total return except the
nonstandardized total return is based on a hypothetical initial investment of
$25,000. 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.
3
<PAGE> 47
<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 (comprised of the
sub-accounts listed in note 1(b)) (collectively, the Account) as of December 31,
1999, 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 Accounts 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, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our 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 the Account as of December
31, 1999, 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 18, 2000
<PAGE> 2
================================================================================
NATIONWIDE VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
December 31, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments at market value:
American Century: Benham Short-Term Government Fund (ACBenSTGvt)
220,320 shares (cost $2,082,934) .........................................$ 2,031,355
American Century: Income & Growth Fund (ACIncGro)
322,498 shares (cost $9,276,159) ......................................... 10,981,053
American Century: Twentieth Century Growth Fund (ACTCGro)
566,913 shares (cost $14,294,132) ........................................ 18,299,951
American Century: Twentieth Century International Growth Fund (ACTCIntlGr)
134,208 shares (cost $1,416,537) ......................................... 2,009,092
American Century: Twentieth Century Ultra Fund (ACTCUltra)
651,457 shares (cost $20,987,488) ........................................ 29,823,713
Delaware Group Delchester High-Yield Bond Fund, Inc. -
Delchester Fund Institutional Class (DeHYBd)
220,882 shares (cost $1,356,266) ......................................... 1,130,915
Dreyfus A Bonds Plus, Inc. (DryABds)
144,237 shares (cost $2,063,566) ......................................... 1,932,781
Dreyfus Appreciation Fund, Inc. (DryApp)
47,141 shares (cost $2,016,065) .......................................... 2,155,770
Dreyfus Balanced Fund, Inc. (DryBal)
21,988 shares (cost $357,585) ............................................ 347,190
Dreyfus S&P 500 Index Fund (Dry500Ix)
554,953 shares (cost $19,537,791) ........................................ 23,813,040
The Dreyfus Third Century Fund, Inc. (Dry3dCen)
135,008 shares (cost $1,689,367) ......................................... 1,964,361
Evergreen Income and Growth Fund - Class Y (EvIncGro)
63,364 shares (cost $1,354,222) .......................................... 1,418,087
Federated High Yield Trust (FedHiYld)
60,295 shares (cost $530,333) ............................................ 498,039
Federated Investment Series Funds, Inc. - Federated Bond Fund - Class F
(FedBdFd) 171,757 shares (cost $1,670,670) ............................... 1,549,246
Fidelity Advisor Balanced Fund - Class T (FABal)
72,905 shares (cost $1,364,625) .......................................... 1,330,516
Fidelity Advisor Equity Income Fund - Class T (FAEqInc)
78,424 shares (cost $2,114,044) .......................................... 2,045,289
Fidelity Advisor Growth Opportunities Fund - Class T (FAGrOpp)
199,987 shares (cost $9,020,612) ......................................... 9,331,386
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
Fidelity Advisor High Yield Fund - Class T (FAHiYld)
258,869 shares (cost $3,155,462) ....................................... $ 2,943,338
Fidelity Asset Manager(TM) (FidAsMgr)
304,964 shares (cost $5,374,309) ....................................... 5,605,247
Fidelity Capital & Income Fund (FidCapInc)
104,874 shares (cost $987,905) ......................................... 974,281
Fidelity Equity-Income Fund (FidEqInc)
301,699 shares (cost $13,779,479) ...................................... 16,134,874
Fidelity Magellan(R) Fund (FidMgln)
284,272 shares (cost $29,737,067) ...................................... 38,840,103
Fidelity Puritan(R) Fund (FidPurtn)
773,684 shares (cost $14,537,156) ...................................... 14,723,211
Fidelity VIP - High Income Portfolio (FidVIPHI)
9,418 shares (cost $109,105) ........................................... 106,512
Franklin Mutual Series Fund Inc. - Mutual Shares Fund - Class I (FranMutSer)
14,260 shares (cost $298,039) .......................................... 290,626
INVESCO Dynamics Fund, Inc. (InvDynam)
136,971 shares (cost $2,804,087) ....................................... 3,542,081
Janus Fund (JanFund)
394,296 shares (cost $13,953,091) ...................................... 17,368,748
Janus Twenty Fund (Jan20Fd)
628,329 shares (cost $33,888,409) ...................................... 52,421,524
Janus Worldwide Fund (JanWrldwde)
249,016 shares (cost $12,020,545) ...................................... 19,032,313
Lazard Small Cap Portfolio - Open Shares (LazSmCap)
11,020 shares (cost $188,153) .......................................... 181,948
MFS - World Governments Fund - Class A (MFSWdGvt)
53,856 shares (cost $576,880) .......................................... 506,786
Nationwide(R) Bond Fund - Class D (NWBdFd)
176,603 shares (cost $1,667,041) ....................................... 1,575,299
Nationwide(R) Fund - Class D (NWFund)
285,936 shares (cost $8,546,699) ....................................... 8,578,089
Nationwide(R) Growth Fund - Class D (NWGroFd)
204,855 shares (cost $3,199,103) ....................................... 3,568,578
Nationwide(R) S&P 500 Index Fund - Class R (NWIndxFdR)
16,472 shares (cost $189,713) .......................................... 210,844
Nationwide(R) Money Market Fund (NWMyMkt)
14,322,801 shares (cost $14,322,801) ................................... 14,322,801
Nationwide(R) Intermediate U.S. Government Bond Fund - Class D(NWUSGvt)
45,286 shares (cost $460,063) .......................................... 439,722
Neuberger & Berman Genesis Trust (NBGenesTr)
32,117 shares (cost $641,458) .......................................... 675,749
Neuberger & Berman Guardian Trust (NBGuardTr)
377,257 shares (cost $8,986,571) ....................................... 6,979,255
</TABLE>
(Continued)
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, CONTINUED
<TABLE>
<S> <C> <C>
Neuberger & Berman Limited Maturity Bond Fund (NBLtdMat)
153,772 shares (cost $1,499,320) ...................................... $ 1,450,073
Neuberger & Berman Partners Fund (NBPartFd)
344,061 shares (cost $9,261,625) ...................................... 8,257,474
Oppenheimer Global Fund - Class A (OppGlob)
190,157 shares (cost $8,682,529) ...................................... 11,894,310
Phoenix Balanced Fund Series - Class A (PhxBalFd)
60,096 shares (cost $1,006,346) ....................................... 1,060,693
Prestige Balanced Fund - Class A (PrBal)
342 shares (cost $3,745) .............................................. 3,841
Prestige International Fund - Class A (PrInt)
4,153 shares (cost $48,885) ........................................... 52,290
Prestige Large Cap Growth Fund - Class A (PrLgCpGro)
1,279 shares (cost $16,998) ........................................... 19,700
Prestige Large Cap Value Fund - Class A (PrLgCpVal)
105 shares (cost $1,104) .............................................. 1,046
Prestige Small Cap Fund - Class A (PrSmCap)
7,732 shares (cost $88,891) ........................................... 98,664
Strong Common Stock Fund, Inc. (StComStk)
39,803 shares (cost $942,721) ......................................... 1,003,424
Strong Total Return Fund, Inc. (StTotRet)
103,813 shares (cost $3,608,348) ...................................... 4,889,592
Templeton Foreign Fund - Class I (TemForFd)
522,700 shares (cost $5,198,492) ...................................... 5,864,693
Warburg Pincus Emerging Growth Fund - Common Shares (WPEmGro)
119,711 shares (cost $4,603,033) ...................................... 5,968,809
Warburg Pincus Global Fixed - Income Fund - Common Shares (WPGlFxInc)
5,731 shares (cost $60,232) ........................................... 57,133
-----------
Total investments ................................................. 360,305,455
Accounts receivable ............................................................... 1,397
-----------
Total assets ...................................................... 360,306,852
Accounts payable .................................................................. 31,070
-----------
Contract owners' equity (note 4) .................................................. $360,275,782
===========
</TABLE>
See accompanying notes to financial statements.
================================================================================
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,1999 AND 1998
<TABLE>
<CAPTION>
Total ACBenSTGvt
------------------------------ --------------------------
1999 1998 1999 1998
------------- ----------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 3,745,866 3,196,414 151,561 162,608
Mortality, expense and administration
charges (note 2) ............................. (3,667,684) (2,533,959) (37,774) (40,633)
------------- ----------- --------- ---------
Net investment activity ...................... 78,182 662,455 113,787 121,975
------------- ----------- --------- ---------
Proceeds from mutual fund shares sold ........... 65,558,218 56,416,999 1,382,393 723,023
Cost of mutual fund shares sold ................. (55,831,639) (48,174,169) (1,416,408) (721,176)
------------- ----------- --------- ---------
Realized gain (loss) on investments .......... 9,726,579 8,242,830 (34,015) 1,847
Change in unrealized gain (loss) on investments . 37,877,938 14,063,893 (64,989) 17,698
------------- ----------- --------- ---------
Net gain (loss) on investments ............... 47,604,517 22,306,723 (99,004) 19,545
------------- ----------- --------- ---------
Reinvested capital gains ........................ 20,213,428 11,574,852 - -
------------- ----------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 67,896,127 34,544,030 14,783 141,520
------------- ----------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 89,714,200 53,270,516 167,093 668,275
Transfers between funds ......................... - - (97,603) 7,071
Redemptions ..................................... (23,847,262) (23,621,452) (1,053,119) (835,080)
Annuity benefits ................................ (26,949) (27,891) (940) (952)
Annual contract maintenance charge (note 2) ..... (261,269) (169,891) (1,463) (1,748)
Contingent deferred sales charges (note 2) ...... (391,816) (324,873) (34,837) (1,752)
Adjustments to maintain reserves ................ (33,202) 788 (448) 290
------------- ----------- --------- ---------
Net equity transactions .................... 65,153,702 29,127,197 (1,021,317) (163,896)
------------- ----------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 133,049,829 63,671,227 (1,006,534) (22,376)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 227,225,953 163,554,726 3,037,422 3,059,798
------------- ----------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 360,275,782 227,225,953 2,030,888 3,037,422
============= =========== ========= =========
<CAPTION>
ACIncGro ACTCGro
--------------------------- ---------------------------
1999 1998 1999 1998
---------- --------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 99,016 64,541 - -
Mortality, expense and administration
charges (note 2) ............................. (116,439) (61,634) (198,570) (152,386)
---------- --------- ---------- ----------
Net investment activity ...................... (17,423) 2,907 (198,570) (152,386)
---------- --------- ---------- ----------
Proceeds from mutual fund shares sold ........... 1,896,243 2,702,912 2,520,566 1,724,411
Cost of mutual fund shares sold ................. (1,646,395) (2,527,718) (1,546,812) (1,226,965)
---------- --------- ---------- ----------
Realized gain (loss) on investments .......... 249,848 175,194 973,754 497,446
Change in unrealized gain (loss) on investments . 1,166,622 627,403 1,707,076 968,585
---------- --------- ---------- ----------
Net gain (loss) on investments ............... 1,416,470 802,597 2,680,830 1,466,031
---------- --------- ---------- ----------
Reinvested capital gains ........................ 18,019 275,147 2,063,722 2,228,156
---------- --------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,417,066 1,080,651 4,545,982 3,541,801
---------- --------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 2,978,474 2,774,469 1,590,054 646,577
Transfers between funds ......................... (53,752) 1,481,828 189,443 (134,689)
Redemptions ..................................... (351,090) (220,883) (1,465,483) (1,058,730)
Annuity benefits ................................ - - (15,993) (12,964)
Annual contract maintenance charge (note 2) ..... (7,497) (2,588) (15,697) (14,839)
Contingent deferred sales charges (note 2) ...... (5,905) (5,005) (9,269) (6,993)
Adjustments to maintain reserves ................ 76 (981) 4,665 3,397
---------- --------- ---------- ----------
Net equity transactions .................... 2,560,306 4,026,840 277,720 (578,241)
---------- --------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 3,977,372 5,107,491 4,823,702 2,963,560
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 7,003,742 1,896,251 13,480,704 10,517,144
---------- --------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $10,981,114 7,003,742 18,304,406 13,480,704
========== ========= ========== ==========
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ACTCIntlGr ACTCUltra
-------------------------- -------------------------
1999 1998 1999 1998
----------- ------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 792 1,491 - -
Mortality, expense and administration
charges (note 2) ............................. (16,275) (10,515) (289,122) (183,975)
----------- ------- ---------- ----------
Net investment activity ...................... (15,483) (9,024) (289,122) (183,975)
----------- ------- ---------- ----------
Proceeds from mutual fund shares sold ........... 724,215 622,576 2,707,592 1,479,795
Cost of mutual fund shares sold ................. (581,513) (562,613) (1,932,118) (1,263,460)
----------- ------- ---------- ----------
Realized gain (loss) on investments .......... 142,702 59,963 775,474 216,335
Change in unrealized gain (loss) on investments . 593,121 35,468 6,814,122 2,426,265
----------- ------- ---------- ----------
Net gain (loss) on investments ............... 735,823 95,431 7,589,596 2,642,600
----------- ------- ---------- ----------
Reinvested capital gains ........................ 103,146 12,976 864,560 1,488,048
----------- ------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 823,486 99,383 8,165,034 3,946,673
----------- ------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 428,105 282,424 6,583,564 3,883,377
Transfers between funds ......................... (38,930) 47,185 (1,139,291) (311,089)
Redemptions ..................................... (87,756) (38,282) (1,224,869) (1,084,444)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (1,654) (677) (20,319) (14,129)
Contingent deferred sales charges (note 2) ...... (2,075) (699) (26,644) (23,446)
Adjustments to maintain reserves ................ 58 14 456 172
----------- ------- ---------- ----------
Net equity transactions .................... 297,748 289,965 4,172,897 2,450,441
----------- ------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 1,121,234 389,348 12,337,931 6,397,114
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 887,916 498,568 17,486,224 11,089,110
----------- ------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 2,009,150 887,916 29,824,155 17,486,224
=========== ======= ========== ==========
<CAPTION>
DeHYBd DryABds
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 123,348 123,276 125,940 115,918
Mortality, expense and administration
charges (note 2) ............................. (15,346) (16,341) (27,148) (25,437)
--------- --------- --------- ---------
Net investment activity ...................... 108,002 106,935 98,792 90,481
--------- --------- --------- ---------
Proceeds from mutual fund shares sold ........... 219,274 341,656 755,271 1,243,229
Cost of mutual fund shares sold ................. (242,560) (327,084) (797,023) (1,219,521)
--------- --------- --------- ---------
Realized gain (loss) on investments .......... (23,286) 14,572 (41,752) 23,708
Change in unrealized gain (loss) on investments . (134,705) (151,204) (49,034) (120,982)
--------- --------- --------- ---------
Net gain (loss) on investments ............... (157,991) (136,632) (90,786) (97,274)
--------- --------- --------- ---------
Reinvested capital gains ........................ - - - 32,247
--------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (49,989) (29,697) 8,006 25,454
--------- --------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 305,176 156,659 416,301 545,761
Transfers between funds ......................... (144,207) (127,468) (396,674) (80,789)
Redemptions ..................................... (71,301) (241,587) (181,145) (241,342)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (559) (495) (1,599) (1,451)
Contingent deferred sales charges (note 2) ...... (1,009) (1,713) (4,613) (3,165)
Adjustments to maintain reserves ................ (10) (83) 403 (408)
--------- --------- --------- ---------
Net equity transactions .................... 88,090 (214,687) (167,327) 218,606
--------- --------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 38,101 (244,384) (159,321) 244,060
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,095,862 1,340,246 2,092,501 1,848,441
--------- --------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $1,133,963 1,095,862 1,933,180 2,092,501
========= ========= ========= =========
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
DryApp DryBal
-------------------------- ----------------------
1999 1998 1999 1998
----------- ------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 10,805 3,740 7,004 3,036
Mortality, expense and administration
charges (note 2) ............................. (22,685) (3,370) (3,386) (1,249)
----------- ------- ------- -------
Net investment activity ...................... (11,880) 370 3,618 1,787
----------- ------- ------- -------
Proceeds from mutual fund shares sold ........... 334,760 108,365 105,989 38,449
Cost of mutual fund shares sold ................. (302,057) (104,926) (111,064) (38,148)
----------- ------- ------- -------
Realized gain (loss) on investments .......... 32,703 3,439 (5,075) 301
Change in unrealized gain (loss) on investments . 77,744 61,961 (4,500) (5,894)
----------- ------- ------- -------
Net gain (loss) on investments ............... 110,447 65,400 (9,575) (5,593)
----------- ------- ------- -------
Reinvested capital gains ........................ 14,262 1,147 30,801 8,351
----------- ------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 112,829 66,917 24,844 4,545
----------- ------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 1,120,026 301,616 167,111 123,154
Transfers between funds ......................... 268,875 367,247 12,770 63,401
Redemptions ..................................... (61,137) (18,608) (16,459) (31,225)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (1,336) (113) (285) (9)
Contingent deferred sales charges (note 2) ...... (776) (36) (608) -
Adjustments to maintain reserves ................ 1,699 273 257 (50)
----------- ------- ------- -------
Net equity transactions .................... 1,327,351 650,379 162,786 155,271
----------- ------- ------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 1,440,180 717,296 187,630 159,816
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 717,296 - 159,816 -
----------- ------- ------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 2,157,476 717,296 347,446 159,816
=========== ======= ======= =======
<CAPTION>
Dry500Ix Dry3dCen
------------------------- ------------------------
1999 1998 1999 1998
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 173,479 120,795 - -
Mortality, expense and administration
charges (note 2) ............................. (233,441) (129,044) (18,115) (11,355)
---------- ---------- --------- ---------
Net investment activity ...................... (59,962) (8,249) (18,115) (11,355)
---------- ---------- --------- ---------
Proceeds from mutual fund shares sold ........... 2,358,016 2,847,389 375,085 277,680
Cost of mutual fund shares sold ................. (1,459,171) (2,101,605) (296,561) (215,841)
---------- ---------- --------- ---------
Realized gain (loss) on investments .......... 898,845 745,784 78,524 61,839
Change in unrealized gain (loss) on investments . 2,071,050 1,493,487 172,373 68,617
---------- ---------- --------- ---------
Net gain (loss) on investments ............... 2,969,895 2,239,271 250,897 130,456
---------- ---------- --------- ---------
Reinvested capital gains ........................ 277,023 2,453 160,139 106,354
---------- ---------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 3,186,956 2,233,475 392,921 225,455
---------- ---------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 7,439,433 3,936,518 689,809 195,911
Transfers between funds ......................... 1,823,273 1,528 (117,085) 7,991
Redemptions ..................................... (1,042,505) (1,319,672) (75,336) (70,148)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (19,905) (8,663) (1,871) (1,341)
Contingent deferred sales charges (note 2) ...... (20,042) (28,571) (1,220) (2,211)
Adjustments to maintain reserves ................ 166 51 29 1
---------- ---------- --------- ---------
Net equity transactions .................... 8,180,420 2,581,191 494,326 130,203
---------- ---------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 11,367,376 4,814,666 887,247 355,658
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 12,445,816 7,631,150 1,077,131 721,473
---------- ---------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $23,813,192 12,445,816 1,964,378 1,077,131
========== ========== ========= =========
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
EvIncGro FedHiYld
-------------------------- ----------------------
1999 1998 1999 1998
----------- --------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 66,966 53,014 43,451 10,742
Mortality, expense and administration
charges (note 2) ............................. (17,674) (15,523) (6,405) (1,643)
----------- --------- ------- -------
Net investment activity ...................... 49,292 37,491 37,046 9,099
----------- --------- ------- -------
Proceeds from mutual fund shares sold ........... 242,571 141,082 454,839 6,112
Cost of mutual fund shares sold ................. (214,601) (121,276) (459,193) (6,420)
----------- --------- ------- -------
Realized gain (loss) on investments .......... 27,970 19,806 (4,354) (308)
Change in unrealized gain (loss) on investments . 85,128 (202,823) (34,463) 2,169
----------- --------- ------- -------
Net gain (loss) on investments ............... 113,098 (183,017) (38,817) 1,861
----------- --------- ------- -------
Reinvested capital gains ........................ 25,558 119,607 - -
----------- --------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 187,948 (25,919) (1,771) 10,960
----------- --------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 181,434 529,511 155,180 52,736
Transfers between funds ......................... (160,727) (1,596) (131,704) 427,826
Redemptions ..................................... (70,401) (329,204) (12,620) (2,247)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (1,050) (584) (242) (13)
Contingent deferred sales charges (note 2) ...... (619) (286) (184) (46)
Adjustments to maintain reserves ................ 7 3 456 162
----------- --------- ------- -------
Net equity transactions .................... (51,356) 197,844 10,886 478,418
----------- --------- ------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 136,592 171,925 9,115 489,378
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,281,506 1,109,581 489,378 -
----------- --------- ------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 1,418,098 1,281,506 498,493 489,378
=========== ========= ======= =======
<CAPTION>
FedBdFd FABal
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- --------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 102,995 63,263 22,784 11,502
Mortality, expense and administration
charges (note 2) ............................. (18,422) (11,793) (11,737) (4,942)
--------- --------- --------- -------
Net investment activity ...................... 84,573 51,470 11,047 6,560
--------- --------- --------- -------
Proceeds from mutual fund shares sold ........... 458,722 87,912 239,744 463,667
Cost of mutual fund shares sold ................. (482,630) (85,985) (254,691) (435,638)
--------- --------- --------- -------
Realized gain (loss) on investments .......... (23,908) 1,927 (14,947) 28,029
Change in unrealized gain (loss) on investments . (109,895) (22,462) (15,270) (21,984)
--------- --------- --------- -------
Net gain (loss) on investments ............... (133,803) (20,535) (30,217) 6,045
--------- --------- --------- -------
Reinvested capital gains ........................ - - 49,976 35,081
--------- --------- --------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (49,230) 30,935 30,806 47,686
--------- --------- --------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 519,407 217,429 973,573 285,138
Transfers between funds ......................... (25,840) 627,230 (70,703) (26,713)
Redemptions ..................................... (98,914) (41,428) (66,271) (15,263)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (719) (198) (1,130) (415)
Contingent deferred sales charges (note 2) ...... (1,002) (1) (1,134) (539)
Adjustments to maintain reserves ................ 34 (3) (6) (12)
--------- --------- --------- -------
Net equity transactions .................... 392,966 803,029 834,329 242,196
--------- --------- --------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 343,736 833,964 865,135 289,882
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,205,464 371,500 465,370 175,488
--------- --------- --------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $1,549,200 1,205,464 1,330,505 465,370
========= ========= ========= =======
</TABLE>
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
FAEqInc FAGrOpp
-------------------------- ------------------------
1999 1998 1999 1998
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 11,115 10,023 66,016 48,032
Mortality, expense and administration
charges (note 2) ............................. (24,189) (18,599) (110,141) (78,505)
----------- --------- --------- ---------
Net investment activity ...................... (13,074) (8,576) (44,125) (30,473)
----------- --------- --------- ---------
Proceeds from mutual fund shares sold ........... 470,946 319,587 750,181 1,353,752
Cost of mutual fund shares sold ................. (369,273) (238,766) (555,496) (1,094,861)
----------- --------- --------- ---------
Realized gain (loss) on investments .......... 101,673 80,821 194,685 258,891
Change in unrealized gain (loss) on investments . (264,494) 55,249 (845,688) 732,635
----------- --------- --------- ---------
Net gain (loss) on investments ............... (162,821) 136,070 (651,003) 991,526
----------- --------- --------- ---------
Reinvested capital gains ........................ 211,430 71,848 900,042 251,548
----------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 35,535 199,342 204,914 1,212,601
----------- --------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 582,052 451,869 2,517,631 1,711,707
Transfers between funds ......................... (215,278) 35,389 (189,059) (64,906)
Redemptions ..................................... (61,176) (185,723) (470,392) (359,563)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (2,401) (1,384) (9,262) (5,519)
Contingent deferred sales charges (note 2) ...... (1,758) (1,588) (8,286) (6,868)
Adjustments to maintain reserves ................ (6) (6) (60) 44
----------- --------- --------- ---------
Net equity transactions .................... 301,433 298,557 1,840,572 1,274,895
----------- --------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 336,968 497,899 2,045,486 2,487,496
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,708,319 1,210,420 7,285,888 4,798,392
----------- --------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 2,045,287 1,708,319 9,331,374 7,285,888
=========== ========= ========= =========
<CAPTION>
FAHiYld FidAsMgr
------------------------ ------------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 221,385 255,735 153,886 117,170
Mortality, expense and administration
charges (note 2) ............................. (37,448) (38,336) (62,792) (49,446)
--------- --------- --------- ---------
Net investment activity ...................... 183,937 217,399 91,094 67,724
--------- --------- --------- ---------
Proceeds from mutual fund shares sold ........... 1,055,487 1,050,322 547,891 896,828
Cost of mutual fund shares sold ................. (1,168,248) (1,032,112) (486,585) (671,236)
--------- --------- --------- ---------
Realized gain (loss) on investments .......... (112,761) 18,210 61,306 225,592
Change in unrealized gain (loss) on investments . 125,442 (349,860) 212,814 (393,169)
--------- --------- --------- ---------
Net gain (loss) on investments ............... 12,681 (331,650) 274,120 (167,577)
--------- --------- --------- ---------
Reinvested capital gains ........................ - 31,024 212,824 626,712
--------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 196,618 (83,227) 578,038 526,859
--------- --------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 591,358 814,267 1,304,975 740,021
Transfers between funds ......................... (367,666) (223,421) (138,610) (76,681)
Redemptions ..................................... (273,085) (195,080) (274,660) (694,794)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (2,284) (1,287) (3,895) (2,816)
Contingent deferred sales charges (note 2) ...... (2,121) (3,651) (4,736) (16,506)
Adjustments to maintain reserves ................ (2,747) 446 176 21
--------- --------- --------- ---------
Net equity transactions .................... (56,545) 391,274 883,250 (50,755)
--------- --------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 140,073 308,047 1,461,288 476,104
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 2,800,745 2,492,698 4,144,138 3,668,034
--------- --------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $2,940,818 2,800,745 5,605,426 4,144,138
========= ========= ========= =========
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
FidCapInc FidEqInc
-------------------------- -------------------------
1999 1998 1999 1998
----------- --------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 92,610 117,272 233,896 269,798
Mortality, expense and administration
charges (note 2) ............................. (14,582) (16,266) (218,755) (229,390)
----------- --------- ---------- ----------
Net investment activity ...................... 78,028 101,006 15,141 40,408
----------- --------- ---------- ----------
Proceeds from mutual fund shares sold ........... 379,568 139,878 3,397,056 3,943,497
Cost of mutual fund shares sold ................. (355,475) (116,142) (1,867,367) (2,379,246)
----------- --------- ---------- ----------
Realized gain (loss) on investments .......... 24,093 23,736 1,529,689 1,564,251
Change in unrealized gain (loss) on investments . (14,514) (112,592) (2,022,662) (528,172)
----------- --------- ---------- ----------
Net gain (loss) on investments ............... 9,579 (88,856) (492,973) 1,036,079
----------- --------- ---------- ----------
Reinvested capital gains ........................ 40,370 32,589 1,446,910 735,781
----------- --------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 127,977 44,739 969,078 1,812,268
----------- --------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. - 1,897 1,545,727 1,203,569
Transfers between funds ......................... (123,285) (8,199) (1,091,107) (1,030,099)
Redemptions ..................................... (238,589) (112,832) (2,329,777) (2,317,284)
Annuity benefits ................................ (1,625) (1,566) (5,247) (4,684)
Annual contract maintenance charge (note 2) ..... (1,525) (1,764) (18,301) (17,633)
Contingent deferred sales charges (note 2) ...... (146) (290) (11,982) (13,552)
Adjustments to maintain reserves ................ (386) 144 189 (186)
----------- --------- ---------- ----------
Net equity transactions .................... (365,556) (122,610) (1,910,498) (2,179,869)
----------- --------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. (237,579) (77,871) (941,420) (367,601)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,211,457 1,289,328 17,076,425 17,444,026
----------- --------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 973,878 1,211,457 16,135,005 17,076,425
=========== ========= ========== ==========
<CAPTION>
FidMgIn FidPurtn
------------------------- -------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 186,247 117,953 473,978 443,211
Mortality, expense and administration
charges (note 2) ............................. (396,210) (234,858) (193,771) (173,935)
---------- ---------- ---------- ----------
Net investment activity ...................... (209,963) (116,905) 280,207 269,276
---------- ---------- ---------- ----------
Proceeds from mutual fund shares sold ........... 1,663,128 1,944,713 2,724,132 1,884,862
Cost of mutual fund shares sold ................. (1,134,531) (1,734,936) (2,380,613) (1,482,526)
---------- ---------- ---------- ----------
Realized gain (loss) on investments .......... 528,597 209,777 343,519 402,336
Change in unrealized gain (loss) on investments . 3,321,891 4,084,520 (1,141,665) 177,749
---------- ---------- ---------- ----------
Net gain (loss) on investments ............... 3,850,488 4,294,297 (798,146) 580,085
---------- ---------- ---------- ----------
Reinvested capital gains ........................ 2,703,524 884,756 726,332 1,012,923
---------- ---------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 6,344,049 5,062,148 208,393 1,862,284
---------- ---------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 10,193,949 4,957,504 3,005,029 2,895,054
Transfers between funds ......................... 1,114,670 (286,839) (2,047,732) (942,420)
Redemptions ..................................... (1,510,513) (1,512,760) (794,957) (1,263,833)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (23,202) (16,887) (10,523) (9,022)
Contingent deferred sales charges (note 2) ...... (31,378) (31,705) (14,389) (23,520)
Adjustments to maintain reserves ................ 4,877 251 (1) 89
---------- ---------- ---------- ----------
Net equity transactions .................... 9,748,403 3,109,564 137,427 656,348
---------- ---------- ---------- ----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 16,092,452 8,171,712 345,820 2,518,632
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 22,752,524 14,580,812 14,377,391 11,858,759
---------- ---------- ---------- ----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $38,844,976 22,752,524 14,723,211 14,377,391
========== ========== ========== ==========
</TABLE>
<PAGE> 11
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
FidVIPHI FranMutSer
-------------------------- ----------------------
1999 1998 1999 1998
----------- ------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 11,245 19,285 4,394 3,923
Mortality, expense and administration
charges (note 2) ............................. (1,576) (2,858) (3,723) (1,297)
----------- ------- ------- -------
Net investment activity ...................... 9,669 16,427 671 2,626
----------- ------- ------- -------
Proceeds from mutual fund shares sold ........... 24,023 146,537 158,518 34,211
Cost of mutual fund shares sold ................. (22,141) (137,310) (161,602) (39,523)
----------- ------- ------- -------
Realized gain (loss) on investments .......... 1,882 9,227 (3,084) (5,312)
Change in unrealized gain (loss) on investments . (4,341) (46,265) 9,018 (16,432)
----------- ------- ------- -------
Net gain (loss) on investments ............... (2,459) (37,038) 5,934 (21,744)
----------- ------- ------- -------
Reinvested capital gains ........................ 420 12,254 20,109 10,640
----------- ------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 7,630 (8,357) 26,714 (8,478)
----------- ------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. - - 89,498 151,888
Transfers between funds ......................... (22,367) (132,120) 27,444 43,975
Redemptions ..................................... - (11,242) (37,866) (1,472)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (77) (110) (623) (16)
Contingent deferred sales charges (note 2) ...... - - (531) -
Adjustments to maintain reserves ................ (9) (4) 267 96
----------- ------- ------- -------
Net equity transactions .................... (22,453) (143,476) 78,189 194,471
----------- ------- ------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. (14,823) (151,833) 104,903 185,993
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 121,339 273,172 185,993 -
----------- ------- ------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 106,516 121,339 290,896 185,993
=========== ======= ======= =======
<CAPTION>
InvDynam JanFund
------------------------ -------------------------
1999 1998 1999 1998
--------- --------- ---------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ - - - 13,196
Mortality, expense and administration
charges (note 2) ............................. (14,436) - (136,357) (59,083)
--------- --------- ---------- ---------
Net investment activity ...................... (14,436) - (136,357) (45,887)
--------- --------- ---------- ---------
Proceeds from mutual fund shares sold ........... 177,186 - 1,467,695 630,648
Cost of mutual fund shares sold ................. (145,218) - (948,993) (554,019)
--------- --------- ---------- ---------
Realized gain (loss) on investments .......... 31,968 - 518,702 76,629
Change in unrealized gain (loss) on investments . 737,993 - 2,229,356 1,321,824
--------- --------- ---------- ---------
Net gain (loss) on investments ............... 769,961 - 2,748,058 1,398,453
--------- --------- ---------- ---------
Reinvested capital gains ........................ 127,810 - 1,754,780 144,449
--------- --------- ---------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 883,335 - 4,366,481 1,497,015
--------- --------- ---------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 751,995 - 4,413,201 1,312,739
Transfers between funds ......................... 2,002,769 - 3,096,905 123,452
Redemptions ..................................... (92,753) - (585,095) (273,851)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (384) - (9,108) (3,757)
Contingent deferred sales charges (note 2) ...... (2,881) - (11,511) (5,439)
Adjustments to maintain reserves ................ 1,470 - 200 87
--------- --------- ---------- ---------
Net equity transactions .................... 2,660,216 - 6,904,592 1,153,231
--------- --------- ---------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 3,543,551 - 11,271,073 2,650,246
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... - - 6,097,880 3,447,634
--------- --------- ---------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $3,543,551 - 17,368,953 6,097,880
========= ========= ========== =========
</TABLE>
(Continued)
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Jan20Fd JanWrldwde
---------------------------- --------------------------
1999 1998 1999 1998
------------ ---------- ---------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 110,311 42,176 6,195 27,824
Mortality, expense and administration
charges (note 2) ............................. (409,436) (127,040) (144,113) (73,506)
------------ ---------- ---------- ---------
Net investment activity ...................... (299,125) (84,864) (137,918) (45,682)
------------ ---------- ---------- ---------
Proceeds from mutual fund shares sold ........... 3,443,884 2,274,301 805,632 1,326,534
Cost of mutual fund shares sold ................. (1,567,343) (1,711,517) (502,006) (1,091,427)
------------ ---------- ---------- ---------
Realized gain (loss) on investments .......... 1,876,541 562,784 303,626 235,107
Change in unrealized gain (loss) on investments . 13,558,639 5,023,354 6,168,659 896,338
------------ ---------- ---------- ---------
Net gain (loss) on investments ............... 15,435,180 5,586,138 6,472,285 1,131,445
------------ ---------- ---------- ---------
Reinvested capital gains ........................ 2,382,851 91,123 300,343 -
------------ ---------- ---------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 17,518,906 5,592,397 6,634,710 1,085,763
------------ ---------- ---------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 15,989,396 3,053,816 4,872,858 2,138,597
Transfers between funds ......................... 4,959,838 2,754,222 1,138,194 111,111
Redemptions ..................................... (2,382,467) (867,882) (590,624) (301,152)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (25,581) (8,378) (11,238) (5,392)
Contingent deferred sales charges (note 2) ...... (54,887) (17,610) (9,166) (6,090)
Adjustments to maintain reserves ................ 1,173 447 520 70
------------ ---------- ---------- ---------
Net equity transactions .................... 18,487,472 4,914,615 5,400,544 1,937,144
------------ ---------- ---------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 36,006,378 10,507,012 12,035,254 3,022,907
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 16,416,311 5,909,299 6,997,578 3,974,671
------------ ---------- ---------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 52,422,689 16,416,311 19,032,832 6,997,578
============ ========== ========== =========
<CAPTION>
LazSmCap MFSWdGvt
----------------------- -----------------------
1999 1998 1999 1998
------- -------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 188 - 38,704 46,268
Mortality, expense and administration
charges (note 2) ............................. (634) - (8,112) (9,446)
------- -------- ------- -------
Net investment activity ...................... (446) - 30,592 36,822
------- -------- ------- -------
Proceeds from mutual fund shares sold ........... 72,252 - 306,136 254,224
Cost of mutual fund shares sold ................. (70,119) - (330,879) (271,092)
------- -------- ------- -------
Realized gain (loss) on investments .......... 2,133 - (24,743) (16,868)
Change in unrealized gain (loss) on investments . (6,204) - (36,873) (1,563)
------- -------- ------- -------
Net gain (loss) on investments ............... (4,071) - (61,616) (18,431)
------- -------- ------- -------
Reinvested capital gains ........................ 6,007 - - -
------- -------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,490 - (31,024) 18,391
------- -------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 95,307 - 58,963 53,676
Transfers between funds ......................... 85,026 454 (138,762) 10,990
Redemptions ..................................... - - (122,666) (84,094)
Annuity benefits ................................ - - (2,456) (2,578)
Annual contract maintenance charge (note 2) ..... (9) - (910) (1,081)
Contingent deferred sales charges (note 2) ...... - - (1,236) (962)
Adjustments to maintain reserves ................ (298) 16 (319) 273
------- -------- ------- -------
Net equity transactions .................... 180,026 470 (207,386) (23,776)
------- -------- ------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 181,516 470 (238,410) (5,385)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 470 - 756,404 761,789
------- -------- ------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $181,986 470 517,994 756,404
======= ======== ======= =======
</TABLE>
<PAGE> 13
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NWBdFd NWFund
-------------------------- ------------------------
1999 1998 1999 1998
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 95,233 93,677 65,302 58,065
Mortality, expense and administration
charges (note 2) ............................. (20,947) (20,893) (109,757) (79,929)
----------- --------- --------- ---------
Net investment activity ...................... 74,286 72,784 (44,455) (21,864)
----------- --------- --------- ---------
Proceeds from mutual fund shares sold ........... 630,227 536,549 1,690,158 2,006,814
Cost of mutual fund shares sold ................. (628,048) (509,194) (1,037,842) (1,061,945)
----------- --------- --------- ---------
Realized gain (loss) on investments .......... 2,179 27,355 652,316 944,869
Change in unrealized gain (loss) on investments . (143,935) 2,462 (1,224,488) 168,811
----------- --------- --------- ---------
Net gain (loss) on investments ............... (141,756) 29,817 (572,172) 1,113,680
----------- --------- --------- ---------
Reinvested capital gains ........................ - - 523,109 351,018
----------- --------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (67,470) 102,601 (93,518) 1,442,834
----------- --------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 464,741 373,966 3,211,265 2,518,633
Transfers between funds ......................... (177,367) (106,283) (778,608) 286,664
Redemptions ..................................... (241,981) (479,980) (1,208,864) (1,272,428)
Annuity benefits ................................ (18) (214) (152) (1,645)
Annual contract maintenance charge (note 2) ..... (1,330) (1,293) (12,189) (5,526)
Contingent deferred sales charges (note 2) ...... (2,347) (972) (6,961) (5,815)
Adjustments to maintain reserves ................ (1,974) 59 (17,167) (970)
----------- --------- --------- ---------
Net equity transactions .................... 39,724 (214,717) 1,187,324 1,518,913
----------- --------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. (27,746) (112,116) 1,093,806 2,961,747
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,601,069 1,713,185 7,462,477 4,500,730
----------- --------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 1,573,323 1,601,069 8,556,283 7,462,477
=========== ========= ========= =========
<CAPTION>
NWGroFd NWIndxFdR
------------------------ ----------------------
1999 1998 1999 1998
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 6,354 5,977 777 -
Mortality, expense and administration
charges (note 2) ............................. (46,039) (53,844) (1,327) -
--------- --------- ------- ---------
Net investment activity ...................... (39,685) (47,867) (550) -
--------- --------- ------- ---------
Proceeds from mutual fund shares sold ........... 980,126 2,457,885 4,536 -
Cost of mutual fund shares sold ................. (686,099) (1,632,831) (4,303) -
--------- --------- ------- ---------
Realized gain (loss) on investments .......... 294,027 825,054 233 -
Change in unrealized gain (loss) on investments . (202,135) (146,456) 21,131 -
--------- --------- ------- ---------
Net gain (loss) on investments ............... 91,892 678,598 21,364 -
--------- --------- ------- ---------
Reinvested capital gains ........................ 442,086 224,429 341 -
--------- --------- ------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 494,293 855,160 21,155 -
--------- --------- ------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 496,793 390,995 175,404 -
Transfers between funds ......................... (71,634) (150,263) 15,317 -
Redemptions ..................................... (886,886) (1,950,035) (1,003) -
Annuity benefits ................................ (141) (1,563) - -
Annual contract maintenance charge (note 2) ..... (4,494) (3,472) (10) -
Contingent deferred sales charges (note 2) ...... (3,288) (4,096) (19) -
Adjustments to maintain reserves ................ (18,658) 524 103 -
--------- --------- ------- ---------
Net equity transactions .................... (488,308) (1,717,910) 189,792 -
--------- --------- ------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 5,985 (862,750) 210,947 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 3,543,989 4,406,739 - -
--------- --------- ------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $3,549,974 3,543,989 210,947 -
========= ========= ======= =========
</TABLE>
(Continued)
<PAGE> 14
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NWMyMkt NWUSGvt
---------------------------- -----------------------
1999 1998 1999 1998
------------ ---------- ------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 542,690 461,473 27,163 14,221
Mortality, expense and administration
charges (note 2) ............................. (154,492) (122,488) (6,715) (3,754)
------------ ---------- ------- -------
Net investment activity ...................... 388,198 338,985 20,448 10,467
------------ ---------- ------- -------
Proceeds from mutual fund shares sold ........... 16,488,282 13,390,890 758,992 370,513
Cost of mutual fund shares sold ................. (16,488,282) (13,390,890) (788,734) (365,796)
------------ ---------- ------- -------
Realized gain (loss) on investments .......... - - (29,742) 4,717
Change in unrealized gain (loss) on investments . - - (13,433) (8,808)
------------ ---------- ------- -------
Net gain (loss) on investments ............... - - (43,175) (4,091)
------------ ---------- ------- -------
Reinvested capital gains ........................ - - 1,715 3,694
------------ ---------- ------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 388,198 338,985 (21,012) 10,070
------------ ---------- ------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 6,833,790 6,108,738 612,619 292,897
Transfers between funds ......................... (1,084,885) 188,506 (477,996) 147,064
Redemptions ..................................... (3,242,473) (2,839,314) (191,094) (7,884)
Annuity benefits ................................ (377) (1,725) - -
Annual contract maintenance charge (note 2) ..... (10,508) (8,599) (431) (162)
Contingent deferred sales charges (note 2) ...... (73,053) (48,336) (193) (105)
Adjustments to maintain reserves ................ (16,045) 1,133 (4) 796
------------ ---------- ------- -------
Net equity transactions .................... 2,406,449 3,400,403 (57,099) 432,606
------------ ---------- ------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 2,794,647 3,739,388 (78,111) 442,676
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 11,504,938 7,765,550 517,836 75,160
------------ ---------- ------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 14,299,585 11,504,938 439,725 517,836
============ ========== ======= =======
<CAPTION>
NBGenesTr NBGuardTr
----------------------- -------------------------
1999 1998 1999 1998
------- ------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 3,514 3,629 56,088 43,561
Mortality, expense and administration
charges (note 2) ............................. (9,160) (5,221) (93,699) (102,643)
------- ------- --------- ---------
Net investment activity ...................... (5,646) (1,592) (37,611) (59,082)
------- ------- --------- ---------
Proceeds from mutual fund shares sold ........... 325,288 46,166 2,233,501 1,421,419
Cost of mutual fund shares sold ................. (380,896) (51,966) (2,271,244) (1,295,137)
------- ------- --------- ---------
Realized gain (loss) on investments .......... (55,608) (5,800) (37,743) 126,282
Change in unrealized gain (loss) on investments . 81,946 (47,655) (1,012,384) (1,131,594)
------- ------- --------- ---------
Net gain (loss) on investments ............... 26,338 (53,455) (1,050,127) (1,005,312)
------- ------- --------- ---------
Reinvested capital gains ........................ - 6,048 1,578,197 1,110,714
------- ------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 20,692 (48,999) 490,459 46,320
------- ------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 203,802 361,520 1,262,107 1,484,830
Transfers between funds ......................... (115,862) 323,146 (1,868,774) (1,057,014)
Redemptions ..................................... (56,722) (10,080) (389,152) (595,129)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (598) (57) (5,549) (5,098)
Contingent deferred sales charges (note 2) ...... (1,250) (76) (9,654) (8,659)
Adjustments to maintain reserves ................ 1,911 267 12,098 (9)
------- ------- --------- ---------
Net equity transactions .................... 31,281 674,720 (998,924) (181,079)
------- ------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 51,973 625,721 (508,465) (134,759)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 625,721 - 7,499,816 7,634,575
------- ------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $677,694 625,721 6,991,351 7,499,816
======= ======= ========= =========
</TABLE>
<PAGE> 15
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NBLtdMat NBPartFd
-------------------------- ------------------------
1999 1998 1999 1998
----------- ------- --------- ---------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 79,478 50,742 89,413 -
Mortality, expense and administration
charges (note 2) ............................. (16,850) (11,240) (114,287) (112,673)
----------- ------- --------- ---------
Net investment activity ...................... 62,628 39,502 (24,874) (112,673)
----------- ------- --------- ---------
Proceeds from mutual fund shares sold ........... 589,165 212,801 2,342,834 1,369,375
Cost of mutual fund shares sold ................. (612,091) (213,183) (2,220,647) (1,169,514)
----------- ------- --------- ---------
Realized gain (loss) on investments .......... (22,926) (382) 122,187 199,861
Change in unrealized gain (loss) on investments . (39,222) (12,717) (502,155) (542,191)
----------- ------- --------- ---------
Net gain (loss) on investments ............... (62,148) (13,099) (379,968) (342,330)
----------- ------- --------- ---------
Reinvested capital gains ........................ - - 955,799 808,960
----------- ------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 480 26,403 550,957 353,957
----------- ------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 761,986 348,091 1,159,627 3,047,800
Transfers between funds ......................... (234,865) (146,743) (2,302,271) (551,497)
Redemptions ..................................... (57,835) (31,227) (459,594) (922,110)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (701) (396) (10,544) (7,349)
Contingent deferred sales charges (note 2) ...... (314) (183) (9,682) (18,634)
Adjustments to maintain reserves ................ 321 225 30 (27)
----------- ------- --------- ---------
Net equity transactions .................... 468,592 169,767 (1,622,434) 1,548,183
----------- ------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 469,072 196,170 (1,071,477) 1,902,140
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 981,318 785,148 9,328,976 7,426,836
----------- ------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 1,450,390 981,318 8,257,499 9,328,976
=========== ======= ========= =========
<CAPTION>
OppGlob PhxBalFd
------------------------- ------------------------
1999 1998 1999 1998
---------- --------- --------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 61,855 61,774 21,606 18,333
Mortality, expense and administration
charges (note 2) ............................. (108,929) (85,201) (11,945) (9,786)
---------- --------- --------- -------
Net investment activity ...................... (47,074) (23,427) 9,661 8,547
---------- --------- --------- -------
Proceeds from mutual fund shares sold ........... 2,303,088 2,675,792 78,572 143,908
Cost of mutual fund shares sold ................. (2,056,611) (2,232,654) (72,900) (144,310)
---------- --------- --------- -------
Realized gain (loss) on investments .......... 246,477 443,138 5,672 (402)
Change in unrealized gain (loss) on investments . 3,280,514 (210,371) 13,459 80,132
---------- --------- --------- -------
Net gain (loss) on investments ............... 3,526,991 232,767 19,131 79,730
---------- --------- --------- -------
Reinvested capital gains ........................ 715,136 475,445 60,704 29,498
---------- --------- --------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 4,195,053 684,785 89,496 117,775
---------- --------- --------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 1,227,953 1,551,016 202,683 143,962
Transfers between funds ......................... (348,998) (79,722) 8,440 (31,417)
Redemptions ..................................... (430,714) (562,042) (33,653) (95,632)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (7,116) (5,709) (1,030) (749)
Contingent deferred sales charges (note 2) ...... (7,553) (12,575) (665) (1,821)
Adjustments to maintain reserves ................ (7,592) (5,842) 50 (7)
---------- --------- --------- -------
Net equity transactions .................... 425,980 885,126 175,825 14,336
---------- --------- --------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 4,621,033 1,569,911 265,321 132,111
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 7,265,693 5,695,782 795,875 663,764
---------- --------- --------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $11,886,726 7,265,693 1,061,196 795,875
========== ========= ========= =======
</TABLE>
(Continued)
<PAGE> 16
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
PrBal PrInt PrLgCpGro
-------------------- ------------------ ------------------
1999 1998 1999 1998 1999 1998
-------- ------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 42 - 17 - - -
Mortality, expense and administration
charges (note 2) ............................. (18) - (116) - (57) -
-------- ------- ------ ----- ------ ------
Net investment activity ...................... 24 - (99) - (57) -
-------- ------- ------ ----- ------ ------
Proceeds from mutual fund shares sold ........... 746 - 3,276 - 1,499 -
Cost of mutual fund shares sold ................. (753) - (3,226) - (1,519) -
-------- ------- ------ ----- ------ ------
Realized gain (loss) on investments .......... (7) - 50 - (20) -
Change in unrealized gain (loss) on investments . 96 - 3,405 - 2,702 -
-------- ------- ------ ----- ------ ------
Net gain (loss) on investments ............... 89 - 3,455 - 2,682 -
-------- ------- ------ ----- ------ ------
Reinvested capital gains ........................ 65 - 422 - 204 -
-------- ------- ------ ----- ------ ------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 178 - 3,778 - 2,829 -
-------- ------- ------ ----- ------ ------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 4,356 - 7,086 - 13,026 -
Transfers between funds ......................... - - 39,644 1,815 5,224 -
Redemptions ..................................... (692) - - - (1,378) -
Annuity benefits ................................ - - - - - -
Annual contract maintenance charge (note 2) ..... - - (2) - - -
Contingent deferred sales charges (note 2) ...... - - - - - -
Adjustments to maintain reserves ................ (5) - (35) 1 20 -
-------- ------- ------ ----- ------ ------
Net equity transactions .................... 3,659 - 46,693 1,816 16,892 -
-------- ------- ------ ----- ------ ------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 3,837 - 50,471 1,816 19,721 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... - - 1,816 - - -
-------- ------- ------ ----- ------ ------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 3,837 - 52,287 1,816 19,721 -
======== ======= ====== ===== ====== ======
<CAPTION>
PrLgCpVal
-----------------
1999 1998
----- -------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 4 -
Mortality, expense and administration
charges (note 2) ............................. (3) -
----- -------
Net investment activity ...................... 1 -
----- -------
Proceeds from mutual fund shares sold ........... 3 -
Cost of mutual fund shares sold ................. (3) -
----- -------
Realized gain (loss) on investments .......... - -
Change in unrealized gain (loss) on investments . (58) -
----- -------
Net gain (loss) on investments ............... (58) -
----- -------
Reinvested capital gains ........................ 4 -
----- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (53) -
----- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 1,100 -
Transfers between funds ......................... - -
Redemptions ..................................... - -
Annuity benefits ................................ - -
Annual contract maintenance charge (note 2) ..... - -
Contingent deferred sales charges (note 2) ...... - -
Adjustments to maintain reserves ................ - -
----- -------
Net equity transactions .................... 1,100 -
----- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 1,047 -
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... - -
----- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $1,047 -
===== =======
</TABLE>
<PAGE> 17
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
PrSmCap STComStk StTotRet
---------------------- ----------------------- -----------------------
1999 1998 1999 1998 1999 1998
---------- ------- --------- -------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 4 - - - - 4,227
Mortality, expense and administration
charges (note 2) ............................. (226) - (5,395) - (38,412) (22,635)
---------- ------- --------- -------- --------- ---------
Net investment activity ...................... (222) - (5,395) - (38,412) (18,408)
---------- ------- --------- -------- --------- ---------
Proceeds from mutual fund shares sold ........... 1,495 - 60,427 - 213,377 377,041
Cost of mutual fund shares sold ................. (1,454) - (57,029) - (158,861) (384,883)
---------- ------- --------- -------- --------- ---------
Realized gain (loss) on investments .......... 41 - 3,398 - 54,516 (7,842)
Change in unrealized gain (loss) on investments . 9,774 - 60,703 - 941,083 473,589
---------- ------- --------- -------- --------- ---------
Net gain (loss) on investments ............... 9,815 - 64,101 - 995,599 465,747
---------- ------- --------- -------- --------- ---------
Reinvested capital gains ........................ 769 - 114,677 - 694,656 21,813
---------- ------- --------- -------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 10,362 - 173,383 - 1,651,843 469,152
---------- ------- --------- -------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 45,455 - 403,570 - 1,173,612 307,761
Transfers between funds ......................... 42,914 454 431,123 - 335,991 (207,357)
Redemptions ..................................... (544) - (4,495) - (291,607) (154,396)
Annuity benefits ................................ - - - - - -
Annual contract maintenance charge (note 2) ..... 0 - (114) - (2,266) (1,357)
Contingent deferred sales charges (note 2) ...... - - (44) - (2,761) (2,073)
Adjustments to maintain reserves ................ 11 12 451 - 90 34
---------- ------- --------- -------- --------- ---------
Net equity transactions .................... 87,836 466 830,491 - 1,213,059 (57,388)
---------- ------- --------- -------- --------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 98,198 466 1,003,874 - 2,864,902 411,764
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 466 - - - 2,024,780 1,613,016
---------- ------- --------- -------- --------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 98,664 466 1,003,874 - 4,889,682 2,024,780
========== ======= ========= ======== ========= =========
<CAPTION>
TemForFd
-----------------------
1999 1998
--------- ---------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 154,634 111,484
Mortality, expense and administration
charges (note 2) ............................. (60,463) (59,378)
--------- ---------
Net investment activity ...................... 94,171 52,106
--------- ---------
Proceeds from mutual fund shares sold ........... 2,870,259 1,293,020
Cost of mutual fund shares sold ................. (3,044,788) (1,287,738)
--------- ---------
Realized gain (loss) on investments .......... (174,529) 5,282
Change in unrealized gain (loss) on investments . 1,497,360 (678,199)
--------- ---------
Net gain (loss) on investments ............... 1,322,831 (672,917)
--------- ---------
Reinvested capital gains ........................ 46,781 328,019
--------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,463,783 (292,792)
--------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 818,678 917,664
Transfers between funds ......................... (235,418) (948,243)
Redemptions ..................................... (244,205) (423,401)
Annuity benefits ................................ - -
Annual contract maintenance charge (note 2) ..... (4,517) (3,898)
Contingent deferred sales charges (note 2) ...... (3,244) (5,931)
Adjustments to maintain reserves ................ 161 (65)
--------- ---------
Net equity transactions .................... 331,455 (463,874)
--------- ---------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 1,795,238 (756,666)
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 4,069,618 4,826,284
--------- ---------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $5,864,856 4,069,618
========= =========
</TABLE>
(Continued)
<PAGE> 18
NATIONWIDE VARIABLE ACCOUNT
STATEMENTS OF CHANGES IN
CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
WPEmGro WPGIFxInc
-------------------------- ------------------------
1999 1998 1999 1998
----------- --------- -------- -------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ......................... $ - - 3,381 3,459
Mortality, expense and administration
charges (note 2) ............................. (59,051) (61,048) (982) (821)
----------- --------- -------- -------
Net investment activity ...................... (59,051) (61,048) 2,399 2,638
----------- --------- -------- -------
Proceeds from mutual fund shares sold ........... 1,515,362 1,097,855 248,010 8,819
Cost of mutual fund shares sold ................. (1,258,934) (912,250) (248,689) (8,789)
----------- --------- -------- -------
Realized gain (loss) on investments .......... 256,428 185,605 (679) 30
Change in unrealized gain (loss) on investments . 806,488 95,404 (4,664) 1,566
----------- --------- -------- -------
Net gain (loss) on investments ............... 1,062,916 281,009 (5,343) 1,596
----------- --------- -------- -------
Reinvested capital gains ........................ 637,805 - - -
----------- --------- -------- -------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,641,670 219,961 (2,944) 4,234
----------- --------- -------- -------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 873,907 1,272,369 33,961 64,115
Transfers between funds ......................... (1,067,817) (414,970) (122,983) 81,989
Redemptions ..................................... (460,638) (547,689) (706) (400)
Annuity benefits ................................ - - - -
Annual contract maintenance charge (note 2) ..... (5,091) (3,914) (130) (3)
Contingent deferred sales charges (note 2) ...... (5,813) (13,328) (30) (25)
Adjustments to maintain reserves ................ 72 (10) 72 53
----------- --------- -------- -------
Net equity transactions .................... (665,380) 292,458 (89,816) 145,729
----------- --------- -------- -------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 976,290 512,419 (92,760) 149,963
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 4,992,592 4,480,173 149,963 -
----------- --------- -------- -------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 5,968,882 4,992,592 57,203 149,963
=========== ========= ======== =======
</TABLE>
See accompanying notes to financial statements.
<PAGE> 19
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(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:
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)
(Continued)
<PAGE> 20
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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) (managed for a fee by an affiliated investment advisor)
Nationwide(R) S&P 500 Index Fund - Class R (NWIndxFdR)
(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 (PrLgCpGro)
(managed for a fee by an affiliated investment advisor)
Prestige Large Cap Value Fund - Class A (PrLgCpVal)
(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)
<PAGE> 21
At December 31, 1999, contract owners have invested in all of the above
funds. The contract owners equity is affected by the investment results
of each fund, equity transactions by contract owners and certain
contract expenses (see note 2). The accompanying financial statements
include only contract owners purchase payments pertaining to the
variable portions of their contracts and exclude any purchase payments
for fixed dollar benefits, the latter being included in the accounts of
the Company.
(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, 1999. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered, the Company will, with certain exceptions,
deduct from a contract owners 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.
(Continued)
<PAGE> 22
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1999,
for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
Annual
Contract owners' equity represented by: Units Unit Value Return*
--------- ------------ -----------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
American Century: Benham
Short-Term Government Fund:
Tax qualified ........................ 87,493 $ 23.132624 $ 2,023,943 1%
American Century: Income & Growth Fund:
Tax qualified ........................ 534,684 20.537578 10,981,114 16%
American Century: Twentieth Century
Growth Fund:
Tax qualified ........................ 153,919 117.667874 18,111,321 33%
American Century: Twentieth Century
International Growth Fund:
Tax qualified ........................ 67,212 29.892733 2,009,150 62%
American Century: Twentieth Century
Ultra Fund:
Tax qualified ........................ 958,510 31.115121 29,824,155 40%
Delaware Group Delchester High-Yield
Bond Fund, Inc.- Delchester Fund
Institutional Class:
Tax qualified ........................ 79,605 14.244875 1,133,963 (4)%
Dreyfus A Bonds Plus, Inc.:
Tax qualified ........................ 160,276 12.061566 1,933,180 0%
Dreyfus Appreciation Fund, Inc.:
Tax qualified ........................ 156,211 13.811292 2,157,476 9%
Dreyfus Balanced Fund, Inc.:
Tax qualified ........................ 29,698 11.699291 347,446 9%
Dreyfus S&P 500 Index Fund:
Tax qualified ........................ 692,394 34.392545 23,813,192 19%
The Dreyfus Third Century Fund, Inc.:
Tax qualified ........................ 59,207 33.178138 1,964,378 28%
Evergreen Income and Growth
Fund - Class Y:
Tax qualified ........................ 72,494 19.561585 1,418,098 15%
Federated High Yield Trust:
Tax qualified ........................ 49,637 10.042770 498,493 1%
Federated Investment Series Funds, Inc.-
Federated Bond Fund - Class F:
Tax qualified ........................ 139,182 11.130751 1,549,200 (4)%
Fidelity Advisor Balanced Fund - Class T:
Tax qualified ........................ 86,087 15.455350 1,330,505 3%
Fidelity Advisor Equity Income
Fund - Class T:
Tax qualified ........................ 122,013 16.762859 2,045,287 2%
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
Annual
Units Unit Value Return*
---------- ------------ ---------
<S> <C> <C> <C> <C>
Fidelity Advisor Growth Opportunities
Fund - Class T:
Tax qualified ............................ 488,519 19.101353 9,331,374 3%
Fidelity Advisor High Yield Fund - Class T:
Tax qualified ............................ 219,180 13.417364 2,940,818 7%
Fidelity Asset Manager(TM):
Tax qualified ............................ 290,579 19.290540 5,605,426 12%
Fidelity Capital & Income Fund:
Tax qualified ............................ 17,840 54.000183 963,363 12%
Fidelity Equity-Income Fund:
Tax qualified ............................ 193,545 83.313397 16,124,891 6%
Fidelity Magellan(R) Fund:
Tax qualified ............................ 1,080,953 35.935860 38,844,976 22%
Fidelity Puritan(R) Fund:
Tax qualified ............................ 637,179 23.106868 14,723,211 2%
Fidelity VIP - High Income Portfolio:
Tax qualified ............................ 4,175 25.512888 106,516 7%
Franklin Mutual Series Fund Inc.-
Mutual Shares Fund - Class I:
Tax qualified ............................ 26,055 11.164707 290,896 13%
INVESCO Dynamics Fund, Inc.:
Tax qualified ............................ 198,949 17.811356 3,543,551 70%
Janus Fund:
Tax qualified ............................ 595,937 29.145619 17,368,953 45%
Janus Twenty Fund:
Tax qualified ............................ 995,837 52.641837 52,422,689 63%
Janus Worldwide Fund:
Tax qualified ............................ 769,694 24.727791 19,032,832 62%
Lazard Small Cap Portfolio - Open Shares:
Tax qualified ............................ 17,391 10.464373 181,986 0%
MFS(R) World Governments Fund - Class A:
Tax qualified ............................ 14,393 35.741694 514,430 (5)%
Nationwide(R) Bond Fund - Class D:
Tax qualified ............................ 37,478 41.898652 1,570,278 (4)%
Non-tax qualified ........................ 73 41.719031 3,045 (4)%
Nationwide(R) Fund - Class D:
Tax qualified ............................ 69,097 123.552516 8,537,108 (2)%
Non-tax qualified ........................ 149 128.692505 19,175 (2)%
Nationwide(R) Growth Fund - Class D:
Tax qualified ............................ 26,654 132.098827 3,520,962 15%
Non-tax qualified ........................ 208 139.479726 29,012 15%
Nationwide(R) S&P 500 Index Fund - Class R:
Tax qualified ............................ 17,851 11.817107 210,947 18%
Nationwide(R) Money Market Fund:
Tax qualified - Pre 12/25/82 ............. 621,449 21.769674 13,528,742 3%
Tax qualified ............................ 27,248 27.412298 746,930 3%
Non-tax qualified ........................ 838 27.585541 23,117 3%
</TABLE>
(Continued)
<PAGE> 24
NATIONWIDE VARIABLE ACCOUNT
NOTES TO FINANCIAL STATEMENTS, Continued
<TABLE>
<CAPTION>
Annual
Units Unit Value Return*
-------- ---------- ---------
<S> <C> <C> <C> <C>
Nationwide(R) Intermediate U.S.
Government Bond Fund - Class D:
Tax qualified ........................... 38,138 11.529833 439,725 (3)%
Neuberger & Berman Genesis Trust
Tax qualified ........................... 71,239 9.512964 677,694 3%
Neuberger & Berman Guardian Trust:
Tax qualified ........................... 379,737 18.411034 6,991,351 7%
Neuberger & Berman Limited Maturity
Bond Fund:
Tax qualified ........................... 119,912 12.095451 1,450,390 0%
Neuberger & Berman Partners Fund:
Tax qualified ........................... 311,323 26.523895 8,257,499 6%
Oppenheimer Global Fund - Class A:
Tax qualified ........................... 315,244 37.706431 11,886,726 56%
Phoenix Balanced Fund Series - Class A:
Tax qualified ........................... 58,295 18.203902 1,061,196 9%
Prestige Balanced Fund - Class A:
Tax qualified ........................... 355 10.809720 3,837 8%
Prestige International Fund - Class A:
Tax qualified ........................... 4,361 11.989686 52,287 19%
Prestige Large Cap Growth Fund - Class A:
Tax qualified ........................... 1,471 13.394083 19,703 33%
Prestige Large Cap Value Fund - Class A:
Tax qualified ........................... 109 9.619068 1,048 (6)%
Prestige Small Cap Fund - Class A:
Tax qualified ........................... 8,135 12.128362 98,664 17%
Strong Common Stock Fund, Inc.
Tax qualified ........................... 69,558 14.432187 1,003,874 39%
Strong Total Return Fund, Inc.:
Tax qualified ........................... 115,792 42.228152 4,889,682 58%
Templeton Foreign Fund - Class I:
Tax qualified ........................... 334,228 17.547470 5,864,856 37%
Warburg Pincus Emerging Growth
Fund - Common Shares:
Tax qualified ........................... 288,739 20.672241 5,968,882 40%
Warburg Pincus Global Fixed-Income
Fund - Common Shares:
Tax qualified ........................... 5,420 10.554122 57,203 (1)%
========== =========
Reserves for annuity contracts in payout phase:
Tax qualified ........................... 225,036
-------------
$ 360,275,782
=============
</TABLE>
* The annual return does not include contract charges satisfied by
surrendering units.
<PAGE> 48
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1999 and
1998, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1996 $ 3.8 $ 527.9 $1,432.6 $173.6 $2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
--------
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ -------- -------- ------ --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ -------- -------- ------ --------
December 31, 1998 3.8 914.7 1,579.0 275.6 2,773.1
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(b) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of accumulated other comprehensive income in
shareholder's equity. The adjustment to deferred policy
acquisition costs represents the change in amortization of
deferred policy acquisition costs that would have been required as
a charge or credit to operations had such unrealized amounts been
realized. The Company has no fixed maturity securities classified
as held-to-maturity or trading as of December 31, 1999 or 1998.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(d) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
Participating business represents approximately 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------- ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------- ---------
$13,831.7 $563.2 $ (22.6) $14,372.3
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
equity that bypass net income. Currently, the Company's only component
of Other Comprehensive Income is unrealized gains (losses) on
securities available-for-sale. The related before and after federal tax
amounts are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans and derivative financial instruments. These
instruments involve, to varying degrees, elements of credit risk in
excess of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $143.6 million and $187.9 million as of December 31,
1999 and 1998, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(9) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance and employees of WSC ended
participation in the plan. A curtailment gain of $67.1 million resulted
(consisting of a $107.2 million reduction in the projected benefit
obligation, net of the write-off of the $40.1 million remaining
unamortized transition obligation related to WSC). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, invested
assets are retained by the ceding company and investment earnings are
paid to the reinsurer. Under the terms of the Company's agreements, the
investment risk associated with changes in interest rates is borne by
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
The ceding of risk does not discharge the original insurer from its
primary obligation to the policyholder. The Company believes that the
terms of the modified coinsurance agreements are consistent in all
material respects with what the Company could have obtained with
unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 million,
respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1999 and
1998 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company paid a dividend to NFS, and NFS paid an equivalent dividend
to Nationwide Corp., consisting of securities having an aggregate fair
value of $850.0 million. The Company recognized a gain of $14.4 million
on the transfer of securities.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to a $600.0 million revolving credit
facility which provides for a $600.0 million loan over a five year term
on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was named in a lawsuit filed in Ohio
state court related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) Segment Information
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate fixed for a
prescribed period, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. Such contracts consist of single premium deferred
annuities, flexible premium deferred annuities and single premium
immediate annuities. The Fixed Annuities segment includes the fixed
option under variable annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
- ----------
(1) The Company's method of allocating net investment income results in
a charge (negative net investment income) to the Variable Annuities
segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on
a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 49
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS PAGE
(a) Financial Statements:
(1) Financial statements included in Prospectus
(Part A)
Condensed Financial Information.
(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.
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1999.
Statements of Operations for the years ended December
31, 1999 and 1998.
Statements of Changes in Contract Owners' Equity for
the years ended December 31, 1999 and 1998.
Notes to Financial Statements.
Nationwide Life Insurance Company and subsidiaries:
Independent Auditors' Report.
Consolidated Balance Sheets as of December 31, 1999
and 1998.
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholder's Equity for
the years ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
<PAGE> 50
Item 24. (b) Exhibits
<TABLE>
<S> <C>
(1) Resolution of the Depositor's Board of Filed previously with the Registration
Directors authorizing the establishment Statement, (File No. 2-58043), and hereby
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 contract Filed previously with the Registration
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 original
Registration Statement (File No. 333-80481),
and hereby incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Not Applicable
</TABLE>
<PAGE> 51
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365-6107
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
301 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
Xerox Corporation
Suite 200
1401 H Street NW
Washington, DC 20005-2110
Ralph M. Paige Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
<PAGE> 52
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1767D Westwood Avenue
Alliance, OH 44601
Richard D. Headley Executive Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
Charles A. Bryan Senior Vice President -
One Nationwide Plaza Chief Actuary - Property and Casualty
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
<PAGE> 53
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
David K. Hollingsworth Senior Vice President -
One Nationwide Plaza Business Development and
Columbus, OH 43215 Sponsor Relations
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
Donna A James Senior Vice President - Chief Human
One Nationwide Plaza Resources Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President -
One Nationwide Plaza Corporate Relations
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Mark D. Phelan Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
Douglas C. Robinette Senior Vice President -
One Nationwide Plaza Claims and Finance Services
Columbus, OH 43215
Mark R. Thresher Senior Vice President -
One Nationwide Plaza Finance - Nationwide Financial
Columbus, OH 43215
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Operations
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product
One Nationwide Plaza Management and Nationwide
Columbus, OH 43215 Financial Marketing
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 54
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<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 Insurance Iowa Underwrites General P&C 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 Wisconsin Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Columbus Insurance Brokerage and Germany Insurance Broker
Service GmbH
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
</TABLE>
<PAGE> 55
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance Agency
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Depositors Insurance Company Iowa Underwrites P&C insurance
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
*Employers Life Insurance Company of Wisconsin Life Insurance Company
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 Agency Alabama Insurance Agency
of Alabama, Inc.
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Financial Horizons Distributors Agency Ohio Insurance Agency
of Ohio, Inc.
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Financial Horizons Distributors Agency Oklahoma Insurance Agency
of Oklahoma, Inc.
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Financial Horizons Distributors Agency Texas Insurance 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 York, New York Workers' compensation claims
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, Inc. Ohio Insurance Agency
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Leben Direkt Insurance Company Germany Life Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
</TABLE>
<PAGE> 56
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<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 Capital Delaware Statutory Business Trust
Trust
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust II
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
</TABLE>
<PAGE> 57
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<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 America California Underwriter
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Insurance Company of Florida Ohio Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
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>
<PAGE> 58
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<S> <C> <C> <C>
Nationwide Properties, Ltd. Ohio Develop, own and operate real estate
and real estate investments
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real estate
and real estate investments
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Alabama Market and administer deferred
of Alabama compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Arizona Market and administer deferred
of Arizona compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Arkansas Market and administer deferred
of Arkansas compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity contracts to
of Ohio members of the National Education
Association in the state of Ohio
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity contracts to
of Oklahoma members of the National Education
Association in the state of Oklahoma
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity contracts to
of Wyoming members of the National Education
Association in the state of Wyoming
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
</TABLE>
<PAGE> 59
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public employees
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
*Nationwide Separate Account Trust Massachusetts Investment Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nationwide Trust Company, FSB United States of America Federal Savings Bank
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Neckura Insurance Company Germany Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Neckura Life Insurance Company Germany Life Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing services
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NFS Distributors, Inc. Delaware Holding Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NWE, Inc. Ohio Special Investments
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
PanEuroLife Luxembourg Life Insurance
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Pension Associates, Inc. Wisconsin Pension plan administration
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Portland Investment Services, Inc. Oregon NASD Registered Broker-Dealer
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Premier Agency, Inc. Iowa Insurance Agency
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Riverview Agency, Inc. Texas Stock Corporation
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Scottsdale Indemnity Company Ohio Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Scottsdale Insurance Company Ohio Insurance Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance
Company Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
SVM Sales GmbH, Neckura Insurance Group Germany Sales support for Neckura Insurance
Group
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Union Bond and Trust Company Oregon Oregon state bank with trust powers
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
Villanova Capital, Inc. Delaware Holding Company
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
</TABLE>
<PAGE> 60
<TABLE>
<CAPTION>
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
NO. VOTING
SECURITIES
(SEE ATTACHED
CHART UNLESS
STATE/COUNTRY OF OTHERWISE
COMPANY ORGANIZATION INDICATED) PRINCIPAL BUSINESS
- ---------------------------------------- ------------------------- ------------------ ----------------------------------------
<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>
<PAGE> 61
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NO. VOTING SECURITIES
STATE/COUNTRY OF (SEE ATTACHED CHART)
COMPANY ORGANIZATION UNLESS OTHERWISE INDICATED PRINCIPAL BUSINESS
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
Nationwide Variable Account-11 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
- --------------------------------------------------------------------------------------------------------------------------------
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 62
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
NO. VOTING SECURITIES
STATE/COUNTRY OF (SEE ATTACHED CHART)
COMPANY ORGANIZATION UNLESS OTHERWISE INDICATED PRINCIPAL BUSINESS
- --------------------------------------------------------------------------------------------------------------------------------
<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>
<PAGE> 63
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
- --------------------------- --------------------------- ----------------------------
| ALLIED GROUP | | ALLIED | | |
| MERCHANT BANKING | | GROUP, INC. | | |
| CORPORATION | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 10,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $150,055 | | |100% $243,344,521 | | | |
- --------------------------- | --------------------------- | ----------------------------
| |
- --------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 500,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI 100% $22,251,842 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
- --------------------------- --------------------------- | ----------------------------
| |
- --------------------------- --------------------------- | ----------------------------
| ALLIED | | MIDWEST | | | NATIONWIDE |
| GROUP INSURANCE | | PRINTING SERVICES, | | | HOME MORTGAGE |
| MARKETING COMPANY | | LTD. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-80% |
| Finance-100% $16,059,469| --------------------------- | ----------------------------
- -------------------------- | |
--------------------------- | ----------------------------
| PREMIER | | | AGMC |
| AGENCY, | | | REINSURANCE, LTD. |
| INC. | | | |
|Common Stock: 100,000 | | |Common Stock: 11,000 |
|------------ Shares | | |------------ Shares |
| |---| | |
| Cost | | Cost |
| ---- | | ---- |
|AGI-100% $100,000 | |NHMC-100% $11,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 64
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
- --| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- -----------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GmbH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | ----| ------------- | |--|------------ |
| | | | | | | |
| | Cost | | Cost | | | Cost |
| | ---- | | ---- | | | ---- |
| |SIC-100% $6,000,000 | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | |
| -------------------------------- -------------------------------- | --------------------------------
| | |
| -------------------------------- -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | |
| |Common Stock: 10,000 | | | | |Common Stock: 1500 Shares |
|---|------------ Shares | | | |--|------------ |
| | | | | | | |
| | Cost | | | | | Cost |
| | ---- | | | | | ---- |
| |SIC-100% $10,000 | |NC-100% | | |Neckura-100% DM 1,643,149 |
| -------------------------------- -------------------------------- | --------------------------------
| |
| -------------------------------- -------------------------------- | --------------------------------
| | WESTERN . | | SUN DIRECT | | | SVM SALES |
| | HERITAGE INSURANCE | | VERSICHERUNGS - | | | GmbH |
| | COMPANY | | AKTIENGESCLISCHAFT | | | |
| |Common Stock: 4,776,076 | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|---|------------ Shares | |------------ |------------| |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|SIC-100% $57,000,000 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 65
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| 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 | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $1,008,497,908 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 36,862,514 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE CASH | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 100 Shares | |-----| ---- |
| |------------ Shares | | |------------ | | |Casualty-18.6% $90,630 |
| | | | | Cost | | |Fire-18.6% $90,722 |
| | Cost | | | ---- | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-100% $11,226 | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE INSURANCE | | | CALFARM INSURANCE |
| | GENERAL AGENCY, INC. | | | COMPANY OF FLORIDA | | | COMPANY |
| | | | | | | |Common Stock: 49,800 Shares |
------|Common Stock: 1,000 | |----|Common Stock: 10,000 Shares| |-----|------------- |
| |------------ Shares | | |------------ | | |
| | | | | Cost | | |
| | Cost | | | ---- | | |
| | ---- | | |Casualty-100% $300,000,000 | |Casualty-100% |
| |Casualty-100% $5,000,000 | | | | | |
| -------------------------------- | -------------------------------- -------------------------------------
| || | |
| -------------------------------- | -------------------------------- -------------------------------------
| | COLONIAL COUNTY | | | NATIONWIDE INTERNATIONAL | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | UNDERWRITERS | | AGENCY |
| | COMPANY | | |Common Stock: 1,000 Shares | | |
| | | |----|------------ | | |
| | | | | | | |
| | | | | Cost | |Common Stock: 1,000 shares |
| |Surplus Debentures: | | | ---- | |------------- |
| |------------------- | | |Casualty-100% $10,000 | | |
| | Cost | | -------------------------------- | |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- |CalFarm Insurance |
| |Lone Star 150,000 | | | NATIONWIDE | |Company - 100% |
| -------------------------------- | | ARENA LLC | -------------------------------------
| | | | |
| -------------------------------- | | | -------------------------------------
| | NATIONWIDE SERVICES | | | | | CAL-AG INSURANCE |
| | COMPANY, LLC | | | | | SERVICES |
| | | | | | | |
| |Single Member Limited | |....| | |Common Stock: 1,000 Shares |
|.....|Liability Company | | | | |------------ |
| | | | | | | |
| | | | |Casualty-90% | |CalFarm Insurance |
| |Casualty-100% | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| | | NATIONWIDE |
| -------------------------------- | | EXCLUSIVE DISTRIBUTION |
| | AMERICAN MARINE | | | COMPANY, LLC (NEDCO) |
| | UNDERWRITERS, INC. | | | |
| | | | | Single Member Limited |
| |Common Stock: 20 Shares | |....| Liability Compnany |
|-----|------------ | | | |
| | Cost | | | |
| | ---- | | |Casualty-100% |
| |Casualty-100% $5,020 | | | |
| | | | --------------------------------
| -------------------------------- | |
| | --------------------------------
| --------------------------------- | | INSURANCE |
| | eNATIONWIDE, LLC | | | INTERMEDIARIES, INC |
| | | | | |
| | Single Member Limited | | |Common Stock 1,615 Shares |
| | Liability Company | |----|------------ |
| | | | Cost |
|.....| | | ---- |
| | |Casualty-100% $1,615,000 |
| | | |
|Casualty-100% | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1999
</TABLE>
Page 1
<PAGE> 66
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| ||--------------------------
- ----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
- ----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR |
| | | | | || | | | || | |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ------------------------------| || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC. |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | GLOBAL FUND | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | CAYMAN ISLANDS | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |--| | EXEMPTED LLC |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | | | || | OF OKLAHOMA, INC |
| | | | | || | Cost | | || | |
| NW Life-90% | | | | || | ---- | | || | |
| NW Mutual-10% | | | | || | NFIDAI-100% $153,000 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | ASSET ALLOCATION TRUST | || | | | || | |
| | | | | || | | | || | |
| Units: |--| | | || | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | OHIO BUSINESS TRUST |==== | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | || | OF TEXAS, INC |
| | | | | Cost | | || | |
| NW Life-97.6% | | | | ---- | | || | |
| NW Mutual-2.4% | | | | NFIDAI-100% $100 | | || | |
- ----------------------------- ----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INS. AGENCY, INC. | | || | |
| OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INS. AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 67
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $1,008,497,908 |
|Fire 649,510 36,862,514 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------|-------------------------|--------------------------|-----------------------------|----------------------|--------------
| | | | |
- -----------|------------ ------------|-------------- -----------|------------- ---------------|--------- ------------|--------------
|NFS DISTRIBUTORS, INC.| | IRVIN L. SCHWARTZ | | NATIONWIDE FINANCIAL | |VILLANOVA CAPITAL, INC.| | NATIONWIDE FINANCIAL |
| (NFSDI) | | AND ASSOCIATES, INC. | |SERVICES (BERMUDA) INC.| |Common Stock: 958,750 | | SERVICES CAPITAL |
| | |Common Stock: Control: | |Common Stock: 250,000 | |------------- Shares | | TRUST II |
| | |------------- -------- | |------------- Shares | |NFS-96% | | |
| | |Class A Other-100%| | Cost | |Preferred Stock:500,000| | |
|NFS-100% | |Class B NFS -100%| | ---- | |--------------- Shares | | |
| | | | |NFS-100% $3,500,000 | |NFS-100% | | NFS-100% |
- -----------|------------ --------------------------- ------------------------- ---------------|--------- -------------------------
| | |
- -----------|---------------------------- -----------------------------|-----------------------|
- -----------|------------ --------------|----------- ------------|------------ --------------|---------- ------------|-------------
| NATIONAL DEFERRED | | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL | | VILLANOVA MUTUAL FUND |
| COMPENSATION, INC. | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)| | CAPITAL TRUST (VMF) |
| | |Common Stock: 236,494 | | | |Common Stock: 82,343 | | |
| | |------------- Shares | | | |------------ Shares | | |
| | | | | | | | | |
|NFSDI-100% | | | | | |VILLANOVA CAPITAL, INC.| | |
| | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% | |DELAWARE BUSINESS TRUST|
- ----------||------------ -------------------|------ ---------------------|--- ---------------------|--- -------------------------
|| | | |
|| | | -----
|| ---------------------------- | ------------------------- | ------------------------- | ------------------------
|| | NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | | | MORLEY & |
|| |SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | |INVESTORS SERVICES, INC.| | | ASSOCIATES, INC. |
|| | | | | NEW MEXICO | | | | | | |
|| |Common Stock: 10,000 | | | Common Stock: 1,000 | | | Common Stock: 5 Shares | | | Common Stock: 3,500 |
|| |------------- Shares |--|--| ------------- Shares | |--|------------- | |--| ------------- Shares |
============ | Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | | |Morley-100% $1,000|
---------------------------- | -------------------------- | -------------------------- | ------------------------
| | |
---------------------------- | -------------------------- | -------------------------- | -----------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA VALUE | | | EXCALIBER FUNDING |
|SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | INVESTOR, LLC | | | CORPORATION |
| | | | SO. DAKOTA | | | | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | | | | |Common Stock: 1,000 |
|------------- Shares |--|--|------------- Shares | ...| | |--|------------- Shares |
| Cost | | | Cost | | | | | Cost |
| ---- | | | ---- | | | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | VSA-100% | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | -----------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | MORLEY CAPITAL | | | CALIBER FUNDING |
| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | MANAGEMENT | | | CORPORATION |
| ARKANSAS | | | OF WYOMING | | | | | |
|Common Stock: 50,000 |-----|Common Stock: 500 Shares| |Common Stock: 500 Shares| | | |
|------------- Shares | | |------------- | |------------- |--|--| |
| Cost | | | Cost | | Cost | | | |
| ---- | | | ---- | | ---- | | | |
|NRS-100% $500 | | |NRS-100% $500 | |Morley-100% $5,000 | | |Morley-100% |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | | | MORLEY RESEARCH |
| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | | | ASSOCIATES, LTD. |
| AGENCY, INC. | | | OF OHIO | | | | | |
|Common Stock: 1,000 | | | | |Common Stock: 2,000 | | | Common Stock: 1,000 |
|------------- Shares |--|==| | |------------- Shares |--|--| ------------- Shares |
| | | | | | | | | |
| Cost | | | | | Cost | | | Cost |
| ---- | | | | | ---- | | | ---- |
|NRS-100% $1,000 | | | | | Morley-100% $50,000 | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
|SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| | | | OKLAHOMA | | | |
|Common Stock: 500 | | | | | Common Stock: 1,000 | |
|------------- Shares |--|==| | | ------------- Shares |--
| Cost | | | | | Cost |
| ---- | | | | | ---- |
|NRS-100% $500 | | | | | Morley-100% $25,000 |
---------------------------- | -------------------------- --------------------------
|
---------------------------- | --------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT|
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. |
| | | | OF TEXAS |
|Common Stock: 1,000 |-- ==| |
|------------- Shares | | |
| Cost | | |
| ---- | | |
|NRS-100% $1,000 | | |
---------------------------- --------------------------
</TABLE>
<PAGE> 68
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
------------------------------- | ---------------------------- -----------------------------
| GATES MCDONALD | | | NATIONWIDE | | NATIONWIDE GLOBAL |
| & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) | | HOLDINGS, INC. (NGH) |
| | | | | | |
- ------------------- --|Common Stock: 254 Shares | |--|Common Stock: 100 Shares | |Common Stock: 1 Share |
| | | |------------ | || |------------ | --|------------ |
| ---------------|-------------- | | Cost | || | Cost || | Cost |
| | | | | ---- | || | ---- || | ---- |
| | THE 401(k) COMPANIES, INC. | | |NW Corp.-100% $25,683,532 | || | || | |
| | (401(k)) | | |------------------------------ || |NW Corp.-100% $14,603,732|| |NW Corp.-100% $257,000,000|
| | | | || --------------------------- | -----------------------------
| |Common Stock: Control | | |------------------------------ || ----------------------------| -----------------------------
||--|------------- ------- | | | MEDPROSOLUTIONS, INC. | || | NATIONWIDE MANAGEMENT || | NATIONWIDE GLOBAL |
|| |Class A Other-100% | --| | |--| SYSTEMS, INC. || | HOLDINGS, INC. - |
|| |Class B NFS-100% | | | Cost | || | || | LUXEMBOURG BRANCH |
|| | | | | ---- | || |Common Stock: 100 Shares || | (BRANCH) |
|| ------------------------------ | |Gates-100% $6,700,000 | || |------------- || | |
|| | | | || | Cost ||--| |
|| | | | || | ---- || |Endowment Capital - |
|| ------------------------------ | ------------------------------- || |NHP Inc.-100% $25,149 || | $1,000,000 |
|| | 401(k) INVESTMENT | | || ----------------------------| --------------|--------------
|| | SERVICES, INC. | | |------------------------------ || ----------------------------| --------------|--------------
|| | | | | GATES MCDONALD & | || | NATIONWIDE || | NGH LUXEMBOURG S.A. |
|| |Common Stock: 1,000,000 | | | COMPANY OF NEW YORK, INC. | || | AGENCY, INC. || | (LUX SA) |
|| |------------ Shares | --| | |--| || | |
||--| | | |Common Stock: 3 Shares | | |Common Stock: 100 Shares || |Common Stock: 5894 Shares |
|| | Cost | | |------------ | | |------------ || -|------------ |
|| | ---- | | | Cost | | | Cost || || Cost |
|| |401(k)-100% $7,800 | | | ---- | | | ---- || || ---- |
|| ------------------------------ | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 || ||BRANCH.-99.98% $115,470,723|
|| | ------------------------------- | ----------------------------| |-----------------------------
|| ------------------------------ | | | |
|| | 401(k) INVESTMENT | | ------------------------------- | ----------------------------| |-----------------------------
|| | ADVISORS, INC. | | | GATES MCDONALD & | | |NATIONWIDE GLOBAL HOLDINGS|| || PAN EURO LIFE |
|| | | | | COMPANY OF NEVADA | | | -HONG KONG, LIMITED || || |
|| |Common Stock: 1,000 Shares | --| | | | || ||Common Stock: 1,300,000 |
||--|------------ | | |Common Stock: 40 Shares | | |Common Stock: 2 Shares || ||------------ Shares |
|| | Cost | | |------------ | | |------------ Cost -- -- |
|| | ---- | | | Cost | | | ---- || || Cost |
|| |401(k)-100% $1,000 | | | ---- | | |NGH-50% || || ---- |
|| ------------------------------ | |Gates-100% $93,750 | | |Casualty--50% || ||LUX SA-90% 3,817,832,685|
|| | ------------------------------- | ----------------------------| || LUF |
|| ------------------------------ | | | |-----------------------------
|| | 401(k) COMPANY | | ------------------------------- | ----------------------------| |-----------------------------
|| | | | | GATES MCDONALD | | | NGH || ||NATIONWIDE GLOBAL HOLDINGS |
|| |Common Stock: 855,000 Shares| | | HEALTH PLUS, INC. | | | NETHERLANDS B.V. || ||- NGH BRASIL PARTICIPACOES,|
|| | | --| | | | || || LTDA (NGH BRASIL) |
|| | Cost | | |Common Stock: 200 Shares | | |Common Stock: 40 Shares || || |
||--| ---- | | |------------ | | |------------ -- -- Shares Cost |
|| |401(k)-100% $1,000 | | | Cost | | | Cost || | ------ ---- |
|| ------------------------------ | | ---- | | | ---- || |LUX SA 6,164,899 R6,164,899|
|| | |Gates-100% $2,000,000 | | |NGH-100% NLG 52,500 || |NGH 1 R1 |
|| ------------------------------ | ------------------------------- | ----------------------------| --------------|--------------
|| | | | | | |
|===| | | ------------------------------- | ----------------------------| --------------|--------------
| | RIVERVIEW AGENCY, INC. | | |NEVADA INDEPENDENT COMPANIES-| | | NATIONWIDE || | NATIONWIDE |
| | | | |MANUFACTURING TRANSPORTATION | | | SERVICES SP. Z.O.O. || | SEGURADORA S.A. |
| | | | | AND DISTRIBUTION | | | || | |
| | | --| | | |Common Stock: 80 Shares || | Shares Cost |
| | | | |Common Stock: 1,000 Shares | | |------------ Cost -- | ------ ---- |
| ------------------------------ | |------------ | | | ---- || |NGH |
| | |Gates-100% | | |NGH-100% 4,000 PLN || |BRASIL 9,999,999 R9,999,999|
| ------------------------------ | ------------------------------- | --------------------------- | |LUX SA 1 R1 |
| | | | | | -----------------------------
| | PENSION ASSOCIATES, INC. | | ------------------------------- | ----------------------------| -----------------------------
| | | | | NEVADA INDEPENDENT | | | MRM INVESTMENTS, INC. || | NATIONWIDE GLOBAL |
- ----| Common Stock: 1,000 Shares | | | COMPANIES-HEALTH AND PROFIT | | | || | FINANCE, LLC |
| | --| | ---|Common Stock: 1 Share || | Single Member Limited |
| Cost | | |Common Stock: 1,000 Shares | |------------ || | Liability Company |
| ---- | | |------------ | | Cost |...| |
| NFS-100% $2,839,392 | | | | | ---- | | |
------------------------------ | |Gates-100% | |NW Corp.-100% $7,000,000 | |NGH-100% |
| ------------------------------- ---------------------------- -----------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-CONSTRUCTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| | |
| |Gates-100% |
| -------------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
--| ENTERTAINMENT | Contractual Association - Double Line
| | Limited Liability Company - Dotted Line
|Common Stock: 1,000 Shares |
|Gates-100% | December 31, 1999
-------------------------------
Page 2
</TABLE>
<PAGE> 69
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 Investment Services Corporation ("NISC") acts as
principal underwriter and general distributor for the
Nationwide Multi-Flex Variable Account, Nationwide Variable
Account, Nationwide Variable Account-II, Nationwide Variable
Account-5, Nationwide Variable Account-6, Nationwide
Variable Account-8, Nationwide Variable Account-9,
Nationwide Variable Account-10, Nationwide Variable
Account-11, Nationwide VA Separate Account-A, Nationwide VA
Separate Account-B, Nationwide VA Separate Account-C,
Nationwide VL Separate Account-A, Nationwide VL Separate
Account-B, Nationwide VL Separate Account-C, Nationwide VL
Separate Account-D, Nationwide VLI Separate Account-2,
Nationwide VLI Separate Account-3, Nationwide VLI Separate
Account-4, Nationwide VLI Separate Account-5, Nationwide DC
Variable Account, Nationwide DCVA-II, and the NACo Variable
Account, all of which are separate investment accounts of
Nationwide or its affiliates.
<PAGE> 70
(b) NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
- -------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
- -------------------------------------------------------------------------------
Joseph J. Gasper Chairman of the Board and
One Nationwide Plaza Director
Columbus, OH 43215
- -------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
- -------------------------------------------------------------------------------
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Duane C. Meek President
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Philip C. Gath Director
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
- -------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
- -------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President and Treasurer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Barbara J. Shane Vice President - Compliance Officer
Two Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Glenn W. Soden Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
<PAGE> 71
NATIONWIDE INVESTMENT SERVICES CORPORATION
DIRECTORS AND OFFICERS
- -------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
- -------------------------------------------------------------------------------
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
- -------------------------------------------------------------------------------
(c)
<TABLE>
<CAPTION>
- ------------------------------ ------------------------ ----------------------- ------------------ -------------------
NET UNDERWRITING COMPENSATION ON
DISCOUNTS AND REDEMPTION OR BROKERAGE
NAME OF PRINCIPAL UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
- ------------------------------ ------------------------ ----------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
Nationwide Investment N/A N/A N/A N/A
Services Corporation
- ------------------------------ ------------------------ ----------------------- ------------------ -------------------
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
<PAGE> 72
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).
<PAGE> 73
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
April 21, 2000
<PAGE> 74
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT, has caused this Pre-Effective
Amendment No. 2 to be signed on its behalf in the City of Columbus, and State of
Ohio, on this 21st day of April, 2000.
NATIONWIDE VARIABLE ACCOUNT
---------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------
(Depositor)
By/s/
---------------------------------------
Steven R. Savini, Esq.
As required by the Securities Act of 1933, this Pre-Effective Amendment No. 2
has been signed by the following persons in the capacities indicated on the 21st
day of April, 2000.
<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
- ---------------------------------------- Officer and Director
Joseph J. Gasper
DIMON R. MCFERSON Chairman and Chief Executive
- ---------------------------------------- Officer and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and
- ---------------------------------------- Director
David O. Miller
YVONNE L. MONTGOMERY Director
- ----------------------------------------
Yvonne L. Montgomery
ROBERT A. OAKLEY Executive Vice President and Chief
- ---------------------------------------- Financial Officer
Robert A. Oakley
RALPH M. PAIGE Director
- ----------------------------------------
Ralph M. Paige
JAMES F. PATTERSON Director
- ----------------------------------------
James F. Patterson
ARDEN L. SHISLER Director By /s/
- ---------------------------------------- -------------------------
Arden L. Shisler Steven R. Savini
Attorney-in-Fact
ROBERT L. STEWART Director
- ----------------------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------------------
Nancy C. Thomas
</TABLE>
<PAGE> 1
EXHIBIT 5
[THE BEST OF AMERICA LOGO]
THE BEST OF AMERICA(R) SUCCESSOR(SM) ANNUITY
APPLICATION
INDIVIDUAL FLEXIBLE PURCHASE PAYMENT DEFERRED VARIABLE ANNUITY
[$15,000] MINIMUM INITIAL PAYMENT
---------------------------------
Nationwide Life Insurance Company
P.O. Box 16609
Columbus, OH 43215
---------------------------------
- --------------------------------------------------------------------------------
PLAN TYPE PLAN TYPE MUST BE SELECTED
This contract is established as a:
[ ] IRA [ ] Roth IRA [ ] IRA Rollover [ ] Roth IRA Rollover
- --------------------------------------------------------------------------------
DEATH BENEFIT OPTIONS MAXIMUM ISSUE AGE THROUGH AGE 84.
[ ] Standard Death Benefit [ ] 1 - Year Anniversary* [ ] 5 - Year Anniversary*
- --------------------------------------------------------------------------------
OTHER OPTIONS
*ELECTION OF ANY OF THESE OPTIONS WILL INCREASE OR DECREASE THE VARIABLE ACCOUNT
CHARGE. PLEASE SEE THE PROSPECTUS.
INCOME GUARD(SM)*
Available only for Annuitants age 82 or less. GAV interest accrues until no
later than the Annuitant's 86th birthday. [NOT AVAILABLE IN CA, MD, MN, NJ OR
OR.]
[ ] OPTION 1 - 5% INTEREST ON PURCHASE PAYMENTS
[ ] OPTION 2 - ANNUAL HIGHEST CONTRACT ANNIVERSARY
CDSC OPTIONS*
[ ] 5 YEAR CONTINGENT DEFERRED SALES CHARGE
[ ] 7 YEAR CONTINGENT DEFERRED SALES CHARGE
[ ] SPOUSAL PROTECTION ANNUITY(SM) OPTION*
If elected, the Owner must be the Annuitant, the Owner's spouse
must be the Co-Annuitant, and both must be sole primary Beneficiaries.
[ ] REDUCED PURCHASE PAYMENT RIDER *
- --------------------------------------------------------------------------------
CONTRACT OWNER CO-ANNUITANT
ONLY IF SPOUSAL PROTECTION ANNUITY(SM)
OPTION IS ELECTED. SPOUSE ONLY.
Last Name Last Name
First Name (continued) MI First Name MI
Address Address
--------------------------------- -------------------------------
--------------------------------- -------------------------------
MAXIMUM ISSUE AGE THROUGH AGE 85 MAXIMUM ISSUE AGE THROUGH AGE 85
Sex [ ] M [ ] F Birthdate / / Sex [ ] M [ ] F Birthdate / /
------------ ----------
MM DD YYYY MM DD YYYY
Soc. Sec. No. Soc. Sec. No.
--------------------------- -------------------------
- --------------------------------------------------------------------------------
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-4696 PRODUCT OF NATIONWIDE LIFE INSURANCE CO. AO (1/2000)
<PAGE> 2
- --------------------------------------------------------------------------------
ANNUITY PURCHASE PAYMENTS [ ] ROLLOVER [ ] PAYMENT ENCLOSED
APPLY FOR TAX YEAR
---------------------
First Purchase Payment $____________ ([$15,000]; For Reducted Purchase Rider,
[$1,000]) 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.
- --------------------------------------------------------------------------------
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-4696
<PAGE> 3
- --------------------------------------------------------------------------------
REMARKS
- --------------------------------------------------------------------------------
FOR AZ RESIDENTS ONLY
---------------------
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 OWNER.
TEN DAY LOOK : TO BE SURE THAT THE OWNER IS SATISFIED WITH THIS CONTRACT, THE
OWNER HAS A TEN DAY "LOOK". WITHIN TEN DAYS OF THE DAY THE CONTRACT IS RECEIVED
BY THE OWNER, IT MAY BE RETURNED TO THE HOME OFFICE OF THE COMPANY OR THE AGENT
THROUGH WHOM IT WAS PURCHASED. WHEN THE CONTRACT IS RECEIVED AT THE HOME OFFICE,
THE COMPANY WILL VOID THE CONTRACT AS THOUGH IT HAD NEVER BEEN IN FORCE AND THE
PURCHASE PAYMENT WILL BE REFUNDED IN FULL.
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.
NOTICE TO ALL RESIDENTS (FL, MN, ND, PA*, SC, SD, TX, VT )
----------------------------------------------------------
*REFERENCES SPECIFIC TO MARKET VALUE ADJUSTMENTS ARE NOT APPLICABLE FOR PA.
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 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.
FOR DC RESIDENTS ONLY
---------------------
WARNING: IT IS A CRIME TO PROVIDE FALSE OR MISLEADING INFORMATION TO AN INSURER
FOR THE PURPOSE OF DEFRAUDING THE INSURER OR ANY OTHER PERSON. PENALTIES INCLUDE
IMPRISONMENT AND/OR FINES. IN ADDITION, AN INSURER MAY DENY INSURANCE BENEFITS
IF FALSE INFORMATION MATERIALLY RELATED TO A CLAIM WAS PROVIDED BY THE
APPLICANT.
FOR FL RESIDENTS ONLY
---------------------
ANY PERSON WHO KNOWINGLY AND WITH INTENT TO INJURE, DEFRAUD, OR DECEIVE ANY
INSURER FILES A STATEMENT OF CLAIM OR AN APPLICATION CONTAINING ANY FALSE,
INCOMPLETE, OR MISLEADING INFORMATION IS GUILTY OF A FELONY OF THE THIRD DEGREE.
FOR NJ RESIDENTS ONLY
---------------------
ANY PERSON WHO INCLUDES ANY FALSE OR MISLEADING INFORMATION ON AN APPLICATION
FOR AN INSURANCE POLICY IS SUBJECT TO CRIMINAL AND CIVIL PENALTIES.
FOR WA RESIDENTS ONLY
---------------------
ANY PERSON WHO KNOWINGLY PRESENTS A FALSE OR FRAUDULENT CLAIM FOR PAYMENT OF A
LOSS OR KNOWINGLY MAKES A FALSE STATEMENT IN AN APPLICATION FOR INSURANCE MAY BE
GUILTY OF A CRIMINAL OFFENSE UNDER STATE LAW.
APO-4696
<PAGE> 4
NOTICE TO ALL RESIDENTS (AR, DC, KY, LA, ME, NM, OH, PA)
--------------------------------------------------------
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 MAY BE A CRIME AND MAY SUBJECT SUCH
PERSON TO CRIMINAL AND CIVIL PENALTIES, FINES, IMPRISONMENT, OR A DENIAL OF
INSURANCE BENEFITS.
- --------------------------------------------------------------------------------
CONTRACT OWNER SIGNATURES
THE CONTRACT PAYMENTS OR VALUES UNDER THE VARIABLE ANNUITY PROVISIONS OF THE
CONTRACT ARE VARIABLE AND ARE NOT GUARANTEED AS TO FIXED DOLLAR AMOUNT.
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
CONTRACT OWNER
------------------------------------------------------------------
Signature
CO-ANNUITANT
--------------------------------------------------------------------
Signature
- --------------------------------------------------------------------------------
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-4696
