<PAGE> 1
As filed with the Securities and Exchange Commission.
'33 Act File No. 2-75059
'40 Act File No. 811-3330
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No.30 [X]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 31 [X]
NATIONWIDE VARIABLE ACCOUNT-II
(Exact Name of Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
(Name of Depositor)
ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Address of Depositor's Principal Executive Offices) (Zip Code)
Depositor's Telephone Number, including Area Code: (614) 249-7111
DENNIS W. CLICK, SECRETARY, ONE NATIONWIDE PLAZA, COLUMBUS, OHIO 43215
(Name and Address of Agent for Service)
This Post-Effective Amendment amends the Registration Statement in respect of
the Prospectus, the Statement of Additional Information and the Financial
Statements.
It is proposed that this filing will become effective (check appropriate space):
[ ] immediately upon filing pursuant to paragraph (b) of Rule 485
[ X ] on May 1, 1998 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
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<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-II
REFERENCE TO ITEMS REQUIRED BY FORM N-4
<TABLE>
<CAPTION>
N-4 ITEM PAGE
Part A INFORMATION REQUIRED IN A PROSPECTUS
<S> <C> <C>
Item 1. Cover page...................................................................................3
Item 2. Definitions..................................................................................5
Item 3. Synopsis or Highlights......................................................................16
Item 4. Condensed Financial Information.............................................................17
Item 5. General Description of Registrant, Depositor, and Portfolio Companies.......................28
Item 6. Deductions and Expenses.....................................................................29
Item 7. General Description of Variable Annuity Contracts...........................................32
Item 8. Annuity Period..............................................................................39
Item 9. Death Benefit and Distributions.............................................................41
Item 10. Purchases and Contract Value................................................................32
Item 11. Redemptions.................................................................................35
Item 12. Taxes.......................................................................................45
Item 13. Legal Proceedings...........................................................................56
Item 14. Table of Contents of the Statement of Additional Information................................56
Part B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page..................................................................................67
Item 16. Table of Contents...........................................................................67
Item 17. General Information and History.............................................................67
Item 18. Services....................................................................................67
Item 19. Purchase of Securities Being Offered........................................................68
Item 20. Underwriters................................................................................68
Item 21. Calculation of Performance Information......................................................68
Item 22. Annuity Payments............................................................................69
Item 23. Financial Statements........................................................................70
Part C OTHER INFORMATION
Item 24. Financial Statements and Exhibits..........................................................122
Item 25. Directors and Officers of the Depositor....................................................124
Item 26. Persons Controlled by or Under Common Control with the Depositor or Registrant.............126
Item 27. Number of Contract Owners..................................................................136
Item 28. Indemnification............................................................................136
Item 29. Principal Underwriter......................................................................136
Item 30. Location of Accounts and Records...........................................................138
Item 31. Management Services........................................................................138
Item 32. Undertakings...............................................................................138
</TABLE>
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<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Home Office
P.O. Box 16609
Columbus, Ohio 43216-6609, 1-800-848-6331
TDD 1-800-238-3035
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT-II
The Contracts described in this prospectus are Flexible Purchase Payment
Contracts (collectively referred to as the "Contracts"). Reference throughout
the prospectus to such Contracts will mean individual contracts as well as
Certificates issued under Group Flexible Fund Retirement Contracts. For such
Group Contracts, references to "Contract Owner" will mean the "Participant"
unless the plan otherwise permits or requires the Contract Owner to exercise
contractual rights under the authority of the plan terms. The Contracts are sold
for use in retirement plans which may qualify for special federal tax treatment
under the Internal Revenue Code (the "Code"). The Contracts are sold as either:
Non-Qualified Contracts; IRAs; Roth IRAs; SEP IRAs; Tax Sheltered Annuities; or
Qualified Contracts. Annuity payments are deferred until a selected later date.
Purchase Payments are allocated to the Nationwide Variable Account-II ("Variable
Account"), a separate account of Nationwide Life Insurance Company (the
"Company"). The Underlying Mutual Funds are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans. The Variable Account uses its assets to
purchase shares at Net Asset Value in one or more of the following Underlying
Mutual Fund options:
AVAILABLE FOR ALL CONTRACTS
<TABLE>
<S> <C>
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM) FAMILY OF INVESTMENTS
American Century VP Balanced American Century VP Capital Appreciation
American Century VP International American Century VP Income & Growth
American Century VP Value
DREYFUS
Dreyfus Stock Index Fund, Inc. Dreyfus Variable Investment Fund- Capital Appreciation Portfolio
Dreyfus Variable Investment Fund- Growth & Income Portfolio*
The Dreyfus Socially Responsible Growth Fund, Inc.
</TABLE>
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
VIP Equity-Income Portfolio VIP Growth Portfolio
VIP High Income Portfolio* VIP Overseas Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
VIP II Asset Manager Portfolio VIP II Contrafund Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
VIP III Growth Opportunities Portfolio
<TABLE>
<S> <C>
MORGAN STANLEY
Morgan Stanley Universal Funds, Inc. - Emerging Markets Debt Portfolio
Van Kampen American Capital Life Investment Trust - Morgan Stanley Real Estate Securities Portfolio
</TABLE>
NATIONWIDE SEPARATE ACCOUNT TRUST
Capital Appreciation Fund Government Bond Fund Money Market Fund
Nationwide Small Cap Value Fund Nationwide Small Company Fund
Total Return Fund
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
AMT Growth Portfolio AMT Guardian Portfolio AMT Limited Maturity
Bond Portfolio
AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
Oppenheimer Bond Fund Oppenheimer Global Securities Fund
Oppenheimer Growth Fund Oppenheimer Multiple Strategies Fund
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<PAGE> 4
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUND II, INC.")
STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Discovery Fund II, Inc. International Stock Fund II
VAN ECK WORLDWIDE INSURANCE TRUST
Worldwide Bond Fund Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
International Equity Portfolio Post-Venture Capital Portfolio
Small Company Growth Portfolio
* These Funds may invest in lower quality debt securities commonly referred to
as junk bonds.
AVAILABLE FOR ALL CONTRACTS
ISSUED ON OR AFTER MAY 1, 1987 AND BEFORE SEPTEMBER 1, 1989
AMERICAN VARIABLE INSURANCE SERIES
Growth Fund High-Yield Bond Fund U.S. Government/AAA-Rated Securities Fund
This prospectus provides you with the basic information you should know about
the Contracts issued by the Variable Account before investing. You should read
it and keep it for future reference. A Statement of Additional Information dated
May 1, 1998, containing further information about the Contracts and the Variable
Account has been filed with the Securities and Exchange Commission ("SEC"). You
can obtain a copy without charge from the Company by calling 1-800-848-6331, TDD
1-800-238-3035, or by writing P.O. Box 16609, Columbus, Ohio 43216-6609.
THE BENEFITS DESCRIBED IN THIS PROSPECTUS MAY NOT BE AVAILABLE IN EVERY
JURISDICTION. PLEASE REFER TO YOUR CONTRACT FOR SPECIFIC BENEFIT INFORMATION.
INVESTMENTS IN THESE CONTRACTS ARE NOT DEPOSITS OR OBLIGATIONS OF, AND ARE NOT
GUARANTEED OR ENDORSED BY, ANY ADVISER OF THE UNDERLYING MUTUAL FUNDS IDENTIFIED
ABOVE, THE U.S. GOVERNMENT, OR ANY BANK OR BANK AFFILIATE. INVESTMENTS ARE NOT
FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. ANY INVESTMENT IN THE CONTRACT
INVOLVES CERTAIN INVESTMENT RISK WHICH MAY INCLUDE THE POSSIBLE LOSS OF
PRINCIPAL.
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.
THE SEC MAINTAINS A WEB SITE, www.sec.gov, THAT CONTAINS THE STATEMENT OF
ADDITIONAL INFORMATION AS WELL AS ANY MATERIAL INCORPORATED BY REFERENCE
RELATING TO THIS PROSPECTUS.
INFORMATION ABOUT THIS PRODUCT AND OTHER BEST OF AMERICA PRODUCTS CAN BE
OBTAINED ON THE WORLD-WIDE WEB AT www.bestofamerica.com.
THE STATEMENT OF ADDITIONAL INFORMATION, DATED MAY 1, 1998, IS INCORPORATED
HEREIN BY REFERENCE. THE TABLE OF CONTENTS FOR THE STATEMENT OF ADDITIONAL
INFORMATION APPEARS ON PAGE 54 OF THE PROSPECTUS.
THE DATE OF THIS PROSPECTUS IS MAY 1, 1998.
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<PAGE> 5
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the Variable
Account Contract Value prior to the Annuitization Date.
ANNUITANT- The person designated to receive annuity payments during
Annuitization and upon whose continuation of life any annuity payment involving
life contingencies depends. This person must be age 78 or younger at the time of
Contract issuance, unless the Company has approved a request for an Annuitant of
greater age. The Annuitant may be changed prior to the Annuitization Date with
the consent of the Company.
ANNUITIZATION- The period during which annuity payments are received.
ANNUITIZATION DATE- The date on which annuity payments commence at
Annuitization.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
commence. The Annuity Commencement Date is shown on the Data Page of the
Contract. The Annuity Commencement Date may be changed by the Contract Owner
with the consent of the Company.
ANNUITY PAYMENT OPTION- The chosen form of annuity payments. Several options are
available under the Contract.
ANNUITY UNIT- An accounting unit of measure used to calculate the value of
Variable Annuity payments.
BENEFICIARY- The person designated to receive certain benefits under the
Contract when the Annuitant dies prior to the Annuitization Date. The
Beneficiary can be changed by the Contract Owner as set forth in the Contract.
CODE- The Internal Revenue Code of 1986, as amended.
COMPANY- Nationwide Life Insurance Company.
CONTINGENT ANNUITANT- The person who may be the recipient of certain rights or
benefits under the Contract when the Annuitant dies before the Annuitization
Date. If a Contingent Annuitant is designated and the Annuitant dies before the
Annuitization Date, the Contingent Annuitant becomes the Annuitant. A Contingent
Annuitant may not be named for Contracts issued as Qualified Contracts, IRAs,
Roth IRAs, SEP IRAs or Tax Sheltered Annuities.
CONTINGENT BENEFICIARY- The person designated to be the Beneficiary if the named
Beneficiary is not living at the time of the death of the Annuitant.
CONTINGENT OWNER- A Contingent Owner succeeds to the rights of the Contract
Owner upon the Contract Owner's death before Annuitization. For Contracts issued
in the state of New York, references throughout this prospectus to "Contingent
Owner" will mean "Owner's Beneficiary." A Contingent Owner may not be named for
Contracts issued as Qualified Contracts, IRAs, Roth IRAs, SEP IRAs or Tax
Sheltered Annuities.
CONTRACT- The Deferred Variable Annuity Contract described in this prospectus.
CONTRACT ANNIVERSARY- An anniversary of the Date of Issue of the Contract.
CONTRACT OWNER- The person who possesses all rights under the Contract,
including the right to designate and change any designations of the Contract
Owner, Contingent Owner, Annuitant, Contingent Annuitant, Beneficiary,
Contingent Beneficiary, Annuity Payment Option and the Annuity Commencement
Date. The Contract Owner is the person named as Owner on the application, unless
changed.
CONTRACT VALUE- The sum of the value of all Accumulation Units plus any amount
in the Fixed Account.
CONTRACT YEAR- Each year the Contract remains in force commencing with the Date
of Issue.
DATE OF ISSUE- The date shown as the Date of Issue on the Data Page of the
Contract.
DEATH BENEFIT- The benefit which is payable upon the death of the Annuitant or
the Contingent Annuitant, if applicable. This benefit does not apply upon the
death of the Contract Owner when the Contract Owner and Annuitant are not the
same person. If the Annuitant dies after the Annuitization Date, any benefit
that may be payable will be as specified in the Annuity Payment Option elected.
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<PAGE> 6
DISTRIBUTION- Any payment of part or all of the Contract Value
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option which is funded by the General Account of
the Company.
FIXED PAYMENT ANNUITY- An annuity providing for payments which are guaranteed by
the Company as to dollar amount during Annuitization.
GENERAL ACCOUNT- All assets of the Company other than those of the Variable
Account or in other separate accounts that have been or may be established by
the Company.
HOME OFFICE- The main office of the Company located in Columbus, Ohio.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408 of the Code, but does not include Roth Individual
Retirement Accounts, which qualify for favorable tax treatment under Section
408A of the Code.
INDIVIDUAL RETIREMENT ANNUITY ("IRA")- An annuity contract which qualifies for
favorable tax treatment under Section 408 of the Code, but does not include Roth
IRAs, which qualify for favorable tax treatment under Section 408A of the Code.
INTEREST RATE GUARANTEE PERIOD- The interval of time during which an interest
rate credited to the Fixed Account is guaranteed to remain the same. For new
Purchase Payments allocated to the Fixed Account or transfers from the Variable
Account, this period begins upon the date of deposit or transfer and ends at the
end of the calendar quarter at least one year (but not more than 15 months) from
deposit or transfer. At the end of an Interest Rate Guarantee Period, a new
interest rate is declared with an Interest Rate Guarantee Period starting at the
end of the prior period and ending at the end of the calendar quarter one year
later.
JOINT OWNER- The Joint Owner possesses an undivided interest in the entire
Contract in conjunction with the Contract Owner. If a Joint Owner is named,
references to "Contract Owner" or "Joint Owner" will apply to both the Contract
Owner and Joint Owner or either of them. Joint Owners must be spouses at the
time Joint Ownership is requested unless otherwise required by state law. Joint
Ownership may be selected only for Non-Qualified Contracts.
NET ASSET VALUE- The value of one share of an Underlying Mutual Fund at the end
of a market day or at the close of the New York Stock Exchange. Net Asset Value
is computed by adding the value of all portfolio holdings plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment under Section 401 or 403(a) (Qualified Plans), 408 (IRAs), 408A (Roth
IRAs) or 403(b) (Tax Sheltered Annuities) of the Code.
PLAN PARTICIPANT- The person for whom contributions are being made to a
Qualified Contract or Tax Sheltered Annuity either through employer
contributions or employee salary reduction contributions.
PURCHASE PAYMENT- A deposit of new value into the Contract. The term "Purchase
Payment" does not include transfers between the Variable Account and Fixed
Account or among the Sub-Accounts.
QUALIFIED CONTRACT- A contract issued to fund a Qualified Plan.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Code.
SEP IRA- A retirement plan which receives favorable tax treatment under Section
408(k) of the Code.
SUB-ACCOUNTS- Separate and distinct divisions of the Variable Account, to which
specific Underlying Mutual Fund shares are allocated and for which Accumulation
Units and Annuity Units are separately maintained.
TAX SHELTERED ANNUITY- An annuity which qualifies for favorable tax treatment
under Section 403(b) of the Code.
UNDERLYING MUTUAL FUND- A registered open-end management investment company in
which the assets of the Sub-Accounts will be invested.
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VALUATION DATE- Each day the New York Stock Exchange and the Home Office are
open for business or any other day during which there is a sufficient degree of
trading of the Underlying Mutual Fund shares that the current Variable Account
Contract Value might be materially affected.
VALUATION PERIOD- The period of time commencing at the close of a Valuation Date
and ending at the close of business for the next succeeding Valuation Date.
VARIABLE ACCOUNT- Nationwide Variable Account-II, a separate investment account
of the Company into which Variable Account Purchase Payments are allocated. The
Variable Account is divided into Sub-Accounts, each of which invests in shares
of a separate Underlying Mutual Fund.
VARIABLE PAYMENT ANNUITY- An annuity providing for payments which are not
predetermined or guaranteed as to dollar amount and which vary in amount with
the investment experience of the Variable Account.
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<PAGE> 8
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
GLOSSARY OF SPECIAL TERMS...........................................................................................3
SUMMARY OF CONTRACT EXPENSES........................................................................................8
UNDERLYING MUTUAL FUND ANNUAL EXPENSES..............................................................................9
EXAMPLE............................................................................................................11
SYNOPSIS...........................................................................................................14
CONDENSED FINANCIAL INFORMATION....................................................................................15
NATIONWIDE LIFE INSURANCE COMPANY..................................................................................26
NATIONWIDE ADVISORY SERVICES, INC..................................................................................26
THE VARIABLE ACCOUNT...............................................................................................26
Underlying Mutual Fund Options..........................................................................26
Voting Rights...........................................................................................27
Substitution of Securities..............................................................................27
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS......................................................................27
Expenses of Variable Account............................................................................27
Mortality Risk Charge...................................................................................27
Expense Risk Charge.....................................................................................27
Contract Maintenance Charge.............................................................................28
Administration Charge...................................................................................28
Contingent Deferred Sales Charge ("CDSC")...............................................................28
Waiver of CDSC..........................................................................................29
Premium Taxes...........................................................................................30
OPERATION OF THE CONTRACT..........................................................................................30
Investments of the Variable Account.....................................................................30
Allocation of Purchase Payments and Contract Value......................................................30
Value of an Accumulation Unit...........................................................................31
Net Investment Factor...................................................................................31
Determining the Contract Value..........................................................................31
Right to Revoke.........................................................................................31
Transfers...............................................................................................32
Contract Ownership......................................................................................33
Joint Ownership.........................................................................................33
Contingent Ownership....................................................................................33
Beneficiary.............................................................................................33
Surrender (Redemption)..................................................................................33
Surrenders Under a Qualified Contract or Tax-Sheltered Annuity Contract.................................34
Loan Privilege..........................................................................................35
Assignment..............................................................................................36
CONTRACT OWNER SERVICES............................................................................................36
Asset Rebalancing.......................................................................................36
Dollar Cost Averaging...................................................................................37
Systematic Withdrawals..................................................................................37
ANNUITY PAYMENT PERIOD, DEATH BENEFIT, AND OTHER DISTRIBUTIONS.....................................................37
Annuity Commencement Date...............................................................................37
Annuitization...........................................................................................37
Fixed Payment Annuity-First and Subsequent Payments.....................................................37
Variable Payment Annuity-First and Subsequent Payments..................................................38
Variable Payment Annuity-Assumed Investment Rate........................................................38
Variable Payment Annuity-Value of an Annuity Unit.......................................................38
Variable Payment Annuity-Exchanges Among Underlying Mutual Fund Options.................................38
Frequency and Amount of Annuity Payments................................................................38
Annuity Payment Options.................................................................................38
Death of Contract Owner -Non-Qualified Contracts........................................................39
Death of Annuitant - Non-Qualified Contracts............................................................39
Death of Contract Owner/Annuitant.......................................................................39
Death Benefit Payment...................................................................................39
Required Distributions for Non-Qualified Contracts......................................................40
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
Required Distributions for Qualified Plans or Tax Sheltered Annuities...................................41
Required Distributions for IRAs or SEP IRAs.............................................................42
Required Distributions for Roth IRAs....................................................................42
FEDERAL TAX CONSIDERATIONS.........................................................................................43
Federal Income Taxes....................................................................................43
Puerto Rico.............................................................................................44
Non-Qualified Contracts- Natural Persons as Contract Owners.............................................44
Non-Qualified Contracts-Non-Natural Persons as Contract Owners..........................................45
Qualified Plans, IRAs, SEP IRAs, and Tax Sheltered Annuities............................................46
Roth IRAs...............................................................................................46
Withholding.............................................................................................46
Non-Resident Aliens.....................................................................................47
Federal Estate, Gift, and Generation Skipping Transfer Taxes............................................47
Charge for Tax..........................................................................................47
Diversification.........................................................................................47
Tax Changes.............................................................................................48
GENERAL INFORMATION................................................................................................48
Contract Owner Inquiries................................................................................48
Statements and Reports..................................................................................48
Advertising.............................................................................................49
YEAR 2000 COMPLIANCE ISSUES........................................................................................53
LEGAL PROCEEDINGS..................................................................................................54
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION...........................................................54
APPENDIX A.........................................................................................................55
APPENDIX B.........................................................................................................56
</TABLE>
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SUMMARY OF CONTRACT EXPENSES
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales Charge ("CDSC")(1)..........................7%
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
RANGE OF CDSC OVER TIME
Number of Completed Years from CDSC
Date of Purchase Payment Percentage
<S> <C>
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
MAXIMUM ANNUAL CONTRACT MAINTENANCE CHARGE(2)................................$30
VARIABLE ACCOUNT ANNUAL EXPENSES
Mortality and Expense Risk Charges..................................1.25%
Administration Charge...............................................0.05%
Total Variable Account Annual Expenses............................1.30%
1 Each Contract Year, the Contract Owner may withdraw without a CDSC:
(a) any amount in order for this Contract to meet minimum distribution
requirements under the Code; or
(b) up to 10% of each Purchase Payment under IRA Contracts issued on or
after March 1, 1993.
Starting with the second Contract Year after a Purchase Payment has been
made, the Contract Owner may withdraw without a CDSC, the greater of:
(a) an amount equal to 10% of each Purchase Payment; or
(b) any amount withdrawn in order to meet minimum distribution
requirements under the Code.
Withdrawals may be restricted for Contracts issued pursuant to the
terms of a Tax Sheltered Annuity Plan or other Qualified Plan. This
CDSC-free withdrawal privilege is non-cumulative. Free amounts not taken
during any given Contract Year cannot be taken as free amounts in a
subsequent Contract Year (see "Waiver of CDSC").
2 The Contract Maintenance Charge is deducted on each Contract Anniversary
and on the date of surrender in any year in which the entire Contract
Value is surrendered (see "Contract Maintenance Charge").
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UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc.-American Century VP Balanced
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc.-American Century VP Capital Appreciation
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, Inc.- 0.70% 0.00% 0.70%
American Century VP Income & Growth
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.50% 0.00% 1.50%
Inc.-American Century VP International
- -------------------------------------------------------------------------------------------------------------
American Century Variable Portfolios, 1.00% 0.00% 1.00%
Inc.-American Century VP Value
- -------------------------------------------------------------------------------------------------------------
AVIS-Growth Fund 0.41% 0.01% 0.42%
- -------------------------------------------------------------------------------------------------------------
AVIS- High-Yield Bond Fund 0.50% 0.01% 0.51%
- -------------------------------------------------------------------------------------------------------------
AVIS- U.S. Government/AAA Rated Securities Fund 0.51% 0.02% 0.53%
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 0.25% 0.03% 0.28%
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Capital 0.75% 0.05% 0.80%
Appreciation Portfolio
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment Fund- Growth & 0.75% 0.05% 0.80%
Income Portfolio
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible Growth 0.75% 0.01% 0.76%
Fund, Inc.
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Equity- Income Portfolio* 0.50% 0.07% 0.57%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio* 0.60% 0.07% 0.67%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income Portfolio 0.59% 0.12% 0.71%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas Portfolio* 0.75% 0.15% 0.90%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager Portfolio* 0.55% 0.09% 0.64%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund Portfolio* 0.60% 0.08% 0.68%
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth Opportunities 0.60% 0.13% 0.73%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Funds, Inc.- 0.04% 1.26% 1.30%
Emerging Markets Debt Portfolio*
- -------------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation Fund 0.60% 0.09% 0.69%
- -------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 0.50% 0.08% 0.58%
- -------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 0.40% 0.08% 0.48%
- -------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Cap Value Fund* 0.90% 0.15% 1.05%
- -------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small Company Fund 1.00% 0.11% 1.11%
- -------------------------------------------------------------------------------------------------------------
NSAT- Total Return Fund 0.60% 0.07% 0.67%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Growth Portfolio 0.83% 0.07% 0.90%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Guardian Portfolio 0.60% 0.40% 1.00%
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Limited Maturity 0.65% 0.12% 0.77%
Bond Portfolio
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- Partners Portfolio 0.80% 0.06% 0.86%
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 0.73% 0.05% 0.78%
Funds-Oppenheimer Bond Fund
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 0.70% 0.06% 0.76%
Funds-Oppenheimer Global Securities Fund
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 0.73% 0.02% 0.75%
Funds-Oppenheimer Growth Fund
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 0.72% 0.03% 0.75%
Funds-Oppenheimer Multiple Strategies Fund
- -------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 1.00% 0.15% 1.15%
- -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 1.00% 0.18% 1.18%
Inc.-Discovery Fund II, Inc.
- -------------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 1.00% 0.51% 1.51%
Inc.-International Stock Fund II
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 12
UNDERLYING MUTUAL FUND ANNUAL EXPENSES(3)
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS,
AFTER EXPENSE REIMBURSEMENT)
CONTINUED
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Management Total Mutual
Fees Other Expenses Fund Expenses
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Van Eck Worldwide Insurance Trust- Worldwide 1.00% 0.12% 1.12%
Bond Fund
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide 0.80% 0.00% 0.80%
Emerging Markets Fund*
- -------------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- Worldwide 1.00% 0.17% 1.17%
Hard Assets Fund*
- -------------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life Investment 1.00% 0.07% 1.07%
Trust- Morgan Stanley Real Estate Securities
Portfolio
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- International Equity 1.00% 0.35% 1.35%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Post-Venture Capital 1.07% 0.33% 1.40%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- Small Company Growth 0.90% 0.24% 1.14%
Portfolio*
- -------------------------------------------------------------------------------------------------------------
</TABLE>
3 The Mutual Fund expenses shown above are assessed at the Underlying
Mutual Fund level and are not direct charges against Variable Account
assets or reductions from Contract Values. These Underlying Mutual Fund
expenses are taken into consideration in computing each Underlying Mutual
Fund's Net Asset Value, which is the share price used to calculate the
unit values of the Variable Account. The management fees and other
expenses are more fully described in the prospectus for each individual
Underlying Mutual Fund. The information relating to the Underlying Mutual
Fund expenses was provided by the Underlying Mutual Fund and was not
independently verified by the Company. Except as otherwise noted below,
the Management Fees and Other Expenses are not currently subject to fee
waivers or expense reimbursements.
* The investment advisers for the indicated Underlying Mutual Funds have
voluntarily agreed to reimburse a portion of the management fees and/or
other expenses resulting in a reduction of total expenses. Absent any
partial reimbursement, "Management Fees" and "Other Expenses" would have
been 0.50% and 0.08% for Fidelity VIP Equity-Income Portfolio, 0.60% and
0.09% for Fidelity VIP Growth Portfolio, 0.75% and 0.17% for Fidelity VIP
Overseas Portfolio, 0.55% and 0.10% for Fidelity VIP II Asset Manager
Portfolio, 0.60% and 0.11% for Fidelity VIP II Contrafund Portfolio,
0.60% and 0.14% for Fidelity VIP III Growth Opportunities Portfolio,
0.80% and 1.26% for Morgan Stanley Universal Funds, Inc.-Emerging Markets
Debt Portfolio, 0.90% and 5.41% for NSAT-Nationwide Small Cap Value Fund,
1.00% and 0.18% for Van Eck Worldwide Insurance Trust-Worldwide Hard
Assets Fund, 1.00% and 0.34% for Van Eck Worldwide Insurance
Trust-Worldwide Emerging Markets Fund, 1.00% and 0.36% for Warburg Pincus
Trust-International Equity Portfolio, 1.25% and 0.33% for Warburg Pincus
Trust-Post-Venture Capital Portfolio, and 0.90% and 0.25% for Warburg
Pincus Trust-Small Company Growth Portfolio.
10
12 of 145
<PAGE> 13
EXAMPLE
The following chart depicts the dollar amount of expenses that would be incurred
under this Contract assuming a $1000 investment and 5% annual return. These
dollar figures are illustrative only and should not be considered a
representation of past or future expenses. Actual expenses may be greater or
lesser than those shown below. The expense amounts presented are derived from a
formula which allows the maximum $30 Contract Maintenance Charge to be expressed
as a percentage of the average Contract account size for existing Contracts.
Since the average Contract account size for Contracts issued under this
prospectus is greater than $1000, the expense effect of the Contract Maintenance
Charge is reduced accordingly.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- ----------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
American Century Variable 95 121 157 277 25 76 130 277 * 76 130 277
Portfolios, Inc.-
American Century VP
Balanced
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 95 121 157 277 25 76 130 277 * 76 130 277
Portfolios, Inc.-
American Century VP
Capital Appreciation
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 92 111 141 245 22 66 114 245 * 66 114 245
Portfolios, Inc.-
American Century VP
Income & Growth
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 100 137 183 328 30 92 156 328 * 92 156 328
Portfolios, Inc.-
American Century VP
International
- ----------------------------------------------------------------------------------------------------------------------
American Century Variable 95 121 157 277 25 76 130 277 * 76 130 277
Portfolios, Inc.-
American Century VP Value
- ----------------------------------------------------------------------------------------------------------------------
AVIS- Growth Fund 89 103 126 214 19 58 99 214 * 58 99 214
- ----------------------------------------------------------------------------------------------------------------------
AVIS- High-Yield Bond Fund 90 105 131 224 20 60 104 224 * 60 104 224
- ----------------------------------------------------------------------------------------------------------------------
AVIS- U.S. Govt./AAA 90 106 132 227 20 61 105 227 * 61 105 227
Rated Securities Fund
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, 87 98 118 199 17 53 91 199 * 53 91 199
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF- Capital 93 115 146 256 23 70 119 256 * 70 119 256
Appreciation Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Dreyfus VIF- Growth & 93 115 146 256 23 70 119 256 * 70 119 256
Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 92 113 144 251 22 68 117 251 * 68 117 251
Responsible Growth Fund,
Inc.
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP 90 107 134 231 20 62 107 231 * 62 107 231
Equity-Income Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 91 110 139 242 21 65 112 242 * 65 112 242
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 92 112 141 246 22 67 114 246 * 67 114 246
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 94 118 152 266 24 73 125 266 * 73 125 266
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 91 110 138 239 21 65 111 239 * 65 111 239
Manager Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Fidelity VIP II 91 111 140 243 21 66 113 243 * 66 113 243
Contrafund Portfolio
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
11
13 of 145
<PAGE> 14
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- ----------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fidelity VIP III Growth 92 112 143 248 22 67 116 248 * 67 116 248
Opportunities Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Morgan Stanley Universal 98 130 172 308 28 85 145 308 * 85 145 308
Funds, Inc.- Emerging
Markets Debt Portfolio
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Capital 91 111 140 244 21 66 113 244 * 66 113 244
Appreciation Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 90 108 135 232 20 63 108 232 * 63 108 232
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 89 104 129 221 19 59 102 221 * 59 102 221
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 95 122 154 282 25 77 132 282 * 77 132 282
Cap Value Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 96 124 163 288 26 79 136 288 * 79 136 288
Company Fund
- ----------------------------------------------------------------------------------------------------------------------
NSAT- Total Return Fund 91 110 139 242 21 65 112 242 * 65 112 242
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 94 118 152 266 24 73 125 266 * 73 125 266
AMT- Growth Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 95 121 157 277 25 76 130 277 * 76 130 277
AMT- Guardian Portfolio
- -----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman 92 114 145 253 22 69 118 253 * 69 118 253
AMT- Limited Maturity Bond
Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 93 116 149 262 23 71 122 262 * 71 122 262
Partners Portfolio
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 92 114 145 254 22 69 118 254 * 69 118 254
Account Funds-
Oppenheimer Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 92 113 144 251 22 68 117 251 * 68 117 251
Account Funds-
Oppenheimer Global
Securities Fund
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 92 113 144 250 22 68 117 250 * 68 117 250
Account Funds-
Oppenheimer Growth Fund
- ----------------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 92 113 144 250 22 68 117 250 * 68 117 250
Account Funds-
Oppenheimer Multiple
Strategies Fund
- ----------------------------------------------------------------------------------------------------------------------
Strong Opportunity Fund 96 126 165 292 26 81 138 292 * 81 138 292
II, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 97 127 166 295 27 82 139 295 * 82 139 295
Funds, Inc.- Discovery
Fund II, Inc.
- ----------------------------------------------------------------------------------------------------------------------
Strong Variable Insurance 100 137 183 329 30 92 156 329 * 92 156 329
Funds, Inc.-
International Stock Fund
II
- ----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 96 125 163 289 26 80 136 289 * 80 136 289
Insurance Trust-
Worldwide Bond Fund
- ----------------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 93 115 146 256 23 70 119 256 * 70 119 256
Insurance Trust-
Worldwide Emerging
Markets Fund
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
12
14 of 145
<PAGE> 15
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
If you surrender your Contract If you do not surrender your If you annuitize your Contract
at the end of the applicable Contract at the end of the at the end of the applicable
time period applicable time period time period
- ----------------------------------------------------------------------------------------------------------------------
1 Yr. 3 Yrs. 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs 5 Yrs. 10 Yrs. 1 Yr. 3 Yrs. 5 Yrs. 10 Yrs.
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Van Eck Worldwide 96 126 166 294 26 81 139 294 * 81 139 294
Insurance Trust-
Worldwide Hard Assets Fund
- ------------------------------------------------------------------------------------------------------------------------
Van Kampen American 95 123 160 284 25 78 133 284 * 78 133 284
Capital Life Investment
Trust-Morgan Stanley
Real Estate Securities
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Warburg Pincus 98 132 175 313 28 87 148 313 * 87 148 313
Trust-International
Equity Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 99 133 178 318 29 88 151 318 * 88 151 318
Post-Venture Capital
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 96 125 164 291 26 80 137 291 * 80 137 291
Small Company Growth
Portfolio
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Contracts sold under this prospectus do not permit Annuitizations during
the first two Contract Years.
The purpose of the Summary of Contract Expenses and Example is to assist the
Contract Owner in understanding the various costs and expenses that will be
borne directly or indirectly when investing in the Contract. The expenses of the
Variable Account as well as those of the Underlying Mutual Fund options are
reflected in the Example. For more complete descriptions of the expenses of the
Variable Account, see "Variable Account Charges and Other Deductions." For more
complete information regarding expenses paid out of the assets of the Underlying
Mutual Fund options, see the prospectus for each Underlying Mutual Fund.
Deductions for premium taxes may also apply but are not reflected in the Example
shown above (see "Premium Taxes").
13
15 of 145
<PAGE> 16
SYNOPSIS
The Contracts can be categorized as follows: (1) Non-Qualified; (2) IRAs; (3)
Roth IRAs; (4) SEP IRAs; (5) Tax Sheltered Annuities; and (6) Qualified.
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. However, if periodic payments are expected by the
Company, this initial first year minimum may be satisfied by Purchase Payments
made on an annualized basis. The cumulative total of all purchase payments under
contracts issued by the Company on the life of any one Annuitant may not exceed
$1,000,000 without the prior consent of the Company (see "Allocation of Purchase
Payments and Contract Value").
The Company does not deduct a sales charge from Purchase Payments made for these
Contracts. However, if any part of the Contract Value is surrendered, the
Company will, with certain exceptions, deduct from the Contract Value a CDSC.
The CDSC will not to exceed the lesser of: (1) 7% of the amount surrendered; or
(2) 7% of the total of all Purchase Payments made within 84 months prior to the
date of the surrender request. This charge, when applicable, is imposed to
permit the Company to recover sales expenses which have been advanced by the
Company (see "Contingent Deferred Sales Charge").
The Company deducts a Mortality Risk Charge equal to an annual rate of 0.80% of
the daily net assets of the Variable Account for mortality risks assumed by the
Company (see "Mortality Risk Charge"). The Company deducts an Expense Risk
Charge equal to an annual rate of 0.45% of the daily net assets of the Variable
Account as compensation for the Company's risk by undertaking not to increase
administrative charges on the Contracts regardless of the actual administrative
costs (see "Expense Risk Charge").
On each Contract Anniversary the Company will deduct a Contract Maintenance
Charge from the Contract Value. The Company will also assess an Administration
Charge equal to an annual rate of 0.05% of the daily net assets of the Variable
Account. These charges are to reimburse the Company for administrative expenses
related to the issue and maintenance of the Contracts (see "Contract Maintenance
Charge" and "Administration Charge").
Upon Annuitization, the selected Annuity Payment Option will begin (see "Annuity
Payment Options"). However, if the net amount to be applied to any Annuity
Payment Option at the Annuitization Date is less than $500, the Contract Value
may be distributed in lump sum in lieu of annuity payments. If any annuity
payment would be less than $20, the Company will have the right to change the
frequency of payments to such intervals as will result in payments of at least
$20. In no event, however, will annuity payments be made less frequently than
annually (see "Frequency and Amount of Annuity Payments").
Taxation of the Contracts will depend on the type of Contract issued (see
"FEDERAL TAX CONSIDERATIONS"). In addition, the Company will charge against the
Purchase Payments or the Contract Value the amount of any premium taxes levied
by a state or any other governmental entity (see "Premium Taxes").
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full unless otherwise required by
law. State and/or federal law may provide additional free look privileges. All
IRA, Roth IRA and SEP IRA refunds will be return of Purchase Payments (see
"Right to Revoke").
14
16 of 145
<PAGE> 17
CONDENSED FINANCIAL INFORMATION
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
American Century Variable 14.300170 16.345418 14.30% 3,321,528 1997
Portfolios, Inc. - 12.912980 14.300170 10.74% 3,254,121 1996
American Century VP 10.801286 12.912980 19.55% 2,978,792 1995
Balanced-Q 10.876699 10.801286 -0.69% 2,670,990 1994
10.232829 10.876699 6.29% 2,039,118 1993
10.000000 10.232829 2.33% 1,233,110 1992
- --------------------------------------------------------------------------------------------------------------
American Century Variable 14.300170 16.345418 14.30% 2,535,285 1997
Portfolios, Inc. - 12.912980 14.300170 10.74% 2,577,277 1996
American Century VP 10.801286 12.912980 19.55% 2,471,621 1995
Balanced-NQ 10.876699 10.801286 -0.69% 2,324,933 1994
10.232829 10.876699 6.29% 2,073,593 1993
10.000000 10.232829 2.33% 1,301,248 1992
- --------------------------------------------------------------------------------------------------------------
American Century Variable 23.677551 22.608168 -4.52% 7,405,239 1997
Portfolios, Inc. - 25.074858 23.677551 -5.57% 9,324,052 1996
American Century VP 19.378026 25.074858 29.40% 9,867,412 1995
Capital Appreciation-Q 19.864882 19.378026 -2.45% 9,394,094 1994
18.244594 19.864882 8.88% 8,366,010 1993
18.736465 18.244594 -2.63% 7,578,213 1992
13.379768 18.736465 40.04% 4,222,602 1991
13.732668 13.379768 -2.57% 1,954,531 1990
10.801278 13.732668 27.14% 548,848 1989
11.201686 10.801278 -3.57% 224,112 1988
- --------------------------------------------------------------------------------------------------------------
American Century Variable 23.677551 22.608168 -4.52% 4,340,405 1997
Portfolios , Inc. - 25.074858 23.677551 -5.57% 6,231,979 1996
American Century VP 19.378026 25.074858 29.40% 7,570,906 1995
Capital Appreciation-NQ 19.864882 19.378026 -2.45% 7,577,109 1994
18.244594 19.864882 8.88% 7,513,748 1993
18.736465 18.244594 -2.63% 8,116,485 1992
13.379768 18.736465 40.04% 5,428,104 1991
13.732668 13.379768 -2.57% 2,629,880 1990
10.801278 13.732668 27.14% 974,118 1989
11.201686 10.801278 -3.57% 348,954 1988
- --------------------------------------------------------------------------------------------------------------
American Century Variable 11.745639 13.753336 17.09% 3,513,167 1997
Portfolios, Inc. - 10.402550 11.745639 12.91% 2,194,705 1996
American Century VP 9.392316 10.402550 10.76% 1,565,354 1995
International-Q 10.000000 9.392316 -6.08% 688,372 1994
- --------------------------------------------------------------------------------------------------------------
American Century Variable 11.745639 13.753336 17.09% 2,814,767 1997
Portfolios, Inc. - 10.402550 11.745639 12.91% 1,758,586 1996
American Century VP 9.392316 10.402550 10.76% 1,498,305 1995
International-NQ 10.000000 9.392316 -6.08% 845,551 1994
- --------------------------------------------------------------------------------------------------------------
American Century Variable 10.142565 12.621843 24.44% 1,153,698 1997
Portfolio, Inc. - 10.000000 10.142565 1.43% 12,933 1996*
American Century VP Value-Q
- --------------------------------------------------------------------------------------------------------------
American Century Variable 10.142565 12.621843 24.44% 1,177,685 1997
Portfolio, Inc. - 10.000000 10.142565 1.43% 77,276 1996*
American Century VP Value-NQ
- --------------------------------------------------------------------------------------------------------------
</TABLE>
15
17 of 145
<PAGE> 18
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVIS- 24.479182 31.433956 28.41% 425,839 1997
Growth Fund-Q 21.880052 24.479182 11.88% 486,423 1996
16.632869 21.880052 31.55% 533,382 1995
16.767635 16.632869 -0.80% 568,831 1994
14.603954 16.767635 14.82% 614,673 1993
13.356752 14.603954 9.34% 630,618 1992
10.154286 13.356752 31.54% 637,666 1991
10.758820 10.154286 -5.62% 612,309 1990
8.912471 10.758820 20.72% 578,318 1989**
7.950563 8.912471 12.10% 335,760 1988
- --------------------------------------------------------------------------------------------------------------
AVIS- 24.479182 31.433956 28.41% 417,659 1997
Growth Fund-NQ 21.880052 24.479182 11.88% 471,250 1996
16.632869 21.880052 31.55% 544,338 1995
16.767635 16.632869 -0.80% 538,005 1994
14.603954 16.767635 14.82% 573,448 1993
13.356752 14.603954 9.34% 658,355 1992
10.154286 13.356752 31.54% 675,796 1991
10.758820 10.154286 -5.62% 709,255 1990
8.912471 10.758820 20.72% 847,522 1989**
7.950563 8.912471 12.10% 365,976 1988
- --------------------------------------------------------------------------------------------------------------
AVIS- 23.160826 25.696356 10.95% 79,449 1997
High-Yield Bond Fund-Q 20.792452 23.160826 11.73% 74,769 1996
17.247186 20.792452 20.19% 74,984 1995
18.696382 17.247186 -7.75% 90,073 1994
16.269615 18.696382 14.92% 97,302 1993
14.656040 16.269615 11.01% 96,741 1992
11.731211 14.656040 24.93% 104,317 1991
11.446666 11.731211 2.49% 91,778 1990
10.615988 11.446666 7.82% 107,592 1989**
10.185386 10.615988 4.23% 80,266 1988
- --------------------------------------------------------------------------------------------------------------
AVIS- 23.160826 25.696356 10.95% 44,445 1997
High-Yield Bond Fund-NQ 20.792452 23.160826 11.73% 53,096 1996
17.247186 20.792452 20.19% 65,007 1995
18.696382 17.247186 -7.75% 63,653 1994
16.269615 18.696382 14.92% 90,260 1993
14.656040 16.269615 11.01% 85,512 1992
11.731211 14.656040 24.93% 93,543 1991
11.446666 11.731211 2.49% 84,258 1990
10.615988 11.446666 7.82% 120,140 1989**
10.185386 10.615988 4.23% 67,570 1988
- --------------------------------------------------------------------------------------------------------------
AVIS- 18.395431 19.690955 7.04% 146,543 1997
U.S. Gov't/AAA-Rated 18.077072 18.395431 1.76% 183,087 1996
Securities Fund-Q 15.872495 18.077072 13.89% 315,331 1995
16.810323 15.872495 -5.58% 346,442 1994
15.319654 16.810323 9.73% 414,364 1993
14.425067 15.319654 6.20% 396,892 1992
12.605067 14.425067 14.44% 436,968 1991
11.780016 12.605067 7.00% 457,802 1990
10.909251 11.780016 7.98% 493,935 1989**
10.389044 10.909251 5.01% 303,920 1988
- --------------------------------------------------------------------------------------------------------------
</TABLE>
16
18 of 145
<PAGE> 19
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
AVIS- 18.395431 19.690955 7.04% 111,728 1997
U.S. Gov't/AAA-Rated 18.077072 18.395431 1.76% 149,634 1996
Securities Fund-NQ 15.872495 18.077072 13.89% 238,614 1995
16.810323 15.872495 -5.58% 272,776 1994
15.319654 16.810323 9.73% 365,338 1993
14.425067 15.319654 6.20% 447,387 1992
12.605067 14.425067 14.44% 496,734 1991
11.780016 12.605067 7.00% 528,128 1990
10.909251 11.780016 7.98% 997,613 1989**
10.389044 10.909251 5.01% 801,676 1988
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 16.470432 21.614298 31.23% 12,220,119 1997
Fund, Inc.- Q 13.619180 16.470432 20.94% 7,592,255 1996
10.087774 13.619180 35.01% 3,284,707 1995
10.130946 10.087774 -0.43% 539,188 1994
10.000000 10.130946 1.31% 114,256 1993
- -------------------------------------------------------------------------------------------------------------
Dreyfus Stock Index 16.470432 21.614298 31.23% 9,791,828 1997
Fund, Inc.- NQ 13.619180 16.470432 20.94% 6,210,747 1996
10.087774 13.619180 35.01% 2,805,145 1995
10.130946 10.087774 -0.43% 418,990 1994
10.000000 10.130946 1.31% 53,556 1993
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 10.000000 10.192063 1.92% 160,444 1997*
Investment Fund-
Capital Appreciation
Portfolio- Q
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 10.000000 10.192063 1.92% 195,833 1997*
Investment Fund-
Capital Appreciation
Portfolio- NQ
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 9.986925 11.455116 14.70% 948,045 1997
Investment Fund - 10.000000 9.986925 -0.13% 15,022 1996*
Growth & Income
Portfolio- Q
- -------------------------------------------------------------------------------------------------------------
Dreyfus Variable 9.986925 11.455166 14.70% 850,450 1997
Investment Fund - 10.000000 9.986925 -0.13% 2,643 1996*
Growth & Income
Portfolio- NQ
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 17.037112 21.597400 26.77% 2,568,412 1997
Responsible Growth 14.239508 17.037112 19.65% 1,552,615 1996
Fund, Inc.- Q 10.721141 14.239508 32.82% 640,387 1995
10.702195 10.721141 0.18% 301,426 1994
10.000000 10.702195 7.02% 32,265 1993
- -------------------------------------------------------------------------------------------------------------
The Dreyfus Socially 17.037112 21.597400 26.77% 1,595,569 1997
Responsible Growth 14.239508 17.037112 19.65% 1,190,421 1996
Fund, Inc.- NQ 10.721141 14.239508 32.82% 421,093 1995
10.702195 10.721141 0.18% 263,764 1994
10.000000 10.702195 7.02% 48,396 1993
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP 28.043676 35.459509 26.44% 23,984,214 1997
Equity-Income 24.863579 28.043676 12.79% 23,565,494 1996
Portfolio-Q 18.646331 24.863579 33.34% 21,482,777 1995
17.644458 18.646331 5.68% 15,283,540 1994
15.123262 17.644458 16.67% 10,828,747 1993
13.099125 15.123262 15.45% 6,712,294 1992
10.095775 13.099125 29.75% 4,458,956 1991
12.075648 10.095775 -16.40% 3,063,355 1990
10.425721 12.075648 15.83% 1,898,037 1989
8.589543 10.425721 21.38% 319,889 1988
- -------------------------------------------------------------------------------------------------------------
</TABLE>
17
19 of 145
<PAGE> 20
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Equity - 28.043676 35.459509 26.44% 19,527,927 1997
Income Portfolio-NQ 24.863579 28.043676 12.79% 20,058,276 1996
18.646331 24.863579 33.34% 21,094,657 1995
17.644458 18.646331 5.68% 15,217,260 1994
15.123262 17.644458 16.67% 11,195,669 1993
13.099125 15.123262 15.45% 6,754,475 1992
10.095775 13.099125 29.75% 4,614,322 1991
12.075648 10.095775 -16.40% 3,627,225 1990
10.425721 12.075648 15.83% 2,861,738 1989
8.589543 10.425721 21.38% 678,815 1988
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 38.497038 46.918894 21.88% 17,382,123 1997
Portfolio-Q 34.006052 38.497038 13.21% 17,849,804 1996
25.451479 34.006052 33.61% 15,252,906 1995
25.790764 25.451479 -1.32% 11,689,858 1994
21.890060 25.790764 17.82% 8,260,724 1993
20.287900 21.890060 7.90% 5,747,021 1992
14.125398 20.287900 43.63% 3,088,464 1991
16.214983 14.125398 -12.89% 1,245,106 1990
12.501824 16.214983 29.70% 398,400 1989
10.938414 12.501824 14.29% 38,122 1988
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 38.497038 46.918894 21.88% 11,857,821 1997
Portfolio-NQ 34.006052 38.497038 13.21% 13,715,597 1996
25.451479 34.006052 33.61% 13,813,237 1995
25.790764 25.451479 -1.32% 10,492,508 1994
21.890060 25.790764 17.82% 8,788,434 1993
20.287900 21.890060 7.90% 6,695,765 1992
14.125398 20.287900 43.63% 4,003,764 1991
16.214983 14.125398 -12.89% 2,190,071 1990
12.501824 16.214983 29.70% 857,832 1989
10.938414 12.501824 14.29% 105,051 1988
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High 24.553550 28.515871 16.14% 6,886,178 1997
Income Portfolio-Q 21.817076 24.553550 12.54% 7,274,256 1996
18.327364 21.817076 19.04% 6,464,833 1995
18.859652 18.327364 -2.82% 4,924,388 1994
15.855840 18.859652 18.94% 4,044,756 1993
13.055215 15.855840 21.45% 1,837,635 1992
9.778064 13.055215 33.52% 669,289 1991
10.147625 9.778064 -3.64% 277,945 1990
10.736745 10.147625 -5.49% 209,652 1989
9.736528 10.736745 10.27% 67,813 1988
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP High 24.553550 28.515871 16.14% 8,097,358 1997
Income Portfolio-NQ 21.817076 24.553550 12.54% 8,722,126 1996
18.327364 21.817076 19.04% 7,993,534 1995
18.859652 18.327364 -2.82% 6,177,851 1994
15.855840 18.859652 18.94% 5,307,509 1993
13.055215 15.855840 21.45% 2,645,096 1992
9.778064 13.055215 33.52% 1,098,412 1991
10.147625 9.778064 -3.64% 425,270 1990
10.736745 10.147625 -5.49% 353,195 1989
9.736528 10.736745 10.27% 140,237 1988
- -------------------------------------------------------------------------------------------------------------
</TABLE>
18
20 of 145
<PAGE> 21
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 16.573676 18.248482 10.11% 12,793,113 1997
Portfolio-Q 14.832631 16.573676 11.74% 13,781,464 1996
13.701507 14.832631 8.26% 14,272,080 1995
13.646118 13.701507 0.41% 15,065,853 1994
10.074553 13.646118 35.45% 11,518,590 1993
11.432117 10.074553 -11.88% 5,381,715 1992
10.707951 11.432117 6.76% 3,095,641 1991
11.042233 10.707951 -3.03% 1,715,341 1990
8.858811 11.042233 24.65% 356,389 1989
8.300609 8.858811 6.72% 53,275 1988
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 16.573676 18.248482 10.11% 11,023,038 1997
Portfolio-NQ 14.832631 16.573676 11.74% 12,840,712 1996
13.701507 14.832631 8.26% 14,672,390 1995
13.646118 13.701507 0.41% 17,550,925 1994
10.074553 13.646118 35.45% 14,793,318 1993
11.432117 10.074553 -11.88% 5,341,001 1992
10.707951 11.432117 6.76% 3,211,265 1991
11.042233 10.707951 -3.03% 1,989,713 1990
8.858811 11.042233 24.65% 605,461 1989
8.300609 8.858811 6.72% 167,313 1988
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 20.422622 24.319958 19.08% 20,417,818 1997
Manager Portfolio-Q 18.056027 20.422622 13.11% 21,570,235 1996
15.641016 18.056027 15.44% 22,704,319 1995
16.874276 15.641016 -7.31% 24,788,850 1994
14.123234 16.874276 19.48% 17,438,762 1993
12.789976 14.123234 10.42% 6,977,842 1992
10.572963 12.789976 20.97% 2,513,661 1991
10.028081 10.572963 5.43% 729,271 1990
10.000000 10.028081 0.28% 124,631 1989
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 20.422622 24.319958 19.08% 12,420,418 1997
Manager Portfolio- NQ 18.056027 20.422622 13.11% 13,822,886 1996
15.641016 18.056027 15.44% 16,037,811 1995
16.874276 15.641016 -7.31% 20,692,145 1994
14.123234 16.874276 19.48% 16,652,403 1993
12.789976 14.123234 10.42% 6,313,629 1992
10.572963 12.789976 20.97% 1,991,456 1991
10.028081 10.572963 5.43% 696,595 1990
10.000000 10.028081 0.28% 161,084 1989
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 13.255157 16.241378 22.53% 13,856,940 1997
Portfolio - Q 11.071500 13.255157 19.72% 10,594,586 1996
10.000000 11.071500 10.72% 3,025,498 1995
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 13.255157 16.241378 22.53% 11,315,346 1997
Portfolio - NQ 11.071500 13.255157 19.72% 9,866,842 1996
10.000000 11.071500 10.72% 3,490,716 1995
- -------------------------------------------------------------------------------------------------------------
Fidelity VIP III 10.000000 10.932125 9.32% 946,688 1997*
Growth Opportunities
Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
</TABLE>
19
21 of 145
<PAGE> 22
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Fidelity VIP III Growth 10.000000 10.932125 9.32% 861,112 1997*
Opportunities
Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley 10.000000 9.810487 -1.90% 172,203 1997*
Universal Funds, Inc.-
Emerging Markets
Debt Portfolio-Q
- -------------------------------------------------------------------------------------------------------------
Morgan Stanley 10.000000 9.810487 -1.90% 222,098 1997*
Universal Funds, Inc.-
Emerging Markets
Debt Portfolio-NQ
- -------------------------------------------------------------------------------------------------------------
NSAT-Capital 17.979967 23.867569 32.75% 3,948,978 1997
Appreciation Fund-Q 14.442619 17.979967 24.49% 2,288,355 1996
11.311683 14.442619 27.68% 897,315 1995
11.564256 11.311683 -2.18% 890,035 1994
10.689287 11.564256 8.19% 545,013 1993
10.000000 10.689287 6.89% 189,896 1992
- -------------------------------------------------------------------------------------------------------------
NSAT-Capital 17.979967 23.867569 32.75% 4,139,623 1997
Appreciation Fund-NQ 14.442619 17.979967 24.49% 2,612,175 1996
11.311683 14.442619 27.68% 904,797 1995
11.564256 11.311683 -2.18% 897,902 1994
10.689287 11.564256 8.19% 549,294 1993
10.000000 10.689287 6.89% 551,252 1992
- -------------------------------------------------------------------------------------------------------------
NSAT- 30.296925 32.793820 8.24% 3,575,004 1997
Government Bond 29.663756 30.296925 2.13% 3,938,276 1996
Fund-Q 25.309101 29.663756 17.21% 4,150,795 1995
26.497619 25.309101 -4.49% 4,217,320 1994
24.513489 26.497619 8.09% 4,093,697 1993
23.025331 24.513489 6.46% 3,388,192 1992
19.989831 23.025331 15.19% 2,396,577 1991
18.497836 19.989831 8.07% 1,366,952 1990
16.442690 18.497836 12.50% 769,336 1989
15.416798 16.442690 6.65% 397,372 1988
- -------------------------------------------------------------------------------------------------------------
NSAT- 30.216906 32.707206 8.24% 2,848,085 1997
Government Bond 29.585401 30.216906 2.13% 3,184,368 1996
Fund-NQ 25.242252 29.585401 17.21% 3,385,486 1995
26.427634 25.242252 -4.49% 3,855,380 1994
24.448737 26.427634 8.09% 4,068,930 1993
22.964507 24.448737 6.46% 3,746,706 1992
19.937021 22.964507 15.19% 3,069,935 1991
18.448970 19.937021 8.07% 2,213,029 1990
16.399248 18.448970 12.50% 1,776,299 1989
15.376062 16.399248 6.65% 1,568,736 1988
- -------------------------------------------------------------------------------------------------------------
NSAT-Money 22.132823 22.994005 3.89% 10,935,137 1997
Market Fund-Q*** 21.334141 22.132823 3.74% 9,766,503 1996
20.457373 21.334141 4.29% 9,961,763 1995
19.951530 20.457373 2.54% 11,466,217 1994
19.672720 19.951530 1.42% 5,669,948 1993
19.275668 19.672720 2.06% 5,743,893 1992
18.453701 19.275668 4.45% 5,848,337 1991
17.301093 18.453701 6.66% 4,869,455 1990
16.070303 17.301093 7.66% 1,988,984 1989
15.171173 16.070303 5.93% 1,232,073 1988
- -------------------------------------------------------------------------------------------------------------
</TABLE>
20
22 of 145
<PAGE> 23
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NSAT-Money 22.132823 22.994005 3.89% 11,155,103 1997
Market Fund-NQ*** 21.334141 22.132823 3.74% 10,963.993 1996
20.457373 21.334141 4.29% 10,688,426 1995
19.951530 20.457373 2.54% 16,632,423 1994
19.672720 19.951530 1.42% 8,583,554 1993
19.275668 19.672720 2.06% 7,286,887 1992
18.453701 19.275668 4.45% 7,417,882 1991
17.301093 18.453701 6.66% 7,729,382 1990
16.070303 17.301093 7.66% 5,325,942 1989
15.171173 16.070303 5.93% 5,407,347 1988
- -------------------------------------------------------------------------------------------------------------
NSAT-Nationwide Small 13.831813 16.020642 15.82% 4,812,645 1997
Company Fund - Q 11.410135 13.831813 21.22% 3,071,120 1996
10.000000 11.410135 14.10% 157,084 1995
- -------------------------------------------------------------------------------------------------------------
NSAT-Nationwide Small 13.831813 16.020642 15.82% 3,793,288 1997
Company Fund - NQ 11.410135 13.831813 21.22% 3,061,699 1996
10.000000 11.410135 14.10% 607,477 1995
- -------------------------------------------------------------------------------------------------------------
NSAT-Total 62.707634 80.108117 27.75% 4,368,093 1997
Return Fund-Q 52.147953 62.707634 20.25% 3,546,292 1996
40.926247 52.147953 27.42% 2,843,673 1995
41.023082 40.926247 -0.24% 2,189,971 1994
37.471598 41.023082 9.48% 1,747,873 1993
35.094975 37.471598 6.77% 1,417,457 1992
25.674744 35.094975 36.69% 905,547 1991
28.286971 25.674744 -9.23% 720,473 1990
25.311336 28.286971 11.76% 604,552 1989
21.361366 25.311336 18.49% 467,922 1988
- -------------------------------------------------------------------------------------------------------------
NSAT-Total 61.092889 78.045294 27.75% 3,538,356 1997
Return Fund-NQ 50.805130 61.092889 20.25% 3,148,253 1996
39.872391 50.805130 27.42% 2,833,128 1995
39.966728 39.872391 -0.24% 2,396,609 1994
36.506693 39.966728 9.48% 2,125,354 1993
34.191261 36.506693 6.77% 2,066,486 1992
25.013609 34.191261 36.69% 1,759,891 1991
27.558577 25.013609 -9.23% 1,524,116 1990
24.659571 27.558577 11.76% 1,576,425 1989
20.811313 24.659571 18.49% 1,429,315 1988
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 29.757359 37.889922 27.33% 5,338,769 1997
AMT-Growth 27.626244 29.757359 7.71% 5,597,573 1996
Portfolio-Q 21.247525 27.626244 30.02% 5,919,670 1995
22.656907 21.247525 -6.22% 4,909,356 1994
21.495392 22.656907 5.40% 4,959,418 1993
19.882145 21.495392 8.11% 4,432,865 1992
15.527030 19.882145 28.05% 3,336,332 1991
17.135185 15.527030 -9.39% 1,761,170 1990
13.408445 17.135185 27.79% 751,612 1989
10.783816 13.408445 24.34% 109,355 1988
- -------------------------------------------------------------------------------------------------------------
</TABLE>
21
23 of 145
<PAGE> 24
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Neuberger & Berman 29.757359 37.889922 27.33% 4,164,923 1997
AMT-Growth Portfolio- 27.626244 29.757359 7.71% 4,702,904 1996
NQ 21.247525 27.626244 30.02% 5,358,461 1995
22.656907 21.247525 -6.22% 4,342,056 1994
21.495392 22.656907 5.40% 4,728,052 1993
19.882145 21.495392 8.11% 4,843,969 1992
15.527030 19.882145 28.05% 3,982,667 1991
17.135185 15.527030 -9.39% 2,294,185 1990
13.408445 17.135185 27.79% 1,363,755 1989
10.783816 13.408445 24.34% 291,414 1988
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 16.791470 17.690564 5.35% 3,398,882 1997
AMT-Limited Maturity 16.311479 16.791470 2.94% 3,722,398 1996
Bond Portfolio-Q 14.896724 16.311479 9.50% 4,061,293 1995
15.115753 14.896724 -1.45% 3,859,535 1994
14.362908 15.115753 5.24% 5,013,322 1993
13.836035 14.362908 3.81% 3,563,619 1992
12.589849 13.836035 9.90% 1,462,609 1991
11.776036 12.589849 6.91% 720,644 1990
10.770188 11.776036 9.34% 303,493 1989
10.182117 10.770188 5.78% 104,283 1988
- --------------------------------------------------------------------------------------------------------------
Neuberger & Berman 16.791470 17.690564 5.35% 2,928,007 1997
AMT-Limited Maturity 16.311479 16.791470 2.94% 3,388,267 1996
Bond Portfolio-NQ 14.896724 16.311479 9.50% 3,866,535 1995
15.115753 14.896724 -1.45% 4,238,249 1994
14.362908 15.115753 5.24% 5,023,386 1993
13.836035 14.362908 3.81% 3,217,005 1992
12.589849 13.836035 9.90% 1,326,257 1991
11.776036 12.589849 6.91% 676,768 1990
10.770188 11.776036 9.34% 299,695 1989
10.182117 10.770188 5.78% 101,445 1988
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 17.256151 22.354609 29.55% 7,980,031 1997
AMT-Partners 13.494251 17.256151 27.88% 5,383,558 1996
Portfolio-Q 10.017795 13.494251 34.70% 2,151,917 1995
10.000000 10.017795 0.18% 223,285 1994
- -------------------------------------------------------------------------------------------------------------
Neuberger & Berman 17.256151 22.354609 29.55% 7,769,569 1997
AMT-Partners 13.494251 17.256151 27.88% 5,392,259 1996
Portfolio-NQ 10.017795 13.494251 34.70% 2,173,222 1995
10.000000 10.017795 0.18% 324,320 1994
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 17.356310 18.715948 7.83% 4,076,992 1997
Accounts Fund- 16.781326 17.356310 3.43% 3,808,030 1996
Oppenheimer Bond 14.531774 16.781326 15.48% 3,369,101 1995
Fund-Q 15.013579 14.531774 -3.21% 2,694,486 1994
13.456350 15.013579 11.57% 2,304,838 1993
12.801628 13.456350 5.11% 1,429,504 1992
11.026344 12.801628 16.10% 609,779 1991
10.352435 11.026344 6.51% 193,600 1990
10.000000 10.352435 3.52% 64,637 1989
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 17.356310 18.715948 7.83% 3,420,959 1997
Accounts Fund- 16.781326 17.356310 3.43% 3,276,566 1996
Oppenheimer Bond 14.531774 16.781326 15.48% 3,073,942 1995
Fund-NQ 15.013579 14.531774 -3.21% 2,666,115 1994
13.456350 15.013579 11.57% 2,249,484 1993
12.801628 13.456350 5.11% 1,407,269 1992
11.026344 12.801628 16.10% 627,014 1991
10.352435 11.026344 6.51% 243,677 1990
10.000000 10.352435 3.52% 56,538 1989
- --------------------------------------------------------------------------------------------------------------
</TABLE>
22
24 of 145
<PAGE> 25
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Oppenheimer Variable 13.266755 16.030693 20.83% 9,603,574 1997
Accounts Fund- 11.411200 13.266755 16.26% 7,895,779 1996
Oppenheimer Global 11.307851 11.411200 0.91% 6,518,772 1995
Securities Fund-Q 12.151882 11.307851 -6.95% 6,376,101 1994
10.000000 12.151882 21.52% 1,254,946 1993
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 13.266755 16.030693 20.83% 6,175,581 1997
Accounts Fund- 11.411200 13.266755 16.26% 5,355,527 1996
Oppenheimer Global 11.307851 11.411200 0.91% 4,810,440 1995
Securities Fund-NQ 12.151882 11.307851 -6.95% 6,373,740 1994
10.000000 12.151882 21.52% 1,833,969 1993
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 10.000000 10.427884 4.28% 465,695 1997*
Account Funds-
Oppenheimer Growth
Fund-Q
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 10.000000 10.427884 4.28% 330,322 1997*
Account Funds-
Oppenheimer Growth
Fund-NQ
- --------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 18.045475 20.878401 15.70% 5,140,468 1997
Accounts Fund- 15.831164 18.045475 13.99% 4,869,534 1996
Oppenheimer Multiple 13.216172 15.831164 19.79% 4,418,303 1995
Strategies Fund-Q 13.655607 13.216172 -3.22% 3,897,893 1994
11.932236 13.655607 14.44% 2,951,734 1993
11.091678 11.932236 7.58% 1,837,408 1992
9.565675 11.091678 15.95% 1,118,029 1991
9.880485 9.565675 -3.19% 643,641 1990
10.000000 9.880485 -1.20% 139,332 1989
- -------------------------------------------------------------------------------------------------------------
Oppenheimer Variable 18.045475 20.878401 15.70% 4,005,875 1997
Accounts Fund- 15.831164 18.045475 13.99% 3,811,559 1996
Oppenheimer Multiple 13.216172 15.831164 19.79% 3,837,204 1995
Strategies Fund-NQ 13.655607 13.216172 -3.22% 3,363,638 1994
11.932236 13.655607 14.44% 2,677,668 1993
11.091678 11.932236 7.58% 1,697,934 1992
9.565675 11.091678 15.95% 1,012,431 1991
9.880485 9.565675 -3.19% 603,205 1990
10.000000 9.880485 -1.20% 184,606 1989
- -------------------------------------------------------------------------------------------------------------
Strong Opportunity 21.072564 26.092982 23.82% 11,262,847 1997
Fund II, Inc.-Q 18.071722 21.072564 16.61% 11,342,542 1996
14.551898 18.071722 24.19% 9,874,627 1995
14.230988 14.551898 2.26% 8,576,003 1994
11.519061 14.230988 23.54% 4,733,084 1993
10.000000 11.519061 15.19% 1,132,322 1992
- --------------------------------------------------------------------------------------------------------------
Strong Opportunity 21.072564 26.092982 23.82% 7,827,155 1997
Fund II, Inc.-NQ 18.071722 21.072564 16.61% 8,634,564 1996
14.551898 18.071722 24.19% 8,712,015 1995
14.230988 14.551898 2.26% 8,937,552 1994
11.519061 14.230988 23.54% 5,766,194 1993
10.000000 11.519061 15.19% 1,281,636 1992
- --------------------------------------------------------------------------------------------------------------
Strong Variable 16.129688 17.733129 9.94% 3,782,422 1997
Insurance Funds, Inc.- 16.212409 16.129688 -0.51% 4,502,456 1996
Discovery Fund II, 12.143604 16.212409 33.51% 5,223,195 1995
Inc.-Q 13.003747 12.143604 -6.61% 3,921,214 1994
10.796708 13.003747 20.44% 2,178,730 1993
10.000000 10.796708 7.97% 1,002,256 1992
- --------------------------------------------------------------------------------------------------------------
</TABLE>
23
25 of 145
<PAGE> 26
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Strong Variable 16.129688 17.733129 9.94% 3,017,702 1997
Insurance Funds, Inc.- 16.212409 16.129688 -0.51% 3,833,429 1996
Discovery Fund II, 12.143604 16.212409 33.51% 5,248,509 1995
Inc.-NQ 13.003747 12.143604 -6.61% 4,385,371 1994
10.796708 13.003747 20.44% 3,188,982 1993
10.000000 10.796708 7.97% 1,433,375 1992
- --------------------------------------------------------------------------------------------------------------
Strong Variable 11.140682 9.509278 -14.64% 1,303,896 1997
Insurance Funds, Inc.- 10.226470 11.140682 8.94% 1,788,555 1996
International Stock 10.000000 10.226470 2.26% 78,603 1995
Fund II - Q
- --------------------------------------------------------------------------------------------------------------
Strong Variable 11.140682 9.509278 -14.64% 1,020,345 1997
Insurance Funds, Inc.- 10.226470 11.140682 8.94% 1,660,749 1996
International Stock 10.000000 10.226470 2.26% 86,735 1995
Fund II - NQ
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 14.604281 14.758566 1.06% 2,104,195 1997
Insurance Trust - 14.433345 14.604281 1.18% 2,627,198 1996
Worldwide Bond Fund-Q 12.465907 14.433345 15.78% 2,993,355 1995
12.798654 12.465907 -2.60% 2,731,900 1994
12.031194 12.798654 6.38% 2,906,303 1993
12.872259 12.031194 -6.53% 2,263,731 1992
11.012132 12.872259 16.89% 1,132,905 1991
10.027192 11.012132 9.82% 453,396 1990
10.000000 10.027192 0.27% 51,091 1989
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 14.604281 14.758566 1.06% 2,016,599 1997
Insurance Trust - 14.433345 14.604281 1.18% 2,639,292 1996
Worldwide Bond Fund- 12.465907 14.433345 15.78% 3,020,939 1995
NQ 12.798654 12.465907 -2.60% 3,204,016 1994
12.031194 12.798654 6.38% 3,619,098 1993
12.872259 12.031194 -6.53% 2,707,532 1992
11.012132 12.872259 16.89% 1,168,830 1991
10.027192 11.012132 9.82% 497,712 1990
10.000000 10.027192 0.27% 27,550 1989
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.077830 8.792462 -12.75% 2,421,738 1997
Insurance Trust - 10.000000 10.077830 0.78% 271,881 1996*
Worldwide Emerging
Markets Fund Q
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 10.077830 8.792462 -12.75% 2,018,746 1997
Insurance Trust - 10.000000 10.077830 0.78% 239,183 1996*
Worldwide Emerging
Markets Fund NQ
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 16.248199 15.767781 -2.96% 2,616,530 1997
Insurance Trust- 13.944310 16.248199 16.52% 3,151,393 1996
Worldwide 12.728311 13.944310 9.55% 3,166,034 1995
Hard Assets Fund-Q 13.544828 12.728311 -6.03% 3,213,104 1994
8.325308 13.544828 62.69% 2,189,942 1993
8.795164 8.325308 -5.34% 800,912 1992
9.175494 8.795164 -4.15% 449,387 1991
10.823789 9.175494 -15.23% 337,698 1990
10.000000 10.823789 8.24% 44,378 1989
- --------------------------------------------------------------------------------------------------------------
Van Eck Worldwide 16.248199 15.767781 -2.96% 2,702,266 1997
Insurance 13.944310 16.248199 16.52% 3,558,069 1996
Trust-Worldwide
Hard Assets Fund-NQ 12.728311 13.944310 9.55% 3,714,045 1995
13.544828 12.728311 -6.03% 4,473,812 1994
8.325308 13.544828 62.69% 3,344,681 1993
8.795164 8.325308 -5.34% 960,152 1992
9.175494 8.795164 -4.15% 565,314 1991
10.823789 9.175494 -15.23% 475,693 1990
10.000000 10.823789 8.24% 83,552 1989
- --------------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 27
CONDENSED FINANCIAL INFORMATION-CONTINUED
Accumulation Unit values for an Accumulation Unit outstanding throughout the
period.
<TABLE>
<CAPTION>
ACCUMULATION ACCUMULATION PERCENT NUMBER OF
UNIT VALUE AT UNIT VALUE CHANGE IN ACCUMULATION
BEGINNING OF AT END ACCUMULATION UNITS AT END OF
FUND PERIOD OF PERIOD UNIT VALUE THE PERIOD YEAR
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Van Kampen American 14.931303 17.901858 19.89% 3,539,264 1997
Capital Life Investment 10.765351 14.931303 38.70% 2,491,780 1996
Trust-Morgan Stanley 10.000000 10.765351 7.65% 161,110 1995
Real Estate
Securities Portfolio-Q
- --------------------------------------------------------------------------------------------------------------
Van Kampen American 14.931303 17.901858 19.89% 4,040,440 1997
Capital Life Investment 10.765351 14.931303 38.70% 3,554,657 1996
Trust-Morgan Stanley 10.000000 10.765351 7.65% 310,010 1995
Real Estate
Securities Portfolio-NQ
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 11.572294 11.164048 -3.53% 5,900,906 1997
International Equity 10.661059 11.572294 8.55% 5,551,036 1996
Portfolio - Q 10.000000 10.661059 6.61% 1,798,470 1995
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 11.572294 11.164048 -3.53% 5,196,387 1997
International Equity 10.661059 11.572294 8.55% 5,736,148 1996
Portfolio - NQ 10.000000 10.661059 6.61% 2,012,385 1995
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.163772 11.369600 11.86% 391,358 1997
Post-Venture Capital 10.000000 10.163772 1.64% 205,349 1996*
Portfolio - Q
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 10.163772 11.369600 11.86% 316,378 1997
Post-Venture Capital 10.000000 10.163772 1.64% 198,784 1996*
Portfolio - NQ
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 13.973889 15.950665 14.15% 6,148,609 1997
Small Company Growth 12.430073 13.973889 12.42% 4,899,073 1996
Portfolio - Q 10.000000 12.430073 24.30% 2,450,661 1995
- --------------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- 13.973889 15.950665 14.15% 5,532,845 1997
Small Company Growth 12.430073 13.973889 12.42% 4,810,067 1996
Portfolio - NQ 10.000000 12.430073 24.30% 2,574,975 1995
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* The Dreyfus Variable Investment Fund - Capital Appreciation Portfolio,
Fidelity VIP III - Growth Opportunities Portfolio, Morgan Stanley
Universal Funds, Inc. - Emerging Markets Debt Portfolio, and Oppenheimer
Variable Account Funds - Oppenheimer Growth Fund were added July 14,
1997. Consequently, the Condensed Financial Information reflects the
Accumulation Unit values for the Accumulation Units outstanding for the
period from July 14, 1997 to December 31, 1997. The American Century
Variable Portfolio, Inc. - American Century VP Value, Dreyfus Variable
Investment Fund - Growth & Income Portfolio, Van Eck Worldwide Insurance
Trust - Worldwide Emerging Markets Fund, and Warburg Pincus Trust -
Post-Venture Capital Portfolio were added December 23, 1996.
Consequently, the Condensed Financial Information reflects the
Accumulation Unit values for the Accumulation Units outstanding for the
period from December 23, 1996 to December 31, 1996.
** On October 20, 1989, the Company substituted shares of the American VI
Series for the then existing shares of the American Life/Annuity Series.
The unit values for the American VI Series started at the same unit
values as the corresponding units of the American Life/Annuity Series on
the date of the substitution.
*** The 7-day yield on the Money Market Fund as of December 31, 1997 was
4.05%.
The American Century Variable Portfolios, Inc. - American Century VP Income &
Growth, Neuberger & Berman AMT - Guardian Portfolio and NSAT - Nationwide Small
Cap Value Fund were added to the Variable Account on May 1, 1998. Consequently,
no Condensed Financial Information is available.
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<PAGE> 28
NATIONWIDE LIFE INSURANCE COMPANY
The Company is a stock life insurance company organized under the laws of the
State of Ohio in March, 1929. The Company is a member of the "Nationwide
Insurance Enterprise" with its Home Office at One Nationwide Plaza, Columbus,
Ohio 43215. The Company is a provider of life insurance, annuities and
retirement products. It is admitted to do business in all states, the District
of Columbia and Puerto Rico.
NATIONWIDE ADVISORY SERVICES, INC.
The Contracts are distributed by the General Distributor, Nationwide Advisory
Services, Inc. ("NAS"), Three Nationwide Plaza, Columbus, Ohio 43215. NAS is a
wholly owned subsidiary of Nationwide Life Insurance Company.
THE VARIABLE ACCOUNT
The Variable Account was established by the Company on October 7, 1981 pursuant
to Ohio law. The Company has caused the Variable Account to be registered with
the SEC as a unit investment trust pursuant to the Investment Company Act of
1940 ("1940 Act"). Such registration does not involve supervision of the
management of the Variable Account or of the Company by the SEC.
The Variable Account is a separate investment account of the Company and as
such, is not chargeable with liabilities arising out of any other business the
Company may conduct. The Company does not guarantee the investment performance
of the Variable Account. Obligations under the Contracts, however, are
obligations of the Company. Income, gains and losses of the Variable Account,
whether or not realized, are credited to or charged against the Variable Account
without regard to other income, gains, or losses of the Company.
Purchase Payments are allocated among one or more Sub-Accounts corresponding to
one or more of the Underlying Mutual Funds designated by the Contract Owner.
There are two Sub-Accounts within the Variable Account for each of the
Underlying Mutual Fund options which may be designated by the Contract Owner.
One such Sub-Account contains the Underlying Mutual Fund shares attributable to
Accumulation Units under Qualified Contracts, IRAs, Roth IRAs, SEP IRAs and Tax
Sheltered Annuities and one such Sub-Account contains the Underlying Mutual Fund
shares attributable to Accumulation Units under Non-Qualified Contracts.
UNDERLYING MUTUAL FUND OPTIONS
A Contract Owner may choose from among a number of different Underlying Mutual
Fund options. See Appendix B which contains a summary of investment objectives
for each Underlying Mutual Fund. More detailed information may be found in the
current prospectus for each Underlying Mutual Fund. Prospectuses for the
Underlying Mutual Funds should be read in conjunction with this prospectus. A
copy of each prospectus may be obtained without charge from the Company by
calling 1-800-848-6331, TDD 1-800-238-3035, or writing P.O. Box 16609, Columbus,
Ohio 43216-6609.
The Underlying Mutual Fund options are NOT available to the general public
directly. The Underlying Mutual Funds are available as investment options in
variable life insurance policies or variable annuity contracts issued by life
insurance companies or, in some cases, through participation in certain
qualified pension or retirement plans.
Some of the Underlying Mutual Funds have been established by investment advisers
which manage publicly traded mutual funds having similar names and investment
objectives. While some of the Underlying Mutual Funds may be similar to, and may
in fact be modeled after publicly traded mutual funds, Contract purchasers
should understand that the Underlying Mutual Funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the investment
performance of publicly traded mutual funds and any corresponding Underlying
Mutual Funds may differ substantially.
The Underlying Mutual Funds may also be available to registered separate
accounts offering variable annuity and variable life products of other
participating insurance companies, as well as to the Variable Account and other
separate accounts of the Company. Although the Company does not anticipate
disadvantages to this, there is a possibility that a material conflict may arise
between the interest of the Variable Account and one or more of the other
separate accounts in which the Underlying Mutual Funds participate. A conflict
may occur due to a number of reasons including: 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. In the event of conflict, the Company will take any steps necessary
to protect the Contract Owners and variable annuity payees, including withdrawal
of the Variable Account from participation in the Underlying Mutual Fund(s)
involved in the conflict.
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<PAGE> 29
VOTING RIGHTS
Voting rights under the Contracts apply ONLY with respect to amounts allocated
to the Sub-Accounts.
In accordance with its view of applicable law, the Company will vote the shares
of the Underlying Mutual Funds at regular and special meetings of the
shareholders. These shares will be voted in accordance with instructions
received from Contract Owners. If the 1940 Act or any regulation thereunder
should be amended or if the present interpretation changes permitting the
Company to vote the shares of the Underlying Mutual Funds in its own right, it
may elect to do so.
The Contract Owner is the person who has the voting interest under the Contract.
The number of Underlying Mutual Fund shares attributable to each Contract Owner
is determined by dividing the Contract Owner's interest in each respective
Sub-Account by the Net Asset Value of the Underlying Mutual Fund corresponding
to the Sub-Account. The number of shares which may be voted will be determined
as of the date chosen by the Company not more than 90 days prior to the meeting
of the Underlying Mutual Fund. Each person having a voting interest will receive
periodic reports relating to the Underlying Mutual Fund, proxy material and a
form with which to give such voting instructions.
Voting instructions will be solicited by written communication at least 21 days
prior to such meeting. Underlying Mutual Fund shares to which no timely
instructions are received will be voted by the Company in the same proportion as
the voting instructions which are received with respect to all contracts
participating in the Variable Account.
SUBSTITUTION OF SECURITIES
If shares of the Underlying Mutual Fund options are no longer available for
investment by the Variable Account or if, in the judgment of the Company's
management, further investment in such Underlying Mutual Fund shares is
inappropriate, the Company may eliminate Sub-Accounts, combine two or more
Sub-Accounts, or substitute shares of another underlying mutual fund for
underlying mutual fund shares already purchased or to be purchased in the future
with Purchase Payments under the Contract. No substitution of securities in the
Variable Account may take place without prior approval of the SEC.
VARIABLE ACCOUNT CHARGES AND OTHER DEDUCTIONS
EXPENSES OF VARIABLE ACCOUNT
The Variable Account is responsible for the following types of expenses: (1)
administrative expenses relating to the issuance and maintenance of the
Contracts; (2) mortality risk charge associated with guaranteeing the annuity
purchase rates at issue for the life of the Contracts; and (3) expense risk
charge associated with guaranteeing that the Mortality Risk, Expense Risk, and
Administration Charges and Contract Maintenance Charge described in this
prospectus will not change regardless of actual expenses. If these charges are
insufficient to cover these expenses, the loss will be borne by the Company.
All of the charges described in this section apply to Variable Account
allocations. Allocations to the Fixed Account are subject to CDSC, Contract
Maintenance Charge and premium tax deductions, if applicable, but are not
subject to charges exclusive to the Variable Account; e.g. the Mortality Risk
Charge, the Expense Risk Charge and the Administration Charge.
MORTALITY RISK CHARGE
The Company deducts a Mortality Risk Charge from the Variable Account. This
amount is computed on a daily basis, and is equal to an annual rate of 0.80% of
the daily net assets of the Variable Account. By guaranteeing the Contract's
annuity rate, the Company assumes the Mortality Risk. These guarantees cannot
change regardless of the death rates of persons receiving annuity payments or of
the general population.
EXPENSE RISK CHARGE
The Company deducts an Expense Risk Charge from the Variable Account. This
amount is computed on a daily basis, and is equal to an annual rate of 0.45% of
the daily net assets of the Variable Account. The Company will not increase
charges for administration of the Contracts regardless of its actual expenses.
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<PAGE> 30
CONTRACT MAINTENANCE CHARGE
Each year on the Contract Anniversary (and on the date of surrender in any year
in which the entire Contract Value is surrendered), the Company deducts a
Contract Maintenance Charge from the Contract Value to reimburse it for
administrative expenses relating to the issuance and maintenance of the
Contract. The Contract Maintenance Charges are as follows:
<TABLE>
<CAPTION>
----------------------------------------------------- ----------------------------------------------------
AMOUNT TYPE OF CONTRACT ISSUED
----------------------------------------------------- ----------------------------------------------------
<S> <C>
- Non-Qualified Contracts
- Individual Retirement Annuities
- Roth IRAs
$30.00 - Tax Sheltered Annuities (sold prior to December
17, 1990)
- Qualified Contracts (issued pursuant to a 401
plan prior to January 14, 1991).(1)
----------------------------------------------------- ----------------------------------------------------
- Tax Sheltered Annuity Contracts issued on or
$12.00 after December 17, 1990 and before August 1,
1994.(2)
----------------------------------------------------- ----------------------------------------------------
$30.00 to $0.00 - Qualified Contracts issued on or after January
14, 1991 and before August 1, 1994.(3)
----------------------------------------------------- ----------------------------------------------------
- Qualified Contracts (sold on or after August 1,
$12.00 to $0.00(4) 1994); SEP IRAs
- Tax Sheltered Annuity Contracts (sold on or after
August 1, 1994).
----------------------------------------------------- ----------------------------------------------------
</TABLE>
1 If additional Contracts are or were issued (on or after January 14, 1991)
pursuant to a plan which was funded by Contracts described in this
prospectus prior to January 14, 1991, such additional Qualified Contracts
will have a Contract Maintenance Charge of $30.00.
2 This charge may be lowered to reflect savings in administration of the
Contracts.
3 Variances are based on internal underwriting guidelines which can result in
reductions of charges in incremental amounts of $5.00. Underwriting
considerations include the size of the group, the average participant
account balance transferred to the Company, if any, and administrative
savings.
4 The charge is determined based on Company underwriting guidelines.
All Contract Maintenance Charge reductions will be based on objective
underwriting guidelines which will be applied in a non-discriminatory manner.
The deduction of the Contract Maintenance Charge is made from each Sub-Account
and the Fixed Account in the same proportion that the value of each Sub-Account
and Fixed Account bears to the total Contract Value. In any Contract Year when a
Contract is surrendered for its full value on any date other than the Contract
Anniversary, the Contract Maintenance Charge will be deducted at the time of
such surrender. The amount of the Contract Maintenance Charge may not be
increased by the Company. In no event will reduction or elimination of the
Contract Maintenance Charge be permitted where such reduction or elimination
will be unfairly discriminatory to any person, or where it is prohibited by
state law.
ADMINISTRATION CHARGE
The Company deducts an Administration Charge equal on an annual basis to 0.05%
of the daily net assets of the Variable Account. The Administration Charge is
designed only to reimburse the Company for administrative expenses.
CONTINGENT DEFERRED SALES CHARGE ("CDSC")
No deduction for sales charges is made from the Purchase Payments for these
Contracts. However, if any part of the Contract Value is surrendered, the
Company will, with certain exceptions, deduct a CDSC (see "Waiver of CDSC"). The
CDSC will not exceed the lesser of: (1) 7% of the amount surrendered; or (2) 7%
of the total of all Purchase Payments made within 84 months prior to the date of
the surrender request. The CDSC, when it is applicable, will be used to cover
expenses relating to the sale of the Contracts, including commissions paid to
sales personnel, the costs of preparation of sales literature and other
promotional activity. The Company attempts to recover its distribution costs
relating to the sale of the Contracts from the CDSC. Any shortfall will be
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<PAGE> 31
made up from the General Account of the Company, which may indirectly include
portions of the Mortality and Expense Risk Charges, since the Company expects to
generate a profit from these charges. The maximum amount that may be paid to a
selling agent on the sale of these Contracts is 5.25% of Purchase Payments.
The CDSC is calculated by multiplying the applicable CDSC percentages noted
below by the Purchase Payments that are surrendered. For purposes of calculating
the CDSC, surrenders are considered to come first from the oldest Purchase
Payment made to the Contract, then the next oldest Purchase Payment and so
forth. For tax purposes, a surrender is usually treated as a withdrawal of
earnings first.
The CDSC applies to Purchase Payments for Contracts issued on or after December
15, 1988:
<TABLE>
<CAPTION>
NUMBER OF COMPLETED CDSC NUMBER OF COMPLETED CDSC
YEARS FROM DATE OF PERCENTAGE YEARS FROM DATE OF PERCENTAGE
PURCHASE PAYMENT PURCHASE PAYMENT
<S> <C> <C> <C>
0 7% 4 3%
1 6% 5 2%
2 5% 6 1%
3 4% 7 0%
</TABLE>
FOR CONTRACTS ISSUED PRIOR TO DECEMBER 15, 1988
For Contracts issued prior to December 15, 1988, a CDSC will be made by the
Company 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 these Contracts, the Contract Owner, after the first year from
the date of each Purchase Payment, may withdraw without a CDSC, up to 5% of that
Purchase Payment for each year that the Purchase Payment has remained on deposit
(less the amount of such Purchase Payment previously surrendered free of charge)
without a CDSC.
WAIVER OF CDSC
Each Contract Year, the Contract Owner may withdraw without a CDSC:
(a) any amount in order for the Contract to meet minimum distribution
requirements under the Code; or
(b) up to 10% of each Purchase Payment under IRAs issued on or after March
1, 1993.
Starting with the second year after a Purchase Payment has been made, the
Contract Owner may withdraw, without a CDSC, the greater of:
(a) an amount equal to 10% of that Purchase Payment; or
(b) any amount withdrawn in order for this Contract to meet minimum
distribution requirements under the Code.
This CDSC-free withdrawal privilege is non-cumulative. Free amounts not taken
during any given Contract Year cannot be taken as free amounts in a subsequent
Contract Year.
In addition, no CDSC will be deducted:
(1) upon 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 84
months.
No CDSC applies upon the transfer of values among the Sub-Accounts or between
the Fixed Account and the Variable Account. When a Contract described in this
prospectus is exchanged for another Contract issued by the Company or any of its
affiliated insurance companies, of the type and class which the Company
determines is eligible for such an exchange, the Company may waive the CDSC on
the first Contract. A CDSC may apply to the contract received in the exchange.
When a Contract is held by a Charitable Remainder Trust, the amount which may be
withdrawn from this Contract without application of a CDSC, will be the larger
of (a) or (b), where:
(a) is the amount which would otherwise be available for withdrawal without
application of a CDSC; and
(b) is the difference between the total Purchase Payments made to the
Contract as of the date of the withdrawal (reduced by previous
withdrawals of such Purchase Payments), and the Contract Value at the
close of the day prior to the date of the withdrawal.
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<PAGE> 32
For Tax Sheltered Annuity Contracts issued on or after December 17, 1990,
Qualified Contracts sold in conjunction with 401 cases sold on or after January
14, 1991, and SEP IRA Contracts sold on or after January 14, 1991, the Company
will waive the CDSC when:
(a) the Plan Participant experiences a case of hardship (as provided in
Code Section 403(b) and as defined for purposes of Code Section
401(k));
(b) the Plan Participant becomes disabled (within the meaning of Code
Section 72(m)(7));
(c) the Plan Participant attains age 59-1/2 and has participated in the
Contract for at least 5 years, as determined from the Contract
Anniversary date immediately preceding the Distribution;
(d) the Plan Participant has participated in the Contract for at least 15
years as determined from the Contract Anniversary date immediately
preceding the Distribution;
(e) the Plan Participant dies; or
(f) the Contract is annuitized after 2 years from the inception of the
Contract.
The Contract Owner may be subject to income tax on all or a portion of any such
withdrawals and to a tax penalty if the Contract Owner takes withdrawals prior
to age 59-1/2 (see "Non-Qualified Contracts- Natural Persons as Contract
Owners").
In no event will elimination of CDSC be permitted where such elimination will be
unfairly discriminatory to any person, or where it is prohibited by law.
PREMIUM TAXES
The Company will charge against the Contract Value any premium taxes levied by a
state or any other government entity upon Purchase Payments received by the
Company. Premium tax rates currently range from 0% to 3.5%. This range is
subject to change. The method used to recoup premium tax will be determined by
the Company at its sole discretion in compliance with state law. The Company
currently deducts such charges from the Contract Value either at: (1) the time
the Contract is surrendered; (2) Annuitization; or (3) such earlier date as the
Company may become subject to such taxes.
OPERATION OF THE CONTRACT
INVESTMENTS OF THE VARIABLE ACCOUNT
The Contract Owner may have Purchase Payments allocated among one or more of the
Sub-Accounts. Shares of the Underlying Mutual Fund options specified by the
Contract Owner are purchased at Net Asset Value for the respective
Sub-Account(s) and converted into Accumulation Units. The Contract Owner may
change the allocation of Purchase Payments or may exchange amounts among the
Sub-Accounts. Such transactions may be subject to conditions imposed by the
Underlying Mutual Funds, as well as those set forth in the Contract.
ALLOCATION OF PURCHASE PAYMENTS AND CONTRACT VALUE
Purchase Payments are allocated to the Fixed Account or to one or more
Sub-Accounts in accordance with the designation of the Underlying Mutual Funds
by the Contract Owner and converted into Accumulation Units.
The initial first year Purchase Payment must be at least $1,500 for
Non-Qualified Contracts. Subsequent Purchase Payments, if any, after the first
Contract Year must be at least $10 each. However, if periodic payments are
expected by the Company, the initial first year minimum may be satisfied by
Purchase Payments made on an annualized basis. The Company reserves the right to
lower the subsequent Purchase Payment minimum for certain employer sponsored
programs. The cumulative total of all purchase payments under contracts issued
by the Company on the life of any one Annuitant may not exceed $1,000,000
without prior consent of the Company.
THE PURCHASER IS CAUTIONED THAT INVESTMENT RETURN ON SMALL INITIAL AND
SUBSEQUENT PURCHASE PAYMENTS MAY BE LESS THAN CHARGES ASSESSED BY THE COMPANY.
The initial Purchase Payment allocated to designated Sub-Accounts will be priced
no later than 2 business days after receipt of an order to purchase, if the
application and all information necessary for processing the purchase order are
complete. The Company may, however, retain the Purchase Payment for up to 5
business days while attempting to complete an incomplete application. If the
application cannot be made complete within 5 business days, the prospective
purchaser will be informed of the reasons for the delay and the Purchase Payment
will be returned immediately unless the prospective purchaser specifically
consents to the Company retaining the
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<PAGE> 33
Purchase Payment until the application is complete. Thereafter, subsequent
Purchase Payments will be priced on the basis of the Accumulation Unit value
next computed for the appropriate Sub-Account after the additional Purchase
Payment is received.
Purchase Payments will not be priced on the following nationally recognized
holidays: New Year's Day; Martin Luther King, Jr. Day; Presidents Day; Good
Friday; Memorial Day; Independence Day; Labor Day; Thanksgiving; and Christmas.
VALUE OF AN ACCUMULATION UNIT
The Accumulation Unit value for any Valuation Period is determined by
multiplying the Accumulation Unit value for each Sub-Account for the immediately
preceding Valuation Period by the net investment factor for the Sub-Account
during the subsequent Valuation Period. Though the number of Accumulation Units
will not change as a result of investment experience, the value of an
Accumulation Unit may increase or decrease from Valuation Period to Valuation
Period.
NET INVESTMENT FACTOR
The net investment factor for any Valuation Period is determined by dividing (a)
by (b) and subtracting (c) from the result where:
(a) is the net of:
(1) the Net Asset Value per share of the Underlying Mutual Fund held
in the Sub-Account determined at the end of the current
Valuation Period; and
(2) the per share amount of any dividend or capital gain
Distributions made by the Underlying Mutual Fund held in the
Sub-Account if the "ex-dividend" date occurs during the current
Valuation Period.
(b) is the Net Asset Value per share of the Underlying Mutual Fund held in
the Sub-Account determined at the end of the immediately preceding
Valuation Period.
(c) is a factor representing the daily Mortality Risk Charge, Expense Risk
Charge and Administration Charge. Such factor is equal to an annual
rate of 1.30% of the daily net assets of the Variable Account.
The net investment factor may be greater or less than one; therefore, the value
of an Accumulation Unit may increase or decrease. It should be noted that
changes in the net investment factor may not be directly proportional to changes
in the Net Asset Value of Underlying Mutual Fund shares, because of the
deduction for Mortality Risk Charge, Expense Risk Charge, and Administration
Charge.
DETERMINING THE CONTRACT VALUE
The Contract Value is the sum of the value of all Accumulation Units and amounts
allocated and credited to the Fixed Account. The number of Accumulation Units
credited to each Sub-Account is determined by dividing the net amount allocated
to the Sub-Account by the Accumulation Unit value for the Sub-Account for the
Valuation Period during which the Purchase Payment is received by the Company.
If part or all of the Contract Value is surrendered or charges or deductions are
made against the Contract Value, an appropriate number of Accumulation Units and
an appropriate amount from the Fixed Account will be deducted in the same
proportion that the Contract Owner's interest in the Variable Account and the
Fixed Account bears to the total Contract Value.
RIGHT TO REVOKE
The Contract Owner has a ten day free look to examine the Contract. Within ten
days of the date the Contract is received, it may be returned for any reason to
the Home Office at the address shown on page 1 of this prospectus. If the
Contract is returned to the Company in a timely manner, the Company will void
the Contract and refund the Contract Value in full, unless otherwise required by
law. State and/or federal law may provide additional free look privileges.
All IRA, Roth IRA and SEP IRA refunds will be return of Purchase Payments.
The 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 to the Contract Owner will be paid by the Company.
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<PAGE> 34
TRANSFERS
The Contract Owner may request a transfer of up to 100% of the Variable Account
value to the Fixed Account, without penalty or adjustment. However, the Company
reserves the right to restrict transfers from the Variable Account to the Fixed
Account to 25% of the Contract Value for any 12 month period. All amounts
transferred to the Fixed Account must remain on deposit in the Fixed Account
until the expiration of the current Interest Rate Guarantee Period. In addition,
transfers from the Fixed Account may not be made prior to the end of the then
current Interest Rate Guarantee Period. The Interest Rate Guarantee Period for
any amount allocated to the Fixed Account expires on the final day of a calendar
quarter during which the one year anniversary of the allocation to the Fixed
Account occurs. The Contract Owner's value in each Sub-Account will be
determined as of the date the transfer request is received in the Home Office in
good order. Once the Contract has been Annuitized, transfers may only be made on
each anniversary of the Annuitization Date.
The Contract Owner may at the maturity of an Interest Rate Guarantee Period,
transfer a portion of the value of the Fixed Account to the Variable Account.
The amount that may be transferred from the Fixed Account to the Variable
Account will be determined by the Company, at its sole discretion, but will not
be less than 10% of the total value of the portion of the Fixed Account that is
maturing. The amount that may be transferred will be declared upon the
expiration date of the then current Interest Rate Guarantee Period. Transfers
from the Fixed Account must be made within 45 days after the expiration date of
the guarantee period. Contract Owners who have entered into a Dollar Cost
Averaging agreement with the Company (see "Dollar Cost Averaging") may transfer
from the Fixed Account to the Variable Account under the terms of that
agreement.
Transfers may be made either in writing or, in states allowing such transfers,
by telephone. This telephone exchange privilege is made available to Contract
Owners automatically without the Contract Owner's election. The Company will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. Such procedures may include the following: requesting
identifying information, such as name, contract number, Social Security Number,
and/or personal identification number; tape recording all telephone
transactions; or providing written confirmation thereof to both the Contract
Owner and any agent of record, at the last address of record; or such other
procedures as the Company may deem reasonable. Although the Company's failure to
follow reasonable procedures may result in the Company's liability for any
losses due to unauthorized or fraudulent telephone transfers, the Company will
not be liable for following instructions communicated by telephone which it
reasonably believes to be genuine. Any losses incurred pursuant to actions taken
by the Company in reliance on telephone instructions reasonably believed to be
genuine will be borne by the Contract Owner.
Contracts described in this prospectus may be sold to individuals who
independently utilize the services of a firm or individual engaged in market
timing. Generally, such firms or individuals obtain authorization from multiple
Contract Owners to make transfers and exchanges among the Sub-Accounts on the
basis of perceived market trends. Because of the unusually large transfers of
funds associated with some of these transactions, the ability of the Company or
Underlying Mutual Funds to process such transactions may be compromised, and the
execution of such transactions may possibly disadvantage or work to the
detriment of other Contract Owners not utilizing market timing services.
Accordingly, the right to exchange Contract Values among the Sub-Accounts may be
subject to modification if such rights are exercised by a market timing firm or
any other third party authorized to initiate transfer or exchange transactions
on behalf of multiple Contract Owners. THE RIGHTS OF INDIVIDUAL CONTRACT OWNERS
TO EXCHANGE CONTRACT VALUES, WHEN INSTRUCTIONS ARE SUBMITTED DIRECTLY BY THE
CONTRACT OWNER, OR BY THE CONTRACT OWNER'S REPRESENTATIVE OF RECORD AS
AUTHORIZED BY THE EXECUTION OF A VALID NATIONWIDE LIMITED POWER OF ATTORNEY
FORM, WILL NOT BE MODIFIED IN ANY WAY. In modifying such rights, the Company
may, among other things, not accept:
(1) the transfer or exchange instructions of any agent acting under a power
of attorney on behalf or more than one Contract Owner; or
(2) the transfer or exchange instructions of individual Contract Owners who
have executed preauthorized transfer or exchange forms which are
submitted by market timing firms or other third parties on behalf of
more than one Contract Owner at the same time.
The Company will not impose any such restrictions or otherwise modify exchange
rights unless such action is reasonably intended to prevent the use of such
rights in a manner that will disadvantage or potentially impair the contract
rights of other Contract Owners.
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CONTRACT OWNERSHIP
Unless the Contract otherwise provides, the Contract Owner has all rights under
the Contract. PURCHASERS NAMING SOMEONE OTHER THAN THEMSELVES AS OWNER WILL HAVE
NO RIGHTS UNDER THE CONTRACT. Prior to the Annuitization Date, the Contract
Owner may name a new Contract Owner in Non-Qualified Contracts. Such change may
be subject to state and federal gift taxes and may also result in federal income
taxation. Any change of Contract Owner designation will automatically revoke any
prior Contract Owner designation. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed. A change of Contract Owner will not apply and will not be
effective with respect to any payment made or action taken by the Company prior
to the time that the change was recorded by the Home Office.
Prior to the Annuitization Date, the Contract Owner may request a change in the
Annuitant, the Contingent Annuitant, Contingent Owner, Beneficiary, or
Contingent Beneficiary. Such a request must be made in writing on a form
acceptable to the Company and must be signed by the Contract Owner. Such request
must be received at the Home Office prior to the Annuitization Date. Any change
is subject to review and approval by the Company. If the Contract Owner is not a
natural person and there is a change of the Annuitant, Distributions will be
made as if the Contract Owner died at the time of the change.
On the Annuitization Date, the Annuitant will become the Contract Owner.
JOINT OWNERSHIP
Joint Owners must be spouses at the time joint ownership is requested, unless
otherwise required by law. If a Joint Owner is named, the Joint Owner will
possess an undivided interest in the Contract. The exercise of any ownership
right in the Contract will require a written request signed by both Joint
Owners. The Company will not be liable for any loss, liability, cost, or expense
for acting in accordance with the instructions of either Joint Owner.
CONTINGENT OWNERSHIP
The Contingent Owner is the person who may receive certain benefits under the
Contract if a Contract Owner, who is not the Annuitant, dies prior to the
Annuitization Date and there is no surviving Joint Owner. If no Contingent Owner
survives a Contract Owner and there is no surviving Joint Owner, all rights and
interest in the Contract will vest in the Annuitant. If a Contract Owner, who is
also the Annuitant, dies before the Annuitization Date, the Contingent Owner
will not have any rights in the Contract unless the Contingent Owner is also the
named Beneficiary.
Subject to the terms of any existing assignment, the Contract Owner may change
the Contingent Owner prior to the Annuitization Date by written notice to the
Company. Once proper notice of the change is recorded by the Home Office, the
change will become effective as of the date the written request was signed,
whether or not the Contract Owner is living at the time of recording, but
without further liability as to any payment or settlement made by the Company
before receipt of the change.
BENEFICIARY
The Beneficiary is the person(s) who may receive certain benefits under the
Contract in the event the Annuitant dies prior to the Annuitization Date. If
more than one Beneficiary survives the Annuitant, each will share equally unless
otherwise specified in the Beneficiary designation. If no Beneficiary survives
the Annuitant, all rights and interest of the Beneficiary will vest in the
Contingent Beneficiary. If more than one Contingent Beneficiary survives, each
will share equally unless otherwise specified in the Contingent Beneficiary
designation. If no Contingent Beneficiaries survive the Annuitant, all rights
and interest of the Contingent Beneficiary will vest with the Contract Owner or
the estate of the last surviving Contract Owner.
Subject to the terms of any existing assignment, the Contract Owner may change
the Beneficiary or Contingent Beneficiary during the lifetime of the Annuitant
by written notice to the Company. Once proper notice of the change is recorded
by the Home Office, the change will become effective as of the date the written
request was signed, whether or not the Annuitant is living at the time of
recording, but without further liability as to any payment or settlement made by
the Company before receipt of such change.
SURRENDER (REDEMPTION)
Prior to the earlier of the Annuitization Date or the death of the Annuitant,
the Company will allow the Contract Owner to surrender a portion or all of the
Contract Value. The request for surrender must be made in writing and must
include the Contract when surrendering the Contract in full. In some cases the
Company will require
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additional documentation. The Company may require that the signature(s) be
guaranteed by a member firm of a major stock exchange or other depository
institution qualified to give such a guaranty.
When requested, the Company will surrender a number of Accumulation Units from
the Variable Account and an amount from the Fixed Account necessary to equal the
gross dollar amount requested, less any applicable CDSC (see "Contingent
Deferred Sales Charge"). The number of Accumulation Units surrendered from each
Sub-Account and the amount surrendered from the Fixed Account will be in the
same proportion that the Contract Owner's interest in the Sub-Accounts and Fixed
Account bears to the total Contract Value.
The Company will pay any amounts surrendered from the Sub-Accounts within 7
days. However, the Company reserves the right to suspend or postpone the date of
any payment for any Valuation Period when:
(1) the New York Stock Exchange ("Exchange") is closed;
(2) trading on the Exchange is restricted;
(3) an emergency exists as a result of which disposal of securities held in
the Variable Account is not reasonably practicable or it is not
reasonably practicable to determine the value of the Variable Account's
net assets; or
(4) the SEC, by order, permits such suspension or postponement for the
protection of security holders.
The applicable rules and regulations of the SEC will govern as to whether the
conditions prescribed in (2) and (3) exist.
The Contract Value on surrender may be more or less than the total of Purchase
Payments made by a Contract Owner, depending on the market value of the
Underlying Mutual Fund shares.
Certain redemption restrictions also apply to Contracts issued under the Texas
Optional Retirement Program or the Louisiana Optional Retirement Plan. With
respect to Contracts issued under the Texas Optional Retirement Program, the
Texas Attorney General has ruled that withdrawal benefits are available only in
the event of a participant's death, retirement, termination of employment due to
total disability, or other termination of employment in a Texas public
institution of higher education. Retirement benefits made pursuant to the
Louisiana Optional Retirement Plan are to be paid in the form of lifetime income
and, except for Death Benefits, lump sum cash payments are not permitted. A
participant under the Louisiana Optional Retirement Plan may take a Distribution
from the Contract only in the event of retirement or termination of employment.
A participant under either the Texas Optional Retirement Program or the
Louisiana Optional Retirement Plan will not, therefore, be entitled to receive
the right of withdrawal in order to receive the cash values credited to such
participant under the Contract unless one of the foregoing conditions has been
satisfied. The value of such Contracts may, however, be transferred to other
contracts or other carriers during the participation in these retirement
programs, subject to any applicable Contingent Deferred Sales Charge. The
Company issues this Contract to participants in the Texas Optional Retirement
Program in reliance upon, and in compliance with, Rule 6c-7 of the 1940 Act and
to participants in the Louisiana Optional Retirement Plan in reliance upon, and
in compliance with, an exemptive order the Company obtained from the Securities
and Exchange Commission on August 22, 1990.
SURRENDERS UNDER A QUALIFIED CONTRACT OR TAX-SHELTERED ANNUITY CONTRACT
Except as provided below, the Contract Owner may surrender part or all of the
Contract Value at any time this Contract is in force prior to the earlier of the
Annuitization Date or the death of the Annuitant:
A. The surrender of Contract Value attributable to contributions made
pursuant to a qualified cash or deferred arrangement (within the
meaning of Code Section 402(g)(3)(A)), a salary reduction agreement
(within the meaning of Code Section 402(g)(3)(C)), or transfers from
a Custodial Account described in Section 403(b)(7) of the Code, may
be executed only:
1. when the Contract Owner attains age 59-1/2, separates from
service, dies, or becomes disabled (within the meaning of Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Code Section
401(k)), provided that any surrender of Contract Value in the
case of hardship may not include any income attributable to
salary reduction contributions.
B. The surrender limitations described in Section A above also apply to:
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1. salary reduction contributions to Tax Sheltered Annuities made
for plan years beginning after December 31, 1988;
2. earnings credited to such contracts after the last plan year
beginning before January 1, 1989, on amounts attributable to
salary reduction contributions; and
3. all amounts transferred from 403(b)(7) Custodial Accounts
(except that earnings, and employer contributions as of December
31, 1988 in such Custodial Accounts, may be withdrawn in the
case of hardship).
C. Any Distribution other than the above, including exercise of a
contractual ten day free look provision (when available) may result
in the immediate application of taxes and penalties and/or
retroactive disqualification of a Qualified Contract or Tax Sheltered
Annuity.
A premature Distribution may not be eligible for rollover treatment. To assist
in preventing disqualification of a Tax Sheltered Annuity in the event of a ten
day free look, the Company will agree to transfer the proceeds to another
contract which meets the requirements of Section 403(b) of the Code, upon proper
direction by the Contract Owner. The foregoing is the Company's understanding of
the withdrawal restrictions which are currently applicable under Code Section
401(k)(2)(B), Code Section 403(b)(11) and Revenue Ruling 90-24. Such
restrictions are subject to legislative change and/or reinterpretation.
Distributions pursuant to Qualified Domestic Relations Orders will not be
considered to be a violation of the restrictions stated in this provision.
The Contract surrender provisions may also be modified pursuant to the plan
terms and tax provisions of the Code when the Contract is issued to fund a
Qualified Plan.
LOAN PRIVILEGE
Prior to the Annuitization Date, the Contract Owner of a Qualified Contract or
Tax Sheltered Annuity Contract may receive a loan from the Contract Value
subject to the terms of the Contract, the Plan, and the Code, which may impose
restrictions on loans.
Loans from Qualified Contracts or Tax Sheltered Annuities are available
beginning 30 days after the Date of Issue. The Contract Owner may borrow a
minimum of $1,000, unless a lower minimum amount is mandated by state law. In
non-ERISA plans, for Contract Values up to $20,000, the maximum loan balance
which may be outstanding at any time is 80% of the Contract Value, but not more
than $10,000. If the Contract Value is $20,000 or more, the maximum loan balance
which may be outstanding at any time is 50% of the Contract Value, but not more
than $50,000. For ERISA plans, the maximum loan balance which may be outstanding
at any time is 50% of the Contract Value, but not more than $50,000. The $50,000
limit will be reduced by the highest loan balances owed during the prior
one-year period. Additional loans are subject to the Contract minimum amount.
The aggregate of all loans may not exceed the Contract Value limitations stated
in this provision. For salary reduction Tax Sheltered Annuities, loans may only
be secured by the Contract Value.
All loans are made from a collateral fixed account. An amount equal to the
principal amount of the loan will be transferred to the collateral fixed
account. The Company will transfer to the collateral fixed account the
Sub-Account's Accumulation Units in proportion to the assets in each option
until the required balance is reached or all such Accumulation Units are
exhausted. Any additional requested collateral will be transferred from the
Fixed Account. No withdrawal charges are deducted at the time of the loan, or on
the transfer from the Variable Account to the collateral fixed account.
Until the loan has been repaid in full, that portion of the collateral fixed
account equal to the outstanding loan balance will be credited with interest at
a rate 2.25% less than the loan interest rate fixed by the Company for the term
of the loan. However, the interest rate credited to the collateral fixed account
will never be less than 3.0%. Specific loan terms are disclosed at the time of
loan application or loan issuance.
Loans must be repaid in substantially level payments, not less frequently than
quarterly, within five years. Loans used to purchase the principal residence of
the Contract Owner must be repaid within 15 years. During the loan term, the
outstanding balance of the loan will continue to earn interest at an annual rate
as specified in the loan agreement. Loan repayments will consist of principal
and interest in amounts set forth in the loan agreement. Loan repayments will be
allocated among the Sub-Accounts in accordance with the Contract, unless the
Contract Owner and the Company agree to amend the Contract at a later date on a
case by case basis.
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Any amounts distributed will be reduced by the amount of the loan outstanding,
plus accrued interest, if:
(1) the Contract is surrendered;
(2) the Contract Owner/Annuitant dies; or
(3) the Contract Owner who is not the Annuitant dies prior to
Annuitization.
In addition the Contract Value will be reduced by the amount of any outstanding
loans plus accrued interest if annuity payments begin while the loan is
outstanding. Until the loan is repaid, the Company reserves the right to
restrict any transfer of the Contract which would otherwise qualify as a
transfer as permitted in the Code.
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available under the terms of the loan agreement. If a loan
payment is not made when due, or by the end of the applicable grace period, the
entire loan will be treated as a deemed Distribution, will be taxable to the
borrower, and may be subject to the early withdrawal tax penalty. Interest will
continue to accrue on the loan after default. Any defaulted amounts, plus
accrued interest, will be deducted from the Contract when the participant
becomes eligible for a Distribution of at least that amount. Additional loans
may not be available while a previous loan remains in default.
Loans may also be subject to additional limitations or restrictions under the
terms of a Qualified Plan or Tax Sheltered Annuity Plan. Loans permitted under
this Contract may still be taxable in whole or part if the participant has
additional loans from other plans or contracts. The Company will calculate the
maximum nontaxable loan based on the information provided by the participant or
the employer.
Loan repayments must be identified as such or else they will be treated as
Purchase Payments and will not be used to reduce the outstanding loan principal
or interest due. The Company reserves the right to modify the loan's terms or
procedures if there is a change in applicable law. The Company also reserves the
right to assess a loan processing fee.
IRAs, Roth IRAs, SEP IRAs and Non-Qualified Contracts are not eligible for
loans.
ASSIGNMENT
The Contract Owner of a Non-Qualified Contract may assign some or all rights
under the Contract at any time during the lifetime of the Annuitant prior to the
Annuitization Date. Once proper notice of assignment is recorded by the Home
Office, the assignment will become effective as of the date the written request
was signed. The Company is not responsible for the validity or tax consequences
of any assignment. The Company will not be liable for any payment or other
settlement made by the Company before recording of the assignment. Where
necessary for the proper administration of the terms of the Contract, an
assignment will not be recorded until the Company has received sufficient
direction from the Contract Owner and assignee as to the proper allocation of
Contract rights under the assignment.
Any portion of the Contract Value attributable to Purchase Payments made after
August 13, 1982, which is pledged or assigned after August 13 1982, will be
treated as a Distribution and will be included in gross income to the extent
that the cash value exceeds the investment in the Contract for the taxable year
in which it was pledged or assigned. In addition, any Contract Value assigned
may be subject to a tax penalty equal to 10% of the amount which is included in
gross income. All rights in the Contract are personal to the Contract Owner and
may not be assigned without written consent of the Company. Assignment of the
entire Contract Value may cause the portion of the Contract Value exceeding the
total investment in the Contract and previously taxed amounts to be included in
gross income for federal income tax purposes each year that the assignment is in
effect.
IRAs, Roth IRAs, SEP IRAs, Tax Sheltered Annuities and Qualified Contracts may
not be assigned, pledged or otherwise transferred except under such conditions
as may be allowed by law.
CONTRACT OWNER SERVICES
ASSET REBALANCING- The Contract Owner may direct the automatic reallocation of
Contract Values to the Sub-Accounts on a predetermined percentage basis. Asset
Rebalancing will occur every three months or on another frequency authorized by
the Company. 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, the Asset Rebalancing reallocation will occur on the first business day
after that day. Asset Rebalancing requests must be in writing on a form provided
by the Company. The Contract Owner may want to contact a financial adviser to
discuss the use of Asset Rebalancing.
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Asset Rebalancing may be subject to employer imposed limitations or restrictions
for Contracts issued to a Qualified Plan or Tax Sheltered Annuity Plan.
The Company reserves the right to discontinue establishing new Asset Rebalancing
programs. The Company also reserves the right to assess a processing fee for
this service.
DOLLAR COST AVERAGING- If the Contract Value is $15,000 or more, the Contract
Owner may direct the Company to automatically transfer a specified amount from
the Fidelity VIP High Income Portfolio, NSAT-Government Bond Fund, NSAT-Money
Market Fund, Neuberger & Berman AMT-Limited Maturity Bond Portfolio or the Fixed
Account to any other Sub-Account. Dollar Cost Averaging will occur on a monthly
basis or on another frequency permitted by the Company. Dollar Cost Averaging is
a long-term investment program which provides for regular, level investments
over time. There is no guarantee that Dollar Cost Averaging will result in a
profit or protect against loss. The minimum monthly transfer is $100. Monthly
transfers from the Fixed Account must be equal to or less than 1/30th of the
Fixed Account when the program is requested. Transfers will be processed until
either the value in the originating Sub-Account or the Fixed Account is
exhausted or the Contract Owner instructs the Home Office in writing to cancel
the transfers.
The Company reserves the right to discontinue establishing new Dollar Cost
Averaging programs. The Company also reserves the right to assess a processing
fee for this service.
SYSTEMATIC WITHDRAWALS- A Contract Owner may elect in writing to begin receiving
withdrawals of a specified dollar amount (of at least $100) on a monthly,
quarterly, semi-annual, or annual basis. Unless otherwise instructed, the
withdrawals will be taken from the Sub-Accounts and the Fixed Account on a
prorated basis. A CDSC may apply (see "Contingent Deferred Sales Charge").
Unless directed otherwise by the Contract Owner, the Company will withhold
federal income taxes. In addition, a 10% penalty tax may be assessed by the IRS
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.
Withdrawals may be discontinued at any time by notifying the Home Office in
writing.
The Company reserves the right to discontinue establishing new Systematic
Withdrawal programs. The Company also reserves the right to assess a processing
fee for this service. Systematic Withdrawals are not available prior to the
expiration of the ten day free look provision of the Contract (see "Right to
Revoke").
ANNUITY PAYMENT PERIOD, DEATH BENEFIT AND OTHER DISTRIBUTIONS
ANNUITY COMMENCEMENT DATE
An Annuity Commencement Date will be selected. Such date will be the first day
of a calendar month unless otherwise agreed upon. The date must be at least 2
years after the Date of Issue. In the event the Contract is issued subject to
the terms of a Qualified Plan or Tax Sheltered Annuity Plan, Annuitization may
occur during the first 2 years subject to approval by the Company.
The Annuity Commencement Date may be changed by the Contract Owner in writing
subject to approval by the Company.
ANNUITIZATION
Annuitization is irrevocable once payments have begun. When making an
Annuitization election, the Annuitant must choose:
(1) an Annuity Payout Option; and
(2) either a Fixed Payment Annuity, Variable Payment Annuity or an
available combination.
If a Variable Payment Annuity is elected, all amounts in the Fixed Account must
be transferred to the Sub-Accounts prior to the Annuitization Date.
Payments under a Fixed Payment Annuity are guaranteed by the Company as to the
dollar amount during the annuity payment period. The dollar amount of each
payment under a Variable Payment Annuity will vary depending on the performance
of the selected Underlying Mutual Fund options. The dollar amount of each
variable payment could be higher or lower than a previous payment.
FIXED PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a Fixed Payment Annuity will be determined by applying
the portion of the total Contract Value specified by the Contract Owner to the
Fixed Payment Annuity table then in effect for the Annuity Payment
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Option elected, after deducting any applicable premium taxes from the total
Contract Value. This will be done at the Annuitization Date on an age last
birthday basis. Subsequent payments will remain level unless the Annuity Payment
Option elected provides otherwise. The Company does not credit discretionary
interest paid by the Company to payments during the annuity payment period.
VARIABLE PAYMENT ANNUITY - FIRST AND SUBSEQUENT PAYMENTS
The first payment under a Variable Payment Annuity will be determined by
applying the portion of the total Contract Value specified by the Contract Owner
to the Variable Payment Annuity table then in effect for the Annuity Payment
Option elected, after deducting any applicable premium taxes from the total
Contract Value. This will be done at the Annuitization Date on an age last
birthday basis. The dollar amount of the first payment is divided by the value
of an Annuity Unit as of the Annuitization Date to establish the number of
Annuity Units representing each monthly annuity payment. This number of Annuity
Units remains fixed during the annuity payment period. The dollar amount of the
second and subsequent payments is not predetermined and may change from month to
month. The dollar amount of each subsequent payment is 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 Company guarantees that the dollar
amount of each payment after the first will not be affected by variations in
mortality experience from mortality assumptions used to determine the first
payment.
VARIABLE PAYMENT ANNUITY - ASSUMED INVESTMENT RATE
A 3.5% assumed investment rate is built into the variable payment annuity
purchase rate basis in the Contracts. A higher assumption would mean a higher
initial payment but more slowly rising or more rapidly falling subsequent
payments. A lower assumption would have the opposite effect. If the actual net
investment rate is at the annual rate of 3.5%, the annuity payments will be
level.
VARIABLE PAYMENT ANNUITY - VALUE OF AN ANNUITY UNIT
The value of an Annuity Unit for a Sub-Account for any subsequent Valuation
Period is determined by multiplying the Annuity Unit value from the immediately
preceding Valuation Period by the net investment factor for the Valuation Period
for which the Annuity Unit value is being calculated, 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 (see "Net Investment Factor").
VARIABLE PAYMENT ANNUITY - EXCHANGES AMONG UNDERLYING MUTUAL FUND OPTIONS
During the annuity payment period, exchanges among the Underlying Mutual Fund
options must be made in writing and the exchange will take place on the
anniversary of the Annuitization Date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments will be made based on the Annuity Payment Option selected. However, if
the net amount available under any Annuity Payment Option is less than $500, the
Company will have the right to pay such amount in one lump sum in lieu of
periodic annuity payments. In addition, if the payments to be provided would be
or become less than $20, the Company will have the right to change the frequency
of payments to such intervals as will result in payments of at least $20. In no
event will the Company make payments under an annuity option less frequently
than annually.
ANNUITY PAYMENT OPTIONS
The Contract Owner may, upon prior written notice to the Company, at any time
prior to the Annuitization Date, elect one of the following Annuity Payment
Options:
(1) Life Annuity-An annuity payable periodically, but at least annually,
during the lifetime of the Annuitant, ending with the last payment due
prior to the death of the Annuitant. 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
designated second individual and continuing thereafter during the
lifetime of the survivor. AS IS THE CASE UNDER OPTION 1 ABOVE, THERE IS
NO MINIMUM NUMBER OF PAYMENTS GUARANTEED UNDER THIS OPTION. PAYMENTS
CEASE UPON THE DEATH OF THE LAST SURVIVING ANNUITANT REGARDLESS OF THE
NUMBER OF PAYMENTS RECEIVED.
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(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 be made for the remainder of the selected guaranteed period
to a designee chosen by the Contract Owner at the time the Annuity
Payment Option was elected.
Alternatively, the designee may elect to receive the present value of any
remaining guaranteed payments in a lump sum. The present value will be
computed as of the date on which the Company receives the notice of the
Annuitant's death.
Some of the stated Annuity Options may not be available in all states. The
Contract Owner may request an alternative option prior to the Annuitization Date
subject to approval by the Company.
For Non-Qualified Contracts, no Distribution will be made until an Annuity
Payment Option has been elected. Qualified Contracts, IRAs, SEP IRAs and Tax
Sheltered Annuities are subject to the "minimum distribution" requirements set
forth in the plan, Contract, or Code.
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
For Non-Qualified Contracts, if the Contract Owner and the Annuitant are not the
same and a Contract Owner dies prior to the Annuitization Date, then the Joint
Owner, if any, becomes the new Contract Owner. If there is no surviving Joint
Owner, the Contingent Owner becomes the new Contract Owner. If there is no
surviving Contingent Owner, the Annuitant becomes the Contract Owner. The entire
interest in the Contract Value, less any applicable deductions (which may
include a CDSC), must be distributed in accordance with the "Required
Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the Contract Owner and Annuitant are not the same, and the Annuitant dies
prior to the Annuitization Date, a Death Benefit will be payable to the
Beneficiary, the Contingent Beneficiary, the Contract Owner, or the last
surviving Contract Owner's estate, as specified in the "Beneficiary" provision,
unless there is a surviving Contingent Annuitant. In such case, the Contingent
Annuitant becomes the Annuitant and no Death Benefit is payable.
The Beneficiary may elect to receive the Death Benefit:
(1) in a lump sum Distribution;
(2) as an annuity payout; or
(3) any Distribution permitted by law and approved by the Company.
An election must be received by the Company 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 OF CONTRACT OWNER/ANNUITANT
If any Contract Owner and Annuitant are the same, and the Annuitant dies before
the Annuitization Date, a Death Benefit will be payable to the Beneficiary, the
Contingent Beneficiary, the Contract Owner, or the last surviving Contract
Owner's estate, as specified in the "Beneficiary" provision and in accordance
with the appropriate "Required Distributions" provisions.
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
For Contracts issued on or after the later of May 1, 1998 or the date on which
state insurance authorities approve applicable Contract modifications, if the
Annuitant dies prior to his or her 75th birthday, the dollar amount of the Death
Benefit will be the greater of:
(1) the Contract Value; or
(2) the sum of all Purchase Payments, less an adjustment for amounts
surrendered.
The adjustment for amounts surrendered will reduce item (2) above in the same
proportion that the Contract Value was reduced on the date(s) of the partial
surrender(s).
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For Contracts issued prior to May 1, 1998 or the date prior to approval of
applicable Contract modifications by state insurance authorities, if the
Annuitant dies prior to his or her 75th birthday, the dollar amount of the Death
Benefit will be the greater of:
(1) the Contract Value; or
(2) the sum of all Purchase Payments, less any amounts surrendered.
If the Annuitant dies on or after his or her 75th birthday and prior to
Annuitization, the Death Benefit will equal the Contract Value.
The Death Benefit value is determined as of the Valuation Date at or next
following the date the Home Office receives:
(1) proper proof of the Annuitant's death;
(2) an election specifying the Distribution method; and
(3) any state required form(s).
If the Annuitant dies after the Annuitization Date, payment will be determined
according to the selected Annuity Payment Option.
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Upon the death of any Contract Owner or Joint Owner (including an Annuitant who
becomes the Contract Owner on the Annuitization Date), certain distributions for
Non-Qualified Contracts issued on or after January 19, 1985, are required by
Section 72(s) of the Code. Notwithstanding any provision of the Contract to the
contrary, the following Distributions will be made in accordance with such
requirements:
1. If any Contract Owner dies on or after the Annuitization Date and
before the entire interest under the Contract has been distributed,
then the remaining interest will be distributed at least as rapidly
as under the method of distribution in effect as of the date of the
Contract Owner's death.
2. If any Contract Owner dies prior to the Annuitization Date, then the
entire interest in the Contract (consisting of either the Death
Benefit or the Contract Value reduced by certain charges as set forth
elsewhere in the Contract) will be distributed within 5 years of the
death of the Contract Owner, provided however:
(a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or
over a period not extending beyond the life expectancy of the
designated beneficiary. Payments must begin within one year of
the date of the Contract Owner's death unless otherwise
permitted by federal income tax regulations; and
(b) if the designated beneficiary is the surviving spouse of the
deceased Contract Owner, the spouse may elect to become the
Contract Owner in lieu of receiving a Death Benefit, and any
distributions required under these distribution rules will be
made upon the death of the spouse.
In the event that this Contract is owned by a person that is not a natural
person (e.g., a trust or corporation), then, for purposes of these distribution
provisions:
(a) the death of the Annuitant will be treated as the death of any
Contract Owner;
(b) any change of the Annuitant will be treated as the death of
any Contract Owner; and
(c) in either case the appropriate distribution required under
these distribution rules will be made upon the death or
change, as the case may be. The Annuitant is the primary
annuitant as defined in Section 72(s)(6)(B) of the Code.
These distribution provisions will not be applicable to any Contract that is not
required to be subject to the provisions of 72(s) of the Code by reason of
Section 72(s)(5) or any other law or rule.
Upon the death of a Contract Owner, the designated beneficiary must elect a
method of distribution which complies with the above distribution provisions and
which is acceptable to the Company. Such election must be received by the
Company within 60 days of the Contract Owner's death.
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REQUIRED DISTRIBUTIONS FOR QUALIFIED PLANS OR TAX SHELTERED ANNUITIES
Amounts in a Qualified Contract or Tax Sheltered Annuity Contract will be
distributed in a manner consistent with the Minimum Distribution and Incidental
Benefit (MDIB) provisions of Section 401(a)(9) of the Code and applicable
regulations. Amounts will be paid, notwithstanding anything else contained
herein, to the Annuitant under the Annuity Payment Option selected, over a
period not exceeding:
(a) the life of the Annuitant or the joint lives of the Annuitant
and the Annuitant's designated beneficiary under the selected
Annuity Payment Option; or
(b) a period not extending beyond the life expectancy of the
Annuitant or the joint life expectancies of the Annuitant and
the Annuitant's designated beneficiary under the selected
annuity Payment Option.
For Tax Sheltered Annuity Contracts, no Distributions will be required from this
Contract if Distributions otherwise required from this Contract are being
withdrawn from another Tax Sheltered Annuity of the Annuitant.
If the Annuitant's entire interest in a Qualified Plan or Tax Sheltered Annuity
is to be distributed in equal or substantially equal payments over a period
described in (a) or (b) above, such payments will commence on the required
beginning date, which is the later of:
(a) the first day of April following the calendar year in which
the Annuitant attains age 70-1/2; or
(b) when the Annuitant retires.
However, provision (b) does not apply to any employee who is a 5% Owner (as
defined in Section 416 of the Code) with respect to the plan year ending in the
calendar year in which the employee attains the age of 70-1/2.
If the Annuitant dies prior to the commencement of his or her Distribution, the
interest in the Qualified Contract or Tax Sheltered Annuity must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs unless:
(a) the Annuitant names his or her surviving spouse as the
Beneficiary and the spouse elects to receive Distribution of
the Contract in substantially equal payments over his or her
life (or a period not exceeding his or her life expectancy)
and commencing not later than December 31 of the year in which
the Annuitant would have attained age 70-1/2; or
(b) the Annuitant names a Beneficiary other than his or her
surviving spouse and the Beneficiary elects to receive a
Distribution of the Contract in substantially equal payments
over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the
year following the year in which the Annuitant dies.
If the Annuitant dies after Distribution has commenced, the Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death.
Payments commencing on the required beginning date will not be less than the
lesser of the quotient obtained by dividing the entire interest of the Annuitant
by the life expectancy of the Annuitant, or the joint life expectancies of the
Annuitant and the Annuitant's designated beneficiary (if the Annuitant dies
prior to the required beginning date) or the Beneficiary under the selected
Annuity Payment Option (if the Annuitant dies after the required beginning date)
whichever is applicable under the applicable minimum distribution or MDIB
provisions. Life expectancy and joint life expectancies are computed by the use
of return multiples contained in Section 1.72-9 of the Treasury Regulations.
If amounts distributed to the Annuitant are less than those mentioned above, a
penalty tax of 50% is levied on the excess of the amount that should have been
distributed for that year over the amount that actually was distributed for that
year.
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REQUIRED DISTRIBUTIONS FOR IRAS OR SEP IRAS
Distribution from an IRA or SEP IRA must begin no later than April 1 of the
calendar year following the calendar year in which the Contract Owner attains
age 70-1/2. Distribution may be payable in a lump sum or in substantially equal
payments over:
(a) the Contract Owner's life or the lives of the Contract Owner
and his or her spouse or designated beneficiary; or
(b) a period not extending beyond 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 prior to the commencement of his or her Distribution,
the interest in the IRA or SEP 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 such spouse elects to:
(i) treat the annuity as an IRA or SEP IRA established for
his or her benefit; or
(ii) receive Distribution of the Contract in substantially
equal payments over his or her life (or a period not
exceeding his or her life expectancy) and commencing not
later than December 31 of the year in which the Contract
Owner would have attained age 70-1/2; or
(b) The Contract Owner names a Beneficiary other than his or her
surviving spouse and the Beneficiary elects to receive a
Distribution of the Contract in substantially equal payments
over his or her life (or a period not exceeding his or her
life expectancy) commencing not later than December 31 of the
year following the year in which the Contract Owner dies.
No Distribution will be required from this Contract if Distributions otherwise
required from this Contract are being withdrawn from another IRA or SEP IRA of
the Contract Owner.
If the Contract Owner dies after Distribution has commenced, Distribution must
continue at least as rapidly as under the schedule being used prior to his or
her death, except that a surviving spouse who is the beneficiary under the
Annuity Payment Option, may treat the Contract as his or her own, in the same
manner as is described in section (a)(i) of this provision.
If the amounts distributed to the Contract Owner are less than those mentioned
above, a penalty tax of 50% is levied on the excess of the amount that should
have been distributed for that year over the amount that actually was
distributed for that year.
A pro-rata portion of all Distributions will be included in the gross income of
the person receiving the Distribution and taxed at ordinary income tax rates.
The portion of the 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
Owner of an IRA 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 IRAs.
IRA and SEP IRA Distributions will not receive the benefit of the tax treatment
of a lump sum Distribution from a Qualified Plan. If the Contract Owner dies
prior to the time Distribution of his or her interest in the annuity is
completed, the balance will also be included in his or her gross estate.
Simplified Employee Pensions (SEPs) and Salary Reduction Simplified Employee
Pensions (SAR SEPs), described in Section 408(k) of the Code are taxed in a
manner similar to IRAs, and are subject to similar distribution requirements as
IRAs. SAR SEPs cannot be established after 1996.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
Distributions from a Roth IRA, unlike other IRAs, are not required to commence
during the lifetime of the Contract Owner.
Upon the death of the Contract Owner, the Contract Owner's 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:
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(a) The Contract Owner names his or her surviving spouse as the
Beneficiary and such spouse elects to:
(i) treat the annuity as a Roth IRA established for his or
her benefit; or
(ii) receive Distribution of the account in substantially
equal payments over his or her life (or a period not
exceeding his or her life expectancy) and commencing not
later than December 31 of the year following the year in
which the Contract Owner would have attained 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 exceeding his or her
life expectancy) commencing not later than December 31 of the
following 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 "nonqualified distributions" (see
"Federal Income Taxes").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The Company does not make any guarantee regarding the tax status for any
Contract or any transaction involving the Contracts. Contract Owners should
consult a financial consultant, legal counsel or tax advisor to discuss in
detail the taxation and the use of the Contracts.
Section 72 of the Code governs federal income taxation of annuities in general.
That section sets forth different rules for: (1) Qualified Contracts; (2) IRAs,
including SEP IRAs; (3) Roth IRAs; (4) Tax Sheltered Annuities; and (5)
Non-Qualified Contracts. Each type of annuity is discussed below.
Distributions to participants from Qualified Contracts or Tax Sheltered
Annuities are generally taxed when received. A portion of each Distribution is
excludable from income based on a formula required by the Code. The formula
required by the Code excludes from income an amount equal to the investment in
the Contract divided by the number of anticipated payments, as determined
pursuant to Section 72(d) of the Code, until the full investment in the Contract
is recovered; thereafter all Distributions are fully taxable.
Distributions from IRAs and SEP IRAs and Contracts owned by Individual
Retirement Accounts are generally taxed when received. The portion of each
payment which is excludable is based on the ratio between the amount by which
nondeductible Purchase Payments to all Contracts exceeds prior non-taxable
Distributions from the Contracts, and the total account balances in the
Contracts at the time of the Distribution. The owner of such IRAs or SEP IRAs or
the Annuitant under Contracts held by Individual Retirement Accounts must
annually report to the IRS the amount of nondeductible Purchase Payments, the
amount of any Distribution, the amount by which nondeductible Purchase Payments
for all years exceed non-taxable Distributions for all years, and the total
balance in all IRAs, SEP IRAs and Individual Retirement Accounts.
Distributions of earnings from Roth IRAs are taxable or nontaxable, depending
upon whether they are "qualified distributions" or "nonqualified distributions."
A "qualified distribution" is one that satisfies the five year rule and meets
one of the following four requirements: (i) it is made on or after the date on
which the Contract Owner attains the age of 59-1/2; (ii) it is made to a
Beneficiary (or the Contract Owner's estate) on or after the death of the
Contract Owner; (iii) it is attributable to the Contract Owner's disability; or
(iv) it is a qualified first-time homebuyer distribution (as defined in Section
72(t)(2)(F) of the Code). If the Roth IRA does not have any qualified rollover
contributions from a retirement plan other than a Roth IRA (or income allocable
thereto), the five year rule is satisfied if the Distribution is not made within
the five year period beginning with the first contribution to the Roth IRA. If
the Roth IRA has any qualified rollover contributions from a retirement plan
other than a Roth IRA (or income allocable thereto), the five year rule is
satisfied if the Distribution is not made within the five taxable year period
commencing with the taxable year in which the qualified rollover contribution
was made.
A nonqualified distribution is any Distribution that is not a qualified
distribution.
A qualified distribution is not included in gross income for federal income tax
purposes. A nonqualified distribution is not includible in gross income to the
extent that such Distribution, when added to all previous Distributions, does
not exceed that aggregate amount of contributions made to the Roth IRA. Any
nonqualified 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.
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Taxable Distributions will not receive the benefit of the tax treatment of a
lump sum Distribution from a qualified plan. If the Contract Owner dies prior to
the complete Distribution of the Contract, the balance will also be included in
the Contract Owner's gross estate for federal estate tax purposes.
A change of the Annuitant or Contingent Annuitant may be treated by the IRS as a
taxable transaction.
PUERTO RICO
Under the Puerto Rico tax code, Distributions from a Non-Qualified Contract
prior to Annuitization are treated as nontaxable return of principal until the
principal is fully recovered; thereafter, all Distributions are fully taxable.
Distributions after Annuitization are treated as part taxable income and part
nontaxable return of principal. The amount excluded from gross income after
Annuitization is equal to the amount of the Distribution in excess of 3% of the
total Purchase Payments paid, until an amount equal to the total Purchase
Payments paid has been excluded; thereafter, the entire Distribution is included
in gross income. Puerto Rico does not impose an early withdrawal penalty tax.
Generally, Puerto Rico does not require income tax to be withheld from
Distributions of income. A personal adviser should be consulted.
NON-QUALIFIED CONTRACTS - NATURAL PERSONS AS CONTRACT OWNERS
The rules applicable to Non-Qualified Contracts provide that a portion of each
annuity payment received is excludable from taxable income based on the ratio
between the Contract Owner's investment in the Contract and the expected return
on the Contract until the investment has been recovered; thereafter the entire
amount is includable in income. The maximum amount excludable from income is the
investment in the Contract. If the Annuitant dies prior to excluding from income
the entire investment in the Contract, the Annuitant's final tax return may
reflect a deduction for the balance of the investment in the Contract.
Distributions made from the Contract prior to the Annuitization Date are taxable
to the Contract Owner to the extent that the cash value of the Contract exceeds
the Contract Owner's investment at the time of the Distribution. Distributions,
for this purpose, include partial surrenders, dividends, loans, or any portion
of the Contract which is assigned or pledged; or for Contracts issued after
April 22, 1987, any portion of the Contract transferred by gift. For these
purposes, a transfer by gift may occur upon Annuitization if the Contract Owner
and the Annuitant are not the same individual. In determining the taxable amount
of a Distribution, all annuity contracts issued after October 21, 1988, by the
same company to the same contract owner during any 12 month period, will be
treated as one annuity contract. Additional limitations on the use of multiple
contracts may be imposed by Treasury Regulations. Distributions prior to the
Annuitization Date with respect to that portion of the Contract invested prior
to August 14, 1982, are treated first as a recovery of the investment in the
Contract as of that date. A Distribution in excess of the amount of the
investment in the Contract as of August 14, 1982, will be treated as taxable
income.
The Tax Reform Act of 1986 has changed the tax treatment of certain
Non-Qualified Contracts held by entities other than individuals. Such entities
are taxed currently on the earnings on the Contract which are attributable to
contributions made to the Contract after February 28, 1986. There are exceptions
for immediate annuities and certain Contracts owned for the benefit of an
individual. An immediate annuity, for purposes of this discussion, is a single
premium Contract on which payments begin within one year of purchase. If this
Contract is issued as the result of an exchange described in Section 1035 of the
Code, for purposes of determining whether the Contract is an immediate annuity,
it will generally be considered to have been purchased on the purchase date of
the contract given up in the exchange.
Code Section 72 also provides for a penalty tax, equal to 10% of the portion of
any Distribution that is includable in gross income, if such Distribution is
made prior to attaining age 59-1/2. The penalty tax does not apply if the
Distribution is attributable to the Contract Owner's death, disability, or is
one of a series of substantially equal periodic payments made over the life or
life expectancy of the Contract Owner (or the joint lives or joint life
expectancies of the Contract Owner and the beneficiary selected by the Contract
Owner to receive payment under the Annuity Payment Option selected by the
Contract Owner) or for the purchase of an immediate annuity, or is allocable to
an investment in the Contract before August 14, 1982. A Contract Owner wishing
to begin taking Distributions to which the 10% tax penalty does not apply should
forward a written request to the Company. Upon receipt of a written request from
the Contract Owner, the Company will inform the Contract Owner of the procedures
pursuant to Company policy and subject to limitations of the Contract including
but not limited to first year withdrawals. Such election shall be irrevocable
and may not be amended or changed.
In order to qualify as an annuity contract under Section 72 of the Code, the
contract must provide for Distribution of the entire contract to be made upon
the death of a Contract Owner. If a Contract Owner dies prior to the
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Annuitization Date, then the Joint Contract Owner, the Contingent Owner or other
named recipient must receive the Distribution within 5 years of the Contract
Owner's death. However, the recipient may elect for payments to be made over
his/her life or life expectancy provided that such payments begin within one
year from the death of the Contract Owner. If the Joint Contract Owner,
Contingent Owner or other named recipient is the surviving spouse, the spouse
may be treated as the Contract Owner and the Contract may be continued
throughout the life of the surviving spouse. In the event the Contract Owner
dies on or after the Annuitization Date and before the entire interest has been
distributed, the remaining portion must be distributed at least as rapidly as
under the method of Distribution being used on the date of the Contract Owner's
death (see "Required Distribution For Qualified Plans and Tax Sheltered
Annuities"). If the Contract Owner is not a natural person, the death of the
Annuitant (or a change in the Annuitant) will result in a Distribution pursuant
to these rules, regardless of whether a Contingent Annuitant is named.
The Code requires that any election to receive an annuity in lieu of a lump sum
payment must be made within 60 days after the lump sum becomes payable
(generally, the election must be made within 60 days after the death of a
Contract Owner or the Annuitant). If the election is made more than 60 days
after the lump sum first becomes payable, the election will be ignored for tax
purposes, and the entire amount of the lump sum will be subject to immediate
tax. If the election is made within the 60 day period, each Distribution will be
taxable when it is paid.
NON-QUALIFIED CONTRACTS - NON-NATURAL PERSONS AS CONTRACT OWNERS
The foregoing discussion of the taxation of Non-Qualified Contracts applies to
Contracts owned (or, pursuant to Section 72(u) of the Code, deemed to be owned)
by individuals.
As a general rule, contracts owned by corporations, partnerships, trusts, and
similar entities ("non-natural persons"), rather than by one or more
individuals, are not treated as annuity contracts for most purposes under the
Code; in particular, they are not treated as annuity contracts for purposes of
Section 72. Therefore, the taxation rules for Distributions, as described above,
do not apply to Non-Qualified Contracts owned by non-natural persons. Rather the
income earned under a non-qualified contract that is owned by a non-natural
person is taxed as ordinary income during the taxable year that it is earned,
and is not deferred, even if the income is not distributed out of the Contract
to the Contract Owner.
The foregoing non-natural person rule does not apply to all entity-owned
contracts. A Contract that is owned by a non-natural person as an agent for an
individual is treated as owned by the individual. This exception does not apply,
however, to a non-natural person who is an employer that holds the Contract
under a non-qualified deferred compensation arrangement for one or more
employees.
The non-natural person rules also do not apply to a Contract that is:
(a) acquired by the estate of a decedent by reason of the death of the
decedent;
(b) issued in connection with certain qualified retirement plans and
individual retirement plans;
(c) used in connection with certain structured settlements;
(d) purchased by an employer upon the termination of certain qualified
retirement plans; or
(e) an immediate annuity.
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QUALIFIED PLANS, IRAS, SEP IRAS AND TAX SHELTERED ANNUITIES
Contract Owners seeking information regarding eligibility, limitations on
permissible amounts of Purchase Payments, and the tax consequences of
distributions from Qualified Plans, Tax Sheltered Annuities, IRAs, SEP IRAs and
other plans that receive favorable tax treatment should seek competent advice;
the terms of such plans may limit the rights available under the Contracts.
Pursuant to Section 403(b)(1)(E) Code, a Contract that is issued as a
Tax-Sheltered Annuity is required to limit the amount of the Purchase Payment
for any year to an amount that does not exceed the limit set forth in Section
402(g) of the Code ($7,000), as it is from time to time increased to reflect
increases in the cost of living. This limit may be reduced by any deposits,
contributions or payments made to any other Tax-Sheltered Annuity or other plan,
contract or arrangement by or on behalf of the Contract Owner.
The Code permits the rollover of most Distributions from Qualified Plans to
other Qualified Plans, IRAs or SEP IRAs. Most Distributions from Tax-Sheltered
Annuities may be rolled into another Tax-Sheltered Annuity, IRA or SEP IRA.
Distributions that may not be rolled over are those which are:
(a) one of a series of substantially equal annual (or more
frequent) payments made:
(i) over the life (or life expectancy) of the Contract
Owner;
(ii) over the joint lives (or joint life expectancies) of the
Contract Owner and the Contract Owner's designated
Beneficiary; or
(iii) for a specified period of ten years or more; or
(b) a required minimum distribution.
Any Distribution eligible for rollover will be subject to federal tax
withholding at a rate of twenty percent (20%) unless the Distribution is
transferred directly to an appropriate plan as described above.
The Contract is available for Qualified Plans electing to comply with Section
404(c) of ERISA. It is the responsibility of the plan and its fiduciaries to
determine and satisfy the requirements of Section 404(c).
IRAs and SEP IRAs may not provide life insurance benefits. If the Death Benefit
exceeds the greater of the cash value of the Contract or the sum of all Purchase
Payments (less any surrenders), it is possible the IRS could determine that the
IRA or SEP IRA did not qualify for the desired tax treatment.
ROTH IRAS
The Contract may be purchased as a Roth IRA. The Contract Owner should seek
competent advice as to the tax consequences associated with the use of a
Contract as a Roth IRA, for information regarding eligibility to invest in a
Roth IRA, for limitations on permissible amounts of Purchase Payments that may
be made to a Roth IRA, and as to the tax consequences of Distributions from Roth
IRAs.
The Code permits the rollover of most Distributions from Individual Retirement
Accounts or IRAs to Roth IRAs. The rollovers are subject to federal income tax
as Distributions from the Individual Retirement Account or IRA. For rollovers
that take place in 1998, the income from rollover is included in income ratably
over the four year period commencing in 1998. For rollovers in subsequent years,
the entire amount of income from the rollover will be required to be included in
income in the year of the rollover Distribution from the Individual Retirement
Account or IRA.
A Distribution from a Roth IRA that received the proceeds of a rollover from an
Individual Retirement Account or IRA within the previous five years could be
subject to a 10% penalty even if the Distribution is not taxable. In addition,
if the rollover from the Individual Retirement Account or IRA was made in 1998
and the income from that rollover was included in income ratably over a four
year period, a Distribution from the Roth IRA within four years of the rollover
may be subject to an additional 10% penalty.
WITHHOLDING
The Company is required to withhold tax from certain Distributions to the extent
that such Distribution would constitute income to the Contract Owner or other
payee. The Contract Owner or other payee is entitled to elect not to have
federal income tax withheld from certain types of Distributions, but may be
subject to penalties in the event insufficient federal income tax is withheld
during a calendar year. However, if the IRS notifies the Company that the
Contract Owner or other payee has furnished an incorrect taxpayer identification
number, or if the Contract Owner or other payee fails to provide a taxpayer
identification number, the Distributions may be
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subject to back-up withholding at the statutory rate which is presently 31% and
which cannot be waived by the Contract Owner or other payee.
NON-RESIDENT ALIENS
Distributions to nonresident aliens (NRAs) are generally subject to federal
income tax and tax withholding at a statutory rate of thirty percent (30%) of
the amount of income that is distributed. The Company may be required to
withhold such amount from the Distribution and remit it to the IRS.
Distributions to certain NRAs may be subject to lower, or in certain instances,
zero tax and withholding rates, if the United States has entered into an
applicable treaty. However, in order to obtain the benefits of such treaty
provisions, the NRA must give to the Company sufficient proof of his or her
residency and citizenship in the form and manner prescribed by the IRS. For
Distributions the NRA must obtain an Individual Taxpayer Identification Number
from the IRS, and furnish that number to the Company prior to the Distribution.
If the Company does not have the proper proof of citizenship or residency and a
proper Individual Taxpayer Identification Number prior to any Distribution, the
Company will be required to withhold 30% of the income, regardless of any treaty
provision.
A payment may not be subject to withholding where the recipient sufficiently
establishes to the Company that such payment is effectively connected to the
recipient's conduct of a trade or business in the United States and that such
payment is includable in the recipient's gross income for United States federal
income tax purposes. Any such Distributions will be subject to the rules set
forth in the section entitled "Withholding."
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
A transfer of the Contract from one Contract Owner to another, or the payment of
a Distribution under the Contract to someone other than a Contract Owner, may
constitute a gift for federal gift tax purposes. Upon the death of the Contract
Owner, the value of the Contract may be included in his or her gross estate for
federal estate tax purposes, even if all or a portion of the value is also
subject to federal income taxes.
The Company may be required to determine whether the Death Benefit or any other
payment or Distribution constitutes a "direct skip" as defined in Section 2612
of the Code, and the amount of the generation skipping transfer tax, if any,
resulting from such direct skip. A direct skip may occur 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 Code (generally,
trusts that have no beneficiaries who are not 2 or more generations
younger than the Contract Owner).
If the Contract Owner is not an individual, then for this purpose only,
"Contract Owner" refers to any person who would be required to include the
Contract, Death Benefit, Distribution, or other payment in his or her federal
gross estate at his or her death, or who is required to report the transfer of
the Contract, Death Benefit, Distribution, or other payment for federal gift tax
purposes.
If the Company determines that a generation-skipping transfer tax is required to
be paid by reason of a direct skip, the Company is required to reduce the amount
of such Death Benefit, Distribution, or other payment by such tax liability, and
pay the tax liability directly to the IRS.
Federal estate, gift and generation-skipping transfer tax consequences, and
state and local estate, inheritance, succession, generation skipping transfer,
and other tax consequences of owning or transferring a Contract, and of
receiving a Distribution, Death Benefit, or other payment, depend on the
circumstances of the person owning or transferring the Contract, or person
receiving a Distribution, Death Benefit, or other payment.
CHARGE FOR TAX
The Company is no longer required to maintain a capital gain reserve liability
on Non-Qualified Contracts since capital gains attributable to assets held in
Sub-Accounts for such Contracts are not taxable to the Company. However, the
Company reserves the right to implement and adjust the tax charge in the future
if the tax laws change.
DIVERSIFICATION
The IRS has promulgated regulations under Section 817(h) of the Code relating to
diversification standards for the investments underlying a variable annuity
contract. The regulations provide that a variable annuity contract which does
not satisfy the diversification standards will not be treated as an annuity
contract, unless the failure to satisfy the regulations was inadvertent, the
failure is corrected, and the Contract Owner or the Company pays an
47
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<PAGE> 50
amount to the IRS. The amount will be based on the 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 failure to
diversify is not corrected in this manner, the Contract Owner of an annuity
contract will be deemed the owner of the underlying securities and will be taxed
on the earnings of his or her account. The Company believes, under its
interpretation of the Code and regulations thereunder, that the investments
underlying this Contract meet these diversification standards.
Representatives of the IRS have suggested, from time to time, that the number of
Underlying Mutual Funds available or the number of transfer opportunities
available under a variable product may be relevant in determining whether the
product qualifies for the desired tax treatment. No formal guidance has been
issued in this area. Should the Secretary of the Treasury issue additional rules
or regulations limiting the number of Underlying Mutual Funds, transfers between
Underlying Mutual Funds, exchanges of Underlying Mutual Funds or changes in
investment objectives of Underlying Mutual Funds such that the Contract would no
longer qualify as an annuity under Section 72 of the Code, the Company will take
whatever steps are available to remain in compliance.
TAX CHANGES
The Code has been subjected to numerous amendments and changes and it is
reasonable to believe that it will continue to be revised. The United States
Congress has considered numerous legislative proposals that, if enacted, could
change the tax treatment of the Contracts. It is reasonable to believe that such
proposals, may be enacted into law. In addition, the Treasury Department may
amend existing regulations, issue new regulations, or adopt new interpretations
of existing law that may be in variance with its current positions on these
matters. In addition, state law (which is not discussed herein) may affect the
tax consequences of the Contract.
The foregoing discussion, which is based on the Company's understanding of
federal tax laws as they are currently interpreted by the IRS, is general and is
not intended as tax advice. Statutes, regulations, and rulings are subject to
interpretation by the courts. The courts may determine that a different
interpretation than the currently favored interpretation is appropriate, thereby
changing the operation of the rules that are applicable to annuity contracts.
Any of the foregoing may change from time to time without any notice, and the
tax consequences arising out of a Contract may be changed retroactively. There
is no way of predicting whether, when, and to what extent any such change may
take place. No representation is made as to the likelihood of the continuation
of these current laws, interpretations and policies.
THE FOREGOING IS A GENERAL EXPLANATION AS TO CERTAIN TAX MATTERS PERTAINING TO
ANNUITY CONTRACTS. IT IS NOT INTENDED TO BE LEGAL OR TAX ADVICE, AND SHOULD NOT
TAKE THE PLACE OF YOUR INDEPENDENT LEGAL, TAX AND/OR FINANCIAL ADVISOR.
GENERAL INFORMATION
CONTRACT OWNER INQUIRIES
Contract Owner inquiries may be directed to the Company by writing P.O. Box
16609, Columbus, Ohio 43216-6609, or calling 1-800-848-6331, TDD 1-800-238-3035.
STATEMENTS AND REPORTS
The Company will mail to Contract Owners, at their last known address, any
statements and reports required by law. Contract Owners should promptly notify
the Company of any address change. Statements are mailed detailing the
Contract's quarterly activity. The Company will also send a confirmation
statement to Contract Owners each time a transaction is made affecting the
Contract Value. However, instead of receiving an immediate confirmation of
transactions made pursuant to some types of recurring payment plans (such as a
dollar cost averaging program or salary reduction arrangement), the Contract
Owner may receive confirmation of such transactions in their quarterly
statements. The Contract Owner should review the information in these statements
carefully. All errors or corrections must be reported to the Company immediately
to assure proper crediting to the Contract. The Company will assume all
transactions are accurately reported on quarterly statements or confirmation
statements unless the Contract Owner notifies the Home Office within 30 days
after receipt of the statement. The Company will also send to Contract Owners a
semi-annual report as of June 30 and an annual report as of December 31,
containing financial statements for the Variable Account.
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<PAGE> 51
ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
The Company may also from time to time advertise the performance of a
Sub-Account relative to the performance of other variable annuity sub-accounts
or underlying mutual fund options with similar or different objectives, or the
investment industry as a whole. Other investments to which the Sub-Accounts may
be compared include, but are not limited to: precious metals; real estate;
stocks and bonds; closed-end funds; CDs; bank money market deposit accounts and
passbook savings; and the Consumer Price Index.
The Sub-Accounts may also be compared to certain market indexes, which may
include, but are not limited to: S&P 500; Shearson/Lehman Intermediate
Government/Corporate Bond Index; Shearson/Lehman Long-Term Government/Corporate
Bond Index; Donoghue Money Fund Average; U.S. Treasury Note Index; Bank Rate
Monitor National Index of 2 1/2 Year CD Rates; and Dow Jones Industrial Average.
Normally these rankings and ratings are published by independent tracking
services and publications of general interest including, but not limited to:
Lipper Analytical Services, Inc., CDA/Wiesenberger, Morningstar, Donoghue's,
magazines such as Money, Forbes, Kiplinger's Personal Finance Magazine,
Financial World, Consumer Reports, Business Week, Time, Newsweek, National
Underwriter, U.S. News and World Report; rating services such as LIMRA, Value,
Best's Agent Guide, Western Annuity Guide, Comparative Annuity Reports; and
other publications such as the Wall Street Journal, Barron's, Investor's Daily,
and Standard & Poor's Outlook. In addition, Variable Annuity Research & Data
Service (The VARDS Report) is an independent rating service that ranks over 500
variable annuity funds based upon total return performance. These rating
services and publications rank the performance of the Underlying Mutual Fund
options against all underlying mutual funds over specified periods and against
underlying mutual funds in specified categories. The rankings may or may not
include the effects of sales charges or other fees.
The Company is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. The purpose of
these ratings is to reflect the financial strength or claims-paying ability of
the Company. The ratings are not intended to reflect the investment experience
or financial strength of the Variable Account. The Company may advertise these
ratings from time to time. In addition, the Company may include in certain
advertisements, endorsements in the form of a list of organizations, individuals
or other parties which recommend the Company or the Contracts. Furthermore, the
Company may occasionally include in advertisements comparisons of currently
taxable and tax deferred investment programs, based on selected tax brackets, or
discussions of alternative investment vehicles and general economic conditions.
The Company may, from time to time, advertise several types of historical
performance of the Sub-Accounts. The Company 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"
illustrates 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 the Underlying Mutual Fund option has not been available for the
prescribed periods. THIS CALCULATION REFLECTS THE DEDUCTION OF ALL APPLICABLE
CHARGES MADE TO THE CONTRACTS EXCEPT FOR PREMIUM TAXES, WHICH MAY BE IMPOSED BY
CERTAIN STATES.
Nonstandardized "total return," calculated similar to standardized "average
annual total return," illustrates the percentage rate of return of a
hypothetical initial investment of $10,000 for the most recent one, five and ten
year periods, or for a period covering the time the Underlying Mutual Fund
option has been in existence. For those Underlying Mutual Fund options which
have not been held as Sub-Accounts for one of the prescribed periods, the
nonstandardized total return illustrations will show the investment performance
such Underlying Mutual Fund options would have achieved (reduced by the same
charges except the CDSC) had such Underlying Mutual Fund options been available
in the Variable Account for the periods quoted. THE CDSC IS NOT REFLECTED
BECAUSE THE CONTRACTS ARE DESIGNED FOR LONG TERM INVESTMENT. THE CDSC, IF
REFLECTED, WOULD DECREASE THE LEVEL OF PERFORMANCE SHOWN. AN INITIAL INVESTMENT
OF
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<PAGE> 52
$10,000 IS ASSUMED BECAUSE THAT AMOUNT MORE CLOSELY APPROXIMATES THE SIZE OF A
TYPICAL CONTRACT THAN DOES THE $1,000 ASSUMPTION USED IN CALCULATING THE
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS.
The standardized average annual total return and nonstandardized total return
quotations reflected below are calculated as described in this section using
Underlying Mutual Fund performance for the period ended December 31, 1997.
However, the Company generally provides performance quotations on a more
frequent basis, the results of which could reflect better or worse results than
shown below. The quotations and other comparative material advertised by the
Company are based upon historical earnings and are not intended to represent or
guarantee future results. Contract Value at redemption may be more or less than
the original cost.
UNDERLYING MUTUAL FUND PERFORMANCE SUMMARY
NON-STANDARDIZED TOTAL RETURN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
1 Year To 5 Years To 10 Years To Date Fund
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 12/31/97 or Effective
Life of Fund
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable 14.00% 9.55% 9.35% 05-01-91
Portfolios, Inc.- American Century
VP Balanced
- -------------------------------------------------------------------------------------------------------
American Century Variable -4.82% 4.12% 7.07%* 11-20-87
Portfolios, Inc.- American Century
VP Capital Appreciation
- -------------------------------------------------------------------------------------------------------
American Century Variable 16.79% N/A 8.83% 05-01-94
Portfolios, Inc.- American Century
VP International
- -------------------------------------------------------------------------------------------------------
American Century Variable 24.14% N/A 21.23% 05-01-96
Portfolios, Inc.- American Century
VP Value
- -------------------------------------------------------------------------------------------------------
AVIS Growth Fund 28.11% 16.33% 15.54%* 02-08-84
- -------------------------------------------------------------------------------------------------------
AVIS High Yield Bond 10.65% 9.31% 10.68%* 02-08-84
Fund
- -------------------------------------------------------------------------------------------------------
AVIS US Govt./AAA- Rated 6.74% 4.87% 6.67%* 11-19-85
Securities Fund
- -------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 30.93% 17.90% 14.09% 09-29-89
- -------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 26.11% N/A 17.81% 04-05-93
Fund-Capital Appreciation Portfolio
- -------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 14.40% N/A 22.19% 05-02-94
Fund - Growth & Income Portfolio
- -------------------------------------------------------------------------------------------------------
The Dreyfus Socially Responsible 26.47% N/A 19.63% 10-06-93
Growth Fund, Inc.
- -------------------------------------------------------------------------------------------------------
Fidelity VIP 26.14% 18.35% 15.04%* 10-09-86
Equity-Income Portfolio
- -------------------------------------------------------------------------------------------------------
Fidelity VIP Growth Portfolio 21.58% 16.23% 15.50%* 10-09-86
- -------------------------------------------------------------------------------------------------------
Fidelity VIP High Income 15.84% 12.21% 11.13%* 09-19-85
Portfolio
- -------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 9.81% 12.39% 7.98%* 01-28-87
Portfolio
- -------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset Manager 18.78% 11.23% 11.03% 09-06-89
Portfolio
- -------------------------------------------------------------------------------------------------------
Fidelity VIP II Contrafund 22.23% N/A 26.29% 01-03-95
Portfolio
- -------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth 27.98% N/A 24.97% 01-03-95
Opportunities Portfolio
- -------------------------------------------------------------------------------------------------------
Morgan Stanley Universal Fund, N/A N/A N/A 06-16-97
Inc.- Emerging Markets Debt
Portfolio
- -------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation Fund 32.45% 17.17% 15.78% 04-15-92
- -------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund 7.94% 5.72% 7.63%* 11-08-82
- -------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund 3.59% 2.88% 4.00%* 11-10-81
- -------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 53
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1 Year To 5 Years To 10 Years To Date Fund
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 12/31/97 or Effective
Life of Fund
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NSAT- Nationwide Small Company Fund 15.52% N/A 23.63% 10-23-95
- --------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 27.45% 16.16% 13.94%* 11-08-82
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 27.03% 11.73% 13.21%* 09-10-84
Growth Portfolio
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 5.05% 3.98% 5.45%* 09-10-84
Limited Maturity Bond Portfolio
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 29.25% N/A 22.30% 03-22-94
Partners Portfolio
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 7.53% 6.56% 7.87%* 04-30-85
Oppenheimer Bond Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 20.53% 17.07% 10.52% 11-12-90
Oppenheimer Global Securities Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 24.76% 16.83% 14.99%* 04-03-85
Oppenheimer Growth Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account Funds- 15.40% 11.59% 11.08%* 02-09-87
Oppenheimer Multiple Strategies Fund
- --------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, Inc. 23.52% 17.54% 18.28% 05-08-92
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, 9.64% 10.19% 10.42% 05-08-92
Inc.- Discovery Fund II, Inc.
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance Funds, -14.94% N/A -2.61% 10-20-95
Inc.- International Stock II
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- 0.76% 3.90% 4.51% 09-01-89
Worldwide Bond Fund
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- -13.05% N/A 3.53% 12-27-95
Worldwide Emerging Markets Fund
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance Trust- -3.32% 13.41% 5.31% 09-01-89
Worldwide Hard Assets Fund
- --------------------------------------------------------------------------------------------------------
Van Kampen American Capital Life 19.59% N/A 25.94% 07-03-95
Investment Trust- Morgan Stanley
Real Estate Securities Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- International -3.83% N/A 4.16% 06-30-95
Equity Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 11.56% N/A 6.64% 09-30-96
Post-Venture Capital Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small Company 13.85% N/A 20.18% 06-30-95
Growth Portfolio
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/97.
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<PAGE> 54
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1 Year To 5 Years To 10 Years or Date Date Fund Added to
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 Fund Available in Variable Account
Variable Account
To 12/31/97
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
American Century Variable 5.90% 6.76% 5.79% 05-01-92
Portfolios, Inc.- American
Century VP Balanced
- ----------------------------------------------------------------------------------------------------------
American Century Variable -12.47% 1.29% 4.99%* 12-01-87
Portfolios, Inc.- American
Century VP Capital
Appreciation
- ----------------------------------------------------------------------------------------------------------
American Century Variable 8.69% N/A 5.24% 08-01-94
Portfolios, Inc.- American
Century VP International
- ----------------------------------------------------------------------------------------------------------
American Century Variable 16.04% N/A 13.77% 12-23-96
Portfolios, Inc.- American
Century VP Value
- ----------------------------------------------------------------------------------------------------------
AVIS Growth Fund 20.01% 13.82% 12.38%* 10-20-89
- ----------------------------------------------------------------------------------------------------------
AVIS High Yield Bond 2.55% 6.58% 9.79%* 10-20-89
Fund
- ----------------------------------------------------------------------------------------------------------
AVIS US Govt./AAA- Rated -1.36% 1.93% 6.11%* 10-20-89
Securities Fund
- ----------------------------------------------------------------------------------------------------------
Dreyfus Stock Index Fund, Inc. 22.83% N/A 16.03% 09-20-93
- ----------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment N/A N/A -5.83% 07-14-97
Fund-Capital Appreciation
Portfolio
- ----------------------------------------------------------------------------------------------------------
Dreyfus Variable Investment 6.30% N/A 2.65% 12-23-96
Fund - Growth & Income
Portfolio
- ----------------------------------------------------------------------------------------------------------
The Dreyfus Socially 18.37% N/A 16.28% 10-01-93
Responsible Growth Fund, Inc.
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP 18.04% 15.98% 13.19%* 05-01-87
Equity-Income Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Growth 13.48% 13.79% 13.79%* 12-01-87
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP High 7.74% 9.64% 8.97%* 05-01-87
Income Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP Overseas 1.71% 10.04% 5.78%* 05-01-87
Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP II Asset 10.68% 8.56% 8.58% 09-01-89
Manager Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP II 14.13% N/A 16.63% 07-03-95
Contrafund Portfolio
- ----------------------------------------------------------------------------------------------------------
Fidelity VIP III Growth N/A N/A 11.10% 07-14-97
Opportunities Portfolio
- ----------------------------------------------------------------------------------------------------------
Morgan Stanley Universal N/A N/A -13.54% 07-14-97
Fund, Inc.- Emerging Markets
Debt Portfolio
- ----------------------------------------------------------------------------------------------------------
NSAT- Capital Appreciation 24.35% 14.53% 13.57% 05-01-92
Fund
- ----------------------------------------------------------------------------------------------------------
NSAT- Government Bond Fund -0.16% 2.80% 5.51%* 11-15-82
- ----------------------------------------------------------------------------------------------------------
NSAT- Money Market Fund -4.51% -0.22% 1.52%* 02-25-82
- ----------------------------------------------------------------------------------------------------------
NSAT- Nationwide Small 7.42% N/A 18.50% 10-23-95
Company Fund
- ----------------------------------------------------------------------------------------------------------
NSAT-Total Return Fund 19.35% 13.55% 12.02%* 11-15-82
- ----------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 18.93% 8.90% 11.49%* 12-01-87
Growth Portfolio
- ----------------------------------------------------------------------------------------------------------
</TABLE>
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<PAGE> 55
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
1 Year To 5 Years To 10 Years or Date Date Fund Added to
SUB-ACCOUNT OPTIONS 12/31/97 12/31/97 Fund Available in Variable Account
Variable Account
To 12/31/97
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Neuberger & Berman AMT- -3.05% 0.96% 3.13%* 12-01-87
Limited Maturity Bond
Portfolio
- --------------------------------------------------------------------------------------------------------
Neuberger & Berman AMT- 21.15% N/A 22.74% 08-01-94
Partners Portfolio
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account -0.57% 3.73% 5.06% 09-01-89
Funds- Oppenheimer Bond Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 12.43% N/A 7.98% 10-01-93
Funds- Oppenheimer Global
Securities Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account N/A N/A -0.58% 07-14-97
Funds- Oppenheimer Growth
Fund
- --------------------------------------------------------------------------------------------------------
Oppenheimer Variable Account 7.30% 8.94% 6.21% 09-01-89
Funds- Oppenheimer Multiple
Strategies Fund
- --------------------------------------------------------------------------------------------------------
Strong Opportunity Fund II, 15.42% 15.19% 15.93% 05-08-92
Inc.
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance 1.54% 7.62% 7.76% 05-08-92
Funds, Inc.- Discovery Fund
II, Inc.
- --------------------------------------------------------------------------------------------------------
Strong Variable Insurance -21.99% N/A -8.20% 10-23-95
Funds, Inc.- International
Stock II
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance -7.23% 0.93% 1.79% 09-01-89
Trust- Worldwide Bond Fund
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance -11.06% 11.32% 2.26% 09-01-89
Trust- Worldwide Emerging
Markets Fund
- --------------------------------------------------------------------------------------------------------
Van Eck Worldwide Insurance -20.21% N/A -21.63% 12-23-96
Trust- Worldwide Hard Assets
Fund
- --------------------------------------------------------------------------------------------------------
Van Kampen American Capital 11.49% N/A 21.59% 07-03-95
Life Investment Trust-
Morgan Stanley Real Estate
Securities Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust- -11.54% N/A -0.76% 07-03-95
International Equity
Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust - 3.46% N/A 1.90% 12-23-96
Post-Venture Capital
Portfolio
- --------------------------------------------------------------------------------------------------------
Warburg Pincus Trust-Small 5.75% N/A 15.96% 07-03-95
Company Growth Portfolio
- --------------------------------------------------------------------------------------------------------
</TABLE>
* Represents 10 years to 12/31/97.
YEAR 2000 COMPLIANCE ISSUES
The Company has developed a plan to address issues related to the Year 2000. The
problem relates to many existing computer programs using only two digits to
identify a year in the date field. These programs were designed and developed
without considering the impact of the upcoming change in the century. If not
corrected, many computer applications could fail or create erroneous results by
or at the Year 2000. The Company has been evaluating its exposure to the Year
2000 issue through a review of all of its operating systems as well as
dependencies on the systems of others since 1996. The Company expects all system
changes and replacements needed to achieve Year 2000 compliance to be completed
by the end of 1998. Compliance testing will be
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<PAGE> 56
completed in the first quarter of 1999. The Company charges all costs associated
with these system changes as the costs are incurred.
Operating expenses in 1997 include approximately $45 million on technology
projects, which includes costs related to Year 2000 and the development of a new
policy administration system for traditional life insurance products and other
system enhancements. The Company anticipates spending a comparable amount in
1998 on technology projects, including Year 2000 initiatives. These expenses do
not have an effect on the assets of the Variable Account and are not charged
through to the Contract Owner.
LEGAL PROCEEDINGS
The Company 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 the Company.
The General Distributor, Nationwide Advisory Services, Inc. is not engaged in
any litigation of any material nature.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits, relating to life insurance pricing
and sales practices. A number of these lawsuits have resulted in substantial
jury awards or settlements. In February 1997, Nationwide Life Insurance Company
was named as a defendant in a lawsuit filed in New York Supreme Court related to
the sale of whole life policies on a "vanishing premium" basis (John H. Snyder
v. Nationwide Life Insurance Co.). The plaintiff in such lawsuit seeks to
represent a national class of Nationwide Life policyholders and claims
unspecified compensatory and punitive damages. This lawsuit has not been
certified as a class action. In April 1997, a motion to dismiss the Snyder
complaint in its entirety was filed by the defendants, and the plaintiff has
opposed such motion.
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 an action against Nationwide Life Insurance Company and the
American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this action, plaintiffs seek 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 some portion of their premiums were
invested in a publicly traded mutual fund when, in fact, the premium monies were
invested in a mutual fund whose shares may only be purchased by insurance
companies. The complaint seeks unspecified compensatory, treble and punitive
damages. In January 1998, both Nationwide Life Insurance Company and American
Century filed motions to dismiss the entire complaint. Plaintiffs' counsel have
opposed these motions and the federal court in Texas heard arguments on the
motions to dismiss in April 1998. This lawsuit is in an early stage and has not
been certified as a class action. Nationwide Life Insurance Company intends to
defend this case vigorously.
There can be no assurance that any litigation relating to pricing and sales
practices will not have a material adverse effect on the Company in the future.
<TABLE>
<CAPTION>
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
PAGE
<S> <C>
General Information and History.............................................................................1
Services....................................................................................................1
Purchase of Securities Being Offered........................................................................2
Underwriters................................................................................................2
Calculations of Performance.................................................................................2
Annuity Payments............................................................................................3
Financial Statements........................................................................................4
</TABLE>
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<PAGE> 57
APPENDIX A
FIXED ACCOUNT
Purchase Payments under the Fixed Account of the Contract and transfers to the
Fixed Account become part of the general account of the Company, which support
insurance and annuity obligations. Because of exemptive and exclusionary
provisions, interests in the general account have not been registered under the
"1933 Act" nor is the general account registered as an investment company under
the "1940 Act." Accordingly, neither the general account nor any interest
therein are subject to the provisions of the 1933 or 1940 Acts, and we have been
advised that the staff of the SEC has not reviewed the disclosures in this
prospectus which relate to the Fixed Account. Disclosures regarding the Fixed
Account and the general account may be subject to certain provisions of the
federal securities law relating to the accuracy and completeness of statements
made in prospectuses.
FIXED ACCOUNT ALLOCATIONS
THE FIXED ACCOUNT
The Fixed Account is made up of all the general assets of the Company, other
than those in the Variable Account and any other segregated asset account.
Purchase Payments will be allocated to the Fixed Account by election of the
Contract Owner.
The Company will invest the assets of the Fixed Account in those assets chosen
by the Company and allowed by applicable law. Investment income from such assets
will be allocated by the Company between itself and the Contracts participating
in the Fixed Account.
Investment income from the Fixed Account includes compensation for mortality and
expense risks borne by the Company in connection with Fixed Account Contracts.
The amount of such investment income allocated to the contracts will vary from
at the sole discretion of the Company at such rate(s) as the Company
prospectively declares. The guaranteed rate for any Purchase Payment will remain
in effect for a period not less than twelve months. However, the Company
guarantees that it will credit interest at not less than 3.0% per year. ANY
INTEREST CREDITED TO AMOUNTS ALLOCATED TO THE FIXED ACCOUNT IN EXCESS OF 3.0%
PER YEAR WILL BE DETERMINED AT THE SOLE DISCRETION OF THE COMPANY. THE CONTRACT
OWNER ASSUMES THE RISK THAT INTEREST CREDITED TO FIXED ACCOUNT ALLOCATIONS MAY
NOT EXCEED THE MINIMUM GUARANTEE OF 3.0% FOR ANY GIVEN YEAR. New Purchase
Payments deposited to the Contract which are allocated to the Fixed Account may
receive a different rate of interest than money transferred from the
Sub-Accounts to the Fixed Account and amounts maturing in the Fixed Account at
the expiration of an Interest Rate Guarantee Period.
The Company guarantees that the Fixed Account Contract Value will not be less
than the amount of the Purchase Payments allocated to the Fixed Account, plus
interest credited as described above, less any applicable charges including
CDSC.
TRANSFERS
For transfers from the Fixed Account to the Variable Account, refer to the
"Transfers" provision of the prospectus.
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APPENDIX B
OBJECTIVES FOR PARTICIPATING UNDERLYING MUTUAL FUNDS
THE UNDERLYING MUTUAL FUNDS LISTED BELOW ARE DESIGNED PRIMARILY AS INVESTMENT
VEHICLES FOR VARIABLE ANNUITY CONTRACTS AND VARIABLE LIFE INSURANCE POLICIES
ISSUED BY INSURANCE COMPANIES. THERE CAN BE NO ASSURANCE THAT THE INVESTMENT
OBJECTIVES WILL BE ACHIEVED.
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS.
American Century Variable Portfolios, Inc. was organized as a Maryland
corporation in 1987. It is a diversified, open-end investment management company
which offers its shares only as investment vehicles for variable annuity and
variable life insurance products of insurance companies. American Century
Variable Portfolios, Inc. is managed by American Century Investment Management,
Inc.
-AMERICAN CENTURY VP BALANCED
Investment Objective: Capital growth and current income. The Fund will
seek to achieve its objective by maintaining approximately 60% of the
assets of the Fund in common stocks (including securities convertible
into common stocks and other equity equivalents) that are considered by
management to have better-than-average prospects for appreciation and
approximately 40% in fixed income securities. A minimum of 25% of the
fixed income portion of the Fund will be invested in fixed income senior
securities. There can be no assurance that the Fund will achieve its
investment objective.
-AMERICAN CENTURY VP CAPITAL APPRECIATION
Investment Objective: Capital growth. The Fund will seek to achieve its
objective by investing in common stocks (including securities convertible
into common stocks and other equity equivalents) that meet certain
fundamental and technical standards of selection and have, in the opinion
of the Fund's investment manager, better than average potential for
appreciation. The Fund tries to stay fully invested in such securities,
regardless of the movement of stock prices generally.
The Fund may invest in cash and cash equivalents temporarily or when it
is unable to find common stocks meeting its criteria of selection. It may
purchase securities only of companies that have a record of at least
three years continuous operation. There can be no assurance that the Fund
will achieve its investment objective.
-AMERICAN CENTURY VP INCOME & GROWTH
Investment Objective: Dividend growth, current income and capital
appreciation. The Fund seeks to achieve its investment objective by
investing in common stocks. The investment manager constructs the
portfolio to match the risk characteristics of the S&P 500 Stock Index
and then optimizes each portfolio to achieve the desired balance of risk
and return potential. This includes targeting a dividend yield that
exceeds that of the S&P 500. Such a management technique known as
"portfolio optimization" may cause the Fund to be more heavily invested
in some industries than in others. However, the Fund may not invest more
than 25% of its total assets in companies whose principal business
activities are in the same industry.
-AMERICAN CENTURY VP INTERNATIONAL
Investment Objective: To seek capital growth. The Fund will seek to
achieve its investment objective by investing primarily in securities of
foreign companies that meet certain fundamental and technical standards
of selection and, in the opinion of the investment manager, have
potential for appreciation. Under normal conditions, the Fund will invest
at least 65% of its assets in common stocks or other equity securities of
issuers from at least three countries outside the United States. While
securities of United States issuers may be included in the portfolio from
time to time, it is the primary intent of the manager to diversify
investments across a broad range of foreign issuers. Although the primary
investment of the Fund will be common stocks (defined to include
depository receipts for common stock and other equity equivalents), the
Fund may also invest in other types of securities consistent with the
Fund's objective. When the manager believes that the total capital growth
potential of other securities equals or exceeds the potential return of
common stocks, the Fund may invest up to 35% of its assets in such other
securities. There can be no assurance that the Fund will achieve its
objectives.
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-AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of
well-established companies with intermediate-to-large market
capitalizations that are believed by management to be undervalued at the
time of purchase. Under normal market conditions, the Fund expects to
invest at least 80% of the value of its total asset in equity securities,
including common and preferred stock, convertible preferred stock and
convertible debt obligations.
DREYFUS STOCK INDEX FUND, INC.
The Dreyfus Stock Index Fund, Inc. ("Fund") is an open-end, non-diversified,
management investment company incorporated under Maryland law on January 24,
1989 and commenced operations on September 29, 1989. The Fund offers its shares
only as investment vehicles for variable annuity and variable life insurance
products of insurance companies. The Dreyfus Corporation ("Dreyfus") serves as
the Fund's manager, while Mellon Equity Associates, an affiliate of Dreyfus,
serves as the Fund's index manager. Dreyfus is a wholly-owned subsidiary of
Mellon Bank, N.A., which is a wholly-owned subsidiary of Mellon Bank
Corporation.
Investment Objective: To provide investment results that correspond to
the price and yield performance of publicly traded common stocks in the
aggregate, as represented by the Standard & Poor's 500 Composite Stock
Price Index. The Fund is neither sponsored by nor affiliated with
Standard & Poor's Corporation.
DREYFUS VARIABLE INVESTMENT FUND
Dreyfus Variable Investment Fund ("Fund") is an open-end, management investment
company. It was organized as an unincorporated business trust under the laws of
the Commonwealth of Massachusetts on October 29, 1986 and commenced operations
on August 31, 1990. The Fund offers its shares only as investment vehicles for
variable annuity and variable life insurance products of insurance companies.
Dreyfus serves as the Fund's manager. Fayez Sarofim & Company serves as the
Capital Appreciation Portfolio's subadviser and provides day-to-day management
of this Portfolio.
-CAPITAL APPRECIATION PORTFOLIO
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of
capital; current income is a secondary investment objective. This
Portfolio invests primarily in the common stocks of domestic and foreign
issuers.
-GROWTH & INCOME PORTFOLIO
Investment Objective: To provide long-term capital growth, current income
and growth of income, consistent with reasonable investment risk. The
Portfolio invests in equity securities, debt securities and money market
instruments of domestic and foreign issuers. The proportion of the
Portfolio's assets invested in each type of security will vary from time
to time in accordance with Dreyfus' assessment of economic conditions and
investment opportunities. In purchasing equity securities, Dreyfus will
invest in common stocks, preferred stocks and securities convertible into
common stocks, particularly those which offer opportunities for capital
appreciation and growth of earnings, while paying current dividends. The
Portfolio will generally invest in investment-grade debt obligations,
except that it may invest up to 35% of the value of its net assets in
convertible debt securities rated not lower than Caa by Moody's Investor
Service, Inc. or CCC by Standard & Poor's Ratings Group, Fitch Investors
Service, L.P. or Duff & Phelps Credit Rating Co., or if unrated, deemed
to be of comparable quality by Dreyfus. These securities are considered
to have predominantly speculative characteristics with respect to
capacity to pay interest and repay principal and are considered to be of
poor standing. See "Investment Considerations and Risks-Lower Rated
Securities" in the Portfolio's prospectuses.
THE DREYFUS SOCIALLY RESPONSIBLE GROWTH FUND, INC.
The Dreyfus Socially Responsible Growth Fund, Inc. is an open-end, diversified,
management investment company incorporated under Maryland law on July 20, 1992
and commenced operations on October 7, 1993. The Fund offers its share only as
investment vehicles for variable annuity and variable life insurance products of
insurance companies. The Dreyfus Corporation serves as the Fund's investment
adviser. NCM Capital Management Group, Inc. serves as the Fund's sub-investment
adviser and provides day-to-day management of the Fund's portfolio.
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Investment Objective: Capital growth through equity investment in
companies that, in the opinion of the Fund's advisers, not only meet
traditional investment standards, but which also show evidence that they
conduct their business in a manner that contributes to the enhancement of
the quality of life in America. Current income is secondary to the
primary goal.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND
The Fidelity Variable Insurance Products Fund (VIP) is an open-end, diversified,
management investment company organized as a Massachusetts business trust on
November 13, 1981. Shares of VIP are purchased by insurance companies to fund
benefits under variable life insurance policies and variable annuity contracts.
Fidelity Management & Research Company ("FMR") is the manager for VIP and it's
portfolios.
-VIP EQUITY-INCOME PORTFOLIO
Investment Objective: Reasonable income by investing primarily in
income-producing equity securities. In choosing these securities FMR also
will consider the potential for capital appreciation. The Portfolio's
goal is to achieve a yield which exceeds the composite yield on the
securities comprising the Standard & Poor's 500 Composite Stock Price
Index.
-VIP GROWTH PORTFOLIO
Investment Objective: Capital appreciation. This Portfolio will invest in
the securities of both well-known and established companies, and smaller,
less well-known companies which may have a narrow product line or whose
securities are thinly traded. These latter securities will often involve
greater risk than may be found in the ordinary investment security. FMR's
analysis and expertise plays an integral role in the selection of
securities and, therefore, the performance of the Portfolio. Many
securities which FMR believes would have the greatest potential may be
regarded as speculative, and investment in the Portfolio may involve
greater risk than is inherent in other underlying mutual funds. It is
also important to point out that this Portfolio makes most sense for you
if you can afford to ride out changes in the stock market, because it
invests primarily in common stocks. FMR can also make temporary
investments in securities such as investment-grade bonds, high-quality
preferred stocks and short-term notes, for defensive purposes when it
believes market conditions warrant.
-VIP HIGH INCOME PORTFOLIO
Investment Objective: High level of current income by investing primarily
in high-risk, lower-rated, high-yielding, fixed-income securities, while
also considering growth of capital. FMR will seek high current income
normally by investing the Portfolio's assets as follows:
o at least 65% in income-producing debt securities and preferred stocks,
including convertible securities
o up to 20% in common stocks and other equity securities when consistent
with the Portfolio's primary objective or acquired as part of a unit
combining fixed-income and equity securities
Higher yields are usually available on securities that are lower-rated
or that are unrated. Lower-rated securities are usually defined as Ba
or lower by Moody's Investor Services, Inc. ("Moody's"); BB or lower
by Standard & Poor's and may be deemed to be of a speculative nature.
The Portfolio may also purchase lower-quality bonds such as those
rated Ca3 by Moody's or C- by Standard & Poor's which provide poor
protection for payment of principal and interest (commonly referred to
as "junk bonds"). For a further discussion of lower-rated securities,
please see the "Risks of Lower-Rated Debt Securities" section of the
Portfolio's prospectus.
-VIP OVERSEAS PORTFOLIO
Investment Objective: Long-term capital growth primarily through
investments in foreign securities. This Portfolio provides a means for
investors to diversify their own portfolios by participating in companies
and economies outside of the United States.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND II
The Fidelity Variable Insurance Products Fund II (VIP II) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on March 21, 1988. VIP II's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP II and its portfolios.
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-VIP II ASSET MANAGER PORTFOLIO
Investment Objective: To seek high total return with reduced risk over
the long-term by allocating its assets among domestic and foreign stocks,
bonds and short-term fixed income instruments.
-VIP II CONTRAFUND PORTFOLIO
Investment Objective: To seek capital appreciation by investing primarily
in companies that the FMR believes to be undervalued due to an overly
pessimistic appraisal by the public. This strategy can lead to
investments in domestic or foreign companies, small and large, many of
which may not be well known. The Portfolio primarily invests in common
stock and securities convertible into common stock, but it has the
flexibility to invest in any type of security that may produce capital
appreciation.
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
The Fidelity Variable Insurance Products Fund III (VIP III) is an open-end,
diversified, management investment company organized as a Massachusetts business
trust on July 14, 1994. VIP III's shares are purchased by insurance companies to
fund benefits under variable life insurance policies and variable annuity
contracts. FMR is the manager of VIP III and its portfolios.
-VIP III GROWTH OPPORTUNITIES PORTFOLIO
Investment Objective: Capital growth by investing primarily in common
stocks and securities convertible into common stocks. The Portfolio,
under normal conditions, will invest at least 65% of its total assets in
securities of companies that FMR believes have long-term growth
potential. Although the Portfolio invests primarily in common stock and
securities convertible into common stock, it has the ability to purchase
other securities, such as preferred stock and bonds, that may produce
capital growth. The Portfolio may invest in foreign securities without
limitation.
MORGAN STANLEY UNIVERSAL FUNDS, INC.
Morgan Stanley Universal Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley Asset Management, Inc.
-EMERGING MARKETS DEBT PORTFOLIO
Investment Objective: High total return by investing primarily in dollar
and non-dollar denominated fixed income securities of government and
government-related issuers located in emerging market countries, which
securities provide a high level of current income, while at the same time
holding the potential for capital appreciation if the perceived
creditworthiness of the issuer improves due to improving economic,
financial, political, social or other conditions in the country in which
the issuer is located.
NATIONWIDE SEPARATE ACCOUNT TRUST
Nationwide Separate Account Trust ("NSAT") is a diversified open-end management
investment company created under the laws of Massachusetts. NSAT offers shares
in the funds listed below, each with its own investment objectives. Shares of
NSAT will be sold primarily to life insurance company separate accounts to fund
the benefits under variable life insurance policies and variable annuity
contracts issued by life insurance companies. The assets of NSAT are managed by
Nationwide Advisory Services, Inc. ("NAS"), a wholly-owned subsidiary of
Nationwide Life Insurance Company.
-CAPITAL APPRECIATION FUND
Investment Objective: Long-term growth by primarily investing in a
diversified portfolio of the common stock of companies which the NAS
determines have a better-than-average potential for sustained capital
growth over the long term.
-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of
securities issued or backed by the U.S. Government, its agencies or
instrumentalities.
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-MONEY MARKET FUND
Investment Objective: As high a level of current income as is considered
consistent with the preservation of capital and liquidity by investing
primarily in money market instruments.
-NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median
market capitalization of approximately $1 billion. Under normal market
conditions, at least 75% of the Fund's total assets will be invested in
equity securities of companies with market capitalizations at the time of
purchase of between $200 million and $2.5 billion. The Fund will invest
in equity securities of domestic and foreign issuers characterized as
"value" companies according to criteria established by The Dreyfus
Corporation, the Fund's subadviser.
-NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger & Berman, L.P., Pictet
International Management Limited with Van Eck Associates Corporation,
Strong Capital Management, Inc. and Warburg Pincus Asset Management, Inc.
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of domestic and foreign companies with market
capitalizations of less than $1 billion at the time of purchase. The
subadvisers were chosen because they utilize a number of different
investment styles when investing in small company stocks. By utilizing
different investment styles, NAS hopes to increase prospects for
investment return and to reduce market risk and volatility.
-TOTAL RETURN FUND
Investment Objective: Capital growth by investing in common stocks of
companies that NAS believes will have above-average earnings or otherwise
provide investors with above-average potential for capital appreciation.
To maximize this potential, NAS may also utilize from time to time,
securities convertible into common stock, warrants and options to
purchase such stocks.
NEUBERGER & BERMAN ADVISERS MANAGEMENT TRUST
Neuberger and Berman Advisers Management Trust ("N&B AMT") is an open-end,
diversified management investment company consisting of several series. Shares
of the series of N&B AMT are offered in connection with certain variable annuity
contracts and variable life insurance policies issued through life insurance
company separate accounts and are also offered directly to qualified pension and
retirement plans outside of the separate account context.
The Guardian and Partners Portfolios of N&B AMT invest all of their investable
assets in a corresponding series of Advisers Managers Trust managed by Neuberger
& Berman Management Incorporated ("N&B Management"). Each series then invests in
securities in accordance with an investment objective, policies and limitations
identical to those of the Portfolio. This "master/feeder fund" structure is
different from that of many other investment companies which directly acquire
and manage their own portfolios of securities. (For more information regarding
"master/feeder fund" structure, see "Special Information Regarding Organization,
Capitalization and Other Matters" in the underlying mutual fund prospectus.) The
investment advisor for all the portfolios is N&B Management.
-AMT GROWTH PORTFOLIO
Investment Objective: Seeks capital growth through investments in common
stocks of companies that the investment adviser believes will have above
average earnings or otherwise provide investors with above average
potential for capital appreciation. To maximize this potential, the
investment adviser may also utilize, from time to time, securities
convertible into common stocks, warrants and options to purchase such
stocks.
-AMT GUARDIAN PORTFOLIO
Investment Objective: Capital appreciation and secondarily, current
income. The Portfolio and its corresponding series seek to achieve these
objectives by investing in common stocks of long-established,
high-quality companies. N&B Management uses a value-oriented investment
approach in selecting
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securities, looking for low price-to-earnings ratios, strong balance
sheets, solid management, and consistent earnings.
-AMT LIMITED MATURITY BOND PORTFOLIO
Investment Objective: To provide high level of current income, consistent
with low risk to principal and liquidity. As a secondary objective, it
also seeks to enhance its total return through capital appreciation when
market factors, such as falling interest rates and rising bond prices,
indicate that capital appreciation may be available without significant
risk to principal. It seeks to achieve its objectives through investments
in a diversified portfolio of limited maturity debt securities.
-AMT PARTNERS PORTFOLIO
Investment Objective: Capital growth by investing primarily in the common
stock of established companies. Its investment program seeks securities
believed to be undervalued based on fundamentals such as low
price-to-earnings ratios, consistent cash flows, and the company's track
record through all parts of the market cycle.
OPPENHEIMER VARIABLE ACCOUNT FUNDS
The Oppenheimer Variable Account Funds are an open-end, diversified management
investment company organized as a Massachusetts business trust in 1984. Shares
of the Funds are sold only to provide benefits under variable life insurance
policies and variable annuity contracts. OppenheimerFunds, Inc. is investment
adviser.
-OPPENHEIMER BOND FUND
Investment Objective: Primarily seeks a high level of current income by
investing at least 65% of its total assets in investment grade debt
securities, U.S. government securities and money market instruments.
Investment grade debt securities would include those rated in one of the
four highest ranking categories by any nationally recognized rating
organization or if unrated or split-rated (rated investment grade and
below investment grade by different rating organizations), determined by
OppenheimerFunds, Inc. to be of comparable quality. The Fund may invest
up to 35% of its total assets in debt securities rated less than
investment grade when consistent with the Fund's investment objectives.
The Fund seeks capital growth as a secondary objective when consistent
with its primary objective.
-OPPENHEIMER GLOBAL SECURITIES FUND
Investment Objective: To seek long-term capital appreciation by investing
a substantial portion of assets in securities of foreign issuers,
"growth-type" companies, cyclical industries and special situations which
are considered to have appreciation possibilities. Current income is not
an objective. These securities may be considered to be speculative.
-OPPENHEIMER GROWTH FUND
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a
history of earnings and dividends and are issued by seasoned companies
(companies which have an operating history of at least five years
including predecessors). Current income is a secondary consideration in
the selection of the Fund's portfolio securities.
-OPPENHEIMER MULTIPLE STRATEGIES FUND
Investment Objective: To seek a total investment return (which includes
current income and capital appreciation in the value of its shares) from
investments in common stocks and other equity securities, bonds and other
debt securities, and "money market" securities.
STRONG OPPORTUNITY FUND II, INC. (FORMERLY "STRONG SPECIAL FUND II, INC.")
Strong Opportunity Fund II, Inc. is a diversified, open-end management company
commonly called a Mutual Fund. Strong Opportunity Fund II, Inc. was incorporated
in Wisconsin and may only be purchased by the separate accounts of insurance
companies for the purpose of funding variable annuity contracts and variable
life insurance policies. Strong Capital Management Inc. (the "Strong") is the
investment advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in
a diversified portfolio of equity securities.
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STRONG VARIABLE INSURANCE FUNDS, INC.
Strong Variable Insurance Funds, Inc. ("Corporation") is an open-end
management investment company commonly referred to as a mutual fund.
Incorporated in the State of Wisconsin, the Corporation has been authorized to
issue shares of common stock and series and classes of series of common stock.
The International Stock Fund II and The Strong Discovery Fund II, Inc. ("Funds")
are offered by the Corporation to insurance company separate accounts for the
purpose of funding variable life insurance policies and variable annuity
contracts. Strong Capital Management, Inc. is the investment advisor to the
Funds.
-DISCOVERY FUND II, INC.
Investment Objective: To seek maximum capital appreciation through
investments in a diversified portfolio of securities. The Fund normally
emphasizes investment in equity securities and may invest up to 100% of
its total assets in equity securities including common stocks, preferred
stocks and securities convertible into common or preferred stocks.
Although the Fund normally emphasizes investment in equity securities,
the Fund has the flexibility to invest in any type of security that the
Advisor believes has the potential for capital appreciation including up
to 100% of its total assets in debt obligations, including intermediate
to long-term corporate or U.S. government debt securities.
-INTERNATIONAL STOCK FUND II
Investment Objective: To seek capital growth by investing primarily in
the equity securities of issuers located outside the United States.
VAN ECK WORLDWIDE INSURANCE TRUST
Van Eck Worldwide Insurance Trust ("Van Eck Trust") is an open-end management
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts on January 7, 1987. Shares of Van Eck Trust are
offered only to separate accounts of various insurance companies to fund the
benefits of life insurance policies and variable annuity contracts. The
investment advisor and manager is Van Eck Associates Corporation.
-WORLDWIDE BOND FUND
Investment Objective: To seek high total return through a flexible policy
of investing globally, primarily in debt securities.
-WORLDWIDE EMERGING MARKETS FUND
Investment Objective: Seeks long-term capital appreciation by investing
primarily in equity securities in emerging markets around the world. The
Fund specifically emphasizes investment in countries that, compared to
the world's major economies, exhibit relatively low gross national
product per capita, as well as the potential for rapid economic growth.
-WORLDWIDE HARD ASSETS FUND
Investment Description: Seeks long-term capital appreciation by
investing, primarily in "Hard Assets Securities." For the Fund's purpose,
"Hard Assets" are real estate, energy, timber, and industrial and
precious metals. Income is a secondary consideration.
VAN KAMPEN AMERICAN CAPITAL LIFE INVESTMENT TRUST
Van Kampen American Capital Life Investment Trust is an open-end diversified
management investment company organized as a Delaware business trust. Shares are
offered in separate portfolios which are sold only to insurance companies to
provide funding for variable life insurance policies and variable annuity
contracts. Van Kampen American Capital Asset Management, Inc. serves as the
Portfolio's investment adviser.
-MORGAN STANLEY REAL ESTATE SECURITIES PORTFOLIO
Investment Objective: Long-term capital growth by investing principally
in a diversified portfolio of securities of companies operating in the
real estate industry ("Real Estate Securities"). Current income is a
secondary consideration. Real Estate Securities include equity
securities, including common stocks and convertible securities, as well
as non-convertible preferred stocks and debt securities of real estate
industry companies. A "real estate industry company" is a company that
derives at least 50% of its assets (marked to market), gross income or
net profits from the ownership, construction, management or sale of
residential, commercial or industrial real estate. Under normal market
conditions, at least 65% of the Portfolio's total assets will be invested
in Real Estate Securities, primarily equity securities of real estate
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investment trusts. The Portfolio may invest up to 25% of its total assets
in securities issued by foreign issuers, some or all of which may also be
Real Estate Securities.
WARBURG PINCUS TRUST
The Warburg Pincus Trust is an open-end management investment company organized
in March 1995 as a business trust under the laws of The Commonwealth of
Massachusetts. The Trust offers its shares to insurance companies for allocation
to separate accounts for the purpose of funding variable annuity and variable
life contracts. The Portfolios are managed by Warburg Pincus Asset Management,
Inc. ("Warburg")
-INTERNATIONAL EQUITY PORTFOLIO
Investment Objective: Long-term capital appreciation by investing
primarily in a broadly diversified portfolio of equity securities of
companies, wherever organized, that in the judgment of Warburg have their
principal business activities and interests outside the United States.
The Portfolio will ordinarily invest substantially all of its assets, but
no less than 65% of its total assets, in common stocks, warrants and
securities convertible into or exchangeable for common stocks. The
Portfolio intends to invest principally in the securities of financially
strong companies with opportunities for growth within growing
international economies and markets through increased earning power and
improved utilization or recognition of assets.
-POST-VENTURE CAPITAL PORTFOLIO
Investment Objective: Long-term growth of capital by investing primarily
in equity securities of issuers in their post-venture capital stage of
development and pursues an aggressive investment strategy. Under normal
market conditions, the Portfolio will invest at least 65% of its total
assets in equity securities of "post-venture capital companies." A
post-venture capital company is one that has received venture capital
financing either: (a) during the early stages of the company's existence
or the early stages of the development of a new product or service; or
(b) as part of a restructuring or recapitalization of the company. The
Portfolio may invest up to 10% of its assets in venture capital and other
investment funds.
-SMALL COMPANY GROWTH PORTFOLIO
Investment Objective: Capital growth by investing in a portfolio of
equity securities of small-sized domestic companies. The Portfolio
ordinarily will invest at least 65% of its total assets in common stocks
or warrants of small-sized companies (i.e., companies having stock market
capitalizations of between $25 million and $1 billion at the time of
purchase) that represent attractive opportunities for capital growth. The
Portfolio intends to invest primarily in companies whose securities are
traded on domestic stock exchanges or in the over-the-counter market. The
Portfolio's investments will be made on the basis of their equity
characteristics and securities ratings generally will not be a factor in
the selection process.
AVAILABLE FOR ALL CONTRACTS ISSUED ON OR AFTER MAY 1, 1987 AND
BEFORE SEPTEMBER 1, 1989
AMERICAN VARIABLE INSURANCE SERIES
The American Variable Insurance Series was organized as a Massachusetts business
trust in 1983, and is a fully managed, diversified, open-end investment company.
Shares of the series are offered only to separate accounts of various insurance
companies which fund certain variable annuity and life indurance contracts.
-GROWTH FUND
Investment Objective: To provide growth of capital. Whatever current
income is generated by the Fund is likely to be incidental to the
objective of capital growth. Ordinarily, accomplishment of the Fund's
objective of capital growth will be sought by investing primarily in
common stocks or securities with common stock characteristics.
-HIGH-YIELD BOND FUND
Investment Objective: Seeks high current income and secondarily seeks
capital appreciation. The Fund invests substantially in intermediate and
long-term corporate obligations, with emphasis on higher yielding, higher
risk, lower rated or unrated securities. These investments are subject to
greater market fluctuations and risk of loss of income and principal than
are investments on lower yielding fixed income securities.
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-U.S. GOVERNMENT/AAA RATED SECURITIES FUND
Investment Objective: A high level of current income consistent with
prudent investment risk and preservation of capital. It seeks to achieve
its objective by investing primarily in a combination of (i) securities
guaranteed by the U.S. Government (backed by the full faith and credit of
the U.S.), and (ii) corporate debt securities rated AAA by Standard and
Poor's Corporation or Aaa Moody's Investors Service, Inc. (or that have
not received a rating but are determined to be of comparable quality by
the Investment Advisor).
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STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 1998
DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT-II
This Statement of Additional Information is not a prospectus. It contains
information in addition to and in some respects more detailed than set forth in
the prospectus and should be read in conjunction with the prospectus dated
May 1, 1998. The prospectus may be obtained from Nationwide Life Insurance
Company by writing P. O. Box 16609, Columbus, Ohio 43216-6609, or calling
1-800-848-6331, TDD 1-800-238-3035.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
General Information and History.......................................................................................1
Services..............................................................................................................1
Purchase of Securities Being Offered..................................................................................2
Underwriters..........................................................................................................2
Calculations of Performance...........................................................................................2
Annuity Payments......................................................................................................3
Financial Statements..................................................................................................4
</TABLE>
GENERAL INFORMATION AND HISTORY
Nationwide Variable Account-II is a separate investment account of Nationwide
Life Insurance Company ("Company"). The Company is a member of the Nationwide
Insurance Enterprise. All of the Company'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 (95.3%) and
Nationwide Mutual Fire Insurance Company (4.7%), the ultimate controlling
persons of Nationwide Insurance Enterprise. The Nationwide Insurance Enterprise
is one of America's largest insurance and financial services family of
companies, with combined assets of over $83.2 billion as of December 31, 1997.
SERVICES
The Company, which has responsibility for administration of the Contracts and
the Variable Account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each Contract Owner
and the number and type of Contract issued to each such Contract Owner and
records with respect to the Contract Value of each Contract.
The Custodian of the assets of the Variable Account is the Company. The Company
will maintain a record of all purchases and redemptions of shares of the
Underlying Mutual Funds. The Company, or affiliates of the Company 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 the Company or an affiliate of the Company and provide for
an annual fee based on the average aggregate net assets of the Variable Account
(and other separate accounts of the Company or life insurance company
subsidiaries of the Company) invested in particular Underlying Mutual Funds.
These fees in no way affect the net asset value of the Underlying Mutual Funds
or fees paid by the Contract Owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG Peat Marwick LLP, independent certified public accountants, Two
Nationwide Plaza, Columbus, Ohio 43215, and upon the authority of said firm as
experts in accounting and auditing.
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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").
When a Contract described in the prospectus is exchanged for another contract
issued by the Company or any of its affiliated insurance companies of the type
and class which the Company determines is eligible for such an exchange, the
Company may waive any remaining Contingent Deferred Sales Charges on the first
Contract. A Contingent Deferred Sales Charge may apply to the contract received
in the exchange.
UNDERWRITERS
The Contracts, which are offered continuously, are distributed by Nationwide
Advisory Services, Inc. ("NAS"), One Nationwide Plaza, Columbus, Ohio 43215, a
wholly owned subsidiary of the Company. During the fiscal years ended December
31, 1997, 1996 and 1995, no underwriting commissions were paid by the Company to
NAS.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of hypothetical pre-existing account having a balance of one accumulation
unit at the beginning of the base period, subtracting a hypothetical charge
reflecting deductions from Contract Owner accounts, and dividing the net change
in account value by the value of the account at the beginning of the period to
obtain a base period return, and multiplying the base period return by (365/7)
or (366/7) in a leap year. At December 31, 1997, the NSAT- Money Market Fund's
seven-day current unit value yield was 4.05%. The NSAT-Money Market Fund
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 Fund. At December 31, 1997, the seven-day effective yield was 4.13%.
The NSAT-Money Market Fund yield and effective yield will fluctuate daily.
Actual yields will depend on factors such as the type of instruments in the
Fund's portfolio, portfolio quality and average maturity, changes in interest
rates, and the Fund's expenses. Although the NSAT-Money Market Fund determines
its yield on the basis of a seven calendar day period, it may use a different
time period on occasion. The yield quotes may reflect the expense limitation
described "Investment Manager and Other Services" in the NSAT-Money Market
Fund's Statement of Additional Information. There is no assurance that the
yields quoted on any given occasion will remain in effect for any period of time
and there is no guarantee that the Net Asset Values will remain constant. It
should be noted that a Contract Owner's investment in the NSAT-Money Market Fund
is not guaranteed or insured. 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 return is found by taking a
hypothetical $1,000 investment in each of the Sub-Accounts' units on the first
day of the period at the offering price, which is the Accumulation Unit Value
per unit ("initial investment") and computing the ending redeemable value
("redeemable value") of that investment at the end of the period. The redeemable
value is then divided by the initial investment and this quotient is taken to
the Nth root (N represents the number of years in the period) and 1 is
subtracted from the result which is then expressed as a percentage, carried to
at least the nearest hundredth of a percent. Standardized average annual total
return reflects the deduction of a maximum $30 Contract Maintenance Charge and a
1.30% Mortality, Expense Risk and Administration Charge. The redeemable value
also reflects the effect of any applicable Contingent Deferred Sales Charge that
may be imposed at the end of the period (see "CDSC" located in the prospectus).
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
$10,000 and does not reflect the deduction of any applicable CDSC. Reflecting
the CDSC would decrease the level of the performance advertised. The CDSC is
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not reflected because the Contract is designed for long term investment. An
assumed initial investment of $10,000 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
amount of the hypothetical initial investment used affects performance because
the Contract Maintenance Charge is fixed per Contract charge.
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. The nonstandardized annual total 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 in existence.
Quotations of average annual total return and total return are based upon
historical earnings and will fluctuate. Any quotation of performance is not a
guarantee of future performance. Factors affecting a Sub-Account's performance
include general market conditions, operating expenses and investment management.
A Contract Owner's account when redeemed may be more or less than original cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
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<PAGE> 1
Independent Auditors' Report
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of Nationwide Variable Account-II:
We have audited the accompanying statement of assets, liabilities and
contract owners' equity of Nationwide Variable Account-II as of December 31,
1997, and the related statements of operations and changes in contract owners'
equity for each of the years in the two year period then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1997, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Variable
Account-II as of December 31, 1997, 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 Peat Marwick LLP]
Columbus, Ohio
February 6, 1998
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Balanced (ACVPBal)
20,476,916 shares (cost $145,210,488) ................................. $ 168,729,789
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
35,124,238 shares (cost $366,581,346) ................................. 340,002,620
American Century VP - American Century VP International (ACVPInt)
26,517,160 shares (cost $175,620,106) ................................. 181,377,372
American Century VP - American Century VP Value (ACVPValue)
9,871,295 shares (cost $66,743,356) ................................... 68,408,074
American VI Series - Growth Fund (AVISGro)
589,564 shares (cost $20,775,384) ..................................... 26,518,568
American VI Series - High-Yield Bond Fund (AVISHiYld)
217,805 shares (cost $3,087,017) ...................................... 3,193,028
American VI Series - U.S. Government/AAA-Rated Securities Fund (AVISGvt)
458,636 shares (cost $5,228,988) ...................................... 5,090,859
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
7,268,176 shares (cost $168,325,784) .................................. 181,486,347
Dreyfus Stock Index Fund (DryStkIx)
42,571,692 shares (cost $948,590,264) ................................. 1,096,221,070
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
360,888 shares (cost $10,005,405) ..................................... 10,068,786
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
2,677,081 shares (cost $55,737,101) ................................... 55,629,748
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
106,941,882 shares (cost $1,935,779,096) .............................. 2,596,548,894
Fidelity VIP - Growth Portfolio (FidVIPGr)
53,769,558 shares (cost $1,588,057,111) ............................... 1,994,850,605
Fidelity VIP - High Income Portfolio (FidVIPHI)
60,959,130 shares (cost $746,503,217) ................................. 827,824,982
Fidelity VIP - Overseas Portfolio (FidVIPOv)
30,489,461 shares (cost $555,147,003) ................................. 585,397,647
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
59,999,206 shares (cost $881,598,674) ................................. 1,080,585,706
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
45,043,887 shares (cost $726,111,363) ................................. 898,175,106
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
2,473,099 shares (cost $45,823,984) ............................ 47,656,618
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
856,692 shares (cost $8,418,963) ............................... 8,284,216
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
17,142,857 shares (cost $314,022,786) .......................... 363,600,007
Nationwide SAT - Government Bond Fund (NSATGvtBd)
26,333,952 shares (cost $291,315,057) .......................... 299,680,377
Nationwide SAT - Money Market Fund (NSATMyMkt)
838,351,024 shares (cost $838,351,024) ......................... 838,351,024
Nationwide SAT - Small Company Fund (NSATSmCo)
18,331,094 shares (cost $280,417,300) .......................... 290,547,833
Nationwide SAT - Total Return Fund (NSATTotRe)
63,193,935 shares (cost $805,902,753) .......................... 1,035,116,651
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
15,635,041 shares (cost $409,653,043) .......................... 477,494,149
Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
13,346,294 shares (cost $185,376,903) .......................... 188,449,671
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
37,727,286 shares (cost $668,834,188) .......................... 777,182,092
Oppenheimer VAF - Bond Fund (OppBdFd)
24,430,851 shares (cost $282,815,152) .......................... 290,971,432
Oppenheimer VAF - Global Securities Fund (OppGlSec)
22,897,460 shares (cost $395,642,269) .......................... 489,318,728
Oppenheimer VAF - Growth Fund (OppGro)
499,105 shares (cost $16,341,029) .............................. 16,190,975
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
20,045,320 shares (cost $291,681,623) .......................... 340,970,893
Strong Opportunity Fund II, Inc. (StOpp2)
35,219,986 shares (cost $610,939,007) .......................... 764,273,695
Strong VIF - Strong Discovery Fund II (StDisc2)
16,231,621 shares (cost $182,339,802) .......................... 195,266,404
Strong VIF - Strong International Stock Fund II (StIntStk2)
5,334,902 shares (cost $59,514,572) ............................ 49,721,288
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
8,849,992 shares (cost $96,871,940) ............................ 97,261,416
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
7,070,676 shares (cost $102,193,831) ........................... 77,777,440
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
8,091,995 shares (cost $132,399,934) ........................... 127,206,167
</TABLE>
(Continued)
<PAGE> 4
<TABLE>
<S> <C>
Van Kampen American Capital LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
16,950,883 shares (cost $256,967,075) ........................ 268,671,490
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
27,338,547 shares (cost $318,884,001) ........................ 286,781,360
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
1,327,288 shares (cost $14,924,669) .......................... 14,679,809
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
23,264,677 shares (cost $348,799,967) ........................ 383,401,872
--------------
Total investments ......................................... 17,848,964,808
Accounts receivable ................................................ 1,086,934
--------------
Total assets .............................................. 17,850,051,742
ACCOUNTS PAYABLE ...................................................... 250,315
--------------
CONTRACT OWNERS' EQUITY (NOTE 4) ...................................... $ 17,849,801,427
==============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
TOTAL ACVPBal
--------------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ $ 296,368,036 225,012,560 1,574,816 2,018,651
Mortality, expense and administration
charges (note 2) .................................. (210,285,310) (146,901,903) (2,067,765) (1,512,063)
---------------- -------------- ----------- -----------
Net investment activity ........................... 86,082,726 78,110,657 (492,949) 506,588
---------------- -------------- ----------- -----------
Proceeds from mutual fund shares sold ............... 6,440,464,106 4,787,197,972 33,424,138 8,647,771
Cost of mutual fund shares sold ..................... (5,862,745,516) (4,367,124,608) (24,057,900) (6,872,205)
---------------- -------------- ----------- -----------
Realized gain (loss) on investments ............... 577,718,590 420,073,364 9,366,238 1,775,566
Change in unrealized gain (loss) on investments ..... 1,250,486,745 281,999,873 5,524,757 6,463,296
---------------- -------------- ----------- -----------
Net gain (loss) on investments .................... 1,828,205,335 702,073,237 14,890,995 8,238,862
---------------- -------------- ----------- -----------
Reinvested capital gains ............................ 616,932,003 375,915,782 6,097,662 2,876,129
---------------- -------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations .............. 2,531,220,064 1,156,099,676 20,495,708 11,621,579
---------------- -------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 3,614,758,515 3,619,439,725 31,207,874 38,739,406
Transfers between funds - - (4,226,209) (2,462,310)
Redemptions ......................................... (1,198,352,163) (664,029,620) (10,189,550) (5,395,131)
Annuity benefits .................................... (1,097,690) (792,443) (2,437) (9,573)
Annual contract maintenance charge (note 2) ......... (7,187,524) (6,040,328) (70,234) (61,745)
Contingent deferred sales charges (note 2) .......... (18,196,002) (10,783,506) (187,816) (123,085)
Adjustments to maintain reserves .................... (692,928) 559,630 (30,715) 83,333
---------------- -------------- ----------- -----------
Net equity transactions ......................... 2,389,232,208 2,938,353,458 16,500,913 30,770,895
---------------- -------------- ----------- -----------
Net change in contract owners' equity ............... 4,920,452,272 4,094,453,134 36,996,621 42,392,474
Contract owners' equity beginning of period ......... 12,929,349,155 8,834,896,021 131,737,212 89,344,738
---------------- -------------- ----------- -----------
Contract owners' equity end of period ............... $ 17,849,801,427 12,929,349,155 168,733,833 131,737,212
================ ============== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACVPCapAp ACVPInt
----------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ................................ -- -- 1,256,182 1,109,222
Mortality, expense and administration
charges (note 2) .................................. (5,142,983) (6,646,658) (2,090,255) (968,385)
----------- ----------- ----------- ----------
Net investment activity ........................... (5,142,983) (6,646,658) (834,073) 140,837
----------- ----------- ----------- ----------
Proceeds from mutual fund shares sold ............... 226,050,085 240,666,599 134,023,354 42,271,118
Cost of mutual fund shares sold ..................... (249,168,854) (193,528,522) (112,395,449) (38,207,780)
----------- ----------- ----------- ----------
Realized gain (loss) on investments ............... (23,118,769) 47,138,077 21,627,905 4,063,338
Change in unrealized gain (loss) on investments ..... 2,545,749 (124,936,016) (1,464,913) 4,485,538
----------- ----------- ----------- ----------
Net gain (loss) on investments .................... (20,573,020) (77,797,939) 20,162,992 8,548,876
----------- ----------- ----------- ----------
Reinvested capital gains ............................ 8,369,061 55,904,041 2,422,638 369,741
----------- ----------- ----------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations .............. (17,346,942) (28,540,556) 21,751,557 9,059,454
----------- ----------- ----------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ................................... 46,091,043 92,833,985 40,115,028 27,630,966
Transfers between funds (101,140,496) (76,797,656) 39,235,433 6,376,082
Redemptions ......................................... (38,900,571) (32,305,592) (8,333,537) (3,307,555)
Annuity benefits .................................... (49,144) (48,088) (1,590) --
Annual contract maintenance charge (note 2) ......... (323,047) (405,658) (50,442) (26,919)
Contingent deferred sales charges (note 2) .......... (640,085) (586,731) (133,437) (60,653)
Adjustments to maintain reserves .................... 1,134 1,732 1,318 5,595
----------- ----------- ----------- ----------
Net equity transactions ......................... (94,961,166) (17,308,008) 70,832,773 30,617,516
----------- ----------- ----------- ----------
Net change in contract owners' equity ............... (112,308,108) (45,848,564) 92,584,330 39,676,970
Contract owners' equity beginning of period ......... 452,299,206 498,147,770 88,792,296 49,115,326
----------- ----------- ----------- ----------
Contract owners' equity end of period ............... 339,991,098 452,299,206 181,376,626 88,792,296
=========== =========== =========== ==========
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ACVPValue AVISGro
-------------------------------- ------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 77,961 -- 144,798 138,557
Mortality, expense and administration
charges (note 2) ............................ (465,301) (106) (329,103) (303,185)
------------ ---------- ----------- -----------
Net investment activity ..................... (387,340) (106) (184,305) (164,628)
------------ ---------- ----------- -----------
Proceeds from mutual fund shares sold ......... 32,856,963 118,660 6,487,233 3,867,313
Cost of mutual fund shares sold ............... (27,872,971) (118,230) (3,240,097) (2,060,914)
------------ ---------- ----------- -----------
Realized gain (loss) on investments ......... 4,983,992 430 3,247,136 1,806,399
Change in unrealized gain (loss) on investments 1,666,087 (1,369) 21,117 (760,617)
------------ ---------- ----------- -----------
Net gain (loss) on investments .............. 6,650,079 (939) 3,268,253 1,045,782
------------ ---------- ----------- -----------
Reinvested capital gains ...................... 151,154 -- 3,172,499 1,661,940
------------ ---------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 6,413,893 (1,045) 6,256,447 2,543,094
------------ ---------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 18,394,894 43,638 597,163 692,043
Transfers between funds ....................... 44,252,062 1,030,309 (973,320) (671,878)
Redemptions ................................... (1,702,361) (319) (2,781,554) (2,669,013)
Annuity benefits .............................. -- -- (946) (852)
Annual contract maintenance charge (note 2) ... (7,615) -- (16,365) (18,116)
Contingent deferred sales charges (note 2) .... (15,377) -- (10,780) (13,815)
Adjustments to maintain reserves .............. (157) -- 998 709
------------ ---------- ----------- -----------
Net equity transactions ..................... 60,921,446 1,073,628 (3,184,804) (2,680,922)
------------ ---------- ----------- -----------
Net change in contract owners' equity ........... 67,335,339 1,072,583 3,071,643 (137,828)
Contract owners' equity beginning of period ..... 1,072,583 -- 23,447,300 23,585,128
------------ ---------- ----------- -----------
Contract owners' equity end of period ........... $ 68,407,922 1,072,583 26,518,943 23,447,300
============ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
AVISHiYid AVISGvt
----------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 253,822 260,531 369,310 511,480
Mortality, expense and administration
charges (note 2) ............................ (38,276) (38,243) (72,106) (97,504)
---------- ---------- ---------- -----------
Net investment activity ..................... 215,546 222,288 297,204 413,976
---------- ---------- ---------- -----------
Proceeds from mutual fund shares sold ......... 736,561 775,236 1,786,834 4,190,849
Cost of mutual fund shares sold ............... (655,361) (745,378) (1,861,559) (4,091,178)
---------- ---------- ---------- -----------
Realized gain (loss) on investments ......... 81,200 29,858 (74,725) 99,671
Change in unrealized gain (loss) on investments (32,967) 73,750 140,996 (465,801)
---------- ---------- ---------- -----------
Net gain (loss) on investments .............. 48,233 103,608 66,271 (366,130)
---------- ---------- ---------- -----------
Reinvested capital gains ...................... 33,142 -- -- --
---------- ---------- ---------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 296,921 325,896 363,475 47,846
---------- ---------- ---------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 75,598 164,228 127,889 208,435
Transfers between funds ....................... 264,205 (91,215) (309,384) (710,949)
Redemptions ................................... (409,603) (334,453) (1,207,471) (3,424,496)
Annuity benefits .............................. (1,226) (1,165) (536) (370)
Annual contract maintenance charge (note 2) ... (2,453) (2,748) (4,847) (6,694)
Contingent deferred sales charges (note 2) .... (1,609) (1,215) (4,252) (4,050)
Adjustments to maintain reserves .............. 271 231 51 21
---------- ---------- ---------- -----------
Net equity transactions ..................... (74,817) (266,337) (1,398,550) (3,938,103)
---------- ---------- ---------- -----------
Net change in contract owners' equity ........... 222,104 59,559 (1,035,075) (3,890,257)
Contract owners' equity beginning of period ..... 2,971,112 2,911,553 6,125,969 10,016,226
---------- ---------- ---------- -----------
Contract owners' equity end of period ........... 3,193,216 2,971,112 5,090,894 6,125,969
========== ========== ========== ===========
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
DrySRGro DryStkix
-------------------------------- ----------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 623,680 178,692 13,324,202 6,174,167
Mortality, expense and administration
charges (note 2) ............................ (1,766,137) (679,529) (11,066,164) (3,747,635)
------------- ----------- -------------- ------------
Net investment activity ....................... (1,142,457) (500,837) 2,258,038 2,426,532
------------- ----------- -------------- ------------
Proceeds from mutual fund shares sold ......... 79,140,012 59,366,774 196,995,162 107,011,967
Cost of mutual fund shares sold ............... (67,423,514) (52,067,858) (145,321,824) (83,630,388)
------------- ----------- -------------- ------------
Realized gain (loss) on investments ........... 11,716,498 7,298,916 51,673,338 23,381,579
Change in unrealized gain (loss) on investments 12,405,500 (1,979,227) 113,272,914 21,835,351
------------- ----------- -------------- ------------
Net gain (loss) on investments ................ 24,121,998 5,319,689 164,946,252 45,216,930
------------- ----------- -------------- ------------
Reinvested capital gains ...................... 4,861,060 3,199,917 30,917,521 7,007,422
------------- ----------- -------------- ------------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 27,840,601 8,018,769 198,121,811 54,650,884
------------- ----------- -------------- ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 50,107,726 27,287,891 302,375,457 152,418,812
Transfers between funds ....................... 36,729,046 26,105,616 185,055,283 122,764,112
Redemptions ................................... (14,091,480) (2,226,938) (44,011,999) (12,727,321)
Annuity benefits .............................. (4,381) (3,044) (20,897) (14,015)
Annual contract maintenance charge (note 2) ... (67,753) (29,645) (248,202) (91,629)
Contingent deferred sales charges (note 2) .... (365,621) (45,645) (796,708) (283,373)
Adjustments to maintain reserves .............. 2,732 3,453 1,320 24,649
------------- ----------- -------------- ------------
Net equity transactions ..................... 72,310,269 51,091,688 442,354,254 262,091,235
------------- ----------- -------------- ------------
Net change in contract owners' equity ........... 100,150,870 59,110,457 640,476,065 316,742,119
Contract owners' equity beginning of period ..... 81,334,310 22,223,853 455,762,151 139,020,032
------------- ----------- -------------- ------------
Contract owners' equity end of period ........... $ 181,485,180 81,334,310 1,096,238,216 455,762,151
============= =========== ============== ============
</TABLE>
<TABLE>
<CAPTION>
DryCapAp DryGrInc
----------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 72,902 -- 403,974 --
Mortality, expense and administration
charges (note 2) ............................ (36,747) -- (387,061) (10)
----------- -- ----------- --------
Net investment activity ....................... 36,155 -- 16,913 (10)
----------- -- ----------- --------
Proceeds from mutual fund shares sold ......... 5,083,147 -- 7,332,820 161,759
Cost of mutual fund shares sold ............... (5,096,505) -- (6,945,321) (161,594)
----------- -- ----------- --------
Realized gain (loss) on investments ........... (13,358) -- 387,499 165
Change in unrealized gain (loss) on investments 63,381 -- (107,097) (256)
----------- -- ----------- --------
Net gain (loss) on investments ................ 50,023 -- 280,402 (91)
----------- -- ----------- --------
Reinvested capital gains ...................... 6,103 -- 3,333,581 --
----------- -- ----------- --------
Net increase (decrease) in contract owners'
equity resulting from operations .......... 92,281 -- 3,630,896 (101)
----------- -- ----------- --------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 3,431,579 -- 31,096,853 9,005
Transfers between funds ....................... 6,774,363 -- 21,834,332 199,331
Redemptions ................................... (246,314) -- (1,113,904) --
Annuity benefits .............................. -- -- -- --
Annual contract maintenance charge (note 2) ... (468) -- (5,976) --
Contingent deferred sales charges (note 2) .... (2,852) -- (21,429) --
Adjustments to maintain reserves .............. (701) -- 558 2
----------- -- ----------- --------
Net equity transactions ..................... 9,955,607 -- 51,790,434 208,338
----------- -- ----------- --------
Net change in contract owners' equity ........... 10,047,888 -- 55,421,330 208,237
Contract owners' equity beginning of period ..... -- -- 208,237 --
----------- -- ----------- --------
Contract owners' equity end of period ........... 10,047,888 -- 55,629,567 208,237
=========== == =========== ========
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidVIPEI FidVIPGr
-------------------------------------- ------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 31,564,284 2,196,188 11,151,243 3,402,849
Mortality, expense and administration
charges (note 2) ............................ (30,084,349) (21,686,508) (24,599,980) (19,702,775)
--------------- ------------- ------------- -------------
Net investment activity ..................... 1,479,935 (19,490,320) (13,448,737) (16,299,926)
--------------- ------------- ------------- -------------
Proceeds from mutual fund shares sold ......... 137,267,016 128,388,351 361,048,888 352,390,654
Cost of mutual fund shares sold ............... (91,126,170) (86,491,155) (231,057,958) (263,927,395)
--------------- ------------- ------------- -------------
Realized gain (loss) on investments ......... 46,140,846 41,897,196 129,990,930 88,463,259
Change in unrealized gain (loss) on investments 306,220,297 109,421,110 186,810,844 11,508,279
--------------- ------------- ------------- -------------
Net gain (loss) on investments .............. 352,361,143 151,318,306 316,801,774 99,971,538
--------------- ------------- ------------- -------------
Reinvested capital gains ...................... 158,698,207 62,957,378 49,915,087 85,921,939
--------------- ------------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 512,539,285 194,785,364 353,268,124 169,593,551
--------------- ------------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 395,432,535 442,789,904 253,081,701 365,931,236
Transfers between funds ....................... (6,514,287) (69,441,399) (129,238,876) (10,863,005)
Redemptions ................................... (152,832,877) (81,847,725) (141,496,031) (75,999,761)
Annuity benefits .............................. (151,789) (88,594) (128,135) (72,619)
Annual contract maintenance charge (note 2) ... (987,195) (829,507) (1,099,317) (953,598)
Contingent deferred sales charges (note 2) .... (2,099,197) (1,245,285) (2,350,994) (1,299,922)
Adjustments to maintain reserves .............. (20,082) 162,241 (37,457) 88,603
--------------- ------------- ------------- -------------
Net equity transactions ................... 232,827,108 289,499,635 (21,269,109) 276,830,934
--------------- ------------- ------------- -------------
Net change in contract owners' equity ......... 745,366,393 484,284,999 331,999,015 446,424,485
Contract owners' equity beginning of period ... 1,851,157,378 1,366,872,379 1,662,797,746 1,216,373,261
--------------- ------------- ------------- -------------
Contract owners' equity end of period ......... $ 2,596,523,771 1,851,157,378 1,994,796,761 1,662,797,746
=============== ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPHI FidVIPOv
-------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 47,561,883 33,785,879 9,616,272 6,275,770
Mortality, expense and administration
charges (note 2) ............................ (9,735,535) (6,818,446) (8,027,188) (7,305,363)
----------- ----------- ----------- -----------
Net investment activity ..................... 37,826,348 26,967,433 1,589,084 (1,029,593)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 311,819,193 277,588,488 325,866,496 239,748,204
Cost of mutual fund shares sold ............... (295,085,798) (254,093,887) (271,581,444) (221,736,644)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 16,733,395 23,494,601 54,285,052 18,011,560
Change in unrealized gain (loss) on investments 45,290,142 3,017,656 (34,908,260) 35,816,737
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. 62,023,537 26,512,257 19,376,792 53,828,297
----------- ----------- ----------- -----------
Reinvested capital gains ...................... 5,878,435 6,610,280 38,173,687 6,903,348
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 105,728,320 60,089,970 59,139,563 59,702,052
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 139,864,147 155,991,160 59,588,290 76,505,148
Transfers between funds ....................... (19,876,856) 39,129,338 (49,688,118) (55,066,402)
Redemptions ................................... (51,389,595) (29,229,650) (45,181,274) (30,773,300)
Annuity benefits .............................. (44,670) (21,532) (81,666) (57,270)
Annual contract maintenance charge (note 2) ... (245,933) (214,322) (348,798) (366,967)
Contingent deferred sales charges (note 2) .... (744,127) (513,145) (640,146) (556,340)
Adjustments to maintain reserves .............. 12,025 19,823 (19,734) (20,346)
----------- ----------- ----------- -----------
Net equity transactions ................... 67,574,991 165,161,672 (36,371,446) (10,335,477)
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 173,303,311 225,251,642 22,768,117 49,366,575
Contract owners' equity beginning of period ... 654,534,143 429,282,501 562,589,941 513,223,366
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... 827,837,454 654,534,143 585,358,058 562,589,941
=========== =========== =========== ===========
</TABLE>
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
FidVIPAM FidVIPCon
----------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 32,069,538 30,292,892 4,746,178 --
Mortality, expense and administration
charges (note 2) ............................ (13,400,915) (11,728,562) (9,830,834) (4,093,694)
--------------- ----------- ----------- -----------
Net investment activity ..................... 18,668,623 18,564,330 (5,084,656) (4,093,694)
--------------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 64,155,222 71,369,834 79,785,498 42,857,454
Cost of mutual fund shares sold ............... (50,691,840) (58,727,873) (62,047,221) (37,740,520)
--------------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 13,463,382 12,641,961 17,738,277 5,116,934
Change in unrealized gain (loss) on investments 61,763,112 52,460,984 115,299,306 55,834,150
--------------- ----------- ----------- -----------
Net gain (loss) on investments .............. 75,226,494 65,102,945 133,037,583 60,951,084
--------------- ----------- ----------- -----------
Reinvested capital gains ...................... 80,445,621 24,978,350 12,543,472 1,453,926
--------------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 174,340,738 108,645,625 140,496,399 58,311,316
--------------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 111,981,451 123,467,338 205,780,604 194,711,240
Transfers between funds ....................... (50,915,784) (91,324,524) 60,354,302 165,546,497
Redemptions ................................... (79,250,445) (51,519,798) (35,225,735) (11,293,134)
Annuity benefits .............................. (154,671) (125,096) (26,879) (13,674)
Annual contract maintenance charge (note 2) ... (604,024) (645,091) (255,108) (92,454)
Contingent deferred sales charges (note 2) .... (1,221,254) (1,014,204) (633,851) (187,219)
Adjustments to maintain reserves .............. 20,989 (64,567) 19,885 26,929
--------------- ----------- ----------- -----------
Net equity transactions ................... (20,143,738) (21,225,942) 230,013,218 348,698,185
--------------- ----------- ----------- -----------
Net change in contract owners' equity ......... 154,197,000 87,419,683 370,509,617 407,009,501
Contract owners' equity beginning of period ... 926,404,131 838,984,448 527,666,759 120,657,258
--------------- ----------- ----------- -----------
Contract owners' equity end of period ......... $ 1,080,601,131 926,404,131 898,176,376 527,666,759
=============== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
FidVIPGrOp MSEmMkt
--------------------------- -----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... -- -- 215,622 --
Mortality, expense and administration
charges (note 2) ............................ (151,360) -- (32,654) --
---------- ---------
Net investment activity ..................... (151,360) -- 182,968 --
---------- ---------
Proceeds from mutual fund shares sold ......... 13,987,376 -- 9,201,428 --
Cost of mutual fund shares sold ............... (13,645,097) -- (9,604,273) --
---------- ---------
Realized gain (loss) on investments ......... 342,279 -- (402,845) --
Change in unrealized gain (loss) on investments 1,832,634 -- (134,747) --
---------- ---------
Net gain (loss) on investments .............. 2,174,913 -- (537,592) --
---------- ---------
Reinvested capital gains ...................... -- -- 93,569 --
---------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 2,023,553 -- (261,055) --
---------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 14,171,862 -- 3,095,151 --
Transfers between funds ....................... 32,032,277 -- 5,390,535 --
Redemptions ................................... (564,541) -- (69,221) --
Annuity benefits .............................. -- -- -- --
Annual contract maintenance charge (note 2) ... (2,292) -- (458) --
Contingent deferred sales charges (note 2) .... (5,479) -- (349) --
Adjustments to maintain reserves .............. 1,844 -- (7,793) --
---------- ---------
Net equity transactions ................... 45,633,671 -- 8,407,865 --
---------- ---------
Net change in contract owners' equity ......... 47,657,224 -- 8,146,810 --
Contract owners' equity beginning of period ... -- -- -- --
---------- ---------
Contract owners' equity end of period ......... 47,657,224 -- 8,146,810 --
========== == ========= ==
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATCapAp NSATGvtBd
----------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 2,726,088 1,251,542 17,136,024 16,514,790
Mortality, expense and administration
charges (note 2) ............................ (3,300,579) (1,068,996) (3,682,644) (3,520,523)
------------- ----------- ----------- -----------
Net investment activity ..................... (574,491) 182,546 13,453,380 12,994,267
------------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 62,546,657 79,805,628 91,300,089 59,380,633
Cost of mutual fund shares sold ............... (46,273,238) (71,378,017) (88,341,190) (60,934,857)
------------- ----------- ----------- -----------
Realized gain (loss) on investments ......... 16,273,419 8,427,611 2,958,899 (1,554,224)
Change in unrealized gain (loss) on investments 40,948,774 5,144,294 4,971,271 (5,952,743)
------------- ----------- ----------- -----------
Net gain (loss) on investments .............. 57,222,193 13,571,905 7,930,170 (7,506,967)
------------- ----------- ----------- -----------
Reinvested capital gains ...................... 7,703,943 3,995,751 -- --
------------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 64,351,645 17,750,202 21,383,550 5,487,300
------------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 79,512,984 28,289,821 36,656,330 50,815,571
Transfers between funds ....................... 95,314,794 64,574,647 (6,550,198) (9,883,482)
Redemptions ................................... (14,345,113) (4,361,006) (32,967,846) (23,561,082)
Annuity benefits .............................. (292) -- (22,811) (24,001)
Annual contract maintenance charge (note 2) ... (90,956) (44,443) (161,508) (177,041)
Contingent deferred sales charges (note 2) .... (235,192) (85,893) (449,182) (341,250)
Adjustments to maintain reserves .............. 8,193 3,484 2,293 4,597
------------- ----------- ----------- -----------
Net equity transactions ................... 160,164,418 88,376,610 (3,492,922) 16,833,312
------------- ----------- ----------- -----------
Net change in contract owners' equity ......... 224,516,063 106,126,812 17,890,628 22,320,612
Contract owners' equity beginning of period ... 139,089,426 32,962,614 281,791,284 259,470,672
------------- ----------- ----------- -----------
Contract owners' equity end of period ......... $ 363,605,489 139,089,426 299,681,912 281,791,284
============= =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NSATMyMkt NSATSmCo
----------------------------------- --------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 46,200,443 39,940,518 -- 389,011
Mortality, expense and administration
charges (note 2) ............................ (12,168,923) (10,854,333) (2,933,759) (985,031)
----------- ----------- ----------- -----------
Net investment activity ..................... 34,031,520 29,086,185 (2,933,759) (596,020)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ......... 2,446,735,002 1,686,345,891 136,575,863 74,827,220
Cost of mutual fund shares sold ............... (2,466,735,002) (1,686,345,891) (116,663,809) (69,879,234)
----------- ----------- ----------- -----------
Realized gain (loss) on investments ......... -- -- 19,912,054 4,947,986
Change in unrealized gain (loss) on investments -- -- 4,818,936 4,726,862
----------- ----------- ----------- -----------
Net gain (loss) on investments .............. -- -- 24,730,990 9,674,848
----------- ----------- ----------- -----------
Reinvested capital gains ...................... -- -- 7,911,895 855,271
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 34,031,520 29,086,185 29,709,126 9,934,099
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 574,163,215 725,565,703 68,338,674 43,614,525
Transfers between funds ....................... (398,798,940) (475,046,733) 46,335,002 96,607,598
Redemptions ................................... (176,620,083) (112,018,563) (12,078,315) (4,098,691)
Annuity benefits .............................. (29,991) (23,110) (1,773) --
Annual contract maintenance charge (note 2) ... (338,131) (319,172) (76,406) (21,542)
Contingent deferred sales charges (note 2) .... (2,442,204) (1,484,513) (198,899) (107,153)
Adjustments to maintain reserves .............. 11,382 48,555 9,979 1,006
----------- ----------- ----------- -----------
Net equity transactions ................... (4,054,752) 136,722,167 102,328,262 135,995,743
----------- ----------- ----------- -----------
Net change in contract owners' equity ......... 29,976,768 165,808,352 132,037,388 145,929,842
Contract owners' equity beginning of period ... 809,469,729 643,661,377 158,512,835 12,582,993
----------- ----------- ----------- -----------
Contract owners' equity end of period ......... 839,446,497 809,469,729 290,550,223 158,512,835
=========== =========== =========== ===========
</TABLE>
<PAGE> 11
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
NSATTotRe NBAMTGro
------------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 12,556,764 9,065,576 -- 140,538
Mortality, expense and administration
charges (note 2) ............................ (10,939,432) (5,979,077) (5,755,671) (5,044,635)
--------------- ------------ ------------ ------------
Net investment activity ..................... 1,617,332 3,086,499 (5,755,671) (4,904,097)
--------------- ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 36,066,433 33,249,637 177,857,355 194,983,679
Cost of mutual fund shares sold ............... (22,601,600) (24,444,426) (151,296,684) (172,820,024)
--------------- ------------ ------------ ------------
Realized gain (loss) on investments ......... 13,464,833 8,805,211 26,560,671 22,163,655
Change in unrealized gain (loss) on investments 139,386,896 51,380,231 47,617,333 (23,619,295)
--------------- ------------ ------------ ------------
Net gain (loss) on investments .............. 152,851,729 60,185,442 74,178,004 (1,455,640)
--------------- ------------ ------------ ------------
Reinvested capital gains ...................... 32,893,745 22,040,126 32,577,604 32,885,958
--------------- ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 187,362,806 85,312,067 100,999,937 26,526,221
--------------- ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 234,728,766 147,190,954 44,470,540 63,157,589
Transfers between funds ....................... 82,492,350 31,680,108 (3,323,065) (56,288,983)
Redemptions ................................... (51,176,329) (27,808,731) (39,592,901) (21,321,681)
Annuity benefits .............................. (152,880) (135,707) (60,735) (54,905)
Annual contract maintenance charge (note 2) ... (390,286) (276,719) (269,972) (261,627)
Contingent deferred sales charges (note 2) .... (714,965) (321,819) (523,316) (336,808)
Adjustments to maintain reserves .............. 38,731 43,110 12,128 (16,483)
--------------- ------------ ------------ ------------
Net equity transactions ................... 264,825,387 150,371,196 712,679 (15,122,898)
--------------- ------------ ------------ ------------
Net change in contract owners' equity ......... 452,188,193 235,683,263 101,712,616 11,403,323
Contract owners' equity beginning of period ... 582,959,358 347,276,095 375,781,424 364,378,101
--------------- ------------ ------------ ------------
Contract owners' equity end of period ......... $ 1,035,147,551 582,959,358 477,494,040 375,781,424
=============== ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
NBAMTLMat NBAMTPart
--------------------------------- ---------------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 11,734,100 16,264,359 1,231,708 353,111
Mortality, expense and administration
charges (note 2) ............................ (2,628,324) (2,674,530) (7,824,975) (2,762,993)
------------ ------------ ------------ ------------
Net investment activity ..................... 9,105,776 13,589,829 (6,593,267) (2,409,882)
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 57,634,002 51,617,066 239,929,783 104,141,211
Cost of mutual fund shares sold ............... (58,656,885) (54,630,288) (184,398,144) (83,085,149)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... (1,022,883) (3,013,222) 55,531,639 21,056,062
Change in unrealized gain (loss) on investments 1,972,323 (4,803,141) 71,315,949 27,820,051
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 949,440 (7,816,363) 126,847,588 48,876,113
------------ ------------ ------------ ------------
Reinvested capital gains ...................... -- -- 18,968,301 4,413,881
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 10,055,216 5,773,466 139,222,622 50,880,112
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 56,406,502 103,107,451 178,218,856 89,463,499
Transfers between funds ....................... (64,818,071) (80,971,699) 138,729,962 126,822,125
Redemptions ................................... (16,675,074) (11,098,410) (32,375,861) (9,554,710)
Annuity benefits .............................. (15,225) (14,378) (1,195) --
Annual contract maintenance charge (note 2) ... (65,787) (70,499) (163,783) (67,419)
Contingent deferred sales charges (note 2) .... (209,825) (166,112) (453,932) (152,084)
Adjustments to maintain reserves .............. 372 5,385 1,670 18,141
------------ ------------ ------------ ------------
Net equity transactions ................... (25,377,108) 10,791,738 283,955,717 206,529,552
------------ ------------ ------------ ------------
Net change in contract owners' equity ......... (15,321,892) 16,565,204 423,178,339 257,409,664
Contract owners' equity beginning of period ... 203,772,070 187,206,866 354,011,224 96,601,560
------------ ------------ ------------ ------------
Contract owners' equity end of period ......... 188,450,178 203,772,070 777,189,563 354,011,224
============ ============ ============ ============
</TABLE>
(Continued)
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
OppBdFd OppGISec
----------------------------- ---------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... $ 14,915,295 11,841,875 4,353,191 --
Mortality, expense and administration
charges (note 2) ............................. (3,235,025) (2,458,735) (5,669,952) (3,373,580)
------------- ------------ ------------ ------------
Net investment activity....................... 11,680,270 9,383,140 (1,316,761) (3,373,580)
------------- ------------ ------------ ------------
Proceeds from mutual fund shares sold .......... 30,992,706 26,186,293 76,448,017 45,734,202
Cost of mutual fund shares sold ................ (30,503,439) (26,001,294) (62,463,469) (44,891,906)
------------- ------------ ------------ ------------
Realized gain (loss) on investments .......... 489,267 184,999 13,984,548 842,296
Change in unrealized gain (loss) on investments. 5,495,496 (2,545,288) 60,986,819 39,919,697
------------- ------------ ------------ ------------
Net gain (loss) on investments ............... 5,984,763 (2,360,289) 74,971,367 40,761,993
------------- ------------ ------------ ------------
Reinvested capital gains ....................... 738,909 96,121 -- --
------------- ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... 18,403,942 7,118,972 73,654,606 37,388,413
------------- ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 55,252,898 64,689,526 90,024,052 69,450,810
Transfers between funds ........................ 19,335,126 3,142,114 43,312,410 15,287,141
Redemptions .................................... (16,712,535) (11,183,443) (23,014,747) (11,768,272)
Annuity benefits ............................... (54,502) (28,688) (4,941) (1,441)
Annual contract maintenance charge (note 2) .... (89,653) (82,976) (173,863) (140,721)
Contingent deferred sales charges (note 2) ..... (268,113) (162,459) (394,896) (243,448)
Adjustments to maintain reserves ............... (3,694) 5,388 (691,837) (24,847)
------------- ------------ ------------ ------------
Net equity transactions .................... 57,459,527 56,379,462 109,056,178 72,559,222
------------- ------------ ------------ ------------
Net change in contract owners' equity ............ 75,863,469 63,498,434 182,710,784 109,947,635
Contract owners' equity beginning of period ...... 215,102,822 151,604,388 306,611,894 196,664,259
------------- ------------ ------------ ------------
Contract owners' equity end of period ............ $ 290,966,291 215,102,822 489,322,678 306,611,894
============= ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
OppGro OppMult
----------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ........................... -- -- 10,986,747 10,013,188
Mortality, expense and administration
charges (note 2) ............................. (40,955) -- (3,902,616) (2,686,847)
----------- -- ------------ ------------
Net investment activity....................... (40,955) -- 7,084,131 7,326,341
----------- -- ------------ ------------
Proceeds from mutual fund shares sold .......... 738,091 -- 8,146,767 7,288,916
Cost of mutual fund shares sold ................ (732,690) -- (6,105,557) (5,896,054)
----------- -- ------------ ------------
Realized gain (loss) on investments .......... 5,401 -- 2,041,210 1,392,862
Change in unrealized gain (loss) on investments. (150,054) -- 22,703,778 13,543,683
----------- -- ------------ ------------
Net gain (loss) on investments ............... (144,653) -- 24,744,988 14,936,545
----------- -- ------------ ------------
Reinvested capital gains ....................... -- -- 9,159,579 4,206,935
----------- -- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ......... (185,608) -- 40,988,698 26,469,821
----------- -- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 5,815,873 -- 67,724,310 54,730,085
Transfers between funds ........................ 10,665,183 -- 15,591,000 (2,296,771)
Redemptions .................................... (104,041) -- (20,273,082) (9,679,010)
Annuity benefits ............................... -- -- (8,967) (5,897)
Annual contract maintenance charge (note 2) .... (799) -- (128,063) (113,444)
Contingent deferred sales charges (note 2) ..... (619) -- (313,339) (172,551)
Adjustments to maintain reserves ............... 125 -- 2,876 8,410
----------- -- ------------ ------------
Net equity transactions .................... 16,375,722 -- 62,594,735 42,470,822
----------- -- ------------ ------------
Net change in contract owners' equity ............ 16,190,114 -- 103,583,433 68,940,643
Contract owners' equity beginning of period ...... -- -- 237,388,771 168,448,128
----------- -- ------------ ------------
Contract owners' equity end of period ............ 16,190,114 -- 340,972,204 237,388,771
=========== == ============ ============
</TABLE>
<PAGE> 13
NATIONWIDE VARIABLE ACCOUNT - II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
Years Ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
StOpp2 StDisc2
----------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 2,534,711 3,950,904 -- 18,969,271
Mortality, expense and administration
charges (note 2) ............................ (9,066,407) (7,057,927) (2,604,823) (2,853,957)
------------ ------------ ------------ ------------
Net investment activity ..................... (6,531,696) (3,107,023) (2,604,823) 16,115,314
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 148,226,419 119,184,242 123,823,006 102,439,111
Cost of mutual fund shares sold ............... (109,705,183) (96,051,789) (138,054,663) (93,265,896)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 38,521,236 23,132,453 (14,231,657) 9,173,215
Change in unrealized gain (loss) on investments 53,401,226 42,622,463 35,647,182 (52,600,640)
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 91,922,462 65,754,916 21,415,525 (43,427,425)
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 57,079,292 18,522,999 -- 25,127,954
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 142,470,058 81,170,892 18,810,702 (2,184,157)
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 89,723,233 114,300,494 22,742,374 54,635,699
Transfers between funds ....................... (29,207,063) (1,880,976) (42,069,763) (61,723,439)
Redemptions ................................... (40,126,673) (24,806,464) (12,584,675) (10,218,470)
Annuity benefits .............................. (34,707) (24,921) (9,675) (6,945)
Annual contract maintenance charge (note 2) ... (341,773) (307,976) (105,512) (117,314)
Contingent deferred sales charges (note 2) .... (633,525) (443,883) (239,340) (194,690)
Adjustments to maintain reserves .............. (51,000) 15,330 2,840 4,270
------------ ------------ ------------ ------------
Net equity transactions ................... 19,328,492 86,851,604 (32,263,751) (17,620,889)
------------ ------------ ------------ ------------
Net change in contract owners' equity ........... 161,798,550 168,022,496 (13,453,049) (19,805,046)
Contract owners' equity beginning of period ..... 602,429,220 434,406,724 208,719,472 228,524,518
------------ ------------ ------------ ------------
Contract owners' equity end of period ........... $764,227,770 602,429,220 195,266,423 208,719,472
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
StintStk2 VEWrldBd
---------------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... 1,173,377 287,395 3,428,399 2,839,207
Mortality, expense and administration
charges (note 2) ............................ (921,090) (611,962) (1,337,855) (1,405,973)
----------- ----------- ------------ ------------
Net investment activity ..................... 252,287 (324,567) 2,090,544 1,433,234
----------- ----------- ------------ ------------
Proceeds from mutual fund shares sold ......... 39,269,990 40,635,874 36,100,931 26,316,732
Cost of mutual fund shares sold ............... (40,207,464) (39,555,594) (37,747,713) (24,676,513)
----------- ----------- ------------ ------------
Realized gain (loss) on investments ......... (937,474) 1,080,280 (1,646,782) 1,640,219
Change in unrealized gain (loss) on investments (9,982,351) 163,302 311,663 (1,896,860)
----------- ----------- ------------ ------------
Net gain (loss) on investments .............. (10,919,825) 1,243,582 (1,335,119) (256,641)
----------- ----------- ------------ ------------
Reinvested capital gains ...................... 1,762,973 -- -- --
----------- ----------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (8,904,565) 919,015 755,425 1,176,593
----------- ----------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 16,108,665 24,522,765 13,446,356 19,593,116
Transfers between funds ....................... (22,926,232) 44,391,422 (16,903,125) (10,054,511)
Redemptions ................................... (4,298,166) (2,445,130) (9,117,586) (7,422,209)
Annuity benefits .............................. (1,862) -- (11,204) (10,709)
Annual contract maintenance charge (note 2) ... (23,552) (13,534) (44,515) (54,748)
Contingent deferred sales charges (note 2) .... (69,910) (44,582) (111,505) (102,961)
Adjustments to maintain reserves .............. 5,043 3,498 3,411 5,937
----------- ----------- ------------ ------------
Net equity transactions ................... (11,206,014) 66,414,439 (12,738,168) 1,953,915
----------- ----------- ------------ ------------
Net change in contract owners' equity ........... (20,110,579) 67,333,454 (11,982,743) 3,130,508
Contract owners' equity beginning of period ..... 69,828,900 2,495,446 109,247,607 106,117,099
----------- ----------- ------------ ------------
Contract owners' equity end of period ........... 49,718,321 69,828,900 97,264,864 109,247,607
=========== =========== ============ ============
</TABLE>
(Continued)
<PAGE> 14
NATIONWIDE VARIABLE ACCOUNT -- II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
VEWrldEMkt VEWrldHAs
---------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 154,979 -- 2,942,339 1,557,690
Mortality, expense and administration
charges (note 2) ............................ (1,293,147) (3,588) (2,001,920) (2,044,967)
----------- ----------- ------------ ------------
Net investment activity ..................... (1,138,168) (3,588) 940,419 (487,277)
----------- ----------- ------------ ------------
Proceeds from mutual fund shares sold ......... 85,151,405 83,165 180,226,702 234,370,915
Cost of mutual fund shares sold ............... (84,005,535) (83,031) (178,928,373) (216,949,542)
----------- ----------- ------------ ------------
Realized gain (loss) on investments ......... 1,145,870 134 1,298,329 17,421,373
Change in unrealized gain (loss) on
investments ................................. (24,512,682) 96,291 (10,420,493) 1,524,272
----------- ----------- ------------ ------------
Net gain (loss) on investments .............. (23,366,812) 96,425 (9,122,164) 18,945,645
----------- ----------- ------------ ------------
Reinvested capital gains ...................... -- -- 3,986,394 1,527,541
----------- ----------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (24,504,980) 92,837 (4,195,351) 19,985,909
----------- ----------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 39,216,218 46,290 16,547,301 25,924,596
Transfers between funds ....................... 58,762,770 12,045,985 (24,931,349) (4,917,223)
Redemptions ................................... (7,729,327) (4,889) (11,775,774) (8,243,366)
Annuity benefits .............................. (1,090) -- (2,890) (1,348)
Annual contract maintenance charge (note 2) ... (31,176) (62) (76,665) (85,001)
Contingent deferred sales charges (note 2) .... (109,502) (40) (187,910) (143,065)
Adjustments to maintain reserves .............. (6,833) 112 (7,728) 51,242
----------- ----------- ------------ ------------
Net equity transactions ................... 90,101,060 12,087,396 (20,435,015) 12,585,835
----------- ----------- ------------ ------------
Net change in contract owners' equity ......... 65,596,080 12,180,233 (24,630,366) 32,571,744
Contract owners' equity beginning of period ... 12,180,233 -- 151,820,758 119,249,014
----------- ----------- ------------ ------------
Contract owners' equity end of period ......... $77,776,313 12,180,233 127,190,392 151,820,758
=========== =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
MSRESec WPinteq
------------------------------ -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends .......................... $ 6,929,835 1,590,652 2,335,080 3,698,055
Mortality, expense and administration
charges (note 2) ............................ (2,856,831) (541,778) (4,217,409) (2,849,091)
------------ ------------ ------------ ------------
Net investment activity ..................... 4,073,004 1,048,874 (1,882,329) 848,964
------------ ------------ ------------ ------------
Proceeds from mutual fund shares sold ......... 87,738,533 16,573,232 94,815,826 106,917,675
Cost of mutual fund shares sold ............... (67,567,070) (14,961,481) (87,661,494) (99,742,804)
------------ ------------ ------------ ------------
Realized gain (loss) on investments ......... 20,171,463 1,611,751 7,154,332 7,174,871
Change in unrealized gain (loss) on
investments ................................. (8,041,235) 19,537,820 (34,790,695) 1,634,068
------------ ------------ ------------ ------------
Net gain (loss) on investments .............. 12,130,228 21,149,571 (27,636,363) 8,808,939
------------ ------------ ------------ ------------
Reinvested capital gains ...................... 22,876,677 753,434 16,160,192 1,645,400
------------ ------------ ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 39,079,909 22,951,879 (13,358,500) 11,303,303
------------ ------------ ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 63,961,156 22,515,613 69,542,854 112,785,247
Transfers between funds ....................... 26,781,688 98,780,721 (17,704,103) 87,888,069
Redemptions ................................... (11,168,996) (1,228,962) (16,226,024) (9,488,177)
Annuity benefits .............................. (1,202) -- (8,123) (2,986)
Annual contract maintenance charge (note 2) ... (56,589) (10,786) (95,572) (62,895)
Contingent deferred sales charges (note 2) .... (156,322) (17,641) (245,953) (148,153)
Adjustments to maintain reserves .............. 4,138 3,554 4,927 25,385
------------ ------------ ------------ ------------
Net equity transactions ................... 79,363,873 120,042,499 35,268,006 190,996,490
------------ ------------ ------------ ------------
Net change in contract owners' equity ......... 118,443,782 142,994,378 21,909,506 202,299,793
Contract owners' equity beginning of period ... 150,233,923 7,239,545 264,866,519 62,566,726
------------ ------------ ------------ ------------
Contract owners' equity end of period ......... $268,677,705 150,233,923 286,776,025 264,866,519
============ ============ ============ ============
</TABLE>
<PAGE> 15
NATIONWIDE VARIABLE ACCOUNT -- II
STATEMENTS OF OPERATIONS AND CHANGES
IN CONTRACT OWNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
WPPVenCap WPSmCoGr
--------------------------- -----------------------------
1997 1996 1997 1996
---- ---- ---- ----
INVESTMENT ACTIVITY:
<S> <C> <C> <C> <C>
Reinvested dividends .......................... $ 2,289 -- -- --
Mortality, expense and administration
charges (note 2) ............................ (303,833) (2,741) (4,274,427) (2,791,973)
----------- ---------- ------------ ------------
Net investment activity ..................... (301,544) (2,741) (4,274,427) (2,791,973)
----------- ---------- ------------ ------------
Proceeds from mutual fund shares sold ......... 46,674,220 -- 206,418,883 197,695,619
Cost of mutual fund shares sold ............... (44,520,920) -- (190,696,238) (177,329,297)
----------- ---------- ------------ ------------
Realized gain (loss) on investments ......... 2,153,300 -- 15,722,645 20,366,322
Change in unrealized gain (loss) on
investments.................................. (396,347) 151,486 32,994,104 (7,620,245)
----------- ---------- ------------ ------------
Net gain (loss) on investments .............. 1,756,953 151,486 48,716,749 12,746,077
----------- ---------- ------------ ------------
Reinvested capital gains ...................... -- -- -- --
----------- ---------- ------------ ------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,455,409 148,745 44,442,322 9,954,104
----------- ---------- ------------ ------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners ............................. 6,835,129 34,854 78,705,384 105,581,082
Transfers between funds ....................... (463,676) 9,268,650 21,336,792 58,853,290
Redemptions ................................... (2,561,771) (3,576) (17,829,181) (10,660,592)
Annuity benefits .............................. -- -- (4,658) (1,515)
Annual contract maintenance charge (note 2) ... (5,950) (47) (116,486) (67,269)
Contingent deferred sales charges (note 2) .... (29,935) (30) (332,255) (179,689)
Adjustments to maintain reserves .............. 975 16 12,595 21,132
----------- ---------- ------------ ------------
Net equity transactions ................... 3,774,772 9,299,867 81,772,191 153,546,439
----------- ---------- ------------ ------------
Net change in contract owners' equity ......... 5,230,181 9,448,612 126,214,513 163,500,543
Contract owners' equity beginning of period ... 9,448,612 -- 257,182,600 93,682,057
----------- ---------- ------------ ------------
Contract owners' equity end of period ......... $14,678,793 9,448,612 383,397,113 257,182,600
=========== ========== ============ ============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 16
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-II (the Account) was established
pursuant to a resolution of the Board of Directors of Nationwide Life
Insurance Company (the Company) on October 7, 1981. The Account has
been registered as a unit investment trust under the Investment Company
Act of 1940.
The Company offers tax qualified and non-tax qualified Individual
Deferred Variable Annuity Contracts, and Individual Modified Single
Premium Deferred Variable Annuity Contracts through the Account. The
primary distribution for the contracts is through the brokerage
community; however, other distributors are utilized.
(b) The Contracts
Only contracts without a 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 expenses.
With certain exceptions, contract owners in either the accumulation or
the payout phase may invest in the following:
Portfolios of the American Century Variable Portfolios, Inc.
(American Century VP)
(formerly TCI Portfolios, Inc.);
American Century VP - American Century VP Balanced (ACVPBal)
(formerly TCI Portfolios - TCI Balanced)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp) (formerly TCI Portfolios - TCI Growth)
American Century VP - American Century VP International
(ACVPInt) (formerly TCI Portfolios - TCI International)
American Century VP - American Century VP Value (ACVPValue)
(formerly TCI Portfolios - TCI Value)
Funds of the American Variable Insurance Series (American VI
Series) (available only for contracts issued on or after May 1,
1987 and before September 1, 1989);
American VI Series - Growth Fund (AVISGro)
American VI Series - High-Yield Bond Fund (AVISHiYld)
American VI Series - U.S. Government/AAA-Rated Securities Fund
(AVISGvt)
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
Dreyfus Stock Index Fund (DryStkIx)
Portfolios of the Dreyfus Variable Investment Fund (Dreyfus VIF);
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
Portfolios of the Fidelity Variable Insurance Products Fund
(Fidelity VIP);
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
Fidelity VIP - Growth Portfolio (FidVIPGr)
Fidelity VIP - High Income Portfolio (FidVIPHI)
Fidelity VIP - Overseas Portfolio (FidVIPOv)
Portfolios of the Fidelity Variable Insurance Products Fund II
(Fidelity VIP-II);
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
<PAGE> 17
Portfolio of the Fidelity Variable Insurance Products Fund III
(Fidelity VIP-III);
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
Portfolio of the Morgan Stanley Universal Funds, Inc.
(Morgan Stanley);
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
Funds of the Nationwide Separate Account Trust (Nationwide SAT)
(managed for a fee by an affiliated investment advisor);
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
Nationwide SAT - Government Bond Fund (NSATGvtBd)
Nationwide SAT - Money Market Fund (NSATMyMkt)
Nationwide SAT - Small Company Fund (NSATSmCo)
Nationwide SAT - Total Return Fund (NSATTotRe)
Portfolios of the Neuberger & Berman Advisers Management Trust
(Neuberger & Berman AMT);
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
Neuberger & Berman AMT - Limited Maturity Bond Portfolio
(NBAMTLMat)
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
Funds of the Oppenheimer Variable Account Funds (Oppenheimer VAF);
Oppenheimer VAF - Bond Fund (OppBdFd)
Oppenheimer VAF - Global Securities Fund (OppGlSec)
Oppenheimer VAF - Growth Fund (OppGro)
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
Strong Opportunity Fund II, Inc. (StOpp2)
(formerly Strong Special Fund II, Inc.)
Funds of the Strong Variable Insurance Funds, Inc. (Strong VIF);
Strong VIF - Strong Discovery Fund II (StDisc2)
Strong VIF - Strong International Stock Fund II (StIntStk2)
Funds of the Van Eck Worldwide Insurance Trust (Van Eck WIT);
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
(formerly Van Eck WIT - Gold and Natural Resources Fund)
Portfolio of the Van Kampen American Capital Life Investment Trust
(Van Kampen American Capital LIT);
Van Kampen American Capital LIT - Morgan Stanley Real Estate
Securities Portfolio (MSRESec)
(formerly Van Kampen American Capital LIT -
Real Estate Securities Fund)
Portfolios of the Warburg Pincus Trust;
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
At December 31, 1997, 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, 1997. 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.
<PAGE> 18
(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) Reclassifications
Certain 1996 amounts have been reclassified to conform with the current
period presentation.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge. For contracts issued prior to December 15, 1988, 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
December 15, 1988, 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) for The
BEST OF AMERICA(R) contracts, an annual contract maintenance charge of $30,
with certain exceptions, which is satisfied by surrendering units; and (b)
for The BEST OF AMERICA(R) contracts issued prior to December 15, 1988, 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
The BEST OF AMERICA(R) contracts issued on or after December 15, 1988, 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; for The BEST OF AMERICA(R)
America's Vision Annuity(SM) contracts, 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 0.15%,
respectively; and for The BEST OF AMERICA(R) Nationwide Insurance
Enterprise Annuity contracts, a mortality risk charge assessed through the
daily unit value calculation equal to an annual rate of 0.80%.
The following table provides mortality, expense and administration charges
by contract type for the period ended December 31, 1997:
<TABLE>
<CAPTION>
TOTAL ACVPBal ACVPCapap ACVPint ACVPValue
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BOA............................. $ 126,406,070 1,191,850 4,037,524 1,015,749 236,395
BOA Vision...................... 83,760,749 875,039 1,103,836 1,073,332 228,347
BOA Enterprise.................. 118,491 876 1,623 1,174 559
------------ ------------ ------------ ------------ ------------
Total....................... $ 210,285,310 2,067,765 5,142,983 2,090,255 465,301
============ ============ ============ ============ ============
AVISGro AVISHiYld AVISGvt DrySRGro DryStkIx
------------ ------------ ------------ ------------ ------------
BOA............................. $ 329,103 38,276 72,106 927,006 4,928,324
BOA Vision...................... - - - 837,713 6,128,921
BOA Enterprise.................. - - - 1,418 8,919
------------ ------------ ------------ ------------ ------------
Total....................... $ 329,103 38,276 72,106 1,766,137 11,066,164
============ ============ ============ ============ ============
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
DryCapAp DryGrInc FidVIPEI FidVIPGr FidVIPHI
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
BOA............................. $ 12,311 148,142 18,215,213 17,002,784 5,147,050
BOA Vision...................... 24,419 237,804 11,859,942 7,588,917 4,584,647
BOA Enterprise.................. 17 1,115 9,194 8,279 3,838
------------ ------------ ------------ ------------ ------------
Total....................... $ 36,747 387,061 30,084,349 24,599,980 9,735,535
============ ============ ============ ============ ============
FidVIPOv FidVIPAM FidVIPCon FidVipGrOp MSEmMkt
------------ ------------ ------------ ------------ ------------
BOA............................. $ 6,016,329 9,994,932 4,517,986 60,777 15,348
BOA Vision...................... 2,010,362 3,404,754 5,308,985 90,378 17,202
BOA Enterprise.................. 497 1,229 3,863 205 104
------------ ------------ ------------ ------------ ------------
Total....................... $ 8,027,188 13,400,915 9,830,834 151,360 32,654
============ ============ ============ ============ ============
NSATCaPap NSATGvtBd NSATMyMkt NSATSmCo NSATTotRe
------------ ------------ ------------ ------------ ------------
BOA............................. $ 1,856,637 2,631,037 6,719,210 1,428,117 6,944,503
BOA Vision...................... 1,437,155 1,049,731 5,441,823 1,497,619 3,970,444
BOA Enterprise.................. 6,787 1,876 7,890 8,023 24,485
------------ ------------ ------------ ------------ ------------
Total....................... $ 3,300,579 3,682,644 12,168,923 2,933,759 10,939,432
============ ============ ============ ============ ============
NBAMTGro NBAMTLMat NBAMTPart OppBdFd OppGISec
------------ ------------ ------------ ------------ ------------
BOA............................. $ 4,438,181 1,495,421 3,649,443 1,630,280 2,979,200
BOA Vision...................... 1,315,545 1,132,335 4,169,214 1,603,881 2,689,657
BOA Enterprise.................. 1,945 568 6,318 864 1,095
------------ ------------ ------------ ------------ ------------
Total....................... $ 5,755,671 2,628,324 7,824,975 3,235,025 5,669,952
============ ============ ============ ============ ============
OppGRo OppMult StOpp2 StDisc2 StintStk2
------------ ------------ ------------ ------------ ------------
BOA............................. $ 18,845 2,272,557 5,943,611 1,607,469 440,839
BOA Vision...................... 22,068 1,628,568 3,119,935 996,834 479,748
BOA Enterprise.................. 42 1,491 2,861 520 503
------------ ------------ ------------ ------------ ------------
Total....................... $ 40,955 3,902,616 9,066,407 2,604,823 921,090
============ ============ ============ ============ ============
VEWrldBd VEWrldEMkt VEWrlfHAs MSRESec WPIntEq
------------ ------------ ------------ ------------ ------------
BOA............................. $ 866,795 699,280 1,330,754 1,477,443 1,892,289
BOA Vision...................... 470,930 592,796 670,086 1,377,066 2,323,574
BOA Enterprise.................. 130 1,071 1,080 2,322 1,546
------------ ------------ ------------ ------------ ------------
Total....................... $ 1,337,855 1,293,147 2,001,920 2,856,831 4,217,409
============ ============ ============ ============ ============
WPPVenCap WPSmCoGr
------------ ------------
BOA............................. $ 135,993 2,040,961
BOA Vision...................... 167,588 2,229,554
BOA Enterprise.................. 252 3,912
------------ ------------
Total....................... $ 303,833 4,274,427
============ ============
</TABLE>
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
<PAGE> 20
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1997,
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:
The BEST OF AMERICA(R) contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ............................ 3,321,528 $ 16.345418 $54,291,764 14%
Non-tax qualified ........................ 2,535,285 16.345418 41,440,293 14%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ............................ 7,405,239 22.608168 167,418,887 (5)%
Non-tax qualified ........................ 4,340,405 22.608168 98,128,605 (5)%
American Century VP -
American Century VP International:
Tax qualified ............................ 3,513,167 13.753336 48,317,766 17%
Non-tax qualified ........................ 2,814,767 13.753336 38,712,436 17%
American Century VP -
American Century VP Value:
Tax qualified ............................ 1,153,698 12.621843 14,561,795 24%
Non-tax qualified ........................ 1,177,685 12.621843 14,864,555 24%
American VI Series - Growth Fund:
Tax qualified ............................ 425,839 31.433956 13,385,804 28%
Non-tax qualified ........................ 417,659 31.433956 13,128,675 28%
American VI Series -
High-Yield Bond Fund:
Tax qualified ............................ 79,449 25.696356 2,041,550 11%
Non-tax qualified ........................ 44,445 25.696356 1,142,075 11%
American VI Series - U.S. Government/
AAA-Rated Securities Fund:
Tax qualified ............................ 146,543 19.690955 2,885,572 7%
Non-tax qualified ........................ 111,728 19.690955 2,200,031 7%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ............................ 2,568,412 21.597400 55,471,021 27%
Non-tax qualified ........................ 1,595,569 21.597400 34,460,142 27%
Dreyfus Stock Index Fund:
Tax qualified ............................ 12,220,119 21.614298 264,129,294 31%
Non-tax qualified ........................ 9,791,828 21.614298 211,643,488 31%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ............................ 160,444 10.192063 1,635,255 2%(a)
Non-tax qualified ........................ 195,833 10.192063 1,995,942 2%(a)
Dreyfus VIF Growth and Income Portfolio:
Tax qualified ............................ 948,045 11.455116 10,859,965 15%
Non-tax qualified ........................ 850,450 11.455116 9,742,003 15%
</TABLE>
<PAGE> 21
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified .......................... 23,984,214 35.459509 850,468,452 26%
Non-tax qualified ...................... 19,527,927 35.459509 692,450,703 26%
Fidelity VIP - Growth Portfolio:
Tax qualified .......................... 17,382,123 46.918894 815,549,987 22%
Non-tax qualified ...................... 11,857,821 46.918894 556,355,847 22%
Fidelity VIP - High Income Portfolio:
Tax qualified .......................... 6,886,178 28.515871 196,365,364 16%
Non-tax qualified ...................... 8,097,358 28.515871 230,903,216 16%
Fidelity VIP - Overseas Portfolio:
Tax qualified .......................... 12,793,113 18.248482 233,454,892 10%
Non-tax qualified ...................... 11,023,038 18.248482 201,153,711 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified .......................... 20,417,818 24.319958 496,560,476 19%
Non-tax qualified ...................... 12,420,418 24.319958 302,064,044 19%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified .......................... 13,856,940 16.241378 225,055,800 23%
Non-tax qualified ...................... 11,315,346 16.241378 183,776,812 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified .......................... 946,688 10.932125 10,349,312 9%(a)
Non-tax qualified ...................... 861,112 10.932125 9,413,784 9%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified .......................... 172,203 9.810487 1,689,395 (2)%(a)
Non-tax qualified ...................... 222,098 9.810487 2,178,890 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified .......................... 3,948,978 23.867569 94,252,505 33%
Non-tax qualified ...................... 4,139,623 23.867569 98,802,738 33%
Nationwide SAT -
Government Bond Fund:
Tax qualified .......................... 3,575,004 32.793820 117,238,038 8%
Non-tax qualified ...................... 2,848,085 32.707206 93,152,903 8%
Nationwide SAT - Money Market Fund:
Tax qualified .......................... 10,935,137 22.994005 251,442,595 4%
Non-tax qualified ...................... 11,155,103 22.994005 256,500,494 4%
Nationwide SAT - Small Company Fund:
Tax qualified .......................... 4,812,645 16.020642 77,101,663 16%
Non-tax qualified ...................... 3,793,288 16.020642 60,770,909 16%
Nationwide SAT - Total Return Fund:
Tax qualified .......................... 4,368,093 80.108117 349,919,705 28%
Non-tax qualified ...................... 3,538,356 78.045294 276,152,034 28%
Neuberger & Berman AMT Growth Portfolio:
Tax qualified .......................... 5,338,769 37.889922 202,285,541 27%
Non-tax qualified ...................... 4,164,923 37.889922 157,808,608 27%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified .......................... 3,398,882 17.690564 60,128,140 5%
Non-tax qualified ...................... 2,928,007 17.690564 51,798,095 5%
(continued)
</TABLE>
<PAGE> 22
<TABLE>
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ....................... 7,980,031 22.354609 178,390,473 30%
Non-tax qualified ................... 7,769,569 22.354609 173,685,677 30%
Oppenheimer VAF - Bond Fund:
Tax qualified ....................... 4,076,992 18.715948 76,304,770 8%
Non-tax qualified ................... 3,420,959 18.715948 64,026,491 8%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ....................... 9,603,574 16.030693 153,951,946 21%
Non-tax qualified ................... 6,175,581 16.030693 98,998,843 21%
Oppenheimer VAF - Growth Fund:
Tax qualified ....................... 465,695 10.427884 4,856,213 4%(a)
Non-tax qualified ................... 330,322 10.427884 3,444,559 4%(a)
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified ....................... 5,140,468 20.878401 107,324,752 16%
Non-tax qualified ................... 4,005,875 20.878401 83,636,265 16%
Strong Opportunity Fund II, Inc.:
Tax qualified ....................... 11,262,847 26.092982 293,881,264 24%
Non-tax qualified ................... 7,827,155 26.092982 204,233,815 24%
Strong VIF - Strong Discovery Fund II:
Tax qualified ....................... 3,782,422 17.733129 67,074,177 10%
Non-tax qualified ................... 3,017,702 17.733129 53,513,299 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ....................... 1,303,896 9.509278 12,399,110 (15)%
Non-tax qualified ................... 1,020,345 9.509278 9,702,744 (15)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ....................... 2,104,195 14.758566 31,054,901 1%
Non-tax qualified ................... 2,016,599 14.758566 29,762,109 1%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ....................... 2,421,738 8.792462 21,293,039 (13)%
Non-tax qualified ................... 2,018,746 8.792462 17,749,747 (13)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ....................... 2,616,530 15.767781 41,256,872 (3)%
Non-tax qualified ................... 2,702,266 15.767781 42,608,738 (3)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ....................... 3,539,264 17.901858 63,359,402 20%
Non-tax qualified ................... 4,040,440 17.901858 72,331,383 20%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ....................... 5,900,906 11.164048 65,877,998 (4)%
Non-tax qualified ................... 5,196,387 11.164048 58,012,714 (4)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ....................... 391,358 11.369600 4,449,584 12%
Non-tax qualified ................... 316,378 11.369600 3,597,091 12%
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C> <C>
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ........................... 6,148,609 15.950665 98,074,402 14%
Non-tax qualified ....................... 5,532,845 15.950665 88,252,557 14%
The BEST OF AMERICA(R) Nationwide Insurance
Enterprise Annuity contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ........................... 7,706 13.063915 100,671 15%
Non-tax qualified ....................... 5,382 13.063915 70,310 15%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ........................... 7,635 8.999141 68,708 (4)%
Non-tax qualified ....................... 11,715 8.999141 105,425 (4)%
American Century VP -
American Century VP International:
Tax qualified ........................... 1,575 13.831167 21,784 18%
Non-tax qualified ....................... 10,967 13.831167 151,686 18%
American Century VP -
American Century VP Value:
Tax qualified ........................... 439 12.687119 5,570 25%
Non-tax qualified ....................... 10,139 12.687119 128,635 25%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ........................... 6,260 15.827982 99,083 27%
Non-tax qualified ....................... 9,564 15.827982 151,379 27%
Dreyfus Stock Index Fund:
Tax qualified ........................... 52,598 16.954928 891,795 32%
Non-tax qualified ....................... 46,692 16.954928 791,659 32%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ........................... 436 10.216047 4,454 2%(a)
Non-tax qualified ....................... 445 10.216047 4,546 2%(a)
Dreyfus VIF
Growth and Income Portfolio:
Tax qualified ........................... 21,624 11.514380 248,987 15%
Non-tax qualified ....................... 13,972 11.514380 160,879 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................... 53,201 15.458195 822,391 27%
Non-tax qualified ....................... 47,182 15.458195 729,349 27%
Fidelity VIP - Growth Portfolio:
Tax qualified ........................... 51,572 13.440547 693,156 22%
Non-tax qualified ....................... 43,269 13.440547 581,559 22%
Fidelity VIP - High Income Portfolio:
Tax qualified ........................... 21,865 13.408646 293,180 17%
Non-tax qualified ....................... 28,876 13.408646 387,188 17%
Fidelity VIP - Overseas Portfolio:
Tax qualified ........................... 859 13.030895 11,194 11%
Non-tax qualified ....................... 5,016 13.030895 65,363 11%
</TABLE>
(Continued)
<PAGE> 24
<TABLE>
<S> <C> <C> <C> <C>
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ........................... 8,799 14.332657 126,113 20%
Non-tax qualified ....................... 7,737 14.332657 110,892 20%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ........................... 22,202 15.126324 335,835 23%
Non-tax qualified ....................... 21,146 15.126324 319,861 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ........................... 1,128 10.957842 12,360 10%(a)
Non-tax qualified ....................... 7,174 10.957842 78,612 10%(a)
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ........................... 2,014 9.833594 19,805 (2)%(a)
Non-tax qualified ....................... 1,055 9.833594 10,374 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ........................... 41,342 17.967816 742,825 33%
Non-tax qualified ....................... 30,233 17.967816 543,221 33%
Nationwide SAT -
Government Bond Fund:
Tax qualified ........................... 12,756 11.460915 146,195 9%
Non-tax qualified ....................... 20,611 11.460915 236,221 9%
Nationwide SAT - Money Market Fund:
Tax qualified ........................... 39,718 10.971484 435,765 4%
Non-tax qualified ....................... 33,925 10.971484 372,208 4%
Nationwide SAT - Small Company Fund:
Tax qualified ........................... 28,143 16.185025 455,495 16%
Non-tax qualified ....................... 53,457 16.185025 865,203 16%
Nationwide SAT - Total Return Fund:
Tax qualified ........................... 154,636 16.295055 2,519,802 28%
Non-tax qualified ....................... 127,059 16.295055 2,070,433 28%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified ........................... 12,673 13.815173 175,080 28%
Non-tax qualified ....................... 12,764 13.815173 176,337 28%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified ........................... 6,757 11.153775 75,366 6%
Non-tax qualified ....................... 4,478 11.153775 49,947 6%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ........................... 28,536 17.688563 504,761 30%
Non-tax qualified ....................... 35,613 17.688563 629,943 30%
Oppenheimer VAF - Bond Fund:
Tax qualified ........................... 9,333 11.589929 108,169 8%
Non-tax qualified ....................... 5,291 11.589929 61,322 8%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ........................... 6,749 14.315651 96,616 21%
Non-tax qualified ....................... 8,609 14.315651 123,243 21%
</TABLE>
<PAGE> 25
<TABLE>
<S> <C> <C> <C> <C>
Oppenheimer VAF - Growth Fund:
Tax qualified ............................ 1,122 10.452434 11,728 5%(a)
Non-tax qualified ........................ 153 10.452434 1,599 5%(a)
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified ............................ 14,345 13.725672 196,895 16%
Non-tax qualified ........................ 9,530 13.725672 130,806 16%
Strong Opportunity Fund II, Inc.:
Tax qualified ............................ 19,338 15.443112 298,639 24%
Non-tax qualified ........................ 14,422 15.443112 222,721 24%
Strong VIF - Strong Discovery Fund II:
Tax qualified ............................ 1,366 11.566866 15,800 10%
Non-tax qualified ........................ 6,228 11.566866 72,038 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ............................ 3,580 9.559256 34,222 (14)%
Non-tax qualified ........................ 1,291 9.559256 12,341 (14)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ............................ 637 10.447140 6,655 2%
Non-tax qualified ........................ 1,016 10.447140 10,614 2%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ............................ 10,818 8.838016 95,610 (12)%
Non-tax qualified ........................ 5,579 8.838016 49,307 (12)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ............................ 1,428 12.634338 18,042 (2)%
Non-tax qualified ........................ 9,072 12.634338 114,619 (2)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified ............................ 6,274 17.802527 111,693 21%
Non-tax qualified ........................ 16,279 17.802527 289,807 21%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ............................ 9,899 10.962668 108,519 (3)%
Non-tax qualified ........................ 7,315 10.962668 80,192 (3)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ............................ 774 11.428435 8,846 12%
Non-tax qualified ........................ 2,554 11.428435 29,188 12%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ............................ 14,575 14.460130 210,756 15%
Non-tax qualified ........................ 23,748 14.460130 343,399 15%
The BEST OF AMERICA(R) America's Vision
Annuity(SM) contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ............................ 2,000,046 15.050621 30,101,934 14%
Non-tax qualified ........................ 2,838,431 15.050621 42,720,149 14%
(continued)
</TABLE>
<PAGE> 26
<TABLE>
<S> <C> <C> <C> <C>
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ............................ 2,614,244 11.511011 30,092,591 (5)%
Non-tax qualified ........................ 3,809,872 11.511011 43,855,479 (5)%
American Century VP -
American Century VP International:
Tax qualified ............................ 2,815,042 13.705793 38,582,383 17%
Non-tax qualified ........................ 4,053,845 13.705793 55,561,160 17%
American Century VP -
American Century VP Value:
Tax qualified ............................ 1,430,623 12.608786 18,038,419 24%
Non-tax qualified ........................ 1,650,353 12.608786 20,808,948 24%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ............................ 1,955,501 20.377644 39,848,503 27%
Non-tax qualified ........................ 2,524,371 20.377644 51,440,734 27%
Dreyfus Stock Index Fund:
Tax qualified ............................ 11,980,808 21.459607 257,103,431 31%
Non-tax qualified ........................ 16,840,871 21.459607 361,398,473 31%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ............................ 282,102 10.187254 2,873,845 2%(a)
Non-tax qualified ........................ 346,889 10.187254 3,533,846 2%(a)
Dreyfus VIF-
Growth and Income Portfolio:
Tax qualified ............................ 1,288,755 11.443262 14,747,561 15%
Non-tax qualified ........................ 1,736,408 11.443262 19,870,172 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ............................ 21,713,028 20.400657 442,960,037 26%
Non-tax qualified ........................ 29,805,895 20.400657 608,059,840 26%
Fidelity VIP - Growth Portfolio:
Tax qualified ............................ 13,935,642 18.531166 258,243,695 22%
Non-tax qualified ........................ 19,539,694 18.531166 362,093,313 22%
Fidelity VIP - High Income Portfolio:
Tax qualified ............................ 10,404,298 15.270686 158,880,768 16%
Non-tax qualified ........................ 15,763,691 15.270686 240,722,375 16%
Fidelity VIP - Overseas Portfolio:
Tax qualified ............................ 4,225,490 13.990014 59,114,664 10%
Non-tax qualified ........................ 6,516,303 13.990014 91,163,170 10%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ............................ 8,255,827 14.837912 122,499,235 19%
Non-tax qualified ........................ 10,687,021 14.837912 158,573,077 19%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ............................ 12,933,714 16.200355 209,530,758 22%
Non-tax qualified ........................ 17,222,256 16.200355 279,006,661 22%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ............................ 1,110,975 10.926972 12,139,593 9%(a)
Non-tax qualified ........................ 1,433,477 10.926972 15,663,563 9%(a)
</TABLE>
<PAGE> 27
<TABLE>
<S> <C> <C> <C> <C>
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified .......................... 116,227 9.805852 1,139,705 (2)%(a)
Non-tax qualified ...................... 317,019 9.805852 3,108,641 (2)%(a)
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified .......................... 3,473,388 21.128614 73,387,874 33%
Non-tax qualified ...................... 4,537,489 21.128614 95,870,854 33%
Nationwide SAT -
Government Bond Fund:
Tax qualified .......................... 3,380,799 12.352251 41,760,478 8%
Non-tax qualified ...................... 3,808,969 12.352251 47,049,341 8%
Nationwide SAT - Money Market Fund:
Tax qualified .......................... 11,607,724 11.491365 133,388,593 4%
Non-tax qualified ...................... 17,151,671 11.491365 197,096,112 4%
Nationwide SAT - Small Company Fund:
Tax qualified .......................... 4,030,537 15.985143 64,428,710 16%
Non-tax qualified ...................... 5,436,630 15.985143 86,905,308 16%
Nationwide SAT - Total Return Fund:
Tax qualified .......................... 9,306,942 19.626064 182,658,639 28%
Non-tax qualified ...................... 11,239,856 19.626064 220,594,133 28%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified .......................... 2,761,902 16.816500 46,445,525 27%
Non-tax qualified ...................... 4,175,280 16.816500 70,213,596 27%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified .......................... 2,638,749 11.674415 30,805,851 5%
Non-tax qualified ...................... 3,901,992 11.674415 45,553,474 5%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified .......................... 7,939,693 22.277405 176,875,757 29%
Non-tax qualified ...................... 11,091,380 22.277405 247,087,164 29%
Oppenheimer VAF - Bond Fund:
Tax qualified .......................... 5,296,817 12.497968 66,199,449 8%
Non-tax qualified ...................... 6,726,718 12.497968 84,070,306 8%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified .......................... 6,984,145 14.691771 102,609,459 21%
Non-tax qualified ...................... 9,087,704 14.691771 133,514,466 21%
Oppenheimer VAF - Growth Fund:
Tax qualified .......................... 291,665 10.422959 3,040,012 4%(a)
Non-tax qualified ...................... 463,976 10.422959 4,836,003 4%(a)
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified .......................... 4,408,475 15.482895 68,255,956 16%
Non-tax qualified ...................... 5,254,667 15.482895 81,357,457 16%
Strong Opportunity Fund II, Inc.:
Tax qualified .......................... 5,827,943 19.146013 111,581,872 24%
Non-tax qualified ...................... 8,020,904 19.146013 153,568,332 24%
</TABLE>
(Continued)
<PAGE> 28
<TABLE>
<S> <C> <C> <C> <C>
Strong VIF - Strong Discovery Fund II:
Tax qualified 2,014,470 14.662845 29,537,861 10%
Non-tax qualified 3,067,461 14.662845 44,977,705 10%
Strong VIF -
Strong International Stock Fund II:
Tax qualified 1,239,246 9.488178 11,758,187 (15)%
Non-tax qualified 1,662,615 9.488178 15,775,187 (15)%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified 1,224,872 11.708039 14,340,849 1%
Non-tax qualified 1,881,869 11.708039 22,032,996 1%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified 1,951,581 8.783348 17,141,415 (13)%
Non-tax qualified 2,439,264 8.783348 21,424,905 (13)%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified 1,258,548 12.924490 16,266,091 (3)%
Non-tax qualified 2,082,493 12.924490 26,915,160 (3)%
Van Kampen American Capital LIT -
Morgan Stanley Real Estate
Securities Portfolio:
Tax qualified 3,169,047 17.856659 56,588,592 20%
Non-tax qualified 4,254,738 17.856659 75,975,406 20%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified 5,873,960 11.135857 65,411,579 (4)%
Non-tax qualified 8,729,469 11.135857 97,210,118 (4)%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified 267,447 11.357831 3,037,618 12%
Non-tax qualified 313,129 11.357831 3,556,466 12%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified 4,888,419 15.910364 77,776,526 14%
Non-tax qualified 7,458,638 15.910364 118,669,646 14%
======== =========
Reserves for annuity contracts in payout phase:
Tax qualified 3,165,730
Non-tax qualified 4,436,449
-------------
$ 17,849,801,427
==============
</TABLE>
(a) This investment option was not being utilized for the entire period.
<PAGE> 71
<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, 1997 and
1996, 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,
1997. 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, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1997, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
January 30, 1998
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions of dollars)
<TABLE>
<CAPTION>
December 31,
-----------------------------------
ASSETS 1997 1996
------
----------------- ---------------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $13,204.1 $12,304.6
Equity securities 80.4 59.1
Mortgage loans on real estate, net 5,181.6 5,272.1
Real estate, net 311.4 265.8
Policy loans 415.3 371.8
Other long-term investments 25.2 28.7
Short-term investments 358.4 4.8
---------- ---------
19,576.4 18,306.9
---------- ---------
Cash 175.6 43.8
Accrued investment income 210.5 210.2
Deferred policy acquisition costs 1,665.4 1,366.5
Investment in subsidiaries classified as discontinued operations - 485.7
Other assets 438.4 426.5
Assets held in Separate Accounts 37,724.4 26,926.7
---------- ---------
$59,790.7 $47,766.3
========== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
------------------------------------
Future policy benefits and claims $18,702.8 $17,600.6
Other liabilities 885.6 1,101.1
Liabilities related to Separate Accounts 37,724.4 26,926.7
---------- ---------
57,312.8 45,628.4
---------- ---------
Commitments and contingencies (notes 7 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 914.7 527.9
Retained earnings 1,312.3 1,432.6
Unrealized gains on securities available-for-sale, net 247.1 173.6
---------- ---------
2,477.9 2,137.9
---------- ---------
$59,790.7 $47,766.3
========== =========
</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 of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1997 1996 1995
------------- ------------- --------------
<S> <C> <C> <C>
Revenues:
Investment product and universal life insurance product policy charges $ 545.2 $ 400.9 $ 286.6
Traditional life insurance premiums 205.4 198.6 199.1
Net investment income 1,409.2 1,357.8 1,294.0
Realized gains (losses) on investments 11.1 (0.3) (1.7)
Other 46.5 35.9 20.7
---------- ---------- ----------
2,217.4 1,992.9 1,798.7
---------- ---------- ----------
Benefits and expenses:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Other benefits and claims 178.2 178.3 165.2
Policyholder dividends on participating policies 40.6 41.0 39.9
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Other operating expenses 384.9 342.4 273.0
---------- ---------- ----------
1,787.5 1,677.4 1,511.1
---------- ---------- ----------
Income from continuing operations before federal income tax expense 429.9 315.5 287.6
Federal income tax expense 150.2 110.9 99.8
---------- ---------- ----------
Income from continuing operations 279.7 204.6 187.8
Income from discontinued operations (less federal income tax expense
of $4.5 and $7.4 in 1996 and 1995, respectively) - 11.3 24.7
---------- ---------- ----------
Net income $ 279.7 $ 215.9 $ 212.5
========== ========== ==========
</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
(in millions of dollars)
<TABLE>
<CAPTION>
Unrealized
gains
(losses)
Additional on securities Total
Common paid-in Retained available- shareholder's
stock capital earnings for-sale, net equity
----------- ------------- -------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1994 $3.8 $ 606.2 $1,378.2 $(119.7) $1,868.5
Capital contribution - 51.0 - (4.1) 46.9
Net income - - 212.5 - 212.5
Dividends to shareholder - - (7.5) - (7.5)
Unrealized gains on securities available-
for-sale, net - - - 508.1 508.1
-------- -------- -------- -------- ---------
December 31, 1995 3.8 657.2 1,583.2 384.3 2628.5
Net income - - 215.9 - 215.9
Dividends to shareholder - (129.3) (366.5) (39.8) (535.6)
Unrealized losses on securities available-
for-sale, net - - - (170.9) (170.9)
-------- -------- -------- -------- ---------
December 31, 1996 3.8 527.9 1,432.6 173.6 2,137.9
Capital contribution - 836.8 - - 836.8
Net income - - 279.7 - 279.7
Dividends to shareholder - (450.0) (400.0) - (850.0)
Unrealized gains on securities available-
for-sale, net - - - 73.5 73.5
-------- -------- -------- -------- ---------
December 31, 1997 $3.8 $ 914.7 $1,312.3 $ 247.1 $2,477.9
======== ======== ======== ======== =========
</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 of dollars)
<TABLE>
<CAPTION>
Years ended December 31,
----------------------------------------------
1997 1996 1995
------------------------------ ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 279.7 $ 215.9 $ 212.5
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,016.6 982.3 950.3
Capitalization of deferred policy acquisition costs (487.9) (422.6) (321.3)
Amortization of deferred policy acquisition costs 167.2 133.4 82.7
Amortization and depreciation (2.0) 7.0 10.2
Realized (gains) losses on invested assets, net (11.1) (0.3) 3.3
(Increase) decrease in accrued investment income (0.3) 2.8 (16.9)
(Increase) decrease in other assets (12.7) (38.9) 39.9
(Decrease) increase in policy liabilities (23.1) (151.0) 123.9
Increase in other liabilities 230.6 191.4 27.0
Other, net (10.9) (61.7) 1.8
----------- --------- --------
Net cash provided by operating activities 1,146.1 858.3 1,113.4
----------- --------- --------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 993.4 1,162.8 634.6
Proceeds from sale of securities available-for-sale 574.5 299.6 107.3
Proceeds from maturity of fixed maturity securities held-to-maturity - - 564.4
Proceeds from repayments of mortgage loans on real estate 437.3 309.0 207.8
Proceeds from sale of real estate 34.8 18.5 48.3
Proceeds from repayments of policy loans and sale of other invested assets 22.7 22.8 53.6
Cost of securities available-for-sale acquired (2,828.1) (1,573.6) (1,942.4)
Cost of fixed maturity securities held-to-maturity acquired - - (593.6)
Cost of mortgage loans on real estate acquired (752.2) (972.8) (796.0)
Cost of real estate acquired (24.9) (7.9) (10.9)
Policy loans issued and other invested assets acquired (62.5) (57.7) (75.9)
Short-term investments, net (354.8) 28.0 77.8
----------- --------- --------
Net cash used in investing activities (1,959.8) (771.3) (1,725.0)
----------- --------- --------
Cash flows from financing activities:
Proceeds from capital contributions 836.8 - -
Cash dividends paid - (50.0) (7.5)
Increase in investment product and universal life insurance
product account balances 2,488.5 1,781.8 1,883.7
Decrease in investment product and universal life insurance
product account balances (2,379.8) (1,784.5) (1,258.7)
----------- --------- --------
Net cash provided by (used in) financing activities 945.5 (52.7) 617.5
----------- --------- --------
Net increase in cash 131.8 34.3 5.9
Cash, beginning of year 43.8 9.5 3.6
----------- --------- --------
Cash, end of year $ 175.6 $ 43.8 $ 9.5
=========== ========= =========
</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, 1997, 1996 and 1995
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS
Prior to January 27, 1997, Nationwide Life Insurance Company (NLIC) was
wholly owned by Nationwide Corporation (Nationwide Corp.). On that
date, Nationwide Corp. contributed the outstanding shares of NLIC's
common stock to Nationwide Financial Services, Inc. (NFS), a holding
company formed by Nationwide Corp. in November 1996 for NLIC and the
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. On March 11
1997, NFS completed an initial public offering of its Class A common
stock.
During 1996 and 1997, Nationwide Corp. and NFS completed certain
transactions in anticipation of the initial public offering that
focused the business of NFS on long-term savings and retirement
products. On September 24, 1996, NLIC declared a dividend payable to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of certain subsidiaries that do not offer or
distribute long-term savings or retirement products. In addition,
during 1996, NLIC entered into two reinsurance agreements whereby all
of NLIC's accident and health and group life insurance business was
ceded to two affiliates effective January 1, 1996. These subsidiaries,
through December 31, 1996, and all accident and health and group life
insurance business have been accounted for as discontinued operations
for all periods presented. See notes 11 and 15. Additionally, NLIC paid
$900.0 million of dividends, $50.0 million to Nationwide Corp. on
December 31, 1996 and $850.0 million to NFS, which then made an
equivalent dividend to Nationwide Corp., on February 24, 1997.
NFS contributed $836.8 million to the capital of NLIC during March
1997.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc.,
Nationwide Investment Services Corporation and NWE, Inc. NLIC and its
subsidiaries are collectively referred to as "the Company."
The Company is a leading provider of long-term savings and retirement
products. The Company is subject to regulation by the Insurance
Departments of states in which it is licensed, and undergoes periodic
examinations by those departments.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) CONSOLIDATION POLICY
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. Subsidiaries that are
classified and reported as discontinued operations are not
consolidated but rather are reported as "Investment in
subsidiaries classified as discontinued operations" in the
accompanying consolidated balance sheets and "Income from
discontinued operations" in the accompanying consolidated
statements of income. All significant intercompany balances and
transactions have been eliminated.
(b) VALUATION OF INVESTMENTS AND RELATED GAINS AND LOSSES
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of shareholder's equity. The adjustment to
deferred policy acquisition costs represents the change in
amortization of deferred policy acquisition costs that would have
been required as a charge or credit to operations had such
unrealized amounts been realized. The Company has no fixed
maturity securities classified as held-to-maturity or trading as
of December 31, 1997 or 1996.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(c) REVENUES AND BENEFITS
INVESTMENT PRODUCTS AND UNIVERSAL LIFE INSURANCE PRODUCTS:
Investment products consist primarily of individual and group
variable and fixed annuities. Universal life insurance products
include universal life insurance, variable universal life
insurance and other interest-sensitive life insurance policies.
Revenues for investment products and universal life insurance
products consist of net investment income, asset fees, cost of
insurance, policy administration and surrender charges that have
been earned and assessed against policy account balances during
the period. Policy benefits and claims that are charged to expense
include interest credited to policy account balances and benefits
and claims incurred in the period in excess of related policy
account balances.
TRADITIONAL LIFE INSURANCE PRODUCTS: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
(d) DEFERRED POLICY ACQUISITION COSTS
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. 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 $365.5 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.
Future policy benefits for traditional life insurance policies
have been calculated using a net level premium method based on
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. See note 4.
<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 50% in 1997 (52%
in 1996 and 54% in 1995) of the Company's life insurance in force,
77% in 1997 (78% in 1996 and 79% in 1995) of the number of life
insurance policies in force, and 27% in 1997 (40% in 1996 and 47%
in 1995) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) FEDERAL INCOME TAX
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) REINSURANCE CEDED
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis. All of the Company's accident
and health and group life insurance business is ceded to
affiliates and is accounted for as discontinued operations. See
notes 11 and 15.
(j) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 130 - REPORTING
COMPREHENSIVE INCOME was issued in June 1997 and is effective for
fiscal years beginning after December 15, 1997. The statement
establishes standards for reporting and display of comprehensive
income and its components in a full set of financial statements.
Comprehensive income includes all changes in equity during a
period except those resulting from investments by shareholders and
distributions to shareholders and includes net income.
Comprehensive income would be reported in addition to earnings
amounts currently presented. The Company will adopt the statement
and begin reporting comprehensive income in the first quarter of
1998.
(k) RECLASSIFICATION
Certain items in the 1996 and 1995 consolidated financial
statements have been reclassified to conform to the 1997
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, 1997 and
1996 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions of dollars) cost gains losses fair value
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 305.1 $ 8.6 $ - $ 313.7
Obligations of states and political subdivisions 1.6 - - 1.6
Debt securities issued by foreign governments 93.3 2.7 (0.2) 95.8
Corporate securities 8,698.7 355.5 (11.5) 9,042.7
Mortgage-backed securities 3,634.2 118.6 (2.5) 3,750.3
------------ --------- --------- -----------
Total fixed maturity securities 12,732.9 485.4 (14.2) 13,204.1
Equity securities 67.8 12.9 (0.3) 80.4
------------ --------- --------- -----------
$ 12,800.7 $ 498.3 $ (14.5) $ 13,284.5
============ ========= ========= ===========
December 31, 1996:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 275.7 $ 4.8 $ (1.3) $ 279.2
Obligations of states and political subdivisions 6.2 0.5 - 6.7
Debt securities issued by foreign governments 100.7 2.1 (0.9) 101.9
Corporate securities 7,999.3 285.9 (33.7) 8,251.5
Mortgage-backed securities 3,589.0 91.4 (15.1) 3,665.3
------------ --------- --------- -----------
Total fixed maturity securities 11,970.9 384.7 (51.0) 12,304.6
Equity securities 43.9 15.6 (0.4) 59.1
------------ --------- --------- -----------
$ 12,014.8 $ 400.3 $ (51.4) $ 12,363.7
============ ========= ========= ===========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1997, by contractual
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions of dollars) cost fair value
-------------- ----------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 419.2 $ 422.1
Due after one year through five years 4,573.5 4,708.4
Due after five years through ten years 2,772.6 2,879.7
Due after ten years 1,333.4 1,443.6
----------- -----------
9,098.7 9,453.8
Mortgage-backed securities 3,634.2 3,750.3
----------- -----------
$ 12,732.9 $ 13,204.1
=========== ===========
</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 gains on securities available-for-sale,
net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- ----------
<S> <C> <C>
Gross unrealized gains $ 483.8 $349.0
Adjustment to deferred policy acquisition costs (103.7) (81.9)
Deferred federal income tax (133.0) (93.5)
-------- -------
$ 247.1 $173.6
======== =======
</TABLE>
An analysis of the change in gross unrealized gains (losses) on
securities available-for-sale and fixed maturity securities
held-to-maturity follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------- -----------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $137.5 $(289.2) $876.3
Equity securities (2.7) 8.9 -
Fixed maturity securities held-to-maturity - - 75.6
------- ------- -------
$134.8 $(280.3) $ 951.9
======= ======= =======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1997,
1996 and 1995 were $574.5 million, $299.6 million and $107.3 million,
respectively. During 1997, gross gains of $9.9 million ($6.6 million
and $4.8 million in 1996 and 1995, respectively) and gross losses of
$18.0 million ($6.9 million and $2.1 million in 1996 and 1995,
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.
During 1995, the Company transferred fixed maturity securities
classified as held-to-maturity with amortized cost of $25.4 million to
available-for-sale securities due to evidence of a significant
deterioration in the issuer's creditworthiness. The transfer of those
fixed maturity securities resulted in a gross unrealized loss of $3.5
million.
As permitted by the Financial Accounting Standards Board's Special
Report, A GUIDE TO IMPLEMENTATION OF STATEMENT 115 ON ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES, issued in November
1995, the Company transferred nearly all of its fixed maturity
securities previously classified as held-to-maturity to
available-for-sale. As of December 14, 1995, the date of transfer, the
fixed maturity securities had amortized cost of $3.32 billion,
resulting in a gross unrealized gain of $155.9 million.
The recorded investment of mortgage loans on real estate considered to
be impaired as of December 31, 1997 was $19.9 million ($51.8 million as
of December 31, 1996), which includes $3.9 million ($41.7 million as of
December 31, 1996) of impaired mortgage loans on real estate for which
the related valuation allowance was $0.1 million ($8.5 million as of
December 31, 1996) and $16.0 million ($10.1 million as of December 31,
1996) of impaired mortgage loans on real estate for which there was no
valuation allowance. During 1997, the average recorded investment in
impaired mortgage loans on real estate was approximately $31.8 million
($39.7 million in 1996) and interest income recognized on those loans
was $1.0 million ($2.1 million in 1996), 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 of dollars) 1997 1996
------------- -------------
<S> <C> <C>
Allowance, beginning of year $51.0 $49.1
(Reductions) additions charged to operations (1.2) 4.5
Direct write-downs charged against the allowance (7.3) (2.6)
------ ------
Allowance, end of year $42.5 $51.0
====== ======
</TABLE>
Real estate is presented at cost less accumulated depreciation of $45.1
million as of December 31, 1997 ($30.3 million as of December 31, 1996)
and valuation allowances of $11.1 million as of December 31, 1997
($15.2 million as of December 31, 1996).
Investments that were non-income producing for the twelve month period
preceding December 31, 1997 amounted to $19.4 million ($26.8 million
for 1996) and consisted of $3.0 million ($0.2 million in 1996) in
securities available-for-sale, $16.4 million ($20.6 million in 1996) in
real estate and none ($5.9 million in 1996) in other long-term
investments.
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- --------- ---------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $ 911.6 $ 917.1 $ 685.8
Equity securities 0.8 1.3 1.3
Fixed maturity securities held-to-maturity - - 201.8
Mortgage loans on real estate 457.7 432.8 395.5
Real estate 42.9 44.3 38.3
Short-term investments 22.7 4.2 10.6
Other 21.0 4.0 7.2
-------- -------- --------
Total investment income 1,456.7 1,403.7 1,340.5
Less investment expenses 47.5 45.9 46.5
-------- -------- --------
Net investment income $1,409.2 $1,357.8 $1,294.0
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- --------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $ 3.6 $(3.5) $ 4.2
Equity securities 2.7 3.2 3.4
Mortgage loans on real estate 1.6 (4.1) (7.1)
Real estate and other 3.2 4.1 (2.2)
------ ------ ------
$11.1 $(0.3) $(1.7)
====== ====== ======
</TABLE>
Fixed maturity securities with an amortized cost of $6.2 million as
of December 31, 1997 and 1996 were on deposit with various
regulatory agencies as required by law.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(4) FUTURE POLICY BENEFITS AND CLAIMS
The liability for future policy benefits for investment contracts
represents approximately 86% and 87% of the total liability for future
policy benefits as of December 31, 1997 and 1996, respectively. The
average interest rate credited on investment product policies was
approximately 6.1%, 6.3% and 6.6% for the years ended December 31,
1997, 1996 and 1995, respectively.
The liability for future policy benefits for traditional life insurance
policies has been established based upon the following assumptions:
INTEREST RATES: Interest rates vary by issue year and were 6.9%
and 6.6% in 1997 and 1996, respectively. Interest rates have
generally ranged from 6.0% to 10.5% for previous issue years.
WITHDRAWALS: Rates, which vary by issue age, type of coverage and
policy duration, are based on Company experience.
MORTALITY: Mortality and morbidity rates are based on published
tables, modified for the Company's actual experience.
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
$220.2 million and $240.5 million as of December 31, 1997 and 1996,
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.
The Company has reinsurance agreements with certain affiliates as
described in note 11. All other reinsurance agreements are not material
to either premiums or reinsurance recoverables.
(5) FEDERAL INCOME TAX
The Company's current federal income tax liability was $60.1 million
and $30.2 million as of December 31, 1997 and 1996, respectively.
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1997
and 1996 are as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Future policy benefits $200.1 $183.0
Liabilities in Separate Accounts 242.0 188.4
Mortgage loans on real estate and real estate 19.0 23.4
Other assets and other liabilities 59.2 53.7
------- ------
Total gross deferred tax assets 520.3 448.5
Less valuation allowance (7.0) (7.0)
------- ------
Net deferred tax assets 513.3 441.5
------- ------
Deferred tax liabilities:
Deferred policy acquisition costs 480.5 399.3
Fixed maturity securities 193.3 133.2
Deferred tax on realized investment gains 40.1 37.6
Equity securities and other long-term investments 7.5 8.2
Other 22.2 25.4
------- ------
Total gross deferred tax liabilities 743.6 603.7
------- ------
Net deferred tax liability $230.3 $162.2
======= ======
</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, 1997, 1996 and 1995.
Federal income tax expense attributable to income from continuing
operations for the years ended December 31 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Currently payable $121.7 $116.5 $88.7
Deferred tax expense (benefit) 28.5 (5.6) 11.1
------ ------ ------
$150.2 $110.9 $99.8
====== ====== ======
</TABLE>
Total federal income tax expense for the years ended December 31, 1997,
1996 and 1995 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---------------------- ---------------------- ----------------------
(in millions of dollars) Amount % Amount % Amount %
---------------------- ------------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $150.5 35.0 $110.4 35.0 $100.6 35.0
Tax exempt interest and dividends
received deduction - 0.0 (0.2) (0.1) - 0.0
Other, net (0.3) (0.1) 0.7 0.3 (0.8) (0.3)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $150.2 34.9 $110.9 35.2 $ 99.8 34.7
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $91.8 million, $115.8 million and
$51.8 million during the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is 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.
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 includes 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> 16
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 13.
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>
1997 1996
------------------------------ -------------------------------
Carrying Estimated Carrying Estimated
(in millions of dollars) amount fair value amount fair value
------------------------------ --------------- ---------------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $13,204.1 $13,204.1 $12,304.6 $12,304.6
Equity securities 80.4 80.4 59.1 59.1
Mortgage loans on real estate, net 5,181.6 5,509.7 5,272.1 5,397.9
Policy loans 415.3 415.3 371.8 371.8
Short-term investments 358.4 358.4 4.8 4.8
Cash 175.6 175.6 43.8 43.8
Assets held in Separate Accounts 37,724.4 37,724.4 26,926.7 26,926.7
Liabilities:
Investment contracts 14,708.2 14,322.1 13,914.4 13,484.5
Policy reserves on life insurance contracts 3,345.4 3,182.4 3,392.8 3,197.5
Liabilities related to Separate Accounts 37,724.4 36,747.0 26,926.7 26,164.2
</TABLE>
(7) RISK DISCLOSURES
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
LEGAL/REGULATORY RISK: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduce 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.
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> 17
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.
FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans. These instruments involve, to varying
degrees, elements of credit risk in excess of amounts recognized on the
consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $341.4 million
extending into 1998 were outstanding as of December 31, 1997. The
Company also had $63.9 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1997.
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 20% (21% in 1996) in any geographic area and no more than 2% (2%
in 1996) with any one borrower as of December 31, 1997. As of December
31, 1997, 46% (44% in 1996) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
The Company had a significant reinsurance recoverable balance from one
reinsurer as of December 31, 1997 and 1996. See note 4.
(8) PENSION PLAN
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. Benefits are based upon the highest average annual
salary of a specified number of consecutive years of the last ten years
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.
Effective January 1, 1995, the plan was amended to provide enhanced
benefits for participants who met certain eligibility requirements and
elected early retirement no later than March 15, 1995. The entire cost
of the enhanced benefit was borne by NMIC and certain of its property
and casualty insurance company affiliates.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Effective December 31, 1995, the Nationwide Insurance Companies and
Affiliates Retirement Plan was merged with the Farmland Mutual
Insurance Company Employees' Retirement Plan and the Wausau Insurance
Companies Pension Plan to form the Nationwide Insurance Enterprise
Retirement Plan (the Retirement Plan). Immediately prior to the merger,
the plans were amended to provide consistent benefits for service after
January 1, 1996. These amendments had no significant impact on the
accumulated benefit obligation or projected benefit obligation as of
December 31, 1995.
Pension costs charged to operations by the Company during the years
ended December 31, 1997, 1996 and 1995 were $7.5 million, $7.4
million and $10.5 million, respectively.
The Company had no net accrued pension expense as of December 31, 1997
($1.1 million as of December 31, 1996).
The net periodic pension cost for the Retirement Plan as a whole for
the years ended December 31, 1997 and 1996 and for the Nationwide
Insurance Companies and Affiliates Retirement Plan as a whole for the
year ended December 31, 1995 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 77.3 $ 75.5 $ 64.5
Interest cost on projected benefit obligation 118.6 105.5 95.3
Actual return on plan assets (328.0) (210.6) (249.3)
Net amortization and deferral 196.4 101.8 143.4
-------- -------- --------
$ 64.3 $ 72.2 $ 53.9
======== ======== ========
</TABLE>
Basis for measurements, net periodic pension cost:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
Weighted average discount rate 6.50% 6.00% 7.50%
Rate of increase in future compensation levels 4.75% 4.25% 6.25%
Expected long-term rate of return on plan assets 7.25% 6.75% 8.75%
</TABLE>
Information regarding the funded status of the Retirement Plan as a
whole as of December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accumulated benefit obligation:
Vested $1,547.5 $1,338.6
Nonvested 13.5 11.1
-------- ---------
$1,561.0 $1,349.7
======== =========
Net accrued pension expense:
Projected benefit obligation for services rendered to date $2,033.8 $1,847.8
Plan assets at fair value 2,212.9 1,947.9
--------- ---------
Plan assets in excess of projected benefit obligation 179.1 100.1
Unrecognized prior service cost 34.7 37.9
Unrecognized net gains (330.7) (202.0)
Unrecognized net asset at transition 33.3 37.2
--------- ---------
$ (83.6) $ (26.8)
========= =========
</TABLE>
<PAGE> 19
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 plan:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Weighted average discount rate 6.00% 6.50%
Rate of increase in future compensation levels 4.25% 4.75%
</TABLE>
Assets of the Retirement Plan are invested in group annuity contracts
of NLIC and Employers Life Insurance Company of Wausau (ELICW).
(9) POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
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,
1997 and 1996 was $36.5 million and $34.9 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1997, 1996 and
1995 was $3.0 million, $3.3 million and $3.1 million, respectively.
Information regarding the funded status of the plan as a whole as of
December 31, 1997 and 1996 follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996
----------- -----------
<S> <C> <C>
Accrued postretirement benefit expense:
Retirees $ 93.3 $ 93.0
Fully eligible, active plan participants 31.6 23.7
Other active plan participants 113.0 84.0
-------- --------
Accumulated postretirement benefit obligation 237.9 200.7
Plan assets at fair value 69.2 63.0
-------- --------
Plan assets less than accumulated postretirement benefit obligation (168.7) (137.7)
Unrecognized transition obligation of affiliates 1.5 1.7
Unrecognized net losses (gains) 1.6 (23.2)
-------- --------
$(165.6) $(159.2)
======== ========
</TABLE>
<PAGE> 20
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 plan as a whole for the years ended
December 31, 1997, 1996 and 1995 was as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
----------- ------------ ------------
<S> <C> <C> <C>
Service cost (benefits attributed to employee
service during the year) $ 7.0 $ 6.5 $ 6.2
Interest cost on accumulated postretirement
benefit obligation 14.0 13.7 14.2
Actual return on plan assets (3.6) (4.3) (2.7)
Amortization of unrecognized transition
obligation of affiliates 0.2 0.2 3.0
Net amortization and deferral (0.5) 1.8 (1.6)
------- ------ ------
$17.1 $17.9 $19.1
======= ====== ======
</TABLE>
Actuarial assumptions used for the measurement of the APBO and the
NPPBC for 1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
APBO:
Discount rate 6.70% 7.25% 6.75%
Assumed health care cost trend rate:
Initial rate 12.13% 11.00% 11.00%
Ultimate rate 6.12% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
NPPBC:
Discount rate 7.25% 6.65% 8.00%
Long term rate of return on plan
assets, net of tax 5.89% 4.80% 8.00%
Assumed health care cost trend rate:
Initial rate 11.00% 11.00% 10.00%
Ultimate rate 6.00% 6.00% 6.00%
Uniform declining period 12 Years 12 Years 12 Years
</TABLE>
For the plan as a whole, a one percentage point increase in the assumed
health care cost trend rate would increase the APBO as of December 31,
1997 by $0.4 million and have no impact on the NPPBC for the year ended
December 31, 1997.
(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.
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The statutory capital and surplus of NLIC as of December 31, 1997, 1996
and 1995 was $1.13 billion, $1.00 billion and $1.36 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1997, 1996 and 1995 was $111.7 million, $73.2 million and
$86.5 million, respectively.
As a result of the $850.0 million dividend paid on February 24, 1997,
any dividend paid by NLIC during the twelve-month period immediately
following the $850.0 million dividend would be an extraordinary
dividend under Ohio insurance laws. Accordingly, no such dividend could
be paid without prior regulatory approval. The Company has no reason to
believe that any reasonably foreseeable dividend to be paid by NLIC
would not receive the required approval.
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
As part of the restructuring described in note 1, NLIC paid a dividend
valued at $485.7 million to Nationwide Corp. on January 1, 1997
consisting of the outstanding shares of common stock of ELICW, National
Casualty Company (NCC) and West Coast Life Insurance Company (WCLIC).
Also, on February 24, 1997, NLIC paid a dividend to NFS, and NFS paid
an equivalent dividend to Nationwide Corp., consisting of securities
having an aggregate fair value of $850.0 million. The Company
recognized a gain of $14.4 million on the transfer of securities.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1997, 1996 and 1995, the
Company made lease payments to NMIC and its subsidiaries of $8.4
million, $9.1 million and $9.0 million, respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by this agreement are subject to
allocation among NMIC, the Company and other affiliates. Amounts
allocated to the Company were $85.8 million, $101.6 million and $107.1
million in 1997, 1996 and 1995, respectively. The allocations are based
on techniques and procedures in accordance with insurance regulatory
guidelines. Measures used to allocate expenses among companies include
individual employee estimates of time spent, special cost studies,
salary expense, commissions expense and other methods agreed to by the
participating companies that are within industry guidelines and
practices. The Company believes these allocation methods are
reasonable. In addition, the Company does not believe that expenses
recognized under the inter-company agreements are materially different
than expenses that would have been recognized had the Company operated
on a stand alone basis. Amounts payable to NMIC from the Company under
the cost sharing agreement were $20.5 million and $15.1 million as of
December 31, 1997 and 1996, respectively.
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1997 and
1996 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Intercompany reinsurance agreements exist between NLIC and,
respectively, NMIC and ELICW whereby all of NLIC's accident and health
and group life insurance business is ceded on a modified coinsurance
basis. NLIC entered into the reinsurance agreements during 1996 because
the accident and health and group life insurance business was unrelated
to the Company's long-term savings and retirement products.
Accordingly, the accident and health and group life insurance business
has been accounted for as discontinued operations for all periods
presented. Under modified coinsurance agreements, invested assets are
retained by the ceding company and investment earnings are paid to the
reinsurer. Under the terms of the Company's agreements, the investment
risk associated with changes in interest rates is borne by ELICW or
NMIC, as the case may be. Risk of asset default is retained by the
Company, although a fee is paid by ELICW or NMIC, as the case may be,
to the Company for the Company's retention of such risk. The agreements
will remain in force until all policy obligations are settled. However,
with respect to the agreement between NLIC and NMIC, either party may
terminate the contract on January 1 of any year with prior notice. The
ceding of risk does not discharge the original insurer from its primary
obligation to the policyholder. The Company believes that the terms of
the modified coinsurance agreements are consistent in all material
respects with what the Company could have obtained with unaffiliated
parties. Amounts ceded to NMIC and ELICW for the years ended December
31, 1997 and 1996 were:
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
(in millions of dollars) NMIC ELICW NMIC ELICW
-------------- ------------- ----------------------------
<S> <C> <C> <C> <C>
Premiums $ 91.4 $199.8 $ 97.3 $224.2
Net investment income and other revenue $ 10.7 $ 13.4 $ 10.9 $ 14.8
Benefits, claims and other expenses $100.7 $225.9 $100.5 $246.6
</TABLE>
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $211.0 million and $4.8 million as of
December 31, 1997 and 1996, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
On March 1, 1995, Nationwide Corp. contributed all of the outstanding
shares of common stock of Farmland Life Insurance Company (Farmland) to
NLIC. Farmland merged into WCLIC effective June 30, 1995. The
contribution resulted in a direct increase to consolidated
shareholder's equity of $46.9 million. As discussed in note 15, WCLIC
is accounted for as discontinued operations.
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, 1997 were $66.1
million, $76.9 million and $57.3 million, respectively.
(12) BANK LINES OF CREDIT
In August 1996, NLIC, along with NMIC, entered into a $600.0 million
revolving credit facility which provides for a $600.0 million loan over
a five year term on a fully revolving basis with a group of national
financial institutions. The credit facility provides for several and
not joint liability with respect to any amount drawn by either NLIC or
NMIC. NLIC and NMIC pay facility and usage fees to the financial
institutions to maintain the revolving credit facility. All previously
existing line of credit agreements were canceled. In September 1997,
the credit agreement was amended to include NFS as a party to and
borrower under the agreement.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(13) CONTINGENCIES
The Company is a defendant in various lawsuits. In the opinion of
management, the effects, if any, of such lawsuits are not expected to
be material to the Company's financial position or results of
operations.
(14) SEGMENT INFORMATION
The Company has three product segments: Variable Annuities, Fixed
Annuities and Life Insurance. The Variable Annuities segment consists
of annuity contracts that provide the customer with the opportunity to
invest in mutual funds managed by the Company and independent
investment managers, with the investment returns accumulating on a
tax-deferred basis. The Fixed Annuities segment consists of annuity
contracts that generate a return for the customer at a specified
interest rate, fixed for a prescribed period, with returns accumulating
on a tax-deferred basis. The Fixed Annuities segment also includes the
fixed option under the Company's variable annuity contracts. The Life
Insurance segment consists of insurance products that provide a death
benefit and may also allow the customer to build cash value on a
tax-deferred basis. In addition, the Company reports corporate expenses
and investments, and the related investment income supporting capital
not specifically allocated to its product segments in a Corporate and
Other segment. In addition, all realized gains and losses and
investment management fees and other revenue earned from mutual funds,
other than the portion allocated to the variable annuities and life
insurance segments, are reported in the Corporate and Other segment.
The following table summarizes revenues and income from continuing
operations before federal income tax expense for the years ended
December 31, 1997, 1996 and 1995 and assets as of December 31, 1997,
1996 and 1995, by segment.
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
------------- ------------ ------------
<S> <C> <C> <C>
Revenues:
Variable Annuities $ 404.0 $ 284.6 $ 189.1
Fixed Annuities 1,141.4 1,092.6 1,052.0
Life Insurance 473.1 435.6 409.1
Corporate and Other 198.9 180.1 148.5
----------- ---------- ----------
$ 2,217.4 $ 1,992.9 $ 1,798.7
=========== ========== ==========
Income from continuing operations before federal income tax
expense:
Variable Annuities $ 150.9 $ 90.3 $ 50.8
Fixed Annuities 169.5 135.4 137.0
Life Insurance 70.9 67.2 67.6
Corporate and Other 38.6 22.6 32.2
----------- ---------- ----------
$ 429.9 $ 315.5 $ 287.6
=========== ========== ==========
Assets:
Variable Annuities $ 35,278.7 $ 25,069.7 $ 17,333.0
Fixed Annuities 14,436.3 13,994.7 13,250.4
Life Insurance 3,901.4 3,353.3 3,027.4
Corporate and Other 6,174.3 5,348.6 4,896.8
----------- ---------- ----------
$ 59,790.7 $ 47,766.3 $ 38,507.6
=========== ========== ==========
</TABLE>
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(15) DISCONTINUED OPERATIONS
As discussed in note 1, NFS is a holding company for NLIC and certain
other companies within the Nationwide Insurance Enterprise that offer
or distribute long-term savings and retirement products. Prior to the
contribution by Nationwide Corp. of the outstanding common stock of
NLIC to NFS, NLIC effected certain transactions with respect to certain
subsidiaries and lines of business that were unrelated to long-term
savings and retirement products.
On September 24, 1996, NLIC's Board of Directors declared a dividend
payable to Nationwide Corp. on January 1, 1997 consisting of the
outstanding shares of common stock of three subsidiaries: ELICW, NCC
and WCLIC. ELICW writes group accident and health and group life
insurance business and maintains it offices in Wausau, Wisconsin. NCC
is a property and casualty company with offices in Scottsdale, Arizona
that serves as a fronting company for a property and casualty
subsidiary of NMIC. WCLIC writes high dollar term life insurance
policies and is located in San Francisco, California. ELICW, NCC and
WCLIC have been accounted for as discontinued operations in the
accompanying consolidated financial statements through December 31,
1996. The Company did not recognize any gain or loss on the disposal of
these subsidiaries.
Also, during 1996, NLIC entered into two reinsurance agreements whereby
all of NLIC's accident and health and group life insurance business was
ceded to ELICW and NMIC, effective January 1, 1996. See note 11 for a
complete discussion of the reinsurance agreements. The Company has
discontinued its accident and health and group life insurance business
and in connection therewith has entered into reinsurance agreements to
cede all existing and any future writings to other affiliated
companies. NLIC's accident and health and group life insurance business
is accounted for as discontinued operations for all periods presented.
The Company did not recognize any gain or loss on the disposal of the
accident and health and group life insurance business. The assets,
liabilities, results of operations and activities of discontinued
operations are distinguished physically, operationally and for
financial reporting purposes from the remaining assets, liabilities,
results of operations and activities of the Company.
A summary of the results of operations of discontinued operations for
the years ended December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- ------------
<S> <C> <C> <C>
Revenues $ - $ 668.9 $ 776.9
Net income $ - $ 11.3 $ 24.7
</TABLE>
A summary of the assets and liabilities of discontinued operations as
of December 31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
(in millions of dollars) 1997 1996 1995
-------------- ------------- -------------
<S> <C> <C> <C>
Assets, consisting primarily of investments $247.3 $3,288.5 $3,206.7
Liabilities, consisting primarily of policy benefits and claims $247.3 $2,802.8 $2,700.0
</TABLE>
<PAGE> 72
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
(a) Financial Statements:
<S> <C>
(1) Financial statements included PAGE
in Prospectus
(Part A):
Condensed Financial Information. 17
(2)Financial statements included
in Part B:
Those financial statements 70
required by Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-II:
Independent Auditors' Report. 70
Statement of Assets, Liabilities and Contract 71
Owners' Equity as of December 31, 1997.
Statements of Operations and Changes in 74
Contract Owners' Equity for the years ended
December 31, 1997 and 1996.
Notes to Financial Statements. 85
Nationwide Life Insurance Company:
Independent Auditors' Report. 98
Consolidated Balance Sheets as of December 99
31, 1997 and 1996.
Consolidated Statements of Income for the 100
years ended December 31, 1997, 1996 and
1995.
Consolidated Statements of Shareholder's 101
Equity for the years ended December 31,
1997, 1996 and 1995.
Consolidated Statements of Cash Flows for 102
the years ended December 31, 1997, 1996
and 1995.
Notes to Consolidated Financial Statements. 103
Schedule I - Consolidated Summary of Investments - Other
Than Investments in Related Parties 141
Schedule III - Supplementary Insurance Information 142
Schedule IV - Reinsurance 143
Schedule V - Valuation and Qualifying Accounts 144
</TABLE>
122 of 145
<PAGE> 73
Item 24. (b) Exhibits
(1) Resolution of the Depositor's Board of Directors
authorizing the establishment of the Registrant -
Filed previously with the Registration Statement,
and hereby incorporated by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts between
the Registrant and Principal Underwriter - Filed
previously with the Registration Statement, and
hereby incorporated by reference.
(4) The form of the variable annuity contract Filed
previously with the Registration Statement, and
hereby incorporated by reference.
(5) Variable Annuity Application
Attached hereto
(6) Articles of Incorporation of Depositor -
Filed previously with the Registration
Statement, and hereby incorporated by
reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously with the
Registration Statement, and hereby incorporated by
reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation Schedule -
Filed previously with PostEffective Amendment No.
14 to the Registration Statement, and hereby
incorporated by reference.
123 of 145
<PAGE> 74
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
300 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Charles L. Fuellgraf, Jr. Director
600 South Washington Street
Butler, PA 16001
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 Nationwide Insurance Enterprise
Columbus, OH 43215 and Director
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
2859 Paces Ferry Road
Atlanta, GA 30339
C. Ray Noecker Director
2770 Winchester Southern S.
Ashville, OH 43103
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
124 of 145
<PAGE> 75
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
10835 Georgetown Street NE
Louisville, OH 44641
Harold W. Weihl Director
14282 King Road
Bowling Green, OH 43402
Dennis W. Click Vice President and Secretary
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
W. Sidney Druen Senior Vice President and General
One Nationwide Plaza Counsel and Assistant Secretary
Columbus, OH 43215
Harvey S. Galloway, Jr. Senior Vice President-Chief Actuary-
One Nationwide Plaza Life, Health and Annuities
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Life
One Nationwide Plaza Company Operations
Columbus, OH 43215
Michael D. Bleiweiss Vice President-
One Nationwide Plaza Individual Annuity Operations
Columbus, OH 43215
</TABLE>
125 of 145
<PAGE> 76
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Matthew S. Easley Vice President -
One Nationwide Plaza Life Marketing and Administrative Services
Columbus, OH 43215
Timothy E. Murphy Vice President-
One Nationwide Plaza Strategic Marketing
Columbus, Ohio 43215
R. Dennis Noice Vice President-
One Nationwide Plaza Retail Operations
Columbus, OH 43215
Joseph P. Rath
One Nationwide Plaza Vice President
Columbus, OH 43215
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR
OR REGISTRANT.
* Subsidiaries for which separate financial statements are
filed
** Subsidiaries included in the respective consolidated
financial statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
126 of 145
<PAGE> 77
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
Affiliate Agency, Inc. Delaware Life Insurance Agency
Affiliate Agency of Ohio, Inc. Ohio Life Insurance Agency
Allnations, Inc. Ohio Promotes cooperative insurance corporations
worldwide
American Marine Underwriters, Inc. Florida Underwriting Manager
Auto Direkt Insurance Company Germany Insurance Company
The Beak and Wire Corporation Ohio Radio Tower Joint Venture
California Cash Management Company California Inactive
Colonial County Mutual Insurance Texas Insurance Company
Company
Colonial Insurance Company of Wisconsin Insurance Company
Wisconsin
Columbus Insurance Brokerage and Germany Insurance Broker
Service GMBH
Companies Agency, Inc. Wisconsin Insurance Broker
Companies Agency Insurance Services California Insurance Broker
of California
Companies Agency of Alabama, Inc. Alabama Insurance Broker
Companies Agency of Georgia, Inc. Georgia Insurance Broker
Companies Agency of Idaho, Inc. Idaho Insurance Broker
Companies Agency of Kentucky, Inc. Kentucky Insurance Broker
Companies Agency of Massachusetts, Massachusetts Insurance Broker
Inc.
Companies Agency of New York, Inc. New York Insurance Broker
Companies Agency of Pennsylvania, Inc. Pennsylvania Insurance Broker
Companies Agency of Phoenix, Inc. Arizona Insurance Broker
Companies Agency of Texas, Inc. Texas Local Recording Agent (P&C)
Companies Annuity Agency of Texas, Texas Group and Variable Contract Agent
Inc.
Cooperative Service Company Nebraska Insurance Agency
Countrywide Services Corporation Delaware Products Liability, Investigative and Claims
Management Services
EMPLOYERS INSURANCE OF WAUSAU A Wisconsin Mutual Insurance Company
Mutual Company
</TABLE>
127 of 145
<PAGE> 78
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
** Employers Life Insurance Company of Wisconsin Life Insurance Company
Wausau
F & B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Life Insurance Agency
Agency of Alabama, Inc.
Financial Horizons Distributors Ohio Life Insurance Agency
Agency of Ohio, Inc.
Financial Horizons Distributors Oklahoma Life Insurance Agency
Agency of Oklahoma, Inc.
Financial Horizons Distributors Texas Life Insurance Agency
Agency of Texas, Inc.
* Financial Horizons Investment Trust Massachusetts Investment Company
Financial Horizons Securities Oklahoma Broker Dealer
Corporation
Gates, McDonald & Company Ohio Cost Control Business
Gates, McDonald & Company of Nevada Nevada Self-Insurance Administration Claims
Examinations and Data Processing Services
Gates, McDonald & Company of New New York Workers Compensation Claims Administration
York, Inc.
Gates McDonald Health Plus, Inc. Ohio Managed Care Organization
Greater La Crosse Health Plans, Inc. Wisconsin Commercial Health and Medicare Supplement
Insurance
Insurance Intermediaries, Inc. Ohio Insurance Broker and Insurance Agency
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Key Health Plan, Inc. California Pre-paid Health Plans
Landmark Financial Services of New New York Life Insurance Agency
York, Inc.
Leben Direkt Insurance Company Germany Life Insurance Company
Lone Star General Agency, Inc. Texas Insurance Agency
** 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 Premium and Benefit Delaware Insurance Administrative Services
Administration Company
** Nationwide Advisory Services, Inc. Ohio Registered Broker-Dealer, Investment Manager
and Administrator
</TABLE>
128 of 145
<PAGE> 79
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C>
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 Redevelopment of blighted areas within the
Redevelopment Corporation City of Columbus, Ohio
Nationwide Corporation Ohio Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to form
or acquire the control of other corporations
Nationwide/Dispatch LLC Ohio Engaged in related Arena development Activity
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Services Capital Delaware Statutory Business Trust
Trust
Nationwide Financial Services, Inc. Delaware Organized for the purpose of acquiring,
holding, encumbering, transferring, or
otherwise disposing of shares, bonds, and
other evidences of indebtedness, securities,
and contracts of other persons, associations,
corporations, domestic or foreign and to form
or acquire the control of other corporations
Nationwide General Insurance Company Ohio Insurance Company
Nationwide Global Holdings, Inc. Ohio Holding Company for Enterprise International
Operations
Nationwide Health Plans, Inc. Ohio Health Maintenance Organization
* Nationwide Indemnity Company Ohio Reinsurance Company
Nationwide Insurance Enterprise Ohio Membership Non-Profit Corporation
Foundation
Nationwide Insurance Enterprise Ohio Performs shares services functions for the
Services, Ltd. Enterprise
Nationwide Insurance Golf Charities, Ohio Membership Non-Profit Corporation
Inc.
Nationwide Investing Foundation Michigan Investment Company
* Nationwide Investing Massachusetts Investment Company
Foundation II
Nationwide Investing Foundation III Ohio Investment Company
</TABLE>
129 of 145
<PAGE> 80
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
Nationwide Investment Services Oklahoma Registered Broker-Dealer in Deferred
Corporation Compensation Market
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
** Nationwide Life and Annuity Insurance Ohio Life Insurance Company
Company
** Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Texas Lloyds Company
Nationwide Management Systems, Inc. Ohio Offers Preferred Provider Organization and
Other Related Products and Services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
Nationwide Properties, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Ltd. Ohio Develops, owns and operates real estate and
real estate investments
* Nationwide Separate Account Trust Massachusetts Investment Company
NEA Valuebuilder Investor Services, Delaware Life Insurance Agency
Inc.
NEA Valuebuilder Investor Services of Alabama Life Insurance Agency
Alabama, Inc.
NEA Valuebuilder Investor Services of Arizona Life Insurance Agency
Arizona, Inc.
NEA Valuebuilder Investor Services of Montana Life Insurance Agency
Montana, Inc.
NEA Valuebuilder Investor Services of Nevada Life Insurance Agency
Nevada, Inc.
NEA Valuebuilder Investor Services of Ohio Life Insurance Agency
Ohio, Inc.
NEA Valuebuilder Investor Services of Oklahoma Life Insurance Agency
Oklahoma, Inc.
NEA Valuebuilder Investor Services of Texas Life Insurance Agency
Texas, Inc.
NEA Valuebuilder Investor Services of Wyoming Life Insurance Agency
Wyoming, Inc.
NEA Valuebuilder Services Insurance Massachusetts Life Insurance Agency
Agency, Inc.
Neckura General Insurance Company Germany Insurance Company
Neckura Holding Company Germany Administrative Service for Neckura Insurance
Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life Insurance Company
</TABLE>
130 of 145
<PAGE> 81
<TABLE>
<CAPTION>
NO. VOTING
SECURITIES
STATE (SEE ATTACHED
OF ORGANIZATION CHART) UNLESS
COMPANY OTHERWISE PRINCIPAL BUSINESS
INDICATED
<S> <C> <C> <C> <C>
NWE, Inc. Ohio Special Investments
PEBSCO of Massachusetts Insurance Massachusetts Markets and Administers Deferred Compensation
Agency, Inc. Plans for Public Employees
PEBSCO of Texas, Inc. Texas Markets and Administers Deferred Compensation
Plans for Public Employees
Pension Associates of Wausau, Inc. Wisconsin Pension plan administration, record keeping
and consulting and compensation consulting
Physicians Plus Insurance Corporation Wisconsin Health Maintenance Organization
Prevea Health Insurance Plan, Inc. Wisconsin Health Maintenance Organization
Public Employees Benefit Services Delaware Markets and Administers Deferred Compensation
Corporation Plans for Public Employees
Public Employees Benefit Services Alabama Markets and Administers Deferred Compensation
Corporation of Alabama Plans for Public Employees
Public Employees Benefit Services Arkansas Markets and Administers Deferred Compensation
Corporation of Arkansas Plans for Public Employees
Public Employees Benefit Services Montana Markets and Administers Deferred Compensation
Corporation of Montana Plans for Public Employees
Public Employees Benefit Services New Mexico Markets and Administers Deferred Compensation
Corporation of New Mexico Plans for Public Employees
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Excess and Surplus Lines Insurance Company
Company
SVM Sales GmbH, Neckura Insurance Germany Sales support for Neckura Insurance Group
Group
TIG Countrywide Insurance Group California Independent Agency Personal Lines Underwriter
Wausau (Bermuda) Ltd. Bermuda Rent-a-captive Reinsurer
Wausau Business Insurance Company Wisconsin Insurance Company
Wausau General Insurance Company Illinois Insurance Company
Wausau Insurance Company (U.K.) United Kingdom Insurance and Reinsurance Company
Limited
Wausau International Underwriters California Special Risks, Excess and Surplus Lines
Insurance Underwriting Manager
** Wausau Preferred Health Insurance Wisconsin Insurance and Reinsurance Company
Company
Wausau Service Corporation Wisconsin Holding Company
Wausau Underwriters Insurance Company Wisconsin Insurance Company
</TABLE>
131 of 145
<PAGE> 82
<TABLE>
<CAPTION>
NO. VOTING SECURITIES
STATE (SEE ATTACHED CHART) UNLESS
OF ORGANIZATION OTHERWISE INDICATED
COMPANY PRINCIPAL BUSINESS
<S> <C> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
Nationwide VA Separate Account-Q Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
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 VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-A Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-B Separate Account Policies
Nationwide VL Separate Ohio Nationwide Life and Annuity Issuer of Life Insurance
Account-C 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
</TABLE>
132 of 145
<PAGE> 83
<TABLE>
<S> <C> <C> <C>
Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
133 of 145
<PAGE> 84
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
------------------------------------------
| EMPLOYERS INSURANCE OF WAUSAU |
| A MUTUAL COMPANY |
| (EMPLOYERS) |
| |========================================
| Contribution Note Cost |
| ----------------- ---- |
| Casualty $400,000,000 |
------------------------------------------
|
-----------------------------------------------------------------------
| | |
- --------------------------- --------------------------- ---------------------------- ---------------------------
| KEY HEALTH PLAN, INC. | | WAUSAU INSURANCE CO. | | WAUSAU SERVICE | | |
| | | (U.K.) LIMITED | | CORPORATION (WSC) | | NATIONWIDE LLOYDS |
|Common Stock: 1,000 | |Common Stock: 8,506,800 | |Common Stock: 1,000 Shares| | |
|------------ Shares | |------------ Shares | |------------ | | |
| | | | | |=========| |
| Cost | | Cost | | Cost | || | A TEXAS LLOYDS |
| ---- | | ---- | | ---- | || | |
|Employers- | |Employers- | |Employers- | || | |
| 80% $1,828,478 | |100% $18,683,300| |100% $176,763,000| || | |
- --------------------------- --------------------------- ---------------------------- || ---------------------------
| ||
--------------------------------------------------------------------- ||
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU BUSINESS | | | COMPANIES AGENCY | | | COUNTRYWIDE SERVICES | | || | |
| INSURANCE COMPANY | | | OF KENTUCKY, INC. | | | CORPORATION | | || | |
|Common Stock: 10,900,000 | | |Common Stock: 1,000 | | |Common Stock: 100 Shares | | || | COMPANIES |
|------------ Shares | | |------------ Shares | | |------------ | | || | AGENCY OF |
| |---|---| | |---| | | ||==| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | || | |
| ---- | | | ---- | | | ---- | | || | |
|WSC-100% $33,800,000| | |WSC-100% $1,000 | | |WSC-100% $145,852 | | || | |
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| | | ||
- --------------------------- | --------------------------- | ---------------------------- | || ---------------------------
| WAUSAU UNDERWRITERS | | | COMPANIES AGENCY | | | WAUSAU GENERAL | | || | |
| INSURANCE COMPANY | | | OF MASSACHUSETTS, INC. | | | INSURANCE COMPANY | | || | |
|Common Stock: 8,750 | | |Common Stock: 1,000 | | |Common Stock: 200,000 | | || | COMPANIES ANNUITY |
|------------ Shares | | |------------ Shares | | |------------ Shares | | || | AGENCY OF |
| |---|---| | |---| | | ====| TEXAS, INC. |
| Cost | | | Cost | | | Cost | | | |
| ---- | | | ---- | | | ---- | | | |
|WSC-100% $69,560,006| | |WSC-100% $1,000 | | |WSC-100% $39,000,000 | | | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| GREATER LA CROSSE | | | COMPANIES AGENCY | | | WAUSAU INTERNATIONAL | | | AMERICAN MARINE |
| HEALTH PLANS, INC. | | | OF NEW YORK, INC. | | | UNDERWRITERS | | | UNDERWRITERS, INC. |
|Common Stock: 3,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 20 |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |------------ Shares |
| |---|---| | |---| | |------| |
| Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|WSC-33.3% $1,461,761 | | |WSC-100% $1,000 | | |WSC-100% $10,000 | | |WSC-100% $248,222 |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- | ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES AGENCY | | | COMPANIES |
| OF ALABAMA, INC. | | | OF PENNSYLVANIA, INC. | | | INSURANCE SERVICES | | | AGENCY, INC. |
| | | | | | | OF CALIFORNIA | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 100 |
|------------ Shares | | |------------ Shares | |---|------------ Shares | |------|------------ Shares |
| |---|---| | | | | | |
| Cost | | | Cost | | | Cost | | Cost |
| ---- | | | ---- | | | ---- | | ---- |
|WSC-100% $100 | | |WSC-100% $100 | | |WSC-100% $1,000 | |WSC-100% $10,000 |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| COMPANIES AGENCY | | | COMPANIES AGENCY | | | PHYSICIANS PLUS | | PENSION ASSOCIATES |
| OF IDAHO, INC. | | | OF PHOENIX, INC. | | | INSURANCE | | OF WAUSAU, INC. |
| | | | | | | CORPORATION | |Common Stock: 1,000 |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | |Common Stock: 7,150 | |------------ Shares |
|------------ Shares | | |------------ Shares | | |------------ Shares | | |
| |-------| | |---|Preferred Stock: 11,540 | | |
| | | | | | |--------------- Shares | |Companies Cost |
| | | | | | | | |Agency, Inc. ---- |
| Cost | | | Cost | | | Cost | |(Wisconsin)-100% $10,000 |
| ---- | | | ---- | | | ---- | | |
|WSC-100% $1,000 | | |WSC-100% $1,000 | | |WSC-33-1/3% $6,215,459| | |
- --------------------------- | --------------------------- | ---------------------------- ---------------------------
| |
| --------------------------- | ----------------------------
| | WAUSAU | | | PREVEA HEALTH |
| | (BERMUDA) LTD. | | | INSURANCE PLAN, INC. |
| | Common Stock: 120,000 | | |Common Stock: 3,000 Shares|
| | ------------- Shares | | |------------ |
----| | ----| |
| | | |
| Cost | | Cost |
| ---- | | ---- |
| WSC-100% $5,000,000| |WSC-33-1/3% $500,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
NATIONWIDE INSURANCE ENTERPRISE(R) (middle)
<S> <C> <C>
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| INSURANCE COMPANY |================================================
| (CASUALTY) |
| |
| |
-----------------------------------------------------------------------------
| || |
| || -------------------------------------------------------------
| || ---------------------------------------------------------------------------------------
| || | |
- -------------------------------- || | -------------------------------- --------------------------------
| ALLNATIONS, INC. | || | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|Common Stock: 10,330 Shares | || | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|------------ | || | | | | |
| Cost | || | |Common Stock: 20,000 | |Common Stock: 10,000 |
| ---- | || | |------------ Shares | |------------ Shares |
|Casualty-18.6% $88,320 | || | | Cost | | Cost |
|Fire-18.6% $88,463 | || | | ---- | | ---- |
|Preferred Stock: 1,466 Shares | || |----|Casualty-100% $5,944,422 | ---------|Casualty-100% $87,943,140 |
|--------------- | || | | | | | |
| Cost | || | | | | | |
| ---- | || | | | | | |
|Casualty-6.8% $100,000 | || | | | | | |
|Fire-6.8% $100,000 | || | | | | | |
- -------------------------------- || | -------------------------------- | --------------------------------
|| | |
- -------------------------------- || | -------------------------------- | --------------------------------
| FARMLAND MUTUAL | || | | NATIONWIDE PROPERTY | | | NECKURA |
| INSURANCE COMPANY | || | | AND CASUALTY | | | INSURANCE COMPANY |
|Guaranty Fund | || | | INSURANCE COMPANY | | | |
|------------ |========= |----|Common Stock: 60,000 | |--------|Common Stock: 6,000 |
|Certificate |-------- | |------------ Shares | | |------------ Shares |
|----------- Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | |Neckura- ---- |
|Casualty $500,000 | | | |Casualty-100% $6,000,000 | | |100% DM 6,000,000 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | | |
- -------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | COLONIAL INSURANCE | | | NECKURA LIFE |
| | | | | COMPANY OF WINCONSIN | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | (COLONIAL) | | | |
|------------ | ------| |----|Common Stock: 1,750 | |--------|Common Stock: 4,000 |
| Cost | | | |------------ Shares | | |------------ Shares |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681 |
- -------------------------------- | | -------------------------------- | --------------------------------
| | |
- -------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | SCOTTSDALE | | | NECKURA GENERAL |
| COMPANY | | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | (SIC) | | | |
|------------ | | | |Common Stock: 30,136 | | |Common Stock: 1,500 |
| Cost |-------- |----|------------ Shares | ---- |--------|------------ Shares |
| ---- | | | Cost | | | | Cost |
|Farmland $3,506,173 | | | ---- | | | | ---- |
|Mutual-100% | | |Casualty-100% $150,000,000 | | | |Neckura-100% DM 1,656,925 |
| | | | | | | | |
| | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONWIDE AGRIBUSINESS | | | SCOTTSDALE | | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | SURPLUS LINES | | | | BROKERAGE AND SERVICE |
|Common Stock: 1,000,000 | | | INSURANCE COMPANY | | | | GmbH |
|------------ Shares |------------ | | Common Stock: 100,000 | | | |Common Stock: 1 Share |
| | | | ------------ Shares | ---| |--------|------------ |
| Cost | | | | | | | Cost |
|Casualty-99.9% ---- | | | Cost | | | | ---- |
|Other Capital: $26,714,335 | | | ---- | | | |Neckura-100% DM 51,639 |
|------------- | | | SIC-100% $6,000,000 | | | | |
|Casualty-Ptd. $ 713,576 | | | | | | | |
- -------------------------------- | -------------------------------- | | --------------------------------
| | |
- -------------------------------- | -------------------------------- | | --------------------------------
| NATIONAL CASUALTY | | | NATIONAL PREMIUM & | | | | LEBEN DIREKT |
| COMPANY | | | BENEFIT ADMINISTRATION | | | | INSURANCE COMPANY |
| (NC) | | | COMPANY | | | | |
|Common Stock: 100 Shares | | |Common Stock: 10,000 | | | |Common Stock: 4,000 Shares |
|------------ |------------- |------------ Shares |----- ---------|------------ |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|Casualty-100% $67,442,439 | |Scottsdale-100% $10,000 | | |Neckura-100% DM 4,000,000 |
| | | | | | |
| | | | | | |
- -------------------------------- -------------------------------- | --------------------------------
| |
- -------------------------------- -------------------------------- | --------------------------------
| NCC OF AMERICA, LTD. | | SVM SALES | | | AUTO DIREKT |
| (INACTIVE) | | GmbH | | | INSURANCE COMPANY |
| | | | | | |
| | |Common Stock: 50 Shares | | |Common Stock: 1,500 Shares |
| | |------------ |----------------- |------------ |
| | | Cost | | Cost |
|NC-100% | | ---- | | ---- |
| | |Neckura-100% DM 50,000 | |Neckura-100% DM 1,643,149 |
| | | | | |
| | | | | |
- -------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE INSURANCE |
| ENTERPRISE FOUNDATION|
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
-----------------------------------------------------------------------------
| |
| |
| NATIONWIDE MUTUAL |
=======| FIRE INSURANCE COMPANY |
| (FIRE) |
| |
| |
-----------------------------------------------------------------------------
|
- --------------- --------------------------------------------------
| |
- ----------------------------------------------------------------------------------------------------------------- |
| | | |
| -------------------------------- | -------------------------------- ----------------------------------
| | SCOTTSDALE | | | NATIONWIDE | | NATIONWIDE |
| | INDEMNITY COMPANY | | | COMMUNITY URBAN | | CORPORATION |
| | | | | REDEVELOPMENT | | |
| | | | | CORPORATION | |Common Stock: Control: |
| |Common Stock: 50,000 | | |Common Stock: 10 Shares | |------------ ------- |
|-----|------------ Shares | |----|------------ | |$13,642,432 100% |
| | Cost | | | Cost | | Shares Cost |
| | ---- | | | ---- | | ------ ---- |
| |Casualty-100% $8,800,000 | | |Casualty-100% $1,000 | |Casualty 12,992,922 $751,352,485|
| | | | | | |Fire 649,510 24,007,936|
| | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- ----------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE | | | INSURANCE |
| | INDEMNITY COMPANY | | | INTERMEDIARIES, INC. |
| | | | | |
|-----|Common Stock: 28,000 | |----|Common Stock: 1,615 |
| |------------ Shares | | |------------ Shares |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $294,529,000 | | |Casualty-100% $1,615,000 |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | LONE STAR | | | NATIONWIDE CASH |
| | GENERAL AGENCY, INC. | | | MANAGEMENT COMPANY |
| | | | |Common Stock: 100 Shares |
------|Common Stock: 1,000 | |----|------------ |
| |------------ Shares | | | Cost |
| | Cost | | | ---- |
| | ---- | | |Casualty-90% $9,000 |
| |Casualty-100% $5,000,000 | | |NW Adv. Serv. 1,000 |
| -------------------------------- | --------------------------------
| || |
| -------------------------------- | --------------------------------
| | COLONIAL COUNTY MUTUAL | | | CALIFORNIA CASH |
| | INSURANCE COMPANY | | | MANAGEMENT |
| | | | | (Inactive) |
| |Surplus Debentures | | | |
| |------------------ | |----| |
| | Cost | | | |
| | ---- | | | |
| |Colonial $500,000 | | |Casualty-100% |
| |Lone Star 150,000 | | | |
| -------------------------------- | --------------------------------
| |
| -------------------------------- | --------------------------------
| | TIG COUNTRYWIDE | | | THE BEAK AND |
| | INSURANCE COMPANY | | | WIRE CORPORATION |
| |Common Stock 12,500 | | | |
-----|------------ Shares | | |Common Stock: 750 Shares |
| | | -----|------------ |
| | Cost | | | Cost |
| | ---- | | | ---- |
| |Casualty-100% $215,273,000 | | |Casualty-100% $1,419,000 |
| | | | | |
| -------------------------------- | | |
| | --------------------------------
| |
| -------------------------------- | --------------------------------
| | NATIONWIDE INSURANCE | | | NATIONWIDE/DISPATCH LLC |
| | ENTERPRISE SERVICES, LTD. | | | |
| | | | | |
| |Single Member Limited | | | |
- - - |Liability Company | - - -| |
| | | |
| | | |
|Casualty-100% | |Casualty-90% |
| | | |
-------------------------------- | |
--------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Lines
Limited Liability Company -- Dotted Line
December 31, 1997
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
(Left Side)
------------------------------------------------
| EMPLOYERS INSURANCE |
| OF WAUSAU |==========================================
| A MUTUAL COMPANY |
------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
| | |
--------------------------- --------------------------- ---------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | INSTITUTION DISTRIBUTORS |
| | | CAPITAL TRUST | | AGENCY, INC. (NFIDAI) |
| Common Stock: 3,814,779 | | Preferred Stock: | | Common Stock: 1,000 |
| ------------ Shares | | --------------- | | ------------ Shares |
| | | | | |
| NFS--100% | | NFS--100% | | NFS--100% |
--------------------------- --------------------------- ---------------------------
| ||
--------------------------- | --------------------------- --------------------------- || --------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | FINANCIAL HORIZONS | || | |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC. | | DISTRIBUTORS AGENCY | || | |
| | | | (NW ADV. SERV.) | | OF ALABAMA, INC. | || | |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--|--| ------------ Shares |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OHIO, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $58,070,003 | | | NW Life -100% $5,996,261 | || | NFIDAI -100% $100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NWE, INC. | | | NATIONWIDE | || | LANDMARK FINANCIAL | || | |
| | | | INVESTORS SERVICES, INC. | || | SERVICES OF | || | |
| | | | | || | NEW YORK, INC. | || | |
| Common Stock: 100 | | | Common Stock: 5 Shares | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | ------------ |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF OKLAHOMA, INC. |
| Cost | | | Cost | || | Cost | || | |
| ---- | | | ---- | || | ---- | || | |
| NW Life -100% $35,971,375 | | | NW Adv. Serv. -100% $5,000| || | NFIDAI -100% $10,100 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE INVESTMENT | | | FINANCIAL HORIZONS | || | FINANCIAL HORIZONS | || | |
| SERVICES CORPORATION | | | INVESTMENT TRUST | || | SECURITIES CORP. | || | |
| | | | | || | | || | |
| Common Stock: 5,000 | | | | || | Common Stock: 10,000 | || | FINANCIAL HORIZONS |
| ------------ Shares |--| | |==|| | ------------ Shares |--||==| DISTRIBUTORS AGENCY |
| | | | | || | | || | OF TEXAS, INC. |
| Cost | | | | || | Cost | || | |
| ---- | | | | || | ---- | || | |
| NW Life -100% $529,728 | | | COMMON LAW TRUST | || | NFIDAI -100% $153,000 | || | |
--------------------------- | --------------------------- || --------------------------- || --------------------------
| || ||
--------------------------- | --------------------------- || --------------------------- || --------------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | || | |
| PROPERTIES, LTD. | | | INVESTING | || | | || | |
| | | | FOUNDATION | || | | || | |
| Units: | | | | || | Common Stock: 100 | || | AFFILIATE |
| ------ - -| | |==|| | ------------ Shares |--||==| AGENCY OF |
| | | | | || | | | OHIO, INC. |
| | | | | || | Cost | | |
| NW Life -90% | | | | || | ---- | | |
| NW Mutual-10% | | | COMMON LAW TRUST | || | NFIDAI -100% $100 | | |
--------------------------- | --------------------------- || --------------------------- --------------------------
| ||
--------------------------- | --------------------------- ||
| NATIONWIDE | | | NATIONWIDE | ||
| PROPERTIES, LTD. | | | INVESTING | ||
| | | | FOUNDATION II | ||
| Units: - -| | | ||
| ------ | | |==||
| | | | ||
| | | | ||
| NW Life -97.6% | | | ||
| NW Mutual -2.4% | | COMMON LAW TRUST | ||
--------------------------- --------------------------- ||
||
--------------------------- ||
| NATIONWIDE | ||
| SEPARATE ACCOUNT | ||
| TRUST | ||
| | ||
| |__||
| |
| |
| |
| COMMON LAW TRUST |
---------------------------
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
(Center)
NATIONWIDE INSURANCE ENTERPRISE (R)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| INSURANCE COMPANY |==========================================
| (CASUALTY) |
------------------------------------------------
|
| ----------------------------------------------------------
| |
---------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
| Casualty 12,992,922 $751,352,485 |
| Fire 649,510 24,007,936 |
---------------------------------------
|-----------------------------------------------------------------
--------------------------- |
| NATIONWIDE FINANCIAL | |
| SERVICES, INC. (NFS) | |
| | |
| Common Stock: Control | |
| ------------ ------- | |
| | |
| | |
| Class A Public--100% | |
| Class B NW Corp--100% | |
--------------------------- |
| |
---------------------------------------------------------------------- |
| | | |
--------------------------- --------------------------- --------------------------- | -------------------------
| IRVIN L. SCHWARTZ | | PUBLIC EMPLOYEES BENEFIT | | NEA VALUEBUILDER | | | NATIONWIDE GLOBAL |
| & ASSOCIATES | | SERVICES CORPORATION | | INVESTOR SERVICES, INC. | | | HOLDINGS, INC. |
| | | (PEBSCO) | | (NEA) | | | |
| Common Stock: Control | | Common Stock: 236,494 |==|| | Common Stock: 500 |= || | | Common Stock: 1 Share |
| ------------ ------- | | ------------ Shares | || | ------------ Shares | || |--| ------------ |
| | | | || | | || | | |
| | | | || | | || | | Cost |
| Class A Other -100% | | | || | | || | | ---- |
| Class B NFS -100% | | NFS -100% | || | NFS -100% | || | | NW Corp-100% $7,000,00 |
- ---------------------------- ---------------------------- || ---------------------------- || | --------------------------
--------------------------- || --------------------------- || |
| PEBSCO OF | || | NEA VALUEBUILDER | || | --------------------------
| ALABAMA | || | INVESTOR SERVICES | || | | MRM INVESTMENT, INC. |
| | || | OF ALABAMA, INC. | || | | |
| Common Stock: 100,000 | || | Common Stock: 500 | || | | |
| ------------ Shares |--|| | ------------ Shares |--|| __ | Common Stock: 1 Share |
| | || | | || | ----------- |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | Cost |
| PEBSCO -100% $1,000 | || | NEA -100% $5,000 | || | ---- |
--------------------------- || --------------------------- || | NW Corp.-100% $7,000,000|
|| || --------------------------
--------------------------- || --------------------------- ||
| PEBSCO OF | || | NEA VALUEBUILDER | ||
| ARKANSAS | || | INVESTOR SERVICES | ||
| | || | OF ARIZONA, INC. | ||
| Common Stock: 50,000 | || | Common Stock: 100 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $500 | || | NEA -100% $1,000 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- ||
| PEBSCO OF MASSACHUSETTS | || | NEA VALUEBUILDER | ||
| INSURANCE AGENCY, INC. | || | INVESTOR SERVICES | ||
| | || | OF MONTANA, INC. | ||
| Common Stock: 1,000 | || | Common Stock: 500 | ||
| ------------ Shares |--|| | ------------ Shares |--||
| | || | | ||
| Cost | || | Cost | ||
| ---- | || | ---- | ||
| PEBSCO -100% $1,000 | || | NEA -100% $500 | ||
--------------------------- || --------------------------- ||
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| MONTANA | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF NEVADA, INC. | || | OF OHIO, INC. |
| Common Stock: 500 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $500 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || -------------------------
| PEBSCO OF | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| NEW MEXICO | || | INVESTOR SERVICES | || | INVESTOR SERVICES |
| | || | OF WYOMING, INC. | || | OF OKLAHOMA, INC. |
| Common Stock: 1,000 | || | Common Stock: 500 | || | |
| ------------ Shares |--|| | ------------ Shares |--||====| |
| | || | | || | |
| Cost | || | Cost | || | |
| ---- | || | ---- | || | |
| PEBSCO -100% $1,000 | || | NEA -100% $500 | || | |
--------------------------- || --------------------------- || --------------------------
|| ||
--------------------------- || --------------------------- || --------------------------
| | || | NEA VALUEBUILDER | || | NEA VALUEBUILDER |
| | || | SERVICES INSURANCE | || | INVESTOR SERVICES |
| PEBSCO OF | || | AGENCY, INC. | || | OF TEXAS, INC. |
| TEXAS, INC. | || | Common Stock: 100 | || | |
| |==|| | ------------ Shares |--||=== | |
| | | | | |
| | | Cost | | |
| | | ---- | | |
| | | NEA -100% $1,000 | | |
--------------------------- --------------------------- --------------------------
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C>
------------------------------------------------
| NATIONWIDE MUTUAL |
========================================| FIRE INSURANCE COMPANY |
| (FIRE) |
------------------------------------------------
|
- -----------------------------------------------------------------|
- ----------------------------------------------------------------------------------------------
| | |
--------------------------- ------------------------------ ------------------------------
| GATES, MCDONALD | | EMPLOYERS LIFE INSURANCE | | NATIONWIDE |
| & COMPANY (GATES) | | OF WAUSAU (ELIOW) | | HEALTH PLANS, INC. (NHP) |
| | | | | |
| Common Stock: 254 | | Common Stock: 250,000 | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | | |
| | Cost | | | Cost | | | Cost |
| | ---- | | | ---- | | | ---- |
| | NW CORP. -100% $25,683,532 | | | NW CORP. -100% $126,509,480 | | | NW CORP. -100% $14,603,732 |
| ----------------------------- | ------------------------------ | ------------------------------
| | |
| --------------------------- | ------------------------------ | ------------------------------
| | GATES, MCDONALD & COMPANY | | | WAUSAU PREFERRED | | | NATIONWIDE MANAGEMENT |
| | OF NEW YORK, INC. | | | HEALTH INSURANCE CO. | | | SYSTEMS, INC. |
| | | | | | | | |
| | Common Stock: 3 | | | Common Stock: 200 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares | |--| ------------ Shares |
| | | | | | | |
| | Cost | | Cost | | | NHP Cost |
| | ---- | | ---- | | | ---- |
| | GATES -100% $106,947 | | ELIOW -100% $57,413,193 | | | Inc. -100% $25,149 |
| ----------------------------- ------------------------------ | ------------------------------
| |
| ----------------------------- | ------------------------------
| | GATES, MCDONALD & COMPANY | | | NATIONWIDE |
| | OF NEVADA | | | AGENCY, INC. |
| | | | | |
| | Common Stock: 40 | | | Common Stock: 100 |
|-- | ------------ Shares | |--| ------------ Shares |
| | | | |
| | Cost | | Cost |
| | ---- | | NHP ---- |
| | Gates -100% $93,750 | | Inc. -99% $116,077 |
| ----------------------------- ------------------------------
|
| -----------------------------
| | GATESMCDONALD |
| | HEALTH PLUS, INC. |
| | |
| | Common Stock: 200 |
|-- | ------------ Shares |
| |
| Cost |
| ---- |
| Gates -100% $2,000,000 |
-----------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1997
Page 2
</TABLE>
<PAGE> 90
Item 27. NUMBER OF CONTRACT OWNERS
The number of Contract Owners of Qualified and Non-Qualified
Contracts as of January 31, 1998 was 272,287 and 101,469
respectively.
Item 28. INDEMNIFICATION
Provision is made in the Company's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by the Company 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 the Company, 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 the Company pursuant to the
foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Advisory Services, Inc. ("NAS") acts as principal
underwriter and general distributor for the Nationwide
Multi-Flex Variable Account, Nationwide DC Variable Account,
Nationwide DCVA II, Nationwide Variable Account-II,
Nationwide Variable Account-5, Nationwide Variable
Account-6, Nationwide Variable Account-8, Nationwide
Variable Account-9, 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 VLI Separate Account-2, Nationwide VLI Separate
Account-3, Nationwide VLI Separate Account-4, NACo Variable
Account and Nationwide Variable Account, all of which are
separate investment accounts of the Company or its
affiliates.
NAS also acts as principal underwriter for Nationwide
Investing Foundation, Nationwide Separate Account Trust,
Financial Horizons Investment Trust, Nationwide Asset
Allocation Trust and Nationwide Investing Foundation II, and
Nationwide Investing Foundation III which are open-end
management investment companies.
(b)
NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
<S> <C>
Joseph J. Gasper President and Director
One Nationwide Plaza
Columbus, OH 43215
Dimon R. McFerson Chairman of the Board of Directors and
One Nationwide Plaza Chairman and
Columbus, OH 43215 Chief Executive Officer--Nationwide
Insurance Enterprise and Director
Robert A. Oakley Executive Vice President - Chief Financial
One Nationwide Plaza Officer and Director
Columbus, OH 43215
</TABLE>
136 of 145
<PAGE> 91
(b)
NATIONWIDE ADVISORY SERVICES, INC.
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
<S> <C>
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President - Chief Investment
One Nationwide Plaza Officer and Director
Columbus, OH 43215
Elizabeth A. Davin Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
W. Sidney Druen Senior Vice President and
One Nationwide Plaza General Counsel and
Columbus, OH 43215 Assistant Secretary
Dennis W. Click Secretary
One Nationwide Plaza
Columbus, OH 43215
Peter J. Neckermann Vice President
One Nationwide Plaza
Columbus, OH 43215
James F. Laird, Jr. Vice President and General
One Nationwide Plaza Manager
Columbus, OH 43215
Edwin P. Mc Causland Senior Vice President-Fixed Income
One Nationwide Plaza Securities
Columbus, OH 43215
William G. Goslee
One Nationwide Plaza Vice President
Columbus, OH 43215
Charles Bath
One Nationwide Plaza Vice President - Investments
Columbus, OH 43215
Joseph P. Rath Vice President - Compliance
One Nationwide Plaza
Columbus, OH 43215
Christopher A. Cray Treasurer
One Nationwide Plaza
Columbus, OH 43215
David E. Simaitis Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
Patricia J. Smith Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
</TABLE>
<TABLE>
<CAPTION>
(c) NAME OF NET UNDERWRITING COMPENSATION ON
PRINCIPAL DISCOUNTS AND REDEMPTION OR BROKERAGE
UNDERWRITER COMMISSIONS ANNUITIZATION COMMISSIONS COMPENSATION
<S> <C> <C> <C> <C>
Nationwide N/A N/A N/A N/A
Advisory
Services,
Inc.
</TABLE>
137 of 145
<PAGE> 92
Item 30. LOCATION OF ACCOUNTS AND RECORDS
Robert O. Cline
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a postcard or similar written
communication affixed to or included in the prospectus that
the applicant can remove to send for a Statement of
Additional Information; and
(c) deliver any Statement of Additional Information and any
financial statements required to be made available under
this form promptly upon written or oral request.
The Registrant represents that any of the Contracts which are
issued pursuant to Section 403(b) of the Code is issued by the
Company through the Registrant in reliance upon, and in compliance
with, a no-action letter issued by the Staff of the Securities and
Exchange Commission to the American Council of Life Insurance
(publicly available November 28, 1988) permitting withdrawal
restrictions to the extent necessary to comply with Section
403(b)(11) of the Code.
The Company represents that the fees and charges deducted under
the Contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by the Company.
138 of 145
<PAGE> 93
Offered by
Nationwide Life Insurance Company
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide Variable Account - II
Deferred Variable Annuity Contract
PROSPECTUS
May 1, 1998
139 of 145
<PAGE> 94
INDEPENDENT AUDITORS' CONSENT AND REPORT ON FINANCIAL STATEMENT SCHEDULES
The Board of Directors of Nationwide Life Insurance Company and
Contract Owners of the Nationwide Variable Account-II:
The audits referred to in our report on Nationwide Life Insurance Company (the
Company) dated January 30, 1998 included the related financial statement
schedules as of December 31, 1997, and for each of the years in the three-year
period ended December 31, 1997, included in the registration statement. These
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statement schedules based on our audits. In our opinion, such financial
statement schedules, when considered in relation to the basic consolidated
financial statements taken as a whole, present fairly in all material respects
the information set forth herein.
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 Peat Marwick LLP
Columbus, Ohio
April 24, 1998
140 of 145
<PAGE> 95
<PAGE> 1
SCHEDULE I
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
CONSOLIDATED SUMMARY OF INVESTMENTS -
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in millions of dollars)
As of December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Column A Column B Column C Column D
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Amount at
which shown
in the
Market consolidated
Type of Investment Cost value balance sheet
- ----------------------------------------------------------------------------- ------------- -------------- ---------------
Fixed maturity securities available-for-sale:
Bonds:
<S> <C> <C> <C>
U.S. Government and government agencies and authorities $ 3,859.7 $ 3,981.7 $ 3,981.7
States, municipalities and political subdivisions 1.6 1.6 1.6
Foreign governments 93.3 95.8 95.8
Public utilities 1,555.3 1,609.8 1,609.8
All other corporate 7,223.0 7,515.2 7,515.2
---------- ---------- ----------
Total fixed maturity securities available-for-sale 12,732.9 13,204.1 13,204.1
---------- ---------- ----------
Equity securities available-for-sale:
Common stocks:
Industrial, miscellaneous and all other 67.8 78.0 78.0
Non-redeemable preferred stock - 2.4 2.4
---------- ---------- ----------
Total equity securities available-for-sale 67.8 80.4 80.4
---------- ---------- ----------
Mortgage loans on real estate, net 5,228.1 5,181.6 (1)
Real estate, net:
Investment properties 254.9 235.7 (1)
Acquired in satisfaction of debt 82.6 75.7 (1)
Policy loans 415.3 415.3
Other long-term investments 27.9 25.2 (2)
Short-term investments 358.4 358.4
---------- ----------
Total investments $19,167.9 $19,576.4
========== ==========
</TABLE>
- ----------
(1) Difference from Column B is primarily due to valuation allowances due to
impairments on mortgage loans on real estate and due to accumulated
depreciation and valuation allowances due to impairments on real estate.
See note 3 to the consolidated financial statements.
(2) Difference from Column B is primarily due to operating gains (losses) of
investments in limited partnerships.
See accompanying independent auditors' report.
<PAGE> 2
SCHEDULE III
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
SUPPLEMENTARY INSURANCE INFORMATION
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Column A Column B Column C Column D Column E Column F
- -------------------------------- ----------------- -------------------- ------------------- ------------------ ---------------
Deferred Future policy Other policy
policy benefits, losses, Unearned claims and
acquisition claims and premiums benefits payable Premium
Segment costs loss expenses (1) (1) revenue
- ------------------------------- ------------------ -------------------- ------------------- ------------------ ---------------
1997: Variable Annuities $1,018.4 $ - $ -
Fixed Annuities 277.9 14,103.1 27.3
Life Insurance 472.9 2,683.4 178.1
Corporate and Other (103.8) 1,916.3 -
-------- ------------- ---------
Total $1,665.4 $18,702.8 $ 205.4
======== ============= =========
1996: Variable Annuities $ 792.1 $ - $ -
Fixed Annuities 242.0 13,388.9 24.0
Life Insurance 414.4 2,391.5 174.6
Corporate and Other (82.0) 1,820.2 -
-------- ------------- ---------
Total $1,366.5 $17,600.6 $ 198.6
======== ============= =========
1995: Variable Annuities $ 569.8 $ - $ -
Fixed Annuities 220.7 12,759.3 32.8
Life Insurance 366.9 2,282.6 166.3
Corporate and Other (136.9) 1,730.0 -
-------- ------------- ---------
Total $1,020.5 $ 16,771.9 $ 199.1
======== ============= =========
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
Column A Column G Column H Column I Column J Column K
- ---------------------------------------------------- -------------------- ------------------- ------------------ ----------------
Net investment Benefits, claims, Amortization Other
income losses and of deferred policy operating Premiums
Segment (2) settlement expenses acquisition costs expenses written
(2)
- ---------------------------------------------------- -------------------- ------------------- ------------------ ---------------
<C> <C> <C> <C> <C>
1997: Variable Annuities $ (26.8) $ 5.9 $ 87.8 $ 159.4
Fixed Annuities 1,098.2 846.7 39.8 85.4
Life Insurance 189.1 227.5 39.6 94.5
Corporate and Other 148.7 114.7 - 45.6
-------- ---------- ------- -------
Total $1,409.2 $ 1,194.8 $ 167.2 $ 384.9
======== ========== ======= =======
1996: Variable Annuities $ (21.4) $ 4.6 $ 57.4 $ 132.3
Fixed Annuities 1,050.6 838.5 38.6 79.7
Life Insurance 174.0 211.4 37.4 79.0
Corporate and Other 154.6 106.1 - 51.4
-------- ---------- ------- -------
Total $1,357.8 $ 1,160.6 $ 133.4 $ 342.4
======== ========== ======= =======
1995: Variable Annuities $ (17.6) $ 2.9 $ 26.3 $ 109.1
Fixed Annuities 1,002.7 805.0 29.5 80.3
Life Insurance 171.2 202.0 31.0 68.8
Corporate and Other 137.7 105.6 (4.1) 14.8
-------- ---------- ------- -------
Total $1,294.0 $ 1,115.5 $ 82.7 $ 273.0
======== ========== ======= =======
</TABLE>
- ----------
(1) Unearned premiums and other policy claims and benefits payable are included
in Column C amounts.
(2) Allocations of net investment income and certain operating expenses are
based on a number of assumptions and estimates, and reported operating
results would change by segment if different methods were applied.
See accompanying independent auditors' report.
<PAGE> 3
SCHEDULE IV
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
REINSURANCE
(in millions of dollars)
As of December 31, 1997, 1996 and 1995 and for each of the years then ended
<TABLE>
<CAPTION>
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Column A Column B Column C Column D Column E Column F
- ----------------------------------------------- --------------- -------------- ------------- ------------- ------------
Percentage
Ceded to Assumed of amount
Gross other from other Net assumed
amount companies companies amount to net
--------------- -------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1997:
Life insurance in force $ 52,648.4 $13,678.7 $ 289.7 $ 39,259.4 0.7%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 235.9 $ 32.7 $ 2.2 $ 205.4 1.1%
Accident and health insurance 261.2 272.6 11.4 - N/A
----------- ---------- --------- ----------- -------
Total $ 497.1 $ 305.3 $ 13.6 $ 205.4 6.6%
=========== ========= ========= =========== =======
1996:
Life insurance in force $47,150.6 $11,164.6 $ 288.6 $ 36,274.6 0.8%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 225.6 $ 29.3 $ 2.3 $ 198.6 1.2%
Accident and health insurance 291.9 305.8 13.9 - N/A
----------- --------- -------- ----------- -------
Total $ 517.5 $ 335.1 $ 16.2 $ 198.6 8.2%
=========== ========= ======== =========== =======
1995:
Life Insurance in force $41,087.9 $ 8,935.7 $ 391.2 $ 32,543.4 1.2%
=========== ========= ======== =========== =======
Premiums:
Life insurance $ 221.3 $ 24.4 $ 2.2 $ 199.1 1.1%
Accident and health insurance 298.0 313.0 15.0 - N/A
----------- --------- -------- ----------- -------
Total $ 519.3 $ 337.4 $ 17.2 $ 199.1 8.6%
=========== ========= ======== =========== =======
</TABLE>
- ----------
Note: The life insurance caption represents principally premiums from
traditional life insurance and life-contingent immediate annuities and
excludes deposits on investment products and universal life insurance
products.
See accompanying independent auditors' report.
<PAGE> 4
SCHEDULE V
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(in millions of dollars)
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------- ------------- -------------
Column A Column B Column C Column D Column E
- --------------------------------------------------- ----------------------------------------------- ------------- -------------
Balance at Charged to Charged to Balance at
beginning costs and other Deductions end of
Description of period expenses accounts (1) period
- --------------------------------------------------- -------------------------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
1997:
Valuation allowances - fixed maturity securities $ - $ 16.2 $ - $ 16.2 $ -
Valuation allowances - mortgage loans on real estate 51.0 (1.2) - 7.3 42.5
Valuation allowances - real estate 15.2 (4.1) - - 11.1
-------- ------ ------- ------- -------
Total $ 66.2 $ 10.9 $ - $ 23.5 $ 53.6
======== ====== ======= ======= =======
1996:
Valuation allowances - mortgage loans on real estate $ 49.1 $ 4.5 $ - $ 2.6 $ 51.0
Valuation allowances - real estate 25.8 (10.6) - - 15.2
-------- ------ ------- ------- -------
Total $ 74.9 $ (6.1) $ - $ 2.6 $ 66.2
======== ====== ======= ======= =======
1995:
Valuation allowances - fixed maturity securities $ - $ 8.9 $ - $ 8.9 $ -
Valuation allowances - mortgage loans on real estate 46.4 7.4 - 4.7 49.1
Valuation allowances - real estate 27.3 (1.5) - - 25.8
-------- ------ ------- ------- -------
Total $ 73.7 $ 14.8 $ - $ 13.6 $ 74.9
======== ====== ======= ======= =======
</TABLE>
- ----------
(1) Amounts represent direct write-downs charged against the valuation
allowance.
See accompanying independent auditors' report.
<PAGE> 96
SIGNATURES
As required by the Securities Act of 1933, the Registrant, NATIONWIDE VARIABLE
ACCOUNT-II, certifies that it meets the requirements of Securities Act 485 for
effectiveness of this Post-Effective Amendment and has caused this
Post-Effective Amendment to be signed on its behalf in the City of Columbus, and
State of Ohio, on this 24th day of April, 1998.
NATIONWIDE VARIABLE ACCOUNT-II
-----------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
-----------------------------------------------
(Depositor)
By/s/JOSEPH P. RATH
-----------------------------------------------
Joseph P. Rath
Vice President-Product and Market Compliance
As required by the Securities Act of 1933, this Post-Effective Amendment has
been signed by the following persons in the capacities indicated on this 24th
day of April, 1998.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- ----------------------------
Lewis J. Alphin
A. I. BELL Director
- ----------------------------
A. I. Bell
KEITH W. ECKEL Director
- ----------------------------
Keith W. Eckel
WILLARD J. ENGEL Director
- ----------------------------
Willard J. Engel
FRED C. FINNEY Director
- ----------------------------
Fred C. Finney
CHARLES L. FUELLGRAF, JR. Director
- ----------------------------
Charles L. Fuellgraf, Jr.
JOSEPH J. GASPER President and Chief
- ---------------------------- Operating Office and Director
Joseph J. Gasper
DIMON R. McFERSON Chairman and Chief Executive Officer
- ---------------------------- Nationwide Insurance Enterprise and Director
Dimon R. McFerson
DAVID O. MILLER Chairman of the Board and Director
- ----------------------------
David O. Miller
YVONNE L. MONTGOMERY Director
- ----------------------------
Yvonne L. Montgomery
C. RAY NOECKER Director
- ----------------------------
C. Ray Noecker
ROBERT A. OAKLEY Executive Vice President-
- ---------------------------- Chief Financial Officer
Robert A. Oakley
JAMES F. PATTERSON Director
- ----------------------------
James F. Patterson
ARDEN L. SHISLER Director
- ----------------------------
Arden L. Shisler
ROBERT L. STEWART Director
- ----------------------------
Robert L. Stewart
NANCY C. THOMAS Director
- ----------------------------
Nancy C. Thomas
HAROLD W. WEIHL Director
- ----------------------------
Harold W. Weihl
<TABLE>
<S> <C>
By/s/JOSEPH P. RATH
----------------------------
Joseph P. Rath
Attorney-in-Fact
</TABLE>
145 of 145
<PAGE> 1
EXHIBIT NO. 5
VARIABLE ANNUITY APPLICATION
<PAGE> 2
<TABLE>
<CAPTION>
[THE BEST OF AMERICA(c) LOGO]
THE BEST OF AMERICA(R) IV ANNUITY
APPLICATION/ENROLLMENT CARD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PLAN TYPE AN OPTION MUST BE SELECTED
This contract is established as a: [ ] 401(k) Plan Information required [ ] 403 (b) Disclosure form required
[ ] NON-QUALIFIED [ ] SIMPLE 401(k) Plan Information required [ ] 403 (b) ERISA Disclosure form &
[ ] IRA [ ] 401(a) Disclosure form required Plan info form required
[ ] SEP IRA 5305 Form Required [ ] CRT (Charitable Remainder Trust) [ ] ORP 403(b) Disclosure form required
[ ] ROTH IRA Statement of Understanding Transmittal Form Required
& Custodial Form Required
- -------------------------------- ---------------------------------- ---------------------------------------------------------------
CONTRACT OWNER [ ] CONTINGENT OWNER [ ] JOINT OWNER
- --------------------------------
Last Name or Plan Name Last Name Spouse only unless prohibited by law
- ------------------------------------------------ ----------------------------------------------------------------
First Name or Plan Name (continued) MI First Name MI
- ------------------------------------------------ ------- ----------------------------------------------------------- ---
Address Address
---------------------------------------- --------------------------------------------------------
---------------------------------------- --------------------------------------------------------
Sex [ ] M [ ] F Birthdate / / Sex [ ] M [ ] F Birthdate / /
----------------------------------- -------------------------
MM DD YYYY MM DD YYYY
Soc. Sec. No. or Tax ID Soc. Sec. No. or Tax ID
-------------------------------------- ----------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
ANNUITANT Complete only if different from [ ] CONTINGENT ANNUITANT (Complete only if applicable)
Last Name primary contract owner. Last Name
- ------------------------------------------------ ----------------------------------------------------------------
First Name MI First Name MI
- ------------------------------------------------ ------- ----------------------------------------------------------- ---
Address
----------------------------------------
----------------------------------------
Maximum issue age through age 78
Sex [ ] M [ ] F Birthdate / / Sex [ ] M [ ] F Birthdate / /
----------------------------------- ------------------------------
MM DD YYYY MM DD YYYY
Soc. Sec. No. Soc. Sec. No.
----------------------------------------------- --------- ----------------------------------------
Occupation Employer
--------------------------- ------------------
- -----------------------------------------------------------------------------------------------------------------------------------
BENEFICIARY BENEFICIARY WILL RECEIVE DEATH BENEFIT UPON DEATH OF ANNUITANT (AND CONTINGENT ANNUITANT, IF NAMED).
Relationship Birthdate
Primary Contingent Print Full Name (Last, First, MI) Allocation to Annuitant Soc. Sec. No. MM/DD/YYYY
[ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
[ ] [ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
[ ] [ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
[ ] [ ] % / /
----------------------------------- --------- ---------------- ----------------- ------------
- ---------------------------------------------------- -------------------------------------------------------------------------------
ANNUITY PURCHASE PAYMENTS [ ] PAYMENT ENCLOSED [ ] SALARY REDUCTION [ ] ROLLOVER
[ ] OTHER Apply for Tax Year ______
First Purchase Payment $__________________________ submitted. A copy of this
application properly signed by the producer will constitute receipt for such
amount. If this application is declined by the Company, there will be no
liability on the part of the Company, and any payments submitted with this
application will be refunded.
- ------------------------------------------------------------------------------
REMARKS
</TABLE>
[LOGO]
APOA-3658 Product of Nationwide Life Insurance Co. AG-BOA4-A0 (03/1998)
<PAGE> 3
- ------------------------------------------------------- ----------------------
PURCHASE PAYMENT ALLOCATION Whole percentages only, must total 100%
- -------------------------------------------------------
A contract cannot be issued unless this
section is complete.
AMERICAN CENTURY
__________% VP Balanced
__________% VP Capital Appreciation
__________% VP Income & Growth
__________% VP International
__________% VP Value
DREYFUS
__________% Capital Appreciation Portfolio
__________% Growth and Income Fund
__________% Stock Index Fund
__________% Socially Responsible Growth Fund
FIDELITY
__________% Asset Manager Portfolio
__________% Contrafund Portfolio
__________% Equity-Income Portfolio
__________% Growth Port Portfolio
__________% Growth Opportunities Portfolio
__________% High Income Portfolio
__________% Overseas Portfolio
MORGAN STANLEY
__________% Emerging Markets Debt Portfolio
__________% Real Estate Securities Portolio
A CONTRACT CANNOT BE ISSUED UNLESS THIS SECTION IS COMPLETE.
NATIONWIDE(R)
__________% Capital Appreciation Fund
__________% Government Bond Fund
__________% Money Market Fund
__________% Total Return Fund
NATIONWIDE SUBADVISED FUNDS
__________% Small Cap Value (Dreyfus)
__________% Small Company Fund
(Multi-Managers)
NEUBERGER & BERMAN
__________% AMT Growth Portfolio
__________% AMT Guardian Portfolio
__________% AMT Ltd. Maturity Bond Portfolio
__________% AMT Partners Portfolio
OPPENHEIMER FUNDS
__________% Bond Fund
__________% Global Securities Fund
__________% Growth Fund
__________% Multiple Strategies Fund
STRONG
__________% Strong Discovery Fund II
__________% Strong International Stock
Fund II
__________% Strong Opportunity Fund II
VAN ECK
__________% Worldwide Bond Fund
__________% Worldwide Hard Assets Fund
__________% Worldwide Emerging Markets Fund
WARBURG PINCUS
__________% International Equity Portfolio
__________% Small Company Growth Portfolio
__________% Post-Venture Capital Portfolio
NATIONWIDE LIFE INS. CO.
__________% Fixed Account
- -----------------------------------------------------------------------------
CONTRACT OWNER SIGNATURES
- -------------------------------------------------------------------------------
I hereby represent my answers to the above questions to be accurate and complete
and acknowledge that I have received a copy of the current prospectus for this
variable annuity contract.
[ ] Yes [ ] No Do you have any reason to believe the Contract applied for is to
replace existing annuities or insurance.
[ ] Please send me a copy of the Statement of Additional Information to the
Prospectus.
STATE IN WHICH APPLICATION WAS SIGNED___________________ DATE_________________
State
CONTRACT OWNER______________________________JOINT OWNER________________________
Signature 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
NAME _______________________ PRODUCER SSN _____________________________
FIRM NAME___________________ PHONE ( ) _______________________________
ADDRESS _________________________________________________________________
_________________________________________________________________
_________________________________________________________________
<TABLE>
<S> <C> <C>
REGULAR MAIL EXPRESS MAIL
----------------------------------- ----------------------------------- --------------------------------------
Nationwide Life Insurance Co. THE BEST OF AMERICA Nationwide Life Insurance Co.
P.O. Box 182356 Service Center Individual Annuity Products, 1-05-P1
Columbus, Ohio 43218-2356 1-800-243-6295 One Nationwide Plaza
Columbus, Ohio 43215-2220
----------------------------------- ----------------------------------- -------------------------------------
</TABLE>
