<PAGE> 1
As filed with the Securities and Exchange Commission.
Securities Act File No. 33-67636
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-4
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
Post-Effective Amendment No. 16 [x]
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [ ]
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, 2000 pursuant to paragraph (b) of Rule 485
[ ] 60 days after filing pursuant to paragraph (a) of Rule 485
[ ] on (date) pursuant to paragraph (a) of Rule 485
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
================================================================================
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<TABLE>
<CAPTION>
NATIONWIDE VARIABLE ACCOUNT-II
REFERENCE TO ITEMS REQUIRED BY FORM N-4
N-4 ITEM CAPTION
<S> <C>
PART A INFORMATION REQUIRED IN A PROSPECTUS
Item 1. Cover Page.................................................................................Cover Page
Item 2. Definitions.................................................................Glossary of Special Terms
Item 3. Synopsis or Highlights......................................................Synopsis of the Contracts
Item 4. Condensed Financial Information.......................................Condensed Financial Information
Item 5. General Description of Registrant, Depositor, and Portfolio
Companies ..........................Nationwide Life Insurance Company; Investing in the Contract
Item 6. Deductions and Expenses...............................................Standard Charges and Deductions
Item 7. General Description of Variable
Annuity Contracts.......................................Contract Ownership; Operation of the Contract
Item 8. Annuity Period...............................................................Annuitizing the Contract
Item 9. Death Benefit and Distributions........................................................Death Benefits
Item 10. Purchases and Contract Value................................................Operation of the Contract
Item 11. Redemptions....................................................................Surrender (Redemption)
Item 12. Taxes ....................................................................Federal Tax Considerations
Item 13. Legal Proceedings...................................................................Legal Proceedings
Item 14. Table of Contents of the Statement of Additional
Information.........................Table of Contents of the Statement of Additional Information
PART B INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
Item 15. Cover Page.................................................................................Cover Page
Item 16. Table of Contents...................................................................Table of Contents
Item 17. General Information and History.......................................General Information and History
Item 18. Services.....................................................................................Services
Item 19. Purchase of Securities Being Offered.............................Purchase of Securities Being Offered
Item 20. Underwriters.............................................................................Underwriters
Item 21. Calculation of Performance Information.....................................Calculation of Performance
Item 22. Annuity Payments.....................................................................Annuity Payments
Item 23. Financial Statements.............................................................Financial Statements
PART C OTHER INFORMATION
Item 24. Financial Statements and Exhibits.............................................................Item 24
Item 25. Directors and Officers of the Depositor.......................................................Item 25
Item 26. Persons Controlled by or Under Common Control with
the Depositor or Registrant..............................................................Item 26
Item 27. Number of Contract Owners.....................................................................Item 27
Item 28. Indemnification...............................................................................Item 28
Item 29. Principal Underwriter.........................................................................Item 29
Item 30. Location of Accounts and Records..............................................................Item 30
Item 31. Management Services...........................................................................Item 31
Item 32. Undertakings..................................................................................Item 32
</TABLE>
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY
Deferred Variable Annuity Contracts
Issued by Nationwide Life Insurance Company through its Nationwide Variable
Account - II
The date of this prospectus is May 1, 2000.
- --------------------------------------------------------------------------------
Variable annuities are complex investment products with unique benefits and
advantages that may be particularly useful to many investors in meeting
long-term savings and retirement needs. There are, however, costs and charges
associated with some of these unique benefits - costs and charges that do not
exist or are not present with other investment products. With help from
financial consultants or advisers, investors are encouraged to compare and
contrast the costs and benefits of the variable annuity described in this
prospectus with those of other investment products, including other variable
annuity or variable life insurance products offered by Nationwide Life Insurance
Company and its affiliates. This process will aid in determining whether the
purchase of the contract described in this prospectus is consistent with an
individual's goals, risk tolerance, time horizon, marital status, tax situation,
and other personal characteristics and needs.
THIS PROSPECTUS CONTAINS BASIC INFORMATION YOU SHOULD KNOW ABOUT THE CONTRACTS
BEFORE INVESTING. PLEASE READ THIS PROSPECTUS CAREFULLY AND KEEP IT FOR FUTURE
REFERENCE.
- --------------------------------------------------------------------------------
The following underlying mutual funds are available under the contracts:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
- American Century VP Balanced
- American Century VP Income & Growth
- American Century VP International
- American Century VP Value
DREYFUS
- Dreyfus Investment Portfolios - European Equity Portfolio
- The Dreyfus Socially Responsible Growth Fund, Inc.
- Dreyfus Stock Index Fund, Inc.
- Dreyfus Variable Investment Fund - Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund - Capital Appreciation Portfolio)
- Dreyfus Variable Investment Fund - Growth & Income Portfolio*
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(R) Portfolio
FIDELITY VARIABLE INSURANCE PRODUCTS FUND III
- VIP III Growth Opportunities Portfolio
JANUS ASPEN SERIES
- Janus Aspen Series - Capital Appreciation Portfolio: Service Shares
- Janus Aspen Series - Global Technology Portfolio: Service Shares
- Janus Aspen Series - International Growth Portfolio: Service Shares
MORGAN STANLEY
THE UNIVERSAL INSTITUTIONAL FUNDS, INC. (FORMERLY, MORGAN STANLEY DEAN
WITTER UNIVERSAL FUNDS, INC.)
- Emerging Markets Debt Portfolio
VAN KAMPEN LIFE INVESTMENT TRUST
- Morgan Stanley Real Estate Securities Portfolio
NATIONWIDE SEPARATE ACCOUNT TRUST
- Capital Appreciation Fund
- Government Bond Fund
- Money Market Fund
- Total Return Fund
- Nationwide Mid Cap Index Fund (subadviser: The Dreyfus Corporation)
- Nationwide Multi Sector Bond Fund (subadviser: Miller, Anderson and
Sherrerd, LLP)
1
<PAGE> 4
- Nationwide Small Cap Growth Fund (subadvisers: Franklin Advisers,
Inc., Miller, Anderson & Sherrerd, LLP, Neuberger Berman, LLC)
- Nationwide Small Cap Value Fund (sub-adviser: The Dreyfus Corporation)
- Nationwide Small Company Fund (sub-advisers: The Dreyfus Corporation,
Neuberger Berman, LLC., Lazard Asset Management and Strong Capital
Management, Inc.)
- Nationwide Strategic Growth Fund (subadviser: Strong Capital
Management, Inc.)
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
- AMT Growth Portfolio
- AMT Guardian Portfolio
- AMT Limited Maturity Bond Portfolio
- AMT Partners Portfolio
OPPENHEIMER VARIABLE ACCOUNT FUNDS
- Oppenheimer Aggressive Growth Fund /VA
- Oppenheimer Bond Fund/VA
- Oppenheimer Capital Appreciation Fund/VA (formerly, Oppenheimer Growth
Fund)
- Oppenheimer Global Securities Fund/VA
- Oppenheimer Main Street Growth & Income Fund/VA
- Oppenheimer Multiple Strategies Fund/VA
STRONG OPPORTUNITY FUND II, INC. (FORMERLY, STRONG SPECIAL FUND II, INC.)
VAN ECK WORLDWIDE INSURANCE TRUST
- Worldwide Bond Fund
- Worldwide Emerging Markets Fund
- Worldwide Hard Assets Fund
WARBURG PINCUS TRUST
- Small Company Growth Portfolio
*These underlying mutual funds may invest in lower quality debt securities
commonly referred to as junk bonds.
The following underlying mutual funds are not available in connection with
contracts for which good order applications are (or were) received on or after
September 27, 1999:
AMERICAN CENTURY VARIABLE PORTFOLIOS, INC., A MEMBER OF THE AMERICAN CENTURY(SM)
FAMILY OF INVESTMENTS
- American Century VP Capital Appreciation
STRONG VARIABLE INSURANCE FUNDS, INC.
- Strong Discovery Fund II, Inc.
- International Stock Fund II
WARBURG PINCUS TRUST
- Global Post-Venture Capital Portfolio (formerly, Post-Venture Capital
Portfolio)
- International Equity Portfolio
Purchase payments not invested in the underlying mutual fund options of the
Nationwide Variable Account - II ("variable account") may be allocated to the
fixed account.
The Statement of Additional Information (dated May 1, 2000) which contains
additional information about the contracts and the variable account, has been
filed with the Securities and Exchange Commission ("SEC") and is incorporated
herein by reference. The table of contents for the Statement of Additional
Information is on page 46.
For general information or to obtain FREE copies of the:
- Statement of Additional Information;
- prospectus, annual report or semi-annual report for any underlying
mutual fund; and
- required Nationwide forms,
call: 1-800-848-6331
1-800-238-3035 (TDD)
or write:
NATIONWIDE LIFE INSURANCE COMPANY
ONE NATIONWIDE PLAZA, 1-05-P1
COLUMBUS, OHIO 43215
The Statement of Additional Information and other material incorporated by
reference can be found on the SEC website at:
WWW.SEC.GOV
Information about this and other Best of America products can be found at:
WWW.BESTOFAMERICA.COM
THIS ANNUITY IS NOT:
2
<PAGE> 5
- - A BANK DEPOSIT - FEDERALLY INSURED
- - ENDORSED BY A BANK - AVAILABLE IN
OR GOVERNMENT AGENCY EVERY STATE
Investors assume certain risks when investing in the contracts, including the
possibility of losing money.
These contracts are offered to customers of various financial institutions and
brokerage firms. No financial institution or brokerage firm is responsible for
the guarantees under the contracts. Guarantees under the contracts are the sole
responsibility of Nationwide.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, NOR HAS THE
SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THE PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
3
<PAGE> 6
GLOSSARY OF SPECIAL TERMS
ACCUMULATION UNIT- An accounting unit of measure used to calculate the contract
value allocated to the variable account before the annuitization date.
ANNUITIZATION DATE- The date on which annuity payments begin.
ANNUITY COMMENCEMENT DATE- The date on which annuity payments are scheduled to
begin. This date may be changed by the contract owner with Nationwide's consent.
ANNUITY UNIT- An accounting unit of measure used to calculate the variable
annuity payments.
CONTRACT VALUE- The total value of all accumulation units in a contract plus any
amount held in the fixed account.
CONTRACT YEAR- Each year the contract is in force beginning with the date the
contract is issued.
ERISA- The Employee Retirement Income Security Act of 1974, as amended.
FIXED ACCOUNT- An investment option that is funded by the general account of
Nationwide.
GENERAL ACCOUNT- All assets of Nationwide other than those of the variable
account or in other separate accounts that have been or may be established by
Nationwide.
INDIVIDUAL RETIREMENT ACCOUNT- An account that qualifies for favorable tax
treatment under Section 408(a) of the Internal Revenue Code, but does not
include Roth IRAs.
INDIVIDUAL RETIREMENT ANNUITY- An annuity contract that qualifies for favorable
tax treatment under Section 408(b) of the Internal Revenue Code, but does not
include Roth IRAs.
INVESTMENT-ONLY CONTRACT- A contract purchased by a Qualified Pension,
Profit-Sharing or Stock Bonus Plan as defined by Section 401(a) if the Internal
Revenue Code.
NATIONWIDE- Nationwide Life Insurance Company.
NON-QUALIFIED CONTRACT- A contract which does not qualify for favorable tax
treatment as an Individual Retirement Annuity, Roth IRA, or Tax Sheltered
Annuity.
QUALIFIED PLANS- Retirement plans which receive favorable tax treatment under
Section 401 or 403(a) of the Internal Revenue Code.
ROTH IRA- An annuity contract which qualifies for favorable tax treatment under
Section 408A of the Internal Revenue Code.
SUB-ACCOUNTS- Divisions of the variable account to and for which accumulation
units and annuity units are separately maintained - each sub-account corresponds
to a single underlying mutual fund.
TAX SHELTERED ANNUITY- An annuity that qualifies for favorable tax treatment
under Section 403(b) of the Internal Revenue Code.
VALUATION PERIOD- Each day the New York Stock Exchange is open for business.
VARIABLE ACCOUNT- Nationwide Variable Account-II, a separate account of
Nationwide that contains variable account allocations. The variable account is
divided into sub-accounts, each of which invests in shares of a separate
underlying mutual fund.
4
<PAGE> 7
TABLE OF CONTENTS
GLOSSARY OF SPECIAL TERMS..........................
SUMMARY OF CONTRACT
EXPENSES......................................
UNDERLYING MUTUAL FUND ANNUAL EXPENSES.............
EXAMPLE............................................
SYNOPSIS OF THE CONTRACTS..........................
FINANCIAL STATEMENTS...............................
CONDENSED FINANCIAL INFORMATION....................
NATIONWIDE LIFE INSURANCE COMPANY..................
NATIONWIDE INVESTMENT SERVICES
CORPORATION........................................
TYPES OF CONTRACTS.................................
Non-Qualified Annuity Contracts
Individual Retirement Annuities (IRAs)
Roth IRAs
Tax Sheltered Annuities
INVESTING IN THE CONTRACT..........................
The Variable Account and Underlying Mutual Funds
Guaranteed Term Options
The Fixed Account
CHARGES AND DEDUCTIONS.............................
Mortality and Expense Risk Charge
Administration Charge
Contingent Deferred Sales Charge
Premium Taxes
CONTRACT OWNERSHIP.................................
Joint Ownership
Contingent Ownership
Annuitant
Beneficiary and Contingent Beneficiary
OPERATION OF THE CONTRACT..........................
Minimum Initial and Subsequent Purchase
Payments
Guaranteed Term Options
Pricing
Allocation of Purchase Payments
Determining the Contract Value
Transfers Prior to Annuitization
Transfers After Annuitization
Transfer Requests
RIGHT TO REVOKE....................................
SURRENDERS (REDEMPTIONS)...........................
Partial Surrenders (Partial Redemptions)
Full Surrenders (Full Redemptions)
Surrenders Under a Tax Sheltered Annuity
LOAN PRIVILEGE.....................................
Minimum and Maximum Loan Amounts
Loan Processing Fee
How Loan Requests are Processed
Interest
Loan Repayment
Distributions and Annuity Payments
Transferring the Contract
Grace Period and Loan Default
ASSIGNMENT.........................................
CONTRACT OWNER SERVICES............................
Asset Rebalancing
Dollar Cost Averaging
Systematic Withdrawals
ANNUITY COMMENCEMENT DATE..........................
ANNUITIZING THE CONTRACT...........................
Annuitization Date
Annuitization
Fixed Payment Annuity
Variable Payment Annuity
Assumed Investment Rate
Value of an Annuity Unit
Exchanges among Underlying Mutual Funds
Frequency and Amount of Annuity Payments
Annuity Payment Options
DEATH BENEFITS.....................................
Death of Contract Owner - Non-Qualified
Contracts
Death of Annuitant - Non-Qualified
Contracts
Death of Contract Owner/Annuitant
How the Death Benefit Value is Determined
Death Benefit Payment
REQUIRED DISTRIBUTIONS.............................
Required Distributions for Non-Qualified
Contracts
Required Distributions for Tax Sheltered
Annuities
5
<PAGE> 8
Required Distributions for Individual Retirement Annuities
Required Distributions for Roth IRAs
FEDERAL TAX CONSIDERATIONS.........................
Federal Income Taxes
Withholding
Non-Resident Aliens
Federal Estate, Gift, and Generation
Skipping Transfer Taxes
Charge for Tax
Diversification
Tax Changes
STATEMENTS AND REPORTS.............................
LEGAL PROCEEDINGS..................................
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY....
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
APPENDIX A: OBJECTIVES FOR UNDERLYING MUTUAL FUNDS.
APPENDIX B: CONDENSED FINANCIAL INFORMATION........
6
<PAGE> 9
SUMMARY OF CONTRACT EXPENSES
The expenses listed below are charged to all contracts unless the contract owner
meets an available exception under the contract.
CONTRACT OWNER TRANSACTION EXPENSES
Maximum Contingent Deferred Sales
Charge ("CDSC") (as a percentage of
purchase payments surrendered)..................7%(1)
Range of CDSC over time:
NUMBER OF COMPLETED YEARS FROM CDSC
DATE OF PURCHASE PAYMENT PERCENTAGE
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
(1)Each contract year, the contract owner may withdraw without a CDSC the
greater of:
a) 10% of all purchase payments made to the contract; or
b) any amount withdrawn to meet minimum distribution requirements under the
Internal Revenue Code.
This free withdrawal privilege is non-cumulative. Free amounts not taken during
any given contract year cannot be taken as free amounts in a subsequent contract
year (see "Contingent Deferred Sales Charge").
Withdrawals may be restricted for contracts issued as Tax Sheltered Annuities.
VARIABLE ACCOUNT CHARGES(2)
(as a percentage of daily net assets of the variable account)
Mortality and Expense Risk Charges.............1.25%
Administration Charge..........................0.15%
Total Variable Account Charges............1.40%
(2)These charges apply only to sub-account allocations. They do not apply to
allocations made to the fixed account or to the Guaranteed Term Options. They
are charged on a daily basis at the annual rate noted above.
7
<PAGE> 10
UNDERLYING MUTUAL FUND ANNUAL EXPENSES
(AS A PERCENTAGE OF UNDERLYING MUTUAL FUND NET ASSETS, AFTER EXPENSE
REIMBURSEMENT)
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12B-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.-American 0.90% 0.00% 0.00% 0.90%
Century VP Balanced
American Century Variable Portfolios, Inc.-American 1.00% 0.00% 0.00% 1.00%
Century VP Capital Appreciation
American Century Variable Portfolios, Inc.-American 0.70% 0.00% 0.00% 0.70%
Century VP Income & Growth
American Century Variable Portfolios, Inc.-American 1.34% 0.00% 0.00% 1.34%
Century VP International
American Century Variable Portfolios, Inc.-American 1.00% 0.00% 0.00% 1.00%
Century VP Value
Dreyfus Stock Index Fund, Inc. 0.25% 0.01% 0.00% 0.26%
Dreyfus Variable Investment Fund- Appreciation Portfolio 0.43% 0.35% 0.00% 0.78%
(formerly, Dreyfus Variable Investment Fund- Capital
Appreciation Portfolio)
Dreyfus Variable Investment Fund- Growth & Income Portfolio 0.75% 0.04% 0.00% 0.79%
Dreyfus European Equity Portfolio 1.00% 0.50% 0.00% 1.50%
The Dreyfus Socially Responsible Growth Fund, Inc. 0.75% 0.04% 0.00% 0.79%
Fidelity VIP Equity-Income Portfolio 0.48% 0.08% 0.00% 0.56%
Fidelity VIP Growth Portfolio 0.58% 0.07% 0.00% 0.65%
Fidelity VIP High Income Portfolio 0.58% 0.11% 0.00% 0.69%
Fidelity VIP Overseas Portfolio 0.73% 0.14% 0.00% 0.87%
Fidelity VIP II Asset Manager Portfolio 0.53% 0.09% 0.00% 0.62%
Fidelity VIP II Contrafund(R)Portfolio 0.58% 0.07% 0.00% 0.65%
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.10% 0.00% 0.68%
Janus Aspen Series - Capital Appreciation Portfolio: 0.65% 0.04% 0.25% 0.94%
Service Class
Janus Aspen Series - Global Technology Portfolio: Service 0.65% 0.13% 0.25% 1.03%
Class
Janus Aspen Series - International Growth Portfolio: 0.65% 0.11% 0.25% 1.01%
Service Class
Morgan Stanley Dean Witter Universal Funds, Inc.- Emerging 0.45% 0.98% 0.00% 1.43%
Markets Debt Portfolio
NSAT- Capital Appreciation Fund 0.60% 0.14% 0.00% 0.74%
NSAT- Government Bond Fund 0.50% 0.15% 0.00% 0.65%
NSAT- Money Market Fund 0.39% 0.15% 0.00% 0.54%
NSAT Nationwide Mid Cap Index Fund 0.88% 0.15% 0.00% 1.03%
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.15% 0.00% 0.90%
NSAT Nationwide Small Cap Growth Fund 1.10% 0.20% 0.00% 1.30%
NSAT Nationwide Strategic Growth Fund 0.90% 0.10% 0.00% 1.00%
NSAT- Nationwide Small Cap Value Fund 0.90% 0.15% 0.00% 1.05%
NSAT- Nationwide Small Company Fund 0.98% 0.17% 0.00% 1.15%
NSAT- Total Return Fund 0.58% 0.14% 0.00% 0.72%
Neuberger Berman AMT- Growth Portfolio 0.84% 0.08% 0.00% 0.92%
Neuberger Berman AMT- Guardian Portfolio 0.85% 0.15% 0.00% 1.00%
Neuberger Berman AMT- Limited Maturity Bond Portfolio 0.65% 0.11% 0.00% 0.76%
Neuberger Berman AMT-Partners Portfolio 0.80% 0.07% 0.00% 0.87%
Oppenheimer Aggressive Growth Fund /VA 0.66% 0.01% 0.00% 0.67%
</TABLE>
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<PAGE> 11
UNDERLYING MUTUAL FUND ANNUAL EXPENSES (CONTINUED)
<TABLE>
<CAPTION>
MANAGEMENT OTHER 12B-1 TOTAL MUTUAL
FEES EXPENSES FEES FUND EXPENSES
<S> <C> <C> <C> <C>
Oppenheimer Variable Account Funds- Oppenheimer Bond 0.72% 0.01% 0.00% 0.73%
Fund/VA
Oppenheimer Variable Account Funds- Oppenheimer 0.68% 0.02% 0.00% 0.70%
Capital Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
Oppenheimer Variable Account Funds- Oppenheimer Global 0.67% 0.02% 0.00% 0.69%
Securities Fund/VA
Oppenheimer Main Street Growth & Income Fund/VA 0.73% 0.05% 0.00% 0.78%
Oppenheimer Variable Account Funds- Oppenheimer 0.72% 0.01% 0.00% 0.73%
Multiple Strategies Fund/VA
Strong Opportunity Fund II, Inc. 1.00% 0.14% 0.00% 1.14%
Strong Variable Insurance Funds, Inc.- Discovery Fund 1.00% 0.14% 0.00% 1.14%
II, Inc.
Strong Variable Insurance Funds, Inc.-International 1.00% 0.16% 0.00% 1.16%
Stock Fund II
Van Eck Worldwide Insurance Trust- Worldwide Bond Fund 1.00% 0.22% 0.00% 1.22%
Van Eck Worldwide Insurance Trust- Worldwide Emerging 1.00% 0.34% 0.00% 1.34%
Markets Fund
Van Eck Worldwide Insurance Trust- Worldwide Hard 1.00% 0.26% 0.00% 1.26%
Assets Fund
Van Kampen Life Investment Trust- Morgan Stanley Real 0.97% 0.13% 0.00% 1.10%
Estate Securities Portfolio
Warburg Pincus Trust- International Equity Portfolio 1.00% 0.32% 0.00% 1.32%
Warburg Pincus Trust- Global Post-Venture Capital 1.07% 0.33% 0.00% 1.40%
Portfolio
Warburg Pincus Trust- Small Company Growth Portfolio 0.90% 0.24% 0.00% 1.14%
</TABLE>
The expenses shown above are deducted by the underlying mutual fund before it
provides Nationwide with the daily net asset value. Nationwide then deducts
applicable variable account charges from the net asset value in calculating the
unit value of the corresponding sub-account. The management fees and other
expenses are more fully described in the prospectus for each underlying mutual
fund. Information relating to the underlying mutual funds was provided by the
underlying mutual funds and not independently verified by Nationwide. Some
underlying mutual funds are subject to fee waivers and expense reimbursements.
The following chart shows what the expenses would have been for such funds
without fee waivers and expense reimbursements.
<TABLE>
<CAPTION>
Management Other 12b-1 Total Mutual
Fees Expenses Fees Fund Expenses
<S> <C> <C> <C> <C>
Dreyfus: European Equity Portfolio 1.00% 3.17% 0.00% 4.17%
Fidelity VIP Equity-Income Portfolio 0.48% 0.09% 0.00% 0.57%
Fidelity VIP Growth Portfolio 0.58% 0.08% 0.00% 0.66%
Fidelity VIP Overseas Portfolio 0.73% 0.18% 0.00% 0.91%
Fidelity VIP II Asset Manager Portfolio 0.53% 0.10% 0.00% 0.63%
Fidelity VIP II Contrafund(R)Portfolio 0.58% 0.09% 0.00% 0.67%
Fidelity VIP III Growth Opportunities Portfolio 0.58% 0.11% 0.00% 0.69%
The Universal Institutional Funds, Inc. - Emerging 0.80% 0.98% 0.00% 1.78%
Markets Debt Portfolio
NSAT Nationwide Mid Cap Index Fund 0.88% 0.86% 0.00% 1.74%
NSAT Nationwide Multi Sector Bond Fund 0.75% 0.27% 0.00% 1.02%
NSAT Nationwide Small Cap Growth Fund 1.10% 1.30% 0.00% 2.40%
NSAT Nationwide Strategic Growth Fund 0.90% 0.33% 0.00% 1.23%
NSAT-Nationwide Small Cap Value Fund 0.90% 0.37% 0.00% 1.27%
Van Eck Worldwide Insurance Trust-Worldwide Emerging 1.00% 0.54% 0.00% 1.54%
Van Kampen Life Investment Trust - Morgan Stanley Real 1.00% 0.13% 0.00% 1.13%
Estate Securities Portfolio
Warburg Pincus Trust - Global Post-Venture Capital 1.25% 0.33% 0.00% 1.58%
Portfolio
</TABLE>
9
<PAGE> 12
EXAMPLE
The following chart shows the expenses (in dollars) that would be incurred under
this contract assuming a $1,000 investment, 5% annual return, and no change in
expenses. These dollar figures are illustrative only and should not be
considered a representation of past or future expenses. Actual expenses may be
greater or less than those shown below.
The example reflects expenses of both the variable account and the underlying
mutual funds. The example reflects variable account charges of 1.40%. Deductions
for premium taxes are not reflected but may apply.
<TABLE>
<CAPTION>
If you surrender your If you do not surrender your If you annuitize your contract
contract at the end of the contract at the end of the at the end of the applicable
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>
American Century Variable 87 119 154 272 24 74 127 272 * 74 127 272
Portfolios, Inc.- American
Century VP Balanced
American Century Variable 88 122 159 282 25 77 132 282 * 77 132 282
Portfolios, Inc.- American
Century VP Capital
Appreciation
American Century Variable 85 113 144 250 22 68 117 250 * 68 117 250
Portfolios, Inc.- American
Century VP Income &Growth
American Century Variable 92 133 177 317 29 88 150 317 * 88 150 317
Portfolios, Inc.- American
Century VP International
American Century Variable 88 122 159 282 25 77 132 282 * 77 132 282
Portfolios, Inc.- American
Century VP Value
Dreyfus Stock Index Fund, Inc. 80 99 120 202 17 54 93 202 * 54 93 202
Dreyfus Variable Investment 86 116 148 259 23 71 121 259 * 71 121 259
Fund- Appreciation Portfolio
(formerly, Dreyfus Variable
Investment Fund- Capital
Appreciation Portfolio)
Dreyfus Variable Investment 86 116 148 260 23 71 121 260 * 71 121 260
Fund- Growth & Income
Portfolio
The Dreyfus Socially 86 116 148 260 23 71 121 260 * 71 121 260
Responsible Growth Fund, Inc.
Dreyfus Investment Portfolios 91 130 172 308 28 85 145 308 * 85 145 308
- - European Equity Portfolio
Fidelity VIP Equity-Income 84 109 136 235 21 64 109 235 * 64 109 235
Portfolio
Fidelity VIP Growth Portfolio 85 111 141 245 22 66 114 245 * 66 114 245
Fidelity VIP High Income 85 113 143 249 22 68 116 249 * 68 116 249
Portfolio
Fidelity VIP Overseas 87 118 153 268 24 73 126 268 * 73 126 268
Portfolio
Fidelity VIP II Asset Manager 84 110 139 242 21 65 112 242 * 65 112 242
Portfolio
Fidelity VIP II Contrafund(R) 85 111 141 245 22 66 114 245 * 66 114 245
Portfolio
</TABLE>
10
<PAGE> 13
EXAMPLE (CONTINUED)
<TABLE>
<CAPTION>
If you surrender your If you do not surrender your If you annuitize your contract
contract at the end of the contract at the end of the at the end of the applicable
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>
Fidelity VIP III Growth 85 112 143 248 22 67 116 245 * 67 116 248
Opportunities Portfolio
Janus Aspen Series - Capital 85 113 143 249 22 68 116 249 * 68 116 249
Appreciation Portfolio:
Service Class
Janus Aspen Series - Global 86 116 148 259 23 71 121 259 * 71 121 259
Technology Portfolio: Service
Class
Janus Aspen Series - 86 115 147 257 23 70 120 257 * 70 120 257
International Growth
Portfolio: Service Class
The Universal Institutional 93 136 182 326 30 91 155 326 * 91 155 326
Funds, Inc.- Emerging Markets
Debt Portfolio
NSAT- Capital Appreciation 85 114 146 255 22 69 119 255 * 69 119 255
Fund
NSAT- Government Bond Fund 85 111 141 245 22 66 114 245 * 66 114 245
NSAT- Money Market Fund 83 108 135 233 20 63 108 233 * 63 108 233
NSAT Nationwide Mid Cap Index 89 123 161 285 26 78 134 285 * 78 134 285
Fund
NSAT Nationwide Multi Sector 87 119 154 272 24 74 127 272 * 74 127 272
Bond Fund
NSAT Nationwide Small Cap 91 132 175 313 28 87 148 313 * 87 148 313
Growth Fund
NSAT- Nationwide Small Cap 89 124 162 287 26 79 135 287 * 79 135 287
Value Fund
NSAT- Nationwide Small 90 127 167 298 27 82 140 298 * 82 140 298
Company Fund
NSAT Nationwide Strategic 88 122 159 282 25 77 132 282 * 77 132 282
Growth Fund
NSAT- Total Return Fund 85 114 145 253 22 69 118 253 * 69 118 253
Neuberger Berman AMT-Growth 87 120 155 274 24 75 128 274 * 75 128 274
Portfolio
Neuberger Berman AMT- 88 122 159 282 25 77 132 282 * 77 132 282
Guardian Portfolio
Neuberger Berman AMT-Limited 86 115 147 257 23 70 120 257 * 70 120 257
Maturity Bond Portfolio
Neuberger Berman AMT- 87 118 153 268 24 73 126 268 * 73 126 268
Partners Portfolio
Oppenheimer VAF-Oppenheimer 85 112 142 247 22 67 115 247 * 67 115 247
Aggressive Growth Fund /VA
Oppenheimer VAF-Oppenheimer 85 114 145 254 22 69 118 254 * 69 118 254
Bond Fund/VA
</TABLE>
11
<PAGE> 14
EXAMPLE (CONTINUED)
<TABLE>
<CAPTION>
If you surrender your If you do not surrender your If you annuitize your contract
contract at the end of the contract at the end of the at the end of the applicable
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>
Oppenheimer VAF- Oppenheimer 85 113 143 249 22 68 116 249 * 68 116 249
Global Securities Fund/VA
Oppenheimer VAF- Oppenheimer 85 113 144 250 22 68 117 250 * 68 117 250
Capital Appreciation Fund/VA
(formerly Oppenheimer Growth
Fund)
Oppenheimer VAF-Oppenheimer 86 116 148 259 23 71 121 259 * 71 121 259
Main Street Growth & Income
Fund/VA
Oppenheimer VAF-Oppenheimer 85 114 145 254 22 69 118 254 * 69 118 254
Multiple Strategies Fund/VA
Strong Opportunity Fund II, 90 127 167 297 27 82 140 297 * 82 140 297
Inc.
Strong Variable Insurance 90 127 167 297 27 82 140 297 * 82 140 297
Funds, Inc.- Discovery Fund
II, Inc.
Strong Variable Insurance 90 128 168 299 27 83 141 299 * 83 141 299
Funds, Inc.- International
Stock Fund II
Van Eck Worldwide Insurance 91 129 171 305 28 84 144 305 * 84 144 305
Trust- Worldwide Bond Fund
Van Eck Worldwide Insurance 92 133 177 317 29 88 150 317 * 88 150 317
Trust- Worldwide Emerging
Markets Fund
Van Eck Worldwide Insurance 91 131 173 309 28 86 146 309 * 86 146 309
Trust- Worldwide Hard Assets
Fund
Van Kampen Life Investment 89 126 165 292 26 81 138 292 * 81 138 292
Trust- Morgan Stanley Real
Estate Securities Portfolio
Warburg Pincus 92 133 176 315 29 88 149 315 * 88 149 315
Trust-International Equity
Portfolio
Warburg Pincus Trust-Global 92 135 180 323 29 90 153 323 * 90 153 323
Post-Venture Capital Portfolio
Warburg Pincus Trust- Small 90 127 167 297 27 82 140 297 * 82 140 297
Company Growth Portfolio
</TABLE>
*Contracts sold under this prospectus do not permit annuitization during the
first two contract years.
12
<PAGE> 15
SYNOPSIS OF THE CONTRACTS
The contracts described in this prospectus are modified single purchase payment
contracts. The contracts may be issued as either individual or group contracts.
In those states where contracts are issued as group contracts, references
throughout this prospectus to "contract(s)" will also mean "certificate(s)" and
"contract owner(s)" will mean "participant(s)," unless the plan otherwise
permits or requires the contract owner to exercise contract rights under the
authority of the plan terms.
The contracts can be categorized as:
- Non-Qualified;
- 401(a) Investment-only;
- IRAs, with contributions rolled over or transferred from certain
tax-qualified plans;
- Roth IRAs; and
- Tax Sheltered Annuities, with contributions rolled over or transferred
from other Tax Sheltered Annuity plans.
For more detailed information with regard to the differences in contract types,
please see "Types of Contracts" later in this prospectus.
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE SUBSEQUENT
TYPE PAYMENT PAYMENTS
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
Charitable $0 $0
Remainder Trust
401(a) $15,000 $1,000
Investment-only
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
CHARGES AND EXPENSES
Nationwide deducts a Mortality and Expense Risk Charge equal to an annual rate
of 1.25% of the daily net assets of the variable account. Nationwide assesses
these charges in return for bearing certain mortality and administrative risks.
Nationwide deducts an Administration Charge equal to an annual rate of 0.15% of
the daily net assets of the variable account. Nationwide assesses this charge in
return for incurring administrative expenses related to contract issuance and
maintenance.
Nationwide does not deduct a sales charge from purchase payments upon deposit
into the contract. However, Nationwide may deduct a CDSC if any amount is
withdrawn from the contract. This CDSC reimburses Nationwide for sales expenses.
The amount of the CDSC will not exceed 7% of purchase payments surrendered.
ANNUITY PAYMENTS
Annuity payments begin on the annuitization date. The payments will be based on
the annuity payment option chosen at the time of application (see "Annuity
Payment Options").
TAXATION
How the contracts are taxed depends on the type of contract issued and the
purpose for which the contract is purchased. Nationwide will charge against the
contract any premium taxes levied by any governmental authority (see "Federal
Tax Considerations" and "Premium Taxes").
TEN DAY FREE LOOK
Contract owners may return the contract for any reason within ten days of
receipt and Nationwide will refund the contract value or the amount required by
law (see "Right to Revoke").
FINANCIAL STATEMENTS
Financial statements for the variable account and Nationwide are located in the
Statement of Additional Information. A current Statement of Additional
Information may be obtained without charge by contacting Nationwide's home
office at the telephone number listed on page 2 of this prospectus.
13
<PAGE> 16
CONDENSED FINANCIAL INFORMATION
The value of an accumulation unit is determined on the basis of changes in the
per share value of the underlying mutual funds and the assessment of variable
account charges, which may vary from contract to contract (for more information
on the calculation of accumulation unit values, see "Variable Payment Annuity").
Please refer to Appendix B for information regarding each class of accumulation
units.
NATIONWIDE LIFE INSURANCE COMPANY
Nationwide is a stock life insurance company organized under Ohio law in March,
1929, with its home office at One Nationwide Plaza, Columbus, Ohio 43215.
Nationwide is a provider of life insurance, annuities and retirement products.
It is admitted to do business in all states, the District of Columbia and Puerto
Rico.
NATIONWIDE INVESTMENT SERVICES CORPORATION
The contracts are distributed by the general distributor, Nationwide Investment
Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio 43215. (For
contracts issued in the State of Michigan, all references to NISC shall mean
Nationwide Svcs. Corporation.) NISC is a wholly owned subsidiary of Nationwide.
TYPES OF CONTRACTS
The contracts described in this prospectus are classified according to the tax
treatment they are subject to under the Internal Revenue Code. The following is
a general description of the various types of contracts. Eligibility
requirements, tax benefits (if any), limitations, and other features of the
contracts will differ depending on the type of contract.
NON-QUALIFIED ANNUITY CONTRACTS
A Non-Qualified Annuity Contract is a contract that does not qualify for certain
tax benefits under the Internal Revenue Code, and which is not an IRA, a Roth
IRA, a SEP IRA, or a Tax Sheltered Annuity.
Upon the death of the owner of a Non-Qualified Annuity Contract, mandatory
distribution requirements are imposed to ensure distribution of the entire
balance in the contract within a required period.
Non-Qualified Annuity contracts that are owned by natural persons allow for the
deferral of taxation on the income earned in the contract until it is
distributed or deemed to be distributed.
INDIVIDUAL RETIREMENT ANNUITIES (IRAS)
Individual Retirement Annuities are contracts that are issued by insurance
companies and satisfy the following requirements:
- the contract is not transferable by the owner;
- the premiums are not fixed;
- the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from qualified plans, tax-sheltered annuities and other IRAs
can be received);
- certain minimum distribution requirements must be satisfied after the
owner attains the age of 70 1/2;
- the entire interest of the owner in the contract is nonforfeitable;
and
- after the death of the owner, additional distribution requirements may
be imposed to ensure distribution of the entire balance in the
contract within the statutory period of time.
Depending on the circumstance of the owner, all or a portion of the
contributions made to the account may be deducted for federal income tax
purposes.
Failure to make the mandatory distributions can result in an additional penalty
tax of 50% of the excess of the amount required to be distributed over the
amount that was actually distributed.
IRAs may receive rollover contributions from other Individual Retirement
Accounts and Individual Retirement Annuities, from Tax
14
<PAGE> 17
Sheltered Annuities, and from qualified retirement plans, including 401(k)
plans.
For further details regarding IRAs, please refer to the disclosure statement
provided when the IRA was established.
ROTH IRAS
Roth IRA contracts are contracts that are issued by insurance companies and
satisfy the following requirements:
- the contract is not transferable by the owner;
- the premiums are not fixed;
- the annual premium cannot exceed $2,000 (although rollovers of greater
amounts from other Roth IRAs and IRAs can be received);
- the entire interest of the owner in the contract is nonforfeitable;
and
- after the death of the owner, certain distribution requirements may be
imposed to ensure distribution of the entire balance in the contract
within the statutory period of time.
A Roth IRA can receive a rollover from an IRA; however, the amount rolled over
from the IRA to the Roth IRA is required to be included in the owner's federal
gross income at the time of the rollover, and will be subject to federal income
tax.
There are income limitations on eligibility to participate in a Roth IRA and
additional income limitations for eligibility to roll over amounts from an IRA
to a Roth IRA. For further details regarding Roth IRAs, please refer to the
disclosure statement provided when the Roth IRA was established.
TAX SHELTERED ANNUITIES
Certain tax-exempt organizations (described in section 501(c)(3) of the Internal
Revenue Code) and public school systems may establish a plan under which annuity
contracts can be purchased for their employees. These annuity contracts are
often referred to as Tax Sheltered Annuities.
Purchase payments made to Tax Sheltered Annuities are excludible from the income
of the employee, up to statutory maximum amounts. These amounts should be set
forth in the plan adopted by the employer.
The owner's interest in the contract is nonforfeitable (except for failure to
pay premiums) and cannot be transferred. Certain minimum distribution
requirements must be satisfied after the owner attains the age of 70 1/2, and
after the death of the owner. Additional distribution requirements may be
imposed to ensure distribution of the entire balance in the contract within the
statutory period of time.
INVESTING IN THE CONTRACT
THE VARIABLE ACCOUNT AND UNDERLYING MUTUAL FUNDS
Nationwide Variable Account-II is a variable account that invests in the
underlying mutual funds listed in Appendix A. Nationwide established the
variable account on October 7, 1981, pursuant to Ohio law. Although the variable
account is registered with the SEC as a unit investment trust pursuant to the
Investment Company Act of 1940 ("1940 Act"), the SEC does not supervise the
management of Nationwide or the variable account.
Income, gains, and losses credited to, or charged against, the variable account
reflect the variable account's own investment experience and not the investment
experience of Nationwide's other assets. The variable account's assets are held
separately from Nationwide's assets and are not chargeable with liabilities
incurred in any other business of Nationwide. Nationwide is obligated to pay all
amounts promised to contract owners under the contracts.
The variable account is divided into sub-accounts, each corresponding to a
single underlying mutual fund. Nationwide uses the assets of each sub-account to
buy shares of the underlying mutual funds based on contract owner instructions.
There are two sub-accounts for each underlying mutual fund. One sub-account
contains shares attributable to accumulation units under Non-Qualified
Contracts. The other contains shares attributable to accumulation units under
IRAs, Investment-
15
<PAGE> 18
only contracts, Roth IRAs, and Tax Sheltered Annuities.
Each underlying mutual fund's prospectus contains more detailed information
about that fund. Prospectuses for the underlying mutual funds should be read in
conjunction with this prospectus.
Underlying mutual funds in the variable account are NOT publicly traded mutual
funds. They are only available as investment options in variable life insurance
policies or variable annuity contracts issued by life insurance companies, or in
some cases, through participation in certain qualified pension or retirement
plans.
The investment advisers of the underlying mutual funds may manage publicly
traded mutual funds with similar names and investment objectives. However, the
underlying mutual funds are NOT directly related to any publicly traded mutual
fund. Contract owners should not compare the performance of a publicly traded
fund with the performance of the underlying mutual funds participating in the
variable account. The performance of the underlying mutual funds could differ
substantially from that of any publicly traded funds.
Voting Rights
Contract owners who have allocated assets to the underlying mutual funds are
entitled to certain voting rights. Nationwide will vote contract owner shares at
special shareholder meetings based on contract owner instructions. However, if
the law changes and Nationwide is allowed to vote in its own right, it may elect
to do so.
Contract owners with voting interests in an underlying mutual fund will be
notified of issues requiring the shareholders' vote as soon as possible before
the shareholder meeting. Notification will contain proxy materials and a form
with which to give Nationwide voting instructions. Nationwide will vote shares
for which no instructions are received in the same proportion as those that are
received.
The number of shares which a contract owner may vote is determined by dividing
the cash value of the amount they have allocated to an underlying mutual fund by
the net asset value of that underlying mutual fund. Nationwide will designate a
date for this determination not more than 90 days before the shareholder
meeting.
Material Conflicts
The underlying mutual funds may be offered through separate accounts of other
insurance companies, as well as through other separate accounts of Nationwide.
Nationwide does not anticipate any disadvantages to this. However, it is
possible that a conflict may arise between the interests of the variable account
and one or more of the other separate accounts in which these underlying mutual
funds participate.
Material conflicts may occur due to a change in law affecting the operations of
variable life insurance policies and variable annuity contracts, or differences
in the voting instructions of the contract owners and those of other companies.
If a material conflict occurs, Nationwide will take whatever steps are necessary
to protect contract owners and variable annuity payees, including withdrawal of
the variable account from participation in the underlying mutual fund(s)
involved in the conflict.
Substitution of Securities
Nationwide may substitute, eliminate, or combine shares of another underlying
mutual fund for shares already purchased or to be purchased in the future if
either of the following occurs:
1) shares of a current underlying mutual fund are no longer available for
investment; or
2) further investment in an underlying mutual fund is inappropriate.
No substitution, elimination, or combination of shares may take place without
the prior approval of the SEC.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. A
Guaranteed Term Option prospectus should be read along with this prospectus. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
Allocations to the
16
<PAGE> 19
Guaranteed Term Options are not subject to variable account charges.
Guaranteed Term Options provide a guaranteed rate of interest over four
different maturity durations: three (3), five (5), seven (7) or ten (10) years.
Note: The guaranteed term may last for up to 3 months beyond the 3, 5, 7, or 10
year period since every guaranteed term will end on the final day of a calendar
quarter after the maturity date.
For the duration selected, Nationwide will declare a guaranteed interest rate.
That rate will be credited to amounts allocated to the Guaranteed Term Option
UNLESS a distribution is taken before the maturity date. If a distribution
occurs before the maturity date, the amount distributed will be subject to a
market value adjustment. A market value adjustment can increase or decrease the
amount distributed depending on current interest rate fluctuations. No market
value adjustment will be applied if Guaranteed Term Option allocations are held
to maturity.
Because a market value adjustment can affect the value of a distribution, its
effects should be carefully considered before surrendering or transferring from
Guaranteed Term Options. When actual interest rates are higher than the
guaranteed rate, a market value adjustment would reduce the value of the amount
distributed. When actual interest rates are lower than the guaranteed rate, the
value of the amount distributed would increase.
Guaranteed Term Options are available only during the accumulation phase of a
contract. They are not available after the annuitization date. In addition,
Guaranteed Term Options are not available for use with asset rebalancing, dollar
cost averaging, or systematic withdrawals.
Guaranteed Term Options are not available in the states of Oregon or Washington.
THE FIXED ACCOUNT
The fixed account is an investment option that is funded by assets of
Nationwide's general account. The general account contains all of Nationwide's
assets other than those in other Nationwide separate accounts. It is used to
support Nationwide's annuity and insurance obligations and may contain
compensation for mortality and expense risks. The general account is not subject
to the same laws as the variable account and the SEC has not reviewed material
in this prospectus relating to the fixed account. However, information relating
to the fixed account is subject to federal securities laws relating to the
accuracy and completeness of prospectus disclosure.
Purchase payments will be allocated to the fixed account by election of the
contract owner.
The investment income earned by the fixed account will be allocated to the
contracts at varying guaranteed interest rates(s) depending on the following
categories of fixed account allocations:
- - New Money Rate - The rate credited on the fixed account allocation when the
contract is purchased or when subsequent purchase payments are made.
Subsequent purchase payments may receive different New Money Rates than the
rate when the contract was issued, since the New Money Rate is subject to
change based on market conditions.
- - Variable Account to Fixed Rate - Allocations transferred from any of the
underlying mutual funds in the variable account to the fixed account may
receive a different rate. The rate may be lower than the New Money Rate.
There may be limits on the amount and frequency of movements from the
variable account to the fixed account.
- - Renewal Rate - The rate available for maturing fixed account allocations
that are entering a new guarantee period. The contract owner will be
notified of this rate in a letter issued with the quarterly statements when
any of the money in the contract owner's fixed account matures. At that
time, the contract owner will have an opportunity to leave the money in the
fixed account and receive the Renewal Rate or the contract owner can move
the money to any of the underlying mutual fund options.
- - Dollar Cost Averaging - From time to time, Nationwide may offer a more
favorable rate
17
<PAGE> 20
for an initial purchase payment into a new contract when used in conjunction
with a Dollar Cost Averaging program.
All of these rates are subject to change on a daily basis; however, once applied
to the fixed account, the interest rates are guaranteed until the end of the
calendar quarter during which the 12 month anniversary of the fixed account
allocation occurs.
Credited interest rates are annualized rates - the effective yield of interest
over a one-year period. Interest is credited to each contract on a daily basis.
As a result, the credited interest rate is compounded daily to achieve the
stated effective yield.
The investment income earned by the fixed account will be allocated to the
contracts at varying rate(s) set by Nationwide. The guaranteed rate for any
purchase payment will be effective for not less than twelve months. Nationwide
guarantees that the rate will not be less than 3.0% per year.
Any interest in excess of 3.0% will be credited to fixed account allocations at
Nationwide's sole discretion. The contract owner assumes the risk that interest
credited to fixed account allocations may not exceed the minimum guarantee of
3.0% for any given year.
Nationwide guarantees that the fixed account contract value will not be less
than the amount of the purchase payments allocated to the fixed account, plus
interest credited as described above, less surrenders and any applicable charges
including CDSC.
CHARGES AND DEDUCTIONS
MORTALITY AND EXPENSE RISK CHARGE
Nationwide deducts a Mortality and Expense Risk Charge from the variable
account. This amount is computed on a daily basis, and is equal to an annual
rate of 1.25% of the daily net assets of the variable account.
The Mortality Risk Charge is equal to an annual rate of 0.80% of the daily net
assets of the variable account. The Mortality Risk Charge compensates Nationwide
for guaranteeing the annuity purchase rates of the contracts. This guarantee
ensures that the annuity purchase rates will not change regardless of the death
rates of annuity payees or the general population.
The Expense Risk Charge is equal to an annual rate of 0.45% of the daily net
assets of the variable account. The Expense Risk Charge compensates Nationwide
for guaranteeing that charges will not increase regardless of actual expenses.
If the Mortality and Expense Risk Charge is insufficient to cover actual
expenses, the loss is borne by Nationwide.
ADMINISTRATION CHARGE
Nationwide deducts an Administration Charge from the variable account. This
amount is computed on a daily basis and is equal to an annual rate of 0.15% of
the daily net assets of the variable account.
The Administration Charge compensates Nationwide for expenses related to
contract issuance and maintenance.
If this charge is insufficient to cover actual expenses, the loss is borne by
Nationwide.
CONTINGENT DEFERRED SALES CHARGE
No sales charge deduction is made from the purchase payments when amounts are
deposited into the contracts. However, if any part of the contract is
surrendered, Nationwide will deduct a CDSC. The CDSC will not exceed 7% of
purchase payments surrendered.
The CDSC is calculated by multiplying the applicable CDSC percentage (noted
below) by amount of purchase payments surrendered.
For purposes of calculating the CDSC, surrenders are considered to come first
from the oldest purchase payment made to the contract, then the next oldest
purchase payment, and so forth. Earnings are not subject to the CDSC, but may
not be distributed prior to the distribution of all purchase payments. (For tax
purposes, a surrender is usually treated as a withdrawal of earnings first.)
18
<PAGE> 21
The CDSC applies as follows:
NUMBER OF YEARS FROM DATE CDSC
OF PURCHASE PAYMENT PERCENTAGE
0 7%
1 6%
2 5%
3 4%
4 3%
5 2%
6 1%
7 0%
The CDSC is used to cover sales expenses, including commissions (maximum of 6.5%
of purchase payments), production of sales material, and other promotional
expenses. If expenses are greater than the CDSC, the shortfall will be made up
from Nationwide's general account, which may indirectly include portions of the
variable account charges, since Nationwide may generate a profit from these
charges.
All or a portion of any withdrawal may be subject to federal income taxes.
Contract owners taking withdrawals before age 59 1/2 may be subject to a 10%
penalty tax.
Waiver of Contingent Deferred Sales Charge
Each contract year, the contract owner may withdraw without a CDSC the greater
of:
(a) 10% of all purchase payments; or
(b) any amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code.
This CDSC-free privilege is non-cumulative. Free amounts not taken during any
given contract year cannot be taken as free amounts in a subsequent contract
year.
In addition, no CDSC will be deducted:
(1) upon the annuitization of contracts which have been in force for at
least two years;
(2) upon payment of a death benefit; or
(3) from any values which have been held under a contract for at least 7
years.
No CDSC applies to transfers among sub-accounts or between or among the
Guaranteed Term Options, the fixed account or the variable account. Nationwide
may waive the CDSC if a contract described in this prospectus is exchanged for
another Nationwide contract (or a contract of any of its affiliated insurance
companies). A CDSC may apply to the contract received in the exchange.
A contract held by a Charitable Remainder Trust may withdraw CDSC-free the
greater of (a) or (b) where:
(a) is the amount which would otherwise be available for withdrawal
without 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) and the contract value at the close of the day prior to
the date of the withdrawal.
For Tax Sheltered Annuity contracts issued prior to February 20, 1996, or issued
in state jurisdictions prior to the approval by insurance regulatory authorities
of applicable contract forms, Nationwide will waive the CDSC when:
(a) the plan participant experiences a case of hardship (as provided in
Internal Revenue Code Section 403(b) and as defined for purposes of
Internal Revenue Code Section 401(k));
(b) the plan participant becomes disabled (within the meaning of Internal
Revenue 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 CDSC will not be eliminated if to do so would be unfairly discriminatory or
prohibited by state law.
19
<PAGE> 22
PREMIUM TAXES
Nationwide will charge against the contract value any premium taxes levied by a
state or other government entity. Premium tax rates currently range from 0% to
5.0%. This range is subject to change. The method used to assess premium tax
will be determined by Nationwide at its sole discretion in compliance with state
law.
If applicable, Nationwide will deduct premium taxes from the contract either at:
(1) the time the contract is surrendered;
(2) annuitization; or
(3) such other date as Nationwide becomes subject to premium taxes.
Premium taxes may be deducted from death benefit proceeds.
CONTRACT OWNERSHIP
The contract owner has all rights under the contract 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 annuity commencement date. Purchasers who name someone other
than themselves as the contract owner will have no rights under the contract.
Contract owners of Non-Qualified Contracts may name a new contract owner at any
time before the annuitization date. Any change of contract owner automatically
revokes any prior contract owner designation. Changes in contract ownership may
result in federal income taxation and may be subject to state and federal gift
taxes.
A change in contract ownership must be submitted in writing and recorded at
Nationwide's home office. Once recorded, the change will be effective as of the
date signed. However, the change will not affect any payments made or actions
taken by Nationwide before it was recorded.
The contract owner may also request a change in the annuitant, contingent
annuitant, contingent owner, beneficiary, or contingent beneficiary before the
annuitization date. These changes must be: o on a Nationwide form; o signed by
the contract owner; and o received at Nationwide's home office before the
annuitization date.
Nationwide must review and approve any change requests. 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, unless
the contract owner is Charitable Remainder Trust.
JOINT OWNERSHIP
Joint owners each own an undivided interest in the contract. If a contract owner
who is NOT the annuitant dies before the annuitization date, the joint owner
becomes the contract owner.
Contract owners can name a joint owner at any time before annuitization subject
to the following conditions:
- Joint owners can only be named for Non-Qualified Contracts;
- Joint owners must be spouses at the time joint ownership is requested,
unless state law requires Nationwide to allow non-spousal joint
owners;
- The exercise of any ownership right in the contract will generally
require a written request signed by both joint owners;
- An election in writing signed by both contract owners must be made to
authorize Nationwide to allow the exercise of ownership rights
independently of either joint owner; and
- Nationwide 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 entitled to certain benefits under the contract, if a
contract owner who is NOT the annuitant dies before the annuitization date, and
there is no surviving joint owner. However, if the contingent owner dies
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before the contract owner, and there is no surviving joint owner, all of the
contract benefits that would have gone to the contingent owner will go to the
contract owner's estate.
If the contract owner and annuitant are the same, and the contract
owner/annuitant dies before the annuitization date, the contingent owner will
not have any rights in the contract unless the contingent owner is also the
beneficiary.
The contract owner may name or change a contingent owner at any time before the
annuitization date. To change the contingent owner, a written request must be
submitted to Nationwide. Once Nationwide has recorded the change, it will be
effective as of the date it was signed, whether or not the contract owner was
living at the time it was recorded. The change will not affect any action taken
by Nationwide before the change was recorded.
ANNUITANT
The annuitant is the person who will receive annuity payments and upon whose
continuation of life any annuity payment involving life contingencies depends.
This person must be age 85 or younger at the time of contract issuance, unless
Nationwide approves a request for an annuitant of greater age. The annuitant may
be changed before the annuitization date with Nationwide's consent.
BENEFICIARY AND CONTINGENT BENEFICIARY
The beneficiary is the person who is entitled to the death benefit if the
annuitant dies before the annuitization date and there is no joint owner. The
contract owner can name more than one beneficiary. The beneficiaries will share
the death benefit equally, unless otherwise specified.
If no beneficiary survives the annuitant, the contingent beneficiary receives
the death benefit. Contingent beneficiaries will share the death benefit
equally, unless otherwise specified.
If no beneficiaries or contingent beneficiaries survives the annuitant, the
contract owner or the last surviving contract owner's estate will receive the
death benefit.
If the contract owner is a Charitable Remainder Trust and the annuitant dies
before the annuitization date, the death benefit will accrue to the Charitable
Remainder Trust. Any designation in conflict with the Charitable Remainder
Trust's right to the death benefit will be void.
The contract owner may change the beneficiary or contingent beneficiary during
the annuitant's lifetime by submitting a written request to Nationwide. Once
recorded, the change will be effective as of the date it was signed, whether or
not the annuitant was living at the time it was recorded. The change will not
affect any action taken by Nationwide before the change was recorded.
OPERATION OF THE CONTRACT
MINIMUM INITIAL AND SUBSEQUENT PURCHASE PAYMENTS
MINIMUM INITIAL MINIMUM
CONTRACT PURCHASE SUBSEQUENT
TYPE PAYMENT PAYMENTS
Non-Qualified $15,000 $1,000
IRA $15,000 $1,000
Roth IRA $15,000 $1,000
Tax Sheltered $15,000 $1,000
Annuity
Charitable $0 $0
Remainder Trust
401(a) $15,000 $1,000
Investment-only
Subsequent purchase payments are not permitted in the State of New York.
GUARANTEED TERM OPTIONS
Guaranteed Term Options are separate investment options under the contract. The
minimum amount that may be allocated to a Guaranteed Term Option is $1,000.
PRICING
Initial purchase payments allocated to sub-accounts will be priced at the
accumulation unit value determined no later than 2 business days after receipt
of an order to purchase if the application and all necessary information are
complete. If the application is not complete, Nationwide may retain a purchase
payment for up to 5 business days while attempting to complete it. If the
application is not completed within 5 business days, the prospective purchaser
will be informed of the reason for the
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delay. The purchase payment will be returned unless the prospective purchaser
specifically allows Nationwide to hold the purchase payment until the
application is completed.
Subsequent purchase payments will be priced based on the next available
accumulation unit value after the payment is received. The cumulative total of
all purchase payments under contracts issued by Nationwide on the life of any
one annuitant cannot exceed $1,000,000 without Nationwide's prior consent.
Purchase payments will not be priced when the New York Stock Exchange is closed
or on the following nationally recognized holidays:
- - New Year's Day - Independence Day
- - Martin Luther King, Jr. Day - Labor Day
- - Presidents' Day - Thanksgiving
- - Good Friday - Christmas
- - Memorial Day
Nationwide also will not price purchase payments if:
(1) trading on the New York Stock Exchange is restricted;
(2) an emergency exists making disposal or valuation of securities held in
the variable account impracticable; or
(3) the SEC, by order, permits a suspension or postponement for the
protection of security holders.
Rules and regulations of the SEC will govern as to when the conditions described
in (2) and (3) exist.
If Nationwide is closed on days when the New York Stock Exchange is open,
contract value may be affected since the contract owner will not have access to
their account.
ALLOCATION OF PURCHASE PAYMENTS
Nationwide allocates purchase payments to sub-accounts, the fixed account,
and/or Guaranteed Term Options as instructed by the contract owner. Shares of
the underlying mutual funds allocated to the sub-accounts are purchased at net
asset value, then converted into accumulation units. Contract owners can change
allocations or make exchanges among the sub-accounts, the fixed account or
Guaranteed Term Options. However, no change may be made that would result in an
amount less than 1% of the purchase payments being allocated to any sub-account
for any contract owner. Certain transactions may be subject to conditions
imposed by the underlying mutual funds, as well as those set forth in the
contract.
DETERMINING THE CONTRACT VALUE
The contract value is the sum of:
(1) the value of amounts allocated to the sub-accounts of the variable
account;
(2) amounts allocated to the fixed account; and
(3) amounts allocated to a Guaranteed Term Option.
If part or all of the contract value is surrendered, or charges are assessed
against the contract value, Nationwide will deduct a proportionate amount from
each sub-account, the fixed account and any Guaranteed Term Option based on
current cash values.
Determining Variable Account Value - Valuing an Accumulation Unit
Purchase payments or transfers allocated to sub-accounts are accounted for in
accumulation units. Accumulation unit values (for each sub-account) are
determined by calculating the net investment factor for the underlying mutual
funds for the current valuation period and multiplying that result with the
accumulation unit values determined on the previous valuation period.
Nationwide uses the net investment factor as a way to calculate the investment
performance of a sub-account from valuation period to valuation period. For each
sub-account, the net investment factor shows the investment performance of the
underlying mutual fund in which a particular sub-account invests, including the
charges assessed against that sub-account for a valuation period.
The net investment factor for any particular sub-account is determined by
dividing (a) by (b), and then subtracting (c) from the result, where:
(a) is:
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(1) the net asset value of the underlying mutual fund as of the end
of the current valuation period; and
(2) the per share amount of any dividend or income distributions made
by the underlying mutual fund (if the ex-dividend date occurs
during the current valuation period).
(b) is the net asset value of the underlying mutual fund determined as of
the end of the preceding valuation period.
(c) is a factor representing the daily variable account charges, which may
include charges for contract options chosen by the contract owner. The
factor is equal to an annual rate of 1.40% of the daily net assets of
the variable account.
Based on the change in the net investment factor, the value of an accumulation
unit may increase or decrease. Changes in the net investment factor may not be
directly proportional to changes in the net asset value of the underlying mutual
fund shares because of the deduction of variable account charges.
Though the number of accumulation units will not change as a result of
investment experience, the value of an accumulation unit may increase or
decrease from valuation period to valuation period.
Determining Fixed Account Value
Nationwide determines the value of the fixed account by:
(1) adding all amounts allocated to the fixed account, minus amounts
previously transferred or withdrawn; and
(2) adding any interest earned on the amounts allocated.
Determining the Guaranteed Term Option Value
Nationwide determines the value of a Guaranteed Term Option by:
(1) adding all amounts allocated to any Guaranteed Term Option, minus
amounts previously transferred or withdrawn (which may be subject to a
market value adjustment);
(2) adding any interest earned on the amounts allocated to any Guaranteed
Term Option.
TRANSFERS PRIOR TO ANNUITIZATION
Transfers from the Fixed Account to the Variable Account
Fixed account allocations may be transferred to the variable account only upon
reaching the end of an interest rate guarantee period. Normally, Nationwide will
permit 100% of such fixed account allocations to be transferred to the variable
account; however, Nationwide may, under certain economic conditions and at its
discretion, limit the maximum transferable amount. The maximum transferable
amount will not be less than 10% of the fixed account allocation reaching the
end of an interest rate guarantee period. Transfers of the fixed account
allocations must be made within 45 days after reaching the end of an interest
rate guarantee period.
Transfers from the Variable Account to the Fixed Account
Variable account allocations may be transferred to the fixed account at any
time. Normally, Nationwide will not restrict transfers from the variable account
to the fixed account; however, Nationwide may establish a maximum transfer limit
from the variable account to the fixed account.
Under no circumstances will the transfer limit be less 10% of the current value
of the variable account and Guaranteed Term Option allocation, for any 12 month
period which the transfer limit is imposed, but not including transfers made
prior to the imposition of the transfer limit. However, Nationwide may refuse
transfers or purchase payments to the fixed account when the fixed account value
is greater than or equal to 30% of the contract value at the time the purchase
payment is made or the transfer is requested.
Transfers from a Guaranteed Term Option prior to maturity are subject to a
market value adjustment.
Contract owners who use Dollar Cost Averaging may transfer from the fixed
account to the variable account (but not to Guaranteed Term
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Options) under the terms of that program (see "Dollar Cost Averaging").
Transfers Among the Sub-Accounts
Allocations may be transferred among the sub-accounts once per valuation period.
TRANSFERS AFTER ANNUITIZATION
After annuitization, transfers may only be made on the anniversary of the
annuitization date.
TRANSFER REQUESTS
Nationwide will accept transfer requests in writing or over the telephone.
Nationwide will use reasonable procedures to confirm that telephone instructions
are genuine and will not be liable for following telephone instructions that it
reasonably determined to be genuine. Nationwide may withdraw the telephone
exchange privilege upon 30 days written notice to contract owners.
For transfers involving the variable account, Nationwide determines contract
value as of the date the completed transfer request is received.
Amounts transferred to the variable account will receive the accumulation unit
value next determined after the transfer request is received.
Interest Rate Guarantee Period
The interest rate guarantee period is the period of time that the fixed account
interest rate is guaranteed to remain the same. Within 45 days of the end of an
interest rate guarantee period, transfers may be made from the fixed account to
the variable account or to the Guaranteed Term Options. Nationwide will
determine the amount that may be transferred and will declare this amount at the
end of the guarantee period. This amount will not be less than 10% of the amount
in the fixed account that is maturing.
For new purchase payments allocated to the fixed account, or transfers to the
fixed account from the variable account or a Guaranteed Term Option, this period
begins on the date of deposit or transfer and ends on the one year anniversary
of the deposit or transfer. The guaranteed interest rate period may last for up
to 3 months beyond the 1 year anniversary because guaranteed terms end on the
last day of a calendar quarter.
The interest rate guarantee period does not in any way refer to interest rate
crediting practices connected with Guaranteed Term Options.
During an interest rate guarantee period, transfers cannot be made from the
fixed account, and amounts transferred to the fixed account must remain on
deposit.
Market Timing Firms
Some contract owners may use market timing firms or other third parties to make
transfers on their behalf. Generally, in order to take advantage of perceived
market trends, market-timing firms will submit transfer or exchange requests on
behalf of multiple contract owners at the same time. Sometimes this can result
in unusually large transfers of funds. These large transfers might interfere
with the ability of Nationwide or the underlying mutual fund to process
transactions. This can potentially disadvantage contract owners not using
market-timing firms. To avoid this, Nationwide may modify transfer and exchange
rights of contract owners who use market timing firms (or other third parties)
to transfer or exchange funds on their behalf.
The exchange and transfer rights of individual contract owners will not be
modified in any way when instructions are submitted directly by the contract
owner, or by the contract owner's representative (as authorized by the execution
of a valid Nationwide Limited Power of Attorney Form).
To protect contract owners, Nationwide may refuse exchange and transfer
requests:
- submitted by any agent acting under a power of attorney on behalf of
more than one contract owner; or
- submitted on behalf of individual contract owners who have executed
pre-authorized exchange forms which are submitted by market timing
firms (or other third parties) on behalf of more than one contract
owner at the same time.
Nationwide will not restrict exchange rights unless Nationwide believes it to be
necessary for the protection of all contract owners.
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RIGHT TO REVOKE
Contract owners have a ten day "free look" to examine the contract. The contract
may be returned to Nationwide's home office for any reason within ten days of
receipt and Nationwide will refund the contract value or another amount required
by law. The refunded contract value will reflect the deduction of any contract
charges, unless otherwise required by law. All IRA and Roth IRA refunds will be
a return of purchase payments. State and/or federal law may provide additional
free look privileges.
Liability of the variable account under this provision is limited to the
contract value in each sub-account on the date of revocation. Any additional
amounts refunded to the contract owner will be paid by Nationwide.
SURRENDERS (REDEMPTIONS)
Contract owners may surrender some or all of their contract value before the
earlier of the annuitization date or the annuitant's death. Surrender requests
must be in writing and Nationwide may require additional information. When
taking a full surrender, the contract must accompany the written request.
Nationwide may require a signature guarantee.
Nationwide will pay any amounts surrendered from the sub-accounts within 7 days.
However, Nationwide may suspend or postpone payment when it is unable to price a
purchase payment or transfer.
PARTIAL SURRENDERS (PARTIAL REDEMPTIONS)
Nationwide will surrender accumulation units from the sub-accounts and an amount
from the fixed account and Guaranteed Term Options. The amount withdrawn from
each investment option will be in proportion to the value in each option at the
time of the surrender request.
A CDSC may apply. The contract owner may direct Nationwide to deduct the CDSC
from either:
(a) the amount requested; or
(b) the contract value remaining after the contract owner has received the
amount requested.
If the contract owner does not make a specific election, any applicable CDSC
will be taken from the contract value remaining after the contract owner has
received the amount requested.
FULL SURRENDERS (FULL REDEMPTIONS)
The contract value upon full surrender may be more or less than the total of all
purchase payments made to the contract. The contract value will reflect variable
account charges, underlying mutual fund charges and the investment performance
of the underlying mutual funds. A CDSC may apply.
SURRENDERS UNDER A TAX SHELTERED ANNUITY
Contract owners of a Tax Sheltered Annuity may surrender part or all of their
contract value before the earlier of the annuitization date or the annuitant's
death, except as provided below:
A. Contract value attributable to contributions made under a qualified cash or
deferred arrangement (within the meaning of Internal Revenue Code Section
402(g)(3)(A)), a salary reduction agreement (within the meaning of Internal
Revenue Code Section 402(g)(3)(C)), or transfers from a Custodial Account
(described in Section 403(b)(7) of the Internal Revenue Code), may be
surrendered only:
1. when the contract owner reaches age 59 1/2, separates from service,
dies, or becomes disabled (within the meaning of Internal Revenue Code
Section 72(m)(7)); or
2. in the case of hardship (as defined for purposes of Internal Revenue
Code Section 401(k)), provided that any such hardship surrender may NOT
include any income earned on salary reduction contributions.
B. The surrender limitations described in Section A also apply to:
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
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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 a ten day free look
cancellation of the contract (when available) may result in taxes,
penalties, and/or retroactive disqualification of a Qualified Contract or
Tax Sheltered Annuity.
In order to prevent disqualification of a Tax Sheltered Annuity after a ten day
free look cancellation, Nationwide will transfer the proceeds to another Tax
Sheltered Annuity upon proper direction by the contract owner.
These provisions explain Nationwide's understanding of current withdrawal
restrictions. These restrictions may change.
Distributions pursuant to Qualified Domestic Relations Orders will not violate
the restrictions stated above.
LOAN PRIVILEGE
The loan privilege is ONLY available to owners of Tax Sheltered Annuities. These
contract owners can take loans from the contract value beginning 30 days after
the contract is issued up to the annuitization date. Loans are subject to the
terms of the contract, the plan, and the Internal Revenue Code. Nationwide may
modify the terms of a loan to comply with changes in applicable law.
MINIMUM AND MAXIMUM LOAN AMOUNTS
Contract owners may borrow a minimum of $1,000, unless Nationwide is required by
law to allow a lesser minimum amount. Each loan must individually satisfy the
contract minimum amount.
Nationwide will calculate the maximum nontaxable loan amount based upon
information provided by the participant or the employer. Loans may be taxable if
a participant has additional loans from other plans. The total of all
outstanding loans must not exceed the following limits:
CONTRACT MAXIMUM OUTSTANDING LOAN
VALUES BALANCE ALLOWED
NON-ERISA PLANS up to up to 80% of contract
$20,000 value (not more than
$10,000)
$20,000 up to 50% of contract
and over value (not more than
$50,000*)
ERISA PLANS All up to 50% of contract
value (not more than
$50,000*)
*The $50,000 limits will be reduced by the highest outstanding balance owed
during the previous 12 months.
For salary reduction Tax Sheltered Annuities, loans may be secured only by the
contract value.
LOAN PROCESSING FEE
Nationwide may charge a Loan Processing Fee at the time each new loan is
processed. If assessed it compensates Nationwide for expenses related to
administering and processing loans. Loans are not available in all states. In
addition, some states may not allow Nationwide to assess a Loan Processing Fee.
HOW LOAN REQUESTS ARE PROCESSED
All loans are made from the collateral fixed account. Nationwide transfers
accumulation units in proportion to the assets in each sub-account to the
collateral fixed account until the requested amount is reached. If there are not
enough accumulation units available in the contract to reach the requested loan
amount, Nationwide next transfers contract value from the fixed account. Any
remaining required collateral will be transferred from the Guaranteed Term
Options. Transfers from the Guaranteed Term Options may be subject to a market
value adjustment. No CDSC will be deducted on transfers related to loan
processing.
INTEREST
The outstanding loan balance in the collateral fixed account is credited with
interest until the loan is repaid in full. The interest rate will be 2.25% less
than the loan interest rate fixed by Nationwide. The interest rate is guaranteed
never to fall below 3.0%.
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Specific loan terms are disclosed at the time of loan application or issuance.
LOAN REPAYMENT
Loans must be repaid in five years. However, if the loan is used to purchase the
contract owner's principal residence, the contract owner has 15 years to repay
the loan.
Contract owners must identify loan repayments as loan repayments or they will be
treated as purchase payments and will not reduce the outstanding loan. Payments
must be substantially level and made at least quarterly.
Loan repayments will consist of principal and interest in amounts set forth in
the loan agreement. Repayments are allocated to the sub-accounts in accordance
with the contract, unless Nationwide and the contract owner have agreed to amend
the contract at a later date on a case by case basis.
Loan repayments to the Guaranteed Term Options must be at least $1,000. If the
proportional share of the repayment to the Guaranteed Term Option is less than
$1,000, that portion of the repayment will be allocated to the NSAT-Money Market
Fund unless the contract owner directs otherwise.
DISTRIBUTIONS AND ANNUITY PAYMENTS
Distributions made from the contract while a loan is outstanding will be reduced
by the amount of the outstanding loan plus accrued interest if:
- the contract is surrendered;
- the contract owner/annuitant dies;
- the contract owner who is not the annuitant dies prior to
annuitization; or
- annuity payments begin.
TRANSFERRING THE CONTRACT
Nationwide reserves the right to restrict any transfer of the contract while the
loan is outstanding.
GRACE PERIOD AND LOAN DEFAULT
If a loan payment is not made when due, interest will continue to accrue. A
grace period may be available (please refer to the terms of the loan agreement).
If a loan payment is not made by the end of the applicable grace period, the
entire loan will be treated as a deemed distribution and will be taxable to the
borrower. This deemed distribution may also be subject to an early withdrawal
tax penalty by the Internal Revenue Service.
After default, interest will continue to accrue on the loan. Defaulted amounts,
plus interest, are deducted from the contract value when the participant is
eligible for a distribution of at least that amount. Additional loans are not
available while a previous loan is in default.
ASSIGNMENT
Contract rights are personal to the contract owner and may not be assigned
without Nationwide's written consent. Investment-only Contracts, IRAs, Roth
IRAs, and Tax Sheltered Annuities may not be assigned, pledged or otherwise
transferred except where allowed by law.
A Non-Qualified Contract owner may assign some or all rights under the contract.
An assignment must occur before annuitization while the annuitant is alive. Once
proper notice of assignment is recorded by Nationwide's home office, the
assignment will become effective as of the date the written request was signed.
Nationwide is not responsible for the validity or tax consequences of any
assignment. Nationwide is not liable for any payment or settlement made before
the assignment is recorded. Assignments will not be recorded until Nationwide
receives sufficient direction from the contract owner and the assignee regarding
the proper allocation of contract rights.
Amounts pledged or assigned will be treated as distributions 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. Amounts assigned may be subject to a tax penalty equal to 10% of the
amount included in gross income.
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Assignment of the entire contract value may cause the portion of the contract
value exceeding the total investment in the contract and previously taxed
amounts to be included in gross income for federal income tax purposes each year
that the assignment is in effect.
CONTRACT OWNER SERVICES
ASSET REBALANCING
Asset rebalancing is the automatic reallocation of contract values to the
sub-accounts on a predetermined percentage basis. Asset rebalancing is not
available for assets held in the fixed account or the Guaranteed Term Options.
Requests for asset rebalancing must be on a Nationwide form.
Asset rebalancing occurs every three months or on another frequency if permitted
by Nationwide. If the last day of the three-month period falls on a Saturday,
Sunday, recognized holiday, or any other day when the New York Stock Exchange is
closed, asset rebalancing will occur on the next business day.
Asset rebalancing may be subject to employer limitations or restrictions for
contracts issued to a Tax Sheltered Annuity plan. Contract owners should consult
a financial adviser to discuss the use of asset rebalancing.
Nationwide reserves the right to stop establishing new asset rebalancing
programs. Nationwide also reserves the right to assess a processing fee for this
service.
DOLLAR COST AVERAGING
Dollar cost averaging is a long-term transfer program that allows you to make
regular, level investments over time. It involves the automatic transfer of a
specified amount from certain sub-accounts and/or the fixed account into other
sub-accounts. Nationwide does not guarantee that this program will result in
profit or protect contract owners from loss.
Contract owners direct Nationwide to automatically transfer specified amounts
from the fixed account, Fidelity VIP High Income Portfolio, NSAT- government
Bond Fund, NSAT- Money Market Fund, Neuberger Berman AMT Limited Maturity Bond
Portfolio to any other underlying mutual fund. Dollar cost averaging transfers
may not be directed to Guaranteed Term Options.
Dollar Cost Averaging from the Fixed Account
Transfers from the fixed account must be equal to or less than 1/30th of the
fixed account value at the time the program is requested. A dollar cost
averaging program which transfers amounts from the fixed account to the variable
account is not the same as an enhanced rate dollar cost averaging program.
Contract owners that wish to utilize dollar cost averaging from the fixed
account should first inquire as to whether any enhanced rate dollar cost
averaging programs are available.
Enhanced Rate Dollar Cost Averaging Program
Nationwide may, from time to time, offer enhanced rate dollar cost averaging
programs. Dollar cost averaging transfers for this program may only be made from
the fixed account. Such enhanced rate dollar cost averaging programs allow the
contract owner to earn a higher rate of interest on assets in the fixed account
than would normally be credited when not participating in the program. Each
enhanced interest rate is guaranteed for as long as the corresponding program is
in effect. Nationwide will process transfers until either amounts in the
enhanced rate fixed account are exhausted, or the contract owner instructs
Nationwide in writing to stop the transfers. For this program only, when a
written request to discontinue transfers is received, Nationwide will
automatically transfer the remaining amount in the enhanced rate fixed account
to the NSAT Money Market Fund.
Transfers occur monthly or on another frequency if permitted by Nationwide.
Nationwide will process transfers until either the value in the originating
investment option is exhausted, or the contract owner instructs Nationwide in
writing to stop the transfers.
Nationwide reserves the right to stop establishing new dollar cost averaging
programs. Nationwide also reserves the right to assess a processing fee for this
service.
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SYSTEMATIC WITHDRAWALS
Systematic withdrawals allow contract owners to receive a specified amount (of
at least $100) on a monthly, quarterly, semi-annual, or annual basis. Requests
for systematic withdrawals and requests to discontinue systematic withdrawals
must be in writing.
The withdrawals will be taken from the sub-accounts and the fixed account
proportionately unless Nationwide is instructed otherwise. Systematic
withdrawals are not available from the Guaranteed Term Options.
Nationwide will withhold federal income taxes from systematic withdrawals unless
otherwise instructed by the contract owner. The Internal Revenue Service may
impose a 10% penalty tax if the contract owner is under age 59 1/2 unless the
contract owner has made an irrevocable election of distributions of
substantially equal payments.
If the contract owner takes systematic withdrawals, the maximum amount that can
be withdrawn annually without a CDSC is the greatest of:
1) 10% of all purchase payments made to the contract as of the withdrawal
date;
2) an amount withdrawn to meet minimum distribution requirements under
the Internal Revenue Code; or
3) a percentage of the contract value based on the contract owner's age,
as shown in the table below:
CONTRACT OWNER'S PERCENTAGE OF
AGE CONTRACT VALUE
Under age 59 1/2 5%
Age 59 1/2through age 61 7%
Age 62 through age 64 8%
Age 65 through age 74 10%
Age 75 and over 13%
Contract value and contract owner's age are determined as of the date the
request for the withdrawal program is recorded by Nationwide's home office. For
joint owners, the older joint owner's age will be used.
If total amounts withdrawn in any contract year exceed the CDSC-free amount
described above, those amounts will only be eligible for the 10% of purchase
payment CDSC-free withdrawal privilege described in the "Contingent Deferred
Sales Charge" section. The total amount of CDSC for that contract year will be
determined in accordance with that provision.
The CDSC-free withdrawal privilege for systematic withdrawals is non-cumulative.
Free amounts not taken during any contract year cannot be taken as free amounts
in a subsequent contract year.
Nationwide reserves the right to stop establishing new systematic withdrawal
programs. Nationwide also reserves the right to assess a processing fee for this
service. Systematic withdrawals are not available before the end of the ten-day
free look period (see "Right to Revoke").
ANNUITY COMMENCEMENT DATE
The annuity commencement date is the date on which annuity payments are
scheduled to begin. The contract owner may change the annuity commencement date
before annuitization. This change must be in writing and approved by Nationwide.
ANNUITIZING THE CONTRACT
ANNUITIZATION DATE
The annuitization date is the date that annuity payments begin. It will be the
first day of a calendar month unless otherwise agreed, and must be at least 2
years after the contract is issued. If the contract is issued to fund a Tax
Sheltered Annuity plan, annuitization may occur during the first 2 years subject
to Nationwide's approval.
ANNUITIZATION
Annuitization is the period during which annuity payments are received. It is
irrevocable once payments have begun. Upon arrival of the annuitization date,
the annuitant must choose:
(1) an annuity payment option; and
(2) either a fixed payment annuity, variable payment annuity, or an
available combination.
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Nationwide guarantees that each payment under a fixed payment annuity will be
the same throughout annuitization. Under a variable payment annuity, the amount
of each payment will vary with the performance of the underlying mutual funds
chosen by the contract owner.
FIXED PAYMENT ANNUITY
A fixed payment annuity is an annuity where the amount of the annuity payment
remains level.
The first payment under a fixed payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
(1) deducting applicable premium taxes from the total contract value; then
(2) applying the contract value amount specified by the contract owner to
the fixed payment annuity table for the annuity payment option
elected.
Subsequent payments will remain level unless the annuity payment option elected
provides otherwise. Nationwide does not credit discretionary interest during
annuitization.
VARIABLE PAYMENT ANNUITY
A variable payment annuity is an annuity where the amount of the annuity
payments will vary depending on the performance of the underlying mutual funds
selected.
The first payment under a variable payment annuity is determined on the
annuitization date on an "age last birthday basis" by:
1) deducting applicable premium taxes from the total contract value; then
2) applying the contract value amount specified by the contract owner to
the variable payment annuity table for the annuity payment option
elected.
The dollar amount of the first payment is converted into a set number of annuity
units that will represent each monthly payment. This is done by dividing the
dollar amount of the first payment by the value of an annuity unit as of the
annuitization date. This number of annuity units remains fixed during
annuitization.
The second and subsequent payments are determined by multiplying the fixed
number of annuity units by the annuity unit value for the valuation period in
which the payment is due. The amount of the second and subsequent payments will
vary with the performance of the selected underlying mutual funds. Nationwide
guarantees that variations in mortality experience from assumptions used to
calculate the first payment will not affect the dollar amount of the second and
subsequent payments.
ASSUMED INVESTMENT RATE
An assumed investment rate is the percentage rate of return assumed to determine
the amount of the first payment under a variable payment annuity. Nationwide
uses the assumed investment rate of 3.5% to calculate the first annuity payment.
The assumed investment rate of 3.5% is the percentage rate of return required to
maintain level variable annuity payments. Subsequent variable annuity payments
may be more or less than the first based on whether actual investment
performance is higher or lower than the assumed investment rate of 3.5%.
VALUE OF AN ANNUITY UNIT
Annuity unit values for sub-accounts are determined by multiplying the net
investment factor for the valuation period for which the annuity unit is being
calculated by the immediately preceding valuation period's annuity unit value,
and multiplying the result by an interest factor to neutralize the assumed
investment rate of 3.5% per annum built into the variable payment annuity
purchase rate basis in the contracts.
EXCHANGES AMONG UNDERLYING MUTUAL FUNDS
Exchanges among underlying mutual funds during annuitization must be in writing.
Exchanges will occur on each anniversary of the annuitization date.
FREQUENCY AND AMOUNT OF ANNUITY PAYMENTS
Payments are made based on the annuity payment option selected, unless:
- the amount to be distributed is less than $5,000, in which case
Nationwide may make one lump sum payment of the contract value; or
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- an annuity payment would be less than $50, in which case Nationwide
can change the frequency of payments to intervals that will result in
payments of at least $50. Payments will be made at least annually.
ANNUITY PAYMENT OPTIONS
Contract owners must elect an annuity payment option before the annuitization
date. The annuity payment options are:
(1) LIFE ANNUITY - An annuity payable periodically, but at least annually,
for the lifetime of the annuitant. Payments will end upon the
annuitant's death. For example, if the annuitant dies before the
second annuity payment date, the annuitant will receive only one
annuity payment. The annuitant will only receive two annuity payments
if he or she dies before the third annuity payment date, and so on.
(2) JOINT AND LAST SURVIVOR ANNUITY - An annuity payable periodically, but
at least annually, during the joint lifetimes of the annuitant and a
designated second individual. If one of these parties dies, payments
will continue for the lifetime of the survivor. As is the case under
option 1, there is no guaranteed number of payments. Payments end upon
the death of the last surviving party, regardless of the number of
payments received.
(3) LIFE ANNUITY WITH 120 OR 240 MONTHLY PAYMENTS GUARANTEED - An annuity
payable monthly during the lifetime of the annuitant. If the annuitant
dies before all of the guaranteed payments have been made, payments
will continue to the end of the guaranteed period and will be paid to
a designee chosen by the annuitant at the time the annuity payment
option was elected.
The designee may elect to receive the present value of the remaining
guaranteed payments in a lump sum. The present value will be computed
as of the date Nationwide receives the notice of the annuitant's
death.
Not all of the annuity payment options may be available in all states. Contract
owners may request other options before the annuitization date. These options
are subject to Nationwide's approval.
No distribution for Non-Qualified Contracts will be made until an annuity
payment option has been elected. IRAs and Tax Sheltered Annuities are subject to
the "minimum distribution" requirements set forth in the plan, contract, and the
Internal Revenue Code.
DEATH BENEFITS
DEATH OF CONTRACT OWNER - NON-QUALIFIED CONTRACTS
If the contract owner who is not the annuitant dies before the annuitization
date, the joint owner becomes the contract owner. If no joint owner is named,
the contingent owner becomes the contract owner. If no contingent owner is
named, the last surviving contract owner's estate becomes the contract owner.
Distributions under Non-Qualified Contracts will be made pursuant to the
"Required Distributions for Non-Qualified Contracts" provision.
DEATH OF ANNUITANT - NON-QUALIFIED CONTRACTS
If the annuitant who is not the contract owner dies before the annuitization
date, a death benefit is payable to the beneficiary unless a contingent
annuitant is named. If a contingent annuitant is named, the contingent annuitant
becomes the annuitant and no death benefit is payable.
If the annuitant dies after the annuitization date, any benefit that may be
payable will be paid according to the selected annuity payment option.
DEATH OF CONTRACT OWNER/ANNUITANT
If a contract owner who is also the annuitant dies before the annuitization
date, a death benefit is payable according to the "Death of the Annuitant -
Non-Qualified Contracts" provision.
If the contract owner/annuitant dies after the annuitization date, any benefit
that may be payable will be paid according to the selected annuity payment
option.
HOW THE DEATH BENEFIT VALUE IS DETERMINED
The death benefit value is determined as of the date the home office receives:
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(1) proper proof of the annuitant's death;
(2) an election specifying the distribution method; and
(3) any state required forms(s).
If the annuitant dies after the annuitization date, payment will be determined
according to the selected annuity payment option.
The beneficiary may elect to receive the death benefit:
(1) in a lump sum;
(2) as an annuity; or
(3) in any other manner permitted by law and approved by Nationwide.
The beneficiary must notify Nationwide of this election within 60 days of the
annuitant's death.
DEATH BENEFIT PAYMENT
For contracts issued on or after May 1, 1998 or the date on which state
insurance authorities approved applicable contract modifications:
If the annuitant dies prior to his or her 86th birthday, the dollar amount of
the death benefit will be the greatest of:
(1) the contract value;
(2) the sum of all purchase payments, less an adjustment for amounts
surrendered; or
(3) the contract value as of the most recent five year contract
anniversary, less an adjustment for amounts surrendered since that
five year contract anniversary.
The adjustment for amounts surrendered will reduce items (2) and (3) above
in the same proportion that the contract value was reduced on the date(s)
of the partial surrender(s).
If the annuitant dies on or after his or her 86th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to the
contract value.
For contracts issued prior to May 1, 1998 or a date prior to which state
insurance authorities approved applicable contract modifications:
If the annuitant dies prior to his or her 86th birthday, the dollar amount of
the death benefit will be the greatest of:
(1) the contract value;
(2) the sum of all purchase payments, less amounts surrendered; or
(3) the contract value as of the most recent five year contract
anniversary, less amounts surrendered since that five year contract
anniversary.
If the annuitant dies on or after his or her 86th birthday and prior to the
annuitization date, the dollar amount of the death benefit will be equal to the
contract value.
REQUIRED DISTRIBUTIONS
REQUIRED DISTRIBUTIONS FOR NON-QUALIFIED CONTRACTS
Internal Revenue Code Section 72(s) requires Nationwide to make certain
distributions when a contract owner dies. The following distributions will be
made according to those requirements:
(1) If any contract owner dies on or after the annuitization date and
before the entire interest in the contract has been distributed, then
the remaining interest must be distributed at least as rapidly as the
distribution method in effect on the contract owner's death.
(2) If any contract owner dies before the annuitization date, then the
entire interest in the contract (consisting of either the death
benefit or the contract value reduced by charges set forth elsewhere
in the contract) will be distributed within 5 years of the contract
owner's death, provided however:
(a) any interest payable to or for the benefit of a natural person
(referred to herein as a "designated beneficiary"), may be
distributed over the life of the designated beneficiary or over a
period not longer than the life expectancy of the designated
beneficiary. Payments must begin within one year of the contract
owner's death unless otherwise permitted by federal income tax
regulations; or
(b) if the designated beneficiary is the surviving spouse of the
deceased contract owner, the spouse can choose to
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become the contract owner instead of receiving a death benefit.
Any distributions required under these distribution rules will be
made upon that spouse's death.
In the event that the contract owner is not a natural person (e.g., a trust or
corporation), then, for purposes of these distribution provisions:
(a) the death of the annuitant will be treated as the death of a contract
owner;
(b) any change of annuitant will be treated as the death of a contract
owner; and
(c) in either case, the appropriate distribution will be made upon the
death or change, as the case may be.
These distribution provisions do not apply to any contract exempt from Section
72(s) of the Internal Revenue Code by reason of Section 72(s)(5) or any other
law or rule.
The designated beneficiary must elect a method of distribution and notify
Nationwide of this election within 60 days of the contract owner's death.
REQUIRED DISTRIBUTIONS FOR TAX SHELTERED ANNUITIES
Distributions from Tax Sheltered Annuities will be made according to the Minimum
Distribution and Incidental Benefit ("MDIB") provisions of Section 401(a)(9) of
the Internal Revenue Code. Distributions will be made to the annuitant according
to the selected annuity payment option over a period not longer than:
(a) the life of the annuitant or the joint lives of the annuitant and the
annuitant's designated beneficiary; or
(b) a period not longer than the life expectancy of the annuitant or the
joint life expectancies of the annuitant and the annuitant's
designated beneficiary.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Tax Sheltered Annuity of the annuitant.
If the annuitant's entire interest in a Tax Sheltered Annuity will be
distributed in equal or substantially equal payments over a period described in
(a) or (b), the payments will begin on the required beginning date. The required
beginning date is the later of:
(a) April 1 of the calendar year following the calendar year in which the
annuitant reaches age 70 1/2; or
(b) the annuitant's retirement date.
Provision (b) does not apply to any employee who is a 5% owner (as defined in
Section 416 of the Internal Revenue Code) with respect to the plan year ending
in the calendar year when the employee attains the age of 70 1/2.
Distributions commencing on the required distribution date must satisfy MDIB
provisions set forth in the Internal Revenue Code. Those provisions require that
distribution cannot be less than the amount determined by dividing the
annuitant's interest in the Tax Sheltered Annuity by the end of the previous
calendar year by: (a) the annuitant's life expectancy; or if applicable (b) the
joint and survivor life expectancy of the annuitant and the annuitant's
beneficiary.
The life expectancies and joint life expectancies are determined by reference to
Treasury Regulation 1.72-9.
If the annuitant dies before distributions begin, the interest in the Tax
Sheltered Annuity must be distributed by December 31 of the calendar year in
which the fifth anniversary of the annuitant's death occurs unless:
(a) the annuitant names his or her surviving spouse as the beneficiary and
the spouse chooses to receive distribution of the contract in
substantially equal payments over his or her life (or a period not
longer than his or her life expectancy) and beginning no 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 distribution of the
contract in substantially equal payments over his or her life (or a
period
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not longer than his or her life expectancy) beginning no later than
December 31 of the year following the year in which the annuitant
dies.
If the annuitant dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule used before the annuitant's
death.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
REQUIRED DISTRIBUTIONS FOR INDIVIDUAL RETIREMENT ANNUITIES
Distributions from an Individual Retirement Annuity must begin no later than
April 1 of the calendar year following the calendar year in which the contract
owner reaches age 70 1/2. Distribution may be paid in a lump sum or in
substantially equal payments over:
(a) the contract owner's life or the lives of the contract owner and his
or her spouse or designated beneficiary; or
(b) a period not longer than the life expectancy of the contract owner or
the joint life expectancy of the contract owner and the contract
owner's designated beneficiary.
If the contract owner dies before distributions begin, the interest in the
Individual Retirement Annuity must be distributed by December 31 of the calendar
year in which the fifth anniversary of the contract owner's death occurs,
unless:
(a) the contract owner names his or her surviving spouse as the
beneficiary and such spouse chooses to:
(1) treat the contract as an Individual Retirement Annuity
established for his or her benefit; or
(2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year in which the contract owner would have reached age 70
1/2; or
(b) the contract owner names a beneficiary other than his or her surviving
spouse and such beneficiary elects to receive a distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year of the contract
owner's death.
Required distributions do not have to be withdrawn from this contract if they
are being withdrawn from another Individual Retirement Annuity or Individual
Retirement Account of the contract owner.
If the contract owner dies after distributions have begun, distributions must
continue at least as rapidly as under the schedule being used before the
contract owner's death. However, a 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)(1) of this provision.
If distribution requirements are not met, a penalty tax of 50% is levied on the
difference between the amount that should have been distributed for that year
and the amount that actually was distributed for that year.
A portion of each distribution will be included in the recipient's gross income
and taxed at ordinary income tax rates. The portion of a distribution which is
taxable is based on the ratio between the amount by which non-deductible
purchase payments exceed prior nontaxable distributions and total account
balances at the time of the distribution. The owner of an Individual Retirement
Annuity 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 nontaxable distributions for all years, and the total
balance of all Individual Retirement Annuities.
Individual Retirement Annuity distributions will not receive the favorable tax
treatment of a lump sum distribution from a Qualified Plan. If the contract
owner dies before the entire interest in
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the contract has been distributed, the balance will also be included in his or
her gross estate.
REQUIRED DISTRIBUTIONS FOR ROTH IRAS
The rules for Roth IRAs do not require distributions to begin during the
contract owner's lifetime.
When the contract owner dies, the interest in the Roth IRA must be distributed
by December 31 of the calendar year in which the fifth anniversary of his or her
death occurs, unless:
(a) the contract owner names his or her surviving spouse as the
beneficiary and the spouse chooses to:
(1) treat the contract as a Roth IRA established for his or her
benefit; or
(2) receive distribution of the contract in substantially equal
payments over his or her life (or a period not longer than his or
her life expectancy) and beginning no later than December 31 of
the year following the year in which the contract owner would
have reached age 70 1/2; or
(b) the contract owner names a beneficiary other than his or her surviving
spouse and the beneficiary chooses to receive distribution of the
contract in substantially equal payments over his or her life (or a
period not longer than his or her life expectancy) beginning no later
than December 31 of the year following the year in which the contract
owner dies.
Distributions from Roth IRAs may be either taxable or nontaxable, depending upon
whether they are "qualified distributions" or "nonqualified distributions" (see
"Federal Tax Considerations").
FEDERAL TAX CONSIDERATIONS
FEDERAL INCOME TAXES
The tax consequences of purchasing a contract described in this prospectus will
depend on:
- the type of contract purchased;
- the purposes for which the contract is purchased; and
- the personal circumstances of individual investors having interests in
the contracts.
See "Synopsis of the Contracts" for a brief description of the various types of
contracts and the different purposes for which the contracts may be purchased.
Existing tax rules are subject to change, and may affect individuals differently
depending on their situation. Nationwide does not guarantee the tax status of
any contracts or any transactions involving the contracts.
If the contract is purchased as an investment of certain retirement plans (such
as qualified retirement plans, Individual Retirement Accounts, and custodial
accounts as described in Sections 401, 408(a), and 403(b)(7) of the Internal
Revenue Code), tax advantages enjoyed by the contract owner and/or annuitant may
relate to participation in the plan rather than ownership of the annuity
contract. Such plans are permitted to purchase investments other than annuities
and retain tax-deferred status.
The following is a brief summary of some of the federal income tax
considerations related to the contracts. In addition to the federal income tax,
distributions from annuity contracts may be subject to state and local income
taxes. The tax rules across all states and localities are not uniform and
therefore will not be discussed in this prospectus. Tax rules that may apply to
contracts issued in U.S. territories such as Puerto Rico and Guam are also not
discussed. Nothing in this prospectus should be considered to be tax advice.
Contract owners and prospective contract owners are encouraged to consult a
financial consultant, tax advisor or legal counsel to discuss the taxation and
use of the contracts.
The Internal Revenue Code sets forth different income tax rules for the
following types of annuity contracts:
- Individual Retirement Annuities;
- SEP IRAs;
- Roth IRAs;
- Tax Sheltered Annuities; and
- "Non-Qualified Annuities."
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IRAs and SEP IRAs
Distributions from Individual Retirement Annuities are generally taxed when
received. If any of the amount contributed to the IRA was nondeductible for
federal income tax purposes, then a portion of each distribution is excludable
from income.
If distributions of income from an IRA are made prior to the date that the owner
attains the age of 59 1/2 years, the income is subject to both the regular
income tax and an additional penalty tax of 10%. The penalty tax can be avoided
if the distribution is:
- made to a beneficiary on or after the death of the owner;
- attributable to the owner becoming disabled (as defined in the
Internal Revenue Code);
- part of a series of substantially equal periodic payments made not
less frequently than annually made for the life (or life expectancy)
of the owner, or the joint lives (or joint life expectancies) of the
owner and his or her designated beneficiary;
- used for qualified higher education expenses; or
- used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
Roth IRAs
Distributions of earnings from Roth IRAs are taxable or nontaxable depending
upon whether they are "qualified distributions" or "non-qualified
distributions." A "qualified distribution" is one that satisfies the five-year
rule and meets one of the following requirements:
- it is made on or after the date on which the contract owner attains
age 59 1/2;
- it is made to a beneficiary (or the contract owner's estate) on or
after the death of the contract owner;
- it is attributable to the contract owner's disability; or
- it is used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
The five year rule generally is satisfied if the distribution is not made within
the five taxable year period beginning with the first taxable year in which a
contribution is made to any Roth IRA established for the owner.
A qualified distribution is not included in gross income for federal income tax
purposes.
A non-qualified distribution is not includible in gross income to the extent
that the distribution, when added to all previous distributions, does not exceed
that total amount of contributions made to the Roth IRA. Any non-qualified
distribution in excess of the aggregate amount of contributions will be included
in the contract owner's gross income in the year that is distributed to the
contract owner.
Special rules apply for Roth IRAs that have proceeds received from an IRA prior
to January 1, 1999 if the owner elected the special 4-year income averaging
provisions that were in effect for 1998.
If non-qualified distributions of income from a Roth IRA are made prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- made to a beneficiary on or after the death of the owner;
- attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- part of a series of substantially equal periodic payments made not
less frequently than annually made for the life (or life expectancy)
of the owner, or the joint lives (or joint life expectancies) of the
owner and his or her designated beneficiary;
- for qualified higher education expenses; or
- used for expenses attributable to the purchase of a home for a
qualified first-time buyer.
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If the contract owner dies before the contract is completely distributed, the
balance may be included in the contract owner's gross estate for tax purposes.
Tax Sheltered Annuities
Distributions from Tax Sheltered Annuities are generally taxed when received. A
portion of each distribution is excludable from income based on a formula
established pursuant to the Internal Revenue Code. The formula excludes from
income the amount invested in the contract divided by the number of anticipated
payments until the full investment in the contract is recovered. Thereafter all
distributions are fully taxable.
If a distribution of income is made from a Tax Sheltered Annuity prior to the
date that the owner attains the age of 59 1/2 years, the income is subject to
both the regular income tax and an additional penalty tax of 10%. The penalty
tax can be avoided if the distribution is:
- made to a beneficiary on or after the death of the owner;
- attributable to the owner becoming disabled as defined in the Internal
Revenue Code;
- part of a series of substantially equal periodic payments made not
less frequently than annually made for the life (or life expectancy)
of the owner, or the joint lives (or joint life expectancies) of the
owner and his or her designated beneficiary;
- for qualified higher education expenses;
- used for expenses attributable to the purchase of a home for a
qualified first-time buyer; or
- made to the owner after separation from service with his or her
employer after age 55.
Non-Qualified Contracts - Natural Persons as Contract Owners
Generally, the income earned inside a Non-Qualified Annuity Contract that is
owned by a natural person is not taxable until it is distributed from the
contract.
Distributions before the annuitization date are taxable to the contract owner to
the extent that the cash value of the contract exceeds the contract owner's
investment at the time of the distribution. Distributions, for this purpose,
include partial surrenders, any portion of the contract that is assigned or
pledged; or any portion of the contract that is transferred by gift. For these
purposes, a transfer by gift may occur upon annuitization if the contract owner
and the annuitant are not the same individual.
With respect to annuity distributions on or after the annuitization date, a
portion of each annuity payment is excludable from taxable income. The amount
excludable is based on the ratio between the contract owner's investment in the
contract and the expected return on the contract. Once the entire investment in
the contract is recovered, all distributions are fully includable in income. The
maximum amount excludable from income is the investment in the contract. If the
annuitant dies before the entire investment in the contract has been excluded
from income, and as a result of the annuitant's death no more payments are due
under the contract, then the unrecovered investment in the contract may be
deducted on his or her final tax return.
In determining the taxable amount of a distribution, all annuity contracts
issued after October 21, 1988 by the same company to the same contract owner
during the same calendar year will be treated as one annuity contract.
A special rule applies to distributions from contracts that have investments
that were made prior to August 14, 1982. For those contracts, distributions that
are made prior to the annuitization date are treated first as a recovery of the
investment in the contract as of that date. A distribution in excess of the
amount of the investment in the contract as of August 14, 1982, will be treated
as taxable income.
The Internal Revenue Code imposes a penalty tax if a distribution is made before
the contract owner reaches age 59 1/2. The amount of the penalty is 10% of the
portion of any distribution that is includible in gross income. The penalty tax
does not apply if the distribution is:
- the result of a contract owner's death;
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- the result of a contract owner's disability, as defined in the
Internal Revenue Code;
- one of a series of substantially equal periodic payments made over the
life (or life expectancy) of the contract owner or the joint lives (or
joint life expectancies) of the contract owner and the beneficiary
selected by the contract owner to receive payment under the annuity
payment option selected by the contract owner; or
- is allocable to an investment in the contract before August 14, 1982.
Non-Qualified Contracts - Non-Natural Persons as Contract Owners
The previous discussion related to the taxation of Non-Qualified Contracts owned
by individuals. Different rules (the so-called "non-natural persons" rules)
apply if the contract owner is not a natural person.
Generally, contracts owned by corporations, partnerships, trusts, and similar
entities are not treated as annuity contracts under the Internal Revenue Code.
Therefore, income earned under a Non-Qualified Contract that is owned by a
non-natural person is taxed as ordinary income during the taxable year that it
is earned. Taxation is not deferred, even if the income is not distributed out
of the contract. The income is taxable as ordinary income, not capital gain.
The non-natural persons rules do not apply to all entity-owned contracts. A
contract that is owned by a non-natural person as an agent of an individual is
treated as owned by the individual. This would cause the contract to be treated
as an annuity under the Internal Revenue Code, allowing tax deferral. However,
this exception does not apply when the non-natural person is an employer that
holds the contract under a non-qualified deferred compensation arrangement for
one or more employees.
The non-natural persons rules also do not apply to contracts that are:
- acquired by the estate of a decedent by reason of the death of the
decedent;
- issued in connection with certain qualified retirement plans and
individual retirement plans;
- purchased by an employer upon the termination of certain qualified
retirement plans.
WITHHOLDING
Pre-death distributions from the contracts are subject to federal income tax.
Nationwide will withhold the tax from the distributions unless the contract
owner requests otherwise. If the distribution is from a Tax Sheltered Annuity,
it will be subject to mandatory 20% withholding that cannot be waived, unless:
- the distribution is made directly to another Tax Sheltered Annuity or
an IRA; or
- the distribution satisfies the minimum distribution requirements
imposed by the Internal Revenue Code.
In addition, contract owners may not waive withholding if the distribution is
subject to mandatory back-up withholding (if no taxpayer identification number
is given or if the Internal Revenue Service notifies Nationwide that mandatory
back-up withholding is required). Mandatory back-up withholding rates are 31% of
income that is distributed.
NON-RESIDENT ALIENS
Generally, a pre-death distribution from a contract to a non-resident alien is
subject to federal income tax at a rate of 30% of the amount of income that is
distributed. Nationwide is required to withhold this amount and send it to the
Internal Revenue Service. Some distributions to non-resident aliens may be
subject to a lower (or no) tax if a treaty applies. In order to obtain the
benefits of such a treaty, the non-resident alien must:
(1) provide Nationwide with proof of residency and citizenship (in
accordance with Internal Revenue Service requirements); and
(2) provide Nationwide with an individual taxpayer identification number.
If the non-resident alien does not meet the above conditions, Nationwide will
withhold 30% of income from the distribution.
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Another way to avoid the 30% withholding is for the non-resident alien to
provide Nationwide with sufficient evidence that:
(1) the distribution is connected to the non-resident alien's conduct of
business in the United States; and
(2) the distribution is includible in the non-resident alien's gross
income for United States federal income tax purposes.
Note that these distributions may be subject to back-up withholding, currently
31%, if a correct taxpayer identification number is not provided.
FEDERAL ESTATE, GIFT, AND GENERATION SKIPPING TRANSFER TAXES
The following transfers may be considered a gift for federal gift tax purposes:
- a transfer of the contract from one contract owner to another; or
- a distribution to someone other than a contract owner.
Upon the contract owner's death, the value of the contract may subject to estate
taxes, even if all or a portion of the value is also subject to federal income
taxes.
Section 2612 of the Internal Revenue Code may require Nationwide to determine
whether a death benefit or other distribution is a "direct skip" and the amount
of the resulting generation skipping transfer tax, if any. A direct skip is when
property is transferred to, or a death benefit or other distribution is made to:
(a) an individual who is two or more generations younger than the contract
owner; or
(b) certain trusts, as described in Section 2613 of the Internal Revenue
Code (generally, trusts that have no beneficiaries who are not 2 or
more generations younger than the contract owner).
If the contract owner is not an individual, then for this purpose ONLY,
"contract owner" refers to any person:
- who would be required to include the contract, death benefit,
distribution, or other payment in his or her federal gross estate at
his or her death; or
- who is required to report the transfer of the contract, death benefit,
distribution, or other payment for federal gift tax purposes.
If a transfer is a direct skip, Nationwide will deduct the amount of the
transfer tax from the death benefit, distribution or other payment, and remit it
directly to the Internal Revenue Service.
CHARGE FOR TAX
Nationwide is not required to maintain a capital gain reserve liability on
Non-Qualified Contracts. If tax laws change requiring a reserve, Nationwide may
implement and adjust a tax charge.
DIVERSIFICATION
Internal Revenue Code Section 817(h) contains rules on diversification
requirements for variable annuity contracts. A variable annuity contract that
does not meet these diversification requirements will not be treated as an
annuity, unless o the failure to diversify was accidental; o the failure is
corrected; and o a fine is paid to the Internal Revenue Service.
The amount of the fine will be the amount of tax that would have been paid by
the contract owner if the income, for the period the contract was not
diversified, had been received by the contract owner.
If the violation is not corrected, the contract owner will be considered the
owner of the underlying securities and will be taxed on the earnings of his or
her contract. Nationwide believes that the investments underlying this contract
meet these diversification requirements.
TAX CHANGES
The foregoing tax information is based on Nationwide's understanding of federal
tax laws. It is NOT intended as tax advice. All information is subject to change
without notice. For more details, contact your personal tax and/or financial
advisor.
39
<PAGE> 42
STATEMENTS AND REPORTS
Nationwide will mail contract owners statements and reports. Therefore, contract
owners should promptly notify Nationwide of any address change.
These mailings will contain:
- statements showing the contract's quarterly activity;
- confirmation statements showing transactions that affect the
contract's value. Confirmation statements will not be sent for
recurring transactions (i.e., dollar cost averaging or salary
reduction programs). Instead, confirmation of recurring transactions
will appear in the contract's quarterly statements;
- semi-annual reports as of June 30 containing financial statements for
the variable account; and
- annual reports as of December 31 containing financial statements for
the variable account.
Contract owners should review statements and confirmations carefully. All errors
or corrections must be reported to Nationwide immediately to assure proper
crediting to the contract. Unless Nationwide is notified within 30 days of
receipt of the statement, Nationwide will assume statements and confirmation
statements are correct.
LEGAL PROCEEDINGS
Nationwide is a party to litigation and arbitration proceedings in the ordinary
course of its business, none of which is expected to have a material adverse
effect on Nationwide.
In recent years, life insurance companies have been named as defendants in
lawsuits, including class action lawsuits relating to life insurance and annuity
pricing and sales practices. A number of these lawsuits have resulted in
substantial jury awards or settlements.
In November 1997, two plaintiffs, one who was the owner of a variable life
insurance contract and the other who was the owner of a variable annuity
contract, commenced a lawsuit in a federal court in Texas against Nationwide and
the American Century group of defendants (Robert Young and David D. Distad v.
Nationwide Life Insurance Company et al.). In this lawsuit, plaintiffs sought to
represent a class of variable life insurance contract owners and variable
annuity contract owners whom they claim were allegedly misled when purchasing
these variable contracts into believing that the performance of their underlying
mutual fund option managed by American Century, whose shares may only be
purchased by insurance companies, would track the performance of a mutual fund,
also managed by American Century, whose shares are publicly traded. The amended
complaint seeks unspecified compensatory and punitive damages. On April 27,
1998, the District Court denied, in part, and granted, in part, motions to
dismiss the complaint filed by Nationwide and American Century. The remaining
claims against Nationwide allege securities fraud, common law fraud, civil
conspiracy, and breach of contract. The District Court, on December 2, 1998,
issued an order denying plaintiffs' motion for class certification and the
appeals court declined to review the order denying class certification upon
interlocutory appeal. On June 11, 1999, the District Court denied the
plaintiffs' motion to amend their complaint and reconsider class certification.
In January 2000 Nationwide and American Century settled this lawsuit now limited
to the claims of the two named plaintiffs. On February 9, 2000 the court
dismissed this lawsuit with prejudice.
On October 29, 1998, Nationwide was named in a lawsuit filed in Ohio state court
related to the sale of deferred annuity products for use as investments in
tax-deferred contributory retirement plans (Mercedes Castillo v. Nationwide
Financial Services, Inc., Nationwide Life Insurance Company and Nationwide Life
and Annuity Insurance Company). On May 3, 1999, the complaint was amended to,
among other things, add Marcus Shore as a second plaintiff. The amended
complaint is brought as a class action on behalf of all persons who purchased
individual deferred annuity contracts or participated in group annuity contracts
sold by Nationwide and the other named Nationwide
40
<PAGE> 43
affiliates which were used to fund certain tax-deferred retirement plans. The
amended complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, Nationwide and the other named defendants
filed a motion to dismiss the amended complaint. On March 8, 2000, the court
denied the motion to dismiss the amended complaint filed by Nationwide and other
named defendants. Nationwide intends to defend this lawsuit vigorously.
There can be no assurance that any litigation relating to pricing or sales
practices will not have a material adverse effect on Nationwide in the future.
The general distributor, NISC, is not engaged in any litigation of any material
nature.
ADVERTISING AND SUB-ACCOUNT PERFORMANCE SUMMARY ADVERTISING
A "yield" and "effective yield" may be advertised for the NSAT-Money Market
Fund. "Yield" is a measure of the net dividend and interest income earned over a
specific seven-day period (which period will be stated in the advertisement)
expressed as a percentage of the offering price of the NSAT-Money Market Fund's
units. Yield is an annualized figure, which means that it is assumed that the
NSAT-Money Market Fund generates the same level of net income over a 52-week
period. The "effective yield" is calculated similarly but includes the effect of
assumed compounding, calculated under rules prescribed by the SEC. The effective
yield will be slightly higher than yield due to this compounding effect.
Nationwide may advertise the performance of a sub-account in relation to the
performance of other variable annuity sub-accounts, underlying mutual fund
options with similar or different objectives, or the investment industry as a
whole. Other investments to which the sub-accounts may be compared include, but
are not limited to:
- precious metals;
- real estate;
- stocks and bonds;
- closed-end funds;
- bank money market deposit accounts and passbook savings;
- CDs; and
- the Consumer Price Index.
Market Indexes
The sub-accounts will be compared to certain market indexes, such as:
- S&P 500;
- Shearson/Lehman Intermediate Government/Corporate Bond Index;
- Shearson/Lehman Long-Term Government/Corporate Bond Index;
- Donoghue Money Fund Average;
- U.S. Treasury Note Index;
- Bank Rate Monitor National Index of 2 1/2 Year CD Rates; and
- Dow Jones Industrial Average.
Tracking & Rating Services; Publications
Nationwide's rankings and ratings are sometimes published by other services,
such as:
- Lipper Analytical Services, Inc.;
- CDA/Wiesenberger;
- Morningstar;
- Donoghue's;
- magazines such as:
- Money;
- Forbes;
- Kiplinger's Personal Finance Magazine;
- Financial World;
- Consumer Reports;
- Business Week;
- Time;
- Newsweek;
- National Underwriter; and
- News and World Report; LIMRA;
- Value;
- Best's Agent Guide;
- Western Annuity Guide;
- Comparative Annuity Reports;
- Wall Street Journal;
- Barron's;
- Investor's Daily;
- Standard & Poor's Outlook; and
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<PAGE> 44
- Variable Annuity Research & Data Service (The VARDS Report).
These rating services and publications rank the underlying mutual funds'
performance against other funds. These rankings may or may not include the
effects of sales charges or other fees.
Financial Rating Services
Nationwide is also ranked and rated by independent financial rating services,
among which are Moody's, Standard & Poor's and A.M. Best Company. Nationwide may
advertise these ratings. These ratings reflect Nationwide's financial strength
or claims-paying ability. The ratings are not intended to reflect the investment
experience or financial strength of the variable account.
Some Nationwide advertisements and endorsements may include lists of
organizations, individuals or other parties that recommend Nationwide or the
contract. Furthermore, Nationwide may occasionally advertise comparisons of
currently taxable and tax deferred investment programs, based on selected tax
brackets, or discussions of alternative investment vehicles and general economic
conditions.
Historical Performance of the Sub-Accounts
Nationwide will advertise historical performance of the sub-accounts. Nationwide
may advertise for the sub-account's standardized "average annual total return,"
calculated in a manner prescribed by the SEC, and nonstandardized "total
return." Average annual total return shows the percentage rate of return of a
hypothetical initial investment of $1,000 for the most recent one, five and ten
year periods (or for a period covering the time the underlying mutual fund has
been available in the variable account if it has not been available for one of
the prescribed periods). This calculation reflects the standard 7-year CDSC
schedule and the deduction of all charges that could be 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," shows the percentage rate of return of a hypothetical
initial investment of $25,000 for the most recent one, five and ten year periods
(or for a period covering the time the underlying mutual fund has been in
existence). For those underlying mutual funds which have not been available for
one of the prescribed periods, the nonstandardized total return illustrations
will show the investment performance the underlying mutual funds would have
achieved (reduced by the same charges except the CDSC) had they been available
in the variable account for one of the periods. If the underlying mutual fund
has been available in the variable account for less than one year, (or if the
underlying mutual fund has been effective for less than one year), standardized
and non-standardized return is not annualized. 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 $25,000
is assumed because that amount is closer to the size of a typical contract than
$1,000, which was used in calculating the standardized average annual total
return.
The standardized average annual total return and nonstandardized total return
quotations are calculated using data for the period ended December 31, 1999.
However, Nationwide generally provides performance information more frequently.
Information relating to performance of the sub-accounts is based on historical
earnings and does not represent or guarantee future results.
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<PAGE> 45
SUB-ACCOUNT PERFORMANCE SUMMARY
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN
<TABLE>
<CAPTION>
10 Years or Date Date Fund
Fund Available in Available in
1 Year To 5 Years To Variable Account the Variable
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Account
<S> <C> <C> <C> <C> <C>
American Century Variable Portfolios, 2.22% 12.99% 9.56% 05-01-92
Inc.- American Century VP Balanced
American Century Variable Portfolios, 55.92% 12.39% 9.84% 12-01-87
Inc.- American Century VP Capital
Appreciation
American Century Variable Portfolios, 10.07% N/A 11.83% 05-01-98
Inc.- American Century VP Income & Growth
American Century Variable Portfolios, 55.45% 22.32% 19.11% 08-01-94
Inc.- American Century VP International
American Century Variable Portfolios, -8.38% N/A 7.32% 12-23-96
Inc.- American Century VP Value
Dreyfus Stock Index Fund, Inc. 12.62% 26.07% 20.62% 09-20-93
Dreyfus Variable Investment 3.60% N/A 14.38% 07-14-97
Fund-Appreciation Portfolio (formerly,
Dreyfus Variable Investment Fund-Capital
Appreciation Portfolio)
Dreyfus Variable Investment 8.95% N/A 12.26% 12-23-96
Fund - Growth & Income Portfolio
The Dreyfus Socially Responsible Growth 21.96% 26.65% 22.31% 10-01-93
Fund, Inc.
Fidelity VIP Equity-Income Portfolio -1.46% 16.66% 12.89% 05-01-87
Fidelity VIP Growth Portfolio 29.21% 27.72% 18.26% 12-01-87
Fidelity VIP High Income Portfolio 0.34% 8.93% 10.86% 05-01-87
Fidelity VIP Overseas Portfolio 34.33% 15.43% 9.87% 05-01-87
Fidelity VIP II Asset Manager Portfolio 3.24% 13.69% 11.57% 09-01-89
Fidelity VIP II Contrafund(R)Portfolio 16.22% N/A 22.79% 07-03-95
Fidelity VIP III Growth Opportunities -3.49% N/A 12.45% 07-14-97
Portfolio
The Universal Institutional Funds, Inc.- 21.27% N/A -6.64% 07-14-97
Emerging Markets Debt Portfolio
NSAT- Capital Appreciation Fund -3.48% 22.38% 16.03% 05-01-92
NSAT- Government Bond Fund -9.75% 5.53% 6.16% 11-15-82
NSAT- Money Market Fund -2.92% 3.29% 3.54% 02-25-82
NSAT Small Cap Value Fund 19.75% N/A 1.21% 10-31-97
NSAT- Nationwide Small Company Fund 35.71% N/A 21.15% 10-23-95
NSAT-Total Return Fund -0.85% 18.82% 13.18% 11-15-82
Neuberger Berman AMT Growth Portfolio 41.99% 24.37% 13.99% 12-01-87
Neuberger Berman AMT Guardian Portfolio 7.02% N/A -0.17% 05-01-98
Neuberger Berman AMT Limited Maturity Bond -6.24% 3.58% 4.38% 12-01-87
Portfolio
Neuberger Berman AMT Partners Portfolio -0.43% 19.07% 17.59% 08-01-94
</TABLE>
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<PAGE> 46
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years or Date Date Fund
Fund Available in Available in
1 Year To 5 Years To Variable Account the Variable
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Account
<S> <C> <C> <C> <C> <C>
Oppenheimer VAF - Oppenheimer Bond Fund/VA -8.99% 5.16% 6.25% 09-01-89
Oppenheimer VAF- Oppenheimer Global 49.97% 19.71% 17.90% 10-01-93
Securities Fund/VA
Oppenheimer VAF- Oppenheimer Capital 33.37% N/A 25.06% 07-14-97
Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
Oppenheimer VAF- Oppenheimer Multiple 3.93% 12.46% 9.28% 09-01-89
Strategies Fund/VA
Strong Opportunity Fund II, Inc. 26.72% 21.38% 19.33% 05-08-92
Strong Variable Insurance Funds, Inc.- -2.68% 9.42% 8.99% 05-08-92
Discovery Fund II, Inc.
Strong Variable Insurance Funds, Inc.- 78.29% N/A 12.16% 10-23-95
International Stock II
Van Eck Worldwide Insurance Trust- -14.78% 3.11% 3.96% 09-01-89
Worldwide Bond Fund
Van Eck Worldwide Insurance Trust- 91.19% N/A 2.91% 12-23-96
Worldwide Emerging Markets Fund
Van Eck Worldwide Insurance Trust- 13.01% -0.49% 1.61% 09-01-89
Worldwide Hard Assets Fund
Van Kampen Life Investment Trust- Morgan -10.69% N/A 8.71% 07-03-95
Stanley Real Estate Securities Portfolio
Warburg Pincus Trust- International Equity 44.99% N/A 12.86% 07-03-95
Portfolio
Warburg Pincus Trust - Global 54.91% N/A 23.40% 12-23-96
Post-Venture Capital Portfolio
Warburg Pincus Trust-Small Company Growth 60.42% N/A 22.76% 07-03-95
Portfolio
</TABLE>
NON-STANDARDIZED TOTAL RETURN
<TABLE>
<CAPTION>
10 Years or Date Date Fund
Fund Available in Available in
1 Year To 5 Years To Variable Account the Variable
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Account
<S> <C> <C> <C> <C> <C>
American Century Variable Portfolios, Inc.- 8.52% 13.32% 9.91% 05-01-91
American Century VP Balanced
American Century Variable Portfolios, Inc.- 62.22% 12.73% 9.84% 11-20-87
American Century VP Capital Appreciation
American Century Variable Portfolios, Inc.- 16.37% N/A 22.96% 10-30-97
American Century VP Income & Growth
American Century Variable Portfolios, Inc.- 61.75% 22.56% 18.39% 05-01-94
American Century VP International
American Century Variable Portfolios, Inc.- -2.24% N/A 9.55% 05-01-96
American Century VP Value
Dreyfus Stock Index Fund, Inc. 18.92% 26.28% 16.05% 09-29-89
Dreyfus Variable Investment Fund- 9.90% 23.78% 18.39% 04-05-93
Appreciation Portfolio (formerly, Dreyfus
Variable Investment Fund-Capital
Appreciation Portfolio)
Dreyfus Variable Investment 15.25% 22.59% 19.24% 05-02-94
Fund - Growth & Income Portfolio
The Dreyfus Socially Responsible Growth 28.26% 26.86% 22.36% 10-06-93
Fund, Inc.
Fidelity VIP Equity-Income Portfolio 4.84% 16.95% 12.89% 10-09-86
</TABLE>
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<PAGE> 47
NON-STANDARDIZED TOTAL RETURN (CONTINUED)
<TABLE>
<CAPTION>
10 Years or Date
Fund Available in
1 Year To 5 Years To Variable Account Date Fund
Sub-Account Options 12/31/99 12/31/99 To 12/31/99 Effective
<S> <C> <C> <C> <C> <C>
Fidelity VIP Growth Portfolio 35.51% 27.92% 18.26% 10-09-86
Fidelity VIP High Income Portfolio 6.64% 9.31% 10.86% 09-19-85
Fidelity VIP Overseas Portfolio 40.63% 15.73% 9.87% 01-28-87
Fidelity VIP II Asset Manager Portfolio 9.54% 14.01% 11.57% 09-06-89
Fidelity VIP II Contrafund(R)Portfolio 22.52% N/A 25.97% 01-03-95
Fidelity VIP III Growth Opportunities 2.81% N/A 19.83% 01-03-95
Portfolio
The Universal Institutional Funds, Inc.- 27.57% N/A -4.02% 06-16-97
Emerging Markets Debt Portfolio
NSAT- Capital Appreciation Fund 2.82% 22.62% 15.64% 04-15-92
NSAT- Government Bond Fund -3.71% 5.96% 6.16% 11-08-82
NSAT- Money Market Fund 3.38% 3.76% 3.54% 11-10-81
NSAT Small Cap Value Fund 26.05% N/A 8.05% 10-31-97
NSAT- Nationwide Small Company Fund 42.01% N/A 21.50% 10-23-95
NSAT-Total Return Fund 5.45% 19.09% 13.18% 11-08-82
Neuberger Berman AMT Growth Portfolio 48.29% 24.60% 13.99% 09-10-84
Neuberger Berman AMT Guardian Portfolio 13.32% N/A 22.32% 11-03-97
Neuberger Berman AMT Limited Maturity Bond 0.06% 4.05% 4.38% 09-10-84
Portfolio
Neuberger Berman AMT Partners Portfolio 5.87% 19.33% 15.84% 03-22-94
Oppenheimer VAF - Oppenheimer Bond Fund/VA -2.90% 5.60% 6.25% 04-30-85
Oppenheimer VAF - Oppenheimer Global 56.27% 19.97% 15.16% 11-12-90
Securities Fund/VA
Oppenheimer VAF - Oppenheimer Capital 39.67% 28.84% 16.81% 04-03-85
Appreciation Fund/VA (formerly Oppenheimer
Growth Fund)
Oppenheimer VAF - Oppenheimer Multiple 10.23% 12.79% 9.28% 02-09-87
Strategies Fund/VA
Strong Opportunity Fund II, Inc. 33.02% 21.63% 19.33% 05-08-92
Strong Variable Insurance Funds, Inc.- 3.62% 9.79% 8.99% 05-08-92
Discovery Fund II, Inc.
Strong Variable Insurance Funds, Inc.- 84.59% N/A 12.60% 10-20-95
International Stock II
Van Eck Worldwide Insurance Trust- -9.11% 3.59% 3.96% 09-01-89
Worldwide Bond Fund
Van Eck Worldwide Insurance Trust- 97.49% N/A 8.40% 12-21-95
Worldwide Emerging Markets Fund
Van Eck Worldwide Insurance Trust- 19.31% 0.06% 1.61% 09-01-89
Worldwide Hard Assets Fund
Van Kampen Life Investment Trust- Morgan -4.73% N/A 9.15% 07-03-95
Stanley Real Estate Securities Portfolio
Warburg Pincus Trust- International Equity 51.29% N/A 13.23% 06-30-95
Portfolio
Warburg Pincus Trust - Global 61.21% N/A 20.64% 09-30-96
Post-Venture Capital Portfolio
Warburg Pincus Trust-Small Company Growth 66.72% N/A 23.00% 06-30-95
Portfolio
</TABLE>
45
<PAGE> 48
TABLE OF CONTENTS OF STATEMENT OF ADDITIONAL INFORMATION
<TABLE>
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>
46
<PAGE> 49
APPENDIX A: OBJECTIVES FOR 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 (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR
AFTER SEPTEMBER 27, 1999)
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
47
<PAGE> 50
issuers may be included in the portfolio from time to time, it is the primary
intent of the manager to diversify investments across a broad range of
foreign issuers. Although the primary investment of the Fund will be common
stocks (defined to include depository receipts for common stock and other
equity equivalents), the Fund may also invest in other types of securities
consistent with the Fund's objective. When the manager believes that the
total capital growth potential of other securities equals or exceeds the
potential return of common stocks, the Fund may invest up to 35% of its
assets in such other securities. There can be no assurance that the Fund will
achieve its objectives.
-AMERICAN CENTURY VP VALUE
Investment Objective: The investment objective of the Fund is long-term
capital growth; income is a secondary objective. The equity securities in
which the Fund will invest will be primarily securities of well-established
companies with intermediate-to-large market capitalizations that are believed
by management to be undervalued at the time of purchase. Under normal market
conditions, the Fund expects to invest at least 80% of the value of its total
asset in equity securities, including common and preferred stock, convertible
preferred stock and convertible debt obligations.
DREYFUS INVESTMENT PORTFOLIOS
Dreyfus Investment Portfolios (the "Fund") is an open-end, management investment
company known as a mutual fund. Shares are offered only to variable annuity and
variable life insurance separate accounts established by insurance companies to
fund variable annuity contracts and variable life insurance policies and to
qualified pension and retirement plans. Individuals may not purchase shares
directly from the Fund. The Dreyfus Corporation serves as the Fund's investment
adviser.
-EUROPEAN EQUITY PORTFOLIO
Investment Objective: The Portfolio seeks long-term capital growth. To
pursue this goal, the Portfolio generally invests at least 80% of its total
assets in stocks included within the universe of the 300 largest European
companies. The Portfolio may invest up to 10% of its total assets in the
stocks of non-European companies. The Portfolio's stock investments may
include common stocks, preferred stocks and convertible securities.
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.
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<PAGE> 51
-APPRECIATION PORTFOLIO (FORMERLY, CAPITAL APPRECIATION PORTFOLIO)
Investment Objective: The Portfolio's primary investment objective is to
provide long-term capital growth consistent with the preservation of capital;
current income is a secondary investment objective. This Portfolio invests
primarily in the common stocks of domestic and foreign issuers.
-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.
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
49
<PAGE> 52
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:
-at least 65% in income-producing debt securities and preferred stocks,
including convertible securities; and
-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.
-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(R) 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
50
<PAGE> 53
contracts. FMR is the manager of VIP III and its portfolios.
-VIP III GROWTH OPPORTUNITIES PORTFOLIO: SERVICE CLASS
Investment Objective: Capital growth by investing primarily in common stocks
and securities convertible into common stocks. The Portfolio, under normal
conditions, will invest at least 65% of its total assets in securities of
companies that FMR believes have long-term growth potential. Although the
Portfolio invests primarily in common stock and securities convertible into
common stock, it has the ability to purchase other securities, such as
preferred stock and bonds, that may produce capital growth. The Portfolio may
invest in foreign securities without limitation.
JANUS ASPEN SERIES
The Janus Aspen Series is an open-end management investment company whose shares
are offered in connection with investment in and payments under variable annuity
contracts and variable life insurance policies, as well as certain qualified
retirement plans. Janus Capital Corporation serves as investment adviser to each
Portfolio.
-CAPITAL APPRECIATION PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in common stocks selected for their growth potential. The
Portfolio may invest in companies of any size, from larger,
well-established companies to smaller, emerging growth companies.
-GLOBAL TECHNOLOGY PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies selected for
their growth potential. Under normal circumstances, the portfolio invests
at least 65% of its total assets in securities of companies that the
portfolio manager believes will benefit significantly from advances or
improvements in technology.
-INTERNATIONAL GROWTH PORTFOLIO: SERVICE SHARES
Investment Objective: Seeks long-term growth of capital by investing at
least 65% of its total assets in securities of issuers from at least five
different countries, excluding the United States. Although the Portfolio
intends to invest substantially all of its assets in issuers located
outside the United States, it may invest in U.S. issuers and it may at
times invest all of its assets in fewer than five countries, or even a
single country.
THE UNIVERSAL INSTITUTIONAL FUNDS, INC.
The Universal Institutional Funds, Inc. is a mutual fund designed to provide
investment vehicles for variable annuity contracts and variable life insurance
policies and for certain tax-qualified investors. Its Emerging Markets Debt
Portfolio is managed by Morgan Stanley 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 mutual funds listed below, each with its own investment objectives.
Shares of NSAT will be sold primarily to separate accounts to fund the benefits
under variable life insurance policies and variable annuity contracts issued by
life insurance companies. The assets of NSAT are managed by Villanova Mutual
Fund Capital
51
<PAGE> 54
Trust ("VMF"), an indirect subsidiary of Nationwide Financial Services, Inc.
-CAPITAL APPRECIATION FUND
Investment Objective: The Capital Appreciation Fund seeks long-term capital
appreciation.
-GOVERNMENT BOND FUND
Investment Objective: As high a level of income as is consistent with the
preservation of capital by investing in a diversified portfolio of securities
issued or backed by the U.S. Government, its agencies or instrumentalities.
-MONEY MARKET FUND
Investment Objective: The Fund seeks as high a level of current income as is
consistent with the preservation of capital and maintenance of liquidity.
-NATIONWIDE MID CAP INDEX FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation. The Fund seeks to match the
performance of the Standard & Poor's MidCap 400 Index. To pursue this goal,
the Fund generally is fully invested in all 400 stocks included in this index
in proportion to their weighting in the index, and in futures whose
performance is tied to the index. The Fund is neither sponsored by nor
affiliated with Standard & Poor's Corporation.
-NATIONWIDE MULTI SECTOR BOND FUND
Subadviser: Miller, Anderson & Sherrerd, LLP
Investment Objective: Primarily seeks a high level of current income. Capital
appreciation is a secondary objective. The Fund seeks to achieve its
objectives by investing in a globally diverse portfolio of fixed-income
investments and by giving the subadviser broad discretion to deploy the
Fund's assets among certain segments of the fixed-income market that the
subadviser believes will best contribute to achievement of the Fund's
investment objectives. The Fund reserves the right to invest predominantly in
securities rated in medium or lower categories, or as determined by the
subadviser to be of comparable quality, commonly referred to as "junk bonds."
Although the subadviser has the ability to invest up to 100% of the Fund's
assets in lower-rated securities, the subadviser does not anticipate
investing in excess of 75% of the Fund's assets in such securities.
-NATIONWIDE SMALL CAP GROWTH FUND
Subadvisers: Franklin Advisers, Inc., Miller Anderson & Sherrerd, LLP,
Neuberger Berman, LLC.
Investment Objective: Seeks capital growth by investing in a broadly
diversified portfolio of equity securities issued by U.S. and foreign
companies with market capitalizations in the range of companies represented
by the Russell 2000, known has small cap companies. Under normal market
conditions, the Fund will invest at least 65% of its total assets in the
equity securities of small cap companies. The balance of the Fund's assets
may be invested in equity securities of larger cap companies.
-NATIONWIDE SMALL CAP VALUE FUND
Subadviser: The Dreyfus Corporation
Investment Objective: Capital appreciation through investment in a
diversified portfolio of equity securities of companies with a median market
capitalization of approximately $1 billion. The Fund intends to pursue its
investment objective by investing, under normal market conditions, at least
75% of the Fund's total assets in equity securities of companies whose equity
market capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index. 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.
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<PAGE> 55
-NATIONWIDE SMALL COMPANY FUND
Subadvisers: The Dreyfus Corporation, Neuberger Berman, LLC, Lazard Asset
Management, Strong Capital Management, Inc. and Credit Suisse Asset
Management, LLC
Investment Objective: Under normal market conditions, the Fund will invest at
least 65% of its total assets in equity securities of companies whose equity
market capitalizations at the time of investment are similar to the market
capitalizations of companies in the Russell 2000 Small Stock Index.
-NATIONWIDE STRATEGIC GROWTH FUND
Subadviser: Strong Capital Management Inc.
Investment Objective: Capital growth by investing primarily in equity
securities that the Fund's subadviser believes have above-average growth
prospects. The Fund will generally invest in companies whose earnings are
believed to be in a relatively strong growth trend, and to a lesser extent,
in companies in which significant further growth is not anticipated but whose
market value is thought to be undervalued. Under normal market conditions,
the Fund will invest at least 65% of its total assets in equity securities,
including common stocks, preferred stocks, and securities convertible into
common or preferred stocks, such as warrants and convertible bonds. The Fund
may invest up to 35% of its total assets in debt obligations, including
intermediate to long-term corporate or U.S. Government debt securities.
-TOTAL RETURN FUND
Investment Objective: The investment objective of the Fund is to obtain a
reasonable, long-term total return on invested capital.
NEUBERGER BERMAN ADVISERS MANAGEMENT TRUST
Neuberger and Berman Advisers Management Trust ("Neuberger Berman AMT") is an
open-end, diversified management investment company consisting of several
series. Shares of the series of Neuberger Berman 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 Neuberger Berman AMT invest all of their
investable assets in a corresponding series of Advisers Managers Trust managed
by Neuberger Berman Management Incorporated ("Neuberger Berman 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 Neuberger Berman 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
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<PAGE> 56
achieve these objectives by investing in common stocks of long-established,
high-quality companies. Neuberger Berman Management uses a value-oriented
investment approach in selecting securities, looking for low
price-to-earnings ratios, strong balance sheets, solid management, and
consistent earnings.
-AMT 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 AGGRESSIVE GROWTH FUND/VA
Investment Objective: Capital appreciation by investing in "growth type"
companies. Such companies are believed to have relatively favorable long-term
prospects for increasing demand for their goods or services, or to be
developing new products, services or markets and normally retain a relatively
larger portion of their earnings for research, development and investment in
capital assets. The Fund may also invest in cyclical industries in "special
situations" that OppenheimerFunds, Inc. believes present opportunities for
capital growth.
-OPPENHEIMER BOND FUND/VA
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/VA
Investment Objective: To seek long-term capital appreciation by investing a
substantial portion of assets in securities of foreign issuers, "growth-type"
companies, cyclical industries and special situations which are considered to
have appreciation possibilities. Current income is not an objective. These
securities may be considered to be speculative.
-OPPENHEIMER CAPITAL APPRECIATION FUND/VA (FORMERLY OPPENHEIMER GROWTH FUND)
Investment Objective: Capital appreciation by investing in securities of
well-known established companies. Such securities generally have a history of
earnings and dividends and are issued by seasoned companies (companies which
have an operating history of at least five years including predecessors).
Current income is a secondary consideration in the selection of the Fund's
portfolio securities.
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<PAGE> 57
-OPPENHEIMER MAIN STREET GROWTH & INCOME FUND/VA
Investment Objective: High total return, which stocks, preferred stocks,
convertible securities and warrants. Debt investments will include bonds,
participation includes growth in the value of its shares as well as current
income from quality and debt securities. In seeking its investment
objectives, the Fund may invest in equity and debt securities. Equity
investments will include common interests, asset-backed securities,
private-label mortgage-backed securities and CMOs, zero coupon securities and
U.S. debt obligations, and cash and cash equivalents. From time to time, the
Fund may focus on small to medium capitalization issuers, the securities of
which may be subject to greater price volatility than those of larger
capitalized issuers.
-OPPENHEIMER MULTIPLE STRATEGIES FUND/VA
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. is the investment
advisor for the Fund.
Investment Objective: To seek capital appreciation through investments in a
diversified portfolio of equity securities.
STRONG VARIABLE INSURANCE FUNDS, INC. (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
SEPTEMBER 27, 1999)
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
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<PAGE> 58
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 LIFE INVESTMENT TRUST
Van Kampen Life Investment Trust is an open-end diversified management
investment company organized as a Delaware business trust. Shares are offered in
separate portfolios which are sold only to insurance companies to provide
funding for variable life insurance policies and variable annuity contracts. Van
Kampen 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 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 Credit Suisse Asset Management,
LLC ("Credit Suisse")
-INTERNATIONAL EQUITY PORTFOLIO (NOT AVAILABLE IN CONNECTION WITH CONTRACTS
FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR AFTER
SEPTEMBER 27, 1999)
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 Credit Suisse 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.
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-GLOBAL POST-VENTURE CAPITAL PORTFOLIO (NOT AVAILABLE IN CONNECTION WITH
CONTRACTS FOR WHICH GOOD ORDER APPLICATIONS ARE (OR WERE) RECEIVED ON OR
AFTER SEPTEMBER 27, 1999)
Investment Objective: Seeks long-term growth of capital by investing
primarily in equity securities of U.S. and foreign companies considered to be
in their post-venture capital stage of development. The Portfolio will invest
in at least three countries, including the United States.
-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.
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APPENDIX B: CONDENSED FINANCIAL INFORMATION
Accumulation unit values for accumulation units outstanding throughout the
period.
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT CHANGE IN ACCUMULATION
BEGINNING OF END OF PERIOD ACCUMULATION UNITS AT END OF
PERIOD UNIT VALUE PERIOD
<S> <C> <C> <C> <C> <C>
Variable Portfolios, Inc. - 17.180551 18.643877 8.52% 2,229,877 1999
American Century 15.050621 17.180551 14.15% 3,311,879 1998
VP Balanced-Q 13.180739 15.050621 14.19% 2,000,046 1997
11.914266 13.180739 10.63% 1,516,835 1996
9.975959 11.914266 19.43% 602,257 1995
10.055760 9.975959 -0.79% 190,646 1994
10.000000 10.055760 0.56% 0 1993
American Century 17.180551 18.643877 8.52% 3,104,126 1999
Variable Portfolios, 15.050621 17.180551 14.15% 2,684,128 1998
Inc.- American Century 13.180739 15.050621 14.19% 2,838,431 1997
VP Balanced-NQ 11.914266 13.180739 10.63% 2,144,874 1996
9.975959 11.914266 19.43% 989,420 1995
10.055760 9.975959 -0.79% 353,974 1994
10.000000 10.055760 0.56% 0 1993
American Century 11.105046 18.015046 62.22 2,124,515 1999
Variable Portfolios, 11.511011 11.105046 -3.53% 5,691,252 1998
Inc.- American Century 12.067726 11.511011 -4.61% 2,614,244 1997
VP Capital 12.792935 12.067726 -5.67% 2,639,035 1996
Appreciation-Q 9.896469 12.792935 29.27% 1,787,046 1995
10.155359 9.896469 -2.55% 581,271 1994
10.000000 10.155359 1.55% 0 1993
American Century 11.105046 18.015046 62.22 3,403,398 1999
Variable Portfolios, 11.511011 11.105046 -3.53% 3,199,790 1998
Inc.- American Century 12.067726 11.511011 -4.61% 3,809,872 1997
VP Capital Appreciation - NQ 12.792935 12.067726 -5.67% 4,282,747 1996
9.896469 12.792935 29.27% 2,955,898 1995
10.155359 9.896469 -2.55% 984,162 1994
10.000000 10.155359 1.55% 0 1993
American Century Variable 10.818483 12.589315 16.37% 1,671,694 1999
Portfolios, Inc. - American 10.000000 10.818483 8.18% 851,923 1998(2)
Century VP Income & Growth
Fund - Q
American Century Variable 10.818483 12.589315 16.37% 1,490,691 1999
Portfolios, Inc. - American 10.000000 10.818483 8.18% 1,195,005 1998(2)
Century VP Income & Growth
Fund - NQ
American Century 16.049229 25.959887 61.75% 3,535,992 1999
Variable Portfolios, 13.705793 16.049229 17.10% 4,804,748 1998
Inc.- American Century 11.716901 13.705793 16.97% 2,815,042 1997
VP International-Q 10.387676 11.716901 12.80% 1,434,727 1996
9.388381 10.387676 10.64% 647,594 1995
10.000000 9.388381 -6.12% 93,487 1994
</TABLE>
58
<PAGE> 61
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION (CONTINUED)
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
American Century 16.049229 25.959887 61.75% 5,086,548 1999
Variable Portfolios, 13.705793 16.049229 17.10% 3,904,415 1998
Inc.- American Century 11.716901 13.705793 16.97% 4,053,845 1997
VP International-NQ 10.387676 11.716901 12.80% 2,170,866 1996
9.388381 10.387676 10.64% 1,011,780 1995
10.000000 9.388381 -6.12% 227,593 1994
American Century 13.030493 12.738880 -2.24% 1,129,610 1999
Variable Portfolio, 12.608786 13.030493 3.34% 1,289,505 1998
Inc.- American Century 10.142340 12.608786 24.32% 1,430,623 1997
VP Value-Q 10.000000 10.142340 1.42% 4,681 1996(1)
American Century 13.030493 12.738880 -2.24% 1,432,698 1999
Variable Portfolio, Inc, - 12.608786 13.030493 3.34% 1,042,979 1998
American Century VP 10.142340 12.608786 24.32% 1,650,353 1997
Value-NQ 10.000000 10.142340 1.42% 10,752 1996(1)
Dreyfus Stock Index 27.128900 32.260809 18.92% 14,668,287 1999
Fund, Inc.-Q 21.459607 27.128900 26.42% 16,760,500 1998
16.369120 21.459607 31.10% 11,980,808 1997
13.549203 16.369120 20.81% 5,666,553 1996
10.046079 13.549203 34.87% 1,651,153 1995
10.099271 10.046079 -0.53% 142,221 1994
10.000000 10.099271 0.99% 0 1993
Dreyfus Stock Index 27.128900 32.260809 18.92% 20,456,947 1999
Fund, Inc.-NQ 21.459607 27.128900 26.42% 11,496,653 1998
16.369120 21.459607 31.10% 16,840,871 1997
13.549203 16.369120 20.81% 8,243,399 1996
10.046079 13.549203 34.87% 2,487,342 1995
10.099271 10.046079 -0.53% 276,005 1994
10.000000 10.099271 0.99% 0 1993
Dreyfus Variable Investment 13.079978 14.374409 9.90% 2,795,489 1999
Fund - Appreciation
Portfolio-Q1
10.187254 13.079978 28.40% 3,218,773 1998
10.000000 10.187254 1.87% 282,102 1997(1)
Dreyfus Variable Investment 13.079978 14.374409 9.90% 4,202,770 1999
Fund - Appreciation
Portfolio-NQ1
10.187254 13.079978 28.40% 3,158,512 1998
10.000000 10.187254 1.87% 346,889 1997(1)
Dreyfus Variable 12.616052 14.539855 15.25% 1,464,304 1999
Investment Fund- 11.443262 12.616052 10.25% 1,530,286 1998
Growth & Income 9.986704 11.443262 14.58% 1,288,755 1997
Portfolio-Q 10.000000 9.986704 -0.13% 1,683 1996(1)
Dreyfus Variable 12.616052 14.539855 15.25% 2,079,004 1999
Investment Fund- 11.443262 12.616052 10.25% 1,010,647 1998
Growth & Income 9.986704 11.443262 14.58% 1,736,408 1997
Portfolio-NQ 10.000000 9.986704 -0.13% 1,403 1996(1)
The Dreyfus Socially 25.996040 33.342555 28.26% 2,307,767 1999
Responsible Growth 20.377644 25.996040 27.57% 3,208,339 1998
Fund, Inc.-Q 16.091197 20.377644 26.64% 1,955,501 1997
13.462638 16.091197 19.52% 863,844 1996
10.146464 13.462638 32.68% 195,462 1995
10.138790 10.146464 0.08% 56,245 1994
10.000000 10.138790 1.39% 0 1993
</TABLE>
1 Formerly, Dreyfus Variable Investment Fund - Capital Appreciation Portfolio.
59
<PAGE> 62
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
The Dreyfus Socially 25.996040 33.342555 28.26% 3,065,919 1999
Responsible Growth 20.377644 25.996040 27.57% 1,734,954 1998
Fund, Inc.-NQ 16.091197 20.377644 26.64% 2,524,371 1997
13.462638 16.091197 19.52% 1,278,742 1996
10.146464 13.462638 32.68% 331,788 1995
10.138790 10.146464 0.08% 106,285 1994
10.000000 10.138790 1.39% 0 1993
Fidelity VIP Equity- 22.453988 23.541057 4.84% 18,744,521 1999
Income Portfolio-Q 20.400657 22.453988 10.07% 23,119,147 1998
16.150507 20.400657 26.32% 21,713,028 1997
14.333670 16.150507 12.68% 16,618,114 1996
10.760332 14.333670 33.21% 8,772,439 1995
10.192462 10.760332 5.57% 2,320,419 1994
10.000000 10.192462 1.92% 0 1993
Fidelity VIP Equity- 22.453988 23.541057 4.84% 26,435,673 1999
Income Portfolio-NQ 20.400657 22.453988 10.07% 17,190,931 1998
16.150507 20.400657 26.32% 29,805,895 1997
14.333670 16.150507 12.68% 22,169,855 1996
10.760332 14.333670 33.21% 12,709,387 1995
10.192462 10.760332 5.57% 3,315,450 1994
10.000000 10.192462 1.92% 0 1993
Fidelity VIP Growth 25.487577 34.539423 35.51% 16,102,523 1999
Portfolio-Q 18.531166 25.487577 37.54% 17,532,628 1998
15.220265 18.531166 21.75% 13,935,642 1997
13.458405 15.220265 13.09% 12,013,122 1996
10.082986 13.458405 33.48% 6,525,239 1995
10.227729 10.082986 -1.42% 2,012,595 1994
10.000000 10.227729 2.28% 0 1993
Fidelity VIP Growth 25.487577 34.539423 35.51% 22,795,122 1999
Portfolio-NQ 18.531166 25.487577 37.54% 11,328,287 1998
15.220265 18.531166 21.75% 19,539,694 1997
13.458405 15.220265 13.09% 17,297,852 1996
10.082986 13.458405 33.48% 10,395,158 1995
10.227729 10.082986 -1.42% 3,322,957 1994
10.000000 10.227729 2.28% 0 1993
Fidelity VIP High 14.405141 15.361833 6.64% 8,271,114 1999
Income Portfolio-Q 15.270686 14.405141 -5.67% 6,464,105 1998
13.162137 15.270686 16.02% 10,404,298 1997
11.707151 13.162137 12.43% 8,108,419 1996
9.844496 11.707151 18.92% 4,074,649 1995
10.140663 9.844496 -2.92% 1,188,719 1994
10.000000 10.140663 1.41% 0 1993
Fidelity VIP High 14.405141 15.361833 6.64% 13,454,975 1999
Income Portfolio-NQ 15.270686 14.405141 -5.67% 6,457,997 1998
13.162137 15.270686 16.02% 15,763,691 1997
11.707151 13.162137 12.43% 11,738,433 1996
9.844496 11.707151 18.92% 5,647,831 1995
10.140663 9.844496 -2.92% 1,667,761 1994
10.000000 10.140663 1.41% 0 1993
</TABLE>
60
<PAGE> 63
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Fidelity VIP Overseas 15.553060 21.872670 40.63% 3,667,413 1999
Portfolio-Q 13.990014 15.553060 11.17% 11,283,013 1998
12.718928 13.990014 9.99% 4,225,490 1997
11.394419 12.718928 11.62% 3,807,002 1996
10.536141 11.394419 8.15% 3,053,190 1995
10.504149 10.536141 0.30% 1,746,850 1994
10.000000 10.504149 5.04% 0 1993
Fidelity VIP Overseas 15.553060 21.872670 40.63% 5,639,452 1999
Portfolio-NQ 13.990014 15.553060 11.17% 9,318,467 1998
12.718928 13.990014 9.99% 6,516,303 1997
11.394419 12.718928 11.62% 5,707,057 1996
10.536141 11.394419 8.15% 4,289,622 1995
10.504149 10.536141 0.30% 2,782,899 1994
10.000000 10.504149 5.04% 0 1993
Fidelity VIP II Asset 16.832250 18.437523 9.54% 7,152,076 1999
Manager Portfolio-Q 14.837912 16.832250 13.44% 18,785,187 1998
12.472730 14.837912 18.96% 8,255,827 1997
11.038610 12.472730 12.99% 6,899,163 1996
9.571852 11.038610 15.32% 5,437,140 1995
10.337032 9.571852 -7.40% 3,610,795 1994
10.000000 10.337032 3.37% 0 1993
Fidelity VIP II Asset Manager 16.832250 18.437523 9.54% 9,494,041 1999
Portfolio-NQ 14.837912 16.832250 13.44% 10,977,395 1998
12.472730 14.837912 18.96% 10,687,021 1997
11.038610 12.472730 12.99% 9,363,900 1996
9.571852 11.038610 15.32% 7,152,807 1995
10.337032 9.571852 -7.40% 5,121,023 1994
10.000000 10.337032 3.37% 0 1993
Fidelity VIP II Contrafund(R) 20.762500 25.437333 22.52% 13,246,393 1999
Portfolio-Q 16.200355 20.762500 28.16% 15,609,123 1998
13.235075 16.200355 22.40% 12,933,714 1997
11.065996 13.235075 19.60% 8,168,270 1996
10.000000 11.065996 10.66% 1,651,204 1995
Fidelity VIP II Contrafund(R) 20.762500 25.437333 22.52% 18,358,303 1999
Portfolio-NQ 16.200355 20.762500 28.16% 11,340,649 1998
13.235075 16.200355 22.40% 17,222,256 1997
11.065996 13.235075 19.60% 11,178,148 1996
10.000000 11.065996 10.66% 2,730,876 1995
Fidelity VIP III Growth 13.426082 13.803637 2.81% 3,074,953 1999
Opportunities Portfolio-Q 10.926972 13.426082 22.87% 2,942,745 1998
10.000000 10.926972 9.27% 1,110,975 1997(1)
Fidelity VIP III Growth 13.426082 13.803637 2.81% 4,552,923 1999
Opportunities Portfolio-NQ 10.926972 13.426082 22.87% 2,183,868 1998
10.000000 10.926972 9.27% 1,433,477 1997(1)
The Universal Institutional 6.924574 8.833418 27.57% 153,956 1999
Funds, Inc.- Emerging 9.805852 6.924574 -29.38% 417,556 1998
Debt Portfolio-Q 10.000000 9.805852 -1.94% 116,227 1997(1)
The Universal Institutional 6.924574 8.833418 27.57% 387,856 1999
Funds, Inc.- Emerging Markets 9.805858 6.924574 -29.38% 283,779 1998
Debt Portfolio-NQ 10.000000 9.805852 -1.94% 317,019 1997(1)
</TABLE>
61
<PAGE> 64
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT- 27.075632 27.838556 2.82% 3,732,455 1999
Capital Appreciation 21.128614 27.075632 28.15% 6,725,123 1998
Fund-Q 15.932775 21.128614 32.61% 3,473,388 1997
12.811228 15.932775 24.37% 1,424,586 1996
10.044095 12.811228 27.55% 217,088 1995
10.278752 10.044095 -2.28% 147,498 1994
10.000000 10.278752 2.79% 0 1993
NSAT- 27.075632 27.838556 2.82% 4,968,186 1999
Capital Appreciation 21.128614 27.075632 28.15% 5,812,770 1998
Fund-NQ 15.932775 21.128614 32.61% 4,537,489 1997
12.811228 15.932775 24.37% 1,750,256 1996
10.044095 12.811228 27.55% 324,265 1995
10.278752 10.044095 -2.28% 182,857 1994
10.000000 10.278752 2.79% 0 1993
NSAT- Government 13.264325 12.771605 -3.71% 4,980,532 1999
Bond Fund-Q 12.352251 13.264325 7.38% 4,202,514 1998
11.423331 12.352251 8.13% 3,380,799 1997
11.196001 11.423331 2.03% 2,626,441 1996
9.562079 11.196001 17.09% 1,375,356 1995
10.021251 9.562079 -4.58% 592,092 1994
10.000000 10.021251 0.21% 0 1993
NSAT- Government 13.264325 12.771605 -3.71% 6,771,077 1999
Bond Fund-NQ 12.352251 13.264325 7.38% 3,353,428 1998
11.423331 12.352251 8.13% 3,808,969 1997
11.196001 11.423331 2.03% 3,145,104 1996
9.562079 11.196001 17.09% 1,845,640 1995
10.021251 9.562079 -4.58% 794,271 1994
10.000000 10.021251 0.21% 0 1993
NSAT- Money Market 11.927856 12.331041 3.38% 19,142,838 1999
Fund-Q* 11.491365 11.927856 3.80% 10,938,889 1998
11.072205 11.491365 3.79% 11,607,724 1997
10.683538 11.072205 3.64% 12,748,020 1996
10.254838 10.683538 4.18% 7,418,948 1995
10.011385 10.254838 2.43% 3,886,019 1994
10.000000 10.011385 0.11% 0 1993
NSAT- Money Market 11.927856 12.331041 3.38% 28,039,121 1999
Fund-NQ* 11.491365 11.927856 3.80% 12,513,821 1998
11.072205 11.491365 3.79% 17,151,671 1997
10.683538 11.072205 3.64% 18,836,301 1996
10.254838 10.683538 4.18% 11,573,455 1995
10.011385 10.254838 2.43% 7,565,949 1994
10.000000 10.011385 0.11% 0 1993
NSAT - Nationwide Small Cap 8.523007 10.743114 26.05% 967,163 1999
Value Fund - Q 10.000000 8.523007 -14.77% 405,997 1998(2)
NSAT - Nationwide Small Cap 8.523007 10.743114 26.05% 1,274,231 1999
Value Fund - NQ 10.000000 8.523007 -14.77% 600,393 1998(2)
</TABLE>
62
<PAGE> 65
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
NSAT- Nationwide Small 15.920417 22.607920 42.01% 3,356,307 1999
Company Fund-Q 15.985143 15.920417 -0.40% 4,961,782 1998
13.815158 15.985143 15.71% 4,030,537 1997
11.408018 13.815158 21.10% 2,079,253 1996
10.000000 11.408018 14.08% 61,355 1995
NSAT- Nationwide Small 15.920417 22.607920 42.01% 4,099,453 1999
15.985146 15.920417 -0.40% 3,151,728 1998
Company Fund-NQ 13.815158 15.985143 15.71% 5,436,630 1997
11.408018 13.815158 21.10% 3,209,131 1996
10.000000 11.408018 14.08% 274,709 1995
NSAT- Total 22.849095 24.093443 5.45% 9,240,684 1999
Return Fund-Q 19.626064 22.849095 16.42% 4,459,090 1998
15.378605 19.626064 27.62% 9,306,942 1997
12.801951 15.378605 20.13% 4,698,191 1996
10.057257 12.801951 27.29% 1,799,440 1995
10.091256 10.057257 -0.34% 441,098 1994
10.000000 10.091256 0.91% 0 1993
NSAT- Total 22.849095 24.093443 5.45% 11,092,594 1999
Return Fund-NQ 19.626064 22.849095 16.42% 3,296,114 1998
15.378605 19.626064 27.62% 11,239,856 1997
12.801951 15.378605 20.13% 6,080,735 1996
10.057257 12.801951 27.29% 2,431,303 1995
10.091256 10.057257 -0.34% 657,733 1994
10.000000 10.091256 0.91% 0 1993
Neuberger Berman AMT- 19.155589 28.406340 48.29% 2,191,851 1999
Growth Portfolio-Q 16.816500 19.155589 13.91% 4,739,527 1998
13.220449 16.816500 27.20% 2,761,902 1997
12.286164 13.220449 7.60% 1,819,563 1996
9.458916 12.286164 29.89% 1,628,798 1995
10.096549 9.458916 -6.32% 264,982 1994
10.000000 10.096549 0.97% 0 1993
Neuberger Berman AMT- 19.155589 28.406340 48.29% 3,249,330 1999
Growth Portfolio-NQ 16.816500 19.155589 13.91% 3,535,046 1998
13.220449 16.816500 27.20% 4,175,280 1997
12.286164 13.220449 7.60% 3,383,799 1996
9.458916 12.286164 29.89% 2,653,678 1995
10.096549 9.458916 -6.32% 616,908 1994
10.000000 10.096549 0.97% 0 1993
Neuberger Berman - AMT 9.276124 10.512151 13.32% 1,174,502 1999
Guardian Portfolio-Q 10.000000 9.276124 -7.24% 928,355 1998(2)
Neuberger Berman - AMT 9.276124 10.512151 13.32% 1,148,237 1999
Guardian Portfolio-NQ 10.000000 9.276124 -7.24% 782,161 1998(2)
Neuberger Berman AMT- 12.016412 12.023258 0.06% 1,753,284 1999
Limited Maturity Bond 11.674415 12.016412 2.93% 3,027,892 1998
Portfolio-Q 11.092313 11.674415 5.25% 2,638,749 1997
10.786223 11.092313 2.84% 2,722,579 1996
9.860649 10.786223 9.39% 2,080,555 1995
10.015749 9.860649 -1.55% 1,228,030 1994
10.000000 10.015749 0.16% 0 1993
</TABLE>
63
<PAGE> 66
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Neuberger Berman AMT- 12.016412 12.023258 0.06% 3,083,884 1999
Limited Maturity Bond 11.674415 12.016412 2.93% 2,828,271 1998
Portfolio-NQ 11.092313 11.674415 5.25% 3,901,992 1997
10.786223 11.092313 2.84% 4,876,119 1996
9.860649 10.786223 9.39% 3,264,440 1995
10.015749 9.860649 -1.55% 1,355,362 1994
10.000000 10.015749 0.16% 0 1993
Neuberger Berman AMT- 22.890094 24.233053 5.87% 4,926,644 1999
Partners Portfolio-Q 22.277405 22.890094 2.75% 7,610,496 1998
17.213970 22.277405 29.41% 7,939,693 1997
13.474969 17.213970 27.75% 3,997,138 1996
10.013591 13.474969 34.57% 1,257,295 1995
10.000000 10.013591 0.14% 33,992 1994
Neuberger Berman AMT- 22.890094 24.233053 5.87% 7,215,015 1999
Partners Portfolio-NQ 22.277405 22.890094 2.75% 5,337,515 1998
17.213970 22.277405 29.41% 11,091,380 1997
13.474969 17.213970 27.75% 5,741,323 1996
10.013591 13.474969 34.57% 1,579,425 1995
10.000000 10.013591 0.14% 89,689 1994
Oppenheimer Variable Account 13.161293 12.779991 -2.90% 4,920,397 1999
Funds- Oppenheimer Bond 12.497968 13.161293 5.31% 4,366,241 1998
Fund/VA-Q 11.601791 12.497968 7.72% 5,296,817 1997
11.228877 11.601791 3.32% 3,583,135 1996
9.733460 11.228877 15.36% 1,725,638 1995
10.066342 9.733460 -3.31% 438,846 1994
10.000000 10.066342 0.66% 0 1993
Oppenheimer Variable Account 13.161293 12.779991 -2.90% 7,205,678 1999
Funds- Oppenheimer Bond 12.497968 13.161293 5.31% 3,654,118 1998
Fund/VA -NQ 11.601791 12.497968 7.72% 6,726,718 1997
11.228877 11.601791 3.32% 4,341,063 1996
9.733460 11.228877 15.36% 2,135,137 1995
10.066342 9.733460 -3.31% 538,413 1994
10.000000 10.066342 0.66% 0 1993
Oppenheimer 16.529444 25.830374 56.27% 6,498,893 1999
Variable Account 14.691771 16.529444 12.51% 9,503,851 1998
Funds- Oppenheimer 12.171005 14.691771 20.71% 6,984,145 1997
Global Securities 10.479380 12.171005 16.14% 4.661,410 1996
Fund/VA -Q 10.394970 10.479380 0.81% 2,901,407 1995
11.182167 10.394970 -7.04% 1,500,105 1994
10.000000 11.182167 11.82% 0 1993
Oppenheimer 16.529444 25.830374 56.27% 8,973,439 1999
Variable Account 14.691771 16.529444 12.51% 5,697,473 1998
Funds- Oppenheimer 12.171005 14.691771 20.71% 9,087,704 1997
Global Securities 10.479380 12.171005 16.14% 6,079,421 1996
Fund/VA -NQ 10.394970 10.479380 0.81% 3,528,736 1995
11.182167 10.394970 -7.04% 2,319,507 1994
10.000000 11.182167 11.82% 0 1993
Oppenheimer Variable Account 12.743636 17.799664 39.67% 2,617,309 1999
Funds- Oppenheimer Capital 10.422959 12.743636 22.27% 1,553,053 1998
Appreciation Fund/VA 10.000000 10.422959 4.23% 291,665 1997*
(formerly Oppenheimer Growth
Fund)- Q
</TABLE>
64
<PAGE> 67
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Oppenheimer Variable Account 12.743636 17.799664 39.67% 3,228,130 1999
Funds- Oppenheimer Capital 10.422959 12.743636 22.27% 1,122,440 1998
Appreciation Fund/VA 10.000000 10.422959 4.23% 463,976 1997*
(formerly Oppenheimer Growth
Fund)- NQ
Oppenheimer Variable Account 16.281980 17.948145 10.23% 3,468,280 1999
Funds- Oppenheimer Multiple 15.482895 16.281980 5.16% 4,734,705 1998
Strategies Fund/VA-Q 13.395639 15.482895 15.58% 4,408,475 1997
11.763879 13.395639 13.87% 2,607,467 1996
9.830640 11.763879 19.67% 1,296,727 1995
10.167774 9.830640 -3.32% 567,718 1994
10.000000 10.167774 1.68% 0 1993
Oppenheimer Variable Account 16.281980 17.948145 10.23% 4,370,474 1999
Funds- Oppenheimer Multiple 15.482895 16.281980 5.16% 3,383,989 1998
Strategies Fund -NQ 13.395639 15.482895 15.58% 5,254,667 1997
11.763879 13.395639 13.87% 3,408,601 1996
9.830640 11.763879 19.67% 1,911,329 1995
10.167774 9.830640 -3.32% 737,041 1994
10.000000 10.167774 1.68% 0 1993
Strong Opportunity Fund II, 21.434632 28.512432 33.02% 4,869,488 1999
Inc.- Q 19.146013 21.434632 11.95% 10,757,453 1998
15.477893 19.146013 23.70% 5,827,943 1997
13.287288 15.477893 16.49% 5,059,293 1996
10.710138 13.287288 24.06% 3,116,534 1995
10.484543 10.710138 2.15% 1,448,992 1994
10.000000 10.484543 4.85% 0 1993
Strong Opportunity Fund II, 21.434632 28.512432 33.02% 6,478,747 1999
Inc.-NQ 19.146046 21.434632 11.95% 6,829,157 1998
15.477893 19.146013 23.70% 8,020,904 1997
13.287288 15.477893 16.49% 6,638,439 1996
10.710138 13.287288 24.06% 4,296,074 1995
10.484543 10.710138 2.15% 2,121,641 1994
10.000000 10.484543 4.85% 0 1993
Strong Variable 15.507147 16.068225 3.62% 1,328,451 1999
Insurance Funds, Inc.- 14.662845 15.507147 5.76% 3,330,495 1998
Discovery Fund II, Inc.-Q 13.350547 14.662845 9.83% 2,014,470 1997
13.432714 13.350547 -0.61% 2,193,936 1996
10.071698 13.432714 33.37% 1,701,819 1995
10.796000 10.071698 -6.71% 521,530 1994
10.000000 10.796000 7.96% 0 1993
Strong Variable 15.507147 16.068225 3.62% 1,902,709 1999
Insurance Funds, Inc.- 14.662845 15.507147 5.76% 2,561,304 1998
Discovery Fund II, Inc.-NQ 13.350547 14.662845 9.83% 3,067,461 1997
13.432714 13.350547 -0.61% 3,358,454 1996
10.071698 13.432714 33.37% 2,670,161 1995
10.796000 10.071698 -6.71% 904,088 1994
10.000000 10.796000 7.96% 0 1993
Strong Variable Insurance 8.908351 16.443689 84.59% 1,261,581 1999
Funds, Inc.- International 9.488178 8.908351 -6.11% 1,115,317 1998
Stock Fund II-Q 11.127252 9.488178 -14.73% 11,758,187 1997
10.224570 11.127252 8.83% 1,170,883 1996
10.000000 10.224570 2.25% 25,615 1995
</TABLE>
65
<PAGE> 68
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Strong Variable Insurance 8.908351 16.443689 84.59% 1,797,088 1999
Funds, Inc.- International 9.488178 8.908351 -6.11% 824,150 1998
Stock Fund II-NQ 11.127252 9.488178 -14.73% 15,775,187 1997
10.224570 11.127252 8.83% 1,645,592 1996
10.000000 10.224570 2.25% 53,080 1995
Van Eck Worldwide 13.016609 11.830291 -9.11% 914,353 1999
Insurance Trust - 11.708039 13.016609 11.18% 1,824,058 1998
Worldwide Bond 11.597396 11.708039 0.95% 1,224,872 1997
Fund-Q 11.473340 11.597396 1.08% 1,142,334 1996
9.919400 11.473340 15.67% 688,208 1995
10.194477 9.919400 -2.70% 237,637 1994
10.000000 10.194477 1.94% 0 1993
Van Eck Worldwide 13.016609 11.830291 -9.11% 1,558,403 1999
Insurance Trust- 11.708039 13.016609 11.18% 1,736,777 1998
Worldwide Bond 11.597396 11.708039 0.95% 1,881,869 1997
Fund-NQ 11.473340 11.597396 1.08% 1.639,285 1996
9.919400 11.473340 15.67% 986,151 1995
10.194477 9.919400 -2.70% 473,752 1994
10.000000 10.194477 1.94% 0 1993
Van Eck Worldwide 5.704452 11.265493 97.49% 2,477,889 1999
Insurance Trust- Worldwide 8.783348 5.704452 -35.05% 1,862,823 1998
Emerging Markets Fund-Q 10.077608 8.783348 -12.84% 1,951,581 1997
10.000000 10.077608 0.78% 343,730 1996*
Van Eck Worldwide 5.704452 11.265493 97.49% 3,263,317 1999
Insurance Trust- Worldwide 8.783348 5.704452 -35.05% 1,394,148 1998
Emerging Markets Fund-NQ 10.077608 8.783348 -12.84% 2,439,264 1997
10.000000 10.077608 0.78% 353,687 1996*
Van Eck Worldwide 8.796887 10.495465 19.31% 716,194 1999
Insurance Trust- 12.924490 8.796887 -31.94% 1,976,563 1998
Worldwide Hard Assets 13.331794 12.924490 -3.06% 1,258,548 1997
Fund-Q 11.453100 13.331794 16.40% 1,203,366 1996
10.464922 11.453100 9.44% 720,611 1995
11.147499 10.464922 -6.12% 416,949 1994
10.000000 11.147499 11.47% 0 1993
Van Eck Worldwide 8.796887 10.495465 19.31% 1,323,974 1999
Insurance Trust- 12.924490 8.796887 -31.94% 1,953,375 1998
Worldwide Hard Assets 13.331794 12.924490 -3.06% 2,082,493 1997
Fund-NQ 11.453100 13.331794 16.40% 1,997,123 1996
10.464922 11.453100 9.44% 1,314,047 1995
11.147499 10.464922 -6.12% 771,280 1994
10.000000 11.147499 11.47% 0 1993
Van Kampen Life Investment 15.560452 14.825198 -4.73% 1,432,926 1999
Trust-Morgan Stanley Real 17.856659 15.560452 -12.86% 2,429,141 1998
Estate Securities Portfolio-Q 14.908696 17.856659 19.77% 3,169,047 1997
10.759998 14.908696 38.56% 1,646,291 1996
10.000000 10.759998 7.60% 69,755 1995
Van Kampen Life Investment 15.560452 14.825198 -4.73% 2,198,091 1999
Trust-Morgan Stanley Real 17.856559 15.560452 -12.86% 2,423,893 1998
Estate Securities Portfolio- NQ 14.908696 17.856659 19.77% 4,254,738 1997
10.759998 14.908696 38.56% 2,361,457 1996
10.000000 10.759998 7.60% 131,252 1995
</TABLE>
66
<PAGE> 69
CONDENSED FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
UNDERLYING MUTUAL FUND ACCUMULATION ACCUMULATION PERCENT CHANGE NUMBER OF YEAR
UNIT VALUE AT UNIT VALUE AT IN ACCUMULATION ACCUMULATION
BEGINNING OF END OF PERIOD UNIT VALUE UNITS AT END OF
PERIOD PERIOD
<S> <C> <C> <C> <C> <C>
Warburg Pincus Trust- 11.567145 17.499626 51.29% 3,168,692 1999
International Equity 11.135857 11.567145 3.87% 4,923,915 1998
Portfolio-Q 11.554772 11.135857 -3.63% 5,873,960 1997
10.655759 11.554772 8.44% 4,575,313 1996
10.000000 10.655759 6.56% 707,567 1995
Warburg Pincus Trust- 11.567145 17.499626 51.29% 5,861,047 1999
International Equity 11.135857 11.567145 3.87% 3,738,519 1998
Portfolio-NQ 11.554772 11.135857 -3.63% 8,729,469 1997
10.655759 11.554772 8.44% 7,026,060 1996
10.000000 10.655759 6.56% 1,351,263 1995
Warburg Pincus Trust- Global 11.927880 19.229243 61.21% 776,179 1999
Post-Venture Capital 11.357831 11.927880 5.02% 531,483 1998
Portfolio-Q 10.163549 11.357831 11.75% 267,447 1997
10.000000 10.163549 1.64% 258,812 1996*
Warburg Pincus Trust- Global 11.927880 19.229243 61.21% 874,495 1999
Post-Venture Capital 11.357897 11.927880 5.02% 448,154 1998
Portfolio-NQ 10.163549 11.357831 11.75% 313,129 1997
10.000000 10.163549 1.64% 266,629 1996*
Warburg Pincus Trust- 15.240137 25.407601 66.72% 3,631,606 1999
Small Company Growth 15.910364 15.240137 -4.21% 5,715,168 1998
Portfolio-Q 13.952718 15.910364 14.03% 4,888,419 1997
12.423899 13.952718 12.31% 3,578,020 1996
10.000000 12.423899 24.24% 972,182 1995
Warburg Pincus Trust- 15.240137 25.407601 66.72% 5,844,172 1999
Small Company Growth 15.910364 15.240137 -4.21% 4,595,026 1998
Portfolio-NQ 13.952718 15.910364 14.03% 7,458,638 1997
12.423899 13.952718 12.31% 5,095,747 1996
10.000000 12.423899 24.24% 1,536,271 1995
</TABLE>
(1) The Dreyfus Variable Investment Fund - Capital Appreciation Portfolio,
Fidelity Variable Insurance Products Fund III - Growth Opportunities
Portfolio, Morgan Stanley Dean Witter Universal Funds, Inc. - Emerging
Markets Debt Portfolio, and Oppenheimer Variable Account Funds
Oppenheimer Capital Appreciation Fund/VA (formerly - Oppenheimer Growth
Fund) were added to the variable account on July 14, 1997. Consequently,
the condensed financial information reflect the reporting 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 to variable account on December 23, 1996.
Consequently, the condensed financial information reflects the reporting
period from December 23, 1996 to December 31, 1996.
(2) The American Century Variable Portfolios, Inc. - American Century VP
Income & Growth, NSAT - Nationwide Small Cap Value Fund and Neuberger &
Berman AMT - Guardian Portfolio were added to the variable account on May
1, 1998. Consequently the condensed financial information reflects the
reporting period from May 1, 1998 through December 31, 1998.
*The 7-day yield on the NSAT Money Market Fund as of December 31, 1999 was
3.97%.
67
<PAGE> 70
STATEMENT OF ADDITIONAL INFORMATION
MAY 1, 2000
MODIFIED SINGLE PREMIUM DEFERRED VARIABLE ANNUITY CONTRACTS
ISSUED BY NATIONWIDE LIFE INSURANCE COMPANY
THROUGH ITS NATIONWIDE VARIABLE ACCOUNT - II
This Statement of Additional Information is not a prospectus. It contains
information in addition to and more detailed than set forth in the prospectus
and should be read in conjunction with the prospectus dated May 1, 2000. The
prospectus may be obtained from Nationwide Life Insurance Company by writing One
Nationwide Plaza, 1-05-P1, Columbus, Ohio 43215, or calling 1-800-848-6331, TDD
1-800-238-3035.
TABLE OF CONTENTS
PAGE
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
GENERAL INFORMATION AND HISTORY
Nationwide Variable Account-II is a separate investment account of Nationwide
Life Insurance Company ("Nationwide"). All of Nationwide's common stock is owned
by Nationwide Financial Services, Inc. ("NFS"), a holding company. NFS has two
classes of common stock outstanding with different voting rights enabling
Nationwide Corporation (the holder of all of the outstanding Class B Common
Stock) to control NFS. Nationwide Corporation is a holding company, as well. All
of its common stock is held by Nationwide Mutual Insurance Company (95.24%) and
Nationwide Mutual Fire Insurance Company (4.76%), the ultimate controlling
persons of Nationwide group of companies. The Nationwide group of companies is
one of America's largest insurance and financial services family of companies,
with combined assets of over $120 billion as of December 31, 1999.
SERVICES
Nationwide, which has responsibility for administration of the contracts and the
variable account, maintains records of the name, address, taxpayer
identification number, and other pertinent information for each contract owner
and the number and type of contract issued to each such contract owner and
records with respect to the contract value of each contract.
Nationwide is the custodian of the assets of the variable account. Nationwide
will maintain a record of all purchases and redemptions of shares of the
underlying mutual funds. Nationwide, or affiliates of Nationwide may have
entered into agreements with either the investment adviser or distributor for
several of the underlying mutual funds. The agreements relate to administrative
services furnished by Nationwide or an affiliate of Nationwide and provide for
an annual fee based on the average aggregate net assets of the variable account
(and other separate accounts of Nationwide or life insurance company
subsidiaries of Nationwide) invested in particular underlying mutual funds.
These fees in no way affect the net asset value of the underlying mutual funds
or fees paid by the contract owner.
The audited financial statements have been included herein in reliance upon the
reports of KPMG LLP, independent certified public accountants, Two Nationwide
Plaza, Columbus, Ohio 43215, and upon the authority of said firm as experts in
accounting and auditing.
1
<PAGE> 71
PURCHASE OF SECURITIES BEING OFFERED
The contracts will be sold by licensed insurance agents in the states where the
contracts may be lawfully sold. Agents are 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 Nationwide or any of its affiliated insurance companies of the type
and class which Nationwide determines is eligible for such an exchange,
Nationwide may waive any remaining CDSC on the first contract. A CDSC may apply
to the contract received in the exchange.
UNDERWRITERS
The contracts, which are offered continuously, are distributed by Nationwide
Investment Services Corporation ("NISC"), Two Nationwide Plaza, Columbus, Ohio
43215, a wholly owned subsidiary of Nationwide. During the fiscal years ended
December 31, 1999, 1998 and 1997 no underwriting commissions were paid by
Nationwide to NISC.
CALCULATIONS OF PERFORMANCE
Any current yield quotations of the NSAT Money Market Fund, subject to Rule 482
of the Securities Act of 1933, will consist of a seven calendar day historical
yield, carried at least to the nearest hundredth of a percent. The yield will be
calculated by determining the net change, exclusive of capital changes, in the
value of a hypothetical pre-existing account having a balance of one
accumulation unit at the beginning of the base period, subtracting a
hypothetical charge reflecting deductions from contract owner accounts, and
dividing the net change in account value by the value of the account at the
beginning of the period to obtain a base period return, and multiplying the base
period return by (365/7) or (366/7) in a leap year. At December 31, 1999, the
NSAT- Money Market Fund's seven-day current unit value yield was 3.97%. The
NSAT-Money Market Fund 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, 1999, the NSAT Money Market Fund's
seven-day effective yield was 4.05%.
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. Yields of other money market funds may not be
comparable if a different base period or another method of calculation is used.
All performance advertising will include quotations of standardized average
annual total return, calculated in accordance with a standard method prescribed
by rules of the SEC. Standardized average annual 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 1.40% Mortality and Expense Risk Charge and
an Administration Charge. The redeemable value also reflects the effect of any
applicable CDSC that may be imposed at the end of the period (see "Contingent
Deferred Sales Charge " located in the prospectus). No deduction is made for
premium taxes which may be assessed by certain states.
2
<PAGE> 72
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 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.
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 the original
cost.
ANNUITY PAYMENTS
See "Frequency and Amount of Annuity Payments" located in the prospectus.
3
<PAGE> 73
<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 (comprised of the
sub-accounts listed in note 1(b)) (collectively, "the Account") as of December
31, 1999, and the related statements of operations and changes in contract
owners' equity for each of the years in the two year period then ended. These
financial statements are the responsibility of the Account'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, 1999, by correspondence with
the transfer agents of the underlying mutual funds. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Account as of December
31, 1999, and the results of its operations and its changes in contract owners'
equity for each of the years in the two year period then ended in conformity
with generally accepted accounting principles.
KPMG LLP
Columbus, Ohio
February 18, 2000
<PAGE> 2
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY
DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at market value:
American Century VP - American Century VP Balanced (ACVPBal)
26,517,451 shares (cost $203,012,429) ................................. $ 206,570,943
American Century VP - American Century VP Capital Appreciation (ACVPCapAp)
25,531,233 shares (cost $257,782,686) ................................. 378,883,491
American Century VP - American Century VP Income & Growth (ACVPIncGr)
10,481,242 shares (cost $72,832,174) .................................. 83,849,932
American Century VP - American Century VP International (ACVPInt)
35,557,792 shares (cost $300,254,654) ................................. 444,472,405
American Century VP - American Century VP Value (ACVPValue)
9,800,232 shares (cost $65,218,525) ................................... 58,311,380
American VI Series - Growth Fund (AVISGro)
588,857 shares (cost $28,265,492) ..................................... 41,585,085
American VI Series - High-Yield Bond Fund (AVISHiYld)
167,855 shares (cost $2,363,818) ...................................... 2,140,150
American VI Series - U.S. Government/AAA-Rated Securities Fund (AVISGvt)
334,165 shares (cost $3,709,267) ...................................... 3,528,783
The Dreyfus Socially Responsible Growth Fund, Inc. (DrySRGro)
10,062,911 shares (cost $321,637,405) ................................. 393,157,920
Dreyfus Stock Index Fund (DryStkIx)
54,265,154 shares (cost $1,607,798,501) ............................... 2,086,495,180
Dreyfus VIF - Capital Appreciation Portfolio (DryCapAp)
5,051,148 shares (cost $179,139,745) .................................. 201,389,281
Dreyfus VIF - Growth and Income Portfolio (DryGrInc)
3,436,183 shares (cost $75,512,595) ................................... 87,553,939
Fidelity VIP - Equity-Income Portfolio (FidVIPEI)
94,615,255 shares (cost $1,966,633,300) ............................... 2,432,558,217
Fidelity VIP - Growth Portfolio (FidVIPGr)
70,151,723 shares (cost $2,693,298,095) ............................... 3,853,434,164
Fidelity VIP - High Income Portfolio (FidVIPHI)
54,938,432 shares (cost $614,074,627) ................................. 621,353,663
Fidelity VIP - Overseas Portfolio (FidVIPOv)
25,608,205 shares (cost $569,897,842) ................................. 702,689,149
Fidelity VIP-II - Asset Manager Portfolio (FidVIPAM)
56,949,751 shares (cost $871,251,534) ................................. 1,063,251,853
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C>
Fidelity VIP-II - Contrafund Portfolio (FidVIPCon)
52,409,042 shares (cost $1,044,025,114) ............................... 1,527,723,575
Fidelity VIP-III - Growth Opportunities Portfolio (FidVIPGrOp)
7,926,756 shares (cost $170,432,448) .................................. 183,504,409
Morgan Stanley - Emerging Markets Debt Portfolio (MSEmMkt)
1,380,116 shares (cost $9,883,090) .................................... 9,536,603
Nationwide SAT - Capital Appreciation Fund (NSATCapAp)
21,855,788 shares (cost $533,266,623) ................................. 561,912,316
Nationwide SAT - Government Bond Fund (NSATGvtBd)
33,292,536 shares (cost $388,374,978) ................................. 359,226,461
Nationwide SAT - Money Market Fund (NSATMyMkt)
1,298,853,387 shares (cost $1,298,853,387) ............................ 1,298,853,387
Nationwide SAT - Small Cap Value Fund (NSATSmCapV)
5,321,261 shares (cost $54,307,371) ................................... 51,722,659
Nationwide SAT - Small Company Fund (NSATSmCo)
14,582,177 shares (cost $247,275,422) ................................. 322,557,764
Nationwide SAT - Total Return Fund (NSATTotRe)
61,878,351 shares (cost $924,410,869) ................................. 1,163,931,779
Neuberger & Berman AMT - Growth Portfolio (NBAMTGro)
15,851,800 shares (cost $403,834,149) ................................. 590,796,571
Neuberger & Berman AMT - Guardian Portfolio (NBAMTGuard)
3,011,862 shares (cost $44,957,196) ................................... 47,738,007
Neuberger & Berman AMT - Limited Maturity Bond Portfolio (NBAMTLMat)
10,607,255 shares (cost $144,390,447) ................................. 140,440,056
Neuberger & Berman AMT - Partners Portfolio (NBAMTPart)
26,519,028 shares (cost $520,546,325) ................................. 520,833,703
Oppenheimer VAF - Bond Fund (OppBdFd)
25,043,315 shares (cost $296,820,680) ................................. 288,498,994
Oppenheimer VAF - Global Securities Fund (OppGlSec)
24,351,608 shares (cost $543,361,311) ................................. 813,587,219
Oppenheimer VAF - Growth Fund (OppGro)
4,188,830 shares (cost $169,188,101) .................................. 208,771,299
Oppenheimer VAF - Multiple Strategies Fund (OppMult)
17,160,682 shares (cost $265,269,878) ................................. 299,625,505
Strong Opportunity Fund II, Inc. (StOpp2)
35,429,099 shares (cost $720,720,106) ................................. 920,802,283
Strong VIF - Strong Discovery Fund II (StDisc2)
11,861,402 shares (cost $134,640,216) ................................. 134,982,756
Strong VIF - Strong International Stock Fund II (StIntStk2)
6,121,471 shares (cost $78,062,849) ................................... 100,208,475
</TABLE>
(Continued)
<PAGE> 4
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENT OF ASSETS, LIABILITIES AND CONTRACT OWNERS' EQUITY, CONTINUED
<TABLE>
<CAPTION>
<S> <C>
Van Eck WIT - Worldwide Bond Fund (VEWrldBd)
6,257,276 shares (cost $70,902,338) ................................... 66,890,284
Van Eck WIT - Worldwide Emerging Markets Fund (VEWrldEMkt)
10,672,737 shares (cost $117,765,886) ................................. 152,193,223
Van Eck WIT - Worldwide Hard Assets Fund (VEWrldHAs)
5,766,023 shares (cost $61,210,818) ................................... 63,195,616
Van Kampen LIT -
Morgan Stanley Real Estate Securities Portfolio (MSRESec)
8,167,735 shares (cost $118,427,684) .................................. 101,034,884
Warburg Pincus Trust - International Equity Portfolio (WPIntEq)
17,125,482 shares (cost $209,566,651) ................................. 285,995,544
Warburg Pincus Trust - Post Venture Capital Portfolio (WPPVenCap)
3,029,501 shares (cost $46,029,445) ................................... 58,348,183
Warburg Pincus Trust - Small Company Growth Portfolio (WPSmCoGr)
18,327,947 shares (cost $323,130,982) ................................. 480,192,205
---------------
Total investments .................................................. 23,414,329,296
Accounts receivable ......................................................... 1,017,765
---------------
Total assets ....................................................... 23,415,347,061
ACCOUNTS PAYABLE ............................................................... 2,145
---------------
CONTRACT OWNERS' EQUITY (NOTE 4) ............................................... $23,415,344,916
===============
</TABLE>
See accompanying notes to financial statements.
<PAGE> 5
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Total ACVPBal
------------------------------------ ---------------------------------
1999 1998 1999 1998
---------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 351,733,257 315,567,353 3,991,181 3,098,368
Mortality, expense and administration
charges (note 2):
BOA ........................................ (159,704,457) (145,540,567) (1,415,598) (1,354,760)
BOA Vision ................................. (130,265,551) (114,290,967) (1,381,790) (1,180,401)
BOA Enterprise ............................. (270,943) (199,407) (2,854) (2,018)
---------------- -------------- ----------- -----------
Net investment activity ...................... 61,492,306 55,536,412 1,190,939 561,189
---------------- -------------- ----------- -----------
Proceeds from mutual fund shares sold ........... 12,341,621,630 9,502,638,819 38,472,902 48,804,378
Cost of mutual fund shares sold ................. (10,997,380,217) (8,727,995,326) (36,411,406) (37,362,868)
---------------- -------------- ----------- -----------
Realized gain (loss) on investments .......... 1,344,241,413 774,643,493 2,061,496 11,441,510
Change in unrealized gain (loss) on investments . 1,709,941,913 440,618,096 (14,059,807) (5,900,979)
---------------- -------------- ----------- -----------
Net gain (loss) on investments ............... 3,054,183,326 1,215,261,589 (11,998,311) 5,540,531
---------------- -------------- ----------- -----------
Reinvested capital gains ........................ 890,110,382 1,177,995,583 27,539,149 19,212,723
---------------- -------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 4,005,786,014 2,448,793,584 16,731,777 25,314,443
---------------- -------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 1,492,378,564 2,214,889,447 15,664,882 22,317,530
Transfers between funds ......................... -- -- (11,222,326) 8,865,047
Redemptions ..................................... (2,712,438,299) (1,806,663,808) (22,586,889) (16,523,412)
Annuity benefits ................................ (2,862,882) (1,988,285) (20,482) (9,922)
Annual contract maintenance charge (note 2) ..... (8,399,835) (8,003,092) (77,891) (76,599)
Contingent deferred sales charges (note 2) ...... (32,704,996) (23,748,555) (291,236) (246,178)
Adjustments to maintain reserves ................ 911,942 (406,310) (340) (1,729)
---------------- -------------- ----------- -----------
Net equity transactions .................... (1,263,115,506) 374,079,397 (18,534,282) 14,324,737
---------------- -------------- ----------- -----------
Net change in contract owners' equity ............. 2,742,670,508 2,822,872,981 (1,802,505) 39,639,180
Contract owners' equity beginning of period ....... 20,672,674,408 17,849,801,427 208,373,013 168,733,833
---------------- -------------- ----------- -----------
Contract owners' equity end of period ............. $ 23,415,344,916 20,672,674,408 206,570,508 208,373,013
================ ============== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
ACVPCapAp ACVPIncGr
---------------------------------- ------------------------------
1999 1998 1999 1998
------------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ -- -- 11,166 181,416
Mortality, expense and administration
charges (note 2):
BOA ........................................ (2,597,354) (2,818,233) (469,581) (95,126)
BOA Vision ................................. (902,035) (857,721) (412,151) (75,918)
BOA Enterprise ............................. (1,598) (1,256) (537) (117)
----------- ----------- ---------- ----------
Net investment activity ...................... (3,500,987) (3,677,210) (871,103) 10,255
----------- ----------- ---------- ----------
Proceeds from mutual fund shares sold ........... 149,920,318 114,736,720 22,834,351 25,325,017
Cost of mutual fund shares sold ................. (150,460,860) (136,788,804) (18,770,040) (26,300,565)
----------- ----------- ---------- ----------
Realized gain (loss) on investments .......... (540,542) (22,052,084) 4,064,311 (975,548)
Change in unrealized gain (loss) on investments . 147,944,253 (264,722) 7,240,752 3,777,007
----------- ----------- ---------- ----------
Net gain (loss) on investments ............... 147,403,711 (22,316,806) 11,305,063 2,801,459
----------- ----------- ---------- ----------
Reinvested capital gains ........................ -- 15,700,848 -- --
----------- ----------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 143,902,724 (10,293,168) 10,433,960 2,811,714
----------- ----------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 15,321,810 23,389,103 11,461,943 2,843,288
Transfers between funds ......................... 10,543,287 (66,469,516) 30,819,145 34,214,351
Redemptions ..................................... (41,284,239) (34,901,415) (7,460,786) (1,148,357)
Annuity benefits ................................ (48,809) (44,914) -- --
Annual contract maintenance charge (note 2) ..... (188,703) (233,324) (17,447) (4,110)
Contingent deferred sales charges (note 2) ...... (395,615) (447,727) (100,849) (9,116)
Adjustments to maintain reserves ................ 10,726 65,167 (6,972) 6,300
----------- ----------- ---------- ----------
Net equity transactions .................... (16,041,543) (78,642,626) 34,695,034 35,902,356
----------- ----------- ---------- ----------
Net change in contract owners' equity ............. 127,861,181 (88,935,794) 45,128,994 38,714,070
Contract owners' equity beginning of period ....... 251,055,304 339,991,098 38,714,070 --
----------- ----------- ---------- ----------
Contract owners' equity end of period ............. 378,916,485 251,055,304 83,843,064 38,714,070
=========== =========== ========== ==========
</TABLE>
(Continued)
<PAGE> 6
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
ACVPInt ACVPValue
------------------------------------ ---------------------------------
1999 1998 1999 1998
--------------- ------------- -------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ -- 1,241,910 591,931 491,657
Mortality, expense and administration
charges (note 2):
BOA ........................................ (2,019,902) (1,733,033) (425,310) (427,970)
BOA Vision ................................. (2,239,092) (1,962,632) (558,488) (588,525)
BOA Enterprise ............................. (2,538) (2,034) (1,236) (1,181)
---------------- ----------- ---------- ----------
Net investment activity ...................... (4,261,532) (2,455,789) (393,103) (526,019)
---------------- ----------- ---------- ----------
Proceeds from mutual fund shares sold ........... 366,068,306 361,873,253 82,656,091 49,075,920
Cost of mutual fund shares sold ................. (325,718,086) (348,435,933) (86,789,734) (49,213,498)
---------------- ----------- ---------- ----------
Realized gain (loss) on investments .......... 40,350,220 13,437,320 (4,133,643) (137,578)
Change in unrealized gain (loss) on investments . 134,123,037 4,337,447 (5,054,394) (3,517,470)
---------------- ----------- ---------- ----------
Net gain (loss) on investments ............... 174,473,257 17,774,767 (9,188,037) (3,655,048)
---------------- ----------- ---------- ----------
Reinvested capital gains ........................ -- 12,749,123 5,607,994 5,869,944
---------------- ----------- ---------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 170,211,725 28,068,101 (3,973,146) 1,688,877
---------------- ----------- ---------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 17,432,902 27,075,201 6,230,196 15,060,446
Transfers between funds ......................... (423,845) 76,963,986 (4,726,693) (9,597,717)
Redemptions ..................................... (34,126,117) (21,143,253) (7,852,378) (6,581,279)
Annuity benefits ................................ (33,416) (13,625) (27,070) (21,465)
Annual contract maintenance charge (note 2) ..... (86,416) (79,895) (22,403) (19,679)
Contingent deferred sales charges (note 2) ...... (455,988) (250,396) (124,598) (100,776)
Adjustments to maintain reserves ................ 316 (18,968) 5,851 (51,138)
---------------- ----------- ---------- ----------
Net equity transactions .................... (17,692,564) 82,533,050 (6,517,095) (1,311,608)
---------------- ----------- ---------- ----------
Net change in contract owners' equity ............. 152,519,161 110,601,151 (10,490,241) 377,269
Contract owners' equity beginning of period ....... 291,977,777 181,376,626 68,785,191 68,407,922
---------------- ----------- ---------- ----------
Contract owners' equity end of period ............. $ 444,496,938 291,977,777 58,294,950 68,785,191
================ =========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
AVISGro AVISHiYld
------------------------------- ------------------------------
1999 1998 1999 1998
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 62,599 104,724 228,188 252,109
Mortality, expense and administration
charges (note 2):
BOA ........................................ (449,681) (365,360) (31,460) (39,297)
BOA Vision ................................. -- -- -- --
BOA Enterprise ............................. -- -- -- --
---------- ---------- --------- ---------
Net investment activity ...................... (387,082) (260,636) 196,728 212,812
---------- ---------- --------- ---------
Proceeds from mutual fund shares sold ........... 7,836,561 7,115,941 952,888 1,134,719
Cost of mutual fund shares sold ................. (3,890,307) (3,771,756) (1,018,592) (1,075,993)
---------- ---------- --------- ---------
Realized gain (loss) on investments .......... 3,946,254 3,344,185 (65,704) 58,726
Change in unrealized gain (loss) on investments . 6,534,190 1,042,218 (26,416) (303,262)
---------- ---------- --------- ---------
Net gain (loss) on investments ............... 10,480,444 4,386,403 (92,120) (244,536)
---------- ---------- --------- ---------
Reinvested capital gains ........................ 5,600,035 4,170,092 -- 36,591
---------- ---------- --------- ---------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 15,693,397 8,295,859 104,608 4,867
---------- ---------- --------- ---------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 476,394 511,282 58,162 116,063
Transfers between funds ......................... 98,674 (964,009) (48,450) (107,348)
Redemptions ..................................... (5,784,308) (3,204,144) (591,479) (566,909)
Annuity benefits ................................ (608) (444) (6,533) (5,289)
Annual contract maintenance charge (note 2) ..... (14,293) (14,895) (1,519) (1,991)
Contingent deferred sales charges (note 2) ...... (17,393) (9,981) (1,150) (3,772)
Adjustments to maintain reserves ................ 1,323 578 181 (2,332)
---------- ---------- --------- ---------
Net equity transactions .................... (5,240,211) (3,681,613) (590,788) (571,578)
---------- ---------- --------- ---------
Net change in contract owners' equity ............. 10,453,186 4,614,246 (486,180) (566,711)
Contract owners' equity beginning of period ....... 31,133,189 26,518,943 2,626,505 3,193,216
---------- ---------- --------- ---------
Contract owners' equity end of period ............. 41,586,375 31,133,189 2,140,325 2,626,505
========== ========== ========= =========
</TABLE>
<PAGE> 7
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
AVISGvt DrySRGro
------------------------------------ -------------------------------
1999 1998 1999 1998
----------------- ------------- ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 247,063 270,372 48,647 409,775
Mortality, expense and administration
charges (note 2):
BOA ........................................ (53,194) (60,816) (2,295,017) (1,451,837)
BOA Vision ................................. -- -- (2,053,668) (1,439,799)
BOA Enterprise ............................. -- -- (4,989) (2,748)
---------------- --------- ----------- -----------
Net investment activity ...................... 193,869 209,556 (4,305,027) (2,484,609)
---------------- --------- ----------- -----------
Proceeds from mutual fund shares sold ........... 1,067,555 1,748,263 121,610,454 143,677,649
Cost of mutual fund shares sold ................. (1,086,104) (1,871,313) (91,860,747) (117,379,825)
---------------- --------- ----------- -----------
Realized gain (loss) on investments .......... (18,549) (123,050) 29,749,707 26,297,824
Change in unrealized gain (loss) on investments . (252,264) 209,910 43,395,270 14,964,682
---------------- --------- ----------- -----------
Net gain (loss) on investments ............... (270,813) 86,860 73,144,977 41,262,506
---------------- --------- ----------- -----------
Reinvested capital gains ........................ -- -- 13,095,806 9,504,871
---------------- --------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (76,944) 296,416 81,935,756 48,282,768
---------------- --------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 172,875 143,640 36,723,685 34,640,924
Transfers between funds ......................... (177,069) (143,468) 39,965,200 17,779,620
Redemptions ..................................... (859,084) (894,059) (30,265,730) (16,450,256)
Annuity benefits ................................ (4,989) (3,938) (9,832) (5,152)
Annual contract maintenance charge (note 2) ..... (3,011) (3,913) (155,033) (112,389)
Contingent deferred sales charges (note 2) ...... (3,094) (3,582) (415,490) (243,228)
Adjustments to maintain reserves ................ 48 (1,962) 33,290 1,747
---------------- --------- ----------- -----------
Net equity transactions .................... (874,324) (907,282) 45,876,090 35,611,266
---------------- --------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. (951,268) (610,866) 127,811,846 83,894,034
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 4,480,028 5,090,894 265,379,214 181,485,180
---------------- --------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. $ 3,528,760 4,480,028 393,191,060 265,379,214
================ ========= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
DryStkIx DryCapAp
-------------------------------- ---------------------------------
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 20,893,189 18,675,816 1,131,796 862,672
Mortality, expense and administration
charges (note 2):
BOA ........................................ (11,506,073) (7,978,285) (1,310,764) (524,245)
BOA Vision ................................. (14,765,173) (10,844,564) (1,389,587) (571,382)
BOA Enterprise ............................. (26,133) (17,348) (2,909) (873)
------------- ------------- ----------- -----------
Net investment activity ...................... (5,404,190) (164,381) (1,571,464) (233,828)
------------- ------------- ----------- -----------
Proceeds from mutual fund shares sold ........... 471,289,199 443,376,469 86,945,557 74,053,794
Cost of mutual fund shares sold ................. (303,007,098) (301,499,093) (76,828,049) (68,960,812)
------------- ------------- ----------- -----------
Realized gain (loss) on investments .......... 168,282,101 141,877,376 10,117,508 5,092,982
Change in unrealized gain (loss) on investments . 151,537,337 179,528,535 8,792,210 13,393,944
------------- ------------- ----------- -----------
Net gain (loss) on investments ............... 319,819,438 321,405,911 18,909,718 18,486,926
------------- ------------- ----------- -----------
Reinvested capital gains ........................ 18,032,609 3,418,338 755,817 14,955
---------------- --------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 332,447,857 324,659,868 18,094,071 18,268,053
---------------- --------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 171,990,917 214,991,310 22,276,022 15,138,079
Transfers between funds ......................... 49,562,572 190,453,913 18,125,447 130,801,206
Redemptions ..................................... (186,725,313) (101,442,520) (23,965,643) (6,949,302)
Annuity benefits ................................ (229,153) (151,728) (4,604) --
Annual contract maintenance charge (note 2) ..... (630,539) (444,587) (56,458) (22,248)
Contingent deferred sales charges (note 2) ...... (2,694,935) (1,522,122) (280,455) (81,927)
Adjustments to maintain reserves ................ 59,782 (10,118) 3,538 (907)
------------- ------------- ----------- -----------
Net equity transactions .................... 31,333,331 301,874,148 16,097,847 138,884,901
------------- ------------- ----------- -----------
NET CHANGE IN CONTRACT OWNERS' EQUITY ............. 363,781,188 626,534,016 34,191,918 157,152,954
CONTRACT OWNERS' EQUITY BEGINNING OF PERIOD ....... 1,722,772,232 1,096,238,216 167,200,842 10,047,888
------------- ------------- ----------- -----------
CONTRACT OWNERS' EQUITY END OF PERIOD ............. 2,086,553,420 1,722,772,232 201,392,760 167,200,842
============= ============= =========== ===========
</TABLE>
(Continued)
<PAGE> 8
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
DryGrInc FidVIPEI
-------------------------------------- --------------------------------
1999 1998 1999 1998
----------------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 504,180 691,042 39,615,425 36,741,162
Mortality, expense and administration
charges (note 2):
BOA ........................................ (423,226) (350,592) (19,653,096) (20,689,256)
BOA Vision ................................. (670,388) (598,700) (16,003,298) (15,778,209)
BOA Enterprise ............................. (3,320) (3,387) (14,945) (15,123)
---------------- ---------- ------------- -------------
Net investment activity ...................... (592,754) (261,637) 3,944,086 258,574
---------------- ---------- ------------- -------------
Proceeds from mutual fund shares sold ........... 19,190,372 30,513,353 560,148,724 360,627,004
Cost of mutual fund shares sold ................. (17,767,135) (28,500,253) (339,913,087) (227,981,252)
---------------- ---------- ------------- -------------
Realized gain (loss) on investments .......... 1,423,237 2,013,100 220,235,637 132,645,752
Change in unrealized gain (loss) on investments . 8,259,646 3,889,051 (183,694,303) (11,150,576)
---------------- ---------- ------------- -------------
Net gain (loss) on investments ............... 9,682,883 5,902,151 36,541,334 121,495,176
---------------- ---------- ------------- -------------
Reinvested capital gains ........................ 2,649,264 1,182,628 87,570,939 130,755,312
---------------- ---------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 11,739,393 6,823,142 128,056,359 252,509,062
---------------- ---------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 10,108,825 20,276,212 133,956,568 244,737,638
Transfers between funds ......................... (7,158,428) 2,527,467 (257,984,591) (147,382,926)
Redemptions ..................................... (7,431,820) (4,679,160) (285,072,997) (223,884,295)
Annuity benefits ................................ (283) -- (355,833) (277,211)
Annual contract maintenance charge (note 2) ..... (35,834) (24,697) (1,004,069) (1,076,592)
Contingent deferred sales charges (note 2) ...... (139,243) (79,324) (3,142,474) (2,878,268)
Adjustments to maintain reserves ................ (542) (1,898) (83,996) (72,439)
---------------- ---------- ------------- -------------
Net equity transactions .................... (4,657,325) 18,018,600 (413,687,392) (130,834,093)
---------------- ---------- ------------- -------------
Net change in contract owners' equity ............. 7,082,068 24,841,742 (285,631,033) 121,674,969
Contract owners' equity beginning of period ....... 80,471,309 55,629,567 2,718,198,740 2,596,523,771
---------------- ---------- ------------- -------------
Contract owners' equity end of period ............. $ 87,553,377 80,471,309 2,432,567,707 2,718,198,740
================ ========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPGr FidVIPHI
----------------------------------- --------------------------------
1999 1998 1999 1998
------------- --------------- ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 5,073,051 10,166,752 69,916,879 62,256,993
Mortality, expense and administration
charges (note 2):
BOA ........................................ (28,030,230) (20,216,127) (4,316,966) (5,314,746)
BOA Vision ................................. (15,387,759) (10,214,372) (5,133,252) (5,818,593)
BOA Enterprise ............................. (25,431) (14,330) (4,126) (5,086)
------------- ------------- ----------- -----------
Net investment activity ...................... (38,370,369) (20,278,077) 60,462,535 51,118,568
------------- ------------- ----------- -----------
Proceeds from mutual fund shares sold ........... 852,659,180 582,531,833 496,639,090 423,878,325
Cost of mutual fund shares sold ................. (546,357,146) (421,522,045) (562,909,611) (424,592,843)
------------- ------------- ----------- -----------
Realized gain (loss) on investments .......... 306,302,034 161,009,788 (66,270,521) (714,518)
Change in unrealized gain (loss) on investments . 422,649,010 330,693,565 53,535,570 (127,578,300)
------------- ------------- ----------- -----------
Net gain (loss) on investments ............... 728,951,044 491,703,353 (12,734,951) (128,292,818)
------------- ------------- ----------- -----------
Reinvested capital gains ........................ 318,968,052 265,940,840 2,613,715 39,559,131
------------- ------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 1,009,548,727 737,366,116 50,341,299 (37,615,119)
------------- ------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 192,599,641 181,501,856 35,505,524 84,716,749
Transfers between funds ......................... 287,973,979 58,879,586 (102,694,090) (63,945,106)
Redemptions ..................................... (404,893,606) (194,431,314) (90,093,350) (79,994,258)
Annuity benefits ................................ (529,423) (254,430) (76,714) (64,108)
Annual contract maintenance charge (note 2) ..... (1,369,566) (1,169,401) (206,545) (250,706)
Contingent deferred sales charges (note 2) ...... (4,094,967) (2,499,712) (1,174,747) (968,813)
Adjustments to maintain reserves ................ 525,987 (85,859) 42,255 34,738
------------- ------------- ----------- -----------
Net equity transactions .................... 70,212,045 41,940,726 (158,697,667) (60,471,504)
------------- ------------- ----------- -----------
Net change in contract owners' equity ............. 1,079,760,772 779,306,842 (108,356,368) (98,086,623)
Contract owners' equity beginning of period ....... 2,774,103,603 1,994,796,761 729,750,831 827,837,454
------------- ------------- ----------- -----------
Contract owners' equity end of period ............. 3,853,864,375 2,774,103,603 621,394,463 729,750,831
============= ============= =========== ===========
</TABLE>
<PAGE> 9
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
FidVIPOv FidVIPAM
----------------------------------- --------------------------------
1999 1998 1999 1998
--------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 8,607,336 11,424,188 37,279,047 34,225,218
Mortality, expense and administration
charges (note 2):
BOA ........................................ (5,467,394) (5,767,471) (10,182,511) (10,568,738)
BOA Vision ................................. (2,354,358) (2,267,521) (4,364,687) (4,231,809)
BOA Enterprise ............................. (732) (762) (3,508) (2,407)
---------------- ----------- ------------- -------------
Net investment activity ...................... 784,852 3,388,434 22,728,341 19,422,264
---------------- ----------- ------------- -------------
Proceeds from mutual fund shares sold ........... 1,023,966,842 448,515,931 194,447,515 111,473,351
Cost of mutual fund shares sold ................. (935,496,853) (408,495,774) (161,974,315) (90,494,053)
---------------- ----------- ------------- -------------
Realized gain (loss) on investments .......... 88,469,989 40,020,157 32,473,200 20,979,298
Change in unrealized gain (loss) on investments . 113,547,668 (11,007,004) (3,889,803) (3,096,910)
---------------- ----------- ------------- -------------
Net gain (loss) on investments ............... 202,017,657 29,013,153 28,583,397 17,882,388
---------------- ----------- ------------- -------------
Reinvested capital gains ........................ 13,882,800 33,671,290 47,220,126 102,675,653
---------------- ----------- ------------- -------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 216,685,309 66,072,877 98,531,864 139,980,305
---------------- ----------- ------------- -------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 24,533,268 35,783,097 52,275,799 83,198,673
Transfers between funds ......................... (42,115,481) (47,526,193) (73,018,699) (45,694,699)
Redemptions ..................................... (74,075,264) (59,779,420) (150,918,856) (117,229,468)
Annuity benefits ................................ (144,693) (122,919) (255,336) (210,178)
Annual contract maintenance charge (note 2) ..... (271,726) (315,146) (524,651) (577,324)
Contingent deferred sales charges (note 2) ...... (696,469) (694,542) (1,398,199) (1,488,964)
Adjustments to maintain reserves ................ (24,739) (2,419) (97,914) (21,188)
---------------- ----------- ------------- -------------
Net equity transactions .................... (92,795,104) (72,657,542) (173,937,856) (82,023,148)
---------------- ----------- ------------- -------------
Net change in contract owners' equity ............. 123,890,205 (6,584,665) (75,405,992) 57,957,157
Contract owners' equity beginning of period ....... 578,773,393 585,358,058 1,138,558,288 1,080,601,131
---------------- ----------- ------------- -------------
Contract owners' equity end of period ............. $ 702,663,598 578,773,393 1,063,152,296 1,138,558,288
================ =========== ============= =============
</TABLE>
<TABLE>
<CAPTION>
FidVIPCon FidVIPGrOp
---------------------------------- --------------------------------
1999 1998 1999 1998
------------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 6,098,599 6,336,699 1,703,363 757,412
Mortality, expense and administration
charges (note 2):
BOA ........................................ (8,351,102) (6,038,275) (1,031,792) (623,486)
BOA Vision ................................. (10,086,258) (7,641,255) (1,475,219) (837,609)
BOA Enterprise ............................. (8,285) (5,816) (1,798) (1,084)
------------- ------------- ----------- -----------
Net investment activity ...................... (12,347,046) (7,348,647) (805,446) (704,767)
------------- ------------- ----------- -----------
Proceeds from mutual fund shares sold ........... 241,199,932 156,614,980 73,752,840 46,907,717
Cost of mutual fund shares sold ................. (138,225,602) (103,037,324) (64,334,468) (43,276,275)
------------- ------------- ----------- -----------
Realized gain (loss) on investments .......... 102,974,330 53,577,656 9,418,372 3,631,442
Change in unrealized gain (loss) on investments . 146,364,701 165,270,018 (6,734,513) 17,973,839
------------- ------------- ----------- -----------
Net gain (loss) on investments ............... 249,339,031 218,847,674 2,683,859 21,605,281
------------- ------------- ----------- -----------
Reinvested capital gains ........................ 44,723,057 46,619,997 3,184,549 2,632,909
------------- ------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 281,715,042 258,119,024 5,062,962 23,533,423
------------- ------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 103,519,454 117,785,191 26,824,322 34,421,791
Transfers between funds ......................... 42,356,473 21,712,329 11,054,415 61,633,353
Redemptions ..................................... (122,041,395) (69,506,982) (17,960,167) (8,308,180)
Annuity benefits ................................ (168,876) (85,161) (80) (8,900)
Annual contract maintenance charge (note 2) ..... (454,566) (362,629) (54,925) (28,889)
Contingent deferred sales charges (note 2) ...... (1,734,705) (1,098,841) (249,977) (90,979)
Adjustments to maintain reserves ................ 86,354 (190,380) 31,463 20,282
------------- ------------- ----------- -----------
Net equity transactions .................... 21,562,739 68,253,527 19,645,051 87,638,478
------------- ------------- ----------- -----------
Net change in contract owners' equity ............. 303,277,781 326,372,551 24,708,013 111,171,901
Contract owners' equity beginning of period ....... 1,224,548,927 898,176,376 158,829,125 47,657,224
------------- ------------- ----------- -----------
Contract owners' equity end of period ............. 1,527,826,708 1,224,548,927 183,537,138 158,829,125
============= ============= =========== ===========
</TABLE>
(Continued)
<PAGE> 10
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
MSEmMkt NSATCapAp
------------------------------------ --------------------------------
1999 1998 1999 1998
--------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 1,115,328 896,541 3,931,360 4,224,848
Mortality, expense and administration
charges (note 2):
BOA ........................................ (63,720) (58,296) (4,673,658) (3,700,716)
BOA Vision ................................. (64,832) (62,351) (3,991,780) (3,266,685)
BOA Enterprise ............................. (12) (123) (36,891) (21,628)
---------------- --------- ----------- -----------
Net investment activity ...................... 986,764 775,771 (4,770,969) (2,764,181)
---------------- --------- ----------- -----------
Proceeds from mutual fund shares sold ........... 45,299,165 34,386,517 233,986,467 133,708,074
Cost of mutual fund shares sold ................. (44,338,363) (37,579,962) (165,049,540) (90,629,019)
---------------- --------- ----------- -----------
Realized gain (loss) on investments .......... 960,802 (3,193,445) 68,936,927 43,079,055
Change in unrealized gain (loss) on investments . 377,131 (588,871) (84,072,383) 63,140,856
---------------- --------- ----------- -----------
Net gain (loss) on investments ............... 1,337,933 (3,782,316) (15,135,456) 106,219,911
---------------- --------- ----------- -----------
Reinvested capital gains ........................ -- -- 37,362,531 19,370,613
---------------- --------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 2,324,697 (3,006,545) 17,456,106 122,826,343
---------------- --------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 726,818 1,603,596 55,980,590 79,993,702
Transfers between funds ......................... (1,247,781) 2,595,520 (141,379,849) 176,934,765
Redemptions ..................................... (981,714) (600,107) (67,256,237) (44,265,008)
Annuity benefits ................................ -- -- (47,322) (8,859)
Annual contract maintenance charge (note 2) ..... (3,172) (2,449) (268,219) (187,439)
Contingent deferred sales charges (note 2) ...... (14,051) (8,579) (900,522) (603,195)
Adjustments to maintain reserves ................ 120 3,560 85,260 31,933
---------------- --------- ----------- -----------
Net equity transactions .................... (1,519,780) 3,591,541 (153,786,299) 211,895,899
---------------- --------- ----------- -----------
Net change in contract owners' equity ............. 804,917 584,996 (136,330,193) 334,722,242
Contract owners' equity beginning of period ....... 8,731,806 8,146,810 698,327,731 363,605,489
---------------- --------- ----------- -----------
Contract owners' equity end of period ............. $ 9,536,723 8,731,806 561,997,538 698,327,731
================ ========= =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NSATGvtBd NSATMyMkt
---------------------------------- ----------------------------------
1999 1998 1999 1998
------------- -------------- ------------- ---------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 21,528,908 20,283,271 55,163,202 49,803,790
Mortality, expense and administration
charges (note 2):
BOA ........................................ (3,133,918) (3,112,323) (8,376,797) (7,311,860)
BOA Vision ................................. (2,334,737) (1,819,228) (7,343,223) (5,795,865)
BOA Enterprise ............................. (6,773) (4,150) (18,398) (7,805)
----------- ----------- ------------- -----------
Net investment activity ...................... 16,053,480 15,347,570 39,424,784 36,688,260
----------- ----------- ------------- -----------
Proceeds from mutual fund shares sold ........... 152,880,585 207,789,615 3,925,072,177 3,220,375,906
Cost of mutual fund shares sold ................. (154,445,541) (193,984,368) (3,925,072,178) (3,220,375,906)
----------- ----------- ------------- -----------
Realized gain (loss) on investments .......... (1,564,956) 13,805,247 (1) --
Change in unrealized gain (loss) on investments . (30,662,357) (6,851,480) -- --
----------- ----------- ------------- -----------
Net gain (loss) on investments ............... (32,227,313) 6,953,767 (1) --
----------- ----------- ------------- -----------
Reinvested capital gains ........................ 692,643 2,132,513 -- --
----------- ----------- ------------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (15,481,190) 24,433,850 39,424,783 36,688,260
----------- ----------- ------------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 38,828,964 39,548,416 163,808,405 264,092,504
Transfers between funds ......................... (43,986,399) 121,987,540 528,119,178 69,584,573
Redemptions ..................................... (61,218,569) (43,099,055) (397,696,244) (235,028,324)
Annuity benefits ................................ (54,129) (24,316) (25,861) (33,165)
Annual contract maintenance charge (note 2) ..... (155,958) (162,551) (379,402) (329,944)
Contingent deferred sales charges (note 2) ...... (580,850) (471,441) (5,693,000) (3,229,365)
Adjustments to maintain reserves ................ (6,144) (20,225) 187,648 124,919
----------- ----------- ------------- -----------
Net equity transactions .................... (67,173,085) 117,758,368 288,320,724 95,181,198
----------- ----------- ------------- -----------
Net change in contract owners' equity ............. (82,654,275) 142,192,218 327,745,507 131,869,458
Contract owners' equity beginning of period ....... 441,874,130 299,681,912 971,315,955 839,446,497
----------- ----------- ------------- -----------
Contract owners' equity end of period ............. 359,219,855 441,874,130 1,299,061,462 971,315,955
=========== =========== ============= ===========
</TABLE>
<PAGE> 11
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NSATSmCapV NSATSmCo
------------------------------------- ---------------------------------
1999 1998 1999 1998
---------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ -- -- -- --
Mortality, expense and administration
charges (note 2):
BOA ........................................ (290,153) (31,885) (1,517,642) (1,700,513)
BOA Vision ................................. (268,350) (35,054) (1,856,910) (2,059,122)
BOA Enterprise ............................. (623) (83) (7,577) (8,482)
-------------- ---------- ----------- -----------
Net investment activity ...................... (559,126) (67,022) (3,382,129) (3,768,117)
-------------- ---------- ----------- -----------
Proceeds from mutual fund shares sold ........... 155,811,318 43,832,595 244,386,183 261,860,480
Cost of mutual fund shares sold ................. (152,202,720) (42,411,426) (229,277,666) (254,018,492)
-------------- ---------- ----------- -----------
Realized gain (loss) on investments .......... 3,608,598 1,421,169 15,108,517 7,841,988
Change in unrealized gain (loss) on investments . (3,160,159) 575,447 67,364,769 (2,212,959)
-------------- ---------- ----------- -----------
Net gain (loss) on investments ............... 448,439 1,996,616 82,473,286 5,629,029
-------------- ---------- ----------- -----------
Reinvested capital gains ........................ 7,696,539 -- 12,517,580 --
-------------- ---------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 7,585,852 1,929,594 91,608,737 1,860,912
-------------- ---------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 3,297,722 859,632 17,388,922 36,933,858
Transfers between funds ......................... 33,216,028 11,542,676 (41,108,002) (26,891,714)
Redemptions ..................................... (5,913,163) (691,704) (26,263,962) (20,592,877)
Annuity benefits ................................ -- -- (34,022) (24,125)
Annual contract maintenance charge (note 2) ..... (10,940) (1,173) (98,855) (105,259)
Contingent deferred sales charges (note 2) ...... (83,345) (8,593) (353,868) (293,623)
Adjustments to maintain reserves ................ 149 87 3,543 (19,321)
-------------- ---------- ----------- -----------
Net equity transactions .................... 30,506,451 11,700,925 (50,466,244) (10,993,061)
-------------- ---------- ----------- -----------
Net change in contract owners' equity ............. 38,092,303 13,630,519 41,142,493 (9,132,149)
Contract owners' equity beginning of period ....... 13,630,519 -- 281,418,074 290,550,223
-------------- ---------- ----------- -----------
Contract owners' equity end of period ............. $ 51,722,822 13,630,519 322,560,567 281,418,074
============== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NSATTotRe NBAMTGro
--------------------------------- ------------------------------------
1999 1998 1999 1998
-------------- ------------- --------------- ----------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 7,868,622 12,035,844 -- --
Mortality, expense and administration
charges (note 2):
BOA ........................................ (9,209,895) (8,914,235) (4,216,248) (4,492,337)
BOA Vision ................................. (7,172,161) (6,595,435) (1,483,794) (1,605,250)
BOA Enterprise ............................. (56,882) (44,307) (2,934) (2,546)
------------- ------------- ----------- -----------
Net investment activity ...................... (8,570,316) (3,518,133) (5,702,976) (6,100,133)
------------- ------------- ----------- -----------
Proceeds from mutual fund shares sold ........... 218,186,595 98,753,814 291,447,611 232,023,189
Cost of mutual fund shares sold ................. (115,795,523) (54,160,507) (300,669,747) (234,618,122)
------------- ------------- ----------- -----------
Realized gain (loss) on investments .......... 102,391,072 44,593,307 (9,222,136) (2,594,933)
Change in unrealized gain (loss) on investments . (71,821,569) 82,128,581 174,435,551 (55,314,235)
------------- ------------- ----------- -----------
Net gain (loss) on investments ............... 30,569,503 126,721,888 165,213,415 (57,909,168)
------------- ------------- ----------- -----------
Reinvested capital gains ........................ 43,408,692 48,037,783 23,683,476 124,274,598
------------- ------------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 65,407,879 171,241,538 183,193,915 60,265,297
------------- ------------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 83,859,132 144,141,140 17,172,088 28,776,863
Transfers between funds ......................... (90,426,844) (18,161,876) (33,256,054) (34,982,287)
Redemptions ..................................... (124,297,518) (98,751,498) (59,895,170) (46,230,014)
Annuity benefits ................................ (252,159) (194,097) (104,449) (83,808)
Annual contract maintenance charge (note 2) ..... (572,602) (517,264) (225,587) (257,911)
Contingent deferred sales charges (note 2) ...... (1,497,675) (1,246,430) (514,810) (499,129)
Adjustments to maintain reserves ................ 46,343 49,874 16,613 (42,003)
------------- ------------- ----------- -----------
Net equity transactions .................... (133,141,323) 25,319,849 (76,807,369) (53,318,289)
------------- ------------- ----------- -----------
Net change in contract owners' equity ............. (67,733,444) 196,561,387 106,386,546 6,947,008
Contract owners' equity beginning of period ....... 1,231,708,938 1,035,147,551 484,441,048 477,494,040
------------- ------------- ----------- -----------
Contract owners' equity end of period ............. 1,163,975,494 1,231,708,938 590,827,594 484,441,048
============= ============= =========== ===========
</TABLE>
(Continued)
<PAGE> 12
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
NBAMTGuard NBAMTLMat
------------------------------------- --------------------------------
1999 1998 1999 1998
--------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 165,509 -- 9,460,320 11,658,274
Mortality, expense and administration
charges (note 2):
BOA ........................................ (317,782) (101,891) (1,237,911) (1,461,067)
BOA Vision ................................. (390,204) (175,876) (878,556) (1,044,829)
BOA Enterprise ............................. (1,086) (340) (700) (942)
---------------- ---------- ----------- -----------
Net investment activity ...................... (543,563) (278,107) 7,343,153 9,151,436
---------------- ---------- ----------- -----------
Proceeds from mutual fund shares sold ........... 38,047,247 27,174,222 51,883,477 67,231,619
Cost of mutual fund shares sold ................. (34,135,139) (30,893,655) (53,710,296) (69,328,641)
---------------- ---------- ----------- -----------
Realized gain (loss) on investments .......... 3,912,108 (3,719,433) (1,826,819) (2,097,022)
Change in unrealized gain (loss) on investments . 1,558,246 1,222,564 (5,412,296) (1,610,865)
---------------- ---------- ----------- -----------
Net gain (loss) on investments ............... 5,470,354 (2,496,869) (7,239,115) (3,707,887)
---------------- ---------- ----------- -----------
Reinvested capital gains ........................ -- -- -- --
---------------- ---------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 4,926,791 (2,774,976) 104,038 5,443,549
---------------- ---------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 6,652,796 2,669,820 9,041,909 23,144,819
Transfers between funds ......................... 7,127,420 40,976,322 (23,713,726) (13,621,857)
Redemptions ..................................... (8,699,070) (2,970,574) (23,363,372) (24,447,184)
Annuity benefits ................................ -- -- (49,054) (19,554)
Annual contract maintenance charge (note 2) ..... (14,896) (4,885) (52,172) (61,292)
Contingent deferred sales charges (note 2) ...... (115,042) (35,504) (212,723) (209,330)
Adjustments to maintain reserves ................ 183 (191) (6,783) 5,646
---------------- ---------- ----------- -----------
Net equity transactions .................... 4,951,391 40,634,988 (38,355,921) (15,208,752)
---------------- ---------- ----------- -----------
Net change in contract owners' equity ............. 9,878,182 37,860,012 (38,251,883) (9,765,203)
Contract owners' equity beginning of period ....... 37,860,012 -- 178,684,975 188,450,178
---------------- ---------- ----------- -----------
Contract owners' equity end of period ............. $ 47,738,194 37,860,012 140,433,092 178,684,975
================ ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
NBAMTPart OppBdFd
---------------------------------- ---------------------------------
1999 1998 1999 1998
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 7,337,748 3,116,604 15,414,869 4,888,363
Mortality, expense and administration
charges (note 2):
BOA ........................................ (3,341,574) (4,534,910) (1,934,416) (1,946,480)
BOA Vision ................................. (4,626,485) (5,859,017) (2,370,252) (2,306,525)
BOA Enterprise ............................. (7,538) (9,661) (3,480) (2,200)
----------- ----------- ----------- -----------
Net investment activity ...................... (637,849) (7,286,984) 11,106,721 633,158
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ........... 239,904,147 323,653,191 76,868,485 72,961,916
Cost of mutual fund shares sold ................. (222,571,480) (285,611,423) (76,262,770) (68,091,867)
----------- ----------- ----------- -----------
Realized gain (loss) on investments .......... 17,332,667 38,041,768 605,715 4,870,049
Change in unrealized gain (loss) on investments . 4,613,141 (112,673,667) (22,578,962) 6,100,995
----------- ----------- ----------- -----------
Net gain (loss) on investments ............... 21,945,808 (74,631,899) (21,973,247) 10,971,044
----------- ----------- ----------- -----------
Reinvested capital gains ........................ 12,761,301 98,173,016 1,480,371 4,423,968
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 34,069,260 16,254,133 (9,386,155) 16,028,170
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 35,843,727 106,356,098 22,252,034 38,178,922
Transfers between funds ......................... (159,119,927) (179,019,279) (24,451,635) 20,835,559
Redemptions ..................................... (53,932,839) (54,732,674) (37,766,569) (27,001,741)
Annuity benefits ................................ (28,192) (14,950) (54,720) (62,643)
Annual contract maintenance charge (note 2) ..... (212,817) (238,809) (93,232) (96,177)
Contingent deferred sales charges (note 2) ...... (793,907) (785,338) (487,790) (362,728)
Adjustments to maintain reserves ................ (6,839) (732) (50,476) 1,178
----------- ----------- ----------- -----------
Net equity transactions .................... (178,250,794) (128,435,684) (40,652,388) 31,492,370
----------- ----------- ----------- -----------
Net change in contract owners' equity ............. (144,181,534) (112,181,551) (50,038,543) 47,520,540
Contract owners' equity beginning of period ....... 665,008,012 777,189,563 338,486,831 290,966,291
----------- ----------- ----------- -----------
Contract owners' equity end of period ............. 520,826,478 665,008,012 288,448,288 338,486,831
=========== =========== =========== ===========
</TABLE>
<PAGE> 13
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN CONTRACT OWNERS' EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
OppGISec OppGro
------------------------------------ -------------------------------
1999 1998 1999 1998
--------------- -------------- -------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 6,228,265 10,856,886 374,223 188,351
Mortality, expense and administration
charges (note 2):
BOA ........................................ (3,866,796) (3,496,341) (966,386) (275,168)
BOA Vision ................................. (4,038,563) (3,604,162) (879,203) (239,248)
BOA Enterprise ............................. (2,009) (1,733) (2,309) (731)
---------------- ----------- ----------- ----------
Net investment activity ...................... (1,679,103) 3,754,650 (1,473,675) (326,796)
---------------- ----------- ----------- ----------
Proceeds from mutual fund shares sold ........... 230,947,138 125,576,767 109,609,431 17,011,520
Cost of mutual fund shares sold ................. (158,158,040) (88,844,140) (95,003,738) (17,085,617)
---------------- ----------- ----------- ----------
Realized gain (loss) on investments .......... 72,789,098 36,732,627 14,605,693 (74,097)
Change in unrealized gain (loss) on investments . 197,811,280 (21,261,831) 33,668,784 6,064,468
---------------- ----------- ----------- ----------
Net gain (loss) on investments ............... 270,600,378 15,470,796 48,274,477 5,990,371
---------------- ----------- ----------- ----------
Reinvested capital gains ........................ 17,453,216 40,867,407 4,110,735 2,272,563
---------------- ----------- ----------- ----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 286,374,491 60,092,853 50,911,537 7,936,138
---------------- ----------- ----------- ----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 30,974,273 51,559,320 19,405,784 16,030,396
Transfers between funds ......................... 13,489,169 (20,304,286) 93,474,901 26,102,066
Redemptions ..................................... (58,376,318) (37,751,898) (18,328,101) (2,687,765)
Annuity benefits ................................ (66,897) (42,320) (9,494) (3,335)
Annual contract maintenance charge (note 2) ..... (194,429) (192,525) (53,674) (13,027)
Contingent deferred sales charges (note 2) ...... (756,679) (520,846) (198,997) (30,325)
Adjustments to maintain reserves ................ 118,199 (20,237) (4,108) 31,362
---------------- ----------- ----------- ----------
Net equity transactions .................... (14,812,682) (7,272,792) 94,286,311 39,429,372
---------------- ----------- ----------- ----------
Net change in contract owners' equity ............. 271,561,809 52,820,061 145,197,848 47,365,510
Contract owners' equity beginning of period ....... 542,142,739 489,322,678 63,555,624 16,190,114
---------------- ----------- ----------- ----------
Contract owners' equity end of period ............. $ 813,704,548 542,142,739 208,753,472 63,555,624
================ =========== =========== ==========
</TABLE>
<TABLE>
<CAPTION>
OppMult StOpp2
---------------------------------- ---------------------------------
1999 1998 1999 1998
------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 10,981,914 3,212,145 -- 1,848,130
Mortality, expense and administration
charges (note 2):
BOA ........................................ (2,175,410) (2,450,308) (7,048,982) (6,768,918)
BOA Vision ................................. (2,039,541) (2,206,025) (4,034,285) (3,890,877)
BOA Enterprise ............................. (2,810) (2,886) (5,749) (5,469)
----------- ----------- ----------- -----------
Net investment activity ...................... 6,764,153 (1,447,074) (11,089,016) (8,817,134)
----------- ----------- ----------- -----------
Proceeds from mutual fund shares sold ........... 69,845,512 41,801,113 228,074,545 193,720,998
Cost of mutual fund shares sold ................. (56,383,590) (33,330,835) (174,655,731) (137,667,518)
----------- ----------- ----------- -----------
Realized gain (loss) on investments .......... 13,461,922 8,470,278 53,418,814 56,053,480
Change in unrealized gain (loss) on investments . (5,740,060) (9,193,583) 109,728,017 (62,980,528)
----------- ----------- ----------- -----------
Net gain (loss) on investments ............... 7,721,862 (723,305) 163,146,831 (6,927,048)
----------- ----------- ----------- -----------
Reinvested capital gains ........................ 15,885,380 18,630,439 85,940,550 101,358,207
----------- ----------- ----------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 30,371,395 16,460,060 237,998,365 85,614,025
----------- ----------- ----------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 15,845,234 36,934,558 37,535,540 61,374,281
Transfers between funds ......................... (42,513,072) (27,844,235) (45,347,859) (62,713,711)
Redemptions ..................................... (36,045,246) (33,380,272) (94,240,143) (60,899,142)
Annuity benefits ................................ (60,336) (41,603) (65,711) (63,802)
Annual contract maintenance charge (note 2) ..... (123,285) (137,253) (342,464) (360,713)
Contingent deferred sales charges (note 2) ...... (375,497) (425,530) (1,055,468) (814,460)
Adjustments to maintain reserves ................ 3,973 (12,023) 13,722 3,809
----------- ----------- ----------- -----------
Net equity transactions .................... (63,268,229) (24,906,358) (103,502,383) (63,473,738)
----------- ----------- ----------- -----------
Net change in contract owners' equity ............. (32,896,834) (8,446,298) 134,495,982 22,140,287
Contract owners' equity beginning of period ....... 332,525,906 340,972,204 786,368,057 764,227,770
----------- ----------- ----------- -----------
Contract owners' equity end of period ............. 299,629,072 332,525,906 920,864,039 786,368,057
=========== =========== =========== ===========
</TABLE>
<PAGE> 14
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN
CONTRACT OWNERS'EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
StDisc2 StIntStk2
------------------------------------ ---------------------------------
1999 1998 1999 1998
---------------- -------------- --------------- ----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ -- -- 138,546 531,928
Mortality, expense and administration
charges (note 2):
BOA ........................................ (1,105,188) (1,451,734) (274,456) (263,007)
BOA Vision ................................. (708,796) (935,260) (343,406) (348,046)
BOA Enterprise ............................. (374) (477) (460) (326)
---------------- ---------------- ---------------- ----------------
Net investment activity ...................... (1,814,358) (2,387,471) (479,776) (79,451)
---------------- ---------------- ---------------- ----------------
Proceeds from mutual fund shares sold ........... 77,903,728 81,516,149 145,476,420 52,143,627
Cost of mutual fund shares sold ................. (83,032,990) (73,384,284) (130,387,481) (61,140,929)
---------------- ---------------- ---------------- ----------------
Realized gain (loss) on investments .......... (5,129,262) 8,131,865 15,088,939 (8,997,302)
Change in unrealized gain (loss) on investments . (13,708,257) 1,124,195 25,244,195 6,694,716
---------------- ---------------- ---------------- ----------------
Net gain (loss) on investments ............... (18,837,519) 9,256,060 40,333,134 (2,302,586)
---------------- ---------------- ---------------- ----------------
Reinvested capital gains ........................ 20,481,549 2,856,579 -- --
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (170,328) 9,725,168 39,853,358 (2,382,037)
---------------- ---------------- ---------------- ----------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 7,639,379 13,493,166 2,463,219 4,412,210
Transfers between funds ......................... (30,800,199) (28,949,271) 25,990,469 (10,811,583)
Redemptions ..................................... (16,279,030) (14,296,989) (5,279,553) (3,576,372)
Annuity benefits ................................ (11,538) (10,191) (5,184) (4,776)
Annual contract maintenance charge (note 2) ..... (69,659) (92,275) (16,210) (17,559)
Contingent deferred sales charges (note 2) ...... (220,909) (225,995) (74,931) (55,830)
Adjustments to maintain reserves ................ (8) (15,647) 3,770 (5,143)
---------------- ---------------- ---------------- ----------------
Net equity transactions .................... (39,741,964) (30,097,202) 23,081,580 (10,059,053)
---------------- ---------------- ---------------- ----------------
NET CHANGE IN CONTRACT OWNERS'EQUITY .............. (39,912,292) (20,372,034) 62,934,938 (12,441,090)
CONTRACT OWNERS'EQUITY BEGINNING OF PERIOD ........ 174,894,389 195,266,423 37,277,231 49,718,321
---------------- ---------------- ---------------- ----------------
CONTRACT OWNERS'EQUITY END OF PERIOD .............. $ 134,982,097 174,894,389 100,212,169 37,277,231
================ ================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
VEWrldBd VEWrldEMkt
------------------------------- ---------------------------------
1999 1998 1999 1998
------------ ----------- ------------- -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 3,808,176 874,183 -- 606,759
Mortality, expense and administration
charges (note 2):
BOA ........................................ (619,697) (780,003) (561,374) (339,625)
BOA Vision ................................. (479,059) (569,654) (476,399) (355,352)
BOA Enterprise ............................. (161) (230) (1,380) (728)
---------------- ---------------- ---------------- ----------------
Net investment activity ...................... 2,709,259 (475,704) (1,039,153) (88,946)
---------------- ---------------- ---------------- ----------------
Proceeds from mutual fund shares sold ........... 76,447,420 69,501,826 215,014,766 93,885,231
Cost of mutual fund shares sold ................. (78,440,054) (64,533,774) (184,370,544) (142,305,956)
---------------- ---------------- ---------------- ----------------
Realized gain (loss) on investments .......... (1,992,634) 4,968,052 30,644,222 (48,420,725)
Change in unrealized gain (loss) on investments . (10,749,478) 6,347,948 31,567,954 27,275,773
---------------- ---------------- ---------------- ----------------
Net gain (loss) on investments ............... (12,742,112) 11,316,000 62,212,176 (21,144,952)
---------------- ---------------- ---------------- ----------------
Reinvested capital gains ........................ 1,701,526 -- -- 539,341
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ (8,331,327) 10,840,296 61,173,023 (20,694,557)
---------------- ---------------- ---------------- ----------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 3,783,861 5,953,441 4,868,337 8,718,923
Transfers between funds ......................... (14,694,471) (2,334,954) 62,522,529 (25,081,916)
Redemptions ..................................... (13,131,006) (12,034,561) (11,272,856) (5,537,310)
Annuity benefits ................................ (15,952) (11,719) (2,076) (2,591)
Annual contract maintenance charge (note 2) ..... (32,133) (39,304) (30,204) (24,163)
Contingent deferred sales charges (note 2) ...... (134,638) (134,345) (126,235) (76,401)
Adjustments to maintain reserves ................ (1,769) (57,710) 56,153 (41,405)
---------------- ---------------- ---------------- ----------------
Net equity transactions .................... (24,226,108) (8,659,152) 56,015,648 (22,044,863)
---------------- ---------------- ---------------- ----------------
NET CHANGE IN CONTRACT OWNERS'EQUITY .............. (32,557,435) 2,181,144 117,188,671 (42,739,420)
CONTRACT OWNERS'EQUITY BEGINNING OF PERIOD ........ 99,446,008 97,264,864 35,036,893 77,776,313
---------------- ---------------- ---------------- ----------------
CONTRACT OWNERS'EQUITY END OF PERIOD .............. 66,888,573 99,446,008 152,225,564 35,036,893
================ ================ ================ ================
</TABLE>
<PAGE> 15
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN
CONTRACT OWNERS'EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
VEWrldHAs MSRESec
------------------------------------ --------------------------------
1999 1998 1999 1998
--------------- --------------- ------------ -----------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ 987,982 711,661 8,729,269 393,097
Mortality, expense and administration
charges (note 2):
BOA ........................................ (594,433) (800,231) (774,460) (1,314,258)
BOA Vision ................................. (342,876) (438,740) (936,460) (1,509,947)
BOA Enterprise ............................. (792) (892) (1,814) (2,421)
---------------- ---------------- ---------------- ----------------
Net investment activity ...................... 49,881 (528,202) 7,016,535 (2,433,529)
---------------- ---------------- ---------------- ----------------
Proceeds from mutual fund shares sold ........... 144,918,510 110,716,383 82,657,939 109,606,337
Cost of mutual fund shares sold ................. (146,155,124) (157,079,801) (100,253,658) (107,603,836)
---------------- ---------------- ---------------- ----------------
Realized gain (loss) on investments .......... (1,236,614) (46,363,418) (17,595,719) 2,002,501
Change in unrealized gain (loss) on investments . 12,197,845 (5,019,280) 4,955,891 (34,053,106)
---------------- ---------------- ---------------- ----------------
Net gain (loss) on investments ............... 10,961,231 (51,382,698) (12,639,828) (32,050,605)
---------------- ---------------- ---------------- ----------------
Reinvested capital gains ........................ -- 17,475,241 -- 3,868,070
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 11,011,112 (34,435,659) (5,623,293) (30,616,064)
---------------- ---------------- ---------------- ----------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 3,038,705 6,023,164 6,177,588 22,405,804
Transfers between funds ......................... (3,908,212) (25,954,967) (45,033,593) (84,189,451)
Redemptions ..................................... (10,586,825) (8,770,856) (13,814,114) (16,396,178)
Annuity benefits ................................ (9,477) (8,819) (6,095) (23,453)
Annual contract maintenance charge (note 2) ..... (38,579) (51,034) (43,795) (65,816)
Contingent deferred sales charges (note 2) ...... (130,954) (112,511) (188,244) (213,235)
Adjustments to maintain reserves ................ 5,697 (61,663) (65,345) (13,239)
---------------- ---------------- ---------------- ----------------
Net equity transactions .................... (11,629,645) (28,936,686) (52,973,598) (78,495,568)
---------------- ---------------- ---------------- ----------------
NET CHANGE IN CONTRACT OWNERS'EQUITY .............. (618,533) (63,372,345) (58,596,891) (109,111,632)
CONTRACT OWNERS'EQUITY BEGINNING OF PERIOD ........ 63,818,047 127,190,392 159,566,073 268,677,705
---------------- ---------------- ---------------- ----------------
CONTRACT OWNERS'EQUITY END OF PERIOD .............. $ 63,199,514 63,818,047 100,969,182 159,566,073
================ ================ ================ ================
</TABLE>
<TABLE>
<CAPTION>
WPIntEq WPPVenCap
---------------------------------- ---------------------------------
1999 1998 1999 1998
-------------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ 2,495,376 1,248,393 -- --
Mortality, expense and administration
charges (note 2):
BOA ........................................ (1,261,922) (1,543,369) (169,484) (124,501)
BOA Vision ................................. (1,728,970) (2,099,581) (191,698) (121,909)
BOA Enterprise ............................. (687) (1,148) (371) (383)
---------------- ---------------- ---------------- ----------------
Net investment activity ...................... (496,203) (2,395,705) (361,553) (246,793)
---------------- ---------------- ---------------- ----------------
Proceeds from mutual fund shares sold ........... 219,304,970 175,012,080 69,208,671 41,505,314
Cost of mutual fund shares sold ................. (212,188,702) (175,381,602) (64,722,902) (41,036,519)
---------------- ---------------- ---------------- ----------------
Realized gain (loss) on investments .......... 7,116,268 (369,522) 4,485,769 468,795
Change in unrealized gain (loss) on investments . 92,169,127 16,362,407 11,911,468 652,131
---------------- ---------------- ---------------- ----------------
Net gain (loss) on investments ............... 99,285,395 15,992,885 16,397,237 1,120,926
---------------- ---------------- ---------------- ----------------
Reinvested capital gains ........................ -- -- -- --
---------------- ---------------- ---------------- ----------------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 98,789,192 13,597,180 16,035,684 874,133
---------------- ---------------- ---------------- ----------------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 11,104,931 24,541,336 1,290,625 2,630,810
Transfers between funds ......................... (29,145,536) (77,448,000) 21,079,024 5,896,486
Redemptions ..................................... (22,034,224) (19,392,829) (2,211,372) (1,865,017)
Annuity benefits ................................ (24,154) (14,068) -- --
Annual contract maintenance charge (note 2) ..... (69,965) (86,940) (7,942) (6,719)
Contingent deferred sales charges (note 2) ...... (320,609) (269,510) (23,526) (22,616)
Adjustments to maintain reserves ................ (28,755) (7,444) 510 (184)
---------------- ---------------- ---------------- ----------------
Net equity transactions .................... (40,518,312) (72,677,455) 20,127,319 6,632,760
---------------- ---------------- ---------------- ----------------
NET CHANGE IN CONTRACT OWNERS'EQUITY .............. 58,270,880 (59,080,275) 36,163,003 7,506,893
CONTRACT OWNERS'EQUITY BEGINNING OF PERIOD ........ 227,695,750 286,776,025 22,185,686 14,678,793
---------------- ---------------- ---------------- ----------------
CONTRACT OWNERS'EQUITY END OF PERIOD .............. 285,966,630 227,695,750 58,348,689 22,185,686
================ ================ ================ ================
</TABLE>
(Continued)
<PAGE> 16
NATIONWIDE VARIABLE ACCOUNT-II
STATEMENTS OF CHANGES IN
CONTRACT OWNERS'EQUITY, CONTINUED
STATEMENTS OF OPERATIONS, Continued
YEARS ENDED DECEMBER 31,1999 AND 1998
<TABLE>
<CAPTION>
WPSmCoGr
---------------------------------
1999 1998
-------------- --------------
<S> <C> <C>
INVESTMENT ACTIVITY:
Reinvested dividends ............................ $ -- --
Mortality, expense and administration
charges (note 2):
BOA ........................................ (1,941,904) (2,148,938)
BOA Vision ................................. (2,107,808) (2,437,919)
BOA Enterprise ............................. (4,194) (4,146)
------------- -----------
Net investment activity ...................... (4,053,906) (4,591,003)
Proceeds from mutual fund shares sold ........... 186,780,446 234,905,719
Cost of mutual fund shares sold ................. (177,277,460) (206,336,848)
------------- -----------
Realized gain (loss) on investments .......... 9,502,986 28,568,871
Change in unrealized gain (loss) on investments . 160,031,891 (37,572,573)
------------- -----------
Net gain (loss) on investments ............... 169,534,877 (9,003,702)
------------- -----------
Reinvested capital gains ........................ 13,490,381 --
------------- -----------
Net increase (decrease) in contract owners'
equity resulting from operations ........ 178,971,352 (13,594,705)
------------- -----------
EQUITY TRANSACTIONS:
Purchase payments received from
contract owners .............................. 16,264,792 35,864,595
Transfers between funds ......................... (5,815,079) (60,145,996)
Redemptions ..................................... (29,565,663) (24,045,876)
Annuity benefits ................................ (19,326) (16,707)
Annual contract maintenance charge (note 2) ..... (114,049) (131,597)
Contingent deferred sales charges (note 2) ...... (439,142) (375,448)
Adjustments to maintain reserves ................ (46,325) (8,986)
------------- -----------
Net equity transactions .................... (19,734,792) (48,860,015)
------------- -----------
NET CHANGE IN CONTRACT OWNERS'EQUITY .............. 159,236,560 (62,454,720)
CONTRACT OWNERS'EQUITY BEGINNING OF PERIOD ........ 320,942,393 383,397,113
------------- -----------
CONTRACT OWNERS'EQUITY END OF PERIOD .............. $ 480,178,953 320,942,393
============= ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 17
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Organization and Nature of Operations
The Nationwide Variable Account-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);
American Century VP - American Century VP Balanced (ACVPBal)
American Century VP - American Century VP Capital Appreciation
(ACVPCapAp)
American Century VP - American Century VP Income & Growth
(ACVPIncGr)
American Century VP - American Century VP International
(ACVPInt)
American Century VP - American Century VP Value (ACVPValue)
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 VISeries - Growth Fund (AVISGro)
American VISeries - High-Yield Bond Fund (AVISHiYld)
American VISeries - 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)
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)
(Continued)
<PAGE> 18
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS, CONTINUED
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 Cap Value Fund (NSATSmCapV)
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 - Guardian Portfolio (NBAMTGuard)
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)
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)
Portfolio of the Van Kampen Life Investment Trust
(Van Kampen LIT);
Van Kampen LIT - Morgan Stanley Real Estate Securities
Portfolio (MSRESec)
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, 1999, contract owners have invested in all of the above
funds. The contract owners' equity is affected by the investment
results of each fund, equity transactions by contract owners and
certain contract expenses (see note 2).
The accompanying financial statements include only contract owners'
purchase payments pertaining to the variable portions of their
contracts and exclude any purchase payments for fixed dollar benefits,
the latter being included in the accounts of the Company.
A contract owner may choose from among a number of different underlying
mutual fund options. The underlying mutual fund options are not
available to the general public directly. The underlying mutual funds
are available as investment options in variable life insurance policies
or variable annuity contracts issued by life insurance companies or, in
some cases, through participation in certain qualified pension or
retirement plans.
Some of the underlying mutual funds have been established by investment
advisers which manage publicly traded mutual funds having similar names
and investment objectives. While some of the underlying mutual funds
may be similar to, and may in fact be modeled after, publicly traded
mutual funds, the underlying mutual funds are not otherwise directly
related to any publicly traded mutual fund. Consequently, the
investment performance of publicly traded mutual funds and any
corresponding underlying mutual funds may differ substantially.
<PAGE> 19
(c) Security Valuation, Transactions and Related Investment Income
The market value of the underlying mutual funds is based on the closing
net asset value per share at December 31, 1999. The cost of investments
sold is determined on the specific identification basis. Investment
transactions are accounted for on the trade date (date the order to buy
or sell is executed) and dividend income is recorded on the ex-dividend
date.
(d) Federal Income Taxes
Operations of the Account form a part of, and are taxed with,
operations of the Company which is taxed as a life insurance company
under the Internal Revenue Code.
The Company does not provide for income taxes within the Account. Taxes
are the responsibility of the contract owner upon termination or
withdrawal.
(e) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles may require management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(f) Calculation of Annuity Reserves
Annuity reserves are computed for contracts in the variable payout
stage according to industry standard mortality tables. The assumed
investment return is 3.5 percent unless the annuitant elects otherwise,
in which case the rate may vary from 3.5 percent to 7 percent, as
regulated by the laws of the respective states. The mortality risk is
fully borne by the Company and may result in additional amounts being
transferred into the Account by the Company to cover greater longevity
of annuitants than expected. Conversely, if reserves exceed amounts
required, transfers may be made to the Company.
(2) EXPENSES
The Company does not deduct a sales charge from purchase payments received
from the contract owners. However, if any part of the contract value of
such contracts is surrendered the Company will, with certain exceptions,
deduct from a contract owner's contract value a contingent deferred sales
charge. 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 up
to $30, dependent on contract type and issue date, 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 AnnuitySM
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%.
(3) RELATED PARTY TRANSACTIONS
The Company performs various services on behalf of the Mutual Fund
Companies in which the Account invests and may receive fees for the
services performed. These services include, among other things, shareholder
communications, preparation, postage, fund transfer agency and various
other record keeping and customer service functions. These fees are paid to
an affiliate of the Company.
(Continued)
<PAGE> 20
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS, CONTINUED
(4) COMPONENTS OF CONTRACT OWNERS' EQUITY
The following is a summary of contract owners' equity at December 31, 1999,
for each series, in both the accumulation and payout phases.
<TABLE>
<CAPTION>
ANNUAL
Contract owners' equity represented by: UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Contracts in accumulation phase:
The BEST OF AMERICA(R)contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ........................ 2,993,387 $20.288854 $60,732,392 9%
Non-tax qualified .................... 2,262,657 20.288854 45,906,718 9%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ........................ 4,817,273 35.454211 170,792,613 62%
Non-tax qualified .................... 3,045,420 35.454211 107,972,963 62%
American Century VP -
American Century VP Income & Growth:
Tax qualified ........................ 1,943,758 12.610627 24,512,007 16%
Non-tax qualified .................... 1,542,249 12.610627 19,448,727 16%
American Century VP -
American Century VP International:
Tax qualified ........................ 4,788,991 26.102697 125,005,581 62%
Non-tax qualified .................... 3,629,927 26.102697 94,750,885 62%
American Century VP -
American Century VP Value:
Tax qualified ........................ 1,174,368 12.777944 15,006,009 (2)%
Non-tax qualified .................... 817,538 12.777944 10,446,455 (2)%
American VI Series - Growth Fund:
Tax qualified ........................ 329,837 65.428997 21,580,904 56%
Non-tax qualified .................... 305,636 65.428997 19,997,457 56%
American VI Series -
High-Yield Bond Fund:
Tax qualified ........................ 52,930 26.601827 1,408,035 4%
Non-tax qualified .................... 25,649 26.601827 682,310 4%
American VI Series - U.S. Government/
AAA-Rated Securities Fund:
Tax qualified ........................ 107,804 20.644287 2,225,537 (2)%
Non-tax qualified .................... 61,401 20.644287 1,267,580 (2)%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ........................ 4,030,454 35.410022 142,718,465 28%
Non-tax qualified .................... 1,978,560 35.410022 70,060,853 28%
Dreyfus Stock Index Fund:
Tax qualified ........................ 17,799,123 32.559249 579,526,078 19%
Non-tax qualified .................... 11,325,336 32.559249 368,744,435 19%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ........................ 3,922,324 14.410358 56,522,093 10%
Non-tax qualified .................... 3,038,562 14.410358 43,786,766 10%
Dreyfus VIF -
Growth and Income Portfolio:
Tax qualified ........................ 1,570,276 14.584456 22,901,621 15%
Non-tax qualified .................... 868,629 14.584456 12,668,481 15%
</TABLE>
<PAGE> 21
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ......................... 19,571,229 41.001029 802,440,528 5%
Non-tax qualified ..................... 13,729,592 41.001029 562,927,400 5%
Fidelity VIP - Growth Portfolio:
Tax qualified ......................... 17,654,023 87.627336 1,546,975,005 36%
Non-tax qualified ..................... 10,898,528 87.627336 955,008,975 36%
Fidelity VIP - High Income Portfolio:
Tax qualified ......................... 5,005,619 28.744305 143,883,039 7%
Non-tax qualified ..................... 4,973,296 28.744305 142,953,937 7%
Fidelity VIP - Overseas Portfolio:
Tax qualified ......................... 9,748,843 28.588402 278,703,843 41%
Non-tax qualified ..................... 7,678,932 28.588402 219,528,395 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ......................... 15,977,617 30.281181 483,821,112 10%
Non-tax qualified ..................... 8,956,320 30.281181 271,207,947 10%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ......................... 17,065,996 25.553458 436,095,212 23%
Non-tax qualified ..................... 11,175,042 25.553458 285,560,966 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ......................... 3,449,404 13.838158 47,733,398 3%
Non-tax qualified ..................... 2,173,640 13.838158 30,079,174 3%
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ......................... 288,028 8.855527 2,550,640 28%
Non-tax qualified ..................... 248,251 8.855527 2,198,393 28%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ......................... 5,806,110 31.511115 182,957,000 3%
Non-tax qualified ..................... 4,182,646 31.511115 131,799,839 3%
Nationwide SAT -
Government Bond Fund:
Tax qualified ......................... 3,473,447 33.975979 118,013,762 (4)%
Non-tax qualified ..................... 2,665,502 33.886230 90,323,814 (4)%
Nationwide SAT - Money Market Fund:
Tax qualified ......................... 14,904,403 24.724254 368,500,245 3%
Non-tax qualified ..................... 13,973,502 24.724254 345,484,413 3%
Nationwide SAT - Small Cap Value Fund:
Tax qualified ......................... 1,353,503 10.761293 14,565,442 26%
Non-tax qualified ..................... 1,205,250 10.761293 12,970,048 26%
Nationwide SAT - Small Company Fund:
Tax qualified ......................... 4,271,874 22.704085 96,988,990 42%
Non-tax qualified ..................... 2,440,861 22.704085 55,417,516 42%
Nationwide SAT - Total Return Fund:
Tax qualified ......................... 4,059,346 98.542231 400,017,011 6%
Non-tax qualified ..................... 2,763,449 96.004702 265,304,098 6%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified ......................... 4,044,236 64.133277 259,370,108 48%
Non-tax qualified ..................... 2,742,557 64.133277 175,889,168 48%
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ......................... 1,353,607 10.529949 14,253,413 13%
Non-tax qualified ..................... 853,290 10.529949 8,985,100 13%
</TABLE>
(Continued)
<PAGE> 22
<TABLE>
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified ..................... 2,335,659 18.256157 42,640,157 0%
Non-tax qualified ................. 2,158,879 18.256157 39,412,834 0%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ..................... 5,884,748 24.366392 143,390,077 6%
Non-tax qualified ................. 3,370,801 24.366392 82,134,259 6%
Oppenheimer VAF - Bond Fund:
Tax qualified ..................... 3,880,174 19.177103 74,410,496 (3)%
Non-tax qualified ................. 3,059,336 19.177103 58,669,202 (3)%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ..................... 9,268,259 28.241523 261,749,750 56%
Non-tax qualified ................. 5,359,593 28.241523 151,363,069 56%
Oppenheimer VAF - Growth Fund:
Tax qualified ..................... 3,453,476 17.844166 61,624,399 40%
Non-tax qualified ................. 2,323,662 17.844166 41,463,810 40%
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified ..................... 3,877,701 24.251858 94,041,454 10%
Non-tax qualified ................. 2,651,955 24.251858 64,314,836 10%
Strong Opportunity Fund II, Inc.:
Tax qualified ..................... 9,527,297 38.936728 370,961,772 33%
Non-tax qualified ................. 5,774,365 38.936728 224,834,879 33%
Strong VIF - Strong Discovery Fund II:
Tax qualified ..................... 2,501,155 19.472227 48,703,058 4%
Non-tax qualified ................. 1,756,743 19.472227 34,207,698 4%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ..................... 1,564,106 16.513647 25,829,094 85%
Non-tax qualified ................. 1,447,666 16.513647 23,906,245 85%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ..................... 1,308,320 14.942949 19,550,159 (9)%
Non-tax qualified ................. 1,204,939 14.942949 18,005,342 (9)%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ..................... 4,194,956 11.300054 47,403,229 98%
Non-tax qualified ................. 3,528,130 11.300054 39,868,060 98%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ..................... 1,664,942 12.830391 21,361,857 19%
Non-tax qualified ................. 1,580,973 12.830391 20,284,502 19%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio:
Tax qualified ..................... 1,634,204 14.892896 24,338,030 (5)%
Non-tax qualified ................. 1,515,882 14.892896 22,575,873 (5)%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ..................... 4,185,969 17.579480 73,587,158 51%
Non-tax qualified ................. 3,074,281 17.579480 54,044,261 51%
</TABLE>
<PAGE> 23
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ......................... 731,811 19.288213 14,115,326 61%
Non-tax qualified ..................... 644,703 19.288213 12,435,169 61%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ......................... 5,376,375 25.523630 137,224,606 67%
Non-tax qualified ..................... 3,969,098 25.523630 101,305,789 67%
The BEST OF AMERICA(R)Nationwide Insurance
Enterprise Annuity contracts:
American Century VP -
American Century VP Balanced:
Tax qualified ........................ 14,335 16.380267 234,811 9%
Non-tax qualified .................... 7,824 16.380267 128,159 9%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified ........................ 8,735 14.255724 124,524 63%
Non-tax qualified .................... 11,822 14.255724 168,531 63%
American Century VP -
American Century VP Income & Growth:
Tax qualified ........................ 1,026 12.717310 13,048 17%
Non-tax qualified .................... 4,483 12.717310 57,012 17%
American Century VP -
American Century VP International:
Tax qualified ........................ 4,359 26.516535 115,586 63%
Non-tax qualified .................... 13,690 26.516535 363,011 63%
American Century VP -
American Century VP Value:
Tax qualified ........................ 1,152 12.974490 14,947 (2)%
Non-tax qualified .................... 9,794 12.974490 127,072 (2)%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified ........................ 22,160 26.214069 580,904 29%
Non-tax qualified .................... 22,246 26.214069 583,158 29%
Dreyfus Stock Index Fund:
Tax qualified ........................ 74,500 25.799667 1,922,075 20%
Non-tax qualified .................... 68,798 25.799667 1,774,965 20%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified ........................ 12,082 14.590853 176,287 11%
Non-tax qualified .................... 18,270 14.590853 266,575 11%
Dreyfus VIF - Growth and Income Portfolio:
Tax qualified ........................ 16,572 14.808738 245,410 16%
Non-tax qualified .................... 14,293 14.808738 211,661 16%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified ........................ 43,344 18.055454 782,596 5%
Non-tax qualified .................... 51,700 18.055454 933,467 5%
Fidelity VIP - Growth Portfolio:
Tax qualified ........................ 82,625 25.356659 2,095,094 36%
Non-tax qualified .................... 81,025 25.356659 2,054,523 36%
Fidelity VIP - High Income Portfolio:
Tax qualified ........................ 14,864 13.653329 202,943 7%
Non-tax qualified .................... 17,568 13.653329 239,862 7%
</TABLE>
(Continued)
<PAGE> 24
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Fidelity VIP - Overseas Portfolio:
Tax qualified ................................. 2,104 20.621533 43,388 41%
Non-tax qualified ............................. 7,979 20.621533 164,539 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified ................................. 12,271 18.026981 221,209 10%
Non-tax qualified ............................. 13,357 18.026981 240,786 10%
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ................................. 23,709 24.040622 569,979 23%
Non-tax qualified ............................. 34,729 24.040622 834,907 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ................................. 7,053 14.011528 98,823 3%
Non-tax qualified ............................. 9,281 14.011528 130,041 3%
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ................................. 50 8.966597 448 28%
Non-tax qualified ............................. 133 8.966597 1,193 28%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ................................. 104,816 23.962791 2,511,684 3%
Non-tax qualified ............................. 88,233 23.962791 2,114,309 3%
Nationwide SAT -
Government Bond Fund:
Tax qualified ................................. 29,229 11.994653 350,592 (3)%
Non-tax qualified ............................. 14,829 11.994653 177,869 (3)%
Nationwide SAT - Money Market Fund:
Tax qualified ................................. 134,873 11.916889 1,607,267 4%
Non-tax qualified ............................. 126,746 11.916889 1,510,418 4%
Nationwide SAT - Small Cap Value Fund:
Tax qualified ................................. 2,089 10.852397 22,671 27%
Non-tax qualified ............................. 7,843 10.852397 85,115 27%
Nationwide SAT - Small Company Fund:
Tax qualified ................................. 19,469 23.169876 451,094 43%
Non-tax qualified ............................. 39,060 23.169876 905,015 43%
Nationwide SAT - Total Return Fund:
Tax qualified ................................. 177,942 20.248322 3,603,027 6%
Non-tax qualified ............................. 167,513 20.248322 3,391,857 6%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified ................................. 9,923 23.621161 234,393 49%
Non-tax qualified ............................. 13,920 23.621161 328,807 49%
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ................................. 2,542 10.619078 26,994 14%
Non-tax qualified ............................. 5,246 10.619078 55,708 14%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified ................................. 2,305 11.627287 26,801 1%
Non-tax qualified ............................. 2,858 11.627287 33,231 1%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ................................. 22,673 19.476219 441,584 7%
Non-tax qualified ............................. 22,752 19.476219 443,123 7%
</TABLE>
<PAGE> 25
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Oppenheimer VAF - Bond Fund:
Tax qualified ................................. 5,049 11.996138 60,569 (2)%
Non-tax qualified ............................. 17,880 11.996138 214,491 (2)%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ................................. 8,666 25.475921 220,774 57%
Non-tax qualified ............................. 6,769 25.475921 172,447 57%
Oppenheimer VAF - Growth Fund:
Tax qualified ................................. 19,261 18.067674 348,001 41%
Non-tax qualified ............................. 10,498 18.067674 189,674 41%
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified ................................. 9,461 16.105297 152,372 11%
Non-tax qualified ............................. 10,611 16.105297 170,893 11%
Strong Opportunity Fund II, Inc.:
Tax qualified ................................. 18,413 23.278533 428,628 34%
Non-tax qualified ............................. 17,006 23.278533 395,875 34%
Strong VIF - Strong Discovery Fund II:
Tax qualified ................................. 998 12.830259 12,805 4%
Non-tax qualified ............................. 3,667 12.830259 47,049 4%
Strong VIF -
Strong International Stock Fund II:
Tax qualified ................................. 6,332 16.768723 106,180 86%
Non-tax qualified ............................. 826 16.768723 13,851 86%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified ................................. 2 10.685109 21 (9)%
Non-tax qualified ............................. 850 10.685109 9,082 (9)%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified ................................. 13,903 11.473874 159,521 99%
Non-tax qualified ............................. 6,958 11.473874 79,835 99%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified ................................. 897 10.385200 9,316 20%
Non-tax qualified ............................. 8,208 10.385200 85,242 20%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio:
Tax qualified ................................. 3,220 14.960757 48,174 (4)%
Non-tax qualified ............................. 9,782 14.960757 146,346 (4)%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified ................................. 3,864 17.437474 67,378 52%
Non-tax qualified ............................. 3,159 17.437474 55,085 52%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified ................................. 595 19.584772 11,653 62%
Non-tax qualified ............................. 2,315 19.584772 45,339 62%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified ................................. 8,591 23.373394 200,801 68%
Non-tax qualified ............................. 24,173 23.373394 565,005 68%
</TABLE>
(Continued)
<PAGE> 26
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
The BEST OF AMERICA(R) America's Vision
Annuity(SM) contracts:
American Century VP -
American Century VP Balanced:
Tax qualified .............................. 2,229,877 18.643877 41,573,553 9%
Non-tax qualified .......................... 3,104,126 18.643877 57,872,943 9%
American Century VP -
American Century VP Capital Appreciation:
Tax qualified .............................. 2,124,515 18.015046 38,273,235 62%
Non-tax qualified .......................... 3,403,398 18.015046 61,312,372 62%
American Century VP -
American Century VP Income & Growth:
Tax qualified .............................. 1,671,694 12.589315 21,045,482 16%
Non-tax qualified .......................... 1,490,691 12.589315 18,766,779 16%
American Century VP -
American Century VP International:
Tax qualified .............................. 3,535,992 25.959887 91,793,953 62%
Non-tax qualified .......................... 5,086,548 25.959887 132,046,211 62%
American Century VP -
American Century VP Value:
Tax qualified .............................. 1,129,610 12.738880 14,389,966 (2)%
Non-tax qualified .......................... 1,432,698 12.738880 18,250,968 (2)%
The Dreyfus Socially Responsible
Growth Fund, Inc.:
Tax qualified .............................. 2,307,767 33.342555 76,946,848 28%
Non-tax qualified .......................... 3,065,919 33.342555 102,225,573 28%
Dreyfus Stock Index Fund:
Tax qualified .............................. 14,668,287 32.260809 473,210,805 19%
Non-tax qualified .......................... 20,456,946 32.260809 659,957,660 19%
Dreyfus VIF -
Capital Appreciation Portfolio:
Tax qualified .............................. 2,795,489 14.374409 40,183,502 10%
Non-tax qualified .......................... 4,202,770 14.374409 60,412,335 10%
Dreyfus VIF - Growth and Income Portfolio:
Tax qualified .............................. 1,464,304 14.539855 21,290,768 15%
Non-tax qualified .......................... 2,079,004 14.539855 30,228,417 15%
Fidelity VIP - Equity-Income Portfolio:
Tax qualified .............................. 18,744,521 23.541057 441,265,837 5%
Non-tax qualified .......................... 26,435,673 23.541057 622,323,685 5%
Fidelity VIP - Growth Portfolio:
Tax qualified .............................. 16,102,523 34.539423 556,171,853 36%
Non-tax qualified .......................... 22,795,122 34.539423 787,330,361 36%
Fidelity VIP - High Income Portfolio:
Tax qualified .............................. 8,271,114 15.361833 127,059,472 7%
Non-tax qualified .......................... 13,454,975 15.361833 206,693,079 7%
Fidelity VIP - Overseas Portfolio:
Tax qualified .............................. 3,667,413 21.872670 80,216,114 41%
Non-tax qualified .......................... 5,639,452 21.872670 123,349,873 41%
Fidelity VIP-II - Asset Manager Portfolio:
Tax qualified .............................. 7,152,076 18.437523 131,866,566 10%
Non-tax qualified .......................... 9,494,041 18.437523 175,046,599 10%
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Fidelity VIP-II - Contrafund Portfolio:
Tax qualified ................................. 13,246,393 25.437333 336,952,910 23%
Non-tax qualified ............................. 18,358,303 25.437333 466,986,267 23%
Fidelity VIP-III -
Growth Opportunities Portfolio:
Tax qualified ................................. 3,074,953 13.803637 42,445,535 3%
Non-tax qualified ............................. 4,552,923 13.803637 62,846,896 3%
Morgan Stanley -
Emerging Markets Debt Portfolio:
Tax qualified ................................. 153,956 8.833418 1,359,958 28%
Non-tax qualified ............................. 387,856 8.833418 3,426,094 28%
Nationwide SAT -
Capital Appreciation Fund:
Tax qualified ................................. 3,732,455 27.838556 103,906,158 3%
Non-tax qualified ............................. 4,968,186 27.838556 138,307,124 3%
Nationwide SAT -
Government Bond Fund:
Tax qualified ................................. 4,980,532 12.771602 63,609,372 (4)%
Non-tax qualified ............................. 6,771,077 12.771602 86,477,501 (4)%
Nationwide SAT - Money Market Fund:
Tax qualified ................................. 19,142,838 12.331041 236,051,120 3%
Non-tax qualified ............................. 28,039,121 12.331041 345,751,551 3%
Nationwide SAT - Small Cap Value Fund:
Tax qualified ................................. 967,163 10.743114 10,390,342 26%
Non-tax qualified ............................. 1,274,231 10.743114 13,689,209 26%
Nationwide SAT - Small Company Fund:
Tax qualified ................................. 3,356,307 22.607920 75,879,120 42%
Non-tax qualified ............................. 4,099,453 22.607920 92,680,105 42%
Nationwide SAT - Total Return Fund:
Tax qualified ................................. 9,240,684 24.093443 222,639,893 5%
Non-tax qualified ............................. 11,092,594 24.093443 267,258,781 5%
Neuberger & Berman AMT -
Growth Portfolio:
Tax qualified ................................. 2,191,851 28.406340 62,262,465 48%
Non-tax qualified ............................. 3,249,330 28.406340 92,301,573 48%
Neuberger & Berman AMT -
Guardian Portfolio:
Tax qualified ................................. 1,174,502 10.512151 12,346,542 13%
Non-tax qualified ............................. 1,148,237 10.512151 12,070,441 13%
Neuberger & Berman AMT -
Limited Maturity Bond Portfolio:
Tax qualified ................................. 1,753,284 12.023258 21,080,186 0%
Non-tax qualified ............................. 3,083,884 12.023258 37,078,333 0%
Neuberger & Berman AMT -
Partners Portfolio:
Tax qualified ................................. 4,926,644 24.233053 119,387,625 6%
Non-tax qualified ............................. 7,215,015 24.233053 174,841,841 6%
Oppenheimer VAF - Bond Fund:
Tax qualified ................................. 4,920,397 12.779991 62,882,629 (3)%
Non-tax qualified ............................. 7,205,678 12.779991 92,088,500 (3)%
Oppenheimer VAF -
Global Securities Fund:
Tax qualified ................................. 6,498,893 25.830374 167,868,837 56%
Non-tax qualified ............................. 8,973,439 25.830374 231,787,285 56%
</TABLE>
(Continued)
<PAGE> 28
<TABLE>
NATIONWIDE VARIABLE ACCOUNT-II
NOTES TO FINANCIAL STATEMENTS, CONTINUED
<CAPTION>
ANNUAL
UNITS UNIT VALUE RETURN*
----- ---------- -------
<S> <C> <C> <C> <C>
Oppenheimer VAF - Growth Fund:
Tax qualified .............................. 2,671,309 17.799664 47,548,403 40%
Non-tax qualified .......................... 3,228,130 17.799664 57,459,629 40%
Oppenheimer VAF -
Multiple Strategies Fund:
Tax qualified .............................. 3,468,280 17.948145 62,249,192 10%
Non-tax qualified .......................... 4,370,474 17.948145 78,441,901 10%
Strong Opportunity Fund II, Inc.:
Tax qualified .............................. 4,869,488 28.512432 138,840,945 33%
Non-tax qualified .......................... 6,478,747 28.512432 184,724,833 33%
Strong VIF - Strong Discovery Fund II:
Tax qualified .............................. 1,328,451 16.068225 21,345,850 4%
Non-tax qualified .......................... 1,902,709 16.068225 30,573,156 4%
Strong VIF -
Strong International Stock Fund II:
Tax qualified .............................. 1,261,581 16.443689 20,745,046 85%
Non-tax qualified .......................... 1,797,088 16.443689 29,550,756 85%
Van Eck WIT - Worldwide Bond Fund:
Tax qualified .............................. 914,353 11.830291 10,817,062 (9)%
Non-tax qualified .......................... 1,558,403 11.830291 18,436,361 (9)%
Van Eck WIT -
Worldwide Emerging Markets Fund:
Tax qualified .............................. 2,477,889 11.265493 27,914,641 97%
Non-tax qualified .......................... 3,263,317 11.265493 36,762,875 97%
Van Eck WIT -
Worldwide Hard Assets Fund:
Tax qualified .............................. 716,194 10.495465 7,516,789 19%
Non-tax qualified .......................... 1,323,974 10.495465 13,895,723 19%
Van Kampen LIT - Morgan Stanley
Real Estate Securities Portfolio:
Tax qualified .............................. 2,198,091 14.825198 32,587,134 (5)%
Non-tax qualified .......................... 1,432,926 14.825198 21,243,412 (5)%
Warburg Pincus Trust -
International Equity Portfolio:
Tax qualified .............................. 3,168,692 17.499626 55,450,925 51%
Non-tax qualified .......................... 5,861,047 17.499626 102,566,130 51%
Warburg Pincus Trust -
Post Venture Capital Portfolio:
Tax qualified .............................. 776,179 19.229243 14,925,335 61%
Non-tax qualified .......................... 874,495 19.229243 16,815,877 61%
Warburg Pincus Trust -
Small Company Growth Portfolio:
Tax qualified .............................. 3,631,606 25.407601 92,270,396 67%
Non-tax qualified .......................... 5,844,172 25.407601 148,486,390 67%
=========== ===========
Reserves for annuity contracts in payout phase:
Tax qualified .............................. 4,788,357
Non-tax qualified .......................... 12,639,950
---------------
$23,415,344,916
===============
</TABLE>
* The annual return does not include contract charges satisfied by
surrendering units.
<PAGE> 74
<PAGE> 1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Nationwide Life Insurance Company:
We have audited the accompanying consolidated balance sheets of Nationwide Life
Insurance Company and subsidiaries (collectively the Company), a wholly owned
subsidiary of Nationwide Financial Services, Inc., as of December 31, 1999 and
1998, and the related consolidated statements of income, shareholder's equity
and cash flows for each of the years in the three-year period ended December 31,
1999. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Nationwide Life
Insurance Company and subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1999, in conformity with generally accepted
accounting principles.
Columbus, Ohio
January 28, 2000
<PAGE> 2
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Balance Sheets
(in millions, except per share amounts)
<TABLE>
<CAPTION>
December 31,
-----------------------------
Assets 1999 1998
------ --------- ---------
<S> <C> <C>
Investments:
Securities available-for-sale, at fair value:
Fixed maturity securities $15,294.0 $14,245.1
Equity securities 92.9 127.2
Mortgage loans on real estate, net 5,786.3 5,328.4
Real estate, net 254.8 243.6
Policy loans 519.6 464.3
Other long-term investments 73.8 44.0
Short-term investments 416.0 289.1
--------- ---------
22,437.4 20,741.7
--------- ---------
Cash 4.8 3.4
Accrued investment income 238.6 218.7
Deferred policy acquisition costs 2,554.1 2,022.2
Other assets 305.9 420.3
Assets held in separate accounts 67,135.1 50,935.8
--------- ---------
$92,675.9 $74,342.1
========= =========
Liabilities and Shareholder's Equity
------------------------------------
Future policy benefits and claims $21,861.6 $19,767.1
Other liabilities 914.2 866.1
Liabilities related to separate accounts 67,135.1 50,935.8
--------- ---------
89,910.9 71,569.0
--------- ---------
Commitments and contingencies (notes 8 and 13)
Shareholder's equity:
Common stock, $1 par value. Authorized 5.0 million shares;
3.8 million shares issued and outstanding 3.8 3.8
Additional paid-in capital 766.1 914.7
Retained earnings 2,011.0 1,579.0
Accumulated other comprehensive income (15.9) 275.6
--------- ---------
2,765.0 2,773.1
--------- ---------
$92,675.9 $74,342.1
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 3
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Income
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenues:
Policy charges $ 895.5 $ 698.9 $ 545.2
Life insurance premiums 220.8 200.0 205.4
Net investment income 1,520.8 1,481.6 1,409.2
Realized (losses) gains on investments (11.6) 28.4 11.1
Other 66.1 66.8 46.5
-------- -------- --------
2,691.6 2,475.7 2,217.4
-------- -------- --------
Benefits and expenses:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Other benefits and claims 210.4 175.8 178.2
Policyholder dividends on participating policies 42.4 39.6 40.6
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Other operating expenses 463.4 419.7 384.9
-------- -------- --------
2,085.1 1,918.6 1,787.5
-------- -------- --------
Income before federal income tax expense 606.5 557.1 429.9
Federal income tax expense 201.4 190.4 150.2
-------- -------- --------
Net income $ 405.1 $ 366.7 $ 279.7
======== ======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Shareholder's Equity
Years ended December 31, 1999, 1998 and 1997
(in millions)
<TABLE>
<CAPTION>
Accumulated
Additional other Total
Common paid-in Retained comprehensive shareholder's
stock capital earnings income equity
-------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C>
December 31, 1996 $ 3.8 $ 527.9 $1,432.6 $173.6 $2,137.9
Comprehensive income:
Net income -- -- 279.7 -- 279.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 73.5 73.5
--------
Total comprehensive income 353.2
--------
Capital contribution -- 836.8 -- -- 836.8
--------
Dividend to shareholder -- (450.0) (400.0) -- (850.0)
------ -------- -------- ------ --------
December 31, 1997 3.8 914.7 1,312.3 247.1 2,477.9
Comprehensive income:
Net income -- -- 366.7 -- 366.7
Net unrealized gains on securities
available-for-sale arising during
the year -- -- -- 28.5 28.5
--------
Total comprehensive income 395.2
--------
Dividend to shareholder -- -- (100.0) -- (100.0)
------ -------- -------- ------ --------
December 31, 1998 3.8 914.7 1,579.0 275.6 2,773.1
Comprehensive income:
Net income -- -- 405.1 -- 405.1
Net unrealized losses on securities
available-for-sale arising during
the year -- -- -- (315.0) (315.0)
--------
Total comprehensive income 90.1
--------
Capital contribution -- 26.4 87.9 23.5 137.8
--------
Dividends to shareholder -- (175.0) (61.0) -- (236.0)
------ -------- -------- ------ --------
December 31, 1999 $ 3.8 $ 766.1 $2,011.0 $(15.9) $2,765.0
====== ======== ======== ====== ========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 405.1 $ 366.7 $ 279.7
Adjustments to reconcile net income to net cash provided by operating
activities:
Interest credited to policyholder account balances 1,096.3 1,069.0 1,016.6
Capitalization of deferred policy acquisition costs (637.0) (584.2) (487.9)
Amortization of deferred policy acquisition costs 272.6 214.5 167.2
Amortization and depreciation 2.4 (8.5) (2.0)
Realized (gains) losses on invested assets, net 11.6 (28.4) (11.1)
Increase in accrued investment income (7.9) (8.2) (0.3)
Decrease (increase) in other assets 122.9 16.4 (12.7)
Decrease in policy liabilities (20.9) (8.3) (23.1)
Increase (decrease) in other liabilities 149.7 (34.8) 230.6
Other, net (8.6) (11.3) (10.9)
--------- --------- ---------
Net cash provided by operating activities 1,386.2 982.9 1,146.1
--------- --------- ---------
Cash flows from investing activities:
Proceeds from maturity of securities available-for-sale 2,307.9 1,557.0 993.4
Proceeds from sale of securities available-for-sale 513.1 610.5 574.5
Proceeds from repayments of mortgage loans on real estate 696.7 678.2 437.3
Proceeds from sale of real estate 5.7 103.8 34.8
Proceeds from repayments of policy loans and sale of other invested assets 40.9 23.6 22.7
Cost of securities available-for-sale acquired (3,724.9) (3,182.8) (2,828.1)
Cost of mortgage loans on real estate acquired (971.4) (829.1) (752.2)
Cost of real estate acquired (14.2) (0.8) (24.9)
Short-term investments, net (27.5) 69.3 (354.8)
Other, net (110.9) (88.4) (62.5)
--------- --------- ---------
Net cash used in investing activities (1,284.6) (1,058.7) (1,959.8)
--------- --------- ---------
Cash flows from financing activities:
Proceeds from capital contributions -- -- 836.8
Cash dividends paid (188.5) (100.0) --
Increase in investment product and universal life insurance
product account balances 3,799.4 2,682.1 2,488.5
Decrease in investment product and universal life insurance
product account balances (3,711.1) (2,678.5) (2,379.8)
--------- --------- ---------
Net cash used in financing activities (100.2) (96.4) 945.5
--------- --------- ---------
Net increase (decrease) in cash 1.4 (172.2) 131.8
Cash, beginning of year 3.4 175.6 43.8
--------- --------- ---------
Cash, end of year $ 4.8 $ 3.4 $ 175.6
========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization and Description of Business
Nationwide Life Insurance Company (NLIC) is a leading provider of
long-term savings and retirement products in the United States and is a
wholly owned subsidiary of Nationwide Financial Services, Inc. (NFS).
The Company develops and sells a diverse range of products including
variable annuities, fixed annuities and life insurance as well as
investment management and administrative services. NLIC markets its
products through a broad network of distribution channels, including
independent broker/dealers, national and regional brokerage firms,
financial institutions, pension plan administrators, life insurance
specialists, Nationwide Retirement Solutions sales representatives, and
Nationwide agents.
Wholly owned subsidiaries of NLIC include Nationwide Life and Annuity
Insurance Company (NLAIC), Nationwide Advisory Services, Inc., and
Nationwide Investment Services Corporation. NLIC and its subsidiaries
are collectively referred to as "the Company."
(2) Summary of Significant Accounting Policies
The significant accounting policies followed by the Company that
materially affect financial reporting are summarized below. The
accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles, which differ
from statutory accounting practices prescribed or permitted by
regulatory authorities. Annual Statements for NLIC and NLAIC, filed
with the Department of Insurance of the State of Ohio (the Department),
are prepared on the basis of accounting practices prescribed or
permitted by the Department. Prescribed statutory accounting practices
include a variety of publications of the National Association of
Insurance Commissioners (NAIC), as well as state laws, regulations and
general administrative rules. Permitted statutory accounting practices
encompass all accounting practices not so prescribed. The Company has
no material permitted statutory accounting practices.
In preparing the consolidated financial statements, management is
required to make estimates and assumptions that affect the reported
amounts of assets and liabilities and the disclosures of contingent
assets and liabilities as of the date of the consolidated financial
statements and the reported amounts of revenues and expenses for the
reporting period. Actual results could differ significantly from those
estimates.
The most significant estimates include those used in determining
deferred policy acquisition costs, valuation allowances for mortgage
loans on real estate and real estate investments and the liability for
future policy benefits and claims. Although some variability is
inherent in these estimates, management believes the amounts provided
are adequate.
(a) Consolidation Policy
The consolidated financial statements include the accounts of NLIC
and its wholly owned subsidiaries. All significant intercompany
balances and transactions have been eliminated.
<PAGE> 7
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(b) Valuation of Investments and Related Gains and Losses
The Company is required to classify its fixed maturity securities
and equity securities as either held-to-maturity,
available-for-sale or trading. Fixed maturity securities are
classified as held-to-maturity when the Company has the positive
intent and ability to hold the securities to maturity and are
stated at amortized cost. Fixed maturity securities not classified
as held-to-maturity and all equity securities are classified as
available-for-sale and are stated at fair value, with the
unrealized gains and losses, net of adjustments to deferred policy
acquisition costs and deferred federal income tax, reported as a
separate component of accumulated other comprehensive income in
shareholder's equity. The adjustment to deferred policy
acquisition costs represents the change in amortization of
deferred policy acquisition costs that would have been required as
a charge or credit to operations had such unrealized amounts been
realized. The Company has no fixed maturity securities classified
as held-to-maturity or trading as of December 31, 1999 or 1998.
Mortgage loans on real estate are carried at the unpaid principal
balance less valuation allowances. The Company provides valuation
allowances for impairments of mortgage loans on real estate based
on a review by portfolio managers. The measurement of impaired
loans is based on the present value of expected future cash flows
discounted at the loan's effective interest rate or, as a
practical expedient, at the fair value of the collateral, if the
loan is collateral dependent. Loans in foreclosure and loans
considered to be impaired are placed on non-accrual status.
Interest received on non-accrual status mortgage loans on real
estate is included in interest income in the period received.
Real estate is carried at cost less accumulated depreciation and
valuation allowances. Other long-term investments are carried on
the equity basis, adjusted for valuation allowances. Impairment
losses are recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount.
Realized gains and losses on the sale of investments are
determined on the basis of specific security identification.
Estimates for valuation allowances and other than temporary
declines are included in realized gains and losses on investments.
(c) Revenues and Benefits
Investment Products and Universal Life Insurance Products:
Investment products consist primarily of individual and group
variable and fixed deferred annuities. Universal life insurance
products include universal life insurance, variable universal life
insurance, corporate owned life insurance and other
interest-sensitive life insurance policies. Revenues for
investment products and universal life insurance products consist
of net investment income, asset fees, cost of insurance, policy
administration and surrender charges that have been earned and
assessed against policy account balances during the period. Policy
benefits and claims that are charged to expense include interest
credited to policy account balances and benefits and claims
incurred in the period in excess of related policy account
balances.
Traditional Life Insurance Products: Traditional life insurance
products include those products with fixed and guaranteed premiums
and benefits and consist primarily of whole life insurance,
limited-payment life insurance, term life insurance and certain
annuities with life contingencies. Premiums for traditional life
insurance products are recognized as revenue when due. Benefits
and expenses are associated with earned premiums so as to result
in recognition of profits over the life of the contract. This
association is accomplished by the provision for future policy
benefits and the deferral and amortization of policy acquisition
costs.
<PAGE> 8
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(d) Deferred Policy Acquisition Costs
The costs of acquiring new business, principally commissions,
certain expenses of the policy issue and underwriting department
and certain variable sales expenses have been deferred. For
investment products and universal life insurance products,
deferred policy acquisition costs are being amortized with
interest over the lives of the policies in relation to the present
value of estimated future gross profits from projected interest
margins, asset fees, cost of insurance, policy administration and
surrender charges. For years in which gross profits are negative,
deferred policy acquisition costs are amortized based on the
present value of gross revenues. Deferred policy acquisition costs
are adjusted to reflect the impact of unrealized gains and losses
on fixed maturity securities available-for-sale as described in
note 2(b). For traditional life insurance products, these deferred
policy acquisition costs are predominantly being amortized with
interest over the premium paying period of the related policies in
proportion to the ratio of actual annual premium revenue to the
anticipated total premium revenue. Such anticipated premium
revenue was estimated using the same assumptions as were used for
computing liabilities for future policy benefits.
(e) Separate Accounts
Separate account assets and liabilities represent contractholders'
funds which have been segregated into accounts with specific
investment objectives. For all but $915.4 million of separate
account assets, the investment income and gains or losses of these
accounts accrue directly to the contractholders. The activity of
the separate accounts is not reflected in the consolidated
statements of income and cash flows except for the fees the
Company receives.
(f) Future Policy Benefits
Future policy benefits for investment products in the accumulation
phase, universal life insurance and variable universal life
insurance policies have been calculated based on participants'
contributions plus interest credited less applicable contract
charges. The average interest rate credited on investment product
policy reserves was 5.6%, 6.0% and 6.1% for the years ended
December 31, 1999, 1998 and 1997, respectively.
Future policy benefits for traditional life insurance policies
have been calculated by the net level premium method using
interest rates varying from 6.0% to 10.5% and estimates of
mortality, morbidity, investment yields and withdrawals which were
used or which were being experienced at the time the policies were
issued, rather than the assumptions prescribed by state regulatory
authorities.
<PAGE> 9
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(g) Participating Business
Participating business represents approximately 29% in 1999 (40%
in 1998 and 50% in 1997) of the Company's life insurance in force,
69% in 1999 (74% in 1998 and 77% in 1997) of the number of life
insurance policies in force, and 13% in 1999 (14% in 1998 and 27%
in 1997) of life insurance statutory premiums. The provision for
policyholder dividends is based on current dividend scales and is
included in "Future policy benefits and claims" in the
accompanying consolidated balance sheets.
(h) Federal Income Tax
The Company files a consolidated federal income tax return with
Nationwide Mutual Insurance Company (NMIC), the majority
shareholder of Nationwide Corp. The members of the consolidated
tax return group have a tax sharing arrangement which provides, in
effect, for each member to bear essentially the same federal
income tax liability as if separate tax returns were filed.
The Company utilizes the asset and liability method of accounting
for income tax. Under this method, deferred tax assets and
liabilities are recognized for the future tax consequences
attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. Under this method, the effect on deferred
tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
Valuation allowances are established when necessary to reduce the
deferred tax assets to the amounts expected to be realized.
(i) Reinsurance Ceded
Reinsurance premiums ceded and reinsurance recoveries on benefits
and claims incurred are deducted from the respective income and
expense accounts. Assets and liabilities related to reinsurance
ceded are reported on a gross basis.
(j) Recently Issued Accounting Pronouncements
In March 1998, The American Institute of Certified Public
Accountant's Accounting Standards Executive Committee issued
Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." The
SOP, which has been adopted prospectively as of January 1, 1999,
requires the capitalization of certain costs incurred in
connection with developing or obtaining internal use software.
Prior to the adoption of SOP 98-1, the Company expensed internal
use software related costs as incurred. The effect of adopting the
SOP was to increase net income for 1999 by $8.3 million.
In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133). FAS 133 establishes accounting
and reporting standards for derivative instruments and for hedging
activities. Contracts that contain embedded derivatives, such as
certain investment and insurance contracts, are also addressed by
the Statement. FAS 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value. In
July 1999 the FASB issued Statement No. 137 which delayed the
effective date of FAS 133 to fiscal years beginning after June 15,
2000. The Company plans to adopt this Statement in first quarter
2001 and is currently evaluating the impact on results of
operations and financial condition.
(k) Reclassification
Certain items in the 1998 and 1997 consolidated financial
statements have been reclassified to conform to the 1999
presentation.
<PAGE> 10
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(3) Investments
The amortized cost, gross unrealized gains and losses and estimated
fair value of securities available-for-sale as of December 31, 1999 and
1998 were:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
(in millions) cost gains losses fair value
--------- ------ ------- ---------
<S> <C> <C> <C> <C>
December 31, 1999:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 428.4 $ 23.4 $ (2.4) $ 449.4
Obligations of states and political subdivisions 0.8 -- -- 0.8
Debt securities issued by foreign governments 110.6 0.6 (0.8) 110.4
Corporate securities 11,414.7 118.9 (218.6) 11,315.0
Mortgage-backed securities 3,422.8 25.8 (30.2) 3,418.4
--------- ------ ------- ---------
Total fixed maturity securities 15,377.3 168.7 (252.0) 15,294.0
Equity securities 84.9 12.4 (4.4) 92.9
--------- ------ ------- ---------
$15,462.2 $181.1 $(256.4) $15,386.9
========= ====== ======= =========
December 31, 1998:
Fixed maturity securities:
U.S. Treasury securities and obligations of U.S.
government corporations and agencies $ 255.9 $ 13.0 $ -- $ 268.9
Obligations of states and political subdivisions 1.6 -- -- 1.6
Debt securities issued by foreign governments 106.5 4.5 -- 111.0
Corporate securities 9,899.6 423.2 (18.7) 10,304.1
Mortgage-backed securities 3,457.7 104.2 (2.4) 3,559.5
--------- ------ ------- ---------
Total fixed maturity securities 13,721.3 544.9 (21.1) 14,245.1
Equity securities 110.4 18.3 (1.5) 127.2
--------- ------ ------- ---------
$13,831.7 $563.2 $ (22.6) $14,372.3
========= ====== ======= =========
</TABLE>
The amortized cost and estimated fair value of fixed maturity
securities available-for-sale as of December 31, 1999, by expected
maturity, are shown below. Expected maturities will differ from
contractual maturities because borrowers may have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Amortized Estimated
(in millions) cost fair value
--------- ---------
<S> <C> <C>
Fixed maturity securities available for sale:
Due in one year or less $ 847.0 $ 847.0
Due after one year through five years 5,240.5 5,205.7
Due after five years through ten years 5,046.9 5,005.2
Due after ten years 4,242.9 4,236.1
--------- ---------
$15,377.3 $15,294.0
========= =========
</TABLE>
<PAGE> 11
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The components of unrealized (losses) gains on securities
available-for-sale, net, were as follows as of December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998
------ -------
<S> <C> <C>
Gross unrealized (losses) gains $(75.3) $ 540.6
Adjustment to deferred policy acquisition costs 50.9 (116.6)
Deferred federal income tax 8.5 (148.4)
------ -------
$(15.9) $ 275.6
====== =======
</TABLE>
An analysis of the change in gross unrealized (losses) gains on
securities available-for-sale for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- ------
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(607.1) $52.6 $137.5
Equity securities (8.8) 4.2 (2.7)
------- ----- ------
$(615.9) $56.8 $134.8
======= ===== ======
</TABLE>
Proceeds from the sale of securities available-for-sale during 1999,
1998 and 1997 were $513.1 million, $610.5 million and $574.5 million,
respectively. During 1999, gross gains of $10.4 million ($9.0 million
and $9.9 million in 1998 and 1997, respectively) and gross losses of
$28.0 million ($7.6 million and $18.0 million in 1998 and 1997,
respectively) were realized on those sales. In addition, gross gains of
$15.1 million and gross losses of $0.7 million were realized in 1997
when the Company paid a dividend to NFS, which then made an equivalent
dividend to Nationwide Corp., consisting of securities having an
aggregate fair value of $850.0 million.
The Company had $15.6 million of real estate investments at December
31, 1999 that were non-income producing the preceding twelve months.
During 1998 the Company had investments of $42.4 million that were
non-income producing, which consisted of $32.7 million of securities
available-for-sale and $9.7 million of real estate.
Real estate is presented at cost less accumulated depreciation of $24.8
million as of December 31, 1999 ($21.5 million as of December 31, 1998)
and valuation allowances of $5.5 million as of December 31, 1999 ($5.4
million as of December 31, 1998).
The recorded investment of mortgage loans on real estate considered to
be impaired was $3.7 million as of both December 31, 1999 and 1998. No
valuation allowance has been recorded for these loans as of December
31, 1999 or 1998. During 1999, the average recorded investment in
impaired mortgage loans on real estate was approximately $3.7 million
($9.1 million in 1998) and there was no interest income recognized on
those loans. Interest income recognized on impaired loans was $0.3
million in 1998 which is equal to interest income recognized using a
cash-basis method of income recognition.
<PAGE> 12
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Activity in the valuation allowance account for mortgage loans on real
estate is summarized for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Allowance, beginning of year $42.4 $42.5 $51.0
Additions (reductions) charged to operations 0.7 (0.1) (1.2)
Direct write-downs charged against the allowance -- -- (7.3)
Allowance on acquired mortgage loans 1.3 -- --
----- ----- -----
Allowance, end of year $44.4 $42.4 $42.5
===== ===== =====
</TABLE>
An analysis of investment income by investment type follows for the
years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Gross investment income:
Securities available-for-sale:
Fixed maturity securities $1,031.3 $ 982.5 $ 911.6
Equity securities 2.5 0.8 0.8
Mortgage loans on real estate 460.4 458.9 457.7
Real estate 28.8 40.4 42.9
Short-term investments 18.6 17.8 22.7
Other 26.5 30.7 21.0
-------- -------- --------
Total investment income 1,568.1 1,531.1 1,456.7
Less investment expenses 47.3 49.5 47.5
-------- -------- --------
Net investment income $1,520.8 $1,481.6 $1,409.2
======== ======== ========
</TABLE>
An analysis of realized gains (losses) on investments, net of valuation
allowances, by investment type follows for the years ended December 31:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----- -----
<S> <C> <C> <C>
Securities available-for-sale:
Fixed maturity securities $(25.0) $(0.7) $ 3.6
Equity securities 7.4 2.1 2.7
Mortgage loans on real estate (0.6) 3.9 1.6
Real estate and other 6.6 23.1 3.2
------ ----- -----
$(11.6) $28.4 $11.1
====== ===== =====
</TABLE>
Fixed maturity securities with an amortized cost of $9.1 million as of
December 31, 1999 and $6.5 million as of December 31, 1998 were on
deposit with various regulatory agencies as required by law.
(4) Derivative Financial Instruments
The Company uses derivative financial instruments, principally interest
rate swaps, interest rate futures contracts and foreign currency swaps,
to manage market risk exposures associated with changes in interest
rates and foreign currency exchange rates. Provided they meet specific
criteria, interest rate swaps and futures are considered hedges and are
accounted for under the accrual method and deferral method,
respectively. The Company has no significant derivative positions that
are not considered hedges.
<PAGE> 13
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest rate swaps are primarily used to convert specific investment
securities and interest bearing policy liabilities from a fixed-rate to
a floating-rate basis. Amounts receivable or payable under these
agreements are recognized as an adjustment to net investment income or
interest credited to policyholder account balances consistent with the
nature of the hedged item. The changes in fair value of the interest
rate swap agreements are not recognized on the balance sheet, except
for interest rate swaps designated as hedges of fixed maturity
securities available-for-sale, for which changes in fair values are
reported in accumulated other comprehensive income.
Interest rate futures contracts are primarily used to hedge the risk of
adverse interest rate changes related to the Company's mortgage loan
commitments and anticipated purchases of fixed rate investments. Gains
and losses are deferred and, at the time of closing, reflected as an
adjustment to the carrying value of the related mortgage loans or
investments. The carrying value adjustments are amortized into net
investment income over the life of the related mortgage loans or
investments.
Foreign currency swaps are used to convert cash flows from specific
policy liabilities and investments denominated in foreign currencies
into U.S. dollars at specified exchange rates. Gains and losses on
foreign currency swaps are recorded in earnings based on the related
spot foreign exchange rate at the end of the reporting period. Gains
and losses on these contracts offset those recorded as a result of
translating the hedged foreign currency denominated liabilities and
investments to U.S. dollars.
The following table summarizes the notional amount of derivative
financial instruments classified as hedges outstanding as of December
31, 1999. Prior to 1999 the Company's activities in derivatives were
not significant.
<TABLE>
<CAPTION>
(in millions)
-------------
<S> <C>
Interest rate swaps
Pay fixed/receive variable rate swaps hedging investments $362.7
Pay variable/receive fixed rate swaps hedging investments $ 28.5
Other contracts hedging investments $ 19.1
Pay variable/receive fixed rate swaps hedging liabilities $577.2
Foreign currency swaps
Hedging foreign currency denominated investments $ 14.8
Hedging foreign currency denominated liabilities $577.2
Interest rate futures contracts $781.6
</TABLE>
<PAGE> 14
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
(5) Federal Income Tax
The tax effects of temporary differences that give rise to significant
components of the net deferred tax liability as of December 31, 1999
and 1998 are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998
---- ----
<S> <C> <C>
Deferred tax assets:
Fixed maturity securities $ 5.3 $ --
Future policy benefits 149.5 207.7
Liabilities in separate accounts 373.6 319.9
Mortgage loans on real estate and real estate 18.5 17.5
Other assets and other liabilities 51.1 58.9
----- ------
Total gross deferred tax assets 598.0 604.0
Less valuation allowance (7.0) (7.0)
----- ------
Net deferred tax assets 591.0 597.0
----- ------
Deferred tax liabilities:
Deferred policy acquisition costs 724.4 568.7
Fixed maturity securities -- 212.2
Deferred tax on realized investment gains 34.7 34.8
Equity securities and other long-term investments 10.8 9.6
Other 26.5 21.6
------ ------
Total gross deferred tax liabilities 796.4 846.9
------ ------
Net deferred tax liability $205.4 $249.9
====== ======
</TABLE>
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion of the
total gross deferred tax assets will not be realized. Nearly all future
deductible amounts can be offset by future taxable amounts or recovery
of federal income tax paid within the statutory carryback period. There
has been no change in the valuation allowance for the years ended
December 31, 1999, 1998 and 1997.
The Company's current federal income tax liability was $104.7 million
and $72.8 million as of December 31, 1999 and 1998, respectively.
Federal income tax expense for the years ended December 31 was as
follows:
(in millions) 1999 1998 1997
------ ------ ------
Currently payable $ 53.6 $186.1 $121.7
Deferred tax expense 147.8 4.3 28.5
------ ------ ------
$201.4 $190.4 $150.2
====== ====== ======
<PAGE> 15
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Total federal income tax expense for the years ended December 31, 1999,
1998 and 1997 differs from the amount computed by applying the U.S.
federal income tax rate to income before tax as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ----------------
(in millions) Amount % Amount % Amount %
------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Computed (expected) tax expense $212.3 35.0 $195.0 35.0 $150.5 35.0
Tax exempt interest and dividends
received deduction (7.3) (1.2) (4.9) (0.9) -- --
Income tax credits (4.3) (0.7) -- -- -- --
Other, net 0.7 0.1 0.3 0.1 (0.3) (0.1)
------ ---- ------ ---- ------ ----
Total (effective rate of each year) $201.4 33.2 $190.4 34.2 $150.2 34.9
====== ==== ====== ==== ====== ====
</TABLE>
Total federal income tax paid was $29.8 million, $173.4 million and
$91.8 million during the years ended December 31, 1999, 1998 and 1997,
respectively.
(6) Comprehensive Income
Comprehensive Income includes net income as well as certain items that
are reported directly within separate components of shareholder's
equity that bypass net income. Currently, the Company's only component
of Other Comprehensive Income is unrealized gains (losses) on
securities available-for-sale. The related before and after federal tax
amounts are as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Unrealized gains (losses) on securities available-for-sale
arising during the period:
Gross $(665.3) $ 58.2 $141.1
Adjustment to deferred policy acquisition costs 167.5 (12.9) (21.8)
Related federal income tax (expense) benefit 171.4 (15.9) (41.7)
------- ------ ------
Net (326.4) 29.4 77.6
------- ------ ------
Reclassification adjustment for net (gains) losses on
securities available-for-sale realized during the
period:
Gross 17.6 (1.4) (6.3)
Related federal income tax expense (benefit) (6.2) 0.5 2.2
------- ------ ------
Net 11.4 (0.9) (4.1)
------- ------ ------
Total Other Comprehensive Income $(315.0) $ 28.5 $ 73.5
======= ====== ======
</TABLE>
(7) Fair Value of Financial Instruments
The following disclosures summarize the carrying amount and estimated
fair value of the Company's financial instruments. Certain assets and
liabilities are specifically excluded from the disclosure requirements
of financial instruments. Accordingly, the aggregate fair value amounts
presented do not represent the underlying value of the Company.
<PAGE> 16
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The fair value of a financial instrument is defined as the amount at
which the financial instrument could be exchanged in a current
transaction between willing parties. In cases where quoted market
prices are not available, fair value is to be based on estimates using
present value or other valuation techniques. Many of the Company's
assets and liabilities subject to the disclosure requirements are not
actively traded, requiring fair values to be estimated by management
using present value or other valuation techniques. These techniques are
significantly affected by the assumptions used, including the discount
rate and estimates of future cash flows. Although fair value estimates
are calculated using assumptions that management believes are
appropriate, changes in assumptions could cause these estimates to vary
materially. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases,
could not be realized in the immediate settlement of the instruments.
Although insurance contracts, other than policies such as annuities
that are classified as investment contracts, are specifically exempted
from the disclosure requirements, estimated fair value of policy
reserves on life insurance contracts is provided to make the fair value
disclosures more meaningful.
The tax ramifications of the related unrealized gains and losses can
have a significant effect on fair value estimates and have not been
considered in the estimates.
The following methods and assumptions were used by the Company in
estimating its fair value disclosures:
Fixed maturity and equity securities: The fair value for fixed
maturity securities is based on quoted market prices, where
available. For fixed maturity securities not actively traded, fair
value is estimated using values obtained from independent pricing
services or, in the case of private placements, is estimated by
discounting expected future cash flows using a current market rate
applicable to the yield, credit quality and maturity of the
investments. The fair value for equity securities is based on
quoted market prices. The carrying amount and fair value for fixed
maturity and equity securities exclude the fair value of
derivatives contracts designated as hedges of fixed maturity and
equity securities.
Mortgage loans on real estate, net: The fair value for mortgage
loans on real estate is estimated using discounted cash flow
analyses, using interest rates currently being offered for similar
loans to borrowers with similar credit ratings. Loans with similar
characteristics are aggregated for purposes of the calculations.
Fair value for mortgage loans in default is the estimated fair
value of the underlying collateral.
Policy loans, short-term investments and cash: The carrying amount
reported in the consolidated balance sheets for these instruments
approximates their fair value.
Separate account assets and liabilities: The fair value of assets
held in separate accounts is based on quoted market prices. The
fair value of liabilities related to separate accounts is the
amount payable on demand, which is net of certain surrender
charges.
Investment contracts: The fair value for the Company's liabilities
under investment type contracts is disclosed using two methods.
For investment contracts without defined maturities, fair value is
the amount payable on demand. For investment contracts with known
or determined maturities, fair value is estimated using discounted
cash flow analysis. Interest rates used are similar to currently
offered contracts with maturities consistent with those remaining
for the contracts being valued.
<PAGE> 17
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Policy reserves on life insurance contracts: Included are
disclosures for individual life insurance, universal life
insurance and supplementary contracts with life contingencies for
which the estimated fair value is the amount payable on demand.
Also included are disclosures for the Company's limited payment
policies, which the Company has used discounted cash flow analyses
similar to those used for investment contracts with known
maturities to estimate fair value.
Commitments to extend credit: Commitments to extend credit have
nominal fair value because of the short-term nature of such
commitments. See note 8.
Futures contracts: The fair value for futures contracts is based
on quoted market prices.
Interest rate and foreign currency swaps: The fair value for
interest rate and foreign currency swaps are calculated with
pricing models using current rate assumptions.
Carrying amount and estimated fair value of financial instruments
subject to disclosure requirements and policy reserves on life
insurance contracts were as follows as of December 31:
<TABLE>
<CAPTION>
1999 1998
------------------------ -------------------------
Carrying Estimated Carrying Estimated
(in millions) amount fair value amount fair value
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Assets:
Investments:
Securities available-for-sale:
Fixed maturity securities $15,294.0 $15,294.0 $14,245.1 $14,245.1
Equity securities 92.9 92.9 128.5 128.5
Mortgage loans on real estate, net 5,786.3 5,745.5 5,328.4 5,527.6
Policy loans 519.6 519.6 464.3 464.3
Short-term investments 416.0 416.0 289.1 289.1
Cash 4.8 4.8 3.4 3.4
Assets held in separate accounts 67,135.1 67,135.1 50,935.8 50,935.8
Liabilities:
Investment contracts (16,977.7) (16,428.6) (15,468.7) (15,158.6)
Policy reserves on life insurance contracts (4,883.9) (4,607.9) (3,914.0) (3,768.9)
Liabilities related to separate accounts (67,135.1) (66,318.7) (50,935.8) (49,926.5)
Derivative financial instruments:
Interest rate swaps hedging assets 4.3 4.3 - -
Interest rate swaps hedging liabilities - (24.2) - -
Foreign currency swaps (11.8) (11.8) - -
Futures contracts 1.3 1.3 (1.3) (1.3)
</TABLE>
(8) Risk Disclosures
The following is a description of the most significant risks facing
life insurers and how the Company mitigates those risks:
Credit Risk: The risk that issuers of securities owned by the Company
or mortgagors on mortgage loans on real estate owned by the Company
will default or that other parties, including reinsurers, which owe the
Company money, will not pay. The Company minimizes this risk by
adhering to a conservative investment strategy, by maintaining
reinsurance and credit and collection policies and by providing for any
amounts deemed uncollectible.
<PAGE> 18
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Interest Rate Risk: The risk that interest rates will change and cause
a decrease in the value of an insurer's investments. This change in
rates may cause certain interest-sensitive products to become
uncompetitive or may cause disintermediation. The Company mitigates
this risk by charging fees for non-conformance with certain policy
provisions, by offering products that transfer this risk to the
purchaser, and/or by attempting to match the maturity schedule of its
assets with the expected payouts of its liabilities. To the extent that
liabilities come due more quickly than assets mature, an insurer would
have to borrow funds or sell assets prior to maturity and potentially
recognize a gain or loss.
Legal/Regulatory Risk: The risk that changes in the legal or regulatory
environment in which an insurer operates will result in increased
competition, reduced demand for a company's products, or create
additional expenses not anticipated by the insurer in pricing its
products. The Company mitigates this risk by offering a wide range of
products and by operating throughout the United States, thus reducing
its exposure to any single product or jurisdiction, and also by
employing underwriting practices which identify and minimize the
adverse impact of this risk.
Financial Instruments with Off-Balance-Sheet Risk: The Company is a
party to financial instruments with off-balance-sheet risk in the
normal course of business through management of its investment
portfolio. These financial instruments include commitments to extend
credit in the form of loans and derivative financial instruments. These
instruments involve, to varying degrees, elements of credit risk in
excess of amounts recognized on the consolidated balance sheets.
Commitments to fund fixed rate mortgage loans on real estate are
agreements to lend to a borrower, and are subject to conditions
established in the contract. Commitments generally have fixed
expiration dates or other termination clauses and may require payment
of a deposit. Commitments extended by the Company are based on
management's case-by-case credit evaluation of the borrower and the
borrower's loan collateral. The underlying mortgage property represents
the collateral if the commitment is funded. The Company's policy for
new mortgage loans on real estate is to lend no more than 75% of
collateral value. Should the commitment be funded, the Company's
exposure to credit loss in the event of nonperformance by the borrower
is represented by the contractual amounts of these commitments less the
net realizable value of the collateral. The contractual amounts also
represent the cash requirements for all unfunded commitments.
Commitments on mortgage loans on real estate of $216.2 million
extending into 2000 were outstanding as of December 31, 1999. The
Company also had $28.0 million of commitments to purchase fixed
maturity securities outstanding as of December 31, 1999.
Notional amounts of derivative financial instruments, primarily
interest rate swaps, interest rate futures contracts and foreign
currency swaps, significantly exceed the credit risk associated with
these instruments and represent contractual balances on which
calculations of amounts to be exchanged are based. Credit exposure is
limited to the sum of the aggregate fair value of positions that have
become favorable to NLIC, including accrued interest receivable due
from counterparties. Potential credit losses are minimized through
careful evaluation of counterparty credit standing, selection of
counterparties from a limited group of high quality institutions,
collateral agreements and other contract provisions. At December 31,
1999, NLIC's credit risk from these derivative financial instruments
was $6.1 million.
Significant Concentrations of Credit Risk: The Company grants mainly
commercial mortgage loans on real estate to customers throughout the
United States. The Company has a diversified portfolio with no more
than 23% (22% in 1998) in any geographic area and no more than 2% (2%
in 1998) with any one borrower as of December 31, 1999. As of December
31, 1999, 39% (42% in 1998) of the remaining principal balance of the
Company's commercial mortgage loan portfolio financed retail
properties.
<PAGE> 19
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Reinsurance: The Company has entered into a reinsurance contract to
cede a portion of its general account individual annuity business to
The Franklin Life Insurance Company (Franklin). Total recoveries due
from Franklin were $143.6 million and $187.9 million as of December 31,
1999 and 1998, respectively. The contract is immaterial to the
Company's results of operations. The ceding of risk does not discharge
the original insurer from its primary obligation to the policyholder.
Under the terms of the contract, Franklin has established a trust as
collateral for the recoveries. The trust assets are invested in
investment grade securities, the market value of which must at all
times be greater than or equal to 102% of the reinsured reserves.
(9) Pension Plan and Postretirement Benefits Other Than Pensions
The Company is a participant, together with other affiliated companies,
in a pension plan covering all employees who have completed at least
one year of service. The Company funds pension costs accrued for direct
employees plus an allocation of pension costs accrued for employees of
affiliates whose work efforts benefit the Company. Assets of the
Retirement Plan are invested in group annuity contracts of NLIC.
Pension cost (benefit) charged to operations by the Company during the
years ended December 31, 1999, 1998 and 1997 were $(8.3) million, $2.0
million and $7.5 million, respectively. The Company has recorded a
prepaid pension asset of $13.3 million and $5.0 million as of December
31, 1999 and 1998, respectively.
In addition to the defined benefit pension plan, the Company, together
with other affiliated companies, participates in life and health care
defined benefit plans for qualifying retirees. Postretirement life and
health care benefits are contributory and generally available to full
time employees who have attained age 55 and have accumulated 15 years
of service with the Company after reaching age 40. Postretirement
health care benefit contributions are adjusted annually and contain
cost-sharing features such as deductibles and coinsurance. In addition,
there are caps on the Company's portion of the per-participant cost of
the postretirement health care benefits. These caps can increase
annually, but not more than three percent. The Company's policy is to
fund the cost of health care benefits in amounts determined at the
discretion of management. Plan assets are invested primarily in group
annuity contracts of NLIC.
The Company elected to immediately recognize its estimated accumulated
postretirement benefit obligation (APBO), however, certain affiliated
companies elected to amortize their initial transition obligation over
periods ranging from 10 to 20 years.
The Company's accrued postretirement benefit expense as of December 31,
1999 and 1998 was $49.6 million and $40.1 million, respectively, and
the net periodic postretirement benefit cost (NPPBC) for 1999, 1998 and
1997 was $4.9 million, $4.1 million and $3.0 million, respectively.
<PAGE> 20
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Information regarding the funded status of the pension plan as a whole
and the postretirement life and health care benefit plan as a whole as
of December 31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
------------------ -----------------------
(in millions) 1999 1998 1999 1998
--------------------------------------------------------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of year $2,185.0 $2,033.8 $ 270.1 $ 237.9
Service cost 80.0 87.6 14.2 9.8
Interest cost 109.9 123.4 17.6 15.4
Actuarial (gain) loss (95.0) 123.2 (64.4) 15.6
Plan settlement in 1999/curtailment in 1998 (396.1) (107.2) -- --
Benefits paid (72.4) (75.8) (11.0) (8.6)
Acquired companies -- -- 13.3 --
-------- -------- ------- -------
Benefit obligation at end of year 1,811.4 2,185.0 239.8 270.1
-------- -------- ------- -------
Change in plan assets:
Fair value of plan assets at beginning of year 2,541.9 2,212.9 77.9 69.2
Actual return on plan assets 161.8 300.7 3.5 5.0
Employer contribution 12.4 104.1 20.9 12.1
Plan settlement (396.1) -- -- --
Benefits paid (72.4) (75.8) (11.0) (8.4)
-------- -------- ------- -------
Fair value of plan assets at end of year 2,247.6 2,541.9 91.3 77.9
-------- -------- ------- -------
Funded status 436.2 356.9 (148.5) (192.2)
Unrecognized prior service cost 28.2 31.5 -- --
Unrecognized net (gains) losses (402.0) (345.7) (46.7) 16.0
Unrecognized net (asset) obligation at transition (7.7) (11.0) 1.1 1.3
-------- -------- ------- -------
Prepaid (accrued) benefit cost $ 54.7 $ 31.7 $(194.1) $(174.9)
======== ======== ======= =======
</TABLE>
<PAGE> 21
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
Basis for measurements, funded status of the pension plan and
postretirement life and health care benefit plan:
<TABLE>
<CAPTION>
Pension Benefits Postretirement Benefits
---------------- -----------------------
1999 1998 1999 1998
---- ---- ------- ------
<S> <C> <C>
Weighted average discount rate 7.00% 5.50% 7.80% 6.65%
Rate of increase in future compensation levels 5.25% 3.75% -- --
Assumed health care cost trend rate:
Initial rate -- -- 15.00% 15.00%
Ultimate rate -- -- 5.50% 8.00%
Uniform declining period -- -- 5 Years 15 Years
</TABLE>
The net periodic pension cost for the pension plan as a whole for the
years ended December 31, 1999, 1998 and 1997 follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
-------------------------------------------------------------------------------- ----------- ------------
<S> <C> <C> <C>
Service cost (benefits earned during the period) $ 80.0 $ 87.6 $ 77.3
Interest cost on projected benefit obligation 109.9 123.4 118.6
Expected return on plan assets (160.3) (159.0) (139.0)
Recognized gains (9.1) (3.8) --
Amortization of prior service cost 3.2 3.2 3.2
Amortization of unrecognized transition obligation (asset) (1.4) 4.2 4.2
------- ------- --------
$ 22.3 $ 55.6 $ 64.3
======= ======= ========
</TABLE>
Effective December 31, 1998, Wausau Service Corporation (WSC) ended its
affiliation with Nationwide Insurance and employees of WSC ended
participation in the plan. A curtailment gain of $67.1 million resulted
(consisting of a $107.2 million reduction in the projected benefit
obligation, net of the write-off of the $40.1 million remaining
unamortized transition obligation related to WSC). During 1999, the
plan transferred assets to settle its obligation related to WSC
employees . A settlement gain of $32.9 million was recognized.
Basis for measurements, net periodic pension cost for the pension plan:
<TABLE>
<CAPTION>
1999 1998 1997
------ ----- -----
<S> <C> <C> <C>
Weighted average discount rate 6.08% 6.00% 6.50%
Rate of increase in future compensation levels 4.33% 4.25% 4.75%
Expected long-term rate of return on plan assets 7.33% 7.25% 7.25%
</TABLE>
<PAGE> 22
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The amount of NPPBC for the postretirement benefit plan as a whole for
the years ended December 31, 1999, 1998 and 1997 was as follows:
<TABLE>
<CAPTION>
(in millions) 1999 1998 1997
------- ----------- -----------
<S> <C> <C> <C>
Service cost (benefits attributed to employee service during the year) $14.2 $ 9.8 $ 7.0
Interest cost on accumulated postretirement benefit obligation 17.6 15.4 14.0
Actual return on plan assets (3.5) (5.0) (3.6)
Amortization of unrecognized transition obligation of affiliates 0.6 0.2 0.2
Net amortization and deferral (1.8) 1.2 (0.5)
----- ----- -----
$27.1 $21.6 $17.1
===== ===== =====
</TABLE>
Actuarial assumptions used for the measurement of the NPPBC for the
postretirement benefit plan for 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------ ------
<S> <C> <C> <C>
Discount rate 6.65% 6.70% 7.25%
Long term rate of return on plan
assets, net of tax 7.15% 5.83% 5.89%
Assumed health care cost trend rate:
Initial rate 15.00% 12.00% 11.00%
Ultimate rate 5.50% 6.00% 6.00%
Uniform declining period 5 Years 12 Years 12 Years
</TABLE>
For the postretirement benefit plan as a whole, a one percentage point
increase or decrease in the assumed health care cost trend rate would
have no impact on the APBO as of December 31, 1999 and have no impact
on the NPPBC for the year ended December 31, 1999.
(10) Shareholder's Equity, Regulatory Risk-Based Capital, Retained Earnings
and Dividend Restrictions
Ohio, NLIC's and NLAIC's state of domicile, imposes minimum risk-based
capital requirements that were developed by the NAIC. The formulas for
determining the amount of risk-based capital specify various weighting
factors that are applied to financial balances or various levels of
activity based on the perceived degree of risk. Regulatory compliance
is determined by a ratio of the company's regulatory total adjusted
capital, as defined by the NAIC, to its authorized control level
risk-based capital, as defined by the NAIC. Companies below specific
trigger points or ratios are classified within certain levels, each of
which requires specified corrective action. NLIC and NLAIC each exceed
the minimum risk-based capital requirements.
The statutory capital and surplus of NLIC as of December 31, 1999, 1998
and 1997 was $1.35 billion, $1.32 billion and $1.13 billion,
respectively. The statutory net income of NLIC for the years ended
December 31, 1999, 1998 and 1997 was $276.2 million, $171.0 million and
$111.7 million, respectively.
The Company is limited in the amount of shareholder dividends it may
pay without prior approval by the Department. As of December 31, 1999
$40.2 million of dividends could be paid by NLIC without prior
approval.
<PAGE> 23
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
In addition, the payment of dividends by NLIC may also be subject to
restrictions set forth in the insurance laws of New York that limit the
amount of statutory profits on NLIC's participating policies (measured
before dividends to policyholders) that can inure to the benefit of the
Company and its shareholder.
The Company currently does not expect such regulatory requirements to
impair its ability to pay operating expenses and shareholder dividends
in the future.
(11) Transactions With Affiliates
During second quarter 1999 the Company entered into a modified
coinsurance arrangement to reinsure the 1999 operating results of an
affiliated company, Employers Life Insurance Company of Wausau (ELOW)
retroactive to January 1, 1999. In September 1999, NFS acquired ELOW
for $120.8 million and immediately merged ELOW into NLIC terminating
the modified coinsurance arrangement. Because ELOW was an affiliate,
the Company accounted for the merger similar to poolings-of-interests;
however, prior period financial statements were not restated due to
immateriality. The reinsurance and merger combined contributed $1.46
million to year to date net income.
The Company has a reinsurance agreement with NMIC whereby all of the
Company's accident and health business is ceded to NMIC on a modified
coinsurance basis. The agreement covers individual accident and health
business for all periods presented and group and franchise accident and
health business since July 1, 1999. Either party may terminate the
agreement on January 1 of any year with prior notice. Prior to July 1,
1999 group and franchise accident and health business and a block of
group life insurance policies were ceded to ELOW under a modified
coinsurance agreement. Under a modified coinsurance agreement, invested
assets are retained by the ceding company and investment earnings are
paid to the reinsurer. Under the terms of the Company's agreements, the
investment risk associated with changes in interest rates is borne by
the reinsurer. Risk of asset default is retained by the Company,
although a fee is paid to the Company for the retention of such risk.
The ceding of risk does not discharge the original insurer from its
primary obligation to the policyholder. The Company believes that the
terms of the modified coinsurance agreements are consistent in all
material respects with what the Company could have obtained with
unaffiliated parties. Revenues ceded to NMIC and ELOW for the years
ended December 31, 1999, 1998 and 1997 were $193.0 million, $216.9
million, and $315.3 million, respectively, while benefits, claims and
expenses ceded were $216.9 million, $259.3 million, and $326.6 million,
respectively.
Pursuant to a cost sharing agreement among NMIC and certain of its
direct and indirect subsidiaries, including the Company, NMIC provides
certain operational and administrative services, such as sales support,
advertising, personnel and general management services, to those
subsidiaries. Expenses covered by such agreement are subject to
allocation among NMIC and such subsidiaries. Measures used to allocate
expenses among companies include individual employee estimates of time
spent, special cost studies, salary expense, commission expense and
other methods agreed to by the participating companies that are within
industry guidelines and practices. In addition, beginning in 1999
Nationwide Services Company, a subsidiary of NMIC, provides computer,
telephone, mail, employee benefits administration, and other services
to NMIC and certain of its direct and indirect subsidiaries, including
the Company, based on specified rates for units of service consumed.
For the years ended December 31, 1999, 1998 and 1997, the Company made
payments to NMIC and Nationwide Services Company totaling $124.1
million, $95.0 million, and $85.8 million, respectively. In addition,
the Company does not believe that expenses recognized under these
agreements are materially different than expenses that would have been
recognized had the Company operated on a stand-alone basis.
The Company leases office space from NMIC and certain of its
subsidiaries. For the years ended December 31, 1999, 1998 and 1997, the
Company made lease payments to NMIC and its subsidiaries of $9.9
million, $8.0 million and $8.4 million, respectively.
<PAGE> 24
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Company also participates in intercompany repurchase agreements
with affiliates whereby the seller will transfer securities to the
buyer at a stated value. Upon demand or a stated period, the securities
will be repurchased by the seller at the original sales price plus a
price differential. Transactions under the agreements during 1999 and
1998 were not material. The Company believes that the terms of the
repurchase agreements are materially consistent with what the Company
could have obtained with unaffiliated parties.
The Company and various affiliates entered into agreements with
Nationwide Cash Management Company (NCMC), an affiliate, under which
NCMC acts as a common agent in handling the purchase and sale of
short-term securities for the respective accounts of the participants.
Amounts on deposit with NCMC were $411.7 million and $248.4 million as
of December 31, 1999 and 1998, respectively, and are included in
short-term investments on the accompanying consolidated balance sheets.
As part of certain restructuring activities that occurred prior to the
March 1997 IPO, the Company paid a dividend valued at $485.7 million to
Nationwide Corp. on January 1, 1997 consisting of the outstanding
shares of common stock of ELOW, National Casualty Company (NCC) and
West Coast Life Insurance Company (WCLIC). Also, on February 24, 1997,
the Company paid a dividend to NFS, and NFS paid an equivalent dividend
to Nationwide Corp., consisting of securities having an aggregate fair
value of $850.0 million. The Company recognized a gain of $14.4 million
on the transfer of securities.
Certain annuity products are sold through three affiliated companies,
which are also subsidiaries of NFS. Total commissions and fees paid to
these affiliates for the three years ended December 31, 1999 were $56.0
million, $60.0 million and $66.1 million, respectively.
(12) Bank Lines of Credit
NFS, NLIC and NMIC are parties to a $600.0 million revolving credit
facility which provides for a $600.0 million loan over a five year term
on a fully revolving basis with a group of national financial
institutions. The credit facility provides for several and not joint
liability with respect to any amount drawn by any party. NFS, NLIC and
NMIC pay facility and usage fees to the financial institutions to
maintain the revolving credit facility. As of December 31, 1999 the
Company had no amounts outstanding under the agreement.
(13) Contingencies
On October 29, 1998, the Company was named in a lawsuit filed in Ohio
state court related to the sale of deferred annuity products for use as
investments in tax-deferred contributory retirement plans (Mercedes
Castillo v. Nationwide Financial Services, Inc., Nationwide Life
Insurance Company and Nationwide Life and Annuity Insurance Company).
On May 3, 1999, the complaint was amended to, among other things, add
Marcus Shore as a second plaintiff. The amended complaint is brought as
a class action on behalf of all persons who purchased individual
deferred annuity contracts or participated in group annuity contracts
sold by the Company and the other named Company affiliates which were
used to fund certain tax-deferred retirement plans. The amended
complaint seeks unspecified compensatory and punitive damages. No class
has been certified. On June 11, 1999, the Company and the other named
defendants filed a motion to dismiss the amended complaint. On March 8,
2000, the court denied the motion to dismiss the amended complaint
filed by the Company and other named defendants. The Company intends to
defend this lawsuit vigorously.
(14) Segment Information
The Company uses differences in products as the basis for defining its
reportable segments. The Company reports three product segments:
Variable Annuities, Fixed Annuities and Life Insurance.
<PAGE> 25
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
The Variable Annuities segment consists of annuity contracts that
provide the customer with access to a wide range of investment options,
tax-deferred accumulation of savings, asset protection in the event of
an untimely death, and flexible payout options including a lump sum,
systematic withdrawal or a stream of payments for life. The Company's
variable annuity products consist almost entirely of flexible premium
deferred variable annuity contracts.
The Fixed Annuities segment consists of annuity contracts that generate
a return for the customer at a specified interest rate fixed for a
prescribed period, tax-deferred accumulation of savings, and flexible
payout options including a lump sum, systematic withdrawal or a stream
of payments for life. Such contracts consist of single premium deferred
annuities, flexible premium deferred annuities and single premium
immediate annuities. The Fixed Annuities segment includes the fixed
option under variable annuity contracts.
The Life Insurance segment consists of insurance products, including
variable universal life insurance and corporate-owned life insurance
products, that provide a death benefit and may also allow the customer
to build cash value on a tax-deferred basis.
In addition to the product segments, the Company reports corporate
revenue and expenses, investments and related investment income
supporting capital not specifically allocated to its product segments,
revenues and expenses of its investment advisor subsidiary, revenues
and expenses related to group annuity contracts sold to Nationwide
Insurance employee and agent benefit plans and all realized gains and
losses on investments in a Corporate and Other segment.
During 1999 the Company revised the allocation of net investment income
among its Life Insurance and Corporate and Other segments. Also,
certain amounts previously reported as other income were reclassified
to operating expense. Amounts reported for prior periods have been
restated to reflect these changes.
The following table summarizes the financial results of the Company's
business segments for the years ended December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1999:
Net investment income (1) $ (41.5) $ 1,134.5 $ 253.1 $ 174.7 $ 1,520.8
Other operating revenue 668.2 43.4 393.0 77.8 1,182.4
--------- --------- -------- -------- ---------
Total operating revenue (2) 626.7 1,177.9 646.1 252.5 2,703.2
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 837.5 130.5 128.3 1,096.3
Amortization of deferred policy
acquisition costs 162.8 49.7 60.1 -- 272.6
Other benefits and expenses 173.6 113.5 334.7 94.4 716.2
--------- --------- -------- -------- ---------
Total expenses 336.4 1,000.7 525.3 222.7 2,085.1
--------- --------- -------- -------- ---------
Operating income before
federal income tax 290.3 177.2 120.8 29.8 618.1
Realized losses on investments -- -- -- (11.6) (11.6)
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 290.3 $ 177.2 $ 120.8 $ 18.2 $ 606.5
========= ========= ======== ======== =========
Assets as of year end $62,599.7 $17,134.8 $6,616.7 $6,324.7 $92,675.9
========= ========= ======== ======== =========
</TABLE>
<PAGE> 26
NATIONWIDE LIFE INSURANCE COMPANY AND SUBSIDIARIES
(a wholly owned subsidiary of
Nationwide Financial Services, Inc.)
Notes to Consolidated Financial Statements, Continued
<TABLE>
<CAPTION>
Variable Fixed Life Corporate
(in millions) Annuities Annuities Insurance and Other Total
------------------------------------ --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
1998:
Net investment income (1) $ (31.3) $ 1,116.6 $ 225.6 $ 170.7 $ 1,481.6
Other operating revenue 532.9 35.7 318.5 78.6 965.7
--------- --------- -------- -------- ---------
Total operating revenue (2) 501.6 1,152.3 544.1 249.3 2,447.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 828.6 115.4 125.0 1,069.0
Amortization of deferred policy
acquisition costs 123.9 44.2 46.4 -- 214.5
Other benefits and expenses 159.3 104.2 293.5 78.1 635.1
--------- --------- -------- -------- ---------
Total expenses 283.2 977.0 455.3 203.1 1,918.6
--------- --------- -------- -------- ---------
Operating income before federal
income tax 218.4 175.3 88.8 46.2 528.7
Realized gains on investments -- -- -- 28.4 28.4
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 218.4 $ 175.3 $ 88.8 $ 74.6 $ 557.1
========= ========= ======== ======== =========
Assets as of year end $47,668.7 $15,215.7 $5,187.6 $6,270.1 $74,342.1
========= ========= ======== ======== =========
1997:
Net investment income (1) $ (26.8) $ 1,098.2 $ 184.9 $ 152.9 $ 1,409.2
Other operating revenue 413.9 43.2 283.4 56.6 797.1
--------- --------- -------- -------- ---------
Total operating revenue (2) 387.1 1,141.4 468.3 209.5 2,206.3
--------- --------- -------- -------- ---------
Interest credited to policyholder
account balances -- 823.4 78.5 114.7 1,016.6
Amortization of deferred policy
acquisition costs 87.8 39.8 39.6 -- 167.2
Benefits and expenses 148.4 108.7 283.5 63.1 603.7
--------- --------- -------- -------- ---------
Total expenses 236.2 971.9 401.6 177.8 1,787.5
--------- --------- -------- -------- ---------
Operating income before federal
income tax 150.9 169.5 66.7 31.7 418.8
Realized gains on investments -- -- -- 11.1 11.1
--------- --------- -------- -------- ---------
Consolidated income before
federal tax expense $ 150.9 $ 169.5 $ 66.7 $ 42.8 $ 429.9
========= ========= ======== ======== =========
Assets as of year end $35,278.7 $14,436.3 $3,901.4 $6,174.3 $59,790.7
========= ========= ======== ======== =========
</TABLE>
- ----------
(1) The Company's method of allocating net investment income results in
a charge (negative net investment income) to the Variable Annuities
segment which is recognized in the Corporate and Other segment. The
charge relates to non-invested assets which support this segment on
a statutory basis.
(2) Excludes realized gains and losses on investments.
The Company has no significant revenue from customers located outside
of the United States nor does the Company have any significant
long-lived assets located outside the United States.
<PAGE> 75
<TABLE>
<CAPTION>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits PAGE
<S> <C>
(a) Financial Statements:
(1) Financial statements included in Prospectus.
(Part A):
Condensed Financial Information.
(2) Financial statements included in Part B: N/A
Those financial statements required by
Item 23 to be included in Part B
have been incorporated therein by reference
to the Prospectus (Part A).
Nationwide Variable Account-II:
Independent Auditors' Report.
Statement of Assets, Liabilities and Contract
Owners' Equity as of December 31, 1999.
Statement of Operations for the years ended
December 31, 1999 and 1998.
Statement of Changes in Contract Owner's Equity
for the years ended December 31, 1999 and 1998.
Notes to Financial Statements.
Nationwide Life Insurance Company and subsidiaries:
Independent Auditors' Report.
Consolidated Balance Sheets as of December
31, 1999 and 1998.
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997.
Consolidated Statements of Shareholder's Equity
for the years ended December 31, 1999, 1998 and
1997.
Consolidated Statements of Cash Flows for the
years ended December 31, 1999, 1998 and 1997.
Notes to Consolidated Financial Statements.
</TABLE>
<PAGE> 76
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 (1933 Act File No. 2-75059
1940 Act File No. 811-3330) and hereby incorporated
by reference.
(2) Not Applicable
(3) Underwriting or Distribution of contracts
between the Registrant and Principal
Underwriter - Attached hereto.
(4) The form of the variable annuity contract
Filed previously with the
Registration Statement (1933 Act File No. 2-67636)
and hereby incorporated
by reference.
(5) Variable Annuity Application
Filed previously with the
Registration Statement (1933 Act File No. 2-67636)
and hereby incorporated by reference.
(6) Articles of Incorporation of Depositor -
Filed previously with the Registration
Statement (1933 Act File No. 2-75059
1940 Act File No. 811-3330) and hereby incorporated
by reference.
(7) Not Applicable
(8) Not Applicable
(9) Opinion of Counsel - Filed previously
with the Registration Statement (1933 Act File No. 2-67636)
and hereby incorporated by reference.
(10) Not Applicable
(11) Not Applicable
(12) Not Applicable
(13) Performance Advertising Calculation
Schedule - Filed previously with the
Registration Statement (1933 Act File No. 2-67636)
and hereby incorporated by reference.
<PAGE> 77
<TABLE>
<CAPTION>
Item 25. DIRECTORS AND OFFICERS OF THE DEPOSITOR
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Lewis J. Alphin Director
519 Bethel Church Road
Mount Olive, NC 28365-6107
A. I. Bell Director
4121 North River Road West
Zanesville, OH 43701
Kenneth D. Davis Director
7229 Woodmansee Road
Leesburg, OH 45135
Keith W. Eckel Director
1647 Falls Road
Clarks Summit, PA 18411
Willard J. Engel Director
301 East Marshall Street
Marshall, MN 56258
Fred C. Finney Director
1558 West Moreland Road
Wooster, OH 44691
Joseph J. Gasper President and Chief Operating Officer
One Nationwide Plaza and Director
Columbus, OH 43215
Dimon R. McFerson Chairman and Chief Executive Officer
One Nationwide Plaza and Director
Columbus, OH 43215
David O. Miller Chairman of the Board and Director
115 Sprague Drive
Hebron, OH 43025
Yvonne L. Montgomery Director
Xerox Corporation
Suite 200
1401 H Street NW
Washington, DC 20005-2110
Ralph M. Paige Director
Federation of Southern
Cooperatives/Land Assistance Fund
2769 Church Street
East Point, GA 30344
James F. Patterson Director
8765 Mulberry Road
Chesterland, OH 44026
</TABLE>
<PAGE> 78
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
Arden L. Shisler Director
1356 North Wenger Road
Dalton, OH 44618
Robert L. Stewart Director
88740 Fairview Road
Jewett, OH 43986
Nancy C. Thomas Director
1767D Westwood Avenue
Alliance, OH 44601
Richard D. Headley Executive Vice President - Chief
One Nationwide Plaza Information Technology Officer
Columbus, OH 43215
Robert A. Oakley Executive Vice President-
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
Robert J. Woodward, Jr. Executive Vice President
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
James E. Brock Senior Vice President - Corporate
One Nationwide Plaza Development
Columbus, OH 43215
Charles A. Bryan Senior Vice President -
One Nationwide Plaza Chief Actuary - Property and Casualty
Columbus, OH 43215
John R. Cook, Jr. Senior Vice President -
One Nationwide Plaza Chief Communications Officer
Columbus, OH 43215
Thomas L. Crumrine Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David A. Diamond Senior Vice President -
One Nationwide Plaza Corporate Controller
Columbus, OH 43215
Philip C. Gath Senior Vice President -
One Nationwide Plaza Chief Actuary - Nationwide Financial
Columbus, OH 43215
Patricia R. Hatler Senior Vice President,
One Nationwide Plaza General Counsel and Secretary
Columbus, OH 43215
</TABLE>
<PAGE> 79
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITIONS AND OFFICES
BUSINESS ADDRESS WITH DEPOSITOR
<S> <C>
David K. Hollingsworth Senior Vice President
One Nationwide Plaza
Columbus, OH 43215
David R. Jahn Senior Vice President -
One Nationwide Plaza Commercial Insurance
Columbus, OH 43215
Donna A James Senior Vice President - Chief Human
One Nationwide Plaza Resources Officer
Columbus, OH 43215
Richard A. Karas Senior Vice President - Sales -
One Nationwide Plaza Financial Services
Columbus, OH 43215
Gregory S. Lashutka Senior Vice President -
One Nationwide Plaza Corporate Relations
Columbus, OH 43215
Edwin P. McCausland, Jr. Senior Vice President -
One Nationwide Plaza Fixed Income Securities
Columbus, OH 43215
Mark D. Phelan Senior Vice President -
One Nationwide Plaza Technology Services
Columbus, OH 43215
Douglas C. Robinette Senior Vice President -
One Nationwide Plaza Claims and Finance Services
Columbus, OH 43215
Mark R. Thresher Senior Vice President -
One Nationwide Plaza Finance - Nationwide Financial
Columbus, OH 43215
Richard M. Waggoner Senior Vice President -
One Nationwide Plaza Operations
Columbus, OH 43215
Susan A. Wolken Senior Vice President - Product
One Nationwide Plaza Management and Nationwide
Columbus, OH 43215 Financial Marketing
</TABLE>
Item 26. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE DEPOSITOR OR
REGISTRANT.
* Subsidiaries for which separate financial statements are filed
** Subsidiaries included in the respective consolidated financial
statements
*** Subsidiaries included in the respective group financial
statements filed for unconsolidated subsidiaries
**** other subsidiaries
<PAGE> 80
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
The 401(k) Companies, Inc. Texas Holding Company
The 401(k) Company Texas Third-party administrator for 401(k)
plans
401(k) Investment Advisors, Inc. Texas Investment advisor registered with the
SEC
401(k) Investments Services, Inc. Texas NASD registered broker-dealer
Affiliate Agency, Inc. Delaware Insurance agency marketing life
insurance & annuity products through
financial institutions
Affiliate Agency of Ohio, Inc. Ohio Insurance agency marketing life
insurance & annuity products through
financial institutions
AID Finance Services, Inc. Iowa Holding Company
ALLIED General Agency Company Iowa Managing general agent and surplus
lines broker for property & casualty
insurance products
ALLIED Group, Inc. Iowa Property & casualty holding company
ALLIED Group Insurance Marketing Iowa Direct marketer for property and
Company casualty insurance products
ALLIED Group Merchant Banking Iowa Broker-Dealer
Corporation
ALLIED Property and Casualty Insurance Iowa Underwrites general property &
Company casualty insurance
Allnations, Inc. Ohio Promotes international cooperative
insurance organizations
AMCO Insurance Company Iowa Underwrites general property &
casualty insurance
American Marine Underwriters, Inc. Florida Underwriting manager for ocean cargo
and bulk insurance
Auto Direkt Insurance Company Germany Insurance Company
Cal-Ag Insurance services, Inc. California Captive insurance brokerage firm
CalFarm Insurance Agency California Former marketing company for
traditional agent producers of CalFarm
Insurance Company
CalFarm Insurance Company California Multi-line insurance company
Caliber Funding Delaware A limited purpose corporation
Colonial County Mutual Insurance Texas Insurance Company
Company
Columbus Insurance Brokerage and Germany General service insurance broker
Service GmbH
</TABLE>
<PAGE> 81
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
Cooperative Service Company Nebraska Insurance agency that sells and
services commercial insurance
Depositors Insurance Company Iowa Underwrites property & casualty
insurance
eNationwide, LLC Ohio A limited liability company to provide
administrative services to
Nationwide's direct operations
Excaliber Funding Corporation Delaware Limited purpose corporation
F&B, Inc. Iowa Insurance Agency
Farmland Mutual Insurance Company Iowa Mutual Insurance Company
Financial Horizons Distributors Alabama Insurance agency marketing life
Agency of Alabama, Inc. insurance and annuity products through
financial institutions
Financial Horizons Distributors Ohio Insurance marketing life insurance and
Agency of Ohio, Inc. annuity products through financial
institutions
Financial Horizons Distributors Oklahoma Insurance marketing life insurance and
Agency of Oklahoma, Inc. annuity products through financial
institutions
Financial Horizons Distributors Texas Insurance marketing life insurance and
Agency of Texas, Inc. annuity products through financial
institutions
*Financial Horizons Investment Trust Massachusetts Diversified, open-end investment
company
Financial Horizons Securities Oklahoma Limited broker-dealer doing business
Corporation solely in the financial institution
market
GatesMcDonald Health Plus Inc. Ohio Managed Care Organization
Gates, McDonald & Company Ohio Services employers for managing
workers' and unemployment compensation
matters
Gates, McDonald & Company of Nevada Nevada Self-insurance administration, claims
examinations and data processing
services
Gates, McDonald & Company of New York, New York Workers' compensation/self-insured
Inc. claims administration services to
employers with exposure in New York
Insurance Intermediaries, Inc. Ohio Insurance agency providing commercial
property & casualty brokerage services
Irvin L. Schwartz and Associates, Inc. Ohio Insurance Agency
Landmark Financial Services of New New York Insurance agency marketing life
York, Inc. insurance and annuity products through
financial institutions
Leben Direkt Insurance Company Germany Life insurance through direct mail
</TABLE>
<PAGE> 82
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
Lone Star General Agency, Inc. Texas General agent to market non-standard
automobile and motorcycle insurance
for Colonial Mutual Insurance Company
MedProSolutions, Inc. Massachusetts Provides third-party administration
services for workers compensation,
automobile injury and disability claims
Midwest Printing Services, Ltd. Iowa General printing services
Morley & Associates, Inc. Oregon Insurance brokerage
Morley Capital Management, Inc. Oregon Investment adviser and stable value
money management
Morley Financial Services, Inc. Oregon Holding Company
Morley Research Associates, Ltd. Delaware Credit research consulting
**MRM Investments, Inc. Ohio Owns and operates a recreational ski
facility
**National Casualty Company Wisconsin Insurance Company
National Casualty Company of America, England Insurance Company
Ltd.
National Deferred Compensation, Inc. Ohio Administers deferred compensation
plans for public employees
**National Premium and Benefit Delaware Provides third-party administration
Administration Company services
Nationwide Advisory Services, Inc. Ohio Registered broker-dealer providing
investment management and
administrative services
**Nationwide Agency, Inc. Ohio Insurance Agency
Nationwide Agribusiness Insurance Iowa Provides property & casualty insurance
Company primarily to agricultural business
Nationwide Arena, LLC Ohio A limited liability company related to
arena development
*Nationwide Asset Allocation Trust Ohio Diversified open-end investment company
Nationwide Assurance Company Wisconsin Underwrites non-standard automobile
and motorcycle insurance
Nationwide Cash Management Company Ohio Investment Securities Agent
</TABLE>
<PAGE> 83
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
Nationwide Corporation Ohio Holding company for entities
affiliated with Nationwide Mutual
Insurance Company
Nationwide Exclusive Distribution Ohio A limited liability company providing
Company, LLC agency support services to Nationwide
exclusive agents
Nationwide Financial Assignment Ohio An assignment company to administer
Company structured settlement business
Nationwide Financial Institution Delaware Insurance Agency
Distributors Agency, Inc.
Nationwide Financial Institution New Mexico Insurance Agency
Distributors Agency, Inc. of
New Mexico
Nationwide Financial Institution Massachusetts Insurance Agency
Distributors Agency, Inc. of
Massachusetts
Nationwide Financial Services Bermuda Long-term insurer which issued
(Bermuda) Ltd. variable annuity and variable life
products to persons outside the U.S. &
Bermuda
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust securities & uses proceeds to acquire
debentures
Nationwide Financial Services Capital Delaware Trust which issues and sells
Trust II securities & uses proceeds to acquire
debentures
Nationwide Financial Services, Inc. Delaware Holding Company for entities
associated with Nationwide Mutual
Insurance Company
Nationwide Foundation Ohio Not-for profit corporation
Nationwide General Insurance Company Ohio Primarily provides automobile and fire
insurance to select customers
Nationwide Global Finance, LLC Ohio Act as a support company for
Nationwide Global Holdings, Inc. & its
international capitalization efforts
Nationwide Global Funds Cayman Islands Exempted company with limited
liability for purpose of issuing
investment shares to segregated asset
accounts of Nationwide Financial
Services (Bermuda) Ltd. and to
non-U.S. resident investors
Nationwide Global Holdings, Inc. Ohio Holding Company for Nationwide
Insurance Enterprise international
operations
Nationwide Global Holdings, Inc.-NGH Grand Duchy of Analyze European market of life
Luxembourg Branch Luxembourg insurance
</TABLE>
<PAGE> 84
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
Nationwide Global Holdings-Hong Kong, Hong Kong Primarily a holding company for
Limited Nationwide Global Holdings, Inc. Asian
operations
Nationwide Global Holdings-NGH Brasil Brazil Holding company
Participacoes LTDA
Nationwide Health Plans, Inc. Ohio Health insuring organization
Nationwide Home Mortgage Company Iowa Mortgage lendor
*Nationwide Indemnity Company Ohio Reinsurance company assuming business
from Nationwide Mutual Insurance
Company and other insurers within the
Nationwide Insurance Enterprise
Nationwide Insurance Company of America Wisconsin Independent agency personal lines
underwriter of property & casualty
insurance
Nationwide Insurance Company of Florida Ohio Transacts general insurance business
except life insurance
Nationwide Insurance Golf Charities, Ohio Not-for-profit corporation
Inc.
Nationwide International Underwriters California Special risks, excess & surplus lines
underwriting manager
Nationwide Investing Foundation Michigan Provide investors with continuous
source of investment under management
of trustees
*Nationwide Investing Foundation II Massachusetts Diversified, open-end investment
company
Nationwide Investment Services Oklahoma Registered broker-dealer
Corporation
Nationwide Investors Services, Inc. Ohio Stock Transfer Agent
**Nationwide Life and Annuity Ohio Life Insurance Company
Insurance Company
**Nationwide Life Insurance Company Ohio Life Insurance Company
Nationwide Lloyds Texas Commercial property insurance in Texas
Nationwide Management Systems, Inc. Ohio Preferred provider organization,
products and related services
Nationwide Mutual Fire Insurance Ohio Mutual Insurance Company
Company
*Nationwide Mutual Funds Ohio Diversified, open-end investment
company
Nationwide Mutual Insurance Company Ohio Mutual Insurance Company
</TABLE>
<PAGE> 85
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
Nationwide Properties, Ltd. Ohio Develop, own and operate real estate
and real estate investments
Nationwide Property and Casualty Ohio Insurance Company
Insurance Company
Nationwide Realty Investors, Inc. Ohio Develop, own and operate real estate
and real estate investments
Nationwide Retirement Solutions, Inc. Delaware Market and administer deferred
compensation plans for public employees
Nationwide Retirement Solutions, Inc. Alabama Market and administer deferred
of Alabama compensation plans for public employees
Nationwide Retirement Solutions, Inc. Arizona Market and administer deferred
of Arizona compensation plans for public employees
Nationwide Retirement Solutions, Inc. Arkansas Market and administer deferred
of Arkansas compensation plans for public employees
Nationwide Retirement Solutions, Inc. Montana Market and administer deferred
of Montana compensation plans for public employees
Nationwide Retirement Solutions, Inc. Nevada Market and administer deferred
of Nevada compensation plans for public employees
Nationwide Retirement Solutions, Inc. New Mexico Market and administer deferred
of New Mexico compensation plans for public employees
Nationwide Retirement Solutions, Inc. Ohio Market variable annuity contracts to
of Ohio members of the National Education
Association in the state of Ohio
Nationwide Retirement Solutions, Inc. Oklahoma Market variable annuity contracts to
of Oklahoma members of the National Education
Association in the state of Oklahoma
Nationwide Retirement Solutions, Inc. South Dakota Market and administer deferred
of South Dakota compensation plans for public employees
Nationwide Retirement Solutions, Inc. Texas Market and administer deferred
of Texas compensation plans for public employees
Nationwide Retirement Solutions, Inc. Wyoming Market variable annuity contracts to
of Wyoming members of the National Education
Association in the state of Wyoming
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
Nationwide Retirement Solutions Massachusetts Market and administer deferred
Insurance Agency Inc. compensation plans for public employees
Nationwide Seguradora S.A. Brazil Engage in elementary, health & life
insurance; private open pension and
wealth concession plans
*Nationwide Separate Account Trust Massachusetts Diversified, open-end investment
company
Nationwide Services Company, LLC. Ohio Single member limited liability
company performing shared services
functions for the Nationwide Insurance
Enterprise
Nationwide Trust Company, FSB United States Federal savings bank chartered by the
Office of Thrift Supervision in U.S.
Department of Treasury to exercise
custody & fiduciary powers
Neckura Holding Company Germany Administrative services for Neckura
Insurance Group
Neckura Insurance Company Germany Insurance Company
Neckura Life Insurance Company Germany Life and health insurance company
Nevada Independent Nevada Workers' compensation administrative
Companies-Construction services to Nevada employers in the
construction industry
Nevada Independent Companies-Health Nevada Workers' compensation administrative
and Nonprofit services to Nevada employers in health
& nonprofit industries
Nevada Independent Companies- Nevada Workers' compensation administrative
Hospitality and Entertainment services to Nevada employers in the
hospitality & entertainment industries
Nevada Independent Companies- Nevada Workers' compensation administrative
Manufacturing, Transportation and services to Nevada employers in the
Distribution manufacturing, transportation and
distribution industries
NFS Distributors, Inc. Delaware Holding company for Nationwide
Financial Services, Inc. distribution
companies
NGH Luxembourg, S.A Luxembourg Acts primarily as holding company for
Nationwide Global Holdings, Inc.
European operations
NGH Netherlands, B.V. The Netherlands Holding company for other overseas
companies
</TABLE>
<PAGE> 87
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- ------------------------------------
<S> <C> <C> <C>
NGH UK, Ltd. United Kingdom Assist Nationwide Global Holdings,
Inc. with European operations and
marketing
Northpointe Capital LLC Delaware Limited liability company for
investments
PanEuroLife Luxembourg Life Insurance company providing
individual life insurance primarily in
the UK, Belgium and France
Pension Associates, Inc. Wisconsin Pension plan administration and record
keeping services
Portland Investment Services, Inc. Oregon NASD registered broker-dealer
Premier Agency, Inc. Iowa Insurance Agency
Riverview Agency, Inc. Texas Has a pending application to become a
licensed insurance agency with the
Texas Department of Insurance
Scottsdale Indemnity Company Ohio Insurance Company
Scottsdale Insurance Company Ohio Insurance Company
Scottsdale Surplus Lines Insurance Arizona Provides excess and surplus lines
Company insurance coverage on a non-admitted
basis
SVM Sales GmbH, Neckura Insurance Germany Recruits and supervises external sales
Group partners who obtain new business for
the Neckura Group as well as to offer
financial services
Union Bond & Trust Company Oregon Oregon state bank with trust powers
Villanova Capital, Inc. Delaware Holding Company
Villanova Mutual Fund Capital Trust Delaware Trust designed to act as a registered
investment advisor
Villanova SA Capital Trust Delaware Trust designed to act as a registered
investment advisor
Western Heritage Insurance Company Arizona Underwrites excess and surplus lines
of property and casualty insurance
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- -------------------------------
<S> <C> <C> <C>
* MFS Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* NACo Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide DC Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide DCVA-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Separate Account No. 1 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Multi-Flex Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide VA Separate Account-A Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-B Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide VA Separate Account-C Ohio Nationwide Life and Annuity Issuer of Annuity Contracts
Separate Account
* Nationwide Variable Account Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-II Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-3 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-4 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-5 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-6 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Fidelity Advisor Variable Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account Account
* Nationwide Variable Account-8 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-9 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
* Nationwide Variable Account-10 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
Nationwide Variable Account-11 Ohio Nationwide Life Separate Issuer of Annuity Contracts
Account
</TABLE>
<PAGE> 89
<TABLE>
<CAPTION>
COMPANY STATE/COUNTRY OF NO. VOTING PRINCIPAL BUSINESS
ORGANIZATION SECURITIES
(SEE ATTACHED
CHART UNLESS
OTHERWISE
INDICATED)
-------------------------- ---------------- ------------- -------------------------------
<S> <C> <C> <C>
* Nationwide VL Separate Account-A Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
Nationwide VL Separate Account-B Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
* Nationwide VL Separate Account-C Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
* Nationwide VL Separate Account-D Ohio Nationwide Life and Annuity Issuer of Life Insurance
Separate Account Policies
* Nationwide VLI Separate Account Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-2 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-3 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
* Nationwide VLI Separate Account-4 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
Nationwide VLI Separate Account-5 Ohio Nationwide Life Separate Issuer of Life Insurance
Account Policies
</TABLE>
<PAGE> 90
<TABLE>
<CAPTION>
(left side)
<S> <C> <C> <C>
- ------------------------
| NATIONWIDE INSURANCE |
| GOLF CHARITIES, INC. |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
- ------------------------
-------------------------------------------------------------------------------------------------------------------------
| |
- --------------------------- --------------------------- ----------------------------
| ALLIED GROUP | | ALLIED | | |
| MERCHANT BANKING | | GROUP, INC. | | |
| CORPORATION | | (AGI) | | NATIONWIDE LLOYDS |
| | | | | |
|Common Stock: 10,000 | |-------|Common Stock: 850 Shares |---| | |
|------------ Shares | | |------------ | | | A TEXAS LLOYDS |================================
| | | | | | | |
| Cost | | | Cost | | | |
| ---- | | | ---- | | | |
|Casualty- | | |Casualty- | | | |
|100% $150,055 | | |100% $243,344,521 | | | |
- --------------------------- | --------------------------- | ----------------------------
| |
- --------------------------- | --------------------------- | ----------------------------
| NATIONWIDE INSURANCE | | | AMCO | | | DEPOSITORS |
| COMPANY OF AMERICA | | | INSURANCE COMPANY | | | INSURANCE COMPANY |
| | | | (AMCO) | | | (DEPOSITORS) |
|Common Stock: 12,000 | | |Common Stock: 500,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | |---|---| |
| Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- |
| | | | | | | |
|AGI-100% $215,273,000 | | |AGI-100% $147,425,540| | |AGI 100% $22,251,842 |
- --------------------------- | --------------------------- | ----------------------------
| | |
- --------------------------- | --------------------------- | ----------------------------
| AID FINANCE | | | ALLIED | | | ALLIED PROPERTY |
| SERVICES, INC. | | | GENERAL AGENCY | | | AND CASUALTY |
| (AID FINANCE) | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 10,000 | | |Common Stock: 5,000 | | |Common Stock: 300,000 |
|------------ Shares | | |------------ Shares | | |------------ Shares |
| |---| | | |---| |
| Cost | | Cost | | | Cost |
| ---- | | ---- | | | ---- |
|AGI-100% $19,545,634| |AMCO-100% $135,342 | | |AGI-100% $47,018,643 |
- --------------------------- --------------------------- | ----------------------------
| |
- --------------------------- --------------------------- | ----------------------------
| ALLIED | | MIDWEST | | | NATIONWIDE |
| GROUP INSURANCE | | PRINTING SERVICES, | | | HOME MORTGAGE |
| MARKETING COMPANY | | LTD. | | | COMPANY (NHMC) |
| | |Common Stock: 10,000 | | | |
|Common Stock: 20,000 | |------------ Shares | | |Common Stock: 54,348 |
|------------ Shares | | |---|---|------------ Shares |
| | | | | | |
| | | | | | |
| | | | | | |
| Cost | | Cost | | | |
| ---- | | ---- | | | |
| Aid | |AGI-100% $610,000 | | |AGI-80% |
| Finance-100% $16,059,469| --------------------------- | ----------------------------
- -------------------------- | |
--------------------------- | ----------------------------
| PREMIER | | | AGMC |
| AGENCY, | | | REINSURANCE, LTD. |
| INC. | | | |
|Common Stock: 100,000 | | |Common Stock: 11,000 |
|------------ Shares | | |------------ Shares |
| |---| | |
| Cost | | Cost |
| ---- | | ---- |
|AGI-100% $100,000 | |NHMC-100% $11,000 |
--------------------------- ----------------------------
</TABLE>
<PAGE> 91
<TABLE>
<CAPTION>
NATIONWIDE(R) (middle)
<S> <C> <C>
------------------------------------------ ------------------------------------------
| | | |
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |==============================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | (FIRE) |
| | | |
------------------------------------------ ------------------------------------------
| || | |
- --| || |--------------------------------------------------------------------| |-----------------------
|| |
|| |--------------------------------------------------------------|-------------------
|| | |
|| -------------------------------- | -------------------------------- -----------------------------------
|| | FARMLAND MUTUAL | | | NATIONWIDE GENERAL | | NECKURA HOLDING |
|| | INSURANCE COMPANY | | | INSURANCE COMPANY | | COMPANY (NECKURA) |
|| |Guaranty Fund | | | | | |
=====||==|------------ |---| | |Common Stock: 20,000 | |Common Stock: 10,000 |
|Certificate | | |---|------------ Shares | |--|------------ Shares |
|----------- | | | | | | | |
| Cost | | | | Cost | | | Cost |
| ---- | | | | ---- | | | ---- |
|Casualty $500,000 | | | |Casualty-100% $5,944,422 | | |Casualty-100% $142,943,140 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| F & B, INC. | | | | NATIONWIDE PROPERTY | | | NECKURA |
| | | | | AND CASUALTY | | | INSURANCE COMPANY |
|Common Stock: 1 Share | | | | INSURANCE COMPANY | | | |
|------------ | | | |Common Stock: 60,000 | |--|Common Stock: 6,000 |
| |---| |---|------------ Shares | | |------------ Shares |
| Cost | | | | | | | |
| ---- | | | | Cost | | | Cost |
|Farmland | | | | ---- | | | ---- |
|Mutual-100% $10 | | | |Casualty-100% $6,000,000 | | |Neckura-100% DM 6,000,000 |
-------------------------------- | | -------------------------------- | --------------------------------
| | |
-------------------------------- | | -------------------------------- | --------------------------------
| COOPERATIVE SERVICE | | | | NATIONWIDE ASSURANCE | | | NECKURA LIFE |
| COMPANY | | | | COMPANY | | | INSURANCE COMPANY |
|Common Stock: 600 Shares | | | | | | | |
|------------ |---- |---|Common Stock: 1,750 | |--|Common Stock: 4,000 |
| | | |------------ Shares | | |------------ Shares |
| Cost | | | | |
| ---- | | | Cost | | | Cost |
|Farmland | | | ---- | | | ---- |
|Mutual-100% $3,506,173 | | |Casualty-100% $41,750,000 | | |Neckura-100% DM 15,825,681|
-------------------------------- | -------------------------------- | --------------------------------
| |
-------------------------------- | -------------------------------- | --------------------------------
| SCOTTSDALE | | | NATIONWIDE AGRIBUSINESS | | | COLUMBUS INSURANCE |
| INSURANCE COMPANY | | | INSURANCE COMPANY | | | BROKERAGE AND SERVICE |
| (SIC) | | | | | | GmbH |
|Common Stock: 30,136 | | |Common Stock: 1,000,000 | | |Common Stock: 1 Share |
|---|------------ Shares |--------|---|------------ Shares | |--|------------ |
| | | | | | | | |
| | | | | Cost | | | Cost |
| | Cost | | | ---- | | | ---- |
| | ---- | | |Casualty-99.9% $26,714,335 | | |Neckura-100% DM 51,639 |
| |Casualty-100% $150,000,500 | | |Other Capital | | | |
| | | | |------------- | | | |
| | | | |Casualty-Ptd. $713,576 | | | |
| -------------------------------- | ------------------------------- | --------------------------------
| | |
| -------------------------------- | -------------------------------- | --------------------------------
| | SCOTTSDALE | | | NATIONAL CASUALTY | | | LEBEN DIREKT |
| | SURPLUS LINES | | | COMPANY | | | INSURANCE COMPANY |
| | INSURANCE COMPANY | | | (NC) | | | |
| |Common Stock: 10,000 | | | Common Stock: 100 Shares | | |Common Stock: 4,000 Shares |
|---|------------ Shares | ----| ------------- | |--|------------ |
| | | | | | | |
| | Cost | | Cost | | | Cost |
| | ---- | | ---- | | | ---- |
| |SIC-100% $6,000,000 | |Casualty-100% $67,442,439 | | |Neckura-100% DM 4,000,000 |
| | | | | | | |
| -------------------------------- -------------------------------- | --------------------------------
| | |
| -------------------------------- -------------------------------- | --------------------------------
| | NATIONAL PREMIUM & | | NCC OF AMERICAN, LTD. | | | AUTO DIREKT |
| | BENEFIT ADMINISTRATION | | (INACTIVE) | | | INSURANCE COMPANY |
| | COMPANY | | | | | |
| |Common Stock: 10,000 | | | | |Common Stock: 1500 Shares |
|---|------------ Shares | | | |--|------------ |
| | | | | | | |
| | Cost | | | | | Cost |
| | ---- | | | | | ---- |
| |SIC-100% $10,000 | |NC-100% | | |Neckura-100% DM 1,643,149 |
| -------------------------------- -------------------------------- | --------------------------------
| |
| -------------------------------- -------------------------------- | --------------------------------
| | WESTERN . | | SUN DIRECT | | | SVM SALES |
| | HERITAGE INSURANCE | | VERSICHERUNGS - | | | GmbH |
| | COMPANY | | AKTIENGESCLISCHAFT | | | |
| |Common Stock: 4,776,076 | |Common Stock: 1 Share | | |Common Stock: 50 Shares |
|---|------------ Shares | |------------ |------------| |
| | | | | |
| Cost | | Cost | | Cost |
| ---- | | ---- | | ---- |
|SIC-100% $57,000,000 | |Neckura-100% $9,600,000 | |Neckura-100% DM 50,000 |
| | | EURO | | |
-------------------------------- -------------------------------- --------------------------------
</TABLE>
<PAGE> 92
<TABLE>
<CAPTION>
(right side)
<S> <C> <C> <C>
------------------------
| NATIONWIDE |
| FOUNDATION |
| |
| MEMBERSHIP |
| NONPROFIT |
| CORPORATION |
------------------------
- ---------------------------------------------------------------------------------------------------------------------|
|
- --------------------------------------------------------------------------------------------------------------- |
| | | |
| | | |
-------------------------------- -------------------------------- | -------------------------------------
| SCOTTSDALE | | NATIONWIDE | | | NATIONWIDE |
| INDEMNITY COMPANY | | COMMUNITY URBAN | | | CORPORATION |
| | | REDEVELOPMENT | | | |
| | | CORPORATION | | |Common Stock: Control: |
|Common Stock: 50,000 | |Common Stock: 10 Shares | | |------------ ------- |
|-----|------------ Shares | |----|------------ | | |$13,642,432 100% |
| | | | | Cost | | | Shares Cost |
| | Cost | | | ---- | | | ------ ---- |
| | ---- | | |Casualty-100% $1,000 | | |Casualty 12,992,922 $1,008,497,908 |
| |Casualty-100% $8,800,000 | | | | | |Fire 649,510 36,862,514 |
| | | | | | | | (See Page 2) |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | NATIONWIDE | | | NATIONWIDE CASH | | | ALLNATIONS, INC. |
| | INDEMNITY COMPANY | | | MANAGEMENT COMPANY | | |Common Stock: 12,167 Shares |
| | | | | | | |------------- Cost |
|-----|Common Stock: 28,000 | |----|Common Stock: 100 Shares | |-----| ---- |
| |------------ Shares | | |------------ | | |Casualty-18.6% $90,630 |
| | | | | Cost | | |Fire-18.6% $90,722 |
| | Cost | | | ---- | | |Preferred Stock 1,466 Shares |
| | ---- | | |Casualty-100% $11,226 | | |--------------- Cost |
| |Casualty-100% $594,529,000 | | | | | | ---- |
| | | | | | | |Casualty-6.8% $100,000 |
| | | | | | | |Fire-6.8% $100,000 |
| -------------------------------- | -------------------------------- | -------------------------------------
| | |
| -------------------------------- | -------------------------------- | -------------------------------------
| | LONE STAR | | | NATIONWIDE INSURANCE | | | CALFARM INSURANCE |
| | GENERAL AGENCY, INC. | | | COMPANY OF FLORIDA | | | COMPANY |
| | | | | | | |Common Stock: 49,800 Shares |
------|Common Stock: 1,000 | |----|Common Stock: 10,000 Shares| |-----|------------- |
| |------------ Shares | | |------------ | | |
| | | | | Cost | | |
| | Cost | | | ---- | | |
| | ---- | | |Casualty-100% $300,000,000 | |Casualty-100% |
| |Casualty-100% $5,000,000 | | | | | |
| -------------------------------- | -------------------------------- -------------------------------------
| || | |
| -------------------------------- | -------------------------------- -------------------------------------
| | COLONIAL COUNTY | | | NATIONWIDE INTERNATIONAL | | CALFARM INSURANCE |
| | MUTUAL INSURANCE | | | UNDERWRITERS | | AGENCY |
| | COMPANY | | |Common Stock: 1,000 Shares | | |
| | | |----|------------ | | |
| | | | | | | |
| | | | | Cost | |Common Stock: 1,000 shares |
| |Surplus Debentures: | | | ---- | |------------- |
| |------------------- | | |Casualty-100% $10,000 | | |
| | Cost | | -------------------------------- | |
| | ---- | | | |
| |Colonial $500,000 | | -------------------------------- |CalFarm Insurance |
| |Lone Star 150,000 | | | NATIONWIDE | |Company - 100% |
| -------------------------------- | | ARENA LLC | -------------------------------------
| | | | |
| -------------------------------- | | | -------------------------------------
| | NATIONWIDE SERVICES | | | | | CAL-AG INSURANCE |
| | COMPANY, LLC | | | | | SERVICES |
| | | | | | | |
| |Single Member Limited | |....| | |Common Stock: 1,000 Shares |
|.....|Liability Company | | | | |------------ |
| | | | | | | |
| | | | |Casualty-90% | |CalFarm Insurance |
| |Casualty-100% | | | | |Agency-100% |
| | | | -------------------------------- -------------------------------------
| -------------------------------- |
| | --------------------------------
| | | NATIONWIDE |
| -------------------------------- | | EXCLUSIVE DISTRIBUTION |
| | AMERICAN MARINE | | | COMPANY, LLC (NEDCO) |
| | UNDERWRITERS, INC. | | | |
| | | | | Single Member Limited |
| |Common Stock: 20 Shares | |....| Liability Compnany |
|-----|------------ | | | |
| | Cost | | | |
| | ---- | | |Casualty-100% |
| |Casualty-100% $5,020 | | | |
| | | | --------------------------------
| -------------------------------- | |
| | --------------------------------
| --------------------------------- | | INSURANCE |
| | eNATIONWIDE, LLC | | | INTERMEDIARIES, INC |
| | | | | |
| | Single Member Limited | | |Common Stock 1,615 Shares |
| | Liability Company | |----|------------ |
| | | | Cost |
|.....| | | ---- |
| | |Casualty-100% $1,615,000 |
| | | |
|Casualty-100% | --------------------------------
| |
---------------------------------
Subsidiary Companies -- Solid Line
Contractual Association -- Double Line
Limited Liability Company -- Dotted Line
December 31, 1999
</TABLE>
Page 1
<PAGE> 93
<TABLE>
<CAPTION>
(Left Side)
<S> <C> <C> <C> <C> <C> <C>
|----------------------------------|-----------------------------------|-----------------------------
| | |
----------------------------- ----------------------------- -----------------------------
| NATIONWIDE LIFE INSURANCE | | NATIONWIDE | | NATIONWIDE TRUST |
| COMPANY (NW LIFE) | | FINANCIAL SERVICES | | COMPANY, FSB |
| | | CAPITAL TRUST | | Common Stock: 2,800,000 |
| Common Stock: 3,814,779 | | Preferred Stock: | | ------------ Shares |
| ------------ Shares | | --------------- | | Cost |
| | | | | ---- |
| NFS--100% | | NFS--100% | | NFS--100% $3,000,000 |
----------------|------------ ----------------------------- -----------------------------
|
| ||--------------------------
- ----------------------------- | ----------------------------- -----------------------------
| NATIONWIDE LIFE AND | | | NATIONWIDE | | NATIONWIDE FINANCIAL |
| ANNUITY INSURANCE COMPANY | | | ADVISORY SERVICES, INC | | INSTITUTION DISTRIBUTORS |
| | | | (NW ADV. SERV.) | | AGENCY, INC. (NFIDAI) |
| Common Stock: 66,000 | | | Common Stock: 7,676 | | |
| ------------ Shares |--|--| ------------ Shares |==== | |
| | | | | || | |
| Cost | | | Cost | || | Common Stock: 1,000 Shares|
| ---- | | | ---- | || | ------------ |
| NW Life-100% $58,070,003 | | | NW Life-100% $5,996,261 | || | NFSDI-100% |
- ----------------------------- | ----------------------------- || --------------|--||----------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE INVESTMENT | | | NATIONWIDE MUTUAL | || | FINANCIAL HORIZONS | | || | |
| SERVICES CORPORATION | | | FUNDS | || | DISTRIBUTORS AGENCY | | || | |
| | | | | || | OF ALABAMA, INC. | | || | |
| Common Stock: 5,000 | | | OHIO BUSINESS TRUST | || | | | || | FLORIDA |
| ------------ Shares | | | | || | Common Stock: 10,000 | | || | RECORDS |===
| |--| | |==|| | ------------ Shares |-- || | ADMINISTRATOR |
| | | | | || | | | || | |
| Cost | | | | || | Cost | | || | |
| ---- | | | | || | ---- | | || | |
| NW Life-100% $529,728 | | | | || | NFIDAI-100% $100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ------------------------------| || -----------------------
| NATIONWIDE FINANCIAL | | | NATIONWIDE | || | LANDMARK FINANCIAL | | || | |
| ASSIGNMENT | | | SEPARATE ACCOUNT | || | SERVICES OF | | || | |
| COMPANY | | | TRUST | || | NEW YORK, INC. | | || | |
| | | | | || | | | || | |
| | | | | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| |--| | MASSACHUSETTS |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | BUSINESS TRUST | || | | | || | OF OHIO, INC. |
| | | | | || | Cost | | || | |
| | | | | || | ---- | | || | |
| NW Life-100% | | | | || | NFIDAI-100% $10,100 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE REALTY | | | NATIONWIDE | || | FINANCIAL HORIZONS | | || | |
| INVESTORS, LTD. | | | GLOBAL FUND | || | SECURITIES CORP. | | || | |
| | | | | || | | | || | |
| Units: | | | CAYMAN ISLANDS | || | Common Stock: 10,000 | | || | FINANCIAL HORIZONS |
| ------ |--| | EXEMPTED LLC |==|| | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | || | | | || | OF OKLAHOMA, INC |
| | | | | || | Cost | | || | |
| NW Life-90% | | | | || | ---- | | || | |
| NW Mutual-10% | | | | || | NFIDAI-100% $153,000 | | || | |
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| || | ||
- ----------------------------- | ----------------------------- || ----------------------------- | || -----------------------
| NATIONWIDE | | | NATIONWIDE | || | AFFILIATE AGENCY, INC. | | || | |
| PROPERTIES, LTD. | | | ASSET ALLOCATION TRUST | || | | | || | |
| | | | | || | | | || | |
| Units: |--| | | || | Common Stock: 100 | | || | FINANCIAL HORIZONS |
| ------ | | OHIO BUSINESS TRUST |==== | ------------ Shares |-- ||==| DISTRIBUTORS AGENCY |
| | | | | | | || | OF TEXAS, INC |
| | | | | Cost | | || | |
| NW Life-97.6% | | | | ---- | | || | |
| NW Mutual-2.4% | | | | NFIDAI-100% $100 | | || | |
- ----------------------------- ----------------------------- ----------------------------- | || -----------------------
| ||
----------------------------- | || -----------------------
| NATIONWIDE FINANCIAL | | || | |
| INSTITUTION DISTRIBUTORS | | || | |
| INS. AGENCY, INC. | | || | |
| OF MASS. | | || | AFFILIATE |
| |-- ====| AGENCY OF |
|Common Stock: 100 Shares | | | OHIO, INC |
|------------ | | | |
| | | | |
|NFIDAI-100% | | | |
----------------------------- | -----------------------
----------------------------- |
| NATIONWIDE FINANCIAL | |
| INSTITUTION DISTRIBUTORS | |
| INS. AGENCY, INC. | |
| OF NEW MEXICO |--
| |
|Common Stock: 100 Shares |
|------------ |
| |
|NFIDAI-100% |
-----------------------------
</TABLE>
<PAGE> 94
<TABLE>
<CAPTION>
(Center)
NATIONWIDE(R)
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------- --------------------------------------------------
| NATIONWIDE MUTUAL | | NATIONWIDE MUTUAL |
| INSURANCE COMPANY |================================| FIRE INSURANCE COMPANY |
| (CASUALTY) | | | (FIRE) |
- -------------------------------------------------- | --------------------------------------------------
|
-----------------------------------------
| NATIONWIDE CORPORATION (NW CORP) |
| Common Stock: Control: |
| ------------ ------- |
| 13,642,432 100% |
| Shares Cost |
| ------ ---- |
|Casualty 12,992,922 $1,008,497,908 |
|Fire 649,510 36,862,514 |
-------------------|---------------------
|--------------------------------------------------------------
---------------|-------------
| NATIONWIDE FINANCIAL |
| SERVICES, INC. (NFS) |
| |
|Common Stock: Control: |
|------------ ------- |
| |
| |
|Class A Public--100% |
|Class B NW Corp--100% |
---------------|-------------
|
- -----------|-------------------------|--------------------------|-----------------------------|----------------------|--------------
| | | | |
- -----------|------------ ------------|-------------- -----------|------------- ---------------|--------- ------------|--------------
|NFS DISTRIBUTORS, INC.| | IRVIN L. SCHWARTZ | | NATIONWIDE FINANCIAL | |VILLANOVA CAPITAL, INC.| | NATIONWIDE FINANCIAL |
| (NFSDI) | | AND ASSOCIATES, INC. | |SERVICES (BERMUDA) INC.| |Common Stock: 958,750 | | SERVICES CAPITAL |
| | |Common Stock: Control: | |Common Stock: 250,000 | |------------- Shares | | TRUST II |
| | |------------- -------- | |------------- Shares | |NFS-96% | | |
| | |Class A Other-100%| | Cost | |Preferred Stock:500,000| | |
|NFS-100% | |Class B NFS -100%| | ---- | |--------------- Shares | | |
| | | | |NFS-100% $3,500,000 | |NFS-100% | | NFS-100% |
- -----------|------------ --------------------------- ------------------------- ---------------|--------- -------------------------
| | |
- -----------|---------------------------- -----------------------------|-----------------------|
- -----------|------------ --------------|----------- ------------|------------ --------------|---------- ------------|-------------
| NATIONAL DEFERRED | | NATIONWIDE RETIREMENT | | VILLANOVA S.A. CAPITAL| | MORLEY FINANCIAL | | VILLANOVA MUTUAL FUND |
| COMPENSATION, INC. | | SOLUTIONS, INC. (NRS)| | TRUST (VSA) | |SERVICES, INC. (MORLEY)| | CAPITAL TRUST (VMF) |
| | |Common Stock: 236,494 | | | |Common Stock: 82,343 | | |
| | |------------- Shares | | | |------------ Shares | | |
| | | | | | | | | |
|NFSDI-100% | | | | | |VILLANOVA CAPITAL, INC.| | |
| | |NFSDI-100% | |DELAWARE BUSINESS TRUST| |-100% | |DELAWARE BUSINESS TRUST|
- ----------||------------ -------------------|------ ---------------------|--- ---------------------|--- -------------------------
|| | | |
|| | | -----
|| ---------------------------- | ------------------------- | ------------------------- | ------------------------
|| | NATIONWIDE RETIREMENT | | |NATIONWIDE RETIREMENT | | | NATIONWIDE | | | MORLEY & |
|| |SOLUTIONS, INC. OF ALABAMA| | | SOLUTIONS, INC. OF | | |INVESTORS SERVICES, INC.| | | ASSOCIATES, INC. |
|| | | | | NEW MEXICO | | | | | | |
|| |Common Stock: 10,000 | | | Common Stock: 1,000 | | | Common Stock: 5 Shares | | | Common Stock: 3,500 |
|| |------------- Shares |--|--| ------------- Shares | |--|------------- | |--| ------------- Shares |
============ | Cost | | | Cost | | | Cost | | | Cost |
| ---- | | | ---- | | | ---- | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | |VSA-100% $5,000 | | |Morley-100% $1,000|
---------------------------- | -------------------------- | -------------------------- | ------------------------
| | |
---------------------------- | -------------------------- | -------------------------- | -----------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | | VILLANOVA VALUE | | | EXCALIBER FUNDING |
|SOLUTIONS, INC. OF ARIZONA| | | SOLUTIONS, INC. OF | | | INVESTOR, LLC | | | CORPORATION |
| | | | SO. DAKOTA | | | | | | |
|Common Stock: 1,000 | | |Common Stock: 1,000 | | | | | |Common Stock: 1,000 |
|------------- Shares |--|--|------------- Shares | ...| | |--|------------- Shares |
| Cost | | | Cost | | | | | Cost |
| ---- | | | ---- | | | | | ---- |
|NRS-100% $1,000 | | |NRS-100% $1,000 | | VSA-100% | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | -----------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | MORLEY CAPITAL | | | CALIBER FUNDING |
| SOLUTIONS, INC. OF | | | SOLUTIONS, INC. | | MANAGEMENT | | | CORPORATION |
| ARKANSAS | | | OF WYOMING | | | | | |
|Common Stock: 50,000 |-----|Common Stock: 500 Shares| |Common Stock: 500 Shares| | | |
|------------- Shares | | |------------- | |------------- |--|--| |
| Cost | | | Cost | | Cost | | | |
| ---- | | | ---- | | ---- | | | |
|NRS-100% $500 | | |NRS-100% $500 | |Morley-100% $5,000 | | |Morley-100% |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- | ------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | UNION BOND | | | MORLEY RESEARCH |
| SOLUTIONS, INS. | | | SOLUTIONS, INC. | | & TRUST COMPANY | | | ASSOCIATES, LTD. |
| AGENCY, INC. | | | OF OHIO | | | | | |
|Common Stock: 1,000 | | | | |Common Stock: 2,000 | | | Common Stock: 1,000 |
|------------- Shares |--|==| | |------------- Shares |--|--| ------------- Shares |
| | | | | | | | | |
| Cost | | | | | Cost | | | Cost |
| ---- | | | | | ---- | | | ---- |
|NRS-100% $1,000 | | | | | Morley-100% $50,000 | | |Morley-100% $1,000 |
---------------------------- | -------------------------- -------------------------- | ------------------------
| |
---------------------------- | -------------------------- -------------------------- |
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT | | PORTLAND INVESTMENT | |
|SOLUTIONS, INC. OF MONTANA| | | SOLUTIONS, INC. OF | | SERVICES, INC. | |
| | | | OKLAHOMA | | | |
|Common Stock: 500 | | | | | Common Stock: 1,000 | |
|------------- Shares |--|==| | | ------------- Shares |--
| Cost | | | | | Cost |
| ---- | | | | | ---- |
|NRS-100% $500 | | | | | Morley-100% $25,000 |
---------------------------- | -------------------------- --------------------------
|
---------------------------- | --------------------------
| NATIONWIDE RETIREMENT | | | NATIONWIDE RETIREMENT|
| SOLUTIONS, INC. OF NEVADA| | | SOLUTIONS, INC. |
| | | | OF TEXAS |
|Common Stock: 1,000 |-- ==| |
|------------- Shares | | |
| Cost | | |
| ---- | | |
|NRS-100% $1,000 | | |
---------------------------- --------------------------
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
(Right)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
------------------------------- | ---------------------------- -----------------------------
| GATES MCDONALD | | | NATIONWIDE | | NATIONWIDE GLOBAL |
| & COMPANY (GATES) | | |HEALTH PLANS, INC. (NHP) | | HOLDINGS, INC. (NGH) |
| | | | | | |
- ------------------- --|Common Stock: 254 Shares | |--|Common Stock: 100 Shares | |Common Stock: 1 Share |
| | | |------------ | || |------------ | --|------------ |
| ---------------|-------------- | | Cost | || | Cost || | Cost |
| | | | | ---- | || | ---- || | ---- |
| | THE 401(k) COMPANIES, INC. | | |NW Corp.-100% $25,683,532 | || | || | |
| | (401(k)) | | |------------------------------ || |NW Corp.-100% $14,603,732|| |NW Corp.-100% $257,000,000|
| | | | || --------------------------- | -----------------------------
| |Common Stock: Control | | |------------------------------ || ----------------------------| -----------------------------
||--|------------- ------- | | | MEDPROSOLUTIONS, INC. | || | NATIONWIDE MANAGEMENT || | NATIONWIDE GLOBAL |
|| |Class A Other-100% | --| | |--| SYSTEMS, INC. || | HOLDINGS, INC. - |
|| |Class B NFS-100% | | | Cost | || | || | LUXEMBOURG BRANCH |
|| | | | | ---- | || |Common Stock: 100 Shares || | (BRANCH) |
|| ------------------------------ | |Gates-100% $6,700,000 | || |------------- || | |
|| | | | || | Cost ||--| |
|| | | | || | ---- || |Endowment Capital - |
|| ------------------------------ | ------------------------------- || |NHP Inc.-100% $25,149 || | $1,000,000 |
|| | 401(k) INVESTMENT | | || ----------------------------| --------------|--------------
|| | SERVICES, INC. | | |------------------------------ || ----------------------------| --------------|--------------
|| | | | | GATES MCDONALD & | || | NATIONWIDE || | NGH LUXEMBOURG S.A. |
|| |Common Stock: 1,000,000 | | | COMPANY OF NEW YORK, INC. | || | AGENCY, INC. || | (LUX SA) |
|| |------------ Shares | --| | |--| || | |
||--| | | |Common Stock: 3 Shares | | |Common Stock: 100 Shares || |Common Stock: 5894 Shares |
|| | Cost | | |------------ | | |------------ || -|------------ |
|| | ---- | | | Cost | | | Cost || || Cost |
|| |401(k)-100% $7,800 | | | ---- | | | ---- || || ---- |
|| ------------------------------ | |Gates-100% $106,947 | | |NHP Inc.-99% $116,077 || ||BRANCH.-99.98% $115,470,723|
|| | ------------------------------- | ----------------------------| |-----------------------------
|| ------------------------------ | | | |
|| | 401(k) INVESTMENT | | ------------------------------- | ----------------------------| |-----------------------------
|| | ADVISORS, INC. | | | GATES MCDONALD & | | |NATIONWIDE GLOBAL HOLDINGS|| || PAN EURO LIFE |
|| | | | | COMPANY OF NEVADA | | | -HONG KONG, LIMITED || || |
|| |Common Stock: 1,000 Shares | --| | | | || ||Common Stock: 1,300,000 |
||--|------------ | | |Common Stock: 40 Shares | | |Common Stock: 2 Shares || ||------------ Shares |
|| | Cost | | |------------ | | |------------ Cost -- -- |
|| | ---- | | | Cost | | | ---- || || Cost |
|| |401(k)-100% $1,000 | | | ---- | | |NGH-50% || || ---- |
|| ------------------------------ | |Gates-100% $93,750 | | |Casualty--50% || ||LUX SA-90% 3,817,832,685|
|| | ------------------------------- | ----------------------------| || LUF |
|| ------------------------------ | | | |-----------------------------
|| | 401(k) COMPANY | | ------------------------------- | ----------------------------| |-----------------------------
|| | | | | GATES MCDONALD | | | NGH || ||NATIONWIDE GLOBAL HOLDINGS |
|| |Common Stock: 855,000 Shares| | | HEALTH PLUS, INC. | | | NETHERLANDS B.V. || ||- NGH BRASIL PARTICIPACOES,|
|| | | --| | | | || || LTDA (NGH BRASIL) |
|| | Cost | | |Common Stock: 200 Shares | | |Common Stock: 40 Shares || || |
||--| ---- | | |------------ | | |------------ -- -- Shares Cost |
|| |401(k)-100% $1,000 | | | Cost | | | Cost || | ------ ---- |
|| ------------------------------ | | ---- | | | ---- || |LUX SA 6,164,899 R6,164,899|
|| | |Gates-100% $2,000,000 | | |NGH-100% NLG 52,500 || |NGH 1 R1 |
|| ------------------------------ | ------------------------------- | ----------------------------| --------------|--------------
|| | | | | | |
|===| | | ------------------------------- | ----------------------------| --------------|--------------
| | RIVERVIEW AGENCY, INC. | | |NEVADA INDEPENDENT COMPANIES-| | | NATIONWIDE || | NATIONWIDE |
| | | | |MANUFACTURING TRANSPORTATION | | | SERVICES SP. Z.O.O. || | SEGURADORA S.A. |
| | | | | AND DISTRIBUTION | | | || | |
| | | --| | | |Common Stock: 80 Shares || | Shares Cost |
| | | | |Common Stock: 1,000 Shares | | |------------ Cost -- | ------ ---- |
| ------------------------------ | |------------ | | | ---- || |NGH |
| | |Gates-100% | | |NGH-100% 4,000 PLN || |BRASIL 9,999,999 R9,999,999|
| ------------------------------ | ------------------------------- | --------------------------- | |LUX SA 1 R1 |
| | | | | | -----------------------------
| | PENSION ASSOCIATES, INC. | | ------------------------------- | ----------------------------| -----------------------------
| | | | | NEVADA INDEPENDENT | | | MRM INVESTMENTS, INC. || | NATIONWIDE GLOBAL |
- ----| Common Stock: 1,000 Shares | | | COMPANIES-HEALTH AND PROFIT | | | || | FINANCE, LLC |
| | --| | ---|Common Stock: 1 Share || | Single Member Limited |
| Cost | | |Common Stock: 1,000 Shares | |------------ || | Liability Company |
| ---- | | |------------ | | Cost |...| |
| NFS-100% $2,839,392 | | | | | ---- | | |
------------------------------ | |Gates-100% | |NW Corp.-100% $7,000,000 | |NGH-100% |
| ------------------------------- ---------------------------- -----------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-CONSTRUCTION |
--| |
| |Common Stock: 1,000 Shares |
| |------------ |
| | |
| |Gates-100% |
| -------------------------------
|
| -------------------------------
| | NEVADA INDEPENDENT |
| | COMPANIES-HOSPITALITY AND | Subsidiary Companies - Solid Line
--| ENTERTAINMENT | Contractual Association - Double Line
| | Limited Liability Company - Dotted Line
|Common Stock: 1,000 Shares |
|Gates-100% | December 31, 1999
-------------------------------
Page 2
</TABLE>
<PAGE> 96
Item 27. NUMBER OF CONTRACT OWNERS
The number of contract owners of Qualified and Non-Qualified
Contracts as of January 31, 2000 was 51,076 and 67,431
respectively.
Item 28. INDEMNIFICATION
Provision is made in Nationwide's Amended and Restated Code of
Regulations and expressly authorized by the General Corporation
Law of the State of Ohio, for indemnification by Nationwide of any
person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or
investigative by reason of the fact that such person is or was a
director, officer or employee of Nationwide, against expenses,
including attorneys fees, judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, to the extent and
under the circumstances permitted by the General Corporation Law
of the State of Ohio.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 ("Act") may be permitted to directors,
officers or persons controlling Nationwide pursuant to the
foregoing provisions, Nationwide has been informed that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Item 29. PRINCIPAL UNDERWRITER
(a) Nationwide Investment Services Corporation ("NISC") acts as
principal underwriter and general distributor for the
Nationwide Multi-Flex Variable Account, Nationwide Variable
Account, Nationwide Variable Account-II, Nationwide
Variable Account-5, Nationwide Variable Account-6,
Nationwide Variable Account-8, Nationwide Variable
Account-9, Nationwide Variable Account-10, Nationwide
Variable Account-11, Nationwide VA Separate Account-A,
Nationwide VA Separate Account-B, Nationwide VA Separate
Account-C, Nationwide VL Separate Account-A, Nationwide VL
Separate Account-B, Nationwide VL Separate Account-C,
Nationwide VL Separate Account-D, Nationwide VLI Separate
Account-2, Nationwide VLI Separate Account-3, Nationwide
VLI Separate Account-4, Nationwide VLI Separate Account-5,
Nationwide DC Variable Account, Nationwide DCVA-II, and the
NACo Variable Account, all of which are separate investment
accounts of Nationwide or its affiliates.
<PAGE> 97
(b) NISC
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------------------
<S> <C>
Joseph J. Gasper Chairman of the Board and
One Nationwide Plaza Director
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Dimon R. McFerson Chairman and Chief Executive
One Nationwide Plaza Officer and Director
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Richard A. Karas Vice Chairman and Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Duane C. Meek President
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Philip C. Gath Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Susan A. Wolken Director
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Robert A. Oakley Executive Vice President -
One Nationwide Plaza Chief Financial Officer
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Robert J. Woodward, Jr. Executive Vice President -
One Nationwide Plaza Chief Investment Officer
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Mark R. Thresher Senior Vice President and Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Barbara J. Shane Vice President - Compliance Officer
Two Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Alan A. Todryk Vice President - Taxation
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
John F. Delaloye Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Glenn W. Soden Assistant Secretary
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
E. Gary Berndt Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 98
NISC
DIRECTORS AND OFFICERS
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
POSITIONS AND OFFICES
NAME AND BUSINESS ADDRESS WITH UNDERWRITER
------------------------------------------------------------------------------------------------------------------
<S> <C>
Duane M. Campbell Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
Terry C. Smetzer Assistant Treasurer
One Nationwide Plaza
Columbus, OH 43215
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 99
<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
Investment
Services
Corporation
</TABLE>
Item 30. LOCATION OF ACCOUNTS AND RECORDS
John Davis
Nationwide Life Insurance Company
One Nationwide Plaza
Columbus, OH 43215
Item 31. MANAGEMENT SERVICES
Not Applicable
Item 32. UNDERTAKINGS
The Registrant hereby undertakes to:
(a) file a post-effective amendment to this registration
statement as frequently as is necessary to ensure that the
audited financial statements in the registration statement
are never more than 16 months old for so long as payments
under the variable annuity contracts may be accepted;
(b) include either (1) as part of any application to purchase a
contract offered by the prospectus, a space that an
applicant can check to request a Statement of Additional
Information, or (2) a 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 contracts which are issued
pursuant to Section 403(b) of the Internal Revenue Code are issued
by Nationwide through the Registrant in reliance upon, and in
compliance with, a no-action letter issued by the Staff of the
Securities and Exchange Commission to the American Council of Life
Insurance (publicly available November 28, 1988) permitting
withdrawal restrictions to the extent necessary to comply with
Section 403(b)(11) of the Internal Revenue Code.
Nationwide represents that the fees and charges deducted under the
contract in the aggregate are reasonable in relation to the
services rendered, the expenses expected to be incurred and risks
assumed by Nationwide.
<PAGE> 100
Independent Auditors' Consent
The Board of Directors of Nationwide Life Insurance Company and Contract Owners
of the Nationwide Variable Account-II:
We consent to the use of our reports included herein and to the reference to our
firm under the heading "Services" in the Statement of Additional Information.
KPMG LLP
Columbus, Ohio
April 28, 2000
<PAGE> 101
SIGNATURES
As required by the Securities Act of 1933, and the Investment Company Act of
1940, the Registrant, NATIONWIDE VARIABLE ACCOUNT-II, certifies that it meets
the requirements of Securities Act Rule 485(b) for effectiveness of this
Post-Effective Amendment No. 16 and has caused this Post-Effective Amendment No.
16 to be signed on its behalf in the City of Columbus, and State of Ohio, on
this 28th day of April, 2000.
<TABLE>
<S> <C> <C>
NATIONWIDE VARIABLE ACCOUNT-II
---------------------------------------------------------------
(Registrant)
NATIONWIDE LIFE INSURANCE COMPANY
---------------------------------------------------------------
(Depositor)
By/s/STEVEN SAVINI, ESQ.
---------------------------------------------------------------
Steven Savini
As required by the Securities Act of 1933, this Post-Effective Amendment No. 16 has been signed by the following
persons in the capacities indicated on the 28th day of April, 2000.
SIGNATURE TITLE
LEWIS J. ALPHIN Director
- ----------------------------------------
Lewis J. Alphin
A. I. BELL Director
- ----------------------------------------
A. I. Bell
KENNETH D. DAVIS Director
- ----------------------------------------
Kenneth D. Davis
KEITH W. ECKEL Director
- ----------------------------------------
Keith W. Eckel
Willard J. Engel Director
- ----------------------------------------
Willard J. Engel
Fred C. Finney Director
- ----------------------------------------
Fred C. Finney
Joseph J. Gasper President and Chief Operating
- ----------------------------------------
Joseph J. Gasper Officer and Director
Dimon R. MCFerson Chairman and Chief Executive
- ----------------------------------------
Dimon R. McFerson Officer and Director
David O. Miller Chairman of the Board and
- ----------------------------------------
David O. Miller Director
Yvonne L. Montgomery Director
- ----------------------------------------
Yvonne L. Montgomery
Robert A. Oakley Executive Vice President and Chief
- ----------------------------------------
Robert A. Oakley Financial Officer
Ralph m. paige Director
- ----------------------------------------
Ralph M. Paige
James F. Patterson Director
- ----------------------------------------
James F. Patterson
Arden L. Shisler Director By /s/ STEVEN SAVINI, ESQ.
- ---------------------------------------- --------------------------------------
Arden L. Shisler Steven Savini
Robert L. Stewart Director Attorney-in-Fact
- ----------------------------------------
Robert L. Stewart
Nancy C. Thomas Director
- ----------------------------------------
Nancy C. Thomas
</TABLE>
<PAGE> 1
MARKETING COORDINATION AND
ADMINISTRATIVE SERVICES AGREEMENT
This Agreement entered into this 1st day of May, 2000, between Nationwide Life
Insurance Company ("Nationwide"), and Nationwide Investment Services Corporation
("NISC").
Nationwide proposes to develop, issue and administer, and NISC proposes to
provide the exclusive national distribution services for certain annuity and
life products (the "Products"). The parties hereby agree as follows:
A. ADMINISTRATION OF PRODUCTS
1. Appointment of Product Administration
Nationwide is hereby appointed Product Administrator for the
Products.
2. Duties of Nationwide
Nationwide will perform in a proper and timely manner, those
functions enumerated in the column marked "Nationwide" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
3. Duties of NISC
NISC will perform in a proper and timely manner, those
functions enumerated in the column marked "NISC" in the
"Analysis of Administrative Functions," attached hereto as
EXHIBIT A, and incorporated herein by reference.
B. MARKETING COORDINATION AND SALES ADMINISTRATION
1. Distribution of Products
The Products will be distributed through registered
representatives of NASD broker-dealer firms, appointed by
Nationwide, who shall be duly qualified and licensed as agents
(the "Agents"), in accordance with applicable state insurance
authority.
2. NISC shall be the exclusive National Distributor of the
Products.
<PAGE> 2
3. Appointment and Termination of Agents
Appointment and termination of Agents shall be processed and
executed by Nationwide. NISC reserves the right to require
Nationwide to consult with it regarding licensing decisions.
4. Advertising
NISC shall not print, publish or distribute any advertisement,
circular or document relating to the Products or relating to
Nationwide unless such advertisement, circular or document has
been approved in writing by Nationwide. Such approval shall
not be unreasonably withheld, and shall be given promptly,
normally within five (5) business days. Neither Nationwide nor
any of its affiliates shall print, publish or distribute any
advertisement, circular or document relating to the Products
or relating to NISC unless such advertisement, circular or
document has been approved in writing by NISC. Such approval
shall not be unreasonably withheld, and shall be given
promptly, normally within five (5) business days. However,
nothing herein shall prohibit any person from advertising the
Products on a generic basis.
5. Marketing Conduct
The parties will jointly develop standards, practices and
procedures respecting the marketing of the Products. Such
standards, practices and procedures are intended to help
Nationwide meet its obligations as an issuer under the
securities laws, to assure compliance with state insurance
laws, and to help NISC meet its obligations under the
securities laws as National Distributor. These standards,
practices and procedures are subject to continuing review and
neither Nationwide nor NISC will object unreasonably to
changes to such standards, practices and procedures
recommended by the other to comply with the intent of this
provision.
6. Sales Material and Other Documents
a. Sales Material
1) Nationwide shall develop and prepare all
promotional material to be used in the
distribution of the Products, in
consultation with NISC.
2) Nationwide is responsible for the printing
and the expense of providing such
promotional material.
3) Nationwide is responsible for approval of
such promotional material by state insurance
regulators, where required.
<PAGE> 3
4) NISC and Nationwide agree to abide by the
Advertising and Sales Promotion Material
Guidelines, attached hereto as EXHIBIT B,
and incorporated herein by reference.
b. Prospectuses
1) Nationwide is responsible for the
preparation and regulatory clearance of any
required registration statements and
prospectuses for the Products.
2) Nationwide is responsible for the printing
of Product prospectuses in such quantities
as the parties agree are necessary to assure
sufficient supplies.
3) Nationwide is responsible for supplying
Agents with sufficient quantities of Product
prospectuses.
c. Contracts, Applications and Related Forms
1) Nationwide, in consultation with NISC, is
responsible for the design and printing of
adequate supplies of Product applications,
contracts, related forms, and such service
forms as the parties agree are necessary.
2) Nationwide is responsible for supplying
adequate quantities of all such forms to the
Agents.
7. Appointment of Agents
a. NISC will assist Nationwide in facilitating the
appointment of Agents by Nationwide.
b. Nationwide will forward all appointment forms and
applications to the appropriate states and maintain
all contacts with the states.
c. Nationwide will maintain appointment files on Agents,
and NISC will have access to such files as needed.
8. Licensing and Appointment Guide
Nationwide shall provide to NISC a Licensing and Appointment
Guide (as well periodic updates thereto), setting forth the
requirements for licensing and appointment, in such quantities
as NISC may reasonably require.
<PAGE> 4
9. Other
a. Product Training
Nationwide is responsible for any Product training
for the Agents.
b. Field Sales Material
1) Nationwide, in consultation with NISC, is
responsible for the development, printing
and distribution of non-public field sales
material to be used by Agents.
2) NISC shall have the right to review all
field sales materials and to require any
modification mandated by regulatory
requirements.
c. Production Reports
Nationwide will deliver to NISC the items listed in
Production Reports to be Provided, attached hereto as
EXHIBIT C, and incorporated herein by reference.
d. Customer Service
Each party will notify the other of all material
pertinent inquiries and complaints it receives, from
whatever source and to whomever directed, and will
consult with the other in responding to such
inquiries and complaints.
e. Records and Books
All books and records maintained by Nationwide in
connection with the offer and sale of variable
annuity interests funded by a Separate Account are
maintained and preserved in conformity with the
requirements of Rule 17a-3 and 17a-4 under the 1934
Exchange Act, to the extent such requirements are
applicable to the variable annuity operations.
All such books and records are maintained and held by
Nationwide on behalf of and as agent for NISC, whose
property they are and shall remain. Such books and
records are at all times subject to inspection by the
Securities and Exchange Commission and the National
Association of Securities Dealers, Inc.
<PAGE> 5
C. GENERAL PROVISIONS
1. Waiver
The forbearance or neglect of either party to insist upon
strict compliance by the other with any of the provisions of
this Agreement, whether continuing or not, or to declare a
forfeiture of termination against the other, shall not be
construed as a waiver of any rights or privileges of the
forbearing party in the event of a further default or failure
of performance.
2. Limitations
Neither party shall have authority on behalf of the other to:
make, alter or discharge any contractual terms of the
Products; waive any forfeiture; extend the time of making any
contributions to the products; guarantee dividends; alter the
forms which either may prescribe; nor substitute other forms
in place of those prescribed by the other.
3. Binding Effect
This Agreement shall be binding on and shall inure to the
benefit of the parties to it and their respective successors
and assigns, provided that neither party shall assign or
sub-contract this Agreement or any rights or obligations
hereunder without prior written consent of the other.
4. Indemnification
Each party ("Indemnifying Party") hereby agrees to release,
indemnify and hold harmless the other party, its officers,
directors, employers, agents, servants, predecessors or
successors from any claims or liability arising out of the
acts or omissions of the Indemnifying Party not authorized by
this Agreement, including the violation of any federal or
state law or regulation.
5. Notices
All notices, requests, demands and other communication under
this Agreement shall be in writing and shall be deemed to have
been given on the date of service if served personally on the
party to whom notice is to be given, or on the date of mailing
if sent postage prepaid by First Class Mail, Registered or
Certified mail, by overnight mail, properly addressed as
follows:
TO NATIONWIDE:
Nationwide Life Insurance Company
Michael C. Butler, Vice President-Sales
Three Nationwide Plaza
Columbus, Ohio 43215
<PAGE> 6
TO NISC:
Nationwide Investment Services Corporation.
Barbara Shane, Vice President-Compliance Officer
Two Nationwide Plaza
Columbus, Ohio 43215
6. Governing Law
This Agreement shall be construed in accordance with and
governed by the laws of the State of Ohio.
7. Arbitration
The parties agree that misunderstandings or disputes arising
from this Agreement shall be decided by arbitration, conducted
upon request of either party before three arbitrators (unless
the parties agree on a single arbitrator) designated by the
American Arbitration Association, and in accordance with the
rules of such Association. The expenses of the arbitration
proceedings conducted hereunder shall be borne equally by both
parties.
8. Confidentiality
Any information, documents and materials, whether printed or
oral, furnished by either party or its agents or employees to
the other shall be held in confidence. No such information
shall be given to any third party, other than to such
sub-contractors of NISC as may be permitted herein, or under
requirements of a lawful authority, without the express
written consent of the other party.
D. TERM OF AGREEMENT
This Agreement, including the Exhibits attached hereto, shall remain in
full force and effect until terminated, and may be amended only by
mutual agreement of the parties in writing. Any decision by either
party to cease issuance or distribution of any specific Product shall
not effect a termination of the Agreement unless such termination is
mutually agreed upon, or unless notice is given pursuant to Section
E.2. hereof.
E. TERMINATION
1. Either party may terminate this Agreement for cause at any
time, upon written notice to the other, if the other knowingly
and willfully: (a) fails to comply with the laws or
regulations of any state or governmental agency or body having
jurisdiction over the sale of insurance or securities; (b)
misappropriates any money or property belonging to the other;
(c) subjects the other to any actual or potential liability
due to misfeasance, malfeasance, or nonfeasance; (d) commits
any fraud upon the other; (e) has an assignment for the
benefit of creditors; (f) incurs bankruptcy; or (g) commits a
material breach of this Agreement.
<PAGE> 7
2. Either party may terminate this Agreement, without regard to
cause, upon six months prior written notice to the other.
3. In the event of termination of this Agreement, the following
conditions shall apply:
a) The parties irrevocably acknowledge the continuing
right to use any Product trademark that might then be
associated with any Products, but only with respect
to all business in force at the time of termination.
b) In the event this Agreement is terminated the parties
will use their best efforts to preserve in force the
business issued pursuant to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to
be effective as of the date first above written.
NATIONWIDE LIFE INSURANCE
COMPANY
By: __________________________
Michael C. Butler
Title: Vice President - Sales
NATIONWIDE INVESTMENT SERVICES
CORPORATION
By: ________________________
Barbara Shane
Title: Vice President - Compliance Officer
<PAGE> 8
EXHIBIT A
ANALYSIS OF ADMINISTRATIVE FUNCTIONS
A. PRODUCT UNDERWRITING/ISSUE
NATIONWIDE NISC
- - Establishes underwriting criteria for - Consults with regard to new business
application processing and rejections. procedures and processing.
- - Reviews the completed application.
Applies underwriting/issue criteria to
application.
- - Notifies Agent and/or customer of
any error or missing data necessary to
underwrite application and establish
records for owner of Product ("Contract
Owner").
- - Prepares policy data page for
approved business and mails with policy
to Contract Owner.
- - Establishes and maintains all records
required for each Contract Owner, as
applicable.
- - Prepares and mails confirmation and
other statements to Contract Owners and
Agents, as required.
- - Prints, provides all forms ancillary
to issue of contract/policy forms for
Products.
- - Maintains supply of approved specimen
policy forms and all ancillary forms,
distributes same to Agents.
<PAGE> 9
B. BILLING AND COLLECTION
NATIONWIDE
- - Receives premium/purchase
payments and reconciles amount
received with remittance media.
- - Updates Contract Owner records to
reflect receipt of premium/purchase
payment and performs accounting/
investment allocation of each
payment received.
- - Deposits all cash received under the
Products in accordance with the
terms of the Products.
C. BANKING
NATIONWIDE
- - Balances, edits, endorses and prepares daily deposit.
- - Places deposits in depository account.
- - Prepares daily cash journal summary reports and
maintains same for review by NISC.
<PAGE> 10
D. PRICING/VALUATION/ACCOUNTING/TRADING
NATIONWIDE NISC
- - Maintains and makes available, as - Cooperates in annual audit of separate
reasonably requested, records used in account financials conducted for purposes
determining "Net Amount Available for of financial statement certification and
Investment." publication.
- - Collects information needed in - Will clear and settle Mutual Fund
determining Variable Account unit trades on behalf of the separate accounts
values from the Funds including using the National Securities Clearing
daily net asset value, capital Corporation FUND/Serv System.
gains or dividend distributions,
and the number of Fund Shares
acquired or sold during the
immediately preceding valuation
period.
- - Performs daily unit valuation
calculation.
<PAGE> 11
E. CONTRACT OWNER SERVICE/
RECORD MAINTENANCE
NATIONWIDE NISC
- - Receives and processes all - Accommodates customer service function
Contract Owner service requests, by providing any supporting information
including but not limited to or documentation which may be in the
informational requests, beneficiary control of NISC.
changes, and transfers of Contract
Value among eligible investment
options.
- - Maintains daily records of all
changes made to Contract Owner
accounts.
- - Researches and responds to all
Contract Owner/Agent inquiries.
- - Keeps all required Contract Owner
records.
- - Maintains adequate number of toll
free lines to service Contract Owner/
Agent inquiries.
F. DISBURSEMENTS (SURRENDERS,
DEATH CLAIMS, LOANS)
NATIONWIDE NISC
- - Receives and processes surrenders,
loans, and death claims in accordance
with established guidelines.
- - Prepares checks for surrenders,
loans, and death claims, and forwards
to Contract Owner or Beneficiary.
Prepares and mails confirmation
statement of disbursement to Contract
Owner/Beneficiary with copy to Agent.
<PAGE> 12
G. COMMISSIONS
NATIONWIDE NISC
- - Ascertains, on receipt of - Receives and performs record keeping
applications, whether writing Agent for investment company payments made
is appropriately licensed. under a 12b-1 Plan.
- - Pays commissions and other fees
in accordance with agreements
relating to same.
H. PROXY PROCESSING
NATIONWIDE NISC
- - Receives record date information
from Funds Receives proxy
solicitation materials from Funds.
- - Prepares Voting Instruction cards
and mails solicitation, if necessary.
- - Tabulates and votes all Fund Shares
in accordance with SEC requirements.
I. PERIODIC REPORTS TO CONTRACT OWNERS
NATIONWIDE NISC
- - Prepares and mails quarterly and
annual Statements of Account to
Contract Owners.
- - Prepares and mails all semi-annual
and annual reports of Variable
Account(s) to Contract Owners.
<PAGE> 13
J. REGULATORY/STATEMENT REPORTS
NATIONWIDE NISC
- - Prepares and files Separate Account - Prepares and files periodic FOCUS
Annual Statements. Reports with the NASDR and SEC, as
applicable.
- - Prepares and mails the appropriate, - Prepares and files annual audited
required IRS reports at the Contract financial statements with required
Owner level. Files same with required regulatory agencies.
regulatory agencies.
- - Prepares and files form N-SAR for
the Separate Account.
K. PREMIUM TAXES
NATIONWIDE NISC
- - Collects, pays and accounts for
premium taxes as appropriate.
- - Prepares and maintains all premium
tax records by state.
- - Maintains liabilities in General
Account ledger for accrual of premium
tax collected.
- - Integrates all company premium taxes
due and performs related accounting.
L. FINANCIAL AND MANAGEMENT REPORTS
NATIONWIDE NISC
- - Provides periodic reports in - Provides periodic reports in accordance
accordance with the Schedule of with the Schedule of Reports to be
Reports to be prepared jointly by prepared jointly by Nationwide and NISC.
Nationwide and NISC. (See EXHIBIT C) (See EXHIBIT C)
<PAGE> 14
M. AGENT LICENSE RECORDKEEPING
NATIONWIDE NISC
- - Receives, establishes, processes, - Maintains securities registrations and
and maintains Agent appointment assumes supervisory responsibility for
records. representatives of affiliated sales and
marketing companies involved in the
wholesale distribution of Nationwide
variable contract products.
- Maintains training, supervisory, and
other required records for and on behalf
of registered representatives of NISC.
<PAGE> 15
EXHIBIT B
ADVERTISING AND SALES PROMOTION MATERIAL GUIDELINES
FOR APPROVAL BY NATIONWIDE AND NISC
In order to assure compliance with state and federal regulatory requirements and
to maintain control over the distribution of promotional materials dealing with
the Products, Nationwide and NISC require that all variable contract promotional
materials be reviewed and approved by both Nationwide and NISC prior to their
use. These guidelines are intended to provide appropriate regulatory and
distribution controls.
1. Sufficient lead time must be allowed in the submission of all
promotional material. Nationwide and NISC shall approve in writing all
promotional material. Such approval shall not be unreasonably withheld,
and shall be given promptly, normally within five (5) days.
2. All promotional material will be submitted in "draft" form to permit
any changes or corrections to be made prior to the printing.
3. Nationwide and NISC will provide each other with details as to each and
every use of all promotional material submitted. Approval for one use
will not constitute approval for any other use. Different standards of
review may apply when the same advertising material is intended for
different uses. The following information will be provided for each
item of promotional material:
a. In what jurisdiction(s) the material will be used.
b. Whether distribution will be to broker/dealer, entity,
participant, etc.
c. How the material will be used (e.g., brochure, mailing, web
site, etc.)
d. The projected date of initial use.
4. Each party will advise the other of the date it discontinues the use of
any material.
5. Any changes to previously approved promotional material must be
resubmitted, following these procedures. When approved material is to
be put to a different use, request for approval of the material for the
new use must be submitted.
6. Nationwide will assign a form number to each item of advertising and
sales promotional material. This number will appear on each piece of
advertising and sales promotional material. It will be used to aid in
necessary filings, and to maintain appropriate controls.
7. Nationwide and NISC will provide written approval for all material to
be used.
8. Nationwide will be responsible to effect necessary state filings.
9 NISC will coordinate SEC/NASD filings of sales and promotional
material.
10. All telephone communication and written correspondence regarding
promotional materials should be directed to Office of Product and
Market Compliance, Nationwide Life Insurance Company, One Nationwide
Plaza, Columbus, Ohio 43215
